Metropolitan Bank v. Quilts
REITERATIONFacts
The Antecedents: Relita P. de los Santos, Corporate Secretary of Quilts & All, Inc. (Quilts), issued a Secretary's Certificate authorizing Senen B. Dizon, President of Quilts, to mortgage a property of Quilts to secure Dizon's personal loan of P700,000.00 with Metropolitan Bank & Trust Company (Metrobank). Metrobank restructured Dizon's loan based on this certificate, and the mortgage was annotated on Quilts' Transfer Certificate of Title (TCT) No. 74172. Procedural History: Quilts, through new counsel, demanded cancellation of the mortgage, alleging the special board meeting where the authorization was purportedly granted lacked a quorum and that the corporation's articles of incorporation prohibited hypothecating corporate property for personal obligations. Quilts filed a complaint for annulment and cancellation of mortgage against Metrobank, Dizon, and de los Santos. The RTC initially dismissed the complaint but later reconsidered and deferred the determination of Metrobank's motion to dismiss until trial. Metrobank filed a petition for certiorari, prohibition, or mandamus with the Court of Appeals (CA), contesting the reinstatement of the complaint. The CA upheld the RTC's jurisdiction over Metrobank but dismissed the case against Dizon and de los Santos, deeming the issue of their ultra vires acts as an intra-corporate matter within the SEC's exclusive jurisdiction. The CA suspended proceedings against Metrobank pending SEC resolution and found paragraph 10 of Quilts' complaint sufficient basis for the case against Metrobank. The Petition: Metrobank filed the instant petition seeking to set aside the CA's resolution, arguing that Quilts' complaint failed to state a cause of action against it.
Issue(s)
Whether Quilts' complaint sufficiently states a cause of action against Metrobank. Whether the Court of Appeals erred in upholding the jurisdiction of the lower court with respect to Metrobank and ordering the suspension of further proceedings.
Ruling
The petition is GRANTED. The Resolution of the Court of Appeals is MODIFIED, and Civil Case No. 5570 against Metrobank is DISMISSED.
Ratio Decidendi
On the issue of whether Quilts' complaint sufficiently states a cause of action against Metrobank: The Court ruled that the complaint does not sufficiently state a cause of action against Metrobank. The allegations in the complaint primarily concern the alleged ultra vires acts of Dizon and de los Santos, which are intra-corporate matters falling under the Securities and Exchange Commission's (SEC) jurisdiction. Paragraph 10 of the complaint, which the CA relied upon, merely states legal conclusions and does not aver ultimate facts demonstrating Metrobank's knowledge or participation in any fraudulent act. The Court emphasized that for a cause of action against Metrobank to exist, the complaint must allege facts showing that Metrobank had prior knowledge, or could have known with due diligence, that the Secretary's Certificate was false or that the mortgage was illegal. The complaint failed to allege specific overt acts showing Metrobank's conspiracy with the other defendants to defraud Quilts. Relying on the Secretary's Certificate in good faith, without awareness of any flaw, and on the presumption that ordinary business courses were followed, is a valid defense for Metrobank. The Court cited Alzua and Armalot vs. Johnson and Bacolod-Murcia Milling Co., Inc. vs. First Farmers Milling Co., Inc. to support the principle that legal conclusions without supporting ultimate facts do not aid a pleading, and that a party must allege facts showing notice or knowledge of any illegality. On the issue of the Court of Appeals' ruling on jurisdiction and suspension of proceedings: While the Court of Appeals correctly identified the issue of ultra vires acts as an intra-corporate matter for the SEC, its decision to suspend proceedings against Metrobank and uphold the sufficiency of the complaint against it was found to be erroneous. The Court found that the complaint, as it pertains to Metrobank, lacked the necessary averments to establish a cause of action. Therefore, the dismissal of the case against Metrobank was warranted, rendering the suspension of proceedings moot.
Main Doctrine
A complaint states a cause of action against a bank for annulment of mortgage when it alleges facts showing the bank's knowledge or constructive knowledge of the falsity of the secretary's certificate or the illegality of the mortgage, or that the bank acted in conspiracy to defraud the corporation. Mere reliance on a secretary's certificate without further inquiry is insufficient if the complaint alleges facts demonstrating the bank's awareness of the irregularities.