12rcbc Vs Iac

11/23/2016 SUPREME COURT REPORTS ANNOTATED VOLUME 213
830 SUPREME COURT REPORTS ANNOTATED

Rizal Commercial Banking Corporation vs. Intermediate
Appellate Court
*
G.R. No. 74851. September 14, 1992.
RIZAL COMMERCIAL BANKING CORPORATION,

petitioner, vs. INTERMEDIATE APPELLATE COURT
AND BF HOMES INCORPORATED, respondents.
Corporation Law; Revised Securities Act; Distressed

Corporations; Preferred creditors may not assert preference where
corporation has asked the SEC for rehabilitation and suspension
of payments.—While it is recognized that RCBC is a preferred
creditor and likewise the highest bidder at the auction sale, We
have however stated that whenever a distressed corporation asks
the SEC for rehabilitation and suspension of payments, preferred
creditors may no longer assert such preference, but as earlier
stated, stand on equal footing with other creditors. Foreclosure
shall be disallowed so as not to prejudice other creditors, or cause
discrimination among them. If foreclosure is undertaken despite
the fact that a petition for rehabilitation has been filed,
______________
* EN BANC.
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VOL. 213, SEPTEMBER 14, 1992 831

Appellate Court
the certificate of sale shall not be delivered pending

rehabilitation. Likewise, if this has also been done, no transfer of
title shall be effected also, within the period of rehabilitation. The
rationale behind PD 902A, as amended, is to effect a feasible and
http://www.central.com.ph/sfsreader/session/000001588e0dd97eeb19cb0c003600fb002c009e/t/?o=False 1/16
viable rehabilitation. This cannot be achieved if one creditor is

preferred over the others.
FELICIANO, J., Dissenting:
Corporation Law; Revised Securities Act; Distressed

Corporations; Rehabilitation and suspension of payments; SEC
must first determine if requirements for appointment of
management committee are present.—It should be pointed out that
the appointment of a management committee or a rehabilitation
receiver is not ordinarily effected immediately upon the filing of
an application for suspension of payments and for rehabilitation.
The reason is that the SEC must first determine whether the
jurisdictional requirements for the appointment of a management
committee are present. There are at least two (2) sets of
requirements: (a) the requirements in respect of the petition for
declaration of suspension of payments; and b) the requirements
concerning the petition for creation and appointment of a
management committee.
Same; Same.—As already noted, SEC took just about six (6)
months after the filing of the petition of B.F. Homes to decide to
create and appoint a management committee. Only upon such
appointment of the management committee did the proviso in
Section 6 (c) which decrees suspension of actions for claims against
the petitioning corporation take effect. It is only then that the SEC
determines that the circumstances warranting, under the statute,
the appointment of a management committee do exist, i.e., that
there is “imminent danger of dissipation, loss, wastage or
destruction of assets—or paralization of business operations—
which [would] be prejudicial to the interest of minority
stockholders, parties litigant or the general public.” Only when
such circumstances have been determined to exist is there
justification for suspending actions for claims against the
corporation so placed under SEC management. The authority of
the SEC to suspend or freeze the judicial enforcement of claims
against a corporation is an extraordinary authority, most specially
where credits secured by specific liens on property, like real estate
mortgages, are involved; such authority cannot lightly be
assumed to have arisen simply because the corporation on its own
initiative goes to the SEC and there seeks shelter from its lawful
creditors. Lastly, but not least,
832
SUPREME COURT REPORTS ANNOTATED 832

Appellate Court
it should be recalled that creditors secured by specific liens on

property are, under our insolvency law, entitled to opt to rely
solely upon their security and hence to refrain from joining other
(unsecured) creditors who must share among themselves the
remaining assets of the insolvent corporation once voluntary or
involuntary insolvency proceedings are commenced.
PETITION for review of the decision of the Court of

Appeals.
The facts are stated in the opinion of the Court.
MEDIALDEA, J.:
This is a petition for the review of the decision of the then

Intermediate Appellate Court (IAC), dated April 8, 1986 in
ACG.R. No. SP06313, entitled “BF Homes, Inc. v. Judge
Ansberto P. Paredes, etc., et al.,” annulling the decision of
the trial court and directing the Register of Deeds to
suspend issuance of the owners’ copies of the land titles to
the Rizal Commercial Banking Corporation (“RCBC”),
purchaser of the foreclosed properties of private respondent
BF Homes, Inc. (“BF Homes”) until the matter shall have
been resolved by the Securities and Exchange Commission
(SEC) in SEC Case No. 002693 and its Resolution on May
28, 1986 denying RCBC’s motion for reconsideration.
The facts of the case are narrated in the Court of
Appeals’ decision.
On September 28, 1984, B.F. Homes filed a “Petition for
Rehabilitation and for Declaration or Suspension of
Payments” (SEC Case No. 002693) with the Securities and
Exchange Commission (SEC).
One of the creditors listed in its inventory of creditors
and liabilities was RCBC.
On October 26, 1984, RCBC requested the Provincial
Sheriff of Rizal to extrajudicially foreclose its real estate
mortgage on some properties of B.F. Homes. A notice of
extrajudicial foreclosure sale was issued by the Sheriff on
October 29, 1984, scheduled on November 29, 1984, copies
furnished both B.F. Homes (mortgagor) and RCBC
(mortgagee).
On motion of B.F. Homes, the SEC issued on November
28,
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Appellate Court
1984 in SEC Case No. 002693 a temporary restraining

order (TRO), effective for 20 days, enjoining RCBC and the
sheriff from proceeding with the public auction sale. The
sale was rescheduled to January 29, 1985.
On January 25, 1985, the SEC ordered the issuance of a
writ of preliminary injunction upon petitioner’s filing of a
bond. However, petitioner did not file a bond until January
29, 1985, the very day of the auction sale, so no writ of
preliminary injunction was issued by the SEC.
Presumably, unaware of the filing of the bond, the sheriffs
proceeded with the public auction sale on January 29,
1985, in which RCBC was the highest bidder for the
properties auctioned.
On February 5, 1985, B.F. Homes filed in the SEC a
consolidated motion to annul the auction sale and to cite
RCBC and the sheriff for contempt. RCBC opposed the
motion.
Because of the proceedings in the SEC, the sheriff
withheld the delivery to RCBC of a certificate of sale
covering the auctioned properties.
On February 13, 1985, the SEC in Case No. 002693
belatedly issued a writ of preliminary injunction stopping
the auction sale which had been conducted by the sheriff
two weeks earlier.
On March 13, 1985, despite SEC Case No. 002693,
RCBC filed with the Regional Trial Court, Br. 140, Rizal
(CC 10042) an action for mandamus against the provincial
sheriff of Rizal and his deputy to compel them to execute in
its favor a certificate of sale of the auctioned properties.
In answer, the sheriffs alleged that they proceeded with
the auction sale on January 29, 1985 because no writ of
preliminary injunction had been issued by SEC as of that
date, but they informed the SEC that they would suspend
the issuance of a certificate of sale to RCBC.
On March 18, 1985, the SEC appointed a Management
Committee for B.F. Homes.
On RCBC’s motion in the mandamus case, the trial
court issued on May 8, 1985 a judgment on the pleadings,
the dispositive portion of which states:
“WHEREFORE, petitioner’s ‘Motion for Judgment on the

pleadings’ is granted and judgment is hereby rendered ordering
respon
834

Appellate Court
dents to execute and deliver to petitioner the Certificate of the

Auction Sale of January 29, 1985, involving the properties sold
therein, more particularly those described in Annex ‘C’ of their
Answer.” (p. 87, Rollo)
On June 4, 1985, B.F. Homes filed an original complaint

with the IAC pursuant to Sec. 9 of B.P. 129 praying for
annulment of the judgment, premised on the following:
“x x x: (1) even before RCBC asked the sheriff to extrajudicially

foreclose its mortgage on petitioner’s properties, the SEC had
already assumed exclusive jurisdiction over those assets, and (2)
that there was extrinsic fraud in procuring the judgment because
the petitioner was not impleaded as a party in the mandamus
case, respondent court did not acquire jurisdiction over it, and it
was deprived of its right to be heard.” (CA Decision, p. 88, Rollo)
On April 8, 1986, the IAC rendered a decision, setting aside

the decision of the trial court, dismissing the mandamus
case and suspending issuance to RCBC of new land titles,
“until the resolution of case by SEC in Case No. 002693,”
disposing as follows:
“WHEREFORE, the judgment dated May 8, 1985 in Civil Case

No. 10042 is hereby annulled and set aside and the case is hereby
dismissed. In view of the admission of respondent Rizal
Commercial Banking Corporation that the sheriffs’ certificate of
sale has been registered on B.F. Homes’ TCT’s Nos. 51001, 51002,
51003, 51005, 51006, 51007, 51011, 51013, 51014, 51015, 51017,
51018, 51019, 51020, 51021, 51022, 51022 (sic), 51286, 51287,
51288, 51290, 51292, 51297, 51309, 51319, 51321, 51331, 51332,
51333, 51334, 51335, 51336, 51337, 51338, 51339, 51340, 51342,
51343, 51344, 51345, 51346 (sic), 51347, 48151, 48165 (sic),
48128, 48194, 68603, 71273, 71275, and 71276, the Register of
Deeds for Pasay City is hereby ordered to suspend the issuance to
the mortgageepurchaser, Rizal Commercial Banking
Corporation, of the owner’s copies of the new land titles replacing
them until the matter shall have been resolved by the Securities
and Exchange Commission in SEC Case No. 002693.” (p. 91,
Rollo) (emphasis ours).
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Appellate Court
On June 18, 1986, RCBC filed its present petition on the

following assigned errors:
1. Petitioner did not commit extrinsic fraud in

excluding private respondent as party defendant in
Special Civil Case No. 10042 as private respondent
was not indispensable party thereto, its
participation not being necessary for the full
resolution of the issues raised in said case.
2. SEC Case No. 2693 cannot be invoked to suspend
Special Civil Case No. 10042, and for that matter,
the extrajudicial foreclosure of the real estate
mortgage in petitioner’s favor, as these do not
constitute actions against private respondent
contemplated under section 6(c) of Presidential
Decree No. 902A.
3. Even assuming arguendo that the extrajudicial
sale constitutes an action that may be suspended
under section 6(c) of Presidential Decree No. 902A,
the basis for the suspension thereof did not exist so
as to adversely affect the validity and regularity
thereof.
4. The Regional Trial Court had jurisdiction to take
cognizance of Special Civil Case No. 10042.
5. The Regional Trial Court had jurisdiction over
Special Civil Case No. 10042.” (p. 5, Rollo)
On November 12, 1986, We gave due course to the petition.

On November 24, 1986, RCBC filed a “Manifestation”
informing Us that on October 16, 1986, the SEC in Case
No. 002693 had issued an Order denying the consolidated
Motion to Annul the Auction Sale and to cite RCBC and the
sheriff for contempt, disposing as follows:
“WHEREFORE, the petitioner’s ‘Consolidated Motion to Cite

Sheriff and Rizal Commercial Banking Corporation for Contempt
and to Annul Proceedings and Sale’, dated February 5, 1985,
should be, as it is, hereby DENIED.
“While we cannot direct the Register of Deeds to allow the
consolidation of the titles subject of the ‘Omnibus Motion’ dated
September 18, 1986 filed by the Rizal Commercial Banking
Corporation, and therefore, denied said Motion, neither can this
Commission restrain the said bank and the Register of Deeds
from effecting said consolidation.
“SO ORDERED.” (p. 138, Rollo, emphasis ours)
836

Appellate Court
as a consequence of which, “the Register of Deeds of Pasay

Cityeffected the transfer of title over the subject properties
topetitioner and caused the issuance of new titles in its
name,”and therefore “the interest of petitioner to continue
prosecutingthe instant petition has become moot and the
issues raisedtherein have become academic.” Petitioner
RCBC further prayedthat “x x x the (instant) petition be
deemed as mooted by theevents that transpired, x x x and
that “this petition be therebydismissed.”
We note the precipitate manner in which the transfers of
title in RCBC’s name had been effected.
Aggrieved by the appellate court’s decision, RCBC had
invoked this Court’s jurisdiction. We gave due course to its
petition on November 27, 1986. It now manifests its loss of
interest to pursue the case because it had “effectively
achieved” what had been nullified by the appellate court,
without awaiting Our final ruling on its petition.
Based on its manifestation, it would seem that the
Pasay City Register of Deeds had taken the SEC
Resolution dated October 16, 1986 as its cue for proceeding
with the transfers of title, despite an explicit directive in
the Court of Appeals’ decision “to suspend issuance x x x
until the matter shall have been resolved by the Securities
and Exchange Commission in SEC Case No. 002693.”
SEC Case No. 002693 is BF Homes’ rehabilitation. On
the other hand, SEC Resolution dated October 16, 1986 is a
denial of BF Homes’ Consolidated Motion to Annul the
auction sale and to cite RCBC and sheriff for contempt.
By specifically mentioning the case number (002693) the
appellate court could only have meant the BF Homes’
rehabilitation and not any indiscriminate action taken by
the SEC. Hence, until final rehabilitation, both RCBC and
the Pasay City Register of Deeds had to abide by the
explicit directive of the appellate court to suspend, in the
meantime, issuance of new land titles, or effect registration
in RCBC’s name.
Against this background, We do not see any merit in
considering the case closed or terminated, for being moot
and academic, since there is basis for nullifying and setting
aside the TCTs in RCBC’s name.
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VOL. 213, SEPTEMBER 14, 1992 837

Appellate Court
We now discuss the merits of the case.

The appellate court had ruled on the illegality of the
mandamus case and thus set aside the decision of the lower
court, directing the delivery of the certificates of auction
sale. This ruling effectively upholds the exclusive
jurisdiction of the SEC (under Sec. 5(d) of PD 902A as
amended) over the assets and properties of a distressed
firm under PD 902A, as amended. In the cases of BF
Homes, Inc. v. CA, et al., G.R. No. 76879 and Roa v. CA,
G.R. No. 77143, October 3, 1990, We clarified that when a
corporation threatened by bankruptcy is taken over by a
receiver, all the creditors should stand on an equal footing,
not anyone should be given preference by paying one or
some of them ahead of the others.
RCBC and the Pasay City Register of Deeds must have
premised their action on SEC’s refusal in the resolution
dated October 16, 1986 to exercise jurisdiction on the
contempt case, thus:
“x x x
“While we cannot direct the Register of Deeds to allow the
consolidation of the titles subject of the ‘Omnibus Motion’ dated
September 18, 1986 filed by the Rizal Commercial Banking
Corporation and, therefore, denies said Motion, neither can this
Commission restrain the said bank and the Register of Deeds
from effecting said consolidation.
“SO ORDERED.”
as their gosignal to disregard the appellate court’s

directive and proceed with the registration of titles. Their
action of course, is clearly contumacious and both are
equally guilty of contempt.
Since the properties, subject of the motion for contempt
(in the SEC) involved assets of a distressed firm, SEC
would have been fully justified in issuing the corresponding
restraining order against the consolidation of title in
RCBC, pursuant to Sec. 6(a), PD 902A, as amended.
However, We do not know if the SEC Resolution dated
October 16, 1986 was ever questioned by BF Homes. At any
rate, since this was not raised as an issue here, We shall
refrain from discussing this.
The fact remains that by ordering the suspension of

registration of titles, the appellate court clearly intended to
838

Appellate Court
have BF Homes’ assets/properties remain untouched

during the period of rehabilitation so as not to render the
SEC Management Committee irrelevant and inutile and to
give it unhampered “rescue efforts” over the distressed
firm.
We also agree with BF Homes that as owner, it should
have been impleaded in CC 10042 to allow it to protect its
rights.
Nevertheless, since RCBC had gone ahead with the
registration of title in complete defiance of the Court of
Appeals’ directive, We have no recourse except to set aside
such transfer and nullify the TCTs issued in RCBC’s name.
While it is recognized that RCBC is a preferred creditor
and likewise the highest bidder at the auction sale, We
have however stated that whenever a distressed
corporation asks the SEC for rehabilitation and suspension
of payments, preferred creditors may no longer assert such
preference, but as earlier stated, stand on equal footing
with other creditors. Foreclosure shall be disallowed so as
not to prejudice other creditors, or cause discrimination
among them. If foreclosure is undertaken despite the fact
that a petition for rehabilitation has been filed, the
certificate of sale shall not be delivered pending
rehabilitation. Likewise, if this has also been done, no
transfer of title shall be effected also, within the period of
rehabilitation. The rationale behind PD 902A, as
amended, is to effect a feasible and viable rehabilitation.
This cannot be achieved if one creditor is preferred over the
others.
In this connection, the prohibition against foreclosure
attaches as soon as a petition for rehabilitation is filed.
Were it otherwise, what is to prevent the petitioner from
delaying the creation of the Management Committee and in
the meantime dissipate all its assets. The sooner the SEC
takes over and imposes a freeze on all the assets, the better
for all concerned.
ACCORDINGLY, the petition is DISMISSED, the
decision of the Court of Appeals is AFFIRMED with the
modification that RCBC and Vicente A. Garcia, Pasay City
Register of Deeds, are hereby found guilty of CONTEMPT

and FINED One Thousand Pesos (P1,000.00) each. The
new torrens titles issued in RCBC’s name are hereby
NULLIFIED and SET ASIDE and BF Homes TCT’s Nos.
51001, 51002, 51003, 51005, 51006, 51007, 51011, 51013,
51014, 51015, 51017, 51018, 51019, 51020, 51021, 51022,
839
VOL. 213, SEPTEMBER 14, 1992 839

Appellate Court
51286, 51287, 51288, 51290, 51292, 51297, 51309, 51319,

51321, 51331, 51332, 51333, 51334, 51335, 51336, 51337,
51338, 51339, 51340, 51342, 51343, 51344, 51345, 51347,
48151, 48128, 48194, 68603, 71273, 71275, and 71276 are
reinstated. Costs against petitioner.
SO ORDERED.
Gutierrez, Jr., Nocon and Melo, JJ., concur.

Narvasa (C.J.), Bidin, Regalado and Bellosillo, JJ.,
In the result.
Cruz, J., No part. Related to petitioner’s counsel.
Feliciano, J., See dissenting opinion.
Padilla, Davide, Jr. and Romero, JJ., We join Mr.
Justice Feliciano in his dissent.
GriñoAquino, J., No part as I was the ponente in
the Court of Appeals.
Campos, Jr., J., No part in the deliberation.
FELICIANO, J.: Dissenting
In the statement of facts set out in the ponencia of my

learned brother in the Court, Mr. Justice Medialdea, the
following items are found, among other things:
“On September 28, 1984, B.F. Homes filed a ‘Petition for

Rehabilitation and for declaration of suspension of payments’
(SEC Case No. 002693) with the Securities and Exchange
Commission (SEC).
x x x x x x x x x
On March 18, 1985, the SEC appointed a management
committee for B.F. Homes.” (Ponencia pages 23)
In other words, a period of just about six (6) months

intervened between the filing of the petition for
rehabilitation and for declaration of suspension of
payments and the appointment by the SEC of a
management committee for B.F. Homes. During that

intervening six (6) months period, the SEC purported to act
by issuing, on 28 November 1984, a temporary restraining
840

Appellate Court
order enjoining the Rizal Commercial Banking Corporation

(RCBC) and the Sheriff from proceeding with the extra
judicial foreclosure sale. On 13 February 1985, the SEC
belatedly issued a writ of preliminary injunction
purportedly stopping the auction sale actually conducted by
the Sheriff two (2) weeks earlier.
The ponencia also states:
“While it is recognized that RCBC is a preferred creditor and

likewise the highest bidder at the auction sale, We have, however,
stated that whenever a distressed corporation asks the SEC for
rehabilitation and suspension of payments, preferred creditor
may no longer assert such preference, but as earlier stated stand
on equal footing with other creditors. Foreclosure shall be
disallowed so as not to prejudice other creditors, or cause
discrimination among them.
x x x x x x x x x
In this connection, the prohibition against foreclosure attaches
as soon as a petition for rehabilitation is filed. Were it otherwise,
what is to prevent the petitioner from delaying the creation of the
management committee and in the meantime dissipate all its
assets. The sooner the SEC takes and imposes a freeze on all the
assets, the better for all concerned.” (Emphasis partly in the
original and partly supplied)
I understand the above quoted portion of the ponencia to be

saying that suspension of actions for claims against the
corporation which applies for rehabilitation takes effect as
soon as the application or a petition for rehabilitation is
filed with the SEC.
I would point out, with respect, that the actual language
used in Section 6 (c) and (d) of P.D. No. 902A, as amended,
does not support the position taken in the ponencia. The
pertinent provision of Section 6 (c) is as follows:
“Sec. 6. In order to effectively exercise such jurisdiction, the

Commission shall possess the following powers:
x x x x x x x x x
c) To appoint one or more receivers of the property, real and

personal, which is the subject of the action pending before
the Commission in accordance with the pertinent
provisions of the Rules of Court in such other cases
whenever necessary to preserve the rights of the parties
litigants to and/or protect the interest of the investing
841
VOL. 213, SEPTEMBER 14, 1992 841

Appellate Court
public and creditors; Provided, however, That the

Commission may, in appropriate cases, appoint a
rehabilitation receiver of corporations, partnerships or
other associations not supervised or regulated by other
government agencies who shall have, in addition to the
powers of a regular receiver under the provisions of the
Rules of Court, such functions and powers as are provided
for in the succeeding paragraph (d) hereof; Provided,
further, that the Commission may appoint a rehabilitation
receiver of corporations, partnership or other associations
supervised or regulated by other government agencies,
such as banks and insurance companies, upon request of
the government agency concerned; Provided, finally, that
upon appointment of a management committee,
rehabilitation receiver, board or body pursuant to this
Decree, all actions for claims against corporations,
partnerships or associations under management or
receivership pending before any court, tribunal, board or
body shall be suspended accordingly.
x x x x x x x x x
(Emphases supplied)
It should be pointed out that the appointment of a

management committee or a rehabilitation receiver is not
ordinarily effected immediately upon the filing of an
application for suspension of payments and for
rehabilitation. The reason is that the SEC must first
determine whether the jurisdictional requirements for the
appointment of a management committee are present.
There are at least two (2) sets of requirements: (a) the
requirements in respect of the petition for declaration of
suspension of payments; and b) the requirements
concerning the petition for creation and appointment of a
management committee.
The requirements which must be satisfied in respect of a

declaration of suspension of payments are set out in
Section 5 (d) P.D. No. 902A, as amended by P.D. No. 1758,
which reads as follows:
“SEC. 5. In addition to the regulatory and adjudication functions

of the Securities and Exchange Commission over corporations,
partnerships and other forms of associations registered with it as
expressly granted under existing laws and decrees, it shall have
original and exclusive jurisdiction to hear and decide cases
involving:
x x x x x x x x x
d) Petitions of corporations, partnership or associations to be
842

Appellate Court
declared in the state of suspension of payments in cases

where the corporation, partnership or association possesses
sufficient property to cover all its debts but foresees the
impossibility of meeting them when they respectively fall
due or in cases where the corporation, partnership or
association has no sufficient assets to cover its liabilities,
but is under the management of a Rehabilitation Receiver
or Management Committee created pursuant to this
Decree.” (Italics and emphases supplied)
Upon the other hand, the requirements which must be

shown if a management committee is to be appointed by
the SEC are set out in Section 6 (d) of the same statute:
d) To create and appoint a management committee, board, or body

upon petition or motu proprio to undertake the management of
corporations, partnerships or other associations not supervised or
regulated by other government agencies in appropriate cases
when there is imminent danger of dissipation, loss, wastage or
destruction of assets or other properties or paralization of business
operations of such corporations or entities which may be
prejudicial to the interest of minority stockholders, parties
litigants or the general public; Provided, further, that the
Commission may create or appoint a management committee,
board or body to undertake the management of corporations,
partnerships or other associations supervised or regulated by
other government agencies, such as banks and insurance
companies, upon request of the government agency concerned.
x x x x x x x x x (Emphases supplied)
Moreover, the SEC could conclude that the condition of the

petitioning corporation is such that appointment of a
management committee would not be appropriate, that the
condition of insolvency (“no sufficient assets to cover its
liabilities”) is realistically irreversible, or that its
restructuring and rehabilitation would not be feasible.
Section 6(d), second paragraph reads:
“The management committee or rehabilitation receiver, board or

body shall have the power to take custody of, and control over, all
the existing assets and property of such entities under
management; to evaluate the existing assets and liabilities,
earnings and operations of such corporations, partnership or
other associations, to determine
843
VOL. 213, SEPTEMBER 14, 1992 843

Appellate Court
the best way to salvage and protect the interest of the investors
and creditors; to study, review and evaluate the feasibility of
continuing operations and restructure and rehabilitate such
entities if determined to be feasible by the Commission. It shall
report and be responsible to the Commission until dissolved by
order of the Commission: x x x.” (Emphasis supplied)
As already noted, SEC took just about six (6) months after
the filing of the petition of B.F. Homes to decide to create
and appoint a management committee. Only upon such
appointment of the management committee did the proviso
in Section 6 (c) which decrees suspension of actions for
claims against the petitioning corporation take effect.
It is only then that the SEC determines that the
circumstances warranting, under the statute, the
appointment of a management committee do exist, i.e., that
there is “imminent danger of dissipation, loss, wastage or
destruction of assets—or paralization of business
operations—which [would] be prejudicial to the interest of
minority stockholders, parties litigant or the general
public.” Only when such circumstances have been
determined to exist is there justification for suspending
actions for claims against the corporation so placed under
SEC management. The authority of the SEC to suspend or
freeze the judicial enforcement of claims against a
corporation is an extraordinary authority, most specially
where credits secured by specific liens on property, like real

estate mortgages, are involved; such authority cannot
lightly be assumed to have arisen simply because the
corporation on its own initiative goes to the SEC and there
seeks shelter from its lawful creditors. Lastly, but not least,
it should be recalled that creditors secured by specific liens
on property are, under our insolvency law, entitled to opt to
rely solely upon their security and hence to refrain from
joining other (unsecured) creditors who must share among
themselves the remaining assets of the insolvent
corporation once voluntary or involuntary insolvency
proceedings are commenced.
It may be noted that in In re Petition for Declaration of
Insolvency of [a] Filand Manufacturing and Estate
Development Company, et al. (G.R. No. 73123, dated 2
September 1991), the
844

Appellate Court
Court stressed that the SEC like any other administrative

body is a tribunal with limited jurisdiction and as such may
wield only such powers as are specifically granted to it by
its enabling statute and that its jurisdiction should be
interpreted in strictissimi juris.
I, therefore, respectfully suggest that the SEC acted
prematurely and without jurisdiction or legal authority
when, on 28 November 1984, it issued a temporary
restraining order enjoining RCBC and the Sheriff from
proceeding with the public auction sale, and when, on 13
February 1985, the SEC issued a writ of preliminary
injunction stopping the auction sale which, incidentally,
had already been conducted two (2) weeks earlier.
I vote to grant the Petition for Review and to reverse
and set aside the Decision of the Court of Appeals.
Petition dismissed; decision affirmed with modification.
——o0o——
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11/23/2016 SUPREME COURT REPORTS ANNOTATED VOLUME 213

830 SUPREME COURT REPORTS ANNOTATED

RIZAL COMMERCIAL BANKING CORPORATION,

Corporation Law; Revised Securities Act; Distressed

VOL. 213, SEPTEMBER 14, 1992 831

Rizal Commercial Banking Corporation vs. Intermediate

the certificate of sale shall not be delivered pending

viable rehabilitation. This cannot be achieved if one creditor is

FELICIANO, J., Dissenting:

Corporation Law; Revised Securities Act; Distressed

SUPREME COURT REPORTS ANNOTATED 832

Rizal Commercial Banking Corporation vs. Intermediate

it should be recalled that creditors secured by specific liens on

PETITION for review of the decision of the Court of

The facts are stated in the opinion of the Court.

This is a petition for the review of the decision of the then

VOL. 213, SEPTEMBER 14, 1992 833

1984 in SEC Case No. 002693 a temporary restraining

“WHEREFORE, petitioner’s ‘Motion for Judgment on the

834 SUPREME COURT REPORTS ANNOTATED

dents to execute and deliver to petitioner the Certificate of the

On June 4, 1985, B.F. Homes filed an original complaint

“x x x: (1) even before RCBC asked the sheriff to extrajudicially

On April 8, 1986, the IAC rendered a decision, setting aside

“WHEREFORE, the judgment dated May 8, 1985 in Civil Case

VOL. 213, SEPTEMBER 14, 1992 835

On June 18, 1986, RCBC filed its present petition on the

1. Petitioner did not commit extrinsic fraud in

On November 12, 1986, We gave due course to the petition.

“WHEREFORE, the petitioner’s ‘Consolidated Motion to Cite

“SO ORDERED.” (p. 138, Rollo, emphasis ours)

836 SUPREME COURT REPORTS ANNOTATED

as a consequence of which, “the Register of Deeds of Pasay

VOL. 213, SEPTEMBER 14, 1992 837

We now discuss the merits of the case.

as their go­signal to disregard the appellate court’s

The fact remains that by ordering the suspension of

838 SUPREME COURT REPORTS ANNOTATED

have BF Homes’ assets/properties remain untouched

Register of Deeds, are hereby found guilty of CONTEMPT

VOL. 213, SEPTEMBER 14, 1992 839

51286, 51287, 51288, 51290, 51292, 51297, 51309, 51319,

Gutierrez, Jr., Nocon and Melo, JJ., concur.

FELICIANO, J.: Dissenting

In the statement of facts set out in the ponencia of my

“On September 28, 1984, B.F. Homes filed a ‘Petition for

In other words, a period of just about six (6) months

management committee for B.F. Homes. During that

840 SUPREME COURT REPORTS ANNOTATED

order enjoining the Rizal Commercial Banking Corporation

“While it is recognized that RCBC is a preferred creditor and

I understand the above quoted portion of the ponencia to be

“Sec. 6. In order to effectively exercise such jurisdiction, the

c) To appoint one or more receivers of the property, real and

VOL. 213, SEPTEMBER 14, 1992 841

public and creditors; Provided, however, That the

It should be pointed out that the appointment of a

The requirements which must be satisfied in respect of a

“SEC. 5. In addition to the regulatory and adjudication functions

d) Petitions of corporations, partnership or associations to be

842 SUPREME COURT REPORTS ANNOTATED

declared in the state of suspension of payments in cases

Upon the other hand, the requirements which must be

as their gosignal to disregard the appellate court’s