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LEGAL NOTE 0013: WHAT ARE THE IMPLEMENTING RULES OF RA 9474 GOVERNING LENDING COMPANIES?

Filed under: LEGAL NOTES — 1 Comment
January 25, 2011

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IMPLEMENTING RULES AND REGULATIONS OF

LENDING COMPANY REGULATION ACT OF 2007

(REPUBLIC ACT NO. 9474)

 

 

RULE 1. Title

These Rules shall be known as the Implementing Rules and

Regulations of Republic Act No. 9474, otherwise known as the

“Lending Company Regulation Act of 2007” promulgated pursuant to

Section 10 thereof.

RULE 2. Definition of Terms

As used in these Implementing Rules, the following definitions shall

apply:

(a) Act shall refer to Lending Company Regulation Act of 2007.

(b) Affilliate shall refer to a corporation, the voting stock of which,

to the extent of fifty percent (50%) or less, is owned by a bank or

quasi-bank which is related or linked to such institution

through common stockholders or such other factors as may be

determined by the Monetary Board of the BSP.

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(c) Subsidiary shall refer to a corporation more than fifty percent

(50%) of the voting stock of which is owned by a bank or quasibank.

(d) Branch Office – shall include an extension office, unit, satellite

office, etc. of a lending company with a Certificate of Authority

to operate as such.

(e) BSP shall refer to the Bangko Sentral ng Pilipinas.

(f) Certificate of Authority (CA) shall refer to a certificate issued by

the SEC in favor of a lending company to engage in the business

of lending regulated by R.A. No. 9474 and its Implementing

Rules and Regulations.

(g) Charges on loan shall refer to agreed upon interest rate, service

charge, penalty, discount, and such other charges incidental to

lending activity.

(h) Debtor shall refer to a borrower or person granted a loan by a

lending company.

(i) Monetary Assets shall refer to total assets inclusive of valuation

reserves and deferred income but shall not include investments

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in real estate, in shares of stock of real estate development

corporations or in real estate based projects, leasehold rights

and improvements, fixed assets, foreclosed properties and

prepayments.

(j) Lending company shall refer to a corporation engaged in

granting loans from its own capital funds or from funds sourced

from not more than nineteen (19) persons. It shall not be

deemed to include banking institutions, investment houses,

savings and loan associations, financing companies,

pawnshops, insurance companies, cooperatives and other credit

institutions already regulated by law. The term lending company

shall be synonymous with lending investor.

(k) Networth shall refer to the excess of assets over liabilities, net

of appraisal surplus, unbooked valuation reserves, capital

adjustments, overstatement of assets and unrecorded liabilities.

(l) Quasi-Bank shall refer to a non-bank financial institution

authorized by the BSP to engage in quasi-banking functions and

to borrow funds from more than nineteen (19) lenders through

the issuance, endorsement or assignment with recourse or

acceptance of deposit substitutes as defined in Section 95 of

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Republic Act No.7653 (the “New Central Bank Act”) for purposes

of relending or purchasing of receivables and other obligations.

(m) SEC or Commission shall refer to the Securities and

Exchange Commission

RULE 3. Requirements for Organization

(a) Form of Organization

A lending company shall be established as a stock corporation.

i. Existing Lending Companies organized as single

proprietorships or partnerships shall, within a period of

one (1) year from the effectivity of the Act, organize

themselves as a stock corporation with the minimum

capitalization prescribed under the Act and secure a

Certificate of Authority to operate a lending company.

Otherwise, they shall be disallowed from engaging in the

business of granting loans to the public.

ii. The words “Lending Company” or “Lending Investor” or

any other word descriptive of its primary activity of

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granting loans to the public except words commonly used

to identify financing companies shall always be included

in the corporate and trade name.

(b) Requirements for Securing an Authority – A lending company

shall file with SEC four (4) copies of a duly accomplished

application form to operate as a lending company, signed under

oath by the President, together with the following documents in

the prescribed form:

i. Information Sheet;

ii. NBI clearance of each director/officer;

iii. Foreign directors/officers, in addition to the NBI

Clearance, shall submit a clearance from the Bureau of

Immigration (BI), a photocopy of his passport showing a

valid visa or stay in the Philippines, ACR i-card, and a

work permit issued by the Department of Labor and

Employment;

iv. President’s Sworn Statement and Undertaking that the

corporation will not accept or solicit investments, other

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than loans, from more than 19 persons without SEC

approval, and upon presentation of valid claims, it shall

immediately indemnify or return the investments of

persons from said unauthorized public solicitation of

funds; Moreover, the sworn statement shall likewise

contain an undertaking that the country or state of the

foreign applicant allows Filipino citizens and corporations

to do lending business therein.

v. For an existing lending investor applying for a Certificate

of Authority, it shall submit an external auditor’s sworn

statement and undertaking that based on his/her

examination of the corporate books of accounts and other

related records of the corporation, it has not accepted or

solicited investments, other than loans, from more than 19

persons without prior compliance with Sections 8 and 12

of the Securities Regulation Code and its Amended

Implementing Rules and Regulations.

vi. Business plan including method of marketing its product

and sources of the funds and maturities of credit; and

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vii. Statement of its compliance with Rule 17.1(2)(A)(i) and (ii)

of the Amended Implementing Rules and Regulations of

the Securities Regulation Code.

(c) Branches, Extension or Satellites Offices or Units.

i. Loan transactions shall be booked in the authorized offices of

the lending company;

ii. No lending company shall establish or operate a branch,

extension office or unit or satellite office without prior

approval by the SEC. The following documents shall be

submitted for the opening of a branch office:

1) Information Sheet on the proposed branch;

2) NBI clearance of the manager, cashier and

administrative officer of the proposed branch;

iii. The Certificate of Authority to operate a branch, extension

office, unit or satellite office shall be coterminous with that of

the Head Office.

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(d) Licensing Fees:

i.Initial Application Fees shall be paid to SEC at the time of

filing of application

1) Head Office –

A fee of 1/10 of 1% of the paid-up capital of the

lending company shall be paid for the issuance of

a Certificate of Authority to Operate as a Lending

Company.

2) Branch, extension office, unit or satellite office

A fee of 1/10 of 1% of the assigned capital of the

branch, extension office, unit or satellite office

shall likewise be paid for the issuance of an

original Certificate of Authority.

ii. Annual fee –

An annual fee shall be paid not later than forty five (45) days

before the anniversary date of the CA.

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1) Head Office – 1/8 of 1% of the required paid-up

capital

2) Branch Office – 1/8 of 1% of the required paid-up

capital

(e) Commencement of Operations

A corporation/company that has been duly registered and

granted a Certificate of Authority to Operate as a Lending

Company shall commence operations within one hundred

twenty (120) days from date of grant of such authority.

Failure to commence operations within said period shall be a

ground for the suspension of its CA.

(f) Lending Companies shall use at least 51% of their funds for

direct lending purposes.

(g) The total investment of a lending company in real estate and in

shares of stock in a real estate development corporation and

other real estate based projects shall not at any time exceed

twenty-five (25%) percent of its networth.

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RULE 4. Capital

(a) A Lending Company shall have a minimum paid-up capital of

One Million Pesos (PhP1,000,000.00), unless the SEC prescribes

a higher minimum capitalization, if warranted by the

circumstances.

i. Lending companies established and in operation with a

lower paid-up capital prior to the effectivity of the Act shall

comply with the capital requirement within three (3) years

from the date of effectivity of the Act. For this purpose,

said lending companies shall, within sixty (60) days from

effectivity of these Rules, provide the SEC a sworn

statement by the President, indicating the schedule of their

capital build-up within the three (3) year period.

ii. Should a branch, extension, satellite office or unit be

established, the excess of the required minimum paid-up

capital may be applied to the additional capital requirement

for the proposed branch, extension, satellite office or unit,

as follows:

PhP300,000.00 : Metro Manila and other first

class cities;

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PhP150,000.00 : Second class and other cities;

and

PhP 75,000.00 : Municipalities

(b) In case of failure to comply with the aforementioned capital

requirement, the authority of a lending company to operate as

such shall be suspended, after due notice and hearing, for a

period of thirty (30) days.

RULE 5. Citizenship Requirements

(a) A majority of the voting stock of the lending company shall be

owned by citizens of the Philippines.

(b) The percentage of foreign-owned voting stocks in any lending

company shall be determined by the citizenship of the

individual stockholders. In the case of corporations owning

shares in a lending company, the citizenship of the individual

owners of voting stock in such corporations shall be the basis

in the computation of the percentage.

(c) If the percentage of foreign owned voting stock in any Lending

Company existing prior to the effectivity of the Act is in excess

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of forty-nine (49%), it shall not be increased but may be

reduced and once reduced, shall not be increased thereafter

beyond 49% of the voting stock.

(d) No foreign national may be allowed to own stock unless the

country of which he is a national accords reciprocal rights to

Filipinos.

RULE 6. Amount and Charges on Loans

(a) A lending company may grant loans in such amounts and

interest rates and charges as may be agreed upon between the

lending company and the debtor:

(b) In accordance with the Truth in Lending Act and prior to the

consummation of the transaction, a lending company shall

furnish each debtor a disclosure statement, setting forth, to

the extent applicable, the following information:

i. The principal amount of loan;

ii. Rate of interest of the loan;

iii. Service or processing fee, if any;

iv. Amortization schedule;

v. Any penalty charge for late amortization payment;

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vi. Collection fee, if any;

vii. Notarial fee;

viii. All other fees in connection with the loan transaction;

ix. Description of the collection and lien enforcement

procedures; and

x. Method of calculating the total amount of obligation in case

of default.

RULE 7. Maintenance of Books of Accounts and Records

(a) Every lending company shall maintain books of accounts and

records as may be required by the SEC and prescribed by the

Bureau of Internal Revenue and other government agencies. In

case a lending company engages in other businesses, it shall

maintain separate books of accounts for these businesses.

(b) The Manual of Accounts prescribed by the BSP for lending

investors shall continue to be adopted by lending companies

for uniform recording and reporting of their operations, until a

new Manual of Accounts shall have been prescribed by the

SEC.

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RULE 8. Authority of the SEC

Lending Companies shall be under the supervision and regulation of the

SEC.

(a) Reports – Lending companies shall file with the SEC the

following reports / manuals in accordance with the following

schedules:

Kind of report / manual Due Date

General Information Sheet (GIS)

Within thirty (30)

days from annual

meeting, as stated in

its SEC approved bylaws

Audited Financial Statements

prepared by an external auditor

accredited by the SEC

Within One Hundred

Twenty (120) days

from end of fiscal

year, as stated in its

SEC approved bylaws

Special Forms for Financial

Statements in Electronic Format

Within thirty (30)

days from the last day

of submission of the

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annual Audited

Financial Statements

Interim semi-annual financial

statements (using Special Form)

including the following:

  • • Balance Sheet;
  • • Income and Expense

statement;

  • • Cash flow
  • • Statement of Changes in

Equity

  • • Schedule of Liabilities
  • • List of Directors and Officers
  • • Aging of Receivables

Every July 15 and

January 15

(b) The SEC may examine the Books of Accounts and other

records of the lending company.

(c) Administrative Sanctions – The SEC shall, at its discretion,

impose upon any lending company a basic fine of P10,000.00

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and P100.00 for each day of continuing violation but such

daily fine shall not exceed P50,000.00 for the following:

i. Violation of the Act and its Implementing Rules and

Regulations;

ii. Violation of the terms and conditions of the Certificate of

Authority;

iii. Violation of any lawful order, decision, or ruling of the

Commission;

iv. Unjustified refusal to have its bank of accounts audited;

and

v. Continuous failure to comply with SEC requirements.

The penalty of suspension shall be imposed in case of three

(3) violations and revocation in case of four (4) violations.

RULE 9. Delineation of Authority between SEC and the BSP

Lending companies shall be under the supervision and regulation of

the SEC, Provided, those lending companies which are subsidiaries

and affiliates of banks and quasi-banks shall be subject to BSP

supervision and examination in accordance with Republic Act

No.7653.

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RULE 10. Acts Punishable and Persons Liable

A fine of not less than Ten Thousand Pesos (PhP10,000.00) and not

more than Fifty Thousand Pesos (PhP50,000.00) or imprisonment of

not less than six months but not more than ten (10) years or both, at

the discretion of the court, shall be imposed upon:

(a) Any person who shall engage in the business of a lending

company without a validly subsisting authority to operate from

the SEC;

(b) The president, treasurer and other officers of a corporation,

including the managing officer thereof, who shall knowingly

and willingly

i. Engage in the business of a lending company without a

validly subsisting authority from the SEC;

ii. Hold themselves out to be a lending company, either

through advertisement on whatever form, whether in its

stationery, commercial paper, or other document, or

through other representations;

iii. Make use of a trade or firm name containing the words

lending company or “lending investor” or any other

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designation that would give the public the impression that

it is engaged in the business of a lending company as

defined in the Act without the appropriate SEC authority;

and

(c) Violators or violations of the provisions of the Act;

(d) Any officer, employee or agent of a lending company who shall:

i. Knowingly and willingly make any statement in any

application, report, or document required to be filled under

the Act, which statement is false or misleading with respect

to any material fact;

ii. Overvalue or aid in overvaluing any security for the purpose

of influencing in any way the action of the company in any

loan;

(e) Any officer, employee or examiner of the SEC directly charged

with the implementation of the Act or of other government

agencies who shall commit, connive, aid, or assist in the

commission of acts enumerated under Subsection 1 and 2 of

this Rule.

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RULE 11. Applicability of Other Laws

The provisions of Republic Act No. 3765, otherwise known as the

“Truth in Lending Act of the Philippines,” Republic Act No. 7394 or the

“Consumer Act of the Philippines” and other existing laws, insofar as

they are not in conflict with any provisions of this Act, shall have a

suppletory applicability to Lending Companies.

RULE 12. Effectivity of Implementing Rules and Regulations

These Implementing Rules and Regulations shall take effect fifteen

(15) days from publication in two (2) newspapers of general

circulation.

Adopted by the Commission En Banc on August 23, 2007.

Mandaluyong City, Philippines.

FE B. BARIN

Chairperson

MA. JUANITA E. CUETO

Commissioner

JESUS ENRIQUE G. MARTINEZ

Commissioner

RAUL J. PALABRICA

Commissioner

THADDEUS E. VENTURANZA

Commissioner

Comment

LEGAL NOTE 0012: WHAT IS THE LAW GOVERNING LENDING COMPANIES? R.A. 9474.

Filed under: LEGAL NOTES — 4 Comments

RA 9474:  AN ACT GOVERNING THE ESTABLISHMENT, OPERATION AND REGULATION OF LENDING COMPANIES (22 MAY 2007)

Be it enacted by the Senate and the House of Representatives of the Philippines in Congress assembled:

SECTION 1. Title. – This Act shall be known as the “”Lending Company Regulation Act of 2007″”.

SEC. 2. Declaration of Policy. – It is hereby declared the policy of the State to regulate the establishment of lending companies and to place their operation on a sound, efficient and stable condition to derive the optimum advantages from them as an additional source of credit; to prevent and mitigate, as far as practicable, practices prejudicial to public interest; and to lay down the minimum requirements and standards under which they may be established and do business.

SEC. 3. Definition of Terms. – For purposes of implementing this Act, the following definitions shall apply:

(a) Lending Company shall refer to a corporation engaged in granting loans from its own capital funds or from funds sourced from not more than nineteen (19) persons. It shall not be deemed to include banking institutions, investment houses, savings and loan associations, financing companies, pawnshops, insurance companies, cooperatives and other credit institutions already regulated by law. The term shall be synonymous with lending investors.

(b) Debtor shall refer to a borrower or person granted a loan by the lending company.

(c) Quasi-Bank shall refer to a non-bank financial institution authorized by the BSP to engage in quasi-banking functions and to borrow funds from more than nineteen (19) lenders through the issuance, endorsement or assignment with recourse or acceptance of deposit substitutes as defined in Section 95 of Republic Act No. 7653 (the “:New Central Bank Act”:) for purposes of relending or purchasing of receivables and other obligations.

(d) Subsidiary shall refer to a corporation more than fifty percent (50%) of the voting stock of which is owned by a bank or quasi-bank.

(e) Affiliate shall refer to a corporation, the voting stock of which, to the extent of fifty percent (50%) or less, is owned by a bank or quasi-bank which is related or linked to such institution through common stockholders or such other factors as may be determined by the Monetary Board of the BSP.

(f) SEC shall refer to the Securities and Exchange Commission.

(g) BSP shall refer to the Bangko Sentral ng Pilipinas.

SEC. 4. Form of Organization. – A lending company shall be established only as a corporation: Provided That existing lending investors organized as single proprietorships or partnerships shall be disallowed from engaging in the business of granting loans to the public one year after the date of effectivity of this Act.

No lending company shall conduct business unless granted an authority to operate by the SEC.

SEC. 5. Capital. – The minimum paid in capital of any lending company which may be established after the effectivity of this Act shall be One million pesos (P1,000,000.00): Provided, however, That lending companies established and in operation prior thereto shall comply with the minimum capitalization required under the provisions of this Section within such time as may be prescribed by the SEC which time shall, in no case, be less than three years from the date of effectivity of this Act and: Provided, further, That the SEC may prescribe a higher minimum capitalization if warranted by circumstances.

SEC. 6. Citizenship Requirements. – Upon the effectivity of this Act, at least a majority of the voting capital stock shall be owned by citizens of the Philippines.

The percentage of foreign-owned voting stock in any lending company existing prior to the effectivity of this Act, if such percentage is in excess of forty-nine percent (49%) of the voting stock, shall not be increased but may be reduced and, once reduced, shall not be increased thereafter beyond forty-nine percent (49%) of the voting stock of the lending company. The percentage of foreign-owned voting stocks in any lending company shall be determined by the citizenship of the individual stockholders. In the case of corporations owning shares in a lending company, the citizenship of the individual owners of voting stock in such corporations shall be the basis in the computation of the percentage.

No foreign national may be allowed to own stock unless the country of which he is a national accords reciprocal rights to Filipinos.

SEC. 7. Amount and Charges on Loans. – A lending company may grant loans in such amounts and reasonable interest rates and charges as may be agreed upon between the lending company and the debtor: Provided, That the agreement shall be in compliance with the provisions of Republic Act No. 3765, otherwise known as the “Truth in Lending Act” and Republic Act 7394, otherwise known as the “Consumer Act of the Philippines”: Provided, further, That the Monetary Board, in consultation with the SEC and the industry, may prescribe such interest rate as may be warranted by prevailing economic and social conditions.

SEC. 8. Maintenance of Books of Accounts and Records. – Every lending company shall maintain books of accounts and records as may be required by the SEC and prescribed by the Bureau of Internal Revenue and other government agencies. In case a lending company engages in other businesses, it shall maintain separate books of accounts for these businesses.

The Manual of Accounts prescribed by the BSP for lending investors shall continue to be adopted by lending companies for uniform recording and reporting of their operations, until a new Manual of Accounts shall have been prescribed by the SEC.

It shall issue the appropriate instruments and documents to the parties concerned to evidence its lending and borrowing transactions.

SEC. 9. Authority of the SEC. – The SEC is hereby authorized to:

(a) Create a new division or bureau within its control to regulate and supervise the operations and activities of lending companies in the country;

(b) Issue rules and regulations to implement the provisions contained herein;

(c) Issue rules and regulations on, among other things, minimum capitalization, uses of funds received, method of marketing and distribution, maturity of funds received, restrictions or outright prohibition of purchases or sales of receivables with or without recourse basis;

(d) Require from lending companies reports of condition and such other reports necessary to determine compliance with the provisions of this Act;

(e) Exercise visitorial powers whenever deemed necessary; and

(f) Impose such administrative sanctions including suspension or revocation of the lending company’s authority to operate and the imposition of fines for violations of this Act and regulations issued by the SEC in pursuance thereto.

SEC. 10. Implementing Rules and Regulations. ? Within three months after the approval of this Act, the SEC shall promulgate the necessary rules and regulations implementing the provisions of this Act.

SEC. 11. Delineation of Authority between SEC and the BSP. – Lending companies shall be under the supervision and regulation of the SEC: Provided, however, That lending companies which are subsidiaries and affiliates of banks and quasi-banks shall be subject to BSP supervision and examination in accordance with Republic Act No. 7653: Provider further, That the Monetary Board, after being satisfied that there is reasonable ground to believe that a lending company is being used as a conduit by a bank, quasi-bank or their subsidiary/affiliate to circumvent or violate BSP rules and regulations, may order an examination of the lending company’s books and accounts.

SEC. 12. Penalty. – A fine of not less than Ten Thousand Pesos (P10,000.00) and not more than Fifty thousand pesos(P50,000.00) or imprisonment of not less than six months but not more than ten (10) years or both, at the discretion of the court, shall be imposed upon:

1. Any person who shall engage in the business of a lending company without a validly subsisting authority to operate from the SEC.

2. The president, treasurer and other officers of the corporation, including the managing officer thereof, who shall knowingly and willingly:

a. Engage in the business of a lending company without a validly subsisting authority to operate from the SEC;

b. Hold themselves out to be a lending company, either through advertisement in whatever form, whether in its stationery, commercial paper, or other document, or through other representations without authority;

c. Make use of a trade or firm name containing the words “lending company” or “lending investor” or any other designation that would give the public the impression that it is engaged in the business of a lending company as defined in this Act without authority; and

d. Violate the provisions of this Act.

3. Any officer, employee, or agent of a lending company who shall:

a. Knowingly and willingly make any statement in any application, report, or document required to be filed under this Act, which statement is false or misleading with respect to any material fact; and

b. Overvalue or aid in overvaluing any security for the purpose of influencing in any way the action of the company in any loan, or discounting line.

4. Any officer, employee or examiner of the SEC directly charged with the implementation of this Act or of other government agencies who shall commit, connive, aid, or assist in the commission of acts enumerated under Subsections 1 and 2 of this Section.

SEC. 13. Matters not Covered by this Act. ? The provisions of Republic Act No. 3765, otherwise known as the “Truth in Lending Act”, Republic Act No. 7394 or the “Consumer Act of the Philippines” and other existing laws, insofar as they are not in conflict with any provision of this Act, shall apply in matters not otherwise specifically provided in this Act.

SEC. 14. Repealing Clause. – All laws, executive orders, letters of instruction, rules and regulations, or provisions thereof which are inconsistent with the provisions of this Act are hereby repealed, amended or modified accordingly.

SEC. 15. Separability Clause. – If any portion hereof shall be held invalid or unconstitutional, such invalidity or unconstitutionality shall not affect the other provisions which shall remain in full force and effect.

SEC. 16. Effectivity. – This Act shall take effect fifteen (15) days after its publication in at least two national newspapers of general circulation.

Approved,

MANNY VILLAR

President of the Senate

JOSE DE VENECIA JR.

Speaker of the House of Representatives

This Act which is a consolidation of Senate Bill No. 1949 and House Bill No. 6073 was finally passed by the Senate and the House of Representatives on December 19, 2006 and February 20, 2007, respectively.

OSCAR G. YABES

Secretary of Senate

ROBERTO P. NAZARENO

Secretary General

House of Representatives

Approved: May 22, 2007

GLORIA MACAPAGAL-ARROYO

President of the Philippines

Comment

CASE 2011-0019: DO-ALL METALS INDUSTRIES, INC., SPS. DOMINGO LIM AND LELY KUNG LIM VS. SECURITY BANK CORP., TITOLAIDO E. PAYONGAYONG, EVYLENE C. SISON, PHIL. INDUSTRIAL SECURITY AGENCY CORP. AND GIL SILOS (G.R. NO. 176339, 10 JANUARY 2011, ABAD, J) SUBJECTS: FILING FEES; EX-PARTE HEARING; TERMINATION OF LEASE. (BRIEF TITLE: DO-ALL METALS ET AL. VS. SECURITY BANK ET AL.)

Filed under: LATEST SUPREME COURT CASES — Leave a comment
January 24, 2011

DO-ALL METALS INDUSTRIES, INC., SPS. DOMINGO LIM AND LELY KUNG LIM VS. SECURITY BANK CORP., TITOLAIDO E. PAYONGAYONG, EVYLENE C. SISON, PHIL. INDUSTRIAL SECURITY AGENCY CORP. AND GIL SILOS (G.R. NO. 176339, 10 JANUARY 2011, ABAD, J) SUBJECTS: FILING FEES; EX-PARTE HEARING; TERMINATION OF LEASE. (BRIEF TITLE: DO-ALL METALS ET AL. VS. SECURITY BANK ET AL.)

x —————————————————————- x

 

 

DOCTRINES

 

 

 

PETITIONERS FILED SUPPLEMENTAL COMPLAINT BUT FAILED TO PAY THE FILING FEES. BANK SAID RTC DID NOT ACQUIRE JURISDICTION OVER THE CASE FOR NON-PAYMENT OF FILING FEES. IS THIS CORRECT? NO BECAUSE WHEN THE ORIGINAL COMPLAINT WAS FILED FILING FEES WERE PAID AND THE COURT ACQUIRED JURISDICTION OVER THE CASE.  SUCH JURISDICTION PERSISTS.

 

 

 

One.  On the issue of jurisdiction, respondent Bank argues that plaintiffs’ failure to pay the filing fees on their supplemental complaint is fatal to their action. 

But what the plaintiffs failed to pay was merely the filing fees for their Supplemental Complaint.  The RTC acquired jurisdiction over plaintiffs’ action from the moment they filed their original complaint accompanied by the payment of the filing fees due on the same.  The plaintiffs’ non-payment of the additional filing fees due on their additional claims did not divest the RTC of the jurisdiction it already had over the case.[1][6] 

THE BANK FAILED TO APPEAR DURING TRIAL. EVIDENCE WAS PRESENTED EX-PARTE. LATER THE BANK ARGUED THAT THE TESTIMONIES OF PETITIONERS’ WITNESSES SHOULD NOT BE GIVEN CREDENCE BECAUSE THEY WERE GIVEN EX-PARTE. SC RULED THAT AN EX PARTE HEARING CANNOT BE ASSAILED AS LESS CREDIBLE.

The Bank belittles the testimonies of the petitioners’ witnesses for having been presented ex parte before the clerk of court.  But the ex parte hearing, having been properly authorized, cannot be assailed as less credible.  It was the Bank’s fault that it was unable to attend the hearing.  It cannot profit from its lack of diligence. 

THE BANK CONTENDED THAT THE LEASE HAVE ALREADY EXPIRED. THEREFORE THEY CAN TAKE OVER THE BUILDING FROM THE PETITIONERS. SC RULED THAT THE BANK HAD NO BUSINESS HARASSING PETITIONERS.

While the lease may have already lapsed, the Bank had no business harassing and intimidating the Lims and their employees.  The RTC was therefore correct in adjudging moral damages, exemplary damages, and attorney’s fees against the Bank for the acts of their representatives and building guards. 

PETITIONERS EXPLAINED THAT THEY HAVE NOT PAID THE FILING FEES FOR THEIR SUPPLEMENTAL COMPLAINT BECAUSE ANYWAY THESE FEES CONSTITUTED A LIEN ON THE JUDGMENT. SC RULED THAT AFTER-JUDGMENT LIEN APPLIES ONLY WHERE THE FEES WERE INCORRECTLY ASSESSED OR PAID OR WHERE THE COURT HAS DISCRETION TO FIX THE AMOUNT OF THE AWARD. NO SUCH CIRCUMSTANCE/S EXITS.

Three. As to the damages that plaintiffs claim under their supplemental complaint, their stand is that the RTC committed no error in admitting the complaint even if they had not paid the filing fees due on it since such fees constituted a lien anyway on the judgment award.  But this after-judgment lien, which implies that payment depends on a successful execution of the judgment, applies to cases where the filing fees were incorrectly assessed or paid or where the court has discretion to fix the amount of the award.[2][8]  None of these circumstances obtain in this case. 

Here, the supplemental complaint specified from the beginning the actual damages that the plaintiffs sought against the Bank.  Still plaintiffs paid no filing fees on the same.  And, while petitioners claim that they were willing to pay the additional fees, they gave no reason for their omission nor offered to pay the same.  They merely said that they did not yet pay the fees because the RTC had not assessed them for it.  But a supplemental complaint is like any complaint and the rule is that the filing fees due on a complaint need to be paid upon its filing.[3][9]  The rules do not require the court to make special assessments in cases of supplemental complaints.

 

 

WHAT IS THE EFFECT OF THE NON-PAYMENT OF FILING FEES PERTINENT TO A SUPPLEMENTAL COMPLAINT? SUCH SUPPLEMENTAL COMPLAINT SHALL BE TREATED AS NOT HAVING BEEN FILED.

To aggravate plaintiffs’ omission, although the Bank brought up the question of their failure to pay additional filing fees in its motion for reconsideration, plaintiffs made no effort to make at least a late payment before the case could be submitted for decision, assuming of course that the prescription of their action had not then set it in.  Clearly, plaintiffs have no excuse for their continuous failure to pay the fees they owed the court.  Consequently, the trial court should have treated their Supplemental Complaint as not filed. 

 

 

PETITIONERS ARGUED THAT THE BANK BE DEEMED TO HAVE WAIVED ITS OBJECTION TO THE NON-PAYMENT OF FILING FEES BECAUSE THEY RAISED THE ISSUE ONLY AFTER THE RTC HAD RENDERED ITS DECISION ON THE CASE. SC RULED THAT A PARTY OR EVEN THE TRIAL COURT CANNOT WAIVE THE PAYMENT OF THE FILING FEES. ONLY THE SUPREME COURT CAN GRANT EXEMPTIONS UNDER THE RULES.

Plaintiffs of course point out that the Bank itself raised the issue of non-payment of additional filing fees only after the RTC had rendered its decision in the case.  The implication is that the Bank should be deemed to have waived its objection to such omission.  But it is not for a party to the case or even for the trial court to waive the payment of the additional filing fees due on the supplemental complaint.  Only the Supreme Court can grant exemptions to the payment of the fees due the courts and these exemptions are embodied in its rules.

x—————————————————————————-x

DECISION

 

ABAD, J.:

This case is about the propriety of awarding damages based on claims embodied in the plaintiff’s supplemental complaint filed without prior payment of the corresponding filing fees.

The Facts and the Case

From 1996 to 1997, Dragon Lady Industries, Inc., owned by petitioner spouses Domingo Lim and Lely Kung Lim (the Lims) took out loans from respondent Security Bank Corporation (the Bank) that totaled P92,454,776.45.  Unable to pay the loans on time, the Lims assigned some of their real properties to the Bank to secure the same, including a building and the lot on which it stands (the property), located at M. de Leon St., Santolan, Pasig City.[4][1] 

In 1998 the Bank offered to lease the property to the Lims through petitioner Do-All Metals Industries, Inc. (DMI) primarily for business although the Lims were to use part of the property as their residence.  DMI and the Bank executed a two-year lease contract from October 1, 1998 to September 30, 2000 but the Bank retained the right to pre-terminate the lease.  The contract also provided that, should the Bank decide to sell the property, DMI shall have the right of first refusal.

On December 3, 1999, before the lease was up, the Bank gave notice to DMI that it was pre-terminating the lease on December 31, 1999.  Wanting to exercise its right of first refusal, DMI tried to negotiate with the Bank the terms of its purchase.  DMI offered to pay the Bank P8 million for the property but the latter rejected the offer, suggesting P15 million instead.  DMI made a second offer of P10 million but the Bank declined the same. 

While the negotiations were on going, the Lims claimed that they continued to use the property in their business.  But the Bank posted at the place private security guards from Philippine Industrial Security Agency (PISA).  The Lims also claimed that on several occasions in 2000, the guards, on instructions of the Bank representatives Titolaido Payongayong and Evylene Sison, padlocked the entrances to the place and barred the Lims as well as DMI’s employees from entering the property.  One of the guards even pointed his gun at one employee and shots were fired.  Because of this, DMI was unable to close several projects and contracts with prospective clients.  Further, the Lims alleged that they were unable to retrieve assorted furniture, equipment, and personal items left at the property. 

The Lims eventually filed a complaint with the Regional Trial Court (RTC) of Pasig City for damages with prayer for the issuance of a temporary restraining order (TRO) or preliminary injunction against the Bank and its co-defendants Payongayong, Sison, PISA, and Gil Silos.[5][2]  Answering the complaint, the Bank pointed out that the lease contract allowed it to sell the property at any time provided only that it gave DMI the right of first refusal.  DMI had seven days from notice to exercise its option.  On September 10, 1999 the Bank gave notice to DMI that it intended to sell the property to a third party.  DMI asked for an extension of its option to buy and the Bank granted it.  But the parties could not agree on a purchase price.  The Bank required DMI to vacate and turnover the property but it failed to do so.  As a result, the Bank’s buyer backed-out of the sale.  Despite what happened, the Bank and DMI continued negotiations for the purchase of the leased premises but they came to no agreement. 

The Bank denied, on the other hand, that its guards harassed DMI and the Lims.  To protect its property, the Bank began posting guards at the building even before it leased the same to DMI.  Indeed, this arrangement benefited both parties.  The Bank alleged that in October of 2000, when the parties could not come to an agreement regarding the purchase of the property, DMI vacated the same and peacefully turned over possession to the Bank.

The Bank offered no objection to the issuance of a TRO since it claimed that it never prevented DMI or its employees from entering or leaving the building.  For this reason, the RTC directed the Bank to allow DMI and the Lims to enter the building and get the things they left there.  The latter claimed, however, that on entering the building, they were unable to find the movable properties they left there.  In a supplemental complaint, DMI and the Lims alleged that the Bank surreptitiously took such properties, resulting in additional actual damages to them of over P27 million.

The RTC set the pre-trial in the case for December 4, 2001.  On that date, however, counsel for the Bank moved to reset the proceeding.  The court denied the motion and allowed DMI and the Lims to present their evidence ex parte.  The court eventually reconsidered its order but only after the plaintiffs had already presented their evidence and were about to rest their case.  The RTC declined to recall the plaintiffs’ witnesses for cross- examination but allowed the Bank to present its evidence.[6][3]  This prompted the Bank to seek relief from the Court of Appeals (CA) and eventually from this Court but to no avail.[7][4]

During its turn at the trial, the Bank got to present only defendant Payongayong, a bank officer.  For repeatedly canceling the hearings and incurring delays, the RTC declared the Bank to have forfeited its right to present additional evidence and deemed the case submitted for decision.

On September 30, 2004 the RTC rendered a decision in favor of DMI and the Lims.  It ordered the Bank to pay the plaintiffs P27,974,564.00 as actual damages, P500,000.00 as moral damages, P500,000 as exemplary damages, and P100,000.00 as attorney’s fees.  But the court absolved defendants Payongayong, Sison, Silos and PISA of any liability.

The Bank moved for reconsideration of the decision, questioning among other things the RTC’s authority to grant damages considering plaintiffs’ failure to pay the filing fees on their supplemental complaint.  The RTC denied the motion.  On appeal to the CA, the latter found for the Bank, reversed the RTC decision, and dismissed the complaint as well as the counterclaims.[8][5]  DMI and the Lims filed a motion for reconsideration but the CA denied the same, hence this petition.

The Issues Presented

          The issues presented in this case are:

          1.       Whether or not the RTC acquired jurisdiction to hear and adjudicate plaintiff’s supplemental complaint against the Bank considering their failure to pay the filing fees on the amounts of damages they claim in it;

2.       Whether or not the Bank is liable for the intimidation and harassment committed against DMI and its representatives; and

3.       Whether or not the Bank is liable to DMI and the Lims for the machineries, equipment, and other properties they allegedly lost after they were barred from the property.

The Court’s Rulings

 

One.  On the issue of jurisdiction, respondent Bank argues that plaintiffs’ failure to pay the filing fees on their supplemental complaint is fatal to their action. 

But what the plaintiffs failed to pay was merely the filing fees for their Supplemental Complaint.  The RTC acquired jurisdiction over plaintiffs’ action from the moment they filed their original complaint accompanied by the payment of the filing fees due on the same.  The plaintiffs’ non-payment of the additional filing fees due on their additional claims did not divest the RTC of the jurisdiction it already had over the case.[9][6] 

Two.  As to the claim that Bank’s representatives and retained guards harassed and intimidated DMI’s employees and the Lims, the RTC found ample proof of such wrongdoings and accordingly awarded damages to the plaintiffs.  But the CA disagreed, discounting the testimony of the police officers regarding their investigations of the incidents since such officers were not present when they happened.  The CA may be correct in a way but the plaintiffs presented eyewitnesses who testified out of personal knowledge.  The police officers testified merely to point out that there had been trouble at the place and their investigations yielded their findings.

The Bank belittles the testimonies of the petitioners’ witnesses for having been presented ex parte before the clerk of court.  But the ex parte hearing, having been properly authorized, cannot be assailed as less credible.  It was the Bank’s fault that it was unable to attend the hearing.  It cannot profit from its lack of diligence. 

Domingo Lim and some employees of DMI testified regarding the Bank guards’ unmitigated use of their superior strength and firepower.  Their testimonies were never refuted.  Police Inspector Priscillo dela Paz testified that he responded to several complaints regarding shooting incidents at the leased premises and on one occasion, he found Domingo Lim was locked in the building.  When he asked why Lim had been locked in, a Bank representative told him that they had instructions to prevent anyone from taking any property out of the premises.  It was only after Dela Paz talked to the Bank representative that they let Lim out.[10][7]

Payongayong, the Bank’s sole witness, denied charges of harassment against the Bank’s representatives and the guards.  But his denial came merely from reports relayed to him.  They were not based on personal knowledge. 

While the lease may have already lapsed, the Bank had no business harassing and intimidating the Lims and their employees.  The RTC was therefore correct in adjudging moral damages, exemplary damages, and attorney’s fees against the Bank for the acts of their representatives and building guards. 

Three. As to the damages that plaintiffs claim under their supplemental complaint, their stand is that the RTC committed no error in admitting the complaint even if they had not paid the filing fees due on it since such fees constituted a lien anyway on the judgment award.  But this after-judgment lien, which implies that payment depends on a successful execution of the judgment, applies to cases where the filing fees were incorrectly assessed or paid or where the court has discretion to fix the amount of the award.[11][8]  None of these circumstances obtain in this case. 

Here, the supplemental complaint specified from the beginning the actual damages that the plaintiffs sought against the Bank.  Still plaintiffs paid no filing fees on the same.  And, while petitioners claim that they were willing to pay the additional fees, they gave no reason for their omission nor offered to pay the same.  They merely said that they did not yet pay the fees because the RTC had not assessed them for it.  But a supplemental complaint is like any complaint and the rule is that the filing fees due on a complaint need to be paid upon its filing.[12][9]  The rules do not require the court to make special assessments in cases of supplemental complaints.

To aggravate plaintiffs’ omission, although the Bank brought up the question of their failure to pay additional filing fees in its motion for reconsideration, plaintiffs made no effort to make at least a late payment before the case could be submitted for decision, assuming of course that the prescription of their action had not then set it in.  Clearly, plaintiffs have no excuse for their continuous failure to pay the fees they owed the court.  Consequently, the trial court should have treated their Supplemental Complaint as not filed. 

Plaintiffs of course point out that the Bank itself raised the issue of non-payment of additional filing fees only after the RTC had rendered its decision in the case.  The implication is that the Bank should be deemed to have waived its objection to such omission.  But it is not for a party to the case or even for the trial court to waive the payment of the additional filing fees due on the supplemental complaint.  Only the Supreme Court can grant exemptions to the payment of the fees due the courts and these exemptions are embodied in its rules.

Besides, as correctly pointed out by the CA, plaintiffs had the burden of proving that the movable properties in question had remained in the premises and that the bank was responsible for their loss.  The only evidence offered to prove the loss was Domingo Lim’s testimony and some undated and unsigned inventories.  These were self-serving and uncorroborated. 

WHEREFORE, the Court PARTIALLY GRANTS the petition and REINSTATES with modification the decision of the Regional Trial Court of Pasig City in Civil Case 68184.  The Court DIRECTS respondent Security Bank Corporation to pay petitioners DMI and spouses Domingo and Lely Kung Lim damages in the following amounts: P500,000.00 as moral damages, P500,000.00 as exemplary damages, and P100,000.00 for attorney’s fees.  The Court DELETES the award of actual damages of P27,974,564.00.

          SO ORDERED.

ROBERTO A. ABAD 

                                                              Associate Justice

WE CONCUR:

ANTONIO T. CARPIO

Associate Justice

ANTONIO EDUARDO B. NACHURA       DIOSDADO M. PERALTA

                  Associate Justice                                    Associate Justice

LUCAS P. BERSAMIN

Associate Justice

ATTESTATION

          I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

                                                      ANTONIO T. CARPIO

                                                   Associate Justice

                                Chairperson, Second Division                  

 

 

CERTIFICATION

          Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

                                                             RENATO C. CORONA

                                                            Chief Justice

 

[1][6]  See PNOC Shipping and Transport Corporation v. Court of Appeals, 358 Phil. 38, 62 (1998).

[2][8]  Rules of Court, Rule 141, Section 2 (Fees in Lien).

[3][9] Section 1 (Payment of Fees) in relation to Section 7 (Fees collectible by the Clerks of Regional Trial Courts for filing an action).

[4][1]  Covered by Transfer Certificate of Title 79603.

[5][2]  Docketed as Civil Case 68184.

[6][3]  Order of the RTC dated May 10, 2002 and Resolution of the RTC dated August 5, 2002; records, Volume 1, pp. 317-318 and 340-341, respectively.

[7][4]  The appeals were docketed as CA-G.R. SP 73520 and G.R. 161828, respectively.

[8][5] In the decision of the Court of Appeals dated October 10, 2006 in CA-G.R. CV 85667, penned by Associate Justice Normandie B. Pizarro and concurred in by Associate Justices Amelita G. Tolentino and Jose Catral Mendoza, now a member of this Court; CA rollo, pp. 151-168.

[9][6]  See PNOC Shipping and Transport Corporation v. Court of Appeals, 358 Phil. 38, 62 (1998).

[10][7]  TSN, January 18, 2002, pp. 3-4.

[11][8]  Rules of Court, Rule 141, Section 2 (Fees in Lien).

[12][9] Section 1 (Payment of Fees) in relation to Section 7 (Fees collectible by the Clerks of Regional Trial Courts for filing an action).

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