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Negros Navigation Corp v. CA (Justification For Stay Order)

The Supreme Court upheld the stay order issued by the rehabilitation court suspending all claims against Negros Navigation Co., Inc. (NNC), a shipping company undergoing corporate rehabilitation. The stay order applied to maritime liens like the unpaid repair claim of Tsuneishi Heavy Industries against NNC. Philippine law on corporate rehabilitation does not distinguish between different types of claims. The purpose of rehabilitation is to allow the company to regain solvency for the benefit of all creditors. While Tsuneishi's maritime lien claim has priority, its enforcement is merely suspended until rehabilitation concludes or NNC is dissolved.

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34 views

Negros Navigation Corp v. CA (Justification For Stay Order)

The Supreme Court upheld the stay order issued by the rehabilitation court suspending all claims against Negros Navigation Co., Inc. (NNC), a shipping company undergoing corporate rehabilitation. The stay order applied to maritime liens like the unpaid repair claim of Tsuneishi Heavy Industries against NNC. Philippine law on corporate rehabilitation does not distinguish between different types of claims. The purpose of rehabilitation is to allow the company to regain solvency for the benefit of all creditors. While Tsuneishi's maritime lien claim has priority, its enforcement is merely suspended until rehabilitation concludes or NNC is dissolved.

Uploaded by

Ervin John Reyes
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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NEGROS NAVIGATION CO., INC. vs.

COURT OF APPEALS, SPECIAL TWELFTH DIVISION


AND TSUNEISHI HEAVY INDUSTRIES (CEBU), INC.
G.R. No. 163156

TSUNEISHI HEAVY INDUSTRIES (CEBU), INC. vs. NEGROS NAVIGATION CO., INC.,
SULFICIO O. TAGUD, JR., AND THE REHABILITATION RECEIVER FOR NEGROS
NAVIGATION CO., INC.
G.R. No. 166845, December 10, 2008,
J. Nachura

Topic:
Justification for Stay Order.

Statutory Construction; PD 902-A does not make any distinction as to what claims are covered by the suspension of
actions for claims against corporations under rehabilitation, no exception is made therein in favor of maritime
claims; The justification for the suspension of actions or claims, without distinction, pending rehabilitation
proceedings is to enable the management committee or rehabilitation receiver to effectively exercise
its/his powers free from any judicial or extrajudicial interference that might unduly hinder or prevent the
“rescue” of the debtor company.

Facts:
NNC, a shipping company that is primarily engaged in the business of transporting through shipping vessels,
passengers and cargoes at various ports of call in the country, engaged the services of THI for the repair of its
vessels. Upon failure to pay the repairman’s lien, THI filed an action against NNC and had several vessels attached
to which the Regional Trial Court of Cebu granted. NNC filed a petition for corporate rehabilitation with prayer of
suspension of payments with the RTC of Manila due to reverses experienced during the Asian Financial Crisis and
the devaluation of peso. RTC Manila granted the petition and issued a Stay Order stating that all claims against
NNC were covered by the order. In an appeal with the CA, THI claimed that the issuance of the stay order
impaired its right to collect the repairman’s lien from NNC, however, the appellate court dismissed the petition of
THI for lack of merit. Hence, the present petition.

Issue:
Whether or not the maritime liens may only be divested in admiralty proceedings, hence, in conflict with a
rehabilitation proceeding;
Whether or not the Stay Order impaired THI’s right to collect from NNC.

Ruling:

The Supreme Court found the contention of THI to be untenable.

THI maintains that its maritime liens against the vessels of NNC were impaired by the issuance of the stay
order. THI argues that the issuance of the stay order by the Manila RTC, acting as rehabilitation court, was
erroneous considering that maritime liens cannot be enforced, divested, and otherwise affected or dealt with except
by an admiralty court in an admiralty proceeding in rem. THI cited various foreign jurisprudence to the effect that
maritime liens are enforceable only by a suit in rem. It further averred that the mere suspension of the in
rem proceedings in the admiralty case prejudiced its substantive rights under Presidential Decree (PD) 1521.

The argument of THI is misplaced. There is no conflict as to which law should apply to the case at bench.
THI wishes to impress the Supreme Court that its claim for repairman’s lien is a maritime lien and, accordingly, may
be enforced only in a proceeding in rem. The Supreme Court agrees that PD 1521 is the governing law concerning
its maritime lien for the services it rendered to NNC. However, when NNC filed a petition for corporate
rehabilitation and suspension of payments, and the Manila RTC found that the petition was sufficient in form and
in substance and appointed the rehabilitation receiver, the admiralty proceeding was appropriately suspended in
accordance with Section 6 of the Interim Rules on Corporate Rehabilitation.

Rehabilitation contemplates continuance of corporate life and activities in an effort to restore and reinstate
the corporation to its former position of successful operation and solvency. The purpose of rehabilitation
proceedings is precisely to enable the company to gain a new lease on life and thereby allow creditors to be paid
their claims from its earnings. The rehabilitation of a financially distressed corporation benefits its employees,
creditors, stockholders and, in a larger sense, the general public.

PD 902-A mandates that upon appointment of a management committee, rehabilitation receiver, board or
body, all actions for claims against corporations, partnerships or associations under management or receivership
pending before any court, tribunal, board or body shall be suspended. PD 902-A does not make any distinction as
to what claims are covered by the suspension of actions for claims against corporations under rehabilitation. No
exception is made therein in favor of maritime claims. Thus, since the law does not make any exemptions or
distinctions, neither should we. Ubi lex non distinguit nec nos distinguere debemos.

The justification for the suspension of actions or claims, without distinction, pending rehabilitation
proceedings is to enable the management committee or rehabilitation receiver to effectively exercise its/his powers
free from any judicial or extra-judicial interference that might unduly hinder or prevent the "rescue" of the debtor
company. To allow such other actions to continue would only add to the burden of the management committee or
rehabilitation receiver, whose time, effort and resources would be wasted in defending claims against the
corporation instead of being directed toward its restructuring and rehabilitation.

It is undisputed that THI holds a preferred maritime lien over NNC’s assets by virtue of THI’s unpaid
services. The issuance of the stay order by the rehabilitation court does not impair or in any way diminish THI’s
preferred status as a creditor of NNC. The enforcement of its claim through court action was merely suspended to
give way to the speedy and effective rehabilitation of the distressed shipping company. Upon termination of the
rehabilitation proceedings or in the event of the bankruptcy and consequent dissolution of the company, THI can
still enforce its preferred claim upon NNC.

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. The stay order is effective on all creditors of the corporation without distinction, whether secured
or unsecured. 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.

Dispositive Portion:

WHEREFORE, in view of the foregoing disquisitions, judgment is rendered as follows:


(1) In G.R. No. 163156, the petition is DISMISSED for being moot and academic; and
(2) In G.R. No. 166845, the petition is DENIED for lack of merit.

SO ORDERED.

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