Note.

—When the spouses are sued for the enforcement

of the obligation entered into by them, they are being
impleaded in their capacity as representative of the
conjugal partnerships and not as independent debtors,
either of them may be sued for the whole amount similar to
that of a solidary liability, although the amount is
chargeable against their conjugal partnership property.
(Carandang vs. Heirs of Quirino A. De Guzman, 508 SCRA
469 [2006])

——o0o——

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

CONSUELO METAL CORPORATION, petitioner, vs.

PLANTERS DEVELOPMENT BANK and ATTY. JESUSA
PRADO-MANINGAS, in her capacity as Ex-officio Sheriff
of Manila, respondents.

Corporation Law; Securities and Exchange Commission

(SEC); Jurisdictions; Republic Act No. 8799 transferred to the
appropriate regional trial courts the SEC’s jurisdiction defined
under Section 5(d) of Presidential Decree No. 902-A.—Republic
Act No. 8799 (RA 8799) transferred to the appropriate regional
trial courts the SEC’s jurisdiction defined under Section 5(d) of
Presidential Decree No. 902-A. Section 5.2 of RA 8799 provides:
The Commission’s jurisdiction over all cases enumerated under
Sec. 5 of Presidential Decree No. 902-A is hereby transferred to
the Courts of general jurisdiction or the appropriate Regional
Trial Court: Provided, That the Supreme Court in the exercise of
its authority may designate the Regional Trial Court branches
that shall exercise jurisdiction over these cases. The Commission
shall retain jurisdiction over pending cases involving intra-
corporate disputes submitted for final resolution which should be
resolved within one (1) year from the enactment of this Code. The
Commission shall retain jurisdiction over pending suspen-

_______________

* FIRST DIVISION.
 466

466 SUPREME COURT REPORTS ANNOTATED

Consuelo Metal Corporation vs. Planters Development Bank

sion of payments/rehabilitation cases filed as of 30 June

2000 until finally disposed. (Emphasis supplied)
Same; Same; Same; Corporate Liquidation; While the SEC
has jurisdiction to order the dissolution of a corporation,
jurisdiction over the liquidation of the corporation now pertains to
the appropriate regional trial courts—the liquidation of a
corporation requires the settlement of claims for and against the
corporation, which clearly falls under the jurisdiction of the
regular courts.—The SEC’s jurisdiction does not extend to the
liquidation of a corporation. While the SEC has jurisdiction to
order the dissolution of a corporation, jurisdiction over the
liquidation of the corporation now pertains to the appropriate
regional trial courts. This is the reason why the SEC, in its 29
November 2000 Omnibus Order, directed that “the proceedings on
and implementation of the order of liquidation be commenced at
the Regional Trial Court to which this case shall be transferred.”
This is the correct procedure because the liquidation of a
corporation requires the settlement of claims for and against the
corporation, 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, ascertain their claims, and
determine their preferences.
Same; Rehabilitation of Corporations; Preference of Credits; If
rehabilitation is no longer feasible and the assets of the
corporation are finally liquidated, secured creditors shall enjoy
preference over unsecured creditors, subject only to the provisions
of the Civil Code on concurrence and preference of credits.—In
Rizal Commercial Banking Corporation v. Intermediate Appellate
Court, 320 SCRA 279 (1999), we held that if rehabilitation is no
longer feasible and the assets of the corporation are finally
liquidated, secured creditors shall enjoy preference over
unsecured creditors, subject only to the provisions of the Civil
Code on concurrence and preference of credits. Creditors of
secured obligations may pursue their security interest or lien, or
they may choose to abandon the preference and prove their
credits 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 of the value of the immovable or
real right to which the preference refers.—Section 2248 of the Civil
Code provides:
 467

VOL. 555, JUNE 26, 2008 467

Consuelo Metal Corporation vs. Planters Development Bank

Those credits which enjoy preference in relation to specific real

property or real rights, exclude all others to the extent of the
value of the immovable or real right to which the preference
refers.
Same; Same; Same; Same; A creditor-mortgagee has the right
to foreclose the mortgage over a specific real property whether or
not the debtor-mortgagor is under insolvency or liquidation
proceedings.—In this case, Planters Bank, as a secured creditor,
enjoys preference over 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 foreclose the
mortgage over a specific real property whether or not the debtor-
mortgagor is under insolvency or liquidation proceedings. The
right to foreclose such mortgage is merely suspended upon the
appointment of a management 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
foreclose the mortgage upon the termination of the rehabilitation
proceedings or upon the lifting of the stay order.
Same; Same; Same; Same; Foreclosure 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.—Foreclosure 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. 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 the afternoon.” The Sheriff’s Minutes of the
Sale stated that “the foreclosure sale was actually opened at 10:00
A.M. and commenced at 2:30 P.M.” There was nothing irregular
about the foreclosure proceedings.

PETITION for review on certiorari of the decision and

resolution of the Court of Appeals.
The facts are stated in the opinion of the Court.
    Jesus C. Nalupta, Jr. and Manuel D. Yngson, Jr. for
petitioner.
468
468 SUPREME COURT REPORTS ANNOTATED
Consuelo Metal Corporation vs. Planters Development
Bank

   Raymundo, Santos, Senga & Associates for respondent

Planters Development Bank.

CARPIO, J.:

The Case

This is a petition for review1 seeking to reverse the 14

December 2001 Decision2 and the 6 March 2002
Resolution3 of the Court of Appeals in CA-G.R. SP No.
65069. In its 14 December 2001 Decision, the Court of
Appeals dismissed petitioner Consuelo Metal Corporation’s
(CMC) petition for certiorari and affirmed the 25 April
2001 Order4 of the Regional Trial Court, Branch 46, Manila
(trial court). In its 6 March 2002 Resolution, the Court of
Appeals partially granted CMC’s motion for
reconsideration and remanded the case to the Securities
and Exchange Commission (SEC) for further proceedings.

The Facts

On 1 April 1996, CMC filed before the SEC a petition to

be declared in a state of suspension of payment, for
rehabilitation, and for the appointment of a rehabilitation
receiver or management committee under Section 5(d) of
Presidential Decree No. 902-A.5 On 2 April 1996, the SEC,
finding the

_______________

1 Under Rule 45 of the 1997 Rules of Civil Procedure.

2 Rollo, pp. 49-56. Penned by Associate Justice Alicia L. Santos, with
Associate Justices Buenaventura J. Guerrero and Marina L. Buzon,
concurring.
3 Id., at pp. 57-59.
4 CA Rollo, pp. 32-35. Penned by Judge Artemio S. Tipon.
5 Section 5(d) of Presidential Decree No. 902-A provides:
Sec. 5. In addition to the regulatory and adjudicative functions
of the Securities and Exchange Commission over corporations,
partnerships and other forms of associations registered with it as
expressly granted under existing laws and de-

469

VOL. 555, JUNE 26, 2008 469

 Consuelo Metal Corporation vs. Planters Development
Bank

petition sufficient in form and substance, declared that “all

actions for claims against CMC pending before any court,
tribunal, office, board, body and/or commission are deemed
suspended immediately until further order” from the SEC.6
In an Order dated 13 September 1999, the SEC directed
the creation of a management committee to undertake
CMC’s rehabilitation and reiterated the suspension of all
actions for claims against CMC.7
On 29 November 2000, upon the management
committee’s recommendation,8 the SEC issued an Omnibus
Order directing the dissolution and liquidation of CMC.9
The SEC also directed that “the proceedings on and
implementation of the order of liquidation be commenced at
the Regional Trial Court to which this case shall be
transferred.”10
Thereafter, respondent Planters Development Bank
(Planters Bank), one of CMC’s creditors, commenced the
extra-judicial foreclosure of CMC’s real estate mortgage.
Public auctions were scheduled on 30 January 2001 and 6
February 2001.

_______________

crees, it shall have original and exclusive jurisdiction to hear and

decide cases involving x x x x

(d) Petitions of corporations, partnerships or associations to be

declared in a state of suspension of payments in cases where the
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 but is under the management of a Rehabilitation
Receiver or Management Committee.
6  CA Rollo, p. 61.
7  Rollo, pp. 102-107.
8  CA Rollo, pp. 68-70.
9  Rollo, pp. 108-113.
10 Id., at p. 113.

470

470 SUPREME COURT REPORTS ANNOTATED

Consuelo Metal Corporation vs. Planters Development
Bank
 CMC filed a motion for the issuance of a temporary
restraining order and a writ of preliminary injunction with
the SEC to enjoin the foreclosure of the real estate
mortgage. On 29 January 2001, the SEC issued a
temporary restraining order to maintain the status quo and
ordered the immediate transfer of the case records to the
trial court.11
The case was then transferred to the trial court. In its
25 April 2001 Order, the trial court denied CMC’s motion
for issuance of a temporary restraining order. The trial
court ruled that since the SEC had already terminated and
decided on the merits CMC’s petition for suspension of
payment, the trial court no longer had legal basis to act on
CMC’s motion.
On 28 May 2001, the trial court denied CMC’s motion
for reconsideration.12 The trial court ruled that CMC’s
petition for suspension of payment could not be converted
into a petition for dissolution and liquidation because they
covered different subject matters and were governed by
different rules. The trial court stated that CMC’s remedy
was to file a new 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 jurisdiction when
it required CMC to file a new petition for dissolution and
liquidation with either the SEC or the trial court when the
SEC clearly retained jurisdiction over the case.
On 13 June 2001, Planters Bank extrajudicially
foreclosed the real estate mortgage.13
 

_______________

11 Id., at pp. 114-116.

12 CA Rollo, pp. 36-37.
13 Id., at pp. 130-132.

471

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Consuelo Metal Corporation vs. Planters Development
Bank

 The Ruling of the Court of Appeals

On 14 December 2001, the Court of Appeals dismissed
the petition and upheld the 25 April 2001 Order of the trial
court. The Court of Appeals held that the trial court
correctly denied CMC’s motion for the issuance of a
temporary restraining order because it was only an
ancillary remedy to the petition for suspension of payment
which was already terminated. The Court of Appeals added
that, under Section 121 of the Corporation Code,14 the SEC
has jurisdiction to hear CMC’s petition for dissolution and
liquidation.
CMC filed a motion for reconsideration. CMC argued
that it does not have to file a new petition for dissolution
and liquidation with the SEC but that the case should just
be remanded to the SEC as a continuation of its
jurisdiction over the petition for suspension of payment.
CMC also asked that Planters Bank’s foreclosure of the
real estate mortgage be declared void.
In its 6 March 2002 Resolution, the Court of Appeals
partially granted CMC’s motion for reconsideration and
ordered that the case be remanded to the SEC under
Section 121 of the Corporation Code. The Court of Appeals
also ruled that since the SEC already ordered CMC’s
dissolution and liquidation, Planters Bank’s foreclosure of
the real estate mortgage was in order.
Planters Bank filed a motion for reconsideration
questioning the remand of the case to the SEC. In a
resolution dated 19 July 2002, the Court of Appeals denied
the motion for reconsideration.

_______________

14 Section 121 of the Corporation Code provides:

Sec. 121. Involuntary dissolution.—A corporation may be
dissolved by the Securities and Exchange Commission upon the
filing of a verified complaint and after proper notice and hearing on
grounds provided by existing laws, rules and regulations.

472

472 SUPREME COURT REPORTS ANNOTATED

Consuelo Metal Corporation vs. Planters Development
Bank

Not satisfied with the 6 March 2002 Resolution, CMC

filed this petition for review on certiorari.

The Issues

CMC raises the following issues:

1. Whether the present case falls under Section
121 of the Corporation Code, which refers to the
 SEC’s jurisdiction over CMC’s dissolution and
liquidation, or is only a continuation of the SEC’s
jurisdiction over CMC’s petition for suspension of
payment; and
2. Whether Planters Bank’s foreclosure of the
real estate mortgage is valid.

The Court’s Ruling

The petition has no merit.

The SEC has jurisdiction to order CMC’s dissolution
but the trial court has jurisdiction over CMC’s liquidation.
While CMC agrees with the ruling of the Court of
Appeals that the SEC has jurisdiction over CMC’s
dissolution and liquidation, CMC argues that the Court of
Appeals remanded the case to the SEC on the wrong
premise that the applicable law is Section 121 of the
Corporation Code. CMC maintains that the SEC retained
jurisdiction over its dissolution and liquidation because it is
only a continuation of the SEC’s jurisdiction over CMC’s
original petition for suspension of payment which had not
been “finally disposed of as of 30 June 2000.”
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 existence of the corporation which are
incompatible with a petition for
473

VOL. 555, JUNE 26, 2008 473

Consuelo Metal Corporation vs. Planters Development
Bank

suspension of payment which seeks to preserve corporate

existence.
Republic Act No. 8799 (RA 8799)15 transferred to the
appropriate regional trial courts the SEC’s jurisdiction
defined under Section 5(d) of Presidential Decree No. 902-
A. Section 5.2 of RA 8799 provides:
“The Commission’s jurisdiction over all cases
enumerated under Sec. 5 of Presidential Decree No. 902-A
is hereby transferred to the Courts of general jurisdiction
or the appropriate Regional Trial Court: Provided, That the
Supreme Court in the exercise of its authority may
designate the Regional Trial Court branches that shall
exercise jurisdiction over these cases. The Commission
shall retain jurisdiction over pending cases involving intra-
corporate disputes submitted for final resolution which
should be resolved within one (1) year from the enactment
of this Code. The Commission shall retain jurisdiction
over pending suspension of payments/rehabilitation
cases filed as of 30 June 2000 until finally disposed.
(Emphasis supplied)
The SEC assumed jurisdiction over CMC’s petition for
suspension of 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
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 dissolution of CMC and the
transfer of the liquidation proceedings before the
appropriate trial court. The SEC finally disposed of CMC’s
petition for suspension of payment when it determined that
CMC could no longer be successfully rehabilitated.
However, the SEC’s jurisdiction does not extend to the
liquidation of a corporation. While the SEC has jurisdiction
to order the dissolution of a corporation,16 jurisdiction over
the

_______________

15 Also known as “The Securities Regulation Code” which took effect on

8 August 2000.
16 Sections 119 and 121 of the Corporation Code.

474

474 SUPREME COURT REPORTS ANNOTATED

Consuelo Metal Corporation vs. Planters Development
Bank

liquidation of the corporation now pertains to the

appropriate regional trial courts. This is the reason why
the SEC, in its 29 November 2000 Omnibus Order, directed
that “the proceedings on and implementation of the order
of liquidation be commenced at the Regional Trial Court to
which this case shall be transferred.” This is the correct
procedure because the liquidation of a corporation requires
the settlement of claims for and against the corporation,
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, ascertain their claims, and
determine their preferences.
 Foreclosure of real estate mortgage is valid.

CMC maintains that the foreclosure is void because it

was undertaken without the knowledge and previous
consent of the liquidator and other lien holders. CMC adds
that the rules on concurrence and preference of credits
should apply in foreclosure proceedings. Assuming that
Planters Bank can foreclose the mortgage, CMC argues
that the foreclosure is still void because it was conducted in
violation of Section 15, Rule 39 of the Rules of Court which
states that the sale “should not be earlier than nine o’clock
in the morning and not later than two o’clock in the
afternoon.”
On the other hand, Planters Bank argues that it has the
right to foreclose 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 been not been declared insolvent and there are no
insolvency proceedings against CMC.
In Rizal Commercial Banking Corporation v.
Intermediate Appellate Court,17 we held that if
rehabilitation is no longer feasible and the assets of the
corporation are finally liquidated, secured creditors shall
enjoy preference over unsecured

_______________

17 378 Phil. 10; 320 SCRA 279, 294 (1999).

475

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Consuelo Metal Corporation vs. Planters Development
Bank

creditors, subject only to the provisions of the Civil Code on

concurrence and preference of credits. Creditors of secured
obligations may pursue their security interest or lien, or
they may choose to abandon the preference and prove their
credits as ordinary claims.18
Moreover, Section 2248 of the Civil Code provides:

“Those credits which enjoy preference in relation to specific

real property or real rights, exclude all others to the extent of the
value of the immovable or real right to which the preference
refers.”
 In this case, Planters Bank, as a secured creditor, enjoys
preference over 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
foreclose the mortgage over a specific real property whether
or not the debtor-mortgagor is under insolvency or
liquidation proceedings. The right to foreclose such
mortgage is merely suspended upon the appointment of a
management committee or rehabilitation receiver19 or upon
the issuance of a stay order by the trial court.20 However,
the creditor-mortgagee may exercise his right to foreclose
the mortgage upon the termination of the rehabilitation
proceedings or upon the lifting of the stay order.21
Foreclosure 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.22 CMC’s challenge to the foreclosure
proceedings has no merit.

_______________

18  Vitug, J., COMMERCIAL LAWS AND JURISPRUDENCE, 557 (Volume 1 ed.
2006).
19 Section 6(c) of Presidential Decree No. 902-A.
20  Section 6, Rule 4 of the Interim Rules of Procedure on Corporate
Rehabilitation.
21  Section 12, Rule 4 of the Interim Rules of Procedure on Corporate
Rehabilitation.
22 Union Bank of the Philippines v. Court of Appeals, G.R. No. 164910,
30 September 2005, 471 SCRA 751.

476

476 SUPREME COURT REPORTS ANNOTATED

Consuelo Metal Corporation vs. Planters Development
Bank

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 the afternoon.”23 The
Sheriff’s Minutes of the Sale stated that “the foreclosure
sale was actually opened at 10:00 A.M. and commenced at
2:30 P.M.”24 There was nothing irregular about the
foreclosure proceedings.
WHEREFORE, we DENY the petition. We REINSTATE
the 29 November 2000 Omnibus Order of the Securities
and Exchange Commission directing the Regional Trial
Court, Branch 46, Manila to immediately undertake the
 liquidation of Consuelo Metal Corporation. We AFFIRM
the ruling of the Court of Appeals that Planters
Development Bank’s extra-judicial foreclosure of the real
estate mortgage is valid.
SO ORDERED.

Puno (C.J., Chairperson), Corona, Azcuna and

Leonardo-De Castro, JJ., concur.

Petition denied, judgment affirmed.

Notes.—A court action is ipso jure suspended only upon

the appointment of a management committee or a
rehabilitation receiver. (Barotac Sugar Mills, Inc. vs. Court
of Appeals, 275 SCRA 497 [1997])
The purchaser in an extrajudicial foreclosure sale may
apply for a writ of possession during the redemption period
by filing for that purpose an ex parte motion under oath, in
the corresponding registration or cadastral proceeding in
the case of a property with a Torrens title. (Samson vs.
Rivera, 428 SCRA 759 [2004])

——o0o——

_______________

23 CA Rollo, p. 130.

24 Rollo, p. 62.

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