Rizal Commercial Banking Corporation vs. Court of Appeals

The Court held that a surety's liability is separate and independent from that of the principal debtor. Consequently, an SEC order suspending all actions for claims against a corporation undergoing rehabilitation under P.D. 902-A does not preclude a creditor from proceeding against the surety to enforce the latter's solidary obligation under a comprehensive surety agreement.

RCBC extended credit facilities to PBM, which imported goods under letters of credit and trust receipts, incurring a total obligation of P7,982,649.08. Alfredo Ching, PBM's officer, executed a Comprehensive Surety Agreement guaranteeing PBM's obligations to RCBC up to P40,000,000.00. After PBM defaulted, RCBC filed a collection suit against both PBM and Ching. During the pendency of this suit, PBM filed a petition for suspension of payments and rehabilitation with the SEC, which issued an order suspending all claims against PBM.

• On May 4, 1979, Alfredo Ching executed a "Comprehensive Surety Agreement" in favor of RCBC, binding himself jointly and severally to guarantee PBM's obligations up to P40,000,000.00.
• Between September 8 and October 30, 1980, PBM applied for letters of credit with RCBC, which opened them and imported goods. PBM acknowledged receipt via trust receipts, with total obligations reaching P7,982,649.08.
• On August 7, 1981, RCBC filed a collection suit (CV-42333) against PBM and Ching, attaching their assets.
• On April 1, 1982, PBM filed a Petition for Suspension of Payments with the SEC (SEC Case No. 2250). On July 6, 1982, the SEC issued an order suspending all actions against PBM.
• On October 14, 1982, RCBC filed a Motion for Summary Judgment in CV-42333, which the trial court granted on November 25, 1982, ordering PBM and Ching to pay jointly and severally.
• The Court of Appeals reversed the trial court, holding it should have deferred proceedings due to the SEC suspension order.

• RCBC argued that the SEC injunctive order pertained only to PBM, the corporation under rehabilitation, and did not affect its right to proceed against Alfredo Ching, the surety, based on his separate and independent undertaking.
• RCBC contended that applying the SEC order to the surety would deprive it of its contractual right to proceed against the surety.

• PBM and Ching argued that Ching's liability was a corporate act as a corporate officer, and thus the SEC rehabilitation proceedings should benefit him.
• They contended that the surety's liability could not exceed what remained after the rehabilitation plan settled PBM's obligations, and that the SEC suspension order necessarily suspended action against the surety.

• Procedural Issues: Whether the trial court acted properly in rendering a summary judgment and continuing proceedings despite the SEC order suspending actions against PBM.
• Substantive Issues: Whether the SEC order suspending all claims against a corporation under rehabilitation also bars a creditor from proceeding against the corporation's surety.

• Procedural: The Court found the trial court correctly rendered summary judgment because no genuine issue of material fact existed. The respondents' allegation of a customary extension of maturity dates was self-serving and unsupported by evidence, making the obligation matured and demandable.
• Substantive: The Court held that the SEC suspension order did not extend to the surety, Alfredo Ching. A surety's obligation is direct, primary, and solidary. The SEC's jurisdiction under P.D. 902-A extends only to the corporation under rehabilitation, not to its sureties. The creditor may proceed against the surety independently.

• Solidary Liability (Articles 1207 & 1216, Civil Code) — When an obligation is solidary, the creditor may demand full compliance from any one of the debtors. The Court applied this to hold that RCBC could proceed directly against the surety, Ching, without first exhausting remedies against the principal debtor, PBM.
• Separate and Independent Obligation of a Surety — The Court emphasized that a surety binds himself as an original promisor. His liability is determined solely by the contract of suretyship and is not diminished or suspended by proceedings affecting the principal debtor, such as corporate rehabilitation.
• Limited Scope of SEC Suspension Order (P.D. 902-A) — The SEC's injunctive power to suspend actions applies only to the corporation under rehabilitation and its assets. It does not extend to third-party sureties who have a separate contractual undertaking.

• "He is charged as an original promissor by virtue of his primary obligation under the Suretyship Agreement." — This passage underscores the Court's characterization of the surety's liability as primary and independent.
• "The SEC injunctive Order can not effect a suspension of payment of respondent Surety's due and demandable obligation, it being clear therefrom that the rehabilitation receivers were limited 'to tak(ing) custody and control over all the existing assets and property of PBM.' Nothing in said Order puts respondent Ching within its scope." — This quote directly supports the holding that the SEC order's reach is confined to the corporate debtor.

• Zenith Insurance Corporation v. Court of Appeals, G.R. No. L-57957, December 29, 1982, 119 SCRA 485 — Cited for the principle that the extent of a surety's liability is determined only by the contract of suretyship and cannot be extended by implication.
• Traders Royal Bank v. Court of Appeals, G.R. No. 78412, September 26, 1989 — Cited as recent authority supporting the proposition that a surety can be sued separately to enforce his liability notwithstanding rehabilitation proceedings against the principal debtor.

• Article 1207, Civil Code — Defines solidary obligations and states that when there are two or more debtors, the concurrence of all is necessary unless expressly stated as solidary.
• Article 1216, Civil Code — Provides that the creditor may proceed against any one of the solidary debtors or some or all of them simultaneously.
• Article 1193, Civil Code — Governs obligations with a period, holding that obligations with a suspensive period become demandable upon the arrival of the period.
• Section 3, P.D. 902-A (as amended by P.D. 1758) — Grants the SEC jurisdiction over corporations and associations, including the power to suspend actions for claims against a corporation undergoing rehabilitation.