Title
Rizal Commercial Banking Corp. vs. Court of Appeals
Case
G.R. No. 85396
Decision Date
Oct 27, 1989
Alfredo Ching, as surety, remained liable to RCBC despite PBM’s SEC rehabilitation, as his obligation was independent and solidary under the Comprehensive Surety Agreement.
surety liability
suspension of payments
injunctive order
A

Case Digest (G.R. No. 85396)

Facts:

  • Parties and capacities
    • Petitioner Rizal Commercial Banking Corporation (RCBC).
    • Respondent Philippine Blooming Mills, Inc. (PBM).
    • Respondent Alfredo Ching as Surety.
  • Surety arrangement and guaranteed obligations
    • On 4 May 1979, Alfredo Ching signed a Comprehensive Surety Agreement with RCBC.
    • The agreement bound Ching jointly and severally to guarantee the prompt payment of all PBM obligations owing RCBC.
    • The guaranteed obligations aggregated P40,000,000.00.
  • Letters of credit and trust receipts
    • Between 8 September to 30 October 1980, PBM filed several applications for letters of credit with RCBC.
    • Under the applications, PBM obligated itself to pay on demand all drafts drawn under or purporting to be drawn under the credits.
    • RCBC opened the corresponding letters of credit and imported various goods for PBM’s account.
    • After the goods arrived, RCBC released them, in trust, to PBM.
    • PBM acknowledged receipt through various trust receipts.
    • All in all, PBM’s obligations stood at P7,982,649.08.
  • RCBC collection case against PBM and Ching
    • On 7 August 1981, RCBC filed a Complaint for collection of P7,982,649.08 against PBM and Alfredo Ching with the then Court of First Instance of Pasig.
    • The case was docketed as CV-42333.
    • Upon filing of a bond satisfactory to the Court, the Court issued a Writ of Preliminary Attachment against PBM’s and Ching’s assets and properties on the same day.
    • PBM and Ching, as special and affirmative defenses, alleged that although trust receipts stipulated due dates, the parties’ true intent and agreement was that maturity dates would be extended at the end of the stipulated dates, allegedly following RCBC’s customary practice with PBM.
    • On 23 September 1981, PBM and Ching moved to discharge the attachment, but RCBC opposed.
    • On 4 December 1981, the Court lifted the attachment upon respondents’ filing of a satisfactory counter-bond.
  • SEC suspension of payments and rehabilitation of PBM
    • On 1 April 1982, PBM filed a Petition for Suspension of Payments with the Securities and Exchange Commission (SEC), docketed as SEC Case No. 2250, and at the same time sought rehabilitation.
    • In an injunctive Order dated 6 July 1982, the SEC ordered that all actions for claims against PBM, pending before any court or tribunal and in whatever stage, were suspended to allow the SEC to determine the feasibility of rehabilitation plans.
    • On 26 April 1988, the SEC approved the revised rehabilitation plan and ordered its implementation.
  • RCBC proceeds with case against PBM and Ching
    • On 14 October 1982, RCBC pursued its claims in CV-42333.
    • RCBC filed, unopposed, a Motion for Summary Judgment in CV-42333.
    • An earlier motion for extension to file opposition was withdrawn.
    • RCBC contended that PBM and Ching had not denied indebtedness, and thus no genuine issue was raised.
  • Trial court summary judgment
    • On 25 November 1982, the CFI rendered summary judgment in RCBC’s favor.
    • The Court ordered PBM and Ching to pay jointly and severally:
      • P7,982,649.08, inclusive of interest, service charges, and penalties as of 7 August 1981, plus additional interest, service charges, and penalties from 7 August 1981 until fully paid; and
      • P10,000.00 as attorney’s fees.
    • The Court assessed costs against the defendants.
  • Court of Appeals reversal on ground of SEC suspension order
    • On appeal, the Court of Appeals ruled that the lower court acted precipitately and improperly by continuing the proceedings despite the SEC order suspending actions for claims against PBM.
    • The Court of Appeals set aside the CFI decision.
    • It ordered the trial court to hold in abeyance the determination on the merits in CV-42333 pending the outcome of SEC Case No. 2250.
  • Denial of reconsideration and current petition
    • On 6 October 1988, the Court of Appeals denied RCBC’s Motion for Reconsideration.
    • RCBC filed the present Petition for Review.
    • The Court gave due course on 31 May 1989 and required memoranda.
    • The last memorandum was submitted on 27 July 1989.
  • Positions of the parties in the petition
    • RCBC’s position
      • RCBC argued that the SEC injunctive Order affected only PBM, the corporation under rehabilitation.
      • RCBC asserted that its right as creditor to proceed against Ching as Surety was not affected.
      • RCBC contended that applying the injunctive Order to both PBM and Ching would deprive RCBC of the right to proceed against the surety based on the surety’s separate and independent undertaking.
    • PBM and Ching’s position
      • PBM and Ching argued that the liabilities incurred by PBM were corporate in character, and Ching could not be held liable as a “corporate officer.”
      • They contended that the pendency of SEC Case No. 2250 and the SEC order of 26 April 1988 implementing rehabilitation necessarily benefited Ching because payment of PBM obligations must be made according to the rehabilitation plan.
      • They argued that the surety’s liability could not exceed what would remain after payment of all PBM obligations under the plan.
      • They alleged it was usual for majority stockholders to co-sign with their corporations in transactions involving guaranty or security agreements, and they characterized Ching’s act as a corporate act.
    • The Court’s determination of the surety liability depends on the suretyship contract and its scope
      • The Court held there was no basis, based on the evidence or the pleadings, to treat Ching’s act as part of a usual corporate procedure as claimed.
      • The Court applied the contractual rule that the extent of a surety’s liability is determined by the suretyship contract’s clause and cannot be extended by implication.
    ...(Subscriber-Only)

Issues:

  • Whether the SEC injunctive Order suspending actions for claims against the principal debtor PBM during rehabilitation bars or precludes RCBC from recovering from the surety, Alfredo Ching.
    • Whether the SEC Order affects only PBM or also the surety.
    • Whether the surety’s undertaking is “separate and independent” such that it remains enforceable.
  • Whether Alfredo Ching could evade liability by characterizing the PBM obligations as corporate in nature and treating his undertaking as a corporate act.
    • Whether evidence and the suretyship agreement support any corporate-officer limitation on Ching’s liability.
  • Whether the SEC injunctive Order extended to cover Ching and suspension of his demandable obligation.
    • Whether SEC authority under P.D. 902-A, as amended, and the terms of the injunctive Order allow suspension as to Ching.
    • Whether rehabilitation receivers were limited to PBM’s asse...(Subscriber-Only)

Ruling:

  • (Subscriber-Only)

Ratio:

  • (Subscriber-Only)
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