Philippine Blooming Mills

Philippine Blooming Mills, Inc. vs.
Court of Appeals | 413 SCRA 445 [2003]
FACTS: Alfredo Ching was the Senior Vice President of PBM. In his personal capacity and not as a
corporate officer, Ching signed a Deed of Suretyship for trust receipts and bound himself as a co-maker
of a promissory note to cover a trust loan. All of which were loaned from TRB.
PBM defaulted in its payment of the three liabilities. PBM and Ching filed a petition for suspension of
payments with the Securities and Exchange Commission. The petition sought to suspend payment of
PBMs obligations and prayed that the SEC allow PBM to continue its normal business operations free
from the interference of its creditors. One of the listed creditors of PBM was TRB.
PBM and Ching moved to dismiss the complaint on the ground that the trial court had no jurisdiction
over the subject matter of the case. PBM and Ching invoked the assumption of jurisdiction by the SEC
over all of PBMs assets and liabilities. TRB filed an opposition to the Motion to Dismiss. TRB argued that
(1) Ching is being sued in his personal capacity as a surety for PBM; (2) the SEC decision declaring PBM in
suspension of payments is not binding on TRB; and (3) Presidential Decree No. 1758 (PD No. 1758),
which Ching relied on to support his assertion that all claims against PBM are suspended, does not apply
to Ching as the decree regulates corporate activities only.
The trial court denied the motion to dismiss with respect to Ching and affirmed its dismissal of the case
with respect to PBM. The trial court stressed that TRB was holding Ching liable under the Deed of
Suretyship. As Ching’s obligation was solidary, the trial court ruled that TRB could proceed against Ching
as surety upon default of the principal debtor PBM. The trial court also held that PD No. 1758 applied
only to corporations, partnerships and associations and not to individuals.
Upon the trial courts denial of his Motion for Reconsideration, Ching filed a Petition for Certiorari and
Prohibition before the Court of Appeals. The appellate court granted Chings petition and ordered the
dismissal of the case. The appellate court ruled that the SEC assumed jurisdiction over Ching and PBM to
the exclusion of courts or tribunals of coordinate rank.
TRB assailed the Court of Appeals Decision before this Court. In Traders Royal Bank v. Court of Appeals,
this Court upheld TRB and ruled that Ching was merely a nominal party in SEC Case No. 2250. Creditors
may sue individual sureties of debtor corporations, like Ching, in a separate proceeding before regular
courts despite the pendency of a case before the SEC involving the debtor corporation.
In his Answer dated 6 November 1989, Ching denied liability as surety and accommodation co-maker of
PBM. He claimed that the SEC had already issued a decision approving a revised rehabilitation plan for
PBMs creditors, and that PBM obtained the credit accommodations for corporate purposes that did not
redound to his personal benefit. He further claimed that even as a surety, he has the right to the
defenses personal to PBM. Thus, his liability as surety would attach only if, after the implementation of
payments scheduled under the rehabilitation plan, there would remain a balance of PBMs debt to TRB.
ISSUE: Whether Ching can be sued separately and whether Ching is liable for obligations PBM contracted
after execution of the Deed of Suretyship.
RULING: Yes, Ching can be sued separately to enforce his liability as surety for PBM, as expressly
provided by Article 1216 of the New Civil Code. It is elementary that a corporation has a personality
distinct and separate from its individual stockholders and members. Being an officer or stockholder of a
corporation does not make ones property the property also of the corporation, for they are separate
entities. Ching’s act of joining as a co-petitioner with PBM in SEC Case No. 2250 did not vest in the SEC
jurisdiction over his person or property, for jurisdiction does not depend on the consent or acts of the
parties but upon express provision of law.
Also, Ching is liable for credit obligations contracted by PBM against TRB before and after the execution
of the 21 July 1977 Deed of Suretyship. This is evident from the tenor of the deed itself; referring to
amounts PBM may now be indebted or may hereafter become indebted to TRB. The law expressly
allows a suretyship for future debts. Article 2053 of the Civil Code provides:
A guaranty may also be given as security for future debts, the amount of which is not yet known; there
can be no claim against the guarantor until the debt is liquidated. A conditional obligation may also be
secured.

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Philippine Blooming Mills, Inc. vs.

Court of Appeals | 413 SCRA 445 [2003]

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