Land Bank of the Philippines vs. Court of Appeals

A petition for certiorari under Rule 65 is not a substitute for a petition for review on certiorari under Rule 45 where the errors ascribed to the Court of Appeals are errors of judgment, not errors of jurisdiction, and the remedy of appeal was available and lost; the availability of appeal makes certiorari improper, and the failure to appeal renders the assailed decision final and executory.

Manotoc Securities, Inc. (MSI) was a licensed broker and dealer in securities, while the Insular Bank of Asia and America (IBAA) and the Land Bank of the Philippines (LBP) were commercial banking corporations authorized to operate as trust companies. MSI sold investment agreements to the public, including private respondents, and constituted IBAA as custodian bank over a collateral pool of securities under an August 19, 1976 custodianship agreement; LBP later substituted IBAA under a December 12, 1979 instrument. The SEC thereafter placed MSI under rehabilitation and receivership, creating a jurisdictional conflict between the RTC’s Rule 98 power over trusts and the SEC’s statutory authority over distressed corporations.

Manotoc Securities, Inc. (MSI), a licensed broker and dealer in securities, and the Insular Bank of Asia and America (IBAA), a commercial banking corporation authorized to operate as a trust company, offered and sold securities to the public. Among the purchasers were private respondents Mamerta B. Rodriguez, the Spouses Armando and Zenaida Sta. Ana, El Observatorio de Manila, Incorporada, the Spouses Wilfredo and Aurora Posadas, Reginald F. Francisco, Bienvenido L. Maceda, the Spouses Hector and Matilde Mendoza, and Eugenio V. Romillo. As evidence of their purchases, the private respondents executed individual investment agreements with MSI, under which MSI undertook to invest funds primarily in a portfolio of specified securities for fixed periods and to return upon maturity the investors’ funds and their corresponding share in income. As security, MSI delivered qualified securities to IBAA, and on August 19, 1976, MSI and IBAA executed a custodianship agreement constituting IBAA as custodian bank of the investment portfolio/collateral pool. The agreement authorized the custodian, upon default, to sell so much of the qualified securities as necessary to satisfy amounts due, to collect proceeds, and to apply them in the order set out in Section 5.04; MSI also executed deeds of assignment in favor of IBAA as security.

On December 12, 1979, MSI as trustor and LBP as trustee executed a contract denominated “Substitution of Trustee with Assumption of Liabilities,” by which LBP substituted and succeeded IBAA as custodian bank of the collateral pool and assumed IBAA’s liabilities under the custodianship agreement. The instrument required LBP to collect outstanding IBAA custodian receipts and substitute its own within thirty days, to notify all investors of the substitution, and waived the effectivity period for removal or resignation of the trustee under Section 3.04-A; MSI, in turn, undertook to liquidate its outstanding obligations with IBAA, which was to render a final accounting. In the same month, Ricardo L. Manotoc, Jr. and Teodoro M. Kalaw filed SEC petitions for rehabilitation of MSI and Trans-Insular Management, Inc.; on December 20, 1979 and January 11, 1980, the SEC placed MSI under rehabilitation and appointed a Management Committee as interim receiver, and on April 2, 1980, the SEC delineated the Committee’s duties. On February 13, 1980, MSI wrote LBP advising that it had been placed under rehabilitation and directing LBP to suspend any movement, disposition, or substitution of any and all properties then held as collateral, security, or custodian for MSI.

On April 18, 1982, the private respondents, through counsel, wrote LBP requesting the return of their investments. LBP referred the letter to the Management Committee, which on May 28, 1982 rejected the demands; on June 1, 1982, LBP wrote the private respondents that it could not comply and that it would turn over all properties/securities lodged with it by MSI to the SEC-Appointed Management Committee. On June 24, 1982, the private respondents acknowledged receipt and asserted that LBP, as trustee of the investment portfolio, held legal title over the same, so the portfolio could not be affected by any directives of the Management Committee; they urged LBP to desist from terminating and closing the account and turning over the portfolio, and instead to sell and dispose of the securities in its custody to satisfy their claims. LBP rejected the demands, and on June 29, 1982, the private respondents demanded an accounting of their portfolio. In a July 20, 1982 letter, LBP refused, stating that as mere custodian of the securities, it did not have legal title over them. The Management Committee thereafter proposed the appointment of a permanent receiver to liquidate assets, pursue collections, run after stockholders, call on the broker/dealer bond, and take other actions.

Fearing that their investments were in serious jeopardy, private respondents Mamerta B. Rodriguez and the Spouses Armando and Zenaida Sta. Ana filed a petition with the RTC of Makati under Rule 98 of the Revised Rules of Court, seeking the removal of IBAA as trustee and the appointment of a substitute trustee. On June 30, 1983, El Observatorio de Manila, Incorporada, the Spouses Wilfredo and Aurora Posadas, and Reginald F. Francisco filed a similar petition, while Bienvenido L. Maceda, the Spouses Hector and Matilde Mendoza, and Eugenio V. Romillo filed another. The petitions were consolidated and assigned to the RTC of Makati, Branch 136. The private respondents alleged that MSI had named and appointed IBAA as trustee of an investment portfolio consisting of investment funds solicited from the public and evidenced by investment agreements and custodian receipts; that amendments dated May 24, 1977 and October 4, 1977 allowed the funds to be invested primarily in financing margin accounts secured by specified shares at 150% cover and real estate at 200% cover; that the portfolio was held in trust for the investors as security for payment at maturity; and that IBAA issued custodian receipts certifying it held qualified securities with values equivalent to the investments. They further alleged that MSI failed to pay or return their investments at maturity despite repeated demands, failed to maintain the required security value of the portfolio, and thereby committed events of default; that IBAA allowed releases, withdrawals, substitutions, and misapplications of trust funds, failed to declare all outstanding investments due, and accepted inadequate security; and that MSI terminated the custodianship agreement and substituted LBP without the investors’ knowledge or consent, without accounting, and without court discharge. They prayed for the removal of IBAA and LBP as trustee and substitute trustee, the appointment of Prudential Bank as substitute trustee, a declaration that the substitution was of no force and effect, accounting, restoration of losses, injunctive relief, turnover of trust properties, forfeiture of compensation, damages, and discharge only upon full restoration.

IBAA and LBP moved to dismiss or suspend the petitions on the ground that it was the SEC, not the RTC, that had jurisdiction under Presidential Decree No. 902-A, as amended by P.D. Nos. 1653 and 1799, and that under Section 6(c) thereof all claims against the distressed corporation should be suspended upon constitution of the Management Committee. MSI, through its SEC-Appointed Management Committee, also moved to dismiss or suspend proceedings in one case, and Ricardo L. Manotoc, Jr. filed a motion to intervene and to suspend on the same ground. The private respondents replied that IBAA and LBP were trustees of the investment portfolio and had acquired title over the properties included therein, so the distressed corporation was not the owner and the SEC had no jurisdiction. After hearing at which the private respondents adduced evidence, the trial court found that although the petitions contained no prayer specifically directed against MSI, they were in reality claims against MSI, or at least their disposition would affect properties belonging or pertaining to a corporation under SEC management or receivership. The trial court held that the SEC had primary jurisdiction to the exclusion of the RTC, that the nature of the agreement should first be determined by the SEC, and that the private respondents should have exhausted remedies before the SEC; it allowed Manotoc/MSI to intervene and ordered the suspension and archiving of the cases until the SEC proceedings were terminated.

• Nature of LBP’s Role: Petitioner maintained that it was a mere custodian of MSI under the custodianship agreement, with specific duties to perform, and therefore only an agent, not a trustee in the strict legal sense; it held no legal title over the properties or securities.
• Inapplicability of Rule 98: Petitioner argued that because it was not a trustee, Section 8, Rule 98 of the Rules of Court was inapplicable, and the RTC had no jurisdiction over the private respondents’ petitions for removal of LBP as trustee.
• SEC Jurisdiction: Petitioner asserted that the SEC had jurisdiction over the petitions under P.D. 902-A, as amended; although denominated as petitions for removal of a trustee, they were in reality claims or actions against MSI, a corporation under SEC management and receivership, or at least their disposition would affect properties belonging or pertaining to MSI, and thus should be suspended under Section 6(c).
• Sly Scheme: Petitioner characterized the petitions as a sly scheme by the private respondents to implement the custodianship agreement between LBP and MSI through the instrumentality of the trial court.
• Compliance with SEC Order: Petitioner stated it was willing to perform its duties and obligations as custodian bank, but claimed it was unable to do so in deference to the SEC Order of April 2, 1980, which directed it to suspend any movement, disposition, or substitution of any and all properties held in behalf of MSI, whether as collateral, security, or custodian; it contended it was duty-bound to comply with the SEC’s valid exercise of regulatory and adjudicatory powers.
• Grave Abuse and No Adequate Remedy: Petitioner averred that the CA committed grave abuse of discretion amounting to lack or excess of jurisdiction in ruling that LBP was a trustee and that the RTC had jurisdiction, and that it had no appeal or any plain, speedy, and adequate remedy in the ordinary course of law.

• Appeal under Rule 45: Private respondents moved to dismiss, arguing that appeal under Rule 45 was available to petitioner and was an equally beneficial, speedy, and sufficient remedy in the ordinary course of law, which should have been availed of.
• Certiorari Not Substitute for Lost Appeal: They argued that petitioner could not allow the period to appeal to expire and then seek to regain the lost remedy through certiorari; an appeal would have stayed the CA decision and prevented it from becoming final and executory.
• Finality: They asserted that petitioner received the CA decision on November 18, 1996, filed its motion for reconsideration on December 3, 1996, and received the denial on April 18, 1997; it had fifteen days from April 18, 1997 to appeal, and for failure to do so, the decision and resolution became final and executory on May 3, 1997.
• Non-compliance with Rule 65 Requirements: They contended that petitioner failed to attach to its petition the pleadings and documents relevant and pertinent to the case, in violation of Section 1, Rule 65, which was fatal to its cause and another ground for dismissal.
• Errors of Judgment: They argued that the CA’s conclusion that a trust was created in each custodianship agreement, even if erroneous, was an error of judgment correctible by appeal, not by certiorari, which is confined to errors of jurisdiction or grave abuse of discretion.
• Conclusiveness of CA Findings: They asserted that the CA’s factual findings on the transfer, assignment, set over, and delivery to IBAA and LBP of the securities for the benefit and security of investors should be conclusive absent abuse of discretion, which petitioner failed to show.
• No Factual Basis for SEC Jurisdiction Claim: They argued that the claim that disposition of the removal petitions would affect properties of MSI under SEC management lacked factual basis because the assignment vested title and interest in the trustee banks, making them legal owners.
• SEC Order Not Applicable: They asserted that the SEC Order of April 2, 1980 contained no directive to LBP and was not addressed to it; even if it did, it would be in excess of jurisdiction and not binding, because no court or tribunal can take property in the possession of a stranger to the action who claims in good faith to be the owner, and the Management Committee had no power over assets not belonging to MSI; LBP as trustee was obliged to defend the trust property.

• Propriety of Rule 65: Whether a petition for certiorari under Rule 65 of the Revised Rules of Court is the proper recourse of petitioner for the reversal of the assailed decision and resolution of the CA.
• Nature of Errors: Whether the errors ascribed to the CA in its decision are errors of judgment or errors of jurisdiction.
• Adequacy of Appeal: Whether a petition for review on certiorari under Rule 45 of the Revised Rules of Court is a plain, speedy, and adequate remedy in the ordinary course of law.
• Finality of CA Decision: Whether the CA decision and resolution had become final and executory due to petitioner’s failure to file a timely appeal.

• Propriety of Rule 65: No. Certiorari under Rule 65 is confined to errors of jurisdiction or grave abuse of discretion amounting to lack or excess of jurisdiction, and cannot substitute for appeal where the latter remedy is available.
• Nature of Errors: Errors of judgment. The CA’s findings—that IBAA and LBP were trustees, that the RTC had jurisdiction under Rule 98, and that primary jurisdiction did not apply—were errors of judgment reviewable by appeal, not by certiorari.
• Adequacy of Appeal: Yes. A petition for review on certiorari under Rule 45 was a plain, speedy, and adequate remedy; it would have stayed the assailed decision and allowed petitioner to raise questions of law, including jurisdiction and whether the petitions were claims against MSI.
• Finality of CA Decision: Yes. The CA decision became final and executory; petitioner received the denial of its motion for reconsideration on April 18, 1997 but filed the Rule 65 petition only on June 17, 1997, beyond the reglementary period.

• Propriety of Rule 65: Section 1, Rule 65 permits certiorari only when a tribunal, board, or officer exercising judicial or quasi-judicial functions has acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal or any plain, speedy, and adequate remedy in the ordinary course of law. The writ is supervisory, narrow in scope, and not a general utility tool; it issues to correct errors of jurisdiction or grave abuse, not to review the intrinsic correctness of a judgment. The CA rendered its decision in the proper exercise of its appellate jurisdiction over the private respondents’ appeal from the RTC order. Petitioner’s complaint was with the CA’s conclusions, not with its power to decide. Hence, Rule 65 was not the proper remedy.
• Nature of Errors: The CA’s enumerated findings—that the RTC erred in archiving and suspending the petitions, that IBAA and LBP were trustees and owners rather than mere agents of MSI, that the investment portfolios were not assets of MSI, that the SEC had no jurisdiction over the portfolios, that only claims against the distressed corporation were suspended, and that primary administrative jurisdiction did not apply—were errors of judgment. An error of judgment is one committed by a court in the exercise of its jurisdiction and is reviewable only by appeal; an error of jurisdiction is one issued without or in excess of jurisdiction or with grave abuse of discretion and is correctible by certiorari. Since the CA had jurisdiction, any error in its findings did not deprive it of jurisdiction. The proper recourse was a petition for review on certiorari under Rule 45.
• Adequacy of Appeal: A petition for review on certiorari under Rule 45 is a plain, speedy, and adequate remedy in the ordinary course of law. Had petitioner filed it within the reglementary period, the assailed decision would have been stayed, and petitioner could have raised questions of law, such as whether the RTC had jurisdiction over the private respondents’ petitions or whether those petitions were in effect actions for claims against MSI as defined in Finasia Investments & Finance Corp. vs. Court of Appeals. Petitioner’s assertion that Rule 65 would be more expeditious did not render Rule 45 inadequate; the remedies are mutually exclusive and not alternative or cumulative.
• Finality of CA Decision: Petitioner received a copy of the CA decision on November 18, 1996 and filed its motion for reconsideration on December 3, 1996. It received the CA resolution denying the motion on April 18, 1997. Instead of filing a petition for review on certiorari under Rule 45 within the period, petitioner filed the instant Rule 65 petition only on June 17, 1997. The CA decision had therefore become final and executory in the interim, beyond the Court’s purview to act upon.

• Certiorari under Rule 65 is not a substitute for appeal — Certiorari is a supervisory writ that issues only to correct errors of jurisdiction or grave abuse of discretion amounting to lack or excess of jurisdiction, and only when there is no appeal or any plain, speedy, and adequate remedy in the ordinary course of law. It cannot be used to review errors of judgment or the intrinsic correctness of a decision. The Court applied this doctrine by dismissing LBP’s Rule 65 petition because a timely Rule 45 appeal was available.
• Errors of judgment vs. errors of jurisdiction — An error of judgment is one committed by a court in the exercise of its jurisdiction and is reviewable only by appeal; an error of jurisdiction is one issued without or in excess of jurisdiction, or with grave abuse of discretion tantamount to lack or excess of jurisdiction, and is correctible by certiorari. The Court applied this distinction by holding that the CA’s findings on the trust relationship, RTC jurisdiction, and primary jurisdiction were errors of judgment, not jurisdiction.
• Grave abuse of discretion — Grave abuse of discretion implies a capricious and whimsical exercise of judgment equivalent to lack of jurisdiction, where power is exercised in an arbitrary manner by reason of passion, prejudice, or personal hostility, and the abuse is so patent or gross as to amount to an evasion of a positive duty or a virtual refusal to perform the duty enjoined or to act at all in contemplation of law. The Court found no such abuse because the CA acted within its appellate jurisdiction.
• Adequate remedy — An adequate remedy is one that is equally beneficial, speedy, and sufficient, not merely a remedy that at some time in the future will bring about a revival of the judgment complained of; it must promptly relieve the petitioner from the injurious effects of the judgment and the acts of the inferior tribunal. The Court held that Rule 45 was such a remedy.
• Certiorari and appeal are mutually exclusive — The remedies of appeal in the ordinary course of law and certiorari under Rule 65 are mutually exclusive and not alternative or cumulative. The Court applied this rule by refusing to allow Rule 65 to substitute for the lost remedy of appeal.
• Finality of judgment — Failure to timely avail of the proper remedy renders the assailed decision final and executory, beyond the reviewing court’s power to act upon. The Court applied this doctrine because LBP filed its Rule 65 petition long after the period to appeal had lapsed.
• Review of factual findings in certiorari — Questions or findings of fact of a lower court, board, or tribunal, and the probative weight and sufficiency of the evidence upon which they are based, are generally not reviewable by certiorari under Rule 65; an exception exists when the sufficiency of evidence is inquired into to determine whether jurisdictional facts were proved or whether the lower court exceeded its jurisdiction. The Court noted this exception but found the case governed by the general rule.

• “Certiorari is a remedy narrow in scope and unflexible in character. It is not a general utility tool in the legal workshop.” — This passage states the settled characterization of certiorari, emphasizing that it is an extraordinary writ of limited scope and cannot be used for every perceived error.
• “The general rule is that a cert writ will not issue where the remedy of appeal is available to the aggrieved party. The remedies of appeal in the ordinary course of law and that of certiorari under Rule 65 of the Revised Rules of Court are mutually exclusive and not alternative or cumulative.” — This is the ratio decidendi for dismissing the petition: because appeal was available, certiorari could not be invoked as a substitute.
• “The special civil action for certiorari is a remedy designed for the correction of errors of jurisdiction and not errors of judgment.” — This passage defines the proper office of certiorari and supports the Court’s holding that the CA’s challenged findings were errors of judgment.
• “A petition for review on certiorari under Rule 45 of the Revised Rules of Court is a plain, speedy and adequate remedy in the ordinary course of law.” — This passage directly rejects LBP’s claim that it had no adequate remedy other than Rule 65 and explains why its petition was procedurally improper.

• SMI Development Corporation vs. Republic of the Philippines, 323 SCRA 862 (2000) — Cited for the rule that certiorari is available when the remedy of appeal is not adequate, or equally beneficial, speedy, and sufficient; the Court acknowledged the exception but found Rule 45 adequate in this case.
• Fortich vs. Corona, 289 SCRA 624 (1998) — Cited for the distinction between an error of judgment, reviewable by appeal, and an error of jurisdiction, correctible by certiorari.
• Finasia Investments & Finance Corp. vs. Court of Appeals, 237 SCRA 446 (1994) — Cited for the definition of “claim” in the context of what petitioner could have raised in a Rule 45 petition.
• San Miguel Foods, Inc.–Cebu B–Meg Feed Plant vs. Laguesma, 263 SCRA 69 (1996) — Cited for the principle that certiorari is narrow in scope and not a general utility tool.
• Silverio vs. Court of Appeals, 141 SCRA 527 (1986) — Cited for the function of certiorari to keep inferior courts within the bounds of their jurisdiction or to prevent grave abuse of discretion.
• Cuison vs. Court of Appeals, 289 SCRA 159 (1998) — Cited for the distinction between excess of jurisdiction and absence of jurisdiction.
• De Baron vs. Court of Appeals, 368 SCRA 407 (2001) — Cited for the definition of grave abuse of discretion.
• New York Marine Managers, Inc. vs. Court of Appeals, 249 SCRA 416 (1995) — Cited for the rule that certiorari cannot review the wisdom or legal soundness of a decision.
• Zacate vs. Commission on Elections, 353 SCRA 441 (2001); Republic vs. Court of Appeals, 322 SCRA 81 (2000); National Irrigation Administration vs. Court of Appeals, 318 SCRA 255 (1999) — Cited for the finality of judgment due to failure to file a timely appeal.

• Section 1, Rule 65, Revised Rules of Court — Provides the requirements for a petition for certiorari: a tribunal, board, or officer exercising judicial or quasi-judicial functions has acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal or any plain, speedy, and adequate remedy in the ordinary course of law. The Court applied this provision to dismiss the petition because appeal was available and the alleged errors were not jurisdictional.
• Section 8, Rule 98, Revised Rules of Court — Provides that the proper Regional Trial Court may, upon petition of the parties beneficially interested and after due notice to the trustee and hearing, remove a trustee if such removal appears essential in the interests of the petitioners. The CA relied on this provision in holding that the RTC had jurisdiction; the Supreme Court treated the CA’s ruling as an error of judgment, not a jurisdictional error correctible by certiorari.
• Section 6(c), Presidential Decree No. 902-A, as amended by P.D. Nos. 1653 and 1799 — Provides for the suspension of claims against corporations under SEC management or receivership. LBP invoked this provision to argue that the RTC should have suspended the petitions; the Court held that this argument could have been raised in a timely petition for review on certiorari under Rule 45.
• Rule 45, Revised Rules of Court — Governs petitions for review on certiorari. The Court held that a petition under this Rule was a plain, speedy, and adequate remedy in the ordinary course of law and should have been filed by LBP instead of a Rule 65 petition.

Justice Bellosillo (Chairman), Justice Quisumbing, Justice Austria-Martinez, and Justice Tinga concurred.