SEPARATE OPINION
PANGANIBAN, J.:
The issue as to when suspension of payments takes effect upon a petition of a distressed corporation is a contentious one. The ponencia in the case under consideration, Rizal Commercial Banking Corporation (RCBC) v. Immediate Appellate Court1 [213 SCRA 830, September 14, 1992. (Concurring unqualifiedly with Justice Medialdea's ponencia were Gutierrez Jr., Nocon, and Melo, JJ.; concurring in the result were Narvasa, CJ, Bidin, Regalado and Bellosillo, JJ.; dissenting were Feliciano, Padilla, Davide, Jr. and Romero, JJ.; Cruz, Griño-Aquino and Campos, JJ., did not take part in the voting.)], has ruled that "the prohibition against foreclosure attaches as soon as a petition for rehabilitation is filed. Were it otherwise, what is to prevent the [creditors] from delaying the creation of the Management Committee and in the meantime [seizing] all [the debtor's] assets. The sooner the SEC takes over and imposes a freeze on all the assets, the better for all concerned.2 [Ibid., p. 838.] Esmsc
Suspension Takes Effect Only Upon
Constitution of Management Committee
A Dissent debunking the quoted ruling was written by the esteemed Justice Florentino P. Feliciano as follows:
"I understand the above quoted portion of the ponencia to be saying that suspension of actions for claims against the corporation which applies for rehabilitation takes effect as soon as the application or a petition for rehabilitation is filed with the SEC.
I would point out with respect, that the actual language used in Section 6 (c) and (d) of P.D. 902-A, as amended, does not support the position taken in the ponencia. The pertinent provision of Section 6 (c) is as follows:
'Sec. 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers: Esmmis
xxx......xxx......xxx
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 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, further, that the Commission may appoint a rehabilitation receiver 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; 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 should be pointed out that the appointment of a management committee or a rehabilitation receiver is not ordinarily effected immediately upon the filing of an application for suspension of payments and for rehabilitation. The reason is that the SEC must first determine whether the jurisdictional requirements for the appointment of a management committee are present. There are at least two (2) sets of requirements: (a) the requirements in respect of the petition for declaration of suspension of payments; and (b) the requirements concerning the petition for creation and appointment of a management committee.
xxx......xxx......xxx
As already noted, SEC took just about six (6) months after the filing of the petition of B.F. Homes to decide to create and appoint a management committee. Only upon such appointment of the management committee did the proviso in Section 6 (c) which decrees suspension of actions for claims against the petitioning corporation take effect.
It is only then that the SEC determines that the circumstances warranting, under the statute, the appointment of a management committee do exist, i.e., that there is ‘imminent danger of dissipation, loss, wastage or destruction of assets – or paralization of business operations –which [would] be prejudicial to the interest of minority stockholders, parties litigant or the general public.’ Only when such circumstances have been determined to exist is there justification for suspending actions for claims against the corporation so placed under SEC management. The authority of the SEC to suspend or freeze the judicial enforcement of claims against a corporation is an extraordinary authority, most especially where credits secured by specific liens on property, like real estate mortgages, are involved; such authority cannot lightly be assumed to have arisen simply because the corporation on its own initiative goes to the SEC and there seeks shelter from its lawful creditors."3 [Ibid., pp. 839-844.]
The foregoing Dissent found jural expression in a later case, Barotac Sugar Mills, Inc. v. Court of Appeals,4 [275 SCRA 497, July 15, 1997. (With the concurrence of Narvasa, CJ; Melo, Francisco and Panganiban, JJ., of the Court’s First Division.] penned by then Associate, now Chief Justice Hilario G. Davide Jr.:
"The appointment of a management committee or rehabilitation receiver may only take place after the filing with the SEC of an appropriate petition for suspension of payments. This is clear from a reading of sub-paragraph (d) of Section 5 and sub-paragraph (d) of Section 6 of P.D. No. 902-A. as amended by P.D. Nos. 1653 and 1758. x x x Esmso
xxx......xxx......xxx
The conclusion then is inevitable that pursuant to the underscored proviso in sub-paragraph (c) of the aforementioned Section 6, taken together with sub-paragraph (d) of Section 6, a court action is ipso jure suspended only upon the appointment of a management committee or a rehabilitation receiver."
As a member of the then First Division which promulgated Barotac, I concurred in the aforequoted ruling. To repeat, Barotac and Justice Feliciano's Dissent are clearly supported by Section 6, paragraph (c) of Presidential Decree 902-A. It is basic in statutory construction that in the absence of doubt or ambiguity, there is no necessity for construction or interpretation of the law, as in this case. Where the law speaks in clear and categorical language, there is no room for interpretation. There is only room for application."5 [Cebu Portland Cement Co. v. Municipality of Naga, 24 SCRA 708, August 22, 1968, per Fernando, J.]
SEC Retains Power to
Issue Injunctive Relief
Left unsaid in RCBC, Barotac and even in the present Resolution, however, is the existence of two competing economic interests in the determination of the issue. On the one hand, there is the creditor; on the other, the corporation and its stockholders. Under the RCBC ponencia of Justice Medialdea, an unscrupulous company can seek shelter in a petition for suspension of payments in order to evade or at least unfairly delay the payment of just obligations. This course of action would clearly prejudice its creditors, who would be barred from judicially enforcing their rightful claims, simply because a petition for suspension has been filed. Indeed, to paraphrase Justice Medialdea, what is to prevent the debtor from delaying the creation of the management committee, in the meantime dissipating all its assets?
On the other hand, if the bare ruling of Barotac were to be applied strictly, a distressed company would be exposed to grave danger that may precipitate its untimely demise, the very evil sought to be avoided by a suspension of payments. Notably, the appointment of a management committee takes place only after several months, even years, from submission of the petition. The appointment entails hearings and the submission of documentary evidence to determine whether the requisites for suspension of payments have been met. By the time a management committee or receiver is appointed, creditors, upon knowledge of the application for suspension of payments, will have feasted on the distressed corporation.
Money lenders will demand satisfaction of their credits by precipitately foreclosing on their mortgages. Particularly vulnerable are liquid assets which can be attached and rendered useless. Payrolls will be frozen and suppliers will lose faith in the company. Verily , the distressed company's credit standing would be zero-rated. Indeed, after the vultures' feast, the remaining corporate carcass can no longer be resurrected into a viable enterprise. When this happens, there will be no more company left to rehabilitate, thus rendering ineffectual the very law which was enacted precisely to effect such rehabilitation, In the business world, bridge liquidity and credit are sometimes even more important than profits. Msesm
The prudent way to avoid the disastrous consequence of a strict application of said law is to call attention to the power of the SEC to issue injunctive reliefs. Herein movant (RCBC) raises the issue of the validity of the restraining order and the writ or preliminary injunction later issued by the Securities and Exchange Commission (SEC) prior to the appointment of the management committee. It contends that the issuance of the injunctive reliefs effectively results in the suspension of actions against the petitioning distressed corporation.
Movant is thus saying that the SEC has no jurisdiction to issue injunctive reliefs in favor of the distressed corporation petitioning for suspension of payments prior to the appointment of a management committee. I disagree.
Sec. 5(d) of PD 902-A clearly enumerates the cases over which the SEC has original and exclusive jurisdiction to hear and decide:
"SEC. 5 In addition to the regulatory and adjudicative functions of the Securities and Exchange Commission over corporations, partnerships and other forms of associations registered with it as expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving:
xxx......xxx......xxx
d) Petitions of corporations, partnerships or associations to be declared in the state of suspension of payments in cases where the corporation, partnership or association possesses sufficient property to cover all its debts but foresees the impossibility of meeting them when they respectively fall due or in cases where the corporation, partnership or association has no sufficient assets to cover its liabilities, but is under the management of a Rehabilitation Receiver or Management Committee created pursuant to this Decree."
Section 6 (a) of said Decree goes on further to say:
"SECTION 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers:
a) To issue preliminary or permanent injunctions, whether prohibitory or mandatory, in all cases in which it has jurisdiction, and in which cases the pertinent provisions of the Rules of Court shall apply;
x x x"
Thus, it is obvious from the above-quoted provisions that the SEC acquires jurisdiction over the distressed companies upon the submission of a petition for suspension of payments. And when the legal requirements are complied with, it has the authority to issue injunctive reliefs for the effective exercise of its jurisdiction. I would like to emphasize that this power to issue restraining orders or preliminary injunctions, upon the prayer of the petitioning corporation, may be the only buffer that could save a company from being feasted on by any vulture-creditor, prior to the appointment of a management committee or a rehabilitation receiver. Exsm
WHEREFORE, I vote to GRANT the Motion for Reconsideration, subject to the caveat that the Securities and Exchange Commission, in meritorious cases, may issue injunctive reliefs.
- J. Panganiban