G.R. No. 211098, April 20, 2016
The Wellex Group, Inc. Vs. Sheriff Edgardo A. Urieta of the Sandiganbayan Security and Sheriff Services, et al.
FACTS
Petitioner The Wellex Group, Inc. (Wellex) obtained a loan from the Investment Management Agreement (IMA) Account (Jose Velarde Account) managed by respondent BDO Unibank, Inc. (BDO), secured by a chattel mortgage on 450,000,000 shares of Waterfront Philippines Inc. (WPI shares). Wellex failed to pay the loan upon maturity. The IMA Account, including its assets and receivables (such as the Wellex loan), was subsequently declared ill-gotten wealth and forfeited in favor of the State by the Sandiganbayan in the plunder case against former President Joseph Estrada (Criminal Case No. 26558). This forfeiture was affirmed by the Supreme Court in G.R. No. 187951. Acting on the forfeiture order, respondent Sheriff Edgardo A. Urieta issued a Notice to Deliver to BDO, received the WPI shares, and scheduled them for public auction. Wellex filed a separate civil case (Civil Case No. 09-399) before the Regional Trial Court (RTC) of Makati for recovery of possession of the WPI shares, claiming full payment of the loan and seeking to enjoin the auction. The RTC dismissed the case on grounds of lack of jurisdiction (hierarchy of courts) and failure to state a cause of action. Wellex filed the present petition assailing the RTC’s dismissal order.
ISSUE
1. Whether the Sandiganbayan may proceed to sell outright, at public auction, the forfeited WPI shares.
2. Whether the trial court may take cognizance of Civil Case No. 09-399.
RULING
1. No, the Sandiganbayan cannot proceed to sell the WPI shares outright at public auction. The Supreme Court, reiterating its ruling in G.R. No. 187951, held that the WPI shares are a security for a valid and existing loan obligation, which is an asset of the forfeited IMA Account. The forfeiture subrogated the State to the rights of the creditor (BDO) concerning that loan. Since the loan remains valid, the State, as subrogee, must avail itself of the same remedies available to the original creditor to collect the debt. Selling the mortgaged chattel (the shares) without first demanding payment from the debtor or instituting proper foreclosure or collection proceedings would constitute a prohibited pactum commissorium under Article 2088 of the Civil Code. Such an outright sale would also violate the debtor’s (Wellex’s) constitutional right to due process, as it would deprive Wellex of the opportunity to pay the obligation or assert any defenses against the creditor.
2. Yes, the trial court may take cognizance of the civil case. The Supreme Court found that the RTC erred in dismissing the case. The action for recovery of possession filed by Wellex, as a third-party claimant asserting ownership over property levied upon, is a separate and distinct action recognized under Section 16, Rule 39 of the Rules of Court. This action is within the general jurisdiction of the RTC. The principle of hierarchy of courts was misapplied, as the issues involved—particularly the determination of whether the formal requirements for executing on the security (the WPI shares) were observed—are not exclusively within the jurisdiction of the Sandiganbayan. The Sandiganbayan’s jurisdiction is limited to cases involving ill-gotten wealth and does not extend to adjudicating with finality ownership disputes arising from execution proceedings, especially where the claimant was not a party to the original criminal case. Therefore, the RTC has jurisdiction to hear and determine Wellex’s claim of ownership and right to possession. The Supreme Court set aside the RTC’s dismissal order and directed the resumption of proceedings in Civil Case No. 09-399.