Molina vs. Pacific Plans, Inc.

A monetary judgment that has become final and executory earns legal interest at 12% per annum from the date of finality until full satisfaction; however, the execution of such judgment is automatically suspended when the judgment debtor is placed under corporate rehabilitation, as the statutory stay applies to all actions for claims regardless of whether they are pending or already adjudicated.

Petitioner Agripino V. Molina was dismissed from his employment as Assistant Vice-President by respondent Pacific Plans, Inc. In 2006, the Supreme Court declared his dismissal illegal and ordered his reinstatement with full backwages and other monetary benefits. After the decision became final in 2007, the parties disputed the proper computation of the award, specifically regarding the inclusion of overriding commissions and the application of legal interest. Meanwhile, respondent corporation was placed under rehabilitation proceedings, prompting the question of whether the execution of the final judgment should be stayed.

• Petitioner Agripino V. Molina was employed by respondent Pacific Plans, Inc. as Assistant Vice-President until his dismissal on August 1, 2001.
• On March 10, 2006, the Supreme Court promulgated a Decision finding petitioner's dismissal illegal and ordering his immediate reinstatement to his former position without demotion in rank and salary, and payment of backwages from August 1, 2001 until actual reinstatement, as well as other accrued monetary benefits.
• The Decision became final and executory on March 5, 2007.
• On August 3, 2007, Executive Labor Arbiter Fatima Jambaro-Franco issued an Order directing the Computation and Examination Unit (CEU) of the NLRC to compute petitioner's monetary award.
• On September 3, 2007, the Executive Labor Arbiter issued a Writ of Execution commanding the sheriff to collect P5,494,358.75 representing backwages, separation pay, and overriding commissions.
• Respondent filed a Partial Appeal assailing the inclusion of salary increases based on the Collective Bargaining Agreement (CBA), arguing that petitioner was not covered by the CBA as an Assistant Vice-President.
• On February 26, 2008, the NLRC granted the partial appeal, excluded the CBA-based increases, and remanded the records for recomputation.
• The CEU submitted a Re-Computation indicating a total award of P4,366,954.80.
• During pre-execution conferences, petitioner manifested entitlement to 12% legal interest from the finality of the March 5, 2007 Decision, while respondent objected to the inclusion of overriding commissions amounting to P2,259,410.40.
• On November 25, 2008, the Labor Arbiter approved the re-computed sum of P4,366,954.80.
• On December 8, 2008, respondent filed a partial appeal reiterating its objections to overriding commissions and legal interest.
• On January 14, 2009, the Supreme Court granted petitioner's Motion to Order Execution, which prayed for execution based on the approved recomputed amount plus 12% legal interest.
• On August 28, 2009, the NLRC granted respondent's partial appeal, deleted the overriding commissions, but ordered payment of 12% interest on the reduced amount.
• Both parties moved for reconsideration of the August 28, 2009 Decision.
• On June 18, 2010, the NLRC granted both motions, set aside the August 28, 2009 Decision, reinstated the CEU computation of P4,366,954.80 (including overriding commissions), deleted the award for legal interest, and remanded the records for execution.
• On October 22, 2010, the Labor Arbiter issued an Alias Writ of Execution.
• Petitioner filed the present Motion praying that the June 18, 2010 NLRC Resolution be modified to conform to the January 14, 2009 Supreme Court Resolution by including 12% interest per annum from March 5, 2007.
• Respondent opposed the motion, contending that it is undergoing corporate rehabilitation and that a Stay Order issued by the Regional Trial Court of Makati City has not yet been lifted, thereby suspending all execution proceedings.

• Petitioner is entitled to legal interest at the rate of 12% per annum on the principal amount of P4,366,954.80, computed from the finality of the March 5, 2007 Decision until full payment thereof, pursuant to the Supreme Court's Resolution of January 14, 2009 and established jurisprudence.
• The execution of the judgment should proceed despite respondent's corporate rehabilitation because the Interim Rules on Corporate Rehabilitation apply only to claims or cases pending before any court, tribunal, or board, and not to cases which have already been adjudicated or where there is already an entry of judgment.

• Petitioner is not entitled to overriding commissions as part of his monetary award.
• The execution of the judgment should be suspended because respondent is undergoing corporate rehabilitation and a Stay Order issued by the Regional Trial Court of Makati City remains in effect, covering all actions for claims against the corporation.

• Procedural Issues:
  • Whether the execution of a final and executory judgment is automatically suspended when the judgment debtor corporation is undergoing rehabilitation proceedings and a stay order has been issued
• Substantive Issues:
  • Whether petitioner is entitled to legal interest of 12% per annum on the monetary award from the date the Supreme Court Decision became final and executory until full payment thereof

• Procedural:
  • The Court held that the execution of the judgment is automatically suspended. Citing Castillo v. Uniwide Warehouse Club, Inc., the Court ruled that under Section 6(c) of Presidential Decree No. 902-A, upon the appointment of a management committee or rehabilitation receiver, all actions for claims against the corporation are suspended. The term "claim" encompasses all debts or demands of a pecuniary nature, whether liquidated or unliquidated, fixed or contingent, matured or unmatured, disputed or undisputed, legal or equitable, secured or unsecured, and crucially, whether or not reduced to judgment. The suspension embraces all phases of the suit, including execution proceedings, and not merely the payment of claims. The Court rejected petitioner's argument that the stay order applies only to pending cases, holding that the law makes no distinction between pending and adjudicated claims. The Court applied the principle ubi lex non distinguit nec nos distinguere debemos—where the law makes no distinction, neither should the Court.
• Substantive:
  • The Court granted the claim for legal interest. Citing Eastern Shipping Lines, Inc. v. Court of Appeals, the Court held that when a judgment awarding a sum of money becomes final and executory, the rate of legal interest shall be 12% per annum from the date of finality (March 5, 2007) until full satisfaction. This interim period is deemed equivalent to a forbearance of credit. The Court modified the June 18, 2010 NLRC Resolution to include interest at 12% per annum on the principal amount of P4,366,954.80 from March 5, 2007 until full payment.

• Eastern Shipping Lines Doctrine on Legal Interest — When a judgment awarding a sum of money becomes final and executory, the rate of legal interest shall be 12% per annum from such finality until its satisfaction, as the interim period is deemed equivalent to a forbearance of credit. The Court applied this doctrine to award petitioner 12% interest from March 5, 2007 until full payment of the principal amount.
• Automatic Stay Doctrine in Corporate Rehabilitation — Upon appointment of a management committee or rehabilitation receiver under Presidential Decree No. 902-A, Section 6(c), all actions for claims against the distressed corporation are automatically suspended. The term "claim" is defined broadly to include all debts or demands of a pecuniary nature, whether liquidated or unliquidated, fixed or contingent, disputed or undisputed, and whether or not reduced to judgment. The suspension embraces all phases of the suit, including execution proceedings. The Court applied this to suspend the execution of the final judgment against Pacific Plans, Inc. pending the termination of its rehabilitation proceedings.
• Ubi Lex Non Distinguit — Where the law makes no distinction, neither should the Court. The Court invoked this principle to reject the petitioner's argument that the stay order applies only to pending cases and not to final judgments, noting that Section 6(c) of PD 902-A makes no distinction as to the claims that are suspended.

• "When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2 above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit."
• "The automatic suspension of an action for claims against a corporation under a rehabilitation receiver or management committee embraces all phases of the suit, that is, the entire proceedings of an action or suit and not just the payment of claims."
• "Ubi lex non distinguit nec nos distinguere debemos."

• Eastern Shipping Lines, Inc. v. Court of Appeals — Controlling precedent establishing the rule that final judgments for money earn 12% legal interest from finality until satisfaction.
• Castillo v. Uniwide Warehouse Club, Inc. — Controlling precedent interpreting Section 6(c) of PD 902-A regarding the automatic stay of all actions for claims, including execution proceedings, during corporate rehabilitation.
• Finasia Investments and Finance Corporation v. Court of Appeals — Cited for the definition of "claim" as referring to debts or demands of a pecuniary nature, or the assertion to have money paid.
• Arranza v. B.F. Homes, Inc. — Cited for the definition of "claim" as an action involving monetary considerations.
• Philippine Airlines v. Kurangking — Cited for the definition of "claim" as the right to payment, whether or not it is reduced to judgment, liquidated or unliquidated, fixed or contingent, matured or unmatured, disputed or undisputed, legal or equitable, and secured or unsecured.
• Rubberworld (Phils.) Inc. v. NLRC — Cited for the principle that the law makes no distinction as to the claims that are suspended once a management committee is created or a rehabilitation receiver is appointed.
• Philippine Airlines, Inc. v. Zamora — Cited for the rule that the automatic suspension embraces all phases of the suit, including the entire proceedings of an action or suit and not just the payment of claims.

• Presidential Decree No. 902-A, Section 6(c) — Mandates that upon appointment of a management committee, rehabilitation receiver, board, or body, all actions for claims against corporations under management or receivership pending before any court, tribunal, board, or body shall be suspended.
• Civil Code, Article 1169 — Governs the computation of interest from the time of default or judicial/extrajudicial demand, referenced in the application of the Eastern Shipping Lines doctrine.