10/27/2019 G.R. Nos. 124185-87 | Ruby Industrial Corp. v.

Court of Appeals

SECOND DIVISION

[G.R. Nos. 124185-87. January 20, 1998.]

RUBY INDUSTRIAL CORPORATION and BENHAR

INTERNATIONAL, INC., petitioners, vs. COURT OF
APPEALS, MIGUEL LIM, ALLIED LEASING and FINANCE
CORPORATION, and THE MANAGEMENT COMMITTEE OF
RUBY INDUSTRIAL CORPORATION, respondents.

Sycip Salazar Hernandez and Gatmaitan for petitioner.

Romulo, Mabanta, Buenaventura Sayoc and De los Angeles for Miguel
Lim.
Balgos and Perez for Benhar Int'l., Inc.
Quiroz and Young for Mgt. Committee of Ind'l. Corp. and ALFC.

SYNOPSIS

Ruby Industrial Corporation (RUBY) suffered severe liquidity problems.

For its rehabilitation, Benhar International, Inc. represented by RUBY's
majority stockholders, submitted to the Securities and Exchange Commission
(SEC) the BENHAR/RUBY Rehabilitation Plan which was subsequently
approved by the SEC hearing panel. The minority stockholders appealed the
approval to the SEC en banc and submitted their own rehabilitation plan. The
SEC en banc granted the temporary restraining order as well as issued the
writ of preliminary injunction against the enforcement of BENHAR/RUBY
Rehabilitation Plan, which was likewise upheld by the Court of Appeals and
this Court.
Meanwhile before the SEC Hearing Panel approved the
BENHAR/RUBY Plan. BENHAR had already implemented part of the plan by
paying one of RUBY's secured creditors, the Far East Bank and Trust Co..
Moreover, despite the SEC en banc's TRO and injunction, BENHAR still paid
RUBY's other secured creditors who, in turn, assigned their credits in favor of
BENHAR. Upon petition of the Allied Leasing and Finance Corporation,
Ruby's biggest unsecured creditor, and private respondent Lim, the SEC
Hearing Panel nullified the deeds of assignment executed by RUBY's
creditors in favor of BENHAR.

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However, while the SEC en banc enjoined the implementation of

BENHAR/RUBY Plan. RUBY filed with the SEC en banc an ex parte petition
to create a new management committee and to approve a revised
rehabilitation plan. This was objected to by over 90% of RUBY's creditors and
the three members of the original management committee on the ground that
its approval is tantamount to giving due advantage to BENHAR to the
prejudice of other RUBY's creditors and minority stockholders. Despite the
objections, the SEC Hearing Panel approved it and was affirmed by the SEC
en banc. On appeal, the Court of Appeals set aside SEC's approval of the
Revised BENHAR/RUBY plan and remanded the case to the SEC for further
proceedings.
The Court ruled that rehabilitation contemplates a continuance of
corporate life and activities in effort to restore and reinstate the corporation to
its former position of successful operation and solvency. All assets of a
corporation under rehabilitation receivership 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 attachment, execution or
otherwise. As between the creditors, the key phrase is equality in equity. Once
the corporation threatened by bankruptcy is taken over by a receiver, all the
creditors ought to stand on equal footing. Not any one of them should be paid
ahead of the others. This is precisely the reason for suspending all pending
claims against the corporation under receivership. cSHIaA

SYLLABUS

1. REMEDIAL LAW; EVIDENCE; FACTUAL FINDINGS OF

ADMINISTRATIVE BODIES GENERALLY ACCORDED RESPECT AND
FINALITY; EXCEPTION. — The settled doctrine is that factual findings of an
administrative agency are accorded respect and, at times, finality for they
have acquired the expertise inasmuch as their jurisdiction is confined to
specific matters. Nonetheless, these doctrines do not apply when the board or
official has gone beyond his statutory authority, exercised unconstitutional
powers or clearly acted arbitrarily and without regard to his duty or with grave
abuse of discretion. In Leongson vs. Court of Appeals, we held "once the
actuation of the administrative official or administrative board or agency is
tainted by a failure to abide by the command of the laws then it is incumbent
on the courts of justice to set matters right, with this Tribunal having the last
say on the matter.
2. ID.; ID.; ID.; ID.; CASE AT BAR. — We hold that the SEC acted
arbitrarily when it approved the Revised BENHAR/RUBY Plan. As found by
the Court of Appeals, the plan contained provisions which circumvented its
final decision in CA-G.R. SP No. 18310, nullifying the deeds of assignment of
credits and mortgages executed by RUBY's creditors in favor of BENHAR, as
well as this Court's Resolution in G.R. No. 96675, affirming said Court of

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Appeals decision. Specifically, the Revised BENHAR/RUBY Plan considered

as Valid the advance payments made by Benhar in favor of some of RUBY'S
creditors. The nullity of BENHAR's unauthorized dealings with RUBY's
creditors is settled. The deeds of assignment between BENHAR and RUBY's
creditors had been categorically declared void by the SEC Hearing Panel in
two (2) orders issued on January 12, 1989 and March 15, 1989.
3. ID.; ACTIONS; JUDGMENTS; RULING IN OLAC CASE (G.R.
No. 84256, 213 SCRA 321) APPLIES ONLY WHERE THERE IS CONFLICT
BETWEEN THE DISPOSITIVE PART AND THE OPINION OF THE COURT.
— The principle laid, down in Olac that the dispositive portion or the fallo
constitute the court's resolution in a given case, while the discussion in the
body of the decision merely expresses the court's opinion applies only when
there is a conflict between the dispositive part ( fallo) and the opinion of the
court contained in the decision. Hence, in the execution of the court's
judgment, the fallo should be considered as the final disposition of the case
before it. Such conflict does not exist in the Court of Appeals' decision in CA-
G.R. SP No. 18310. It is crystal clear that what the Court of Appeals affirmed
in CA-GR SP No. 18310 was the nullity of the deeds of assignment in favor of
BENHAR. In a minute resolution in G.R. No. 96675, we even sustained the
Court of Appeals' decision in CA-GR SP No. 18310.
4. ID.; ID.; ESTOPPEL; A PARTY CANNOT PARTICIPATE IN THE
PROCEEDINGS, SUBMIT HIS CASE FOR DECISION. ACCEPT JUDGMENT
IF FAVORABLE BUT ATTACK IT IF ADVERSE. — In any event, petitioners
actively participated in the proceedings before the SEC and the Court of
Appeals when private respondents sought the nullification of the subject
deeds. Petitioners are, therefore, estopped from questioning anew the validity
of the deeds of assignment executed by RUBY's creditors in favor of
BENHAR. Petitioners should know that it is not for a party to participate in the
proceedings, submit his case for decision, accept the judgment if, it is
favorable to him but attack it for any reason when it is adverse.
5. COMMERCIAL LAW; PRIVATE CORPORATIONS;
REHABILITATION, CONSTRUED. — Rehabilitation contemplates a
continuance of corporate life and activities in an effort to restore and reinstate
the corporation to its former position of successful operation and solvency.
6. ID.; ID.; ID.; APPOINTMENT OF MANAGEMENT COMMITTEE,
PURPOSE. — When a distressed company is placed under rehabilitation, the
appointment of a management committee follows to avoid collusion between
the previous management and creditors it might favor, to the prejudice of the
other creditors. All assets of a corporation under rehabilitation receivership
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
attachment, execution or otherwise. As between the creditors, the key phrase
is equality in equity. Once the corporation threatened by bankruptcy is taken

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over by a receiver, all the creditors ought to stand on equal footing. Not any
one of them should be paid ahead of the others. This is precisely the reason
for suspending all pending claims against the corporation under receivership.
7. REMEDIAL LAW; ACTIONS; APPEALS; ISSUES CANNOT BE
RAISED FOR THE FIRST TIME ON APPEAL. — The settled rule is that
issues not raised in the court a quo cannot be raised for the first time on
appeal — in this case, in a motion for reconsideration — for being offensive to
the basic rules of fair play, justice and due process.
8. ID.; ID.; FORUM-SHOPPING; RULE THEREON WILL NOT
APPLY WHERE PRIVATE RESPONDENTS REPRESENT DIFFERENT
GROUPS WITH DIFFERENT INTERESTS; CASE' AT BAR. — Petitioners
charge that private respondents are guilty of forum-shopping. It appears that
the three (3) private respondents filed separate petitions before the Court of
Appeals upon receipt of the adverse ruling of the SEC en banc. Private
respondent Miguel commenced CA-G.R. SP No. 32404, thru its counsel
Romulo Mabanta Buenaventura Sayoc and De los Angeles. For their part,
private respondent Allied leasing and the original management committee of
RUBY, represented by Attorney Waiter T. Young, commenced CA-G.R. SP
No. 32483 and CA-G.R. SP No. 32469, respectively. In CA-G.R. SP No.
32483, Atty. Young signed for and in behalf of the law firm Ocampo, Quiroz,
Pesayco and Associates, while in CA-G.R. SP No. 32469, Atty. Young signed
for the law firm Quiroz and Young. In both petitions, he used the same
business address — Allied Bank Center, 6754 Ayala Avenue, Makati City. We
hold that private respondents are not guilty of forum-shopping. In the case at
bar, private respondents represent different groups with different interests —
the minority stockholders' group represented by private respondent Lim; the
unsecured creditors group, Allied Leasing & Finance Corporation; and the old
management group. Each group has distinct rights to protect. In line with our
ruling in Ramos, the cases filed by private respondents should be
consolidated. In fact, BENHAR and RUBY did just that — in their urgent
motions filed on December 1, 1993 and December 6, 1993, respectively, they
prayed for the consolidation of the cases before the Court of Appeals.

DECISION

PUNO, J : p

Petitioners seek the reversal of the Court of Appeals Decision, 1 setting

aside the Orders of the Securities and Exchange Commission (SEC), dated
July 30, 1993 and October 15, 1993, which approved the Revised
Rehabilitation Plan of Ruby Industrial Corporation (RUBY) and appointed
Benhar International, Inc. (BENHAR) as member of RUBY's Management
Committee. LibLex

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The facts: Petitioner Ruby Industrial Corporation (RUBY) is a domestic

corporation engaged in glass manufacturing, while petitioner Benhar
International, Inc. (BENHAR) is a domestic corporation engaged in
importation and sale of vehicle spare parts. BENHAR is wholly-owned by the
Yu family and headed by Henry Yu who is also a director and majority
stockholder of RUBY.
In 1983, RUBY suffered severe liquidity problems. thus, on December
13, 1983, it filed a Petition for Suspension of Payments with the Securities
and Exchange Commission (SEC). 2
On December 20, 1983, the SEC issued an Order 3 declaring RUBY
under suspension of payments. Pending hearing of its petition, the SEC
enjoined RUBY from disposing its property, except insofar as necessary in its
ordinary operations. It also enjoined RUBY from making payments outside of
the necessary or legitimate expenses of its business.
On August 10, 1984, the SEC Hearing Panel 4 created a management
committee 5 for RUBY to: (1) undertake the management of RUBY; (2) take
custody of and control over all existing assets and liabilities of RUBY; (3)
evaluate RUBY's existing assets and liabilities, earnings and operations; (4)
determine the best way to salvage and protect the interest of its investors and
creditors; and (5) study, review and evaluate the proposed rehabilitation plan
for RUBY. 6
Subsequently; at RUBY's special stockholders meeting, its majority
stockholders led by Yu Kim Giang presented the BENHAR/RUBY
Rehabilitation Plan to be submitted to SEC. Under the plan, BENHAR shall
lend its P60 million credit line in China Bank to RUBY, payable within ten (10)
years. Moreover, BENHAR shall purchase the credits of RUBY's creditors and
mortgage RUBY's properties to obtain credit facilities for RUBY. 7 Upon
approval of the rehabilitation plan, BENHAR shall control and manage
RUBY'S operations. For its service, BENHAR shall receive a management fee
equivalent to 7.5% of RUBY's net sales. 8
Some 40% of the stockholders opposed the BENHAR/RUBY Plan,
including private respondent MIGUEL LIM, a minority shareholder of RUBY.
Private respondent Allied Leasing and Finance Corporation, the biggest
unsecured creditor of RUBY and chairman of the management committee,
also objected to the plan as it would transfer RUBY's assets beyond the reach
and to the prejudice of its unsecured creditors. Despite the oppositions, the
majority stockholders still submitted the BENHAR/RUBY Plan to the SEC for
approval.
Upon the other hand, RUBY's minority stockholders, represented by
private respondent Lim, submitted their own rehabilitation plan (the
ALTERNATIVE PLAN) to the SEC where they proposed to: (1) pay all RUBY'S
creditors without securing any bank loan; (2) run and operate RUBY without

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charging management fees; (3) buy-out the majority shares or sell their
shares to the majority stockholders; (4) rehabilitate RUBY's two plants; and
(5) secure a loan at 25% interest, as against the 28% interest charged in the
loan under the BENHAR/RUBY Plan. 9
Both plans were endorsed by the SEC to RUBY's management
committee for evaluation.
On October 28, 1988, the SEC Hearing Panel approved the
BENHAR/RUBY Plan. 10 The minority stockholders, thru private respondent
Lim, appealed the approval to the SEC en banc. On November 15, 1988, the
SEC en banc temporarily enjoined the implementation of the BENHAR/RUBY
Plan. On December 20, 1988, after the expiration of the TRO, the SEC en
banc granted the writ of preliminary injunction against the enforcement of the
BENHAR/RUBY Plan. 11
Thereafter BENHAR and Henry Yu, later joined by RUBY and Yu Kim
Giang, appealed to the Court of Appeals (CA-G.R. SP No. 16798) questioning
the issuance of the writ. Their appeal was denied. 12
BENHAR and company elevated the matter to this Court. In a minute
Resolution, 13 dated February 28, 1990, we denied the petition and upheld the
injunction against the implementation of the BENHAR/RUBY Plan.
However, it appears that before the SEC Hearing Panel approved the
BENHAR/RUBY Plan on October 28, 1988, BENHAR had already
implemented part of the plan by paying off Far East Bank & Trust Company
(FEBTC), one of RUBY's secured creditors. Thus, by May 30, 1988, FEBTC
had already executed a deed of assignment of credit and mortgage rights in
favor of BENHAR. Moreover, despite the SEC en banc's TRO and injunction,
BENHAR still paid RUBY's other secured creditors who, in turn, assigned their
credits in favor of BENHAR.
Hence, RUBY's biggest unsecured creditor, Allied Leasing and Finance
Corporation, and private respondent Lim moved to nullify the deeds of
assignment executed in favor of BENHAR and cite the parties thereto in
contempt for willful violation of the December 20, 1983 SEC Order enjoining
RUBY from disposing its properties and making payments pending the
hearing of its petition for suspension of payments. Private respondents Lim
and Allied Leasing charged that in paying off FEBTC's credits, FEBTC was
given undue preference over the other creditors of RUBY.
Acting on private respondents' motions, the SEC Hearing Panel nullified
the deeds of assignment executed by RUBY's creditors in favor of BENHAR
and declared the parties thereto guilty of indirect contempt. 14
Petitioners appealed to the SEC en banc. Their appeal was denied. 15 It
was ruled that, pending approval of the BENHAR/RUBY plan, BENHAR had
no authority to pay off FEBTC, one of RUBY's creditors. In prematurely

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implementing the BENHAR/RUBY plan, BENHAR defied the SEC Order

declaring RUBY under suspension of payments and directing the
management committee to preserve its assets.
Petitioners RUBY and BENHAR, joined by Henry Yu and Yu Kim Giang,
appealed to the Court of Appeals (CA-G.R. SP No. 18310). On August 29,
1990, the Court of Appeals affirmed the SEC ruling nullifying the deeds of
assignment. 16 It also declared that its decision is final and executory as to
RUBY and Yu Kim Clang for their failure to file their pleadings within the
reglementary period. This Court affirmed the Court of Appeals' decision in
G.R. No. 96675. 17
Earlier, on May 29 1990, after the SEC en banc enjoined the
implementation of BENHAR/RUBY Plan, RUBY filed with the SEC en banc an
ex-parte petition to create a new management committee and to approve its
revised rehabilitation plan (Revised BENHAR/RUBY Plan). Under the revised
plan, BENHAR shall receive P34.068 Million of the P60.437 Million credit
facility to be extended to RUBY, as reimbursement for BENHAR's payment to
some of RUBY's creditors.
The SEC en banc directed RUBY to submit the Revised
BENHAR/RUBY Plan to its creditors for comment and approval. The petition
for the creation of a new management committee was remanded for further
proceedings to the SEC Hearing Panel. The Alternative Plan of RUBY's
minority stockholders was also forwarded to the hearing panel for evaluation
On April 26, 1991, over ninety (90%) percent of RUBY's creditors
objected to the Revised BENHAR/RUBY Plan and the creation of a new
management committee. Instead, they endorsed the minority stockholders'
Alternative Plan.
At the hearing of the petition for the creation of a new management
committee, three (3) members of the original 18 management committee
opposed the Revised BENHAR/RUBY plan on the following grounds:
(1) the Revised BENHAR/RUBY Plan would legitimize the
entry of BENHAR, a total stranger, to RUBY as BENHAR
would become the biggest creditor of RUBY;
(2) the revised plan would put RUBY's assets beyond the
reach of the unsecured creditors and the minority
stockholders; and,
(3) the revised plan was not approved by RUBY's
stockholders in a meeting called for the purpose.
However, on September 18, 1991, despite the objections of over 90% of
RUBY's creditors and three (3) members of the management committee, the
SEC Hearing Panel approved the revised plan and dissolved the existing
management committee. It also created a new management committee and

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appointed BENHAR as one of its members. 19 In addition to the powers

originally conferred to the management committee under P. D. No. 902-A, the
new management committee was tasked to oversee the implementation by
the Board of Directors of the revised rehabilitation plan for RUBY.
Consequently, the original management committee, Lim, and the Allied
Leasing Corporation appealed to the SEC en banc. On July 30, 1993, the
SEC En Banc affirmed the approval of the Revised BENHAR/RUBY Plan and
the creation or a new management committee. 20 To avoid any group from
controlling the management of RUBY, the SEC appointed SEC lawyers Ruben
C. Ladia and Teresita R. Siao as additional members of the new management
committee. Further, it declared that BENHAR's membership in the new
management committee is subject to the condition that BENHAR will extend
its credit facilities to RUBY without using the latter's assets as security or
collateral.
Private respondents Lim, Allied Leasing Corporation and the original
management committee moved for reconsideration. Petitioners, on the other
hand, asked the SEC to reconsider the portion of its Order prohibiting
BENHAR from utilizing RUBY's assets as collateral.
On October 15, 1993, the SEC denied private respondents' motions for
reconsideration. However, it granted petitioners' motion and allowed BENHAR
to use RUBY'S assets as collateral for loans, subject to the approval of the
majority of all the members of the new management committee. 21
On appeal by private respondents, the Court of Appeals 22 set aside
SEC'S approval of the Revised BENHAR/RUBY plan and remanded the case
to the SEC for further proceedings. It ruled that the revised plan circumvented
its earlier decision (CA-G.R. SP No. 18310) nullifying the deeds of assignment
executed by RUBY'S creditors in favor of BENHAR. Under the revised plan,
BENHAR was to receive P34.068 Million of the P60.437 Million credit facility
to be extended to RUBY, as settlement for its advance payment to RUBY'S
seven (7) secured creditors. In effect, the payments made by BENHAR under
the void Deeds of Assignment were recognized as payable to BENHAR under
the revised plan. Petitioners' motion for reconsideration was denied. 23
Hence, this petition where petitioners aver that:
"I. THE COURT OF APPEALS COMMITTED A REVERSIBLE
ERROR, GRAVELY ABUSED ITS DISCRETION AND EXCEEDED
ITS JURISDICTION WHEN IT WENT AGAINST THE FACTS AS
FOUND BY THE SEC AND, THEREAFTER, SUBSTITUTED ITS
JUDGMENT FOR THAT OF THE SEC.
"II. THE COURT OF APPEALS COMMITTED AN ERROR
REVIEWABLE ON APPEAL AND ALSO A PROPER SUBJECT OF
CERTIORARI WHEN IT ALLOWED PRIVATE RESPONDENTS TO

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FILE SEPARATE PETITIONS PREPARED BY LAWYERS

REPRESENTING THEMSELVES AS BELONGING TO DIFFERENT
LAW FIRMS."
We find no merit in the petition.
Petitioners first contend that, in reversing the SEC's approval of the
Revised BENHAR/RUBY Plan, the Court of Appeals exceeded its jurisdiction
and disregarded the SEC's expertise in resolving corporate controversies.
The settled doctrine is that factual findings of an administrative agency
are accorded respect and, at times, finality for they have acquired the
expertise inasmuch as their jurisdiction is confined to specific matters. 24
Nonetheless, these doctrines do not apply when the board or official has gone
beyond his statutory authority, exercised unconstitutional powers or clearly
acted arbitrarily and without regard to his duty or with grave abuse of
discretion. 25 In Leongson vs. Court of Appeals, 26 we held: "once the actuation
of the administrative official or administrative board or agency is tainted by a
failure to abide by the command of the law, then it is incumbent on the courts
of justice to set matters right, with this Tribunal having the last say on the
matter."
We hold that the SEC acted arbitrarily when it approved the Revised
BENHAR/RUBY Plan. As found by the Court of Appeals, the plan contained
provisions which circumvented its final decision 27 in CA-G.R. SP No. 18310,
nullifying the deeds of assignment of credits and mortgages executed by
RUBY's creditors in favor of BENHAR, as well as this Court's resolution in
G.R. No. 96675, affirming said Court of Appeals' decision. Specifically, the
Revised BENHAR/RUBY Plan considered as valid the advance payments
made by BENHAR in favor of some of RUBY'S creditors. The nullity of
BENHAR's unauthorized dealings with RUBY'S creditors is settled. The deeds
of assignment between BENHAR and RUBY's creditors had been
categorically declared void by the SEC Hearing Panel in two (2) orders issued
on January 12, 1989 and March 15, 1989. 28 The dispositive portion of the
Order, dated January 12, 1989, held:
"WHEREFORE, the motion for reconsideration of the Order
dated October 7, 1988, insofar as it relates to the motion of Allied
Leasing and Finance Corporation to cite for contempt and to annul
deed of assignment is hereby GRANTED. . . The Deed of
Assignment of Receivables and Mortgages, Rights, Credits and
Interest Without Recourse having been executed in violation of the
Order dated December 20, 1988 is hereby declared NULL and VOID.
"SO ORDERED."
The dispositive portion of the Order dated March 15, 1989, similarly
provided:

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"WHEREFORE, Mr. Yu Kim Giang and others are hereby

found guilty of indirect contempt and a penalty of P500.00 each is
hereby imposed on them. The Deed of Assignment of Receivables
and Mortgages, Rights, Credits and Interest Without Recourse, in
favor of Benhar International, Inc., by Florence Danon, Philippine
Bank of Communication, Philippine Commercial International Bank,
Philippine Trust Company and PCI Leasing and Finance
Incorporated, having been executed in violation of the Order dated
December 20, 1988 are hereby declared NULL and VOID.

These orders were upheld by the SEC en banc 29 and the Court of
Appeals. 30 In CA-GR SP No. 18310, the Court of Appeals ruled as follows:
"xxx xxx xxx
"1) . . . when the Deed of Assignment was executed on
May 30, 1988 by and between Ruby Industrial Corp., Benhar
International Inc., and FEBTC, the Rehabilitation Plan proposed by
petitioner Ruby Industrial Corp. for Benhar International Inc. to
assume all petitioner's obligation has not been approved by the SEC.
The Rehabilitation Plan was not approved until October 28, 1988.
There was a willful and blatant violation of the SEC order dated
December 20, 1983 on the part of petitioner Ruby Industrial Corp.,
represented by Yu Kim Giang, by Benhar International Inc.,
represented by Henry Yu and by FEBTC . . .
"2) The magnitude and coverage of the transactions
involved were such that Yu Kim Giang and the other signatories
cannot feign ignorance or pretend lack of knowledge thereto in view
of the fact that they were all signatories to the transaction and privy to
all the negotiations leading to the questioned transactions. In
executing the Deeds of Assignments, the petitioners totally
disregarded the mandate contained in the SEC order not to dispose
the properties of Ruby Industrial Corp. in any manner whatsoever
pending the approval of the Rehabilitation Plan and rendered illusory
the SEC efforts to rehabilitate the petitioner corporation to the best
interests of all the creditors.
"3) The assignments were made without prior approval of
the Management Committee created by the SEC in an Order dated
August 10, 1984. Under Section 6, par. d, sub. par. (2) of P.D. 902-A
as amended by P.D. 1799, the Management Committee,
rehabilitation receiver, board or body shall have the power to take
custody and control over all existing assets of such entities under
management notwithstanding any provision of law, articles of
incorporation or by-law to the contrary. The SEC therefore has the
power and authority, through a Management Committee composed of
petitioner's creditors or through itself directly, to declare all
assignment of assets of the petitioner Corporation declared under

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suspension of payments, null and void, and to conserve the same in

order to effect a fair, equitable and meaningful rehabilitation of the
insolvent corporation."
"4) . . . The acts for which petitioners were held in indirect
contempt by the SEC arose from the failure or willful refusal by
petitioners to obey the lawful order of the SEC not to dispose of any
of its properties in any manner whatsoever without authority or
approval of the SEC. The execution of the Deeds of Assignment tend
to defeat or obstruct the administration of justice. Such acts are
offenses against the SEC because they are calculated to embarrass,
hinder and obstruct the tribunal in the administration of justice or
lessen its authority.
"In view of the foregoing conclusion which has now been
reached, it is not necessary to discuss at length or to determine other
questions which are presented on record. It is sufficient to say that
the facts as established by the evidence on records warrant a finding
that petitioners are guilty of indirect contempt. The Order of the SEC
is hereby AFFIRMED. This petition is DISMISSED with costs against
the petitioners
"SO ORDERED." (emphasis ours)
Petitioners insist that the Court of Appeals did not make a categorical
statement in the dispositive portion of its decision in CA-G.R. SP No. 18310
that it was nullifying the deeds of assignment in favor of BENHAR. Allegedly it
merely stated that it is affirming the decision of the SEC. Petitioners cite Olac
vs. Court of Appeals 31 where we held that the dispositive portion or the fallo
constitutes the court's resolution in a given case, while the discussion in the
body of the decision merely expresses the court's opinion.
The contention has no merit. The principle laid down in Olac applies
only when there is a conflict between the dispositive part (fallo) and the
opinion of the court contained in the decision. Hence, in the execution of the
court's judgment, the fallo should be considered as the final disposition of the
case before it. Such conflict does not exist in the Court of Appeals' decision in
CA-G.R. SP No. 18310. It is crystal clear that what the Court of Appeals
affirmed in CA-GR SP No. 18310 was the nullity of the deeds of assignment in
favor of BENHAR. In a minute resolution in G.R. No. 96675, we even
sustained the Court of Appeals' decision in CA-GR SP No. 18310. 32
In any event, petitioners actively participated in the proceedings before
the SEC and the Court of Appeals when private respondents sought the
nullification of the subject deeds. Petitioners are, therefore, estopped from
questioning anew the validity of the deeds of assignment executed by RUBY's
creditors in favor of BENHAR. Petitioners should know that it is not for a party
to participate in the proceedings, submit his case for decision, accept the
judgment if it is favorable to him but attack it for any reason when it is
adverse. 33
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Even the SEC en banc, in its July 30, 1993 Order affirming the approval
of the Revised BENHAR/RUBY Plan, has acknowledged the invalidity of the
subject deeds of assignment However, to justify its approval of the plan and
the appointment of BENHAR to the new management committee, it gave the
lame excuse that BENHAR became RUBY's creditor for having paid RUBY's
debts. We quote the relevant portion of the SEC's ruling, thus:
"Anent the contention that BENHAR should not take an active
participation in the management of petitioner corporation, the same
deserves scant consideration.
"While the Deeds of Assignment executed by creditors of
Ruby in favor of Benhar were all declared null and void, the Revised
Rehabilitation Plan, as herein approved by the Commission, shows
that Benhar will assign its credit lines/loan proceeds or will act as
financier whereby it re-lends the contracted loan to Ruby thereby
converting Benhar as a creditor of the petitioner corporation once the
Rehabilitation Plan is implemented. In fact, as of March 31, 1990, it
appears that Benhar had made some advance payments to some
creditors of Ruby further strengthening its status as a creditor. We
cannot, therefore, see any reason why Benhar should not sit in the
management team to oversee the implementation of the Plan."
For its part, the Court of Appeals noted that the approved Revised
BENHAR/RUBY Plan gave undue preference to BENHAR. The records,
indeed, show that BENHAR's offer to lend its credit facility in favor of RUBY is
conditioned upon the payment of the amount it advanced to RUBY's creditors,
thus:
"FUND SOURCING
xxx xxx xxx
1.1. Deed of Assignment of Credit Facility (or Loan
Proceeds) to be executed by Benhar in favor of Ruby, under pre-
arrangement with China Banking Corporation or by any other
creditor-banks, and upon payment by Ruby of such amount already
advanced by Benhar."
In fact, BENHAR shall receive P34.068 Million out of the P60.437 Million
credit facility to be extended to RUBY for the latter's rehabilitation.
Rehabilitation contemplates a continuance of corporate life and
activities in an effort to restore and reinstate the corporation to its former
position of successful operation and solvency. 34 When a distressed company
is placed under rehabilitation, the appointment of a management committee
follows to avoid collusion between the previous management and creditors it
might favor, to the prejudice of the other creditors. All assets of a corporation
under rehabilitation receivership 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 attachment, execution or otherwise. As between

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the creditors, the key phrase is equality in equity. Once the corporation
threatened by bankruptcy is taken over by a receiver, all the creditors ought to
stand on equal footing. Not any one of them should be paid ahead of the
others. This is precisely the reason for suspending all pending claims against
the corporation under receivership. 35
Parenthetically, BENHAR is a domestic corporation engaged in
importing and selling vehicle spare parts with an authorized capital stock of
thirty million pesos. Yet, it offered to lend its credit facility in the amount of
sixty to eighty millions pesos to RUBY. It is to be noted that BENHAR is not a
lending or financing corporation and lending its credit facilities, worth more
than double its authorized capitalization, is not one of the powers granted to it
under its Articles of Incorporation. Significantly, Henry Yu, a director and a
majority stockholder of RUBY is, at the same time, a stockholder of BENHAR,
a corporation owned and controlled by his family. These circumstances render
the deals between BENHAR and RUBY highly irregular.
To justify its appointment in the new management committee and to
dispute that it will become a creditor of RUBY only on account of the proposed
assignment of its credit facility to RUBY, BENHAR avers that as early as
December 27, 1988, it already lent one million pesos (P1,000,000.00) to
RUBY for the latter's working capital.
The submission deserves scant consideration. To start with, this
argument was raised by BENHAR for the first time in its motion for
reconsideration before the Court of Appeals. The settled rule is that issues not
raised in the court a quo cannot be raised for the first time on appeal — in this
case, in a motion for reconsideration — for being offensive to the basic rules
of fair play, justice and due process. 36
Moreover, when RUBY initiated its petition for suspension of payments
with the SEC, BENHAR was not listed as one of RUBY's creditors. BENHAR
is a total stranger to RUBY. If at all, BENHAR only served as a conduit of
RUBY. As aptly stated in the challenged Court of Appeals decision: 37
"Benhar's role in the Revised Benhar/Ruby Plan, as
envisioned by the majority stockholders, is to contract the loan for
Ruby and, serving the role of a financier, relend the same to Ruby.
Benhar is merely extending its credit line facility with China Bank,
under which the bank agrees to advance funds to the company
should the need arise. This is unlikely a loan in which the entire
amount is made available to the borrower so that it can be used and
programmed for the benefit of the company's financial and
operational needs. Thus, it is actually China Bank which will be the
source of the funds to be relent to Ruby. Benhar will not shell out a
single centavo of its own funds. It is the assets of Ruby which will be
mortgaged in favor of Benhar. Benhar's participation will only make

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the rehabilitation plan more costly and, because of the mortgage of

its (Ruby's) assets to a new creditor, will create a situation which is
worse than the present . . ."
We need not say more.
On the second issue, petitioners charge that private respondents are
guilty of forum-shopping. It appears that the three (3) private respondents filed
separate petitions before the Court of Appeals upon receipt of the adverse
ruling of the SEC en banc. Private respondent Miguel Lim commenced CA-
G.R. SP No. 32404, thru its counsel Romulo Mabanta Buenaventura Sayoc
and De los Angeles. For their part, private respondent Allied Leasing and the
original management committee of RUBY, represented by Attorney Walter T.
Young, commenced CA-G.R. SP No. 32483 and CA-G.R. SP No. 32469,
respectively. In CA-G.R. SP No. 32483, Atty. Young signed for and in behalf of
the law firm Ocampo Quiroz Pesayco and Associates, while in CA-G.R. SP
No. 32469, Atty. Young signed for the law firm Quiroz and Young. In both
petitions, he used the same business address — Allied Bank Center, 6754
Ayala Avenue, Makati.
We hold that private respondents are not guilty of forum-shopping. In
Ramos, Sr. vs. Court of Appeals, 38 we ruled:
"The private respondents can be considered to have engaged
in forum shopping if all of them, acting as one group, filed identical
special civil actions in the Court of Appeals and in this Court. There
must be identity of parties or interests represented, rights asserted
and relief sought in different tribunals. In the case at bar, two groups
of private respondents appear to have acted independently of each
other when they sought relief from the appellate court. Both group
sought relief from the same tribunal.
"It would not matter even if there are several divisions in the
Court of Appeals. The adverse party can always ask for the
consolidation of the two cases. . ."
In the case at bar, private respondents represent different groups with
different interests — the minority stockholders' group, represented by private
respondent Lim; the unsecured creditors group, Allied Leasing & Finance
Corporation; and the old management group. Each group has distinct rights to
protect. In line with our ruling in Ramos, the cases filed by private
respondents should be consolidated. In fact, BENHAR and RUBY did just that
— in their urgent motions filed on December 1, 1993 and December 6, 1993,
respectively, they prayed for the consolidation of the cases before the Court of
Appeals.
IN VIEW OF THE FOREGOING, the instant petition is DISMISSED for
lack of merit. The Court of Appeals' Decision, dated March 31, 1995, and its
Resolution, dated March 12, 1996, in CA-G.R. SP Nos. 32404, 42469 and
32483 are AFFIRMED. The case is remanded to the Securities and Exchange
Commission for further proceedings. Costs against petitioners.
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SO ORDERED
Regalado, and Mendoza, JJ ., concur.
Martinez, J ., took no part.

Footnotes
1. Dated March 31, 1995; Penned by Associate Justice Consuelo Ynares-
Santiago and concurred in by Associate Justice Antonio M. Martinez (now a
distinguished member of this Court) and Associate' Justice Ruben T. Reyes;
See Rollo, pp. 33-56.
2. Docketed as SEC Case No. 2556.
3. Rollo, pp. 271-272.
4. Composed of Hearing Officers Alberto P. Atas, Juanito B. Almosa and
Rolando C. Malabonga.
5. Composed of Allied Leasing & Finance Corp. as Chairman, with the
following as members: Philippine, Bank of Commerce, China Banking
Corporation, Filipinas Shell Petroleum and Ruby Industrial Corp.
6. Order of SEC Hearing Panel, dated October 28, 1988, Rollo, pp. 100-
109.
7. Comment of private respondent Miguel Lim, Rollo, pp. 201-202
8. See Order of SEC Hearing Panel, dated October 28, 1988, in SEC Case
No. 2556, marked as Annex 'E" of Petition, Rollo, pp. 100-109.
9. Ibid., at p. 203
10. Annex "E" of Petition, Rollo, pp. 100-109.
11. The Writ of Injunction was finally issued on January 6, 1989, Rollo, p.
278.
12. The Fourth Division of the Court of Appeals which decided the appeal
in CA-G.R. SP No. 16798 was composed of Associate Justices Cecilio L.
Pe (ponente) Pedro A. Ramirez and now Supreme Court Associate Justice
Vicente V. Mendoza.
13. G.R. No. L-88311.
14. Orders, dated January 12, 1989 and March 15, 1989; Rollo, pp. 408-
412, 416-419.
15. Order, dated July 31, 1989, Rollo, pp. 414-415.
16. Decision, dated August 29, 1990, Rollo, pp. 285-292.
17. Resolution, dated August 26, 1991, Rollo, p. 293.

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18. Lim (representing the minority stockholders), Allied Leasing and

Finance Corporation (representing the unsecured creditors), and Filipinas
Shell Petroleum Corporation.
19. The other members were China Banking Corporation, representing the
secured creditors; Allied Leasing, representing the unsecured creditors;
BENHAR, representing the entity extending credit facilities to RUBY; a
representative of the majority stockholders; and a representative of the
minority stockholders. See Order dated September 18, 1991, Rollo, pp. 92-
99.
20. Rollo, pp. 77-81.
21. Resolution, dated October 15, 1993, Rollo, pp. 84-86.
22. Decision, dated March 31, 1995, supra.
23. Resolution, dated March 12, 1996, Rollo, pp 58-75.
24. Alejandro vs. Court of Appeals, G.R. Nos. 84572-73, November 27,
1990, 191 SCRA 700.
25. Pao vs. Ago, No. L-15414, June 30, 1960, 108 Phil 905.
26. No. L-32255, January 30, 1973, 49 SCRA 212.
27. Dated August 29, 1990, Rollo, pp. 285-292.
28. Signed by Hearing Officers Alberto P. Atas, Juanito B. Almosa, Jr., and
Rolando C. Malabonga.
29. See Order dated July 31, 1989, Rollo, pp. 414-415.
30. CA-G.R. SP No. 18310 Decision dated August 29, 1990, Rollo, pp.
285-292. Penned by former Associate Justice Jose Campos, Jr.; Associate
Justices Oscar N. Herrera and Artemon D. Luna concurred in the decision.
31. G.R. No. 84256, 213 SCRA 321, 328-329.
32. See note 18.
33. Ilocos Sur Electric Cooperative, Inc., vs. NLRC, G.R. No. 106161,
February 1, 1995, 241 SCRA 36.
34. New York Title and Mortgage Co., vs. Friedman, 276 N.Y.S. 72, 153,
Misc. 697.
35. Araneta vs. Court of Appeals, G.R. No. 95253, July 10, 1992, 211
SCRA 390; Rizal Commercial Banking Corporation vs. IAC and BF Homes,
Inc., G.R. No. 74851, September 14, 1992, 213 SCRA 830.
36. Association of Marine Officers, et al., vs. Laguesma, et al., G.R. No.
107761, December 27, 1994, 239 SCRA 460.
37. See note 1.
38. G.R. Nos. 80908 & 80909, May 24, 1989, 173 SCRA 550.

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