Traders Royal Bank v. Court of Appeals
REITERATIONFacts
1. The Antecedents: Philippine Blooming Mills, Inc. (PBM) and its stockholder, Alfredo Ching, jointly filed a petition for suspension of payments with the Securities and Exchange Commission (SEC). Traders Royal Bank, a creditor of PBM, subsequently filed a collection suit against PBM and Ching, who had signed as a surety for PBM's obligations to the bank. 2. Procedural History: The SEC issued an order placing PBM under rehabilitation receivership and suspending all actions for claims against the company. PBM and Ching moved to dismiss the collection suit in the Regional Trial Court (RTC) based on this SEC order. The RTC, after dropping PBM from the complaint, denied Ching's motion to dismiss, ruling that the SEC did not have jurisdiction over individuals. Ching then filed a petition for certiorari and prohibition with the Court of Appeals (CA), which nullified the RTC's orders and prohibited further proceedings in the collection case, holding that the SEC had assumed jurisdiction over Ching. The bank then filed the present petition for review. 3. The Petition: Traders Royal Bank assails the Court of Appeals' decision, arguing that the appellate court erred in holding that the SEC assumed jurisdiction over Alfredo Ching as a co-signer or surety and that the RTC could not assume jurisdiction over him to avoid multiplicity of suits. The bank further contends that the SEC's assumed jurisdiction over Ching was not to the exclusion of courts of coordinate rank. The bank asserts that the SEC's jurisdiction is limited to corporations and their assets, not private individuals, and that Ching's joinder in the SEC petition did not divest the RTC of its jurisdiction over him as a surety.
Issue(s)
Whether the SEC assumed jurisdiction over Alfredo Ching as a co-signer or surety of PBM, thereby precluding the RTC from assuming jurisdiction over him to avoid multiplicity of suits. Whether the jurisdiction assumed by the SEC over Ching was to the exclusion of courts or tribunals of coordinate rank.
Ruling
The petition for review is granted. The decision of the Court of Appeals is set aside. The respondent Judge of the Regional Trial Court in Pasay City is ordered to reinstate Civil Case No. 1028-P and to proceed therein against the private respondent Alfredo Ching.
Ratio Decidendi
On the issue of SEC's jurisdiction over Alfredo Ching: The Supreme Court held that although Ching was impleaded as a co-petitioner in SEC Case No. 2250, the SEC could not assume jurisdiction over his person and properties. The SEC's power as a rehabilitation receiver extends only to the assets and properties of PBM, as the SEC has jurisdiction over corporations, not over private individuals, except in intra-corporate disputes. Ching's inclusion as a nominal party in the SEC case did not subject his personal properties to the rehabilitation receivership. Therefore, TRB was not barred from filing a separate suit against Ching as a surety for PBM's obligations. The Court emphasized that an anomalous situation would arise if individual sureties could escape liability by merely co-filing a petition for suspension of payments with a corporation in the SEC, whose jurisdiction is limited to corporations and their corporate assets. The term "parties-in-interest" in the SEC's rules contemplates only private individuals sued or suing as stockholders, directors, or officers in an intra-corporate dispute. On the issue of Ching's liability as surety and the exclusion of other tribunals: The Court affirmed that Ching could be sued separately to enforce his liability as a surety, as expressly provided by Article 1216 of the New Civil Code. This article allows a creditor to proceed against any or all of the solidary debtors simultaneously, and a demand made against one does not preclude subsequent demands against others as long as the debt is not fully collected. The Court reiterated the elementary principle that a corporation has a personality distinct and separate from its individual stockholders or members. Ching's act of joining as a co-petitioner with PBM in the SEC case did not vest the SEC with jurisdiction over his person or property because jurisdiction is conferred by express provision of law, not by the consent or acts of the parties. Consequently, the RTC was not precluded from assuming jurisdiction over Ching in the collection suit filed by TRB.
Main Doctrine
The Securities and Exchange Commission (SEC) has jurisdiction only over corporations, not over private individuals, except in intra-corporate disputes. Therefore, a surety's act of co-filing a petition for suspension of payments with a corporation does not vest the SEC with jurisdiction over the surety's person or property, allowing a creditor to file a separate collection suit against the surety.