G.R. No. 131729 May 19, 1998
Union Bank of the Philippines, petitioner, vs. The Honorable Court of Appeals, Commissioner Fe Eloisa C. Gloria, Atty. Manolito Soller, in their capacity as Chairperson and Member, respectively, of the Hearing Panel of the Securities and Exchange Commission, Eulogio O. Yutingco, Caroline Yutingco-Yao, Theresa I. Lao, Nikon Industrial Corporation, Nikolite Industrial Corporation, Thames Philippines, Inc., 2000 Industries Corporation, Trade Hope Industrial Corporation, First Uni-Brands Food Corporation, Integral Steel Corporation, Clarion Printing House, Inc., Nikon Plaza, Inc., Nikon Land Corporation, Eyco Properties, Inc., Interim Receivers Amelia B. Cabal, as representative of SGV, Inocencio B. Deza, Jr., as representative of PNB, and Florencio B. Orendain of Eyco, respondents.

FACTS

On September 16, 1997, private respondents, the EYCO Group of Companies and its controlling stockholders (the Yutingcos), jointly filed a Petition for Declaration of Suspension of Payments, Formation and Appointment of Rehabilitation Receiver/Committee, and Approval of Rehabilitation Plan with the Securities and Exchange Commission (SEC). They alleged their assets were sufficient to cover their obligations but due to unforeseen factors, they were unable to meet their debt schedule. The Yutingcos justified their inclusion as co-petitioners on the ground that they had bound themselves to the creditors under a Joint Several Solidary Guaranty (J.S.S. Clause). The SEC Hearing Panel found the petition sufficient and issued an order on September 19, 1997, setting a hearing and directing the suspension of all actions against private respondents. Meanwhile, a consortium of 22 creditor banks, including petitioner Union Bank of the Philippines, convened. Without notifying the consortium, Union Bank broke away and filed several civil cases against private respondents in various Regional Trial Courts. The SEC appointed interim receivers on October 3, 1997. Union Bank also filed a Motion to Dismiss with the SEC on October 22, 1997, contending the SEC lacked jurisdiction because the petition included individuals (the Yutingcos) not covered by P.D. No. 902-A, and that the proper remedy was under the Insolvency Law (Act No. 1956) in the regular courts. It also alleged fraudulent dispositions of property. Subsequently, the SEC Hearing Panel issued an Omnibus Order on October 27, 1997, directing the creation of a Management Committee (Mancom) and granting the annotation of the suspension order on property titles, without prejudice to resolving Union Bank’s pending Motion to Dismiss. Aggrieved, Union Bank filed a Petition for Certiorari with the Court of Appeals on October 29, 1997, imputing grave abuse of discretion to the SEC for issuing the suspension order and directing the creation of the Mancom prematurely, thereby depriving it of due process. The appellate court issued a temporary restraining order. Some creditor banks from the consortium filed motions for intervention, opposing Union Bank’s petition for failure to exhaust administrative remedies and forum-shopping.

ISSUE

Whether the Securities and Exchange Commission (SEC) properly assumed jurisdiction over the petition for suspension of payments filed jointly by the EYCO Group of Companies and its individual stockholders (the Yutingcos).

RULING

Yes. The Supreme Court upheld the jurisdiction of the SEC. The Court ruled that the inclusion of the individual stockholders in the petition did not divest the SEC of jurisdiction. The Yutingcos, as controlling stockholders who had executed a Joint Several Solidary Guaranty (J.S.S. Clause) in favor of the corporate creditors, had a direct interest in the rehabilitation proceedings. Their inclusion was justified because their financial fate was inextricably linked with the distressed corporations. The Court emphasized that the SEC’s jurisdiction under P.D. No. 902-A, as amended, over petitions for suspension of payments filed by corporations, partnerships, or associations is well-established. The fact that individuals joined the petition did not automatically place it under the Insolvency Law (Act No. 1956), which applies to petitions filed solely by individuals. The Court found that the SEC acted within its authority in issuing the suspension order and in proceeding with the creation of a Management Committee, as these are part of its statutory mandate to rehabilitate distressed corporations. The Court of Appeals’ decision dismissing Union Bank’s petition was affirmed.