GR 199308; (June, 2019) (Digest)
G.R. No. 199308 June 19, 2019
RIZAL COMMERCIAL BANKING CORPORATION, Petitioner, vs. PLAST-PRINT INDUSTRIES INC., AND REYNALDO C. DEQUITO, Respondents.
FACTS
Respondent Plast-Print Industries Inc. obtained various credit facilities from petitioner RCBC, secured by a real estate mortgage. Plast-Print defaulted on its obligations. After a failed attempt at restructuring, RCBC initiated extra-judicial foreclosure proceedings. A public auction for some mortgaged properties was held on November 12, 1998, with RCBC as the highest bidder. A second auction for remaining properties was scheduled for November 30, 1998. Unknown to RCBC, Plast-Print had earlier filed a petition for suspension of payments with the Securities and Exchange Commission (SEC) on October 5, 1998. Consequently, the SEC issued an order on November 16, 1998, suspending all payments due from Plast-Print for 30 days, which halted the second auction. The parties subsequently executed a Restructuring Agreement on June 25, 1999, approved by the SEC, wherein Plast-Print acknowledged a specific debt and agreed to a new payment schedule.
ISSUE
The core issue is whether the extra-judicial foreclosure sale conducted on November 12, 1998, and the resulting Certificate of Sale, are valid despite the subsequent SEC order suspending payments.
RULING
The Supreme Court ruled that the foreclosure sale was valid. The legal logic hinges on the timing of the SEC’s jurisdiction and order relative to the foreclosure action. The SEC’s jurisdiction over suspension of payments cases attaches upon the filing of the petition. However, its order suspending all actions for payment against the debtor only becomes effective upon its issuance. The foreclosure proceedings were initiated and the first auction was completed on November 12, 1998, which was before the SEC issued its suspension order on November 16, 1998. At the time of the auction, there was no legal impediment in effect. The Court emphasized that the SEC’s approval of the subsequent Restructuring Agreement, which recognized Plast-Print’s indebtedness, did not retroactively invalidate the already-perfected foreclosure sale. The agreement constituted a novation, creating a new obligation, but it did not rescind the prior foreclosure. The second scheduled auction was correctly suspended by the SEC order, but the first was a consummated act. Therefore, the RTC and CA erred in ordering the cancellation of the Certificate of Sale. The accounting and attorney’s fees awards were also set aside.