Rizal Banking Corporation vs. Intermediate Appellate Court and BF Homes, INC.

Issue: When could the provision of the Presidential Decree No. 902-A be applicable?
Facts:
1. On September 28, 1984, BF Homes filed a “Petition for Rehabilitation and Declaration of Suspension of
Payments” to the Securities and Exchange Commission (SEC)
a. One of the creditors in their list was RCBC
2. October 26, 1984, RCBC requested the Provincial Sheriff to extra-judicially foreclose its real estate mortgage on
some of the properties of BF Homes
a. A notice was issued and copies were furnished to BF Homes and RCBC
b. The auction was scheduled on Oct. 29, 1985 however, was moved to January 29, 1985 due to the TRO
issue s by the SEC enjoining the RCBC to do such
3. Sheriffs proceeded with the auction sale on January 29, 1985
4. On February 5, BF Homes filed in the SEC a motion to annul the auction sale and cite the Sheriff and RCBC in
contempt
a. Because of such, the Sheriff refused to withhold the delivery of the certificate of sale to RCBC
5. RCBC, on March 13, filed for an action for Mandamus against provincial sheriff of Rizal and his deputy to compel
them to execute the certificate of sale in favour of them and was granted to them on May 8.
6. March 18, 1985, the SEC appointed a Management Committee for BF Homes
7. June 4, 1985, BF Homes filed for an original complaint in the IAC pursuant to section 9 of BP 129 and thereafter
was granted.
a. It suspended the issuance to RCBC of the Transfer certificates until matters shall have been resolved by
the SEC
8. On June 18, 1986, the RCBC appealed for the decision of the IAC but was still dismissed for ruling out that the
prohibition against foreclosure attaches as soon as petition for rehabilitation is filed.
9. Thus, the case at bar.

Ruling: The petition is meritorious and RCBC can move for the extrajudicial foreclosure of the said properties

Ratio: When the law is clear and free from any doubt or ambiguity, there is no room for construction or interpretation.

1. It was clear that the provisions of PD No. 902-A are not yet applicable and it may still be allowed to assert its
preferred status because it foreclosed the mortgage prior to the appointment of the management committee on
March 18, 1985.
a. Paragraph C, Section 6 of Presidential Decree 902-A provides:
“to appoint one or more receivers of the property, real and personal… 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 association under management or
receivership pending before any court, tribunal, board or body, shall be suspended accordingly.
- Meaning, the suspension of claims against a corporation under rehabilitation is counted or
figured up only upon the appointment of a management committee
b. To insist on such ruling no matter how practical and noble would encroach upon legislative prerogative
to define the wisdom of the law-plainly judicial legislation
2. Secured Creditors retain their preference over unsecured creditors, but enforcement of such preference is
equally suspended upon the appointment of a management committee.
a. This suspension shall not prejudice or render ineffective the status of a secured creditor as compared to
a totally unsecured creditor. PD 902-A does not state anything to this effect.