84

SUPREMECOURTREPORTSANNOTATED
ChasRealtyandDevelopmentCorporationvs.Talavera
G.R.No.151925.February6,2003.*
CHAS REALTY AND DEVELOPMENT CORPORATION, petitioner,
vs.HON.TOMASB.TALAVERA,inhiscapacityasPresidingJudgeof
theRegionalTrialCourtofCabanatuanCity,Branch28,andANGELD.
CONCEPCION,SR.,respondents.
Corporation Law; Rehabilitation; Procedure; Contents of Petition for
CorporateRehabilitationprovidedunderRule4,Section2(k)oftheInterimRuleson
CorporateRehabilitation.Rule4,Section2(k),distinctlyprovidesthat,first,under
letter(a),thefilingofthepetitionhasbeendulyauthorized;and,second,underletter
(b),thedirectorsandstockholdershaveirrevocablyapprovedand/orconsentedto,in
accordance with existing laws, all actions or matters necessary and desirable to
rehabilitatethedebtorincluding,butnotlimitedto,amendmentstothearticlesof
incorpo
_______________

19Vda.deMedina,etal.vs.Cresencia,etal.,99Phil.506.

*FIRSTDIVISION.

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85
ChasRealtyandDevelopmentCorporationvs.Talavera
ration and bylaws or articles of partnership; increase or decrease in the
authorized capital stock; issuance of bonded indebtedness, alienation, transfer, or
encumbranceofassetsofthedebtor;andmodificationofshareholdersrights.
Same;Same;Same;ObservethatRule4,Section2(k),prescribestheneedfora
certification.Observe that Rule 4, Section 2(k), prescribes the need for a
certification;one,tostatethatthefilingofthepetitionhasbeendulyauthorized,and
two,toconfirmthatthedirectorsandstockholdershaveirrevocablyapprovedand/or
consentedto, inaccordancewithexistinglaws,allactionsormattersnecessaryand
desirabletorehabilitatethecorporatedebtor,including,asandwhencalledfor,such
extraordinarycorporateactionsasmaybemarkedout.Thephrase,inaccordance
withexistinglaws,obviouslywouldrefer tothatwhichis,ortothosethatare,
intendedtobedonebythecorporationinthepursuitofitsplanforrehabilitation.
Thus,ifanyextraordinarycorporateaction(mentionedinRule4,Section2(k),ofthe
Interim Rules on Corporate Rehabilitation) are to be done under the proposed
rehabilitation plan, the petitioner would be bound to make it known that it has
received the approval of a majority of the directors and the affirmative votes of
stockholdersrepresentingatleasttwothirds(2/3)oftheoutstandingcapitalstockof
thecorporation.Wherenosuchextraordinarycorporateacts(oronethatunderthe
lawwouldcallforatwothirds[2/3]vote)arecontemplatedtobedoneincarrying
outtheproposedrehabilitationplan,thentheapprovalofstockholderswouldonlybe
byamajority,notnecessarilyatwothirds(2/3),vote,aslongas,ofcourse,thereisa
quorumafactwhichisnotherebeingdisputed.
CivilProcedure;PleadingsandPractice;Certiorari;Thefilingofamotionfor
reconsiderationbeforeavailingoftheremedyofcertiorariisnotalwayssinequa
non.Relativetothecontentionthatamotionforreconsiderationisrequiredpriorto
bringingupthepetitionforcertiorari(withtheCourtofAppeals),itshouldsufficeto
saythatthefilingofamotionforreconsiderationbeforeavailingoftheremedyof
certiorariisnotalwayssinequanonsuchaswhentheissueraisedisonepurelyof
law,orwheretheerrorispatentortheQuestionsraisedoncertiorariareexactlythe
sameasthosealreadysquarelypresentedtoandpasseduponbythecourtaquo.
PETITIONforreviewoncertiorariofadecisionoftheCourtofAppeals.

ThefactsarestatedintheopinionoftheCourt.
Abello,Concepcion,RegalaandCruzforpetitioner.
R.A.S.DizonLawOfficeforprivaterespondent.
86
86
SUPREMECOURTREPORTSANNOTATED
ChasRealtyandDevelopmentCorporationvs.Talavera
VITUG,J.:

Petitioner Chas Realty and Development Corporation (CRDC) is a

domesticcorporationengagedinpropertydevelopmentandmanagement.
Itistheowneranddeveloperofathreehectareshoppingcomplex,also
knownastheMegacenterMall(Megacenter),inCabanatuanCity.
TheconstructionofMegacentercommencedinJanuary1996,butby
thetimeofitssocalledsoftopeninginJuly1998,itwasonlypartly
completed due to lack of funds, said to have been brought about by
constructionoveragesduetothemassivedevaluationofthepesoduring
the economic crisis in 1997, low occupancy, and rental arrearages of
tenants.Theopeningoftheuppergroundfloorandthesecondfloorofthe
buildingfollowed,respectively,inAugust1998andtowardstheendof
1998.Eventually,Megacenteropeneditsthirdfloorin1999.
PurportedlyonaccountoffactorsbeyondthecontrolofCRDC,suchas
highinterestratesonitsloans,unpaidrentalsoftenants,lowoccupancy
rate,sluggishnessoftheeconomyandthefreezingofitsbankaccountby
itsmaincreditor,theLandBankofthePhilippines,CRDCencountered
difficultyinpayingitsobligationsasandwhentheyfelldueandhadto
contendwithcollectionsuitsandrelatedcases.
On04June2001,CRDCfiledapetitionforrehabilitationattaching
thereto a proposed rehabilitation plan, accompanied by a secretarys
certificate, consonantly with paragraph 2(k), Section 2, Rule 4, of the
InterimRulesofProcedureonCorporateRehabilitation.CRDCclaimed
that it had sufficient assets and a workable rehabilitation plan both of
whichshowedthatthecontinuanceofitsbusinesswasstillfeasible.It
allegedthat,priortothefilingofthepetitionforrehabilitation,aspecial
meetingofitsstockholderswasheldon18April2001duringwhichthe
majorityoftheoutstandingcapitalstockofCRDCapprovedtheresolution
authorizingthefilingofapetitionforrehabilitation.
On08June2001,theRegionalTrialCourt,Branch28,ofCabanatuan
City,towhichthepetitionwasassigned,issuedanorderstayingallclaims
against CRDC and prohibited it from making any payment on its
outstanding obligations and selling, or otherwise disposing or
encumbering,itsproperty.Forthwith,thecourtappointedarehabilitation
receiver.
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VOL.397,FEBRUARY6,2003
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ChasRealtyandDevelopmentCorporationvs.Talavera
On20July2001,AngelD.Concepcion,Sr.,hereinprivaterespondent,
filed acomplaint ininterventionopposingthe appointment ofCRDCs
nomineeforthepostofrehabilitationreceiver.HebeliedCRDCsfactual
allegationsandclaimedthatthepredicamentofthecorporationwasdueto
serious mismanagement, fraud, embezzlement, misappropriation and
gross/evident violation of the fiduciary duties of CHAS officers.
Concepcionmovedtodismissand/ortodenythepetitionforrehabilitation
onthegroundthattherewasnoapprovalbythestockholdersrepresenting
atleasttwothirds(2/3)oftheoutstandingcapitalstockwhich,according
tohim,wouldbeessentialunderparagraph2(k),Section2,Rule4,ofthe
Interim Rules on Corporate Rehabilitation. Concepcion further asserted
thatthesupposedapprovalofthedirectorsofthefilingofthepetitionfor
rehabilitationwasinaccurateconsideringthatthemembershipofpetitioner
CRDCsboardofdirectorswasstillthenbeingcontestedandpendingfinal
resolution.
On 10 August 2001, CRDC submitted its opposition ex abundante
cautelam contendingthatthecomplaintininterventionwasaprohibited
pleadingandthattherewasnoneedforittosecuretheirrevocableconsent
andapprovalofitsstockholdersrepresentingatleasttwothirds(2/3)ofits
outstandingcapitalstockbecausethepetitiondidnotincludeinitsplanfor
rehabilitation acts that would need any amendment of its articles of
incorporationand/orbylaws,increaseordecreaseintheauthorizedcapital
stock,issuanceofbondedindebtedness,orthelike,wheresuchtwothirds
(2/3)votewouldberequired.
Thetrialcourtissuedanorder,dated15October2001,thedecretal
portionofwhichwastothefollowingeffect;viz.:
WHEREFORE, premises considered, in the absence of any showing that the
petitionerhascompliedwiththecertificationrequiredunderSection2,Rule4(K)of
theInterimRulesofProcedureonCorporateRehabilitation,thepetitionerishereby
givenaperiodof15daysfromreceiptofacopyofthisordertosecurefromits
directorsandstockholdersthedesiredcertificationandsubmitthesametothisCourt
inaccordancewiththeabovementionedprovisionoftheInterimRulesofProcedure
onCorporateRehabilitation.
Withrespecttotheotheroppositionstothepetitionforrehabilitationincluding
theoppositiontotheappointmentoftherehabilitationreceiver,oppositionfiledby
thelandbankandtheEEI,Inc.,theresolutionofthesameisherebyheldinabeyance
tillaftertheperiodgiventothe
88
88
SUPREMECOURTREPORTSANNOTATED
ChasRealtyandDevelopmentCorporationvs.Talavera
petitionertocomplywiththisorderasitmaybecomemootandacademicafterthe
expirationoftheperiodgiventothepetitioner.1
On29October2001,CRDCfiledbeforetheCourtofAppealsapetition
for certiorari, with prayer for temporary restraining order and/or
preliminaryinjunction,whichsoughttohavethe15thOctober2001order
ofthetrialcourtsetaside.
TheCourtofAppealsrenderedadecisionon18January2002andheld:
WHEREFORE,theforegoingpremisesconsidered,thepetitionforcertiorari,with
prayer for temporary restraining order and/or writ of preliminary injunction, is
DENIEDforlackofmerit.2
Hence,theinstantpetitiononthefollowinggrounds:
I

Publicrespondentactedwithgraveabuseofdiscretionamountingtolackand/or
excessofjurisdictioninissuingtheassailedorderconsideringthat:
1. A.
Thepetitionforrehabilitationandtheproposedrehabilitationplandonotrequire
extraordinarycorporateactions.
2. B.
Sincenoextraordinarycorporateactionsarerequiredorevencontemplatedas
necessaryanddesirablefortherehabilitationofCRDC,therequirementsofthe
corporationcodefortheapprovalofsuchactionscannotbecompliedwith.
3. C.
Therehabrulesandthecorporationcodedonotalloworintendblindblanket
approvalsofextraordinarycorporateactions.
4. D.
Torequire2/3stockholdersapprovalforcorporateactionsrequiringonlya
majorityviolatestherightofthemajoritystockholders.
II

Publicrespondentactedwithgraveabuseofdiscretionamountingtolackand/or
excessofjurisdictioninrequiringCRDCscompliancewithparagraph2(k),Section
2,Rule4oftheRehabruleswhenCRDCalreadycompliedtherewith.3
_______________

1Rollo,p.73.

2Rollo,p.44.

3Rollo,pp.3738.

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89
ChasRealtyandDevelopmentCorporationvs.Talavera
Rule 4, Section 2(k), of the Interim Rules on Corporate Rehabilitation
provides:
Sec.2.ContentsofthePetition.Thepetitionfiledbythedebtormustbeverified
andmustsetforthwithsufficientparticularityallthefollowingmaterialfacts:(a)the
nameandbusinessofthedebtor;(b)thenatureofthebusinessofthedebtor;(c)the
historyofthedebtor;(d)thecauseofitsinabilitytopayitsdebts;(e)allthepending
actionsorproceedingsknowntothedebtorandthecourtsortribunalswheretheyare
pending;(f)threatsordemandstoenforceclaimsorliensagainstthedebtor;and(g)
themannerbywhichthedebtormayberehabilitatedandhowsuchrehabilitationmay
benefitthegeneralbodyofcreditors,employees,andstockholders.
Thepetitionershallbeaccompaniedbythefollowingdocuments:
xxxxxxxxx.
k.ACertificateattesting,underoath,that(a)thefilingofthepetitionhasbeen
dulyauthorized;and(b)thedirectorsandstockholdershaveirrevocablyapproved
and/orconsentedto,inaccordancewithexistinglaws,allactionsormattersnecessary
anddesirabletorehabilitatethedebtorincluding,butnotlimitedto,amendmentsto
the articles of incorporation and bylaws or articles of partnership; increase or
decreaseintheauthorizedcapitalstock;issuanceofbondedindebtedness;alienation,
transfer,orencumbranceofassetsofthedebtor;andmodificationofshareholders
rights.4
Rule4,Section2(k),distinctlyprovidesthat, first, underletter(a),the
filingofthepetitionhasbeendulyauthorized;and, second, underletter
(b), the directors and stockholders have irrevocably approved and/or
consented to, in accordance with existing laws, all actions or matters
necessaryanddesirabletorehabilitatethedebtorincluding,butnotlimited
to,amendmentstothearticlesofincorporationandbylawsorarticlesof
partnership;increaseordecreaseintheauthorizedcapitalstock;issuance
ofbondedindebtedness,alienation,transfer,orencumbranceofassetsof
thedebtor;andmodificationofshareholdersrights.
Observe that Rule 4, Section 2(k), prescribes the need for a
certification; one, to state that the filing of the petition has been duly
authorized,and two, toconfirmthatthedirectorsandstockholdershave
irrevocably approved and/or consented to, in accordance with existing
laws,allactionsormattersnecessaryanddesirableto
_______________

4A.M.No.00810SC.

90
90
SUPREMECOURTREPORTSANNOTATED
ChasRealtyandDevelopmentCorporationvs.Talavera
rehabilitatethecorporatedebtor,including,asandwhencalledfor,such
extraordinarycorporateactionsasmaybemarkedout.Thephrase,in
accordancewithexistinglaws,obviouslywouldrefertothatwhichis,or
tothosethatare,intendedtobedonebythecorporationinthepursuitofits
plan for rehabilitation. Thus, if any extraordinary corporate action
(mentionedin Rule 4,Section 2(k),of theInterimRules onCorporate
Rehabilitation)aretobedoneundertheproposedrehabilitationplan,the
petitioner would be bound to make it known that it has received the
approval of a majority of the directors and the affirmative votes of
stockholders representing at least twothirds (2/3) of the outstanding
capitalstockofthecorporation.Wherenosuchextraordinarycorporate
acts(oronethatunderthelawwouldcallforatwothirds[2/3]vote)are
contemplatedtobedoneincarryingouttheproposedrehabilitationplan,
then the approval of stockholders would only be by a majority, not
necessarily a twothirds (2/3), vote, as long as, of course, there is a
quorum5afactwhichisnotherebeingdisputed.
The trial court and appellate court, unfortunately, have taken an
inaccurate understandingofthe memorandum tothe SupremeCourt of
JusticeReynatoS.Puno,thecommitteechaironthedraftoftheruleson
corporaterehabilitation,stillthenbeingproposed;thememorandumreads,
inpart,thusly:
3.Rule4.Rehabilitation
ThefollowingaretheprincipaldeviationfromtheSECRules:
a)TheproposedRulesnowrequire,asanattachmenttothepetition,aCertificate
attesting,amongothers,thatthegoverningbodyandownersofthepetitioningdebtor
haveapprovedandconsentedtowhateverisnecessaryordesirable(includingbutnot
limitedtoincreasingordecreasingtheauthorizedcapitalstockofthecompanyand
modificationofstockholdersright)torehabilitatethedebtor(Sec.2,par.(k),Rule
4).Thisistoavoidasituationwherearehabilitationplan,afterbeingdevelopedfor
years,cannotbeimplementedbecauseoftherefusalofshareholderstoapprovethe
arrangementsnecessaryforitsimplementation.6
_______________

5JoseC.Campos,MariaClaraL.Campos,TheCorporationCodeComments,Notesand

SelectedCases,1990Ed.,p.419.
6Rollo,p.72.

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VOL.397,FEBRUARY6,2003
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ChasRealtyandDevelopmentCorporationvs.Talavera
Nowhere in the aforequoted paragraph can it be inferred that an
affirmativevoteofstockholdersrepresentingatleasttwothirds(2/3)of
theoutstandingstockisinvariablynecessaryforthefilingofapetitionfor
rehabilitationregardlessofthecorporateactionthattheplanenvisions.
Justtothecontrary,itonlyrequiresinthefilingofthepetitionthatthe
corporateactionsthereinproposedhavebeendulyapprovedorconsented
tobythedirectorsandstockholdersinconsonancewithexistinglaws.
Therequirementisdesignedtoavoidasituationwherearehabilitation
plan,afterbeingdevelopedandjudiciallysanctioned,cannotultimatelybe
seen through because of the refusal of directors or stockholders to
cooperateinthefullimplementationoftheplan.Infine,acertificationon
theapprovalofstockholdersisrequiredbutthequestion,whethersuch
approval should be by a majority or by a twothirds (2/3) vote of the
outstandingcapitalstock,woulddependontheexistinglaw visvisthe
corporate act or acts proposed to be done in the rehabilitation of the
distressedcorporation.
Therehabilitationplan7 submittedbypetitionermerelyconsistsofa
repaymentorrestructuringschemeofCRDCsbankloanstoLandBank
ofthePhilippinesandEquitablePCIBankandofleasingoutmostofthe
available spaces in the Megacenter, including the completion of the
constructionofthefourthfloor,toincreaserentalrevenues.Noneofthe
proposed corporate actions would require a vote of approval by the
stockholders representing at least twothirds (2/3) of the outstanding
capitalstock.
Relativetothecontentionthatamotionforreconsiderationisrequired
priortobringingupthepetitionforcertiorari(withtheCourtofAppeals),
itshouldsufficetosaythatthefilingofamotionforreconsiderationbefore
availingoftheremedyof certiorari isnotalways sinequanon suchas
whentheissueraisedisonepurelyoflaw,orwheretheerrorispatentor
theQuestionsraisedon certiorariareexactlythesameasthosealready
squarelypresentedtoandpasseduponbythecourtaquo.8
WHEREFORE,theinstantpetitionisGRANTEDandthequestioned
decisionoftheCourtofAppeals,dated18January2002,andtheorderof
theRegionalTrialCourt,Branch28,Cabanatuan
_______________

7Rollo,pp.94122.

8ProgressiveDevelopmentCorp.vs.CourtofAppeals,301SCRA637(1999).

92

92
SUPREMECOURTREPORTSANNOTATED
Velezvs.Flores
City,dated15October2001,inCivilCaseNo.4036AF,areREVERSED
andSETASIDE.TheRegionalTrialCourtisdirectedtogiveduecourse
tothePetitionforRehabilitationandconductwithdispatchthenecessary
proceedingsstillrequiredthereon.Nocosts.
SOORDERED.
Davide,Jr.(C.J.,Chairman),YnaresSantiago,Carpio andAzcuna,
JJ.,concur.
Petitiongranted,assaileddecisionreversedandsetaside.
Note.A court action is ipso jure suspended only upon the
appointment of a management committee or a rehabilitation receiver.
(BarotacSugarMills,Inc.vs.CA,275SCRA497[1997])
o0o

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