FIRST DIVISION

G.R. No. 196637, June 03, 2019

FAR EAST BANK AND TRUST COMPANY, PETITIONER, v. UNION BANK
OF THE PHILIPPINES [NOW SUBSTITUTED BY BAYAN DELINQUENT
LOAN RECOVERY 1 (SPV-AMC), INC.], RESPONDENT.
Object 1

DECISION
GESMUNDO, J.:
This is an appeal by certiorari from the November 15, 2010
Decision1 and April 19, 2011 Resolution 2 of the Court of Appeals (CA)
in CA-G.R. CV No. 86172 which reversed and set aside the March 22,
2005 and August 26, 2005 Orders3 of the Regional Trial Court of Pasig
City, Branch 157 (RTC) in Civil Case No. 66477.
Antecedents

On September 16, 1997, the EYCO Group of Companies4 (EYCO) and

its controlling stockholders, namely Eulogio O. Yutingco, Caroline
Yutingco-Yao and Theresa5 T. Lao (the Yutingcos) filed with the
Securities and Exchange Commission (SEC) a "Petition for the
Declaration of Suspension of Payment[s], Formation and Appointment
of Rehabilitation Receiveri Committee, Approval of Rehabilitation Plan
with Alternative Prayer for Liquidation and Dissolution of
Corporations" (SEC Case No. 09-97-5764).6
On September 19, 1997, a consortium of EYCO's creditors
(Consortium) composed of 22 domestic banks, including Union Bank
of the Philippines (Union Bank), convened for the purpose of deciding
their options in the event that EYCO and its co-petitioners in SEC Case
No. 09-97-5764 would invoke the provisions of Presidential Decree
(PD) No. 902-A, as amended. Among the matters agreed upon during
said meeting were the engagement of a lawyer to represent the
creditors and composition of the management committee from seven
banks with the highest exposures.7
However, Union Bank, without notifying the members of the
Consortium, decided to break away from the group by suing EYCO
and the Yutingcos in the regular courts. Among the several suits
commenced by Union Bank was Civil Case No. 66477 (Union Bank of
the Philippines v. Eulogio and Bee Kuan Yutingco, Far East Bank and
Trust Company and EYCO Properties) filed in the RTC of Pasig City,
Branch 157 on September 26, 1997.8

In its Complaint,9 Union Bank alleged that Spouses Eulogio and Bee

Kuan Yutingco (Spouses Yutingco) were its debtors by virtue of a
Continuing Surety Agreement10 dated September 12, 1996 to secure
credit accommodations amounting to P110,000,000.00 granted to
Nikon Industrial Corporation, Nikolite Industrial Corporation and 2000
Industries Corporation (collectively known as NIKON), which they
owned. Upon investigation, Union Bank confirmed that majority of
NIKON's assets were used to purchase real estate properties through
EYCO, purposely to shield NIKON from answering for its debts. EYCO
owned condominium units and parking spaces in Tektite Tower and
the Strata 200 Building Condominium Project. On September 15,
1997, these properties were sold to herein petitioner, Far East Bank
and Trust Company (FEBTC).11
Union Bank claimed that the sale of the properties was fraudulent and
done in bad faith to prevent them from being levied upon; in fact, it
was made a day before the Spouses Yutingco and NIKON filed a
petition for suspension of payments with the SEC. The total purchase
price for the Strata 200 condominium units was P32,000,000.00,
which was grossly inadequate considering that they were situated in a
prime area of Pasig City. In furtherance of its conspiracy with the
Spouses Yutingco and NIKON, FEBTC supposedly authorized the
purchase of various golf club shares and two more units and parking
spaces in the same condominium buildings, assets of EYCO and
NIKON registered in their respective names. It is clear that EYCO, in
collusion with the Spouses Yutingco and FEBTC, intended to transfer
all or nearly all of its properties because of its insolvency or great
embarrassment financially. FEBTC, being a vendee in fraud of
creditors, was deemed an implied trustee of the properties and should
hold them for the benefit of those who are entitled thereto. Union
Bank, as unpaid creditor of the true owner of the property, is entitled
to nullify the sale in favor of FEBTC.12
SEC Case No. 09-97-5764

On September 19, 1997, an Order13 was issued by the SEC enjoining

the disposition of the debtor corporations' properties in any manner
except in the ordinary course of business and payment outside of
legitimate business expenses during the pendency of the proceedings
and suspending all actions, claims and proceedings against EYCO until
further orders from the SEC.
In an Omnibus Order dated October 27, 1997, the SEC Hearing Panel
directed the creation of a Management Committee (MANCOM).14
Union Bank filed a petition for certiorari in the CA (CA-G.R. SP No.
45774) assailing the September 19, 1997 Order declaring the
suspension of payments for EYCO and directing the creation of the
MANCOM. Union Bank contended that these issuances were
premature and would render the motion to dismiss filed before the
RTC, in Civil Case No. 66477, as moot. The steering committee of the
Consortium composed of the Philippine National Bank, FEBTC, Allied
Bank, Traders Royal Bank, Philippine Commercial International Bank,
Bank of Commerce and Westmont Bank, were allowed to intervene by
the CA. However, in the same decision of the CA, the petition filed by
Union Bank was dismissed for failure to exhaust administrative
remedies and forum shopping, prompting the latter to seek recourse
in this Court (G.R. No. 131729).15
On May 19, 1998, this Court promulgated its Decision in Union Bank
of the Philippines v. Court of Appeals, et al.16 holding that the SEC's
jurisdiction on matters of suspension of payments is confined only to
those initiated by corporations, partnerships or associations.
Consequently, the SEC exceeded its jurisdiction in declaring the
Spouses Yutingco together with EYCO under suspension of payments.
Nonetheless, based on our previous ruling in Modern Paper Products,
Inc., et al. v. Court of Appeals, et al.,17 the Rules of Court on
misjoinder of parties may be applied. Thus, the proper remedy was
not to dismiss the entire petition for suspension of payments but to
dismiss it only as against the party upon whom the tribunal or court
cannot acquire jurisdiction. Accordingly, this Court ordered the SEC
"to drop from the petition for suspension of payments filed before it
the names of Eulogio O. Yutingco, Caroline Yutingco-Yao and Theresa
T. Lao without prejudice to their filing a separate petition in the
Regional Trial Court."18

On December 18, 1998, the SEC issued an Order 19 adopting the

Unsolicited Rehabilitation Proposal submitted by Strategies and
Alliances Corporation (SAC) which was granted a period of six months
within which to complete the groundwork for the effective
implementation of the early "all-debt payment plan."
As described by the SEC, the SAC plan proposed to settle and
extinguish all financial obligations of EYCO to its creditors, secured
and unsecured, amounting to P5.2 Billion - P4 Billion by banks and
P1.2 Billion by non-banks. The repayment of principal and interest
thereon on stated due dates were guaranteed to be paid in cash by
the Republic of the Philippines through the Home Insurance Guaranty
Corporation (HIGC).
The SEC Order further barred all creditors from pursuing their
respective claims until further orders.
The Consortium appealed the December 18, 1998 Order to the
SEC En Banc. On September 14, 1999, the SEC En Banc rendered its
Decision20 finding the SAC plan not viable and feasible for the
rehabilitation of EYCO. Accordingly, the SAC plan and suspension of
payment proceedings were ordered terminated, the committees
created dissolved and discharged. The SEC further ordered the
dissolution and liquidation of the petitioning corporations.
Subsequently, a Liquidator was appointed pursuant to the provisions
of the Rules of Procedure on Corporate Rehabilitation.21

On October 10, 2000, the SEC issued an Order22 directing all creditors

claiming against EYCO to file their formal claims with the Liquidator. It
likewise declared that all such claims shall be deemed barred if not
filed within 30 days after publication of the said order in two
newspapers of general circulation in the Philippines.
Due to disagreement on Liquidator's fee, a Liquidation Committee was
formed to assume the duties of the Liquidator originally appointed by
the SEC. On May 31, 2001, the said committee was dissolved and the
SEC finally appointed Atty. Danilo L. Concepcion (Atty. Concepcion) as
Liquidator pursuant to the provisions of the Rules of Procedure on
Corporate Recovery.23
In March 2002, Atty. Concepcion submitted a proposed Liquidation
Plan. Finding the said Liquidation Plan meritorious, the SEC approved
it on April 11, 2002.24
Motions to Dismiss Civil Case No. 66477
The Spouses Yutingco filed a Motion to Dismiss on the ground of
pendency of the proceedings in the SEC which had acquired prior
jurisdiction over the subject matter of the case. 25
FEBTC also filed a motion to dismiss on the ground of Union Bank's
failure to implead NIKON, which are indispensable parties.
Accordingly, the court should suspend the trial until such parties are
made either as plaintiffs or defendants. Moreover, since the complaint
was for rescission of a contract of sale, it should have expressly
alleged that Union Bank had no other legal means to collect its
credits. Thus, the complaint failed to state a cause of action. There
was also no allegation whether the credit accommodations extended
by Union Bank were secured or unsecured. More important, Union
Bank had no legal personality to sue for the enforcement of the rights
and interests of the creditors as this is vested in the rehabilitation
receiver. In view of the pending SEC proceedings, Union Bank had an
available remedy by participating therein. 26 In a Manifestation, the
Spouses Yutingco adopted the aforesaid arguments of FEBTC. 27

In its Opposition,28 Union Bank asserted that litis pendentia is not

applicable in this case as it is not a party to the SEC proceedings for
suspension of payments. Also, there is no identity of causes of action
since the present case is founded on Union Bank's right to effect
retention lien on the properties of EYCO pursuant to the provisions of
the continuing surety agreement executed by the Spouses Yutingco.
On the matter of jurisdiction, Union Bank contended that the court
has the exclusive authority to hear Civil Case No. 66477.

In their Reply to Opposition,29 EYCO and Spouses Yutingco reiterated

that NIKON are indispensable parties considering that Union Bank
claimed that the assets of said corporations were allegedly diverted to
purchase real properties "under the name" of EYCO. Union Bank's
theory is the true ownership of NIKON of the properties, the same
being merely registered under EYCO. NIKON, being the actual sellers,
were indispensable parties without whom no final determination of
action can be had. Moreover, an action for rescission being subsidiary,
cannot be instituted except "when the party suffering damages has no
other legal means to obtain reparation of the same." No allegation of
unavailability of other remedies was made by Union Bank in its
complaint. Lastly, it was reiterated that it was now the SEC appointed
interim receiver who was given specific authority to take custody of all
assets of the distressed corporations. Hence, Union Bank should bring
its claims before the said receiver.

In a Supplemental Motion to Dismiss, 30 EYCO and Spouses Yutingco

averred that Union Bank was guilty of forum shopping and the RTC
had no jurisdiction over the subject matter. Union Bank's allegation of
fraud was the same claim it made in the motion to dismiss it filed
before the SEC. And, not waiting for the SEC to rule on the issue,
Union Bank went to the CA in a petition for certiorari (CA-G.R. SP No.
45774), in which it again placed in issue the same allegations of fraud
raised before the RTC and SEC. Aggravating its act of forum shopping,
Union Bank raised the very same issues in the pending civil suits
before RTC of Pasig City, Branch Nos. 158 and 159, and RTC of
Valenzuela (Civil Case Nos. 66478 and 66479; 5360-V-97). This
further shows the other legal remedies being availed of by Union Bank
in seeking rescission of the sale of the properties of NIKON.
Specifically, Union Bank had a pending collection case before the RTC
of Makati City, Branch 148 (Civil Case No. 97-2184). Union Bank
knew it could not simultaneously seek rescission and collection, but it
did so anyway. Finally, it was emphasized that when PD No. 902-A
vested SEC with jurisdiction over petitions for suspension of
payments, the law necessarily conferred exclusive jurisdiction to it
over all incidents of the petition, including enforcement of claims. 31
RTC Ruling

On March 22, 2005, the RTC issued an Order32 granting the motions

to dismiss on the ground of litis pendentia, as follows:cralawred
It cannot be denied that there is a pending action between
the same parties over the same transactions involving the
same properties before the instant case was filed. Plaintiff as
one of the creditors of defendants is a compulsory party in the
Petition for Declaration of Suspension of Payments, Formation
and Appointment of Rehabilitation Receiver/Committee filed
by defendants with the SEC on September 16, 1997 or before
the institution of instant case on October 16, 1997. By filing a
motion to dismiss the petition, plaintiff made itself a party to
the case and voluntarily submitted to the jurisdiction of the
SEC. Further, it was conceded that among the properties
subject of the order of suspension issued by the SEC are the
properties subject of the instant controversy. Indubitably, all
the elements of litis pendentia are present.

It must also be emphasized that even before the instant case

was filed, the SEC has already acquired jurisdiction over the
petition for declaration of suspension, which jurisdiction has
been sustained by no less than the Supreme Court. In fact,
the SEC had issued several directives for the rehabilitation of
 the petitioning corporations with the end in view of settling
their obligations to all their creditors, plaintiff included. The
actions taken by the SEC, including the issuance of an order
of suspension and the creation of the Management Committee
were all well in accord with Sec. 5 of P.D. No. 902-A, as
amended.

With the MANCOM having been created by order of the SEC,

plaintiff has been deprived of legal personality to impugn
through the instant case the disposition of the properties in
controversy made by defendant EYCO PROPERTIES, INC.,
which in the first place is not plaintiff's debtor.

Finally, the finding by the Court of Appeals and sustained by

the Supreme Court, that plaintiff was guilty of forum
shopping, is binding upon this Court.

WHEREFORE, the motions to dismiss separately filed by

defendants Spouses Yutingco and EYCO PROPERTIES, INC[.]
and FAR EAST BANK and TRUST COMPANY (FEBTC) are
hereby [GRANTED]. This case is DISMISSED.

SO ORDERED.33 (italics supplied)

Union Bank's motion for reconsideration was likewise denied under

the RTC's Order34 dated August 26, 2005.
CA Ruling
On appeal to the CA, Union Bank argued that there was no litis
pendentia as it never submitted itself to the jurisdiction of the SEC
and even filed a motion to dismiss SEC Case No. 09-97-5764. There
was also no identity of parties because Union Bank and the Spouses
Yutingco were not parties to the SEC case. Citing this Court's Decision
in Union Bank of the Phils. v. Court of Appeals,35 Union Bank pointed
out that the Spouses Yutingco were dropped as petitioners in the SEC
for lack of jurisdiction over them as individual debtors. Identity of
rights asserted and cause of action was likewise lacking because in
the present civil action, Union Bank seeks to annul the fraudulent
conveyances of real property made by Spouses Yutingco/EYCO to
FEBTC, while its cause of action against NIKON was for collection of
credit. There can be no res judicata since there was no identity of
parties, subject matter and causes of action. Besides, the SEC had no
jurisdiction over the case for annulment of sale.
By Decision dated November 15, 2010, the CA granted Union Bank's
appeal and reversed the assailed orders of the RTC.
First, the CA found that there was no identity of parties between Civil
Case No. 66477 and SEC Case No. 09-97-5764. In Union Bank of the
Phils. v. Court of Appeals36 this Court ruled that Eulogio O. Yutingco,
Caroline Yutingco-Yao and Theresa T. Lao were not proper parties in
the SEC case and should be dropped therefrom, not being
corporations but individuals. In the case before the RTC, the Spouses
Yutingco were sued as sureties for the collection of credit against the
debtor companies (NIKON).
Second, there was no identity of rights asserted because Union Bank,
in its complaint filed in the RTC, prayed for the rescission of the sale
of the debtors' properties to FEBTC and reversion of their ownership
to NIKON and/or Spouses Yutingco. As provided in Sec. 19 of Batas
Pambansa (BP) Blg. 129, actions that are incapable of pecuniary
estimation and those involving title of real property are within the
exclusive jurisdiction of the RTC. Union Bank's foreclosure suit could
therefore proceed, since it is not an enforcement of monetary claim
but assails the validity of Spouses Yutingco/NIKON's sale of the
subject properties of EYCO. There being absolutely no identity of
rights asserted and remedies sought in the present case and the SEC
case, there was no res judicata to speak of.
Further, the appellate court rejected the contention of FEBTC and
Spouses Yutingco that the payment of P34,270,570.21, representing
Union Bank's share from the proceeds of the sale of EYCO's
properties, has been approved and the balance of P88,975,716.72 has
been written off under the SEC-approved Liquidation Plan submitted
by SEC-appointed Liquidator Atty. Danilo Concepcion, and that such
Liquidation Plan was binding on Union Bank. This was because the
Liquidation Plan expressly provided that the parties' waivers and
quitclaims shall cause the dismissal of all actions filed by the parties
in relation to the SEC case. But FEBTC/Spouses Yutingco failed to
show that Union Bank had issued such waiver or quitclaim and
accepted the offer of payment. Thus, it cannot be said that Union
Bank had accepted the terms of payment and had agreed to cease
from pursuing its claims against the debtors.
On the issue of forum shopping, the CA said that a close reading of
this Court's decision in Union Bank of the Phils. v. Court of
Appeals37 reveals that Union Bank was found guilty of forum shopping
for filing a petition for certiorari in the CA when its motion to dismiss
was still pending before the SEC, the two cases raising the same
issues of whether SEC had jurisdiction and whether suspension of
payments was proper. The decision did not delve into the complaints
filed with the regular courts for rescission of contracts. In any event,
Union Bank was not guilty of forum shopping because the elements
of litis pendentia and res judicata were not present.
Finally, on the matter of Union Bank's alleged lack of personality to
sue, the CA held that while the RTC used such term, the true reason
for dismissal of the complaint was "lack of capacity to sue." When
Union Bank filed its complaint on September 16, 1997, it was still
qualified to do so. The authority of the Liquidator to recover all the
properties of NIKON and EYCO in the hands of other persons had not
yet been established. It was only on October 27, 1997 that the
MANCOM was created and no law provides for the retroactive effect of
its authority. However, substitution of parties may be effected in
accordance with the procedure under the Rules if the circumstances
so warrant.
Finding no legal obstacle in allowing full ventilation of the issues
raised in the complaint filed in the RTC, the CA thus
decreed:cralawred
 ACCORDINGLY, the appeal is GRANTED. The twin Orders
dated March 22, 2005 and August 26, 2005 of the Regional
Trial Court, Branch 157, Pasig City, in Civil Case No. 66477
are REVERSED and SET ASIDE and a new one
rendered REMANDING the case to the trial court for a full
blown hearing and determination of the case on the merits.

SO ORDERED.38 (citation omitted)

On March 14, 2011, BAYAN Delinquent Loan Recovery I (SPV-AMC,

INC.) (BAYAN) filed a Motion for Substitution With Motion to Admit
Comment, manifesting that under Deed of Assignment dated October
3, 2007, Union Bank assigned all its rights, title, interest and benefit,
and all obligations arising out of or in connection with the loan
obligation of NIKON, to BAYAN, including the bank's right to collect
from Spouses Yutingco pursuant to the surety agreements and other
security documents they executed in favor of Union Bank.39
In its Resolution dated April 19, 2011, the CA granted the motion for
substitution and admitted the comment, but denied the motions for
reconsideration respectively filed by FEBTC and Yutingcos/EYCO for
lack of merit.40
The present petition was filed by FEBTC (now Bank of the Philippine
Islands) on May 13, 2011. The Spouses Yutingco had earlier
requested for extension of time to file in this Court a separate petition
questioning the same CA ruling in CA-G.R. CV No. 86172, docketed as
G.R. No. 196629 entitled "Eulogio and Wong Bee Kuan Yutingco and
Eyco Properties, Inc. vs. Union Bank of the Philippines and Bayan
Delinquent and Loan Recovery 1 [SPV-AMC]." However, G.R. No.
196629 was withdrawn by the Yutingcos under Manifestation dated
July 6, 2011. Accordingly, this Court's Second Division issued, on
August 3, 2011, a Resolution granting the said Manifestation and
declaring G.R. No. 196629 closed and terminated.41
Issues
For resolution are the following issues: 1) Whether Civil Case No.
66477 should be dismissed on the ground of litis pendentia; 2)
Whether Union Bank was guilty of forum shopping; and 3) Whether
Union Bank had the legal personality to file Civil Case No. 66477.
Petitioner's Arguments
On the first issue, petitioner contends that the CA erred in not
dismissing Civil Case No. 66477 in view of another pending case, SEC
Case No. 09-97-5764 filed on September 16, 1997. The issue in the
SEC case is precisely the settlement of EYCO's obligations to its
creditors, which include herein respondent Union Bank. Here, Union
Bank also seeks to collect from the distressed corporations of EYCO.
The CA failed to consider the well settled rule that all questions
involving properties of an insolvent are properly cognizable by the
insolvency court to the exclusion of all other courts. Civil Case No.
66477 is necessarily related to, and thus precluded by, the SEC Case
which has exclusive jurisdiction "to decide all questions concerning
the title or right of possession" over the properties of the distressed
corporation. The issue of invalidity of the conveyance of property of
EYCO will necessarily have to be threshed out in the SEC case.
Further, petitioner asserts that the CA incorrectly ruled that the
parties in the two cases are different. The law does not require that
there be absolute identity of parties with respect to a later case, but
only substantial identity of parties. Union Bank, as one of the
creditors of NIKON, is a compulsory party in the SEC case. Thus,
judgment in the SEC case will bar the proceedings in Civil Case No.
66477 and vice-versa.
On the second issue, respondent was shown to have repetitively
availed of several judicial remedies in different courts, simultaneously
or successively, all substantially founded on the same transactions
and the same essential facts and circumstances, and all raising
substantially the same issues either pending in, or already resolved
by, some other court. In G.R. No. 131729 (Union Bank of the Phils. v.
Court of Appeals),42 both the CA and this Court found Union Bank
guilty of forum shopping. The SEC already appointed a MANCOM or
rehabilitation receiver, who was to have custody and control of all the
assets of the corporation under receivership/ rehabilitation.
On the third issue, petitioner argues that, insofar as the rights and
interests of the creditors of corporations under a management
committee, such as Union Bank, and the judicial enforcement of said
rights are concerned, they are collectively vested upon the
rehabilitation receiver. With the appointment of a MANCOM, Union
Bank clearly has no legal personality to impugn the sale by EYCO to
FEBTC. The proper party to institute such an action is the
rehabilitation receiver.
Respondent's Arguments

Union Bank, substituted by [Deutsche Bank] 43/Bayan Delinquent Loan

Recovery 1 (SPV-AMC), Inc., submits the arguments set forth in the
Comment/Opposition to FEBTC's motion for reconsideration (of the
Decision dated November 15, 2010) filed in the CA.
On litis pendentia, respondent maintains that there is no identity of
parties considering that this Court in Union Bank of the Phils. v. Court
of Appeals44 has ordered that the Spouses Yutingco be dropped as
"party-defendants" in the SEC case due to lack of jurisdiction over
their persons. Petitioner's argument that NIKON are indispensable
parties in Civil Case No. 66477 is unavailing, inasmuch as the creditor
has the right to proceed against the surety independent of the debtor.
Here, the Continuing Surety Agreement executed by the Spouses
Yutingco in favor of Union Bank, unequivocally provides that the
former bind themselves solidarity with their principal (NIKON).
Neither is there identity in causes of action considering that it is the
fraudulent conveyance of properties by the Spouses Yutingco through
EYCO properties in favor of FEBTC that caused Union Bank's cause of
action to accrue. Employing another test to determine the identity of
causes of action, i.e., whether the same evidence will sustain both
actions, respondent points out that it will have to present evidence in
the SEC case proving the Spouses Yutingcos' obligation to it and their
consequent failure to abide by the same. Such evidence, however, is
not needed in the annulment of sale case (Civil Case No. 66477).
As to petitioner's allegation that the approved Liquidation Plan is
binding on the respondent, under which NIKON's obligation with
Union Bank was extinguished, respondent asserts that such does not
warrant the reversal of the CA Decision. As found by the CA, Union
Bank is not a party to the SEC case and hence not bound by any
order or proceeding therein. Petitioner's reliance of this Court's
pronouncement in Union Bank of the Phils. v. Court of Appeals 45 is
likewise misplaced. In said case, this Court merely held that the SEC's
jurisdiction on matters of suspension of payments is confined only to
those initiated by corporations, partnerships or associations and not
those by individuals. In any event, from the very terms of the
Liquidation Plan itself, it is not the approval of the Liquidation Plan but
the execution of waivers and quitclaims and the dismissal of all
pending cases arising from or related to the subject loan obligations
that would extinguish the same. Lastly, judgment in Civil Case No.
66477 will not operate as res judicata in the SEC case, nor will the
final disposition of the SEC case operate as res judicata in the former
civil suit.
Respondent maintains that it is not guilty of forum shopping since
there is no similarity of parties, issues, reliefs sought and evidence.
As to this Court's pronouncement in Union Bank of the Phils. v. Court
of Appeals,46 the CA correctly pointed out that a close reading of the
decision in that case reveals that Union Bank was found guilty of
forum shopping for filing a petition for certiorari in the Supreme Court
when its motion to dismiss was still pending with the SEC, and does
not pertain to the complaints filed in the regular courts for rescission
of contracts.
Finally, respondent contends that the CA correctly held that when
Union Bank filed its complaint in the RTC against the Spouses
Yutingco on September 26, 1997, the MANCOM was not yet created
and no Liquidator had been appointed.
The Court's Ruling
We deny the petition.
Litis pendentia as a ground for the dismissal of a civil action
contemplates a situation wherein another action is pending between
the same parties for the same cause of action, such that the second
action becomes unnecessary and vexatious. 47 It is one of the grounds
that authorizes a court to dismiss a case motu proprio, as provided in
Sec. 1(e), Rule 16 of the 1997 Rules of Civil Procedure. 48
For litis pendentia to exist, the following requisites or elements must
concur: (a) identity of parties, or at least such parties who represent
the same interests in both actions; (b) identity of rights asserted and
relief prayed for, the relief being founded on the same facts; and (c)
identity with respect to the two (2) preceding particulars in the two
(2) cases is such that any judgment that may be rendered in the
pending case, regardless of which party is successful, would amount
to res judicata in the other case.49
We sustain the CA in holding that litis pendentia is not applicable to
the present case.
On the first requisite, there is no identity of parties considering that
the Yutingcos were ordered dropped from SEC Case No. 09-97-5764
pursuant to Union Bank of the Phils. v. Court of Appeals 50 which was
decided in 1998. This Court ruled therein that the SEC cannot acquire
jurisdiction over an individual filing a petition for suspension of
payments together with a corporate entity.51
In Civil Case No. 66477 filed by Union Bank, the Spouses Yutingco are
being sued as sureties for the loans obtained by NIKON from Union
Bank, along with petitioner who is the present registered owner of the
EYCO properties. SEC Case No. 09-97-5764 was initiated by EYCO
and the Yutingcos, seeking a suspension of payments for its
financially distressed companies, which included NIKON and
petitioner. Notably, NIKON is not impleaded as defendants in Civil
Case No. 09-97-5764, Union Bank having asserted that the Spouses
Yutingco are the real parties in interest being the controlling
stockholders of NIKON and EYCO, and sureties of NIKON's loans with
Union Bank.52 While petitioner and Union Bank are among the
creditors affected by the filing of the SEC case, the proceedings
therein are not adversarial.
The second requisite is likewise absent. In Civil Case No. 66477,
Union Bank sought to rescind the sale of certain properties of EYCO to
petitioner, on the theory that the Yutingcos/EYCO colluded with
petitioner to divert the assets of NIKON to purchase real properties
under the name ofEYCO. Union Bank prayed that ownership of the
properties be reverted to NIKON so that these can be used to pay for
credit facilities extended to it by Union Bank, pursuant to the
undertaking of the Yutingcos under the Continuing Surety Agreement.
On the other hand, SEC Case No. 09-97-5764 was initiated by EYCO
seeking a declaration of suspension of payments under the provisions
of P.D. No. 902-A. While it is true that EYCO's creditors have been
directed to file its claims under existing contracts with the debtor-
corporations - the ultimate objective being the equitable distribution
of earnings from the business under rehabilitation -- the validity of
the sale to petitioner of EYCO's properties is the principal issue in Civil
Case No. 66477. Thus, it cannot be said that the rights asserted and
the reliefs prayed for are the same.53
Moreover, SEC took cognizance of the petition for suspension of
payments, having been vested with exclusive jurisdiction under P.D.
No. 902-A over such recourse by financially distressed corporations.
While a management committee or rehabilitation receiver may review
or seek modification of existing contracts of the debtor-corporation,
this is merely an incident of the specific powers granted by law and
only for the purpose of maintaining the viability of the debtor-
corporation which would ultimately benefit the creditors. The RTC, on
the other hand, unquestionably has jurisdiction to hear and decide
actions incapable of pecuniary estimation, such as the suit for
rescission of sale (Civil Case No. 66477).
Finally, the third element is also lacking. Any judgment in Civil Case
No. 66477 will not have the effect of res judicata to the proceedings
in SECCase No. 09-97-5764, and vice versa. 54 Any judgment or final
disposition by the SEC on the claims against the debtor-corporations
will not fully resolve the issues before the trial court (i.e., validity of
the sale of EYCO properties in favor of petitioner, real ownership of
the properties and damages). The rulings issued by the SEC Hearing
Panel in the course of rehabilitation will not settle the issue of whether
the Spouses Yutingco, EYCO and petitioner connived to ensure that
the properties of NIKON will not answer for the latter's huge loans
obtained from Union Bank. Rehabilitation proceedings are summary in
nature; they do not include adjudication of claims that require full trial
on the merits.55
Conversely, the trial court's decision annulling the contract of sale in
favor of petitioner will not in any way determine the viability of
rehabilitation plan for EYCO, nor provide an equitable distribution of
the assets of the debtor-corporations. It bears stressing that the
properties subject of Civil Case No. 66477 were never included in the
properties of EYCO placed in the custody of the MANCOM and
eventually the Liquidator, for distribution to all claimants and
creditors.
There being no litis pendentia or res judicata, we find Union Bank not
guilty of forum shopping.
Jurisprudence has laid down the test for determining whether a party
violated the rule against forum shopping. Forum shopping exists
where the elements of litis pendentia are present or where a final
judgment in one case will amount to res judicata in the other.56 The
requisites of litis pendentia not having concurred, and the issues
presented in SEC Case No. 09-97-5764 and RTC not being identical,
Union Bank is therefore not guilty of forum shopping. 57
As already discussed, the main issue in the SEC petition is the
viability of EYCO to continue their businesses. The debtor-
corporations, who having allegedly sufficient assets to cover all its
debts, foresees the impossibility of meeting those debts when they
respectively fall due. In Civil Case No. 66477, the issue being litigated
is the validity of the contract of sale of EYCO properties to petitioner,
allegedly made in fraud of NIKON's creditor, Union Bank. Clearly, the
issues in the two cases are not identical.
As correctly stated by the CA, the act of forum shopping raised in the
present case should be distinguished from that adjudged in Union
Bank of the Phils. v. Court of Appeals 58 where the charge of forum
shopping arose from Union Bank's resort to a petition for certiorari in
the CA, even as its motion to dismiss based on lack of jurisdiction of
the SEC and propriety of suspension of payments was still pending in
the SEC. Thus:cralawred
As to the issue of forum-shopping, we fully subscribe to the
Court of Appeals in ruling that such violation existed when it
declared:cralawred

Finally, the charge that petitioner is guilty of forum shopping -

which is the institution of two or more actions or proceedings
grounded on the same cause - cannot unceremoniously be
glossed over. It is patent that the instant petition and the
pending motion to dismiss before the SEC raise identical
issues, namely, lack of jurisdiction and the propriety of the
suspension of payments.59 (underlining supplied, italics in the
original)

Here, forum shopping was among the grounds raised in the motions
to dismiss filed by EYCO and the Yutingcos who assailed Union Bank
for having filed a motion to dismiss in the SEC case and for having
earlier filed other complaints in different courts citing the same
transactions and fraudulent dispositions of the same properties
allegedly committed by them.60 They contend that it is the SEC which
has jurisdiction over all properties of the debtor-corporations under
rehabilitation such that Union Bank should have filed its claim against
EYCO and NIKON before the SEC.
As already mentioned, the properties subject of Civil Case No. 66477
were not included in the rehabilitation proceedings before the SEC.
These properties were sold to petitioner one day before the filing of
the petition with the SEC where EYCO sought the suspension of
payments of debts to its creditors and the rehabilitation of its
companies. Union Bank filed the rescission case in the trial court
against EYCO, petitioner and the Yutingcos, the latter being sureties
of NIKON who availed of Union Bank's credit facilities. Union Bank
sought to rescind the allegedly fraudulent sale of EYCO's properties
purchased out of NIKON's assets, and revert their ownership to
NIKON. Clearly, the issues in the two cases are not the same, and the
reliefs prayed for are different.
It may be mentioned that under the new law on corporate
rehabilitation and insolvency, Republic Act No. 10142 (Financial
Rehabilitation and Insolvency Act [FRIA] of 2010), among those
exempted from the coverage of a Stay Order are actions filed against
sureties or persons solidarily liable with the debtor.
SECTION. 18. Exceptions to the Stay or Suspension Order. —
The Stay or Suspension Order shall not apply:cralawred

xxxx

(c) to the enforcement of claims against sureties and

other persons solidarily liable with the debtor, and
third party or accommodation mortgagors as well as
issuers of letters of credit, unless the property subject
of the third party or accommodation mortgage is
necessary for the rehabilitation of the debtor as
determined by the court upon recommendation by the
rehabilitation receiver[.]61 (emphasis supplied)
Petitioner nonetheless contends that the matter of interests and rights
of the creditors of the debtor-corporations are vested on the
management committee created pursuant to P.D. 902-A. With the
appointment of a MANCOM, the proper party to file the action for
rescission of the sale of EYCO properties to petitioner is clearly the
rehabilitation receiver appointed by SEC. Union Bank thus has no
legal personality to institute Civil Case No. 66477 involving the assets
of the debtor-corporations under rehabilitation.
We find no reversible error in the CA's ruling that when Union Bank
filed Civil Case No. 66477 on September 26, 1997, it still possessed
the legal capacity (not legal personality) to do so. This is because it
was only on October 27, 1997 that the MANCOM was created.
Notwithstanding the CA's proper denial of the motion to dismiss Civil
Case No. 66477, we hold that said case should have been suspended
upon the constitution of the MANCOM.
The applicable law on the suspension of actions for claims against
corporations is P.D. No. 902-A, which was in force at the time EYCO
filed its petition for suspension of payments with the SEC.
The pertinent provisions of P.D. No. 902-A read:cralawred
Section 5. In addition to the regulatory 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 decrees, it shall
have original and exclusive jurisdiction to hear and decide
cases involving:cralawred

xxxx

d) Petitions of corporations, partnerships or

associations to be declared in the 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
created pursuant to this Decree.62

chanRoblesvirtualLaw1ibrary

Section 6. In order to effectively exercise such jurisdiction,

the Commission shall possess the following:cralawred

xxxx

c) To appoint one or more receivers of the property,

real or personal, which is the subject of the action
pending before the Commission in accordance with
the pertinent provisions of the Rules of Court in such
other cases whenever necessary in order to preserve
the rights of the parties-litigants and/or protect the
interest of the investing public and creditors. x x x
Provided, further, that upon appointment of a
management committee, rehabilitation receiver,
board or body, pursuant to this Decree, all actions for
claims against corporations, partnerships or
associations under management or receivership
pending before any court, tribunal, board or body
shall be suspended accordingly.63 (emphasis
supplied)

In Rizal Commercial Banking Corporation v. Intermediate Appellate

Court, et al.,64 the Court held that once a management committee,
rehabilitation receiver, board or body is appointed pursuant to P.D.
902-A, all actions for claims against a distressed corporation pending
before any court, tribunal, board or body shall be suspended
accordingly.

In Castillo v. Uniwide Warehouse Club, Inc., et al.,65 we explained the

coverage of the suspension order, thus:cralawred
Jurisprudence is settled that the suspension of proceedings
referred to in the law uniformly applies to "all actions for
 claims" filed against a corporation, partnership or association
under management or receivership, without distinction,
except only those expenses incurred in the ordinary course of
business. In the oft-cited case of Rubberworld (Phils.), Inc. v.
NLRC, the Court noted that aside from the given
exception, the law is clear and makes no distinction as to the
claims that are suspended once a management committee is
created or a rehabilitation receiver is appointed. Since the law
makes no distinction or exemptions, neither should this
Court. Ubi lex non distinguit nec nos distinguere debemos.
Philippine Airlines, Inc. v. Zamora declares that the automatic
suspension of an action for claims against a corporation under
a rehabilitation receiver or management committee embraces
all phases of the suit, that is, the entire proceedings of an
action or suit and not just the payment of claims.

xxxx

At this juncture, it must be conceded that the date when the

claim arose, or when the action was filed, has no bearing at
all in deciding whether the given action or claim is covered by
the stay or suspension order. What matters is that as long as
the corporation is under a management committee or a
rehabilitation receiver, all actions for claims against it,
whether for money or otherwise, must yield to the greater
imperative of corporate revival, excepting only, as already
mentioned, claims for payment of obligations incurred by the
corporation in the ordinary course of business.66 (citations
omitted, emphasis supplied)

In Philippine Airlines Incorporated, et al. v. Zamora,67 the Court

reiterated the reason for suspending claims during
rehabilitation, viz:cralawred
The raison d'etre behind the suspension of claims pending
rehabilitation proceedings was explained in this
wise:cralawred

In light of these powers, the reason for suspending

actions for claims against the corporation should not
 be difficult to discover. It is not really to enable the
management committee or the rehabilitation receiver
to substitute the defendant in any pending action
against it before any court, tribunal, board or
body. Obviously, the real justification is to enable the
management committee or rehabilitation receiver to
effectively exercise its/his powers free from any
judicial or extra-judicial interference that might
unduly hinder or prevent the "rescue" of the debtor
company. To allow such other action to continue
would only add to the burden of the management
committee or rehabilitation receiver, whose time,
effort and resources would be wasted in defending
claims against the corporation instead of being
directed toward its restructuring and
68
rehabilitation.  (italics in the original, emphasis
supplied)

Thus, while the motions to dismiss Civil Case No. 66477 should have
been denied by the trial court, said case should have also been
suspended in view of the creation of the MANCOM on October 27,
1997. As borne by the records, the case did not go beyond pre-trial
stage because of the long exchange of pleadings between the parties
upon the sole incident of the motions to dismiss filed by EYCO and
Yutingcos. It was only on March 22, 2005 that the trial court issued
the order granting the motions to dismiss. Union Bank appealed to
the CA, which resulted in more delays until the CA rendered the
assailed decision reversing the trial court's dismissal of the case.
Expectedly, the present controversy was overtaken by succeeding
developments in SEC Case No. 09-97-5764.
The rehabilitation plan of a group of creditors earlier adopted by the
SEC Hearing Panel, was disapproved on September 14, 1999 by the
SEC En Banc which granted the appeal of the Consortium. The
suspension of payment proceedings were terminated, the committees
created dissolved and discharged, the dissolution and liquidation of
the petitioning corporations were ordered, and a Liquidator appointed.
The case was remanded to the hearing panel for liquidation
proceedings. On appeal by EYCO (CA-G.R. SP No. 55208), the CA
upheld the SEC ruling. EYCO then filed a petition for certiorari before
this Court, docketed as G.R. No. 145977, which case was eventually
dismissed under Resolution dated May 3, 2005 upon joint
manifestation and motion to dismiss filed by the parties. Said
resolution became final and executory on June 16, 2005.69
By October 10, 2000, the SEC had directed all creditors/claimants of
the companies belonging to EYCO to file their formal claims with the
Liquidator. Atty. Concepcion took over as Liquidator on May 31, 2001
and his proposed Liquidation Plan was eventually approved by the
SEC on April 11, 2002.
While these developments in SEC Case No. 09-97-5764 were taking
place, R.A. No. 8799 was passed by Congress, transferring all those
cases enumerated in Sec. 5 of P.D. No. 902-A to the regional trial
courts. As to the implications of the transfer of jurisdiction to the
appropriate regional trial courts of cases formerly handled by the SEC,
this Court has previously ruled that the proceedings in SEC Case No.
09-97-5764 was effectively terminated upon the disapproval of the
SAC rehabilitation plan for the EYCO Group of Companies, and the
order of dissolution and liquidation issued by the SEC En Banc on
September 14, 1999.

In Bank of the Philippine Islands v. Hong, et al.,70 a petition for

review on certiorari was filed in this Court by BPI assailing the CA
decision which affirmed the trial court's denial of its motion to dismiss
the injunction suit filed by the respondent, an unsecured creditor of
NIKON. BPI moved to dismiss the injunction case arguing that, by
respondent's own submissions, it is the SEC which has jurisdiction
over the reliefs prayed for in respondent's complaint, and that
respondent actually resorted to forum shopping since he filed a claim
with the SEC and the designated Liquidator in the ongoing liquidation
of EYCO.
Before this Court, BPI as secured creditor of EYCO who initiated
foreclosure proceedings, raised the sole issue of whether the RTC can
take cognizance of the injunction suit despite the pendency of SEC
Case No. 09-97-5764. We denied BPI's petition, as follows:cralawred
Previously, under the Rules of Procedure on Corporate
Recovery, the SEC upon termination of cases involving
petitions for suspension of payments or rehabilitation
may, motu proprio, or on motion by any interested party, or
on the basis of the findings and recommendation of the
Management Committee that the continuance in business of
the debtor is no longer feasible or profitable, or no longer
works to the best interest of the stockholders, parties-
litigants, creditors, or the general public, order the dissolution
of the debtor and the liquidation of its remaining assets
appointing a Liquidator for the purpose. The debtor's
properties are then deemed to have been conveyed to the
Liquidator in trust for the benefit of creditors, stockholders
and other persons in interest. This notwithstanding, any lien
or preference to any property shall be recognized by the
Liquidator in favor of the security or lienholder, to the extent
allowed by law, in the implementation of the liquidation plan.

However, R.A. No. 8799, which took effect on August 8, 2000,

transferred to the appropriate regional trial courts the SEC's
jurisdiction over those cases enumerated in Sec. 5 of P.D. No.
902-A. Section 5.2 of R.A. No. 8799 provides:cralawred

SEC. 5.2 The Commission's jurisdiction over all cases

enumerated under Section 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. x x x

Upon the effectivity of R.A. No. 8799, SEC Case No. 09-97-
5764 was no longer pending. The SEC finally disposed of said
case when it rendered on September 14, 1999 the decision
disapproving the petition for suspension of payments,
terminating the proposed rehabilitation plan, and ordering the
dissolution and liquidation of the petitioning corporation. With
the enactment of the new law, jurisdiction over the liquidation
proceedings ordered in SEC Case No. 09-97-5764 was
transferred to the RTC branch designated by the Supreme
Court to exercise jurisdiction over cases formerly cognizable
by the SEC. As this Court held in Consuelo Metal Corporation
v. Planters Development Bank:cralawred

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,
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. xxx

There is no showing in the records that SEC Case No. 09-97-

5764 had been transferred to the appropriate RTC designated
as Special Commercial Court at the time of the
commencement of the injunction suit on December 18, 2000.
Given the urgency of the situation and the proximity of the
scheduled public auction of the mortgaged properties as per
the Notice of Sheriffs Sale, respondent was constrained to
seek relief from the same court having jurisdiction over the
foreclosure proceedings - RTC of Valenzuela City. Respondent
thus filed Civil Case No. 349-V-00 in the RTC of Valenzuela
City on December 18, 2000 questioning the validity of and
enjoining the extrajudicial foreclosure initiated by petitioner.
Pursuant to its original jurisdiction over suits for injunction
and damages, the RTC of Valenzuela City, Branch 75 properly
took cognizance of the injunction case filed by the
respondent. No reversible error was therefore committed by
the CA when it ruled that the RTC of Valenzuela City, Branch
75 had jurisdiction to hear and decide respondent's complaint
for injunction and damages.

Lastly, it may be mentioned that while the Consortium of

Creditor Banks had agreed to end their opposition to the
liquidation proceedings upon the execution of the Agreement
dated February 10, 2003, on the basis of which the parties
moved for the dismissal of G.R. No. 145977, it is to be noted
that petitioner is not a party to the said agreement. Thus,
even assuming that the SEC retained jurisdiction over SEC
Case No. 09-97-5764, petitioner was not bound by the terms
and conditions of the Agreement relative to the foreclosure of
those mortgaged properties belonging to EYCO and/or other
accommodation mortgagors.71 (citations omitted, emphasis
supplied)
Without delving into matters concerning the liquidation proceedings in
SEC Case No. 09-97-5764, We hold that with the termination of
suspension of payment proceedings in SEC Case No. 09-97-5764 on
September 14, 1999, there is no more legal hindrance to the
continuation of Civil Case No. 66477. Records show that the Spouses
Yutingco already filed their Answer but BPI had requested for
suspension of proceedings until the present petition is finally
resolved.72
WHEREFORE, the petition is DENIED. The November 15, 2010
Decision and April 19, 2011 Resolution of the Court of Appeals in CA-
G.R. CV No. 86172 are hereby AFFIRMED.
SO ORDERED.
cralawlawlibrary
Bersamin, C.J., (Chairperson), Del Castillo, and Jardeleza, JJ., concur.
Carandang, J., on wellness leave.
Endnotes: