G.R. No. 152580. June 26, 2008.

* 29 November 2000 Omnibus Order, directed that “the proceedings on and

CONSUELO METAL CORPORATION, petitioner, vs. PLANTERS DEVELOPMENT implementation of the order of liquidation be commenced at the Regional
BANK and ATTY. JESUSA PRADO-MANINGAS, in her capacity as Ex- Trial Court to which this case shall be transferred.” This is the correct
officio Sheriff of Manila, respondents. procedure because the liquidation of a corporation requires the settlement
of claims for and against the corporation, which clearly falls under the
Corporation Law; Securities and Exchange Commission (SEC); jurisdiction of the regular courts. The trial court is in the best position to
Jurisdictions; Republic Act No. 8799 transferred to the appropriate regional convene all the creditors of the corporation, ascertain their claims, and
trial courts the SEC’s jurisdiction defined under Section 5(d) of Presidential determine their preferences.
Decree No. 902-A.—Republic Act No. 8799 (RA 8799) transferred to the Same; Rehabilitation of Corporations; Preference of Credits; If
appropriate regional trial courts the SEC’s jurisdiction defined under Section rehabilitation is no longer feasible and the assets of the corporation are finally
5(d) of Presidential Decree No. 902-A. Section 5.2 of RA 8799 provides: The liquidated, secured creditors shall enjoy preference over unsecured creditors,
Commission’s jurisdiction over all cases enumerated under Sec. 5 of subject only to the provisions of the Civil Code on concurrence and preference
Presidential Decree No. 902-A is hereby transferred to the Courts of general of credits.—In Rizal Commercial Banking Corporation v. Intermediate
jurisdiction or the appropriate Regional Trial Court: Provided, That the Appellate Court, 320 SCRA 279 (1999), we held that if rehabilitation is no
Supreme Court in the exercise of its authority may designate the Regional longer feasible and the assets of the corporation are finally liquidated,
Trial Court branches that shall exercise jurisdiction over these cases. The secured creditors shall enjoy preference over unsecured creditors, subject
Commission shall retain jurisdiction over pending cases involving intra- only to the provisions of the Civil Code on concurrence and preference of
corporate disputes submitted for final resolution which should be resolved credits. Creditors of secured obligations may pursue their security interest or
within one (1) year from the enactment of this Code. The Commission shall lien, or they may choose to abandon the preference and prove their credits
retain jurisdiction over pending suspen- as ordinary claims.
_______________ Same; Same; Same; Mortgages; Those credits which enjoy preference in
relation to specific real property or real rights, exclude all others to the extent
* FIRST DIVISION. of the value of the immovable or real right to which the preference refers.—
466 Section 2248 of the Civil Code provides:
467
466 SUPREME COURT REPORTS ANNOTATED
VOL. 555, JUNE 26, 2008 467
Consuelo Metal Corporation vs. Planters Development Bank
Consuelo Metal Corporation vs. Planters Development Bank
sion of payments/rehabilitation cases filed as of 30 June 2000 until
finally disposed. (Emphasis supplied) Those credits which enjoy preference in relation to specific real property
Same; Same; Same; Corporate Liquidation; While the SEC has jurisdiction or real rights, exclude all others to the extent of the value of the immovable
to order the dissolution of a corporation, jurisdiction over the liquidation of or real right to which the preference refers.
the corporation now pertains to the appropriate regional trial courts—the Same; Same; Same; Same; A creditor-mortgagee has the right to
liquidation of a corporation requires the settlement of claims for and against foreclose the mortgage over a specific real property whether or not the
the corporation, which clearly falls under the jurisdiction of the regular debtor-mortgagor is under insolvency or liquidation proceedings.—In this
courts.—The SEC’s jurisdiction does not extend to the liquidation of a case, Planters Bank, as a secured creditor, enjoys preference over a specific
corporation. While the SEC has jurisdiction to order the dissolution of a mortgaged property and has a right to foreclose the mortgage under Section
corporation, jurisdiction over the liquidation of the corporation now pertains 2248 of the Civil Code. The creditor-mortgagee has the right to foreclose the
to the appropriate regional trial courts. This is the reason why the SEC, in its mortgage over a specific real property whether or not the debtor-mortgagor
1
is under insolvency or liquidation proceedings. The right to foreclose such the case to the Securities and Exchange Commission (SEC) for further
mortgage is merely suspended upon the appointment of a management proceedings.
committee or rehabilitation receiver or upon the issuance of a stay order by
the trial court. However, the creditor-mortgagee may exercise his right to The Facts
foreclose the mortgage upon the termination of the rehabilitation
proceedings or upon the lifting of the stay order. On 1 April 1996, CMC filed before the SEC a petition to be declared in a
Same; Same; Same; Same; Foreclosure proceedings have in their favor state of suspension of payment, for rehabilitation, and for the appointment
the presumption of regularity and the burden of evidence to rebut the same of a rehabilitation receiver or management committee under Section 5(d) of
is on the party that seeks to challenge the proceedings.—Foreclosure Presidential Decree No. 902-A.5 On 2 April 1996, the SEC, finding the
proceedings have in their favor the presumption of regularity and the burden _______________
of evidence to rebut the same is on the party that seeks to challenge the
proceedings. CMC’s challenge to the foreclosure proceedings has no merit. 1 Under Rule 45 of the 1997 Rules of Civil Procedure.
The notice of sale clearly specified that the auction sale will be held “at 10:00 2 Rollo, pp. 49-56. Penned by Associate Justice Alicia L. Santos, with
o’clock in the morning or soon thereafter, but not later than 2:00 o’clock in Associate Justices Buenaventura J. Guerrero and Marina L. Buzon, concurring.
the afternoon.” The Sheriff’s Minutes of the Sale stated that “the foreclosure 3 Id., at pp. 57-59.
sale was actually opened at 10:00 A.M. and commenced at 2:30 P.M.” There 4 CA Rollo, pp. 32-35. Penned by Judge Artemio S. Tipon.
was nothing irregular about the foreclosure proceedings. 5 Section 5(d) of Presidential Decree No. 902-A provides:
Sec. 5. In addition to the regulatory and adjudicative functions of
PETITION for review on certiorari of the decision and resolution of the Court the Securities and Exchange Commission over corporations,
of Appeals. partnerships and other forms of associations registered with it as
The facts are stated in the opinion of the Court. expressly granted under existing laws and de-
Jesus C. Nalupta, Jr. and Manuel D. Yngson, Jr. for petitioner.468
469
468 SUPREME COURT REPORTS ANNOTATED VOL. 555, JUNE 26, 2008 469
Consuelo Metal Corporation vs. Planters Development Bank Consuelo Metal Corporation vs. Planters Development Bank
Raymundo, Santos, Senga & Associates for respondent Planters petition sufficient in form and substance, declared that “all actions for claims
Development Bank. against CMC pending before any court, tribunal, office, board, body and/or
commission are deemed suspended immediately until further order” from
CARPIO, J.:
the SEC.6
In an Order dated 13 September 1999, the SEC directed the creation of a
The Case
management committee to undertake CMC’s rehabilitation and reiterated
This is a petition for review1 seeking to reverse the 14 December 2001 the suspension of all actions for claims against CMC.7
Decision2 and the 6 March 2002 Resolution3 of the Court of Appeals in CA- On 29 November 2000, upon the management committee’s
G.R. SP No. 65069. In its 14 December 2001 Decision, the Court of Appeals recommendation,8 the SEC issued an Omnibus Order directing the dissolution
dismissed petitioner Consuelo Metal Corporation’s (CMC) petition for and liquidation of CMC.9 The SEC also directed that “the proceedings on and
certiorari and affirmed the 25 April 2001 Order4 of the Regional Trial Court, implementation of the order of liquidation be commenced at the Regional
Branch 46, Manila (trial court). In its 6 March 2002 Resolution, the Court of Trial Court to which this case shall be transferred.”10
Appeals partially granted CMC’s motion for reconsideration and remanded
2
 Thereafter, respondent Planters Development Bank (Planters Bank), one payment could not be converted into a petition for dissolution and liquidation
of CMC’s creditors, commenced the extra-judicial foreclosure of CMC’s real because they covered different subject matters and were governed by
estate mortgage. Public auctions were scheduled on 30 January 2001 and 6 different rules. The trial court stated that CMC’s remedy was to file a new
February 2001. petition for dissolution and liquidation either with the SEC or the trial court.
_______________ CMC filed a petition for certiorari with the Court of Appeals. CMC alleged
that the trial court acted with grave abuse of discretion amounting to lack of
crees, it shall have original and exclusive jurisdiction to hear and decide jurisdiction when it required CMC to file a new petition for dissolution and
cases involving x x x x liquidation with either the SEC or the trial court when the SEC clearly retained
jurisdiction over the case.
(d) Petitions of corporations, partnerships or associations to be On 13 June 2001, Planters Bank extrajudicially foreclosed the real estate
declared in a state of suspension of payments in cases where the mortgage.13
corporation, partnership or association possesses sufficient property
to cover all its debts but foresees the impossibility of meeting them _______________
when they respectively fall due or in cases where the corporation,
partnership or association has no sufficient assets to cover its liabilities 11 Id., at pp. 114-116.
but is under the management of a Rehabilitation Receiver or 12 CA Rollo, pp. 36-37.
Management Committee. 13 Id., at pp. 130-132.
6 CA Rollo, p. 61.
7 Rollo, pp. 102-107. 471
8 CA Rollo, pp. 68-70. VOL. 555, JUNE 26, 2008 471
9 Rollo, pp. 108-113. Consuelo Metal Corporation vs. Planters Development Bank
10 Id., at p. 113. The Ruling of the Court of Appeals
On 14 December 2001, the Court of Appeals dismissed the petition and
470 upheld the 25 April 2001 Order of the trial court. The Court of Appeals held
470 SUPREME COURT REPORTS ANNOTATED that the trial court correctly denied CMC’s motion for the issuance of a
Consuelo Metal Corporation vs. Planters Development Bank temporary restraining order because it was only an ancillary remedy to the
CMC filed a motion for the issuance of a temporary restraining order and petition for suspension of payment which was already terminated. The Court
a writ of preliminary injunction with the SEC to enjoin the foreclosure of the of Appeals added that, under Section 121 of the Corporation Code,14 the SEC
real estate mortgage. On 29 January 2001, the SEC issued a temporary has jurisdiction to hear CMC’s petition for dissolution and liquidation.
restraining order to maintain the status quo and ordered the immediate CMC filed a motion for reconsideration. CMC argued that it does not have
transfer of the case records to the trial court.11 to file a new petition for dissolution and liquidation with the SEC but that the
The case was then transferred to the trial court. In its 25 April 2001 Order, case should just be remanded to the SEC as a continuation of its jurisdiction
the trial court denied CMC’s motion for issuance of a temporary restraining over the petition for suspension of payment. CMC also asked that Planters
order. The trial court ruled that since the SEC had already terminated and Bank’s foreclosure of the real estate mortgage be declared void.
decided on the merits CMC’s petition for suspension of payment, the trial In its 6 March 2002 Resolution, the Court of Appeals partially granted
court no longer had legal basis to act on CMC’s motion. CMC’s motion for reconsideration and ordered that the case be remanded to
On 28 May 2001, the trial court denied CMC’s motion for the SEC under Section 121 of the Corporation Code. The Court of Appeals also
reconsideration.12 The trial court ruled that CMC’s petition for suspension of
3
ruled that since the SEC already ordered CMC’s dissolution and liquidation, that the SEC retained jurisdiction over its dissolution and liquidation because
Planters Bank’s foreclosure of the real estate mortgage was in order. it is only a continuation of the SEC’s jurisdiction over CMC’s original petition
Planters Bank filed a motion for reconsideration questioning the remand for suspension of payment which had not been “finally disposed of as of 30
of the case to the SEC. In a resolution dated 19 July 2002, the Court of Appeals June 2000.”
denied the motion for reconsideration. On the other hand, Planters Bank insists that the trial court has jurisdiction
_______________ over CMC’s dissolution and liquidation. Planters Bank argues that dissolution
and liquidation are entirely new proceedings for the termination of the
14 Section 121 of the Corporation Code provides: existence of the corporation which are incompatible with a petition for
Sec. 121. Involuntary dissolution.—A corporation may be 473
dissolved by the Securities and Exchange Commission upon the filing VOL. 555, JUNE 26, 2008 473
of a verified complaint and after proper notice and hearing on grounds Consuelo Metal Corporation vs. Planters Development Bank
provided by existing laws, rules and regulations. suspension of payment which seeks to preserve corporate existence.
472 Republic Act No. 8799 (RA 8799)15 transferred to the appropriate regional
472 SUPREME COURT REPORTS ANNOTATED trial courts the SEC’s jurisdiction defined under Section 5(d) of Presidential
Decree No. 902-A. Section 5.2 of RA 8799 provides:
Consuelo Metal Corporation vs. Planters Development Bank
“The Commission’s jurisdiction over all cases enumerated under Sec. 5 of
Not satisfied with the 6 March 2002 Resolution, CMC filed this petition for
Presidential Decree No. 902-A is hereby transferred to the Courts of general
review on certiorari.
jurisdiction or the appropriate Regional Trial Court: Provided, That the
The Issues Supreme Court in the exercise of its authority may designate the Regional
Trial Court branches that shall exercise jurisdiction over these cases. The
CMC raises the following issues: Commission shall retain jurisdiction over pending cases involving intra-
1. Whether the present case falls under Section 121 of the corporate disputes submitted for final resolution which should be resolved
Corporation Code, which refers to the SEC’s jurisdiction over CMC’s within one (1) year from the enactment of this Code. The Commission shall
dissolution and liquidation, or is only a continuation of the SEC’s retain jurisdiction over pending suspension of payments/rehabilitation
jurisdiction over CMC’s petition for suspension of payment; and cases filed as of 30 June 2000 until finally disposed. (Emphasis supplied)
2. Whether Planters Bank’s foreclosure of the real estate The SEC assumed jurisdiction over CMC’s petition for suspension of
mortgage is valid. payment and issued a suspension order on 2 April 1996 after it found CMC’s
petition to be sufficient in form and substance. While CMC’s petition was still
The Court’s Ruling pending with the SEC as of 30 June 2000, it was finally disposed of on 29
November 2000 when the SEC issued its Omnibus Order directing the
The petition has no merit. dissolution of CMC and the transfer of the liquidation proceedings before the
The SEC has jurisdiction to order CMC’s dissolution appropriate trial court. The SEC finally disposed of CMC’s petition for
but the trial court has jurisdiction over CMC’s liquidation. suspension of payment when it determined that CMC could no longer be
While CMC agrees with the ruling of the Court of Appeals that the SEC has successfully rehabilitated.
jurisdiction over CMC’s dissolution and liquidation, CMC argues that the However, the SEC’s jurisdiction does not extend to the liquidation of a
Court of Appeals remanded the case to the SEC on the wrong premise that corporation. While the SEC has jurisdiction to order the dissolution of a
the applicable law is Section 121 of the Corporation Code. CMC maintains corporation,16 jurisdiction over the
_______________
4
 15 Also known as “The Securities Regulation Code” which took effect on 17 378 Phil. 10; 320 SCRA 279, 294 (1999).
8 August 2000.
16 Sections 119 and 121 of the Corporation Code. 475
VOL. 555, JUNE 26, 2008 475
474 Consuelo Metal Corporation vs. Planters Development Bank
474 SUPREME COURT REPORTS ANNOTATED creditors, subject only to the provisions of the Civil Code on concurrence and
Consuelo Metal Corporation vs. Planters Development Bank preference of credits. Creditors of secured obligations may pursue their
liquidation of the corporation now pertains to the appropriate regional trial security interest or lien, or they may choose to abandon the preference and
courts. This is the reason why the SEC, in its 29 November 2000 Omnibus prove their credits as ordinary claims.18
Order, directed that “the proceedings on and implementation of the order of Moreover, Section 2248 of the Civil Code provides:
liquidation be commenced at the Regional Trial Court to which this case shall “Those credits which enjoy preference in relation to specific real property
be transferred.” This is the correct procedure because the liquidation of a or real rights, exclude all others to the extent of the value of the immovable
corporation requires the settlement of claims for and against the corporation, or real right to which the preference refers.”
which clearly falls under the jurisdiction of the regular courts. The trial court
is in the best position to convene all the creditors of the corporation, In this case, Planters Bank, as a secured creditor, enjoys preference over
ascertain their claims, and determine their preferences. a specific mortgaged property and has a right to foreclose the mortgage
under Section 2248 of the Civil Code. The creditor-mortgagee has the right to
Foreclosure of real estate mortgage is valid. foreclose the mortgage over a specific real property whether or not the
debtor-mortgagor is under insolvency or liquidation proceedings. The right to
CMC maintains that the foreclosure is void because it was undertaken foreclose such mortgage is merely suspended upon the appointment of a
without the knowledge and previous consent of the liquidator and other lien management committee or rehabilitation receiver19 or upon the issuance of
holders. CMC adds that the rules on concurrence and preference of credits a stay order by the trial court.20 However, the creditor-mortgagee may
should apply in foreclosure proceedings. Assuming that Planters Bank can exercise his right to foreclose the mortgage upon the termination of the
foreclose the mortgage, CMC argues that the foreclosure is still void because rehabilitation proceedings or upon the lifting of the stay order.21
it was conducted in violation of Section 15, Rule 39 of the Rules of Court which Foreclosure proceedings have in their favor the presumption of regularity
states that the sale “should not be earlier than nine o’clock in the morning and the burden of evidence to rebut the same is on the party that seeks to
and not later than two o’clock in the afternoon.” challenge the proceedings.22 CMC’s challenge to the foreclosure proceedings
On the other hand, Planters Bank argues that it has the right to foreclose has no merit.
the real estate mortgage because of non-payment of the loan obligation. _______________
Planters Bank adds that the rules on concurrence and preference of credits
and the rules on insolvency are not applicable in this case because CMC has 18 Vitug, J., COMMERCIAL LAWS AND JURISPRUDENCE, 557 (Volume 1 ed. 2006).
been not been declared insolvent and there are no insolvency proceedings 19 Section 6(c) of Presidential Decree No. 902-A.
against CMC. 20 Section 6, Rule 4 of the Interim Rules of Procedure on Corporate
In Rizal Commercial Banking Corporation v. Intermediate Appellate Rehabilitation.
Court,17 we held that if rehabilitation is no longer feasible and the assets of 21 Section 12, Rule 4 of the Interim Rules of Procedure on Corporate
the corporation are finally liquidated, secured creditors shall enjoy Rehabilitation.
preference over unsecured 22 Union Bank of the Philippines v. Court of Appeals, G.R. No. 164910, 30
_______________ September 2005, 471 SCRA 751.

5
476 Puno (C.J., Chairperson), Corona, Azcuna and Leonardo-De Castro,
476 SUPREME COURT REPORTS ANNOTATED JJ., concur.
Consuelo Metal Corporation vs. Planters Development Bank Petition denied, judgment affirmed.
The notice of sale clearly specified that the auction sale will be held “at 10:00
o’clock in the morning or soon thereafter, but not later than 2:00 o’clock in Notes.—A court action is ipso jure suspended only upon the appointment
the afternoon.”23 The Sheriff’s Minutes of the Sale stated that “the of a management committee or a rehabilitation receiver. (Barotac Sugar
foreclosure sale was actually opened at 10:00 A.M. and commenced at 2:30 Mills, Inc. vs. Court of Appeals, 275 SCRA 497 [1997])
P.M.”24 There was nothing irregular about the foreclosure proceedings. The purchaser in an extrajudicial foreclosure sale may apply for a writ of
WHEREFORE, we DENY the petition. We REINSTATE the 29 November possession during the redemption period by filing for that purpose
2000 Omnibus Order of the Securities and Exchange Commission directing an ex parte motion under oath, in the corresponding registration or cadastral
the Regional Trial Court, Branch 46, Manila to immediately undertake the proceeding in the case of a property with a Torrens title. (Samson vs. Rivera,
liquidation of Consuelo Metal Corporation. We AFFIRM the ruling of the Court 428 SCRA 759 [2004])
of Appeals that Planters Development Bank’s extra-judicial foreclosure of the
real estate mortgage is valid. ——o0o——
SO ORDERED.