Traders Royal Bank vs. Court of Appeals

The SEC's jurisdiction over a corporation under rehabilitation receivership does not extend to an individual surety who co-filed the petition for suspension of payments, and a creditor may separately sue such surety in the regular courts to enforce the surety agreement.

Traders Royal Bank was a creditor of Philippine Blooming Mills, Inc. (PBM), which had an outstanding obligation of ₱22,227,794.05. Alfredo Ching, a stockholder of PBM, had signed a Deed of Suretyship dated July 21, 1977, guaranteeing PBM's obligations to the bank up to ₱10,000,000. PBM and Ching jointly filed a petition for suspension of payments before the SEC (SEC No. 2250), where Ching was joined as co-petitioner on the theory that, as surety, he was entitled to PBM's defenses and was expected to raise most of the ₱100 million stockholders' equity required under PBM's rehabilitation plan. The SEC subsequently placed PBM under rehabilitation receivership and ordered the suspension of all claims against PBM pending before any court or tribunal.

On March 30, 1982, Philippine Blooming Mills, Inc. (PBM) and Alfredo Ching jointly submitted to the Securities and Exchange Commission a petition for suspension of payments (SEC No. 2250). Ching was joined as co-petitioner on the theory that, as surety, he was entitled to avail of PBM's defenses and was expected to raise most of the ₱100 million stockholders' equity required under PBM's rehabilitation plan. Traders Royal Bank was listed among PBM's creditors in Schedule A accompanying the petition.

On July 9, 1982, the SEC issued an Order placing PBM's business, including its assets and liabilities, under rehabilitation receivership, and directing that "all actions for claims listed in Schedule A of the petition pending before any court or tribunal are hereby suspended in whatever stage the same may be, until further orders from the Commission." The order was published once a week for three consecutive weeks in Bulletin Today, Philippine Daily Express, and Times Journal at the expense of PBM and Ching.

On May 13, 1983, Traders Royal Bank filed Civil Case No. 1028-P in the Regional Trial Court, Branch CXIII, Pasay City, against PBM and Alfredo Ching to collect ₱22,227,794.05, exclusive of interests, penalties, and other bank charges, representing PBM's outstanding obligation. Ching, a stockholder of PBM, was impleaded as co-defendant for having signed as surety for PBM's obligations to the extent of ₱10,000,000 under a Deed of Suretyship dated July 21, 1977.

PBM and Ching jointly moved to dismiss the civil case, invoking the pendency of the SEC proceedings. Before the motion could be resolved, the bank dropped PBM from the complaint on the ground that the SEC had already placed PBM under rehabilitation receivership. On August 15, 1983, the trial court denied Ching's motion to dismiss, pointing out that P.D. 1758 is concerned only with the activities of corporations, partnerships, and associations, and was never intended to regulate the activities of individuals. Ching's motion for reconsideration was denied on May 24, 1984, the respondent judge ruling that under P.D. 902-A, as amended, the SEC may not validly acquire jurisdiction over an individual like Ching.

Ching then filed a petition for certiorari and prohibition in the Court of Appeals (CA-G.R. SP No. 03593) to annul the RTC orders and prohibit further proceedings. On April 29, 1987, the Court of Appeals granted the writs, nullifying the questioned orders and prohibiting the RTC from further proceeding in Civil Case No. 1028-P, except to enter an order of dismissal. The appellate court reasoned that the SEC had assumed jurisdiction over Ching in SEC Case No. 2250 and reiterated such assumption in SEC-EB No. 018, and that under P.D. 902-A, as amended by P.D. 1758, all actions for claims against a corporation under receivership pending before any court shall be suspended.

• SEC Jurisdiction over Individuals: Petitioner argued that the Court of Appeals erred in holding that jurisdiction over Ching was assumed by the SEC merely because he was a co-signer or surety of PBM, and that the lower court could not assume jurisdiction over him to avoid multiplicity of suits.
• Exclusivity of SEC Jurisdiction: Petitioner contended that the appellate court erred in holding that the jurisdiction assumed by the SEC over Ching was to the exclusion of courts or tribunals of coordinate rank.

• SEC Jurisdiction over Surety: Whether the SEC, in a corporation's suspension of payments proceedings, may assume jurisdiction over the person and properties of an individual surety who co-filed the petition with the corporation.
• Effect of SEC Suspension Order on Separate Collection Suit: Whether the SEC's order suspending all claims against the corporation under rehabilitation receivership bars a creditor from filing a separate collection suit against the individual surety in the regular courts.

• SEC Jurisdiction over Surety: No. The SEC's jurisdiction is limited to corporations and their assets; it cannot extend jurisdiction over the person or properties of an individual surety merely because he co-filed the petition for suspension of payments.
• Effect of SEC Suspension Order on Separate Collection Suit: No. The suspension order covers only claims against the corporation under receivership; the creditor bank may separately sue the surety in the RTC to enforce the surety agreement.

• SEC Jurisdiction over Surety: The SEC was empowered, as rehabilitation receiver, to take custody and control only of the assets and properties of PBM, for the SEC has jurisdiction over corporations only, not over private individuals, except stockholders in an intra-corporate dispute, pursuant to Section 5 of P.D. 902-A and Section 2 of P.D. 1758. Although Ching was impleaded in SEC Case No. 2250 as co-petitioner, he was a nominal party whose properties were not included in the rehabilitation receivership. The term "parties-in-interest" in Section 6, Rule 3 of the SEC's New Rules of Procedure contemplates only private individuals sued or suing as stockholders, directors, or officers of a corporation. Jurisdiction does not depend on the consent or acts of the parties but upon express provision of law. Ching's act of joining as co-petitioner did not vest the SEC with jurisdiction over his person or property.

• Effect of SEC Suspension Order on Separate Collection Suit: A corporation has a personality distinct and separate from its individual stockholders or members; being an officer or stockholder does not make one's property the property of the corporation. Ching may be sued separately to enforce his liability as surety, as expressly provided by Article 1216 of the New Civil Code, which allows the creditor to proceed against any of the solidary debtors or all of them simultaneously. An anomalous situation would arise if individual sureties for debtor corporations could escape liability by simply co-filing with the corporation a petition for suspension of payments in the SEC, whose jurisdiction is limited to corporations and their corporate assets. The bank should have questioned the SEC's assumption of jurisdiction over Ching in an appellate forum, not in the court a quo, but the SEC's assumption of jurisdiction was itself invalid as to Ching.

• Separate Corporate Personality — A corporation has a personality distinct and separate from its individual stockholders or members; being an officer or stockholder of a corporation does not make one's property the property also of the corporation. The Court applied this doctrine to hold that Ching's suretyship liability was separate from PBM's corporate obligation, and the SEC's receivership over PBM's assets did not extend to Ching's person or properties.
• Jurisdiction by Consent or Acts of Parties — Jurisdiction does not depend on the consent or acts of the parties but upon express provision of law. The Court applied this principle to reject the notion that Ching's voluntary joinder as co-petitioner in the SEC proceedings vested the SEC with jurisdiction over his person or property.
• Solidary Liability under Article 1216, Civil Code — The creditor may proceed against any of the solidary debtors or all of them simultaneously; demand against one does not bar subsequent demands against the others so long as the debt has not been fully collected. The Court invoked this provision to confirm the bank's right to sue Ching separately as surety notwithstanding the SEC proceedings involving PBM.

• "An anomalous situation would arise if individual sureties for debtor corporations may escape liability by simply co-filing with the corporation a petition for suspension of payments in the SEC whose jurisdiction is limited only to corporations and their corporate assets." — This passage articulates the policy rationale for limiting SEC jurisdiction to corporations and preventing sureties from using suspension of payments proceedings as a shield against separate collection suits.

• "The term 'parties-in-interest' in Section 6, Rule 3 of the SEC's New Rules of Procedure contemplates only private individuals sued or suing as stockholders, directors, or officers of a corporation." — This defines the scope of the SEC Rules' joinder provision, clarifying that it does not extend to individual sureties acting in their personal capacity.

• "Ching's act of joining as a co-petitioner with PBM in SEC Case No. 2250 did not vest in the SEC jurisdiction over his person or property, for jurisdiction does not depend on the consent or acts of the parties but upon express provision of law." — This states the ratio decidendi on the jurisdictional question, tying the principle of jurisdiction by operation of law to the specific facts of Ching's voluntary joinder.

• Adelio Cruz vs. Quiterio Dalisay, 152 SCRA 482 — Cited for the doctrine that a corporation has a personality distinct and separate from its individual stockholders or members, and that being an officer or stockholder does not make one's property the property of the corporation.
• Tolentino vs. Social Security System, 138 SCRA 428 — Cited for the principle that jurisdiction does not depend on the consent or acts of the parties but upon express provision of law.
• Lee vs. Municipal Trial Court of Legaspi City, Br. I, 145 SCRA 408 — Cited alongside Tolentino for the same principle that jurisdiction is conferred by law, not by the parties' consent or acts.

• Section 5, P.D. 902-A — Defines the jurisdiction of the SEC over corporations, including suspension of payments and rehabilitation receivership. The Court relied on this provision to confirm that the SEC's jurisdiction extends only to corporations, not to private individuals.
• Section 2, P.D. 1758 — Amends P.D. 902-A and likewise limits the SEC's jurisdiction to corporations, partnerships, and associations. The trial court invoked this provision to deny Ching's motion to dismiss, and the Supreme Court affirmed that it does not cover individual sureties.
• Section 6, Rule 3, SEC New Rules of Procedure — Provides that parties in interest without whom no final determination can be had shall be joined as complainant, petitioner, or respondent. The Court construed this provision as contemplating only individuals sued or suing as stockholders, directors, or officers, not individual sureties.
• Article 1216, New Civil Code — Allows the creditor to proceed against any of the solidary debtors or all of them simultaneously. The Court applied this provision to confirm the bank's right to sue Ching separately as surety for PBM's obligation.

Narvasa, Cruz, Gancayco, and Medialdea, JJ., concurred.