Metropolitan Bank & Trust Company vs. Manolito S. Soller

[SEC-EB CASE NO. 593. October 13, 1998.] METROPOLITAN BANK & TRUST COMPANY , petitioner , vs . HON. MANOLITO S. SOLLER, in his capacity as Hearing Officer, GERRY ALCANTARA SHOES, INC. and BANDOLINO SHOE CORP. , respondent . [SEC-AC CASE NO. 603. October 13, 1998.] (SEC Case No. 06-97-5677) IN THE MATTER OF: PETITION FOR THE DECLARATION IN A STATE OF SUSPENSION OF PAYMENTS WITH PROPOSED REHABILITATION PLAN, GERRY ALCANTARA SHOES, INC. AND BANDOLINO SHOE CORP. , appellees . O R D E R Before the Commission En Banc are two (2) cases, a petition for certiorari and an appeal proceeding, seeking to annul and set aside the following orders on the ground that they were issued with grave abuse of discretion: LLjur 1. Omnibus Order dated December 10, 1997 granting the Motion to Admit Amended Petition of Gerry Alcantara Shoes, Inc. (GASI) and Bandolino Shoe Corporation (BSC); and 2. Order dated December 11, 1997 granting GASI's and BSC's Urgent Motion to Constitute Management Committee. The Commission decided to have a joint resolution of these to 2 cases, there being identity in the issues raised and in the orders by questioned. Further, the Commission treated SEC-AC Case No. 603 as an original petition for certiorari as the errors raised therein arose from the issuance of interlocutory orders and a decision on the case being appealed has yet to be rendered. This was admitted by appellants themselves when in their Memorandum on Appeal, they gave the Commission the option to treat it "either as an original action for certiorari or as an appeal". The following are the facts pertinent to the cases under consideration: Gerry Alcantara Shoes, Inc. (GASI) and Bandolino Shoe Corporation (BSC) are sister corporations which filed a joint petition for, suspension of payments with a proposed rehabilitation plan on June 19, 1997. Among the creditors of GASI and BSC affected by the filing of the petition are Metropolitan Bank & Trust Company (MBTC), Philippine Commercial International Bank (PCIB) and PCI Leasing and Finance, Inc. Finding the petition sufficient in form and substance, the Hearing Officer in an Order dated June 23, 1997, set the creditors meeting on July 22, 1997. During the creditors meeting, MBTC objected to the joining of the two corporations in a single petition for suspension of payments. Counsel for GASI and BSC agreed to amend the petition by filing two separate petitions of suspension of payments, one for each of the corporation on the condition that the two cases be consolidated (see p. 20 of the Transcript of Stenographic Note). Pending the submission of the amended petition, PCI Leasing and Finance, Inc. moved to dismiss the case on the ground that (1) the Commission has not acquired jurisdiction over the case because GASI and BSC are insolvent and the causes of action have been misjoined and (2) the rehabilitation plan attached to the petition is not sufficient. On August 21, 1997, a Manifestation and Motion to Admit Amended Petition was filed by GASI and BSC, where the amended petition was attached. The amended petition was still a single petition for suspension of payments, the only major amendments made were in the annexes since the assets and liabilities of the two corporations have now been separated. Hence, MBTC opposed the Manifestation and Motion on the ground that "the joinder of two separate and distinct corporations in a single petition for suspension of payments is substantively and procedurally defective." PCI Leasing and Finance, Inc. likewise opposed the motion and maintained its position that the amended petition be dismissed on the grounds that the two corporations are insolvent, that the motion does not contain any notice of hearing and that no adequate or valid rehabilitation plan had been submitted. Hearing Officer Manolito Soller denied the Motion to Dismiss and: Consolidated Opposition to the Manifestation and Motion to Dismiss the Amended Petition filed by PCI Leasing and Finance, Inc. on the ground that the matters invoked therein are facts which should be the subject of a full-blown trial. Anent the lacking notice of hearing, he directed that a hearing be held on October 1, 1997 to consider the Manifestation and Motion. A motion for reconsideration of the order was filed. PCIB, in Manifestation and Motion dated October 9, 1997, adopted as its own the Motion for Reconsideration filed by PCI Leasing and Finance, Inc. and also moved for the dismissal of the petition. Pending the resolution of the Motion to Admit Amended Petition, GASI and BSC filed an Urgent Motion to Constitute Management Committee in order not to paralyze their business operations. MBTC filed an Opposition to this motion on the ground that the Amended Petition has not yet been admitted by the Commission. Assuming that the Amended Petition has been admitted, it is the position of MBTC that there must still be a hearing to establish the propriety of placing the two corporations under the control of a management committee. PCIB and PCI Leasing and Finance, Inc. likewise opposed the motion primarily on the ground that GASI, its debtor, is insolvent. Hence, there is no need for a management committee. On December 10, 1997, Hearing Officer Manolito Soller issued an Omnibus Order granting GASI's and BSC's Motion to Admit Amended Petition on the ground that the interest of all the parties is best served by the granting of the said Motion, thereby denying the Motion for Reconsideration of PCI Leasing and Finance, Inc. and adopted by PCIB. The next day, the same Hearing Officer granted the Urgent Motion to Constitute Management Committee. MBTC filed a Motion for Reconsideration of the two orders while PCIB and PCI Leasing and Finance, Inc. directly filed a notice of appeal with the Commission En Banc on December 24, 1997. The motion for reconsideration was denied in an Order dated March 6, 1998. Thus, on March 20, 1998, MBTC filed a petition for certiorari with the SEC En Banc questioning the abovementioned orders of the Hearing Officer on the ground of grave abuse of discretion. The threshold issue at hand is whether or not two corporations, which are sister companies, can seek debt relief under a single petition for suspension of payments. The Commission rules in the affirmative. According to the General Information Sheets of GASI and BSC for the year 1997, the two corporations are sister companies, with GASI being declared as the parent company of BSC. They are involved in the same line of business the manufacturing of footwears. Their majority stockholders are the same. Lastly, they are being managed by the same set of Board of Directors and officers. Where it appears that two business enterprises are owned, conducted and controlled by the same parties, both law and equity will, when necessary to protect the rights of third persons, disregard the legal fiction that two corporations are distinct entities, and treat them as identical. (Philippine Veterans Development Corporation vs. CA, G.R. No. 85266, January 30, 1990). In fact, evidence on record show that these corporations were treated as one by MBTC when it granted a loan of P45 Million to the two corporations (see Annex B of the Amended Petition). MBTC is therefore estopped from invoking the separate personalities of the two corporations when it has previously treated them as one. Another creditor, Land Bank of the Philippines, likewise treated the two corporations as one. Taken together, the loans of these two creditors comprised the bulk of the outstanding obligations of GASI and BSC. The doctrine of separate and distinct personality of corporations is a legal fiction created by law for convenience and to promote the ends of justice. For this reason, it may not be used or invoked for ends subversive of the policy and purpose behind its creation or which could not have been intended by law to which it owes its being (p. 11, Comments on the Corporation Code of the Philippines, Agpalo). As a consequence, the law admits of certain and specific exceptions to this rule. One of the noted and recognized exception is when the fiction is used to defeat public convenience. If GASI and BSC will file two separate petitions for suspension of payments, these corporations, their respective creditors, and the general public will be burdened with the trial of two identical cases which essentially involve the same parties and the same issues to be resolved. The proper thing to do would be to consolidate the cases and jointly try them. In filing a joint petition for a suspension of payments, GASI and BSC actually pre-empted this Commission in consolidating the two cases. Although this is an inappropriate, albeit not prohibited, step to take, this Commission, as an administrative agency exercising quasi-judicial functions, is not strictly bound by the technical rules of procedure in order to obtain a just, expeditious and inexpensive settlement of the cases. Hence, such a procedural lapse should not further delay the proceedings of the case. Accordingly, the Hearing Officer did not err in granting the Motion to Admit Amended Petition filed by GASI and BSC. It is not disputed that PCIB and PCI Leasing and Finance, Inc. are creditors of GASI only. Assuming arguendo that they have been misjoined in the petition, as alleged by their counsel, this fact alone is not sufficient for the dismissal of the petition (Sec. 11, Rule 3, 1997 Rules of Civil Procedure). Moreover, in filing a single petition for suspension of payments, GASI and BSC will not be made to "respond jointly to obligations incurred by one without the participation of the other". Their respective properties will be treated separately as well as their respective obligations. GASI and BSC are merely asking for a postponement of the payment of their debts, whether incurred singly or jointly. Neither would such a petition result to an evasion of the payment of their outstanding obligations as in fact petitioners have been expressly declared to be their creditors. Hence, the evils PCIB and PCI Leasing and Finance, Inc. perceive to exist and which they sought to avoid in a joint petition for suspension of payments are actually non-existent. Regarding the insolvency of GASI and/or BSC persistently raised by petitioners as a ground for the dismissal of the petition, this is a factual issue which must be determined in a full-blown trial, as correctly held by the Hearing Officer. As to the absence of a notice of hearing in the Manifestation and Motion to Admit Amended Petition, this has been cured when the Hearing Officer himself scheduled the hearing on the motion to be on October 1, 1997. Petitioners likewise question the legality of the creation of the management committee. MBTC posits the view that there must be a hearing to determine the existence of conditions to warrant the creation of a management committee as well as to determine the viability and feasibility of the proposed rehabilitation plan. Without a hearing, the order creating the management committee is void as in this case. MBTC is mistaken in this view. P.D. 902-A does not require, whether expressly nor impliedly, a hearing to be conducted before an order creating a Management Committee is issued. What Section 6d of the said law prescribe is that there must be a finding of "imminent danger of dissipation, loss, wastage or destruction of assets or other properties or paralization of business operations of such corporations or entities which may be prejudicial to the interests of minority stockholders, parties-litigants, or the general public". This fact can be determined through the allegations in the pleadings and documentary evidence submitted. In the present case, records of the case show that the Hearing Officer had given the concerned parties 10 days to file comment/opposition to the Urgent Motion to Constitute Management Committee. All the creditors filed their Comment/Opposition to the said motion including PCIB and PCI Leasing and Finance, Inc. which filed its Opposition on October 20, 1997 and MBTC which filed its Opposition on November 25, 1997. Hence, due process was properly accorded to all the parties. "Due process" was designed to afford an opportunity to be heard, not that an actual hearing should always and indispensably be held (Pamantasan ng Lungsod ng Maynila vs. Civil Service Commission, G.R. No. 107590, February 21, 1995). Therefore, the Hearing Officer, in ruling that "the assets of the petitioners (GASI and BSC) could be preserved and maximized their utilization if the management committee is constituted", clearly acted within his jurisdiction and no grave abuse of discretion can be imputed upon him. Where the court has jurisdiction over the case even if its findings are not correct, they would at most constitute errors of law and not abuse of discretion correctible by certiorari (New York Marine Managers, Inc. vs. CA, G.R. No. 111837, October 24, 1995). As regard the allegation of the insufficiency of the attached rehabilitation plan, "the same is not yet due for approval by the Commission. This shall be considered in due time both by the creditors and the Commission and the petitioner as well." (p. 2, Omnibus Order dated December 10, 1997 issued by Hearing Officer Soller) Besides, the sufficiency of the rehabilitation plan is not a condition sine qua non for the creation of a management committee, contrary to the contention of MBTC. The basic reason behind the creation of a management committee is to prevent the "dissipation, loss, wastage or destruction of assets or other properties or paralization of business operations of such corporations or entities which may be prejudicial to the interest of minority stockholders, parties-litigants, or the general public" (Sec. 6d, P.D. 902-A). The Urgent Motion to Constitute a Management Committee filed by GASI and BSC echoed such a concern in contending that "there is an urgent need for the constitution of a management committee to undertake and oversee the business of petitioners [GASI and BSC] in order not to paralyze their operations". With none of the creditors of the corporations disputing this allegation in their respective Opposition/Comment, the Hearing Officer cannot be faulted in granting the said motion. prLL The allegation of forum shopping on the part of GASI and BSC deserves scant consideration. As the basis for this allegation, Civil Case No. 97-622 was cited in the Memorandum on Appeal of PCIB and PCI Leasing and Finance, Inc. However, Civil Case No. 97-622 is a collection case filed by PCI Leasing and Finance, Inc. against GASI. For forum shopping to exist, both actions must involve the same transactions, same essential facts and circumstances, and that the actions must also raise identical causes of action, subject matter, and issues (International Container Terminal Services, Inc. vs. Court of Appeals, G.R. No. 116910, October 18, 1995). How then can there be forum shopping when there is no identity in the causes of action, subject matter, and issues in the present case and in the said civil case? Lastly, the publication of the Order admitting the Amended Petition is no longer necessary. The Hearing Officer is correct in stating that the publication requirement had already been substantially complied with when the Order dated June 23, 1997 finding the original petition sufficient in form and substance was published. It must be stressed that publication of the order serves notice to the public that all actions, claims and proceedings against the petitioning corporation pending before any court or tribunal are deemed suspended until further orders from the Commission. Since the Hearing Officer did not reverse his initial findings upon the submission of the amended petition, then there is no need for the order to be published. WHEREFORE, premises considered, the Petition for Certiorari is denied and the Appeal is dismissed for lack of merit. Accordingly, the Omnibus Order dated December 10, 1997 and the Order dated December 11, 1997 are hereby sustained. SO ORDERED. (did not participate) (SGD.) PERFECTO R. YASAY, JR. Chairman (SGD.) FE ELOISA C. GLORIA (SGD.) EDIJER A. MARTINEZ Associate Commissioner Associate Commissioner (on vacation leave) (SGD.) ROSALINDA U. CASIGURAN (SGD.) DANILO L. CONCEPCION Associate Commissioner Associate Commissioner (in acting capacity) (SGD.) EUGENIO E. REYES Associate Commissioner