[ G.R. No. 74851. September 14, 1992 ] 288 Phil. 746
EN BANC
[ G.R. No. 74851. September 14, 1992 ]
RIZAL COMMERCIAL BANKING CORPORATION, PETITIONER, VS. INTERMEDIATE APPELLATE COURT AND BF HOMES INCORPORATED, RESPONDENTS. D E C I S I O N
MEDIALDEA, J.:
This is a petition for the review of the decision of the then Intermediate Appellate Court (IAC), dated April 8, 1986 in AC-G.R. No. SP-06313, entitled “BF Homes, Inc. v. Judge Ansberto P. Paredes, etc., et al.,” annulling the decision of the trial court and directing the Register of Deeds to suspend issuance of the owners’ copies of the land titles to the Rizal Commercial Banking Corporation (“RCBC”), purchaser of the foreclosed properties of private respondent BF Homes, Inc. (“BF Homes”) until the matter shall have been resolved by the Securities and Exchange Commission (SEC) in SEC Case No. 002693 and its Resolution on May 28, 1986 denying RCBC’s motion for reconsideration.
The facts of the case are narrated in the Court of Appeals’ decision.
On September 28, 1984, B.F. Homes filed a “Petition for Rehabilitation and for Declaration or Suspension of Payments” (SEC Case No. 002693) with the Securities and Exchange Commission (SEC).
One of the creditors listed in its inventory of creditors and liabilities was RCBC.
On October 26, 1984, RCBC requested the Provincial Sheriff of Rizal to extra-judicially foreclose its real estate mortgage on some properties of B.F. Homes. A notice of extra-judicial foreclosure sale was issued by the Sheriff on October 29, 1984, scheduled on November 29, 1984, copies furnished both B.F. Homes (mortgagor) and RCBC (mortgagee).
On motion of B.F. Homes, the SEC issued on November 28, 1984 in SEC Case No. 002693 a temporary restraining order (TRO), effective for 20 days, enjoining RCBC and the sheriff from proceeding with the public auction sale. The sale was rescheduled to January 29, 1985.
On January 25, 1985, the SEC ordered the issuance of a writ of preliminary injunction upon petitioner’s filing of a bond. However, petitioner did not file a bond until January 29, 1985, the very day of the auction sale, so no writ of preliminary injunction was issued by the SEC. Presumably, unaware of the filing of the bond, the sheriffs proceeded with the public auction sale on January 29, 1985, in which RCBC was the highest bidder for the properties auctioned.
On February 5, 1985, B.F. Homes filed in the SEC a consolidated motion to annul the auction sale and to cite RCBC and the sheriff for contempt. RCBC opposed the motion.
Because of the proceedings in the SEC, the sheriff withheld the delivery to RCBC of a certificate of sale covering the auctioned properties.
On February 13, 1985, the SEC in Case No. 002693 belatedly issued a writ of preliminary injunction stopping the auction sale which had been conducted by the sheriff two weeks earlier.
On March 13, 1985, despite SEC Case No. 002693, RCBC filed with the Regional Trial Court, Br. 140, Rizal (CC 10042) an action for mandamus against the provincial sheriff of Rizal and his deputy to compel them to execute in its favor a certificate of sale of the auctioned properties.
In answer, the sheriffs alleged that they proceeded with the auction sale on January 29, 1985 because no writ of preliminary injunction had been issued by SEC as of that date, but they informed the SEC that they would suspend the issuance of a certificate of sale to RCBC.
On March 18, 1985, the SEC appointed a Management Committee for B.F. Homes.
On RCBC’s motion in the mandamus case, the trial court issued on May 8, 1985 a judgment on the pleadings, the dispositive portion of which states:
“WHEREFORE, petitioner’s ‘Motion for Judgment on the pleadings’ is granted and judgment is hereby rendered ordering respondents to execute and deliver to petitioner the Certificate of the Auction Sale of January 29, 1985, involving the properties sold therein, more particularly those described in Annex ‘C’ of their Answer.” (p. 87, Rollo)
On June 4, 1985, B.F. Homes filed an original complaint with the IAC pursuant to Sec. 9 of B.P. 129 praying for annulment of the judgment, premised on the following:
“x x x: (1) even before RCBC asked the sheriff to extrajudicially foreclose its mortgage on petitioner’s properties, the SEC had already assumed exclusive jurisdiction over those assets, and (2) that there was extrinsic fraud in procuring the judgment because the petitioner was not impleaded as a party in the mandamus case, respondent court did not acquire jurisdiction over it, and it was deprived of its right to be heard.” (CA Decision, p. 88, Rollo)
On April 8, 1986, the IAC rendered a decision, setting aside the decision of the trial court, dismissing the mandamus case and suspending issuance to RCBC of new land titles, “until the resolution of case by SEC in Case No. 002693,” disposing as follows:
“WHEREFORE, the judgment dated May 8, 1985 in Civil Case No. 10042 is hereby annulled and set aside and the case is hereby dismissed. In view of the admission of respondent Rizal Commercial Banking Corporation that the sheriffs’ certificate of sale has been registered on B.F. Homes’ TCT’s Nos. 51001, 51002, 51003, 51005, 51006, 51007, 51011, 51013, 51014, 51015, 51017, 51018, 51019, 51020, 51021, 51022, 51022 (sic), 51286, 51287, 51288, 51290, 51292, 51297, 51309, 51319, 51321, 51331, 51332, 51333, 51334, 51335, 51336, 51337, 51338, 51339, 51340, 51342, 51343, 51344, 51345, 51346 (sic), 51347, 48151, 48165 (sic), 48128, 48194, 68603, 71273, 71275, and 71276, the Register of Deeds for Pasay City is hereby ordered to suspend the issuance to the mortgagee- purchaser, Rizal Commercial Banking Corporation, of the owner’s copies of the new land titles replacing them until the matter shall have been resolved by the Securities and Exchange Commission in SEC Case No. 002693.” (p. 91, Rollo) (emphasis ours).
On June 18, 1986, RCBC filed its present petition on the following assigned errors:
Petitioner did not commit extrinsic fraud in excluding private respondent as party defendant in Special Civil Case No. 10042 as private respondent was not indispensable party thereto, its participation not being necessary for the full resolution of the issues raised in said case.
SEC. Case No. 2693 cannot be invoked to suspend Special Civil Case No. 10042, and for that matter, the extrajudicial foreclosure of the real estate mortgage in petitioner’s favor, as these do not constitute actions against private respondent contemplated under section 6(c) of Presidential Decree No. 902-A.
Even assuming arguendo that the extra-judicial sale constitutes an action that may be suspended under section 6(c) of Presidential Decree No. 902-A, the basis for the suspension thereof did not exist so as to adversely affect the validity and regularity thereof.
The Regional Trial Court had jurisdiction to take cognizance of Special Civil Case No. 10042.
The Regional Trial Court had jurisdiction over Special Civil Case No. 10042." (p. 5, Rollo)
On November 12, 1986, We gave due course to the petition.
On November 24, 1986, RCBC filed a “Manifestation” informing Us that on October 16, 1986, the SEC in Case No. 002693 had issued an Order denying the consolidated Motion to Annul the Auction Sale and to cite RCBC and the sheriff for contempt, disposing as follows:
“WHEREFORE, the petitioner’s ‘Consolidated Motion to Cite Sheriff and Rizal Commercial Banking Corporation for Contempt and to Annul Proceedings and Sale’, dated February 5, 1985, should be, as it is, hereby DENIED.
“While we cannot direct the Register of Deeds to allow the consolidation of the titles subject of the ‘Omnibus Motion’ dated September 18, 1986 filed by the Rizal Commercial Banking Corporation, and therefore, denied said Motion, neither can this Commission restrain the said bank and the Register of Deeds from effecting said consolidation.
“SO ORDERED.” (p. 138, Rollo, emphasis ours)
as a consequence of which, “the Register of Deeds of Pasay City effected the transfer of title over the subject properties to petitioner and caused the issuance of new titles in its name,” and therefore “the interest of petitioner to continue prosecuting the instant petition has become moot and the issues raised therein have become academic.” Petitioner RCBC further prayed that “x x x the (instant) petition be deemed as mooted by the events that transpired, x x x and that “this petition be thereby dismissed.”
We note the precipitate manner in which the transfers of title in RCBC’s name had been effected.
Aggrieved by the appellate court’s decision, RCBC had invoked this Court’s jurisdiction. We gave due course to its petition on November 27, 1986. It now manifests its loss of interest to pursue the case because it had “effectively achieved” what had been nullified by the appellate court, without awaiting Our final ruling on its petition.
Based on its manifestation, it would seem that the Pasay City Register of Deeds had taken the SEC Resolution dated October 16, 1986 as its cue for proceeding with the transfers of title, despite an explicit directive in the Court of Appeals’ decision “to suspend issuance x x x until the matter shall have been resolved by the Securities and Exchange Commission in SEC Case No. 002693.”
SEC Case No. 002693 is BF Homes’ rehabilitation. On the other hand, SEC Resolution dated October 16, 1986 is a denial of BF Homes’ Consolidated Motion to Annul the auction sale and to cite RCBC and sheriff for contempt.
By specifically mentioning the case number (002693) the appellate court could only have meant the BF Homes’ rehabilitation and not any indiscriminate action taken by the SEC. Hence, until final rehabilitation, both RCBC and the Pasay City Register of Deeds had to abide by the explicit directive of the appellate court to suspend, in the meantime, issuance of new land titles, or effect registration in RCBC’s name.
Against this background, We do not see any merit in considering the case closed or terminated, for being moot and academic, since there is basis for nullifying end setting aside the TCTs in RCBC’s name.
We now discuss the merits of the case.
The appellate court had ruled on the illegality of the mandamus case and thus set aside the decision of the lower court, directing the delivery of the certificates of auction sale. This ruling effectively upholds the exclusive jurisdiction of the SEC (under Sec. 5(d) of PD 902-A as amended) over the assets and properties of a distressed firm under PD 902-A, as amended. In the cases of BF Homes, Inc. v. CA, et al., G.R. No. 76879 and Roa v. CA, G.R. No. 77143, October 3, 1990, We clarified that when a corporation threatened by bankruptcy is taken over by a receiver, all the creditors should stand on an equal footing, not anyone should be given preference by paying one or some of them ahead of the others.
RCBC and the Pasay City Register of Deeds must have premised their action on SEC’s refusal in the resolution dated October 16, 1986 to exercise jurisdiction on the contempt case, thus:
“x x x
“While we cannot direct the Register of Deeds to allow the consolidation of the titles subject of the ‘Omnibus Motion’ dated September 18, 1986 filed by the Rizal Commercial Banking Corporation and, therefore, denies said Motion, neither can this Commission restrain the said bank and the Register of Deeds from effecting said consolidation.
“SO ORDERED.”
as their go-signal to disregard the appellate court’s directive and proceed with the registration of titles. Their action of course, is clearly contumacious and both are equally guilty of contempt.
Since the properties, subject of the motion for contempt (in the SEC) involved assets of a distressed firm, SEC would have been fully justified in issuing the corresponding restraining order against the consolidation of title in RCBC, pursuant to Sec. 6(a), PD 902-A, as amended. However, We do not know if the SEC Resolution dated October 16, 1986 was ever questioned by BF Homes. At any rate, since this was not raised as an issue here, We shall refrain from discussing this.
The fact remains that by ordering the suspension of registration of titles, the appellate court clearly intended to have BF Homes’ assets/properties remain untouched during the period of rehabilitation so as not to render the SEC Management Committee irrelevant and inutile and to give it unhampered “rescue efforts” over the distressed firm.
We also agree with BF Homes that as owner, it should have been impleaded in CC 10042 to allow it to protect its rights.
Nevertheless, since RCBC had gone ahead with the registration of title in complete defiance of the Court of Appeals’ directive, We have no recourse except to set aside such transfer and nullify the TCTs issued in RCBC’s name.
While it is recognized that RCBC is a preferred creditor and likewise the highest bidder at the auction sale, We have however stated that whenever a distressed corporation asks the SEC for rehabilitation and suspension of payments, preferred creditors may no longer assert such preference, but as earlier stated, stand on equal footing with other creditors. Foreclosure shall be disallowed so as not to prejudice other creditors, or cause discrimination among them. If foreclosure is undertaken despite the fact that a petition for rehabilitation has been filed, the certificate of sale shall not be delivered pending rehabilitation. Likewise, if this has also been done, no transfer of title shall be effected also, within the period of rehabilitation. The rationale behind PD 902-A, as amended, is to effect a feasible and viable rehabilitation. This cannot be achieved if one creditor is preferred over the others.
In this connection, the prohibition against foreclosure attaches as soon as a petition for rehabilitation is filed. Were it otherwise, what is to prevent the petitioner from delaying the creation of the Management Committee and in the meantime dissipate all its assets. The sooner the SEC takes over and imposes a freeze on all the assets, the better for all concerned.
ACCORDINGLY, the petition is DISMISSED, the decision of the Court of Appeals is AFFIRMED with the modification that RCBC and Vicente A. Garcia, Pasay City Register of Deeds, are hereby found guilty of CONTEMPT and FINED One Thousand Pesos (P1,000.00) each. The new torrens titles issued in RCBC’s name are hereby NULLIFIED and SET ASIDE and BF Homes TCT’s Nos. 51001, 51002, 51003, 51005, 51006, 51007, 51011, 51013, 51014, 51015, 51017, 51018, 51019, 51020, 51021, 51022, 51286, 51287, 51288, 51290, 51292, 51297, 51309, 51319, 51321, 51331, 51332, 51333, 51334, 51335, 51336, 51337, 51338, 51339, 51340, 51342, 51343, 51344, 51345, 51347, 48151, 48128, 48194, 68603, 71273, 71275, and 71276 are reinstated. Costs against petitioner.
SO ORDERED. Gutierrez, Jr., Nocon, and Melo, JJ., concur. Narvasa, C.J., Bidin, Regalado, and Bellosillo, JJ., in the result. Cruz, J., no part, related to petitioner’s counsel. Feliciano, J., see dissenting opinion. Padilla, Davide, Jr., and Romero, JJ., joins Mr. Justice Feliciano in his dissent. Grino-Aquino, J., no part, was the ponente in the C.A. Campos, Jr., J., no part in the deliberation.