Facts: On September 28, 1984, BF Homes filed a “Petition for Rehabilitation and for Declaration of Suspension of Payments” with the SEC.
RCBC, one of the creditors listed in BF Homes’ inventory of creditors and liabilities, on October 26, 1984, requested the Provincial Sheriff of Rizal to extra-judicially foreclose its real estate mortgage on some properties of BF Homes. BF Homes opposed the auction sale and the SEC ordered the issuance of a writ of preliminary injunction upon petitioners filing of a bond. Presumably unaware of the filing of the bond on the very day of the auction sale, the sheriff proceeded with the public auction sale in which RCBC was the highest bidder for the properties auctioned. But because of the proceedings in the SEC, the sheriff withheld the delivery to RCBC of the certificate of sale covering the auctioned properties.
On March 13, 1985, despite the SEC case, RCBC filed with RTC an action for mandamus against the provincial sheriff of Rizal to compel him to execute in its favor a certificate of sale of the auctioned properties.
On March 18, 1985, the SEC appointed a Management Committee for BF Homes.
Consequently, the trial court granted RCBC’s “motion for judgment on the pleading” ordering respondents to execute and deliver to petitioner the Certificate of Auction Sale.
On appeal, the SC affirmed CA’s decision (setting aside RTC’s decision dismissing the mandamus case and suspending issuance to RCBC of new land titles until the resolution of the SEC case) ruling that “whenever a distressed corporation asks the SEC for rehabilitation and suspension of payments, preferred creditors may no longer assert such preference but stand on equal footing with other creditors.” Hence, this Motion for Reconsideration.
Issue: When should the suspension of actions for claims against BF Homes take effect?
Held: The issue of whether or not preferred creditors of distressed corporations stand on equal footing with all other creditors gains relevance and materiality only upon the appointment of a management committee, rehabilitation receiver, board or body.
Upon cursory reading of Section 6, par (c) of PD 902-A, it is 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 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.
Once a management committee, rehabilitation receiver, board or body is appointed pursuant to PD 902-A, all actions for claims against a distressed corporation pending before any court, tribunal, board or body shall be suspended accordingly; Suspension shall not prejudice or render ineffective the status of a secured creditor as compared to a totally unsecured creditor. What it merely provides is that all actions for claims against the corporation, partnership or association shall be suspended. This should give the receiver a chance to rehabilitate the corporation if there should still be a possibility for doing so. In the event that rehabilitation is no longer feasible and claims against the distressed corporation would eventually have to be settled, the secured creditors shall enjoy preference over the unsecured creditors subject only to the provisions of the Civil Code on Concurrence and Preferences of Credit.
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