8/11/2019 insolvency Law - Stay Order - Negros Navigation v CA

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STAY ORDER

NEGROS NAVIGATION CO., INC. vs.COURT OFAPPEALS, SPECIAL TWELFTH DIVISION AND

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

TSUNEISHI HEAVYINDUSTRIES 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

Facts:

NNC, a shipping company, engaged the servicesof THI for the repair of its vessels. Upon failure to paythe repairmans lien, THI filed an action against NNC

and had several vessels attached to which the RTC(Cebu) granted. NNC filed a petition for corporaterehabilitation with prayer of suspension of paymentswith the RTC (Manila) due to reverses experiencedduring the Asian Financial Crisis and the devaluation

of peso. RTC Manila granted the petition and issued aStay Order stating that all claims against NNC werecovered by the order. In an appeal with the CA, THIclaimed that the issuance of the stay order impairedits right to collect the repairmans lien from NNC,

however, the appellate court dismissed the petition ofTHI for lack of merit. Hence, the present petition.

Issue:

1. WON the maritime liens may only bedivested in admiralty proceedings, hence,in conflict with a rehabilitation proceeding

2. WON the Stay Order impaired THIs rightto collect from NNC

Ruling:

No. THI maintains that its maritime liensagainst the vessels of NNC were impaired by theissuance of the stay order. THI argues that theissuance of the stay order by the Manila RTC, actingas rehabilitation court, was erroneous consideringthat maritime liens cannot be enforced, divested, andotherwise affected or dealt with except by anadmiralty court in an admiralty proceeding in rem.THI cited various foreign jurisprudence to the effect

that maritime liens are enforceable only by a suit inrem. It further averred that the mere suspension ofthe in remproceedings in the admiralty caseprejudiced its substantive rights under PresidentialDecree (PD) 1521.

The argument of THI is misplaced. There is noconflict as to which law should apply to the case atbench. THI wishes to impress this Court that its claimfor repairmans lien is a maritime lien and,

accordingly, may be enforced only in a proceeding inrem.The Court agrees that PD 1521 is the governing

law concerning its maritime lien for the services itrendered to NNC. However, when NNC filed apetition for corporate rehabilitation and suspension ofpayments, and the Manila RTC found that thepetition was sufficient in form and in substance andappointed the rehabilitation receiver, the admiraltyproceeding was appropriately suspended inaccordance with Section 6 of the Interim Rules onCorporate Rehabilitation.

Rehabilitation contemplates continuance ofcorporate life and activities in an effort to restore andreinstate the corporation to its former position ofsuccessful operation and solvency. The purpose ofrehabilitation proceedings is precisely to enable thecompany to gain a new lease on life and thereby allowcreditors to be paid their claims from its earnings. Therehabilitation of a financially distressed corporationbenefits its employees, creditors, stockholders and, ina larger sense, the general public.

PD 902-A mandates that upon appointment of a

management committee, rehabilitation receiver, boardor body, all actions for claims against corporationspartnerships or associations under management orreceivership pending before any court, tribunal, boardor body shall be suspended. PD 902-A does not makeany distinction as to what claims are covered by thesuspension of actions for claims against corporationsunder rehabilitation. No exception is made therein infavor of maritime claims. Thus, since the law does notmake any exemptions or distinctions, neither shouldwe. Ubi lex non distinguit nec nos distingueredebemos.

The justification for the suspension of actions orclaims, without distinction, pending rehabilitationproceedings is to enable the management committeeor rehabilitation receiver to effectively exercise its/hispowers free from any judicial or extra-judicialinterference that might unduly hinder or prevent the"rescue" of the debtor company. To allow such otheractions to continue would only add to the burden ofthe management committee or rehabilitation receiverwhose time, effort and resources would be wasted indefending claims against the corporation instead ofbeing directed toward its restructuring and

rehabilitation.

It is undisputed that THI holds a preferredmaritime lien over NNCs assets by virtue of THIs

unpaid services. The issuance of the stay order by therehabilitation court does not impair or in any waydiminish THIs preferred status as a creditorof NNCThe enforcement of its claim through court action wasmerely suspended to give way to the speedy andeffective rehabilitation of the distressed shippingcompany. Upon termination of the rehabilitationproceedings or in the event of the bankruptcy and

8/11/2019 insolvency Law - Stay Order - Negros Navigation v CA

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consequent dissolution of the company, THI can stillenforce its preferred claim upon NNC.

When a distressed company is placed underrehabilitation, the appointment of a managementcommittee follows to avoid collusion between theprevious management and creditors it might favor, tothe prejudice of the other creditors. The stay order iseffective on all creditors of the corporation without

distinction, whether secured or unsecured. All assetsof a corporation under rehabilitation receivership areheld in trust for the equal benefit of all creditors topreclude one from obtaining an advantage orpreference over another by the expediency ofattachment, execution or otherwise.