Modern Paper Products Inc Vs CA

[G.R. No. 127166. March 2, 1998] MODERN PAPER PRODUCTS, INC.
, and SPOUSES ALFONSO CO

and ELIZABETH CO, petitioners, vs.COURT OF APPEALS, METROPOLITAN BANK & TRUST CO., and
PHILIPPINE SAVINGS BANK,respondents.
Nature: In this petition for review on certiorari under Rule 45 of the Rules of Court, the petitioners ask us
to review and set aside that part of the 12 July 1996 Decision [1] of the Court of Appeals in CA-G.R. SP No.
40285[2] ordering the dismissal of the petition for suspension of payments filed with the Securities and
Exchange Commission (SEC) insofar as petitioners Alfonso and Elizabeth Co were concerned.
Facts:
1.Modern Paper Products, Inc. (hereafter, MPPI) and Spouses Alfredo and Elizabeth Co filed before the
Securities and Exchange Commission a Petition for Suspension of Payments for rehabilitation purposes,
seeking the following reliefs:
a.
Upon filing of this petition, a temporary restraining order and/or writ of preliminary injunction be issued restraining and
enjoining petitioner MPPIs creditors from instituting, prosecuting or in any other manner enforcing any foreclosures of mortgages,
actions or complaints before the courts or any other tribunal or agency;
b.
Petitioners be declared in a state of suspension of payments, and that an Order be issued suspending and enjoining the filing,
prosecution and/or enforcement of any and all other claims against petitioners and their properties, whether judicially or
extrajudicially, before any court, tribunal, board or agency;
c.
An Order be issued approving petitioners rehabilitation plan and schedule for deferred payment of petitioner MPPIs liabilities
to its creditors;
d.
Petitioner MPPI be allowed to continue with its business operations and to use the proceeds or income thereof in accordance
with petitioner MPPIs rehabilitation plan and schedule of deferred payment; and
e.
A Management Committee be created to oversee the continuation of petitioner MPPIs business
operations as well as the implementation of petitioner MPPIs rehabilitation plan and schedule of deferred payment, and to exercise
such other functions subject to the control and supervision of the Honorable Commission (Rollo, pp. 55-56).
2. Pursuant thereto, the Hearing Panel issued an order setting the petition for hearing. Several hearings
were conducted wherein evidences [sic] were adduced to determine the feasibility and viability of the
proposed rehabilitation plan.
3. Metrobank and PSBank, in an Omnibus Motion, sought the dismissal of MPPIs petition for not being
legally feasible. The Hearing Panel denied the Motion and directed the creation of a management
committee. It also ordered the suspension of all claims not only against MPPI but against the Co
spouses, as well.
4. Metrobank and PSBank on one hand, and TR Mercantile on the other, took exception in separate
petitions for certiorari before the Commission En Banc, questioning the order for the creation of a
management committee. The Commission En Banc denied both petitions.
5. Unsatisfied with the consolidated order, Metrobank and PS Bank filed with public respondent Court of
Appeals a petition for review. Alleging therein that
a. The SEC (En Banc) misconstrued and misapplied the rules on suspension of payments.
a.01. The SEC (En Banc) went beyond the scope of Sec. 6 (c) of P.D. 902-A by expanding the effects of the suspension of all
actions for claims against MPPI to include personal obligations of the Co spouses.
a.03. More, the SEC (En Banc) refused to remove MPPI from the control of management committee despite having received
uncontroverted evidence that the proposed rehabilitation plan is neither feasible nor viable. As far as the SEC (En Banc) is
concerned, therefore, a management committee can continue to exist even if the proposed rehabilitation has already been shown
not to be feasible and viable.
6. CA: Affirming the appealed order with the modification that the petition of Spouses Alfonso and
Elizabeth Co filed before the SEC for the suspension of payments of obligations they incurred in their
personal capacity was ordered dismissed for lack of jurisdiction.
7. Court of Appeals ruled that petitions for suspension of payments under Section 5(d) of P.D. No. 902-A
are limited to corporations, partnerships, or associations. [6] It then concluded that the Co spouses could
not be allowed as co-petitioners in their personal capacity in MPPIs petition; hence, the SEC exceeded
its jurisdiction when it included them under a state of suspension of payments.
8. Metrobank and PS Bank filed a Motion for Partial Reconsideration and/or Clarification urging the Court
of Appeals
(a) to declare that the SECs order placing MPPI under a management committee did not thereby
permanently discharge Metrobank and PS Banks mortgage lien over MPPIs property, and
(b) to set aside the SEC (En Banc) order insofar as it refused to remove MPPI under the control of a
management committee.
9 MPPI and the Co spouses also filed a motion for the reconsideration of the decision insofar as it
dismissed the petition of the said spouses for suspension of payments.
10. CA: Denied both MFRs, but granted the motion for clarification by declaring that the appointment of a
management committee did not by itself extinguish the mortgage lien over MPPIs property.
Dissatisfied with the abovementioned decision, MPPI and the Co spouses filed the instant petition.
11. Issue: whether the Court of Appeals erred in dismissing the petition for suspension of payments
insofar as Spouses Alfonso and Elizabeth Co were personally concerned.
12. Held: No. The Court of Appeals was correct in concluding that the SEC lacked or exceeded its
jurisdiction when it included the Co spouses under a state of suspension of payments together with MPPI.
It is indubitably clear from the aforequoted Section 5(d) that onlycorporations, partnerships, and
associations NOT private individuals can file with the SEC petitions to be declared in a state of
suspension of payments. It logically follows that the SEC does not have jurisdiction to entertain petitions
for suspension of payments filed by parties other than corporations, partnerships, or associations.
Chung Ka Bio v. Intermediate Appellate Court ruling: This section clearly does not allow a mere individual
to file the petition which is limited to corporation, partnerships or associations. Administrative agencies
like the SEC are tribunals of limited jurisdiction and, as such, can exercise only those powers which are
specifically granted to them by their enabling statutes.
13. The petitioners try to convince this Court that the claims against the Co spouses, the payments of
which they sought to have suspended through their petition before the SEC, are not personal in nature
because such claims were incurred by them in their capacity as officers of MPPI and while acting for and
in behalf of the said corporation.
14. This contention is belied by petitioners-spouses own representations in their petition for suspension of
payments wherein they alleged that they had executed the suretyship agreements in question in their
personal capacity and offered their personal properties to secure the obligations of petitioner MPPI
The petitioners-spouses are now estopped from denying that they executed the suretyship agreements in
their personal capacity. Moreover, as correctly pointed out by the private respondents, to subscribe to
Co spouses theory that they had acted for and in behalf of the corporation when they executed the
suretyship agreements would result in an absurd situation wherein the corporation (acting through its
officers) would actually be acting as surety of itself.
15. WHEREFORE, the petition is DENIED. The challenged decision of the Court of Appeals in CA-G.R.
SP No. 40285 is AFFIRMED in toto.

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[G.R. No. 127166. March 2, 1998] MODERN PAPER PRODUCTS, INC.

, and SPOUSES ALFONSO CO

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