Case Digest (G.R. No. 253311)
Facts:
BDO Unibank, Inc. was impleaded as a creditor in the Petition for Voluntary Insolvency filed by Ailene Chua Co (doing business under “Twin Blessings Enterprise” and “Co Branding Enterprise”) and her husband, Andrew Co, before the RTC, Branch 90 of Quezon City, in November 2011. Under the Financial Rehabilitation and Insolvency Act of 2010 (FRIA), the RTC issued a Liquidation Order on December 9, 2011, ordering that the insolvent’s assets be held for creditor distribution and directing BDO, as creditor, to account for and hold in trust the respondents’ US dollar time deposit accounts Account Nos. 302703078315 and 302703452706.
After liquidation began, BDO claimed it had unilaterally applied (set off) the deposited funds to Ailene’s loan obligations within the 90-day period before the liquidation order. When respondents sought production of the complete account ledgers, the RTC repeatedly required BDO to comply; it ultimately nullified the application of payment in an Omnibus Order dated January 10, 2017 and later reiterated the requirement to produce the ledgers, while admitting a Promissory Note with Assignment on BDO’s motion. The RTC denied BDO’s motion for reconsideration (February 28, 2019), and the CA affirmed (January 16, 2020; September 2, 2020).
Issues:
- Whether the RTC gravely abused its discretion in issuing the interlocutory orders requiring BDO to produce complete ledgers and in nullifying BDO’s application of payment.
- Whether BDO’s challenge to the January 10, 2017 nullification order was barred by laches.
- Whether BDO, as a secured creditor, was entitled to have its set-off or application of payment respected in the insolvency proceedings, considering Section 114 of the FRIA.
- Whether BDO’s proof of secured status through its Motion to Admit (and attached documents) was the proper procedural remedy to establish the validity of its application of payment.
Ruling:
The Supreme Court denied the petition, holding that the RTC did not commit grave abuse of discretion, as the assailed RTC orders were interlocutory steps in facilitating a speedy, orderly liquidation and ensuring transparency. The Court emphasized that BDO failed to comply with prior orders to produce complete ledgers needed to verify its claims.
The Court held that BDO’s attempt to assail the January 10, 2017 nullification order was unreasonably delayed, constituting laches, because BDO challenged that earlier nullification only much later through motions directed at subsequent RTC orders. Even disregarding laches, the petition still failed because determining BDO’s secured status and the validity/effect of the set-off involved questions of fact.
Ratio:
The RTC’s directives to produce complete ledgers, to facilitate verification of BDO’s claimed set-off, fell within the liquidation court’s mandate under the FRIA to protect assets for equitable creditor distribution. The Court found that the RTC’s later August 23, 2018 order was essentially a reiteration of its earlier orders (beginning September 15, 2014 and February 5, 2018) and thus showed no grave abuse.
On laches, the Court ruled that BDO’s certiorari attack only targeted later interlocutory orders, while the actual nullification of BDO’s application of payment was issued January 10, 2017, which BDO did not promptly question. Allowing BDO to seek reversal after a long lapse would be inequitable. Further, under Section 114 of the FRIA, the right of a secured creditor presupposes competent proof of secured status; the Court found BDO’s continued refusal to comply with ledger-production orders prevented it from establishing the basis to remove its transactions from the liquidation process. Finally, the Court treated the issues on secured status and the validity of the application of payment as questions of fact outside the limited scope of a Rule 45 petition.
Doctrine:
- Interlocutory orders in insolvency proceedings may be challenged only through proper special civil action, but certiorari will not issue absent lack or excess of jurisdiction or grave abuse of discretion.
- (Get Pro to unlock 7 more doctrines)