G.R. No. L-76627, June 27, 1988
Marietta Y. Figueroa, petitioner, vs. Securities and Exchange Commission and Philippine Underwriters Finance Corporation (PHIL-FINANCE), respondents.

FACTS

The Securities and Exchange Commission (SEC) and the Central Bank took over the management of respondent Philippine Underwriters Finance Corporation (PHIL-FINANCE) in June 1981. The SEC subsequently appointed a Receivership Committee. On October 1, 1985, petitioner Marietta Y. Figueroa and PHIL-FINANCE, through its President Gregorio V. Gonzales, executed a “Canteen Concession Agreement.” This contract granted Figueroa the right to operate a canteen in the PHIL-FINANCE building for two years, renewable for another two, with PHIL-FINANCE providing the space, utilities, and equipment free of charge.
In October 1985, the Bengzon Law Offices was appointed as the new receiver. Upon review, the receiver found the contract to be onerous and infirm. Specific infirmities included the absence of approval from the SEC Receivership Committee Chairman, lack of a board resolution authorizing the President to sign, and an apparently falsified notarization. The receiver petitioned the SEC to nullify the agreement. On August 19, 1986, the SEC issued a resolution declaring the contract null and void. Figueroa’s motion for reconsideration was denied by the SEC en banc on October 21, 1986.

ISSUE

Whether the SEC, acting as a receiver under P.D. No. 902-A, as amended, has the authority to declare null and void a private contract entered into by the corporation under receivership, and if so, whether it can do so without violating the petitioner’s right to due process.

RULING

The Supreme Court ruled in favor of the respondents and dismissed the petition. The Court held that the SEC, through its receiver, possesses the statutory authority to nullify the contract. This power is explicitly granted under Paragraph 6(d), sub-paragraph (2) of P.D. No. 902-A, as amended by P.D. No. 1799, which states that a rehabilitation receiver “may overrule or revoke the actions of the previous management and board of directors of the entity or entities under management notwithstanding any provision of law.” The canteen contract was executed by the previous management while the corporation was under effective SEC receivership control, without the receiver’s knowledge or approval, and contained terms grossly disadvantageous to PHIL-FINANCE and its creditors (e.g., free rental, utilities, and use of equipment).
Regarding due process, the Court found no violation. The petitioner was informed by the receiver of the contract’s infirmities before the SEC’s resolution and was given a full opportunity to be heard when she filed her motion for reconsideration, which the SEC en banc duly considered. Jurisprudence establishes that due process is satisfied when a party is afforded a chance to seek reconsideration and present arguments. Therefore, the SEC did not commit grave abuse of discretion in nullifying the onerous and irregular contract to protect the corporation and its creditors.