DE BARRETO VS. VILLANUEVA, G.R. L-14938, DECEMBER 29, 1962
COURT OF APPEALS, GR 126200,
Facts:
Cruzado sold land (which was foreclosed by RFC but later resold to
Cruzado) to Villanueva with a stipulation that Villanueva will continue payment to
RFC (for the reselling price). Villanueva mortgaged the land to De Barreto when it
obtained a loan from the latter. Villanueva failed to pay both Cruzado and De
Barreto. On the one hand, De Barreto sued for foreclosure and won. On the other
hand, Cruzado filed a motion in that foreclosure proceeding for the recognition of
his “vendor’s lien.”
RTC: granted Cruzado’s motion that his lien be satisfied by the foreclosure
proceeds.
SC: affirmed RTC. But on Motion For Reconsideration, reversed RTC ruling.
Issue:
WON Cruzado’s lien can be satisfied by the foreclosure proceedings in
accordance with the relevant provisions of the Civil Code?
Held:
The question as to whether the Civil Code and the Insolvency Law can be
harmonized is settled by Article 2243, Civil Code. The preferences named in Articles
2241 and 2242 are to be enforced in accordance with the Involvency Law.
Thus, it becomes evident that one preferred creditor's third-party claim to
the proceeds of a foreclosure sale (as in the case now before us) is not the
proceeding contemplated by law for the enforcement of preferences under Article
2242, unless the claimant were enforcing a credit for taxes that enjoy absolute
priority. If none of the claims is for taxes, a dispute between two creditors will not
enable the Court to ascertain the pro rata dividend corresponding to each, because
the rights of the other creditors likewise enjoying preference under Article 2242 can
not be ascertained. Wherefore, the order of the Court of First Instance of Manila
now appealed from decreeing that the proceeds of the foreclosure sale be
apportioned only between appellant and appellee, is incorrect and must be
reversed.
In the absence of insolvency proceedings (or other equivalent general
liquidation of the debtor's estate), the conflict between the parties now before us
must be decided pursuant to the well established principle concerning register
lands; that a purchaser in good faith and for value (as the appellant concededly is)
takes registered property free from liens and encumbrances other than statutory
liens and those recorded in the certificate of title. There being no insolvency or
liquidation, the claim of the appellee, as unpaid vendor, did not acquire the
character and rank of a statutory lien co-equal to the mortgagee's recorded
encumbrance, and must remain subordinate to the latter.
DEVELOPMENT BANK OF THE PHILIPPINES V.
AUGUST 16, 2001
FACTS:
Remington Industrial Supplies Sales Corporation, which sold and delivered
construction materials and other merchandise worth P921,755.95, which purchases
remained unpaid, sought to recover payment by filing a complaint for sum of
money and damages against the debtor, Marinduque Mining, and its creditors, PNB
and DBP, which extra-judicially foreclosed on the mortgages executed by
Marinduque over its assets, as well as, the corporations they formed to make use of
the assets of Marinduque.
ISSUE
1. WON the articles of the Civil Code on concurrence and preference of
credits are applicable only to the insolvent debtor
2. What is the remedy of a preferred creditor under the articles on
concurrence and preference of credits?
HELD
1. NO. There is nothing in the law that shows such limitations. If we are to
interpret this portion of the Code as intended only for insolvency cases,
then other creditor-debtor relationships where there are concurrence of
credits would be left without any rules to govern them, and it would
render purposeless the special laws on insolvency.
2. HE CAN COLLECT HIS PRO RATA SHARE UNDER ART. 2249, which provides
that “if there are two or more credits with respect to the same specific real
property or real rights, they shall be satisfied pro rata, after the payment of
the taxes and assessments upon the immovable property or real right.”
However, in order to make this prorating fully effective, the preferred
creditors enumerated in Nos. 2 to 14 of Article 2242 (or such of them as
have credits outstanding) must necessarily be convened, and the import of
their claims ascertained. It is thus apparent that the full application of
Articles 2249 and 2242 demands that there must be first some proceeding
where the claims of all the preferred creditors may be bindingly
adjudicated, such as insolvency, the settlement of decedent's estate under
Rule 87 of the Rules of Court, or other liquidation proceedings of similar
import.
An exception applies to taxes, which enjoy a similar absolute preference. If
none of the claims is for taxes, a dispute between two creditors will not
enable the Court to ascertain the pro rata dividend corresponding to each,
because the rights of the other creditors likewise enjoying preference
under Article 2242 cannot be ascertained.
The extra-judicial foreclosure instituted by PNB and DBP is not the
liquidation proceeding contemplated by the Civil Code, so Remington
cannot claim its pro rata share from DBP.
J.L. BERNARDO CONSTRUCTION vs. CA, GR 105827, JANUARY 31, 2000
Facts:
The Municipality of San Antonio failed to pay petitioners for the latter’s
construction of the public market of San Antonio. Petitioners then sued the
municipality for breach of contract, specific performance, etc. with a prayer for the
enforcement of contractor’s lien (based on Art. 2242 of the Civil Code).
RTC granted petitioners’ motion and awarded possession and use of the
building to them. CA reversed RTC.
SC: affirmed CA
Issue:
WON a statutory lien can be enforced through an action for specific
performance plus damages
Held:
Article 2242 only finds application when there is a concurrence of credits,
i.e. when the same specific property of the debtor is subjected to the claims of
several creditors and the value of such property of the debtor is insufficient to pay
in full all the creditors. In such a situation, the question of preference will arise, that
is, there will be a need to determine which of the creditors will be paid ahead of the
others. Fundamental tenets of due process will dictate that this statutory lien
should then only be enforced in the context of some kind of a proceeding where the
claims of all the preferred creditors may be bindingly adjudicated, such as
insolvency proceedings.
This is made explicit by Article 2243 which states that the claims and liens
enumerated in articles 2241 and 2242 shall be considered as mortgages or pledges
of real or personal property, or liens within the purview of legal provisions
governing insolvency.
The action filed by petitioners in the trial court does not partake of the
nature of an insolvency proceeding. It is basically for specific performance and
damages. Thus, even if it is finally adjudicated that petitioners herein actually stand
in the position of unpaid contractors and are entitled to invoke the contractor's lien
granted under Article 2242, such lien cannot be enforced in the present action for
there is no way of determining whether or not there exist other preferred creditors
with claims over the San Antonio Public Market. The records do not contain any
allegation that petitioners are the only creditors with respect to such property. The
fact that no third party claims have been filed in the trial court will not bar other
creditors from subsequently bringing actions and claiming that they also have
preferred liens against the property involved.
RCBC v. IAC, GR 74851, DECEMBER 9, 1999
Facts:
BF Homes filed a “Petition for Rehabilitation and for Declaration of Suspension of
Payments” (SEC Case No. 002693) with the SEC. One of the creditors listed in its
inventory of creditors and liabilities was RCBC. RCBC requested the Provincial
Sheriff of Rizal to extra-judicially foreclose its REM on some properties of BF Homes.
In the auction sale, RCBC was the highest bidder.
RCBC argued that the SEC Case No. 2693 cannot be invoked to suspend the extra-
judicial foreclosure of the REM in petitioner’s favor, as these do not constitute
actions against private respondent contemplated under Section 6(c) of PD 902-A.
Issue:
When should the suspension of actions for claims against BF Homes take effect?
Held:
The issue of whether or not preferred creditors of distressed corporations stand on
equal footing with all other creditors gains relevance and materiality only upon the
appointment of a management committee, rehabilitation receiver, board or body.
Upon cursory reading of Section 6, par (c) of PD 902-A, it is adequately clear that
suspension of claims against a corporation under rehabilitation is counted or
figured up only upon the appointment of a management committee or a
rehabilitation takes effect as soon as the application or a petition for rehabilitation
is filed with the SEC may to some, be more logical and wise but unfortunately, such
is incongruent with the clear language of the law. To insist on such ruling, no matter
how practical and noble would be to encroach upon legislative prerogative to
define the wisdom of the law --- plainly judicial legislation.
Once a management committee, rehabilitation receiver, board or body is appointed
pursuant to PD 902-A, all actions for claims against a distressed corporation pending
before any court, tribunal, board or body shall be suspended accordingly;
Suspension shall not prejudice or render ineffective the status of a secured creditor
as compared to a totally unsecured creditor. What it merely provides is that all
actions for claims against the corporation, partnership or association shall be
suspended. This should give the receiver a chance to rehabilitate the corporation if
there should still be a possibility for doing so. In the event that rehabilitation is no
longer feasible and claims against the distressed corporation would eventually have
to be settled, the secured creditors shall enjoy preference over the unsecured
creditors subject only to the provisions of the Civil Code on Concurrence and
Preferences of Credit.
SOBREJUANITE vs. ASB DEV’T. CORP., G.R. No. 165675, 30 September 2005

FACTS:

On March 7, 2001, spouses Eduardo and Fidela Sobrejuanite (Sobrejuanite) filed a

Complaint for rescission of contract, refund of payments and damages, against ASB
Development Corporation (ASBDC) before the Housing and Land Use Regulatory
Board (HLURB).

Sobrejuanite alleged that they entered into a Contract to Sell with ASBDC over a
condominium unit and a parking space in the BSA Twin Tower-B Condominum
located at Bank Drive, Ortigas Center, Mandaluyong City. They averred that despite
full payment and demands, ASBDC failed to deliver the property on or before
December 1999 as agreed. They prayed for the rescission of the contract; refund of
payments amounting to P2,674,637.10; payment of moral and exemplary damages,
attorney’s fees, litigation expenses, appearance fee and costs of the suit.

ISSUE

WON the claim of rescission of contracts with damages is a claim within the
contemplation of PD 902-A

HELD

YES. The Interim Rules define a “claim” as referring to all claims or demands, of
whatever nature or character against a debtor or its property, whether for money
or otherwise. (The definition is all encompassing.)

Although the petition for rehabilitation was filed PRIOR to the effectivity of the
Interim Rules, the same would still apply pursuant to Section 1 of Rule 1 thereof.
Even under the rulings in Finasia and Arranza, the complaint for rescission with
damages would still fall under the category of a claim considering that it is for
pecuniary considerations. In this case, the HLURB gave undue preference to
Sobrejuanite over other creditors of ASB.
RUBBER world v. NLRC [G. R No. 128003, July 26, 2000]
FACTS: Petitioner Rubberworld, Inc filed with the DOLE a notice of temporary
shutdown of operation; but even before the effectivity of such, was forced to
prematurely shutdown its operation. Private Respondents filed with the NLRC a
petition for illegal dismissal and non- payment of separation pay. Rubberworld then
filed the SEC a petition for declaration of suspension of payments with a proposed
rehabilitation plan. SEC then ordered an order, stating that “all action for claims
against Rubberworld Philippines, Inc. pending before any court, tribunal, office,
board, body, Commission or sheriff are hereby deemed SUSPENDED.’’ Petitioner
submitted to the labor arbiter a motion to suspend the proceedings invoking the
SEC order. The Labor arbiter ignored the motion and thereafter rendered a decision
finding Rubberworld quality of illegal shutdown ordering it to pay separation pay;
and moral and exemplarydamages. On appeal, the NLRC affirmed the decision with
modification deleting the award for moral and exemplary damages.
ISSUE: W/N the DOLE, Labor arbiter, or NLRC may legally act on claims despite an
order of the SEC suspending all actions against a company under rehabilitation by a
management committee.
HELD: Yes. PD 902-A is clear that “ all action for claims againstcorporation,
partnerships or association under management or receivership pending before any
court, tribunal, board or body shall be suspended accordingly.’’ The law did not
make any exception in favor of labor claims. The justification for such to enable the
management committee to exercise its powers free from interference that might
hinder or prevent the “rescue’’ of the debtor company. To allow the labor case
toproceed would open the defeat the rescue effort of the management committee.
Even if an award is given, the ruling could not enforce as long as petitioner is under
management committee.
LECA REALTY CORPORATION vs. MANUELA CORPORATION
G.R. No. 166800 September 25, 2007
FACTS:
1. Manuela Corporation (Manuela) is a duly registered domestic
corporation, principally engaged in the business of leasing commercial
spaces in shopping malls to retailers. At the time, respondent owned
and operated M Star One, M Star, Starmall, Metropolis Star, and Pacific
Mall.
2. Manuela obtained several loans from two syndicates of lenders to
finance the costs of two of its buildings. Aside from its Php2.174 billion
loan from banks, the company also had Php1.476 billion indebtedness
to Hero Holdings, Inc. and its trade suppliers, and other parties.
3. The region was then beset by the 1997 Asian financial crisis which
prompted banks to stop their lending activities. This severely affected
Manuela whose malls did not operate sufficiently, causing serious
losses to the company. The adjusted interest rates on Manuela’s loans
were around 18% to 30%, which contributed to its liquidity problems.
4. The company, however, exerted all efforts to cushion the financial blow
by “closing down non-income generating businesses, concentrating on
its business of leasing commercial spaces, intensifying collection efforts,
reducing personnel, negotiating for restructuring of loan with creditors,
and working out a viable payment scheme without giving undue
preference to any creditor.” In spite of all these initiatives, Manuela still
failed to pay its financial obligations.
5. This forced the company to ask the court to issue a Stay Order and
approve its proposed Rehabilitation Plan, which if successfully
implemented will “enable it to settle its remaining obligations in an
orderly manner, restore its financial viability, and allow it to resume its
normal operations.” The trial court subsequently issued the Stay Order,
which stated:’
a) a stay in the enforcement of all claims, whether for money or
otherwise and whether such enforcement is by court action or
otherwise, against petitioner MANUELA, its guarantors and
sureties not solidarily liable with it; …
e) directing the payment in full of all administrative expenses
incurred after the issuance of this Stay Order.
6. The trial court appointed Marilou Adea as rehabilitation receiver. Adea
recommended the approval of Manuela’s Rehabilitation Plan and
convened with Manuela’s creditors for the latter to air their concerns.
7. Leca Realty Corporation (Leca) filed its Comment and/or Formal Claim
against Manuela amounting to Php193.7 million, comprised of unpaid
rentals, security deposits, interests, and penalty charges. After Leca’s
receipt of Adea’s Report and Recommendation, petitioner questioned
the reduction of Manuela’s liability, “considering its contractual nature
which cannot be impaired during the process of rehabilitation.” The
trial court eventually approved the Rehabilitation Plan. Leca’s appeal to
the Court of Appeals was dismissed for lack of merit.
8. The disagreement is grounded on the fact that the rental rates agreed
upon by Leca and Manuela were reduced in the Rehabilitation Plan.
There was a gross discrepancy between the amounts of rent agreed
upon by the parties and those provided in the Rehabilitation Plan.
9. Leca filed another petition before the appellate court alleging violation
of its constitutional right to non-impairment contract and the Interim
Rules of Procedure on Corporate Rehabilitation. The Court of Appeals,
in denying the petition, ruled:
The pendency of the rehabilitation proceedings cannot be
interpreted to impair the contractual obligations previously
entered into by the contracting parties because the automatic
stay of all actions is sanctioned by P.D. [No.] 902-A which
provides that “all actions for claims against corporations,
partnerships or associations under management or receivership
pending before any court, tribunal, board or body shall be
suspended accordingly.”
10. Thus, Leca filed a petition for review on certiorari before the Supreme
Court.
ISSUE:
Whether the pendency of the rehabilitation proceedings can justify
impairment of contractual obligations previously entered into by the
parties?
HELD:
No, the pendency of the rehabilitation plan can no justify the impairment of
contractual obligations. The amount provided in the rehabilitation plan is
null and void.
RATIO:
Petitioner, in support of its contention, cites in its Memorandum the
treatises of Ateneo Law Dean Cesar L. Villanueva and former SEC
Commissioner Danilo L. Concepcion, both known authorities on Corporation
Law. In his Article which appeared in the Ateneo Law Journal, Dean
Villanueva said:
The nature and extent of the power
of the SEC to approve and enforce a
rehabilitation plan is certainly an important
issue. Often, a rehabilitation plan would
require a diminution, if not destruction, of
contractual and property rights of some, if not
most of the various stakeholders in the
petitioning corporation. In the absence of
clear coercive legal provisions, the courts of
justice and much less the SEC would have no
power to amend or destroy the property and
contractual rights of private parties, much less
relieve a petitioning corporation from its
contractual commitments.
On the other hand, Professor Concepcion stated that what is allowed in
rehabilitation proceedings is only the suspension of payments, or the stay
of all actions for claims of distressed corporations, and upon its successful
rehabilitation, the claims must be settled in full.