SEC En Banc Case No. 04-16-399 In the matter of the petition for Declaration of State of Suspension of payments; for the approval of a rehabilitation plan; and the appointment of a management committee Victorias Milling Company, Inc., Petitioner-Appellant, -versus- The Special Hearing Panel 1 and Land Bank of the Philippines, Respondents.

Securities and Exchange Commission Republic of the Philippines Department of Finance

PETITION FOR DECLARATION OF IN THE MATTER OF THE

A STATEOFSUSPENSION OF

MANAGEMENT COMMITTEE PAYMENTS; FOR THE APPROVAL OF A REHABILITATION PLAN; AND THE APPOINTMENT OF A

VICTORIAS MILLING COMPANY, INC. Petitioner-Appellant, SEC En Banc Case No.04-16-399

versus -

and PHILIPPINES, THE SPECIAL HEARING PANEL 1 LAND BANK OF THE

Respondents.

DECISION

Milling Company, Inc.(VMC) seeking to reverse and set aside the Order dated 17 March 2016 (Assailed Order) of the Special Hearing Panel 1 (SHP1,the dispositive portion is read as follows: This resolves the pending Appeal filed, on 01 April 2016,by Victorias

"WHEREFORE, premises considered, Victorias Milling Company is Thousand Thirteen Pesos and Twenty Eight Centavos (P the Phiippines or its duly authorized representative."2 hereby directed to deliver the refined sugar equivalent to the amount of Four Hundred Nine Million Eight Hundred Fourteen 409,814,013.28) to Intervenor Landbank of the Philippines or its duly authorized representative. In case the release of the refined sugar is no longer possible, Victorias Milling Company is directed (sic) pay for the monetary equivalent of the remaining amount of Nine Million Eight Hundred Fourteen Thousand Thirteen Pesos and Twenty Eight Centavos (P 409,814,013.28), to Landbank of the loan incurred by NNMCI, in the total amount of Four Hundred

The Facts and Proceedings

Suspension of Payments; for the Approval of a Rehabilitation Plan; and the Investigation and Clearing Department (SICD) a Petition for Declaration of On 04 July 1997,VMC filed before the Commission, through the Securities

Emphasis supplied Notice of Appeal and Memorandum of Appeai dated 01 April 2016,Records.pages 236-267

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Appointment of a Management Committee (SEC Case No. 07-97-5693). The SICD gave due course to the said petition. Thereafter, the SICD issued an Order dated 08 July 1997 suspending all actions or claims against VMC that are pending before any court, tribunal, office, board and/or the Commission.

be recognized as part of its DIRECT liabilities and its payment be included in the a Complaint-in-Intervention3 against VMC praying that the RSDO issued by VMC latter's rehabilitation plan.Later on 12 April 1999, LBP filed an Amended On 31 August 1998,Landbank of the Philippines (LBP) filed with the SICD

Complaint-in-Intervention to include an additional claim.

granted North Negros Marketing Company,Inc.(NNMCI),a subsidiary of VMC,an increased to Php 400,000,000.006. NNMCI availed of the said credit line and executed the following promissory notes: Omnibus Credit Line5 amounting to Php 250,000,000.00, which was later In its Complaint-in-Intervention, LBP alleges that, on 30 August 1994, it

B-194611 B-194609 B-194610 Promissory Note Number Php 50,000,000.00 Php 50,000,000.00 Php 2,073,933.87 Amount 14 February 1997 14 February 1997 15 April 1997 Date

96-4-203-60012 B-19461210 B-19461311 $1,550,000.00 Php 622,334.00 Php 22,059,680.25 16 April 1997 17 March 1997 27 November 1996 19 March 1997 20 March 1997

secure its loan. In addition to the said mortgages, NNMCI executed several Orders (RSD0) numbers 37568,37569,37570,37571,37572,and 3757314 Promissory Notes covered by Deeds of Assignmenti3 conveying to LBP the right to claim 588,716 kilograms of refined sugar under VMC Refined Sugar Delivery At the same time,NNMCI mortgaged its real properties in favor of LBP to

signed by VMC's Treasurer, Rolando C. Rodriguez, and Executive Vice-President Carlos H. Tupas Jr., stating that VMC issued in favor NNMCI the RSDOs totaling The said Deeds of Assignment was accompanied by a Certificationi5

3 Dated 27 August 1998. Annex *C* of the Memorandum of Appeal, Records. pages 195-220. Dated 07 April 1999.AnnexFof the Memorandum of Appeal,Records.pages 132-142 AnnexAof the Amended Complaint-in-InterventionRecords.pages 126130 AnnexBof the Amended Complaint-in-Intervention.Records,pages 121-125 Annex "E" of the Memoraindum of Appeai, Records, page 183. Annex "E-1 of the Memorandum of Appeal, Records.page 182 AnnexGof the Memorandum of Appeal, Records,page 151 Annex E-3of the Memorandum of Appeal, Records.pages 176-178 Annex~, F-1F2,F-3, F-4, 5 of the Amended Complaint-in-Intervention Records. pages 85-98 nnex"E-2of the Memorandum of Appeal, Records. pages 179-181 Annexes "F-6-F-II"of the Amended Complaint-in-Intervention.. Records.page 79-84 Annex~E-5of the Amended Complaint-in-interventionRecords.page 99-10 \nnexE-4of the Memorandum of Appeal,Records.pages 173-175

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588,716 kilograms of refined sugar standard grade 50-kilo pack, which is available upon demand and surrender of the RSDOsi6

LBP foreclosed the mortgaged properties. Despite the foreclosure, however, interests, penalties and other charges. Then,LBP tried to secure the physical there still remain an outstanding balance of Php 187,176,231.40,exclusive of When the loans became due,NNMCI failed to pay the same. Consequently

possession of refined sugar covered by the subject RSDOs but VMC refused to honor the same.

filed a Motion to Dismiss based on the following grounds: 1.) LBP failed to comply with the rules on non-forum shopping; 2.) litis pendencia; 3.) LBP failed to state a cause of action; 4.) the Commission has no jurisdiction over the complaint-in- intervention; and 5.)LBP failed to comply with a condition precedent for filing the claim. On 24 September 1998,VMC's Management Committee (VMC-MANCOM)

authorized to sign by VMC; 4. LBP did not properly demand within the April 1999, an Amended Answer18 to LBP's Amended Complaint-in-Intervention. It argues that:1.) LBP should direct its claim against NNMCI; 2.) the Commission has no jurisdiction over LBP's claims since the latter did not pay the required the RSDOs contain escalation clauses which are void in initio. Hence, LBP has no docket fees; 3.) the subject RSDOs were executed by persons who are not contemplation of the Warehouse Receipts Law as no quedan was presented and there was no offer to pay the warehouseman's lien; 5.) the RSDOs, certification and other documents were executed by persons not authorized by VMC; and 6.) cause of action. On 30 September 1998,VMC filed its Answer17.Then,it also filed,on 19

issued the Assailed Order and ruled that: respective arguments and evidence19 in support to their positions. Then, SHP1 Subsequently, the proceedings ensued and the parties presented their

delivery of the specific quantity of the refined sugar to the latter. "The Panel agrees with the contention of Intervenor LBP.Regardless of whether or not the subject RSDOs in question are warehouse of LBP effectively transfers the right of the former to claim the receipts,the execution of the Deed of Assignment by NNMCI in favor

negotiable instrument. In fact, any kind of document may give rise to Obligations may arise, not only from a warehouse receipt or a an obligation because there are various sources of obligations. Under

I hs to cen haE VICTORAS MIING CO. INCa IUe n avo fNORTH NEROS MARKETING CO INC NNMCe VMC Refined Sugar Delivery Order (RSDO) totaling 588.716LKG Refined Sugar Standard Grade 50-kilo packwhich shall be connection with NNMCI's assignment of the above stocks for loan availment with your bank. avallable upon de Dated 28 September 1998. nd and surrender of said refined sugar delivery order as follows: x This certification is being issued in

19BPSEibitBEFGHJ-KH-1-a1aJMNOSTUVWY Dated 15 April 1999

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Article 1157 of the Civil Code, obligations may arise from law contracts, quasi-contracts, acts or omissions punished by law and quasi-delicts. They also come in different forms. Under our laws, a contract may be even be expressed or implied.

In this case, a quasi-contract was the source of the obligation of VMC to deliver the refined sugar to NNMCI. The undertaking to make the subject bags of refined sugar available upon demand and upon surrender of the RSDOs in issue, as embodied in the Certification issued by VMC for the purpose of loan availment with the Intervenor, partake of the nature of an obligation. Considering that NNMCI has transferred its right to LBP,it is but proper for VMC to honor its obligation under the RSDOs it issued by delivering the bags of refined sugar to Landbank

It is thus settled that the obligation to release the remaining bags of sugar can be treated as a contractual obligation of VMC. A discussion on whether or not the subject RsDOs are warehouse receipts is immaterial in this case.

VMC is obliged to deliver the remaining bags of sugar under the subject RSDOs or to pay the monetary equivalent thereof,should the first be impossible to fulfill.In this situation, to rule otherwise would be iniquitous and would run contrary to the principles of justice."

Hence, this Appeal.

In VMC's Memorandum of Appeal2o, it argues that the SHP1 acted without

its monetary equivalent, because: or in excess of jurisdiction or with grave abuse of discretion, when it issued the Assailed Order and ruled that VMC is obliged to deliver to LBP refined sugar or

i SHP1 has no jurisdiction to adjudicate and award the claims and

I. On the assumption that SHP1 has jurisdictionLBP has no cause reliefs in the Complaint-in-Intervention

iii. The Deeds of Assignment executed by NNMCI in favor of LBP did iv. LBP's demand to VMC to deliver the possession of the refined claim are not in fact or in law warehouse receipts or quedans, covered by the RSDOs to LBP, the same being merely a collateral sugar covered by the RSDO or to pay the monetary equivalent of the remaining amount of the loan incurred by NNMCI is not of action against VMC since the RSDOs upon which LBP bases its further, the RSDOs are not valid and enforceable since they were not issued by a competent authority or officer of VMC; not transfer any rights, interest or ownership over the sugar or pledge constituted to secure the fulfillment of NNMCI's anchored on any source of obligation either by law or contract. obligation;and

20 Note 1, Supra.

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Thereafter, VMC filed a Supplement to the Memorandum of Appeal21 where it presented additional arguments,to wit

iii. The purported Deeds of Assignment executed by NNMCI in favor of LBP Ii I The Certification dated 29 August 1996 on which LBP anchors VMC's alleged liability to surrender the sugar subject of the RSDOs was not authorized by VMC cannot be held liable on the basis of a Quasi-Contract and the covered by the RSDOs, the same being merely a collateral or pledge the Board of Directors of VMC; Certification allegedly issued by VMC;and could not transfer any rights, interest, or ownership over the sugar allegedly constituted to secure the fulfillment of NNMCI's obligation.

On the other hand,LBP,in its Reply Memorandum22,counters that:

i.SHP1 has jurisdiction to award the claims of LBP as prayed for in its Complaint-in-Intervention as provided in sub-paragraph (d) of Section 5 and sub-paragraphs (c) and (d) of Section 6 of P.D

I. iii. The Deed of Assignment by NNMCI in favor of LBP effectively SHP1 was correct in holding that petitioner VMC is obliged to deliver the remaining bags of sugar under the RSDOs (and equivalent thereof even if the RSDOs are not considered transfer the right of the former to claim the delivery of the No. 902-A embodied in the Certification of VMC) or to pay the monetary warehouse receipts or quedans; and specific quantity of the refined sugar as declared in the subject RSDOs.

Issues

Simply stated, the issues now to be resolved are:

1. Whether or not SHP1 has jurisdiction to resolve LBP's Complaint-in

2.Whether or not LBP can lawfully claim from VMC based on the RSDO Intervention;

assigned to the former and certified by the latter. Nos. 37568, 37569, 37570, 37571, 37572,and 37573 which was

Ruling

Jurisdiction over LBP's Complaint-in-Intervention

VMC argues that SHP1 has no jurisdiction to adjudicate and award LBP's claim on the ground that rehabilitation proceedings are summary and non- adversarial in nature. It avers that LBP's claim partakes the nature of a civil claim

21Dated 06 Apri 2016. fledon 12 April 2016 Dated 26, April 2016,Filed on27 April 2016

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which involves an actual controversy involving rights that are legally

be with the regular courts and not with the Commission. demandable or enforceable. Hence, the determination of the said issues should

In support to its position,VMC cited Advent Capital vs. Alcantara, et al.23

Pool A (SPV-AMC), Inc.vs.Armando Pan Jr.et al.and SEC En Banc Case No.12 1, et al." (VMC vs. APAA & BPI), which were affirmed by the Court of Appeals25 and Express Investment III Private Ltd. et al. vs. Bayan Telecommunications,Inc. et and Supreme Court26 al.24.Furthermore,it also cited SEC En Banc Case No.12-12-276 entitledAsset 12-279 entitled "Bank of the Philippine Islands, et al. vs. SEC Special Hearing Panel

Commission has jurisdiction as provided in sub-paragraph (d) of Section 5 and sub-paragraph (d of Section 6 of P.D.No.902-A,as amended by P.D.Nos.1653 and 1758.LBP avers that its claim is a simple money claim founded on a contract which is within the jurisdiction of SHP1. On the other hand, LBP disagrees with VMC's argument. It claims that the

and Dao Heng Bank, Inc.27 (VMC vs.DHB. In the said case,we have ruled that Commission's jurisdiction over these VMC RSDO claimants in SEC En Banc Case No. 01-15-353 entitled "Victorias Milling Company, Inc.vs. Special Hearing Panel 1 Recently,we have extensively discussed and passed upon the issue on the

and subject matter of a petition or complaint is determined by "It is axiomatic that the jurisdiction of a tribunal, including a quasi-judicial officer or government agency, over the nature the material allegations therein and the character of the relief prayed for, irrespective of whether the petitioner or complainant is entitled to any or all such reliefs.

In this case, the Commission's exclusive and original jurisdiction over petitions for suspension of payments or rehabilitation of corporations, as well as incidents thereof, is clearly provided in Sections 5 (d) and 6 (c)(d) of P.D.no.902-A, as amended by P.D. No. 1758. X X X

In view of the foregoing jurisprudence, it is clear that the stay order their claim. The principle of "equality is equity" lies at the heart of ensuring as much as possible that the process of being able to sort of rehabilitation proceedings seek to prevent the creditors from out among the debtor, the creditors and other stakeholders, the most pursuing separate and disparate remedies in various fora to enforce

25 AnnexMftheMemorandumofAppeal.Cour of Appeais 5 Diviins Decisiondated05December2014 (CAGR-SP 23 G.R. No. 183050, 25 January 2012 the Appeal,Supreme Court 2n Division's Notice dated21 October 2015 (G.R.No.218239,03 August 2015 No.132208,05 December 2014) GR.No.174457-59.05 December 2012 Annex Nof the Memorandum of Appeal,Supreme Court.2n Division's Notice dated 03 August 2015 and AnnexOof Decision dated 29 November 2016

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feasible means possible to work-out a rehabilitation plan to the best interest of all stakeholders

Thus, the Commission, prior to the enactment of R.A. No. 8799 or the Securities Regulation Code (SRC), is empowered to hear and jurisdiction over the instant case, and any incidents thereof. determine all claims by creditors against the distressed corporation. Indeed, Section 5 of the SRC further declared that the Commission shall retain jurisdiction over pending suspension of payments/rehabilitation cases filed as of 30 June 2000 until finally disposed. This is the reason why the Commission should retain

Jr., et al.",SEC En Banc Case No. 12-12-276 and "Bank of the On a similar note, we like to take this opportunity to clarify and discuss the applicability to the instant case of the previous consolidated cases of "Asset Pool A (SPV-AMC), Inc.vs.Armando Pan Philippine Islands,et al.vs. SEC Special Hearing Panel 1,et al.SEC En Banc Case No.12-12-279 (VMC vs.APAA &BPD,which was affirmed by the Court of Appeals and Supreme Court.

In the said consolidated cases, the Commission was asked to interpret a stipulation (the exercise of VMC's right of first refusal) in the Mortgage Trust Indenture Agreement (MTIA) between VMC right over VMC's obligation in the MTIA to Asset Pool A (SPV-AMC) and Bank of the Philippine Islands (BPI).Similarly,BPI assigned its Inc. (APAA). The Commission does ruled that it does not have jurisdiction to determine issues/matters which are not necessary or incidental to the rehabilitation proceedings and does not serve the purpose of rehabilitation. However,in the instant case,we are now asked to determine DHB's claim against VMC based on the subject issued RSD0s. Specifically,DHB's right to claim the 105,000 bags of PEPSI to the former. refined sugar covered by the subject RSDOs which was assigned by

resolve and determine claims against a distressed corporation, we rule that we have jurisdiction over the instant case. a determination of a right in an agreement/contract (MTIA), thus the Otherwise stated, VMC vs.APAA & BPI and the present case are differently situated. In VMC vs. APAA & BPI, the issue to be resolve is Commission has no jurisdiction over the same. While in the present case, the issue to be resolve is a determination of a claim against the distressed corporation. Since the Commission is empowered to

on its claim for reimbursement against VMC, the Supreme Court when it issued stay orders, it should also be pointed out that the specifically with regard to the VMC's rehabilitation. In Malayan assails the CA's Decision affirming the suspension of the proceedings Having settled that the Commission has jurisdiction over all claims Supreme Court had the occasion to rule on the coverage of claims Insurance Company,Inc.vs. Victorias Milling Company, Inc., Malayan ruled that:

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XX X

Based on the above-discussion, DHB's claim for the delivery of 105,000 bags of refined sugar covered by the subject RSD0s,falls

Deed of Assignment between DHB and PEPSI. should be filed with the Commission. This is because DHB's claim emanates from its right over VMC's RSDOs. DHB's right was conveyed, transferred and assigned by PEPSI, as evidenced by the within the definition of "claims"covered by the stay order.Thus,it

X X X

Additionally, the Commission En Banc already allowed DHB's Motion to Intervene, when it ruled

"During the 18 February 1998 hearing, both parties were duly represented by their respective counsels and there ensued an Both parties declared during the hearing that they have no objections to the SEC deciding the present controversy. exhaustive discussion on the pertinent issues of the case and the respective argument of both parties. Petitioner-appellee VMC clarified that it has no objection to the intervention filed by DHB.

and properties of a distressed firm under sec.5 (d of P.D.902-A The exclusive jurisdiction of the SEC over cases involving the assets was upheld by the Supreme court in the case of RCBC vs. IAC (213 SCRA 830

In view of the foregoing, the instant appeal is hereby GRANTED. The Omnibus Order of the Hearing Panel dated 03 November 1997 is thus MODIFIED, allowing the Motion for Leave to Intervene filed by Intervenor-Appellant DHB before the SICD.

it has presented in this instant appeal. Clearly,VMC's admissions in the RTC and SHP proceedings are contrary to its present position which casts doubt to the arguments

In Banaga, et al. vs. COSLAP, et al. the parties had conflicting free patent applications over a parcel of public land. On appeal to the Commission on the Settlement of Land Problems (COSLAP) on the controversy, and that it is the Bureau of Lands which has the jurisdiction over the dispute between the parties herein. It was held Supreme Court, Banaga seeks the annulment of the decision ground that COSLAP has no jurisdiction to hear and resolve the that:

"Finally, assuming, in gratia argumenti, that the Provincial PACLAP Committee had no jurisdiction over the controversy, petitioners are already estopped from raising the issue of jurisdiction and from alleging at the same time that the case falls within the jurisdiction later replaced by the COSLAP. What they alleged in their appeal, as one of their assigned errors, was that the PACLAP Provincial of the Bureau of Lands. Petitioners had not raised this matter of lack of jurisdiction in their appeal to the PACLAP which was

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to be properly within the jurisdiction of the civil courts. This is not the issue of jurisdiction which they are now raising before Us. In Committee exceeded its jurisdiction in ruling on the validity of the verbal agreement between the parties herein, which they contend the instant petition, they now claim that jurisdiction belongs to the Bureau of Lands and not to the PACLAP.

practice of party submitting his case for decision and then accepting the judgment, only if favorable, and attacking it for lack of jurisdiction when adverse. Here, the principle of estoppel applies. Hence, a party may be estopped or barred from raising the question of jurisdiction for the first time in a petition before the the elementary principles of right dealing and good faith. Further and decide for the first time, a question not raised in the This Court has time and again frowned upon the undesirable Supreme Court when it failed to do so in the early stages of the proceedings. This principle should deter those who are disposed to trifle with the courts by taking inconsistent positions contrary to the position whereby the court, which is supposed to review administrative determinations, would not review, but determine the rule is settled that this Court cannot allow a litigant to assume a different posture when he comes before the court and challenges administrative forum."

To reiterate, it was VMC which filed, on 09 July 1999, a motion to suspend proceedings with the RTC on the ground that the proceedings before the SICD Hearing Panel. In fact, it presented not only on estoppel in pais but estoppel by laches as well. Commission had already acquired jurisdiction over the rehabilitation case when it issued a Stay Order.Moreover,VMC participated in the evidence in support of its defense. However,after failing to obtain an affirmative relief from the SHP, VMC now invokes the Commission's lack of jurisdiction over DHB's claim. Pursuant to principles laid estopped from questioning the Commission's jurisdiction based down in Banaga, which cited Tijam vs. Sibonghanoy,VMC should be

and non-adversarial in nature, we are not persuaded. VMC anchored its argument on the Supreme Court cases of Advent Capital vs. As to VMC's argument that rehabilitation proceedings are summary Alcantara, et al. and Express Investment IIl Private Ltd. et al. vs. Bayan Telecommunications, Inc. et al.. A close reading of the same would however, show that these cases find no application.

creditor seeking to recover its claim from a third party in the rehabilitation proceedings. The Supreme Court ruled that the recognized and even paid for several RSDOs that PEPSI presented. In Advent Capital case, it is the distressed corporation which is the rehabilitation court has no power to resolve disputes between Supreme Court ruled that it should file a separate action for recovery Advent (as creditor) and its claim against third parties. Thus, the Thus, VMC is not disputing the claim (RSDOs) but merely argues that "since no warehouse receipt was presented to VMC, there is no obligation or latter's part to deliver the goods". of its claim.In the instant case, PEPSI is not a third party. VMC

Victorias Milling Company,Inc vs.The Special Hearing Panel 1 and Land Bank of the Philippines SEC En Banc Case No. 04-16-399 Page 10 of 14

Similarly, in Express Investment case, the Supreme Court ruled that

etc.) incurred by creditors in pursuing their claim cannot be included claim of costs (payment to accountants, financial experts, lawyers

in the rehabilitation proceedings.

Both of these cases do not fall squarely to the facts of the instant case, hence these are not applicable.

Finally, it is clearly provided in Section 2-4 of the SEC Rules of Procedure on Corporate Recovery that:

cause shown, the Commission may permit any interested party to intervene generally or with respect to any specified matter. Section 2-4. Permissive intervention - On motion and for good

tointervene in VMC's rehabilitation proceedings. The As above-provided, the Commission can allow an interested party

Commission is given the discretion to determine which interested party may participate in the rehabilitation proceedings of a distressed corporation."

NNMCI's assignment over the latter's right to claim 588,716 kilograms of refined sugar covered by the subject RSDOs. Since we are faced with the same issues, we now rule in the same manner as in VMC vs. DHB that the Commission has VMC vs. DHB is similar with the instant case. LBP's claim comes from

jurisdiction to determine LBP's claim against VMC.

LBP's Claim based on VMC RSDOs

VMC argues that the RSDOs,on which LBP bases its right to claim 588,716

invoices and delivery orders. Thus, it is not bound to deliver any sugar to LBP kilograms of refined sugar, are not warehouse receipts or quedans but mere

pursuant to Section 8 of Act No. 2137 or the "Warehouse Receipts Law"28 not issued by a competent authority or officer of VMC.31 Moreover,it contends that the supposed RSDOs29 and VMC Certification30 were

indorsement or delivery since this is in contravention of the principle of pactum RSDOs is a pledge to secure NNMCI's loan obligation. Thus,LBP cannot acquire ownership over the refined sugar covered by the subject RSDOs through a mere VMC further contends that the bags of sugar covered by the subject

28 Obligation of warhouseen to iver this Act is bound to deliver the goods upor aCBnnanG A warehouseman.in the abse made either by the holder of a receipt for the qoods or by the e.of some.lawful.excuse.provided bv

receipt. if negotiable, with such indorsements as would be necessary for the negotiation of the receipt, and (c) A readiness is requested by the warehouseman. In case the warehouseman refuses or fails to deliver the goods in compliance with a demand by the holder or depositor so accompanied.the burden shall be upon the warehouseman to establish the existence depositor if such.demand is acco and willinaness to sign.when the goods are deliveredan acknowiedament that they have been delivered if such signature of a lawful excuse for such refusal mpanied with(a) An offer to satisfy the warehouseman's lien(b) An offer to surrender the

Note 1 5, Supra Note20, Supra Note 1 4,Supra

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commissorium. Also,VMC asserts that LBP's claim to the bags of sugar covered by the subject RSDO is not anchored in any source of obligation either in law or contract.

On the other hand, LBP contends that SHP1 was correct in ruling that

VMC Certification. It argues that the Deeds of Assignment issued by NNMCI in VMC is liable to deliver the bags of refined sugar based on the subject RSDOs and

LBP's favor effectively transfer the right to claim the bags of refined sugar covered by the subject RSDOs. It added that VMC is estopped from denying the authority of its officers who signed the RSDOs and VMC certification under the doctrine of apparent authority. LBP further claims that it is collecting from VMC as an assignee of NNMCI.Also,it alleges that VMC is not privy to its agreement with NNMCI, hence VMC cannot set up as a defense the principle of pactum commissorium.

DHB for the issued RSDOs which were assigned to the latter, to wit: As earlier discussed,in VMC vs.DHB,we have ruled that VMC is liable to

"We find merit in DHB's position.

A quasi-contracts are those juridical relations arising from lawful voluntary and unilateral acts give rise to the juridical relation of quasi-contract to the end that no one shall be unjustly enriched or benefited at the expense of another. In this case, there was no definite determination that VMC benefitted from the NNMCI's loan with NNMCI's loan. with DHB. Thus,it cannot be said that VMC was unjustly enriched

transferring the right of the assignor to the assignee, who would then be allowed to proceed against the debtor. It may be done either to give consent. On the other hand, an assignment of credit/right is the process of gratuitously or onerously, in which case, the assignment has an effect similar to that of a sale. In an assignment of credit/right, the consent of the debtor is not essential in order that it may produce legal effects. Hence, the duty to pay does not depend on the consent of the debtor; otherwise, all creditors would be prevented from assigning their credits/rights because of the possibility of the debtors' refusal

Furthermore, in Victorias Milling Co., Inc. vs. Court of Appeals and Consolidated Sugar Corporation, wherein Consolidated Sugar to deliver the same to the said buyer or its assignee, thus: Corporation becane the holder/owner of VMC's Shipping List/Delivery Receipts (SLDRs), the Supreme Court ruled that when there is a transfer of title to the buyer or its assignee,VMC is obliged

from alleging the contrary. The contract is the law between the contract of sale, not a contract to sell. Petitioner is now estopped "The aforequoted terms and conditions clearly show that petitioner transferred title to the sugar to the buyer or his assignee upon payment of the purchase price. Said terms clearly establish a

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contracting parties. And where the terms and conditions so stipulated are not contrary to law, morals, good customs, public upheld.Having transferred title to the sugar in question petitioner is now obliged to deliver it to the purchaser or its policy or public order, the contract is valid and must be assignee.

In the instant case,VMC cannot deny the fact that when PEPSI

sugar to DHB, the latter is now claiming the right to the refined sugar assigned its right to claim the remaining 105,000 bags of refined covered by the subsequent RsDOs. Moreover, it indubitable that VMC has an agreement with PEPSI to deliver the remaining bags of refined sugar for the reason that it already partially performed its obligation to the latter when: 1.) it cancelled RSD0 No.37977 and issued 20 RSDOs to PEPSI;2.) it delivered 45,000 bags to PEPSI when the latter surrendered RSD0 Nos.38473,38483-38486,38487

amounting to Php 10,123,845.76 for hauling the refined sugar.Based and 38488;3.) it received payment of the corresponding tolling fees

on this established fact, VMC is estopped from denying its obligation to DHB to deliver 150,000 bags of refined sugar.

into the shoes of PEPSI (assignor), the former acquiring the latter's because of quasi-contract." In other words,DHB's right to claim the 105,000 bags of sugar covered by the subject RSDOs, comes from PEPSI by virtue of the Deed of Assignment dated 25 June 1997 and not from VMC's right to claim the 105,000 bags of refined sugar. In essence,DHB became the creditor of VMC as to the remaining 105,000 bags of certification dated 03 December 1996.Thus,DHB (assignee) steps refined sugar, by virtue of the Deed of Assignment and not

latter's right to claim bags of refined sugar covered by subject RSDOs emanates from a valid assignment. Relative to the instant case, we are confronted with a deliver 588,716 kilograms of refined sugar covered by the subject RSD0s to LBP. the NNMCI's assignment. LBP stepped into the shoes of NNMCI wherein it acquires the latter's right to claim from VMC. substantially the same issue on whether VMC is liable to LBP based on the subject RSDOs. Applying our ruling in VMC vs. DHB, we find VMC to be liable to LBP's right to claim the bags of sugar covered by the subject RSDOs comes from As above-discussed,we have ruled that VMC is liable to DHB because the

established that these bags of sugar were intended to secure NNMCI's loan with We agree with VMC's allegation that the 588,716 kilograms of refined sugar covered by the subject RSDOs is considered as a contract of pledge. It is clearly As to VMC's argument on pactum commissorium, we are not persuaded.

LBP

the creditor or to a third person a movable32 or document evidencing Pledge is an accessory contract by virtue of which the debtor delivers to

32 Artide 2094 of the New Civil Code.

Victorias Milling Company Inc. vs.The Special Hearing Panel I and Land Bank of the Philippines SEC En Banc Case No. 04-1 6-399 Page 13 of 14

incorporeal rights33 for the purpose of securing the fulfillment of a principal

delivered shall be returned with all its fruits and accessions.34 obligation with the understanding that when the obligation is fulfilled, the thing

Civil Code, is a stipulation empowering the creditor to appropriate the thing given as guaranty for the fulfillment of the obligation in the event the obligor fails Relatedly, pactum commissorium, as provided in Article 208835 of the New

proceedings, and a public sale. The elements of pactum commissorium, which to live up to his undertakings, without further formality, such as foreclosure

the need of any foreclosure proceedings, are: (1) there should be a property thing mortgaged in case of non-payment of the principal obligation within the enable the mortgagee to acquire ownership of the mortgaged property without there should be a stipulation for automatic appropriation by the creditor of the stipulated period.36 In other words,what is prohibited by Article 2088 is the mortgaged by way of security for the payment of the principal obligation,and (2)

automatic appropriation by the creditor of the thing pledged or mortgaged upon failure of the debtor to pay his debt within the period agreed upon by virtue of authority or right previously given the creditor.37

However, in the instant case, there is no automatic appropriation of the thing pledged or the bags of refined sugar. It can be seen that LBP still filed its appropriate for itself the bags of refined sugar covered by the subject RSDOs. It VMC. This could not be considered as "automatic appropriation" because LBP claim with the Commission, as the rehabilitation court. It did not automatically undergone the needed procedure as provided by law to enforce its claim with still sought for the Commission to determine its claim against VMC.

In Martinez vs. Philippine National Bank38, the Supreme Court expounded the concept of "automatic appropriation", to wit:

is transferred or endorsed to a creditor only to secure the keep and with the consent of the owner to sell them so as to payment of a loan or debt, the transferee or endorsee does not automatically become the owner of the goods covered by the satisfy the obligation from the proceeds of the sale, this for the or warehouse receipts is lost without fault or negligence of the mortgagee or pledgee or the transferee or endorsee of the "In conclusion,we hold that where a warehouse receipt or quedan warehouse receipt or quedan but merely retains the right to mortgage or pledge,and that if the property covered by the quedans simple reason that the transaction involved is not a sale but only a

38 G.R. No.L-4080. September 21, 1 953. dispose of themAny stipulation to the contrary is null and voia 3 L Article 2088 of the New Civil Code.The creditor cannot appropriate the things given by way of pledge or mortgage,or De LeonHectorComments and Cases on Credit Transactions,1999Editionpage 322 Article 2095 of the New Civil Code De Leon Hector.Comments and Cases on Credit Transactions, 1999 Editionpage 337. Sps.Edralin vs.Philippine Veterans Bank.G.R.No.168523.09 March 2011

vs.The Special Hearing Panel I and Land Bank of the Philippines SEC En Banc Case No.04-16-399 Victorias Milling Company.Inc Page 14 of 14

lost on account of the real owner, mortgagor or pledgor." warehouse receipt of quedan, then said goods are to be regarded as

executed a Debt Restructuring Agreement with its creditors. Section 19 thereof expressly provides: Finally,records of the Commission show that,on 29 April 2002, VMC

debts of Nonemarco. As of date of execution of this Agreement, the However, in the event that VMC shall eventually be held liable by final restructure the RSDO Claims .or a portion thereof under the same terms and conditions of the terms of restructuring for VMC's currently 19.1VMC's subsidiary, North Negros Marketing Company Inc (Nonemarcoused Refined Sugar Delivery OrdersRSDOs purportedly issued by VMC to avail of loans from Dao Heng Bank,Land Bank of the Philippines, BPI,Metrobank and Asian Bank (the "RSDO Claimants") allegedly in the total principal amount of approxiamately One Billion One Hundred Thirty Four Million Pesos (P1.134 Billion) The RSDO Claimants are asking VMC to either deliver to them the quantity of sugar covered by their respective RSDOs or absorb the RSDO Claims are still subject of a pending litigation before the SEC judgment to pay such RSDO Claims or a portion thereof, VMC shall UNSECURED CREDITORS.xXx

pursuant to Section 19 of the Debt Restructuring Agreement dated 29 April The Special Hearing Panel 1's Order dated 17 March 2016 is hereby AFFIRMED with MODIFICATIONS.VMC is DIRECTED to comply with said SHP's Order 2002. WHEREFORE, premises considered, the instant appeal is hereby DENIED.

SO ORDERED.

Pasay City;07 March 2017

TERESWA J. HERBOSA Chairperson

atma Aoa 91nwX

ANTONIETA F. IBE Commissioner EPHYRO LUIS B.AMATONG Commissioner

BLAS JAMESG.VITERBO Commissioner EMILIO B.AQUINO Commissid

*On Official Business