Documente Academic
Documente Profesional
Documente Cultură
- versus -
YNARES-SANTIAGO, J.,
(Chairperson)
AUSTRIA-MARTINEZ,
CALLEJO, SR., and
CHICO-NAZARIO, JJ.
been foreclosed and transferred to respondent bank before the petition for
rehabilitation was filed, and petitioner, in fact, still owes respondent bank
deficiency liability.[4]
On January 13, 2003, the RTC issued an Omnibus Order terminating the
proceedings and dismissing the case.[5] Petitioner filed an Omnibus Motion
but this was denied by the RTC in its Order dated April 14, 2003.[6]
Petitioner then filed with the CA a special civil action for certiorari,
which was denied by the CA per assailed Decision dated July 19, 2004, the
dispositive portion of which reads:
WHEREFORE, in view of the foregoing premises, judgment is hereby
rendered by us DISMISSING the petition filed in this case and AFFIRMING the
orders assailed by the petitioner.
SO ORDERED.[7]
In dismissing the petition, the CA sustained the findings of the RTC that
since petitioner no longer has sufficient assets and properties to continue
with its operations and answer its corresponding liabilities, it is no longer
eligible for rehabilitation. The CA also ruled that even if the RTC erred in
dismissing the petition, the same could not be corrected anymore because
what petitioner filed before the CA was a special civil action for certiorari
under Rule 65 of the Rules of Court instead of an ordinary appeal.[8]
Hence, herein petition based on the following reasons:
(a)
THE COURT OF APPEALS ERRED AND GRAVELY ABUSED ITS DISCRETION IN
UPHOLDING THE FINDINGS OF THE SPECIAL COMMERCIAL COURT (RTC BR. 39,
ILOILO CITY), PREMATURELY EXCLUDING THE FORECLOSED PROPERTY OF
PETITIONER AND DECLARING THAT PETITIONER HAS NO SUBSTANTIAL
PROPERTY LEFT TO MAKE CORPORATE REHABILITATION FEASIBLE AS THERE IS
AN ONGOING LITIGATION FOR THE ANNULMENT OF SUCH FORECLOSURE IN
ANOTHER PROCEEDING.
(b)
THE COURT OF APPEALS ERRED IN DISMISSING THE PETITION FOR
CERTIORARI FILED BEFORE IT AS IMPROPER, APPEAL BEING AN AVAILABLE
REMEDY.[9]
The Court denies the petition.
Rehabilitation contemplates a continuance of corporate life and
activities in an effort to restore and reinstate the corporation to its former
position of successful operation and solvency.[10] Presently, the applicable
law on rehabilitation petitions filed by corporations, partnerships or
associations,[11] including rehabilitation cases transferred from the Securities
and Exchange Commission to the RTCs pursuant to Republic Act No. 8799 or
the Securities Regulation Code,[12] is the Interim Rules of Procedure on
Corporate Rehabilitation (2000).
Under the Interim Rules, the RTC, within five (5) days from the filing of
the petition for rehabilitation and after finding that the petition is sufficient in
form and substance, shall issue a Stay Order appointing a Rehabilitation
Receiver, suspending enforcement of all claims, prohibiting transfers or
encumbrances of the debtors properties, prohibiting payment of outstanding
liabilities, and prohibiting the withholding of supply of goods and services
from the debtor.[13] Any transfer of property or any other conveyance, sale,
payment, or agreement made in violation of the Stay Order or in violation of
the Rules may be declared void by the court upon motion or motu proprio.
[14]
Further, the Stay Order is effective both against secure and unsecured
creditors. This is in harmony with the principle of "equality is equity" first
enunciated in Alemars Sibal & Sons, Inc. v. Elbinias,[15] thus:
During rehabilitation receivership, the assets are held in trust for the equal
benefit of all creditors to preclude one from obtaining an advantage or
preference over another by the expediency of an attachment, execution or
otherwise. For what would prevent an alert creditor, upon learning of the
receivership, from rushing posthaste to the courts to secure judgments for
the satisfaction of its claims to the prejudice of the less alert creditors.
As between creditors, the key phrase is "equality is equity." When a
corporation threatened by bankruptcy is taken over by a receiver, all the
creditors should stand on an equal footing. Not anyone of them should be
given any preference by paying one or some of them ahead of the others.
This is precisely the reason for the suspension of all pending claims against
the corporation under receivership. Instead of creditors vexing the courts with
suits against the distressed firm, they are directed to file their claims with the
receiver who is a duly appointed officer of the SEC. (Emphasis supplied)
Nevertheless, the suspension of the enforcement of all claims against
the corporation is subject to the rule that it shall commence only from the
time the Rehabilitation Receiver is appointed. Thus, in Rizal Commercial
Banking Corporation v. Intermediate Appellate Court,[16] the Court upheld
the right of RCBC to extrajudicially foreclose the mortgage on some of BF
Homes properties, and reinstated the trial courts judgment ordering the
sheriff to execute and deliver to RCBC the certificate of auction sale involving
the properties.
The Court vacated its previous Decision rendered on
September 14, 1992 in the same case, finding that RCBC can rightfully move
for the extrajudicial foreclosure of the mortgage since it was done on October
16, 1984, while the management committee was appointed only on March
18, 1985. The Court also took note of the SECs denial of the petitioners
consolidated motion to cite the sheriff and RCBC for contempt and to annul
the auction proceedings and sale.
However, it should be noted that the Court issued A.M. No. 04-9-07-SC on
September 14, 2004, clarifying the proper mode of appeal in cases involving
corporate rehabilitation and intra-corporate controversies. It is provided
therein that all decisions and final orders in cases falling under the Interim
Rules of Corporate Rehabilitation and the Interim Rules of Procedure
Governing Intra-Corporate Controversies under Republic Act No. 8799 shall be
appealed to the CA through a petition for review under Rule 43 of the Rules of
Court to be filed within fifteen (15) days from notice of the decision or final
order of the RTC.
In any event, as previously stated, since what petitioner filed was a petition
for certiorari under Rule 65 of the Rules, the CA rightly dismissed the petition
and affirmed the assailed Orders.
WHEREFORE, the petition is DENIED for lack of merit.
2. LEONARDO S. UMALE, [deceased] represented by CLARISSA VICTORIA,
JOHN LEO, GEORGE LEONARD, KRISTINE, MARGUERITA ISABEL, AND
MICHELLE ANGELIQUE, ALL SURNAMED UMALE,
Petitioners,
G.R. No. 181126
Present:
VELASCO, JR.,
Acting Chairperson,
LEONARDO-DE CASTRO,
BERSAMIN,,
DEL CASTILLO, and
- versus PEREZ, JJ.
ASB REALTY CORPORATION,
Respondent.
Promulgated:
June 15, 2011
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DECISION
DEL CASTILLO, J.:
Being placed under corporate rehabilitation and having a receiver
appointed to carry out the rehabilitation plan do not ipso facto deprive a
corporation and its corporate officers of the power to recover its unlawfully
detained property.
Petitioners filed this Petition for Review on Certiorari[1] assailing the
October 15, 2007 Decision[2] of the Court of Appeals (CA) in CA-G.R. SP No.
91096, as well as its January 2, 2008 Resolution.[3] The dispositive portion of
the assailed Decision reads:
WHEREFORE, the Decision dated March 28, 2005 of the trial court is
affirmed in toto.
SO ORDERED.[4]
Factual Antecedents
This case involves a parcel
Amethyst Street, Ortigas Center, Pasig
Amethyst Pearl Corporation (Amethyst
wholly-owned by respondent ASB Realty
suit filed by ASB Realty to recover its property and back rentals from Umale
could only benefit ASB Realty.[23]
The dispositive portion of the RTC Decision reads as follows:
WHEREFORE, premises considered, the appealed decision is hereby
reversed and set aside. Accordingly, judgment is hereby rendered in favor of
the plaintiff-appellant ordering defendant-appellee and all persons claiming
rights under him:
1) To immediately vacate the subject leased premises located at
Lot 7, Block 5, Amethyst St., Pearl Drive, Ortigas Center, Pasig City and
deliver possession thereof to the plaintiff-appellant;
2) To pay plaintiff-appellant the sum of P1,300,000.00 representing
rentals in arrears from June 2002 to June 2003;
3) To pay plaintiff-appellant the amount of P100,000.00 a month
starting from July 2003 and every month thereafter until they finally vacate
the subject premises as reasonable compensation for the continued use and
occupancy of the same;
4) To pay plaintiff-appellant the sum of P200,000.00 as and by way
of attorneys fees; and the costs of suit.
SO ORDERED.[24]
Umale filed a Motion for Reconsideration[25] while ASB Realty moved
for the issuance of a writ of execution pursuant to Section 21 of the 1991
Revised Rules on Summary Procedure.[26]
In its July 26, 2005 Order, the RTC denied reconsideration of its
Decision and granted ASB Realtys Motion for Issuance of a Writ of Execution.
[27]
Umale then filed his appeal[28] with the CA insisting that the parties
did not enter into a lease contract.[29] Assuming that there was a lease, it
was at most an implied lease. Hence its period depended on the rent
payments. Since Umale paid rent annually, ASB Realty had to respect his
lease for the entire year. It cannot terminate the lease at the end of the
month, as it did in its Notice of Termination of Lease.[30] Lastly, Umale
insisted that it was the rehabilitation receiver, not ASB Realty, that was the
real party-in-interest.[31]
Pending the resolution thereof, Umale died and was substituted
by his
widow and legal heirs, per CA Resolution dated August 14, 2006.[32]
Ruling of the Court of Appeals
whatsoever in this case that the SEC gave ASB Realtys rehabilitation receiver
the exclusive right to sue.
Petitioners cite Villanueva,[66] Yam,[67] and Abacus Real Estate[68]
as authorities for their theory that the corporate officers of a corporation
under rehabilitation is incapacitated to act. In Villanueva,[69] the Court
nullified the sale contract entered into by the Philippine Veterans Bank on the
ground that the banks insolvency restricted its capacity to act. Yam,[70] on
the other hand, nullified the compromise agreement that Manphil Investment
Corporation entered into while it was under receivership by the Central Bank.
In Abacus Real Estate,[71] it was held that Manila Banks president had no
authority to execute an option to purchase contract while the bank was
under liquidation.
These jurisprudence are inapplicable to the case at bar because they
involve
banking and financial institutions that are governed by different laws.[72] In
the cited cases, the applicable banking law was Section 29[73] of the Central
Bank Act.[74] In stark contrast to rehabilitation where the corporation retains
control and management of its affairs, Section 29 of the Central Bank Act, as
amended, expressly forbids the bank or the quasi-bank from doing business
in the Philippines.
Moreover, the nullified transactions in the cited cases involve
dispositions of assets and claims, which are prohibited transactions even for
corporate rehabilitation[75] because these may be prejudicial to creditors
and contrary to the rehabilitation plan. The instant case, however, involves
the recovery of assets and collection of receivables, for which there is no
prohibition in PD 902-A.
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
ASB 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.
Coming to the second issue, petitioners maintain that ASB Realty
has no
cause of action against them because it is not their lessor. They insist that
Umale entered into a verbal lease agreement with Amethyst Pearl only. As
proof of this verbal agreement, petitioners cite their possession of the
premises, and construction of buildings thereon, sans protest from Amethyst
Pearl or ASB Realty.[76]
Petitioners concede that they may have raised questions of fact but
insist nevertheless on their review as the appellate courts ruling is allegedly
grounded entirely on speculations, surmises, and conjectures and its
conclusions regarding the termination of the lease contract are manifestly
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on account of the writ of execution.[8] On April 17, 2001, the Labor Arbiter
issued another order requiring petitioner to explain why it should not be cited
for contempt for failure to comply with its previous order.[9] When petitioner
failed to comply, the Labor Arbiter issued a third order dated May 7, 2001,
which ordered petitioner to immediately turn over to the NLRC the garnished
amount equivalent to the amount covered by the surety bond.[10]
On May 11, 2001, petitioner served a demand upon BPI for the release of the
bank deposits that respondent had assigned in its favor.[11] BPI rejected the
demand because respondent was still challenging the validity of the
execution award [in the CA]; and the validity of the Deed of Assignment may
be questioned on the ground that it was executed without the requisite
authority of the Management Committee.[12]
In a Letter[13] dated May 16, 2001, respondent advised petitioner that the
issuance and enforcement of the writ of execution is premature, void and
illegal, for which reason, respondent disavowed any liability liable for
whatever consequences resulting from the premature execution of the
decision.
Petitioner replied that it had raised before the NLRC the issues cited in the
May 16, 2001 Letter, but the latter was bent on enforcing the writ of
execution. Thus, petitioner requested from respondent a copy of the
temporary restraining order (TRO) that it allegedly procured from the Court of
Appeals (CA), with a reminder that, without a TRO, it would be compelled to
comply with the writ of execution to avoid being held in contempt.[14]
On May 18, 2001, petitioner released P6,605,275.24 to the NLRC.[15]
Thereafter, petitioner made a series of demands for reimbursement against
respondent and BPI but to no avail.[16]
On January 15, 2003, petitioner filed a complaint for sum of money and
damages against respondent and BPI. BPI filed a motion to dismiss the
complaint. Respondent also filed a motion to dismiss on the ground that it is
the SEC that has jurisdiction over the claim considering that it is under a
state of suspension of payments.
Meanwhile, with the approval of the rehabilitation plan, SEC issued an order
appointing a rehabilitation receiver on January 27, 2003.[17]
Thus, on July 2, 2003, the Regional Trial Court (RTC) issued an order denying
BPIs motion to dismiss while suspending the proceedings as against
respondent, thus:
WHEREFORE, co-defendant BPIs motion to dismiss dated March 4, 2003 is
denied for lack of merit.
Insofar as co-defendant VMC [Victorias Milling Company, Inc.] is concerned,
the herein proceeding is suspended.
SO ORDERED.[18]
Petitioner moved for the partial reconsideration of the order insofar as it
suspended the proceedings against respondent. On October 7, 2004, the RTC
denied the motion.[19]
Subsequently, petitioner filed a petition for certiorari with the CA assailing the
said orders. On May 21, 2004, the CA agreed with the RTC that petitioners
claim is covered by the Stay Order; consequently, it dismissed the petition. It
stressed that, as held in Rubberworld (Phils.), Inc. v. NLRC,[20] Sec.6(c) of P.D.
902-A does not make any distinction as to what claims are covered. The
appellate court noted that the law provides that actions for claims shall be
suspended upon appointment of a management committee or a
rehabilitation receiver. It then concluded that, even if the claim were not
covered by the said stay order, the suspension of petitioners claim would still
be inevitable considering that at the time the rehabilitation receiver was
appointed by the SEC on January 27, 2003, petitioners complaint was already
pending before the trial court. According to the CA, to rule otherwise would
defeat the very purpose of suspension of payments and render inutile the
rescue functions of the management committee.
On April 11, 2005, the CA denied the petitioners motion for reconsideration.
Dissatisfied with the CAs ruling, petitioner now comes to this Court raising
the following issues:
I
WITH ALL DUE RESPECT, THE HONORABLE COURT ERRED IN RULING THAT BY
VIRTUE OF SECTION 6 (C) OF P.D. 902-A, ALL ACTIONS FOR CLAIMS AGAINST
RESPONDENT VICTORIAS MILLING, CO., INC. (VMC), WITHOUT ANY
DISTINCTION, ARE SUSPENDED UPON THE APPOINTMENT BY THE SECURITIES
AND EXCHANGE COMMISSION (SEC) OF A MANAGEMENT COMMITTEE FOR
RESPONDENT VMC.
II
WITH DUE RESPECT, THE HONORABLE COURT ERRED IN RULING THAT SINCE
THE ACTION OF PETITIONER MICI AGAINST RESPONDENT VMC IN THE CASE
BELOW WAS ALREADY PENDING WHEN THE SEC APPOINTED A
REHABILITATION RECEIVER FOR RESPONDENT VMC, ITS SUSPENSION WOULD
STILL BE INEVITABLE AS THE LAW PROVIDES THAT SUSPENSION OF
ACTIONS COMMENCES UPON APPOINTMENT OF A MANAGEMENT COMMITTEE
OR A REHABILITATION RECEIVER.
III
WITH DUE RESPECT, THE HONORABLE COURT ERRED IN FINDING THAT THE
PAYMENT OF THE INSTANT CLAIM OF PETITIONER MICI WOULD DEFEAT THE
VERY PURPOSE OF THE STAY ORDER ISSUED BY THE SEC FOLLOWING THE
APPOINTMENT OF THE MANAGEMENT COMMITTEE FOR RESPONDENT VMC.
[21]
Petitioner maintains that the Stay Order applies only to claims existing prior
to or at the time of the issuance of the said order. It avers that Sec. 6(c) of
P.D. No. 902-A is clear and categorical that the suspension covers actions for
claims which are pending before any court at the time of the appointment of
the management committee or rehabilitation receiver.[22] And, not being a
pre-existing claim, payment of petitioners claim will not result in undue
preference which is the mischief sought to be prevented by a stay order.
The CA allegedly erred in citing Rubberworld which declared that the
suspension is deemed to cover all claims since the law made no distinction
or exemption. Petitioner posits that such pronouncement referred to claims in
general, as opposed to labor claims.[23]
Petitioner further contends that the suspension of actions commences either
upon the appointment of a management receiver or rehabilitation receiver,
not successively as interpreted by the CA. It argues that the use of the
disjunctive word or in Sec. 6(c) signifies that suspension of actions
commences either upon appointment of a management committee or a
rehabilitation receiver.
Citing Philippine Blooming Mills, Inc. v. Court of Appeals,[24] petitioner
submits that, as surety, it is separately liable for the satisfaction of the
judgment award rendered against the respondent in the labor case. Petitioner
lays the blame on the respondent for its failure to avert the execution of the
NLRC Decision.
For its part, respondent posits that it is immaterial when the actions were
commenced as Sec. 6(c) of P.D. 902-A is clear that all actions standing before
a court against a corporation under a management committee must be
stayed; hence, even actions for claims instituted after the appointment of the
management committee are covered by the stay.[25] It avers that the stay
order is not limited to the claims stated in the Schedule of Debts and
Liabilities.
Respondent counters that, in Rubberworld, this Court applied Sec. 6(c) of P.D.
902-A and suspended the proceedings in the labor case even if the complaint
for illegal dismissal was filed after the issuance of the stay order.[26]
Respondent also cited Arranza v. B.F. Homes, Inc.[27] wherein the class suit
was filed 10 years after the management committee was appointed.
Respondent avers that in said case, this Court did not consider the time of
the filing of the claim or when the cause of action accrued. It points out that,
in a later case,[28] the Court even concluded that had the claim in Arranza
been for monetary awards, the proceedings to enforce such claim would have
been suspended.
Respondent emphasizes that the petitioners claim is for reimbursement of
the monetary award it paid to Abelido in the labor case, which was later
ordered suspended by the CA in CA-GR SP No. 64467. Having originated from
an action for a claim that has been suspended, petitioners claim should also
be deemed suspended. The suspension of the labor proceedings by the CA
rendered moot the petitioners cause of action; its remedy is now to go
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Promulgated:
January 20, 2009
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DECISION
NACHURA, J.:
Before this Court is a Petition for Certiorari[1] under Rule 65 of the Revised
Rules on Civil Procedure assailing the Resolution[2] of the Court of Appeals
(CA) dated September 4, 2001 in CA-G.R. CV No. 65778.
Respondent Sabine Koschinger (Koschinger) filed a complaint[3] for design
infringement and damages against petitioner Philippine Airlines, Inc. (PAL)
before the Regional Trial Court (RTC) of Makati City. Koschinger claimed PAL
used table linens and placemats bearing designs substantially identical to her
patented designs in its commercial flights without her consent or authority.
The trial court rendered its Decision[4] on July 15, 1998 in favor of
Koschinger. PAL appealed the same to the CA.
Meanwhile, on June 23, 1998, the Securities and Exchange Commission (SEC)
gave due course to PALs petition for the appointment of a rehabilitation
receiver due to its being a distressed company, pursuant to Presidential
Decree No. 902-A. On July 1, 1998, the SEC directed that [i]n light of the
Order of the Commission appointing an Interim Receiver all claims for
payment against PAL are deemed suspended.[5]
On August 3, 1998, PAL filed before the RTC a Motion for Suspension of
Proceedings.[6] However, when the RTC failed to act upon the motion, PAL
filed before the CA a Reiteration of Motion to Suspend Proceedings[7] on May
29, 2000.
On September 4, 2001, the CA issued its assailed Resolution, which reads in
part:
[R]ecords show that as early as July 15, 1998, Regional Trial Court, Branch
137, Makati City, rendered its decision in said Civil Case No. 92-186, which is
the subject of the instant appeal before this Court, and is now on the
completion stage. As a matter of fact, appellant itself has filed its brief. This
Court is awaiting for (sic) the appellees brief. Hence, proceedings below
could no longer be stopped because it had terminated.
If it is the proceedings before this Court that appellant wanted to be
suspended, the same could not be given due course, as the issue in the
The CA ruled that, first, the proceedings before the trial court could no longer
be suspended because these had been terminated and, second, that the
appeal before it could not likewise be suspended because the issue before it
was not yet a claim.
The CA was partially correct in stating that the issue to be resolved before it
was whether or not PAL violated the provisions of the Patent Law.[10]
However, it failed to consider the fact that the same also carried a prayer for
damages. It also incorrectly ruled that the same is not a claim such that the
proceedings shall be suspended in accordance with the SECs directive.
Under the Interim Rules of Procedure on Corporate Rehabilitation,[11] a claim
shall include all claims or demands of whatever nature or character against a
debtor or its property, whether for money or otherwise.[12]
The definition is all-encompassing as it refers to all actions whether for
money or otherwise. There are no distinctions or exemptions.[13]
Prior to the promulgation of the Interim Rules of Procedure on Corporate
Rehabilitation, this Court construed claim as referring only to debts or
demands pecuniary in nature:
[T]he word claim as used in Sec. 6(c) of P.D. 902-A refers to debts or
demands of a pecuniary nature. It means the assertion of a right to have
money paid. It is used in special proceedings like those before administrative
court, on insolvency.
The word claim is also defined as:
Right to payment, whether or not such right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured, or unsecured; or right to an equitable
remedy for breach of performance if such breach gives rise to a right to
payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed,
secured, unsecured.
In conflicts of law, a receiver may be appointed in any state which has
jurisdiction over the defendant who owes a claim.
As used in statutes requiring the presentation of claims against a
decedents estate, claim is generally construed to mean debts or demands
of a pecuniary nature which could have been enforced against the deceased
in his lifetime and could have been reduced to simple money judgments; and
among these are those founded upon contract. [14]
In subsequent cases, the Court pronounced that [it] is not prepared to
depart from the well-established doctrines essentially maintaining that all
actions for claims against a corporation pending before any court, tribunal or
board shall ipso jure be suspended in whatever stage such actions may be
found upon the appointment by the SEC of a management committee or a
rehabilitation receiver.[15]
Further, this was taken to embrace all phases of the suit, be it before the trial
court or any tribunal or before this Court[16] such that no other action may
be taken in, including the rendition of judgment during the state of
suspension what are automatically stayed or suspended are the
proceedings of an action or suit and not just the payment of claims during the
execution stage after the case had become final and executory.[17]
Moreover, a perusal of the Complaint filed before the RTC reveals that the
same was for Design Infringement and Damages with a Prayer for a
Temporary Restraining Order and Writ of Preliminary Injunction[18] and
prayed for actual damages amounting to P2 million, exemplary damages
amounting to P250,000.00 and attorneys fees amounting to P250,000.00.
Thus, whether under the Interim Rules of Procedure on Corporate
Rehabilitation or under the Courts rulings prior to the promulgation of the
Rules, the subject of the case would fall under the term claim, considering
that it involves monetary consideration.
The reason for the suspension of claims while the corporation undergoes
rehabilitation proceedings has been explained by the Court, thus:
In light of these powers, the reason for suspending actions for claims against
the corporation should not be difficult to discover. It is not really to enable
the management committee or the rehabilitation receiver to substitute the
defendant in any pending action against it before any court, tribunal, board
or body. Obviously, the real justification is to 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.[19]
This underlying reason applies with equal force to the appeal before the CA.
The continuation of the appeal proceedings would have unduly hindered the
management committees task of rehabilitating the ailing corporation, giving
rise precisely to the situation that the stay order sought to avoid.
It was likewise error for the CA to have ruled that the proceedings before the
RTC could not be stopped because they had been terminated.
This Court has repeatedly held that execution is the final stage of litigation,
[20] the fruit and end of the suit.[21] Thus, the proceedings before the RTC
were not terminated by the filing of the appeal to the CA. The same could not
be executed hence, not yet terminated until the appeal is decided with
DECISION
PERALTA, J.:
Before this Court is a petition for review on certiorari[1] under Rule 45 of the
Rules of Court, seeking to set aside the April 27, 2006 Decision[2] and August
2, 2006 Resolution[3] of the Court of the Appeals (CA) in CA-G.R. SP No.
90947.
The facts of the case are as follows:
On October 15, 2004, Jose Marcel Panlilio, Erlinda Panlilio, Nicole Morris and
Marlo Cristobal (petitioners), as corporate officers of Silahis International
Hotel, Inc. (SIHI), filed with the Regional Trial Court (RTC) of Manila, Branch
24, a petition for Suspension of Payments and Rehabilitation[4] in SEC Corp.
Case No. 04-111180.
On October 18, 2004, the RTC of Manila, Branch 24, issued an Order[5]
staying all claims against SIHI upon finding the petition sufficient in form and
substance. The pertinent portions of the Order read:
Finding the petition, together with its annexes, sufficient in form and
substance and pursuant to Section 6, Rule 4 of the Interim Rules on Corporate
Rehabilitation, the Court hereby:
xxxx
2) Stays the enforcement of all claims, whether for money or otherwise and
whether such enforcement is by court action or otherwise, against the debtor,
its guarantors and sureties not solidarily liable with the debtor.[6]
At the time, however, of the filing of the petition for rehabilitation, there were
a number of criminal charges[7] pending against petitioners in Branch 51 of
the RTC of Manila. These criminal charges were initiated by respondent
Social Security System (SSS) and involved charges of violations of Section 28
(h)[8] of Republic Act 8282, or the Social Security Act of 1997 (SSS law), in
relation to Article 315 (1) (b)[9] of the Revised Penal Code, or Estafa.
Consequently, petitioners filed with the RTC of Manila, Branch 51, a
Manifestation and Motion to Suspend Proceedings.[10] Petitioners argued that
the stay order issued by Branch 24 should also apply to the criminal charges
pending in Branch 51. Petitioners, thus, prayed that Branch 51 suspend its
proceedings until the petition for rehabilitation was finally resolved.
On December 13, 2004, Branch 51 issued an Order[11] denying petitioners
motion to suspend the proceedings. It ruled that the stay order issued by
Branch 24 did not cover criminal proceedings, to wit:
xxxx
Clearly then, the issue is, whether the stay order issued by the RTC
commercial court, Branch 24 includes the above-captioned criminal cases.
The Court shares the view of the private complainants and the SSS that the
said stay order does not include the prosecution of criminal offenses.
Precisely, the law criminalizes the non-remittance of SSS contributions by
an employer to protect the employees from unscrupulous employers. Clearly,
in these cases, public interest requires that the said criminal acts be
immediately investigated and prosecuted for the protection of society.
From the foregoing, the inescapable conclusion is that the stay order issued
by RTC Branch 24 does not include the above-captioned cases which are
criminal in nature.[12]
Branch 51 denied the motion for reconsideration filed by petitioners.
On August 19, 2005, petitioners filed a petition for certiorari[13] with the CA
assailing the Order of Branch 51.
On April 27, 2006, the CA issued a Decision denying the petition, the
dispositive portion of which reads:
WHEREFORE, premises considered, the Petition is hereby DENIED and is
accordingly DISMISSED. No costs.[14]
The CA discussed that violation of the provisions of the SSS law was a
criminal liability and was, thus, personal to the offender. As such, the CA held
that the criminal proceedings against the petitioners should not be
considered a claim against the corporation and, consequently, not covered by
the stay order issued by Branch 24.
Petitioners filed a Motion for Reconsideration,[15] which was, however,
denied by the CA in a Resolution dated August 2, 2006.
Hence, herein petition, with petitioners raising a lone issue for this Courts
resolution, to wit:
x x x WHETHER OR NOT THE STAY ORDER ISSUED BY BRANCH 24, REGIONAL
TRIAL COURT OF MANILA, IN SEC CORP. CASE NO. 04-111180 COVERS ALSO
VIOLATION OF SSS LAW FOR NON-REMITTANCE OF PREMIUMS AND VIOLATION
OF [ARTICLE] [3] 515 OF THE REVISED PENAL CODE.[16]
The petition is not meritorious.
To begin with, corporate rehabilitation connotes the restoration of the debtor
is not a legal ground for the extinction of petitioners criminal liabilities. There
is no reason why criminal proceedings should be suspended during corporate
rehabilitation, more so, since the prime purpose of the criminal action is to
punish the offender in order to deter him and others from committing the
same or similar offense, to isolate him from society, reform and rehabilitate
him or, in general, to maintain social order.[26] As correctly observed in
Rosario,[27] it would be absurd for one who has engaged in criminal conduct
could escape punishment by the mere filing of a petition for rehabilitation by
the corporation of which he is an officer.
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 in Rosario,
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.[28] 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.[29]
On a final note, this Court would like to point out that Congress has recently
enacted Republic Act No. 10142, or the Financial Rehabilitation and
Insolvency Act of 2010.[30] Section 18 thereof explicitly provides that
criminal actions against the individual officer of a corporation are not subject
to the Stay or Suspension Order in rehabilitation proceedings, to wit:
The Stay or Suspension Order shall not apply:
xxxx
(g) any criminal action against individual debtor or owner, partner, director or
officer of a debtor shall not be affected by any proceeding commenced under
this Act.
Withal, based on the foregoing discussion, this Court rules that there is
no legal impediment for Branch 51 to proceed with the cases filed against
petitioners.
set aside the consolidated Decision1 and Resolution2 dated June 29, 2006,
and October 31, 2006, respectively, of the Court of Appeals (CA) in CA-G.R.
SP No. 92807, CA-G.R. SP No. 92808 and CA-G.R. SP No. 92882.
The first assailed issuance affirmed the earlier Decision3 dated October 10,
2005 of the Office of the President (OP, hereinafter), as modified in its Order4
of December 22, 2005, in consolidated OP Case No. 05-F-212 and OP Case
No. 05-G-215. The second assailed issuance, on the other hand, denied
reconsideration of the first.
Per its Resolution5 of March 26, 2007, the Court ordered the consolidation of
these petitions.
From the petitions and the comments thereon, with their respective annexes,
and other pleadings, the Court gathers the following facts:
On October 25, 1995, Dylanco and SLGT each entered into a contract to sell
with ASB for the purchase of a unit (Unit 1106 for Dylanco and Unit 1211 for
SLGT) at BSA Towers then being developed by the latter. As stipulated, ASB
will deliver the units thus sold upon completion of the construction or before
December 1999. Relying on this and other undertakings, Dylanco and SLGT
each paid in full the contract price of their respective units. The promised
completion date came and went, but ASB failed to deliver, as the Project
remained unfinished at that time. To make matters worse, they learned that
the lots on which the BSA Towers were to be erected had been mortgaged6 to
Metrobank, as the lead bank, and UCPB7 without the prior written approval of
the Housing and Land Use Regulatory Board (HLURB).
Alarmed by this foregoing turn of events, Dylanco, on August 10, 2004, filed
with the HLURB a complaint8 for delivery of property and title and for the
declaration of nullity of mortgage. A similar complaint9 filed by SLGT followed
three (3) days later. At this time, it appears that the ASB Group of Companies,
which included ASB, had already filed with the Securities and Exchange
Commission a petition for rehabilitation and a rehabilitation receiver had in
fact been appointed.
What happened next are laid out in the OP decision adverted to above, thus:
In response to the above complaints, ASB alleged that it encountered
liquidity problems sometime in 2000 after its creditors [UCPB and
Metrobank] simultaneously demanded payments of their loans; that on May
4, 2000, the Commission (SEC) granted its petition for rehabilitation; that it
negotiated with UCPB and Metrobank but nothing came out positive from
their negotiation .
On the other hand, Metrobank claims that complainants [Dylanco and SLGT]
have no personality to ask for the nullification of the mortgage because they
are not parties to the mortgage transaction ; that the complaints must be
dismissed because of the ongoing rehabilitation of ASB; xxx that its claim
against ASB, including the mortgage to the [Project] have already been
modified in its December 22, 2005 Order, the affirmance being predicated, in
gist, on the following main premises:
1. A mortgage constituted on a condominium project without the approval of
the HLURB in violation of the prescription of Presidential Decree (PD) 957, like
the ASB-Metrobank-Trust Division mortgage contract, is void; a mortgage is
indivisible and cannot be divided into a valid and invalid parts.
2. The complaints of Dylanco and SLGT are not covered by the order issued
by the SEC suspending all actions and proceedings against ASB.
Petitioner banks separate motions for reconsideration were later denied in
the CAs equally assailed resolution15 dated October 31, 2006.
Hence, these separate petitions.
Although formulated a bit differently, the grounds and arguments advanced
in support of the petitions converge and focus on two issues, to wit:
1. The declaration of nullity of the entire mortgage constituted on the project
land site and the improvements thereon; and
2. The applicability to this case of the suspension order granted by SEC to
ASB.
We DENY.
As to the first issue, it is the petitioners posture that the CA, and, before it,
the OP, erred when it declared the subject mortgage contract void in its
entirety and then directed both petitioner banks to release the mortgage on
the Project.
We are not persuaded.
Both petitioners do not dispute executing the mortgage in question without
the HLURBs prior written approval and notice to both individual respondents.
Section 18 of Presidential Decree No. (PD) 957 The Subdivision and
Condominium Buyers Protective Decree provides:
SEC. 18. Mortgages. - No mortgage of any unit or lot shall be made by the
owner or developer without prior written approval of the [HLURB]. Such
approval shall not be granted unless it is shown that the proceeds of the
mortgage loan shall be used for the development of the condominium or
subdivision project . The loan value of each lot or unit covered by the
mortgage shall be determined and the buyer thereof, if any, shall be notified
before the release of the loan. The buyer may, at his option, pay his
installment for the lot or unit directly to the mortgagee who shall apply the
payments to the corresponding mortgage indebtedness secured by the
particular lot or unit being paid for . (Emphasis and word in bracket added)
There can thus be no quibbling that the project lot/s and the improvements
introduced or be introduced thereon were mortgaged in clear violation of the
aforequoted provision of PD 957. And to be sure, Dylanco and SLGT, as
Project unit buyers, were not notified of the mortgage before the release of
the loan proceeds by petitioner banks.
As it were, PD 957 aims to protect innocent subdivision lot and condominium
unit buyers against fraudulent real estate practices. Its preambulatory
clauses say so and the Court need not belabor the matter presently. Section
18, supra, of the decree directly addresses the problem of fraud and other
manipulative practices perpetrated against buyers when the lot or unit they
have contracted to acquire, and which they religiously paid for, is mortgaged
without their knowledge, let alone their consent. The avowed purpose of PD
957 compels, as the OP correctly stated, the reading of Section 18 as
prohibitory and acts committed contrary to it are void.16 Any less stringent
construal would only accord unscrupulous developers and their financiers
unbridled discretion to follow or not to follow PD 957 and thus defeat the very
lofty purpose of that decree. It thus stands to reason that a mortgage
contract executed in breach of Section 18 of the decree is null and void.
In Philippine National Bank v. Office of the President,17 involving a defaulting
mortgagor-subdivision developer, a mortgagee-bank and a lot buyer, the
Court expounded on the rationale behind PD 957, as a tool to protect
subdivision lot and/or condominium unit buyers against developers and
mortgaging banks, in the following wise:
xxx [T]he unmistakable intent of the law [is] to protect innocent lot buyers
from scheming subdivision developers. As between these small lot buyers
and the gigantic financial institutions which the developers deal with, it is
obvious that the law as an instrument of social justice must favor the
weak. Indeed, the petitioner bank had at its disposal vast resources with
which it could adequately protect its loan activities, and therefore is
presumed to have conducted the usual "due diligence" checking and
ascertaining the actual status, condition, utilization and occupancy of the
property offered as collateral. xxx On the other hand, private respondents
obviously were powerless to discover the attempt of the land developer to
hypothecate the property being sold to them. It was precisely in order to deal
with this kind of situation that P.D. 957 was enacted, its very essence and
intendment being to provide a protective mantle over helpless citizens who
may fall prey to the razzmatazz of what P.D. 957 termed "unscrupulous
subdivision and condominium sellers."
The Court then quoted with approval the following instructive comments of
the Solicitor General:
Verily, if P.D. 957 were to exclude from its coverage the aforecited mortgage
contract, the vigorous regulation which P.D. 957 seeks to impose on
unconscientious subdivision sellers will be translated into a feeble exercise of
police power just because the iron hand of the state cannot particularly touch
mortgage contracts badged with the unfortunate accident of having been
without obligation to look beyond the certificate and investigate the title of
the mortgagor. Such rule, however, does not apply to mortgagee-banks,20
their business being one affected with public interest, holding as they do and
keeping, in trust, money pertaining to the depositing public which they should
guard with earnest. Unlike private individuals, it behooves banks to exercise
greater care and prudence in their dealings, including those involving
registered lands.21 As we wrote in Cruz v. Bancom Finance Corporation,22 "a
banking institution is expected to exercise due diligence before entering into
a mortgage contract. The ascertainment of the status or condition of a
property offered to it as a security must be standard and indispensable part
of its operations." A bank that failed to observe due diligence cannot be
accorded the status of a bona fide mortgagee.23
Surely, petitioner banks cannot plausibly assert compliance with the due
diligence requirement exacted contextually by the situation. For, have they
done so, they could have easily discovered that there is an on-going
condominium project on the lots offered as mortgage collateral and, as such,
could have aroused their suspicion that the developer may have engaged in
pre-selling, or, with like effect, that there may be unit buyers therein, as was
the case here. Having been short in care and prudence, petitioners cannot be
deemed to be mortgagees in good faith entitled to the benefits arising from
such status.
This thus brings us to the next issue of whether or not the HLURB, OP and,
necessarily, the CA reversibly erred in continuing with the resolution of this
case notwithstanding the rehabilitation proceedings before, and the
appointment by, the SEC of a receiver for ASB which, under Section 6 (c)24 of
PD 902-A, as amended,25 necessarily suspended "all actions for claims"
against distressed corporations.
Petitioners maintain that individual respondents demands initially filed with
the HLURB partake of the nature of "claim" within the contemplation of the
aforesaid suspensive section of PD 902-A. They cite Sobrejuanite v. ASB
Development Corporation26 to drive home the idea of the encompassing
reach of the word "claim" which they deem to include any and all claims or
demands of whatever nature and character.
The Court is unable to accommodate the petitioners.
As we articulated in Arranza v. B.F. Homes, Inc.,27 the fact that respondent
B.F. Homes is under receivership does not preclude the continuance before
the HLURB of the case for specific performance of a real estate developers
obligation under PD 957. For, "[E]"ven if respondent is under receivership, its
obligations as a real estate developer under P.D. 957 are not suspended.
Section 6 (C) of P.D. No. 902-A, as amended , on suspension of all actions
for claims against corporations refers solely to monetary claims."28 Says the
Court further:
xxx The appointment of a receiver does not dissolve the corporation, nor
does it interfere with the exercise of corporate rights. In this case where there
SLGT and Dylanco, as unit buyers, on the other, cannot be that of a debtorcreditor as to bring the case within the purview of the rules on corporate
recovery, let alone the Sobrejuanite case. Then, too, the vinculum that binds
SLGT/Dylanco, as unit buyers and as suitors before the HLURB, and ASB is far
from being akin to that of debtor-creditor. As it were, SLGT/Dylanco sued ASB
for having constituted, in breach of PD 957, a mortgage on the condominium
project without prior HLURB approval and so much as notifying them of the
loan release for which reason they prayed for the delivery of their units free
from all liens and encumbrances. With the view we take of the case, the
complaint of individual respondents is not in the nature of "claims" that
should be covered by the suspensive effect of a rehabilitation proceeding.
Looking beyond the strictly legal issues involved in this case, however, the
pendency of the rehabilitation proceedings ought not, as stressed in the
Order34 of the OP, be invoked to defeat or deny the claim of individual
respondents. Suspending the proceedings would only perpetuate and
compound the injustice committed by ASB on SLGT and Dylanco. It would
reduce to pure jargon the beneficent provisions and render illusory the
purpose of PD 957 which, to repeat, is to protect innocent unit and lot buyers
from scheming subdivision/condominium owners/developers. As a matter of
good conscience, the Court cannot allow it under the factual and legal
premises surrounding this case.
WHEREFORE, the instant petitions are DENIED and the assailed CA Decision
and Resolution are AFFIRMED.
Cost against the petitioners.
SO ORDERED.
7. SPOUSES EDUARDO
SOBREJUANITE and
FIDELA SOBREJUANITE,
Petitioners,
Promulgated:
of the Court of Appeals in CA-G.R. SP No. 79420 which reversed and set aside
the Decision of the Office of the President; and its October 18, 2004
Resolution denying reconsideration thereof.
The antecedent facts show that on March 7, 2001, spouses Eduardo
and Fidela Sobrejuanite (Sobrejuanite) filed a Complaint[1] 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, attorneys fees, litigation
expenses, appearance fee and costs of the suit.
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.
The arbiter found that under the Contract to Sell, ASBDC should have
delivered the property to Sobrejuanite in December 1999; that the latter had
fully paid their obligations except the P50,000.00 which should be paid upon
completion of the construction; and that rescission of the contract with
damages is proper.
The dispositive portion of the Decision reads:
WHEREFORE, in view of the foregoing judgment is rendered ordering the
rescission of the contracts to sell between the parties, and further ordering
the respondent [ASBDC] to pay the complainants [Sobrejuanite] the following:
a)
all amortization payments by the complainants amounting to
P2,674,637.10 plus 12% interest from the date of actual payment of each
amortization;
b)
moral damages amounting to P200,000.00;
c)
exemplary damages amounting to P100,000.00;
d)
attorneys fees amounting to P100,000.00;
e)
litigation expenses amounting to P50,000.00.
All other claims and all counter-claims are hereby dismissed.
IT IS SO ORDERED.[2]
The HLURB Board of Commissioners[3] affirmed the ruling of the arbiter that
NOT
BEING
IN
3.
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR AND
GRAVELY ABUSED ITS DISCRETION IN RULING THAT RESPONDENT IS
JUSTIFIED IN EXTENDING THE AGREED DATE OF DELIVERY BY INVOKING AS
GROUND THE FINANCIAL CONSTRAINTS IT EXPERIENCED, BEING CONTRARY
TO LAW AND IN EEFECT AN UNLAWFUL NOVATION OF THE AGREEMENT OF
THE DATE OF DELIVERY ENTERED INTO BY PETITIONERS AND RESPONDENT.
[11]
The petition lacks merit.
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. [Emphasis added]
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.[12]
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.[13] 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.[14]
Thus, in order to resolve whether the proceedings before the HLURB
should be suspended, it is necessary to determine whether the complaint for
rescission of contract with damages is a claim within the contemplation of PD
No. 902-A.
In Finasia Investments and Finance Corp. v. Court of Appeals,[15] we
construed claim to refer only to debts or demands pecuniary in nature. Thus:
[T]he word claim as used in Sec. 6(c) of P.D. 902-A refers to debts or
demands of a pecuniary nature. It means the assertion of a right to have