GR 152580; (June, 2008) (Digest)
G.R. No. 152580 ; June 26, 2008
CONSUELO METAL CORPORATION, petitioner, vs. PLANTERS DEVELOPMENT BANK and ATTY. JESUSA PRADO-MANINGAS, in her capacity as Ex-officio Sheriff of Manila, respondents.
FACTS
Petitioner Consuelo Metal Corporation (CMC) filed a petition for suspension of payments and rehabilitation with the Securities and Exchange Commission (SEC) in 1996. The SEC issued orders suspending all claims against CMC. In 2000, however, the SEC issued an Omnibus Order directing CMC’s dissolution and liquidation and ordered the transfer of the proceedings to the Regional Trial Court (RTC). Respondent Planters Development Bank, a creditor, subsequently initiated the extra-judicial foreclosure of a real estate mortgage. CMC sought to enjoin the foreclosure, first with the SEC, which issued a temporary restraining order and transferred the case records to the RTC, and then with the RTC itself.
The RTC denied CMC’s motion for injunctive relief, ruling it no longer had legal basis to act since the SEC had already terminated the petition for suspension of payment on the merits. The RTC further held that a petition for suspension of payment could not be converted into one for dissolution and liquidation, and CMC’s remedy was to file a new petition. The Court of Appeals initially affirmed the RTC but, on reconsideration, partially granted CMC’s motion and remanded the case to the SEC for dissolution and liquidation proceedings under Section 121 of the Corporation Code. It also upheld the validity of Planters Bank’s foreclosure.
ISSUE
The primary issue is whether jurisdiction over CMC’s dissolution and liquidation lies with the SEC or the RTC, and whether Planters Bank’s foreclosure of the mortgage is valid.
RULING
The Supreme Court denied the petition, affirming the Court of Appeals with modification regarding jurisdiction. The Court clarified the jurisdictional delineation under Republic Act No. 8799 (The Securities Regulation Code), which transferred the SEC’s jurisdiction over suspension of payments and rehabilitation cases to the RTCs. However, for dissolution and liquidation, the applicable law is the Corporation Code. Under Section 121 of the Corporation Code, the SEC retains jurisdiction to hear and decide petitions for involuntary dissolution. Conversely, Section 122 of the same Code provides that liquidation proceedings, following a decree of dissolution, fall under the jurisdiction of the RTC where the corporation’s principal office is located.
Thus, the SEC correctly ordered CMC’s dissolution, but the subsequent liquidation proceedings must be conducted by the RTC. The Court of Appeals erred in remanding the entire case to the SEC; the proper course is for the RTC to undertake the liquidation. Regarding the foreclosure, the Court ruled it was valid. The SEC’s Omnibus Order for dissolution and liquidation effectively terminated the suspension of claims against CMC. Consequently, the legal basis for enjoining creditors’ actions ceased, and Planters Bank was within its rights to foreclose on the mortgage. The petition had no merit.