Myline Cordial

Consuelo Metal Corporation vs. Planters Development Bank, et. al.
G.R. No. 152580, June 26, 2008
555 SCRA 465
578 Phil. 431

FACTS:
On 1 April 1996, CMC filed before the SEC a petition to be declared in a state of suspension of payment, for rehabilitation, and for the appointment of a rehabilitation receiver or management committee. The SEC assumed jurisdiction over CMC’s petition for suspension of payment and issued a suspension order on 2 April 1996 after it found CMC’s petition to be sufficient in form and substance. While CMC’s petition was still pending with the SEC as of 30 June 2000, it was finally disposed of on 29 November 2000 when the SEC issued its Omnibus Order directing the dissolution of CMC and the transfer of the liquidation proceedings before the appropriate trial court.

ISSUE:
Is the transfer of the liquidation proceedings before the trial court proper?

RULING:
Yes.The SEC has jurisdiction to order the dissolution of a corporation but jurisdiction over the liquidation of the corporation pertains to the appropriate regional trial courts. Republic Act No. 8799 (RA 8799) transferred to the appropriate regional trial courts the SEC’s jurisdiction defined under Section 5(d) of Presidential Decree No. 902-A. Section 5.2 of RA 8799 provides: The Commission’s jurisdiction over all cases enumerated under Sec. 5 of Presidential Decree No. 902-A is hereby transferred to the Courts of general jurisdiction or the appropriate Regional Trial Court: Provided, That the Supreme Court in the exercise of its authority may designate the Regional Trial Court branches that shall exercise jurisdiction over these cases. The Commission shall retain jurisdiction over pending cases involving intra-corporate disputes submitted for final resolution which should be resolved within one (1) year from the enactment of this Code. The Commission shall retain jurisdiction over pending suspension of payments/rehabilitation cases filed as of 30 June 2000 until finally disposed. 

Corporate Liquidation

The SEC’s jurisdiction does not extend to the liquidation of a corporation. While the SEC has jurisdiction to order the dissolution of a corporation, jurisdiction over the liquidation of the corporation now pertains to the appropriate regional trial courts. This is the reason why the SEC, in its 29 November 2000 Omnibus Order, directed that “the proceedings on and implementation of the order of liquidation be commenced at the Regional Trial Court to which this case shall be transferred.” This is the correct procedure because the liquidation of a corporation requires the settlement of claims for and against the corporation, which clearly falls under the jurisdiction of the regular courts. The trial court is in the best position to convene all the creditors of the corporation, ascertain their claims, and determine their preferences.

NOTES:

Rehabilitation of Corporation; Preference of Credits

In Rizal Commercial Banking Corporation v. Intermediate Appellate Court, we held that if rehabilitation is no longer feasible and the assets of the corporation are finally liquidated, secured creditors shall enjoy preference over unsecured creditors, subject only to the provisions of the Civil Code on concurrence and preference of credits. Creditors of secured obligations may pursue their security interest or lien, or they may choose to abandon the preference and prove their credits as ordinary claims.

Section 2248 of the Civil Code provides: Those credits which enjoy preference in relation to specific real property or real rights, exclude all others to the extent of the value of the immovable or real right to which the preference refers.

In this case, Planters Bank, as a secured creditor, enjoys preference over a specific mortgaged property and has a right to foreclose the mortgage under Section 2248 of the Civil Code. The creditor-mortgagee has the right to foreclose the mortgage over a specific real property whether or not the debtor-mortgagor is under insolvency or liquidation proceedings. The right to foreclose such mortgage is merely suspended upon the appointment of a management committee or rehabilitation receiver or upon the issuance of a stay order by the trial court. However, the creditor-mortgagee may exercise his right to foreclose the mortgage upon the termination of the rehabilitation proceedings or upon the lifting of the stay order.

Foreclosure proceedings have in their favor the presumption of regularity and the burden of evidence to rebut the same is on the party that seeks to challenge the proceedings. CMC’s challenge to the foreclosure proceedings has no merit. The notice of sale clearly specified that the auction sale will be held “at 10:00 o’clock in the morning or soon thereafter, but not later than 2:00 o’clock in the afternoon.” The Sheriff’s Minutes of the Sale stated that “the foreclosure sale was actually opened at 10:00 A.M. and commenced at 2:30 P.M.” There was nothing irregular about the foreclosure proceedings.

Full Text: Consuelo Metal Corp vs Planters G.R. No. 152580, June 26, 2008