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METROPOLITAN BANK v. QUILTS

FACTS:

The case involves a petition to set aside the decision of the Court of Appeals, which declared that the trial court did not have jurisdiction to decide on the authority of defendants Senen B. Dizon and Relita P. de los Santos to enter into a mortgage contract. The Court of Appeals ordered the suspension of further proceedings until the issue is resolved by the Securities and Exchange Commission (SEC).

Relita P. de los Santos, the Corporate Secretary of Quilts and All, Inc., issued a Secretary's Certificate stating that in a special meeting of the Board of Directors, President Senen B. Dizon was authorized to mortgage a property owned by Quilts to Metrobank. Metrobank restructured Dizon's personal loan and secured it with the mortgaged property based on this certificate.

Quilts offered to cancel the mortgage, claiming that Dizon had left the country with several creditors. However, Metrobank refused the offer.

Quilts later challenged the validity of the special meeting, alleging a lack of directors to constitute a quorum. Quilts filed a complaint for annulment and cancellation of the mortgage against Metrobank, Dizon, and de los Santos. Metrobank's motion to dismiss the complaint was initially granted but later reconsidered by the trial court.

Metrobank filed a petition before the Court of Appeals, contesting the reinstatement of the complaint. The Court of Appeals upheld the jurisdiction of the trial court only with respect to Metrobank. It dismissed the case against Dizon and de los Santos, stating that the issue of ultra vires acts falls within the jurisdiction of the SEC. The Court of Appeals also directed the suspension of the proceedings against Metrobank pending the outcome of the case filed with the SEC.

The main issue in this petition is whether Quilts' complaint sufficiently states a cause of action against Metrobank. The complaint alleges that de los Santos issued a Secretary's Certificate authorizing Dizon to mortgage Quilts' property to Metrobank and that the property was indeed mortgaged to guarantee Dizon's personal obligation based on verification from the Registry of Deeds.

ISSUES:

  1. Whether the lower court has jurisdiction over the issue of the authority of Senen B. Dizon to enter into the mortgage contract.

  2. Whether Quilt's complaint sufficiently states a cause of action against Metrobank.

RULING:

  1. The Court of Appeals declared that the lower court does not have jurisdiction over the issue of Senen B. Dizon's authority to enter into the mortgage contract. The SEC has the original and exclusive jurisdiction to resolve matters concerning ultra vires acts of corporate officers.

  2. The Court of Appeals held that paragraph 10 of Quilt's complaint is sufficient to establish a cause of action against Metrobank.

PRINCIPLES:

  • The Securities and Exchange Commission has the original and exclusive jurisdiction to resolve matters concerning ultra vires acts of corporate officers. (Section 5 of Presidential Decree 902-A, as amended)

  • A complaint sufficiently states a cause of action if it contains factual allegations that, if admitted, would give rise to a valid cause of action against the defendant.