Alemar's Sibal & Sons, Inc. vs. Honorable Jesus M. Elbinias

A final and executory money judgment cannot be enforced by execution while the judgment debtor is under SEC rehabilitation receivership; the suspension of all actions for claims against the corporation includes the issuance of a writ of execution, and execution would give the creditor an undue preference over other creditors.

Alemar's Sibal & Sons, Inc. owned and managed Alemar's Bookstore. G.A. Yupangco & Co., Inc. was a creditor of Alemar's. Under Presidential Decree No. 902-A, as amended, the Securities and Exchange Commission may appoint a rehabilitation receiver for a distressed corporation and suspend all actions for claims against it; Alemar's was placed under such receivership, with Ledesma, Saludo & Associates appointed receiver, to preserve assets and ensure the orderly payment of claims.

On December 11, 1984, G.A. Yupangco & Co., Inc. filed an action in the Regional Trial Court of Makati, Branch 141, docketed as Civil Case No. 9252, for collection of a sum of money with damages and preliminary attachment against Alemar's Bookstore, a business entity owned and managed by Alemar's Sibal & Sons, Inc. On August 30, 1985, the trial court rendered judgment by default ordering Alemar's Book Store to pay G.A. Yupangco P39,502.57 representing its unpaid obligation, plus 2% per month interest beginning December 11, 1984 until fully paid, the stipulated 25% of the recoverable amount as attorney's fees, and costs of suit.

On September 23, 1985, Ledesma, Saludo and Associates, as intervenor-movant, filed an omnibus motion informing the trial court that Alemar's had been placed under rehabilitation receivership by the Securities and Exchange Commission and that it had been appointed as receiver. It prayed that it be allowed to intervene, that the August 30, 1985 decision be set aside, and that further proceedings be suspended. Attached to the motion was an SEC order dated August 1, 1984 appointing Ledesma, Saludo & Associates as Rehabilitation Receiver pursuant to Presidential Decree No. 902-A, as amended, to meet the imminent danger of dissipation, loss, wastage or destruction of assets and deterioration of vital financial ratios and to ensure the orderly payment of claims. The SEC order stated that all actions for claims against the corporation pending before any court, tribunal, board or body were suspended accordingly, and it restricted disbursements and withdrawals.

G.A. Yupangco opposed the motion, maintaining that it received notice of the receivership only on January 10, 1985, or one month after the collection suit, and that the motion to intervene was not seasonably made. On October 29, 1985, the trial court denied the motion for intervention and the motion to set aside the default judgment on the ground that movant was barred from its present action, but granted the motion to suspend proceedings, stating that plaintiff could present the default judgment to the receiver as the basis for settlement of its claim.

On January 7, 1986, G.A. Yupangco moved for the issuance of a writ of execution to implement the August 30, 1985 default judgment, which had become final and executory because no motion for reconsideration or appeal had been filed. The writ was issued on January 15, 1986. Alemar's moved to discharge the writ on the ground that its issuance was improper because proceedings in Civil Case No. 9252 had been suspended by the October 29, 1985 order; the trial court held resolution of the motion in abeyance.

On January 31, 1986, the branch manager of the Bank of the Philippine Islands, after having previously stopped payment of the cashier's check issued to satisfy the August 30, 1985 money judgment, allowed encashment of the check in the amount of P62,240.00. In compliance with a subsequent order of the trial court, BPI also compensated G.A. Yupangco for the delay in payment in an amount equivalent to the interest on P62,240.00 from January 17, 1986 to January 31, 1986, or a total of 14 days. Alemar's filed a supplement to its motion to discharge the writ, contending that the payment of P62,240.00 to G.A. Yupangco through BPI defeated the purpose for which it had been placed under receivership, and praying that the amount be returned to it or to its account with BPI.

On May 15, 1986, the trial court denied Alemar's motions to discharge the writ. The trial court found that the August 30, 1985 default judgment had become final and executory and that Alemar's was under receivership. Alemar's then filed this petition for certiorari with prayer for preliminary mandatory injunction.

• Improper Issuance of Writ Despite Suspension: Petitioner argued that the writ of execution was improperly issued because proceedings in Civil Case No. 9252 had been suspended pursuant to the October 29, 1985 order.
• Defeat of Receivership Purpose and Return of Payment: Petitioner contended that the payment of P62,240.00 to G.A. Yupangco through BPI defeated the purpose for which petitioner had been placed under receivership and prayed that the amount be returned to petitioner or to its account with BPI.

• Late Notice and Belated Intervention: Private respondent G.A. Yupangco maintained that it received notice of the receivership only on January 10, 1985, or one month after the collection suit, and that the motion to intervene by the receiver was not seasonably made.
• Final and Executory Judgment: G.A. Yupangco urged the issuance of a writ of execution to implement the August 30, 1985 default judgment, which had become final and executory, there being no motion for reconsideration or appeal.

• Execution Despite Rehabilitation Receivership: Whether respondent court can validly proceed with the execution of a final decision for the payment of a sum of money despite the fact that the judgment debtor has been placed under receivership.

• Execution Despite Rehabilitation Receivership: No. The trial court cannot validly proceed with execution; the SEC-ordered suspension of all actions for claims against Alemar's includes the issuance of the writ of execution, and allowing encashment gave G.A. Yupangco an undue preference over other creditors. The amount received must be returned.

• Execution Despite Rehabilitation Receivership: The general rule is that once a decision becomes final and executory, its enforcement becomes the ministerial duty of the court. The rule admits of exceptions, one of which is where it becomes imperative in the higher interest of justice to direct the deferment of execution. In this case, the stay of execution was warranted by the fact that Alemar's had been placed under rehabilitation receivership. The SEC had expressly decreed that all actions for claims against the corporation pending before any court, tribunal, board or body were suspended accordingly. The trial court had granted petitioner's motion to suspend its own proceedings and even suggested that the creditor present the default judgment to the receiver as the basis for settlement of its claim. When the trial court ordered execution, it assumed a myopic view of its own suspension order; the proceedings sought to be suspended by the October 29, 1985 order necessarily included the issuance of the writ of execution. Central Bank vs. Morfe and Lipana vs. Development Bank of Rizal were enlightening on why execution could be held in abeyance despite a final judgment; in both cases, a creditor attempted to enforce payment against a bank declared insolvent or placed under receivership by obtaining a favorable judgment and insisting on execution. The rationale applied even if Alemar's was not a banking institution. The SEC had ordered the suspension of all actions for claims against Alemar's so that all its assets could be inventoried and kept intact for the purpose of ascertaining an equitable scheme of distribution among its creditors. During rehabilitation receivership, the assets are held in trust for the equal benefit of all creditors to preclude one from obtaining an advantage or preference over another by attachment, execution or otherwise. Otherwise, an alert creditor, upon learning of the receivership, could rush to the courts to secure judgments for the satisfaction of its claims to the prejudice of less alert creditors. As between creditors, the key phrase is "equality is equity." When a corporation threatened by bankruptcy is taken over by a receiver, all creditors should stand on an equal footing; no one should be given preference by paying one or some ahead of the others. Instead of creditors vexing the courts with suits against the distressed firm, they are directed to file their claims with the receiver, a duly appointed officer of the SEC. When the trial court ruled in favor of G.A. Yupangco in the collection case, it only determined the exact extent of petitioner's indebtedness and in no way gave G.A. Yupangco a priority over other creditors. However, it clearly exceeded its jurisdiction when it allowed G.A. Yupangco to encash the check of P62,240.00 pursuant to the writ of execution. In doing so, the trial court gave G.A. Yupangco an undue preference by reducing the assets of petitioner corporation for its sole benefit to the grave damage and prejudice of the other creditors, and thus frustrating the very purpose for which petitioner had been placed under receivership.

• Rehabilitation Receivership and Suspension of Claims — When the Securities and Exchange Commission places a corporation under rehabilitation receivership pursuant to Presidential Decree No. 902-A, as amended, all actions for claims against the corporation pending before any court, tribunal, board or body are suspended. The suspension includes the issuance of a writ of execution to enforce a final money judgment. In this case, the trial court's own suspension order necessarily covered the issuance of the writ of execution, and the trial court erred in allowing execution to proceed.
• Equality Among Creditors in Receivership (Equality is Equity) — During rehabilitation receivership, the assets are held in trust for the equal benefit of all creditors to preclude one from obtaining an advantage or preference over another by attachment, execution or otherwise. Applied to this case, allowing G.A. Yupangco to encash the check of P62,240.00 pursuant to the writ of execution gave it an undue preference over other creditors, and the amount received had to be returned.
• Exception to Ministerial Enforcement of Final Judgments — The general rule is that once a decision becomes final and executory, its enforcement becomes the ministerial duty of the court. An exception exists where it becomes imperative in the higher interest of justice to direct the deferment of execution. The rehabilitation receivership of Alemar's warranted the stay of execution despite the final and executory default judgment.

• "All actions for claims against the corporation pending before any court, tribunal, board or body are suspended accordingly." — This passage from the SEC order establishes the scope of the suspension that the Court held necessarily included the issuance of the writ of execution.
• "Verily, the proceedings sought to be suspended by the order of October 29, 1985 necessarily includes the issuance of the writ of execution." — This is the ratio decidendi on why the trial court could not validly issue or continue the writ of execution after it had suspended proceedings.
• "During rehabilitation receivership, the assets are held in trust for the equal benefit of all creditors to preclude one from obtaining an advantage or preference over another by the expediency of an attachment, execution or otherwise." — This passage states the controlling doctrine of equality among creditors during rehabilitation receivership.
• "When respondent court ruled in favor of G.A. Yupangco in the collection case, it only determined the exact extent of petitioner's indebtedness and in no way gave G.A. Yupangco a priority over the other creditors. However, it clearly exceeded its jurisdiction when it allowed G.A. Yupangco to encash the check of P 62,240.00 pursuant to the writ of execution." — This passage explains why the collection judgment did not itself create a preference, but the execution and encashment did.

• Central Bank vs. Morfe, G.R. No. L-34827, March 12, 1975, 63 SCRA 114 — Cited as enlightening on why execution may be held in abeyance despite a final judgment where a creditor sought to enforce payment against a bank declared insolvent or placed under receivership; the rationale was applied by analogy to Alemar's.
• Lipana vs. Development Bank of Rizal, G.R. No. 73884, September 24, 1987, 154 SCRA 257 — Cited alongside Central Bank vs. Morfe for the same principle; the Court held that the rationale applied even if Alemar's was not a banking institution.
• Ramisch vs. Fulton, 41 Ohio App. 443, 180 N.E. 735 — Cited in Central Bank vs. Morfe for the principle "equality is equity" among creditors.

• Presidential Decree No. 902-A, as amended — Cited as authority for the SEC's appointment of a rehabilitation receiver and for the SEC order suspending all actions for claims against the corporation pending before any court, tribunal, board or body. Applied to suspend proceedings in Civil Case No. 9252, including execution, and to require equal treatment of creditors.

Gutierrez, Jr. and Bidin, JJ., concurred. Feliciano and Cortes, JJ., were on leave.