G.R. No. 196637 - Far East Bank and Trust Co. vs. Union Bank of the Philippines

Case Summary (G.R. No. 196637)

Factual Antecedents and Transactions

EYCO and controlling stockholders (the Yutingcos) filed a petition for declaration of suspension of payments and rehabilitation with the SEC on September 16, 1997. Prior to that, on September 15, 1997, EYCO sold condominium units and parking spaces (included among NIKON-related assets allegedly used to shield creditors) to petitioner FEBTC. Union Bank, a creditor of NIKON under a Continuing Surety Agreement executed by the Yutingcos, sued the Yutingcos, EYCO and FEBTC in Civil Case No. 66477 (RTC Pasig) on September 26, 1997, seeking rescission of the sale as fraudulent and in fraud of creditors.

SEC Proceedings and Interim Orders

On September 19, 1997 the SEC issued an order enjoining disposition of debtor-corporations’ properties and suspending actions against EYCO; subsequently the SEC Hearing Panel directed the creation of a Management Committee (MANCOM) by Omnibus Order of October 27, 1997. The SEC later entertained an unsolicited rehabilitation proposal, then the SEC En Banc, on September 14, 1999, disapproved the proposed SAC plan, terminated suspension proceedings, ordered dissolution and liquidation, and directed liquidation proceedings with appointment of a Liquidator.

Union Bank’s Prior Litigation and Supreme Court Ruling

Union Bank filed certiorari in the Court of Appeals challenging the SEC’s suspension-of-payments order and MANCOM creation; this Court in Union Bank of the Philippines v. Court of Appeals (1998) held SEC jurisdiction over suspension of payments is confined to petitions initiated by corporate entities and ordered the Yutingcos dropped from the SEC petition, without prejudice to separate proceedings in the RTC.

Motions to Dismiss in RTC Civil Case No. 66477

EYCO and the Yutingcos moved to dismiss the RTC action citing pendency of SEC proceedings and lack of jurisdiction (litis pendentia and subject-matter jurisdiction), and FEBTC moved to dismiss on grounds that Union Bank failed to implead NIKON (indispensable parties), failed to state a cause of action for rescission (no allegation of unavailability of other remedies), and lacked legal personality to sue because the rehabilitation receiver or MANCOM should enforce creditor rights. Union Bank opposed, asserting no identity of parties or causes with the SEC case and that the RTC had exclusive jurisdiction over rescission of sale and title matters.

RTC’s Dismissal Order (March 22, 2005) and Reconsideration Denial

The RTC (Pasig, Branch 157) granted defendants’ motions to dismiss on litis pendentia grounds, finding a pending SEC action involving the same properties and that Union Bank, by its filings before the SEC, had voluntarily submitted to SEC jurisdiction. The court relied on the creation of MANCOM and prior rulings that Union Bank was guilty of forum shopping. The RTC denied Union Bank’s motion for reconsideration on August 26, 2005.

Court of Appeals Reversal (November 15, 2010) and Substitution (April 19, 2011)

On appeal the CA reversed the RTC, holding there was no identity of parties because the Yutingcos had been dropped from SEC proceedings; no identity of rights and causes because Union Bank’s RTC action sought rescission and reversion of title (matters within RTC exclusive jurisdiction under BP Blg. 129, Sec. 19); and Union Bank had not accepted or executed waivers under the SEC-approved Liquidation Plan so it was not bound. The CA found no forum shopping and concluded Union Bank retained capacity to sue when it filed in the RTC. The CA later granted BAYAN’s motion to substitute as assignee of Union Bank.

Issues Presented to the Supreme Court

Whether Civil Case No. 66477 should be dismissed on the ground of litis pendentia; 2) Whether Union Bank committed forum shopping; and 3) Whether Union Bank had legal personality (capacity) to file Civil Case No. 66477 in view of SEC’s MANCOM appointment and rehabilitation proceedings.

Supreme Court’s Standard on Litis Pendentia

The Court restated the three-element test for litis pendentia: (a) identity of parties or substantially identical parties representing same interests; (b) identity of rights asserted and relief prayed for founded on the same facts; and (c) such identity that judgment in one case would be res judicata as to the other. Litis pendentia is a ground for dismissal under Rule 16 Sec. 1(e) and may be raised motu proprio.

Application of Litis Pendentia to the Case — Parties and Causes

The Supreme Court found the three requisites lacking. First, identity of parties was absent because the Yutingcos were ordered dropped from SEC Case No. 09-97-5764 pursuant to the Court’s 1998 ruling; the RTC action sued the Yutingcos as sureties and FEBTC as purchaser, whereas the SEC proceeding was a corporate petition by EYCO. Second, the rights and reliefs differed: the RTC case principally sought rescission of sale and reversion of title to NIKON (a real property and rescissory remedy within the RTC’s competence), while the SEC petition concerned suspension of payments and rehabilitation viability under P.D. No. 902-A. Third, any judgment in one forum would not operate as res judicata in the other because SEC rehabilitation proceedings are summary and do not adjudicate facts requiring full trial on fraud, ownership and damages, whereas an RTC adjudication annulling sale would not determine rehabilitation viability or equitable distribution of company assets.

Forum Shopping Analysis

The Court clarified forum shopping exists where elements of litis pendentia are present or where a final judgment in one case would be res judicata in another. Because litis pendentia was absent and the issues, parties and reliefs were not identical, Union Bank was not guilty of forum shopping. The Court distinguished this situation from Union Bank’s earlier forum-shopping violation (in the 1998 decision) where Union Bank simultaneously pursued certiorari despite pending SEC motions raising identical issues.

Legal Personality/Capacity and Effect of MANCOM Creation

The Supreme Court held Union Bank had the legal capacity to file the RTC action when it filed on September 26, 1997 because MANCOM was not constituted until October 27, 1997. The Court emphasized capacity versus substitution: although a management committee or rehabilitation receiver, when appointed, generally assumes authority over enforcement of claims against a distressed corporation and may justify suspension of pending claims under P.D. No. 902-A, the timing of MANCOM’s creation meant Union Bank’s suit

Case Syllabus (G.R. No. 196637)

Case Caption and Decision Reference

G.R. No. 196637; First Division; Decision penned by Justice Gesmundo; promulgated June 03, 2019; reported at 852 Phil. 206.
Appeal by certiorari from the Court of Appeals Decision dated November 15, 2010 and Resolution dated April 19, 2011 in CA-G.R. CV No. 86172 which reversed and set aside the RTC of Pasig City, Branch 157 Orders dated March 22, 2005 and August 26, 2005 in Civil Case No. 66477.
Petitioner: Far East Bank and Trust Company (FEBTC) (now Bank of the Philippine Islands as noted in the record).
Respondent: Union Bank of the Philippines (substituted later by BAYAN Delinquent Loan Recovery I (SPV-AMC), Inc. per deed of assignment dated October 3, 2007 and CA substitution filed March 14, 2011).

Antecedent Facts — Corporate Group, Loans and Alleged Conveyance

The EYCO Group of Companies (EYCO) and controlling stockholders Eulogio O. Yutingco, Caroline Yutingco‑Yao and Theresa (Teresa/T. Lao) filed with the SEC on September 16, 1997 a "Petition for the Declaration of Suspension of Payment[s], Formation and Appointment of Rehabilitation Receiver/Committee, Approval of Rehabilitation Plan with Alternative Prayer for Liquidation and Dissolution of Corporations" (SEC Case No. 09‑97‑5764).
A creditor consortium of 22 domestic banks (the Consortium), including Union Bank, met on September 19, 1997 to coordinate responses to the SEC petition and agreed on common representation and a seven‑bank management committee composition.
Union Bank broke away from the Consortium without notifying members and filed suits in regular courts; one such suit was Civil Case No. 66477 filed in RTC Pasig, Branch 157 on September 26, 1997: Union Bank of the Philippines v. Eulogio and Bee Kuan Yutingco, Far East Bank and Trust Company and EYCO Properties.
Union Bank alleged the Spouses Yutingco were debtors under a Continuing Surety Agreement dated September 12, 1996 securing P110,000,000.00 credit accommodations extended to Nikon Industrial Corp., Nikolite Industrial Corp. and 2000 Industries Corp. (collectively NIKON), entities allegedly majority‑owned or controlled by the Yutingcos.
Union Bank contended that NIKON diverted assets to acquire real estate through EYCO to shield assets from creditors; EYCO owned condominium units and parking spaces in Tektite Tower and Strata 200 Building and these were sold to FEBTC on September 15, 1997 — one day before EYCO/NIKON/Spouses filed with the SEC.
Union Bank alleged the sale was fraudulent, in bad faith to prevent levy, the Strata 200 units’ purchase price of P32,000,000.00 was grossly inadequate, and FEBTC colluded with EYCO and the Spouses Yutingco to purchase additional assets, making FEBTC a vendee in fraud and an implied trustee for creditors; Union Bank sought to nullify the sale and recover assets for NIKON’s creditors.

SEC Proceedings — Orders, MANCOM, Rehabilitation Plan, Liquidation

On September 19, 1997, SEC issued an Order enjoining disposition of the debtor corporations’ properties except in the ordinary course and suspending actions/claims against EYCO pending the SEC proceedings.
An Omnibus Order dated October 27, 1997 directed creation of a Management Committee (MANCOM).
The SEC Hearing Panel later adopted an unsolicited rehabilitation proposal by Strategies and Alliances Corporation (SAC) via Order dated December 18, 1998; SAC proposed an “all‑debt payment plan” with P5.2 Billion settlement guaranteed by the Republic of the Philippines through Home Insurance Guaranty Corporation (HIGC); SEC barred all creditors from pursuing claims until further orders.
The Consortium appealed; on September 14, 1999 the SEC En Banc found SAC plan not viable, terminated suspension of payments proceedings, dissolved the committees, ordered dissolution and liquidation of petitioning corporations and appointed a Liquidator pursuant to the Rules on Corporate Rehabilitation.
On October 10, 2000 SEC ordered all creditors to file formal claims with the Liquidator within 30 days of publication or risk bar; disagreements on Liquidator’s fee led to formation, dissolution and final appointment of Atty. Danilo L. Concepcion as Liquidator on May 31, 2001.
Atty. Concepcion submitted a Liquidation Plan in March 2002 which the SEC approved on April 11, 2002.
Subsequent developments included the transfer of SEC jurisdictional matters under R.A. No. 8799; the SEC’s prior concluding actions in EYCO’s suspension/rehabilitation were noted.

Civil Case No. 66477 — Pleadings, Grounds for Relief

Union Bank’s complaint sought rescission/nullification of sale of EYCO properties to FEBTC, reversion of ownership to NIKON/Spouses Yutingco, and related reliefs grounded on alleged fraudulent conveyance and the Spouses’ surety obligations.
Complaint, continuing surety agreement, and related pleadings appear in the record (Records, Vols. I–III references cited by the court).

Motions to Dismiss Before RTC — Grounds Raised by Defendants

Spouses Yutingco moved to dismiss on ground of pendency of SEC proceedings which acquired prior jurisdiction over subject matter.
FEBTC moved to dismiss alleging: failure to implead NIKON as indispensable parties; complaint failed to allege lack of other legal means to obtain reparation (a requisite for rescission as subsidiary action); nondisclosure whether Union Bank’s credit accommodations were secured or unsecured; Union Bank lacked legal personality to sue for enforcement of creditors’ rights because such were vested in the rehabilitation receiver; remedy available by participating in SEC proceedings.
EYCO and Spouses Yutingco reiterated forum‑shopping allegations, stressed identity of issues with SEC proceedings and argued Union Bank had other pending remedies including cases before other RTC branches and previously filed motions with SEC.

RTC Ruling — Orders of March 22, 2005 and August 26, 2005

RTC Branch 157 granted motions to dismiss on ground of litis pendentia, ruling:
- There was a pending action between same parties over same transactions involving same properties before the SEC prior to this case.
- Union Bank, by filing a motion to dismiss before the SEC, had made itself a party and voluntarily submitted to SEC jurisdiction; elements of litis pendentia present.
- SEC had acquired jurisdiction over the petition for suspension and its directives (e.g., MANCOM) were in accord with P.D. No. 902‑A; with MANCOM created plaintiff lacked legal personality to impugn EYCO’s disposition of properties.
RTC dismissed Civil Case No. 66477 and denied Union Bank’s motion for reconsideration (Order August 26, 2005).

Court of Appeals Decision — November 15, 2010; April 19, 2011 Resolution

On appeal CA reversed and set aside the RTC dismissal and remanded the case for full hearing on merits.
CA’s primary findings and reasoning:
- No identity of parties: Yutingcos had been ordered dropped from SEC Case No. 09‑97‑5764 in Union Bank of the Phils. v. Court of Appeals (1998) because SEC lacked jurisdiction over individuals; in RTC case Yutingcos were sued as sureties for NIKON loans.
- No identity of rights/causes: Union Bank sought rescission of sale and reversion of title — actions over title and incapable of pecuniary estimation which fall under RTC jurisdiction per Sec. 19 BP Blg. 129.
- Liquidation Plan and purported payment to Union Bank did not bind Union Bank because waivers/quitclaims required by the Plan were not shown to have been executed by Union Bank.
- Forum shopping finding in prior Supreme Court decision related only to Union Bank’s petition for certiorari while a motion to dismiss was pending in SEC, and did not extend to the rescission suits filed in regular courts; thus Union Bank was not guilty of forum shopping in relation to Civil Case No. 66477.
- Union Bank had capacity to sue when it filed the RTC complaint on September 26, 1997; MANCOM was created only on October 27, 1997 and no retroactive effect was provided for such authority. CA allowed substitution (BAYAN) and denied FEBTC/Yutingcos’ motions for reconsideration.

Subsequent Procedural Posture — Substitution and Petitions to Supreme Court

BAYAN filed Motion for Substit