SEC En Banc Case No. 04-14-324Victorias Milling Company, Inc. vs. SHP I and Malayan Insurance Company, Inc. (Decision dtd 02 March 2023)

Securities and Exchange Commission COMMISSION EN BANC Republic of the Philippines Department of Financ

IN THE MATTER OF THE PETITION FOR DECLARATION OF A STATE OF SUSPENSION OF PAYMENT;FOR THE APPROVAL OF A REHABILITATION PLAN; AND THE APPOINTMENT OF A MANAGEMENT COMMITTEE

INC. VICTORIAS MILLING COMPANY Petitioner-Appellant,

- versus -- SEC En Banc Case No. 03-14-324 Promulgated: 02 March 2023

THE SEC SPECIAL HEARING PANEL I AND MALAYAN INSURANCE COMPANY, INC., Respondents-Appellees.

DECISION

2014, assailing the Order dated March 13, 2014 (the "Assailed Order") issued by the Special Hearing Panel 1 (SHP), the dispositive portion of Order dated March 13, 2014 issued by the Securities and Exchange Commission Special Hearing Panel 1) [the "Petition for Review"] filed by Petitioner- Appellant Victorias Milling Company, Inc. (VMC) on 31 March which reads: Before this Commission is the Petition for Review on Certiorari (Re:

to P6,605,275.24 plus legal interests and charges from May File Notice of Claim for Reimbursement of Surety Bond with Notice of Claim filed by Malayan Insurance Company, Inc. (MICO) is GRANTED. The Rehabilitation Receiver, Atty. Luis Ma. G. Uranza is directed to include MICO's claim amounting 18, 2001 in the Schedule of Debts and Liabilities of VMC." "WHEREFORE, premises considered, the Motion for Leave to

Victorias Milling Company, Inc. vs. Special Hearing Panel1et.a C

SEC En Banc Case No.03-14-324 Page 2 of 9 DECISION

THE RELEVANT FACTS

undisputed. The factual circumstances attendant in the instant case is

Plan; and the Appointment of Management Committee which was docketed as SEC Case No. 07-97-5693 (the "Petition").1 Declaration of Suspension of Payment; the Approval of a Rehabilitation On 4 July 1997, VMC filed with the Commission a Petition for the

where VMC was declared to be under a state of suspension of payments; and issued a Stay Order dated 7 July 1998 in its favor.2 In an Order dated 8 July 1997, the Commission granted the Petition

On 31 May 1999, during the pendency of the rehabilitation

per annum from the finality of the decision until fully paid.4 (NLRC) rendered a Decision dated 31 May 1999 (the "RAB Decision") in the case entitled "Dominador P. Abelido, Jr. v. Victorias Milling Company Inc."3, directing VMC to pay Dominador P. Abelido, Jr. (Mr. Abelido) the Seventy-Five & 24/100 (PhP6,605,275.24) plus interest at the rate of 6% proceedings, Executive Labor Arbiter Oscar Uy (ELA Uy) of the Regional Arbitration Branch No. IV of the National Labor Relations Commission amount of Pesos: Six Million Six Hundred Five Thousand Two Hundred

070117 covering the amount of PhP6,605,275.24 that was issued by Malayan Insurance Company, Inc. (MICO).5 Cebu) via a Memorandum of Appeal where it posted Surety Bond No. VMC elevated the RAB Decision to the NLRC - Cebu City (NLRC

VMC's Memorandum of Appeal for lack of merit. The Motion for the NLRC Cebu in its Resolution dated 31 January 2001.6 Reconsideration which VMC subsequently filed was likewise denied by In its Decision dated 7 September 2000, the NLRC Cebu dismissed

Appeals (CA) which was docketed as CA-G.R. SP No. 64467. During the dated 4 April 2001 (the "Writ") and Notices of Garnishment dated 4 and pendency of the action with the CA, ELA Uy issued a Writ of Execution VMC forthwith filed a Petition for Certiorari before the Court of

1 Petition for Review on Certiorari. Par. 3.1 2 Ibid. Par. 3.2 3 Docketed as RAB Case No. 06-08-10553-98 Ibid.Pa 3e also Annex "H" (Motion for Leave to File Notice of Claim for Reimbursement of

5 Ibid. Par. 3.4. See also Order dated 13 March 2014. Page 2 Surety Bond. Par. 2) 6 Ibid. Pars 3.5 and 3.6

Victorias Milling Company, Inc. Sne anel 1 et.al

SEC En Banc Case No.03-14-324 Page 3 of 9 DECISION

18 April 2001 on the strength of the Entry of Judgment dated 29 March 2001.7 ELA Uy subsequently directed MIC0 to turn over the amount covered by the Surety Bond to satisfy the Writ, which the latter complied With.

for Certiorari, the dispositive portion of which reads: On 5 June 2003, the CA rendered a Decision granting the Petition

rules as follows: "WHEREFORE, based on the foregoing premises, this Court

2. 1. The assailed September 7, 2000 Decision of the NLRC is AFFIRMED; The January 31, 2001 Resolution denying VMC's motion

3 for reconsideration is SET ASIDE; The case is REMANDED to the NLRC for suspension on

4 the proceedings with respect to VMC's motion for Private respondent is directed to bring his claim before reconsideration;

5. This petition is deemed CLOSED AND TERMINATED. the petitioner's management committee; and

CA issued a Resolution dated 31 July 2006, deleting item number 1 of the afore-quoted portion of its Decision.8 Acting on the Partial Motion for Reconsideration filed by VMC, the

and BPI, after the latter allegedly disregarded/ignored its demands for reimbursement.9 The RTC-Manila issued an Order on 2 July 2003 where (RTC-Manila) a Complaint for Sum of Money with Damages against VMC MICO subsequently filed with the Regional Trial Court of Manila

holding that MICO's claim for reimbursement is covered by the Stay it directed the suspension of the proceedings against VMC.10 Unsatisfied, Order issued by the Commission. The SC Decision attained finality on 15 December 2009.11 MICO elevated the said Order of the RTC-Manila all the way to the Supreme Court (SC) which rendered a Decision dated 17 April 2009

Leave with Notice of Claim (the "Motion with Notice"), praying that it be On 26 April 2012, MIC0 filed with the Commission a Motion for

8 Id. Par. 3.12 7 Ibid. Par. 3.6 9IdAnne x "H" (Motion for Leave to File Notice of Claim for Reimbursement of Surety Bond. Par. 4)

11 Id. Pars. 3.16 and 3.17. See also Annex "H" (Motion for Leave to File Notice of Claim for Reimbursement 10 Id. Pars. 3.14 and 3.15 of Surety Bond. Par. 5)

Victorias Milling Company, Inc. vs. Special Hearin Do ne1 ef.

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May 2001 pursuant to the Indemnity Agreement and Deed of Assignment.12 granted leave to file its Notice of Claim for reimbursement of the sum of PhP6,605,275.24, plus legal interest and other charges thereon from 18

to File Notice of Claim for Reimbursement of Surety Bond Payment, Rehabilitation Receiver, Atty. Jose Ma. Aranza, similarly prayed for the therein praying for its denial on the ground of forum shopping and for alleged want of merit. In his Comment dated 10 June 2012, the denial of the Motion with Notice for lack of merit.13 On 25 May 2012, VMC filed its Opposition to the Motion for Leave

prayed for the denial of their Opposition and Comment, respectively. the arguments presented by VMC and the Rehabilitation Receiver, and On 3 July 2012, MIC0 filed its Consolidated Reply where it refuted

presented in their earlier pleadings. Rehabilitation Receiver, and MICO filed their respective Position Papers where they basically reiterated the allegations and arguments which they In compliance with the Order dated 25 March 2013,VMC, the

resulted in the filing of the instant Petition. for Review On 13 March 2014, the SHP 1 issued the Assailed Order which

injunction; (b) the denial of the Petition; and (c) the affirmation of the supplemented the findings of the SHP 1 in the Assailed Order. Certiorari dated 28 March 2014), praying for (a) the denial of VMC's application for issuance of restraining order and/or writ of preliminary Assailed Order. MICO therein presented arguments that supported and On 2 May 2014, MICO filed its Answer (to the Petition for Review of

basically reiterated the arguments in the Petition for Review. VMC emphasized the failure of MICO to refute its argument that the SHP 1 2014 filed by Respondent Malayan Insurance Company, Inc.) which committed grave abuse of discretion amounting to lack or excess of jurisdiction. On 6 June 2014, VMC filed its Reply (To Answer dated April 30

position that the SHP 1 did not commit any grave abuse of discretion in allowing the recordal of its Notice of Claim, and in directing the In its Manifestation dated 6 September 2022, MIC0 reiterated its

12 [d. Par. 3.18 13 Id. Annex "J"

Victorias Milling Company, Inc. vs. Special Hearing SEC En Banc Case No. 03-14-324 Panel 1 et. a Page 5 of 9 DECISION

Rehabilitation Receiver to include its claim in the Schedule of Debts and Liabilities of VMC.

On 14 September 2022, VMC filed its Manifestation informing the

from MICO after it filed its Reply to the latter's Answer. Commission that as of said date, it has not received any new submission

ISSUE

Receiver to include MICO's claim in the Schedule of Debts and Liabilities Whether or not the SHP 1 committed grave abuse of discretion in granting the Motion with Notice, and directing the Rehabilitation

of VMC.

RULING

We reverse the SHP 1.

against VMC. The effect of such'directive, if carried out by the and the Rehabilitation Plan which were previously approved and are Receiver to include MICO's claim in the Schedule of Debts and Liabilities of VMC on the basis of its finding that (a) the same is not premature in the sense that a ruling thereon will not involve a determination of the factual Rehabilitation Receiver, is to amend the Schedule of Debts and Liabilities currently being implemented. and legal issues in the civil case, and (b) the same is valid and enforceable In the Assailed Order, the SPH 1 directed the Rehabilitation

Procedure on Corporate Rehabilitation (the "Rules"), which is the regulation in effect when the Motion and Notice was filed, provides: and (c) of A.M. No. 00-8-10-SC14 otherwise known as the Rules of In relation to the Schedule of Debts and Liabilities, Section 12(b)

Receiver. - The rehabilitation receiver shall not take over the management and control of the debtor but shall closely oversee and monitor the operations of the debtor during the pendency of the proceedings. For this purpose, the functions of a receiver under Presidential Decree No. 902-A, rehabilitation receiver shall have the powers, duties and as amended, and the Rules of Court. "Section 12. Powers and Functions of Rehabilitation

14 December 2, 2008

Victorias Milling Company, Inc. vs. Special Hearing Panel 1 et. al SEC En Banc Case No.03-14-324 Page 6 of 9 DECISION

powers and functions: The rehabilitation receiver shall be considered as an officer rehabilitated, as well as implement the rehabilitation plan after its approval. Accordingly, he shall have the following of the court. He shall be primarily tasked to study the best way to rehabilitate the debtor and to ensure that the value of the debtor's property is reasonably maintained pending the determination of whether or not the debtor should be

XXXXXXXXX

(b) To accept and incorporate, when justified,

Liabilities; amendments to the Schedule of Debts and

(c) To recommend to the court the disallowance of justification; xxx (Emphasis supplied) of Debts and Liabilities that lack sufficient proof and claims and rejection of amendments to the Schedule

acceptance/disallowance of a claim or cause the amendment of the Debts and Liabilities are lodged exclusively with the Rehabilitation Receiver, who is equally tasked to recommend to the court (or this Commission as the case may be) the disallowance of claims and rejection of amendments thereto if he finds the same to be bereft of merit. Stated otherwise, the SHP 1 has no authority under the Rules to direct the Schedule of Debts and Liabilities. authority to accept and incorporate amendments to the Schedule of Under the afore-quoted provisions of the Rules, the power and

Receiver to accept and incorporate amendments to the Schedule of Debts and Liabilities, and to recommend to the court (or this Commission as the a creditor and to make the appropriate recommendation. case may be) the disallowance of claims and rejection of amendments thereto, it follows that the authority of the SHP 1 is necessarily limited to directing the Rehabilitation Receiver to evaluate any claim presented by Given the express grant of exclusive authority to the Rehabilitation

is misplaced as the said provision applies and governs the filing of an Procedure on Corporate Rehabilitation, which was adopted in the Rules, the Stay Order has been issued. Granting ex gratia that the provision applies, there is nothing therein that gives the rehabilitation court or the opposition to a petition. It has no application to the filing of a claim after MICO's reliance on Rule 4 Section 10 of the Interim Rules of

Victorias Milling Company, Inc. vs. Special Hearing Panel 1 et. SEC En Banc Case No. 03-14-324 Page 7 of 9 DECISION

authority is lodged specifically with the rehabilitation receiver SHP the authority to accept or deny a claim precisely because such

discussed the concept of grave abuse of discretion as follows: In the case of People v. Court of Appealsi5, the Supreme Court

"Grave abuse of discretion defies exact definition, but it generally refersto capricious or whimsical

hostility." The abuse of discretion must be patent and gross as to amount to an evasion of a positive duty or a virtual refusal to exercise of judgment as is equivalent to lack of jurisdiction. perform a duty enjoined by law, or to act at all in contemplation of law, as where the power is exercised in an arbitrary and despotic manner by reason of passion and

of a resolution of the CA in Cunanan v. Court of Appeals16, based on the parameters established in the afore-quoted doctrine, thus: We find the Supreme Court justifying the reversal and nullification

justice on the ground of technicalities. Neither of the two resolutions of the CA discloses that neither of the two tackled the lament of Cunanan that she was denied her constitutional proceedings and furnished copies of the pleadings. The DAR- R03 and the CA took the shortcut by denying her pleas for stated that she was notified or that she was furnished copies of the pleadings. She was not even furnished a copy of the order cancelling TcT No. 288509 in her name. Doubtless, she was deprived of her property without due right to due process because she was never notified of the A review of the orders of the DAR-R03 and the

process of law.

be perpetuated and made permanent. It is simply The Court cannot rest easy if such a travesty of justice would unconscionable.

To correct an injustice, all the orders of the DAR-R03 and the rules to justify their actions due to the ignorance or resolutions of the CA should be vacated and set aside for being issued with grave abuse of discretion. The DAR-R03 and the CA might have correctly cited pertinent technical

15 G.R. Nos. 205182-83 (Notice), [August 5, 2013] 16 G.R. No. 205573 (Resolution), [August 17, 2016]

Victorias Milling Company, Inc. vs. Special Hearing Panel 1 et. SEC En Banc Case No. 03-14-324 Page 8 of 9 DECISION

negligence of the petitioner's counsel but the bottom line is that Cunananwasdeprived of her property in violation of her constitutional right to due process." (Emphasis supplied)

of applicable laws, rules, and regulations, which justifies the nullification of decisions made in violation of the same, was explained by the Supreme Court in Republic v. Sandiganbayan17, thus: The reason for the imperative nature of observing the provisions

to render justice." cease to breathe life to this fundamental principle is the day "Every part of our law -- whether substantive or procedural outcome of human agency, our laws are to be interpreted and applied with meaning and purpose. The day that our courts that we erode the public's confidence in the ability of the law is the outcome ofreasonable deliberation. As the

On the basis thereof, we find that the SHP 1 committed grave abuse of discretion amounting to lack or excess of jurisdiction when it exercised a power that is exclusively lodged in the Rehabilitation Receiver by the and exercise of an authority which, by express provision of the Rules, are not for the SHP 1 to discharge. The Assailed Order must therefore be struck down for having been made without authority. Rules. This Commission cannot give its imprimatur to such assumption

the other issues presented in the Petition which are technical in nature. Given the foregoing, the Commission finds it unnecessary to rule on

WHEREFORE, premises considered, the Petition for Review on

abuse of discretion amounting to lack or excess of jurisdiction. is hereby REVERSED AND SET ASIDE for having been made with grave Exchange Commission Special Hearing Panel 1) is hereby GRANTED. The Order dated March 13, 2014 issued by the Special Hearing Panel 1 (SHP) Certiorari (Re: Order dated March 13, 2014 issued by the Securities and

SO ORDERED.

Makati City, Philippines.

EMILIQ B AQUINO

Chainperson

17 G.R. No. 195295, [October 5, 2016], 796 PHIL 617-643

Victorias Milling Company, Inc. vs. Special Hearing Panel 1 et. al. SEC En Banc Case No. 03-14-324 Page 9 of 9 DECISION

JAVEY PAUL D. FRANCISCO KELVINEES TERKLE

Commissioner Commissioner

KARLO S. BELLO Commissioner MCJIIL BRYANT T. FERNANDEZ Commissioner