G.R. No. 190107 ; June 6, 2011
JAPRL DEVELOPMENT CORP., PETER RAFAEL C. LIMSON and JOSE UY AROLLADO, Petitioners, vs. SECURITY BANK CORPORATION, Respondent.

FACTS

JAPRL Development Corporation (JAPRL) obtained a credit facility from Security Bank Corporation (SBC). Petitioners Peter Rafael C. Limson (Chairman) and Jose Uy Arollado (President) executed a Continuing Suretyship Agreement (CSA) guaranteeing JAPRL’s obligations. In 2003, during restructuring talks with creditors, SBC discovered material inconsistencies in JAPRL’s financial statements compared to those originally submitted, constituting an event of default under the Credit Agreement. SBC demanded payment and, upon failure to pay, filed a complaint for sum of money with an application for a writ of preliminary attachment against JAPRL, Limson, and Arollado before the Makati RTC.
During the hearing on the application for attachment, SBC informed the court of a Stay Order issued by the Quezon City RTC in a separate petition for rehabilitation filed by JAPRL. The Makati RTC initially ordered the archiving of the case but later issued a written order dismissing it without prejudice. Upon SBC’s motion for reconsideration, the court reverted to its oral order archiving the complaint. SBC moved for clarification, arguing the suspension should apply only to JAPRL, not the sureties Limson and Arollado. The Makati RTC maintained its order archiving the complaint against all defendants.
Limson and Arollado filed separate “Opposition (Ad Cautelam)” to SBC’s motions, claiming lack of service of summons and raising defenses on the merits, while also praying for the archiving of the case pending rehabilitation. The Quezon City RTC later disapproved the rehabilitation plan, leading the Makati RTC to reinstate SBC’s complaint. Subsequently, a new Stay Order was issued by the Calamba RTC in a fresh rehabilitation petition filed by JAPRL and its subsidiary. The Makati RTC again archived the complaint. SBC moved for reconsideration, arguing the case should proceed against the sureties and that they should be declared in default for not filing Answers. The Makati RTC denied the motion.
SBC filed a petition for certiorari with the Court of Appeals. The CA ruled that Limson and Arollado voluntarily submitted to the Makati RTC’s jurisdiction by seeking affirmative relief (i.e., archiving of the case) in their pleadings. The CA further held that SBC’s claim against the sureties could proceed independently of JAPRL’s rehabilitation, citing the Interim Rules on Corporate Rehabilitation which stay claims against sureties not solidarily liable with the debtor. The CA denied petitioners’ motion for reconsideration.

ISSUE

Whether the Court of Appeals erred in ruling that: (1) Limson and Arollado voluntarily submitted to the jurisdiction of the Makati RTC; and (2) the complaint for sum of money against them, as sureties, could proceed independently of the corporate rehabilitation proceedings against JAPRL.

RULING

The Supreme Court DENIED the petition and AFFIRMED the Court of Appeals’ decision.
1. On Voluntary Submission to Jurisdiction: The Court held that Limson and Arollado voluntarily submitted to the jurisdiction of the Makati RTC. While their “Opposition (Ad Cautelam)” contained a prefatory statement about not receiving summons, they proceeded to plead defenses on the merits and, crucially, sought affirmative relief by praying for the archiving of the case. By asking the court to suspend the proceedings, they invoked the court’s authority to grant relief, which constitutes a voluntary appearance equivalent to service of summons under Rule 14, Section 20 of the Rules of Court. An appearance is only considered special and not a submission to jurisdiction if its sole object is to question the court’s jurisdiction.
2. On Proceeding Against Sureties During Rehabilitation: The Court affirmed that the complaint for sum of money against the sureties, Limson and Arollado, could proceed separately from the rehabilitation proceedings of the principal debtor, JAPRL. The Court cited Section 6(b), Rule 4 of the Interim Rules of Procedure on Corporate Rehabilitation, which states that a Stay Order effects a stay of enforcement of claims “against the debtor, its guarantors and sureties not solidarily liable with the debtor.” The Court, referencing its ruling in Philippine Savings Bank v. Spouses Castillo, clarified that a surety who is solidarily liable with the debtor is excluded from the stay order. The Continuing Suretyship Agreement (CSA) executed by Limson and Arollado bound them “jointly and severally” with JAPRL, making them solidarily liable. Therefore, they were not covered by the Stay Order issued in JAPRL’s rehabilitation case, and the Makati RTC could continue to hear the claim against them.