Viva Footwear Manufacturing Corporation v. Securities and Exchange Commission

SECOND DIVISION

[G.R. No. 163235. April 27, 2007.]

VIVA FOOTWEAR MANUFACTURING CORPORATION, petitioner, vs. SECURITIES AND EXCHANGE COMMISSION, PHILIPPINE NATIONAL BANK and PHILIPPINE BANK OF COMMUNICATIONS, respondents.

D E C I S I O N

QUISUMBING, J p:

For review on certiorari are the Decision 1 dated August 4, 2003 and Resolution 2 dated April 21, 2004 of the Court of Appeals in CA-G.R. SP No. 72271, which affirmed the July 16, 2002 Order 3 of the Securities and Exchange Commission (SEC). The Order had dismissed the petition for rehabilitation filed by herein petitioner.

The facts, culled from the records, are as follows:

Petitioner Viva Footwear Manufacturing Corporation is a domestic corporation engaged in the manufacture of rubber footwear. Respondents Philippine National Bank (PNB) and Philippine Bank of Communications (PBCom) are two of petitioner's creditors.

In 1996, petitioner filed with the SEC a petition for rehabilitation and for declaration in a state of suspension of payments. 4 An Order 5 dated June 20, 1996, declaring petitioner in a state of suspension of payments, was forthwith issued by the SEC.

PNB filed an Opposition 6 to the petition for rehabilitation, alleging that the rehabilitation applied for was no longer feasible. To determine the feasibility of petitioner's rehabilitation plan, an Interim Management Committee was formed, composed of representatives from petitioner, PNB, and PBCom.

In 1998, petitioner submitted a Revised and Combined Rehabilitation Plan, which included Coco Manila Food Corp. 7 Petitioner subsequently filed an urgent motion for consolidation 8 with Coco Manila Food Corp.'s petition for rehabilitation and for declaration in a state of suspension of payments. Finding no merit in the said motion, the SEC denied it. 9

Thereafter, the Interim Management Committee submitted its report 10 recommending approval of the aforesaid Revised and Combined Rehabilitation Plan. However, only petitioner and PNB signed the said report because PBCom objected to the consolidated rehabilitation of petitioner and Coco Manila Food Corp. 11 Nonetheless, about three years later, PBCom filed a Manifestation 12 conforming to the said consolidated rehabilitation. TDCAIS

In the interim, petitioner filed a motion 13 to transfer the case to the Regional Trial Court (RTC) claiming that the newly enacted Securities Regulation Code 14 transferred SEC jurisdiction over rehabilitation cases to the RTC.

Petitioner also submitted a Second Revised Rehabilitation Plan, but PNB objected to the said plan. 15 On May 27, 2002, petitioner submitted a Third Revised Rehabilitation Plan. 16 However, the SEC found the said plan incomplete and unfeasible. 17 Thus, the SEC, in its impugned Order, dismissed the petition for rehabilitation. In the same Order, the SEC denied petitioner's motion to transfer the case to the RTC explaining that the Securities Regulation Code provides that the SEC shall retain jurisdiction over pending rehabilitation cases filed as of June 30, 2000.

Petitioner filed a motion for reconsideration 18 of the said Order, which it subsequently withdrew 19 explaining that it intended to elevate the matter to the Court of Appeals. However, upon review, the appellate court affirmed the SEC Order. Petitioner's motion for reconsideration was likewise denied for lack of merit.

Hence, the instant petition raising the following issues:

I.

WHETHER OR NOT THE COURT OF APPEALS ERRED, AND ITS ERROR WAS COMMITTED IN GRAVE ABUSE OF DISCRETION AMOUNTING TO EXCESS OR LACK OF JURISDICTION, IN ITS AFFIRMANCE OF THE RESPONDENT COMMISSION'S ORDER DATED 16 JULY 2002, DISMISSING THE PETITION FOR REHABILITATION WHEN THE LATTER UNREASONABLY SAT ON THE PETITION BEFORE IT, AND AFTER ALMOST SEVEN (7) YEARS OF INORDINATE DELAY, IT RULED THAT IT COULD NO LONGER BE REHABILITATED. CAIaDT

II.

WHETHER OR NOT THE COURT OF APPEALS ERRED AND ITS ERROR WAS COMMITTED IN GRAVE ABUSE OF DISCRETION AMOUNTING TO EXCESS OR LACK OF JURISDICTION WHEN IT DISMISSED THE PETITION FOR REHABILITATION SOLELY ON THE BASIS OF A MEMORANDUM REPORT WHICH WAS NOT MADE KNOWN TO THE PETITIONER NOR WAS THE LATTER PROVIDED A COPY THEREOF IN VIOLATION OF THE PETITIONER'S RIGHT TO DUE PROCESS. 20

Simply stated, the issue is whether or not the Court of Appeals committed reversible error in affirming the SEC Order dismissing the petition for rehabilitation. HCaEAT

Petitioner contends that the SEC committed gross dereliction of public duty when it sat for seven years on the petition for rehabilitation despite numerous motions for speedy resolution of said petition. Petitioner argues the long lapse of time reckoned from the submission of the original rehabilitation plan up to the dismissal of the petition for rehabilitation diminished, if not extinguished, petitioner's chance to rehabilitate the company as favorably endorsed by the Interim Management Committee. Petitioner also alleges its right to due process was violated when the SEC referred the rehabilitation plan to the Financial Analysis and Audit Division without notice to petitioner.

On the other hand, the SEC counters that the delay, if any, was attributable to petitioner's own fault. The SEC further claims that petitioner's Third Revised Rehabilitation Plan was not feasible; hence, the dismissal of the petition for rehabilitation was but proper. The SEC maintains that petitioner was duly afforded the right to due process.

For its part, PNB argues that the SEC correctly dismissed the petition for rehabilitation for being unfeasible. As for the alleged breach of petitioner's right to due process, PNB points out that the SEC's referral of the petition to its Financial Analysis and Audit Division was just a regular internal matter and did not constitute a violation of petitioner's rights.

PBCom, on the other hand, explained that it had no participation in the extrajudicial foreclosure proceeding initiated by PNB against petitioner, the circumstance giving rise to the principal issue in this case. Thus, it neither joins nor opposes petitioner or any of the other respondents. CIAHDT

After a careful study of the records of the case and the parties' submissions, we find the petition bereft of merit.

Petitioner's claim that the SEC sat for seven long years on its petition for rehabilitation is inaccurate and misleading. Records show that while the petition for rehabilitation and for declaration in a state of suspension of payments was filed as early as 1996, petitioner had revised its rehabilitation plan several times since. In 1998, it revised its original rehabilitation plan. In 2001, petitioner again revised its rehabilitation plan. Finally, on May 27, 2002, petitioner submitted its Third Revised Rehabilitation Plan. Therefore, the SEC Order of July 16, 2002 cannot be said to be unreasonably overdue. If at all, the said Order, issued less than two months from the submission of the third and final rehabilitation plan, was timely.

As for the SEC's dismissal of the petition for rehabilitation, we see no error or abuse of discretion. On the contrary, we find supported by facts on record the SEC finding that the rehabilitation plan was not viable, thus:

First, based on petitioner's performance for the last three years, petitioner appears to be not financially sound. It has high current ratios and beyond standard debt-equity ratios. . . .

Second, petitioner's audited financial statements for the same period do not reflect the company's true financial condition. The reported total liabilities averaged only about thirty-one percent (31%) of the alleged outstanding loan balances of P201.365 million with six banks. Should the said total loan balances be included, petitioner will appear insolvent and financially unsound. ICacDE

Third, petitioner's bulk of current assets consists of inventories and supplies averaging about 86% of the total current assets. This casts doubt on the marketability of the company's merchandise especially when it starts to operate beyond the present 20% working capacity. On the other hand, petitioner's existing fixed assets appear to be fully depreciated as the resulting net book value of the assets in 1999 is nearly equal to the reported value of the land amounting to P1.148 million. In fact, in 2000 and 2001, even the land appears to have been depreciated since the resulting net book value is less than the valuation of the land.

Fourth, petitioner has just started producing Ethyl Vinyl Acetate (EVA) sheets and has yet to show proof of its share in the market and profitability. Despite the reported sales of 30,000 EVA sponge sheets in 2001, total sales actually declined by sixteen percent (16%) compared to 2000 sales. Admittedly, the company failed to meet its target of 20-35% profit margin due to emergence of competitors from China and Vietnam.

In view of the foregoing reasons, the Commission hereby finds petitioner's rehabilitation plan not viable. Accordingly, the instant motion [for approval of the rehabilitation plan] is DENIED. 21

In administrative proceedings such as the instant case, only substantial evidence or that amount of relevant evidence that a reasonable mind might accept as adequate to support a conclusion is required. Thus, findings of fact of quasi-judicial agencies are generally accorded respect and even finality by this Court, if supported by substantial evidence, in recognition of their expertise on the specific matters under their consideration. 22

As for the petitioner's allegation of lack of due process, we stress that in administrative proceedings, due process simply means an opportunity to seek a reconsideration of the order complained of; it cannot be fully equated to due process in its strict jurisprudential sense. A respondent in an administrative case is not entitled to be informed of the preliminary findings and recommendations; he is entitled only to a reasonable opportunity to be heard, and to the administrative decision based on substantial evidence. 23 Note that it is the administrative order, not the preliminary report, which is the basis of any further remedies the losing party in an administrative case may pursue. 24 DSTCIa

Thus, petitioner has no right to be notified of the preliminary report by the Financial Analysis and Audit Division of the SEC. Petitioner's claim that the SEC's referral of the petition for rehabilitation to the said division violated its right to due process deserves no consideration. Petitioner's right to administrative due process only entitles it to an opportunity to be heard and to a decision based on substantial evidence. No more, no less. AaSTIH

The Court of Appeals therefore neither erred nor committed grave abuse of discretion in affirming the Order of the SEC dismissing the petition for rehabilitation.

WHEREFORE, the petition is DENIED for lack of merit. The Decision dated August 4, 2003 and Resolution dated April 21, 2004, of the Court of Appeals in CA-G.R. SP No. 72271, which affirmed the July 16, 2002 Order of the Securities and Exchange Commission, are AFFIRMED.

Costs against petitioner.

SO ORDERED.

Carpio, Carpio-Morales, Tinga and Velasco, Jr., JJ., concur.

 

Footnotes

1. Rollo, pp. 28-38.

2. Id. at 40.

3. Records, Vol. 2, pp. 305-306.

4. Records, Vol. 1, pp. 1-129.

5. Id. at 130-133.

6. Id. at 149-153.

7. Id. at 261-315.

8. Id. at 333-334.

9. Id. at 351.

10. Id. at 398-399.

11. Id. at 401.

12. Id. at 411.

13. Records, Vol. 2, pp. 186-190.

14. Rep. Act No. 8799. Effective August 8, 2000.

15. Supra note 13, at 221-224.

16. Id. at 235-255.

17. Id. at 302.

18. Id. at 311-320.

19. Id. at 321-323.

20. Rollo, p. 171.

21. Records, Vol. 2, pp. 305-306.

22. Quiambao v. Court of Appeals, G.R. No. 128305, March 28, 2005, 454 SCRA 17, 40.

23. Velasquez v. Hernandez, G.R. No. 150732, August 31, 2004, 437 SCRA 357, 369.

24. Id. (Emphasis supplied.)