MANUEL D. YNGSON, JR.

vs PHILIPPINE NATIONAL BANK

G.R. No. 171132 August 15, 2012

Digest of digest:
ARCAM entered into a loan with PNB secured by several property mortgages.
ARCAM failed to pay hence PNB foreclosed the properties. Before the auction
sale of the properties, SEC issued a TRO and subsequently a writ of
preliminary injunction enjoining PNB and RTCs sheriff from proceeding with
the foreclosure. 6 years had passed but ARCAM was not rehabilitated because
its expected investor did not push through with its promise. SEC then decreed
petitioner Yngson as liquidator of ARCAM.

PNB then proceeded with the foreclosure sale. After the sale, petitioner filed
motion to nullify the sale on the ground that all actions against companies
under liquidation are suspended because liquidation is a continuation of the
suspension proceedings. SEC ruled in favor of PNB; CA also denied
petitioners appeal. Issue is whether foreclosure sale of PNB is valid. Yes, NCC
and FRIA provide that a secured creditor enjoys preference over a specific
mortgaged property.

Facts:
ARCAM is engaged in the operation of a sugar mill in Pampanga. Between
1991 and 1993, ARCAM applied for and was granted a loan by respondent
PNB. To secure the loan, ARCAM executed a Real Estate Mortgage to its
personal and real properties.

ARCAM defaulted hence PNB initiated extrajudicial foreclosure proceedings in

the Office of the Clerk of Court/Ex Officio Sheriff of the RTC of Guagua,
Pampanga. The public auction was scheduled on December 29, 1993 for the
mortgaged real properties and December 8, 1993 for the mortgaged personal
properties.

The SEC issued a TRO and subsequently a writ of preliminary injunction,

enjoining PNB and the Sheriff of the RTC of Guagua, Pampanga from
proceeding with the foreclosure sale of the mortgaged properties. An interim
management committee was also created.

On February 9, 2000, the SEC ruled that ARCAM can no longer be

rehabilitated. The SEC noted that the petition for suspension of payment was
filed in December 1993 and six years had passed but the potential white
knight investor had not infused the much needed capital to bail out ARCAM
from its financial difficulties. Thus, the SEC decreed that ARCAM be dissolved
and placed under liquidation. SEC appointed Atty. Manuel D. Yngson, Jr. &
Associates as Liquidator for ARCAM.

Petitioner filed with the SEC a Motion for the Issuance of a TRO and/or Writ of
Preliminary Injunction to enjoin the foreclosure sale of ARCAMs assets. The
SEC en banc issued a TRO effective for 72 hours, but said TRO lapsed without
any writ of preliminary injunction being issued by the SEC.
Consequently, on July 28, 2000, PNB resumed the proceedings for the
extrajudicial foreclosure sale of the mortgaged properties. PNB emerged as
the highest winning bidder in the auction sale, and certificates of sale were
issued in its favor.

Petitioner filed with the SEC a motion to nullify the auction sale. Petitioner
posited that all actions against companies that are under liquidation are
suspended because liquidation is a continuation of the petition for suspension
proceedings. Petitioner argued that the prohibition against foreclosure
subsisted during liquidation because payment of all of ARCAMs obligations
was proscribed except those authorized by the Commission.

SEC denied petitioners motion to nullify the foreclosure sale. CA denied the
appeal of petitioner mainly on procedural grounds.

Issue:
WON SEC erred in ruling that PNB was not barred from foreclosing on the
mortgages

Decision:
No, PNB, 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.

SEC. 114 (Rights of Secured Creditors) of the FRIA Law provides that the
Liquidation Order shall not affect the right of a secured creditor to enforce his
lien in accordance with the applicable contract or law.

PNB elected to maintain its rights under the security or lien; hence, its right
to foreclose the mortgaged properties should be respected.