Consuelo Metal v.

Planters Bank | Emerson

June 26, 2008
CONSUELO METAL CORPORATION, petitioner, vs.
PLANTERS DEVELOPMENT BANK and ATTY. JESUSA PRADOMANINGAS, in her
capacity as EXOFFICIO SHERIFF OF MANILA, respondents.
Carpio, J.:
NOTE: This case also appears in Credit and in Specpro.
SUMMARY: CMC filed a petition for suspension of payments before the SEC. The designated
management committee recommended CMCs dissolution and liquidation, which was upheld by
the SEC. In the same order for dissolution, the proceedings for liquidation were ordered to be
commenced before the RTC to which the case will be transferred. Meanwhile a creditor bank of
CMC foreclosed on its real estate mortgage. CMC moved to stop the foreclosure. The RTC
denied the motion, holding that the suspension of payments proceeding had already been
terminated and CMC must file a new petition for liquidation. On certiorari, CA upheld the RTC.
On reconsideration sought by CMC, CA partially reversed and remanded the case to the SEC,
but the foreclosure was upheld. On certiorari to the SC, the foreclosure and the original
dissolution order of the SEC were upheld, the SC holding that the suspension of payments
proceeding had been terminated by the final determination of the SEC that CMC should be
dissolved and liquidated. Having ordered CMCs dissolution, SEC correctly ordered the transfer
of the case to the RTC for the liquidation, because the Securities Regulation Code had
transferred jurisdiction over liquidation of corporations from the SEC to the RTC. SEC retains its
jurisdiction over ordering the dissolution of corporations.
DOCTRINE: Under 119 and 121 of the Corporation Code, the SEC has jurisdiction to order the
dissolution of a corporation. However, the jurisdiction over the liquidation of a corporation now
pertains to the appropriate RTC under the Securities Regulation Code. Liquidation involves the
settlement of claims for and against a corporation, which clearly falls under the jurisdiction of the
trial courts. The trial court is in the best position to gather all the creditors, ascertain their claims,
and determine their preferences. [other pronouncements on foreclosure omitted]
NATURE: Petition for review on certiorari of a CA decision under Rule 45. Original action to
enjoin an extrajudicial foreclosure of a real estate mortgage.
FACTS
Apr. 1, 1996 Consuelo Metal Corporation (CMC) filed before the SEC a petition for
declaration of suspension of payments, rehabilitation, and appointment of a
management committee or rehabilitation receiver under 5(d) of PD902-A.
Apr. 2, 1996 Finding the petition sufficient in substance, the SEC declared the
suspension of all claims or proceedings against CMC.
Sep. 13, 1999 SEC ordered the creation of a management committee to oversee the
rehabilitation of CMC.
Nov. 29, 2000 SEC OMNIBUS ORDER
o Upon recommendation of the management committee, SEC directed the
dissolution and liquidation of CMC
o SEC also directed the commencement of the proceedings for CMCs liquidation
to the RTC where the case will be transferred.

After the issuance of the Omnibus Order, PLANTERS Development Bank (one of CMCs
creditors) commenced the extrajudicial foreclosure of a real estate mortgage executed
by CMC in its favor. Public auctions were scheduled for Jan. 30 and Feb. 6, 2001.
o CMC moved for a Temporary Restraining Order and a writ of preliminary
injunction before the SEC to stop the foreclosure.
Jan. 29, 2001 SEC issued the TRO sought. It also ordered the immediate transfer of
the case records to the RTC.
April 25, 2001 The case having been transferred, the RTC issued an order denying
CMCs motion for TRO, holding that there was no more legal basis for granting the TRO
because CMCs petition for suspension of payments had already been decided and
terminated by the SEC
May 28, 2001 RTC denied CMCs motion for reconsideration.
o RULING: CMCs petition for suspension of payment cannot be converted into a
petition for dissolution and liquidation because they covered different subjects
and were governed by different rules. CMCs remedy was to file a new petition for
dissolution and liquidation before the SEC or the RTC.
CMC filed a petition for certiorari with the CA, arguing that the SEC retained jurisdiction
over the case, hence it was error for the RTC to require CMC to file a new petition with
the SEC or the RTC.
June 13, 2001 Planters extrajudicially foreclosed the real estate mortgage.
Dec. 14, 2001 CA DECISION
o dismissed CMCs petition and upheld the April 25 order of the RTC
o Denial of motion for TRO was proper because it was merely an ancillary remedy
for the already-terminated petition for suspension of payments.
o SEC had jurisdiction to hear CMCs petition for liquidation under 121 of the
Corporation Code.
CMC filed an MR, arguing that it need not file a new petition for liquidation. Instead, the
case must be remanded to the SEC as continuation of its jurisdiction over the petition for
suspension of payments. It also asked the CA to declare Planters extrajudicial
foreclosure void.
Mar. 6, 2002 CA RESOLUTION
o Partially granted CMCs MR
o Case was remanded to SEC under Corp. Code 121
o Planters foreclosure was valid since the SEC had already ordered the dissolution
and liquidation of CMC.
In an MR, Planters questioned the remand of the case to the SEC. It was denied.
CMC filed the present petition.

ISSUES (HELD)
1) The nature of the present case: Did it become a proceeding for dissolution and liquidation
under Corp. Code, 121 or was it a mere continuation of the SECs jurisdiction over the petition
suspension of payments? (Dissolution and liquidation, but jurisdiction over the liquidation
pertains to RTC.)
2) W/N the foreclosure of the real estate mortgage is valid. (YES)
RATIO
1) SEC HAS JURISDICTION TO ORDER DISSOLUTION BUT RTC HAS JURISDICTION
OVER LIQUIDATION

CMC: Disagrees with CAs basis for remanding the case to the SEC, which retained
jurisdiction over the dissolution and liquidation of CMC because it is a mere continuation
of the original proceeding for suspension of payments which has not yet been finally
disposed of as of June 30, 2000.
Planters: RTC has jurisdiction over CMCs dissolution and liquidation. This is an entirely
new proceeding for the termination of a corporations existence which is incompatible
with a petition for suspension of payments which seeks to preserve corporate existence.
SC: The applicable law, RA 8799 or the Securities Regulation Code, transferred SECs
jurisdiction under PD 902-A, 5 to the RTC.
o RA 8799, 5.2: The Commission's jurisdiction over all cases enumerated under
5 of Presidential Decree No. 902A is hereby transferred to the Courts of general
jurisdiction or the appropriate Regional Trial Court: Provided, That the Supreme
Court in the exercise of its authority may designate the Regional Trial Court
branches that shall exercise jurisdiction over these cases. The Commission
shall retain jurisdiction over pending cases involving intracorporate disputes
submitted for final resolution which should be resolved within one (1) year from
the enactment of this Code. The Commission shall retain jurisdiction over
pending suspension of payments/rehabilitation cases filed as of 30 June
2000 until finally disposed. (Emphasis supplied)
o CASE AT BAR: SEC assumed jurisdiction over CMCs petition for suspension of
payments. The proceeding was terminated on Nov. 29, 2000, when SEC issued
the Omnibus Order directing CMCs dissolution. This was a final determination by
the SEC that CMC cannot be rehabilitated anymore.
o Under 119 and 121 of the Corporation Code, the SEC has jurisdiction to
order the dissolution of a corporation. However, the jurisdiction over the
liquidation of a corporation now pertains to the appropriate RTC.
o CASE AT BAR: This is why the SEC, in its Omnibus Order, directed the
commencement of the liquidation proceedings in the RTC where the case will be
transferred.
o This is the correct procedure. Liquidation involves the settlement of claims for
and against a corporation, which clearly falls under the jurisdiction of the trial
courts.
o The trial court is in the best position to gather all the creditors, ascertain their
claims, and determine their preferences.
2) FORECLOSURE OF REAL ESTATE MORTGAGE IS VALID [not so impt for Corpo]
CMC: Foreclosure is void because it was without the knowledge and previous consent of
the liquidator and other lien holders. The rules on concurrence and preference of credits
should apply to in foreclosure proceedings. Assuming that Planters could validly
foreclose, the foreclosure made was still void because it violated ROC 39, 15
Planters: It has the right to foreclose because CMC did not pay its loan obligation.
Concurrence and preference rules do not apply because CMC has not been declared
insolvent and there are no insolvency proceedings against it.
SC: If rehabilitation is no longer feasible and the corporation assets are finally liquidated,
secured creditors shall enjoy preference over unsecure creditors, subject only to the Civil
Code rules on concurrence and preference of credits. Secured creditors may foreclose
on their security or choose to abandon the preference and prove their credits as ordinary
claims (RCBC v. IAC).

NCC 2248: Those credits which enjoy preference in relation to specific real
property or real rights, exclude all others to the extent of the value of the
immovable or real right to which the preference refers.
o CASE AT BAR: Planters is a secured creditor and thus has a right to foreclose
the mortgage under NCC 2248.
o The creditormortgagee has the right to foreclose the mortgage over a specific
real property whether or not the debtormortgagor is under insolvency or
liquidation proceedings.
o The right to foreclose such mortgage is merely suspended upon the
appointment of a management committee or rehabilitation receiver or upon
the issuance of a stay order by the trial court. However, the creditormortgagee may exercise his right to foreclose the mortgage upon the
termination of the rehabilitation proceedings or upon the lifting of the stay
order. [citing PD 902-A and the Interim Rules of Procedure on Corporate
Rehabilitation]
There is a presumption of regularity in favor of foreclosure proceedings, and the party
challenging the proceeding has the burden of rebutting such presumption (Union Bank v.
CA).
CASE AT BAR: CMC failed to do so. The notice of sale clearly stated that the auction
will be held at 10:00 AM or soon thereafter but not later than 2:00 PM. The sheriffs
minutes of the sale stated that the sale actually opened at 10:00 PM and commenced at
2:30. There was no irregularity.
o

DISPOSITION: Petition denied. SEC order of liquidation and the extrajudicial foreclosure are
upheld.