VOL.

534,SEPTEMBER25,2007
97
LecaRealtyCorporationvs.ManuelaCorporation
G.R.No.166800.September25,2007.*
LECA REALTY CORPORATION, petitioner, vs. MANUELA
CORPORATIONandMS.MARILOUO.ADEA,asREHABILITATION
RECEIVERforMANUELACORPORATION,respondents.
G.R.No.168924.September25,2007.*
LECA REALTY CORPORATION, petitioner, vs. MANUELA
CORPORATIONandMS.MARILOUO.ADEA,asREHABILITATION
RECEIVERforMANUELACORPORATION,respondents.
Corporation Law; Rehabilitation; The prohibited pleadings enumerated in
Section1oftheInterimRulesofProcedureonCorporateRehabilitationarethose
filedintherehabilitationproceedings.Theprohibitedpleadingsenumeratedabove
arethosefiledintherehabilitationproceedings.Oncethetrialcourtdecidesthecase
and
_______________

*FIRSTDIVISION.

98

98
SUPREMECOURTREPORTSANNOTATED
LecaRealtyCorporationvs.ManuelaCorporation
anaggrievedpartyappeals,theproceduretobefollowedisthatprescribedby
theRulesofCourtasmandatedbySection5,Rule3,ofthesameInterimRules,thus:
Thereviewofanyorderordecisionofthecourtoronappealtherefromshallbein
accordancewiththeRulesofCourt.
Same;Same;TheRehabilitationPlanisvoidinsofarasitamendstherental
ratesagreeduponbytheparties.Theamountofrentalisanessentialconditionof
anyleasecontract.Needlesstostate,thechangeofitsrateintheRehabilitationPlan
isnotjustifiedasitimpairsthestipulationbetweentheparties.Wethusrulethatthe
RehabilitationPlanisvoidinsofarasitamendstherentalratesagreeduponbythe
parties.
PETITIONS for review on certiorari of the decisions of the Court of
Appeals.
ThefactsarestatedintheopinionoftheCourt.
 Santiago,Cruz&SarteLawOfficesforpetitioner.
Sobrevias,Hayudini,Bodegon,NavarroandSanJuanforManuela
Corporation.
AngelitoW.ChuaforrespondentMarilouO.Adea.
SANDOVALGUTIERREZ,J.:

Theseareconsolidatedpetitionsforreview on certiorari filedbyLeca

Realty Corporation (LECA), petitioner, assailing the separate related
DecisionsoftheCourtofAppealsinCAG.R.SPNo.87185andCAG.R.
SPNo.80861.
G.R.No.168924
InapetitionforreviewoncertiorariunderRule45ofthe1997Rulesof
CivilProcedure,asamended,petitionerLECAassailstheDecisionofthe
Court of Appeals (Special 8th Division) dated April 28, 2005 and its
ResolutionofJuly15,2005inCAG.R.SPNo.87185.
99
VOL.534,SEPTEMBER25,2007
99
LecaRealtyCorporationvs.ManuelaCorporation
InitsDecision,theCourtofAppealssustainedtheRehabilitationPlanof
ManuelaCorporation(Manuela),respondent.Petitionernowcontendsthat
theRehabilitationPlanhasimpaireditscontractofleasewithrespondent
overatractoflandconsistingofalmostthree(3)hectares.Petitioneristhe
ownerofthepropertysituatedonShawBoulevard,MandaluyongCity.
G.R.No.166800
ThisisapetitionforreviewoncertiorariunderthesameRulequestioning
the Decision dated September 30, 2004 of the Court of Appeals (17th
Division)anditsResolutiondatedJanuary25,2005inCAG.R.SPNo.
80861.
InitsDecision,theCourtofAppealsaffirmedthetrialcourtsOrder
denying petitioners motionfor extension oftime tofileits Record on
Appeal in Civil Case No. LP020028, entitled In the Matter of the
PetitionforRehabilitationofManuelaCorporation.
As found by the Court of Appeals in CAG.R. SP No. 87185, the
antecedentfacts,commontobothpetitions,are:
OnJanuary31,2002,respondentfiledwiththeRegionalTrialCourt
(RTC),Branch253,LasPiasCity,aPetitionforRehabilitation,docketed
as Civil Case No. LP020028. The petition alleges inter alia that
respondentisacorporationdulyorganizedandexistingunderthelawsof
the Republic of the Philippines, primarily engaged in the business of
leasing to retailers commercial spaces in shopping malls. Its principal
officeaddressisAlabangZapoteRoad,Pamplona,LasPiasCity.
Respondent is the owner and operator of the following malls
strategicallylocatedinMetroManila:
1. a)
MStarOne
2. b)
MStar
3. c)
Starmall
100
100
SUPREMECOURTREPORTSANNOTATED
LecaRealtyCorporationvs.ManuelaCorporation
1. d)
MetropolisStar
2. e)
PacificMall
RespondenthasassetsvaluedatP12.43billionandtotalliabilitiesofP4.87
billionasofDecember31,2001.
However,duetoreasonsthatshallbediscussedbelow,respondentis
nowhavingseverecashflowproblemswhichpreventitfrompayingits
debtsastheyfalldue.
InordertofinancethecostsofbuildingtheMetropolisStarandthe
PacificMall,respondentobtainedseveralloansfromtwosyndicatesof
lenders.ThefirstsyndicateiscomposedofBankofPhilippineIslands,BPI
FamilyBank,MetropolitanBankandTrustCompany,AlliedBank,and
BankofCommerce;the second syndicateiscomposedofAlliedBank,
BankofCommerce,PhilippineNationalBank,andEquitablePCIBank.
RespondentsloansaregovernedbytheLoanAgreementdatedJuly5,
1995andtheSyndicatedLoanAgreementdatedDecember16,1996.
Respondentstotaloutstandingloanfromthesyndicates(e.g.,principal
plusinterest)isP2.174billionasofDecember31,2001.Theseloansare
securedbyamortgageoverMStarOneandMStar,bothlocatedinLas
PiasCity.
RespondentalsohasliabilitiestotheHeroHoldings,Inc.anditstrade
suppliersandotherpartiesinthesumofP1.476billionasofDecember31,
2001.
AttheonsetoftheAsianfinancialcrisisin1997,thebanksstopped
theirlendingactivitiestoborrowers,includingrespondent.Thiseventtook
its toll upon respondent since its malls failed to operate sufficiently
resultinginheavylosses.
Matters finally came to a head in 1997 when respondent could no
longerpayitstradesuppliersformaturingobligations.Neithercoulditpay
itscreditorbanks.Theadjustedinterestratesonitsoutstandingloans,asa
resultoftheAsianfinancialcrisis,werebetween18%to30%whichadded
torespondentsliquidityproblems.
101
VOL.534,SEPTEMBER25,2007
101
LecaRealtyCorporationvs.ManuelaCorporation
Nonetheless, respondent has been acting in good faith and has exerted
earnesteffortstoavertitsworseningfinancialproblems.Itcloseddown
nonincomegeneratingbusinesses,concentratedonitsbusinessofleasing
commercial spaces, intensified collection efforts, reduced personnel,
negotiated for restructuring of loans with creditors, and worked out a
viablepaymentschemewithoutgivingunduepreferencetoanycreditor.
Despiteitsefforts,respondentcouldnolongerpayitssuppliersandthe
maturinginterestsonitsloans.
Thepetitionfurtherallegesthatrespondentcanonlybebroughtbackto
itsfinancialviabilityifitsproposedRehabilitationPlanisapprovedand
thatitisgivenarespitefromitscreditorsdemandsthroughtheissuance
of a Stay Order. The successful implementation of the proposed
RehabilitationPlanwillenableittosettleitsremainingobligationsinan
orderlymanner,restoreitsfinancialviability,andallowittoresumeits
normaloperations.
OnFebruary5,2002,thetrialcourtissuedaStayOrder,1thus:
xxx
1. a)
 astayintheenforcementofallclaims,whetherformoneyorotherwiseand
whethersuchenforcementisbycourtactionorotherwise,againstpetitioner
MANUELA,itsguarantorsandsuretiesnotsolidarilyliablewithit;
2. b)
prohibitingMANUELAfromselling,encumbering,transferringordisposinginany
manneranyofitspropertiesexceptintheordinarycourseofbusiness;
3. c)
prohibitingMANUELAfrommakinganypaymentofitsliabilitiesoutstandingas
ofthefilingoftheinstantpetition;
4. d)
prohibitingMANUELAssuppliersofgoodsandservicesfromwithholdingsupply
ofgoodsandservicesintheordinarycourseofbusinessaslongasMANUELA
makespaymentsforthegoodsandservicessuppliedaftertheissuanceofthis
StayOrder;and
_______________

1RolloofCAG.R.SPNo.80861,p.643.

102
102
SUPREMECOURTREPORTSANNOTATED
LecaRealtyCorporationvs.ManuelaCorporation
1. e)
directingthepaymentinfullofalladministrativeexpensesincurredafterthe
issuanceofthisStayOrder.2
InthesameStayOrder,thetrialcourtappointedMarilouAdea,alsoa
respondent,asRehabilitationReceiver.OnFebruary12,2002,respondent
Adeaacceptedherappointment.
InitsOrderdatedMay21,2002,thetrialcourtreferredthepetitionto
respondentAdeaforevaluationandrecommendation.OnSeptember28,
2002,shesubmittedtothetrialcourtherReportandRecommendation
findingrespondentManuelasRehabilitationPlanviableandfeasibleand
recommendingitsapproval.
Respondent Adea then held several consultative meetings with
respondentManuelascreditorstodiscusstheirrespectiveconcernsand
suggestionsrelativetoitsrehabilitation.Fortheirpart,thecreditorsfiled
theirvariouscomments/oppositionstorespondentManuelasPetitionfor
RehabilitationandRehabilitationPlan.
 On July 31, 2002, petitioner filed with the trial court its Comment
and/or Formal Claim with Leave of Court against respondent Manuela
amounting to P193,724,262.34 as of February 28, 2002, representing
unpaidrentals,securitydeposits,interests,andpenaltycharges.
OnSeptember30,2002,respondentAdeaissuedaNoticeinformingall
creditors, claimants, suppliers, lot and/or house buyers, counsels,
oppositors, and other parties that copies of her Report and
RecommendationonrespondentManuelasPetitionforRehabilitationare
available and on file with the trial court for distribution to all parties
concerned.
On October 22, 2002, petitioner filed its comment on respondent
Adeas Report and Recommendation. Petitioner opposed her
recommendationtoreducerespondentManuelasliability,consideringits
contractual nature which cannot be impaired during the process of
rehabilitation.
_______________

2Id.,pp.637638.

103
VOL.534,SEPTEMBER25,2007
103
LecaRealtyCorporationvs.ManuelaCorporation
On July 28, 2003, the trial court issued an Order approving the
RehabilitationPlan,thedispositiveportionofwhichreads:
WHEREFORE,theRehabilitationPlansubmittedbytheRehabilitationReceiver,
pp. 120 to 165 of the Report and Recommendation on Manuela Corporation
(Manuela)s Petition for Rehabilitation revised June 9, 2003, is APPROVED.
Petitioner is strictly enjoined to abide by its terms and conditions and the
RehabilitationReceivershall,unlessdirectedotherwise,submitaquarterlyreporton
theprogressoftheimplementationoftheRehabilitationPlan.3
Aggrieved,petitionerfiledwiththetrialcourtitsNoticeofAppealwith
MotionforExtensionofTimetoFileRecordonAppeal.4
However, the trial court issued an Order denying the Motion for
ExtensionofTimetoFileRecordonAppeal,thus:
BeforetheCourtisa NoticeofAppealwithMotionforExtensionofTimefiledby
creditorLecaRealtyCorporationprayingforaperiodofthirty(30)daysfromAugust
21,2003toSeptember20,2003tofileitsintendedrecordonappeal.
 However,underRule3,Section1oftheInterimRulesofProcedureonCorporate
Rehabilitation,amotionforextensionisaprohibitedpleading.
WHEREFORE,thesubjectmotionisDENIED.
SOORDERED.
PetitionerthenelevatedthecasetotheCourtofAppealsthroughaPetition
for Certiorari andMandamus,docketedasCAG.R.SPNo.80861and
assignedtothe17thDivision.
On September 30, 2004, the Court of Appeals rendered a Decision
dismissingthepetitionforlackofmerit.5
_______________

3Rollo,p.37.

4Id.,pp.4849.

5Id.,p.72.

104
104
SUPREMECOURTREPORTSANNOTATED
LecaRealtyCorporationvs.ManuelaCorporation
Petitionerthenfiledamotionforreconsiderationbutitwasdeniedbythe
appellatecourtinitsResolutiondatedJanuary25,2005.6
Hence,theinstantpetitionforreviewon certiorari,docketedasG.R.
No.166800.
G.R.No.168924
Inthemeantime,petitionerseasonablyfiledwiththeCourtofAppealsa
petitionforreviewunderRule43ofthe1997RulesofCivilProcedure,as
amended,allegingthattheRTCerredinapprovingrespondentManuelas
RehabilitationPlanasitviolatesits(petitioners)constitutionalrightto
nonimpairment of contract and the Interim Rules of Procedure on
CorporateRehabilitation.
On April 28, 2005, the Court of Appeals (Special 8th Division)
promulgateditsDecisiondenyingthepetition,holdingthat:
xxxThependencyoftherehabilitationproceedingscannotbeinterpretedtoimpair
thecontractualobligationspreviouslyenteredintobythecontractingpartiesbecause
theautomaticstayofallactionsissanctionedbyP.D.902Awhichprovidesthatall
actions for claims against corporations, partnerships or associations under
managementorreceivershippendingbeforeanycourt,tribunal,boardorbodyshall
besuspendedaccordingly[Rubberworld(Phils.),Inc.v.NLRC,391Phil.318;336
SCRA433(2000)].
OnMay20,2005,petitionerfiledwiththeCourtofAppealsamotionfor
reconsiderationbutitwasdeniedinitsResolutiondatedJuly15,2005.
Hence, petitioner filed with this Court a Petition for Review
onCertiorari,docketedasG.R.No.168924.
_______________

6RolloofCAG.R.SPNo.80861,p.1733.

105
VOL.534,SEPTEMBER25,2007
105
LecaRealtyCorporationvs.ManuelaCorporation
Inviewoftheidentityofpartiesandtheinterrelationshipoftheissues
involved in G.R. No. 166800 and G.R. No. 168924, we resolved to
consolidatethetwopetitions.
The issue posed before us in G.R. No. 166800 for certiorari and
mandamus is whether the trial court erred in ruling that a motion for
extensionoftimetofilerecordonappealisaprohibitedpleadingunder
Section1oftheInterimRulesofProcedureonCorporateRehabilitation
whichprovides:
Section1NatureofProceedings.AnyproceedinginitiatedundertheseRulesshall
beconsideredinrem.Jurisdictionoverallthoseaffectedbytheproceedingsshallbe
consideredasacquireduponpublicationofthenoticeofthecommencementofthe
proceedingsinanynewspaperofgeneralcirculationinthePhilippinesinthemanner
prescribedbytheseRules.
The proceedings shall also be summary and nonadversarial in nature. The
followingpleadingsareprohibited:
1. a.
MotiontoDismiss;
2. b.
MotionforBillofParticulars;
3. c.
MotionforNewTrialorForReconsideration;
4. d.
PetitionforRelief;
5. e.
 MotionforExtension;
6. f.
Memorandum;
7. g.
MotionforPostponement;
8. h.
ReplyorRejoinder;
9. i.
ThirdPartyComplaint;
10. j.
Intervention;
xxxxxxxxx
The prohibited pleadings enumerated above are those filed in the
rehabilitationproceedings.Oncethetrialcourtdecidesthecaseandan
aggrievedpartyappeals,theproceduretobefollowedisthatprescribedby
theRulesofCourtasmandatedbySection5,Rule3,ofthesameInterim
Rules,thus:
106
106
SUPREMECOURTREPORTSANNOTATED
LecaRealtyCorporationvs.ManuelaCorporation
Thereviewofanyorderordecisionofthecourtoronappealtherefromshallbein
accordancewiththeRulesofCourt.
Inthisconnection,Section11,Rule11,oftheRulesofCourt(nowthe
1997RulesofCivilProcedure,asamended),states:
Extensionoftimetoplead.Uponmotionandonsuchtermsasmaybejust,the
courtmayextendthetimetopleadprovidedintheseRules.
Thecourtmayalso,uponliketerms,allowananswerorotherpleadingtobefiled
afterthetimefixedbytheseRules.
Verily,thetrialcourterredindenyingpetitionersmotionforextensionof
timetofilerecordonappeal.Atanyrate,thispetitionhasbecomemoot
consideringthattheCourtofAppealsgaveduecoursetoLECAspetition
forreview(CAG.R.SPNo.80861)whicheventuallyreachedthisCourt
viaapetitionforreviewoncertiorari,docketedasG.R.No.168924.
InG.R.No.168924,petitionerascribestotheCourtofAppealsthe
followingassignmentoferrors:
1. 1.
 THECOURTOFAPPEALSGRIEVOUSLYERREDINRULING
THATTHEPENDENCYOFTHEREHABILITATION
PROCEEDINGSCANNOTBEINTERPRETEDTOIMPAIRTHE
CONTRACTUALOBLIGATIONSPREVIOUSLYENTERED
INTOBYTHECONTRACTINGPARTIESBECAUSETHE
AUTOMATICSTAYOFALLACTIONSISSANCTIONEDBY
P.D.902AWHICHPROVIDESTHATALLACTIONSFOR
CLAIMSAGAINSTCORPORATIONS,PARTNERSHIPSOR
ASSOCIATIONSUNDERMANAGEMENTORRECEIVERSHIP
PENDINGBEFOREANYCOURT,TRIBUNAL,BOARDOR
BODYSHALLBESUSPENDEDACCORDINGLY,
CITINGRUBBERWORLD(PHILS.),INC.v.NLRC,G.R.NO.
128003,JULY26,2000,336SCRA433.
2. 2.
THECOURTOFAPPEALSERREDINSUSTAININGTHELOWER
COURTSAPPROVALOFRESPONDENTMANUELAS
REHABILITATIONPLANEVENIFSUCHPLANISNOT
VIABLEORFEASIBLEBECAUSERESPONDENTMANUELA
CORPORATIONCOULDNOTEVENCOMPLYWITH
107
VOL.534,SEPTEMBER25,2007
107
LecaRealtyCorporationvs.ManuelaCorporation
1. THE TERMS AND PROVISIONS OF THE COURTAPPROVED
REHABILITATIONPLAN.
2. 3.
THECOURTOFAPPEALSALSOERREDINNOTADDRESSING
THEISSUEOFTHELOWERCOURTSFAILURETOACT,
THATIS,APPROVEORDISAPPROVE,THE
REHABILITATIONPLANOFMANUELACORPORATION
WITHINEIGHTEENMONTHSAFTERTHEFILINGOFTHE
PETITIONFORREHABILITATION.
Petitioner contends that the approved Rehabilitation Plan drastically
alteredthetermsofitsleasecontractwithrespondentManuela,hence,
shouldbedeclaredvoid.
 ThecontractofleasebetweenpetitionerandrespondentManuela7for
twentyfiveyears,fromAugust1,1995toJuly31,2020,stipulatesthatthe
ratesofrentalontheleasedparceloflandareasfollows:
Year
Rent/Sq.M.
MonthlyRent
YearlyRent
1
60.00
1,607,400.00
19,288,800.00
2
64.20
1,719,918.00
20,639,016.00
3
68.40
1,832,436.00
21,989,232.00
4
72.60
1.944,954.00
23,339,448.00
5
76.80
2,057,472.00
24,689,664.00
6
82.94
2,221,962.00
26,663,551.20
7
89.08
2,386,453.20
28,637,438.40
8
95.23
2,552,211.70
30,614,540.40
9
101.37
2,715,702.30
32,588,427.60
10
107.52
2,880,460.80
34,565,529.60
11
117.19
3,139,520.10
37,674,241.20
12
126.87
3,398,847.30
40,786,167.60
13
136.54
3,657,906.
6043,894,879.20
14
146.22
3,917,233.80
47,006,805.60
15
155.90
4,176,561.00
50,118,732.00
16
174.60
4,677,534.00
56,130,408.00
17
193.30
5,178,507.00
62,142,084.00
18
212.00
5,679,480.00
68,153,760.00
_______________

7AnnexC,Petition,inG.R.No.168924.

108
108
SUPREMECOURTREPORTSANNOTATED
LecaRealtyCorporationvs.ManuelaCorporation
19
230.70
6,180,453.00
74,165,436.00
20
260.69
6,983,885.10
83,806,621.20
21
290.68
7,787,317.20
93,447,806.40
22
320.67
8,590,749.30
103,088,991.60
23
365.56
9,793,352.40
117,520,288.80
24
410.45
10,995,955.50
131,951,466.00
25
455.34
12,198,558.60
146,382,703.20
Ontheotherhand,theRehabilitationPlanprescribesthefollowingrental
rates:

Year
YearlyRent
1styear
20032004
RENTFREE
2ndyear
20042005
P5,000,000.00
3rdyear
20052006
5,000,000.00
4thyear
20062007
5,000,000.00
5thyear
20072008
19,288,800.00
6thyear
20082009
20,639,016.00
7thyear
20092010
21,639,016.00
8thyear
20102011
23,339,445.00
9thyear
20112012
24,689,664.00
10thyear
20122013
26,663,544.00
Clearly,thereisagrossdiscrepancybetweentheamountsofrentagreed
uponbythepartiesandthoseprovidedintheRehabilitationPlan.
InitsDecision,theCourtofAppealsrejectedpetitionerscontention
thattheapprovedRehabilitationPlanimpairstheobligationofcontract,
ratiocinating that the automatic stay of all actions is sanctioned by
Section5(c)ofPresidentialDecree(P.D.)No.902Awhichprovidesthat
allactionsforclaimsagainstcorporations,partnershipsorassociations
under management or receivership pending before any court, tribunal,
boardorbodyshallbesuspendedaccordingly.
Petitioner,insupportofitscontention,citesinitsMemorandumthe
treatises of Ateneo Law Dean Cesar L. Villanueva and former SEC
Commissioner Danilo L. Concepcion, both known authorities on
CorporationLaw.InhisArti
109
VOL.534,SEPTEMBER25,2007
109
LecaRealtyCorporationvs.ManuelaCorporation
clewhichappearedintheAteneoLawJournal,DeanVillanuevasaid:
The nature and extent of the power of the SEC to approve and enforce a
rehabilitationplaniscertainlyanimportantissue.Often,arehabilitationplanwould
requireadiminution,ifnotdestruction,ofcontractualandpropertyrightsofsome,if
notmostofthevariousstakeholdersinthepetitioningcorporation.Intheabsenceof
clearcoercivelegalprovisions,thecourtsofjusticeandmuchlesstheSECwould
havenopowertoamendordestroythepropertyandcontractualrightsofprivate
parties, much less relieve a petitioning corporation from its contractual
commitments.8
Ontheotherhand,ProfessorConcepcionstatedthatwhatisallowedin
rehabilitation proceedings is only the suspension of payments, or the
stayofallactionsforclaimsofdistressedcorporations,anduponits
successfulrehabilitation,theclaimsmustbesettledinfull.9
Weagreewithpetitioner.
In TheInsularLifeAssuranceCompany,Ltd.,v.CourtofAppeals,et
al.,weheld:
Whenthelanguageofthecontractisexplicitleavingnodoubtastotheintentionof
thedraftersthereof,thecourtsmaynotreadintoitanyotherintentionthatwould
contradict its plain import. The Court would be rewriting the contract of lease
between Insular and Sun Brothers under the guise of construction were we to
interpret the option to renew clause as Sun Brothers propounds it, despite the
express provision in the original contract of lease and the contracting parties
subsequentacts.AstheCourthasheldinRivieraFilipina,Inc.vs.CourtofAppeals,
acourt,eventheSupremeCourt,hasnorighttomakenewcontractsfortheparties
orignorethosealreadymadebythem,simplytoavoidseeminghardships.
_______________

8AteneoLawJournal,Vol.XLIII,Number2,May1999.

9 Concepcion,DaniloL.,InsolvencySystemsinAsia:AnEfficiencyPerspective.Corporate

Rehabilitation:ThePhilippineExperience;citedintheMemorandumforthePetitioner,G.R.No.
168924,p.23.
110
110
SUPREMECOURTREPORTSANNOTATED
LecaRealtyCorporationvs.ManuelaCorporation
Neitherabstractjusticenortheruleofliberalconstructionjustifiesthecreationofa
contractforthepartieswhichtheydidnotmakethemselvesortheimpositionupon
onepartytoacontractofanobligationnotassumed.10
The amount of rental is an essential condition of any lease contract.
Needlesstostate,thechangeofitsrateintheRehabilitationPlanisnot
justifiedasitimpairsthestipulationbetweentheparties.Wethusrulethat
theRehabilitationPlanisvoidinsofarasitamendstherentalratesagreed
uponbytheparties.
ItmustbeemphasizedthatthereisnothinginSection5(c)ofP.D.No.
902Aauthorizingthechangeormodificationofcontractsenteredintoby
thedistressedcorporationanditscreditors.
 Moreover,theStayOrderissuedbythetrialcourtdirectedrespondent
Manuelatopayinfull,aftertheissuanceofsuchOrder,alladministrative
expensesincurred.Administrativeexpensesarecostsassociatedwiththe
general administration of an organization and include such items as
utilities,rents,salaries,postages,furniture,andhousekeepingcharges.11
Inasmuch as rents are considered administrative expenses and
consideringthattheStayOrderdirectedrespondentManuelatopaythe
rentsinfull,thenitmustcomplyattheratesagreedupon.
Respondent Manuela, therefore, must update its payment of rental
arrearsandcontinuetopaycurrentrentalsattheratestipulatedinthelease
contract.Therentalsshallincurinterestatthelegalrateof6%perannum.
Upon finality of this Decision, the legal rate shall be 12%per annum,
pursuanttothefollowingrulingsofthisCourt:
_______________

10G.R.No.126850,April28,2004,428SCRA79.

11 Administrative Expense, Dictionary of Insurance Terms. Barrons Educational

Series, Answers.com 14 September 2007.http://www.answer.com/topic/administrative
expense.
111
VOL.534,SEPTEMBER25,2007
111
LecaRealtyCorporationvs.ManuelaCorporation
1. 1.
Whentheobligationisbreached,anditconsistsinthepaymentofasum
ofmoney,i.e.,aloanorforbearanceofmoney,theinterestdue
shouldbethatwhichmayhavebeenstipulatedinwriting.
Furthermore,theinterestdueshallitselfearnlegalinterestfromthe
timeitisjudiciallydemanded.Intheabsenceofstipulation,therate
ofinterestshallbe12%perannumtobecomputedfromdefault,i.e.,
fromjudicialorextrajudicialdemandunderandsubjecttothe
provisionsofArticle1169oftheCivilCode.
2. 2.
Whenanobligation,notconstitutingaloanorforbearanceofmoney,is
breached,aninterestontheamountofdamagesawardedmaybe
imposedatthediscretionofthecourtattherateof6%perannum.
Nointerest,however,shallbeadjudgedonunliquidatedclaimsor
 damagesexceptwhenoruntilthedemandcanbeestablishedwith
reasonablecertainty.Accordingly,wherethedemandisestablished
withreasonablecertainty,theinterestshallbegintorunfromthe
timetheclaimismadejudiciallyorextrajudicially(Art.1169,Civil
Code)butwhensuchcertaintycannotbesoreasonablyestablishedat
thetimethedemandismade,theinterestshallbegintorunonlyfrom
thedatethejudgmentofthecourtismade(atwhichtimethe
quantificationofdamagesmaybedeemedtohavebeenreasonably
ascertained).Theactualbaseforthecomputationoflegalinterest
shall,inanycase,beontheamountfinallyadjudged.
3. 3.
Whenthejudgmentofthecourtawardingasumofmoneybecomesfinal
andexecutory,therateoflegalinterest,whetherthecasefallsunder
paragraph1orparagraph2,above,shallbe12%perannumfrom
suchfinalityuntilitssatisfaction,thisinterimperiodbeingdeemedto
bebythenanequivalenttoaforbearanceofcredit.12
WHEREFORE,weGRANTthePetitionforReviewinG.R.No.168924.
TheassailedDecisionoftheCourtofAppealsinCAG.R.SPNo.87185is
AFFIRMEDwithMODIFICATION.TheRehabilitationPlan,insofarasit
modifiestherentalratesagreeduponbypetitionerLECAandrespondent
Manuela,isdeclaredVOID.
_______________

12 Victory Liner, Inc. v. Gammad, etal.,G.R. No. 159636, November25, 2004,444

SCRA355;citingEasternShippingLines,Inc.v.CourtofAppeals,234SCRA78,9596
(1994).
112
112
SUPREMECOURTREPORTSANNOTATED
PhilippineSocietyforthePreventionofCrueltytoAnimalsvs.CommissiononAudit
RespondentManuelaisorderedtopaytherentalsandallarrearagesatthe
ratesstipulatedintheleasecontractwithinterestat6%perannum.Upon
thefinalityofthisDecision,theinterestshallbe12%perannumuntilfully
paid.
ThePetitionforReviewonCertiorariinG.R.No.166800isDENIED
forbeingmoot.Ithasbeenovertakenbyevents.Nocosts.
SOORDERED.
 Puno (C.J., Chairperson), Corona, Azcuna and Garcia, JJ.,
concur.
Petitiongranted,assaileddecisionaffirmedwithmodification.
Note.The contents of petition for corporate rehabilitation are
providedunderRule4,Section2(k)oftheInterimRulesonCorporate
Rehabilitation.(ChasRealtyandDevelopmentCorporationvs.Talavera,
397SCRA84[2003])
o0o

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