TITLE: PHILIPPINE ISLANDS CORPORATION FOR TOURISM

DEVELOPMENT, INC. vs. VICTORIAS MILLING COMPANY, INC.

G.R. No. 167674
Date of Promulgation: June 17, 2008
Ponente: J. Quisumbing Second Division

Doctrine: Unlike the provisions in the Insolvency Law which exempts

secured creditors from the suspensive effect of the order issued by the court
in an ordinary suspension of payments proceedings, the provisions of P.D.
No. 902-A, when it comes to the appointment of a management committee
or a rehabilitation receiver, do not contain an exemption for secured
creditors.

Sections cited: Section 6(c) of P.D. No. 902-A as amended by P.D. No.
1799

Facts: Petitioner Philippine Islands Corporation for Tourism Development,

Inc. (PICTD) filed a complaint for collection of a sum of money against
Respondent Victorias Milling Company (VMC). In its complaint, PICTD
alleged that VMC obtained loans from the CICM Missionaries, Inc. When
the loans matured, PICTD sought payment from VMC but the latter failed to
pay, prompting PICTD to file the abovementioned complaint. The RTC
ordered the issuance of a writ of preliminary attachment against VMC's
properties. However, upon VMC's motion, the writ of attachment was lifted
when VMC deposited a counter attachment bond. Meanwhile, VMC filed a
petition before the SEC to declare itself in a state of suspension of
payments, alleging that although it has sufficient property to cover all of its
debts, it foresees its inability to pay them when they become due because of
financial difficulties. VMC sought the appointment of a management
committee that would oversee the implementation of its proposed
rehabilitation plan so that it can continue its operations and thus enable it
to meet its obligations and satisfy its liabilities. The SEC ordered the
suspension of all actions or claims against VMC pending before any court,
tribunal, office, board, body and/or commission. Pursuant to said order,
VMC filed before the RTC an urgent motion to suspend proceedings. The
RTC granted VMC's motion and suspended proceedings in the civil case.
PICTD filed before the SEC a motion to lift the suspension of proceedings.
SEC denied PICTD's motion. The SEC ruled that PICTD is merely a general
creditor who was able to seize the property of the debtor through an
attachment issued before judgment and did not have a prior security
agreement with VMC that will ripen into a creditor's right in case of default.
Thus, its claim against VMC could not take precedence over the secured
creditors.

Issues: Whether or not the proceedings of the complaint for collection of a

sum of money filed by PICTD against VMC should be excluded from the SEC
Order suspending all actions or claims against VMC pending before any
court, tribunal, office, board, body and/or commission.

Ruling: No. We agree to sustain the ruling of the appellate court upholding
the SEC Order suspending the proceedings of the collection suit filed by
PICTD against VMC.

We are not persuaded by PICTD's argument that it should be exempt from

the suspension order because it is a secured creditor. Unlike the provisions
in the Insolvency Law which exempts secured creditors from the suspensive
effect of the order issued by the court in an ordinary suspension of
payments proceedings, the provisions of P.D. No. 902-A, when it comes to
the appointment of a management committee or a rehabilitation receiver,
do not contain an exemption for secured creditors.

We likewise find no merit in PICTD's argument that the SEC should have
exempted it from the suspension order. Although the SEC may, under
Section 4-10, Rule IV of the Rules of Procedure on Corporate Recovery of
the SEC, on motion or motu proprio, grant, on a case-to-case basis, a relief
from the suspension order, we find that the determination of such issue is
an administrative finding that this Court will not disturb absent any showing
of grave abuse of discretion on the part of the SEC.

Disposition: WHEREFORE, the petition is DENIED. The assailed Decision

dated June 30, 2004 and the Resolution dated March 30, 2005 of the Court
of Appeals in CA-G.R. SP No. 79230 are AFFIRMED.

Expanded Ratio:

Section 6(c) of P.D. No. 902-A as amended by P.D. No. 1799, enumerating
the powers of the SEC provides:

SEC. 6. In order to effectively exercise such jurisdiction, the

Commission shall possess the following powers:

xxxx

c) To appoint one or more receivers of the property, real and

personal, which is the subject of the action pending before the
Commission…whenever necessary in order to preserve the rights of
the parties-litigants and/or protect the interest of the investing public
and creditors:…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. (Emphasis supplied.)

The purpose for the suspension of the proceedings is to prevent a creditor

from obtaining an advantage or preference over another and to protect and
preserve the rights of party litigants as well as the interest of the investing
public or creditors. Such suspension is intended to give enough breathing
space for the management committee or rehabilitation receiver to make the
business viable again, without having to divert attention and resources to
litigations in various fora. The suspension would enable the management
committee or rehabilitation receiver to effectively exercise its/his powers
free from any judicial or extra-judicial interference that might unduly hinder
or prevent the "rescue" of the debtor company. To allow such other action
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.