MARILYN VICTORIO-AQUINO, Petitioner,

vs.

PACIFIC PLANS, INC. and MAMERTO A. MARCELO, JR. (Court-Appointed

Rehabilitation Receiver of Pacific Plans, Inc.), Respondents.

G.R. No. 193108 December 10, 2014

FACTS:

Respondent Pacific Plans, Inc. (now “APEC”) is engaged in the business of selling
pre-need plans and educational plans, including traditional open-ended educational
plans (PEPTrads). PEPTrads are educational plans where respondent guarantees to pay
the planholder, without regard to the actual cost at the time of enrolment, the full amount
of tuition and other school fees of a designated beneficiary.

Petitioner is a holder of two (2) units of respondent’s PEPTrads.

On April 7, 2005, foreseeing the impossibility of meeting its obligations to the

availing planholders as they fall due, respondent filed a Petition
for CorporateRehabilitation with the Regional Trial Court, praying that it be placed under
rehabilitation and suspension of payments. At the time of filing of the Petition
for Corporate Rehabilitation, respondent had more or less 34,000 outstanding
PEPTrads.

On April 12, 2005, the Rehabilitation Court issued a Stay Order, directing the
suspension of payments of the obligations of respondent and ordering
all creditors and interested parties to file their comments/oppositions, respectively, to
the Petition for Corporate Rehabilitation. The same Order also appointed respondent
Marcelo as the rehabilitation receiver.

Pursuant to the prevailing rules on corporate rehabilitation, respondent submitted

to the Rehabilitation Court its proposed rehabilitation plan. Under the terms thereof,
respondent proposed the implementation of a “Swap,” which will essentially give the
planholder a means to exit from the PEPTrads at terms and conditions relative to a
termination value that is more advantageous than those provided under the educational
plan in case of voluntary termination.

The rehabilitation receiver submitted an Alternative Rehabilitation Plan and was

approved by the Court. However due to the fact that the value of the Philippine Peso
strengthened and appreciated, the rehabilitation receiver submitted a Modified
Rehabilitation Plan.

ISSUE:
 Whether or not the Rehabilitation Court has the authority to sanction a
rehabilitation plan, or the modification thereof, even when the essential feature of the
plan involves forcing creditors to reduce their claims against respondent.

HELD:

YES. The Court upheld the “cram-down” power of the Rehabilitation Court
pursuant to Sec. 23 of FRIA which states that the court may approve a rehabilitation plan
over the opposition of creditors, holding a majority of the total liabilities of the debtor if,
in its judgment, the rehabilitation of the debtor is feasible and the opposition of
the creditors is manifestly unreasonable.

Moreover, notwithstanding the rejection of the Rehabilitation Plan by

the creditors, the court may confirm the Rehabilitation Plan if all of the following
circumstances are present:

http://lawtechworld.com/blog/blog/2016/04/2014-case-digest-aquino-v-pacific-plans/

BPI vs. St. Michael Medical Center,

G.R. No. 205469, March 25, 2015
FACTS: Spouses Virgilio and Yolanda Rodil (Sps. Rodil) are the owners and
sole proprietors of St. Michael Diagnostic and Skin Care Laboratory Services
and Hospital (St. Michael Hospital), a 5-storey secondary level hospital built
on their property located in Molino 2, Bacoor, Cavite. With a vision to
upgrade St. Michael Hospital into a modern, well-equipped and full service
tertiary 11-storey hospital, Sps. Rodil purchased two (2) parcels of land
adjoining their existing property and, on May 22, 2003, incorporated
SMMCI, with which entity they planned to eventually consolidate St.
Michael Hospital’s operations. SMMCI had an initial capital of
P2,000,000.00 which was later increased to P53,500,000.00, 94.49% of
which outstanding capital stock, or P50,553,000.00, was subscribed and paid
by Sps. Rodil.5
To nance the costs of building construction, SMMCI applied for a loan with
petitioner BPI Family Savings Bank, Inc. (BPI Family) which gave a credit
line of up to P35,000,000.00,7secured by a Real Estate Mortgage8 (mortgage)
over three (3) parcels of land9 belonging to Sps. Rodil, on a portion of which
stands the hospital building being constructed.
They agreed to be co-borrowers on the loan and executed and signed a
Promissory Note.
After su ering nancial losses due to problems with the rst building
contractor,12Sps. Rodil temporarily deferred the original construction plans
for the 11-storey hospital building and, instead, engaged the services of
another contractor for the completion of the remaining structural works of the
un nished building up to the 5th oor. In this regard, they spent an additional
P25,000,000.00, or a total of P55,000,000.00 for the construction. The lack of
funds for the nishing works of the 3rd, 4th and 5th oors, however, kept the new
building from becoming completely functional and, in turn, hampered the
plans for the physical transfer of St. Michael Hospital’s operations to
SMMCI. Nevertheless, using hospital-generated revenues, Sps. Rodil were
still able to purchase new equipment and machinery for St. Michael Hospital.
BPI Family demanded immediate payment of the entire loan obligation15and,
soon after, led a petition for extrajudicial foreclosure16 of the real properties
covered by the mortgage. The auction sale was scheduled on December 11,
2009, which was postponed to February 15, 2010 with the conformity of BPI
Family.
SMMCI led a Petition for Corporate Rehabilitation. SMMCI claimed that it
had to defer the construction of the projected 11-storey hospital building due
to the problems it had with its rst contractor as well as the rise of the cost of
construction materials. As of date, only two (2) oors of the new building are
functional, in which some of the operations of St. Michael had already been
transferred.
RTC approved the Rehabilitation Plan with the modi cations recommended
by the Rehabilitation Receiver. CA a rmed the RTC’s approval of the
Rehabilitation Plan.
ISSUE: WON the CA correctly a rmed SMMCI’s Rehabilitation Plan as
approved by the RTC.
HELD: YES.
Restoration is the central idea behind the remedy of corporate rehabilitation.
In common parlance, to “restore” means “to bring back to or put back into a
former or original state.”42 Case law explains that corporate rehabilitation
contemplates a continuance of corporate life and activities in an e ort to
restore and reinstate the corporation to its former position of successful
operation and solvency, the purpose being to enable the company to gain
a new lease on life and allow its creditors to be paid their claims out of its
earnings.43 Consistent therewith is the term’s statutory de nition under
Republic Act No. 10142,44 otherwise known as the “Financial Rehabilitation
and Insolvency Act of 2010” (FRIA).
In other words, rehabilitation assumes that the corporation has been
operational but for some reasons like economic crisis or mismanagement
had become distressed or insolvent, i.e., that it is generally unable to pay its
debts as they fall due in the ordinary course of business or has liability that
are greater than its assets.45 Thus, the basic issues in rehabilitation
proceedings concern the viability and desirability of continuing the business
operations of the distressed corporation,46 all with a view of e ectively
restoring it to a state of solvency or to its former healthy nancial condition
through the adoption of a rehabilitation plan.
In this case, it cannot be said that the petitioning corporation, SMMCI, had
been in a position of successful operation and solvency at the time the
Rehabilitation Petition was led on August 11, 2010. While it had indeed
“commenced business” through the preparatory act of opening a credit line
with BPI Family to nance the construction of a new hospital building for its
future operations, SMMCI itself admits that it has not formally operated nor
earned any income since its incorporation. This simply means that there
exists no viable business concern to be restored. Perforce, the remedy of
corporate rehabilitation is improper, thus rendering the dispositions of the
courts a quo in rm.
A material nancial commitment becomes signi cant in gauging the resolve,
determination, earnestness and good faith of the distressed corporation in
nancing the proposed rehabilitation plan. This commitment may include the
voluntary undertakings of the stockholders or the would-be investors of the
debtor- corporation indicating their readiness, willingness and ability to
contribute funds or property to guarantee the continued successful
operation of the debtor corporation during the period of
rehabilitation.50cralawred
In this case, aside from the harped on merger of St. Michael Hospital with
SMMCI, the only proposed source of revenue the Rehabilitation Plan
suggests is the capital which would come from SMMCI’s potential investors,
which negotiations are merely pending. Evidently, both propositions
commonly border on the speculative and, hence, hardly t the description of a
material nancial commitment which would inspire con dence that the
rehabilitation would turn out to be successful.
https://www.scribd.com/archive/plans?doc=310325030&metadata=%7B%22context%22%3A%
22archive_view_restricted%22%2C%22page%22%3A%22read%22%2C%22action%22%3A%2
2download%22%2C%22logged_in%22%3Atrue%2C%22platform%22%3A%22web%22%7D

G.R. No. 187581 October 20, 2014

PHILIPPINE BANK OF COMMUNICATIONS,
Petitioner,
 vs.
 BASIC POLYPRINTERS AND PACKAGING
CORPORATION, Respondent.
BERSAMIN, J.:
DECISION
FACTS:

Respondent Basic Polyprinters and Packaging Corporation (Basic

Polyprinters) was a

domestic corporation engaged in the business of printing greeting

cards, gift wrappers, gift bags,

calendars, posters, labels and other novelty items.

Basic Polyprinters, along with the eight other corporations belonging
to the Limtong Group of
Companies filed a joint petition for suspension of paymentswith
approval of the proposed
rehabilitation in the RTC (docketed as SEC Case No. 031-04). 4

The RTC issued a stay order, and

eventually approved the rehabilitation plan, but the CA reversed the

RTC on October 25, 2005, 5

and
directed the petitioning corporations tofile their individual petitions for
suspension of payments and
rehabilitation in the appropriate courts.

Basic Polyprinters brought its individual petition, 6

averring therein that: (a) its business since

incorporation had been very viable and financially profitable; (b) it had
obtained loans from various
banks, and had owed accounts payable to various creditors; (c) the
Asian currency crisis,
devaluation of the Philippine peso, and the current state of affairs of
the Philippine economy, coupled
with: (i) high interest rates, penalties and charges by its creditors; (ii)
low demand for gift items and
cards due to the economic recession and the use of cellular phones;
(iii) direct competition from
stores like SM, Gaisano, Robinson and other malls; and (iv) the fire of
July 19, 2002 that had

destroyed its warehouse containing inventories worth

P
264,000,000.00, resulting in difficulty of

meeting its obligations; (d) its operations would be hampered and

would render rehabilitation difficult
should its creditors enforce their claims through legal actions,
including foreclosure proceedings; (e)
included in its overall Rehabilitation Program was the full payment of
its outstanding loans in favor of
petitioner Philippine Bank of Communications (PBCOM), RCBC, Land
Bank, EPCI Bank and AUB
via repayment over 15 years with moratorium of two-years for the
interestand five years for the
principal at 5% interest per annumand a dacion en pagoof its affiliate
property in favor of EPCI Bank;
and (f) its assets worth
15,374,654.00 with net liabilities amounting to
13,031,438.00. 7

PP

RTC issued the stay order dated August 31, 2006. 8

It appointed Manuel N. Cacho III as the

rehabilitation receiver, and required all creditors and interested

parties, including the Securities and
Exchange Commission (SEC), to file their comments.

After the initial hearing and evaluation of the comments and opposition
of the creditors, including

PBCOM, the RTC gave due course to the petition and referred it to the
rehabilitation receiver for

evaluation and recommendation.

RTC issued an order approving the rehabilitation plan. CA affirmed the questioned
RTC,

agreeing with the finding of the rehabilitation receiver that there were sufficient evi
and

actual opportunities in the rehabilitation plan indicating that Basic

Polyprinters could be successfully

rehabilitated in due time.

ISSUE: Whether the approval of the rehabilitation plan was proper.
HELD: APPROPRIATE.
Rehabilitation is the process of restoring "the debtor to a position of
successful operation and
solvency, if it is shown that its continuance of operation is
economically feasible and its creditors can
recover by way of the present value of payments projected in the plan
more if the corporation

continues as a going concern that if it is immediately liquidated."

ofcorporate life and activities in an effort to restore and reinstate the
corporation to its former position
21

It contemplates a continuance
of successful operation and solvency.

Republic Act No. 10142 (Financial Rehabilitation and Insolvency Act

(FRIA) of 2010), a law that is applicablehereto, 26

hasdefinedacorporatedebtorasacorporationdulyorganizedandexisting
underPhilippinelawsthathasbecomeinsolvent. 27

TheterminsolventisdefinedinRepublicActNo. 10142 as "the financial

condition of a debtor that is generally unable to pay its or his liabilities
as they fall due in the ordinary course of business or has liabilities that
are greater than its or his assets."28

As such, the contention that rehabilitation becomes inappropriate

because of the perceived insolvency of BasicPolyprinters was
incorrect.

A material financial commitment becomes significant in gauging the

resolve, determination,
earnestness and good faith ofthe distressed corporation in financing
the proposed rehabilitation

plan.
30

This commitment may include the voluntary undertakings ofthe

stockholders or the would-be

investors of the debtor-corporation indicating their readiness,

willingness and ability to contribute
funds or property to guarantee the continued successful operation of
the debtor corporation during
the period of rehabilitation.

The commitment to add

10,000,000.00 working capital appeared to be doubtful considering
that
the insurance claim from which said working capital would be sourced
had already been written-off

by Basic Polyprinters’s affiliate, Wonder Book Corporation.

34

A claim that has been written-off is

considered a bad debt or a worthless asset,

35

and cannot be deemed a material financial

commitment for purposes of rehabilitation. At any rate, the proposed

additional
P
10,000,000.00

working capital was insufficient to cover at least half ofthe

shareholders’ deficit that amounted
23,316,044.00 as of June 30, 2006.

P
to P
We observe, too, that Basic Polyprinters’s proposal to enter into the
dacion en pagoto create a source of "fresh capital" was not feasible
because the object thereof would not be its own property but one
belonging to its affiliate, TOL Realty and Development Corporation, a
corporation also undergoing rehabilitation. Moreover, the negotiations
(for the return of books and magazines from Basic Polyprinters’s trade
creditors) did not partake of a voluntary undertaking because no
actual financial commitments had been made thereon.
Worthy of note here is that Wonder Book Corporation was a sister
company of Basic Polyprinters, being one of the corporations that had
filed the joint petition for suspension of payments and rehabilitation in
SEC Case No. 031-04 adverted to earlier. Both of them submitted
identical
commitments in their respective rehabilitation plans. As a result, as
the Court observed in Wonder Book, the commitments by Basic
37

Polyprinters could not be considered as firm assurances that could

convince creditors, future investors and the general public of its
financial and operational viability.
https://www.scribd.com/document/310433136/Philippine-Bank-of-Communications-vs-Basic-
Polyprinters

Viva Shipping Lines, Inc. v. Keppel Philippines, Inc. et. al. G.R. No. 177382, February 17, 2016, Leonen,
J:

Facts: On October 4, 2005, Viva Shipping Lines, Inc. (Viva Shipping Lines) filed a Petition for Corporate
Rehabilitation before the Regional Trial Court of Lucena City. The Regional Trial Court initially denied the
Petition for failure to comply with the requirements in Rule 4, Sections 2 and 3 of the Interim Rules of
Procedure on Corporate Rehabilitation. On October 17, 2005, Viva Shipping Lines filed an Amended
Petition. In the Amended Petition, Viva Shipping Lines claimed to own and operate 19 maritime vessels5
and Ocean Palace Mall, a shopping mall in downtown Lucena City. Viva Shipping Lines also declared its
total properties’ assessed value at about ₱45,172,790.00. However, these allegations were contrary to
the attached documents in the Amended Petition.

One of the attachments, the Property Inventory List, showed that Viva Shipping Lines owned only two (2)
maritime vessels: M/V Viva Peñafrancia V and M/V Marian Queen. The list also stated that the fair market
value of all of Viva Shipping Lines’ assets amounted to ₱447,860,000.00, ₱400 million more than what
was alleged in its Amended Petition. Some of the properties listed in the Property Inventory List were
already marked as "encumbered" by its creditors; hence, only ₱147,630,000.00 of real property and its
vessels were marked as "free assets." In its Company Rehabilitation Plan, Viva Shipping Lines
enumerated possible sources of funding such as the sale of old vessels and commercial lots of its sister
company, Sto. Domingo Shipping Lines. It also proposed the conversion of the Ocean Palace Mall into a
hotel, the acquisition of two (2) new vessels for shipping operations, and the "re-operation" of an oil mill in
Buenavista, Quezon.

On October 19, 2005, the Regional Trial Court found that Viva Shipping Lines’ Amended Petition to be
"sufficient in form and substance," and issued a stay order. It stayed the enforcement of all monetary and
judicial claims against Viva Shipping Lines, and prohibited Viva Shipping Lines from selling, encumbering,
transferring, or disposing of any of its properties except in the ordinary course of business. Thereafter,
several of the creditors of Viva Shipping Lines (including emplloyees) came out. The RTC then lifted the
stay order and denied Viva Shiping Lines’ petition. Page 191 of 195

MERCANTILE LAW DIGESTS 2014-June 2016 The Regional Trial Court found that Viva Shipping Lines’
assets all appeared to be nonperforming. Further, it noted that Viva Shipping Lines failed to show any
evidence of consent to sell real properties belonging to its sister company. Aggrieved, Viva Shipping
Lines filed a Petition for Review under Rule 43 of the Rules of Court before the Court of Appeals. The
Court of Appeals dismissed Viva Shipping Lines’ Petition for Review in the Resolution dated January 5,
2007. It found that Viva Shipping Lines failed to comply with procedural requirements under Rule 43. The
Court of Appeals ruled that due to the failure of Viva Shipping Lines to implead its creditors as
respondents, "there are no respondents who may be required to file a comment on the petition, pursuant
to Section 8 of Rule 43."

Petitioner argues that the Court of Appeals should have given due course to its Petition and excused its
non-compliance with procedural rules. For petitioner, the Interim Rules of Procedure on Corporate
Rehabilitation mandates a liberal construction of procedural rules, which must prevail over the strict
application of Rule 43 of the Rules of Court. Issue:

1. Whether the Court of Appeals erred in dismissing petitioner Viva Shipping Lines’ Petition for Review on
procedural grounds; and 2. Whether petitioner was denied substantial justice when the Court of Appeals
did not give due course to its petition.

Held:

1. No. The Court held that it cannot exercise its equity jurisdiction and allow petitioner to circumvent the
requirement to implead its creditors as respondents. Tolerance of such failure will not only be unfair to the
creditors, it is contrary to the goals of corporate rehabilitation, and will invalidate the cardinal principle of
due process of law. The failure of petitioner to implead its creditors as respondents cannot be cured by
serving copies of the Petition on its creditors. Since the creditors were not impleaded as respondents, the
copy of the Petition only serves to inform them that a petition has been filed before the appellate court.
Their participation was still significantly truncated. Petitioner’s failure to implead them deprived them of a
fair hearing. The appellate court only serves court orders and processes on parties formally named and
identified by the petitioner. Since the creditors were not named as respondents, they could not receive
court orders prompting them to file remedies to protect their property rights. 2. No. Petitioner’s
rehabilitation plan is almost impossible to implement. Even an ordinary individual with no business
acumen can discern the groundlessness of petitioner’s rehabilitation plan. Petitioner should have
presented a more realistic and practicable rehabilitation plan within the time periods allotted after initiatory
hearing, or otherwise, should have opted for liquidation. Corporate rehabilitation is a remedy for
corporations, partnerships, and associations "who [foresee] the impossibility of meeting [their] debts when
they respectively fall due." A corporation under rehabilitation continues with its corporate life and activities
to achieve solvency, or a position where the corporation is able to pay its obligations as they fall due in
the ordinary course of business. Solvency is a state where the businesses’ liabilities are less than its
assets. Corporate rehabilitation is a type of proceeding available to a business that is insolvent. In
general, insolvency proceedings provide for predictability that commercial obligations will be met despite
business downturns. Stability in the economy results when there is assurance to the investing public that
obligations will be reasonably paid. It is considered state policy to encourage debtors, both juridical and
natural persons, and their creditors to collectively and realistically resolve and adjust competing claims
and property rights[.] . . . [R]ehabilitation or liquidation shall be made with a view to ensure or maintain
certainty and predictability in commercial affairs, preserve and maximize the value of the assets of these
debtors, recognize creditor rights and respect priority of claims, and ensure equitable treatment of
creditors who are similarly situated. When rehabilitation is not feasible, it is in the interest of the State to
facilitate a speedy and orderly liquidation of these debtors’ assets and the settlement of their obligations.
The rationale in corporate rehabilitation is to resuscitate businesses in financial distress because "assets .
. . are often more valuable when so maintained than they would be when liquidated." Rehabilitation
assumes that assets are still serviceable to meet the purposes of the business. The corporation receives
assistance from the court and a disinterested rehabilitation receiver to balance the interest to recover and
continue ordinary business, all the while attending to the interest of its creditors to be paid equitably.
These interests are also referred to as the rehabilitative and the equitable purposes of corporate
rehabilitation. Rather than let struggling corporations slip and vanish, the better option is to allow
commercial courts to come in and apply the process for corporate rehabilitation.

https://edoc.site/pals-bar-ops-2017-mercantile-law-case-digests-2014-june-2016-pdf-free.html

LINGKOD MANGGAGAWA SA RUBBERWORLD v. RUBBERWORLD, GR NO. 153882, 2007-01-29

Facts:
On August 26, 1994, Rubberworld filed with the Department of Labor and Employment (DOLE) a
Notice of Temporary Partial Shutdown due to severe financial crisis, therein announcing the formal
actual company shutdown to take effect on September 26, 1994. A copy of said... notice was
served on the recognized labor union of Rubberworld, the Bisig Pagkakaisa-NAFLU, the union with
which the corporation had a collective bargaining agreement.
On September 1, 1994, Bisig Pagkakaisa-NAFLU staged a strike. It set up a picket line in front of
the premises of Rubberworld and even welded its gate. As a result, Rubberworld's premises closed
prematurely even before the date set for the start of its temporary... partial shutdown.
On September 9, 1994, herein petitioner union, the Lingkod Manggagawa Sa Rubberworld,
Adidas-Anglo (Lingkod, for brevity), represented by its President, Sonia Esperanza, filed a
complaint against Rubberworld and its Vice Chairperson, Mr. Antonio Yang, for unfair... labor
practice (ULP), illegal shutdown, and non-payment of salaries and separation pay. In its
complaint... petitioner union alleged that it had filed a petition for certification... election during
the freedom period, which petition was granted by the DOLE Regional Director. In the same
complaint, petitioner union claimed that the strike staged by Bisig Pagkakaisa-NAFLU was
company-instigated/supported.
On November 22, 1994
Rubberworld filed with the SEC a Petition for Declaration of a State of Suspension of Payments
with Proposed Rehabilitation Plan. The petition... was granted by the SEC... in its Order[3] dated
December 28, 1994, to wit:
Accordingly, with the creation of the Management Committee, all actions for claims against
Rubberworld Philippines, Inc. pending before any court, tribunal, office, board, body, Commission
or sheriff are hereby deemed SUSPENDED.
Notwithstanding the SEC's aforementioned suspension order and despite Rubberworld's
submission on January 10, 1995 of a Motion to Suspend Proceedings,[4] Labor Arbiter Dinopol
went ahead with the ULP case and rendered his decision[5] thereon on August 16, 1995,... thus:
1. denying respondents motion to suspend proceedings;
2. declaring respondent Rubberworld Phils., Inc. to have committed unfair labor practice;
3. ordering respondent Rubberworld Phils., Inc. to reinstate complainant-Union's members
4. ordering respondent Rubberworld Phils., Inc. to pay the members of the complainant-
Union their backwages
On September 21, 1995, Rubberworld went on appeal to the NLRC, posting therefor a temporary
appeal bond in the amount of P500,000.00 as tentatively fixed by the Labor Arbiter. Meanwhile, on
October 10, 1995, Ricardo Atienza of the NLRC's Research and Information Unit submitted... his
report on the computation of the monetary awards, as ordered by the Labor Arbiter. He came out
with the total amount of Twenty Seven Million Five Hundred Six Thousand and Two Hundred Fifty-
Five Pesos and 70/100 (P27,506,255.70). Despite Rubberworld's vigorous opposition, the
First Division of the NLRC, in its Order[6] of January 22, 1996, required the corporation to post an
appeal bond in an amount equivalent to Mr. Atienza's computation, with a warning that failure to
do so shall result in the... dismissal of its appeal for non-perfection... on account of Rubberworld's
failure to upgrade or complete its appeal bond as indicated in the NLRC's January 22, 1996 Order,
the Commission, in a decision[9] dated June 28, 1996, did dismiss Rubberworld's appeal. Owing to
this development,... Rubberworld filed with the Court a Supplemental Petition for Certiorari,[10]
therein incorporating its challenge to the said dismissal order of the NLRC, contending that the
labor tribunal acted without or in excess of jurisdiction.
On April 22, 1998, the SEC issued an Order[11] declaring Rubberworld as dissolved and lifting its
earlier suspension order
On August 18, 1995, a writ of execution[12] was issued by the NLRC in favor of the petitioner union
with a copy thereof served on the respondent corporation.
On February 8, 1999, Rubberworld filed with the Court a Motion to Admit its Amended Petition for
Certiorari[13] and its Supplement,[14] alleging therein that pursuant to the SEC Order dated
December 28, 1994,... supra, the proceedings before the Labor Arbiter should have been
suspended. Hence, since the Labor Arbiter disregarded the SEC's suspension order, the subsequent
proceedings before it were null and void.
Consistent with its ruling in St. Martin Funeral Homes v. NLRC,[15] the Court, in its Resolution of
February 29, 1999, referred Rubberworld's amended petition for certiorari and its supplement to
the CA for appropriate action... the CA, in its Resolution[16] of May 11, 2000, over the vehement
opposition of the petitioner union, resolved to admit Rubberworld's aforementioned amended
petition and the supplement thereto "in the interest of justice."
Eventually, in the herein assailed Decision[17] dated January 18, 2002, the CA granted
Rubberworld's petition in CA G.R. SP. No. 53356 on the finding that the Labor Arbiter had indeed
committed grave abuse of discretion when it proceeded with... the ULP case despite the SEC's
suspension order of December 28, 1994, and accordingly declared the proceedings before it,
including the subsequent orders by the NLRC dismissing Rubberworld's appeal and the writ of
execution, null and void.
Issues:
1. Whether the CA had committed grave abuse of discretion amounting to lack of jurisdiction
or an excess in the exercise thereof when it gave due course to the petition filed by
Rubberworld (Phils.), Inc. and annulled and set aside the decisions rendered by the labor...
arbiter a quo and the NLRC, when the said decisions had become final and executory
warranting the outright dismissal of the aforesaid petition;
2. Whether the CA had committed grave abuse of discretion and reversible error when it
applied Section 5(d) and Section 6 (c) of P.D. No. 902-A, as amended, to the case at bar;
3. Whether the CA had committed reversible error when it adopted and applied the rulings in
the cases of Rubberworld (Phils.), Inc., or Julie Yap Ong v. NLRC, Marilyn F. Arellano, et.
al.[19] and Rubberworld (Phils.), Inc. and Julie Y.
Ong v. NLRC, Aquino Magsalin, et. al.[20] to the case at bar.
Ruling:
Given the factual milieu obtaining in this case, it cannot be said that the decision of the Labor
Arbiter, or the decision/dismissal order and writ of execution issued by the NLRC, could ever attain
final and executory status. The Labor Arbiter completely disregarded and... violated Section 6(c) of
Presidential Decree 902-A, as amended, which categorically mandates the suspension of all actions
for claims against a corporation placed under a management committee by the SEC. Thus, the
proceedings before the Labor Arbiter and the order and writ... subsequently issued by the NLRC
are all null and void for having been undertaken or issued in violation of the SEC suspension Order
dated December 28, 1994. As such, the Labor Arbiter's decision, including the dismissal by the
NLRC of Rubberworl's appeal, could not have achieved... a final and executory status.
As correctly ruled by the CA, the issue of applicability in labor cases of the aforequoted provisions
of PD 902-A, as amended, had already been resolved by this Court in its earlier decisions in
Rubberworld (Phils.), Inc., or Julie Yap Ong v. NLRC, Marilyn F. Arellano, et.
al.[27] and Rubberworld (Phils.), Inc. and Julie Y. Ong v. NLRC, Aquino, Magsalin, et. al,[28] supra.
In the first Rubberworld case, the Court upheld the applicability of PD 902-A to labor cases
pursuant to Section 5(d) and Section 6(c) thereof
The law is clear: upon the creation of a management committee or the appointment of a
rehabilitation receiver, all claims for actions "shall be suspended accordingly." No exception in
favor of labor claims is mentioned in the law. Since the law... makes no distinction or exemptions,
neither should this Court. Ubi lex non distinguit nec nos distinguere debemos.
In Chua v. National Labor Relations Commission, we ruled that labor claims cannot proceed
independently of a bankruptcy liquidation proceeding, since these claims "would spawn needless
controversy, delays, and confusion."[31] With more... reason, allowing labor claims to continue in
spite of a SEC suspension order in a rehabilitation case would merely lead to such results.
http://lawyerly.ph/digest/c9f5f?user=704

G.R. No. 164856 August 29, 2007 JUANITO A. GARCIA and ALBERTO J. DUMAGO, Petitioners, vs.
PHILIPPINE AIRLINES, INC., Respondent. QUISUMBING,
J.:
Facts: Petitioners Alberto J. Dumago and Juanito A. Garcia were employed by respondent PAL
as Aircraft Furnishers Master "C" and Aircraft Inspector, respectively. They were assigned in the
PAL Technical Center. A Notice of Administrative Charge was served on petitioners. They were
allegedly "caught in the act of sniffing shabu inside the Toolroom Section," then placed under
preventive suspension. Petitioners vehemently denied the allegations. Petitioners were
dismissed for violation of the PAL Code of Discipline. Both simultaneously filed a case for illegal
dismissal and damages.
In the meantime, the SEC placed PAL under an Interim Rehabilitation Receiver due to severe
financial losses.
The Labor Arbiter rendered a decision in peti
tioners’ favor
finding PAL guilty of illegal suspension and illegal dismissal and ordering them to reinstate
complainants to their former position without loss of seniority rights and other privileges and to
pay jointly and severally unto the complainants backwages, 13
th
month pay
and damages and attorney’s fees.

Meanwhile, the SEC replaced the Interim Rehabilitation Receiver with a Permanent
Rehabilitation Receiver.
The Labor Arbiter issued a Writ of Execution and a Notice of Garnishment. PAL moved to quash
the Writ of Execution and to lift the Notice of Garnishment. NLRC declared the Writ of
Execution and Notice of Garnishment valid but suspended the said proceedings and referred
the same to the Receiver of PAL for appropriate action. Issue:
Whether petitioners are entitled to execution of the Labor Arbiter’s order
of reinstatement even if PAL is under receivership. Held: No, Since
petitioners’ claim against PAL is a money claim for their wages during the pendency of PAL’s
appeal to the
NLRC, the same should have been suspended pending the rehabilitation proceedings. The Labor
Arbiter, the NLRC, as well as the Court of Appeals shoul
d have abstained from resolving petitioners’ case for illegal dismissal and should instead have
directed them to lodge their claim before PAL’s receiver.
Upon appointment by the SEC of a rehabilitation receiver, all actions for claims against the
corporation pending before any court, tribunal or board shall ipso jure be suspended. The
purpose of the automatic stay of all pending actions for claims is to enable the rehabilitation
receiver to effectively exercise its/his powers free from any judicial or extra- judicial
interference that might unduly hinder or prevent the rescue of the corporation. More
importantly, the suspension of all actions for claims against the corporation embraces all
phases of the suit, be it before the trial court or any tribunal or before this Court. No other
action may be taken, including the rendition of judgment during the state of suspension. It
must be stressed that what are automatically stayed or suspended are the proceedings of a suit
and not just the payment of claims during the execution stage after the case had become final
and executory. Furthermore, the actions that are suspended cover all claims against the
corporation whether for damages founded on a breach of contract of carriage, labor cases,
collection suits or any other claims of a pecuniary nature.
19
No exception in favor of labor claims is mentioned in the law.

https://www.scribd.com/document/211442449/Garcia-vs-PAL

Jose Marcel Panlilio, et. al. v. RTC Br. 51, et. al. G.R. No. 173846; February
2, 2011
Facts:

Petitioners were corporate officers of Silahis International Hotel Inc. (SIHI)

who were charged with violation of the SSS law in relation to the Revised
Penal Code. The criminal case was raffled in RTC Br 51.

Meanwhile, a petition for suspension of payments and rehabilitation was

pending in RTC Br 24. SIHI's petition was granted and a suspension order
was issued by RTC Br 24, staying all claims against SIHI.

On the basis of RTC 24's order, petitioners now claim that the proceeding
before RTC Br 51 should be suspended.

RTC Br 51 denied the petitioners' motion and ruled that the stay order does
not include the suspension of criminal proceedings. This decision was
affirmed by the CA. Hence, this case.

Issue:

Whether or not the stay order stays criminal cases

Held:

No. Section 18 of FRIA explicitly provides that criminal actions against the
individual officer of a corporation are not subject to the Stay or Suspension
Order in rehabilitation proceedings.

The prosecution of the officers of the corporation has no bearing on the

pending rehabilitation of the corporation, especially since they are charged in
their individual capacities. Such being the case, the purpose of the law for
the issuance of the stay order is not compromised, since the appointed
rehabilitation receiver can still fully discharge his functions as mandated by
law. It bears to stress that the rehabilitation receiver is not charged to
defend the officers of the corporation. If there is anything that the
rehabilitation receiver might be remotely interested in is whether the court
also rules that petitioners are civilly liable.

Such a scenario, however, is not a reason to suspend the criminal

proceedings, because as aptly discussed inRosario, should the court
prosecuting the officers of the corporation find that an award or
indemnification is warranted, such award would fall under the category of
claims, the execution of which would be subject to the stay order issued by
the rehabilitation court. The penal sanctions as a consequence of violation of
the SSS law, in relation to the revised penal code can therefore be
implemented if petitioners are found guilty after trial. However, any civil
indemnity awarded as a result of their conviction would be subject to the
stay order issued by the rehabilitation court. Only to this extent can the
order of suspension be considered obligatory upon any court, tribunal,
branch or body where there are pending actions for claims against the
distressed corporation.

http://heyitsmm.blogspot.com/2017/12/philippine-education-co-inc-v-mauricio.html

Spouses Sobrejuanite
v.
ASB Development Corp., G.R. No. 165675

FACTS OF THE CASE

1. 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).

2. 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.

3. ASBDC filed a motion to dismiss or suspend proceedings in view

of the approval by the Securities and Exchange Commission (SEC)
on April 26, 2001 of the rehabilitation plan of ASB Group of
Companies, which includes ASBDC, and the appointment of a
rehabilitation receiver. The HLURB arbiter however denied the
motion and ordered the continuation of the proceedings.

ISSUE:
Whether the SEC’s approval of the corporate rehabilitation plan
has the effect of suspending the proceeding before HLURB.

RULING:
Yes. Section 6(c) of PD No. 902-A empowers the SEC:

c) To appoint one or more receivers of the property, real and

personal, which is the subject of the action pending before the
Commission … whenever necessary in order to preserve the rights
of the parties-litigants and/or protect the interest of the investing
public and creditors: … 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 associations under management or receivership
pending before any court, tribunal, board or body shall be
suspended accordingly.
The purpose for the suspension of the proceedings is to prevent a
creditor from obtaining an advantage or preference over another
and to protect and preserve the rights of party litigants as well as
the interest of the investing public or creditors. Such suspension is
intended to give enough breathing space for the management
committee or rehabilitation receiver to make the business viable
again, without having to divert attention and resources to litigations
in various fora.

The suspension would enable the management committee or

rehabilitation receiver to effectively exercise its/his powers free
from any judicial or extra-judicial interference that might unduly
hinder or prevent the “rescue” of the debtor company.

To allow such other action to continue would only add to the burden
of the management committee or rehabilitation receiver, whose
time, effort and resources would be wasted in defending claims
against the corporation instead of being directed toward its
restructuring and rehabilitation.
http://joparcon.blogspot.com/2015/10/spouses-sobrejuanite-v-asb-devt-corp.html

Metropolitan Waterworks and Sewerage

System V. Hon. Reynaldo B. Daway G.R.
No. 160732. June 21, 2004
MARCH 15, 2014LEAVE A COMMENT
The prohibition under Sec 6 (b) of Rule 4 of the Interim Rules does not apply to the the standby
letter of credit issued by the bank as the former prohibition is on the enforcement of claims
against guarantors or sureties of the debtors whose obligations are not solidary with the debtor.
The concept of guarantee vis-à-vis the concept of an irrevocable letter of credit are inconsistent with
each other. The guarantee theory destroys the independence of the bank’s responsibility from the
contract upon which it was opened and the nature of both contracts is mutually in conflict with each
other. A Standby Letter of Credit is not a guaranty because under a Standby Letter of Credit, the
bank undertakes a primary obligation. On the other hand, a guarantor undertakes a collateral
obligation which arises only upon the debtor’s default. A Standby Letter of Credit is a primary
obligation and not an accessory contract.
Facts: Maynilad obtained a 20-year concession to manage, repair, refurbish, and upgrade existing
Metropolitan Waterworks and Sewerage System (MWSS) water delivery and sewerage services in
Metro Manila’s west zone. Maynilad, under the concession agreement undertook to pay concession
fees and itsforeign loans. To secure its obligations, Maynilad was required under Section 9 of the
concession contract to put up a bond, bank guarantee or other security acceptable to MWSS. Pursuant
to this requirement, Maynilad arranged on for a three-year facility with a number of foreign banks led
by Citicorp Intl for the issuance of an irrevocable standby letter of credit (SLC) in the amount of $ 120
million in favor of MWSS for the full and prompt payment of Maynilad’s obligations to MWSS. Due
to devaluation of the peso and other business reversals of Maynilad, MWSS filed a notice of early
termination of the concession contract. Upon certification of the non performance of Maynilad
obligation, the MWSS moved to collect from Citicorp on the standby letters of credit issued. Maynilad
filed for corporate rehabilitation. Judge Daway stayed the payment of the letter of credit by Citicorp
pursuant to Sec 6 (b) of Rule 4 of the Interim Rules on Corporate Rehabilitation.

Issue: Whether or not the payment of the standby of letter of credit can be stayed by filing of a petition
for rehabilitation

Held: No. The prohibition under Sec 6 (b) of Rule 4 of the Interim Rules does not apply to the the
standby letter of credit issued by the bank as the former prohibition is on the enforcement of claims
against guarantors or sureties of the debtors whose obligations are not solidary with the debtor.

The participating bank’s obligation under the letter of credit are solidary with respondent Maynilad in
that it is a primary, direct, definite and an absolute undertaking to pay and is not conditioned on the
prior exhaustion of the debtors assets. These are the same characteristics of a surety or solidary obligor.
And being solidary, the claims against them can be pursued separately from and independently of the
rehabilitation case.

Issuing banks under the letters of credit are not equivalent to guarantors. The concept of guarantee vis-
à-vis the concept of an irrevocable letter of credit are inconsistent with each other. The guarantee
theory destroys the independence of the bank’s responsibility from the contract upon which it was
opened and the nature of both contracts is mutually in conflict with each other. In contracts of
guarantee, the guarantor’s obligation is merely collateral and it arises only upon the default of the
person primarily liable. On the other hand, in an irrevocable letter of credit, the bank undertakes a
primary obligation. We have also defined a letter of credit as an engagement by a bank or other person
made at the request of a customer that the issuer shall honor drafts or other demands of payment upon
compliance with the conditions specified in the credit.

A Standby Letter of Credit is not a guaranty because under a Standby Letter of Credit, the bank
undertakes a primary obligation. On the other hand, a guarantor undertakes a collateral obligation
which arises only upon the debtor’s default. A Standby Letter of Credit is a primary obligation and
not an accessory contract.

https://lexmercatoriaphilippines.wordpress.com/2014/03/15/metropolitan-waterworks-and-
sewerage-system-v-hon-reynaldo-b-daway-g-r-no-160732-june-21-2004/
BUREAU OF INTERNAL REVENUE, ASSISTANT COMMISSIONER
ALFREDO V. MISAJON, GROUP SUPERVISOR ROLANDO M. BALBIDO,
and EXAMINER REYNANTE DP. MARTIREZ, Petitioners, vs. LEPANTO
CERAMICS, INC., Respondent. (G.R. No. 224764; April 24, 2017)

Lepanto Ceramics, Inc. (LCI) filed a petition for corporate rehabilitation under RA
10142 with the RTC in Calamba City. Aside from financial difficulties, the petition
for rehab also alleged LCI's tax liability at 6.3 million pesos. The Rehabilitation
(Rehab Court) issued a Commencement Order (Order).

The Order declared LCI under rehab and suspended all actions or proceedings, in
court or otherwise, for the enforcement of claims against LCI. It also directed the BIR
to file and serve on LCI its comment or opposition to the petition, or its claims against
LCI.

Despite this, petitioners, acting as Assistant Commissioner, Group Supervisor, and

Examiner, sent LCI a notice of informal conference, informing the latter of its tax
liabilities for the fiscal year ending June 30, 2010. Despite receiving LCI's letter-reply
regarding the pendency of a rehab proceeding, the BIR sent LCI a Formal Letter of
Demand.

A petition for indirect contempt of court was filed by LCI against petitioners for
defying the Order. In their defense, petitioners insist that the issue has already become
moot and academic because, in the meantime, LCI had already been declared
rehabilitated. Also, petitioners argue that their acts do not amount to a defiance of the
Commencement Order as it was done merely to toll the prescriptive period in
collecting deficiency taxes, that their acts of sending a Notice of Informal Conference
and Formal Letter of Demand do not amount to a "legal action or other recourse"
against LCI outside of the rehabilitation proceedings and that the indirect contempt
proceedings interferes with the exercise of their functions to collect taxes due to the
govenment.

ISSUE: Are petitioners guilty of indirect contempt for issuing a notice of

informal conference despite the fact that they simple wanted to toll the
prescriptive period and considering the lifeblood doctrine?

Yes, they are guilty of indirect contempt.

According to RA 10142, upon the issuance of a commencement order, the distressed

corporation shall be temporarily immune from the enforcement of all claims against it,
including all claims of the government, whether national or local, including taxes,
tariffs and customs duties.

To clarify, however, creditors of the distressed corporation are not without remedy as
they may still submit their claims to the rehabilitation court for proper consideration
so that they may participate in the proceedings, keeping in mind the general policy of
the law.

Petitioners' act of issuing a notice of informal conference and later a formal letter of
demand, all despite the written reminder by LCI regarding the pendency of the rehab
proceeding, is in clear defiance of the Commencement Order.

As aptly put by the RTC Br. 35, they could have easily tolled the running of such
prescriptive period, and at the same time, perform their functions as officers of the
BIR, without defying the Commencement Order and without violating the laudable
purpose of RA 10142 by simply ventilating their claim before the Rehabilitation
Court.

https://www.projectjurisprudence.com/2018/08/case-digest-bir-vs-lepanto-gr-no-224764-april-
24-2017.html
[G.R. No. 181126. June 15, 2011.]
LEONARDO S. UMALE, [deceased] represented by CLARISSA VICTORIA, JOHN LEO,
GEORGE LEONARD, KRISTINE, MARGUERITA ISABEL, AND MICHELLE
ANGELIQUE, ALL SURNAMED UMALE, petitioners, vs. ASB REALTY CORPORATION,
respondent.
FACTS:
1.
This case involves a parcel of land located in Amethyst Street, Ortigas Center,
Pasig City which was originally owned by Amethyst Pearl Corporation (Amethyst
Pearl), a company that is, in turn, wholly
-
owned by respondent ASB Realty
Corporation (ASB
Realty).
2.
Amethyst Pearl executed a Deed of Assignment in Liquidation of the subject
premises in favor of ASB Realty in consideration of the full redemption of
Amethyst Pearl's outstanding capital stock from ASB Realty. making ASB Realty
the owner of the s
ubject premises
3.
Sometime in 2003, ASB Realty commenced an action in the MTC for unlawful
detainer against petitioner Leonardo S. Umale.
4.
ASB Realty alleged that it entered into a lease contract with Umale for the
period June 1, 1999
-
May 31, 2000. Their agr
eement was for Umale to conduct a
pay
-
parking business on the property and pay a monthly rent of P60,720.00.
5.
Upon the contract's expiration on continued occupying the premises and paying
rentals.
6.
On June 2003, ASB Realty served on Umale a Notice of Termina
tion of Lease
and Demand to Vacate and Pay. ASB Realty stated that it was terminating the
lease effective midnight of June 30, 2003.
7.
Umale failed to comply with ASB Realty's demands and continued in possession
of the subject premises, even constructing co
mmercial establishments thereon.
8.
Umale admitted occupying the property since 1999 by virtue of a verbal lease
contract but vehemently denied that ASB Realty was his lessor. He was
adamant that his lessor was the original owner, Amethyst Pearl. Since there
was no contract between himself and ASB Realty.
9.
In asserting his right to remain on the property based on the oral lease contract
with Amethyst Pearl, Umale interposed that the lease period agreed upon was
"for a long period of time." Umale further claimed
that when his oral lease
contract with Amethyst Pearl ended, they both agreed on an oral contract to sell.
They agreed that Umale did not have to pay rentals until the sale over the
subject property had been perfected between them.
10.
Umale also challenged
ASB Realty's personality to recover the subject premises
considering that ASB Realty had been placed under receivership by SEC and a
rehabilitation receiver had been duly appointed. Under the Interim Rules of
Procedure on Corporate Rehabilitation (Interim
Rules), it is the rehabilitation
receiver that has the power to "take possession, control and custody of the
debtor's assets." Since ASB Realty claims that it owns the subject premises, it is
its duly
-
appointed receiver that should sue to recover possessio
n of the same.
11.
ASB Realty replied that it was impossible for Umale to have entered into a
Contract of Lease with Amethyst Pearl in 1999 because Amethyst Pearl had
been liquidated in 1996.
12.
MTC dismissed ASB Realty's complaint against Umale without prejudi
ce. It held
that ASB Realty had no cause to seek Umale's ouster from the subject property
because it was not Umale's lessor. MTC agreed with Umale that only the
rehabilitation receiver could file suit to recover ASB Realty's property. Having
been placed un
der receivership, ASB Realty had no more personality to file the
complaint for unlawful detainer.
13.
RTC reversed decision of the MTC. It found sufficient evidence to support the
conclusion that it was indeed ASB Realty that entered into a lease contract with
Umale. With respect to ASB Realty's personality to file the unlawful detainer
suit, the RTC ruled that ASB Realty retained all its corporate powers, including
the power to sue, despite the appointment of a rehabilitation receiver. Citing the
Interim Rules
, the RTC noted that the rehabilitation receiver was not granted
therein the power to file complaints on behalf of the corporation. Moreover, the
retention of its corporate powers by the corporation under rehabilitation will
advance the objective of corpor
ate rehabilitation, which is to conserve and
administer the assets of the corporation in the hope that it may eventually be
able to go from financial distress to solvency.
14.
Umale filed MR while ASB Realty moved for the issuance of a writ of execution,
the
RTC denied reconsideration of its Decision and granted ASB Realty's
Motion for Issuance of a Writ of Execution.
15.
Umale then filed his appeal with the CA insisting that the parties did not enter
into a lease contract.
16.
Pending the resolution thereof, Umale
died and was substituted by his widow
and legal heirs. CA affirmed RTC decision in toto.
Issues:
Can a corporate officer of ASB Realty (duly authorized by the Board of
Directors) file suit to recover an unlawfully detained corporate property despite the f
act
that the corporation had already been placed under rehabilitation?
The Court resolves the issue in favor of ASB Realty and its officers.
There is no denying that ASB Realty, as the owner of the leased premises, is the real
party
-
in
-
interest in the
unlawful detainer suit. Real party
-
in
-
interest is defined as "the party
who stands to be benefited or injured by the judgment in the suit, or the party entitled to
the avails of the suit.
What petitioners argue is that the corporate officer of ASB Realty i
s incapacitated to file
this suit to recover a corporate property because ASB Realty has a duly
-
appointed
rehabilitation receiver. Allegedly, this rehabilitation receiver is the only one that can file the
instant suit.
Corporations, such as ASB Realty, are
juridical entities that exist by operation of law. As a
creature of law, the powers and attributes of a corporation are those set out, expressly or
impliedly, in the law. Among the general powers granted by law to a corporation is the
power to sue in its
own name. This power is granted to a duly
-
organized corporation,
unless specifically revoked by another law. The question becomes: Do the laws on
corporate rehabilitation
—
particularly PD 902
-
A, as amended and its corresponding rules
of procedure
—
forfei
t the power to sue from the corporate officers and Board of
Directors?
Corporate rehabilitation is defined as "the restoration of the debtor to a position of
successful operation and solvency, if it is shown that its continuance of operation is
economi
cally feasible and its creditors can recover by way of the present value of
payments projected in the plan more if the corporation continues as a going concern than
if it is immediately liquidated." This concept of preserving the corporation's business as
a
going concern while it is undergoing rehabilitation is called debtor
-
in
-
possession or debtor
-
in
-
place. This means that the debtor corporation (the corporation undergoing
rehabilitation), through its Board of Directors and corporate officers, remains in c
ontrol of
its business and properties, subject only to the monitoring of the appointed rehabilitation
receiver. The concept of debtor
-
in
-
possession, is carried out more particularly in the SEC
Rules, the rule that is relevant to the instant case. It states
therein that the interim
rehabilitation receiver of the debtor corporation "does not take over the control and
management of the debtor corporation." Likewise, the rehabilitation receiver that will
replace the interim receiver is tasked only to monitor th
e successful implementation of the
rehabilitation plan. There is nothing in the concept of corporate rehabilitation that would
ipso facto deprive the Board of Directors and corporate officers of a debtor corporation,
such as ASB Realty, of control such tha
t it can no longer enforce its right to recover its
property from an errant lessee.
To be sure, corporate rehabilitation imposes several restrictions on the debtor corporation.
The rules enumerate the prohibited corporate actions and transactions 64 (m
ost of which
involve some kind of disposition or encumbrance of the corporation's assets) during the
pendency of the rehabilitation proceedings but none of which touch on the debtor
corporation's right to sue.
While the Court rules that ASB Realty and its
corporate officers retain their power to sue
to recover its property and the back rentals from Umale, the necessity of keeping the
receiver apprised of the proceedings and its results is not lost upon this Court. Tasked to
closely monitor the assets of AS
B Realty, the rehabilitation receiver has to be notified of
the developments in the case, so that these assets would be managed in accordance with
the approved rehabilitation plan.

http://docshare.tips/corpo-digests-ch-1-atty-chavez_5750e050b6d87f4c568b49fe.html

Negotiable Instruments Case Digest: State

Investment House Inc. V. CA (1993)

G.R. No. 101163 January 11, 1993

Lessons Applicable: Rights of the Holder (Negotiable Instruments Law)

FACTS:
 Nora B. Moulic issued to Corazon Victoriano, as security for pieces of jewelry to be
sold on commission,2 post-dated Equitable Banking Corporation checks OF P 50,000
each

 Corazon negotiated the checks to State Investment House. Inc. (State)

 MOULIC failed to sell the pieces of jewelry, so she returned them to the payee
before maturity of the checks.

 The checks, however, could no longer be retrieved as they had already been
negotiated

 before their maturity dates, MOULIC withdrew her funds from the drawee bank

 Upon presentment for payment, the checks were dishonored for insufficiency of
funds
 October 6, 1983: State sued to recover the value of the checks plus attorney's fees
and expenses of litigation

 CA affirmed RTC: dismissed

ISSUE: W/N State has a right to recourse as holder in due course regardless if the sale
did not push through against MOULIC

HELD: YES. Petition is Granted.

Sec. 52. What constitutes a holder in due course. — A holder in due course is a holder
who has taken the instrument under the following conditions: (a) That it is complete
and regular upon its face; (b) That he became the holder of it before it was overdue,
and without notice that it was previously dishonored, if such was the fact; (c) That he
took it in good faith and for value; (d) That at the time it was negotiated to him he had
no notice of any infirmity in the instrument or defect in the title of the person
negotiating it.

 a prima facie presumption exists that the holder of a negotiable instrument is a

holder in due course

 burden of proving that STATE is not a holder in due course lies in MOULIC - failed

 As holder in due course, it holds the instruments free from any defect of title of
prior parties, and from defenses available to prior parties among themselves

 State may, therefore, enforce full payment of the checks

 MOULIC cannot set up against STATE the defense that there was failure or absence
of consideration

 That the post-dated checks were merely issued as security is not a ground for the
discharge of the instrument as against a holder in due course.

 For the only grounds are those outlined in Sec. 119 of the Negotiable Instruments
Law:
Sec. 119. Instrument; how discharged. — A negotiable instrument is discharged: (a) By
payment in due course by or on behalf of the principal debtor; (b) By payment in due
course by the party accommodated, where the instrument is made or accepted for his
accommodation; (c) By the intentional cancellation thereof by the holder; (d) By any
other act which will discharge a simple contract for the payment of money; (e) When
the principal debtor becomes the holder of the instrument at or after maturity in his
own right.
 Obviously, MOULIC may only invoke paragraphs (c) and (d) as possible grounds for
the discharge of the instrument.

 But, the intentional cancellation contemplated under paragraph (c) is that

cancellation effected by destroying the instrument either by tearing it up, burning
it, or writing the word "cancelled" on the instrument.

 The act of destroying the instrument must also be made by the holder of the
instrument intentionally.

 Since MOULIC failed to get back possession of the post-dated checks, the intentional
cancellation of the said checks is altogether impossible.

 acts which will discharge a simple contract for the payment of money under
paragraph (d) are determined by other existing legislations since Sec. 119 does not
specify what these acts are, e.g., Art. 1231 of the Civil Code which enumerates the
modes of extinguishing obligations.

 Again, none of the modes outlined therein is applicable in the instant case as Sec.
119 contemplates of a situation where the holder of the instrument is the creditor
while its drawer is the debtor. In the present action, the payee, Corazon Victoriano,
was no longer MOULIC's creditor at the time the jewelry was returned.

 State failed to give Notice of Dishonor to MOULIC is of no moment. The need for
such notice is not absolute; there are exceptions under Sec. 114 of the Negotiable
Instruments Law:

Sec. 114. When notice need not be given to drawer. — Notice of dishonor is not
required to be given to the drawer in the following cases:
(a) Where the drawer and the drawee are the same person;
(b) When the drawee is a fictitious person or a person not having capacity to contract;
(c) When the drawer is the person to whom the instrument is presented for payment:
(d) Where the drawer has no right to expect or require that the drawee or acceptor will
honor the instrument;
(e) Where the drawer had countermanded payment.
 she was responsible for the dishonor of her checks, hence, there was no need to
serve her Notice of Dishonor, which is simply bringing to the knowledge of the
drawer or indorser of the instrument, either verbally or by writing, the fact that a
specified instrument, upon proper proceedings taken, has not been accepted or has
not been paid, and that the party notified is expected to pay it

 No unjust enrichment -absence of a similar provision in Act No. 3135, as amended,

it cannot be concluded that the creditor loses his right recognized by the Rules of
Court to take action for the recovery of any unpaid balance on the principal
obligation simply because he has chosen to extrajudicially foreclose the real estate
mortgage pursuant to a Special Power of Attorney given him by the mortgagor in
the contract of mortgage.
http://www.philippinelegalguide.com/2011/08/negotiable-instruments-case-digest_5758.html
https://www.scribd.com/document/333055315/State-Investment-House-vs-Court-of-Appeals-
Case-Digest

CORPORATION LAW G.R. No. 157549 May 30, 2011 DONNINA C. HALLEY, Petitioner, vs.

PRINTWELL, INC., Respondent. FACTS: BMPI (Business Media Philippines Inc.) is a

corporation under the control of its stockholders, including Donnina Halley. In the course of its
business, BMPI commissioned PRINTWELL to print Philippines, Inc. (a magazine published
and distributed by BMPI). PRINTWELL extended 30-day credit accommodation in favor of
BMPI and in a period of 9 mos. BMPI placed several orders amounting to 316,000.
However, only 25,000 was paid hence a balance of 291,000. PRINTWELL sued BMPI for
collection of the unpaid balance and later on impleaded BMPI’s original stockholders and
incorporators
to recover on their
unpaid subscriptions.

It appears that BMPI has an authorized capital stock of 3M divided into 300,000

shares with P10 par value. Only 75,000 shares worth P750,000 were originally subscribed of
which P187,500 were paid up capital.
Halley subscribed to 35,000 shares worth P350,000 but only paid P87,500.
Halley contends that:

1. They all had already paid their subscriptions in full

2. BMPI had a separate and distinct personality

3. BOD and SH had resolved to dissolve BMPI

RTC and CA:
Defendant merely used the corporate fiction as a cloak/cover to create an

injustice (against PRINTWELL)

.
Rejected allegations of full payment in view of irregularity in the issuance of

ORs Payment made on a later date was covered by an OR with a lower serial

number than payment made on an earlier date).

Doctrine of Limited Liability (b. Cases)

ISSUE: Whether or not petitioner Donnina Halley is personally liable though she submits she
had no participation in the transaction between BMPI and Printwell and that BMPI acted on its
own. HELD: Yes. Although a corporation has a personality separate and distinct from those of
its stockholders, directors, or officers,

such separate and distinct personality is merely a fiction created by law for the sake of
convenience and to promote the ends of justice.

The corporate personality may be disregarded, and the individuals composing the corporation
will be treated as individuals, if the corporate entity is being used as a cloak or cover for fraud or
illegality; as a justification for a wrong; as an alter ego, an adjunct, or a business conduit for the
sole benefit of the stockholders. As a general rule, a corporation is looked upon as a legal entity,
unless and until sufficient reason to the contrary appears. Thus, the courts always presume good
faith, and for that reason accord prime importance to the separate personality of the corporation,
disregarding the corporate personality only after the wrongdoing is first clearly and convincingly

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