INSOLVENCY

RCBC v. IAC and BF HOMES INC

FACTS:
 BF Homes filed before SEC "Petition for Rehabilitation and Declaration of Suspension of Payments."
 One of the creditors listed in its inventory of creditors and liabilities was RCBC who requested the Provincial Sheriff of Rizal to extra-judicially
foreclose its REM on some properties of BF Homes.
 A notice of extra-judicial foreclosure sale was issued by the Sheriff on October 29, scheduled on November 29, copies furnished both BF Homes
(mortgagor) and RCBC (mortgagee).
 On motion of BF Homes, the SEC issued TRO effective for 20 days, enjoining RCBC and the sheriff from proceeding with the public auction sale.
The sale was rescheduled to January 29, 1985.
 On January 25, SEC ordered the issuance of a writ of preliminary injunction upon petitioner's filing of a bond. However, petitioner did not file a bond
until January 29, the very day of the auction sale, so no writ of preliminary injunction was issued by the SEC.
 Unaware of the filing of the bond, the sheriffs proceeded with the public auction sale on January 29, in which RCBC was the highest bidder for the
properties auctioned.
 On February 5, BF Homes filed in the SEC a consolidated motion to annul the auction sale and to cite RCBC and the sheriff for contempt. RCBC
opposed the motion.
 On February 13, SEC belatedly issued a WPI stopping the auction sale which had been conducted by the sheriff two weeks earlier.
 Despite the SEC case, RCBC filed with RTC Rizal an action for mandamus against the provincial sheriff of Rizal and his deputy to compel them
to execute in its favor a certificate of sale of the auctioned properties.
 In answer, the sheriffs alleged that they proceeded with the auction sale on January 29, 1985 because no WPI had been issued by SEC as of that
date, but they informed the SEC that they would suspend the issuance of a certificate of sale to RCBC.
 On RCBC's motion in the mandamus case, RTC granted RCBC’s Motion for Judgment on the pleadings, ordering respondents to execute and
deliver to petitioner the Certificate of the Auction Sale involving the properties sold therein.
 BF Homes filed an original complaint with the IAC pursuant to Section 9 of BP 129 praying for the annulment of the judgment.
 IAC set aside RTC Order, dismissing the mandamus case and suspending issuance to RCBC of new land titles, "until the resolution of case by
SEC Case.
 RCBC appealed the decision of then IAC (now CA) to this Court (SC)
 During the pendency of the case, RCBC brought to the attention of the Court an order issued by the SEC denying the consolidated Motion to Annul
the Auction Sale and to cite RCBC and the Sheriff for Contempt.
 By virtue of the aforesaid order, the Register of Deeds of Pasay City effected the transfer of title over subject pieces of property to petitioner RCBC,
and the issuance of new titles in its name. Thereafter, RCBC presented MD of the petition, theorizing that the issuance of said new transfer
certificates of title in its name rendered the petition moot and academic.
 Ruling on the merits, SC upheld the decision of IAC which dismissed the mandamus case filed by RCBC and suspended the issuance of new titles
to RCBC. Setting aside RCBC's acquisition of title and nullifying the TCTs issued to it.

ISSUE: W/N auction sale is invalid and RCBC’s actions are premature considering that BF Homes have already filed a petition for rehabilitation, thus all
claims of creditors must be suspended.

RULING: NO.
Insofar as petitioner RCBC is concerned, the provisions of PD 902-A are not yet applicable and it may still be allowed to assert its preferred status
because it foreclosed on the mortgage prior to the appointment of the management committee on March 18, 1985.
The law on the matter, Section 6(d) of PD 902-A states that “in order to effectively exercise such jurisdiction, the Commission shall possess the following
powers: d) 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.”
It is thus adequately clear that suspension of claims against a corporation under rehabilitation is counted or figured up only upon the
appointment of a management committee or a rehabilitation receiver. The holding that suspension of actions for claims against a corporation
under rehabilitation takes effect as soon as the application or a petition for rehabilitation is filed with the SEC — may, to some, be more
logical and wise but unfortunately, such is incongruent with the clear language of the law. To insist on such ruling, no matter how practical
and noble, would be to encroach upon legislative prerogative to define the wisdom of the law — plainly judicial legislation.

It bears stressing that the first and fundamental duty of the Court is to apply the law. When the law is clear and free from any doubt or ambiguity, there is
no room for construction or interpretation. Only when the law is ambiguous or of doubtful meaning may the court interpret or construe its true intent.

Under Section 6(d) of PD 902-A, certain situations must be shown to exist before a management committee may be created or appointed:
1. when there is imminent danger of dissipation, loss, wastage or destruction of assets or other properties; or
2. when there is paralization of business operations of such corporations or entities which may be prejudicial to the interest of minority stockholders,
parties-litigants or to the general public.

Section 6(c), P.D. 902- A, provides that receivers may be appointed whenever:
1. necessary in order to preserve the rights of the parties-litigants; and/or
2. protect the interest of the investing public and creditors.

These situations are rather serious in nature, requiring the appointment of a management committee or a receiver to preserve the existing assets and
property of the corporation in order to protect the interests of its investors and creditors. Thus, in such situations, suspension of actions for claims
against a corporation as provided in Section 6(c) of PD 902-A is necessary, and here we borrow the words of the late Justice Medialdea, "so as not to
render the SEC management Committee irrelevant and inutile and to give it unhampered 'rescue efforts' over the distressed firm.”

In fine, the Court grants the MR for the cogent reason that suspension of actions for claims commences only from the time a management committee or
receiver is appointed by the SEC. Petitioner RCBC, therefore, could have rightfully, as it did, move for the extrajudicial foreclosure of its mortgage on
October 26, 1984 because a management committee was not appointed by the SEC until March 18, 1985.

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WHEREFORE, petitioner's MR is hereby GRANTED. The IAC Decision is REVERSED and SET ASIDE, and the judgment of the RTC National Capital
Judicial Region, Branch 140, in Civil Case No. 10042 REINSTATED.

Facts:
Private respondent filed a "Petition for Rehabilitation and for Declaration of Suspension of Payments" with the
Securities and Exchange Commission (SEC). One of the creditors listed in its inventory of creditors and liabilities
was the petitioner. Subsequently, upon request of petitioner, the sheriff extrajudicially foreclosed its real estate
mortgage on some properties of private respondent. Thereafter, a public auction sale was held, in which petitioner
was the highest bidder for the properties auctioned. The sheriff, however, withheld the delivery to petitioner of a
certificate of sale covering the auctioned properties because of the proceedings in the SEC. The SEC issued a writ of
preliminary injunction stopping the auction sale. Petitioner then filed with the RTC, of Rizal an action for mandamus
against the provincial sheriff and his deputy. The SEC appointed a Management Committee for private respondent.
The trial court granted petitioner's motion in the mandamus case. Private respondent filed an original complaint with
the IAC praying for the annulment of the judgment. The IAC rendered a decision dismissing the mandamus case and
suspending issuance to petitioner of new land titles until the resolution by the SEC. On appeal, the Supreme Court, in
its decision, upheld the decision of the IAC. Hence, this motion for reconsideration.

Issue: Whether the auction sale is invalid and RCBC’s actions are premature considering that BF Homes have
already filed a petition for rehabilitation.

Ruling: NO
Paragraph (c), Section 6 of Presidential Decree 902-A, provides:
Sec. 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers:
c) To appoint one or more receivers of the property, real and personal, which is the subject of the action pending
before the Commission in accordance with the pertinent provisions of the Rules of Court in such other cases
whenever necessary to preserve the rights of the parties-litigants to and/or protect the interest of the investing public
and creditors; Provided, however, that the Commission may, in appropriate cases, appoint a rehabilitation receiver of
corporations, partnerships or other associations not supervised or regulated by other government agencies who shall
have, in addition to the powers of a regular receiver under the provisions of the Rules of Court, such functions and
powers as are provided for in the succeeding paragraph (d) hereof: 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.
It is thus adequately clear that suspension of claims against a corporation under rehabilitation is counted or figured
up only upon the appointment of a management committee or a rehabilitation receiver. The holding that suspension
of actions for claims against a corporation under rehabilitation takes effect as soon as the application or a petition for
rehabilitation is filed with the SEC — may, to some, be more logical and wise but unfortunately, such is incongruent
with the clear language of the law. To insist on such ruling, no matter how practical and noble, would be to encroach
upon legislative prerogative to define the wisdom of the law — plainly judicial legislation.
A petition for rehabilitation does not always result in the appointment of a receiver or the creation of a management
committee. The SEC has to initially determine whether such appointment is appropriate and necessary under the
circumstances. Under Paragraph (d), Section 6 of Presidential Decree No. 902-A, certain situations must be shown to
exist before a management committee may be created or appointed, such as;
1. when there is imminent danger of dissipation, loss, wastage or destruction of assets or other properties; or
2. when there is paralization of business operations of such corporations or entities which may be prejudicial to the
interest of minority stockholders, parties-litigants or to the general public.
On the other hand, receivers may be appointed whenever:
1. necessary in order to preserve the rights of the parties-litigants; and/or
2. protect the interest of the investing public and creditors. (Section 6(c), P.D. 902-A.)
These situations are rather serious in nature, requiring the appointment of a management committee or a receiver to
preserve the existing assets and property of the corporation in order to protect the interests of its investors and
creditors. Thus, in such situations, suspension of actions for claims against a corporation as provided in Paragraph
(c) of Section 6, of Presidential Decree No. 902-A is necessary.
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WHEREFORE, petitioner's motion for reconsideration is hereby GRANTED.