PHILIPPINE COMMERCIAL INTERNATIONAL BANK AND MELCHOR B. FRANCISCO, PETITIONERS, VS. THE HON. COURT OF APPEALS AND BENGZON, ZARRAGA, NARCISO, CUDALA, PECSON, AZCUNA AND BENGZON, …

This is a petition for review on certiorari which seeks to
reverse the decision of the Court of Appeals in CA-G.R. SP No. 10363 (Bengzon, et al. vs. Hon. Job Madayag,
et al.) dated December 11, 1986 setting aside the order of the Regional Trial
Court of Makati, Branch 145 dated September 24, 1986
and enjoining petitioners Philippine Commercial International Bank and Melchor B. Francisco from proceeding with the auction sale
of pledged shares of stocks and bonds.

 The following facts are
not controverted:

On March 3, 1981,
Philippine Underwriters Finance Corporation (Philfinance,
for brevity) executed a pledge agreement involving certain shares of stocks and
bonds in favor of Insular Bank of Asia and America
(now Philippine Commercial International Bank, PCIB for brevity, the petitioner
herein) as a security for its outstanding obligation. (p. 25, Rollo)

On June 18, 1981,
the Securities and Exchange Commission (SEC, for brevity) placed Philfinance under suspension of payments upon “the
directive of the President of the Philippines
to conserve the assets of the Corporation and obtain an equitable payment to
all its creditors.” (p. 16, Records)

On August 7, 1981, SEC appointed a Receivership Committee to
conserve the assets of Philfinance and determine the
best way to protect the creditors, as well as make the necessary presentations
with any court or other body for the consolidation of all claims against Philfinance which are pending
before such court or body in order to forestall the probability of inequitable
disposition/satisfaction of said claims. 
(p. 22, Records)

On December 19, 1983,
upon the basis of the findings of the Receivership Committee and on its own,
SEC ordered the dissolution and liquidation of Philfinance.  From this order, some concerned parties
appealed to this Court and respondent Court of Appeals.

On October 30, 1985, SEC appointed private respondent Bengzon, Zarraga, Narciso, Cudala, Pecson, Azcuna and Bengzon Law Office as the Rehabilitation Receiver instead
of the SEC Receivership Committee under the same terms and conditions provided
in the Order dated August 7, 1981 “in view of the considerable delay that
would be entailed due to the appeals filed with the Appellate Courts before the
liquidation of the Corporation can be undertaken . . .” (p. 19, Records)

Meanwhile, Philfinance failed to
satisfy its outstanding obligation with PCIB which prompted the latter to post
a Notice of Auction Sale of the pledged shares of stocks and bonds on August 18, 1986 by the other
petitioner, Notary Public Melchor B. Francisco.

On August 15, 1986,
the Receiver filed a petition for a writ of preliminary injunction with the
Regional Trial Court to stop the aforementioned auction sale.

On September 24, 1986,
the trial court issued an order denying the petition, to wit (p. 55, Rollo):

“Acting upon the application for the issuance of a writ of
preliminary injunction incorporated in the verified complaint dated August 15,
1986, and the opposition and supplemental opposition thereto filed by
defendants dated September 10, and 17, 1986, the Court Resolved, in view of the
cogent grounds stated in said opposition, to deny said application.

“SO ORDERED.”

Thereupon, the Receiver filed a petition for certiorari
with the Court of Appeals.  On December 11, 1986, the Appellate
Court issued a decision, the dispositive portion of
which reads:

“WHEREFORE, the petition for certiorari is GRANTED and
the order dated September 24, 1986
is SET ASIDE and the respondents are enjoined from proceeding with the auction
sale of pledged shares of stocks and bonds until the termination of
receivership of Philfinance.  Without pronouncement as to
costs.

“SO ORDERED.” (p. 102, Rollo)

Hence, the present petition.

The issues raised for consideration are the following:

“IN ISSUING ITS DECISION DATED 11 DECEMBER 1986, RESPONDENT
COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF
JURISDICTION AND SAID DECISION IS NOT IN ACCORD WITH LAW OR WITH APPLICABLE
DECISIONS OF THE HONORABLE COURT CONSIDERING THAT:

I

“RESPONDENT COURT OF APPEALS, IN
ENJOINING THE FORECLOSURE OF THE SUBJECT PROPERTIES, TOTALLY IGNORED THE FACT
THAT PRIVATE RESPONDENT HAS NOT ESTABLISHED A CLEAR AND POSITIVE RIGHT TO THE
RELIEF DEMANDED SINCE:

“(A)    THE SECURITIES AND EXCHANGE COMMISSION HAS
ALREADY ORDERED THE DISSOLUTION AND LIQUIDATION OF PHILFINANCE.  CONSEQUENTLY THE ORDER OF SUSPENSION OF
PAYMENTS ON WHICH PRIVATE RESPONDENT BASED ITS ALLEGED RIGHT TO INJUNCTIVE
RELIEF HAS BEEN VACATED;

“(B)   ASSUMING THAT THE ORDER OF SUSPENSION OF
PAYMENTS HAS NOT BEEN VACATED, THE SAME HAS, THROUGH THE LAPSE OF CONSIDERABLE
TIME, ALREADY BECOME OPPRESSIVE AND VIOLATIVE OF PETITIONER PCIBANK’S
CONSTITUTIONAL RIGHTS.

“II

“PRIVATE RESPONDENT FAILED TO PROVE
ITS ALLEGATION ON GRAVE AND IRREPARABLE DAMAGE AND HOW PETITIONER PCIBANK’S
EXERCISE OF ITS RIGHTS AS A SECURED CREDITOR TO HAVE THE PLEDGED PROPERTIES
SOLD AT PUBLIC AUCTION WOULD.  VIOLATE
PRIVATE RESPONDENT’S RIGHT; FURTHER, THE LOSS OF THE PLEDGED PROPERTIES, BEING
THE ONLY CONCEIVABLE LOSS, IS CLEARLY CAPABLE OF PECUNIARY ESTIMATION.” (pp. 138-139, Rollo).

We sustain the petitioners.

SEC’s order for suspension of payments of Philfinance
as well as for all actions of claims against Philfinance
could only be applied to claims of unsecured creditors.  Such order can not extend to creditors
holding a mortgage, pledge or any lien on the property unless they give up the
property security or lien favor of all the creditors of Philfinance.  This ruling finds support in Chartered Bank
vs. Imperial and National Bank (48 Phil. 931) where We
held:

“It is, therefore, clear and evident that the law recognizes
and respects the right of a creditor holding a mortgage, pledge or lien of any
kind, attachment or execution on the property of the debtor, recorded and not
dissolved under said Act, to refrain from voting at the election of an
assignee, and consequently, to preserve said right; to refrain from taking part
or intervening in the insolvency proceedings and to retain the property
mortgaged to him and the respective security or lien, the court having no
power, even if the debtor is adjudged insolvent, to dispose of said property,
security or lien and cede or transfer them to the sheriff or assignee by virtue
of said adjudication x x x
as long as the creditor does not voluntarily deliver or assign said property,
security or lien for the benefit of all the creditors of the insolvent.”

It is true that the aforequoted
ruling deals with insolvency but by analogy the same could be adopted in this
case considering that the rights of a preferred creditor remain to be respected
and recognized in every existing situation. 
To hold otherwise would render the said rights inutile and
illusory.  Besides, We
find no substantial difference between the suspension of actions in the instant
case and that under the Insolvency Law. 
Consequently, the herein order of suspension could not have a different
interpretation as regards secured credits than that already given by this
Court.  The records show that PClB neither surrendered the pledged shares of stock and
bonds nor participated in the proceedings before the SEC regarding the
suspension of payments or actions of claims against Philfinance
or in the latter’s subsequent dissolution and liquidation.  The pledged properties being still in PCIB’s possession, the Receiver could not possess the same
for equitable distribution to the creditors of Philfinance.

Further, We take judicial notice of the fact that the SEC order
for the dissolution and liquidation of Philfinance
has already been upheld by this Court in the resolutions dated December 9,
1985, March 20, 1986 and April 29, 1987 in G.R. No. 71821 (Fereira,
et al. vs. The Intermediate Appellate Court, et al.), G.R. No. 71327 (Luis Amor, et al. vs. The Intermediate Appellate Court, et al.)
and in G.R. No. 72675 (Philippine Underwriters Finance Corporation, et al. vs.
Securities and Exchange Commission, et al.), respectively.  In view of this development, it appears that
the Rehabilitation Receiver has no more right to enjoin the auction sale since
its prayer for injunctive relief was based on the order for suspension of
payments which was in turn based on the “directive of the President of the
Philippines to conserve the assets of the corporation and obtain an equitable
payment to all its creditors,” supra.

With the conclusions thus reached, We
need not discuss the other issues involved in this petition.

ACCORDINGLY, the decision of the Court of Appeals dated December 11, 1986 is SET ASIDE and
the decision of the Regional Trial Court dated September 24, 1986 is REINSTATED.

No pronouncement as to costs.

SO ORDERED.

Narvasa, (Chairman) Cruz, Gancayco, and Griño-Aquino, JJ., concur.