G.R. No. 123240 August 11, 1997
STATE INVESTMENT HOUSE, INC., petitioner, vs. THE COURT OF APPEALS, the SECURITIES & EXCHANGE COMMISSION and PHILIPPINE BLOOMING MILLS, CO., INC., respondents.

FACTS

Petitioner State Investment House, Inc. (SIHI) filed a “Motion to Declare and Confirm the Highest Preference of Movant’s First Mortgage Lien” with the Securities and Exchange Commission (SEC) in the pending action for settlement of claims of the various creditors of respondent Philippine Blooming Mills Co., Inc. (PBM), which was under rehabilitation/receivership proceedings. The SEC hearing officer denied the motion, a decision affirmed by the SEC en banc and subsequently by the Court of Appeals. The Supreme Court initially denied SIHI’s petition via a minute resolution. SIHI filed a motion for reconsideration, arguing that the doctrine in PCIB vs. Court of Appeals, which recognized the preference of secured creditors, should apply and had not been validly abrogated, particularly criticizing the reliance on the RCBC vs. Court of Appeals case as a precedent since its motion for reconsideration was allegedly still pending. SIHI also sought consolidation of its case with the RCBC case.

ISSUE

Whether petitioner SIHI, as a mortgagee of respondent PBM, may be declared to have the highest preference over the specific mortgaged property despite the pendency of rehabilitation/receivership proceedings before the SEC.

RULING

The Supreme Court denied the motion for reconsideration and affirmed the dismissal of the petition. The Court held that SIHI’s motion to declare its first mortgage lien as having the highest preference was premature. In rehabilitation/receivership proceedings, the provisions on “Concurrence and Preference of Credits” under the Civil Code (Articles 2242 and 2243) apply. These articles enumerate various claims, including mortgages, that constitute an encumbrance on specific immovable property, and such claims are to be considered as mortgages or liens within insolvency proceedings. The existence of other claims enumerated in Article 2242, which by Article 2243 are considered as mortgages on the property, must first be determined. The proper resolution of SIHI’s preference should be made in light of the rehabilitation plan approved by the SEC, which included a schedule of payment and was not part of the petition for review. The Court clarified that the PCIB case, which relied on the pre-Civil Code case of Chartered Bank, is not controlling because the Civil Code provisions were not yet operative at that time. Furthermore, the Court denied SIHI’s motion for consolidation with the RCBC case, noting that the RCBC decision had long been rendered and the factual premises were different, as RCBC involved issues related to the retroactive application of an injunction to foreclosure proceedings and the annulment of a judgment, whereas in this case, the foreclosure sale had been declared null and void and SIHI’s claim was referred to the SEC for determination of priorities under the rehabilitation plan.