Cases for June 23

7/28/2019 Cases for June 23

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EN BANC

[G.R. No. 74851. December 9, 1999]

RIZAL COMMERCIAL BANKING CORPORATION,petitioner, vs. INTERMEDIATE APPELLATE COURT AND BF HOMES, INC., respondents.

R E S O L U T I O N

MELO,J.:

On September 14, 1992, the Court passed upon the case at bar and rendered its decision, dismissing the petition of Rizal Commercial Banking Corporation

(RCBC), thereby affirming the decision of the Court of Appeals which canceled the transfer certificate of title issued in favor of RCBC, and reinstating that of

respondent BF Homes.

This will now resolve petitioners motion for reconsideration which, although filed in 1992 was not deemed submitted for reso lution until in late

1998. The delay was occasioned by exchange of pleadings, the submission of supplemental papers, withdrawal and change of lawyers, not to speak of the case

having been passed from one departing to another retiring justice. It was not until May 3, 1999, when the case was re-raffled to hereinponente, but the record

was given to him only sometime in the late October 1999.By way of review, the pertinent facts as stated in our decision are reproduced herein, to wit:

On September 28, 1984, BF Homes filed a Petition for Rehabilitation and for Declaration of Suspension of Payments (SEC Case No. 002693) with the Securities

and Exchange Commission (SEC).

One of the creditors listed in its inventory of creditors and liabilities was RCBC.

On October 26, 1984, RCBC requested the Provincial Sheriff of Rizal to extra-judicially foreclose its real estate mortgage on some properties of BF Homes. A

notice of extra-judicial foreclosure sale was issued by the Sheriff on October 29, 1984, scheduled on November 29, 1984, copies furnished both BF Homes

(mortgagor) and RCBC (mortgagee).

On motion of BF Homes, the SEC issued on November 28, 1984 in SEC Case No. 002693 a temporary restraining order (TRO), effective for 20 days, enjoining

RCBC and the sheriff from proceeding with the public auction sale. The sale was rescheduled to January 29, 1985.

On January 25, 1985, the SEC ordered the issuance of a writ of preliminary injunction upon petitioners filing of a bond. However, petitioner did not file a bond

until January 29, 1985, the very day of the auction sale, so no writ of preliminary injunction was issued by the SEC. Presumably, unaware of the filing of the

bond, the sheriffs proceeded with the public auction sale on January 29, 1985, in which RCBC was the highest bidder for the properties auctioned.

On February 5, 1985, BF Homes filed in the SEC a consolidated motion to annul the auction sale and to cite RCBC and the sheriff for contempt. RCBC opposed

the motion.

Because of the proceedings in the SEC, the sheriff withheld the delivery to RCBC of a certificate of sale covering the auctioned properties.On February 13, 1985, the SEC in Case No. 002693 belatedly issued a writ of preliminary injunction stopping the auction sale which had been conducted by the

sheriff two weeks earlier.

On March 13, 1985, despite SEC Case No. 002693, RCBC filed with the Regional Trial Court, Br. 140, Rizal (CC 10042) an action for mandamus against the

provincial sheriff of Rizal and his deputy to compel them to execute in its favor a certificate of sale of the auctioned properties.

In answer, the sheriffs alleged that they proceeded with the auction sale on January 29, 1985 because no writ of preliminary injunction had been issued by SEC

as of that date, but they informed the SEC that they would suspend the issuance of a certificate of sale to RCBC.

On March 18, 1985, the SEC appointed a Management Committee for BF Homes.

On RCBCs motion in the mandamus case, the trial court issued on May 8, 1985 a judgment on the pleadings, the dispositive portion of which states:

WHEREFORE, petitioners Motion for Judgment on the pleadings is granted and judgement is hereby rendered ordering respondents to execute and deliver to

petitioner the Certificate of the Auction Sale of January 29, 1985, involving the properties sold therein, more particularly those described in Annex C of their

Answer. (p. 87, Rollo.)

On June 4, 1985, B.F. Homes filed an original complaint with the IAC pursuant to Section 9 of B.P. 129 praying for the annulment of the judgment, premised on

the following:

x x x: (1) even before RCBC asked the sheriff to extra-judicially foreclose its mortgage on petitioners properties, the SEC had already assumed exclusive

jurisdiction over those assets, and (2) that there was extrinsic fraud in procuring the judgment because the petitioner was not impleaded as a party in the

mandamus case, respondent court did not acquire jurisdiction over it, and it was deprived of its right to be heard. (CA Decision, p. 88, Rollo).

On April 8, 1986, the IAC rendered a decision, setting aside the decision of the trial court, dismissing the mandamus case and suspending issuance to RCBC of

new land titles, until the resolution of case by SEC in Case No. 002693, disposing as follows:

WHEREFORE, the judgment dated May 8, 1985 in Civil Case No. 10042 is hereby annulled and set aside and the case is hereby dismissed. In view of the

admission of respondent Rizal Commercial Banking Corporation that the sheriffs certificate of sale has been registered on BFHomes TCTs . . . (here the TCTs

were enumerated) the Register of Deeds for Pasay City is hereby ordered to suspend the issuance to the mortgagee-purchaser, Rizal Commercial Banking

Corporation, of the owners copies of the new land titles replacing themuntil the matter shall have been resolved by the Securities and Exchange Commission in

SEC Case No. 002693.

(p. 257-260, Rollo; also pp. 832-834, 213 SCRA 830[1992]; Emphasis in the original.)

On June 18, 1986, RCBC appealed the decision of the then Intermediate Appellate Court (now, back to its old revered name, the Court of Appeals) to this

Court, arguing that:

1. Petitioner did not commit extrinsic fraud in excluding private respondent as party defendant in Special Civil Case No. 10042 as private respondent was not

indispensable party thereto, its participation not being necessary for the full resolution of the issues raised in said case.

2. SEC Case No. 2693 cannot be invoked to suspend Special Civil Case No. 10042, and for that matter, the extra-judicial foreclosure of the real estate mortgage

in petitioners favor, as these do not constitute actions against private respondent contemplated under Section 6(c) of Presidential Decree No. 902-A.

3. Even assuming arguendo that the extra-judicial sale constitute an action that may be suspended under Section 6(c) of Presidential Decree No. 902-A, the basis

for the suspension thereof did not exist so as to adversely affect the validity and regularity thereof.

4. The Regional Trial court had jurisdiction to take cognizance of Special Civil Case No. 10042.

5. The Regional Trial court had jurisdiction over Special Civil Case No. 10042.

(p. 5, Rollo.)

On November 12, 1986, the Court gave due course to the petition. During the pendency of the case, RCBC brought to the attention of the Court an order

issued by the SEC on October 16, 1986 in Case No.002693, denying the consolidated Motion to Annul the Auction Sale and to cite RCBC and the Sheriff for

Contempt, and ruling as follows:

WHEREFORE, the petitioners Consolidated Motion to Cite Sheriff and Rizal Commercial Banking Corporation for Contempt and to Annul Proceedings and Sale,

dated February 5, 1985, should be as is, hereby DENIED.

While we cannot direct the Register of Deeds to allow the consolidation of the titles subject of the Omnibus Motion dated September 18, 1986 filed by the Rizal

Commercial banking Corporation, and therefore, denies said Motion, neither can this Commission restrain the said bank and the Register of Deeds from

effecting the said consolidation.

SO ORDERED.

(p. 143, Rollo.)

By virtue of the aforesaid order, the Register of Deeds of Pasay City effected the transfer of title over subject pieces of property to petitioner RCBC, andthe issuance of new titles in its name. Thereafter, RCBC presented a motion for the dismissal of the petition, theorizing that the issuance of said new transfer

certificates of title in its name rendered the petition moot and academic.

In the decision sought to be reconsidered, a greatly divided Court (Justices Gutierrez, Nocon, and Melo concurred with the ponente, Justice Medialdea;

Chief Justice Narvasa, Justices Bidin, Regalado, and Bellosillo concurred only in the result; while Justice Feliciano dissented and was joined by Justice Padilla, then

Justice, now Chief Justice Davide, and Justice Romero; Justices Grio-Aquino and Campos took no part) denied petitioners motion to dismiss, finding basis for


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nullifying and setting aside the TCTs in the name of RCBC. Ruling on the merits, the Court upheld the decision of the Intermediate Appellate Court which

dismissed the mandamus case filed by RCBC and suspended the issuance of new titles to RCBC. Setting aside RCBCs acquisition of title and nullifying the TCTs

issued to it, the Court held that:

. . . whenever a distressed corporation asks the SEC for rehabilitation and suspension of payments, preferred creditors may no longer assert such preference,

but . . . stand on equal footing with other creditors. Foreclosure shall be disallowed so as not to prejudice other creditors, or cause discrimination among

them. If foreclosure is undertaken despite the fact that a petition for rehabilitation has been filed, the certificate of sale shall not be delivered pending

rehabilitation. Likewise, if this has also been done, no transfer of title shall be effected also, within the period of rehabilitation. The rationale behind PD 902-A,

as amended, is to effect a feasible and viable rehabilitation. This cannot be achieved if one creditor is preferred over the others.

In this connection, the prohibition against foreclosure attaches as soon as a petition for rehabilitation is filed. Were it otherwise, what is to prevent the

petitioner from delaying the creation of a Management Committee and in the meantime dissipate all its assets. The sooner the SEC takes over and imposes a

freeze on all the assets, the better for all concerned.

(pp. 265-266, Rollo; also p. 838, 213 SCRA 830[1992].)Then Justice Feliciano (joined by three other Justices), dissented and voted to grant the petition. He opined that the SEC acted prematurely and without

jurisdiction or legal authority in enjoining RCBC and the sheriff from proceeding with the public auction sale. The dissent maintain that Section 6 (c) of

Presidential Decree 902-A is clear and unequivocal that, claims against the corporations, partnerships, or associations shall be suspended only upon the

appointment of a management committee, rehabilitation receiver, board or body. Thus, in the case under consideration, only upon the appointment of the

Management Committee for BF Homes on March 18, 1985, should the suspension of actions for claims against BF Homes have taken effect and not earlier.

In support of its motion for reconsideration, RCBC contends:

The restraining order and the writ of preliminary injunction issued by the Securities and Exchange Commission enjoining the foreclosure sale of the properties of

respondent BF Homes were issued without or in excess of its jurisdiction because it was violative of the clear provision of Presidential Decree No. 902-A, and are

therefore null and void; and

Petitioner, being a mortgage creditor, is entitled to rely solely on its security and to refrain from joining the unsecured creditors in SEC Case No. 002693, the

petition for rehabilitation filed by private respondent.

We find the motion for reconsideration meritorious.

The issue of whether or not preferred creditors of distressed corporations stand on equal footing with all other creditors gains relevance and materiality

only upon the appointment of a management committee, rehabilitation receiver, board, or body. Insofar as petitioner RCBC is concerned, the provisions of

Presidential Decree No. 902-A are not yet applicable and it may still be allowed to assert its preferred status because it foreclosed on the mortgage prior to theappointment of the management committee on March 18, 1985. The Court, therefore, grants the motion for reconsideration on this score.

The law on the matter, Paragraph (c), Section 6 of Presidential Decree 902-A, provides:

Sec. 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers:

c) To appoint one or more receivers of the property, real and personal, which is the subject of the action pending before the Commission in accordance with the

pertinent provisions of the Rules of Court in such other cases whenever necessary to preserve the rights of the parties-litigants to and/or protect the interest of

the investing public and creditors; Provided, however, that the Commission may, in appropriate cases, appoint a rehabilitation receiver of corporations,

partnerships or other associations not supervised or regulated by other government agencies who shall have, in addition to the powers of a regular receiver

under the provisions of the Rules of Court, such functions and powers as are provided for in the succeeding paragraph (d) hereof: Provided, finally, That upon

appointment of a management committee, rehabilitation receiver, board or body, pursuant to this Decree, all actions for claims against corporations,

partnerships or associations under management or receivership pending before any court, tribunal, board or body shall be suspended accordingly. (As amended

by PDs No. 1673, 1758 and by PD No. 1799. Emphasis supplied.)

It is thus adequately clear that suspension of claims against a corporation under rehabilitation is counted or figured up only upon the appointment of a

management committee or a rehabilitation receiver. The holding that suspension of actions for claims against a corporation under rehabilitation takes effect as

soon as the application or a petition for rehabilitation is filed with the SEC may, to some, be more logical and wise but unfortunately, such is incongruent with

the clear language of the law. To insist on such ruling, no matter how practical and noble, would be to encroach upon legislative prerogative to define the

wisdom of the law plainly judicial legislation.

It bears stressing that the first and fundamental duty of the Court is to apply the law. When the law is clear and free from any doubt or ambiguity, there is

no room for construction or interpretation. As has been our consistent ruling, where the law speaks in clear and categorical language, there is no occasion for

interpretation; there is only room for application (Cebu Portland Cement Co. vs. Municipality of Naga, 24 SCRA 708 [1968]).

Where the law is clear and unambiguous, it must be taken to mean exactly what it says and the court has no choice but to see to it that its mandate is obeyed

(Chartered Bank Employees Association vs. Ople, 138 SCRA 273 [1985]; Luzon Surety Co., Inc. vs. De Garcia, 30 SCRA 111 [1969]; Quijano vs. Development Bank

of the Philippines, 35 SCRA 270 [1970]).

Only when the law is ambiguous or of doubtful meaning may the court interpret or construe its true intent. Ambiguity is a condition of admitting two or

more meanings, of being understood in more than one way, or of referring to two or more things at the same time. A statute is ambiguous if it is admissible of

two or more possible meanings, in which case, the Court is called upon to exercise one of its judicial functions, which is to interpret the law according to its true

intent.

Furthermore, as relevantly pointed out in the dissenting opinion, a petition for rehabilitation does not always result in the appointment of a receiver or

the creation of a management committee. The SEC has to initially determine whether such appointment is appropriate and necessary under the

circumstances. Under Paragraph (d), Section 6 of Presidential Decree No. 902-A, certain situations must be shown to exist before a management committee

may be created or appointed, such as;

1. when there is imminent danger of dissipation, loss, wastage or destruction of assets or other properties; or

2. when there is paralization of business operations of such corporations or entities which may be prejudicial to the interest of minority

stockholders, parties-litigants or to the general public.

On the other hand, receivers may be appointed whenever:

1. necessary in order to preserve the rights of the parties-litigants; and/or

2. protect the interest of the investing public and creditors. (Section 6 (c), P.D. 902-A.)

These situations are rather serious in nature, requiring the appointment of a management committee or a receiver to preserve the existing assets and

property of the corporation in order to protect the interests of its investors and creditors. Thus, in such situations, suspension of actions for claims against a

corporation as provided in Paragraph (c) of Section 6, of Presidential Decree No. 902-A is necessary, and here we borrow the words of the late Justice

Medialdea, so as not to render the SEC management Committee irrelevant and inutile and to give it unhampered rescue efforts over the distressed firm

(Rollo, p. 265).

Otherwise, when such circumstances are not obtaining or when the SEC finds no such imminent danger of losing the corporate assets, a management

committee or rehabilitation receiver need not be appointed and suspension of actions for claims may not be ordered by the SEC. When the SEC does not deem

it necessary to appoint a receiver or to create a management committee, it may be assumed, that there are sufficient assets to sustain the rehabilitation plan

and, that the creditors and investors are amply protected.

Petitioner additionally argues in its motion for reconsideration that, being a mortgage creditor, it is entitled to rely on its security and that it need not jointhe unsecured creditors in filing their claims before the SEC-appointed receiver. To support its position, petitioner cites the Courts ruling in the case

ofPhilippine Commercial International Bank vs. Court of Appeals, (172 SCRA 436 [1989]) that an order of suspension of payments as well as actions for claims

applies only to claims of unsecured creditors and cannot extend to creditors holding a mortgage, pledge, or any lien on the property.

Ordinarily, the Court would refrain from discussing additional matters such as that presented in RCBCs second ground, and would rather limit itself only

to the relevant issues by which the controversy may be settled with finality.


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In view, however, of the significance of such issue, and the conflicting decisions of this Court on the matter, coupled with the fact that our decision of

September 14, 1992, if not clarified, might mislead the Bench and the Bar, the Court resolved to discuss further.

It may be recalled that in the herein en banc majority opinion (pp. 256-275, Rollo, also published as RCBC vs. IAC, 213 SCRA 830 [1992]), we held that:

. . . whenever a distressed corporation asks the SEC for rehabilitation and suspension of payments, preferred creditors may no longer assert such preference, but

. . . stand on equal footing with other creditors. Foreclosure shall be disallowed so as not to prejudice other creditors, or cause discrimination among them. If

foreclosure is undertaken despite the fact that a petition for rehabilitation has been filed, the certificate of sale shall not be delivered pending

rehabilitation. Likewise, if this has also been done, no transfer of title shall be effected also, within the period of rehabilitation. The rationale behind PD 902-A,

as amended, is to effect a feasible and viable rehabilitation. This cannot be achieved if one creditor is preferred over the others.

In this connection, the prohibition against foreclosure attaches as soon as a petition for rehabilitation is filed. Were it otherwise, what is to prevent the

petitioner from delaying the creation of a Management Committee and in the meantime dissipate all its assets. The sooner the SEC takes over and imposes a

freeze on all the assets, the better for all concerned.

(pp. 265-266, Rollo; also p. 838, 213 SCRA 830[1992]. Emphasis supplied.)The foregoing majority opinion relied upon BF Homes, Inc. vs. Court of Appeals (190 SCRA 262 [1990] per Cruz, J.: First Division) where it was held that

when a corporation threatened by bankruptcy is taken over by a receiver, all the creditors should stand on an equal footing. Not anyone of them should be

given preference by paying one or some of them ahead of the others. This is precisely the reason for the suspension of all pending claims against the

corporation under receivership. Instead of creditors vexing the courts with suits against the distressed firm, they are directed to file their claims with the receiver

who is a duly appointed officer of the SEC(pp. 269-270; emphasis in the original). This ruling is a reiteration ofAlemars Sibal & Sons, Inc. vs. Hon. Jesus M.

Elbinias (pp. 99-100;186 SCRA 94 [1990] per Fernan, C.J.: Third Division).

Taking the lead fromAlemars Sibal & Sons,the Court also applied this same ruling inAraneta vs. Court of Appeals (211 SCRA 390 [1992] per Nocon, J.:

Second Division).

All the foregoing cases departed from the ruling of the Court in the much earlier case ofPCIB vs. Court of Appeals (172 SCRA 436 [1989] per Medialdea,

J.: First Division) where the Court categorically ruled that:

SECs order for suspension of payments of Philfinance as well as for all actions of claims against Philfinance could only be applied to claims of unsecured

creditors. Such order can not extend to creditors holding a mortgage, pledge or any lien on the property unless they give up the property, security or lien in

favor of all the creditors of Philfinance. . .

(p. 440. Emphasis supplied)

Thus, in BPI vs. Court of Appeals (229 SCRA 223 [1994] per Bellosillo, J.: First Division) the Court explicitly stated that . . . the doctrine in the PCIB Casehas since been abrogated. InAlemars Sibal & Sons v. Elbinias, BF Homes, Inc. v. Court of Appeals, Araneta v. Court of Appealsand RCBC v. Court of Appeals, we

already ruled that whenever a distressed corporation asks SEC for rehabilitation and suspension of payments, preferred creditors may no longer assert such

preference, but shall stand on equal footing with other creditors. . . (pp. 227-228).

It may be stressed, however, that of all the cases cited by Justice Bellosillo in BPI, which abandoned the Courts ruling in PCIB, only the present case

satisfies the constitutional requirement that no doctrine or principle of law laid down by the court in a decision rendereden banc or in division may be modified

or reversed except by the court sitting en banc (Sec 4, Article VIII, 1987 Constitution). The rest were division decisions.

It behooves the Court, therefore, to settle the issue in this present resolution once and for all, and for the guidance of the Bench and the Bar, the

following rules of thumb shall are laid down:

1. All claims against corporations, partnerships, or associations that are pending before any court, tribunal, or board, without distinction as to whether or

not a creditor is secured or unsecured, shall be suspended effective upon the appointment of a management committee, rehabilitation receiver, board, or body

in accordance with the provisions of Presidential Decree No. 902-A.

2. Secured creditors retain their preference over unsecured creditors, but enforcement of such preference is equally suspended upon the appointment of

a management committee, rehabilitation receiver, board, or body. In the event that the assets of the corporation, partnership, or association are finally

liquidated, however, secured and preferred credits under the applicable provisions of the Civil Code will definitely have preference over unsecured ones.

In other words, once a management committee, rehabilitation receiver, board or body is appointed pursuant to P.D. 902-A, all actions for claims against a

distressed corporation pending before any court, tribunal, board or body shall be suspended accordingly.

This suspension shall not prejudice or render ineffective the status of a secured creditor as compared to a totally unsecured creditor. P.D. 902-A does not

state anything to this effect. What it merely provides is that all actions for claims against the corporation, partnership or association shall be suspended. This

should give the receiver a chance to rehabilitate the corporation if there should still be a possibility for doing so. (This will be in consonance withAlemars, BF

Homes,Araneta, and RCBCinsofar as enforcing liens by preferred creditors are concerned.)

However, in the event that rehabilitation is no longer feasible and claims against the distressed corporation would eventually have to be settled, the

secured creditors shall enjoy preference over the unsecured creditors (still maintaining PCIB ruling), subject only to the provisions of the Civil Code on

Concurrence and Preferences of Credit (our ruling in State Investment House, Inc. vs. Court of Appeals, 277 SCRA 209 [1997]).

The majority ruling in our 1992 decision that preferred creditors of distressed corporations shall, in a way, stand on equal footing with all other creditors,

must be read and understood in the light of the foregoing rulings. All claims of both a secured or unsecured creditor, without distinction on this score, are

suspended once a management committee is appointed. Secured creditors, in the meantime, shall not be allowed to assert such preference before the

Securities and Exchange Commission. It may be stressed, however, that this shall only take effect upon the appointment of a management committee,

rehabilitation receiver, board, or body, as opined in the dissent.

In fine, the Court grants the motion for reconsideration for the cogent reason that suspension of actions for claims commences only from the time a

management committee or receiver is appointed by the SEC. Petitioner RCBC, therefore, could have rightfully, as it did, move for the extrajudicial foreclosure of

its mortgage on October 26, 1984 because a management committee was not appointed by the SEC until March 18, 1985.

WHEREFORE, petitioners motion for reconsideration is hereby GRANTED. The decision dated September 14, 1992 is vacated, the decision of

Intermediate Appellate Court in AC-G.R. No. SP-06313 REVERSED and SET ASIDE, and the judgment of the Regional Trial Court National Capital Judicial Region,

Branch 140, in Civil Case No. 10042 REINSTATED.

SO ORDERED.

Davide, Jr., C.J., Bellosillo, Puno, Vitug, Kapunan, Mendoza, Quisumbing, Pardo, Buena, Gonzaga-Reyes, Ynares-Santiago, and De Leon, Jr., JJ., concur.

Panganiban, J., see separate opinion.

Purisima, J., no part.


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THIRD DIVISION

IMMACULADA L. GARCIA,

Petitioner,

- versus -

SOCIAL SECURITY COMMISSION LEGAL AND COLLECTION, SOCIAL

SECURITY SYSTEM,

Re s ponde nt s .

G . R . N o. 170735

Present:

YNARES-SANTIAGO,J.,

Chairperson,

AUSTRIA-MARTINEZ,

CHICO-NAZARIO,

NACHURA, andREYES,JJ.

Promulgated:

December 17, 2007

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

D E C I S I O N

CHICO-NAZARIO,J.:

This is petition for review on Certiorariunder Rule 45 of the Rules of Court is assailing the 2 June 2005 Decision[1]

and 8 December

2005 Resolution[2]

both of the Court of Appeals in CA-G.R. SP No. 85923. the appellate court affirmed the --- Order and --- Resolution both of the Social Security

Commission (SSC) in SSC Case No. 10048, finding Immaculada L. Garcia (Garcia), the sole surviving director of Impact Corporation, petitioner herein, liable

for unremitted, albeit collected, SSS contributions.

Petitioner Immaculada L. Garcia, Eduardo de Leon, Ricardo de Leon, Pacita Fernandez, and Consuelo Villanueva were directors[3]

of Impact

Corporation. The corporation was engaged in the business of manufacturing aluminum tube containers and operated two factories. One was a slug foundry-

factory located in Cuyapo, NuevaEcija, while the other was an Extrusion Plant in Cainta, Metro Manila, which processed the slugs into aluminum collapsible

tubes and similar containers for toothpaste and other related products.

Records show that around 1978, Impact Corporation started encountering financial problems. By 1980, labor unrest besieged the corporation.

In March 1983, Impact Corporation filed with the Securities and Exchange Commission (SEC) a Petition for Suspension of Payments,[4]

docketed as SEC Case

No. 02423, in which it stated that:

[Impact Corporation] has been and still is engaged in the business of manufacturing aluminum tube containers x x x.

x x x x

In brief, it is an on-going, viable, and profitable enterprise.

On 8 May 1985, the union of Impact Corporation filed a Notice of Strike with the Ministry of Labor which was followed by a declaration of strike on 28

July 1985. Subsequently, the Ministry of Labor certified the labor dispute for compulsory arbitration to the National Labor Relations Commission (NLRC) in an

Order[5]

dated 25 August 1985. The Ministry of Labor, in the same Order, noted the inability of Impact Corporation to pay wages, 13th

month pay, and SSS

remittances due to cash liquidity problems. A portion of the order reads:

On the claims of unpaid wages, unpaid 13th

month pay and non-remittance of loan amortization and SSS premiums, we are for

directing the company to pay the same to the workers and to remit loan amortizations and SSS premiums previously deducted from their

wages to the Social Security System. Such claims were never contested by the company both during the hearing below and in our office. In

fact, such claims were admitted by the company although it alleged cash liquidity as the main reason for such non-payment.

WHEREFORE, the dispute at Impact Corporation is hereby certified to the National Labor Relations Commission for compulsory

arbitration in accordance with Article 264 (g) of the Labor Code, as amended.

x x x x

The company is directed to pay all the entitled workers unpaid wages, unpaid 13th

month pay and to remit to the Social Security

System loan amortizations and SSS premiums previously deducted from the wages of the workers.[6]

On 3 July 1985, the Social Security System (SSS), through its Legal and Collection Division (LCD), filed a case before the SSC for the collection

of unremitted SSS premium contributions withheld by Impact Corporation from its employees. The case which impleaded Impact Corporation as respondent

was docketed as SSC Case No. 10048.[7]

Impact Corporation was compulsorily covered by the SSS as an employer effective 15 July 1963 and was assigned Employer I.D. No. 03-2745100-21.

In answer to the allegations raised in SSC Case No. 10048, Impact Corporation, through its then Vice President Ricardo de Leon, explained in a letter

dated 18 July 1985that it had been confronted with strikes in 1984 and layoffs were effected thereafter. It further argued that the P402,988.93 is erroneous. It

explained among other things, that its operations had been suspended and that it was waiting for the resolution on its Petition for Suspension of Payments by
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the SEC under SEC Case No. 2423. Despite due notice, the corporation failed to appear at the hearings. The SSC ordered the investigating team of the SSS to

determine if it can still file its claim for unpaid premium contributions against the corporation under the Petition for Suspension of Payments.

In the meantime, the Petition for Suspension of Payments was dismissed which was pending before the SEC in an Order[8]

dated 12 December

1985. Impact Corporation resumed operations but only for its winding up and dissolution.[9]

Due to Impact Corporations liability and cash flow problems, all of

its assets, namely, its machineries, equipment, office furniture and fixtures, were sold to scrap dealers to answer for its arrears in rentals.

On 1 December 1995, the SSS-LCD filed an amended Petition[10]

in SSC Case No. 10048 wherein the directors of Impact Corporation were directly

impleaded as respondents, namely: Eduardo de Leon, Ricardo de Leon,[11]

Pacita Fernandez, Consuelo Villanueva, and petitioner. The amounts sought to be

collected totaled P453,845.78 and P10,856.85 for the periods August 1980 to December 1984 and August 1981 to July 1984, respectively, and the penalties for

late remittance at the rate of 3% per month from the date the contributions fell due until fully paid pursuant to Section 22(a) of the Social Security Law ,[12]

as

amended, in the amounts of P49,941.67 and P2,474,662.82.

Period Unremitted Amount Penalties

(3% Interest Per Month)

TOTAL

August 1980 to

December 1984

P 453,845.78 P49, 941.67 503,787.45

August 1981 to July 1984 P 10,856.85 P2, 474, 662.82 2,485,519.67

Summonses were not served upon Eduardo de Leon, Pacita Fernandez, and Consuelo Villanueva, their whereabouts unknown. They were all later

determined to be deceased. On the other hand, due to failure to file his responsive pleading, Ricardo de Leon was declared in default.

Petitioner filed with the SSC a Motion to Dismiss[13]

on grounds of prescription, lack of cause of action and cessation of business, but the Motion was

denied for lack of merit.[14]

In her Answer with Counterclaim[15]

dated 20 May 1999, petitioner averred that Impact Corporation had ceased operations in

1980. In her defense, she insisted that she was a mere director without managerial functions, and she ceased to be such in 1982. Even as a stockholder and

director of Impact Corporation, petitioner contended that she cannot be made personally liable for the corporate obligations of Impact Corporation since herliability extended only up to the extent of her unpaid subscription, of which she had none since her subscription was already fully paid. The petitioner raised the

same arguments in her Position Paper.[16]

On 23 January 1998, Ricardo de Leon died following the death, too, of Pacita Fernandez died on 7 February 2000. In an Order dated 11 April 2000,

the SSC directed the System to check if Impact Corporation had leviable properties to which the investigating team of respondent SSS manifested that the

Impact Corporation had already been dissolved and its assets disposed of.[17]

In a Resolution dated 28 May 2003, the Social Security Commission ruled in favor of SSS and declared petitioner liable to pay

the unremitted contributions and penalties, stating the following:

WHEREFORE, premises considered, this Commission finds, and so holds, that respondents Impact Corporation

and/or Immaculada L. Garcia, as director and responsible officer of the said corporation, is liable to pay the SSS the amounts of

P442,988.93, representing the unpaid SS contributions of their employees for the period August 1980 to December 1984, not inclusive,

and P10,856.85, representing the balance of the unpaid SS contributions in favor of Donato Campos, Jaime Mascarenas, Bonifacio Franco

and Romeo Fullon for the period August 1980 to December 1984, not inclusive, as well as the 3% per month penalty imposed thereon forlate payment in the amounts of P3,194,548.63 and P78,441.33, respectively, computed as of April 30, 2003. This is without prejudice to

the right of the SSS to collect the penalties accruing after April 30, 2003 and to institute other appropriate actions against the respondent

corporation and/or its responsible officers.

Should the respondents pay their liability for unpaid SSS contributions within sixty (60) days from receipt of a copy of this

Resolution, the 3% per month penalty for late payment thereof shall be deemed condoned pursuant to SSC Res. No. 397-S.97, as amended

by SSC Res. Nos. 112-S.98 and 982-S.99, implementing the provision on condonation of penalty under Section 30 of R.A. No. 8282.

In the event the respondents fail to pay their liabilities within the aforestated period, let a writ of execution be issued, pursuant to

Section 22 (c) [2] of the SS Law, as amended, for the satisfaction of their liabilities to the SSS.[18]

Petitioner filed a Motion for Reconsideration[19]

of the afore-quoted Decision but it was denied for lack of merit in an Orde r[20]

dated 4 August 2004,

thus:

Nowhere in the questioned Resolution dated May 28, 2003 is it stated that the other directors of the defunct Impact Corporation

are absolved from their contribution and penalty liabilities to the SSS. It is certainly farthest from the intention of the petitioner SSS or this

Commission to pin the entire liability of Impact Corporation on movant Immaculada L. Garcia, to the exclusion of the directors of the

corporation namely: Eduardo de Leon, Ricardo de Leon, Pacita Fernandez and Conzuelo Villanueva, who were all impleaded as parties-

respondents in this case.

The case record shows that there was failure of service of summonses upon respondents Eduardo de Leon, Pacita Fernandez

and Conzuelo Villanueva, who are all deceased, for the reason that their whereabouts are unknown. Moreover, neither the legal heirs nor

the estate of the defaulted respondent Ricardo de Leon were substituted as parties-respondents in this case when he died on January 23,

1998. Needless to state, the Commission did not acquire jurisdiction over the persons or estates of the other directors of Impact

Corporation, hence, it could not validly render any pronouncement as to their liabilities in this case.

Furthermore, the movant cannot raise in a motion for reconsideration the defense that she was no longer a director of Impact

Corporation in 1982, when she was allegedly eased out by the managing directors of Impact Corporation as purportedly shown in the

Deed of Sale and Assignment of Shares of Stock dated January 22, 1982. This defense was neither pleaded in her Motion to Dismiss

datedJanuary 17, 1996 nor in her Answer with Counterclaim dated May 18, 1999 and is, thus, deemed waived pursuant to Section 1, Rule

9 of the 1997 Rules of Civil Procedure, which has suppletoryapplication to the Revised Rules of Procedure of the Commission.

Finally, this Commission has already ruled in the Order dated April 27, 1999 that since the original Petition was filed by the SSS on

July 3, 1985, and was merely amended on December 1, 1995 toimplead the responsible officers of Impact Corporation, without changing
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its causes of action, the same was instituted well within the 20-year prescriptive period provided under Section 22 (b) of the SS Law, as

amended, considering that the contribution delinquency assessment covered the period August 1980 to December 1984.

In view thereof, the instant Motion for Reconsideration is hereby denied for lack of merit.

Petitioner elevated her case to the Court of Appeals via a Petition for Review. Respondent SSS filed its Comment dated 20 January 2005, and

petitioner submitted her Reply thereto on 4 April 2005.

The Court of Appeals, applying Section 28(f) of the Social Security Law,[21]

again ruled against petitioner. It dismissed the petitioners Petition in a

Decision dated 2 June 2005, the dispositive portion of which reads:

WHEREFORE, premises considered, the petition is DISMISSED for lack of merit. The assailed Resolution dated 28 May 2003 and the

Order dated 4 August 2004 of the Social Security Commission are AFFIRMED in toto.[22]

Aggrieved, petitioner filed a Motion for Reconsideration of the appellate courts Decision but her Motion was denied in a Resolution dated 8

December 2005.

Hence, the instant Petition in which petitioner insists that the Court of Appeals committed grave error in holding her solely liable for the collected

but unremitted SSS premium contributions and the consequent late penalty payments due thereon. Petitioner anchors her Petition on the following arguments:

I. SECTION 28(F) OF THE SSS LAW PROVIDES THAT A MANAGING HEAD, DIRECTOR OR PARTNER IS LIABLE ONLY FOR THE

PENALTIES OF THE EMPLOYER CORPORATION AND NOT FOR UNPAID SSS CONTRIBUTIONS OF THE EMPLOYER CORPORATION.

II. UNDER THE SSS LAW, IT IS THE MANAGING HEADS, DIRECTORS OR PARTNERS WHO SHALL BE LIABLE TOGETHER WITH THE

CORPORATION. IN THIS CASE, PETITIONER HAS CEASED TO BE A STOCKHOLDER OF IMPACT CORPORATION IN 1982. EVENWHILE SHE WAS A STOCKHOLDER, SHE NEVER PARTICIPATED IN THE DAILY OPERATIONS OF IMPACT CORPORATION.

III. UNDER SECTION 31 OF THE CORPORATION CODE, ONLY DIRECTORS, TRUSTEES OR OFFICERS WHO PARTICIPATE IN UNLAWFUL

ACTS OR ARE GUILTY OF GROSS NEGLIGENCE AND BAD FAITH SHALL BE PERSONALLY LIABLE. OTHERWISE, BEING A MERE

STOCKHOLDER, SHE IS LIABLE ONLY TO THE EXTENT OF HER SUBSCRIPTION.

IV. IMPACT CORPORATION SUFFERED IRREVERSIBLE ECONOMIC LOSSES, EVENTS WHICH WERE NEITHER DESIRED NOR CAUSED BY

ANY ACT OF THE PETITIONER. THUS, BY REASON OF FORTUITOUS EVENTS, THE PETITIONER SHOULD BE ABSOLVED FROM

LIABILITY.

V. RESPONDENT SOCIAL SECURITY SYSTEM FAILED MISERABLY IN EXERTING EFFORTS TO ACQUIRE JURISDICTION OVER THE

LEVIABLE ASSETS OF IMPACT CORPORATION, PERSON/S AND/OR ESTATE/S OF THE OTHER DIRECTORS OR OFFICERS OF IMPACT

CORPORATION.

VI. THE HONORABLE COMMISSION SERIOUSLY ERRED IN NOT RENDERING A JUDGMENT BY DEFAULT AGAINST THE DIRECTORS

UPON WHOM IT ACQUIRED JURISDICTION.

Based on the foregoing, petitioner prays that the Decision dated 2 June 2005 and the Resolution dated 8 December 2005 of the Court of Appeals be

reversed and set aside, and a new one be rendered absolving her of any and all liabilities under the Social Security Law.

In sum, the core issue to be resolved in this case is whether or not petitioner, as the only surviving director of Impact Corporation, can be made solely

liable for the corporate obligations of Impact Corporation pertaining to unremitted SSS premium contributions and penalties therefore.

As a covered employer under the Social Security Law, it is the obligation of Impact Corporation under the provisions of Sections 18, 19 and 22

thereof, as amended, to deduct from its duly covered employees monthly salaries their shares as premium contributions and remit the same to the SSS,

together with the employers shares of the contributions to the petitioner, for and in their behalf.

From all indications, the corporation has already been dissolved. Respondents are now going after petitioner who is the only surviving director of

Impact Corporation.

A cursory review of the alleged grave errors of law committed by the Court of Appeals above reveals there seems to be no dispute as to the assessed

liability of Impact Corporation for the unremitted SSS premiums of its employees for the period January 1980 to December 1984.

There is also no dispute as to the fact that the employees SSS premium contributions have been deducted from their salaries by Impact Corporation.

Petitioner in assailing the Court of Appeals Decision, distinguishes the penalties from the unremitted or unpaid SSS premium contributions. She

points out that although the appellate court is of the opinion that the concerned officers of an employer corporation are liable for the penalties for non-

remittance of premiums, it still affirmed the SSC Resolution holding petitioner liable for the unpaid SSS premium contributions in addition to the penalties.

Petitioner avers that under the aforesaid provision, the liability does not include liability for the unremitted SSS premium contributions.

Petitioners argument is ridiculous. The interpretation petitioner would like us to adopt finds no support in law or in jurisprudence. While the Court

of Appeals Decision provided that Section 28(f) refers to the liabilities pertaining to penalty for the non-remittance of SSS employee contributions, holding that it

is distinct from the amount of the supposed SSS remittances, petitioner mistakenly concluded that Section 28(f) is applicable only to penalties and not to the

liability of the employer for the unremitted premium contributions. Clearly, a simplistic interpretation of the law is untenable. It is a rule in statutoryconstruction that every part of the statute must be interpreted with reference to the context, i.e., that every part of the statute must be considered together

with the other parts, and kept subservient to the general intent of the whole enactment.[23]

The liability imposed as contemplated under the foregoing Section

28(f) of the Social Security Law does not preclude the liability for the unremitted amount. Relevant to Section 28(f) is Section 22 of the same law.
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SEC. 22. Remittance of Contributions. -- (a) The contributions imposed in the preceding Section shall be remitted to the SSS within

the first ten (10) days of each calendar month following the month for which they are applicable or within such time as the Commission

may prescribe. Every employer required to deduct and to remit such contributions shall be liable for their payment and if any contribution

is not paid to the SSS as herein prescribed, he shall pay besides the contribution a penalty thereon of three percent (3%) per month from

the date the contribution falls due until paid. If deemed expedient and advisable by the Commission, the collection and remittance of

contributions shall be made quarterly or semi-annually in advance, the contributions payable by the employees to be advanced by their

respective employers: Provided, That upon separation of an employee, any contribution so paid in advance but not due shall be credited

or refunded to his employer.

Under Section 22(a), every employer is required to deduct and remit such contributions penalty refers to the 3% penalty that automatically attaches to

the delayed SSS premium contributions. The spirit, rather than the letter of a law determines construction of a provision of law. It is a cardinal rule in statutoryconstruction that in interpreting the meaning and scope of a term used in the law, a careful review of the whole lawinvolved, as well as the intendment of the

law, must be made.[24]

Nowhere in the provision or in the Decision can it be inferred that the persons liable are absolved from paying the unremitted premium

contributions.

Elementary is the rule that when laws or rules are clear, it is incumbent upon the judge to apply them regardless of personal belief or predilections - when

the law is unambiguous and unequivocal, application not interpretation thereof is imperative .[25]

However, where the language of a statute is vague and

ambiguous, an interpretation thereof is resorted to. An interpretation thereof is necessary in instances where a literal interpretation would be either impossible

or absurd or would lead to an injustice. A law is deemed ambiguous when it is capable of being understood by reasonably well-informed persons in either of two

or more senses.[26]

The fact that a law admits of different interpretations is the best evidence that it is vague and ambiguous .[27]

In the instant case, petitioner

interprets Section 28(f) of the Social Security Law as applicable only to penalties and not to the liability of the employer for the unremitted premium

contributions. Respondents present a more logical interpretation that is consistent with the provisions as a whole and with the legislative intent behind the

Social Security Law.

This Court cannot be made to accept an interpretation that would defeat the intent of the law and its legislators.[28]

Petitioner also challenges the finding of the Court of Appeals that under Section 28(f) of the Social Security Law, a mere director or officer of an

employer corporation, and not necessarily a managing director or officer, can be held liable for the unpaid SSS premium contributions.

Section 28(f) of the Social Security Law provides the following:

(f) If the act or omission penalized by this Act be committed by an association, partnership, corporation or any other institution, its

managing head, directors or partners shall be liable to the penalties provided in this Act for the offense.

This Court agrees in petitioners observation that the SSS did not even deny nor rebut the claim that petitioner was not the managing head of Impact

Corporation. However, the Court of Appeals rightly held that petitioner, as a director of Impact Corporation, is among those officers covered by Section 28(f) of

the Social Security Law.

Petitioner invokes the rule in statutory construction called ejusdem generic; that is, where general words follow an enumeration of persons or things,

by words of a particular and specific meaning, such general words are not to be construed in their widest extent, but are to be held as applying only to persons

or things of the same kind or class as those specifically mentioned. According to petitioner, to be held liable under Section 28(f) of the Social Security Law, one

must be the managing head, managing director, or managing partner. This Court though finds no need to resort to statutory construction. Section 28(f) of

the Social Security Law imposes penalty on:

(1) the managing head;

(2) directors; or

(3) partners, for offenses committed by a juridical person

The said provision does not qualify that the director or partner should likewise be a managing director or managing partner.[29]

The law is clear and

unambiguous.

Petitioner nonetheless raises the defense that under Section 31 of the Corporation Code, only directors, trustees or officers who participate in

unlawful acts or are guilty of gross negligence and bad faith shall be personally liable, and that being a mere stockholder, she is liable only to the extent of her

subscription.

Section 31 of the Corporation Code, stipulating on the liability of directors, trustees, or officers, provides:

SEC. 31. Liability of directors, trustees or officers. - Directors or trustees who willfully and knowingly vote for or assent to patently

unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any

personal or pecuniary interest in conflict with their duty as such directors, or trustees shall be liable jointly and severally for all damages

resulting therefrom suffered by the corporation, its stockholders or members and other persons.

Basic is the rule that a corporation is invested by law with a personality separate and distinct from that of the persons composing it as well as from

that of any other legal entity to which it may be related. A corporation is a juridical entity with legal personality separate and distinct from those acting for and

in its behalf and, in general, from the people comprising it. Following this, the general rule applied is that obligations incurred by the corporation, acting through

its directors, officers and employees, are its sole liabilities.[30]

A director, officer, and employee of a corporation are generally not held personally liable for

obligations incurred by the corporation.

Being a mere fiction of law, however, there are peculiar situations or valid grounds that can exist to warrant the disregard of its independent beingand the lifting of the corporate veil. This situation might arise when a corporation is used to evade a just and due obligation or to justify a wrong, to shield or

perpetrate fraud, to carry out other similar unjustifiable aims or intentions, or as a subterfuge to commit injustice and so circumvent the law.[31]

Thus, Section 31

of the Corporation Law provides:
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Taking a cue from the above provision, a corporate director, a trustee or an officer, may be held solidarily liable with the corporation in the

following instances:

1. When directors and trustees or, in appropriate cases, the officers of

a corporation--

(a) vote for or assent to patently unlawful acts of the corporation;

(b) act in bad faith or with gross negligence in directing the corporate affairs;

(c) are guilty of conflict of interest to the prejudice of the corporation, its stockholders or members, and other persons.

2. When a director or officer has consented to the issuance of watered stocks or who, having knowledge thereof, did not forthwith file

with the corporate secretary his written objection thereto.

3. When a director, trustee or officer has contractually agreed or stipulated to hold himself personally and solidarily liable with the

Corporation.

4. When a director, trustee or officer is made, by specific provision of law, personally liable for his corporate action.[32]

The aforesaid provision states:

SEC. 31. Liability of directors, trustees or officers. - Directors or trustees who willfully and knowingly vote for or assent to patently

unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any

personal or pecuniary interest in conflict with their duty as such directors, or trustees shall be liable jointly and severally for all damages

resulting therefrom suffered by the corporation, its stockholders or members and other persons.

The situation of petitioner, as a director of Impact Corporation when said corporation failed to remit the SSS premium contributions falls exactlyunder the fourth situation. Section 28(f) of the Social Security Law imposes a civil liability for any act or omission pertaining to the violation of the Social Security

Law, to wit:

(f) If the act or omission penalized by this Act be committed by an association, partnership, corporation or any other institution, its

managing head, directors or partners shall be liable to the penalties provided in this Act for the offense.

In fact, criminal actions for violations of the Social Security Law are also provided under the Revised Penal Code. The Social Security Law provides, in

Section 28 thereof, to wit:

(h) Any employer who, after deducting the monthly contributions or loan amortizations from his employees compensation, fails to

remit the said deductions to the SSS within thirty (30) days from the date they became due shall be presumed to have misappropriated

such contributions or loan amortizations and shall suffer the penalties provided in Article Three hundred fifteen of the Revised Penal Code.

(i) Criminal action arising from a violation of the provisions of this Act may be commenced by the SSS or the employee concerned

either under this Act or in appropriate cases under the Revised Penal Code: x x x.

Respondents would like this Court to apply another exception to the rule that the persons comprising a corporation are not personally liable for acts done

in the performance of their duties.

The Court of Appeals in the appealed Decision stated:

Anent the unpaid SSS contributions of Impact Corporations employees, the officers of a corporation are liable in behalf of a

corporation, which no longer exists or has ceased operations. Although as a rule, the officers and members of a corporation are not

personally liable for acts done in performance of their duties, this rule admits of exception, one of which is when the employer

corporation is no longer existing and is unable to satisfy the judgment in favor of the employee, the officers should be held liable for acting

on behalf of the corporation. Following the foregoing pronouncement, petitioner, as one of the directors of Impact Corporation, together

with the other directors of the defunct corporation, are liable for the unpaid SSS contributions of their employees.[33]

On the other hand, the SSC, in its Resolution, presented this discussion:

Although as a rule, the officers and members of a corporation are not personally liable for acts done in the performance of their duties,

this rule admits of exceptions, one of which is when the employer corporation is no longer existing and is unable to satisfy the judgment in

favor of the employee, the officers should be held liable for acting on behalf of the corporation. x x x.[34]

The rationale cited by respondents in the two preceding paragraphs need not have been applied because the personal liability for the unremitted SSS

premium contributions and the late penalty thereof attaches to the petitioner as a director of Impact Corporation during the period the amounts became due

and demandable by virtue of a direct provision of law.

Petitioners defense that since Impact Corporation suffered irreversible economic losses, and by reason of fortuitous events, she should be absolved

from liability, is also untenable. The evidence adduced totally belies this claim. A reference to the copy of the Petition for Suspension of Payments filed by

Impact Corporation on 18 March 1983 before the SEC contained an admission that:

*I+t has been and still is engaged in business and has been and still is engaged in the business of manufacturing aluminum tube

containers and in brief, it is an on -going, viable, and profitable enterprise which has sufficient assets and actual and potential

income-generation capabilities.
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The foregoing document negates petitioners assertion and supports the contention that during the period involved Impact Corporation was still

engaged in business and was an ongoing, viable, profitable enterprise. In fact, the latest SSS form RIA submitted by Impact Corporation is dated 7 May

1984. The assessed SSS premium contributions and penalty are obligations imposed upon Impact Corporation by law, and should have been remitted to the SSS

within the first 10 days of each calendar month following the month for which they are applicable or within such time as the SSC prescribes.[35]

This Court also notes the evident failure on the part of SSS to issue a judgment in default against Ricardo de Leon, who was the vice-president and

officer of the corporation, upon his non-filing of a responsive pleading after summons was served on him. As can be gleaned from Section 11 of the SSS Revised

Rules of Procedure, the Commissioner is mandated to render a decision either granting or denying the petition. Under the aforesaid provision, if respondent fails

to answer within the time prescribed, the Hearing Commissioner may, upon motion of petitioner, or motu proprio, declare respondent in default and proceed to

receive petitioners evidenceex parte and thereafter recommend to the Commission either the granting or denial of the petition as the evidence may

warrant.[36]

On a final note, this Court sees it proper to quote verbatim respondents prefatory statement in theirComment:

The Social Security System is a government agency imbued with a salutary purpose to carry out the policy of the State to establish,

develop, promote and perfect a sound and viable tax exempt social security system suitable to the needs of the people throughout the

Philippines which shall promote social justice and provide meaningful protection to members and their beneficiaries against the hazards of

disability, sickness, maternity, old-age, death and other contingencies resulting in loss of income or financial burden.

The soundness and viability of the funds of the SSS in turn depends on the contributions of its covered employee and employer

members, which it invests in order to deliver the basic social benefits and privileges to its members. The entitlement to and amount of

benefits and privileges of the covered members are contribution-based. Both the soundness and viability of the funds of the SSS as well as

the entitlement and amount of benefits and privileges of its members are adversely affected to a great extent by the non-remittance of

the much-needed contributions.[37]

The sympathy of the law on social security is toward its beneficiaries. This Court will not turn a blind eye on the perpetration of injustice. This Court cannotand will not allow itself to be made an instrument nor be privy to any attempt at the perpetration of injustice.

Following the doctrine laid down in Laguna Transportation Co., Inc. v. Social Security System ,[38]

this Court rules that although a corporation once

formed is conferred a juridical personality separate and distinct from the persons comprising it, it is but a legal fiction introduced for purposes of convenience

and to subserve the ends of justice. The concept cannot be extended to a point beyond its reasons and policy, and when invoked in support of an end

subversive of this policy, will be disregarded by the courts.

WHEREFORE, pursuant to the foregoing, the Decision of the Court of Appeals dated 2 June 2005 in CA-G.R. SP No. 85923 is hereby AFFIRMED WITH

FINALITY. Petitioner Immaculada L. Garcia, as sole surviving director of Impact Corporation is hereby ORDERED to pay for the collected and unremitted SSS

contributions of Impact Corporation. The case is REMANDED to the SSS for computation of the exact amount and collection thereof.

SO ORDERED

MIN IT A V . C HIC O - N A Z A R IO

A s s oc iat e J us t i c e

W E C O N C UR:

CONSUELO YNARES-SANTIAGO

Associate Justice

Chairperson

MA. ALICIA AUSTRIA-MARTINEZ ANTONIO EDUARDO B. NACHURA

Associate Justice Associate Justice

RUBEN T. REYES

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation before the case was ass igned to the writer of the opinion of the Courts

Division.

CONSUELO YNARES-SANTIAGO

Associate Justice

Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, it is hereby certified that the conclusions in the above

Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

REYNATO S. PUNO

Chief Justice
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Republic of the Philippines

SUPREME COURT

Manila

EN BANC

G.R. Nos. 24116-17 August 22, 1968

CEBU PORTLAND CEMENT COMPANY, plaintiff-appellant,

vs.

MUNICIPALITY OF NAGA, CEBU, ET AL., defendants-appellees.

Tomas P. Matic, Jr. and Lorenzo R. Mosqueda for plaintiff-appellant.

Fernan, Osmea and Bellaflor for defendants-appellees.

FERNANDO,J.:

In two separate actions, plaintiff-appellant Cebu Portland Cement Company sought to test the validity of the distraint and thereafter the sale at public auction bythe principal defendant-appellee, Municipality of Naga, Cebu, of 100,000 bags of cement for the purpose of satisfying its alleged deficiency in the payment of the

municipal license tax for 1960, municipal license tax for 1961 as well as the penalty, all in the total sum of P204,300.00. The lower court rendered a joint decision

sustaining the validity of the action taken by defendant-appellee Municipality of Naga. The case is now before us on appeal. We affirm.

According to the appealed decision: "From all the evidence, mostly documentary, adduced during the hearing the following facts have been established. The

efforts of the defendant Treasurer to collect from the plaintiff the municipal license tax imposed by Amended Ordinance No. 21. Series of 1959 on cement

factories located within the Municipality of Naga, Cebu, have met with rebuff time and again. The demands made on the taxpayer ... have not been entirely

successful. Finally, the defendant Treasurer decided on June 26, 1961 to avail of the Civil remedies provided for under Section 2304 of the Revised

Administrative Code and gave the plaintiff a period of ten days from receipt thereof within which to settle the account, computed as follows ...: Deficiency

Municipal License Tax for 1960 P80,250.00; Municipal License Tax for 1961 P90,000.00; and 20% Penalty P34,050.00, stating in exasperation, "This is our

last recourse as we had exhausted all efforts for an amicable solution of our problem." "1

It was further shown: "On July 6, 1961, at 11:00 A.M., the defendant Treasurer notified the Plant Manager of the plaintiff that he was "distraining 100,000 bags

of Apo cement in satisfaction of your delinquency in municipal license taxes in the total amount of P204,300.00" ... This notice was received by the acting officer

in charge of the plaintiff's plant, Vicente T. Garaygay, according to his own admission. At first, he was not in accord with the said letter, asking the defendant

Treasurer for time to study the same, but in the afternoon he [acknowledged the] distraint ..."2

As was noted in the decision, the defendant Treasurer in turn "signed the receipt for goods, articles or effects seized under authority of Section 2304 of theRevised Administrative Code, certifying that he has constructively distrained on July 6, 1961 from the Cebu Portland Cement Company at its plant at Tina-an,

Naga, Cebu, 100,000 bags of Apo cement in tanks, and that "the said articles or goods will be sold at public auction to the highest bidder on July 27, 1961, and

the proceeds thereof will be utilized in part satisfaction of the account of the said company in municipal licenses and penalties in the total amount of

P204,300.00 due the Municipality of Naga Province of Cebu" ..."3

The lower court likewise found as a fact that on the same day, July 6, 1961, the municipal treasurer posted the notice of sale to the effect that pursuant to the

provisions of Section 2305 of the Revised Administrative Code, he would sell at public auction for cash to the highest bidder at the main entrance of the

municipal building of the Municipality of Naga, Province of Cebu, Philippines on the 27th day of July, 1961, at 9 o'clock in the morning, the property seized and

distrained or levied upon from the Cebu Portland Cement Company in satisfaction of the municipal license taxes and penalties in the amount of P204,300.00,

specifying that what was to be sold was 100,000 bags of Apo cement.4

No sale, as thus announced, was held on July 27, 1961. It was likewise stated in the

appealed decision that there was stipulation by the parties to this effect: "1. The auction sale took place on January 30, 1962, ..."5

In this appeal from the above joint decision, plaintiff-appellant Cebu Portland Cement Company upholds the view that the distraint of the 100,000 bags of

cement as well as the sale at public auction thereafter made ran counter to the law. As earlier noted, we do not see it that way.

1. On the validity of the distraint In the first two errors assigned, plaintiff-appellant submits as illegal the distraint of 100,000 bags of cement made on July 6,

1961. Its contention is premised on the fact that in the letter of defendant-appellee dated June 26, 1961, requiring plaintiff-appellant to settle its account of

P204,300.00, it was given a period of 10 days from receipt within which it could pay, failure to do so being the occasion for the distraint of its property. It is now

alleged that the 10-day period of grace was not allowed to lapse, the distraint having taken place on July 6, 1961.

It suffices to answer such a contention by referring to the explicit language of the law. According to the Revised Administrative Code: "The remedy by distraint

shall proceed as follows: Upon the failure of the person owing any municipal tax or revenue to pay the same, at the time required, the municipal treasurer may

seize and distrain any personal property belonging to such person or any property subject to the tax lien, in sufficient quantity to satisfy the tax or charge in

question, together with any increment thereto incident to delinquency, and the expenses of the distraint."6

The clear and explicit language of the law leaves no room for doubt. The municipal treasurer "may seize and distrain any personal property" of the individual or

entity subject to the tax upon failure "to pay the same, at the time required ..." There was such a failure on the part of plaintiff-appellant to pay the municipal

tax at the time required. The power of the municipal treasurer in accordance with the above provision therefore came into play.1wph1.t

Whatever might have been set forth in the letter of the municipal treasurer could not change or amend the law it has to be enforced as written. That was what

the lower court did. What was done then cannot be rightfully looked upon as a failure to abide by what the statutory provision requires. Time and time again, it

has been repeatedly declared by this Court that where the law speaks in clear and categorical language, there is no room for interpretation. There is only room

for application. That was what occurred in this case.7

2. On the validity of the auction sale The validity of the auction sale held on January 30, 1962 is challenged in the next two errors assigned as allegedly

committed by the lower court. Plaintiff-appellant's argument is predicated on the fact that it was not until January 16, 1962 that it was notified that the public

auction sale was to take place on January 29, 1962. It is its view that under the Revised Administrative Code8

the sale of the distrained property cannot take

place "less than twenty days after notice to the owner or possessor of the property [distrained] ... and the publication or posting of such notice."

Why such a contention could not prosper is explained clearly by the lower court in the appealed decision. Thus: "With respect to the claim that the auction sale

held on January 30, 1962 pursuant to the distraint was null and void for being contrary to law because not more than twenty days have elapsed from the date of

notice, it is believed that the defendant Municipality of Naga and Municipal Treasurer of Naga have substantially complied with the requirements provided for

by Section 2305 of the Revised Administrative Code. From the time that the plaintiff was first notified of the distraint on July 6, 1961 up to the date of the sale

on January 30, 1962, certainly, more than twenty days have elapsed. If the sale did not take place, as advertised, on July 27, 1961, but only on January 30, 1962,

it was due to the requests for deferment made by the plaintiff which unduly delayed the proceedings for collection of the tax, and the said taxpayer should not

be allowed now to complain that the required period has not yet elapsed when the intention of the tax collector was already well-publicized for many

months."9

The reasonableness of the above observation of the lower court cannot be disputed. Under the circumstances, the allegation that there was no

observance of the twenty-day period hardly carries conviction.

The point is further made that the auction sale took place not on January 29, 1962, as stated in the notice of sale, but on the next day, January 30, 1962.

According to plaintiff-appellant: "On this score alone, the sale ..., was illegal as it was not made on the time stated in the notice."10

There is no basis to sustain such a plea as the finding of the lower court is otherwise. Thus: "On January 16, 1962, the defendant Treasurer informed Garaygay

that he would cause the readvertisement for sale at public auction of the 100,000 bags of Apo cement which were under constructive distraint ... On January 19,

1962, the said defendant issued the corresponding notice of sale, which fixed January 30, 1962, at 10:00 A.M., as the date of sale, posting the said notice in

public places and delivering copies thereof to the interested parties in the previous notice, ... Ultimately, the bidding was conducted on that day, January 30,1962, with the representatives of the Provincial Auditor and Provincial Treasurer present. Only two bidders submitted sealed bids. After the bidding, the

defendant-treasurer informed the plaintiff that an award was given to the winning bidder, ..."11

This being a direct appeal to us, plaintiff-appellant must be deemed to have accepted as conclusive what the lower court found as established by the evidence,

only questions of law being brought to us for review. It is the established rule that when a party appeals directly to this Court, he is deemed to have waived the

right to dispute any finding of fact made by the court below.12


11/38

Republic of the Philippines

SUPREME COURT

Manila

EN BANC

G.R. No. L-25659 October 31, 1969

LUZON SURETY CO., INC., petitioner,

vs.

JOSEFA AGUIRRE DE GARCIA, VICENTE GARCIA and the FOURTH DIVISION OF THE COURT OF APPEALS, respondents.

Tolentino and Garcia and D. R. Cruz for petitioner.

Rodolfo J. Herman for respondents.

FERNANDO,J.:

The crucial question in this petition for the review of a decision of the Court of Appeals, to be passed upon for the first time, is whether or not a conjugalpartnership, in the absence of any showing of benefits received, could be held liable on an indemnity agreement executed by the husband to accommodate a

third party in favor of a surety company. The Court of Appeals held that it could not. Petitioner Luzon Surety Co., Inc., dissatisfied with such a judgment, which

was an affirmance of a lower court decision, would have us reverse. We do not see it that way. The Court of Appeals adjudicated the matter in accordance with

law. We affirm what it did.

As noted in the brief of petitioner Luzon Surety Co., Inc., on October 18, 1960, a suit for injunction was filed in the Court of First Instance of Negros Occidental

against its Provincial Sheriff by respondents-spouses, Josefa Aguirre de Garcia and Vicente Garcia "to enjoin [such Sheriff] from selling the sugar allegedly owned

by their conjugal partnership, pursuant to a writ of garnishment issued by virtue of a writ of execution issued in Civil Case No. 3893 of the same Court of First

Instance ... against the respondent Vicente Garcia ... ."1

There was a stipulation of facts submitted. There is no question as to one Ladislao Chavez, as principal, and petitioner Luzon Surety Co., Inc., executing a surety

bond in favor of the Philippine National Bank, Victorias Branch, to guaranty a crop loan granted by the latter to Ladislao Chavez in the sum of P9,000.00. On or

about the same date, Vicente Garcia, together with the said Ladislao Chavez and one Ramon B. Lacson, as guarantors, signed an indemnity agreement wherein

they bound themselves, jointly and severally, to indemnify now petitioner Luzon Surety Co., Inc. against any and all damages, losses, costs, stamps, taxes,

penalties, charges and expenses of whatsoever kind and nature which the petitioner may at any time sustain or incur in consequence of having become

guarantor upon said bond, to pay interest at the rate of 12% per annum, computed and compounded quarterly until fully paid

Documents

Cases for June 23