SEC Adm. Case No. 12-12-275 The revocation of the Certificate of Approval of Increase of Capital Stock of Victorias Milling Company, Inc.

Securities and Exchange Commission SEC Bidg. EDSA, Greenhills, Mandaluyong City Republic of the Philippines Department of Finance

COMMISSION EN BANC

IN THE MATTER OF: CERTIFCATE OF APPROVAL MILLING COMPANY, INC. THE REVOCATION OF THE OF INCREASE OF CAPITAL STOCK OF VICTORIAS SEC En Banc Case No. 12-12-275 26 March 2009 Lifting of Revocation Order, dated For :

VICTORIAS MILLING COMPANY INC. Petitioner

DECISION

that it has no available appeal, or. any plain, speedy and adequate remedy in the 2009, issued by the Company Registration and Monitoring Department (CRMD) of the SEC. Petitioner invokes the jurisdiction of the Commission En Banc by alleging ordinary course of law other than this petition. Hence, pursuant to Section 12-1 of the 2006 Ruies of Procedure of the SEC, the Commission En Banc hereby takes cognizance of this case as a Petition for Review on Certiorari. This is an original action seeking to lift the Revocation Order, dated 26 March

BACKGROUND OF THE CASE

registered with the Commission on 7 May 1919, under SEC Registration No. PW- 364, with principal office located at Victorias City, Negros Occidental. Petitioner Victorias Milling Company, Inc. ("VMC") is a stock corporation

into 495,957,670 shares with the par value of P1.00 each to P2,563,035,708.00, Rehabilitation Plan of the company, approved`by the SEC per Orders dated 2: June capital stock of VMC, via conversion of liabilities..from*P495,957,670.00, divided Amendment to the Rehabilitation Plan, dated 22 July 1999, and the Alternative divided into 2,563,035,708 shares with the par value of PhP1.00 each. The increase of capital stock was implemented in accordance with the Original Rehabilitation Plan, the First. Addendum to the Rehabilitation Plan, dated 5 February 1999, the Second On 2 October 2002, the Commission approved the increase of authorized

2001, and affirmed by the Court of Appeals in its Decision dated 11 February 2002. 1999, 17 and 19 August 1999, 29 November 2000, Omnibus Order dated 23 August Decision -- In the Matter of the Revocation of the Certificate of Approval of Increase of Capital Stock of Victorias Milling Company, Inc. SEC En Banc Case No. i2-i2-275 Page 2 of 5

Restructuring Agreement, the unsecured creditors were required to proportionately convert into equity all unpaid interest and part of their outstanding principal loan to submitted to the Company Registration and Monitoring Department (CRMD). VMC in order that the PhP1.1B worth of debt is converted into equity. When the aforesaid increase of capital stock was approved on 2 October 2002, the required deeds of assignment which should convert the liabilities into equity had not yet been In this particular increase of capital stock, and in consonance with the Debt

recommended approval of the increase, provided that the 1,100,000,000 shares.to be issued as a result of the conversion of the loans into equity shall be held in escrow until the deeds of assignment to be executed by the assignors-creditors of VMC are submitted within sixty (60) days from the date of approval of the application. Hence, the Financial Analysis and Audit Division (FAAD) of the CRMD

to submit the duly executed Deeds of Assignment by the company creditors evidencing their assignment of a portion of their unpaid loans as payment for subscription to the increase in VMC shares of stock be submitted within sixty (60) days from the issuance of the certificate of approval. The letter also reminded the corporation that the non-submission of the documents, within the prescribed period, related application approved by the Commission, or for the institution of appropriate action deem fit under the circumstances. This directive is pursuant to the Guidelines November 1994 SEC Guidelines"). after due notice and hearing, shall be a sufficient ground for the revocation of the Covering the Use of Properties that Require Ownership Registration as Paid Up Capital of Corporations adopted by the Commission on 15 November 1994 ("15 Pursuant thereto, the CRMD, in a letter dated October 2, 2002, directed VMC

to comply with its undertaking to submit the said deeds of assignments. Each time, the CRMD granted a 60-day period to comply with the condition. Records on file show the series of the said letters filed by VMC asking for extension of time and the corresponding action of CRMD, to wit: VMC requested several extensions of time through numerous letter- requests

VMC Request CRMD Reply

2 3 4 6 8 9. S I 10. 11 1 11 September 2007 18 October 2006 21 May 2007 18 July 2007 30 January 2006 14 July 2006 4 April 2006 5 December 2006 2 May 2006 5 November 2007 8 January 2008 20 December 2007 24 August 2007 10 April 2006 15 May 2006 6 November 2007 25 14December 2006 3February 2006 2 August 2006 8November 2006 1 June 2007 January 2008

Decision -- In the Matter of the Revocatiori of the Certificate of Approval Of Increase of Capital Stock of Victorias Milling Company, Inc. SEC En Banc Case No. i2-12-275 Page 3 of 5

14. 14 July 2008 18. 6March 2009 12 13. 19 15 11. 1. 9September 2008 3 March 2008 6 November 2008 7 January 2009 May 2008 13 March 2008 30 July 2008 17 September 2008 3 June 2008

that the subsequent requests for extension, dated 6 November 2008, 7:5anuary 2009 VMC a final sixty-day period to comply with the requirement. Records do not show and 6 March 2009, were answered by CRMD. It must be noted that the CRMD, in its reply dated 17 September 2008, granted

Director Benito A. Cataran, on another matter. Approval of Increase of Capital Stock of VMC for its failure to comply with the conditions set forth in the 15 November 1994 SEC Guidelines. Petitioner came to know of the revocation order only on 23 July 2012, when it had a meeting with then On 26 March 2009, the CRMD issued an Order revoking the Certificate of

ISSUES

to due process was violated and, as a consequence thereof, the Revocation Order, dated 26 March 2009, should be set aside. In essence, the sole issue before the Commission is whether Petitioner's right

DECISION

increase of its authorized capital stock. It appears that the deeds of assignments were with the' submission of the Deeds of Assignments pursuant to the directive of 2 October 2002 to submit the same as a condition subsequent after the approval of the (2) remaining creditors have yet to execute the Deeds of Assignment as of 30 January submitted on various dates. As stated in VMC's letter-request for extension, only two 2006. Records show that VMC repeatedly requested for extension of time to comply

remained as an unsecured creditor of VMC which had yet to execute the said deed of the planned substitution of "Multinational? by Philippine Islands Corporation for Tourism Development, Inc. ("PICTD"). affected creditors, which were beyond its control. Specifically, it was consistent in its representation that it was Multinational Investment Bancorporation (Multinational") that was apparently causing the delay. As of 14 July 2006, only "Multinational" assignment. Further, it was also pointed out that another matter causing the delay was to submit the deeds of assignment was due to the pending legal issues peculiar to the VMC was very consistent in its letter-requests for extension, that its inability

issuing the final extension letter of 17 September 2008, it also failed to consider that remiss in its obligation in that it regularly updated the Commission of its submission VMC's delay in complying with the directive was due to the involvement of third parties in the execution of the deeds of assignment. Moreover, VMC had not been and requested formally for more time to comply with the directive. CRMD had been lenient in granting VMC the extension of time; however, by Decision -- In the Matter of the Revoc of Increase of Capital Stock of Victorias Milling Company, Inc. cation of the Certificate of Approval SEC En Banc Case No. i2-12-275 Page 4 of 5

time to VMC was forwarded to the former address of the corporation at 9126 Sultana Street corner Honradez Street, Barangay Olympia, Makati City. As early as 14 January 2008, it had already notified the SEC of the transfer of its business office to its current address, 348 J. Nepomuceno Street, San Miguel District, Manila. Despite thereof, the CRMD sent the 17 September 2008 letter to VMC's old address. The aforementioned letter of 17 September 2008 granting a final extension of

26 March 2009, for the same reason that it was sent to its old business address. In fact. CRMD was able to obtain the said Revocation Order supposedly sent to VMC from the SEC.archives. More importantly, VMC did not receive a copy of the Revocation Order, dated

notice of the postmaster, whichever date is earlier. VMC never received a copy of the actual receipt of the addressee or after five (5) days from the date he received the first final orders or resolutions shall be served either personally or by registered mail. Section .10 of the same rule consider service by registered mail as complete upon Revocation Order. Thus, service of said Order unto VMC is not complete and, consequently, said Order cannot bind VMC. Under Section 9, Rule 13 of the 1997 Rules of Civil Procedure, judgments,

also deprived of notice and hearing prior to the cancellation of the increase. The 15 August 1979 Guidelines adopted by the Commission provides that, "the non hearing, shall be sufficient ground for the revocation of the related application...". submission of the documents above, within the prescribed period, after due notice and Aside from the fact that it did not receive the Order of Revocation, VMC was

long as the parties are given the opportunity to be heard before judgment is rendered, The very essence of due process in administrative proceedings is the opportunity to the demands of due process are sufficiently met. What is offensive to due process is the denial of the opportunity to be heard. explain one's side or seek a reconsideration of the action or ruling complained of. As Is absence of notice and hearing tantamount to deprivation of due process?

for the same length of time every time the request was granted. to comply with condition subsequent or the submission of the required deeds of totally deprived of due process for it was given at least fourteen (14) extension of time assignments. The.CRMD found the reasons laid down by VMC justifiable to merit the granting of series of requests for extension of time. We must take into account that VMC was given an initial .period of sixty (60) days to comply, which were extended As already pointed out earlier, in fairness to CRMD, the company was not

proper notice and hearing should have been afforded VMC before commencing the revocation proceedings against the controversial increase of capital stock. VMC was not informed of the fact that the revocation of its increase' was already being contemplated when the last grant of extension was given to it. All this notwithstanding, unfortunately, the CRMD could have seen to it that Decision -- In the Matter of the Revocation of the Certificate of Approval of Increase of Capital Stock of Victorias Milling Company, Inc 'SEC En B anc Case No. i2-i2-275 Page 5 of 5

Revocation Order, having been issued prematurely, must be nullified. 2009: In its letter dated 6 March 2009, VMC requested for an additional sixty (60) days from 15 March 2009, or until 14 May 2009, within which to submit the deeds of assignment. In the Revocation Order itself, the CRMD admitted that it has granted all of VMC's requests for extension, including the one dated 6 March 2009. The More importantly, the Revocation Order was prematurely issued on 26 March

pursuant to the Guidelines Covering the Use of Properties that Require Ownership November 1994. 2009 is hereby LIFTED and the case is remanded to the CRMD to determine whether Registration as Paid Up Capital of Corporations adopted by the Commission on 15 VMC has complied with the directive in the CRMD letter, dated 2 October 2002,: WHEREFORE, premises considered, the Revocation Order of 26 March

SO ORDERED

Mandaluyong City, 20 December 2012.

TERESITA J. HERBOSA Chairperson

9L MA. JUANI Commissione: ITA E. CUET MANUEL HUBERTO B. GAITE Commissioner

Mom TIA AD 1 A. JALA oner ANTONIETA F. IBE Commissioner