Figueroa v. Securities and Exchange Commission and Philippine Underwriters Finance Corporation
REITERATIONFacts
The Antecedents: On June 18, 1981, the Securities and Exchange Commission (SEC) and the Central Bank (CB) took over the management of Philippine Underwriters Finance Corporation (PHIL-FINANCE). Subsequently, the SEC appointed receivers for PHIL-FINANCE. On October 1, 1985, petitioner Marietta Y. Figueroa entered into a "Canteen Concession Agreement" with PHIL-FINANCE, allowing her to operate its canteen for two years. On October 30, 1985, the Bengzon Law Offices was appointed receiver for PHIL-FINANCE. Procedural History: The receiver, upon finding irregularities in the canteen concession contract, wrote to the SEC on July 14, 1986, requesting that the agreement be declared null and void due to onerous terms, lack of approval from the SEC Receivership Committee Chairman, absence of board resolution authorizing the president to bind the company, and falsified notarization. On August 19, 1986, the SEC issued a resolution declaring the contract null and void. Petitioner's motion for reconsideration was denied by the SEC en banc on October 21, 1986. The Petition: Petitioner filed a petition for review, alleging that the SEC committed grave abuse of discretion in declaring the contract null and void without express authority and without prior notice to her.
Issue(s)
Whether the SEC has the power and authority under P.D. 902-A, as amended, to declare null and void private contracts and agreements, specifically the canteen concession contract, given its role as receiver of PHIL-FINANCE. Whether the SEC denied the petitioner due process by initially declaring the contract null and void without prior notice, and whether the subsequent opportunity to be heard through a motion for reconsideration satisfied due process requirements.
Ruling
The petition is devoid of merit and is hereby DISMISSED without pronouncement as to costs.
Ratio Decidendi
On the SEC's power to declare contracts null and void: The Court affirmed that under paragraph 6(d), sub-par. (2) of P.D. No. 902-A, as amended by P.D. No. 1799, the management committee or receiver has the power to take custody and control over all existing assets and property of the entity under management, and may overrule or revoke the actions of the previous management and board of directors. The SEC, in its capacity as receiver, was empowered to revoke or nullify the acts of the previous management, including the canteen concession contract, especially since it was entered into while the receivership committee was already managing PHIL-FINANCE and without prior approval or knowledge of the SEC as receiver. The Court found that the contract was irregular, onerous, and prejudicial to the creditors of PHIL-FINANCE, citing the free rental, provision of utilities, and use of existing canteen equipment without charge, which were not in the best interest of the company and its creditors. The SEC's action was a valid exercise of its authority to protect the assets and interests of the company under receivership. On the issue of due process: The Court held that petitioner was not denied due process. While the SEC initially declared the contract null and void without prior notice to the petitioner, she was subsequently afforded the opportunity to be heard when she filed a motion for reconsideration. This motion was duly considered by the SEC sitting en banc, and her side was ventilated. The Court reiterated that what the law prohibits is the absolute absence of notice and opportunity to be heard. Where a party is given a chance to be heard through a motion for reconsideration, there is sufficient compliance with the requirements of due process. The petitioner's insistence on the validity of the contract, despite being informed of its infirmities, further supported the SEC's action. Therefore, the SEC did not commit a grave abuse of discretion in nullifying the contract.
Main Doctrine
The Securities and Exchange Commission (SEC), acting as receiver, has the authority under P.D. 902-A, as amended, to declare null and void contracts entered into by the entity under receivership, especially when such contracts are found to be onerous, prejudicial, and attended by irregularities such as falsified notarization, and when the parties are afforded due process through a motion for reconsideration.