Credit Trans 2

8/9/2019 Credit Trans 2

1/39

Concept of Insolvency

Section 2. Declaration of Policy. - It is the policy of the State to encourage debtors, both juridical and natural persoand their creditors to collectively and realistically resolve and adjust competing claims and property rights. Infurtherance thereof, the State shall ensure a timely, fair, transparent, effective and efficient rehabilitation or liquidatof debtors. The rehabilitation or liquidation shall be made with a view to ensure or maintain certainly andpredictability in commercial affairs, preserve and maimi!e the value of the assets of these debtors, recogni!e credi

rights and respect priority of claims, and ensure equitable treatment of creditors who are similarly situated. "henrehabilitation is not feasible, it is in the interest of the State to facilities a speedy and orderly liquidation of thesedebtor#s assets and the settlement of their obligations.

Section $.%p& Insolvent shall refer to the financial condition of a debtor that is generally unable to pay its or hisliabilities as they fall due in the ordinary course of business or has liabilities that are greater than its or his assets.

%q& Insolvent debtor's estate shall refer to the estate of the insolvent debtor, which includes all the property and asseof the debtor as of commencement date, plus the property and assets acquired by the rehabilitation receiver orliquidator after that date, as well as all other property and assets in which the debtor has an ownership interest,

whether or not these property and assets are in the debtor#s possession as of commencement date' Provided, That truassets and bailment, and other property and assets of a third party that are in the possession of the debtor as ofcommencement date, are ecluded therefrom.

%r& Involuntary proceedings shall refer to proceedings initiated by creditors.

Section 146. Application to Pending Insolvency, Suspension of Payments and Rehabilitation Cases. - This (ct shalgovern all petitions filed after it has ta)en effect. (ll further proceedings in insolvency, suspension of payments andrehabilitation cases then pending, ecept to the etent that in opinion of the court their application would not befeasible or would wor) injustice, in which event the procedures set forth in prior laws and regulations shall apply.

Section 147. Application to Pending Contracts. - This (ct shall apply to all contracts of the debtor regardless of thedate of perfection.

Section 148. Repeating Clause. - The Insolvency *aw %(ct +o. /&. (s amended is hereby repealed. (ll other laorders, rules and regulations or parts thereof inconsistent with any provision of this (ct are hereby repealed ormodified accordingly.

Concrrence and 0reference of Credit

Section 133. Concurrence and Preference of Credits. - The *iquidation 0lan and its Implementation shall ensure ththe concurrence and preference of credits as enumerated in the Civil Code of the 0hilippines and other relevant lawshall be observed, unless a preferred creditor voluntarily waives his preferred right. 1or purposes of this chapter,credits for services rendered by employees or laborers to the debtor shall enjoy first preference under (rticle 22$$ othe Civil Code, unless the claims constitute legal liens under (rticle 22$ and 22$2 thereof.

Section 136. i!uidation of a Securities "ar#et Participant. - The foregoing provisions of this chapter shall bewithout prejudice to the power of a regulatory agency or self- regulatory organi!ation to liquidate trade-related claimof clients or customers of a securities mar)et participant which, for purposes of investor protection, are hereby


2/39

deemed to have absolute priority over other claims of whatever nature or )ind insofar as trade-related assets areconcerned.

1or purposes of this section, trade -related assets include cash, securities, trading right and other owned and used bythe securities mar)et participant in the ordinary course of this business.

[G.R. NO. 180036 - July 25, 2012]

SI!S "#$#%O&'#N (OR&OR)ION v. )SI)R!S *)N+,

The instant 3ule $ 0etition assails the 4ecision and 3esolution2 of the Court of (ppeals %C(& in C(-5.3. C6 +78229. The C( reversed and set aside the (djudication9 of the 3egional Trial Court %3TC&, :ranch 9, ;ue!on C%the 3ehabilitation Court& in Civil Case +o. ;-82-88, which had approved the Second (mended 3ehabilitation 0of petitioners Situs 4evelopment Corporation, 4aily Supermar)et, Inc. and Color *ithographic 0ress, I%collectively, petitioners or petitioner corporations& over the objections of respondents (siatrust :an) %(siatru(llied :an)ing Corporation %(llied :an)& and


3/39

@n Auly 2/, 288,


4/39

(SI(T3ST filed its comment with partial opposition praying li)ewise for the dismissal of the petition on thegrounds that it is not in due form and lac)s substantial allegations on its debt obligations with its various creditorsFthat petitioners do not have a viable rehabilitation planF and that petitioners do not have a clear source of repaymentheir obligations.

+o comment or opposition was filed by SDC.

In an @rder dated (ugust 2, 2882, the court a quo found prima facie merit in the petition and gave due course thereThe 3ehabilitation 3eceiver was given forty-five %$& days within which to submit his report on the proposedrehabilitation plan.

@n @ctober , 2882,


5/39

. The new owners are (siatrust with 2P ownership,


6/39

petitioners a sporting chance at business resuscitation. That the realties are titled in the name of


7/39

because the etrajudicial foreclosure proceedings had ta)en place prior to the filing of the 0etition for 3ehabilitatioand the issuance of the Stay @rder.

1urthermore, the C( agreed with the contention of respondents that the 0etition was insufficient in form and insubstance. (mong the reasons cited by the appellate court was the fact that the inventory of assets of petitionercorporations included properties that were not owned by them, but registered in the names of spouses Chua andalready acquired by (llied :an) and


8/39

the 78-day period may be etended, such etension may be granted only Hif it appears by convincing and compellievidence that the debtor may successfully be rehabilitated.HQRrJUll

In this case, the Second (mended 3ehabilitation 0rogram was approved by the trial court beyond the 78-day periocounted from the date of the initial hearing. ?owever, the evidence on record does not support the lower court sfinding that the debtor corporations may still be successfully rehabilitated.

The trial court s only justification for approving the Second (mended 3ehabilitation 0rogram is that Hthe creditorban)s are fully aware that the real property on which the building structure of Situs 4evelopment sits is more thansufficient to answer for all the outstanding obligations of the petitioners.H8 It then went on to conclude that Hthis falone should be enough to afford the petitioners a sporting chance at business resuscitation.HQRrJUll

"e do not agree.

It is a fundamental principle in corporate law that a corporation is a juridical entity with a legal personality separateand distinct from the people comprising it.2 ?ence, the rule is that assets of stoc)holders may not be considered asassets of the corporation, and vice-versa. The mere fact that one is a majority stoc)holder of a corporation does notma)e one s property that of the corporation, since the stoc)holder and the corporation are separate entities.9QRrJUll

In this case, the parcels of land mortgaged to respondent ban)s are owned not by petitioners, but by spousesChua.$ (pplying the doctrine of separate juridical personality, these properties cannot be considered as part of thecorporate assets. Dven if spouses Chua are the majority stoc)holders in petitioner corporations, they own theseproperties in their individual capacities. Thus, the parcels of land in question cannot be included in the inventory ofassets of petitioner corporations.

The fact that these properties were mortgaged to secure corporate debts is of no moment. ( mortgage is an accessorunderta)ing to secure the fulfillment of a principal obligation. In a third-party mortgage, the mortgaged propertystands as security for the loan obtained by the principal debtorF but until the mortgaged property is foreclosed,

ownership thereof remains with the third-party mortgagor.?ere, the properties owned by spouses Chua were mortgaged as security for the debts contracted by petitionercorporations. ?owever, ownership of these properties remained with the spouses notwithstanding the fact that thesewere mortgaged to secure corporate debts. "e have ruled that Hwhen a debtor mortgages his property, he merelysubjects it to a lien but ownership thereof is not parted with.H/ This leads to no other conclusion than that,notwithstanding the mortgage, the real properties in question belong to spouses ChuaF hence, these properties shoulnot be considered as assets of petitioner corporations.

Since the real properties in question cannot be considered as corporate assets, the trial court s pronouncement thatpetitioners were susceptible of rehabilitation was bereft of any basis. :ased on the rehabilitation court s narration o

facts, Situs 4evelopment Corporation has total assets of 0$,=/,$.22 with total liabilities of 0=$,98$,77.8F 4aSupermar)et, Inc. has total assets of 0$9,7/,$2.99 with total liabilities of 0$,2,$/2.88F and Color *ithograph0ress, Inc. has total assets of 0=,/7,88/./ and total liabilities of 0/,77,9$..=Clearly, the aggregate totalliabilities of petitioner corporations far eceed their aggregate total assets.

"e ta)e this opportunity to point out that rehabilitation contemplates a continuance of corporate life and activities ian effort to restore and reinstate the corporation to its former position of successful operation andsolvency.7 ?owever, if the continued eistence of the corporation is no longer viable, rehabilitation can no longer ban option. The purpose of rehabilitation proceedings is to enable the company to gain a new lease on life, and not prolong its inevitable demise.

http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=66493:gr-180036-2012&catid=1559&Itemid=566#fnt9http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=66493:gr-180036-2012&catid=1559&Itemid=566#fnt10http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=66493:gr-180036-2012&catid=1559&Itemid=566#fnt11http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=66493:gr-180036-2012&catid=1559&Itemid=566#fnt12http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=66493:gr-180036-2012&catid=1559&Itemid=566#fnt13http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=66493:gr-180036-2012&catid=1559&Itemid=566#fnt14http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=66493:gr-180036-2012&catid=1559&Itemid=566#fnt15http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=66493:gr-180036-2012&catid=1559&Itemid=566#fnt16http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=66493:gr-180036-2012&catid=1559&Itemid=566#fnt17http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=66493:gr-180036-2012&catid=1559&Itemid=566#fnt18http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=66493:gr-180036-2012&catid=1559&Itemid=566#fnt18http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=66493:gr-180036-2012&catid=1559&Itemid=566#fnt19http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=66493:gr-180036-2012&catid=1559&Itemid=566#fnt9http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=66493:gr-180036-2012&catid=1559&Itemid=566#fnt10http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=66493:gr-180036-2012&catid=1559&Itemid=566#fnt11http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=66493:gr-180036-2012&catid=1559&Itemid=566#fnt12http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=66493:gr-180036-2012&catid=1559&Itemid=566#fnt13http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=66493:gr-180036-2012&catid=1559&Itemid=566#fnt14http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=66493:gr-180036-2012&catid=1559&Itemid=566#fnt15http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=66493:gr-180036-2012&catid=1559&Itemid=566#fnt16http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=66493:gr-180036-2012&catid=1559&Itemid=566#fnt17http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=66493:gr-180036-2012&catid=1559&Itemid=566#fnt18http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=66493:gr-180036-2012&catid=1559&Itemid=566#fnt19


9/39

II

The Stay @rder does not suspend the foreclosure of a mortgage constituted over the property of a third-party

mortgagor 0etitioners insist that the Stay @rder covers the mortgaged properties, citing the Interim 3ules on Corporate3ehabilitation %the 3ules&. nder the 3ules, one of the effects of a Stay @rder is the stay of the Henforcement of allclaims, whether for money or otherwise and whether such enforcement is by court action or otherwise, against thedebtor, its guarantors and sureties not solidarily liable with the debtor.H28QRrJUll

:ased on a reading of the 3ules, we rule that the Stay @rder cannot suspend foreclosure proceedings alreadycommenced over properties belonging to spouses Chua. The Stay @rder can only cover those claims directed againspetitioner corporations or their properties, against

petitioners guarantors, or against petitioners sureties who are not solidarily liable with them.

Spouses Chua may not be considered as Hdebtors.H The Interim 3ules on Corporate 3ehabilitation %the 3ules& definthe term HdebtorH as follows'

H4ebtorH shall mean any corporation, partnership, or association, whether supervised or regulated by the Securitiesand Dchange Commission or other government agencies, on whose behalf a petition for rehabilitation has been filunder these 3ules.

*i)ewise, the enforcement of the mortgage lien cannot be considered as a claim against a guarantor or a surety notsolidarily liable with the debtor corporations. "hile spouses Chua eecuted Continuing 5uaranty and Comprehensi

Surety underta)ings in favor of (llied :an), the ban) did not proceed against them as individual guarantors orsureties. 3ather, by initiating etrajudicial foreclosure proceedings, the ban) was directly proceeding against theproperty mortgaged to them by the spouses as security. The Civil Code provides that the property upon which amortgage is imposed directly and immediately subjected to the fulfillment of the obligation for whose security themortgage was constituted.2 (s such, a real estate mortgage is a lien on the property itself, inseparable from theproperty upon which it was constituted.

In this case, we find that the underta)ing of spouses Chua with respect to the loans of petitioner corporations is thesale at public auction of certain real properties belonging to them to satisfy the indebtedness of petitioner corporatioin case of a default by the latter. This underta)ing is properly that of a third-party mortgagor or an accommodation

mortgagor, whereby one mortgages one s property to stand as security for the indebtedness of another.22

QRrJUllIn 0acific "ide 3ealty and 4evelopment Corporation v. 0uerto (!ul *and, Inc.,29 we ruled that the issuance of a St@rder cannot suspend the foreclosure of accommodation mortgages, because the Stay @rder may only cover thesuspension of the enforcement of all claims against the debtor, its guarantors, and sureties not solidarily liable withdebtor .2$ Thus, the suspension of enforcement of claims does not etend to the foreclosure of accommodationmortgages.


10/39

SDC. =. Stay @rder.

%b& staying enforcement of all claims, whether for money or otherwise and whether such enforcement is by court

action or otherwise, against the debtor, its guarantors and persons not solidarily liable with the debtorF provided, thathe stay order shall not cover claims against letters of credit and similar security arrangements issued by a third partto secure the payment of the debtor#s obligationsF provided, further, that the stay order shall not cover foreclosure bycreditor of property not belonging to a debtor under corporate rehabilitationF provided, however, that where the ownof such property sought to be foreclosed is also a guarantor or one who is not solidarily liable, said owner shall beentitled to the benefit of ecussion as such guarantor .2 % $mphasis supplied &

1rom the foregoing, we therefore hold that foreclosure proceedings over the properties in question are not suspendeby the trial courtVs issuance of the Stay @rder.

1urthermore, even assuming that the properties in question fall under the ambit of the Stay @rder, the issuance there

should not affect the eecution of the Certificate of Sale.

In 3i!al Commercial :an)ing Corporation v. Intermediate (ppellate Court and :1 ?omes, Inc.,2/ the debtorcorporation filed a 0etition for 3ehabilitation and 4eclaration of Suspension of 0ayments before the Securities andDchange Commission %SDC&. 0rior to the SDC s appointment of a management committee and during the pendencof the case, the mortgagee-ban) foreclosed on the real estate mortgage over some of the corporationVs mortgagedproperties. (n auction sale was conducted, and the mortgagee-ban) emerged as the highest bidder. ?owever, becauof the pendency of the rehabilitation case before the SDC, the Sheriff withheld the delivery of the Certificate of Sal3uling on the validity of the foreclosure proceedings, we held that the conduct of the foreclosure sale was valid,because it was carried out prior to the issuance of the SDC s order appointing a management committee. "e held th

the appointment of a management committee, rehabilitation receiver, board or body pursuant to 0residential 4ecree+o. 82-( is the operative act that suspends all actions or claims against a distressed corporation.

In the case at bar, the auction sale for the parcels of land covered by TCT +os. 3T-9/28 and 3T-9/2 andmortgaged to respondent (llied :an) was conducted on / 1ebruary 288, while the foreclosure sale for the parcel oland covered by TCT +o. =/ and mortgaged to


11/39

Sec. 9. +ature of Transfer. (ll sales or transfers of +on-0erforming (ssets to an S06 shall be in the nature of a trusale after proper notice in accordance with the procedures as provided for in section 2' 0rovided, That 51Is and5@CCs shall be subject to eisting law on the disposition of assets' 0rovided, further, That in the transfer of the+0*s, the provisions on subrogation and assignment of credits under the +ew Civil Code shall apply.

In turn, (rt. /9$ of the Civil Code on (ssignment of Credits and @ther Incorporeal 3ights provides'QRrJLlJLQ

(rt. /9$. "hen a credit or other incorporeal right in litigation is sold, the debtor shall have a right to etinguish it reimbursing the assignee for the price the latter paid therefor, the judicial costs incurred by him, and the interest on price from the day on which the same was paid.

( credit or other incorporeal right shall be considered in litigation from the time the complaint concerning the sameanswered.

The debtor may eercise his right within thirty days from the date the assignee demands payment from him.

(t the outset, we find that the issue is only belatedly raised in the instant 0etition27 and was never threshed out in thproceedings below. 1undamental considerations of fair play, justice and due process dictate that this Court should n

pass upon this question.2 H;uestions raised on appeal must be within the issues framed by the partiesF consequentlyissues not raised before the trial court cannot be raised for the first time on appeal.H 98QRrJUll

(s early as 2 4ecember 288,


12/39

H+on-0erforming *oans or +0*sH refers to loans and receivables such as mortgage loans, unsecured loans,consumption loans, trade receivables, lease receivables, credit card receivables and all registered and unregisteredsecurity and collateral instruments, including but not limited to, real estate mortgages, chattel mortgages, pledges, aantichresis, whose principal andBor interest have remained unpaid for at least one hundred eighty %78& days after thhave become past due or any of the events of default under the loan agreement has occurred.99QRrJUll

"hat is involved in this case is more properly a real property acquired by a financial institution in settlement of a lo

%3@0@(&. nder the law, 3@0@(s are defined in this manner' H3@0@(sH refers to real and other properties owneor acquired by an financial institution in settlement of loans and receivables, including real properties, shares ofstoc)s, and chattels formerly constituting collaterals for secured loans which have been acquired by way of dation ipayment %dacion en pago& or judicial or etra-judicial foreclosure or eecution of judgment.9$QRrJUll


13/39

2. That the subject properties should be included in the ambit of the Stay @rder by virtue of the provisions of the

1inancial 3ehabilitation and Insolvency (ct of 288 %13I(&, which should be given a retroactive effectF and

9. That (llied :an) and


14/39

Since the subject properties are beyond the reach of the Stay @rder, and since foreclosure and consolidation of titlemay no longer be stalled, petitioners rehabilitation plan is no longer feasible. "e therefore affirm our earlier findingthat the dismissal of the 0etition for the 4eclaration of State of Suspension of 0ayments with (pproval of 0roposed3ehabilitation 0lan is in order.

"?D3D1@3D, the Court resolves to 4D+> "IT? 1I+(*IT> the instant


15/39


16/39

G.R. No. 175844, July 2, 2013

*)N+ O # &I%I&&IN# IS%)N"S, v. S)R)*I) ')NOR O#% (OR&OR)ION,

:efore the Court is a petition for review on certiorari assailing the 4ecision2 dated (pril 2$, 288/ and3esolution9 dated 4ecember /, 288/ of the Court of (ppeals, Cebu City %C(& in C(-5.3. C6. +o. 7/ whichaffirmed with modification the rehabilitation plan of respondent Sarabia


17/39

the amount of 0$=,/.7&F and % f & its stoc)holders %in the amount of 07,=$7,98/.9&./

In its proposed rehabilitation plan,= Sarabia sought for the restructuring of all its outstanding loans, submitting thatthe interest payments on the same be pegged at a uniform escalating rate of' %a& =P per annum %p.a.& for the years2882 to 288F %b& 7P p.a. for the years 288/ to 288F %c& 8P p.a. for the years 28 to 289F %d & 2P p.a. for theyears 28$ to 28F and %e& $P p.a. for the year 287. *i)ewise, Sarabia sought to ma)e annual payments on theprincipal loans starting in 288$, also in escalating amounts depending on cash flow. 1urther, it proposed that it shou

pay off its outstanding obligations to the government and its suppliers on their respective due dates, for the sa)e of day to day operations.

1inding SarabiaVs rehabilitation petition sufficient in form and substance, the 3TC issued a Stay @rder 7 on (ugust 2882. It also appointed *iberty :. 6alderrama as SarabiaVs rehabilitation receiver %3eceiver&. Thereafter, :0I filed i@pposition.

(fter several hearings, the 3TC gave due course to the rehabilitation petition and referred SarabiaVs proposedrehabilitation plan to the 3eceiver for evaluation.28

In a 3ecommendation2 dated Auly 8, 2889 %3eceiverVs 3eport&, the 3eceiver found that Sarabia may be rehabilitatand thus, made the following recommendations'

%& 3estructure the loans with SarabiaVs creditors, namely, :0I, Imperial (ppliance, 3ural :an) of 0avia, and :arce5estion ?otelera, S.*. %:arcelo&, under the following terms and conditions' %a& the total outstanding balance as of4ecember 9, 2882 shall be recomputed, with the interest for the years 288 and 2882 capitali!ed and treated as paof the principalF %b& waive all penaltiesF %c& etend the payment period to seventeen %=& years, i.e., from 2889 to28, with a two-year grace period in principal paymentF %d & fi the interest rate at /.=P p.a. plus 8P value addeta on interest for the entire term of the restructured loansF22 %e& the interest and principal based on the amorti!ationschedule shall be payable annually at the last ban)ing day of each yearF and % f & any deficiency shall be paid persona

by SarabiaVs stoc)holders in the event it fails to generate enough cash flowF on the other hand, any ecess fundsgenerated at the end of the year shall be paid to the creditors to accelerate the debt servicingF29

%2& 0ay SarabiaVs outstanding payables with its suppliers and the government so as not to disrupt hotel operationsF2$

%9& Convert the (dvances from stoc)holders amounting to 07,=$7,98/.88 to stoc)holderVs equity and other advancamounting to 0$2,/77,=9$.88 as of the 4ecember 9, 2882 tentative financial statements to 4eferred CreditsF the saconversion should increase stoc)holdersV equity to 02/7,$,=9.88 and bring the debt to equity ratio to 8.7'F2

%$& 3equire SarabiaVs stoc)holders to pay its payables to the hotel recorded as (ccounts 3eceivable Trade,

amounting to 027,/2.= as of 4ecember 9, 288, and its remaining receivables after such dateF2/

%& +o compensation or cash dividends shall be paid to the stoc)holders during the rehabilitation period, ecept thowho are directly employed by the hotel as a full time officer, employee or consultant covered by a valid contract anfor a reasonable feeF2=

%/& (ll capital ependitures which are over and above what is provided in the case flow of the rehabilitation planwhich will materially affect SarabiaVs cash position but which are deemed necessary in order to maintain the hotelVscompetitiveness in the industry shall be subject to the 3TCVs approval prior to its implementationF27

%=& Terminate the management contract with :arcelo, thereby saving an estimated 02,798,=.88 in management


18/39

fees, over and above the salaries and benefits of certain managerial employeesF2

%7& (ppoint a new management team which would be required to submit a comprehensive business plan to support generation of the target revenue as reported in the rehabilitation planF98

%& @pen a debt servicing account and transfer all ecess funds thereto, which in no case should be less than088,888.88 at the end of the monthF the funds will be drawn payable to the creditors only based on the amorti!atio

scheduleF9 and

%8& 3elease the surety obligations of SarabiaVs stoc)holders, considering the adequate collaterals and securitiescovered by the rehabilitation plan and the continuing mortgages over SarabiaVs properties.92

e R( Rulin

In an @rder 99 dated (ugust =, 2889, the 3TC approved SarabiaVs rehabilitation plan as recommended by the 3eceivfinding the same to be feasible. In this accord, it observed that the rehabilitation plan was realistic since, based onSarabiaVs financial history, it was shown that it has the inherent capacity to generate funds to pay its loan obligation

given the proper perspective.9$

The recommended rehabilitation plan was also practical in terms of the interest ratepegged at /.=P p.a. since it is based on SarabiaVs ability to pay and the creditorsV perceived cost of money.9 It wasli)ewise found to be viable since, based on the etrapolations made by the 3eceiver, SarabiaVs revenue projections,albeit projected to slow down, remained to have a positive businessBprofit outloo) altogether.9/

The 3TC further noted that while it may be true that Sarabia has been unable to comply with its eisting terms with:0I, it has nonetheless complied with its obligations to its employees and suppliers and pay its taes to both local anational government without disrupting the day-to-day operations of its business as an on-going concern.9=


19/39

(ggrieved, :0I moved for reconsideration which was, however, denied in a 3esolution$$ dated 4ecember /, 288/.

?ence, this petition.

e Iue *eoe te (out

The primordial issue raised for the CourtVs resolution is whether or not the C( correctly affirmed SarabiaVsrehabilitation plan as approved by the 3TC, with the modification on the reinstatement of the surety obligations ofSarabiaVs stoc)holders.

:0I mainly argues that the approved rehabilitation plan did not give due regard to its interests as a secured creditor view of the imposition of a fied interest rate of /.=P p.a. and the etended loan repayment period.$ It li)ewiseavers that SarabiaVs misrepresentations in its rehabilitation petition remain unresolved.$/

@n the contrary, Sarabia essentially maintains that' %a& the present petition improperly raises questions of factF$=

%b&the approved rehabilitation plan ta)es into consideration all the interests of the parties and the terms and conditionsstated therein are more reasonable than what :0I proposesF$7 and %c& :0IVs allegations of misrepresentation are merdesperation moves to convince the Court to overturn the rulings of the courts a !uo.$

e (out Rulin

The petition has no merit.

A. Propriety of BPI’s petition; procedural considerations.

It is fundamental that a petition for review on certiorari filed under 3ule $ of the 3ules of Court covers onlyquestions of law. In this relation, questions of fact are not reviewable and cannot be passed upon by the Court unlesthe following eceptions are found to eist' %a& when the findings are grounded entirely on speculations, surmises, oconjecturesF %b& when the inference made is manifestly mista)en, absurd, or impossibleF %c& when there is a graveabuse of discretionF %d & when the judgment is based on misappreciation of factsF %e& when the findings of fact areconflictingF % f & when in ma)ing its findings, the same are contrary to the admissions of both partiesF % g & when thefindings are contrary to those of the trial courtF %h& when the findings are conclusions without citation of specificevidence on which they are basedF %i& when the facts set forth in the petition as well as in the petitionerVs main andreply briefs are not disputed by the respondentF and % & when the findings of fact are premised on the supposedabsence of evidence and contradicted by the evidence on record.8

The distinction between questions of law and questions of fact is well- defined. ( question of law eists when thedoubt or difference centers on what the law is on a certain state of facts. ( question of fact, on the other hand, eiststhe doubt centers on the truth or falsity of the alleged facts. This being so, the findings of fact of the C( are final anconclusive and the Court will not review them on appeal.

In view of the foregoing, the Court finds :0IVs petition to be improper and hence, dismissible2 as the issues raitherein involve questions of fact which are beyond the ambit of a 3ule $ petition for review.

To elucidate, the determination of whether or not due regard was given to the interests of :0I as a secured creditor

the approved rehabilitation plan parta)es of a question of fact since it will require a review of the sufficiency and


20/39

weight of evidence presented by the parties among others, the various financial documents and data showingSarabiaVs capacity to pay and :0IVs perceived cost of money and not merely an application of law. Therefore, givthe compleion of the issues which :0I presents, and finding none of the above-mentioned eceptions to eist, theCourt is constrained to dismiss its petition, and prudently uphold the factual findings of the courts a !uo which areentitled to great weight and respect, and even accorded with finality. This especially obtains in corporate rehabilitatproceedings wherein certain commercial courts have been designated on account of their epertise and speciali!ed)nowledge on the subject matter, as in this case.

In any event, even discounting the above-discussed procedural considerations, the Courts still finds :0IVs petitionlac)ing in merit.

B. Approval of Sarabia’s rehabilitation plan; substantive considerations.

3ecords show that Sarabia has been in the hotel business for over thirty years, tracing its operations bac) to =2. Ihotel building has been even considered a landmar) in Iloilo, being one of its )ind in the province and having helpebring progress to the community.9 Since then, its epansion was continuous which led to its decision to commencewith the construction of a new hotel building. nfortunately, its contractor defaulted which impelled Sarabia to ta)

over the same. This significantly s)ewed its projected revenues and led to various cash flow difficulties, resulting inits incapacity to meet its maturing obligations.

3ecogni!ing the volatile nature of every business, the rules on corporate rehabilitation have been crafted in order togive companies sufficient leeway to deal with debilitating financial predicaments in the hope of restoring or reachina sustainable operating form if only to best accommodate the various interests of all its sta)eholders, may it be thecorporationVs stoc)holders, its creditors and even the general public. In this light, case law has defined corporaterehabilitation as an attempt to conserve and administer the assets of an insolvent corporation in the hope of itseventual return from financial stress to solvency. It contemplates the continuance of corporate life and activities in aeffort to restore and reinstate the corporation to its former position of successful operation and liquidity. 6erily, the

purpose of rehabilitation proceedings is to enable the company to gain a new lease on life and thereby allow creditoto be paid their claims from its earnings.$ Thus, rehabilitation shall be underta)en when it is shown that the continuoperation of the corporation is economically more feasible and its creditors can recover, by way of the present valuof payments projected in the plan, more, if the corporation continues as a going concern than if it is immediatelyliquidated.

(mong other rules that foster the foregoing policies, Section 29, 3ule $ of the Interim 3ules of 0rocedure onCorporate 3ehabilitation/ %Interim 3ules& states that a rehabilitation plan may be approved even over the oppositiof the creditors holding a majority of the corporation’s total liabilities if there is a showing that rehabilitation

is feasible andthe opposition of the creditors is manifestly unreasonable. (lso )nown as the cram-down clause,

this provision, which is currently incorporated in the 13I(,=

is necessary to curb the majority creditorsV naturaltendency to dictate their own terms and conditions to the rehabilitation, absent due regard to the greater long-termbenefit of all sta)eholders. @therwise stated, it forces the creditors to accept the terms and conditions of therehabilitation plan, preferring long-term viability over immediate but incomplete recovery.

It is within the parameters of the aforesaid provision that the Court eamines the approval of SarabiaVs rehabilitatio

i. easibility of Sarabia’s rehabilitation.

In order to determine the feasibility of a proposed rehabilitation plan, it is imperative that a thorough eamination aanalysis of the distressed corporationVs financial data must be conducted. If the results of such eamination and


21/39

analysis show that there is a real opportunity to rehabilitate the corporation in view of the assumptions made andfinancial goals stated in the proposed rehabilitation plan, then it may be said that a rehabilitation is feasible. In thisaccord, the rehabilitation court should not hesitate to allow the corporation to operate as an on-going concern, albeiunder the terms and conditions stated in the approved rehabilitation plan. @n the other hand, if the results of thefinancial eamination and analysis clearly indicate that there lies no reasonable probability that the distressedcorporation could be revived and that liquidation would, in fact, better subserve the interests of its sta)eholders, theit may be said that a rehabilitation would not be feasible. In such case, the rehabilitation court may convert the

proceedings into one for liquidation.7 (s further guidance on the matter, the CourtVs pronouncement in (onder %oCorporation v. Philippine %an# of Communications proves instructive'cralavvonlinelawlibrary

3ehabilitation is available to a corporation which, while illiquid, has assets that can generate more cash if usin its daily operations than sold. It liui9ity iue cn :e 99ee9 :y ;ctic:le :uine ;ln tt ei:le n9


22/39

financial statements to stoc)holderVs equity was grantedF/$ %c& all capital ependitures which are over and above whis provided in the cash flow of the approved rehabilitation plan which will materially affect the cash position of thehotel but which are deemed necessary in order to maintain the hotelVs competitiveness in the industry shall be subjeto the approval by the Court prior to implementationF/ %d & the formation of SarabiaVs new management team and threquirement that the latter shall be required to submit a comprehensive business plan to support the generation ofrevenues as reported in the 3ehabilitation 0lan, both short term and long termF // %e& the maintenance of all SarabiaVeisting real estate mortgages over hotel properties as collaterals and securities in favor of :0I until the formerVs fu

and final liquidation of its outstanding loan obligations with the latterF/= and % f & the reinstatement of thecomprehensive surety agreement of SarabiaVs stoc)holders regarding the formerVs debt to :0I./7 "ith these terms aconditions/ in place, the subsisting obligations of Sarabia to its creditors would, more li)ely than not, be satisfied.

Therefore, based on the above-stated reasons, the Court finds SarabiaVs rehabilitation to be feasible.

ii. "anifest unreasonableness of BPI ’s opposition.

(lthough undefined in the Interim 3ules, it may be said that the opposition of a distressed corporationVs majoritycreditor is manifestly unreasonable if it counter-proposes unrealistic payment terms and conditions which would,

more li)ely than not, impede rather than aid its rehabilitation. The unreasonableness becomes further manifest if therehabilitation plan, in fact, provides for adequate safeguards to fulfill the majority creditorVs claims, and yet the lattpersists on speculative or unfounded assumptions that his credit would remain unfulfilled.

"hile Section 29, 3ule $ of the Interim 3ules states that the rehabilitation court shall consider certain incidents indetermining whether the opposition is manifestly unreasonable,=8 :0I neither proposes SarabiaVs liquidation over itrehabilitation nor questions the controlling interest of SarabiaVs shareholders or owners. It only ta)es eception to' %the imposition of the fied interest rate of /.=P p.a. as recommended by the 3eceiver and as approved by thecourts a !uo, proposing that the original escalating interest rates of =P, 7P, 8P, 2P, and $P, over seventeenyears be applied insteadF= and %b& the fact that SarabiaVs misrepresentations in the rehabilitation petition, i.e., that it

physically acquired additional property whereas in fact the increase was mainly due to the recognition of 3evaluatiIncrement and because of capital ependitures, were not ta)en into consideration by the courts a !uo.=2

(nent the first matter, it must be pointed out that oppositions which push for high interests rates are generally frowupon in rehabilitation proceedings given that the inherent purpose of a rehabilitation is to find ways and means tominimi!e the epenses of the distressed corporation during the rehabilitation period. It is the objective of arehabilitation proceeding to provide the best possible framewor) for the corporation to gradually regain or achieve sustainable operating form. ?ence, if a creditor, whose interests remain well-preserved under the eistingrehabilitation plan, still declines to accept interests pegged at reasonable rates during the period of rehabilitation, anin turn, proposes rates which are largely counter-productive to the rehabilitation, then it may be said that the credito

opposition is manifestly unreasonable.

In this case, the Court finds :0IVs opposition on the approved interest rate to be manifestly unreasonable considerinthat' %a& the /.=P p.a. interest rate already constitutes a reasonable rate of interest which is concordant with Sarabiprojected rehabilitationF and %b& on the contrary, :0IVs proposed escalating interest rates remain hinged on thetheoretical assumption of future fluctuations in the mar)et, this notwithstanding the fact that its interests as a securecreditor remain well-preserved.

The following observations impel the foregoing conclusion' first , the /.=P p.a. interest rate is actually higher than:0IVs perceived cost of money as evidenced by its published time deposit rate %for an amount of 0,888,888.88, wia term of 9/8-9/$ days& which is only set at .P p.a.F second # the /.=P p.a. is also higher than the benchmar)


23/39

ninety one-day commercial paper, which is used by ban)s to price their loa averages to /.$P p.a. in 288, and has athree-year average rate of /.=P p.a.F and third , :0IVs interests as a secured creditor are adequately protected by thmaintenance of all SarabiaVs eisting real estate mortgages over its hotel properties as collateral as well as by thereinstatement of the comprehensive surety agreement of SarabiaVs stoc)holders, among other terms in the approvedrehabilitation plan.

(s to the matter of SarabiaVs alleged misrepresentations, records disclose that Sarabia already clarified its initial

statements in its rehabilitation petition by submitting, on its own accord, a supplemental affidavit dated @ctober 2$2882=9 that eplains that the increase in its properties and assets was indeed by recognition of revaluation increment

0roceeding from this fact, the C( observed that :0I actually failed to establish its claimed defects in light of Sarabassertive and forceful eplanation that the alleged inaccuracies do not warrant the dismissal of its petition.= Thus,absent any compelling reason to disturb theC(#s finding on this score, the Court deems it proper to dismiss :0I#sallegations of misrepresentation against Sarabia.

(s a final point, :0I claims that Sarabia#s projections were Htoo optimistic,H its management was HetremelyincompetenfH=/ and that it was even forced to pay a pre-termination penalty due to its previous loan with the *and

ban) of the 0hilippines.== Suffice it to state that bare allegations of fact should not be entertained as they are bereft any probative value.=7 In any event, even if it is assumed that the said allegations are substantiated by clear andconvincing evidence, the Court, absent any cogent basis to proceed otherwise, remains steadfast in its preclusion tothresh out matters of fact on a 3ule $ petition, as in this case.

(ll told, Sarabia#s rehabilitation plan, as approved and modified by the C(, is hereby sustained. In view of theforegoing pronouncements, the Court finds it unnecessary to delve on the other ancillary issues as herein raised.

D#R#OR#, the petition is "#NI#". (ccordingly, the 4ecision dated (pril 2$, 288/ and 3esolution dated4ecember /, 288/ of the Court of (ppeals, Cebu City in C(-53. C6. +o. 7/ are hereby )IR'#".


24/39

G.R. No. 173610 Octo:e 1, 2012

ODN )N" (O!NR/ #N#R&RIS#S, IN(., Petitioner , v. ONOR)*%# NOR*#RO J. E!IS!'*IN

G.R. No. 174132

ODN )N" (O!NR/ #N#R&RIS#S, IN(., Petitioner , v. '#RO&O%I)N *)N+ )N" R!S(O., Respondent .

These consolidated 3ule $ 0etitions for 3eview on Certiorari primarily assail the 98 +ovember 288 4ecision

rendered by the 1ourth 4ivision of the Court of (ppeals %C(& in C(-5.3. C6 +o. 7$$/$QRrJUll and the 2$


25/39

anchored on the second paragraph of Section $= of 3epublic (ct %3(& +o. 7=$. $QRrJUll 1inding the 3ehabilitation0lan submitted by TCDI feasible, on the other hand, the rehabilitation court issued the @rder dated 2


26/39

Insisting that the transfers of title in


27/39

9. The 4ecision of the C( failed to ta)e into consideration the far reaching effects of a 0etition for 3ehabilitation a

against a


28/39

Section $=. *oreclosure of Real $state "ortgage.

+otwithstanding (ct 99, juridical persons whose property is being sold pursuant to an etrajudicial foreclosure,

shall have the right to redeem the property in accordance with this provision until, but not after, the registration of t

certificate of foreclosure sale with the applicable 3egister of 4eeds which in no case shall be more than three %9&

months after foreclosure, whichever is earlier. @wners of property that has been sold in a foreclosure sale prior to th

effectivity of this (ct shall retain their redemption rights until their epiration.

?aving purchased the subject realties at public auction on = +ovember 288,


29/39

eventually granted on / September 288$. In affirming the validity of the certificate of sale, certificate of title and wof possession issued in favor of Dquitable, the Court ruled as follows'

In 3C:C, we upheld the etrajudicial foreclosure sale of the mortgage properties of :1 ?omes wherein 3C:C

emerged as the highest bidder as it was done before the appointment of the management committee. +oteworthy to

mention was the fact that the issuance of the certificate of sale in 3C:Cs favor, the consolidation of title, and the

issuance of the new titles in 3C:Cs name had also been upheld notwithstanding that the same were all done after thmanagement committee had already been appointed and there was already a suspension of claims. Thus,

applying RC%C v. IAC in this case, since the foreclosure of respondent 4+5#s mortgage and the issuance of the

certificate of sale in petitioner D0CI:#s favor were done prior to the appointment of a 3ehabilitation 3eceiver and t

Stay @rder, all the actions ta)en with respect to the foreclosed mortgage property which were subsequent to the

issuance of the Stay @rder were not affected by the Stay @rder. Thus, after the redemption period e)pired -ithout

respondent redeeming the foreclosed property, petitioner becomes the absolute o-ner of the property and it -as

-ithin its right to as# for the consolidation of title and the issuance of ne- title in its name as a conse!uence of

o-nership& thus, it is entitled to the possession and enoyment of the property. %Italics supplied&

( similar dearth of merit may be said of TCDIs claim that the subject properties were in custodia legis upon theissuance of the Stay @rder and the approval of the rehabilitation plan fails to persuade. (s early as = 1ebruary 2882three months after the foreclosure sale on = +ovember 288,


30/39

principal obligation. 1oreclosure may be effected either judicially or etrajudicially. In a public bidding during etr

judicial foreclosure, the creditor-mortgagee, trustee, or other person authori!ed to act for the creditor may participa

and purchase the mortgaged property as any other bidder. Thereafter the mortgagor has one year within which to

redeem the property from and after registration of sale with the 3egister of 4eeds. In case of non-redemption, the

purchaser at foreclosure sale shall file with the 3egister of 4eeds, either a final deed of sale eecuted by the person

authori!ed by virtue of the power of attorney embodied in the deed or mortgage, or his sworn statement attesting tothe fact of nonredemptionF whereupon, the 3egister of 4eeds shall issue a new certificate of title in favor of the

purchaser after the owner#s duplicate of the certificate has been previously delivered and cancelled. Thus, upon fail

to redeem foreclosed realty, consolidation of title becomes a matter of right on the part of the auction buyer, and the

issuance of a certificate of title in favor of the purchaser becomes ministerial upon the 3egister of 4eeds.

In upholding the 3TCs denial of its motion for the cancellation of the certificates of title issued in favor of


31/39

[G.R. No. 173846 e:uy 02, 2011]

JOS# ')R(#% &)N%I%IO, #R%IN") &)N%I%IO $S. R#GION)% RI)% (O!R, *R)N( 51

:efore this Court is a petition for review on certiorari under 3ule $ of the 3ules of Court, see)ing to set aside the(pril 2=, 288/ 4ecision2 and (ugust 2, 288/ 3esolution9 of the Court of the (ppeals %C(& in C(-5.3. S0 +o. 8

The facts of the case are as follows'

@n @ctober , 288$, Aose


32/39

The Court shares the view of the private complainants and the SSS that the said stay order does not include theprosecution of criminal offenses. 0recisely, the law Hcriminali!esH the non-remittance of SSS contributions by anemployer to protect the employees from unscrupulous employers. Clearly, in these cases, public interest requires ththe said criminal acts be immediately investigated and prosecuted for the protection of society.

1rom the foregoing, the inescapable conclusion is that the stay order issued by 3TC :ranch 2$ does not include the

above-captioned cases which are criminal in nature.2

:ranch denied the motion for reconsideration filed by petitioners.

@n (ugust , 288, petitioners filed a petition for certiorari9 with the C( assailing the @rder of :ranch .

@n (pril 2=, 288/, the C( issued a 4ecision denying the petition, the dispositive portion of which reads'

"?D3D1@3D, premises considered, the 0etition is hereby 4D+ID4 and is accordingly 4IS


33/39

In +ovember 2, 2888, this Court $n %anc promulgated the Interim 3ules of 0rocedure on Corporate3ehabilitation,28 Section /, 3ule $ of which provides a stay order on all claims against the corporation, thus'

Stay )rder . - If the court finds the petition to be sufficient in form and substance, it shall, not later than five %& dayfrom the filing of the petition, issue an @rder F %b& tyin enoce=ent o ll cli=, whether for money orotherwise and whether such enforcement is by court action or otherwise, against the debtor, its guarantors and suret

not solidarily liable with the debtorF 2

In *inasia Investments and *inance Corporation v. Court of Appeals,22 the term HclaimH has been construed to referdebts or demands of a pecuniary nature, or the assertion to have money paid. The purpose for suspending actions foclaims against the corporation in a rehabilitation proceeding is to enable the management committee or rehabilitatioreceiver to effectively eercise itsBhis powers free from any judicial or etrajudicial interference that might undulyhinder or prevent the rescue of the debtor company.29

The issue to be resolved then is' does the suspension of Hall claimsH as an incident to a corporate rehabilitation alsocontemplate the suspension of criminal charges filed against the corporate officers of the distressed corporationW

This Court rules in the negative.

In Rosario v. Co2$ 0Rosario1, a case of recent vintage, the issue resolved by this Court was whether or not during thpendency of rehabilitation proceedings, criminal charges for violation of %atas Pambansa %ilang 22 should besuspended, was disposed of as follows'

the gravamen of the offense punished by %.P. %lg. 22 is the act of ma)ing and issuing a worthless chec)F that a chec) that is dishonored upon its presentation for payment. It is designed to prevent damage to trade, commerce,and ban)ing caused by worthless chec)s. In o3ano v. "artine3 , this Court declared that it is not the nonpayment ofobligation which the law punishes. The law is not intended or designed to coerce a debtor to pay his debt. The thrusof the law is to prohibit, under pain of penal sanctions, the ma)ing and circulation of worthless chec)s. :ecause of deleterious effects on the public interest, the practice is proscribed by the law. The law punishes the act not as anoffense against property, but an offense against public order. The prime purpose of the criminal action is to punish toffender in order to deter him and others from committing the same or similar offense, to isolate him from society, reform and rehabilitate him or, in general, to maintain social order. ?ence, the criminal prosecution is designed topromote the public welfare by punishing offenders and deterring others.

(oneuently, te ilin o te ce o >ioltion o *.&. *l. 22 i not Fcli=F tt cn :e enoine9 ie< o &.". No. 02-). ue, ltou con>iction o te ccue9 o te llee9 ci=e coul9 eult in te

etitution, e;tion o in9e=niiction o te ;i>te oen9e9 ;ty o te 9=e o inuy e utine9

:y eon o te eloniou ct o te ccue9, ne>etele, ;oecution o >ioltion o *.&. *l. 22 i ci=in

ction.

( criminal action has a dual purpose, namely, the punishment of the offender and indemnity to the offended party. Tdominant and primordial objective of the criminal action is the punishment of the offender. The civil action is mereincidental to and consequent to the conviction of the accused. The reason for this is that criminal actions are primarintended to vindicate an outrage against the sovereignty of the state and to impose the appropriate penalty for thevindication of the disturbance to the social order caused by the offender. @n the other hand, the action between theprivate complainant and the accused is intended solely to indemnify the former.2


34/39

Rosario is at fours with the case at bar. 0etitioners are charged with violations of Section 27 %h& of the SSS law, inrelation to (rticle 9 %& %b& of the 3evised 0enal Code, or Dstafa. The SSS law clearly Hcriminali!esH the non-remittance of SSS contributions by an employer to protect the employees from unscrupulous employers. Therefore,public interest requires that the said criminal acts be immediately investigated and prosecuted for the protection ofsociety.

The rehabilitation of SI?I and the settlement of claims against the corporation is not a legal ground for the etinctioof petitioners# criminal liabilities. There is no reason why criminal proceedings should be suspended during corporarehabilitation, more so, since the prime purpose of the criminal action is to punish the offender in order to deter himand others from committing the same or similar offense, to isolate him from society, reform and rehabilitate him orgeneral, to maintain social order.2/ (s correctly observed in Rosario,2= it would be absurd for one who has engaged criminal conduct could escape punishment by the mere filing of a petition for rehabilitation by the corporation ofwhich he is an officer.The prosecution of the officers of the corporation has no bearing on the pending rehabilitation of the corporation,especially since they are charged in their individual capacities. Such being the case, the purpose of the law for theissuance of the stay order is not compromised, since the appointed rehabilitation receiver can still fully discharge hi

functions as mandated by law. It bears to stress that the rehabilitation receiver is not charged to defend the officers the corporation. If there is anything that the rehabilitation receiver might be remotely interested in is whether the coalso rules that petitioners are civilly liable. Such a scenario, however, is not a reason to suspend the criminalproceedings, because as aptly discussed in Rosario, should the court prosecuting the officers of the corporation findthat an award or indemnification is warranted, such award would fall under the category of claims, the eecution ofwhich would be subject to the stay order issued by the rehabilitation court.27 The penal sanctions as a consequence violation of the SSS law, in relation to the revised penal code can therefore be implemented if petitioners are foundguilty after trial. ?owever, any civil indemnity awarded as a result of their conviction would be subject to the stayorder issued by the rehabilitation court. @nly to this etent can the order of suspension be considered obligatory upany court, tribunal, branch or body where there are pending actions for claims against the distressed corporation. 2

@n a final note, this Court would li)e to point out that Congress has recently enacted 3epublic (ct +o. 8$2, or th1inancial 3ehabilitation and Insolvency (ct of 288.98 Section 7 thereof eplicitly provides that criminal actionsagainst the individual officer of a corporation are not subject to the Stay or Suspension @rder in rehabilitationproceedings, to wit'

The Stay or Suspension @rder shall not apply'

%g& any criminal action against individual debtor or owner, partner, director or officer of a debtor shall not be affectby any proceeding commenced under this (ct.

"ithal, based on the foregoing discussion, this Court rules that there is no legal impediment for :ranch to procewith the cases filed against petitioners.

D#R#OR#, premises considered, the petition is "#NI#". The (pril 2=, 288/ 4ecision and (ugust 2, 288/3esolution of the Court of (ppeals in C(-5.3. S0 +o. 8$= are )IR'#". The 3egional Trial Court of


35/39

[G.R. NO. 171132 - )uut 15, 2012]

')N!#% ". /NGSON, JR. v. &I%I&&IN# N)ION)% *)N+,

@n appeal are the 3esolutions dated (pril $, 288 and Aanuary 2$, 288/2 of the Court of (ppeals %C(& in C(-5.3S0 +o. 77=9. The C( dismissed petitioner#s 0etition for 3eview of the Aanuary $, 288 3esolution9 and 1ebruary 2888 @rder $ of the Securities and Dchange Commission %SDC& for failure of petitioner to attach to the petition copof material portions of the records and other relevant or pertinent documents. lJKbrJLrMN

The facts follow'law library

(3C(< O Company, Inc. %(3C(


36/39

(3C(


37/39

T?D *I;I4(T@3 4@DS +@T G+@" (:@T, (+4 I1 T?D3D "D3D, T?DSD C@*4 C@


38/39

litigation.2 The ends of speedy justice would not be served by a remand of this case to the C( especially since anyruling of the C( on the matter could end up being appealed to this Court.

4id the SDC then err in ruling that 0+: was not barred from foreclosing on the mortgagesW "e answer in thenegative.

In the case of Consuelo "etal Corporation v. Planters Development %an# ,2/ which involved factual antecedents

similar to the present case, the court has already settled the above question and upheld the right of the secured credito foreclose the mortgages in its favor during the liquidation of a debtor corporation. In that case, Consuelo


39/39

%a& waive his rights under the security or lien, prove his claim in the liquidation proceedings and share in the

distribution of the assets of the debtorF or

%b& maintain his rights under his security or lienF

If the secured creditor maintains his rights under the security or lien'QRrJLlJLQ

%& the value of the property may be fied in a manner agreed upon by the creditor and the liquidator. "hen the valu

of the property is less than the claim it secures, the liquidator may convey the property to the secured creditor and th

latter will be admitted in the liquidation proceedings as a creditor for the balanceF if its value eceeds the claim

secured, the liquidator may convey the property to the creditor and waive the debtor s right of redemption upon

receiving the ecess from the creditorF

%2& the liquidator may sell the property and satisfy the secured creditor s entire claim from the proceeds of the saleF

%9& the secured creditor may enforce the lien or foreclose on the property pursuant to applicable laws.

In this case, 0+: elected to maintain its rights under the security or lienF hence, its right to foreclose the mortgagedproperties should be respected, in line with our pronouncement in Consuelo

Credit Trans 2

Documents

Transcript of Credit Trans 2