09 JAPRL Development Corp. vs.

Security Bank Corporation

G.R. No. 190107. June 6, 2011
Ponente: Carpio-Morales, J.

FACTS:
1. In 1996, JAPRL Development Corporation applied for and was granted a credit
facility (Letter of Credit/Trust Receipt) in the amount of Php 50,000.00 with
Security Bank Corporation (SBC).
2. In 2001, Limson and Arollado, JAPRL Chairman and President, respectively,
executed a Continuing Suretyship Agreement (CSA) in favour of SBC, wherein
they guaranteed obligations under the credit facility.
3. In 2002, on JAPRLs proposal, SBC extended the period of settlement of his
obligations.
4. In 2003, JAPRLs financial adviser, MRM Management Incorporated (MRM),
convened JAPRLs creditors, SBC included, for the purpose of restructuring JAPRLs
existing loan obligations.
5. SBC soon discovered material inconsistencies in the financial statements given by
MRM vis--vis those submitted by JAPRL when it applied for a credit facility,
drawing SBC to conclude that JAPRL committed mirepresentation. Thus, SBC sent
a formal letter of demand to JAPRL, Limson and Arollado for the immediate
payment of Php 43,926,021.41 representing JAPRLs outstanding obligations.
6. Petitioners failed to comply with the demand, hence SBC filed a complaint for sum
of money with application for issuance of writ of preliminary attachment before
RTC Makati against JAPRL, Limson and Arollado.
7. During pendency of the case, SBC manifested in court that it received a copy of a
Stay Order issued by RTC Quezon City wherein JAPRLs petition for rehabilitation
was lodged.
8. RTC Makati at once ordered in open court archiving SBCs complaint for sum of
money until disposition by RTC Quezon City of JAPRLs petition for rehabilitation.
When RTC Makati reduced to writing its open court order, however, it instead
declared dismissal of SBCs complaint.
9. SBC filed a motion for reconsideration, and moved to clarify the Makati RTC Order,
positing that the suspension of the proceedings should only be with respect to
JAPRL but not with respect to Limson and Arollado.
10. However, RTC Makati maintained its order archiving complaint against all
petitioners.
11. Meanwhile, the proposed rehabilitation plan before RTC Quezon City was
disapproved.
12. On motion, RTC Makati thus reinstated SBCs complaint.
13. Later, petitioners filed a manifestation informing that a Stay Order was issued,
this time by RTC Calamba, in a new petition for rehabilitation filed by JAPRL.
Again, RTC Makati archived SBCs complaint against petitioners.
14. SBC moved for reconsiderations averring that its complaint should not have been
archived with respect to sureties Limson and Arollado.

ISSUE: Can SBC pursue its claim against Limson and Arollado, as sureties, despite
the pendency of JAPRLs petition for rehabilitation?

RULING: YES. SBC can pursue its claim against Limson and Arollado despite the
pendency of JAPRLs petition for rehabilitation. For, by the CSA in favor of SBC, it is
the obligation of the sureties, who are therein stated to be solidary with JAPRL, to see
to it that JAPRLs debt is fully paid.

On a trial courts suspension of proceedings against a surety of a corporation in the

process of rehabilitation, Banco de OroEPCI, Inc. v. JAPRL Development Corporation
holds that a creditor can demand payment from the surety solidarily liable with the
corporation seeking rehabilitation, it being not included in the list of stayed claims.

Indeed, Section 6(b) of the Interim Rules of Procedure of Corporate Rehabilitation

provides that a stay order does not apply to sureties who are solidarily liable with the
debtor. In Limson and Arollados case, their solidary liability with JAPRL is
documented.

Limson and Arollado, as sureties, whose liability is solidary cannot, therefore, claim
protection from the rehabilitation court, they not being the financially distressed
corporation that may be restored, not to mention that the rehabilitation court has no
jurisdiction over them.