GR 196637; (June, 2019) (Digest)
G.R. No. 196637 June 3, 2019
FAR EAST BANK AND TRUST COMPANY, Petitioner vs. UNION BANK OF THE PHILIPPINES [NOW SUBSTITUTED BY BAYAN DELINQUENT LOAN RECOVERY 1 (SPV-AMC), INC.], Respondent
FACTS
On September 16, 1997, the EYCO Group of Companies and its controlling stockholders filed a Petition for Suspension of Payments with the Securities and Exchange Commission (SEC Case No. 09-97-5764). A consortium of 22 creditor banks, including respondent Union Bank, was formed. However, Union Bank unilaterally filed a separate civil case (Civil Case No. 66477) against the debtors and petitioner Far East Bank and Trust Company (FEBTC) in the Regional Trial Court (RTC). Union Bank alleged that certain properties of the debtors were fraudulently sold to FEBTC to shield them from creditors. The SEC subsequently issued an order suspending all actions against EYCO.
The SEC eventually approved a rehabilitation plan for EYCO. FEBTC moved to dismiss the RTC case, arguing it was barred by the SEC’s suspension order and the approved rehabilitation plan. The RTC granted the dismissal. Union Bank appealed to the Court of Appeals (CA), which reversed the RTC, ruling that the SEC’s jurisdiction over EYCO’s rehabilitation did not automatically extend to the separate civil case against the individual stockholders and FEBTC.
ISSUE
Whether the civil case for annulment of sale filed by Union Bank against the individual debtors and FEBTC should be dismissed in light of the SEC-approved rehabilitation proceeding for the corporate debtor, EYCO.
RULING
The Supreme Court REVERSED the Court of Appeals and REINSTATED the RTC orders dismissing the civil case. The legal logic is anchored on the doctrine of primary jurisdiction and the statutory stay or suspension order inherent in corporate rehabilitation proceedings. The Court clarified that while the SEC (and later, courts under the Financial Rehabilitation and Insolvency Act) has jurisdiction over the rehabilitation of the corporate debtor, the automatic stay of claims applies broadly to preserve the debtor’s assets for the benefit of all creditors. The civil case, while nominally against individual stockholders and a third-party transferee (FEBTC), directly implicated properties integral to the rehabilitation plan of EYCO. Allowing the case to proceed would undermine the collective, equitable, and orderly process of rehabilitation by permitting a single creditor to pursue assets potentially needed to satisfy the approved plan for all creditors. The Court emphasized that the remedy for an aggrieved creditor is to participate in the rehabilitation proceedings and challenge the plan therein, not to initiate piecemeal litigation that could deplete the very assets intended for the rehabilitation. The dismissal of the civil case is without prejudice to Union Bank’s rights within the rehabilitation proceedings.