G.R. No. 263887 - Philippine Primark Properties, Inc. vs. China Banking Corporation Trust and Assets Management Group

Case Summary (G.R. No. 263887)

Petitioner

Primark executed the ONFSA with CBC and China Bank Savings, Inc. (CBSI), drew down several loans, assigned present and future receivables from tenant leases to CBC-TAMG as assignee/security trustee, and later asserted the ONFSA was void ab initio under the DOSRI rule (Section 36, General Banking Law), subsequently defaulted, and contested CBC-TAMG’s authority to collect receivables.

Respondent

CBC-TAMG acted as the assignee/security trustee under the ONFSA and, after Primark’s default and consignment of funds controversy, asserted rights to collect rent and filed counterclaims/cross-claims in the interpleader proceedings; it contended it had capacity to sue and be sued as a trust entity/department performing trust functions for CBC.

Key Dates

ONFSA executed: May 11, 2018.
Primark’s notice abrogating ONFSA: August 13, 2019 (to CBC) and September 2, 2019 (to CBC-TAMG).
CBC-TAMG’s Security Assignment notice to BDO and instructions: February 4–5, 2020.
RTC dismissal order: November 16, 2020.
CA reversal and remand: April 12, 2022; CA denial of reconsideration: October 13, 2022.
Supreme Court decision: August 19, 2024 (decision uses 1987 Constitution as applicable constitutional basis).

Applicable Law and Authorities

1987 Philippine Constitution (applicable per instruction given decision date).
2019 Revised Rules of Court: Rule 3 (who may be parties), Rule 15 §13 (dismissal with prejudice), Rule 41 §1(g) (orders not appealable), Rule 45 §4(d) (contents of petition), Rule 3 §3 (representatives as parties), Rule 65 (special civil action for certiorari).
Republic Act No. 8791 (General Banking Law): Sections 36, 79, 80, 81, 82, 83, 87.
2021 Manual of Regulations for Banks (MORB): Sections 132, 412 (organization and management of trust department).
Revised Corporation Code (RA 11232): Section 35 (corporate power to sue and be sued).
Civil Code Article 44 (enumeration of juridical persons).
Relevant jurisprudence cited in the decision (e.g., Cancio v. Performance Foreign Exchange Corp., Columbia Pictures, SEC v. Laigo, and American cases on trust departments).

Facts: ONFSA, Security Assignment and DSRA

Primark obtained a notes facility up to PHP 7 billion under the ONFSA and secured its obligations by assigning present and future receivables from tenant leases to CBC-TAMG (as assignee/security trustee). The ONFSA required a Debt Service Reserve Account (DSRA) with a maintaining balance authorized for debit by CBC-TAMG upon Primark’s failure to pay. Primark drew down approximately PHP 3.947 billion, later sought waivers and amendments, and then asserted the ONFSA was void ab initio as an alleged DOSRI accommodation.

Facts: Default, Notices, and BDO Payment Instructions

Primark failed to pay interest due in September 2019; CBC-TAMG debited the DSRA for the interest shortfall, Primark failed to replenish the DSRA and was declared in default. Primark had previously notified BDO of the assignment of receivables. CBC-TAMG then issued an acceleration notice and instructions to BDO to pay receivables directly to CBC-TAMG and to cease recognizing Primark’s instructions. Primark countered by telling BDO that the assignment was void ab initio and demanded BDO continue paying Primark. Conflicting claims led BDO to file an interpleader and seek discharge and consignation.

Procedural History: RTC Ruling

BDO filed a Complaint for Interpleader against Primark and CBC-TAMG. RTC-57 dismissed the first interpleader case and CBC-TAMG’s cross-claims and the parties’ counterclaims in an Order dated November 16, 2020, on the ground that CBC-TAMG lacked juridical personality and legal capacity to be sued because it was merely a department/unit of CBC tasked with trust functions, and thus not an entity organized under law. The RTC characterized its dismissal as being due to lack of legal capacity and lack of cause of action.

Procedural History: Subsequent Filings and CA Ruling

BDO did not appeal the RTC dismissal but later filed a second interpleader impleading CBC (not CBC-TAMG) in RTC-233. CBC-TAMG appealed the RTC dismissal to the CA. The CA reversed and set aside the RTC Order, held that CBC-TAMG had capacity to sue and be sued because it was a “trust entity” performing trust functions endowed with corporate-like powers under Section 83 of RA 8791, found CBC-TAMG a real party-in-interest, and concluded Primark was estopped from denying CBC-TAMG’s legal capacity. The CA remanded for CBC-TAMG to present evidence on its counterclaims/cross-claims and ordered consolidation with the second interpleader case.

Issues Presented to the Supreme Court

Whether the CA erred in giving due course to CBC-TAMG’s appeal from an RTC order that was effectively a dismissal without prejudice (thus allegedly not appealable).
Whether the CA erred in reinstating BDO’s first interpleader complaint despite BDO’s decision not to appeal and subsequent filing of a second interpleader impleading CBC.
Whether CBC-TAMG has legal capacity to sue and be sued as an entity separate and distinct from CBC.

Procedural Compliance and Substantial Compliance with Rule 45

The Supreme Court found Primark’s petition substantially complied with Rule 45 §4(d) despite initial arguments by CBC-TAMG that material portions of the record were not attached. Primark later furnished certified copies of the CA Decision and Resolution, and attached necessary motions; CBC-TAMG itself supplied relevant record portions in its comment. The Court invoked precedent (Cancio) to allow resolution on the merits rather than dismiss for technical non-compliance.

Proper Remedy from Order Dismissing Without Prejudice

The Supreme Court held that the RTC dismissal rested on CBC-TAMG’s lack of legal capacity to sue — an affirmative defense not among those that render dismissal with prejudice under Rule 15 §13(a). Therefore the RTC order was a dismissal without prejudice. Under Rule 41 §1(g), an order dismissing without prejudice is not appealable; the proper remedy is a special civil action under Rule 65 (petition for certiorari). Because CBC-TAMG appealed instead of filing a Rule 65 petition, the CA should have dismissed the appeal for wrong remedy. The Court concluded that the CA erred by entertaining CBC-TAMG’s appeal.

Scope of CA Remand and Effect on BDO’s Complaint

The Supreme Court clarified that the CA’s remand related only to allowing CBC-TAMG to present evidence on its counterclaims and cross-claims; it did not revive any interpleader complaint that BDO had chosen not to pursue. BDO had already filed a second interpleader impleading CBC, and the Court emphasized that the second interpleader case was the appropriate venue for the dispute over receivables. The CA’s consolidation order was therefore misplaced in light of procedural posture and the presence of the second case.

Legal Capacity of CBC-TAMG: Statutory Interpretation and Trustee Role

The Supreme Court analyzed RA 8791 and the MORB, distinguishing between a bank authorized to engage in trust business (the statutory “trust entity”) and an internal trust department or unit. Sections 79–83 of RA 8791 show that a trust entity is a stock corporation or person duly authorized by the Monetary Board to engage in trust business; Section 83 refers to powers of such an entity in addition to “general powers incident to corporations.” The Court held that these provisions do not create a separate juridical pe

Case Syllabus (G.R. No. 263887)

Case Caption and Procedural Posture

G.R. No. 263887; Decision of the Supreme Court penned by Justice Inting, dated August 19, 2024 (Third Division).
Petition for Review on Certiorari filed by Philippine Primark Properties, Inc. (Primark) assailing: (a) the Court of Appeals (CA) Decision dated April 12, 2022; and (b) the CA Resolution dated October 13, 2022, in CA‑G.R. CV No. 116479.
Subject of challenge: CA reversed and set aside the Regional Trial Court (RTC), Branch 57, Makati City (RTC‑57) Order dated November 16, 2020 in Civil Case No. R‑MKT‑20‑01679‑SC, and remanded the case to allow China Banking Corporation Trust and Asset Management Group (CBC‑TAMG) to present evidence on its counterclaims and cross‑claims; CA also ordered consolidation with a subsequently filed interpleader case (Civil Case No. R‑MKT‑21‑00063‑SC, RTC‑233).
Relief sought by Primark: reversal of the CA Decision and Resolution; confirmation of RTC‑57 dismissal of interpleader, cross‑claims, and counterclaims; declaration that CBC‑TAMG lacks legal capacity to sue.

Parties and Primary Claims

Petitioner: Philippine Primark Properties, Inc. (Primark) — borrower and lessor in lease contracts with BDO Unibank, Inc. (BDO).
Respondent: China Banking Corporation Trust and Assets Management Group (CBC‑TAMG) — described in the record as CBC’s trust department/business unit (identified in documents as a “banking corporation duly organized and existing under the laws of the Republic of the Philippines and authorized to perform trust and other fiduciary duties” in the ONFSA).
Third party/Interested payor: BDO Unibank, Inc. (BDO) — lessee under several lease agreements with Primark and plaintiff in an interpleader case to determine lawful recipient of rental payments.

Contractual Background — ONFSA and Security Assignment

On May 11, 2018, Primark executed an Omnibus Notes Facility and Security Agreement (ONFSA) with China Banking Corporation (CBC) and China Bank Savings, Inc. (CBSI) (collectively, the Banks), granting Primark a Notes Facility with a maximum aggregate amount of PHP 7 billion.
As security for Primark’s obligations under the ONFSA, Primark assigned all present and future rights and interests over receivables arising from its lease contracts with tenants to CBC‑TAMG as assignee/security trustee; tenants were informed of the arrangement.
The ONFSA required Primark to maintain a Debt Service Reserve Account (DSRA) at a prescribed DSRA Maintaining Balance; CBC‑TAMG was authorized to debit amounts from the DSRA to pay loan obligations upon Primark’s failure to timely pay, and Primark was required to replenish any debited amounts within a specified period.
Primark made ten drawdowns under the ONFSA totaling PHP 3,947,000,000.00 and later requested waivers and proposed amendments, which the Banks declined to release until conditions precedent were complied with.

Primark’s Claim of Abrogation and Default

Primark sent a Letter dated August 13, 2019 notifying CBC that it was abrogating the ONFSA on the ground that the agreement was void ab initio as a mere credit accommodation to CBC and CBSI’s directors, officers, stockholders, and related interests (DOSRI), allegedly in violation of Section 36 of the General Banking Law (RA 8791). Primark informed CBC‑TAMG by a Letter dated September 2, 2019.
Primark failed to pay interest due on borrowings on September 4, 2019 (amounting to PHP 76,868,808.74); CBC‑TAMG debited that amount from the DSRA, causing the DSRA to fall below required balance; Primark failed to replenish the shortfall and was declared in default on December 5, 2019.

Lease Agreements with BDO and Notices of Assignment

Primark entered into Contracts of Lease with BDO for various branch locations on dates between March 14, 2017 and August 3, 2018.
Primark sent multiple Notices of Assignment of Receivables to BDO (dates: May 22, 2018; August 3, 2018; February 11, 2019; April 23, 2019), informing BDO that CBC‑TAMG was assignee/security trustee of the lease receivables and authorizing BDO, upon CBC‑TAMG’s instruction, to pay designated CBC‑TAMG bank accounts.
BDO continued to pay Primark rents as due until CBC‑TAMG issued an Acceleration/Security Assignment notice dated February 4, 2020 advising BDO that an Acceleration Event occurred, instructing BDO: (i) to cease complying with instructions from Primark or any party other than CBC‑TAMG; (ii) not to recognize Primark’s attempts to claim receivables; and (iii) to pay or deliver receivables to CBC‑TAMG as directed.

Conflicting Instructions and BDO’s Interpleader

On February 5, 2020, Primark instructed BDO to ignore CBC‑TAMG’s notices and to continue paying Primark, asserting the Security Assignment was void ab initio.
BDO responded on February 17, 2020 that it could not honor CBC‑TAMG’s instructions because of Primark’s challenge.
BDO wrote on April 7, 2020 that it would issue checks payable to either Primark or CBC‑TAMG starting March 2020; CBC‑TAMG reiterated its instructions on June 26, 2020; Primark sent demand letters on June 30, 2020 demanding rent and refusing to recognize payments to unauthorized persons.
Resultant litigation: BDO filed a Complaint for Interpleader with Prayer for Consignation against Primark and CBC‑TAMG before RTC‑57 (first interpleader case) seeking discharge from liability and permission to consign rental checks with the RTC until rightful recipient determined.

Pleadings of CBC‑TAMG and Primark in Interpleader

CBC‑TAMG’s Answer with Ad Cautelam Counterclaim and Cross‑Claim denied that ONFSA and Security Assignment were void; asserted the assignment preceded and secured Primark’s obligations and conferred rights to collect receivables and to institute suits upon default; argued ONFSA valid, subsisting, and not unilaterally rescindable by Primark; asserted estoppel.
Primark’s Answer raised as affirmative defense that CBC‑TAMG lacked standing to sue or be sued under Rule 3, Section 1 of the Rules of Court, alleging CBC‑TAMG was merely a department/unit attached to CBC for trust operations; also alleged pending action for declaration of nullity of contracts (Civil Case No. R‑MKT‑19‑05512) involving same ONFSA and related documents.

RTC‑57 Order (November 16, 2020) — Dismissal

RTC‑57 (Acting Presiding Judge Ricardo A. Moldez II) issued an Order dated November 16, 2020 that: (1) dismissed BDO’s Complaint for Interpleader; (2) dismissed CBC‑TAMG’s cross‑claims against BDO and Primark; and (3) dismissed the parties’ respective counterclaims — all on grounds of CBC‑TAMG’s lack of legal capacity to be sued and lack of cause of action.
RTC‑57 reasoning: under the Rules of Court, only natural or juridical persons, or entities authorized by law may be parties; CBC‑TAMG being a department of CBC tasked with trust functions was not organized or incorporated under law and thus could not be a party; CBC‑TAMG lacked separate juridical personality and, at most, had only an incidental interest.
RTC‑57 declared CBC‑TAMG’s application for a Writ of Preliminary Injunction moot.
BDO filed a Motion for Reconsideration with Motion for Leave to Amend Complaint to implead CBC instead of CBC‑TAMG; RTC‑57 denied the Motions on December 11, 2020.
BDO withdrew appeal of those RTC orders, then filed a new interpleader (second interpleader) on January 7, 2021 impleading CBC as defendant (Civil Case No. R‑MKT‑21‑00063‑SC, raffled to RTC‑233). CBC‑TAMG filed Notice of Appeal from the RTC‑57 order.

Court of Appeals Decision (April 12, 2022) and Resolution (Oct 13, 2022)

CA (Fourteenth Division; authored by Associate Justice Victoria Isabel A. Paredes with concurring Justices Emily R. AliAo‑Geluz and Jose Lorenzo R. Dela Rosa) reversed and set aside the RTC‑57 Order dated November 16, 2020, and remanded the case to RTC‑57 for further proceedings to allow CBC‑TAMG to present evidence on its counterclaims and cross‑claims; CA also ordered consolidation of the second interpleader (RTC‑233) with the first interpleader (RTC‑57).
CA’s principal holdings and reasoning:
- CBC‑TAMG has capacity to sue and be sued because as a trust entity performing trust functions it possesses general powers incident to corp
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