G.R. No.

74851
RCBC vs. IAC

Facts:

On September 28, 1984, BF Homes filed a "Petition for Rehabilitation and for Declaration of Suspension of
Payments" with the Securities and Exchange Commission (SEC).

On October 26, 1984, RCBC requested the Provincial Sheriff of Rizal to extra-judicially foreclose its real
estate mortgage on some properties of BF Homes. Presumably, unaware of the filing of the bond, the
sheriffs proceeded with the public auction sale on January 29, 1985, in which RCBC was the highest bidder
for the properties auctioned.

On April 8, 1986, the IAC rendered a decision, setting aside the decision of the trial court, dismissing
the mandamus case and suspending issuance to RCBC of new land titles

Issue: Whether or not preferred creditors of distressed corporations stand on equal footing with all other
creditors upon the appointment of a management committee, rehabilitation receiver, board, or body.

Ruling:

The Court to settle the issue in this present resolution once and for all, and for the guidance of the Bench
and the Bar, the following rules of thumb shall are laid down:

1. All claims against corporations, partnerships, or associations that are pending before any court, tribunal,
or board, without distinction as to whether or not a creditor is secured or unsecured, shall be suspended
effective upon the appointment of a management committee, rehabilitation receiver, board, or body in
accordance which the provisions of Presidential Decree No. 902-A.

2. Secured creditors retain their preference over unsecured creditors, but enforcement of such preference is
equally suspended upon the appointment of a management committee, rehabilitation receiver, board, or
body. In the event that the assets of the corporation, partnership, or association are finally liquidated,
however, secured and preferred credits under the applicable provisions of the Civil Code will definitely have
preference over unsecured ones.

In other words, once a management committee, rehabilitation receiver, board or body is appointed pursuant
to P.D. 902-A, all actions for claims against a distressed corporation pending before any court, tribunal,
board or body shall be suspended accordingly.

This suspension shall not prejudice or render ineffective the status of a secured creditor as compared totally
unsecured creditor P.D. 902-A does not state anything to this effect. 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 of doing so.