CASE DIGEST : DIVERSIFIED PLASTIC FILM SYSTEM, INC., VS. PHILIPPINE INVESTMENT ONE (SPV-AMC), INC., G.R. No. 236924. March 29, 2023 GAERLAN

FACTS : The case arose from Diversified's default on a ₱100 million loan secured by a Mortgage Trust Indenture (MTI), which was eventually assigned by DBP to PI-One after All Asia transferred its rights to DBP. When PI-One initiated the extrajudicial foreclosure of Diversified's mortgaged properties, Diversified questioned PI-One's authority to foreclose, claiming that it was not the valid trustee under the MTI. After the writ of preliminary injunction obtained by Diversified was dissolved with finality, PI-One filed a petition for its appointment as successor trustee under Section 7.08 of the MTI. The RTC granted the petition, and the CA affirmed, holding that the court had authority to appoint a successor trustee after the contractual period lapsed, and that PI-One, as assignee of the loan and the remaining creditor, succeeded to All Asia's rights under the MTI.

On appeal, Diversified argued that the RTC had no jurisdiction to appoint PI-One as trustee, that summons was improperly served, that PI-One was not qualified to act as trustee because it was not engaged in the trust business, and that no urgency justified the appointment. The CA rejected these arguments, ruling that Section 7.08 of the MTI expressly authorizes any lender to seek judicial appointment of a successor trustee when the parties fail to appoint one within the prescribed period, that Diversified voluntarily submitted to the RTC's jurisdiction by filing its Answer, and that under Section 13 of the Special Purpose Vehicle Act (R.A. No. 9182), PI-One validly acquired All Asia's rights and interests under the MTI through assignment, including the right to act as trustee.

ISSUE : WON the RTC does not have jurisdiction to appoint a trustee because under the MTI, the power to appoint a trustee is lodged in both Diversified and the majority of its lenders

HELD : The Supreme Court held that while the RTC had jurisdiction over the petition for appointment of a trustee, as the action is incapable of pecuniary estimation and Section 7.08 of the Mortgage Trust Indenture (MTI) expressly authorizes a lender to seek judicial appointment of a successor trustee, it failed to acquire jurisdiction over Diversified's person due to improper service of summons. Summons was served on Diversified's receiving officer instead of the corporate officers exclusively enumerated under Section 11, Rule 14 of the Rules of Court. The Court further ruled that Diversified did not voluntarily submit to the RTC's jurisdiction because its Answer Ad Cautelam and subsequent pleadings consistently and expressly challenged the RTC's jurisdiction through a special appearance, thereby rendering all proceedings before the RTC null and void.

The Court likewise ruled that the Deed of Assignment between DBP and PI-One was ineffective for failure to comply with the mandatory notice requirements and certification under Section 12 of the Special Purpose Vehicle Act (R.A. No. 9182). Even assuming a valid assignment, PI-One could not automatically assume the position of trustee because an assignee merely acquires the rights of its assignor and remains bound by the conditions of the MTI. Since the MTI requires that the trustee be an institution duly authorized to engage in the trust business, and PI-One admittedly lacked such qualification, it was disqualified from serving as trustee. Accordingly, the Court granted the petition, reversed the CA and RTC rulings, and dismissed PI-One's petition for appointment as trustee.