Land Bank of the Philippines v. Capistrano
NEW DOCTRINEFacts
1. The Antecedents: On September 19, 1980, Filand Manufacturing and Estate Development Co., Inc. and Emilio Ching obtained a P10,000,000.00 loan from Land Bank of the Philippines. When they failed to repay, Land Bank filed a collection suit. Subsequently, on December 29, 1984, Filand Manufacturing, Emilio Ching, his spouse Inai Teh, and Top Construction Enterprises, Inc. filed a petition for declaration of insolvency before the Regional Trial Court (RTC) of Pasay City, citing business setbacks due to a fire and the economic crisis following Senator Aquino's assassination as reasons for their inability to meet their financial obligations. 2. Procedural History: The RTC of Pasay City, on January 29, 1985, issued an Order of Adjudication declaring the private respondents insolvent. Land Bank moved for reconsideration, arguing lack of jurisdiction and defects in the petition. The RTC denied the motion and appointed Land Bank as assignee. Land Bank declined, and the City Treasurer of Pasay City was appointed. Land Bank filed a Notice of Appeal and Record on Appeal, which the RTC forwarded to the Supreme Court. The Supreme Court initially questioned the mode of appeal and required explanations. Subsequently, it directed Land Bank to file a petition for review on certiorari, which was complied with. On March 3, 1986, the RTC rendered a decision declaring the corporations insolvent but not discharging them, while discharging the spouses Emilio Ching and Inai Teh. The Supreme Court issued a temporary restraining order against enforcing the decision, later lifting it for the spouses. 3. The Petition: Land Bank, in its petition for review on certiorari, argues that the Securities and Exchange Commission (SEC), not the RTC, has jurisdiction over the insolvency petition of corporations, citing Presidential Decree No. 902-A. The private respondents contend that insolvency petitions are not among the cases under the SEC's exclusive jurisdiction as enumerated in P.D. 902-A. The Supreme Court, after impleading the SEC and hearing from an amicus curiae, ruled that the regular courts retain exclusive and original jurisdiction over insolvency proceedings for private corporations under Act 1956, and the SEC's jurisdiction is limited to cases of suspension of payments as an incident to its powers under P.D. 902-A.
Issue(s)
Whether the Securities and Exchange Commission (SEC) has exclusive and original jurisdiction over petitions for declaration of insolvency filed by private corporations. Whether Presidential Decree No. 902-A, as amended, repealed the Insolvency Law (Act No. 1956) concerning corporate insolvency proceedings.
Ruling
The petition for review on certiorari is denied. The temporary restraining order issued on April 14, 1986, is lifted. The Regional Trial Court has exclusive and original jurisdiction over petitions for declaration of insolvency of private corporations.
Ratio Decidendi
On the jurisdiction over petitions for declaration of insolvency of private corporations: The Court held that under Act No. 1956, the Insolvency Law, jurisdiction over proceedings for suspension of payments, voluntary and involuntary insolvency is exclusively vested in the regular courts. Presidential Decree No. 1758, issued in 1981, added to the exclusive and original jurisdiction of the SEC under Section 5 of P.D. No. 902-A, the power to entertain petitions of corporations for suspension of payments. However, this provision, specifically Section 5(d), cannot be stretched to include petitions for insolvency. The qualification in Section 5(d) that jurisdiction over corporations with no sufficient assets to cover liabilities is contingent upon them being under the management of a Rehabilitation Receiver or Management Committee created pursuant to P.D. No. 902-A effectively circumscribes the SEC's jurisdiction over insolvent corporations. This demonstrates that jurisdiction over insolvency proceedings pertains to the SEC only in continuation of or as an incident to its exercise of jurisdiction over suspension of payments cases where the corporation was already placed under a rehabilitation receiver or management committee by the SEC itself. Therefore, for a petition for declaration of insolvency where the corporation has no sufficient assets and is not under a rehabilitation receiver or management committee, and does not merely seek to suspend payments, the applicable law is Act No. 1956 on voluntary insolvency, and jurisdiction lies with the regular courts. On the repeal of the Insolvency Law by P.D. No. 902-A: The Court ruled that repeals by implication are not favored and will not be declared unless it is manifest that the legislature so intended. Construing P.D. No. 902-A, as amended, in relation to Act No. 1956, the Court found no manifest intent to repeal the Insolvency Law concerning petitions for declaration of insolvency of private corporations. The additional powers granted to the SEC under Section 6(c) and (d) of P.D. No. 902-A are ancillary powers to enable the SEC to effectively exercise its jurisdiction defined in Section 5, and do not enlarge its exclusive and original jurisdiction. Therefore, the Insolvency Law remains the applicable law for such proceedings, and jurisdiction remains with the regular courts.
Main Doctrine
The Regional Trial Court, not the Securities and Exchange Commission, has exclusive and original jurisdiction over petitions for declaration of insolvency of private corporations under Act No. 1956, as amended. The SEC may entertain such petitions only as an incident of and in continuation of its already acquired jurisdiction over petitions to be declared in the state of suspension of payments under specific circumstances outlined in Section 5(d) of P.D. No. 902-A, as amended.