Development Bank of the Philippines v. Liban

SIXTH DIVISION [CA-G.R. SP No. 65723. July 25, 2002.] DEVELOPMENT BANK OF THE PHILIPPINES , petitioner , vs . HON. JUDGE BELEN RINGPIS LIBAN, in her capacity as Presiding Judge of the Regional Trial Court of Malolos, Bulacan, Branch 85, and BALIWAG MAHOGANY CORPORATION , respondents . PESTAO , J p : Before Us is a Petition for Certiorari under Rule 65 of the 1997 Rules of Civil Procedure assailing the Orders dated: 1) February 21, 2001 ( Annex "A", Petition, Rollo , pp. 17-22 ), denying DBP's Motion to Dismiss and ordering the issuance of a writ of preliminary injunction against DBP; 2) April 24, 2001 ( Annex "B", Petition , ibid ., pp. 23-24 ), ordering the reduction in the Injunction Bond required for the preliminary injunction from P60,000,000.00 to P1,000,000.00 cash bond; and 3) May 29, 2001 ( Annex "C", Petition, ibid ., pp. 25-26 ), denying DBP's Motion for Reconsideration, with Prayer for a Restraining Order Preliminary injunction to enjoin public respondent Judge from proceeding with the hearing of the case during the pendency of private respondent Baliwag Mahogany Corporation's Petition for Suspension of Payment, issued by Public Respondent Judge, Hon. Belen Ringpis Liban, of the Regional Trial Court of Malolos, Bulacan, Branch 85, in Civil Case No. 85-M-2001, entitled " Baliwag Mahogany Corp., Petitioner, versus Development Bank of the Philippines, et al., Respondents ," on the ground that public respondent committed grave abuse of discretion amounting to excess of jurisdiction in issuing the said Orders. Petitioner Development Bank of the Philippines ("DBP" for brevity), is a government financial institution existing and operating under the provisions of Executive Order No. 81, as amended by Republic Act No. 8523, while respondent Baliwag Mahogany Corporation ("BMC" for brevity), is a domestic corporation duly organized and existing under Philippine laws. From 1987 to 1991, DBP granted in favor of respondent BMC, the following loans and financial accommodations: P15,000,000.00 Term loan granted on November 25, 1987 for the construction of building and acquisition of machinery and equipment; Maturity date: July 14, 1993 P10,000,000.00 Term loan granted on July 16, 1989 for the acquisition of machinery and equipment; Maturity date: June 31, 1995 P16,200,000.00 Conversion of foreign currency loan to peso loan in July 1987; Maturity date: May 31, 1992 P35,000,000.00 Credit line for working capital, granted on May 27, 1991. Maturity date: November and December, 1991 P76,200,000.00 TOTAL The credit accommodations were secured by, among others, Real Estate Mortgage on lands and Chattel Mortgage on personal properties. Since December 1991, the account of BMC had been past due in view of its failure to pay its loans as they fell due. ( Petition, Rollo , p.4 ) On November 22, 1991, BMC filed with the Securities and Exchange Commission (SEC) a Petition for Rehabilitation and for a Declaration in State of Suspension of Payments docketed as SEC Case No. 4109. On January 8, 1992, the SEC issued an Order granting the Petition for Rehabilitation and Suspension of Payments and ordered the appointment of a Management Committee (MANCOM) for BMC ( Annex "D", Petition, Rollo, pp. 27-36 ). The MANCOM, composed of representatives of BMC and each of the creditor banks, including DBP, executed on October 13, 1992 a Memorandum of Agreement (MOA), including a Rehabilitation Plan for the BMC. Under the MOA, all creditor banks, including DBP, expressly agreed that any and all actions against BMC, including the foreclosure of any property mortgaged in favor of the creditor banks, shall be suspended. Likewise, the MANCOM undertook the management of BMC and took over all the assets and liabilities of the said corporation, including the parcels of land covered by TCT No. 21995 (T-238434), TCT (T-238435) RT-317, TCT No. TC-173, TCT No. TC-174, TCT No. TC-176, and TCT No. TC-177. Also under the MOA, BMC, as mortgagor, was made to execute a Second Real Estate Mortgage and Second Chattel Mortgage in favor of the Consortium of Banks, as mortgagees, to secure payment of its outstanding credits. The MOA and the Rehabilitation Plan were approved by the SEC in its Decision dated November 27, 1992. On April 13, 1994, the MANCOM submitted to the SEC its report, with the conclusion that "the continuance in business of BMC would no longer work to the best interest of the corporation, its creditors and the general public", thus, BMC should be immediately liquidated to protect the interests of the parties. ( Annex "E", Petition, Rollo ., pp. 37-41 ) HDCAaS In its Order dated April 15, 1998 ( Annex "F", Petition, Rollo, pp. 42-46 ), the SEC declared the rehabilitation plan of BMC as a total failure and dismissed the Petition. A Motion for Reconsideration was filed on May 7, 1998 setting forth, among other grounds, that the Revised Rehabilitation Plan was not duly considered. On December 2, 1998, the SEC hearing panel issued an Order denying said Motion for Reconsideration. An appeal to the SEC en banc was filed by the petitioner on December 16, 1998. On October 23, 2000, the SEC En Banc issued its Decision dismissing the appeal. ( Annex "G", Petition, ibid ., pp. 47-50 ) BMC filed a Motion for Reconsideration of the Order dated October 23, 2000 but the same was denied due course by the SEC En Banc in its Order dated January 23, 2001 ( Annex "H", Petition, ibid ., p. 51 ) on the ground that pursuant to Rule XVII, Section 16-11 of the Revised Rules of Procedure 2000 of the SEC, "No motion for reconsideration of the Order or Decision of the Commission En Banc shall be entertained." BMC claims that while its Motion for Reconsideration was still pending resolution by the SEC En Banc, DBP made an application for Foreclosure of Real Estate and Chattel Mortgages on the properties of BMC which were mortgaged to DBP. The properties subject of the foreclosure were allegedly included among the assets of BMC covered by the terms of the MOA and the Rehabilitation Plan. On January 18, 2001, BMC received a letter from DBP dated January 5, 2001 stating that its properties located in Bulacan would be sold at public auction on January 31, 2001 at 10:00 in the morning. On January 25, 2001, BMC filed with the Regional Trial Court of Malolos, Bulacan, Branch 85, a Petition for Injunction and Damages with Urgent Prayer for Issuance of Temporary Restraining Order ( Annex "J", Petition, ibid ., pp. 62-74 ), docketed as Civil Case No. 85-M-2001, in order to stop the sale of its properties at public, auction. BMC averred in its petition that allowing the public auction to push through would render nugatory its rehabilitation plans, thereby prejudicing not only the corporation but also its employees, the other banks and creditors, and prospective investors. The arguments in support of its petition for injunctive relief were: (1) BMC has a pending Motion for Reconsideration with the SEC En Banc for the approval of its Revised Rehabilitation Plan. If the same is approved, the order for suspension of payment will be maintained resulting in the suspension of any and all actions against BMC, including the foreclosure of any mortgage executed by BMC in favor of its creditors; (2) DBP is one of the creditor banks which participated in the proceedings before the SEC and DBP also participated in the execution of the MOA approving the Rehabilitation Plan of BMC; and (3) the SEC ruling was not yet final and executory, hence, application for foreclosure of BMC's properties was premature. Civil Case No. 85-M-2001 (Petition for Injunction) was raffled to and the record of the case was received by the RTC of Malolos, Bulacan, Branch 85, presided over by respondent Judge on January 29, 2001. In view of the closeness of the date for the public auction sale of BMC's properties, and considering that setting the petition for hearing was not feasible under the circumstances, the court, in its Order of January 30, 2001, resolved to grant the application for a Temporary Restraining Order ex-parte enjoining the DBP from proceeding with the public auction sale scheduled on January 31, 2001. ( Annex "K", Petition, ibid ., p. 75 ) The petition for preliminary injunction was scheduled for hearing on February 7, 2001. On February 5, 2001, DBP filed its Opposition to Plaintiff's Application for TRO/Preliminary Injunction ( Annex "L", Petition, ibid ., pp. 76-83 ), and on February 7, 2001, it filed a Motion to Dismiss the petition for injunction ( Annex "M", Petition, ibid ., pp. 84-89 ), citing the following grounds: (1) the injunction prayed for is prohibited by P.D. 385, (2) plaintiff had no such clear legal right to the relief sought for as to warrant the grant of injunctive relief; (3) the court had no jurisdiction over the case; and (4) the filing of the petition constituted forum-shopping in view of the pendency of SEC Case No. AC 644. During the hearing on the application for injunction held on February 7, 2001, the respective counsels of both parties were present. Upon motion of counsel for BMC, BMC was given a period of five (5) days within which to file its Comment on the Motion to Dismiss filed by DBP as well as a Reply to the Comment/Opposition that might be filed by DBP. BMC filed its Reply to the Opposition to Plaintiff's Application for TRO / Preliminary Injunction ( Annex "O", Petition, ibid. , pp. 95-101 ) and its Opposition to the Motion to Dismiss ( Annex "N", Petition, ibid ., pp. 90-94 ) to which DBP filed a Rejoinder and a Reply, respectively ( Annex "P", Petition, ibid ., pp. 102-105 ). The arguments of both BMC and DBP before the lower court hinged on the following issues: 1. Did the RTC of Malolos, Bulacan have jurisdiction over the petition for injunction? 2. Was petitioner BMC guilty of forum-shopping? 3. Is P.D. 385 applicable in the instant case? 4. Did BMC have a clear legal right to ask for injunctive relief? On February 21, 2001, the respondent Judge issued the assailed Order, thus: "WHEREFORE, premises considered, the Motion to Dismiss is denied. Upon payment of injunction bond in the amount of Sixty million Pesos (P60,000,000.00) the writ of preliminary injunction issue against respondent DBP enjoining it from proceeding with the foreclosure of the mortgaged properties of petitioner BMC until an Order to the contrary is issued by this Court." ( Annex "A", Petition, Rollo , pp. 17-22 ) BMC filed an Ex-parte Motion to Reduce and/or Modify Bond on March 5, 2001. It prayed that the injunction bond of P60,000,000.00 as required by the Order of February 21, 2001 be reduced or modified to P100,000.00. On April 24, 2001, the respondent Judge issued an Order, thus; "After considering the arguments of BMC and DBP, the Court finds that reduction of the cash bond to only P100,000.00 is not tenable However, reduction of the injunction bond to P1,000,000.00 is allowed provided that the same is posted as cash bond." On March 28, 2001, DBP moved for reconsideration of the Order of respondent Judge dated February 21, 2001 on the grounds that the RTC had no jurisdiction over the issue involved in the case and that the petition for suspension of payments was already final and executory. On May 29, 2001, the respondent Judge issued an Order, thus: "In view of the foregoing, the Motion for Reconsideration is DENIED." Not satisfied with the afore-mentioned orders of respondent Judge, petitioner DBP instituted this Petition for Certiorari under Rule 65 of the 1997 Rules of Civil Procedure alleging grave abuse of discretion amounting to lack or excess of jurisdiction committed by respondent Judge in issuing the questioned Orders. The following are the grounds relied upon in support of this petition: 1. The Honorable Court has no jurisdiction over the case; 2. The filing of the case constitutes forum-shopping; 3. The Petition states no cause of action; and 4. The relief prayed for is prohibited under P.D. 385. ( Petition, Rollo , pp. 2-15 ) Petitioner DBP claims that while by virtue of R.A 8799, jurisdiction over Petitions for Suspension of Payments had been transferred to regular courts, SEC retained exclusive jurisdiction over BMC's Petition for Suspension of Payments and continued to do so until it was finally disposed of considering that it was already filed as of June 30, 2000. It likewise maintained that since the relief sought for by respondent BMC in its petition for injunction was but an incident of the petition for suspension of payments still pending with the SEC, then the Regional Trial Court had no jurisdiction over the petition for injunction. In assuming jurisdiction over the petition for injunction, respondent Judge committed a violation of the doctrine of non-interference with a court of coordinate jurisdiction, an act which amounts to grave abuse of discretion. Respondent BMC, on the other hand, alleges that the petition for injunction filed with the RTC, Branch 85 of Malolos, Bulacan, was a main and principal action which sought to restrain petitioner DBP from proceeding with the extrajudicial foreclosure of the mortgaged properties. It was not merely incidental to the pending Motion for Reconsideration in the petition for suspension of payments proceedings filed before the SEC and, accordingly, should be filed with the courts of general jurisdiction under the new Securities Regulation Code (Republic Act No. 8799). Further, respondent BMC claims that SEC no longer had any jurisdiction to entertain such petition considering that the same was filed after August 2000, the effectivity of RA No. 8799. Petitioner's arguments are impressed with merit. It cannot be disputed that Regional Trial Courts have jurisdiction to issue a writ of injunction to enjoin acts committed within their respective territorial jurisdiction. By authority of Section 21 of B.P. 129: "Regional Trial Courts shall exercise jurisdiction: 1. In the issuance of writs of certiorari, prohibition, mandamus, quo warranto, habeas corpus and injunction which may be enforced in any part of their respective regions." On the other hand, the law governing the original and exclusive jurisdiction of the SEC at the time of the filing of BMC's Petition for Suspension of Payments, and which law applies to the present petition, is P.D. 902-A otherwise known as the Revised Securities Act. Under Section 5(d) of P.D. 902-A. SADECI "SEC. 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange Commission over corporations, partnership and other forms of associations registered with it as expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving: xxx xxx xxx d) Petitions of corporations, partnerships or associations to be declared in the state of suspension of payments in cases where the corporation, partnership or association possesses sufficient property to cover all its debts but foresees the impossibility of meeting them when they respectively fall due or in cases where the corporation, partnership or association has no sufficient assets to cover its liabilities, but under the management of a Rehabilitation Receiver or Management Committee created pursuant to this Decree." Section 6 (a) of said Decree further states: "SECTION 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers: a) To issue preliminary or permanent injunctions, whether prohibitory or mandatory, in all cases in which it has jurisdiction, and in which cases the pertinent provisions of the Rules of Court shall apply; xxx xxx xxx" In fine, the SEC acquires jurisdiction over distressed companies upon the submission of a petition for suspension of payments. When the legal requirements in a petition for suspension have been complied with, it has the authority to issue injunctive reliefs for the effective exercise of its jurisdiction. The power to issue restraining orders or preliminary injunctions, upon prayer of the petitioning corporation, may be the only buffer that could save a company from being feasted on by any vulture-creditor, prior to the appointment of a management committee or a rehabilitation receiver ( Separate Concurring Opinion of J. Panganiban in RCBC vs. IAC, 320 SCRA 279 ). The SEC is an administrative body vested with quasi-judicial functions. It is in the exercise of this function that the private respondent anchors its petition alleging that the intended foreclosure was premature in view of the fact that its Revised Rehabilitation Plan was still under consideration of the SEC. The provisions of B.P. 129 and P.D. 902-A vest both the RTC and SEC, respectively, with the authority to issue injunctive reliefs in cases brought before them. However, the RTC is a court of general jurisdiction while the SEC is a specialized quasi-judicial body exclusively vested with the jurisdiction to hear and decide Petitions for Suspension of Payments, including all incidents connected thereto or involving the properties of the petitioner corporations. The SEC has the exclusive authority to decide an application for the issuance of a temporary restraining order / preliminary injunction in connection with a petitioning corporation's petition for suspension of payments. We find untenable the argument of respondent BMC that the SEC would not accept its petition for injunction and damages, since it no longer had any jurisdiction to entertain such petition after August 2000. While it is true that under R.A. No. 8799, the SEC's jurisdiction over all cases enumerated under Section 5 of P.D. No. 902-A have been transferred to the Courts of general jurisdiction or the appropriate Regional Trial Courts, the SEC, under Section 5, sub-section 5.2, has retained jurisdiction over pending cases involving intra-corporate disputes and suspension of payments/rehabilitation cases submitted to and filed with it for final resolution as of 30 June 2000 until finally disposed of Again, as stated above, the issues raised by respondent BMC in seeking the relief prayed for in its Petition for Injunction before the RTC were the same issues which had direct connection with those raised and passed upon by the SEC in the Petition for Suspension of Payments. However, considering that a motion for reconsideration of the SEC en banc's decision is a prohibited pleading under the SEC Rules of Procedure, private respondent's recourse should have been to appeal said decision to the Court of Appeals, in accordance with Rule 43 of the 1997 Rules of Civil Procedure, incorporating therein a prayer for the issuance of a temporary restraining order enjoining DBP from foreclosing and selling at public auction its mortgaged properties. Viewed in this light, the Regional Trial Court had no jurisdiction to hear and decide private respondent BMC's petition for injunction because the relief sought for was directly connected with the remedies prayed for in its petition for suspension pending with the SEC, or prayed for in an appeal which it should have filed with this Court. The merits of private respondent BMC's arguments in the petition for issuance of preliminary injunction properly belong to the SEC or the appellate court for determination. Thus, when she took cognizance of and gave due course to the petition for injunction, public respondent Judge clearly committed grave abuse of discretion amounting to lack or excess of jurisdiction. Petitioner DBP further alleges that the respondent Judge committed grave abuse of discretion in granting respondent BMC's petition for injunction considering that its petition for extra-judicial foreclosure was initiated pursuant to the mandatory provisions of Section 1 of P.D. No. 385, to wit: "SECTION 1. It shall be mandatory for government financial institutions, after the lapse of sixty (60) days from the issuance of this Decree, to foreclose the collaterals and/or securities for any loan, credit accommodation, and/or guarantees granted by them whenever the arrearages on such account, including accrued interest and other charges amount to at least twenty percent (20%) of total outstanding obligations, including interest and other charges, as appearing in the books of account and/or related records of the financial institution concerned. This shall be without prejudice to the exercise by the government financial institutions of such rights and/or remedies available to them under their respective contract with their debtors, including the right to foreclose on loans, credit accommodations and/or guarantees on which the arrearages are less than twenty percent (20%)." Having been resorted to pursuant to the above-quoted provision of the law, petitioner DBP further avers that the extra-judicial foreclosure cannot be enjoined in accordance with Section 2 of the same Decree, thus: "SECTION 2. No restraining order, temporary or permanent injunction shall be issued by the court against any government financial institution in any action taken by such institution in compliance with the mandatory foreclosure provided in Section 1 hereof, whether such restraining order, temporary or permanent injunction is sought by the borrower(s) or any third party or parties except after due hearing in which it is established by the borrower and admitted by the government financial institution concerned that twenty percent (20%) of the outstanding arrearages has been paid after the filing of foreclosure proceedings." HETDAa We are persuaded by petitioner's argument. Presidential Decree No. 385 was enacted and became effective on January 31, 1974. Its provisions govern all government financial institutions, particularly the Philippine National Bank (before its privatization) and its subsidiary, the National Investment and Development Corporation, the Development Bank of the Philippines, the Government Service Insurance System, and the Social Security System. The decree was issued primarily to see to it that government financial institutions are not denied substantial cash inflows, which are necessary to finance development projects all over the country, by large borrowers who, when they become delinquent, resort to court actions in order to prevent or delay the government's collection of payments for their debts and loans. ( Filipinas Marble Corp. vs. Intermediate Appellate Court, 142 SCRA 180 ) The "mandatory foreclosure of collaterals" provided for under Section 1 of P.D. 385 certainly applies to petitioner DBP, being a government financial institution. Private respondent BMC does not deny that it has not made any payment on its huge account with DBP since October 13, 1993. Annexes "I" to "I-9" (Petition, Rollo , pp. 52-61) reveal that as early as January 31, 2001, respondent BMC's overdue obligation to petitioner DBP amounted to a total of P284,278,848.07 as reflected in the statements of account computed per each promissory note executed by respondent BMC. Hence, respondent BMC cannot claim exemption from the express prohibition provided for under P.D. 385. We hold that petitioner DBP was merely exercising its right as a government financial institution under P.D. 385 when it proceeded to foreclose the mortgaged properties of private respondent BMC. It is clear from Sec. 2 of P.D. 385 that the only ground on which a court may issue an injunction against a government financial institution is payment by the borrower of at least 20% of its outstanding arrearages after the filing of the foreclosure proceedings. In this case, absent any evidence to prove that it has paid at least 20% of its outstanding arrearages with petitioner, the mandatory foreclosure provision should be applied to private respondent BMC. What is established on record is that private respondent BMC had not made any payment on its account since October 13, 1993 when it made its last payment. As of January 31, 2001, respondent BMC's overdue obligation to the petitioner amounted to Two Hundred Eighty-Four Million Two Hundred Seventy-Eight Thousand Eight Hundred Forty-Eight Pesos and Seven Centavos (P284,278,848.07) as shown in the statements of account computed per each promissory note executed by respondent. ( Annex "I" - "I-9", Petition, Rollo, pp. 52-61 ) Private respondent never presented evidence to rebut said statements of account. Moreover, P.D. 385 is a law specifically applicable only to government financial institutions while P.D. 902-A is a law generally applicable to all corporations, private and government. Under established rules of statutory construction, the law of special application should prevail over or constitute an exception to the law of general application. Hence, public respondent Judge committed grave abuse of discretion when she granted the preliminary injunction prayed for, considering that she acted on a case which had already been taken cognizance of by another tribunal of competent jurisdiction. In deference to the judgment of the SEC which is vested by law with authority to exclusively hear and decide cases involving suspension of payments and rehabilitation of distressed corporations and its corollary power to issue injunctive reliefs in the exercise of its quasi-judicial functions, respondent Judge should have dismissed the petition for injunction and damages filed by respondent BMC, but without prejudice to the filing of the same with the SEC or with the appellate court, as the case my be. While both the regular courts and the SEC are vested by law with authority to issue writs of injunction in cases within their respective jurisdiction, the SEC, in this particular instance, had the exclusive jurisdiction over the petition for injunction filed by private respondent considering that the injunctive relief sought for was merely ancillary to the prayer for suspension of payments and rehabilitation. WHEREFORE, PREMISES CONSIDERED, the assailed Orders dated February 21, 2001, April 24, 2001, and May 29, 2001, are hereby declared NULL and VOID and SET ASIDE for having been issued by public respondent Presiding Judge of the Regional Trial Court, Branch 85, Malolos, Bulacan with grave abuse of discretion amounting to lack or excess of jurisdiction, and another one is entered allowing the foreclosure and sale at public auction of the assets of private respondent Baliwag Mahogany Corporation mortgaged to petitioner Development Bank of the Philippines (DBP). SO ORDERED. Vidallon-Magtolis and Rivera, JJ., concur.