In re: Voluntary Dissolution of Cebu Packing Products Co.

[SEC-SICD * CASE NO. 03-99-6227. April 11, 2000.] IN RE: VOLUNTARY DISSOLUTION OF CEBU PACKING PRODUCTS CO., UNDER SEC 1999 OF THE CORPORATION CODE CEBU PACKAGING PRODUCTS CO.,INC. , petitioner . D E C I S I O N This is a verified petition for the voluntary dissolution of Cebu Packaging Products Co. Inc. Petitioner alleges that it is a corporation duly registered under the laws of the Philippines with SEC Registry No. A8093-007515 and with principal office address at Shemberg Compound, Mandaue City, Cebu; that its main and only business is research on, production, processing trading, import and export of packaging mediums, packaging materials, tools and instruments; that it started its commercial operation in January 1, 1995; that in the first year of operation, it incurred a net loss of P380,124.00 while, in the following year, it broke even with a net income of P33,701.00; that due to the regional financial crisis in the 2nd half of 1997, the demand for petitioner's product as well as the price thereof sharply dropped which inevitably resulted to its remarkable net loss of P18,194,157.00 and cast doubts for its continued operation; that on account of continuing losses, decrease in demand, lower price, and lack of working capital, petitioner, by its Board of Directors closed its business in May 1998; that in an effort to minimize its losses, petitioner even leased out its laminator to a sister company, Luzon Packaging Products Inc. (LPPI);that likewise for similar reasons LPPI shut down in July 1998 thereby leaving petitioner no other source of income and recourse; that by September 30, 1998, petitioner's net loss had increased to P20,354,350.00 or it has current liabilities of P71,367,625.00 as against its current assets of only P25,577,049.00; that having sensed that petitioner's business was no longer viable and feasible, both its Board and stockholders jointly and unanimously voted for its dissolution on November 24, 1998 thus leaving (as of November 30, 1998) a total indebtedness of P73,982,092.00 to almost forty-five (45) creditors as against its assets of P27,524,128.00 or a net loss of P22,725,319.00 and a deficit of P40,324,664.00. Following the filing of this petition, the Commission, by its Order of March 15, 1999 caused the publication thereof and gave the petitioner's creditors sufficient time or until May 10, 1999 to file their objection or opposition to the petition. Moreover, records of the case show that the said order of this Commission was published three times or once a week for three consecutive weeks in the "Today's" issues of April 22, April 29, and May 6, 1999. A copy of the same Order was also posted for three weeks at the Bulletin Board of the Mandaue City Hall, Mandaue City where petitioner's principal office is located from April 22 to May 13, 1999. The petitioner had the copies of the said order posted at its own Bulletin Board and furnished to each of the creditors who were named in the petition. While in the said published order, creditors were originally given up to May 10, 1999 to file their opposition to this petition for dissolution, the period was, upon petitioner's suggestion, further extended until October 1, 1999 . Of the forty-five creditors listed in the petition, only nine (9) of them, whose stated claims amounts to P23,714,904.00 or about a bit more than thirty-two (32) percent of the total liabilities of P73,982,092.00, filed with the Commission either notices of claims, manifestations asking for a copy of the petition and annexes, or an opposition contesting the propriety of suspending ongoing collection cases filed against petitioner with the regular courts. Specifically, creditors Asa Color and Chemical Industries Inc.,Lorenzo Shipping Corporation, Blessed Chemical and Industrial Sales Co.,and S.A. Styropor Inc. only filed notices and requests of payments of claims while El Buen Asenso Y Cia simply requested for a copy of the petition and its annexes. On their part, Cathay Packaging Corp. and Alliance Thread Co. Inc. merely asked for a deferment of the dissolution until final determination of the true financial status of the petitioner while Manchester Commercial International Corp. and International Polymer Corp. only opposed the relief for an order suspending on-going collection cases in the regular courts. Moreover, creditor Manchester Commercial International Corp. claims that it has a preferred and superior lien over petitioner's properties which it attached and they should not be included in the properties to be administered and disposed of by a receiver to be appointed; and that this petition for voluntary dissolution does not warrant the suspension of money claims against petitioner because the petition does not fall within Sec. 5(d) of P.D. 902-A, as it did not ask for suspension of payments. In reply thereto, petitioner argued that Manchester's claim of preference had been abrogated by the Supreme Court in the BPI Case (229 SCRA 223, 1994) where it ruled that preferred creditors cannot assert such preference in rehabilitation and suspension of payment cases; and that what petitioner's filed is not one for suspension of payments but voluntary dissolution with prayer for suspension of action under Section 119 of the Corporation Code in conjunction with Section 6 of P.D. 902-A which states that upon appointment of the receiver all actions for claims against the petitioning corporation shall be accordingly suspended. In its opposition, creditors International Polymer similarly opposed petitioner's relief to suspend collection cases and accordingly argued that there is no law that either made a petition for voluntary dissolution as a ground to suspend pending collection cases or gave the Commission full and complete jurisdiction over all property of and claims against the petitioner or divested the regular courts of jurisdiction over pending civil actions for collection upon the institution of dissolution proceeding. Hence the same creditor argued further that pending cases may proceed independently to judgment for the purpose of ascertaining, if indeed, the oppositor has a valid and just claim against the petitioner. In resolving this petition it is important for the Commission to consider (a) whether it has sufficient basis in allowing .the petition for voluntary dissolution and (b) whether petitioner is entitled to an order that suspends pending collection cases against it. Basically, petitioner anchored its petition and reliefs upon two provisions of law, particularly Sec. 119 of the Corporation Code and Sec. 6 of P.D. 902-A, as amended, which read as follows: "SECTION 119. Voluntary dissolution where creditors are affected . Where the dissolution of a corporation may prejudice the rights of any creditor, a petition for dissolution of a corporation shall be filed with; the Securities and Exchange Commission. The petition shall be signed by majority of its board of directors or trustees of other officers having the management of its affairs, verified by its president or secretary or one of its directors or trustees, and shall set forth all claims and demands against it, and that its dissolution was resolved upon by the affirmative vote of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock or by at least two-thirds (2/3) of the members, at a meeting of its stockholders or members called for that purpose. LLphil If the petition is sufficient in form and substance, the Commission shall, by an order reciting the purpose of the petition, fix a date on or before which objections thereto may be filed by any person which date shall not be less than thirty (30) days nor more than sixty (60) days after the entry of the order. Before such date, a copy of the order shall be published at least once a week for three consecutive weeks in a newspaper of general circulation published in the municipality or city where the principal office of the corporation is situated, or if there be no such newspaper, then in a newspaper of general circulation in the Philippines, and a similar copy shall be posted for three (3) consecutive weeks in three public places in such municipality or city. Upon five (5) days notice given after the date on which the right to file objections as fixed in the order has expired, the Commission shall proceed to hear the petition and try any issue made by the objections filed; and if no such objection is sufficient, and the material allegations of the petition are true, it shall render judgment dissolving the corporation and directing the disposition of its assets as justice requires, and may appoint a receiver to collect such assets and pay the debts of the corporation." "Under Sec. 6 of P.D. 902-A In order to effectively exercise such jurisdiction, the Commission shall possess the following powers: a) ... b) ... c) To appoint one or more receivers the property, real and 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 to and/or protect the interest of the investing public and creditors; Provided, however, that the Commission may, in appropriate cases appoint a rehabilitation receiver of corporations, partnerships or other associations not supervised or regulated by other government agencies who shall have, in addition to the powers of 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 the Commission may appoint a rehabilitation receiver of corporations, partnerships or other associations supervised or regulated by other government agencies, such as banks and insurance companies, upon the request of the government agency concerned; Provided, finally, that upon appointment of a management committee, rehabilitation receiver, board or body, pursuant to this Decree, all actions for claims against corporations, partnership or associations under management or receivership sending before any court, tribunal, board or body shall be suspended accordingly." Applying the foregoing provisions of law to the issues or reliefs at bar, the Commission finds the first one to be in the affirmative while the other to be in the negative. Sec. 119 above, which is the main legal yardstick governing voluntary dissolution, partly speaks of two-fold procedural steps and alternatives whereby this Commission either (1) conducts a hearing on the merit of the issues raised by the objections of the oppositors to the dissolution, if any; or (2) if there is no such sufficient objections thereto, to immediately render judgment of dissolution if it appears that the material allegations in the petition are true. Accordingly, an evaluation of the facts of the above case, as well as, of the allegations and arguments of the petitioner and the creditors-oppositors in their respective pleadings reveal that there is not a single issue or an objection to petitioner's voluntary dissolution, that has to be threshed out in a formal hearing on the merit. Although some of the creditors filed pleadings designated as "Opposition",the same are basically notices of monetary claims and demands of payments thereof which can in fact, even be construed as an implied consent to the approval of the voluntary dissolution applied for. Likewise the focus of arguments between petitioner, on the one hand, and creditors-oppositors Manchester Commercial International Corp. and International Polymer Corp.,on the other, is not the relief on petitioner's dissolution but the propriety of the relief for an order suspending all on-going collection cases against petitioner which, however, is a mere legal issue that similarly does not need any trial. In other words, there is nothing further for the Commission to do, except to issue judgment approving petitioner's act of voluntarily dissolving itself.' Moreover, there is nothing to show that petitioner's allegations in the petition are tainted with falsity. It is clear from the petition itself and from the annexes thereto or documentary evidence in support thereof that there has been, in fact, substantial compliance of the legal requirements for voluntary dissolution under Sec. 119 of the Corporation Code of the Philippines, like a board and/or stockholders' approval of the intended dissolution and publication. With respect to the second relief, there is no specific provision of law which specifies that, in case a petition for corporate dissolution is filed and/or granted and a receiver/liquidator therefore is appointed, all actions for claims against the corporation are suspended. Sec. 6(c) of P.D. 902-A as amended, or the law upon which petitioner relied for its second relief and which provides, among others, that all actions for claims against corporations shall be suspended accordingly upon appointment of a management committee or rehabilitation receiver applies only to petitions for simple suspension of payments or corporate rehabilitation and not to petitions on corporate dissolution where the very purpose is to end-up the life and business affairs of a particular corporation, who thereafter liquidates its affairs by appointing a receiver who, in turn, under the law, is tasked to collect the assets and pay the debts of the corporation. To issue an order therefore for the specific purpose of directing all other courts or tribunals to suspend the proceedings in all on-going collection cases against petitioner is devoid of merit and runs counter to the very purpose of approving the voluntary dissolution applied for by herein petitioner. The denial of the second relief, however, does not mean to avoid the petitioner or its appointed receiver-liquidator in exercising and enforcing its powers and rights under the law or jurisprudence governing corporate liquidation and payment of corporate debts. WHEREFORE, judgment is hereby rendered approving petitioner's petition for voluntary dissolution and accordingly dissolving the same and directing it to hereinafter immediately liquidate or wind-up its corporate affairs. Likewise, for the purpose of petitioner's liquidation, a receiver-liquidator from this Commission's list of accredited receivers in the person of Atty. Norma S. de Leon be, as she is hereby, appointed as such who, in addition to those provided in the Rules of Court, shall be tasked with functions and equipped with powers to collect, preserve, take custody of, dispose, sell, and distribute all petitioner's assets and interests, as well as, to pay and settle all its duly established indebtedness and obligations and/or to file and defend a case thereby, in accordance with applicable laws, rules and jurisprudence on preference of credits and corporate liquidation. SO ORDERED. (SGD.) PAULINO Q. GALLEGOS Hearing Officer