G.R. No. 74851 - Rizal Commercial Banking Corp. vs. Intermediate Appellate Court

BF Homes, Inc. filed a Petition for Rehabilitation and for Declaration or Suspension of Payments with the Securities and Exchange Commission (SEC) on September 28, 1984, under SEC Case No. 002693.
Among those listed as creditors in BF Homes’ inventory was the Rizal Commercial Banking Corporation (RCBC).
RCBC, being the mortgagee for certain real estate properties, later initiated actions leading to extra-judicial foreclosure.

On October 26, 1984, RCBC requested the Provincial Sheriff of Rizal to proceed with an extra-judicial foreclosure of BF Homes’ properties.
A notice of extra-judicial foreclosure sale was issued on October 29, 1984, with copies provided to both BF Homes and RCBC.
Due to BF Homes’ intervention, the SEC issued a temporary restraining order (TRO) on November 28, 1984, against RCBC and the sheriff, initially effective for 20 days.
The auction sale was subsequently rescheduled for January 29, 1985.

On January 25, 1985, the SEC ordered the issuance of a writ of preliminary injunction upon the filing of a bond by RCBC; however, RCBC filed the bond on the day of the auction sale (January 29, 1985), too late to prevent the sale.
Regardless, the sheriffs proceeded with the public auction sale on January 29, 1985, in which RCBC emerged as the highest bidder.
On February 5, 1985, BF Homes filed a consolidated motion in the SEC to annul the auction sale and to cite RCBC and the sheriff for contempt, a motion which RCBC opposed.
The SEC later, on February 13, 1985, issued a writ of preliminary injunction, effectively stopping further auction proceedings already conducted.

On March 13, 1985, RCBC filed a mandamus action in the Regional Trial Court (RTC) to compel the sheriffs to issue a certificate of sale for the auctioned properties.

The sheriffs, in their answer, justified the auction sale by stating that no writ of preliminary injunction had been issued at that time, but they committed to suspending the issuance of the certificate of sale.

On May 8, 1985, the RTC rendered judgment ordering the sheriffs to execute and deliver the certificate of the auction sale to RCBC.
On June 4, 1985, BF Homes filed an original complaint with the then Intermediate Appellate Court (IAC) seeking annulment of the RTC decision on the grounds of:

The IAC, on April 8, 1986, annulled the RTC judgment and suspended the issuance of new land titles (pending the resolution of SEC Case No. 002693), specifically directing that the Register of Deeds for Pasay City suspend the issuance of owner’s copies to RCBC.

On June 18, 1986, RCBC filed a petition for review of the IAC decision, raising five assigned errors including issues of extrinsic fraud, jurisdiction, and the applicability of SEC actions.
On November 12, 1986, the petition was given due course and on November 24, 1986, RCBC filed a “Manifestation” informing that the SEC issued an order on October 16, 1986, denying BF Homes’ motion to annul the auction sale.
As a result, the Pasay City Register of Deeds proceeded with transferring title to RCBC, effectively nullifying RCBC’s continued interest in pursuing the petition, even as merits and issues arose regarding the proper suspension of title issuance.

The SEC, under its exclusive jurisdiction and pursuant to PD 902-A (as amended), was tasked with protecting the assets of a corporation undergoing rehabilitation by freezing actions that could prejudice creditor equality.
RCBC’s action in foreclosing and later effecting title transfers despite the SEC and appellate court directives raised significant questions regarding the proper application of the law in insolvency and rehabilitation contexts.

Whether RCBC committed extrinsic fraud by excluding BF Homes as a necessary party in the mandamus action (Special Civil Case No. 10042).
Determination if BF Homes’ non-impleading affected the resolution of the proceedings.

Whether SEC Case No. 002693 (BF Homes’ rehabilitation) could be invoked to suspend the proceedings in the mandamus case and the extrajudicial foreclosure sale.
Whether actions taken under SEC authority are deemed applicable for suspending individual creditor actions under section 6(c) of PD 902-A.

Whether the basis for suspending the extra-judicial foreclosure and auction sale existed and if such foreclosure action was legally valid.
Whether the issuance of the certificate of sale and subsequent title transfer to RCBC should be recognized despite the SEC directives.

Whether the RTC had proper jurisdiction to take cognizance of and decide Special Civil Case No. 10042 concerning the issuance of the auction sale certificate.

Whether the SEC’s exclusive jurisdiction over a distressed company in rehabilitation meant that all foreclosure proceedings and title issuances must automatically be suspended pending final SEC resolution.
Determining the interplay between statutory provisions under PD 902-A and the actions of the RTC and the pasay City Register of Deeds.