Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 167768 April 17, 2009
MALAYAN INSURANCE COMPANY, INC., Petitioners,
vs.
VICTORIAS MILLING COMPANY, INC., Respondents.
D E C I S I O N
NACHURA, J.:
Petitioner Malayan Insurance Company, Inc. assails the Court of Appeals’ Decision1 dated May 21, 2004 and Resolution2 dated April 11, 2005, which affirmed the suspension of the proceedings on its claim for reimbursement against the respondent Victorias Milling Company, Inc.
The case arose from the following antecedents:
On July 8, 1997, acting on the verified petition for declaration of a state of suspension of payments, for the approval of a rehabilitation plan and the appointment of a management committee, the Securities and Exchange Commission (SEC) issued an order suspending all pending actions for claims against respondent, thus:
As a consequence of the filing of the instant petition for suspension of payments, all actions for claims against VICTORIAS MILLING COMPANY, INC., pending before any court, [t]ribunal, [o]ffice, [b]oard, body, and/or [c]ommission are deemed SUSPENDED immediately until further order from this Hearing Panel. (RCBC v. IAC, et al., 213 [SCRA] 830; BPI vs. CA, 229 SCRA 223))
Likewise, petitioner [herein respondent] is hereby enjoined from disposing of any and all of its properties in any manner whatsoever, except in the ordinary course of its business and from making any payment outside of the legitimate expenses of its business during the pendency of the proceedings.3
A month later, SEC constituted a Management Committee.
On May 31, 1999, the Labor Arbiter rendered a decision in RAB Case No. 06-08-10553-98 entitled "Dominador P. Abelido v. Victorias Milling Co., Inc.," ordering respondent to pay ₱6,605,275.24 to Abelido.
To comply with the requisite bond for an appeal to the National Labor Relations Commission (NLRC), respondent procured from the petitioner a surety bond (MICO Bond No. 070117) on July 16, 1999, to secure the satisfaction of the judgment rendered against it. Under the said surety bond, petitioner bound itself to be jointly and severally liable with respondent for the sum of ₱6,605,275.24 in the event judgment in the labor case is affirmed in whole or in part.4
In consideration of the execution of the surety bond, respondent, through its Chief Financial Officer Romeo Hermoso, executed in favor of petitioner an Indemnity Agreement5 dated July 16, 1999. In said agreement, respondent bound itself to indemnify petitioner and to keep it harmless from all damages, costs, penalties, taxes and other expenses that petitioner may, at any time, incur as a consequence of having become surety.
As security for its obligation under the Indemnity Agreement, respondent executed a Deed of Assignment6 dated July 15, 1999 wherein respondent assigned in favor of the petitioner all of its funds on deposit with the Bank of the Philippine Islands (BPI), equivalent to the amount of the supersedes bond.
On September 7, 2000, the NLRC rendered a decision affirming the May 31, 1999 Decision of the Labor Arbiter. Consequently, a writ of execution was issued on April 4, 2001.7
On April 10, 2001, Executive Labor Arbiter Oscar Uy issued an order, directing petitioner to immediately turn over to the NLRC the amount of ₱6,605,275.24 on account of the writ of execution.8 On April 17, 2001, the Labor Arbiter issued another order requiring petitioner to explain why it should not be cited for contempt for failure to comply with its previous order.9 When petitioner failed to comply, the Labor Arbiter issued a third order dated May 7, 2001, which ordered petitioner to immediately turn over to the NLRC the garnished amount equivalent to the amount covered by the surety bond.10
On May 11, 2001, petitioner served a demand upon BPI for the release of the bank deposits that respondent had assigned in its favor.11 BPI rejected the demand because respondent was still challenging the validity of the execution award [in the CA]; and the validity of the Deed of Assignment may be questioned on the ground that it was executed without the requisite authority of the Management Committee.12
In a Letter13 dated May 16, 2001, respondent advised petitioner that the issuance and enforcement of the writ of execution is premature, void and illegal, for which reason, respondent disavowed any liability liable for whatever consequences resulting from the premature execution of the decision.
Petitioner replied that it had raised before the NLRC the issues cited in the May 16, 2001 Letter, but the latter was bent on enforcing the writ of execution. Thus, petitioner requested from respondent a copy of the temporary restraining order (TRO) that it allegedly procured from the Court of Appeals (CA), with a reminder that, without a TRO, it would be compelled to comply with the writ of execution to avoid being held in contempt.14
On May 18, 2001, petitioner released ₱6,605,275.24 to the NLRC.15 Thereafter, petitioner made a series of demands for reimbursement against respondent and BPI but to no avail.16
On January 15, 2003, petitioner filed a complaint for sum of money and damages against respondent and BPI. BPI filed a motion to dismiss the complaint. Respondent also filed a motion to dismiss on the ground that it is the SEC that has jurisdiction over the claim considering that it is under a state of suspension of payments.
Meanwhile, with the approval of the rehabilitation plan, SEC issued an order appointing a rehabilitation receiver on January 27, 2003.17
Thus, on July 2, 2003, the Regional Trial Court (RTC) issued an order denying BPI’s motion to dismiss while suspending the proceedings as against respondent, thus:
WHEREFORE, co-defendant BPI’s motion to dismiss dated March 4, 2003 is denied for lack of merit.
Insofar as co-defendant VMC [Victorias Milling Company, Inc.] is concerned, the herein proceeding is suspended.
SO ORDERED.18
Petitioner moved for the partial reconsideration of the order insofar as it suspended the proceedings against respondent. On October 7, 2004, the RTC denied the motion.19
Subsequently, petitioner filed a petition for certiorari with the CA assailing the said orders. On May 21, 2004, the CA agreed with the RTC that petitioner’s claim is covered by the Stay Order; consequently, it dismissed the petition. It stressed that, as held in Rubberworld (Phils.), Inc. v. NLRC,20 Sec.6(c) of P.D. 902-A does not make any distinction as to what claims are covered. The appellate court noted that the law provides that actions for claims shall be suspended "upon appointment of a management committee or a rehabilitation receiver." It then concluded that, even if the claim were not covered by the said stay order, the suspension of petitioner’s claim would still be inevitable considering that at the time the rehabilitation receiver was appointed by the SEC on January 27, 2003, petitioner’s complaint was already pending before the trial court. According to the CA, to rule otherwise would defeat the very purpose of suspension of payments and render inutile the rescue functions of the management committee.
On April 11, 2005, the CA denied the petitioner’s motion for reconsideration. Dissatisfied with the CA’s ruling, petitioner now comes to this Court raising the following issues:
I
WITH ALL DUE RESPECT, THE HONORABLE COURT ERRED IN RULING THAT BY VIRTUE OF SECTION 6 (C) OF P.D. 902-A, "ALL ACTIONS FOR CLAIMS" AGAINST RESPONDENT VICTORIAS MILLING, CO., INC. ("VMC"), WITHOUT ANY DISTINCTION, ARE SUSPENDED UPON THE APPOINTMENT BY THE SECURITIES AND EXCHANGE COMMISSION ("SEC") OF A MANAGEMENT COMMITTEE FOR RESPONDENT VMC.
II
WITH DUE RESPECT, THE HONORABLE COURT ERRED IN RULING THAT SINCE THE ACTION OF PETITIONER MICI AGAINST RESPONDENT VMC IN THE CASE BELOW WAS ALREADY PENDING WHEN THE SEC APPOINTED A REHABILITATION RECEIVER FOR RESPONDENT VMC, ITS SUSPENSION "WOULD STILL BE INEVITABLE" AS THE LAW PROVIDES THAT "SUSPENSION OF ACTIONS COMMENCES UPON APPOINTMENT OF A MANAGEMENT COMMITTEE OR A REHABILITATION RECEIVER."
III
WITH DUE RESPECT, THE HONORABLE COURT ERRED IN FINDING THAT THE PAYMENT OF THE INSTANT CLAIM OF PETITIONER MICI WOULD "DEFEAT THE VERY PURPOSE" OF THE STAY ORDER ISSUED BY THE SEC FOLLOWING THE APPOINTMENT OF THE MANAGEMENT COMMITTEE FOR RESPONDENT VMC.21
Petitioner maintains that the Stay Order applies only to claims existing prior to or at the time of the issuance of the said order. It avers that Sec. 6(c) of P.D. No. 902-A is clear and categorical that the suspension covers actions for claims which are pending before any court at the time of the appointment of the management committee or rehabilitation receiver.22 And, not being a pre-existing claim, payment of petitioner’s claim will not result in undue preference which is the mischief sought to be prevented by a stay order.
The CA allegedly erred in citing Rubberworld which declared that the suspension is deemed to cover "all claims" since the law made no distinction or exemption. Petitioner posits that such pronouncement referred to claims in general, as opposed to labor claims.23
Petitioner further contends that the suspension of actions commences either upon the appointment of a management receiver or rehabilitation receiver, not successively as interpreted by the CA. It argues that the use of the disjunctive word "or" in Sec. 6(c) signifies that suspension of actions commences either upon appointment of a management committee or a rehabilitation receiver.
Citing Philippine Blooming Mills, Inc. v. Court of Appeals,24 petitioner submits that, as surety, it is separately liable for the satisfaction of the judgment award rendered against the respondent in the labor case. Petitioner lays the blame on the respondent for its failure to avert the execution of the NLRC Decision.
For its part, respondent posits that it is immaterial when the actions were commenced as Sec. 6(c) of P.D. 902-A is clear that all actions standing before a court against a corporation under a management committee must be stayed; hence, even actions for claims instituted after the appointment of the management committee are covered by the stay.25 It avers that the stay order is not limited to the claims stated in the Schedule of Debts and Liabilities.
Respondent counters that, in Rubberworld, this Court applied Sec. 6(c) of P.D. 902-A and suspended the proceedings in the labor case even if the complaint for illegal dismissal was filed after the issuance of the stay order.26 Respondent also cited Arranza v. B.F. Homes, Inc.27 wherein the class suit was filed 10 years after the management committee was appointed. Respondent avers that in said case, this Court did not consider the time of the filing of the claim or when the cause of action accrued. It points out that, in a later case,28 the Court even concluded that had the claim in Arranza been for monetary awards, the proceedings to enforce such claim would have been suspended.
Respondent emphasizes that the petitioner’s claim is for reimbursement of the monetary award it paid to Abelido in the labor case, which was later ordered suspended by the CA in CA-GR SP No. 64467. Having originated from an action for a claim that has been suspended, petitioner’s claim should also be deemed suspended. The suspension of the labor proceedings by the CA rendered moot the petitioner’s cause of action; its remedy is now to go against the bond posted by Abelido in the NLRC.
Finally, respondent contends that claims not arising from the operation of the corporation’s business, whether filed before or after the petition for suspension of payments, are covered by the SEC Stay Order.29
The petition is bereft of merit.
For our resolution of the instant case, we briefly revisit the following undisputed facts:
On July 8, 1997, the SEC issued a Stay Order, suspending all actions for claims against respondent pending before any court, tribunal, office, board, body or commission. On August 8, 1997, the SEC constituted a Management Committee. On May 31, 1999, the Labor Arbiter rendered a decision in "Abelido v. Victorias Milling", ordering respondent to pay Abelido the sum of ₱6,605,275.24. On July 16, 1999, respondent procured from the petitioner a surety bond as a requisite to the filing of an appeal with the NLRC from the Labor Arbiter’s decision. On September 7, 2000, the NLRC affirmed the decision of the Labor Arbiter, and a writ of execution was issued on April 4, 2001.
The Executive Labor Arbiter issued three orders (dated April 10, 2001, April 17, 2001, and May 7, 2001, respectively) directing the petitioner to turn over to the NLRC the amount of ₱6.605,275.24, on pain of contempt. On May 11, 2001, petitioner served a demand upon BPI for the release of the bank deposits that respondent had assigned in its favor, but BPI refused.lawphil.net On May 16, 2001, respondent advised petitioner that the enforcement of the writ of execution was premature and without legal basis. The following day, petitioner replied that the NLRC was bent on enforcing the writ, and sought from the respondent a copy of a TRO, if any, issued by the Court of Appeals. On May 18, 2001, petitioner released the amount to the NLRC.
Failing to obtain reimbursement from the respondent despite a series of demands, petitioner, on January 15, 2003, filed a complaint for sum of money with the RTC. On January 27, 2003, SEC issued an order appointing a rehabilitation receiver for respondent. On July 2, 2003, the RTC suspended the proceedings against respondent, and subsequently denied the petitioner’s motion for reconsideration.
Petitioner then went to the CA on a petition for certiorari which the CA dismissed on May 21, 2004, concurring with the RTC that the SEC Stay Order covered petitioner’s claim. On April 11, 2005, the CA denied the petitioner’s motion for reconsideration.
Meanwhile, on June 5, 2003, the CA resolved the petition for certiorari filed by the respondent assailing the NLRC decision. The appellate court, while affirming the NLRC decision, set aside the latter’s resolution on the respondent’s motion for reconsideration, and remanded the case to the NLRC for suspension of the proceedings, ruling that the NLRC decision cannot be enforced while [the respondent] is under a management committee.30
Petitioner now comes to us, insisting that since its claim (for reimbursement of the amount it released to NLRC to satisfy the judgment on the labor claims of Abelido) arose after the respondent was placed under a management committee, such claim should not be suspended nor covered by the SEC Stay Order.
The argument must fall.
It must be noted that petitioner’s claim is for reimbursement of whatever it may have paid to the NLRC as full and final settlement of the award rendered against respondent in the Abelido case, secured by Security Bond No. 070117.31 In order to resolve whether said proceedings should be suspended, it is necessary to determine whether the complaint for sum of money with damages is a "claim" within the contemplation of P.D. No. 902-A.
In Finasia Investments and Finance Corp. v. Court of Appeals,32 we construed "claim" to refer to debts or demands of a pecuniary nature. It means the assertion of a right to have money paid. Also in Arranza v. B.F. Homes, Inc.,33 we referred to it as an action involving monetary considerations. And in Philippine Airlines v. Kurangking,34 we said it is a right to payment, whether or not it is reduced to judgment, liquidated or unliquidated, fixed or contingent, matured or unmatured, disputed or undisputed, legal or equitable, and secured or unsecured. More importantly, the Interim Rules of Procedure on Corporate Rehabilitation provides an all-encompassing definition of the term and thus includes all claims or demands of whatever nature or character against a debtor or its property, whether for money or otherwise.
Clearly then, the complaint filed by petitioner against respondent falls under the category of "claim" whether under our rulings in Finasia, Arranza or Kurangking, or as defined in the Interim Rules, considering that it is for pecuniary considerations.35
We have consistently held in Rubberworld (Phils.) Inc. v. NLRC,36 in Sobrejuanite v. ASB Development Corporation,37 and in Garcia v. Philippine Airlines,38 that the suspension of proceedings referred to in Section 6 (c) of Presidential Decree No. 902-A, which pertinently provides –
x x x Provided, finally, that upon appointment of a management committee, rehabilitation receiver, board or body, pursuant to this Decree, all actions for claims against corporations, partnerships or associations under management or receivership pending before any court, tribunal, board or body, shall be suspended accordingly.391avvphi1
uniformly applies to "all actions for claims" filed against a corporation, partnership or association under management or receivership, without distinction.40
Aptly cited in the assailed Court of Appeals decision is our pronouncement in Rubberworld, viz:
x x x The law is clear: upon the creation of a management committee or the appointment of a rehabilitation receiver, all claims for actions "shall be suspended accordingly." x x x Since the law makes no distinction or exemptions, neither should this Court. Ubi lex non distinguit nec nos distinguere debemos.
Along the same vein, in Sobrejuanite, we enunciated:
x x x The interim rules define a claim as referring to all claims or demands, of whatever nature or character against a debtor or its property, whether for money or otherwise. The definition is all-encompassing as it refers to all actions whether for money or otherwise. There are no distinctions or exemptions.
Similarly, in Garcia v. Philippine Airlines, we said:
Since petitioners’ claim against PAL is a money claim for their wages during the pendency of PAL’s appeal to the NLRC, the same should have been suspended pending the rehabilitation proceedings. The Labor Arbiter, the NLRC, as well as the Court of Appeals should have abstained from resolving petitioners’ case for illegal dismissal and should instead have directed them to lodge their claims before PAL’s receiver.
and, very recently, in this Court’s en banc Decision in the same Garcia v. Philippine Airlines,41 we had the occasion to restate this oft-repeated verdict, thus:
It is settled that upon appointment by the SEC of a rehabilitation receiver, all actions for claims before any court, tribunal or board against the corporation shall ipso jure be suspended. As stated early on, during the pendency of petitioners’ complaint before the Labor Arbiter, the SEC placed respondent under an Interim Rehabilitation Receiver. After the Labor Arbiter rendered his decision, the SEC replaced the Interim Rehabilitation Receiver with a Permanent Rehabilitation Receiver.
The suspension of action for claims against a corporation under rehabilitation receiver or management committee embraces all phases of the suit, be it before the trial court or any tribunal or before this Court. Otherwise stated, what are automatically stayed or suspended are the proceedings of an action or suit and not just the payment of claims. Furthermore, the actions that are suspended cover all claims against a distressed corporation whether for damages founded on a breach of contract of carriage, labor cases, collection suits or any other claims of a pecuniary nature.42
The indiscriminate suspension of actions for claims is intended to expedite the rehabilitation of the distressed corporation. As this Court held in Rubberworld,43 the automatic stay of actions is designed "to enable the management committee or the rehabilitation receiver to effectively exercise its/his powers free from any judicial or extrajudicial interference that might unduly hinder or prevent the ‘rescue’ of the debtor company. To allow such other actions to continue would only add to the burden of the management committee or rehabilitation receiver, whose time, effort and resources would be wasted in defending claims against the corporation instead of being directed toward its restructuring and rehabilitation." Thus, in Section 6 (d) of P.D. 902-A, the management committee or rehabilitation receiver is given the following powers:
(d) To create and appoint a management committee, board, or body upon petition or motu proprio to undertake the management of corporations, partnerships or other associations not supervised or regulated by other government agencies in appropriate cases when there is imminent danger of dissipation, loss, wastage or destruction of assets or other properties or paralyzation of business operations of such corporations or entities which may be prejudicial to the interest of minority stockholders, parties-litigants or the general public: Provided, further, That the Commission may create or appoint a management committee, board or body to undertake the management of corporations, partnerships or other associations supervised or regulated by other government agencies, such as banks and insurance companies, upon request of the government agency concerned.
The management committee or rehabilitation receiver, board or body shall have the power to take custody of, and control over, all the existing assets and property of such entities under management; to evaluate the existing assets and liabilities, earnings and operations of such corporations, partnerships, or other associations, to determine the best way to salvage and protect the interest of the investors and creditors; to study, review and evaluate the feasibility of continuing operations and restructure and rehabilitate such entities if determined to be feasible by the Commission. It shall report and be responsible to the Commission until dissolved by order of the Commission: Provided, however, That the Commission may, on the basis of the findings and recommendation of the management committee, or rehabilitation receiver, board or body, or on its own findings, determine that the continuance in business of such corporation or entity would not be feasible or profitable nor work to the best interest of the stockholders, parties-litigants, creditors, or the general public, order the dissolution of such corporation entity and its remaining assets liquidated accordingly. The management committee or rehabilitation receiver, board or body may overrule or revoke the actions of the previous management and board of directors of the entity or entities under management notwithstanding any provision of law, articles of incorporation or by-laws to the contrary.
x x x x
Given these premises, it is not difficult to understand why actions for claims against the ailing enterprise have to be suspended. It then becomes easy to accept the hypothesis that the date when the claim arose, or when the action is filed, is of no moment. As long as the corporation is under a management committee or a rehabilitation receiver, all actions for claims against it --- for money or otherwise --- must yield to the greater imperative of corporate rehabilitation, excepting only, as already mentioned, claims for payment of obligations incurred by the corporation in the ordinary course of business. Enforcement of writs of execution issued by judicial or quasi-judicial tribunals, since such writs emanate from "actions for claims," must, likewise, be suspended.
If we allow the reimbursement action to proceed, and if petitioner’s claim is granted, it would be in a position to assert a preference over other creditors. Worse, respondent would be compelled to dispose of its properties in order to satisfy the claim of petitioner. It would in effect be a clear defiance of the proscription set forth in the Interim Rules on "selling, encumbering, transferring, or disposing in any manner any of its (respondent’s) properties except in the ordinary course of business."44 Certainly, petitioner’s claim for reimbursement did not arise from the usual operations of respondent’s business. Neither can we consider it as an ordinary expense for the conduct of its operations.
All told, the suspension of the proceedings before the trial court is therefore imperative.
WHEREFORE, premises considered, the petition is hereby DENIED. The Decision of the Court of Appeals dated May 21, 2004 and its Resolution dated April 11, 2005, are AFFIRMED.
SO ORDERED.
ANTONIO EDUARDO B. NACHURA
Associate Justice
WE CONCUR:
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson
MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice |
RENATO C. CORONA*
Associate Justice |
MINITA V. CHICO-NAZARIO
Associate Justice
A T T E S T A T I O N
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.
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division
C E R T I F I C A T I O N
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.
REYNATO S. PUNO
Chief Justice
Footnotes
* Designated as additional member per raffle dated November 26, 2007.
1 Penned by Bienvenido L. Reyes, with the concurrence of Associate Justices Ruben T. Reyes (Retired Associate Justice of the Supreme Court) and Jose C. Mendoza; rollo, pp. 46-56.
2 Id. at 58-59.
3 Id. at 179-180.
4 Id. at 76.
5 Id. at 79-80.
6 Id. at 80-81.
7 Id. at 85-86.
8 Id. at 84.
9 Id. at 87.
10 Id. at 89.
11 Id. at 90.
12 Id. at 91.
13 Id. at 92-93.
14 Id. at 94-95.
15 Id. at 96.
16 Id. at 98-100.
17 Id. at 53.
18 Id. at 183.
19 Id. at 209.
20 G.R. No. 126773, April 14, 1999, 305 SCRA 721.
21 Rollo, p. 22.
22 Id. at 446.
23 Id. at 439-440.
24 G.R. No. 142381, October 15, 2003, 413 SCRA 445.
25 Rollo, pp. 482-484.
26 Id. at 485-486.
27 389 Phil. 318 (2000).
28 Sobrejuanite v. ASB Development Corporation, G.R. No. 165675, September 30, 2005, 471 SCRA 763.
29 Rollo, p. 500.
30 Embodied in a Decision dated June 5, 2003, in CA-G.R. SP. No. 64467; rollo, pp.527-532.
31 Rollo, p. 70.
32 G.R. No. 107002, October 7, 1994, 237 SCRA 446, 450-451.
33 Supra. note 27.
34 438 Phil. 375 (2002).
35 See: Sobrejuanite v. ASB Development Corporation, G.R. No. 165675, September 30, 2005, 471 SCRA 763, 772.
36 Supra. Note 20.
37 Supra.
38 G.R. No. 164856, August 29, 2007, 531 SCRA 574.
39 Emphasis supplied.
40 Except for expenses incurred in the ordinary course of its business.
41 G.R. No. 164856, January 20, 2009.
42 Philippine Airlines, Incorporated v. Zamora, G.R. No. 166996, February 6, 2007, 514 SCRA 584.
43 See: Philippine Airlines, Incorporated v. Philippine Airlines Employees Association (PALEA), G.R. No. 142399, June 19, 2007, 525 SCRA 29.
44 Section 6, Interim Rules of Procedure on Corporate Rehabilitation.
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