Title
Bank of the Philippine Islands vs. Bacalla, Jr.
Case
G.R. No. 223404
Decision Date
Jul 15, 2020
A case involving TGICI's liquidation, fraudulent corporate acts, and BPI's certiorari petition challenging RTC's denial of Requests for Admission, ruled as intra-corporate under Interim Rules.

Case Summary (G.R. No. 223404)

Procedural Background

The litigation arose from an RTC judgment granting a petition for involuntary dissolution of TGICI and ordering liquidation and receivership. Acting pursuant to that judicial authority, the court‑appointed receiver, together with TGICI investors and FITI, filed a civil action (Civil Case No. LP‑05‑0212) against multiple parties (including Prudential Bank, JAMCOR Holdings, and Cielo Azul) for alleged violations of PD No. 902‑A and the Interim Rules under RA No. 8799, seeking recovery of assets, nullity of contracts, specific performance, and injunctive relief.

Core Allegations by Respondents

The complaint alleged that TGICI engaged in fraudulent inducement, deceit, and misrepresentation by soliciting and accepting investments through multiple front and conduit corporations and issuing unregistered securities in violation of the SEC’s regulatory pronouncements. Respondents asserted that funds raised by TGICI were funneled to JAMCOR and Cielo Azul and thereafter used to purchase shares of Prudential Bank (totaling 630,225 shares) — purchases that respondents alleged were made with proceeds of the illegal scheme and were therefore subject to recovery.

Trial Court Orders and Discovery Dispute

During pretrial, the petitioner orally moved to declare respondents non‑suited for lack of Special Powers of Attorney; the trial court denied that motion (Order of November 28, 2011). Petitioner thereafter served Requests for Admission (February 8, 2012) to respondents seeking admissions on matters including authority to sue and knowledge of proceedings. The RTC denied petitioner’s motion for reconsideration and denied the Requests for Admission in Orders dated August 10, 2012 and January 14, 2013, citing concerns of judicial stability and the impropriety of belated discovery requests under the Interim Rules.

Intermediate Appeals and Related Petitions

Petitioner sought relief by filing petitions for certiorari before the Court of Appeals and earlier petitions reaching the Supreme Court on related interlocutory disputes. The CA ultimately denied the petition challenging the denial of the Requests for Admission (CA decision dated July 27, 2015), and denied reconsideration (March 4, 2016). The Supreme Court subsequently reviewed the CA decision in the present petition for review on certiorari.

Issues Presented to the Supreme Court

Two central issues were raised: (1) whether the Interim Rules on Intra‑Corporate Controversies apply to the proceedings below; and (2) whether petitioner violated the rule against splitting a cause of action in filing successive petitions for certiorari and whether any petition was filed out of time.

Legal Framework Governing Jurisdiction and Pleadings

The Interim Rules stem from Section 5.2 of RA No. 8799, which transferred to the RTC the jurisdiction previously exercised by the SEC over matters enumerated in Section 5 of PD No. 902‑A. Section 5 of PD No. 902‑A covers (a) devices or schemes amounting to fraud and misrepresentation detrimental to public or shareholder interests, (b) controversies arising out of intra‑corporate relations, and (c) controversies in corporate elections/appointments. Rule 1, Section 1(a) of the Interim Rules restates these categories and further includes derivative suits and inspection of corporate books. Jurisprudence requires that, when a party invokes the court’s special commercial jurisdiction under the Interim Rules, the complaint itself must on its face specify the alleged fraudulent corporate acts or schemes.

Supreme Court’s Analysis — Applicability of the Interim Rules

The Court concluded that the Interim Rules applied to the proceedings. The complaint, on its face, alleged detailed fraudulent corporate layering, diversion of investor funds through subsidiaries, matched orders and other manipulative devices, and the use of subsidiary corporations as conduits for illegal transfers. Those specific allegations satisfied the requisite pleading standard that the fraud or fraudulent devices be shown on the face of the complaint, thereby bringing the action within Section 5(a) of PD No. 902‑A and the Interim Rules.

Relationship Test and Nature of Controversy Test Applied

The Court applied a combined relationship test and nature of the controversy test to determine whether the dispute was intra‑corporate. Under the relationship test, any of several intra‑corporate relations (e.g., between corporation and stockholders, among stockholders, or between corporation and the public) will characterize a dispute as intra‑corporate. Under the nature test, the controversy must pertain to enforcement of correlative corporate rights and obligations or internal corporate regulation. The complaint’s allegations connected TGICI (the dissolved issuer), its subsidiaries (including Cielo Azul and JAMCOR), and the investors in a factual matrix alleging one singular scheme; respondents sought to pierce corporate separateness and recover assets dissipated through subsidiary transactions. That factual showing implicated intra‑corporate relations and corporate regulatory remedies, bringing the case squarely within the Interim Rules.

Role of Third‑Party Purchasers and Corporate Books

The Court rejected petitioner’s contention that the presence of third‑party transferees (Prudential Bank and vendees) converted the action into an ordinary civil action beyond the Interim Rules. Because respondents alleged that the shares were acquired with proceeds of the fraudulent scheme and that the vendees and the bank participated knowingly, impleading those parties was consequential to enforcement of TGICI’s or its investors’ corporate rights. The receiver’s right to access corporate books and records of a subsidiary for recovery of dissipated corporate assets was held not to be foreclosed merely because third parties were involved.

Specificity Requirement and Supporting Allegations

The Court emphasized that, consistent with precedent, a complaint invoking the Interim Rules must articulate the fraudulent corporate acts with sufficient specificity. Examination of the complaint revealed particularized averments (corporate layering, improper matched orders, manipulative devices) in specific paragraphs, which met the standard and justified the application of the Interim Rules and the circumscribed discovery schedule under those rules.

Rule Against Splitting Causes of Action and Certiorari Distinction

The Supreme Court identified and corrected the CA’s misapplication of the rule against splitting a cause of action. It explained that a cause of action (Rules of Court, Rule 2) is distinct from a petition for certiorari (Rule 65). A certiorari petition addresses grave abuse of discretion by a tribunal and is not grounded on a cause of a

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