Land Bank of the Philippines vs. Capistrano

The regular courts, not the Securities and Exchange Commission, retain original and exclusive jurisdiction over petitions for the declaration of insolvency of private corporations. The SEC's jurisdiction under Section 5(d) of P.D. No. 902-A is confined to petitions for suspension of payments and, in cases of insolvency, is qualified by the requirement that the entity is already under a rehabilitation receiver or management committee created by the SEC itself.

Private respondents Filand Manufacturing and Estate Development Co., Inc., Emilio Ching, and others filed a petition for declaration of insolvency before the Regional Trial Court of Pasay City, citing inability to pay debts due to business reverses. The RTC declared them insolvent. Petitioner Land Bank of the Philippines, a creditor, challenged the RTC's jurisdiction, arguing that the Securities and Exchange Commission had exclusive jurisdiction over such petitions for corporations by virtue of P.D. No. 902-A.

• Nature of the Action: Petitioner Land Bank of the Philippines sought to annul the orders and decision of the Regional Trial Court of Pasay City in an insolvency proceeding, primarily contesting the RTC's jurisdiction over the corporate petitioners.
• The Loan and Collection Suit: On September 19, 1980, Filand Manufacturing and Emilio Ching obtained a P10 million loan from Land Bank. Upon default, Land Bank filed a collection suit (Civil Case No. 0184-P) before the RTC of Manila.
• Filing of the Insolvency Petition: During the pendency of the collection suit, on December 29, 1984, Filand Manufacturing, Emilio Ching, his spouse, and Top Construction Enterprises, Inc. filed a petition for declaration of insolvency before the RTC of Pasay City. They cited inability to pay debts due to a fire and the national economic crisis.
• RTC's Orders: The RTC issued an Order of Adjudication on January 29, 1985, declaring the petitioners insolvent and directing the sheriff to take possession of their properties. After Land Bank challenged jurisdiction, the RTC upheld its authority in an order dated July 19, 1985, and appointed Land Bank as assignee.
• Land Bank's Refusal and Subsequent Events: Land Bank declined the assignment. The City Treasurer of Pasay City was appointed as receiver. The RTC later rendered a final decision on March 3, 1986, declaring the corporations insolvent and discharging the individual spouses from their debts.

• Jurisdiction Vested in SEC: Land Bank argued that the Securities and Exchange Commission, not the RTC, had jurisdiction over the insolvency petition. It contended that Sections 3, 5(d), and 6(c) and (d) of P.D. No. 902-A, as amended, effectively repealed the Insolvency Law (Act No. 1956) and transferred jurisdiction over corporate insolvency and suspension of payments to the SEC.
• Defective Petition: Land Bank also moved for reconsideration on the ground that the insolvency petition was defective in form and substance.

• Jurisdiction Retained by RTC: Private respondents maintained that a petition for declaration of insolvency is not among the cases enumerated under Section 5 of P.D. No. 902-A over which the SEC has original and exclusive jurisdiction. They argued the RTC properly took cognizance of the case under the Insolvency Law.
• SEC's Submission: The SEC, impleaded as a party, through the Solicitor General, filed a memorandum supporting the view that its jurisdiction under P.D. No. 902-A does not cover petitions for declaration of insolvency.

• Jurisdiction Over Corporate Insolvency: Whether the Regional Trial Court or the Securities and Exchange Commission has original and exclusive jurisdiction over a petition for the declaration of insolvency of private corporations.

• Jurisdiction Over Corporate Insolvency: The RTC has jurisdiction. The SEC's jurisdiction under Section 5(d) of P.D. No. 902-A is limited to petitions for suspension of payments. Its authority over insolvent corporations is qualified by the conjunctive phrase "but is under the management of a Rehabilitation Receiver or Management Committee created pursuant to this Decree." This qualification circumscribes the SEC's jurisdiction, making it applicable only as an incident to an existing suspension-of-payments proceeding where the SEC has already appointed a receiver or committee. A direct petition for declaration of insolvency, without such prior SEC intervention, falls under the Insolvency Law (Act No. 1956) and is cognizable by the regular courts.

• Limited Jurisdiction of Administrative Agencies — The Securities and Exchange Commission, like any administrative body, is a tribunal of limited jurisdiction and can wield only such powers as are specifically granted to it by its enabling statute. Its jurisdiction should be interpreted in strictissimi juris.
• Repeals by Implication Not Favored — A well-recognized rule in statutory construction is that repeals by implication are not favored and will not be so declared unless it be manifest that the legislature so intended. Statutes in pari materia should be construed together to give effect to every provision of each.

• "The SEC like any other administrative body, is a tribunal of limited jurisdiction and as such, could wield only such powers as are specifically granted to it by its enabling statute. Its jurisdiction should be interpreted in strictissimi juris."
• "Section 5, par. (d) should be construed as vesting upon the SEC original and exclusive jurisdiction only over petitions to be declared in a state of suspension of payments... Said provision cannot be stretched to include petitions for insolvency."

• Union Glass & Container Corporation v. Securities and Exchange Commission, 126 SCRA 31 — Cited for the principle that the SEC is a tribunal of limited jurisdiction.
• Devesa v. Montecillo, 27 SCRA 822 — Cited for the principle that the jurisdiction of a limited jurisdiction tribunal must be strictly construed.
• Bocobo v. Estanislao, 72 SCRA 520; Gimenez Stock Brokerage & Co. v. SEC, 133 SCRA 840 — Cited for the rule that repeals by implication are not favored.

• Section 5(d), Presidential Decree No. 902-A (as amended by P.D. No. 1758) — Grants the SEC original and exclusive jurisdiction over petitions of corporations to be declared in a state of suspension of payments. The Court construed this provision narrowly, holding it does not extend to petitions for outright insolvency unless the entity is already under an SEC-appointed rehabilitation receiver or management committee.
• Section 14, Act No. 1956 (The Insolvency Law) — Provides that an insolvent debtor may apply to the Court of First Instance (now RTC) to be discharged from debts. The Court held this provision remains applicable to petitions for declaration of insolvency of corporations not under SEC receivership.

• Justice Hugo E. Gutierrez, Jr.
• Justice Abdulwahid A. Bidin
• Justice Hilario G. Davide, Jr.
• (Justice Carolina C. Griño-Aquino was on leave; Justice Jose A.R. Melo was not yet a member of the Court at the time of this decision.)