Case Summary (G.R. No. 112019)
Petitioner
Rizal Commercial Banking Corporation (RCBC) — mortgagee and creditor that commenced extrajudicial foreclosure proceedings after Plast-Print defaulted on multiple promissory notes and other credit facilities. RCBC successfully purchased foreclosed properties as highest bidder and later defended the validity of the foreclosure and sale.
Respondents
Plast-Print Industries, Inc. — borrower/debtor that availed several secured credit facilities from RCBC and later filed a petition for suspension of payments with the SEC, and subsequently filed a civil complaint in the RTC seeking accounting, cancellation of bid price and sheriff’s certificate of sale, injunction and damages. Reynaldo C. Dequito — Plast-Print’s Vice-President for Operations and co-plaintiff in the RTC complaint.
Key Dates and Procedural Posture
- Plast-Print obtained multiple loans in 1995 and failed to pay certain obligations; RCBC demanded payment in 1997 and commenced extrajudicial foreclosure in 1998.
- Plast-Print filed a petition for suspension of payments with the SEC on October 5, 1998; the SEC issued a 30-day suspension and later approved a Restructuring Agreement executed June 25, 1999.
- Plast-Print and Dequito filed the RTC Complaint on August 22, 2000; the RTC rendered judgment in their favor on May 17, 2006, nullifying certain foreclosure sales and ordering RCBC to make an accounting and pay P200,000 in attorney’s fees.
- The CA affirmed the RTC decision on May 31, 2011 and denied reconsideration. The Supreme Court granted review on certiorari and ultimately reversed and set aside the RTC and CA rulings, dismissing the RTC complaint for lack of jurisdiction and directing reinstatement of the foreclosure certificate annotations.
Applicable Law and Legal Framework
- Presidential Decree No. 902-A (as amended) defines the SEC’s original and exclusive jurisdiction over petitions for suspension of payments and related matters; Section 5 enumerates SEC’s adjudicatory functions and jurisdiction.
- Republic Act No. 8799 (the securities laws amendment) transferred certain SEC jurisdiction to the courts but preserved SEC jurisdiction over pending suspension of payments/rehabilitation cases filed before June 30, 2000.
- Civil Code provisions on obligations and novation (Arts. 1159, 1291–1292) govern whether a restructuring agreement effects extinguishment (extinctive novation) or merely modifies obligations (modificatory novation).
- Jurisprudence establishes that the SEC, when exercising its quasi-judicial functions, is a co-equal body with the RTC and that courts of general jurisdiction may be precluded from acting on matters within the SEC’s exclusive jurisdiction.
Factual Background (Loans, Security, and Defaults)
Plast-Print obtained secured loans and credit lines from RCBC (term loan, loan line, and LC/TR line), evidenced by several promissory notes dated in 1995 with varying principal amounts and interest rates, resulting in a total principal loan obligation of P12,980,000 plus subsequent unpaid amounts and charges. The loans were secured by a real estate mortgage covering multiple titled properties in Rizal Province. Plast-Print failed to pay certain promissory notes and other obligations; RCBC demanded payment and, after unsuccessful restructuring efforts and dishonored checks, proceeded with extrajudicial foreclosure and public auctions in late 1998.
SEC Petition, Suspension of Payments, and Restructuring Agreement
On October 5, 1998 Plast-Print filed a petition for suspension of payments with the SEC. The SEC ordered a 30-day suspension of payments, which prevented the second scheduled auction; negotiations followed and culminated in a Restructuring Agreement dated June 25, 1999 and approved by the SEC on July 22, 1999. Under the Restructuring Agreement Plast-Print acknowledged an outstanding indebtedness to RCBC of P11,216,178.22 as of December 31, 1998, executed a non-negotiable promissory note due December 31, 2004, and agreed to specific payment terms including grace periods. The restructuring agreement, in its provisions, stated that existing agreements were superseded for purposes of governing mutual rights and obligations, but also included provisions preserving the status quo of mortgaged collaterals and allowing foreclosure/consolidation on default.
RTC Complaint, Defenses, and Trial Court Ruling
After RCBC denied a further moratorium request, Plast-Print and Dequito filed an RTC complaint seeking accounting, cancellation of bid price and sheriff’s certificate of sale, injunctive relief, and damages, alleging that payments totaling P5,506,152.00 were not applied and seeking reconciliation and re-accounting. RCBC moved to dismiss on grounds including lack of jurisdiction due to the pending SEC petition, defective certification against forum shopping, forum shopping, and that the action was barred by the SEC-approved Restructuring Agreement. The RTC denied RCBC’s motion to dismiss and eventually ruled in favor of Plast-Print and Dequito, declaring the foreclosure sale null and void, ordering cancellation of the certificates of sale annotations on specific TCTs, directing RCBC to make an accounting and recomputation of payments, and awarding P200,000 as attorney’s fees.
Court of Appeals Decision
RCBC appealed to the CA, which affirmed the RTC. The CA held that RCBC failed to show it had informed Plast-Print how its payments were applied, that the RTC had jurisdiction because the RTC complaint (annulment and cancellation of sheriff’s certificate) was an ordinary civil action beyond the SEC’s exclusive jurisdiction, and that RCBC’s previous petition for certiorari dismissal did not preclude the RTC from acting. The CA rejected RCBC’s claims for damages, attorney’s fees, and litigation expenses and denied reconsideration.
Issues Presented to the Supreme Court
The Supreme Court identified and resolved three principal issues: (1) whether the CA erred in holding that the RTC had jurisdiction to hear the RTC complaint; (2) whether the CA erred in directing RCBC to make an accounting and recomputation of Plast-Print’s payments; and (3) whether the CA erred in affirming the nullification of the foreclosure sale and the certificates of sale arising therefrom.
Supreme Court Ruling — Jurisdictional Analysis
The Supreme Court held that the petition was meritorious and that the RTC lacked jurisdiction to hear the RTC complaint because Plast-Print had filed a petition for suspension of payments with the SEC, which acquired jurisdiction over the financial accommodations and related securities. The Court emphasized that where the SEC has acquired jurisdiction through a suspension petition, it has original and exclusive jurisdiction over related matters to the exclusion of the RTC. The Court explained that jurisdiction over the nature of the action is distinct from general subject-matter jurisdiction and that lack of jurisdiction over the nature of the action may be raised at any time and cannot be barred by doctrines such as law of the case, estoppel, or waiver. RCBC had timely and repeatedly asserted that the RTC lacked jurisdiction, including in its Answer ad Cautelam, and thus did not waive the defense.
Supreme Court Ruling — Effect of the Restructuring Agreement
Regarding the substantive effect of the SEC-approved Restructuring Agreement, the Supreme Court held that Plast-Print had acknowledged and bound itself to pay P11,216,178.22 to RCBC as reflected in Annex “A” to the Restructuring Agreement. The Court treated the SEC-approved restructuring as having the force and effect of a judgment (analogous to a judicially approved compromise) that embodied mutual concessions and became binding between the parties. The Restructuring Agreement therefore precluded Plast-Print from invoking a new re-computation to avoid its obligations under that compromise.
Supreme Court Ruling — Novation and the Foreclosure
On the
Case Syllabus (G.R. No. 112019)
The Case
- Nature of case: Petition for Review on Certiorari under Rule 45 of the Rules of Court challenging (a) Decision dated May 31, 2011 and (b) Resolution dated November 9, 2011 of the Court of Appeals in CA-G.R. CV No. 89431.
- Parties: Petitioner — Rizal Commercial Banking Corporation (RCBC); Respondents — Plast-Print Industries, Inc. (Plast-Print) and Reynaldo C. Dequito.
- Lower court decision(s) challenged: RTC of Antipolo City, Branch 74 Decision dated May 17, 2006 in Civil Case No. 00-5875 ordering cancellation of Certificate(s) of Sale annotated on specified TCTs and directing RCBC to make accounting, re-computation, and to pay attorney’s fees and costs.
- Relief sought from the Supreme Court: review and reversal of CA and RTC decisions; dismissal of Civil Case No. 00-5875 for lack of jurisdiction; reinstatement of Certificate of Sale annotations on specified Transfer Certificates of Title.
Chronology of Key Procedural Events
- 1995 (January–April): Plast-Print executed multiple promissory notes and availed of secured loans and an LC/TR line; total principal loan obligation of P12,980,000.00.
- July 31, 1997: RCBC sent demand letter to Plast-Print for settlement of account.
- October 9, 1997: Parties met to reconcile payments; reconciled except for three payment applications (RCBC Checks Nos. 21412 and 21413; OR No. 107556).
- May 4, 1998: RCBC filed separate petitions for extra-judicial foreclosure with the RTC.
- November 12, 1998: Public auction(s) conducted; RCBC emerged as highest bidder for some properties; a second auction was scheduled for November 30, 1998.
- October 5, 1998: Plast-Print filed petition for suspension of payments with the Securities and Exchange Commission (SEC).
- November 16, 1998: SEC ordered 30-day suspension of all payments due Plast-Print’s creditors; second auction did not push through.
- June 25, 1999: Execution of Restructuring Agreement among Plast-Print and creditors.
- July 22, 1999: SEC approved the Restructuring Agreement by Order.
- August 21, 2000: Plast-Print sought another moratorium; RCBC denied the moratorium.
- August 22, 2000 (approx.): Plast-Print and Dequito filed RTC Complaint (Civil Case No. 00-5875) for accounting, cancellation of bid price and Sheriff’s Certificate of Sale, injunction and damages.
- May 17, 2006: RTC rendered Decision in favor of Plast-Print and Dequito (permanent injunction; cancellation of Certificate of Sale annotations on specified TCTs; RCBC ordered to make accounting and pay P200,000 attorney’s fees).
- RCBC appealed to the Court of Appeals; CA affirmed RTC Decision on May 31, 2011.
- CA denied RCBC’s motion for reconsideration by Resolution dated November 9, 2011.
- RCBC filed Petition for Review on Certiorari with the Supreme Court on January 2, 2012 (with notes on filing dates and motion for extension).
The Underlying Facts — Credit Facilities and Payment History
- Plast-Print applied for and obtained the following credit facilities from RCBC for working capital and expansion:
- Secured (A) Term Loan: P6.65 Million.
- Secured (C) Loan Line: P4.49 Million.
- Import/Domestic Letters of Credit with Trust Receipts (LC/TR) Line: P2 Million.
- The credit facilities were secured by, among others, a real estate mortgage covering TCT Nos. 499643, 617967, 597336, 597337, 621037, 59286 and PT-91458.
- Promissory notes (PN) executed by Plast-Print included (as reflected in the record):
- PN No. 153-95 dated January 11, 1995 — Amount P4,490,000.00 — Due January 11, 2000 — Interest 15% p.a.
- PN No. 185-95 dated January 16, 1995 — Amount P3,000,000.00 — Due on demand — Interest 15% p.a.
- PN No. 465-95 dated February 9, 1995 — Amount P1,000,000.00 — Due on demand — Interest 15.5% p.a.
- PN No. 514-95 dated February 13, 1995 — Amount P4,490,000.00 — Due February 13, 2000 — Interest 13.25% p.a.
- PN No. 951-95 dated March 27, 1995 — Amount P2,000,000.00 — Due March 27, 2000 — Interest 13.51% p.a.
- PN No. 1058-95 dated April 5, 1995 — Amount P490,000.00 — Due on demand — Interest 25% p.a.
- Total principal loan obligation: P12,980,000.00 (including LC/TR of P2,000,000.00).
- Plast-Print failed to pay past due obligations under PN Nos. 514-95, 951-95, 185-95, 465-95 and LC/TR.
- RCBC’s demand and reconciliation efforts:
- July 31, 1997: RCBC demand letter and subsequent statements of account sent to Plast-Print.
- August 7, 1997: Plast-Print acknowledged obligation but disputed amounts; requested reconciliation.
- October 9, 1997 meeting: accounts reconciled; parties confirmed statements correct except three payment applications: RCBC Check No. 21412 (P843,177.78), RCBC Check No. 21413 (P835,733.33), and OR No. 107556 (P335,782.22).
- RCBC later explained that Checks Nos. 21412 and 21413 were returned checks; OR No. 107556 was a replacement for returned UCPB Check No. 127374.
- Plast-Print offered restructuring; RCBC agreed conditioned on immediate payment of P4,000,000.00. Two post-dated checks of P2,000,000.00 each were issued; one was dishonored.
- Written demand made for payment of P13,452,372.85 as of October 10, 1997 within five days; no payment made.
RCBC’s Extra-Judicial Foreclosure Proceedings
- May 4, 1998: RCBC filed separate petitions for extra-judicial foreclosure on properties mortgaged in its favor.
- November 12, 1998: Some properties covered by the real estate mortgage were sold at public auction; RCBC was the highest bidder for properties under TCT Nos. 499643 (Taytay, Rizal) and 617967, 597336, 597337 and 621037 (Cainta, Rizal).
- A second public auction for remaining mortgaged properties (TCT Nos. 59286 and PT-91458) was scheduled for November 30, 1998 but did not proceed because of subsequent SEC action.
Plast-Print’s SEC Petition for Suspension of Payments; Negotiations and Restructuring Agreement
- October 5, 1998: Plast-Print filed a petition for suspension of payments with the SEC (SEC Petition).
- November 16, 1998: SEC ordered a 30-day suspension of all payments due Plast-Print’s creditors; second auction cancelled as a consequence.
- Negotiations among Plast-Print and creditors resulted in a Restructuring Agreement executed June 25, 1999.
- July 22, 1999: SEC approved the Restructuring Agreement by Order.
- Under the Restructuring Agreement:
- Plast-Print acknowledged indebtedness to RCBC in the amount of P11,216,178.22 as of December 31, 1998.
- Plast-Print bound itself to pay the P11,216,178.22 within a six-year term, with grace periods: one year for interest and two years for principal payments.
- Plast-Print executed in favor of RCBC a non-negotiable promissory note for P11,216,178.22, due December 31, 2004.
- Annex “A” to the agreement detailed aggregate principal, capitalized interest and other charges attributable to creditors and showed RCBC’s total P11,216,178.22 (Principal P8,628,188.37; Capitalized interest P1,439,293.18; Other charges P1,148,696.67) representing 13.341% of aggregate indebtedness.
- Sections of the Restructuring Agreement expressly addressed effects: Section 2 (Restructuring commitment and exclusivity), Section 15 (security for Restructured Loans; status quo of collaterals; proceeds allocation upon sale), and Section 20(b) (consequences of default including foreclosure/consolidation of title for properties already foreclosed).
Plast-Print’s RTC Complaint and RTC Proceedings
- After RCBC denied another moratorium on August 21, 2000, Plast-Print and Dequito filed on or about August 22, 2000 the RTC Complaint for accounting, cancellation of bid price and Sheriff’s Certificate of Sale, injunction and damages (Civil Case No. 00-5875).
- Allegations in the RTC Complaint included payment by Plast-Print of P5,506,152.00 not applied to its Statement of Account, prompting demands for reconciliation and re-accounting.
- Notice of Sheriff’s Sale received May 5, 1998 reflected alleged outstanding of P9,021,161.24 as of October 10, 1997 per Plast-Print’s claim.
- RCBC moved to dismiss the RTC Complaint asserting:
- Lack of jurisdiction of RTC due to pending SEC Petition.
- Defective certification against forum shopping and allegation that Plast-Print and Dequito engaged in forum shopping.
- Bar by prior judgment given SEC Order approving Restructuring Agreement.
- RTC denied RCBC’s motion to dismiss by Order dated April 16, 2001; motion for reconsideration also denied.
- RCBC petitioned the Court of Appeals for certiorari to annul RTC Order; CA dismissed petition f