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RCBC VS IAC (1999)

Facts of Previous Case:

BF Homes filed for Petition for Rehabilitation and for Suspension of Payments
o The purpose of a suspension of payments is to suspend or
delay the payment of debts the amount of which isnt affected although
a postponement is declared
RCBC was one of the creditors
RCBC requested for foreclosure of some of the real estate properties of BF Homes,
subjecting them to public auction
o Notice was sent to BF Homes
BF Homes filed and was granted TRO, delaying the public auction sale
SEC ordered BF Homes to file a bond but they did not file until the day of the auction
so SEC wasnt able to issue said bond immediately
Sheriffs proceeded with public auction sale, not knowing that a bond was filed
RCBC was the highest bidder for properties
BF Homes filed to invalidate the auction, citing RCBC and sheriff for contempt
Sheriff withheld the delivery of certificate of sale to RCBC because of the motions
RCBC filed action for mandamus, compelling sheriff to execute certificate of sale of
auctioned properties
o Granted by trial court
SEC appointed a Management Committee for BF Homes
BF Homes filed an OG complaint with IAC pursuant to BP 129 Sec 9 for annulment
of the judgment on grounds:
SEC had exclusive jurisdiction over assets of BF Homes
Extrinsic fraud bc RCBC was not prosecuted as a party in the
mandamus case
o IAC decision reversed decision of trial court
RCBC appealed to SC
o It did not commit extrinsic fraud
o Foreclosure of real estate mortgage in RCBCs favor cannot be suspended
under PD 902 A (6c)
o Validity and regularity of sale cannot be affected because suspension did not
exist in the first place
SC ruled:
o Upheld decision of trial courts not to execute certificate of sale
o Legal basis: PD 902-A
Whenever a distressed corpo 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
If foreclosure is undertaken even tho pretition for rehabilitation has
been filed, certificate of sale should not be delivered while petition is
If delivered already, transfer of title should not be effected

Issue of MR: W/N preferred creditors of distressed corporations stand on equal footing with
other creditors only after the creation of a management committee
Held. Supreme Court granted motion for reconsideration

RCBC: were still allowed to exercise its preferred status because it foreclosed mortgage before
appointment of management committee, PD 902-A not applicable

PD 902-A

c) To appoint one or more receivers of the property, real or 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 in order to preserve the rights of the parties-
litigants and/or protect the interest of the investing public
and creditors. Provided, however, That the Commission may, in appropriate cases, appoint a
Rehabilitation Receiver 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 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

1. Therefore, suspension of claims against a corporation under rehabilitation is counted upon the
appointment of management committee, not when the petition for rehabilitation is filed.
In this case, RCBC requesting for foreclosure and filing of petition for
mandamus to award certificate of title are valid.
2. *STAT CON* First and fundamental duty of Court is to apply the law. When the law
is clear, there is no room for construction or occasion for interpretation, only
application. When the law is ambiguous or of doubtful , court must interpret.
Petition for rehabilitation does not give rise to the creation of a
management committee. SEC has the discretion to determine whether such
appointment is appropriate.
Management committee is organized for the purpose of preserving
existing assets when:
1. Imminent danger of dissipation, lose, wastage or destruction
2. Paralization of business operations of such corporations
In this case, when BF Homes filed a petition for rehabilitation and
suspension of payments, this did not give rise to the creation of a
management committee. Only when SEC created did the suspension of
claims commence.

RCBC: being a mortgage creditor, can rely on its own security, and doesn't need to join the
unsecured creditors in filing claims before the SEC

secured creditors retain preference over unsecured creditors but enforcement of such
preference is suspended upon appointment of a management committee. Regain
preference after liquidation.
Secured creditors do not lose their status as opposed to unsecured creditors, PD 902-A
does not state anything to this effect. They however, cannot assert preferences before
the SEC upon creation of management committee

Decision: MR granted, RCBC had the right to move for foreclosure of mortgage because
management committee was not appointed until almost a year later.