In The Matter of the Petition for Rehabilitation and for Declaration in a State of Suspension of Payments

[SEC-SICD * CASE NO. 09-99-6240. April 8, 1999.] IN THE MATTER OF THE PETITION FOR REHABILITATION AND FOR DECLARATION IN A STATE OF SUSPENSION OF PAYMENTS SM SINOP COMPANY, represented in this derivative suit by Maybelle Joaquin , petitioner . D E C I S I O N Before Us is a verified petition dated March 8, 1999, for rehabilitation and for declaration in a state of suspension of payments filed by SM Sinop Company. The petition alleges the following: that petitioner is a domestic partnership duly organized and existing under and by virtue of the laws of the Philippines with office address at Sampol Market, San Jose del Monte, Bulacan, and represented by one of its partner and manager Maybelle Joaquin; that petitioner was established primarily for lending purpose; that in the course of its business it has acquired real and personal property and receivable with an estimated value of twelve million pesos (p 12 M) and obligations estimated at ten million pesos (P 10 M). LLjur According to petitioner, it is now constrained to ask this Commission for a declaration of suspension of payments for the following reasons: petitioner has to reconstruct its records and conduct an audit, in order to verify the identity and authenticity of the claims of its creditors; that petitioner has tried its best to meet its obligations by seeking extension or restructuring of debts but that it could not do so because it is illiquid; that it needs time to convert real property into case; that its clients pre-terminated their investment placements; that petitioner has trouble collecting receivables; that a management committee or a rehabilitation receiver should be appointed considering the fact that the petitioner is capable of being rehabilitated; and that there are possible investors to infuse additional capital and to assume liabilities of petitioner. An examination of the petition would show that the grounds cited by petitioner to support the petition for suspension of payments are unmeritorious and unsupported. Preliminary, this is not a derivative suit as claimed by petitioner in the caption in the petition. On a more substantial level, petitioners allegations that is cannot pay its obligations to is creditors as they fall due are unsupported by any annexes attached to the petition. Petitioner failed to include in the petition the maturity dates of the obligations. Moreover, in spite of the fact that is has included a list of its creditors with corresponding liabilities, petitioner later on conceded that it has not yet even conducted an audit of its finances, and that it has to "reconstruct" its records in order to correctly identify its creditors and determine the true amount of its obligations. Hence, how could petitioner then claim that it is merely illiquid and not insolvent? How could petitioner claim that it is beset by demands for payment in the absence of proof of demand from creditors? LibLex What is glaring in the petition is that the financial distress experienced by the corporation is due more to the purported mismanagement of the partnership, than to the economic crisis, as attested to by the allegations that the investors "pre-terminated" the investments or placements (p. 3, petition dated March 8, 1999), the "poor collection" of receivable (ibid.), and seemingly unorganized records of petitioner (pp. 2 and 5, ibid.) to such an extent that is could not determine with a semblance of accuracy the amount of its assets and liabilities. It is clear therefore that relying upon the allegations contained in the petition, the instant petition is not a case falling under Sec. 5 (d) * of P.D. 902-A which vests jurisdiction to the Commission over corporations and partnerships to be declared in the state. of suspension of payments " in cases where the corporation or partnership possesses sufficient property to cover its liabilities but foresees the impossibility of meeting them when they fall due ." AacCHD PREMISES CONSIDERED, the instant petition for rehabilitation and for declaration in a state of suspension of payments is hereby DISMISSED. SO ORDERED. (on official leave of absence) (SGD.) FE ELOISA C. GLORIA Hearing Officer (SGD.) MYRA-LYN B. SOLANO (SGD.)YSOBEL S. YASAY-MURILLO Hearing Officer Hearing Officer * Copied verbatim from documents obtained directly from the Securities and Exchange Commission .