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~upreme Qtourt
;if-llanila
FIRST DIVISION

FAR EAST BANK AND TRUST G.R. No. 196637

COMPANY,
Petitioner, Present:

BERSAMIN, C.J., Chairperson,

- versus - DEL CASTILLO,
JARDELEZA,
GESMUNDO, and
CARANDANG,* JJ.
UNION BANK OF THE
PHILIPPINES [now substituted by
BAYAN DELINQUENT LOAN Promulgated:
RECOVERY 1 (SPV-AMC), INC.],
Respondent. JUNO 3 2019
X -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
\
DECISION
GESMUNDO, J.:

This is an appeal by certiorari from the November 15, 2010 Decision 1

and April 19, 2011 Resolution2 of the Court of Appeals (CA) in CA-G.R. CV
No. 86172 which reversed and set aside the March 22, 2005 and August 26,
2005 Orders3 ofthe Regional Trial Court of Pasig City, Branch 157 (RTC) in
Civil Case No. 66477.

* On wellness leave.
1
Rollo, pp. 37-65; penned by Associate Justice Amy C. Lazaro-Javier (now a Member of this Court), with
Associate Justices Rebecca De Guia-Salvador and Sesinando E. Villon, concurring.
2
Id. at 67.
3
Id. at 81-84, 86; penned by Judge Esperanza Fabon-Victorino.

/tit
 DECISION 2 G.R. No. 196637

Antecedents

On September 16, 1997, the EYCO Group of Companies 4 (EYCO) and

its controlling stockholders, namely Eulogio 0. Yutingco, Caroline Yutingco-
Yao and Theresa5 T. Lao (the Yutingcos) filed with the Securities and
Exchange Commission (SEC) a "Petition for the Declaration of Suspension of
Payment[s], Formation and Appointment of Rehabilitation Receiver/
Committee, Approval of Rehabilitation Plan with Alternative Prayer for
Liquidation and Dissolution of Corporations" (SEC Case No. 09-97-5764). 6

On September 19, 1997, a consortium of EYCO's creditors

(Consortium) composed of 22 domestic banks, including Union Bank of the
Philippines (Union Bank), convened for the purpose of deciding their options
in the event that EYCO and its co-petitioners in SEC Case No. 09-97-5764
would invoke the provisions of Presidential Decree (PD) No. 902-A, as
amended. Among the matters agreed upon during said meeting were the
engagement of a lawyer to represent the creditors and composition of the
management committee from seven banks with the highest exposures. 7

However, Union Bank, without notifying the members of the

Consortium, decided to break away from the group by suing EYCO and the
Yutingcos in the regular courts. Among the several suits commenced by
Union Bank was Civil Case No. 66477 (Union Bank of the Philippines v.
Eulogio and Bee Kuan Yutingco, Far East Bank and Trust Company and
EYCO Properties) filed in the RTC of Pasig City, Branch 157 on September
26, 1997. 8

In its Complaint,9 Union Bank alleged that Spouses Eulogio and Bee
Kuan Yutingco (Spouses Yutingco) were its debtors by virtue of a Continuing
Surety Agreement 10 dated September 12, 1996 to secure credit
accommodations amounting to Pl I0,000,000.00 granted to Nikon Industrial
Corporation, Nikolite Industrial Corporation and 2000 Industries Corporation
(collectively known as NIKON), which they owned. Upon investigation,
Union Bank confirmed that majority of NIKON's assets were used to
purchase real estate properties through EYCO, purposely to shield NIKON
from answering for its debts. EYCO owned condominium units and parking
spaces in Tektite Tower and the Strata 200 Building Condominium Project.

4
Records, p. 1634, Vol. III; Nikon Industrial Corp., Nikolite Industrial Corp., 2000 Industries, Corp.,
Thames, Phil., Inc., EYCO Properties, Inc., TradeHope Industrial Corp., First Unibrands Food Corp., Integral
Steel Corp., Clarion Printing House, Inc., Nikon Plaza, Inc., and Nikon Land, Inc.
5
Referred to as Teresa in other parts of the rollo.
6
See Union Bank of the Philippines v. Court of Appeals, et al., 352 Phil. 808, 814-815 (1998).
7
ld. at 815-817.
8
Id.at817.
9
Records, pp. 2-13, Vol. I.
10
Id. at 16-19.

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 DECISION 3 G.R. No. 196637

On September 15, 1997, these properties were sold to herein petitioner, Far
East Bank and Trust Company (FEBTC). 11

Union Bank claimed that the sale of the properties was fraudulent and
done in bad faith to prevent them from being levied upon; in fact, it was made
a day before the Spouses Yutingco and NIKON filed a petition for suspension
of payments with the SEC. The total purchase price for the Strata 200
condominium units .was P32,000,000.00, which was grossly inadequate
considering that they were situated in a prime area of Pasig City. In
furtherance of its conspiracy with the Spouses Yutingco and NIKON, FEB TC
supposedly authorized the purchase of various golf club shares and two more
units and parking spaces in the same condominium buildings, assets ofEYCO
and NIKON registered in their respective names. It is clear that EYCO, in
collusion with the Spouses Yutingco and FEBTC, intended to transfer all or
nearly all of its properties because of its insolvency or great embarrassment
financially. FEBTC, being a vendee in fraud of creditors, was deemed an
implied trustee of the properties and should hold them for the benefit of those
who are entitled thereto. Union Bank, as unpaid creditor of the true owner of
the property, is entitled to nullify the sale in favor ofFEBTC. 12

SEC Case No. 09-97-5764

On September 19, 1997, an Order 13 was issued by the SEC enjoining

the disposition of the debtor corporations' properties in any manner except in
the ordinary course of business and payment outside of legitimate business
expenses during the pendency of the proceedings and suspending all actions,
claims and proceedings against EYCO until further orders from the SEC.

In an Omnibus Order dated October 27, 1997, the SEC Hearing Panel
directed the creation of a Management Committee (MANCOM). 14

Union Bank filed a petition for certiorari in the CA (CA-G.R. SP No.

45774) assailing the September 19, 1997 Order declaring the suspension of
payments for EYCO and directing the creation of the MANCOM. Union Bank
contended that these issuances were premature and would render the motion
to dismiss filed before the RTC, in Civil Case No. 66477, as moot. The
steering committee of the Consortium composed of the Philippine National
Bank, FEBTC, Allied Bank, Traders Royal Bank, Philippine Commercial
International Bank, Bank of Commerce and Westmont Bank, were allowed to
intervene by the CA. However, in the same decision of the CA, the petition
filed by Union Bank was dismissed for failure to exhaust administrative

11
Id. at 2-7, 20-35.
12
Id. at 7-9.
13
Id. at 476-479.
14
Union Bank ofthe Phi/s. v. CA, supra note 6 at 8 I 9; Records, pp. 1199-1200, Vol. III.

f1f
 DECISION 4 G.R. No. 196637

remedies and forum shopping, prompting the latter to seek recourse in this
Court (G.R. No. 131729) . 15

On May 19, 1998, this Court promulgated its Decision in Union Bank of
the Philippines v. Court ofAppeals, et al. 16 holding that the SEC' s jurisdiction
on matters of suspension of payments is confined only to those initiated by
corporations, partnerships or associations. Consequently, the SEC exceeded
its jurisdiction in declaring the Spouses Yutingco together with EYCO under
suspension of payments. Nonetheless, based on our previous ruling in
Modern Paper Products, Inc., et al. v. Court of Appeals, et al., 17 the Rules of
Court on misjoinder of parties may be applied. Thus, the proper remedy was
not to dismiss the entire petition for suspension of payments but to dismiss it
only as against the party upon whom the tribunal or court cannot acquire
jurisdiction. Accordingly, this Court ordered the SEC "to drop from the
petition for suspension of payments filed before it the names of Eulogio 0.
Yutingco, Caroline Yutingco-Yao and Theresa T. Lao without prejudice to
their filing a separate petition in the Regional Trial Court." 18

On December 18, 1998, the SEC issued an Order 19 adopting the

Unsolicited Rehabilitation Proposal submitted by Strategies and Alliances
Corporation (SAC) which was granted a period of six months within which to
complete the groundwork for the effective implementation of the early "all-
debt payment plan."

As described by the SEC, the SAC plan proposed to settle and

extinguish all financial obligations of EYCO to its creditors, secured and
unsecured, amounting to P5.2 Billion - P4 Billion by banks and Pl .2 Billion
by non-banks. The repayment of principal and interest thereon on stated due
dates were guaranteed to be paid in cash by the Republic of the Philippines
through the Home Insurance Guaranty Corporation (HJGC).

The SEC Order further barred all creditors from pursuing their
respective claims until further orders.

The Consortium appealed the December 18, 1998 Order to the SEC En
Banc. On September 14, 1999, the SEC En Banc rendered its Decision20
finding the SAC plan not viable and feasible for the rehabilitation of EYCO.
Accordingly, the SAC plan and suspension of payment proceedings were
ordered terminated, the committees created dissolved and discharged. The
SEC further ordered the dissolution and liquidation of the petitioning

15
Id. at 819-821.
16 Id.
17
350 Phil. 402 (1998).
18
Union Bank of the Phils. v. CA, supra note 6 at 832.
19
Records, pp. 1399-1413, Vol. III.
20
Id. at 1591-1597.

t't~
 DECISION 5 G.R. No. 196637

corporations. Subsequently, a Liquidator was appointed pursuant to the

provisions of the Rules of Procedure on Corporate Rehabilitation. 21

On October 10, 2000, the SEC issued an Order2 2 directing all creditors
claiming against EYCO to file their formal claims with the Liquidator. It
likewise declared that all such claims shall be deemed barred if not filed
within 30 days after publication of the said order in two newspapers of general
circulation in the Philippines.

Due to disagreement on Liquidator's fee, a Liquidation Committee was

formed to assume the duties of the Liquidator originally appointed by the
SEC. On May 31, 2001, the said committee was dissolved and the SEC finally
appointed Atty. Danilo L. Concepcion (Atty. Concepcion) as Liquidator
pursuant to the provisions of the Rules of Procedure on Corporate Recovery. 23

In March 2002, Atty. Concepcion submitted a proposed Liquidation

Plan. Finding the said Liquidation Plan meritorious, the SEC approved it on
April 11, 2002. 24

Motions to Dismiss Civil Case No. 66477

The Spouses Yutingco filed a Motion to Dismiss on the ground of

pendency of the proceedings in the SEC which had acquired prior jurisdiction
over the subject matter of the case. 25

FEB TC also filed a motion to dismiss on the ground of Union Bank's

failure to implead NIKON, which are indispensable parties. Accordingly, the
court should suspend the trial until such parties are made either as plaintiffs
or defendants. Moreover, since the complaint was for rescission of a contract
of sale, it should have expressly alleged that Union Bank had no other legal
means to collect its credits. Thus, the complaint failed to state a cause of
action. There was also no allegation whether the credit accommodations
extended by Union Bank were secured or unsecured. More important, Union
Bank had no legal personality to sue for the enforcement of the rights and
interests of the creditors as this is vested in the rehabilitation receiver. In view
of the pending SEC proceedings, Union Bank had an available remedy by
participating therein. 26 In a Manifestation, the Spouses Yutingco adopted the
aforesaid arguments of FEBTC. 27

21 Id. at 1598-1604.
22
Id. at 1598-1599.
23
Id. at 1600-1604.
24
Id. at 1625-1670.
25
Id. at 83-85, Vol. I.
26
Id. at 511-518.
27
Id. at 507-508.

r"'
 DECISION 6 G.R. No. 196637

In its Opposition, 28 Union Bank asserted that litis pendentia is not

applicable in this case as it is not a party to the SEC proceedings for
suspension of payments. Also, there is no identity of causes of action since
the present case is founded on Union Bank's right to effect retention lien on
the properties of EYCO pursuant to the provisions of the continuing surety
agreement executed by the Spouses Yutingco. On the matter of jurisdiction,
Union Bank contended that the court has the exclusive authority to hear Civil
Case No. 66477.

In their Reply to Opposition, 29 EYCO and Spouses Yutingco reiterated

that NIKON are indispensable parties considering that Union Bank claimed
that the assets of said corporations were allegedly diverted to purchase real
properties "under the name" of EYCO. Union Bank's theory is the true
ownership of NIKON of the properties, the same being merely registered
under EYCO. NIKON, being the actual sellers, were indispensable parties
without whom no final determination of action can be had. Moreover, an
action for rescission being subsidiary, cannot be instituted except "when the
party suffering damages has no other legal means to obtain reparation of the
same." No allegation of unavailability of other remedies was made by Union
Bank in its complaint. Lastly, it was reiterated that it was now the SEC-
appointed interim receiver who was given specific authority to take custody
of all assets of the distressed corporations. Hence, Union Bank should bring
its claims before the said receiver.

In a Supplemental Motion to Dismiss, 30 EYCO and Spouses Yutingco

averred that Union Bank was guilty of forum shopping and the RTC had no
jurisdiction over the subject matter. Union Bank's allegation of fraud was the
same claim it made in the motion to dismiss it filed before the SEC. And, not
waiting for the SEC to rule on the issue, Union Bank went to the CA in a
petition for certiorari (CA-G.R. SP No. 45774), in which it again placed in
issue the same allegations of fraud raised before the RTC and SEC.
Aggravating its act of forum shopping, Union Bank raised the very same
issues in the pending civil suits before RTC of Pasig City, Branch Nos. 158
and 159, and RTC ofValenzuela (Civil Case Nos. 66478 and 66479; 5360-V-
97). This further shows the other legal remedies being availed of by Union
Bank in seeking rescission of the sale of the properties of NIKON.
Specifically, Union Bank had a pending collection case before the RTC of
Makati City, Branch 148 (Civil Case No. 97-2184). Union Bank knew it could
not simultaneously seek rescission and collection, but it did so anyway.
Finally, it was emphasized that when PD No. 902-A vested SEC with
jurisdiction over petitions for suspension of payments, the law necessarily

28
Id. at 521-526, Vol. II.
29
Id. at 549-559.
30
Id. at 761-774.

ko/r
 DECISION 7 G.R. No. 196637

conferred exclusive jurisdiction to it over all incidents of the petition,

including enforcement of claims. 31

RTC Ruling

On March 22, 2005, the RTC issued an Order32 granting the motions to
dismiss on the ground of litis pendentia, as follows:

It cannot be denied that there is a pending action between the same

parties over the same transactions involving the same properties before the
instant case was filed. Plaintiff as one of the creditors of defendants is a
compulsory party in the Petition for Declaration of Suspension of Payments,
Formation and Appointment of Rehabilitation Receiver/Committee filed by
defendants with the SEC on September 16, 1997 or before the institution of
instant case on October 16, 1997. By filing a motion to dismiss the petition,
plaintiff made itself a party to the case and voluntarily submitted to the
jurisdiction of the SEC. Further, it was conceded that among the properties
subject of the order of suspension issued by the SEC are the properties
subject of the instant controversy. Indubitably, all the elements of litis
pendentia are present.

It must also be emphasized that even before the instant case was
filed, the SEC has already acquired jurisdiction over the petition for
declaration of suspension, which jurisdiction has been sustained by no less
than the Supreme Court. In fact, the SEC had issued several directives for
the rehabilitation of the petitioning corporations with the end in view of
settling their obligations to all their creditors, plaintiff included. The actions
taken by the SEC, including the issuance of an order of suspension and the
creation of the Management Committee were all well in accord with Sec. 5
of P.D. No. 902-A, as amended.

With the MANCOM having been created by order of the SEC,

plaintiff has been deprived oflegal personality to impugn through the instant
case the disposition of the properties in controversy made by defendant
EYCO PROPERTIES, INC., which in the first place is not plaintiffs debtor.

Finally, the finding by the Court of Appeals and sustained by the

Supreme Court, that plaintiff was guilty of forum shopping, is binding upon
this Court.

WHEREFORE, the motions to dismiss separately filed by

defendants Spouses Yutingco and EYCO PROPERTIES, INC[.] and FAR
EAST BANK and TRUST COMPANY (FEBTC) are hereby [GRANTED].
This case is DISMISSED.

SO ORDERED. 33 (italics supplied)

31
Id. at 762-768.
32
Rollo, pp. 81-84.
33
Id. at 83-84.

P'
 DECISION 8 G.R. No. 196637

Union Bank's motion for reconsideration was likewise denied under the
RTC's Order34 dated August 26, 2005.

CA Ruling

On appeal to the CA, Union Bank argued that there was no litis
pendentia as it never submitted itself to the jurisdiction of the SEC and even
filed a motion to dismiss SEC Case No. 09-97-5764. There was also no
identity of parties because Union Bank and the Spouses Yutingco were not
parties to the SEC case. Citing this Court's Decision in Union Bank of the
Phils. v. Court of Appeals, 35 Union Bank pointed out that the Spouses
Yutingco were dropped as petitioners in the SEC for lack of jurisdiction over
them as individual debtors. Identity of rights asserted and cause of action was
likewise lacking because in the present civil action, Union Bank seeks to annul
the fraudulent conveyances of real property made by Spouses
Yutingco/EYCO to FEB TC, while its cause of action against NIKON was for
collection of credit. There can be no res judicata since there was no identity
of parties, subject matter and causes of action. Besides, the SEC had no
jurisdiction over the case for annulment of sale.

By Decision dated November 15, 2010, the CA granted Union Bank's

appeal and reversed the assailed orders of the RTC.

First, the CA found that there was no identity of parties between Civil
Case No. 66477 and SEC Case No. 09-97-5764. In Union Bank of the Phils.
v. Court of Appeals 36 this Court ruled that Eulogio 0. Yutingco, Caroline
Yutingco-Yao and Theresa T. Lao were not proper parties in the SEC case
and should be dropped therefrom, not being corporations but individuals. In
the case before the RTC, the Spouses Yutingco were sued as sureties for the
collection of credit against the debtor companies (NIKON).

Second, there was no identity of rights asserted because Union Bank,

in its complaint filed in the RTC, prayed for the rescission of the sale of the
debtors' properties to FEBTC and reversion of their ownership to NIKON
and/or Spouses Yutingco. As provided in Sec. 19 of Batas Pambansa (BP)
Blg. 129, actions that are incapable of pecuniary estimation and those
involving title of real property are within the exclusive jurisdiction of the
RTC. Union Bank's foreclosure suit could therefore proceed, since it is not an
enforcement of monetary claim but assails the validity of Spouses Yutingco
/NIKON's sale of the subject properties ofEYCO. There being absolutely no

34
Rollo. p. 86.
35
Supra note 6.
36 Id.

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 DECISION 9 G.R. No. 196637

identity of rights asserted and remedies sought in the present case and the SEC
case, there was no res judicata to speak of.

Further, the appellate court rejected the contention of FEBTC and

Spouses Yutingco that the payment of P34,270,570.21, representing Union
Bank's share from the proceeds of the sale of EYCO's properties, has been
approved and the balance of P88,975,716.72 has been written off under the
SEC-approved Liquidation -Plan submitted by SEC-appointed Liquidator
Atty. Danilo Concepcion, and that such Liquidation Plan was binding on
Union Bank. This was because the Liquidation Plan expressly provided that
the parties' waivers and quitclaims shall cause the dismissal of all actions filed
by the parties in relation to the SEC case. But FEBTC/Spouses Yutingco
failed to show that Union Bank had issued such waiver or quitclaim and
accepted the offer of payment. Thus, it cannot be said that Union Bank had
accepted the terms of payment and had agreed to cease from pursuing its
claims against the debtors.

On the issue of forum shopping, the CA said that a close reading of this
Court's decision in Union Bank ofthe Phils. v. Court ofAppeals 37 reveals that
Union Bank was found guilty of forum shopping for filing a petition for
certiorari in the CA when its motion to dismiss was still pending before the
SEC, the two cases raising the same issues of whether SEC had jurisdiction
and whether suspension of payments was proper. The decision did not delve
into the complaints filed with the regular courts for rescission of contracts. In
any event, Union Bank was not guilty of forum shopping because the elements
of litis pendentia and res judicata were not present.

Finally, on the matter of Union Bank's alleged lack of personality to

sue, the CA held that while the RTC used such term, the true reason for
dismissal of the complaint was "lack of capacity to sue." When Union Bank
filed its complaint on September 16, 1997, it was still qualified to do so. The
authority of the Liquidator to recover all the properties of NIKON and EYCO
in the hands of other persons had not yet been established. It was only on
October 27, 1997 that the MANCOM was created and no law provides for the
retroactive effect of its authority. However, substitution of parties may be
effected in accordance with the procedure under the Rules if the circumstances
so warrant.

Finding no legal obstacle in allowing full ventilation of the issues raised

in the complaint filed in the R TC, the CA thus decreed:

ACCORDINGLY, the appeal is GRANTED. The twin Orders

dated March 22, 2005 and August 26, 2005 of the Regional Trial Court,
Branch 157, Pasig City, in Civil Case No. 66477 are REVERSED and SET

31 Id.

M1
 DECISION 10 G.R. No. 196637

ASIDE and a new one rendered REMANDING the case to the trial court
for a full blown hearing and determination of the case on the merits.

SO ORDERED. 38 ( citation omitted)

On March 14, 2011, BAYANDelinquentLoanRecoveryI (SPY-AMC,

INC.) (BAYAN) filed a Motion for Substitution With Motion to Admit
Comment, manifesting that under Deed of Assignment dated October 3, 2007,
Union Bank assigned all its rights, title, interest and benefit, and all
obligations arising out of or in connection with the loan obligation of NIKON,
to BA YAN, including the bank's right to collect from Spouses Yutingco
pursuant to the surety agreements and other security documents they executed
in favor of Union Bank. 39

In its Resolution dated April 19, 2011, the CA granted the motion for
substitution and admitted the comment, but denied the motions for
reconsideration respectively filed by FEBTC and Yutingcos/EYCO for lack
of merit. 40

The present petition was filed by FEB TC (now Bank of the Philippine
Islands) on May 13, 2011. The Spouses Yutingco had earlier requested for
extension of time to file in this Court a separate petition questioning the same
CA ruling in CA-G.R. CV No. 86172, docketed as G.R. No. 196629 entitled
"Eulogio and Wong Bee Kuan Yutingco and Eyco Properties, Inc. vs. Union
Bank of the Philippines and Bayan Delinquent and Loan Recovery 1 [SPV-
AMC}." However, G.R. No. 196629 was withdrawn by the Yutingcos under
Manifestation dated July 6, 2011. Accordingly, this Court's Second Division
issued, on August 3, 2011, a Resolution granting the said Manifestation and
declaring G.R. No. 196629 closed and terminated. 41

Issues

For resolution are the following issues: 1) Whether Civil Case No.
66477 should be dismissed on the ground of litis pendentia; 2) Whether Union
Bank was guilty of forum shopping; and 3) Whether Union Bank had the legal
personality to file Civil Case No. 664 77.

38
Rollo, pp. 64-65.
39
Id. at 105-121.
40
Id. at 122.
41
Records, pp. 1839-1840, Vol. III.

#i1
 DECISION 11 G.R. No. 196637

Petitioner's Arguments

On the first issue, petitioner contends that the CA erred in not

dismissing Civil Case No. 664 77 in view of another pending case, SEC Case
No. 09-97-5764 filed on September 16, 1997. The issue in the SEC case is
precisely the settlement ofEYCO's obligations to its creditors, which include
herein respondent Union Bank. Here, Union Bank also seeks to collect from
the distressed corporations of EYCO. The CA failed to consider the well-
settled rule that all questions involving properties of an insolvent are properly
cognizable by the insolvency court to the exclusion of all other courts. Civil
Case No. 66477 is necessarily related to, and thus precluded by, the SEC Case
which has exclusive jurisdiction "to decide all questions concerning the title
or right of possession" over the properties of the distressed corporation. The
issue of invalidity of the conveyance of property of EYCO will necessarily
have to be threshed out in the SEC case.

Further, petitioner asserts that the CA incorrectly ruled that the parties
in the two cases are different. The law does not require that there be absolute
identity of parties with respect to a later case, but only substantial identity of
parties. Union Bank, as one of the creditors of NIKON, is a compulsory party
in the SEC case. Thus, judgment in the SEC case will bar the proceedings in
Civil Case No. 66477 and vice-versa.

On the second issue, respondent was shown to have repetitively availed

of several judicial remedies in different courts, simultaneously or
successively, all substantially founded on the same transactions and the same
essential facts and circumstances, and all raising substantially the same issues
either pending in, or already resolved by, some other court. In G.R. No.
131729 (Union Bank ofthe Phils. v. Court ofAppeals),42 both the CA and this
Court found Union Bank guilty of forum shopping. The SEC already
appointed a MANCOM or rehabilitation receiver, who was to have custody
and control of all the assets of the corporation under receivership/
rehabilitation.

On the third issue, petitioner argues that, insofar as the rights and
interests of the creditors of corporations under a management committee, such
as Union Bank, and the judicial enforcement of said rights are concerned, they
are collectively vested upon the rehabilitation receiver. With the appointment
of a MANCOM, Union Bank clearly has no legal personality to impugn the
sale by EYCO to FEBTC. The proper party to institute such an action is the
rehabilitation receiver.

42
Supra note 6.

;1rt?V1
 DECISION 12 G.R. No. 196637

Respondent's Arguments

Union Bank, substituted by [Deutsche Bank] 43 /Bayan Delinquent Loan

Recovery 1 (SPV-AMC), Inc., submits the arguments set forth in the
Comment/Opposition to FEBTC's motion for reconsideration (of the
Decision dated November 15, 2010) filed in the CA.

On litis pendentia, respondent maintains that there is no identity of

parties considering that this Court in Union Bank of the Phils. v. Court of
Appeals44 has ordered that the Spouses Yutingco be dropped as "party-
defendants" in the SEC case due to lack of jurisdiction over their persons.
Petitioner's argument that NIKON are indispensable parties in Civil Case No.
664 77 is unavailing, inasmuch as the creditor has the right to proceed against
the surety independent of the debtor. Here, the Continuing Surety Agreement
executed by the Spouses Yutingco in favor of Union Bank, unequivocally
provides that the former bind themselves solidarily with their principal
(NIKON).

Neither is there identity in causes of action considering that it is the

fraudulent conveyance of properties by the Spouses Yutingco through EYCO
properties in favor of FEBTC that caused Union Bank's cause of action to
accrue. Employing another test to determine the identity of causes of action,
i.e., whether the same evidence will sustain both actions, respondent points
out that it will have to present evidence in the SEC case proving the Spouses
Yutingcos' obligation to it and their consequent failure to abide by the same.
Such evidence, however, is not needed in the annulment of sale case (Civil
Case No. 664 77).

As to petitioner's allegation that the approved Liquidation Plan is

binding on the respondent, under which NIKON's obligation with Union
Bank was extinguished, respondent asserts that such does not warrant the
reversal of the CA Decision. As found by the CA, Union Bank is not a party
to the SEC case and hence not bound by any order or proceeding therein.
Petitioner's reliance of this Court's pronouncement in Union Bank of the
Phils. v. Court of Appeals45 is likewise misplaced. In said case, this Court
merely held that the SEC's jurisdiction on matters of suspension of payments
is confined only to those initiated by corporations, partnerships or associations
and not those by individuals. In any event, from the very terms of the
Liquidation Plan itself, it is not the approval of the Liquidation Plan but the
execution of waivers and quitclaims and the dismissal of all pending cases
arising from or related to the subject loan obligations that would extinguish
the same. Lastly, judgment in Civil Case No. 66477 will not operate as res

43
Rollo, pp. 89-90, 94.
44
Supra note 6.
45 Id.

11~
 DECISION 13 G.R. No. 196637

judicata in the SEC case, nor will the final disposition of the SEC case operate
as res judicata in the former civil suit.

Respondent maintains that it is not guilty of forum shopping since there

is no similarity of parties, issues, reliefs sought and evidence. As to this
Court's pronouncement in Union Bank ofthe Phils. v. Court ofAppeals,46 the
CA correctly pointed out that a close reading of the decision in that case
reveals that Union Bank was found guilty of forum shopping for filing a
petition for certiorari in the Supreme Court when its motion to dismiss was
still pending with the SEC, and does not pertain to the complaints filed in the
regular courts for rescission of contracts.

Finally, respondent contends that the CA correctly held that when

Union Bank filed its complaint in the RTC against the Spouses Yutingco on
September 26, 1997, the MANCOM was not yet created and no Liquidator
had been appointed.

The Court's Ruling

We deny the petition.

Litis pendentia as a ground for the dismissal of a civil action

contemplates a situation wherein another action is pending between the same
parties for the same cause of action, such that the second action becomes
unnecessary and vexatious. 47 It is one of the grounds that authorizes a court to
dismiss a case motu proprio, as provided in Sec. 1(e), Rule 16 of the 1997
Rules of Civil Procedure. 48

For litis pendentia to exist, the following requisites or elements must

concur: (a) identity of parties, or at least such parties who represent the same
interests in both actions; (b) identity of rights asserted and relief prayed for,
the relief being founded on the same facts; and (c) identity with respect to the
two (2) preceding particulars in the two (2) cases is such that any judgment
that may be rendered in the pending case, regardless of which party is
successful, would amount to res judicata in the other case. 49

46 Id.
47
Subic Telecommunications Company, Inc. v. Subic Bay Metropolitan Authority, et al., 618 Phil. 480, 493
(2009), citing Guevara v. BPI Securities Corporation, 530 Phil 342, 366 (2006).
48
SECTION 1. Grounds. - Within the time for but before filing the answer to the complaint or pleading
asserting a claim, a motion to dismiss may be made on any of the following grounds:
xxxx
(e) That there is another action pending between the same parties for the same cause[.]
49
Supra note 47 at 494-495.

Mb
 DECISION 14 G.R. No. 196637

We sustain the CA in holding that litis pendentia is not applicable to

the present case.

On the first requisite, there is no identity of parties considering that the

Yutingcos were ordered dropped from SEC Case No. 09-97-5764 pursuant to
Union Bank of the Phils. v. Court of Appeals 50 which was decided in 1998.
This Court ruled therein that the SEC cannot acquire jurisdiction over an
individual filing a petition for suspension of payments together with a
corporate entity. 51

In Civil Case No. 66477 filed by Union Bank, the Spouses Yutingco
are being sued as sureties for the loans obtained by NIKON from Union Bank,
along with petitioner who is the present registered owner of the EYCO
properties. SEC Case No. 09-97-5764 was initiated by EYCO and the
Yutingcos, seeking a suspension of payments for its financially distressed
companies, which included NIKON and petitioner. Notably, NIKON is not
impleaded as defendants in Civil Case No. 09-97-5764, Union Bank having
asserted that the Spouses Yutingco are the real parties in interest being the
controlling stockholders of NIKON and EYCO, and sureties of NIKON's
loans with Union Bank. 52 While petitioner and Union Bank are among the
creditors affected by the filing of the SEC case, the proceedings therein are
not adversarial.

The second requisite is likewise absent. In Civil Case No. 664 77, Union
Bank sought to rescind the sale of certain properties of EYCO to petitioner,
on the theory that the Yutingcos/EYCO colluded with petitioner to divert the
assets of NIKON to purchase real properties under the name ofEYCO. Union
Bank prayed that ownership of the properties be reverted to NIKON so that
these can be used to pay for credit facilities extended to it by Union Bank,
pursuant to the undertaking of the Yutingcos under the Continuing Surety
Agreement.

On the other hand, SEC Case No. 09-97-5764 was initiated by EYCO
seeking a declaration of suspension of payments under the provisions of P.D.
No. 902-A. While it is true that EYCO's creditors have been directed to file
its claims under existing contracts with the debtor-corporations - the ultimate
objective being the equitable distribution of earnings from the business under
rehabilitation -- the validity of the sale to petitioner of EYCO' s properties is

50
Supra Note 6.
51
Id. at 825, citing Chung Ka Bio v. Intermediate Appellate Court, et al., 246 Phil. 556 (1988); Modern Paper
Products, Inc., et al. v. Court of Appeals, et al., 350 Phil. 402 ( 1998).
52
Records, pp. 1685-1687, Vol. Ill.

f'1
 DECISION 15 G.R. No. 196637

the principal issue in Civil Case No. 664 77. Thus, it cannot be said that the
rights asserted and the reliefs prayed for are the same. 53

Moreover, SEC took cognizance of the petition for suspension of

payments, having been vested with exclusive jurisdiction under P.D. No. 902-
A over such recourse by financially distressed corporations. While a
management committee or rehabilitation receiver may review or seek
modification of existing contracts of the debtor-corporation, this is merely an
incident of the specific powers granted by law and only for the purpose of
maintaining the viability of the debtor-corporation which would ultimately
benefit the creditors. The RTC, on the other hand, unquestionably has
jurisdiction to hear and decide actions incapable of pecuniary estimation, such
as the suit for rescission of sale (Civil Case No. 664 77).

Finally, the third element is also lacking. Any judgment in Civil Case
No. 664 77 will not have the effect of res judicata to the proceedings in SEC
Case No. 09-97-5764, and vice versa. 54 Any judgment or final disposition by
the SEC on the claims against the debtor-corporations will not fully resolve
the issues before the trial court (i.e., validity of the sale of EYCO properties
in favor of petitioner, real ownership of the properties and damages). The
rulings issued by the SEC Hearing Panel in the course of rehabilitation will
not settle the issue of whether the Spouses Yutingco, EYCO and petitioner
connived to ensure that the properties of NIKON will not answer for the
latter's huge loans obtained from Union Bank. Rehabilitation proceedings are
summary in nature; they do not include adjudication of claims that require full
trial on the merits. 55

Conversely, the trial court's decision annulling the contract of sale in

favor of petitioner will not in any way determine the viability of rehabilitation
plan for EYCO, nor provide an equitable distribution of the assets of the
debtor-corporations. It bears stressing that the properties subject of Civil Case
No. 664 77 were never included in the properties of EYCO placed in the
custody of the MANCOM and eventually the Liquidator, for distribution to
all claimants and creditors.

There being no litis pendentia or res judicata, we find Union Bank not
guilty of forum shopping.

Jurisprudence has laid down the test for determining whether a party
violated the rule against forum shopping. Forum shopping exists where the
elements of litis pendentia are present or where a final judgment in one case

53 See Philippine Woman's Christian Temperance Union, Inc. v. Abiertas House of Friendship, Inc., et al.,
354 Phil. 791, 801 (1998).
54
Id. at 801.
55
See Steel Corporation of the Phils. v. Mapfre Insular Insurance Corporation, et al., 719 Phil. 638, 655-
656 (2013), citing Advent Capital and Finance Corporation v. Alcantara, et al., 680 Phil. 238, 246(2012).

~
 DECISION 16 G.R. No. 196637

will amount to res judicata in the other. 56 The requisites of litis pendentia not
having concurred, and the issues presented in SEC Case No. 09-97-5764 and
RTC not being identical, Union Bank is therefore not guilty of forum
shopping. 57

As already discussed, the main issue in the SEC petition is the viability
of EYCO to continue their businesses. The debtor-corporations, who having
allegedly sufficient assets to cover all its debts, foresees the impossibility of
meeting those debts when they respectively fall due. In Civil Case No. 66477,
the issue being litigated is the validity of the contract of sale of EYCO
properties to petitioner, allegedly made in fraud of NIKON's creditor, Union
Bank. Clearly, the issues in the two cases are not identical.

As correctly stated by the CA, the act of forum shopping raised in the
present case should be distinguished from that adjudged in Union Bank ofthe
Phils. v. Court of Appeals 58 where the charge of forum shopping arose from
Union Bank's resort to a petition for certiorari in the CA, even as its motion
to dismiss based on lack of jurisdiction of the SEC and propriety of suspension
of payments was still pending in the SEC. Thus:

As to the issue of forum-shopping, we fully subscribe to the Court of

Appeals in ruling that such violation existed when it declared:

Finally, the charge that petitioner is guilty of forum shopping - which

is the institution of two or more actions or proceedings grounded on the same
cause - cannot unceremoniously be glossed over. It is patent that the instant
petition and the pending motion to dismiss before the SEC raise identical
issues, namely, lack of jurisdiction and the propriety of the suspension of
payments. 59 (underlining supplied, italics in the original)

Here, forum shopping was among the grounds raised in the motions
to dismiss filed by EYCO and the Yutingcos who assailed Union Bank for
having filed a motion to dismiss in the SEC case and for having earlier filed
other complaints in different courts citing the same transactions and
fraudulent dispositions of the same properties allegedly committed by them. 60
They contend that it is the SEC which has jurisdiction over all properties of
the debtor-corporations under rehabilitation such that Union Bank should
have filed its claim against EYCO and NIKON before the SEC.

56
Rudecon Management Corporation v. Singson, 494 Phil. 581 (2005); citing Ayala Land Inc. v. Valisno,
381 Phil. 518 (2000).
57
See Phil. Woman's Christian Temperance Union Inc. v. Abiertas House of Friendship, Inc. et al., supra
note 53.
58
Supra note 6.
59
Id. at 831-832.
60
Rollo, p. 82.

M~
 DECISION 17 G.R. No. 196637

As already mentioned, the properties subject of Civil Case No. 66477

were not included in the rehabilitation proceedings before the SEC. These
properties were sold to petitioner one day before the filing of the petition with
the SEC where EYCO sought the suspension of payments of debts to its
creditors and the rehabilitation of its companies. Union Bank filed the
rescission case in the trial court against EYCO, petitioner and the Yutingcos,
the latter being sureties of NIKON who availed of Union Bank's credit
facilities. Union Bank sought to rescind the allegedly fraudulent sale of
EYCO's properties purchased out of NIKON's assets, and revert their
ownership to NIKON. Clearly, the issues in the two cases are not the same,
and the reliefs prayed for are different.

It may be mentioned that under the new law on corporate rehabilitation

and insolvency, Republic Act No. 10142 (Financial Rehabilitation and
Insolvency Act [FRIAJ of 2010), among those exempted from the coverage
of a Stay Order are actions filed against sureties or persons solidarily liable
with the debtor.

SECTION. 18. Exceptions to the Stay or Suspension Order. -The

Stay or Suspension Order shall not apply:

xxxx

(c) to the enforcement of claims against sureties and other

persons solidarily liable with the debtor, and third party or
accommodation mortgagors as well as issuers of letters of
credit, unless the property subject of the third party or
accommodation mortgage is necessary for the rehabilitation
of the debtor as determined by the court upon
recommendation by the rehabilitation receiver[.] 61
(emphasis supplied)

Petitioner nonetheless contends that the matter of interests and rights of

the creditors of the debtor-corporations are vested on the management
committee created pursuant to P.D. 902-A. With the appointment of a
MANCOM, the proper party to file the action for rescission of the sale of
EYCO properties to petitioner is clearly the rehabilitation receiver appointed
by SEC. Union Bank thus has no legal personality to institute Civil Case No.
664 77 involving the assets of the debtor-corporations under rehabilitation.

We find no reversible error in the CA's ruling that when Union Bank
filed Civil Case No. 664 77 on September 26, 1997, it still possessed the legal
capacity (not legal personality) to do so. This is because it was only on
October 27, 1997 that the MANCOM was created.

61
R.A. No. 10142, Sec. 18(c).

~""'
 DECISION 18 G.R. No. 196637

Notwithstanding the CA's proper denial of the motion to dismiss Civil

Case No. 66477, we hold that said case should have been suspended upon the
constitution of the MANCOM.

The applicable law on the suspension of actions for claims against

corporations is P.D. No. 902-A, which was in force at the time EYCO filed its
petition for suspension of payments with the SEC.

The pertinent provisions of P .D. No. 902-A read:

Section 5. In addition to the regulatory adjudicative functions of the

Securities and Exchange Commission over corporations, partnerships and
other forms of associations registered with it as expressly granted under
existing laws and decrees, it shall have original and exclusive jurisdiction
to hear and decide cases involving:
xxxx
d) Petitions of corporations, partnerships or
associations to be declared in the state of suspension of
payments in cases where the corporation, partnership or
association possesses sufficient property to cover all its debts
but foresees the impossibility of meeting them when they
respectively fall due or in cases where the corporation,
partnership or association has no sufficient assets to cover its
liabilities, but is under the management of a Rehabilitation
Receiver or Management Committee created pursuant to this
Decree. 62

Section 6. In order to effectively exercise such jurisdiction, the

Commission shall possess the following:
xxxx
c) To appoint one or more receivers of the property,
real or personal, which is the subject of the action pending
before the Commission in accordance with the pertinent
provisions of the Rules of Court in such other cases
whenever necessary in order to preserve the rights of the
parties-litigants and/or protect the interest of the investing
public and creditors. x x x Provided, further, that upon
appointment of a management committee, rehabilitation
receiver, board or body, pursuant to this Decree, all
actions for claims against corporations, partnerships or
associations under management or receivership pending
before any court, tribunal, board or body shall be
suspended accordingly. 63 ( emphasis supplied)

62
Sec. 3 of P.D. No. 1758, s. 1981.
63
Sec. 4 of P.D. No. 1758, s. 1981.

~~
 DECISION 19 G.R. No. 196637

In Rizal Commercial Banking Corporation v. Intermediate Appellate

Court, et al., 64 the Court held that once a management committee,
rehabilitation receiver, board or body is appointed pursuant to P.D. 902-A, all
actions for claims against a distressed corporation pending before any court,
tribunal, board or body shall be suspended accordingly.

In Castillo v. Uniwide Warehouse Club, Inc., et al., 65 we explained the

coverage of the suspension order, thus:

Jurisprudence is settled that the suspension of proceedings

referred to in the law uniformly applies to "all actions for claims" filed
against a corporation, partnership or association under management
or receivership, without distinction, except only those expenses incurred
in the ordinary course of business. In the oft-cited case of Rubberworld
(Phils.), Inc. v. NLRC, the Court noted that aside from the given exception,
the law is clear and makes no distinction as to the claims that are
suspended once a management committee is created or a rehabilitation
receiver is appointed. Since the law makes no distinction or exemptions,
neither should this Court. Ubi lex non distinguit nee nos distinguere
debemos. Philippine Airlines, Inc. v. Zamora declares that the automatic
suspension of an action for claims against a corporation under a
rehabilitation receiver or management committee embraces all phases of
the suit, that is, the entire proceedings of an action or suit and not just
the payment of claims.

xxxx
At this juncture, it must be conceded that the date when the claim
arose, or when the action was filed, has no bearing at all in deciding whether
the given action or claim is covered by the stay or suspension order. What
matters is that as long as the corporation is under a management
committee or a rehabilitation receiver, all actions for claims against it,
whether for money or otherwise, must yield to the greater imperative
of corporate revival, excepting only, as already mentioned, claims for
payment of obligations incurred by the corporation in the ordinary
course of business. 66 ( citations omitted, emphasis supplied)

In Philippine Airlines Incorporated, et al. v. Zamora, 67 the Court

reiterated the reason for suspending claims during rehabilitation, viz:

The raison d'etre behind the suspension of claims pending

rehabilitation proceedings was explained in this wise:

In light of these powers, the reason for suspending

actions for claims against the corporation should not be
difficult to discover. It is not really to enable the

64
378 Phil. 10, 21-22 (1999).
65
634 Phil. 41 (2010).
66
Id. at 50-52.
67
543 Phil. 546 (2007).

~
 DECISION 20 G.R. No. 196637

management committee or the rehabilitation receiver to

substitute the defendant in any pending action against it
before any court, tribunal, board or body. Obviously, the
real justification is to enable the management committee
or rehabilitation receiver to effectively exercise its/his
powers free from any judicial or extra-judicial
interference that might unduly hinder or prevent the
"rescue" of the debtor company. To allow such other
action to continue would only add to the burden of the
management committee or rehabilitation receiver, whose
time, effort and resources would be wasted in defending
claims against the corporation instead of being directed
toward its restructuring and rehabilitation. 68 (italics in the
original, emphasis supplied)

Thus, while the motions to dismiss Civil Case No. 664 77 should have
been denied by the trial court, said case should have also been suspended in
view of the creation of the MANCOM on October 27, 1997. As borne by the
records, the case did not go beyond pre-trial stage because of the long
exchange of pleadings between the parties upon the sole incident of the
motions to dismiss filed by EYCO and Yutingcos. It was only on March 22,
2005 that the trial court issued the order granting the motions to dismiss.
Union Bank appealed to the CA, which resulted in more delays until the CA
rendered the assailed decision reversing the trial court's dismissal of the case.

Expectedly, the present controversy was overtaken by succeeding

developments in SEC Case No. 09-97-5764.

The rehabilitation plan of a group of creditors earlier adopted by the

SEC Hearing Panel, was disapproved on September 14, 1999 by the SEC En
Banc which granted the appeal of the Consortium. The suspension of payment
proceedings were terminated, the committees created dissolved and
discharged, the dissolution and liquidation of the petitioning corporations
were ordered, and a Liquidator appointed.

The case was remanded to the hearing panel for liquidation

proceedings. On appeal by EYCO (CA-G.R. SP No. 55208), the CA upheld
the SEC ruling. EYCO then filed a petition for certiorari before this Court,
docketed as G.R. No. 145977, which case was eventually dismissed under
Resolution dated May 3, 2005 upon joint manifestation and motion to dismiss
filed by the parties. Said resolution became final and executory on June 16,
2005. 69

By October 10, 2000, the SEC had directed all creditors/claimants of

the companies belonging to EYCO to file their formal claims with the
Liquidator. Atty. Concepcion took over as Liquidator on May 31, 2001 and

68
Id. at 564; citing BF Homes, Incorporated v. Court ofAppeals, 268 Phil. 276, 284 (I 990).
69
See Bank of Philippine Islands v. Hong, et al., 682 Phil. 66, 69 (2012).

Kf\,
 DECISION 21 G.R. No. 196637

his proposed Liquidation Plan was eventually approved by the SEC on April
11, 2002.
While these developments in SEC Case No. 09-97-5764 were taking
place, R.A. No. 8799 was passed by Congress, transferring all those cases
enumerated in Sec. 5 of P.D. No. 902-A to the regional trial courts. As to the
implications of the transfer of jurisdiction to the appropriate regional trial
courts of cases formerly handled by the SEC, this Court has previously ruled
that the proceedings in SEC Case No. 09-97-5764 was effectively terminated
upon the disapproval of the SAC rehabilitation plan for the EYCO Group of
Companies, and the order of dissolution and liquidation issued by the SEC En
Banc on September 14, 1999.

In Bank of the Philippine Islands v. Hong, et al., 70 a petition for review

on certiorari was filed in this Court by BPI assailing the CA decision which
affirmed the trial court's denial of its motion to dismiss the injunction suit
filed by the respondent, an unsecured creditor of NIKON. BPI moved to
dismiss the injunction case arguing that, by respondent's own submissions, it
is the SEC which has jurisdiction over the reliefs prayed for in respondent's
complaint, and that respondent actually resorted to forum shopping since he
filed a claim with the SEC and the designated Liquidator in the ongoing
liquidation of EYCO.

Before this Court, BPI as secured creditor of EYCO who initiated

foreclosure proceedings, raised the sole issue of whether the RTC can take
cognizance of the injunction suit despite the pendency of SEC Case No. 09-
97-5764. We denied BPI's petition, as follows:

Previously, under the Rules of Procedure on Corporate Recovery,

the SEC upon termination of cases involving petitions for suspension of
payments or rehabilitation may, motu proprio, or on motion by any
interested party, or on the basis of the findings and recommendation of the
Management Committee that the continuance in business of the debtor is no
longer feasible or profitable, or no longer works to the best interest of the
stockholders, parties-litigants, creditors, or the general public, order the
dissolution of the debtor and the liquidation of its remaining assets
appointing a Liquidator for the purpose. The debtor's properties are then
deemed to have been conveyed to the Liquidator in trust for the benefit of
creditors, stockholders and other persons in interest. This notwithstanding,
any lien or preference to any property shall be recognized by the Liquidator
in favor of the security or lienholder, to the extent allowed by law, in the
implementation of the liquidation plan.

However, R.A. No. 8799, which took effect on August 8, 2000,

transferred to the appropriate regional trial courts the SEC's jurisdiction
over those cases enumerated in Sec. 5 of P.D. No. 902-A. Section 5.2 of
RA. No. 8799 provides:

10 Supra.

)111
DECISION 22 G.R. No. 196637

SEC. 5.2 The Commission's jurisdiction over all

cases enumerated under Section 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. x x x

Upon the effectivity of R.A. No. 8799, SEC Case No. 09-97-5764
was no longer pending. The SEC finally disposed of said case when it
rendered on September 14, 1999 the decision disapproving the petition
for suspension of payments, terminating the proposed rehabilitation
plan, and ordering the dissolution and liquidation of the petitioning
corporation. With the enactment of the new law, jurisdiction over the
liquidation · proceedings ordered in SEC Case No. 09-97-5764 was
transferred to the RTC branch designated by the Supreme Court to exercise
jurisdiction over cases formerly cognizable by the SEC. As this Court held
in Consuelo Metal Corporation v. Planters Development Bank:

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
Ord~r directing the dissolution of CMC and the transfer of
the liquidation proceedings before the appropriate trial court.
The SEC finally disposed of CMC's petition for
suspension of payment when it determined that CMC
could no longer be successfully rehabilitated.

However, 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. xxx

/41
 DECISION 23 G.R. No. 196637

There is no showing in the records that SEC Case No. 09-97-5764

had been transferred to the appropriate RTC designated as Special
Commercial Court at the time of the commencement of the injunction suit
on December 18, 2000. Given the urgency of the situation and the proximity
of the scheduled public auction of the mortgaged properties as per the Notice
of Sheriffs Sale, respondent was constrained to seek relief from the same
court having jurisdiction over the foreclosure proceedings - RTC of
Valenzuela City. Respondent thus filed Civil Case No. 349-V-00 in the RTC
of Valenzuela City on December 18, 2000 questioning the validity of and
enjoining the extrajudicial foreclosure initiated by petitioner. Pursuant to its
original jurisdiction over suits for injunction and damages, the RTC of
Valenzuela City, Branch 75 properly took cognizance of the injunction case
filed by the respondent. No reversible error was therefore committed by
the CA when it ruled that the RTC of Valenzuela City, Branch 75 had
jurisdiction to hear and decide respondent's complaint for injunction
and damages.

Lastly, it may be mentioned that while the Consortium of Creditor

Banks had agreed to end their opposition to the liquidation proceedings
upon the execution of the Agreement dated February 10, 2003, on the basis
of which the parties moved for the dismissal of G.R. No. 145977, it is to be
noted that petitioner is not a party to the said agreement. Thus, even
assuming that the SEC retained jurisdiction over SEC Case No. 09-97-5764,
petitioner was not bound by the terms and conditions of the Agreement
relative to the foreclosure of those mortgaged properties belonging to
EYCO and/or other accommodation mortgagors. 71 (citations omitted,
emphasis st1;pplied)

Without delving into matters concerning the liquidation proceedings in

SEC Case No. 09-97-5764, We hold that with the termination of suspension
of payment proceedings in SEC Case No. 09-97-5764 on September 14, 1999,
there is no more legal hindrance to the continuation of Civil Case No. 66477.
Records show that the Spouses Yutingco already filed their Answer but BPI
had requested for suspension of proceedings until the present petition is finally
resolved. 72

WHEREFORE, the petition is DENIED. The November 15, 2010

Decision and April 19, 2011 Resolution of the Court of Appeals in CA-G.R.
CV No. 861 72 are hereby AFFIRMED.

SO ORDERED.

71 Id. at 74-77.
72
Records, pp. 1867-1868, 1882-1894, Vol. III.
DECISION 24 G.R. No. 196637

WE CONCUR:

~1~e
Chairperson
...
A l l r A / ~P
FRA~rRDELEZA
Associate Justice Associate Justice

(On wellness leave)

ROSMARID.CARANDANG
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that

the conclusions in the above Decision had been reached in consultation before
the case was assigned to the writer of the opinion of the Court's Division.