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G.R. No. 164479 - ROMBE EXIMTRADE (PHILS.), INC., ET AL. v. ASIATRUST DEVELOPMENT BANK

G.R. No. 164479 - ROMBE EXIMTRADE (PHILS.), INC., ET AL. v. ASIATRUST DEVELOPMENT BANK

PHILIPPINE SUPREME COURT DECISIONS

SECOND DIVISION

[G.R. NO. 164479 : February 13, 2008]

ROMBE EXIMTRADE (PHILS.), INC. and SPOUSES ROMEO PERALTA and MARRIONETTE PERALTA, Petitioners, v. ASIATRUST DEVELOPMENT BANK, Respondent.

D E C I S I O N

VELASCO, JR., J.:

There is no interference by one co-equal court with another when the case filed in one involves corporate rehabilitation and suspension of extrajudicial foreclosure in the other.

The Case Background

Rombe Eximtrade (Phils.), Inc. (Rombe) is a corporation organized and existing under Philippine laws with its main office in the City of Mandaluyong. It is represented in this petition by the spouses Romeo and Marrionette Peralta. It owned some real properties in Malolos, Bulacan.

Sometime in 2002, Rombe filed a Petition for the Declaration of a State of Suspension of Payments with Approval of Proposed Rehabilitation Plan docketed as Civil Case No. 325-M-2002 with the Malolos, Bulacan Regional Trial Court (RTC), Branch 7.

On May 3, 2002, in accordance with Section 6, Rule 4 of the Interim Rules of Procedure on Corporate Rehabilitation (IRPCR), the RTC issued a Stay Order suspending the enforcement of all claims whether for money or otherwise judicial or extrajudicial against Rombe.

The Securities and Exchange Commission and Rombe's other creditors, the Bank of the Philippine Islands and creditor-respondent Asiatrust Development Bank (Asiatrust), opposed the petition.

Thereafter, on September 24, 2002, the Malolos, Bulacan RTC, Branch 7 issued an Order dismissing Civil Case No. 325-M-2002, and the May 3, 2002 Stay Order suspending all the claims against Rombe was lifted. According to the trial court, Rombe misrepresented its true financial status in its petition for suspension of payments. It found that: (1) Rombe did not submit an audited financial statement as required by the IRPCR; (2) Rombe made it appear that it had sufficient assets to fully pay its outstanding obligations when it submitted copies of certificates of title over real properties, but when examined, these were registered in the names of other persons and only two were unencumbered; (3) Rombe misdeclared the value of its assets, violating the provisions of the IRPCR; (4) Rombe gave only general references to the location of its properties without mention of the book values nor condition of the properties in its Inventory of Assets; (5) Rombe did not attach any evidence of title or ownership to the properties enumerated in the Inventory of Assets contrary to the IRPCR; (6) Rombe did not attach nor provide a Schedule of Accounts Receivable indicating the amount of each receivable, from whom due, the maturity date, and the degree of collectivity, as required by the IRPCR; (7) Rombe also had not been complying with its reportorial duty in filing its General Information Sheet from 1992 to 2002, nor its Financial Statement (FS) from 1992 to 1995 and 2001, while its FSs for 1999 and 2000 were filed late; (8) Rombe's Balance Sheet claimed it had receivables but it did not indicate the nature, basis, and other information of the receivables; (9) Rombe grossly exaggerated assets claiming properties it did not own; and (10) Rombe did not have a feasible rehabilitation plan.1 The RTC concluded that Rombe made numerous material misrepresentations and was insolvent.

Since Rombe did not appeal, Asiatrust initiated foreclosure proceedings against Rombe's properties.

On December 17, 2002, anticipating the foreclosure, Rombe filed a Complaint for Annulment of Documents and Damages with Prayer for a Temporary Restraining Order (TRO) and Injunction docketed as Civil Case No. 906-M-2002 and raffled to the Malolos, Bulacan RTC, Branch 15. In this case, Rombe asked that Asiatrust and the Ex-Officio Provincial Sheriff of Bulacan be stopped from proceeding with the extra-judicial foreclosure of mortgage on its properties initiated by Asiatrust. The RTC, Branch 15 issued the January 8, 2003 Order granting the writ of preliminary injunction in favor of Rombe. Asiatrust's Motion for Reconsideration with Motion to Dissolve Writ of Preliminary Injunction was rejected in the April 3, 2003 Order.

Aggrieved, Asiatrust filed before the Court of Appeals (CA) a Petition for Certiorari under Rule 65 docketed as CA-G.R. SP No. 77471 with the CA, alleging grave abuse of discretion on the part of the RTC, Branch 15 in issuing the TRO.

The Court of Appeals ruled Rombe misrepresented itself

On March 29, 2004, the CA issued the Decision2 in favor of Asiatrust stating, as follows:

IN VIEW OF ALL THE FOREGOING, finding merit in this Petition, the same is GRANTED and the assailed Orders dated January 8, 2003 and April 3, 2003 are hereby ANNULLED and SET ASIDE, for having been issued with grave abuse of discretion amounting to lack or excess of jurisdiction. Costs against private respondents.

SO ORDERED.

The CA found that the May 3, 2002 Stay Order of the Malolos, Bulacan RTC, Branch 7 in Civil Case No. 325-M-2002 could not be clearer. The Stay Order was lifted by the trial court because of Rombe's insolvency, misrepresentations, and infeasible rehabilitation plan. The appellate court observed that the January 8, 2003 Order of the RTC, Branch 15 granting the TRO in Civil Case No. 906-M-2002 interfered with and set aside the earlier September 24, 2002 Order of the RTC, Branch 7; and such intervention thwarted the foreclosure of Rombe's assets.

Rombe's Motion for Reconsideration was denied on July 2, 2004.

Hence, this petition is filed with us. Rombe raises the following issues:

(a)

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED WHEN IT ORDERED THE ANNULMENT OF THE ORDERS OF THE TRIAL COURT FOR THE ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION AGAINST HEREIN RESPONDENT DESPITE THE FACT THAT CIVIL CASE NO. 906-M-2002, A CASE FOR ANNULMENT OF DOCUMENTS FILED BEFORE BRANCH 15 OF THE REGIONAL TRIAL COURT OF MALOLOS, BULACAN, INVOLVES A TOTALLY SEPARATE AND DISTINCT CAUSE OF ACTION FROM THAT OF CIVIL CASE NO. 325-M-2002, A PETITION FOR DECLARATION OF STATE OF SUSPENSION OF PAYMENTS WITH APPROVAL OF PROPOSED REHABILITATION FILED BEFORE BRANCH 7 OF THE REGIONAL TRIAL COURT OF MALOLOS, BULACAN

(b)

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED WHEN IT ORDERED THE ANNULMENT OF THE ORDERS OF THE TRIAL COURT FOR THE ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION AGAINST HEREIN RESPONDENT DESPITE THE FACT THAT THE PURPOSE OF THE RESTRAINING ORDER ISSUED BY BRANCH 15 REGIONAL TRIAL COURT OF MALOLOS, BULACAN IN CIVIL CASE NO. 906-M-2002 IS ENTIRELY SEPARATE AND DISTINCT FROM THE PURPOSE OF THE STAY ORDER ISSUED BY BRANCH 7 OF THE REGIONAL TRIAL COURT OF MALOLOS, BULACAN IN CIVIL CASE NO. 325-M-2002

(c)

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED WHEN IT ORDERED THE ANNULMENT OF THE ORDERS OF THE TRIAL COURT FOR THE ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION AGAINST HEREIN RESPONDENT DESPITE THE ABSENCE OF ANY FINDING OF GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION EXERCISED BY THE TRIAL COURT IN THE [ISSUANCE] OF THE SAID ORDERS

(d)

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED WHEN IT DID NOT EVEN BOTHER TO ADDRESS THE FACT THAT THE PETITION FILED BEFORE IT IS FATALLY DEFECTIVE

The Court's Ruling

We shall first address what Rombe claims are fatal defects in Asiatrust's petition before the CA. According to Rombe, the signatory of the petition, Esmael C. Ferrer, Asiatrust's Manager and Head of the Acquired Assets Unit, was not authorized by Asiatrust's Board of Directors to sign Asiatrust's petition and the CA, therefore, should have dismissed the petition outright. Citing Premium Marble Resources, Inc. v. Court of Appeals (Premium),3 Rombe avers that the power of a corporation to sue and be sued in any court is lodged with the board of directors and, absent any board resolution, no one can act on behalf of the corporation. Any action without this authorization cannot bind the corporation.

Rombe's reliance on Premium is misplaced. The issue in Premium is not the authority of the president of Premium to sign the verification and certification against forum shopping in the absence of a valid authority from the board of directors. The real issue in Premium is, who between the two sets of officers, both claiming to be the legal board of directors, had the authority to file the suit for and on behalf of the company. Premium is inapplicable to this case.

On the matter of verification, the purpose of the verification requirement is to assure that the allegations in a petition were made in good faith or are true and correct, not merely speculative. The verification requirement is deemed substantially complied with when one who has ample knowledge to swear to the truth of the allegations in the petition signed the verification attached to it, and when matters alleged in the petition have been made in good faith or are true and correct.4 In this case, we find that the position, knowledge, and experience of Ferrer as Manager and Head of the Acquired Assets Unit of Asiatrust, and his good faith, are sufficient compliance with the verification and certification requirements. This is in line with our ruling in Iglesia ni Cristo v. Ponferrada,5 where we said that it is deemed substantial compliance when one with sufficient knowledge swears to the truth of the allegations in the complaint. However, to forestall any challenge to the authority of the signatory to the verification, the better procedure is to attach a copy of the board resolution of the corporation empowering its official to sign the petition on its behalf.

Now, as to the core of the petition, Rombe vigorously asserts that the writ of preliminary injunction issued by Branch 15 does not affect in any way the earlier September 24, 2002 Order of Branch 7 since the two cases involve separate and distinct causes of action.

Rombe's thesis is correct but for a different reason.

The rehabilitation case (Civil Case No. 325-M-2002) is distinct and dissimilar from the annulment of foreclosure case (Civil Case No. 906-M-2002), in that the first case is a special proceeding while the second is a civil action.

A civil action is one by which a party sues another for the enforcement or protection of a right or the prevention or redress of a wrong.6 Strictly speaking, it is only in civil actions that one speaks of a cause of action. A cause of action is defined as the act or omission by which a party violates a right of another.7 Thus, in the annulment of foreclosure case, the cause of action of Rombe is the act of Asiatrust in foreclosing the mortgage on Rombe's properties by which the latter's right to the properties was allegedly violated.

On the other hand, the rehabilitation case is treated as a special proceeding. Initially, there was a difference in opinion as to what is the nature of a petition for rehabilitation. The Court, on September 4, 2001, issued a Resolution in A.M. No. 00-8-10-SC to clarify the ambiguity, thus:

On the other hand, a petition for rehabilitation, the procedure for which is provided in the Interim Rules of Procedure on Corporate Recovery, should be considered as a special proceeding. It is one that seeks to establish the status of a party or a particular fact. As provided in section 1, Rule 4 of the Interim Rules on Corporate Recovery, the status or fact sought to be established is the inability of the corporate debtor to pay its debts when they fall due so that a rehabilitation plan, containing the formula for the successful recovery of the corporation, may be approved in the end. It does not seek a relief from an injury caused by another party.

Thus, a petition for rehabilitation need not state a cause of action and, hence, Rombe's contention that the two cases have distinct causes of action is incorrect.

Indeed, the two cases are different with respect to their nature, purpose, and the reliefs sought such that the injunctive writ issued in the annulment of foreclosure case did not interfere with the September 24, 2002 Order in the rehabilitation case.

The rehabilitation case is a special proceeding which is summary and non-adversarial in nature. The annulment of foreclosure case is an ordinary civil action governed by the regular rules of procedure under the 1997 Rules of Civil Procedure.

The purpose of the rehabilitation case and the reliefs prayed for by Rombe are the suspension of payments because it "foresees the impossibility of meeting its debts when they respectively fall due,"8 and the approval of its proposed rehabilitation plan. The objective and the reliefs sought by Rombe in the annulment of foreclosure case are, among others, to annul the unilateral increase in the interest rate and to cancel the auction of the mortgaged properties.

Being dissimilar as to nature, purpose, and reliefs sought, the January 8, 2003 Order granting the injunctive writ in the annulment of foreclosure case, therefore, did not interfere with the September 24, 2002 Order dismissing the rehabilitation petition and lifting the May 3, 2002 Stay Order.

More importantly, it cannot be argued that the RTC, Branch 15 intervened with the rehabilitation case before the RTC, Branch 7 when the former issued the January 8, 2003 injunctive writ since the rehabilitation petition was already dismissed on September 24, 2002, which eventually attained finality. After September 2002, there was no rehabilitation case pending before any court to speak of. Hence, the Malolos, Bulacan RTC, Branch 15 did not commit grave abuse of discretion in issuing the January 8, 2003 Order.

WHEREFORE, the petition is GRANTED. The CA Decision in CA-G.R. SP No. 77471, annulling and setting aside the January 8, 2003 and April 3, 2003 Orders of the Malolos Bulacan RTC, Branch 15, is hereby REVERSED and SET ASIDE. The Malolos, Bulacan RTC, Branch 15 is ordered to conduct further proceedings in Civil Case No. 906-M-2002 with dispatch.

SO ORDERED.

Endnotes:


1 Rollo, pp. 396-398.

2 Penned by Associate Justice Conrado M. Vasquez, Jr. and concurred in by Associate Justices Bienvenido L. Reyes and Arsenio J. Magpale.

3 G.R. No. 96551, November 4, 1996, 264 SCRA 11.

4 Iglesia ni Cristo v. Ponferrada, G.R. No. 168943, October 27, 2006, 505 SCRA 828, 840-841.

5 Id.

6 Rules of Court, Rule 1, Sec. 3(a).

7 Id., Rule 2, Sec. 2.

8 Interim Rules of Procedure on Corporate Rehabilitation, Rule 4, Sec. 1.

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