cases on insolvency

8/11/2019 Cases on Insolvency

1/101

THIRD DIVISION

MAJORITY STOCKHOLDERS OF

RUBY INDUSTRIAL

CORPORATION, Petitioners,

- versus -

MIGUEL LIM, in his persn!"

#!p!#i$% !s S$#&h"'er ( R)*%

In')s$ri!" Crpr!$in !n'

represen$in+ $he MINORITYSTOCKHOLDERS OF RUBY

INDUSTRIAL CORPORATION !n'

$he MANAGEMENT COMMITTEE

OF RUBY INDUSTRIAL

CORPORATION,

Respondents.

GR N -./001

23 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 32

CHINA BANKING CORPORATION,

Petitioner,

- versus -

MIGUEL LIM, in his persn!" #!p!#i$%!s ! s$#&h"'er ( R)*% In')s$ri!"

Crpr!$in !n' represen$in+ $he

MINORITY STOCKHOLDERS OF

RUBY INDUSTRIAL

CORPORATION,

Respondents.

GR N -./454

Present:

CARPIO MORALES,J.,

Chairperson,

BRION,

BERSAMIN,

ABAD, and

VILLARAMA, R.,JJ.

Pro!u"#ated:

une $, %&''
http://sc.judiciary.gov.ph/jurisprudence/2011/june2011/165887.htm#_ftn1http://sc.judiciary.gov.ph/jurisprudence/2011/june2011/165887.htm#_ftn1


2/101

23 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 32

DECISION

VILLARAMA, JR,J6

()is *ase is +rou#)t to us on appea" or t)efourthti!e, invo"vin# t)e sa!e

parties and interests "iti#atin# on issues arisin# ro! re)a+i"itation pro*eedin#s

initiated + Ru+ Industria" Corporation a+a*/ in '012.

3o""oin# is t)e a*tua" +a*/drop o t)e present *ontrovers, as *u""ed ro!

t)e re*ords and a*ts set ort) in t)eponencia o C)ie usti*e Renato S. PunoinRuby Industrial Corporation v. Court of Appeals.7-8

The An$e#e'en$s

Ru+ Industria" Corporation 4R5B67 is a do!esti* *orporation en#a#ed in

#"ass !anua*turin#. Ree"in# ro! severe "i8uidit pro+"e!s +e#innin# in '01&,

R5B6 i"ed on De*e!+er '2, '012 a petition or suspension o pa!ents it) t)e

Se*urities and E9*)an#e Co!!ission 4SEC7 do*/eted as SEC Case No. %$. On

De*e!+er %&, '012, t)e SEC issued an order de*"arin# R5B6 under suspension o

pa!ents and en;oinin# t)e disposition o its properties pendin# )earin# o t)e

petition, e9*ept insoar as ne*essar in its ordinar operations, and !a/in#

pa!ents outside o t)e ne*essar or "e#iti!ate e9penses o its +usiness.

On Au#ust '&, '01


3/101

MANCOM as tas/ed to peror! t)e o""oin# un*tions: 4'7 underta/e t)e

!ana#e!ent o R5B6@ 4%7 ta/e *ustod and *ontro" over a"" e9istin# assets and

"ia+i"ities o R5B6@ 427 eva"uate R5B6s e9istin# assets and "ia+i"ities, earnin#s

and operations@ 4


4/101

and operate R5B6 it)out *)ar#in# !ana#e!ent ees@ 427 +u-out t)e !a;orit

s)ares or se"" t)eir s)ares to t)e !a;orit sto*/)o"ders@ 4


5/101

o t)e De*e!+er %&, '012 SEC order en;oinin# R5B6 ro! disposin# its

properties and !a/in# pa!ents pendin# t)e )earin# o its petition or suspension

o pa!ents. ()e a"so *)ar#ed t)at in pain# o 3EB(Cs *redits, 3EB(C as

#iven undue preeren*e over t)e ot)er *reditors o R5B6. A*tin# on t)e !otions,

t)e SEC =earin# Pane" n)""i(ie' t)e deeds o assi#n!ent e9e*uted + R5B6s

*reditors in avor o BEN=AR and de*"ared t)e parties t)ereto #ui"t o indire*t

*onte!pt. BEN=AR and R5B6 appea"ed to t)e SECEn Banc)i*) denied t)eir

appea". BEN=AR and R5B6 ;oined + =enr 6u and 6u >i! ?ian# appea"ed to

t)e CA 4CA-?.R. SP No. '12'&7. B De*ision798dated Au#ust %0, '00&, t)e CA

air!ed t)e SEC ru"in# nu""iin# t)e deeds o assi#n!ent. ()e CA a"so de*"ared

its de*ision ina" and e9e*utor as to R5B6 and 6u >i! ?ian# or t)eir ai"ure to

i"e t)eir p"eadin#s it)in t)e re#"e!entar period. B Reso"ution dated Au#ust

%$, '00' in G.R. No. $%%&',7:8t)is Court air!ed t)e CAs de*ision.

Ear"ier, on Ma %0, '00&, ater t)e SECEn Bancen;oined t)e

i!p"e!entation o BEN=ARR5B6 P"an, R5B6 i"ed it) t)e SECEn

Bancan e( partepetition to *reate a ne !ana#e!ent *o!!ittee and to approve

its revised re)a+i"itation p"an 4Revised BEN=ARR5B6 P"an7. 5nder t)e revised

p"an, BEN=AR s)a"" re*eive P2


6/101

t)e )earin# o t)e petition or t)e *reation o a ne !ana#e!ent *o!!ittee, t)ree

427 !e!+ers o t)e ori#ina" !ana#e!ent *o!!ittee 4Li!, AL3C and Pi"ipinas

S)e""7 opposed t)e Revised BEN=ARR5B6 P"an on #rounds t)at: 4'7 it ou"d

"e#iti!iFe t)e entr o BEN=AR, a tota" stran#er, to R5B6 as BEN=AR ou"d

+e*o!e t)e +i##est *reditor o R5B6@ 4%7 it ou"d put R5B6s assets +eond t)e

rea*) o t)e unse*ured *reditors and t)e !inorit sto*/)o"ders@ and 427 it as not

approved + R5B6s sto*/)o"ders in a !eetin# *a""ed or t)e purpose.

Notit)standin# t)e o+;e*tions o 0& o R5B6s *reditors and t)ree

!e!+ers o t)e MANCOM, t)e SEC =earin# Pane" approved on Septe!+er '1,

'00' t)e Revised BEN=ARR5B6 P"an and disso"ved t)e e9istin# !ana#e!ent*o!!ittee. It a"so *reated a ne !ana#e!ent *o!!ittee and appointed BEN=AR

as one o its !e!+ers. In addition to t)e poers ori#ina"" *onerred to t)e

!ana#e!ent *o!!ittee under Presidentia" De*ree 4P.D.7 No. 0&%-A, t)e ne

!ana#e!ent *o!!ittee as tas/ed to oversee t)e i!p"e!entation + t)e Board o

Dire*tors o t)e revised re)a+i"itation p"an or R5B6.

()e ori#ina" !ana#e!ent *o!!ittee 4MANCOM7, Li! and AL3C appea"edto t)e SECEn Banc)i*) air!ed t)e approva" o t)e Revised BEN=ARR5B6

P"an and t)e *reation o a ne !ana#e!ent *o!!ittee on u" 2&, '002. (o ensure

t)at t)e !ana#e!ent o R5B6 i"" not +e *ontro""ed + an #roup, t)e SEC

appointed SEC "aers Ru+en C. Ladia and (eresita R. Siao as additiona"

!e!+ers o t)e ne !ana#e!ent *o!!ittee. 3urt)er, it de*"ared t)at BEN=ARs

!e!+ers)ip in t)e ne !ana#e!ent *o!!ittee is su+;e*t to t)e *ondition t)at

BEN=AR i"" e9tend its *redit a*i"ities to R5B6 it)out usin# t)e "atters assetsas se*urit or *o""atera".

Li!, AL3C and MANCOM !oved or re*onsideration )i"e R5B6 and

BEN=AR as/ed t)e SEC to re*onsider t)e portion o its Order pro)i+itin#


7/101

BEN=AR ro! uti"iFin# R5B6s assets as *o""atera". On O*to+er ', '002, t)e

SEC denied t)e !otion o Li!, AL3C and t)e ori#ina" !ana#e!ent *o!!ittee +ut

#ranted R5B6 and BEN=ARs !otion and a""oed BEN=AR to use R5B6s

assets as *o""atera" or "oans, su+;e*t to t)e approva" o t)e !a;orit o a"" t)e

!e!+ers o t)e ne !ana#e!ent *o!!ittee. Li!, AL3C and MANCOM

appea"ed to t)e CA 4CA-?.R. SP Nos. 2%


8/101

JSpe*ii*a"", t)e Revised BEN=ARR5B6 P"an *onsidered as va"id t)e

advan*e pa!ents !ade + BEN=AR in avor o so!e o R5B6s

*reditors. ()e nu""it o BEN=ARs unaut)oriFed dea"in#s it) R5B6s*reditors is sett"ed. ()e deeds o assi#n!ent +eteen BEN=AR and R5B6s

*reditors )ad +een *ate#ori*a"" de*"ared void + t)e SEC =earin# Pane" in to

4%7 orders issued on anuar '%, '010 and Mar*) ', '010. 9 9 9

9 9 9 9

()ese orders ere up)e"d + t)e SEC en bancand t)e Court o Appea"s. In CA-

?.R. SP No. '12'&, t)e Court o Appea"s ru"ed as o""os:

K9 9 9 9 9 9 9 9 9

K'7 9 9 9 )en t)e Deed o Assi#n!ent as e9e*uted on

Ma 2&, '011 + and +eteen Ru+ Industria" Corp., Ben)arInternationa", In*., and 3EB(C, the Rehabilitation +lan proposed

by petitioner Ruby Industrial Corp. for Benhar International, Inc.to assue all petitioner-s obliation has not been approved by the/EC. ()e Re)a+i"itation P"an as not approved unti"O*to+er %1,

'011. 0here 1as a 1illful and blatant violation of the /EC order

dated 2eceber )3, #$!" on t)e part o petitioner Ru+ Industria"Corp., represented + 6u >i! ?ian#, + Ben)ar Internationa", In*.,

represented + =enr 6u and + 3EB(CJ.

K%7 ()e !a#nitude and *overa#e o t)e transa*tions

invo"ved ere su*) t)at 6u >i! ?ian# and t)e ot)er si#natories

*annot ei#n i#noran*e or pretend "a*/ o /no"ed#e t)ereto in

vie o t)e a*t t)at t)e ere a"" si#natories to t)e transa*tion andpriv to a"" t)e ne#otiations "eadin# to t)e 8uestioned

transa*tions. In e(ecutin the 2eeds of Assinent, the petitionerstotally disrearded the andate contained in the /EC order not to

dispose the properties of Ruby Industrial Corp. in an !anner

)atsoever pendin# t)e approva" o t)e Re)a+i"itation P"an and

rendered i""usor t)e SEC eorts to re)a+i"itate t)e petitioner*orporation to t)e +est interests o a"" t)e *reditors.

K27 0he assinents 1ere ade 1ithout prior approval of

the 4anaeent Coittee *reated + t)e SEC in an Order

dated Au#ust '&, '01


9/101

assi#n!ent o assets o t)e petitioner Corporation de*"ared under

suspension o pa!ents, nu"" and void, and to *onserve t)e sa!e in

order to ee*t a air, e8uita+"e and !eanin#u" re)a+i"itation o t)einso"vent *orporation.

K


10/101

ootin#. N$ !n% ne ( $he= sh)"' *e p!i' !he!' ( $he $hers This ispre#ise"% $he re!sn (r s)spen'in+ !"" pen'in+ #"!i=s !+!ins$ $he

#rpr!$in )n'er re#ei;ership708

4Additiona" e!p)asis supp"ied.7

Aside ro! t)e undue preeren*e t)at ou"d )ave +een #iven to BEN=AR

under t)e Revised BEN=ARR5B6 P"an, e a"so ound R5B6s dea"in# it)

BEN=AR )i#)" irre#u"ar and its proposed inan*in# s*)e!e !ore *ost" and

u"ti!ate" pre;udi*ia" to R5B6. ()us:

Parent)eti*a"", BEN=AR is a do!esti* *orporation en#a#ed in i!portin#

and se""in# ve)i*"e spare parts it) an aut)oriFed *apita" sto*/ o t)irt !i""ion

pesos. 6et, it oered to "end its *redit a*i"it in t)e a!ount o si9t to ei#)t

!i""ion pesos to R5B6. It is to +e noted t)at BEN=AR is not a "endin# or

inan*in# *orporation and "endin# its *redit a*i"ities, ort) !ore t)an dou+"e itsaut)oriFed *apita"iFation, is not one o t)e poers #ranted to it under its Arti*"es

o In*orporation. Si#nii*ant", =enr 6u, a dire*tor and a !a;orit sto*/)o"dero R5B6 is, at t)e sa!e ti!e, a sto*/)o"der o BEN=AR, a *orporation oned

and *ontro""ed + )is a!i". ()ese *ir*u!stan*es render t)e dea"s +eteen

BEN=AR and R5B6 )i#)" irre#u"ar.

9 9 9 9

Moreover, )en R5B6 initiated its petition or suspension o pa!ents

it) t)e SEC, BEN=AR as not "isted as one o R5B6s *reditors. BEN=AR isa tota" stran#er to R5B6. I at a"", BEN=AR on" served as a *onduit o

R5B6. As apt" stated in t)e *)a""en#ed Court o Appea"s de*ision:

KBen)ars ro"e in t)e Revised Ben)arRu+ P"an, as

envisioned + t)e !a;orit sto*/)o"ders, is to *ontra*t t)e "oan or

Ru+ and, servin# t)e ro"e o a inan*ier, re"end t)e sa!e toRu+. Ben)ar is !ere" e9tendin# its *redit "ine a*i"it it)

C)ina Ban/, under )i*) t)e +an/ a#rees to advan*e unds to t)e

*o!pan s)ou"d t)e need arise. ()is is un"i/e" a "oan in )i*)t)e entire a!ount is !ade avai"a+"e to t)e +orroer so t)at it *an

+e used and pro#ra!!ed or t)e +eneit o t)e *o!pans inan*ia"

and operationa" needs. 0hus, it is actually China Ban6 1hich 1ill

be the source of the funds to be relent to Ruby. Benhar 1ill notshell out a sinle centavo of its o1n funds. It is the assets of Ruby

1hich 1ill be ortaed in favor of Benhar. Benh!r>s

p!r$i#ip!$in ?i"" n"% =!&e $he reh!*i"i$!$in p"!n =re #s$"%

!n', *e#!)se ( $he =r$+!+e ( i$s @R)*%>s !sse$s $ ! ne?

#re'i$r, ?i"" #re!$e ! si$)!$in ?hi#h is ?rse $h!n $he

presen$ 9 9 9
http://sc.judiciary.gov.ph/jurisprudence/2011/june2011/165887.htm#_ftn9http://sc.judiciary.gov.ph/jurisprudence/2011/june2011/165887.htm#_ftn9http://sc.judiciary.gov.ph/jurisprudence/2011/june2011/165887.htm#_ftn9


11/101

e need not sa !ore.748 4Additiona" e!p)asis supp"ied.7

Ater t)e ina"it o t)e a+ove de*ision, t)e SEC set t)e *ase or urt)er

pro*eedin#s.7-8

On Mar*) '


12/101


13/101


14/101


15/101

!a;orit sto*/)o"ders e9tendin# t)e *orporate "ie o R5B6 or anot)er tent-

ive 4%7 ears.

()e MANCOM *on*urred it) Li! and !ade a si!i"ar !aniestation*o!!ent75:8re#ardin# t)e irre#u"ar and inva"id *apita" inusion and

e9tension o R5B6s *orporate ter! approved + sto*/)o"ders representin# on"

$& o R5B6s outstandin# *apita" sto*/. It urt)er stated t)at t)e ore#oin# a*ts

ere perpetrated + t)e !a;orit sto*/)o"ders it)out even *onsu"tin# t)e

MANCOM, )i*) te*)ni*a"" stepped into t)e s)oes o R5B6s +oard o

dire*tors. Sin*e R5B6 as sti"" under a state o suspension o pa!ent at t)e ti!e

t)e spe*ia" sto*/)o"ders !eetin# as *a""ed, a"" *orporate a*ts s)ou"d )ave +een!ade in *onsu"tation and *"ose *oordination it) t)e MANCOM.

Li! "i/eise i"ed an Opposition75/8to BPIs Motion to Va*ate Suspension

Order, assertin# t)at t)e !ana#e!ent *o!!ittee ori#ina"" *reated + t)e SEC

*ontinues to *ontro" t)e *orporate aairs and properties o R5B6. =e a"so

*ontended t)at t)e SECRu"es o Pro*edure on Corporate Re*over *annot app" in

t)is *ase )i*) as i"ed "on# +eore t)e ee*tivit o said ru"es.

On t)e ot)er )and, R5B6 i"ed its Opposition75.8to t)e Motion i"ed + Li!

denin# t)e a""e#ation o Li! t)at R5B6s *orporate e9isten*e )ad

*eased. R5B6 *"ai!ed t)at due noti*e ere #iven to a"" sto*/)o"ders o

t)e O*to+er %, '00' spe*ia" !eetin# in )i*) t)e inusion o additiona" *apita" as

dis*ussed. It urt)er *ontended t)at t)e CA de*ision settin# aside t)e SEC orders

approvin# t)e Revised BEN=ARR5B6 P"an, )i*) as su+se8uent" air!ed+ t)is Court on anuar %&, '001, did not nu""i t)e reso"ution o R5B6s +oard

o dire*tors to issue t)e previous" unissued s)ares. ()e a!end!ent o its arti*"es

o in*orporation on t)e e9tension o R5B6s *orporate ter! as du" su+!itted

it) and approved + t)e SEC as per t)e Certii*ation dated Septe!+er %


16/101


17/101

798 Ear"ier, Li! !oved or a )earin# to veri t)e inor!ation t)at C)ina Ban/ and

BPI )ad separate" e9e*uted deeds o assi#n!ent in avor o ?reener Invest!ent

Corporation, a *o!pan oned + 6u >i! ?ian#, one o R5B6s !a;orit

sto*/)o"ders.79-8 Said )earin#, )oever, did not pus) t)rou#) in vie o R5B6s

proposa" or a *o!pro!ise a#ree!ent.7958 Li! su+!itted )is *o!!ents on t)e

Proposed Co!pro!ise A#ree!ent, +ut t)ere as no response ro! R5B6 and t)e

!a;orit sto*/)o"ders.7998 ()e !inorit sto*/)o"ders "i/eise served a *op o t)e

revised Co!pro!ise A#ree!ent to t)e !a;orit sto*/)o"ders.79:8 Li! !oved t)at

t)e *ase +e assi#ned to a ne Pane" o =earin# Oi*ers and t)e !a;orit

sto*/)o"ders +e !ade to de*"are in a )earin# )et)er t)e a**ept t)e

*ounterproposa"s o t)e !inorit in t)eir drat A!i*a+"e Sett"e!ent in order t)at

t)e *ase *an pro*eed i!!ediate" to "i8uidation.79/8

On anuar %, %&&', t)e MANCOM i"ed it) t)e SEC its Reso"ution

unani!ous" adopted on anuar '0, %&&' air!in# t)at: 4'7 MANCOM as

never inor!ed nor advised o t)e supposed *apita" inusion + t)e !a;orit

sto*/)o"ders in O*to+er '00' and it never a*tua"" re*eived an su*) additiona"

su+s*ription nor si#ned an do*u!ent attestin# to or aut)oriFin# t)e said in*rease

o R5B6s *apita" sto*/ or t)e e9tension o its *orporate "ie@ 4%7 MANCOM

*ontinuous" re*o#niFes t)e $&-i! ?ian# )ave not *o!p"ied it) t)e De*e!+er %%, '010

SEC order or t)e! to turn over t)e *as) in*"udin# +an/ deposits, a"" ot)er

inan*ia" re*ords and do*u!ents o R5B6 in*"udin# transer *ertii*ates o tit"e

over its rea" properties, and render an a**ountin# o a"" t)e !one re*eived +

R5B6@ and 47 pursuant to t)is Courts ru"in# in ?.R. No. 0$$ dated Au#ust %$,
http://sc.judiciary.gov.ph/jurisprudence/2011/june2011/165887.htm#_ftn31http://sc.judiciary.gov.ph/jurisprudence/2011/june2011/165887.htm#_ftn32http://sc.judiciary.gov.ph/jurisprudence/2011/june2011/165887.htm#_ftn33http://sc.judiciary.gov.ph/jurisprudence/2011/june2011/165887.htm#_ftn34http://sc.judiciary.gov.ph/jurisprudence/2011/june2011/165887.htm#_ftn35http://sc.judiciary.gov.ph/jurisprudence/2011/june2011/165887.htm#_ftn36http://sc.judiciary.gov.ph/jurisprudence/2011/june2011/165887.htm#_ftn31http://sc.judiciary.gov.ph/jurisprudence/2011/june2011/165887.htm#_ftn32http://sc.judiciary.gov.ph/jurisprudence/2011/june2011/165887.htm#_ftn33http://sc.judiciary.gov.ph/jurisprudence/2011/june2011/165887.htm#_ftn34http://sc.judiciary.gov.ph/jurisprudence/2011/june2011/165887.htm#_ftn35http://sc.judiciary.gov.ph/jurisprudence/2011/june2011/165887.htm#_ftn36


18/101


19/101

#overn!ent aut)orities o environ!enta" "as parti*u"ar" on po""ution *ontro",

and MANCOMs assent to ee*t a "i8uidation, t)e MANCOM asserted t)at a

)earin# s)ou"d o*us on t)e eventua" "i8uidation o R5B6. It added t)at a

dis!issa" under t)e *ir*u!stan*es ou"d +e tanta!ount to a per*eived s)ir/in# +

t)e SEC o its !andate to aord a"" *reditors a!p"e opportunit to re*over on t)eir

respe*tive inan*ia" e9posure it) R5B6.7908

On Ma ', %&&', t)e MANCOM su+!itted *opies o !inutes o !eetin#s

)e"d ro! Apri" '2, %&&& to De*e!+er %0, %&&&.7948

On Septe!+er %&, %&&', t)e SEC issued an Order dire*tin# t)e Mana#e!entCo!!ittee to su+!it a detai"ed report not !ere !inutes o !eetin#s -- on t)e

status o t)e re)a+i"itation pro*ess and inan*ia" *ondition o R5B6, )i*) s)ou"d

*ontain a state!ent on t)e easi+i"it o t)e re)a+i"itation p"an. 7:8 ()e MANCOM

*o!p"ied it) t)e said order on 3e+ruar ', %&&%.7:-8 ()e !a;orit sto*/)o"ders

and R5B6 !oved to dis!iss t)e petition and stri/e ro! t)e re*ords t)e

Co!p"ian*eReport. MANCOM i"ed its o!ni+us opposition to t)e said

!otions. ()ere as urt)er e9*)an#e o p"eadin#s + t)e parties on t)e !atter o)et)er t)e SEC s)ou"d a"read dis!iss t)e petition o R5B6 as praed or + t)e

!a;orit sto*/)o"ders and R5B6, or pro*eed it) supervised "i8uidation o R5B6

as proposed + t)e MANCOM and !inorit sto*/)o"ders.

The SEC>s R)"in+

On Septe!+er '1, %&&%, t)e SEC issued its Order7:58denin# t)e petition or

suspension o pa!ents, as o""os:

=ERE3ORE, in vie o t)e ore#oin#, t)e Co!!ission )ere+ reso"vesto ter!inate t)e pro*eedin#s and DEN6 t)e instant petition.
http://sc.judiciary.gov.ph/jurisprudence/2011/june2011/165887.htm#_ftn39http://sc.judiciary.gov.ph/jurisprudence/2011/june2011/165887.htm#_ftn40http://sc.judiciary.gov.ph/jurisprudence/2011/june2011/165887.htm#_ftn41http://sc.judiciary.gov.ph/jurisprudence/2011/june2011/165887.htm#_ftn42http://sc.judiciary.gov.ph/jurisprudence/2011/june2011/165887.htm#_ftn43http://sc.judiciary.gov.ph/jurisprudence/2011/june2011/165887.htm#_ftn39http://sc.judiciary.gov.ph/jurisprudence/2011/june2011/165887.htm#_ftn40http://sc.judiciary.gov.ph/jurisprudence/2011/june2011/165887.htm#_ftn41http://sc.judiciary.gov.ph/jurisprudence/2011/june2011/165887.htm#_ftn42http://sc.judiciary.gov.ph/jurisprudence/2011/june2011/165887.htm#_ftn43


20/101

A**ordin#", pursuant to Se*. - o t)e SECs Ru"es o Pro*edure on

Corporate Re*over, )i*) provides:

KDis*)ar#e o t)e Mana#e!ent Co!!ittee -- ()e

Mana#e!ent Co!!ittee s)a"" +e dis*)ar#ed and disso"ved under

t)e o""oin# *ir*u!stan*es:

a. )enever t)e Co!!ission, on !otion or otu prop7r8io,)as deter!ined t)at t)e ne*essit or t)e Mana#e!ent

Co!!ittee no "on#er e9ists@

+. 5pon t)e appoint!ent o a "i8uidator under t)ese Ru"es@*. B a#ree!ent o t)e parties@

d. 5pon ter!ination o t)e pro*eedin#s.

5pon its dis*)ar#e and disso"ution, t)e Mana#e!ent

Co!!ittee s)a"" su+!it its ina" report and render an a**ountin# o

its !ana#e!ent it)in su*) reasona+"e ti!e as t)e Co!!ission

!a a""o.

t)e Mana#e!ent Co!!ittee is )ere+ DISSOLVED. It is "i/eise

ordered to:

4'7 Ma/e an inventor o t)e assets, unds and properties o t)e

petitioner@

4%7 (urn-over t)e aore!entioned assets, unds and properties to t)eproper part4ies7@

427 Render an a**ountin# o its !ana#e!ent@ and

4


21/101

re#ardin# t)e 8uestiona+"e issuan*e o s)ares o sto*/ + t)e !a;orit sto*/)o"ders

and e9tension o R5B6s *orporate ter!, *itin# t)e presu!ption o re#u"arit in

t)e a*t o a #overn!ent entit )i*) o+tains upon t)e SECs approva" o R5B6s

a!end!ent o arti*"es o in*orporation. It pointed out t)at Li! raised t)e issue

on" in t)e ear %&&&. Moreover, t)e SEC ound t)at notit)standin# )is

a""e#ations o raud, Li! never proved t)e i""e#a"it o t)e additiona" inusion o

t)e *apita"iFation + R5B6 so as to arrant a indin# t)at t)ere as indeed an

un"au" a*t.7::8

Li!, in )is persona" *apa*it and in representation o t)e !inorit

sto*/)o"ders o R5B6, i"ed a petition or revie it) praer or a te!porar

restrainin# order andor rit o pre"i!inar in;un*tion +eore t)e CA 4CA-?.R. SP

No. 2'07 assai"in# t)e SEC order dis!issin# t)e petition and disso"vin# t)e

MANCOM.

R)"in+ ( $he CA

On Ma %$, %&&


22/101

427 i!p"e!entin# t)e inva"idation o an and a"" i""e#a" assi#n!ents o

*reditpur*)ase o *redits and t)e *an*e""ation o !ort#a#es *onne*ted t)ereit)

!ade + t)e *reditors o Ru+ Industria" Corporation durin# t)e ee*tivit o t)esuspension o pa!ents order in*"udin# t)at o C)ina Ban/ and BPI and to

de"iver to MANCOM or t)e Li8uidator a"" t)e ori#ina" o t)e Deeds o

Assi#n!ents and t)e re#istered tit"es t)ereto and an ot)er do*u!ents re"atedt)ereto@ and order t)eir unindin# and re8uirin# t)e !a;orit sto*/)o"ders to

a**ount or a"" i""e#a" assi#n!ents 4a!ounts, dates, interests, et*. and present t)e

ori#ina" do*u!ents supportin# t)e sa!e7@ and

4


23/101

On t)e supposed de"a o t)e !inorit sto*/)o"ders in raisin# t)e issue o t)e

va"idit o t)e inusion o additiona" *apita" ee*ted + t)e +oard o dire*tors, t)e

CA )e"d t)at "a*)es is inapp"i*a+"e in t)is *ase. It noted t)at Li! sou#)t re"ie

)i"e t)e *ase is sti"" pendin# +eore t)e SEC. I ever t)ere as de"a, t)e sa!e is

not ata" to t)e *ause o t)e !inorit sto*/)o"ders.

()e CA "i/eise au"ted t)e SEC in re"in# on t)e presu!ption o re#u"arit

on t)e !atter o t)e e9tension o R5B6s *orporate ter! t)rou#) t)e i"in# o

a!ended arti*"es o in*orporation. In doin# so, t)e CA tota"" disre#arded t)e

eviden*e )i*) re+utted said presu!ption, as de!onstrated + Li!: 4'7 it as t)e

+oard o dire*tors and not t)e sto*/)o"ders )i*) *ondu*ted t)e !eetin# it)outt)e approva" o t)e MANCOM@ 4%7 t)ere as no ritten aivers o t)e !inorit

sto*/)o"ders pre-e!ptive ri#)ts and t)us it as irre#u"ar to !ere" noti t)e! o

t)e +oard o dire*tors !eetin# and as/ t)e! to e9er*ise t)eir option@ 427 t)ere as

an e9istin# per!anent in;un*tion a#ainst an additiona" *apita" inusion on t)e

BEN=ARR5B6 P"an, )i"e t)e CA and t)is Court +ot) re;e*ted t)e Revised

BEN=ARR5B6 P"an@ 4


24/101


25/101

sto*/)o"ders +ut a"so in +e)a" o t)e *orporation itse" )i*) is t)e rea" part in

interest. ()us, notit)standin# t)at Li!s oners)ip in R5B6 *o!prises on"

'. O3 5RISDIC(ION -- =EN I( S5S(AINED COLLA(ERAL

A((AC>S O3 3INAL AD5DICA(IONS O3 (=E SEC5RI(IES AND

EC=AN?E COMMISSION.7:08


26/101

On t)e ot)er )and, petitioner C)ina Ban/ in ?.R. No. '$0%0 puts ort) t)e

ar#u!ent t)at t)e prin*ip"e ostare decisis *annot +e #iven ee*t in t)is *ase

*onsiderin# t)e prevai"in# a*tua" *ir*u!stan*es, as to do so ou"d resu"t in

!aniest in;usti*e. It *ontends t)at t)e reason or t)e de*"aration o nu""it o t)e

Deed o Assi#n!ent pronoun*ed !ore t)an a de*ade a#o, )as +e*o!e "e#a""

inei*a*ious + its o+so"es*en*e. ()e *reditors o R5B6 )ave t)e ri#)t to re*over

t)eir *redit. But )en t)e CA ordered t)e nu""ii*ation o C)ina Ban/s Deed o

Assi#n!ent in avor o ?reener Invest!ent Corporation, it pra*ti*a"" das)ed its

"ast )ope or ever re*overin# its *redit.

C)ina Ban/ is o t)e vie t)at t)e CA overstret*)ed t)e i!port o t)isCourts anuar %&, '001 de*ision in ?.R. Nos. '%


27/101

+eore t)e CA assai"in# t)e Septe!+er '1, %&&% SEC Order@ 4%7 )et)er t)e

dee*ts in t)e *ertii*ation o non-oru! s)oppin# su+!itted + Li! arrant t)e

dis!issa" o )is petition +eore t)e CA@ 427 )et)er t)e CA as *orre*t in

reversin# t)e SECs order dis!issin# t)e petition or suspension o pa!ent.

O)r R)"in+

()e petitions )ave no !erit.

On t)e *)ar#e o oru! s)oppin#, e )ave a"read ru"ed on t)e !atter in

?.R. Nos. '%


28/101

In t)e present *ase, no *onso"idation o CA-?.R. SP Nos. 2'$0 4i"ed +

MANCOM7 )i*) as ear"ier assi#ned to t)e ()irteent) Division and CA-?.R.

SP No. 2'0 4i"ed + Li!7 de*ided + t)e Se*ond Division, too/ p"a*e. In t)eir

Co!!ent i"ed +eore CA-?.R. SP No. 2'$0, t)e Ma;orit Sto*/)o"ders and

R5B6 4private respondents t)erein7 praed or t)e dis!issa" o said *ase ar#uin#

t)at MANCOM, o )i*) Li! is a !e!+er, *ir*u!vented t)e pros*ription a#ainst

oru! s)oppin#. ()e CAs ()irteent) Division, )oever, disa#reed it) private

respondents and #ranted t)e !otion to it)dra petition i"ed + MANCOM

)i*) !aniested t)at t)e Se*ond Division in CA-?.R. SP No. 2'0 + De*ision

dated Ma %$, %&&< )ad #ranted t)e re"ies si!i"ar to t)ose praed or in t)eir

petition, said de*ision +ein# +indin# on MANCOM )i*) as a"so i!p"eaded in

said *ase 4CA-?.R. SP No. 2'07. ()e ()irteent) Division a"so *ited our

pronoun*e!ent in ?.R. Nos. '%


29/101

*reditors. Ea*) ti!e t)e #o to *ourt, Li! and MANCOM essentia"" advan*e t)e

interest o t)e *orporation itse". ()e )ave *onsistent" ta/en t)e position t)at

R5B6s assets s)ou"d +e preserved or t)e e8ua" +eneit o all its *reditors, and

vi#orous" resisted an atte!pt o t)e *ontro""in# sto*/)o"ders to avor an or

so!e o its *reditors + enterin# into 8uestiona+"e dea"s or inan*in# s*)e!es

under to BEN=ARR5B6 P"ans. Vieed in t)is "i#)t, t)e CA as t)ereore

*orre*t in re*o#niFin# Li!s ri#)t to institute a sto*/)o"ders a*tion in )i*) t)e

rea" part in interest is t)e *orporation itse".

A derivative a*tion is a suit + a s)are)o"der to enor*e a *orporate *ause o

a*tion.7/-8

It is a re!ed desi#ned + e8uit and )as +een t)e prin*ipa" deense ot)e !inorit s)are)o"ders a#ainst a+uses + t)e !a;orit.7/58 3or t)is purpose, it is

enou#) t)at a !e!+er or a !inorit o sto*/)o"ders i"e a derivative suit or and in

+e)a" o a *orporation.7/98 An individua" sto*/)o"der is per!itted to institute a

derivative suit on +e)a" o t)e *orporation )erein )e )o"ds sto*/ in order to

prote*t or vindi*ate *orporate ri#)ts, )enever oi*ia"s o t)e *orporation reuse to

sue or are t)e ones to +e sued or )o"d t)e *ontro" o t)e *orporation. In su*)

a*tions, t)e suin# sto*/)o"der is re#arded as t)e no!ina" part, it) t)e

*orporation as t)e part in interest.7/:8

No, on t)e t)ird and su+stantive issue *on*ernin# t)e SECs dis!issa" o

R5B6s petition or suspension o pa!ent.

()e SEC +ased its a*tion on Se*.


30/101

#ood ait) and it) due di"i#en*e, and t)at t)e de+tor ou"d "i/e" +e a+"e to

!a/e a via+"e re)a+i"itation p"an. Ater t)e "apse o one )undred and ei#)t 4'1&7

das ro! t)e issuan*e o t)e suspension order, no e9tension o t)e said orders)a"" +e #ranted + t)e Co!!ission i opposed in ritin# + a !a;orit o an

*"ass o *reditors. ()e Co!!ission !a #rant an e9tension +eond one )undred

ei#)t 4'1&7 das on" i it appears + *onvin*in# eviden*e t)at t)ere is a #ood*)an*e or t)e su**essu" re)a+i"itation o t)e de+tor and t)e opposition t)ereto +

t)e *reditor appears !aniest" unreasona+"e.

In an event, $he pe$i$in is 'ee=e' ipso facto'enie' !n' 'is=isse' i(n Reh!*i"i$!$in P"!n ?!s !ppr;e' *% $he C==issin )pn $he "!pse (

$he r'er r $he "!s$ e2$ensin $here( In s)#h #!se, $he 'e*$r sh!"" #=e

)n'er $he 'iss")$in !n' "i


31/101

Moreover, re*ords revea" t)at t)e de"a in t)e pro*eedin#s ater t)e *ase as

set or )earin# o""oin# t)is Courts ina" ;ud#!ent in ?.R. Nos. '%


32/101

Corporate Re*over ou"d i!pair t)e vested ri#)ts o t)e !inorit sto*/)o"ders

under t)is Courts de*ision inva"idatin# t)e aoresaid deeds o assi#n!ent, t)us:

e a#ree it) t)e o+servations o t)e petition t)at i t)e i""e#a"

assi#n!ents not )avin# +een unound and t)e !ort#a#es not *an*e"ed, t)e!a;orit, t)eir a"ter e#o, andor *o)orts i"" *"ai! to +e se*ured *reditors and

ree" *o""e*t e9tra-;udi*ia"" t)e o+"i#ations *overed + t)e i""e#a"

assi#n!ents. Ru+ )as ver "itt"e !one *o!pared to t)e P%&& Mi""ion pro+a+"e

"ia+i"it to t)e i""e#a" assi#nees as uni"atera"" stated + Ru+ it)out audit4previous" !ere" tota"ed to P2< Mi""ion in '001 as stated in t)e revised

re)a+i"itation p"an7. 3ore*"osure o t)e !ort#a#es + t)e i""e#a" assi#nees i""

o""o@ Ru+ i"" "ose a"" its pri!e properties@ t)ere i"" +e no assets "et orunse*ured *reditors@ and t)ere i"" +e no residua" P$&& Mi""ion assets to divide.7/.8

Evident", t)e !inorit sto*/)o"ders and MANCOM )ad a"read oreseen

t)e i!possi+i"it o i!p"e!entin# a via+"e re)a+i"itation p"an i t)e i""e#a"

assi#n!ents !ade + its *reditors it) BEN=AR and t)e !a;orit sto*/)o"ders,

and su+se8uent", it) *onduits o R5B6 or =enr 6u, are not proper" unound

and t)ose dire*tors responsi+"e or t)e void transa*tions not re8uired to !a/e a u""

a**ountin#. Contrar to petitioner C)ina Ban/s insinuation t)at t)e !inorit

sto*/)o"ders !ere" ant to pro"on# t)e "iti#ation to t)e #reat pre;udi*e andda!a#e to R5B6s *reditors, MANCOM and Li! )ad deter!ined and !oved or

SEC-supervised "i8uidation pro*eedin#s as t)e !ore prudent *ourse o a*tion or

an order" and e8uita+"e sett"e!ent o R5B6s "ia+i"ities.

Re*ords "i/eise revea"ed t)at t)e SEC *)ose to /eep si"ent and ai"ed to

assist t)e MANCOM and !inorit sto*/)o"ders in t)eir eorts to de!and

*o!p"ian*e ro! t)e !a;orit sto*/)o"ders or 6u >i! ?ian# 4)o )eaded t)e irstMANCOM7 it) t)e De*e!+er %%, '010 Order dire*tin# t)e! to turn over t)e

*as), inan*ia" re*ords and do*u!ents o R5B6, in*"udin# *ertii*ates o tit"e over

R5B6s rea" properties, and render an a**ountin# o a"" !ones re*eived and

pa!ents !ade + R5B6. On anuar '1, %&&%, t)e MANCOM even i"ed a


33/101

Motion7/18 to re8uire 6u >i! ?ian# to render reporta**ountin# o R5B6 ro!

'012 to t)e 'st8uarter o '00&, statin# t)at despite a *o!!it!ent ro! Mr. ?ian#,

)e )as see!in#" de"aed )is *o!p"ian*e, )en*e rustratin# t)e desire o

MANCOM to su+!it a *o!pre)ensive and *o!p"ete report or t)e )o"e period o

'012 up to t)e present. (o unders*ore t)e i!portan*e o !a/in# t)e said re*ords

avai"a+"e or s*rutin o t)e SEC and MANCOM, Li! !aniested +eore t)e SEC

t)at--

Indeed, t)e !a;orit is a*tua"" uni""in# 4and not !ere" una+"e7 tosu+!it su*) re*ords +e*ause t)ese i"" s)o, a!on# ot)ers:

4'7 ()e !a;orit to !inorit ratio in t)e *orporate oners)ip is

0.1%1 :


34/101


35/101


36/101

()e Revised Ben)arRu+ P"an, in a*t, #ives Ben)ar undue preeren*e on

t)e !atter o repa!ent. 5nder t)e said p"an, t)e *reditors o Ru+ i"" +e paid

in a**ordan*e it) t)e o""oin# s*)edu"es:

KSe*ured Creditors

C)ina Ban/in# Corp.BPI

P)i"ippine Orient

P'.&%%M (o +e paid in *as) it)

'% interest p.a.

5nse*ured Creditors

A""ied Leasin#3i"*or 3inan*e

P 0.2


37/101

even C)ina Ban/.

2. ()e !ain assets are to+e !ort#a#ed to t)e

*reditor- assi#nor o

Ben)ar and i t)e i""e#a"

assi#n!ents are re*o#niFed,t)en Ben)ar s)a"" )ave to +e

re*o#niFed as !ort#a#ee

even )en it is adis8ua"iied

*reditor andor

!ort#a#ee.

2. Mort#a#edto +an/4s7dire*t".


38/101


39/101

!inorit i"" ta/e up t)eirpre-e!ptive ri#)ts and

di"ute !inorit

s)are)o"din#s.

!ont)s + t)e!inorit sto*/)o"ders.

9 9 9 97.-8

Prior to t)e Septe!+er '1, '00' Order approvin# t)e Revised

BEN=ARR5B6 P"an and disso"vin# t)e MANCOM, !a;orit o R5B6s

*reditors 40&7 )ave a"read it)dran t)eir support to t)e revised p"an and

!aniested t)at t)e ere on" "ate" inor!ed a+out anot)er p"an su+!itted +

t)e !inorit sto*/)o"ders. =en*e, t)ese *reditors rote individua" "etters to t)eSEC =earin# Pane" e9pressin# t)eir a#ree!ent it) and endorse!ent o t)e

A"ternative P"an o t)e !inorit sto*/)o"ders. 7.58

()e Revised BEN=ARR5B6 P"an )ad proposed t)e *a""in# or

su+s*ription o unissued s)ares t)rou#) a Board Reso"ution ro! t)e P''.1'7 upon findin the petition sufficient in form and substance' The pertinent

portions of the Brder readF

indin the petition6 toether with its anne1es6 sufficient in form and substance andpursuant to ection *6 Rule 4 of the 7nterim Rules on !orporate Rehabilitation6 the

!ourt herebyF

1 1 1 1

2$ tays the enforcement of all claims6 whether for money or otherwise and whether

such enforcement is by court action or otherwise6 aainst the debtor6 its uarantors and

sureties not solidarily liable with the debtor'+*-

"t the time6 however6 of the filin of the petition for rehabilitation6 there were a numberof criminal chares+


71/101

rom the foreoin6 the inescapable conclusion is that the stay order issued by RT!

8ranch 24 does not include the above%captioned cases which are criminal in nature'+,2-

8ranch 5, denied the motion for reconsideration filed by petitioners'

Bn "uust ,6 20056 petitioners filed a petition for certiorari+,3-with the !" assailin the

Brder of 8ranch 5,'

Bn "pril 2 R(7D PN"; !BD'+,*-

The petition is not meritorious'

To bein with6 corporate rehabilitation connotes the restoration of the debtor to a

position of successful operation and solvency6 if it is shown that its continued operation

is economically feasible and its creditors can recover more6 by way of the present value

of payments pro=ected in the rehabilitation plan6 if the corporation continues as a oin

concern than if it is immediately liAuidated'+,


72/101

distressed corporation' ection * #c$ of Presidential Decree No' 02%"6 as amended6

provides for suspension of claims aainst corporations underoin rehabilitation6 to witF

ection * #c$' 1 1 1

1 1 1 Provided6 finally6 that upon appointment of a manaement committee6rehabilitation receiver6 board or body6 pursuant to this Decree6 / /ct4o5 or

c/48aainst corporations6 partnerships or associations under manaement or

receivership pendin before any court6 tribunal6 board or body6 9/ be

:e5;e;accordinly'+,-

7n November 2,6 20006 this !ourt En "ancpromulated the 7nterim Rules of Procedure

on !orporate Rehabilitation6+20-ection *6 Rule 4 of which provides a stay order on all

claims aainst the corporation6 thusF

Sta) Order' % 7f the court finds the petition to be sufficient in form and substance6 itshall6 not later than five #5$ days from the filin of the petition6 issue an Brder 1 1 1J

#b$ t/45< e5orce8e5t o / c/486 whether for money or otherwise and whether

such enforcement is by court action or otherwise6 aainst the debtor6 its uarantors and

sureties not solidarily liable with the debtorJ 1 1 1+2,-

7n Finasia In%estments and Finance Corporation % Court of Appeals$+22-the term OclaimO

has been construed to refer to debts or demands of a pecuniary nature6 or the assertion

to have money paid' The purpose for suspendin actions for claims aainst the

corporation in a rehabilitation proceedin is to enable the manaement committee or

rehabilitation receiver to effectively e1ercise its:his powers free from any =udicial or

e1tra=udicial interference that miht unduly hinder or prevent the rescue of the debtor

company'+23-

The issue to be resolved then isF does the suspension of Oall claimsO as an incident to a

corporate rehabilitation also contemplate the suspension of criminal chares filed

aainst the corporate officers of the distressed corporationQ

This !ourt rules in the neative'

7n Rosario % Co+24-.Rosario/6a case of recent vintae6 the issue resolved by this !ourt

was whether or not durin the pendency of rehabilitation proceedins6 criminal chares

for violation of "atas Pambansa "ilang 44should be suspended6 was disposed of as

followsF

1 1 1 the gra%amenof the offense punished by "P "lg 44is the act of ma9in and

issuin a worthless chec9J that is6 a chec9 that is dishonored upon its presentation for

payment' 7t is desined to prevent damae to trade6 commerce6 and ban9in caused by


73/101

worthless chec9s' 7n Lo;ano % Martine;6this !ourt declared that it is not the

nonpayment of an obliation which the law punishes' The law is not intended or

desined to coerce a debtor to pay his debt' The thrust of the law is to prohibit6 under

pain of penal sanctions6 the ma9in and circulation of worthless chec9s' 8ecause of its

deleterious effects on the public interest6 the practice is proscribed by the law' The law

punishes the act not as an offense aainst property6 but an offense aainst public order'

The prime purpose of the criminal action is to punish the offender in order to deter him

and others from committin the same or similar offense6 to isolate him from society6 to

reform and rehabilitate him or6 in eneral6 to maintain social order' >ence6 the criminal

prosecution is desined to promote the public welfare by punishin offenders and

deterrin others'

Co5e=e5t, t9e 445< o t9e c/e or >4o/t4o5 o #.!. #4e o !.D. No. B02A. Tre, /t9o4ct4o5 o t9e /cce; or t9e /e/te oe5;e; :/rt or t9e ;/8/ert9ee, :roect4o5 or >4o/t4o5 o #.!. #7 and the settlement of claims aainst the corporation is not aleal round for the e1tinction of petitionersL criminal liabilities' There is no reason why

criminal proceedins should be suspended durin corporate rehabilitation6 more so6

since the prime purpose of the criminal action is to punish the offender in order to deter

him and others from committin the same or similar offense6 to isolate him from

society6 reform and rehabilitate him or6 in eneral6 to maintain social order'+2*-"s

correctly observed in Rosario6+2


74/101

rehabilitation by the corporation of which he is an officer'

The prosecution of the officers of the corporation has no bearin on the pendin

rehabilitation of the corporation6 especially since they are chared in their individual

capacities' uch bein the case6 the purpose of the law for the issuance of the stay

order is not compromised6 since the appointed rehabilitation receiver can still fully

dischare his functions as mandated by law' 7t bears to stress that the rehabilitation

receiver is not chared to defend the officers of the corporation' 7f there is anythin

that the rehabilitation receiver miht be remotely interested in is whether the court also

rules that petitioners are civilly liable' uch a scenario6 however6 is not a reason to

suspend the criminal proceedins6 because as aptly discussed in Rosario6 should the

court prosecutin the officers of the corporation find that an award or indemnification is

warranted6 such award would fall under the cateory of claims6 the e1ecution of which

would be sub=ect to the stay order issued by the rehabilitation court'+2)-The penal

sanctions as a conseAuence of violation of the law6 in relation to the revised penal

code can therefore be implemented if petitioners are found uilty after trial' >owever6any civil indemnity awarded as a result of their conviction would be sub=ect to the stay

order issued by the rehabilitation court' Bnly to this e1tent can the order of suspension

be considered obliatory upon any court6 tribunal6 branch or body where there are

pendin actions for claims aainst the distressed corporation'+2-

Bn a final note6 this !ourt would li9e to point out that !onress has recently enacted

Republic "ct No' ,0,426 or the inancial Rehabilitation and 7nsolvency "ct of 20,0'+30-

ection ,) thereof e1plicitly provides that criminal actions aainst the individual officer

of a corporation are not sub=ect to the tay or uspension Brder in rehabilitation

proceedins6 to witF

The tay or uspension Brder shall not applyF

1 1 1 1

#$ any criminal action aainst individual debtor or owner6 partner6 director or officer of

a debtor shall not be affected by any proceedin commenced under this "ct'

Cithal6 based on the foreoin discussion6 this !ourt rules that there is no leal

impediment for 8ranch 5, to proceed with the cases filed aainst petitioners'

W"EREORE6 premises considered6 the petition is DENIED' The "pril 2


75/101

Corona$0C1$ Carpio$ .Chairperson/$ Pere;$00and Mendo;a$ 11$ concur'

MDesinated as an additional member in lieu of "ssociate ?ustice "ntonio duardo 8'Nachura6 per raffle dated ?une 226 200'

MMDesinated as an additional member in lieu of "ssociate ?ustice Roberto "' "bad6 per

raffle dated ?uly ,26 20,0'

+,-Rollo6 pp' % 23'

+2-Penned by "ssociate ?ustice "ndres 8' Reyes6 ?r'6 with "ssociate ?ustices Rosmari D'

!arandan and ?apar 8' Dimaampao6 concurrin6 id' at 3,%3


76/101


77/101

SECOND DIVISION

[ G.R. No. 17-((, % 2B, 2013 ]

#AN) O T"E !"I$I!!INE IS$ANDS, !ETITIONER, VS.SARA#IA 'ANOR "OTE$ COR!ORATION, RES!ONDENT.

D E C I S I O N

!ER$AS#ERNA#E, %.+

8efore the !ourt is a petition for review on certiorari+,-assailin the Decision+2-dated

"pril 246 200* and Resolution+3-dated December *6 200* of the !ourt of "ppeals6 !ebu

!ity #!"$ in !"%&'R' !(' No' ),5* which affirmed with modification the rehabilitation

plan of respondent arabia .anor >otel !orporation #arabia$ as approved by the

Reional Trial !ourt of 7loilo !ity6 8ranch 3 #RT!$ throuh its Brder+4-dated "uust


78/101

parlors and such other businesses incident to or necessary in the manaement or

operation of hotels'+*-

7n ,


79/101

)G p'a' for the years 200* to 20,0J #c$ ,0G p'a' for the years 20,, to 20,3J #d$ ,2G

p'a' for the years 20,4 to 20,5J and #e$ ,4G p'a' for the year 20,)' ;i9ewise6 arabia

souht to ma9e annual payments on the principal loans startin in 20046 also in

escalatin amounts dependin on cash flow' urther6 it proposed that it should pay off

its outstandin obliations to the overnment and its suppliers on their respective due

dates6 for the sa9e of its day to day operations'

indin arabia/s rehabilitation petition sufficient in form and substance6 the RT! issued

a tay Brder+,)-on "uust 26 2002' 7t also appointed ;iberty 8' (alderrama as arabia/s

rehabilitation receiver #Receiver$' Thereafter6 8P7 filed its Bpposition'+,-

"fter several hearins6 the RT! ave due course to the rehabilitation petition and

referred arabia/s proposed rehabilitation plan to the Receiver for evaluation'+20-

7n a Recommendation+2,-dated ?uly ,06 2003 #Receiver/s Report$6 the Receiver found

that arabia may be rehabilitated and thus6 made the followin recommendationsF

#,$ Restructure the loans with arabia/s creditors6 namely6 8P76 7mperial "ppliance6

Rural 8an9 of Pavia6 and 8arcelo &estion >otelera6 ';' #8arcelo$6 under the followin

terms and conditionsF #a$ the total outstandin balance as of December 3,6 2002 shall

be recomputed6 with the interest for the years 200, and 2002 capitaliHed and treated

as part of the principalJ #b$ waive all penaltiesJ #c$ e1tend the payment period to

seventeen #,


80/101

#5$ No compensation or cash dividends shall be paid to the stoc9holders durin the

rehabilitation period6 e1cept those who are directly employed by the hotel as a full time

officer6 employee or consultant covered by a valid contract and for a reasonable feeJ+2


81/101

.ore sinificantly6 the RT! did not ive credence to 8P7/s opposition to the Receiver/s

recommended rehabilitation plan as neither 8P7 nor the Receiver was able to

substantiate the claim that 8P7/s cost of funds was at the ,0G p'a' threshold' 7n this

reard6 the RT! ave more credence to the Receiver/s determination of fi1in the

interest rate at *'


82/101

interests as a secured creditor in view of the imposition of a fi1ed interest rate of *'


83/101

of 8P7 as a secured creditor in the approved rehabilitation plan parta9es of a Auestion of

fact since it will reAuire a review of the sufficiency and weiht of evidence presented by

the parties K amon others6 the various financial documents and data showin arabia/s

capacity to pay and 8P7/s perceived cost of money K and not merely an application of

law' Therefore6 iven the comple1ion of the issues which 8P7 presents6 and findin none

of the above%mentioned e1ceptions to e1ist6 the !ourt is constrained to dismiss its

petition6 and prudently uphold the factual findins of the courts a quowhich are entitled

to reat weiht and respect6 and even accorded with finality' This especially obtains in

corporate rehabilitation proceedins wherein certain commercial courts have been

desinated on account of their e1pertise and specialiHed 9nowlede on the sub=ect

matter6 as in this case'

7n any event6 even discountin the above%discussed procedural considerations6 the

!ourts still finds 8P7/s petition lac9in in merit'

. -pproal of Sarabia8s rehabilitation plan9substantie !onsiderations.

Records show that arabia has been in the hotel business for over thirty years6 tracin

its operations bac9 to ,


84/101

"mon other rules that foster the foreoin policies6 ection 236 Rule 4 of the 7nterim

Rules of Procedure on !orporate Rehabilitation+5*-#7nterim Rules$ states that a

rehabilitation plan ma) be approed een oer the opposition of the !reditors

holding a ma#orit) of the !orporation8s total liabilities if there is a sho"ing

that rehabilitation is feasibleand the opposition of the !reditors is manifestl)

unreasonable."lso 9nown as the cram%downE clause6 this provision6 which is

currently incorporated in the R7"6+5


85/101

co8:ete /c t9ereo or t9e eHect4o5 o t9e b45e :/5 dF c/9 o

c/55ot t/45 ;/4 o:er/t4o5 /5; eF 5ee 5et ort9 /5; t9e /et /re

5e/r ;e:rec4/t4o5 or ;e:rec4/te;'+*0-#mphasis and underscorin

supplied$

eepin with these principles6 the !ourt thus observes thatF

:irst6 arabia has the financial capability to undero rehabilitation'

8ased on the Receiver/s Report6 arabia/s financial history shows that it has the

inherent capacity to enerate funds to repay its loan obliations if applied throuh the

proper financial framewor9' The Receiver/s e1amination and analysis of arabia/s

financial data reveals that the latter/s business is not only an on%oin but also a

rowin concern' Despite its financial constraints6 arabia li9ewise continues to be

profitable with its hotelier business as its operations have not been disrupted'+*,->ence6

iven its current fiscal position6 the prospect of substantial and continuous revenueeneration is a realistic oal'

Se!ond6 arabia has the ability to have sustainable profits over a lon period of time'

"s concluded by the Receiver6 arabia/s pro=ected revenues shall have a steady year%

on%year rowth from the time that it applied for rehabilitation until the end of its

rehabilitation plan in 20,)6 albeit with decreasin rowth rates #rowth rate is at 2*G

in 20036 5G in 2004%200


86/101

reAuirement that the latter shall be reAuired to submit a comprehensive business plan

to support the eneration of revenues as reported in the Rehabilitation Plan6 both short

term and lon termJ+**-#e$ the maintenance of all arabia/s e1istin real estate

mortaes over hotel properties as collaterals and securities in favor of 8P7 until the

former/s full and final liAuidation of its outstandin loan obliations with the latterJ+*


87/101

turn6 proposes rates which are larely counter%productive to the rehabilitation6 then it

may be said that the creditor/s opposition is manifestly unreasonable'

7n this case6 the !ourt finds 8P7/s opposition on the approved interest rate to be

manifestly unreasonable considerin thatF #a$ the *'


88/101


89/101

+,2-7d' at *)%5' Doc9eted as !ivil !ase No' 02%2


90/101

+34-7d' at 204'

+35-7d'

+3*-7d' at 205'

+3


91/101

#$ The fact that the case is not appealable to the upreme !ourt'+53-Rollo$p' ,*'

+54-eeE!press In%estments III Pri%ate Ltd % "a)an Telecommunications$ Inc6 &'R'

Nos' ,


92/101

+*4-7d' at '

+*5-7d'

+**-7d'

+*


93/101

evidence6 are not eAuivalent to proof 7n short' mere alleations are not evidence'O

#Real % "elo6 542 Phil' ,06 ,22 +200


94/101

machinery6 enerators6 field transportation and heavy eAuipment'

"R!".6 however6 defaulted on its obliations to PN8' Thus6 on November 256 ,36

pursuant to the provisions of the Real state .ortae and !hattel .ortae6 PN8

initiated e1tra=udicial foreclosure proceedins in the Bffice of the !ler9 of !ourt:1

Bfficio heriff of the Reional Trial !ourt #RT!$ of &uaua6 Pampana'+


95/101

proceeds shared with the unsecured creditors'

7n its Bpposition6 PN8 asserted that neither Presidential Decree #P'D'$ No' 02%" nor

the ! rules prohibits secured creditors from foreclosin on their mortaes to satisfy

the mortaor/s debt after the termination of the rehabilitation proceedins and durin

liAuidation proceedins'+,4-

Bn ?anuary 46 20056 the ! issued a Resolution+,5-denyin petitioner/s motion to

nullify the auction sale' 7t held that PN8 was not leally barred from foreclosin on the

mortaes'

"rieved6 petitioner filed on ebruary 2)6 20056 a petition for review in the !"

Auestionin the ?anuary 46 2005 Resolution of the !'+,*-

8y Resolution dated "pril ,46 20056 the !" dismissed the petition on the round that

petitioner failed to attach material portions of the record and other documents relevantto the petition as reAuired in Rule 4*6 ection 3 of the ,< Rules of !ivil Procedure6 as

amended' The !" li9ewise denied "R!"./s motion for reconsideration in its Resolution

dated ?anuary 246 200*'

>ence this petition under Rule 45 aruin thatF

4',' T> ! RRD 7N "7;7N& TB "PP; T> RI; B !BN!IRRN! "ND

PRRN! B !RD7T INDR T> !7(7; !BD "ND ?IR7PRIDN! C>N PD

02%" PRB(7D T>"T T> ". 8 "PP;7D 7N 7NT"N! C>R8 "N NT7T 7

BRDRD D7B;(D "ND P;"!D INDR ;7@I7D"T7BN BN "!!BINT B "7;IR TBR>"87;7T"T DI TB 7NB;(N!'+,< -

4'2' 7T C" &RB; RRBNBI BR T> ! TB >"( ";;BCD PN8 TB

BR!;B T> .BRT&"& C7T>BIT 7RT ";;BC7N& T> "R!". ;7@I7D"TBR TB

." " DTR.7N"T7BN B T> ;7N B(R T> "R!". R"; PRBPRT76 7N!

T> ;7@I7D"TBR >"D 7N7T7";; DTR.7ND T>"T "7D RB. PN86 B. "R!".

CBRR ." ";B >"( " ;&"; ;7N B(R T> "7D PRBPRT " R&"RD

T>7R !;"7. BR INP"7D C"&' T> ;7N B(R T> ". .B("8; BR R";

PRBPRT "R TB 8 "T77D PRB%R"T" C7T> T> !BNTR"!TI"; ;7N

PIRI"NT TB 224< "ND 224 B T> !7(7; !BD6 7N R;"T7BN TB 224, TB 2242

RP!T7(;' ";B6 T>R ." 8 B. T" ".NT T>"T T> ;7@I7D"TBR

DB NBT NBC "8BIT6 "ND 7 T>R CR6 T> !BI;D !B.PR7 T" ;7N6

C>7!> INDR "RT7!; 2243 B T> !7(7; !BD "R !;"R; &7(N PR7BR7T B(R

BT>R PRRRD !;"7. 7N! I!> "R TB 8 "T77D 7RT6 B(R BT>R

;7N PRB(7DD INDR "RT7!; 224, "ND 2242 B T> !7(7; !BD6 I!> "

.BRT&"& ;7N'+,)-


96/101

4'3' T> ! ;"8BRD INDR T> .7T"N 7.PR7BN T>"T "TR "N NT7T 7

D7B;(D "ND P;"!D INDR ;7@I7D"T7BN DI TB 7NB;(N!6 !IRD

!RD7TBR "R "ITB."T7!";; ";;BCD TB BR!;B BR !IT BR

BT>RC7 ." &BBD BN T>7R !RD7T "&"7NT T> D8TBR'+,-

4'4' ?IR7PRIDN! BN T> ."TTR ";B N&"T T> !/ >B;D7N& T>"T T>

BR!;BIR 8 PN8 C" ;&";' (N "I.7N& BR T> " B "R&I.NT

T>"T PN8 7 T> B; "ND BN; ;7N >B;DR6 7T T7;; !"NNBT BR!;B

IN; T> ;7@I7D"TBR "&R TB I!> BR T>"T T> ! &"( PN8 PR7BR

PR.77BN TB 7NT7TIT T> P"R"T BR!;BIR PRB!D7N&'+20-

4'5' RPBNDNT PN8 >BI;D 8 ."D TB P" D"."& BR T> R"BN T>"T

T> BR!;BIR PRB!D7N& CR "TTNDD C7T> 8"D "7T>'+2,-

The issues to be resolved areF #,$ whether the !" correctly dismissed the petition for

failure to attach material documents referred to in the petitionJ and #2$ whether PN86as a secured creditor6 can foreclose on the mortaed properties of a corporation under

liAuidation without the 9nowlede and prior approval of the liAuidator or the !'

Bn the procedural issue6 the !ourt finds that the !" erred in dismissin the petition for

review before it on the round of failure to attach material portions of the record and

other documents relevant to the petition' " perusal of the petition for review filed with

the !"6 and as admitted by PN86+22-reveals that certified true copies of the assailed

?anuary 46 2005 ! Resolution and the ebruary 6 2000 ! Brder appointin

petitioner "tty' .anuel D' nson6 ?r' as liAuidator were anne1ed therein'

Ce find the foreoin attached documents sufficient for the appellate court to decide

the case at bar considerin that the ! resolution contains statements of the factual

antecedents material to the case' The Resolution also contains the !/s findins on the

leality of PN8/s foreclosure of the mortaes' The ! held that when the

rehabilitation proceedin was terminated and the suspensive effect of the order stayin

the enforcement of claims was lifted6 PN8 could already assert its preference over

unsecured creditors6 and the secured asset and the proceeds need not be included in

the liAuidation and shared with the unsecured creditors'+23-8efore the !"6 petitioner

raised only the same leal Auestions as there was no controversy involvin factual

matters' Petitioner claimed that the ! erred in not applyin the rules on concurrenceand preference of credits6 and in denyin its motion to nullify the auction sale of the

secured properties'+24-Therefore6 the assailed ! Resolution is the only material

portion of the record that should be anne1ed with the petition for the !" to decide on

the correctness of the !/s interpretation of the law and =urisprudence on the matter

before it'

>avin so ruled6 this !ourt would normally order the remand of the case to the !" for


97/101

resolution of the substantive issues' >owever6 we find it more appropriate to decide the

merits of the case in the interest of speedy =ustice considerin that the parties have

adeAuately arued all points and issues raised' 7t is the policy of the !ourt to strive to

settle an entire controversy in a sinle proceedin6 and to leave no root or branch to

bear the seeds of future litiation'+25-The ends of speedy =ustice would not be served by

a remand of this case to the !" especially since any rulin of the !" on the matter

could end up bein appealed to this !ourt'

Did the ! then err in rulin that PN8 was not barred from foreclosin on the

mortaesQ Ce answer in the neative'

7n the case of Consuelo Metal Corporation % Planters &e%elopment "an#6+2*-which

involved factual antecedents similar to the present case6 the court has already settled

the above Auestion and upheld the riht of the secured creditor to foreclose the

mortaes in its favor durin the liAuidation of a debtor corporation' 7n that case6

!onsuelo .etal !orporation #!.!$ filed with the ! a petition to be declared in a stateof suspension of payment6 for rehabilitation6 and for the appointment of a rehabilitation

receiver or manaement committee under ection 5#d$ of P'D' No' 02%"' Bn "pril 26

,*6 the !6 findin the petition sufficient in form and substance6 declared that all

actions for claims aainst !.! pendin before any court6 tribunal6 office6 board6 body

and:or commission are deemed suspended immediately until further ordersE from the

!' Then on November 26 20006 upon the manaement committee/s

recommendation6 the ! issued an Bmnibus Brder directin the dissolution and

liAuidation of !.!' Thereafter6 respondent Planters Development 8an9 #Planters 8an9$6

one of !.!/s creditors6 commenced the e1tra=udicial foreclosure of !.!/s real estate

mortae' Planters 8an9 e1tra=udicially foreclosed on the real estate mortae as !.!failed to secure a TRB' !.! Auestioned the validity of the foreclosure because it was

done without the 9nowlede and approval of the liAuidator' The !ourt ruled in favor of

the respondent ban96 as followsF

7n Ri;al Commercial "an#ing Corporation % Intermediate Appellate Court6 we held that

if rehabilitation is no loner feasible and the assets of the corporation are finally

liAuidated6 secured creditors shall en=oy preference over unsecured creditors6 sub=ect

only to the provisions of the !ivil !ode on concurrence and preference of

credits'Cre;4tor o ecre; ob4e t9e4r cre;4t /

or;45/r c/48.

.oreover6 ection 224) of the !ivil !ode providesF

Those credits which en=oy preference in relation to specific real property or real rihts6

e1clude all others to the e1tent of the value of the immovable or real riht to which the

preference refers'E


98/101

7n this case6 Planters 8an96 as a secured creditor6 en=oys preference over a specific

mortaed property and has a riht to foreclose the mortae under ection 224) of

the !ivil !ode' T9e cre;4tor8ort


99/101

pronouncement in Consuelo Metal Corporation'

"s to petitionerLs arument on the riht of first preference as reards unpaid waes6

the !ourt has elucidated in the case of&e%elopment "an# of the Philippines %

'LRC+2)-that a distinction should be made between a preference of credit and a lien' "

preference applies only to claims which do not attach to specific properties' " lien

creates a chare on a particular property' The riht of first preference as reards unpaid

waes reconiHed by "rticle ,,0 of the ;abor !ode6 does not constitute a lien on the

property of the insolvent debtor in favor of wor9ers' 7t is but a preference of credit in

their favor6 a preference in application' 7t is a method adopted to determine and specify

the order in which credits should be paid in the final distribution of the proceeds of the

insolventLs assets' 7t is a riht to a first preference in the dischare of the funds of the

=udment debtor' !onseAuently6 the riht of first preference for unpaid waes may not

be invo9ed in this case to nullify the foreclosure sales conducted pursuant to PN8 Ls

riht as a secured creditor to enforce its lien on specific properties of its debtor6 "R!".'

W"EREORE6 the petition for review on certiorari is DENIED'

Cith costs aainst the petitioner'

SO ORDERED.

Carpio$0Leonardo-&e Castro$00.Acting Chairperson/$ "ersamin6 and &el Castillo$

11$ concur'

MDesinated "ctin .ember of the irst Division per pecial Brder No' ,2)4 dated

"uust *6 20,2'

MMDesinated "ctin !hairperson of the irst Division per pecial Brder No' ,22* dated

.ay 306 20,2'

+,-Rollo6 pp' 32%33' Penned by "ssociate ?ustice Perlita ?' Tria Tirona with "ssociate

?ustices Delilah (idallon%.atolis and ?ose !' Reyes6 ?r' concurrin'

+2-7d' at 35' Penned by "ssociate ?ustice ?ose !' Reyes6 ?r' with "ssociate ?ustices

Rosmari D' !arandan and .onina "revalo Uenarosa concurrin'

+3-7d' at 3%45'

+4-7d' at 3*%3)'


100/101

+5-7d' at ,0'

+*-7d' at 2*5'

+


101/101

+2*-&'R' No' ,525)06 ?une 2*6 200)6 555 !R" 4*5'

+2

cases on insolvency

Documents