Diversified Plastic Film System v. Philippine Investment One
REITERATIONFacts
The Antecedents: Development Bank of the Philippines (DBP) granted a loan to All Asia Capital and Trust Corporation (All Asia), which in turn lent the amount to Diversified Plastic Film System, Inc. (Diversified). Diversified executed a Mortgage Trust Indenture (MTI) in favor of All Asia as trustee for its lenders. Subsequently, All Asia executed a dation in payment transferring its rights in the MTI to DBP. DBP then executed a Deed of Assignment covering Diversified's loan in favor of Philippine Investment One (SPV-AMC), Inc. (PI-One). Due to Diversified's failure to pay, PI-One initiated extra-judicial foreclosure proceedings. Diversified filed a complaint for injunction, obtaining a Temporary Restraining Order (TRO) and later a Writ of Preliminary Injunction (WPI) from the RTC of Mariveles, Bataan. PI-One filed a Petition for Certiorari before the Court of Appeals (CA), arguing grave abuse of discretion by the RTC. The CA annulled and set aside the WPI. Procedural History: Diversified's subsequent petition before the Supreme Court (SC) to reinstate the WPI was denied. Meanwhile, PI-One filed a Petition for Appointment as Trustee before the RTC of Makati City, Branch 143, asserting it became the new creditor and trustee by virtue of the assignments. Diversified opposed, raising issues of jurisdiction, improper service of summons, and PI-One's lack of qualification as trustee. The RTC granted PI-One's petition, appointing it as trustee. Diversified appealed to the CA, which affirmed the RTC's decision. Diversified then filed the instant Petition for Review on Certiorari before the SC. The Petition: Diversified assailed the CA's Decision and Resolution, arguing that the RTC erred in appointing PI-One as trustee due to lack of jurisdiction over Diversified's person (improper service of summons) and PI-One's lack of qualification as trustee. Diversified also contended that the Deed of Assignment from DBP to PI-One was void for violating R.A. No. 9182.
Issue(s)
Whether the RTC has jurisdiction to appoint PI-One as trustee. Whether the RTC acquired jurisdiction over the person of Diversified. Whether the Deed of Assignment between DBP and PI-One is valid. Whether PI-One is qualified to be appointed as trustee under the MTI.
Ruling
The Supreme Court granted the petition, reversed and set aside the CA's decision and resolution, and dismissed PI-One's petition for appointment as trustee. The Court found that while the RTC had jurisdiction over the subject matter, it failed to acquire jurisdiction over the person of Diversified due to improper service of summons. Furthermore, the Deed of Assignment between DBP and PI-One was declared void for non-compliance with Section 12 of R.A. No. 9182. Even assuming a valid assignment, PI-One was disqualified from being a trustee as it did not meet the qualification of being an institution duly authorized to engage in the trust business, as required by the MTI.
Ratio Decidendi
On the RTC's jurisdiction to appoint a trustee: The Court affirmed the CA's finding that the RTC has the authority to take cognizance of PI-One's petition for the appointment of a trustee. Section 7.08 of the MTI expressly provides that if no trustee is appointed within two months of a vacancy, any lender may file a petition with a court of competent jurisdiction. Moreover, the principal relief sought in a petition for appointment of a trustee is not for the recovery of a sum of money or real property, making it a case incapable of pecuniary estimation, thus falling under the jurisdiction of the RTC as per Batas Pambasa Blg. 129. On the RTC's jurisdiction over the person of Diversified: The Court found that the RTC failed to acquire jurisdiction over Diversified due to improper service of summons. Section 11, Rule 14 of the Rules of Court enumerates the exclusive persons to whom summons may be served on a domestic private juridical entity, and service upon Diversified's receiving officer was not among them. The Court rejected the RTC's conclusion that Diversified's filing of an Answer Ad Cautelam constituted voluntary appearance, emphasizing that a special appearance to challenge jurisdiction, even if followed by a qualified answer, does not amount to voluntary submission. Diversified consistently challenged the RTC's jurisdiction throughout the proceedings. On the validity of the Deed of Assignment: The Court found the Deed of Assignment between DBP and PI-One to be invalid for failure to comply with Section 12 of R.A. No. 9182. This section requires prior written notice to the borrower and all persons holding prior encumbrances, as well as a written notice after the sale or transfer, and a prior certification of eligibility. The Court noted that the only evidence presented was a letter dated the same day as the assignment, which was insufficient to prove compliance with the mandatory notice requirements. The Court cited previous rulings stating that failure to comply with these notice requirements renders the transfer of non-performing loans to an SPV ineffective. On PI-One's qualification as trustee: Even assuming a valid assignment, the Court held that PI-One could not be appointed as trustee. Section 13 of R.A. No. 9182 states that transfers to SPVs follow rules on subrogation and assignment of credits. Under established jurisprudence, an assignee acquires no greater rights than the assignor and is bound by the same conditions. Section 7.02 of the MTI explicitly requires the trustee to be an institution duly authorized to engage in the trust business in Metro Manila. Since PI-One is not engaged in the trust business, it cannot meet this qualification and is therefore disqualified from serving as trustee.
Main Doctrine
The assignment of a loan to a Special Purpose Vehicle (SPV) is invalid if the transferring financial institution fails to comply with the notice requirements under Section 12 of R.A. No. 9182. Furthermore, an assignee cannot be appointed as a trustee if it does not meet the qualifications stipulated in the trust indenture, even if it is the assignee of the loan.