Bank of the Philippine Islands v. Eduardo Hong
REITERATIONFacts
1. The Antecedents: The underlying dispute concerns the foreclosure of real properties mortgaged by Eyco Properties, Inc. and Blue Star Mahogany, Inc. to the Bank of the Philippine Islands (BPI), as successor-in-interest of Far East Bank and Trust Company. Eduardo Hong, an unsecured creditor of Nikon Industrial Corporation (part of the EYCO Group of Companies), sought to enjoin this foreclosure, arguing it was illegal and would prejudice other creditors. He contended that the properties were under the jurisdiction of the Securities and Exchange Commission (SEC) for liquidation proceedings and that the foreclosure would grant undue preference to BPI. 2. Procedural History: The EYCO Group of Companies filed for suspension of payments and rehabilitation before the SEC in 1997. The SEC initially approved a rehabilitation plan but later disapproved it, ordering dissolution and liquidation. This decision was upheld by the Court of Appeals (CA) and a subsequent petition to the Supreme Court was dismissed. While the SEC case was pending before the CA, BPI initiated extra-judicial foreclosure proceedings. Hong filed a petition for injunction and damages with the Regional Trial Court (RTC) of Valenzuela City. The RTC denied BPI's motion to dismiss, and the CA affirmed this denial, holding that the RTC had jurisdiction over the foreclosure's validity. BPI then filed the present petition for review on certiorari with the Supreme Court. 3. The Petition: This case is a petition for review on certiorari under Rule 45 of the Rules of Court. BPI assails the CA's decision affirming the RTC's jurisdiction over Hong's injunction suit. The sole issue raised is whether the RTC can take cognizance of the injunction suit despite the pendency of the SEC liquidation case. BPI argues that the SEC retains jurisdiction over the properties and that the RTC acted without jurisdiction. The petition seeks to have the CA's decision reversed and the injunction suit dismissed.
Issue(s)
Whether the Regional Trial Court (RTC) can take cognizance of an injunction suit questioning the validity of extra-judicial foreclosure proceedings despite the pendency of a rehabilitation and liquidation case before the Securities and Exchange Commission (SEC). Whether the SEC retained jurisdiction over the liquidation proceedings of EYCO Group of Companies after the effectivity of Republic Act No. 8799.
Ruling
The petition is denied. The Decision of the Court of Appeals affirming the RTC's denial of the motion to dismiss is affirmed. The RTC of Valenzuela City, Branch 75, properly took cognizance of the injunction case filed by the respondent.
Ratio Decidendi
On the jurisdiction of the RTC over the injunction suit: The Court reiterated that jurisdiction is conferred by law. The nature of an action and the subject matter are determined by the material allegations of the complaint and the reliefs prayed for. Respondent Hong's complaint principally sought to enjoin the foreclosure proceedings initiated by BPI on the ground that the properties were under the SEC's jurisdiction and that the foreclosure would give undue preference to BPI, contrary to law. An action for injunction, as a principal cause of action, falls within the jurisdiction of the RTC pursuant to Section 19 of Batas Pambansa Blg. 129, as amended by Republic Act No. 7691. While the SEC has the power to issue injunctions in cases within its jurisdiction under Section 6(a) of Presidential Decree (P.D.) No. 902-A, an action for foreclosure of mortgage and its incidents, including its validity, is not among those cases over which the SEC exercises exclusive and original jurisdiction under Section 5 of P.D. No. 902-A. Therefore, the RTC properly took cognizance of the injunction case. On the SEC's retained jurisdiction over liquidation proceedings: The Court clarified the effect of Republic Act No. 8799, which transferred the SEC's jurisdiction over cases enumerated in Section 5 of P.D. No. 902-A to the appropriate RTCs. However, Section 5.2 of R.A. No. 8799 explicitly states that "The Commission shall retain jurisdiction over pending suspension of payments/rehabilitation cases filed as of 30 June 2000 until finally disposed." In this case, SEC Case No. 09-97-5764 was finally disposed of by the SEC on September 14, 1999, when it rendered its decision disapproving the petition for suspension of payments, terminating the rehabilitation plan, and ordering dissolution and liquidation. Therefore, as of the effectivity of R.A. No. 8799, the SEC case was no longer pending. Jurisdiction over the liquidation proceedings ordered in that case was transferred to the appropriate RTC designated as a Special Commercial Court. Since there was no showing that SEC Case No. 09-97-5764 had been transferred to the appropriate RTC at the time the injunction suit was filed, and given the urgency of the scheduled foreclosure, respondent Hong was constrained to seek relief from the RTC of Valenzuela City, which had jurisdiction over the foreclosure proceedings. The RTC's exercise of jurisdiction was therefore proper.
Main Doctrine
The Regional Trial Court (RTC) has jurisdiction over an action for injunction to question the validity of extrajudicial foreclosure proceedings, even if a rehabilitation and liquidation case is pending before the Securities and Exchange Commission (SEC), especially when the SEC's jurisdiction over the specific liquidation proceedings has been transferred to the appropriate RTC by operation of law.