LECA REALTY CORPORATION vs. MANUELA CORPORATION 7.
7. Leca Realty Corporation (Leca) filed its Comment and/or Formal Claim
G.R. No. 166800 September 25, 2007
FACTS:
1. Manuela Corporation (Manuela) is a duly registered domestic
corporation, principally engaged in the business of leasing commercial
spaces in shopping malls to retailers. At the time, respondent owned
and operated M Star One, M Star, Starmall, Metropolis Star, and
Pacific Mall.
2. Manuela obtained several loans from two syndicates of lenders to
finance the costs of two of its buildings. Aside from its Php2.174
billion loan from banks, the company also had Php1.476 billion
indebtedness to Hero Holdings, Inc. and its trade suppliers, and other
parties.
3. The region was then beset by the 1997 Asian financial crisis which
prompted banks to stop their lending activities. This severely affected
Manuela whose malls did not operate sufficiently, causing serious
losses to the company. The adjusted interest rates on Manuela’s loans
were around 18% to 30%, which contributed to its liquidity problems.
4. The company, however, exerted all efforts to cushion the financial
blow by “closing down non-income generating businesses,
concentrating on its business of leasing commercial spaces,
intensifying collection efforts, reducing personnel, negotiating for
restructuring of loan with creditors, and working out a viable payment
scheme without giving undue preference to any creditor.” In spite of all
these initiatives, Manuela still failed to pay its financial obligations.
5. This forced the company to ask the court to issue a Stay Order and
approve its proposed Rehabilitation Plan, which if successfully
implemented will “enable it to settle its remaining obligations in an
orderly manner, restore its financial viability, and allow it to resume
its normal operations.” The trial court subsequently issued the Stay
Order, which stated:’
a) a stay in the enforcement of all claims, whether for money or
otherwise and whether such enforcement is by court action or
otherwise, against petitioner MANUELA, its guarantors and
sureties not solidarily liable with it; …
e) directing the payment in full of all administrative expenses
incurred after the issuance of this Stay Order.
6. The trial court appointed Marilou Adea as rehabilitation receiver. Adea
recommended the approval of Manuela’s Rehabilitation Plan and
convened with Manuela’s creditors for the latter to air their concerns.
against Manuela amounting to Php193.7 million, comprised of unpaid
rentals, security deposits, interests, and penalty charges. After Leca’s
receipt of Adea’s Report and Recommendation, petitioner questioned
the reduction of Manuela’s liability, “considering its contractual nature
which cannot be impaired during the process of rehabilitation.” The
trial court eventually approved the Rehabilitation Plan. Leca’s appeal
to the Court of Appeals was dismissed for lack of merit.
8. The disagreement is grounded on the fact that the rental rates agreed
upon by Leca and Manuela were reduced in the Rehabilitation Plan.
There was a gross discrepancy between the amounts of rent agreed
upon by the parties and those provided in the Rehabilitation Plan.
9. Leca filed another petition before the appellate court alleging violation
of its constitutional right to non-impairment contract and the Interim
Rules of Procedure on Corporate Rehabilitation. The Court of Appeals,
in denying the petition, ruled:
The pendency of the rehabilitation proceedings cannot be
interpreted to impair the contractual obligations previously
entered into by the contracting parties because the automatic
stay of all actions is sanctioned by P.D. [No.] 902-A which
provides that “all actions for claims against corporations,
partnerships or associations under management or receivership
pending before any court, tribunal, board or body shall be
suspended accordingly.”
10. Thus, Leca filed a petition for review on certiorari before the Supreme
Court.
ISSUE:
Whether the pendency of the rehabilitation proceedings can justify
impairment of contractual obligations previously entered into by the
parties?
HELD:
No, the pendency of the rehabilitation plan can no justify the impairment
of contractual obligations. The amount provided in the rehabilitation plan
is null and void.
RATIO:
Petitioner, in support of its contention, cites in its Memorandum the
treatises of Ateneo Law Dean Cesar L. Villanueva and former SEC
Commissioner Danilo L. Concepcion, both known authorities on
Corporation Law. In his Article which appeared in the Ateneo Law
Journal, Dean Villanueva said:
The nature and extent of the power of
the SEC to approve and enforce a rehabilitation
plan is certainly an important issue. Often, a
rehabilitation plan would require a diminution,
if not destruction, of contractual and property
rights of some, if not most of the various
stakeholders in the petitioning corporation. In
the absence of clear coercive legal provisions,
the courts of justice and much less the SEC
would have no power to amend or destroy the
property and contractual rights of private
parties, much less relieve a petitioning
corporation from its contractual commitments.
On the other hand, Professor Concepcion stated that what is allowed in
rehabilitation proceedings is only the suspension of payments, or the
stay of all actions for claims of distressed corporations, and upon
its successful rehabilitation, the claims must be settled in full.
The Supreme Court, in agreeing with Leca, cited its ruling in The Insular
LifeAssurance Company, Ltd. v. Court of Appeals, which provides:
When the language of the contract is explicit leaving no doubt as
to the intention of the drafters thereof, the courts may not read
into it any other intention that would contradict its plain import.
The Court would be rewriting the contract of lease between
Insular and Sun Brothers under the guise of construction were we
to interpret the ‘option to renew’ clause as Sun Brothers
propounds it, despite the express provision in the original contract
of lease and the contracting parties’ subsequent acts. As the Court
has held in Riviera Filipina, Inc. vs. Court of Appeals, ‘a court,
even the Supreme Court, has no right to make new contracts for
the parties or ignore those already made by them, simply to avoid
seeming hardships. Neither abstract justice nor the rule of liberal
construction justifies the creation of a contract for the parties
which they did not make themselves or the imposition upon one
party to a contract of an obligation not assumed.
The Court voided the Rehabilitation Plan insofar as it amends the rental
rates agreed upon by the parties. It opined that the change is not justified
as the amount of rent is an “essential condition of any lease contract;”
thus, any alteration on the rate is tantamount to impairment of stipulation
of the parties.
MWSS vs. DAWAY AND MAYNILAD
G.R. No. 160732.
June 21, 2004
FACTS: MWSS granted Maynilad under a Concession Agreement to
manage, operate, repair, decommission and refurbish the existing MWSS
water delivery and sewerage services in the West Zone Service Area, for
which Maynilad undertook to pay the corresponding concession fees
which, among other things, consisted of payments of petitioners mostly
foreign loans.
To secure the concessionaires performance of its obligations, Maynilad
was required under Section 6.9 of said contract to put up a bond, bank
guarantee or other security acceptable to MWSS.
In compliance with this requirement, Maynilad arranged for a three-year
facility with a number of foreign banks, led by Citicorp Int’l Ltd., for the
issuance of an Irrevocable Standby Letter of Credit in favor of MWSS for
the full and prompt performance of Maynilads obligations to MWSS as
aforestated.
Later, the parties agreed to resolve the issues between them [Maynilad is
asking for a mechanism by which it hoped to recover the losses it had
allegedly incurred and would be incurring as a result of the depreciation of
the Philippine Peso against the US Dollar and in filing to get what it
desired, Maynilad unilaterally suspended the payment of the concession
fees] through an amendment of the Concession Agreement which was
based on the terms set down in MWSS Board of Trustees Resolution which
provided inter alia for a formula that would allow Maynilad to recover
foreign exchange losses it had incurred or would incur under the terms of
the Concession Agreement.
However Maynilad served upon MWSS a Notice of Event of Termination,
claiming that MWSS failed to comply with its obligations under the
Concession Agreement and its Amendment regarding the adjustment
mechanism that would cover Maynilads foreign exchange losses. Maynilad
filed a Notice of Early Termination of the concession, which was
challenged by MWSS. This matter was eventually brought before the
Appeals Panel by MWSS. the Appeals Panel ruled that there was no Event
of Termination as defined under Art. 10.2 (ii) or 10.3 (iii) of the Concession
Agreement and that, therefore, Maynilad should pay the concession fees
that had fallen due.
The award of the Appeals Panel became final. MWSS, thereafter,
submitted a written notice to Citicorp Int’l Ltd, as agent for the
participating banks, that by virtue of Maynilads failure to perform its
obligations under the Concession Agreement, it was drawing on the
Irrevocable Standby Letter of Credit and thereby demanded payment.
Prior to this, however, Maynilad had filed on a petition for rehabilitation
before the RTC of Quezon City which resulted in the issuance of the Stay
Order and the disputed Order of November 27, 2003.
ISSUE: WON the rehabilitation court sitting as such, act in excess of its
authority or jurisdiction when it enjoined herein petitioner from seeking
the payment of the concession fees from the banks that issued the
Irrevocable Standby Letter of Credit in its favor
HELD: the petition for certiorari is granted.The Order of November 27,
2003 of the RTC of Quezon City 90, is hereby declared null and voidand
set aside.
YES
First, the claim is not one against the debtor but against an entity that
respondent Maynilad has procured to answer for its non-performance of
certain terms and conditions of the Concession Agreement, particularly
the payment of concession fees.
Secondly, Sec. 6 (b) of Rule 4 of the Interim Rules does not enjoin the
enforcement of all claims against guarantors and sureties, but only those
claims against guarantors and sureties who are not solidarily liable with
the debtor. Respondent Maynilads claim that the banks are not solidarily
liable with the debtor does not find support in jurisprudence.
Letters of credit were developed for the purpose of insuring to a seller
payment of a definite amount upon the presentation of documentsand is
thus a commitment by the issuer that the party in whose favor it is issued
and who can collect upon it will have his credit against the applicant of
the letter, duly paid in the amount specified in the letter They are in effect
absolute undertakings to pay the money advanced or the amount for
which credit is given on the faith of the instrument. They are primary
obligations and not accessory contracts and while they are security
arrangements, they are not converted thereby into contracts of guaranty.
What distinguishes letters of credit from other accessory contracts, is the
engagement of the issuing bank to pay the seller once the draft and other
required shipping documents are presented to it. They are definite
undertakings to pay at sight once the documents stipulated therein are
presented.
The prohibition under Sec 6 (b) of Rule 4 of the Interim Rules does not
apply to herein petitioner as the prohibition is on the enforcement of
claims against guarantors or sureties of the debtors whose obligations are
not solidary with the debtor. The participating banks obligation 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.
The terms of the Irrevocable Standby Letter of Credit do not show that the
obligations of the banks are not solidary with those of respondent
Maynilad. On the contrary, it is issued at the request of and for the
account of Maynilad in favor of the MWSS as a bond for the full and
prompt performance of the obligations by the concessionaire under the
Concession Agreement and herein MWSS is authorized by the banks to
draw on it by the simple act of delivering to the agent a written
certification substantially in the form of the Letter of Credit.
Taking into consideration our own rulings on the nature of letters of credit
and the customs and usage developed over the years in the banking and
commercial practice of letters of credit, we hold that except when a letter
of credit specifically stipulates otherwise, the obligation of the banks
issuing letters of credit are solidary with that of the person or entity
requesting for its issuance, the same being a direct, primary, absolute and
definite undertaking to pay the beneficiary upon the presentation of the
set of documents required therein.
The public respondent, therefore, exceeded his jurisdiction, in holding that
he was competent to act on the obligation of the banks under the Letter of
Credit under the argument that this was not a solidary obligation with
that of the debtor. Being a solidary obligation, the letter of credit is
excluded from the jurisdiction of the rehabilitation court and therefore in
enjoining petitioner from proceeding against the Standby Letters of Credit
to which it had a clear right under the law and the terms of said Standby
Letter of Credit, public respondent acted in excess of his jurisdiction.
NOTES:
We held in Feati Bank & Trust Company v. Court of Appeals that the
concept of guarantee vis–vis the concept of an irrevocable letter of credit
are inconsistent with each other.The guarantee theory destroys the
independence of the banks 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 guarantors 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.
MANUEL D. YNGSON, JR. vs PHILIPPINE NATIONAL BANK
G.R. No. 171132 August 15, 2012
Digest of digest:
ARCAM entered into a loan with PNB secured by several property
mortgages. ARCAM failed to pay hence PNB foreclosed the properties.
Before the auction sale of the properties, SEC issued a TRO and
subsequently a writ of preliminary injunction enjoining PNB and RTC’s
sheriff from proceeding with the foreclosure. 6 years had passed but
ARCAM was not rehabilitated because its expected investor did not push
through with its promise. SEC then decreed petitioner Yngson as
liquidator of ARCAM.
PNB then proceeded with the foreclosure sale. After the sale, petitioner
filed motion to nullify the sale on the ground that all actions against
companies under liquidation are suspended because liquidation is a
continuation of the suspension proceedings. SEC ruled in favor of PNB; CA
also denied petitioner’s appeal. Issue is whether foreclosure sale of PNB is
valid. Yes, NCC and FRIA provide that a secured creditor enjoys preference
over a specific mortgaged property.
Facts:
ARCAM is engaged in the operation of a sugar mill in Pampanga. Between
1991 and 1993, ARCAM applied for and was granted a loan by respondent
PNB. To secure the loan, ARCAM executed a Real Estate Mortgage to its
personal and real properties.
ARCAM defaulted hence PNB initiated extrajudicial foreclosure
proceedings in the Office of the Clerk of Court/Ex Officio Sheriff of the
RTC of Guagua, Pampanga. The public auction was scheduled on
December 29, 1993 for the mortgaged real properties and December 8,
1993 for the mortgaged personal properties.
The SEC issued a TRO and subsequently a writ of preliminary injunction,
enjoining PNB and the Sheriff of the RTC of Guagua, Pampanga from
proceeding with the foreclosure sale of the mortgaged properties. An
interim management committee was also created.
On February 9, 2000, the SEC ruled that ARCAM can no longer be
rehabilitated. The SEC noted that the petition for suspension of payment
was filed in December 1993 and six years had passed but the potential
white knight investor had not infused the much needed capital to bail out
ARCAM from its financial difficulties. Thus, the SEC decreed that ARCAM
be dissolved and placed under liquidation. SEC appointed Atty. Manuel D.
Yngson, Jr. & Associates as Liquidator for ARCAM.
Petitioner filed with the SEC a Motion for the Issuance of a TRO and/or
Writ of Preliminary Injunction to enjoin the foreclosure sale of ARCAM’s
assets. The SEC en banc issued a TRO effective for 72 hours, but said
TRO lapsed without any writ of preliminary injunction being issued by the
SEC.
Consequently, on July 28, 2000, PNB resumed the proceedings for the
extrajudicial foreclosure sale of the mortgaged properties. PNB emerged as
the highest winning bidder in the auction sale, and certificates of sale were
issued in its favor.
Petitioner filed with the SEC a motion to nullify the auction sale. Petitioner
posited that all actions against companies that are under liquidation are
suspended because liquidation is a continuation of the petition for
suspension proceedings. Petitioner argued that the prohibition against
foreclosure subsisted during liquidation because payment of all of
ARCAM’s obligations was proscribed except those authorized by the
Commission.
SEC denied petitioner’s motion to nullify the foreclosure sale. CA denied
the appeal of petitioner mainly on procedural grounds.
Issue:
WON SEC erred in ruling that PNB was not barred from foreclosing on the
mortgages
Decision:
No, PNB, as a secured creditor, enjoys preference over a specific
mortgaged property and has a right to foreclose the mortgage under
Section 2248 of the Civil Code. The creditor-mortgagee has the right to
foreclose the mortgage over a specific real property whether or not the
debtor-mortgagor is under insolvency or liquidation proceedings.
The right to foreclose such mortgage is merely suspended upon the
appointment of a management committee or rehabilitation receiver or
upon the issuance of a stay order by the trial court. However, the creditor-
mortgagee may exercise his right to foreclose the mortgage upon the
termination of the rehabilitation proceedings or upon the lifting of the stay
order.
SEC. 114 (Rights of Secured Creditors) of the FRIA Law provides that the
Liquidation Order shall not affect the right of a secured creditor to enforce
his lien in accordance with the applicable contract or law.
PNB elected to maintain its rights under the security or lien; hence, its
right to foreclose the mortgaged properties should be respected.
Rosario v. Co
G.R. No. 133608
August 26, 2008
Corporate Dissolution
- Rehabilitation (Financial Rehabilitation and Insolvency Act of 2010,
R.A. No. 10142)
Facts:
Petitioner Tiong Rosario is the proprietor of TR Mercantile (TRM), a
single proprietorship engaged in the business of selling and trading paper
products and supplies of various kinds; while respondent Alfonso Co is the
Chairman and President of Modern Paper Products, Inc. (MPPI). In the
course of its business, MPPI purchased from TRM a variety of paper
products on credit. As payment for his purchases, respondent issued the
three (3) China Banking Corporation checks in favor of TRM which, upon
presentment for payment, were dishonored by the drawee bank on May
11, 1995, April 6, 1995, and April 28, 1995, respectively, for the reason
that the payment was either stopped or that the checks were drawn
against insufficient funds. TRM, through a demand letter, demanded that
respondent make good the checks and pay MPPI’s outstanding obligations
within five (5) banking days from receipt of the letter, otherwise, it would
be constrained to file both criminal and civil actions to protect its interest.
Respondent, however, failed to heed the demand. So petitioner filed a
complaint against respondent for violation of Batas Pambansa (B.P.) Blg.
22 with the Office of the City Prosecutor, Pasig City; upon finding probable
cause against respondent, the investigating prosecutor filed three separate
informations against him for violation of B.P. Blg. 22 before the
Metropolitan Trial Court (MeTC), Pasig City.
Prior thereto, MPPI and its principal stockholders, the Spouses Alfredo
and Elizabeth Co filed before the Securities and Exchange Commission
(SEC), under P.D. No. 902-A, a Petition for Suspension of Payments for
Rehabilitation Purposes with prayer for the creation of a management
committee and for a temporary restraining order and/or preliminary
injunction. The SEC issued an Omnibus Order creating a Management
Committee and consequently suspending all actions for claims against
MPPI pending before any court, tribunal, branch or body.
Meanwhile, in the criminal cases pending before the MeTC, respondent
was arraigned, and the cases were set for trial. Prior to initial trial,
respondent filed a Motion to Suspend Proceedings which petitioner
opposed. The SEC, through an order, granted respondents Motion to
Compel Compliance and For Issuance of Orders of Suspension in the
Criminal Cases. On September 3, 1996, the MeTC issued an Order
denying respondents motion to suspend proceedings. It held that the
elements of a prejudicial question do not exist. Respondent filed a Motion
for Reconsideration but it was denied. Aggrieved, respondent filed a
petition for certiorari before the RTC questioning the above orders. The
RTC enjoined the MeTC from further proceeding with Criminal Cases
during the pendency of the action before it. Then, petitioner filed a Motion
for Partial Reconsideration. However, upon agreement of the parties,
resolution on the motion was held in abeyance awaiting the RTC
resolution in the main case, the issues raised being identical. The RTC
issued the assailed Resolution granting respondent’s petition stating that
the respondent Court is directed to suspend the proceedings in Criminal
Cases during the pendency of the petition in SEC Case. Hence, this
petition.
Issue: Whether a criminal case against a corporate officer for violation of
B.P. 22 could be suspended on account of the pendency of a petition for
suspension of payments filed by that officer’s corporation with the
Securities and Exchange Commission?
Ruling:
No. A criminal case against a corporate officer for violation of BP 22 could
not be suspended on account of the pendency of a petition for suspension
of payments filed by that officer’s corporation with the Securities and
Exchange Commission.
As early as Finasia Investment and Finance Corp. v. Court of Appeals, this
Court clarified that the word claim used in Sec. 6 (c) of P.D. No. 902-A, as
amended, refers to debts or demands of a pecuniary nature and the
assertion of a right to have money paid. It is used in special proceedings
like those before an administrative court on insolvency. In Arranza v. B.F.
Homes, Inc., claim was defined as an action involving monetary
considerations. Clearly, the suspension contemplated under Sec. 6 (c) of
P.D. No. 902-A refers only to claims involving actions which are pecuniary
in nature.
The purpose of suspending the proceedings under P.D. No. 902-A 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. It 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.
Whereas, the gravamen of the offense punished by B.P. Blg. 22 is the act
of making and issuing a worthless check; that is, a check that is
dishonored upon its presentation for payment. It is designed to prevent
damage to trade, commerce, and banking caused by worthless checks. In
Lozano v. Martinez, the SC declared that it is not the nonpayment of an
obligation which the law punishes. The thrust of the law is to prohibit,
under pain of penal sanctions, the making and circulation of worthless
checks. Because of its deleterious effects on the public interest, the
practice is proscribed by the law. The law punishes the act not as an
offense against property, but an offense against public order. 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, to reform and rehabilitate him or, in general, to maintain
social order. Hence, the criminal prosecution is designed to promote the
public welfare by punishing offenders and deterring others.
Consequently, the filing of the case for violation of B.P. Blg. 22 is not a
claim that can be enjoined within the purview of P.D. No. 902-A. True,
although conviction of the accused for the alleged crime could result in the
restitution, reparation or indemnification of the private offended party for
the damage or injury he sustained by reason of the felonious act of the
accused, nevertheless, prosecution for violation of B.P. Blg. 22 is a
criminal action.
A criminal action has a dual purpose, namely, the punishment of the
offender and indemnity to the offended party. The dominant and
primordial objective of the criminal action is the punishment of the
offender. The civil action is merely incidental to and consequent to the
conviction of the accused. The reason for this is that criminal actions are
primarily intended to vindicate an outrage against the sovereignty of the
state and to impose the appropriate penalty for the vindication of the
disturbance to the social order caused by the offender. On the other hand,
the action between the private complainant and the accused is intended
solely to indemnify the former.
As far as the criminal aspect of the cases is concerned, the provisions of
Sec. 6 (c) of P.D. No. 902-A should not interfere with the prosecution of a
case for violation of B.P. Blg. 22, even if restitution, reparation or
indemnification could be ordered, because an absurdity would result, i.e.,
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. At any rate, should the court deem it fit to award
indemnification, such award would now fall under the category of a claim
under Sec. 6 (c) of P.D. No. 902-A, considering that it is already one for
monetary or pecuniary consideration. 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.
Gelano V. CA (1981)
G.R. No. L-39050 February 24, 1981
Lessons Applicable: Who are liable after dissolution and winding-up?
(Corporate Law)
FACTS:
Insular Sawmill, Inc. leased the paraphernal property of Guillermina M.
Gelano (wife) for P1.2K/month
November 19, 1947-December 26, 1950: Carlos Gelano (husband)
obtained cash advances of P25,950 on account of rentals
agreement: Insular Sawmill, Inc. could deduct the same from the monthly
rentals of the leased premises until the cash advances are fully paid
Carlos Gelano was able to pay only P5,950.00 thereby leaving an unpaid
balance of P20,000.00 which he refused to pay
Guillermina M. Gelano refused to pay on the ground that said amount was
for the personal account of her husband asked for by, and given to him,
without her knowledge and consent and did not benefit the family
May 4, 1948 to September 11, 1949: Spouses Gelanos purchased lumber
materials on credit leaving P946.46 unpaid
July 14, 1952: Joseph Tan Yoc Su, as accomdating party, executed a joint
and several promissory note with Carlos Gelano in favor of China Banking
Corporation bank in the amount of P8,000.00 payable in 60 days to help
renew the previous loan of the spouses
the bank collected P9,106.00 including interests by debiting the current
account of the corp.
Carlos only paid P5,000
Guillermina refused to pay on the ground that she had no knowledge of
such accomodation
May 29, 1959: Insular thru Atty. German Lee, filed a complaint for
collection against the spouses before the CFI
In the meantime, private respondent amended its Articles of Incorporation
to shorten its term of existence up to December 31, 1960 only
November 20, 1964: CFI favored Insular holding Carlos Gelano liable
August 23, 1973: held spouses jointly ad severally liable
ISSUE: W/N a corporation, whose corporate life had ceased by the
expiration of its term of existence, could still continue prosecuting and
defending suits after its dissolution and beyond the period of 3 years
provided for under Act No. 1459, otherwise known as the Corporation law,
to wind up its affairs, without having undertaken any step to transfer its
assets to a trustee or assignee.
HELD: YES. Affirmed with mod - conjugal property is liable
time during which the corporation, through its own officers, may conduct
the liquidation of its assets and sue and be sued as a corporation is
limited to 3 years from the time the period of dissolution commences; but
that there is no time limited within which the trustees must complete a
liquidation placed in their hands
only the conveyance to the trustees must be made within the 3-year period
effect of the conveyance is to make the trustees the legal owners of the
property conveyed, subject to the beneficial interest therein of creditors
and stockholders
trustee may commence a suit which can proceed to final judgment even
beyond the 3-year period
"trustee" = general concept - include the counsel to whom was entrusted
in the instant case
The purpose in the transfer of the assets of the corporation to a trustee
upon its dissolution is more for the protection of its creditor and
stockholders
Debtors may not take advantage of the failure of the corporation to
transfer its assets to a trustee
Section 77 of the Corporation Law, when the corporate existence is
terminated in any legal manner, the corporation shall nevertheless
continue as a body corporate for 3 years after the time when it would have
been dissolved, for the purpose of prosecuting and defending suits by or
against it.
LUIS C. CLEMENTE, LEONOR CLEMENTE DE ELEPAÑO, HEIRS OF
ARCADIO C. OCHOA, represented by FE O. OCHOA-BAYBAY,
CONCEPCION, MARIANO, ARTEMIO, VICENTE, ANGELITA, ROBERTO,
HERNANDO AND LOURDES, all surnamed ELEPAÑO, petitioners, vs.
THE HON. COURT OF APPEALS, ELVIRA PANDINCO-CASTRO AND
VICTOR CASTRO, respondents.
G.R. No. 82407 March 27, 1995
VITUG, J.:
FACTS: Petitioners sought to be declared the owners of a piece of land
situated in Calamba, Laguna bought by "Sociedad Popular Calambeña".
The “sociedad” was organized at the advent of the early American
occupation of the Philippines. It did business and held itself out as a
corporation from 1909 up to 1932. Its principal business was cockfighting
or the operation and management of a cockpit. The "Sociedad" acquired
the subject parcel of land from the Friar Lands Estate of Calamba. Patent
was issued and the Real Property Tax Register of the Office of the
Treasurer of Calamba, Laguna showed that the lot was declared and
assessed for taxation purposes.
Plaintiffs show that Mariano Elepaño and Pablo Clemente, now both
deceased, were the original stockholders of the "sociedad." Pablo
Clemente's shares of stocks were later distributed and apportioned to his
heirs. The "sociedad" then issued stock certificates to the heirs. On the
basis of their respective stocks certificates, they, along with the heirs of
Mariano Elepaño jointly claimed ownership over the subject parcel of land,
asserting that their fathers being the only known stockholders of the
"sociedad" they, to the exclusion of all others, are entitled to be declared
owners of the lot. Private respondents, in their answer; likewise claimed
ownership of the property by virtue of acquisitive prescription.
The trial court dismissed the complaint on the grounds of insufficiency of
evidence and absent a corporate liquidation, it is the corporation, not the
stockholders, which can assert, if at all, any title to the corporate assets.
The CA sustained the dismissal of the complaint.
ISSUE: Whether or not petitioners can be held to have succeeded in
establishing for themselves a firm title to the property in question.
HELD: NO. Except in showing that they are the successors-in-interest of
Elepaño and Clemente, petitioners have been unable to come up with any
evidence to substantiate their claim of ownership of the corporate asset.
If, indeed, the sociedad has long become defunct, it should behoove
petitioners, or anyone else who may have any interest in the corporation,
to take appropriate measures before a proper forum for a peremptory
settlement of its affairs. We might invite attention to the various modes
provided by the Corporation Code for dissolving, liquidating or winding up,
and terminating the life of the corporation.
Among the causes for such dissolution are when the corporate term has
expired or when, upon a verified complaint and after notice and hearing,
the SEC orders the dissolution of a corporation for its continuous
inactivity for at least 5 years. The corporation continues to be a body
corporate for 3 years after its dissolution for purposes of prosecuting and
defending suits by and against it and for enabling it to settle and close its
affairs, culminating in the disposition and distribution of its remaining
assets. It may, during the 3-year term, appoint a trustee or a receiver who
may act beyond that period. If the 3-year extended life has expired without
a trustee or receiver having been expressly designated by the corporation,
the board of directors (or trustees) itself may be permitted to so continue
as "trustees" by legal implication to complete the corporate liquidation.
Still in the absence of a board of directors or trustees, those having any
pecuniary interest in the assets, including not only the shareholders but
likewise the creditors of the corporation, acting for and in its behalf, might
make proper representations with the SEC for working out a final
settlement of the corporate concerns.
Benigno Vigilla, et al. v Philippine College of Criminology, Inc. GR No.
200094, June 10, 2013
Law Principle:
Anything favorable to the labor-only contractor redounds to the benefit of
the employer under the principle of solidary liability
Facts:
The petitioners work for the Philippine College of Criminology Inc. (PCCr)
as janitors, janitress and supervisor in its maintenance department. The
petitioners were made to understand by the respondent PCCr that they are
under the Metropolitan Building Services, Inc. (MBMSI) which is a
corporation engaged in providing janitorial services. PCCr terminated the
services of MBMSI on 2009 which resulted in the dismissal of the
petitioners. An illegal dismissal complaint was then filed against PCCr by
the petitioners contending that it is their real employer and not MBMSI.
Subsequently, the PCCr submitted to the Labor Arbiter waivers, releases
and quitclaims that were executed by the petitioners in favor to MBMSI.
The Labor Arbiter and NLRC ruled in favor of the petitioner, however upon
filing the petition for review on certiorari before the Court of Appeals, the
CA ruled that the quitclaims, releases and waivers executed by the
petitioners in favor to MBMSI redounds to the benefit of PCCr by virtue of
solidary liability under Article 1217 of the NewCivil Code. The petitioners
contend that under Article 106 of the Labor Code a labor-only contractor's
liability is not solidary as it is the employer who should be directly
responsible to the supplied worker.
Issue
Whether or not the quitclaims, releases and waivers executed by the
petitioners in favor to MBMSI redounds to the benefit of PCCr?
Held
Yes.
The Supreme Court held that the basis of the solidary liability of the
principal with those engaged in labor-only contracting is the last
paragraph of Article 106 of the Labor Code that provides, "In such cases of
labor-only contracting, the person or intermediary shall be considered
merely as an agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were directly
employed by him."
It also pointed out D.O. No. 18-A, s. 2011 section 27 providing for the
effects of labor-only contracting "where upon the finding by competent
authority of labor-only contracting shall render the principal jointly and
severally liable with the contractor to the latter's employees, in the same
manner and extent that the principal is liable to employees directly hired
by him/her, as provided in Article 106 of the Labor Code."
Hence, the PCCr's solidary liability was already expunged by virtue of the
releases, waivers and quitclaims executed by the petitioners in favor of
MBMSI by virtue of Article 1217 of the Civil Code providing that "payment
made by one of the solidary debtors extinguishes the obligation."
Metropolitan Bank & Trust Company, Inc. vs. Board of Trustees of
Riverside Mills Corporation Provident and Retirement Fund 630
SCRA 350
FACTS:
The Riverside Mills Corporation (RMC) established a Plan for its regular
employees. The contributions to the plan shall form part of the Fund
which shall be held, invested and distributed by the Commercial Bank and
Trust Company. The BOT of the fund entered into an agreement with
Philbank to act as an agent of the BOT and to hold, manage, invest and
reinvest the Fund in Trust Account No. 1797 in its behalf. When RMC
ceased its business operations, the BOD of Philbank decided to apply the
remaining trust assets held by it in the name of the Fund against part of
the RMC’s outstanding obligations.

When the unpaid employees of RMC learned of the trust account, they
demanded the payment of their share, which went unheeded. They,
together with the members of the Fund, filed a complaint for accounting
against the BOD of Philbank and its officers. The trial court ruled in favor
of the BOT of RMC and was affirmed on appeal. The BOD on petition for
review on certiorari under Rule 45 of the Rules of Court contends that
without known claimants of the Fund for eleven (11) years since RMC
closed shop, it was justifiable for petitioner to consider the Fund to have
“technically reverted” to, and formed part of RMC’s assets. Hence, it could
be applied to satisfy RMC’s debts to Philbank.

ISSUE:
Whether the BOD’s contention is correct.

RULING:
No. The Court held that “a trust is a “fiduciary relationship with respect to
property which involves the existence of equitable duties imposed upon
the holder of the title to the property to deal with it for the benefit of
another.” A trust is either express or implied. Express trusts are those
which the direct and positive acts of the parties create, by some writing or
deed, or will, or by words evincing an intention to create a trust.”