Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
PHILIPPINE BANK OF COMMUNICATIONS, Petitioner, foreclosure proceedings; (e) included in its overall Rehabilitation Program
vs. was the full payment of its outstanding loans in favor of petitioner Philippine
BASIC POLYPRINTERS AND PACKAGING Bank of Communications (PBCOM), RCBC, Land Bank, EPCI Bank and
CORPORATION, Respondent. AUB via repayment over 15 years with moratorium of two-years for the
interest and five years for the principal at 5% interest per annumand a
G.R. No. 187581 October 20, 2014 dacion en pagoof its affiliate property in favor of EPCI Bank; and (f) its
assets worth ₱15,374,654.00 with net liabilities amounting to
Facts: ₱13,031,438.00.7
Respondent Basic Polyprinters and Packaging Corporation (Basic Finding the petition sufficient in form and substance, the RTC issued the
Polyprinters) was a domestic corporation engaged in the business of stay order dated August 31, 2006.8 It appointed Manuel N. Cacho III as the
printing greeting cards, gift wrappers, gift bags, calendars, posters, labels rehabilitation receiver, and required all creditors and interested parties,
and other novelty items.3 including the Securities and Exchange Commission (SEC), to file their
comments.
On February 27, 2004, Basic Polyprinters, along with the eight other
corporations belonging to the Limtong Group of Companies (namely: After the initial hearing and evaluation of the comments and opposition of
Cuisine Connection, Inc., Fine Arts International, Gibson HP Corporation, the creditors, including PBCOM, the RTC gave due course to the petition
Gibson Mega Corporation, Harry U. Limtong Corporation, Main Pacific and referred it to the rehabilitation receiver for evaluation and
Features, Inc., T.O.L. Realty & Development Corp., and Wonder Book recommendation.9
Corporation), filed a joint petition for suspension of paymentswith approval
of the proposed rehabilitation in the RTC (docketed as SEC Case No. 031- On October 18, 2007, the rehabilitation receiver submitted his report
04).4 The RTC issued a stay order, and eventually approved the recommending the approval of the rehabilitation plan. On December 19,
rehabilitation plan, but the CA reversed the RTC on October 25, 2005,5 and 2007, the rehabilitation receiver submitted his clarifications and corrections
directed the petitioning corporations tofile their individual petitions for to his report and recommendations.
suspension of payments and rehabilitation in the appropriate courts.
RTC: approved the rehabilitation Plan.
6
Accordingly, Basic Polyprinters brought its individual petition, averring PBCOM Appealed
therein that: (a) its business since incorporation had been very viable and CA: Affirmed the order of RTC
financially profitable; (b) it had obtained loans from various banks, and had
owed accounts payable to various creditors; (c) the Asian currency crisis, Contention-PBCOM:
devaluation of the Philippine peso, and the current state of affairs of the -that the sole issue in corporate rehabilitation is one of liquidity; hence, the
Philippine economy, coupled with: (i) high interest rates, penalties and petitioning corporation should have sufficient assets to cover all its
charges by its creditors; (ii) low demand for gift items and cards due to the indebtedness because it only foresees the impossibility of paying the
economic recession and the use of cellular phones; (iii) direct competition indebtedness falling due. It claims that rehabilitation became inappropriate
from stores like SM, Gaisano, Robinson and other malls; and (iv) the fire of because Basic Poly printers was insolvent due to its assets being
July 19, 2002 that had destroyed its warehouse containing inventories inadequate to cover the outstanding obligations
worth ₱264,000,000.00, resulting in difficulty of meeting its obligations; (d) - The petitioner next argues that Basic Polyprinters did not present any
its operations would be hampered and would render rehabilitation difficult material financial commitment in the rehabilitation plan, thereby violating
should its creditors enforce their claims through legal actions, including Section 5, Rule 4 of the Interim Rules, the rule applicable at the time of the
1
filing of the petition for rehabilitation. In that regard, Basic Polyprinters Consequently, the basic issues inrehabilitation proceedings concern the
made no commitment in relation to the infusion of fresh capital by its viability and desirability of continuing the business operations of the
stakeholders,29 and presented only a "lopsided" protracted repayment petitioning corporation. The determination of such issues was to be carried
schedule that included the dacion en pago involving an asset mortgaged to out by the court-appointed rehabilitation receiver,25 who was Cacho in this
the petitioner itself in favor of another creditor. case.
2
effect of direct competition from stores like SM, Gaisano, Rules of Procedure on Corporate Rehabilitation.3 On October 17, 2005,
Robinsons, and other malls. Viva Shipping Lines filed an Amended Petition.4
o that Basic Polyprinters’s proposal to enter into the dacion en pagoto
create a source of "fresh capital" was not feasible because the In the Amended Petition, Viva Shipping Lines claimed to own and operate
object thereof would not be its own property but one belonging to its 19 maritime vessels5 and Ocean Palace Mall, a shopping mall in downtown
affiliate, TOL Realty and Development Corporation, a corporation Lucena City.6 Viva Shipping Lines also declared its total properties’
also undergoing rehabilitation. assessed value at about ₱45,172,790.00.7 However, these allegations
were contrary to the attached documents in the Amended Petition.
Due to the rehabilitation plan being an indispensable requirement in On October 19, 2005, the Regional Trial Court found that Viva Shipping
corporate rehabilitation proceedings,38 Basic Polyprinters was expected to Lines’ Amended Petition to be "sufficient in form and substance," and
exert a conscious effort in formulating the same, for such plan would spell issued a stay order.20 It stayed the enforcement of all monetary and judicial
the future not only for itself but also for its creditors and the public in claims against Viva Shipping Lines, and prohibited Viva Shipping Lines
general. The contents and execution of the rehabilitation plan could not be from selling, encumbering, transferring, or disposing of any of its properties
taken lightly. except in the ordinary course of business.21 The Regional Trial Court also
appointed Judge Mendoza as rehabilitation receiver.
2. VIVA SHIPPING LINES, INC., Petitioner, During the initial hearing, Pilipinas Shell Petroleum Corporation (Pilipinas
vs. Shell) moved for additional time to write its opposition to Viva Shipping
KEPPEL PHILIPPINES MINING, INC., METROPOLITAN BANK & TRUST Lines’ Amended Petition.23 Pilipinas Shell later filed its
COMPANY, PILIPINAS SHELL PETROLEUM CORPORATION, CITY OF Comment/Opposition with Formal Notice of Claim.24
BATANGAS, CITY OF LUCENA, PROVINCE OF QUEZON, ALEJANDRO
OLIT, NIDA MONTILLA, PIO HERNANDEZ, EUGENIO BACULO, and Luzviminda C. Cueto, a former employee of Viva Shipping Lines, also filed
HARLAN BACALTOS,Respondents.
a Manifestation and Registration of Monetary Claim stating that Viva
Shipping Lines owes her ₱232,000.00 as separation and 13th month
G.R. No. 177382 pay.25 The Securities and Exchange Commission filed a Comment
informing the Regional Trial Court that Viva Shipping Lines violated certain
FACTS: laws and rules of the Commission.26
On October 4, 2005, Viva Shipping Lines, Inc. (Viva Shipping Lines) filed a RTC:In the Order dated October 30, 2006
Petition for Corporate Rehabilitation before the Regional Trial Court of - lifted the stay order and dismissed Viva Shipping Lines’ Amended Petition
Lucena City.2 The Regional Trial Court initially denied the Petition for failure for failure to show the company’s viability and the feasibility of
to comply with the requirements in Rule 4, Sections 2 and 3 of the Interim rehabilitation.
3
- found that Viva Shipping Lines’ assets all appeared to be non-performing. Section 6 of the Rules of Court provides that the "[r]ules shall be liberally
Further, it noted that Viva Shipping Lines failed to show any evidence of construed in order to promote their objective of securing a just, speedy and
consent to sell real properties belonging to its sister company. inexpensive disposition of every action and proceeding." However, this
provision does not negate the entire Rules of Court by providing a license
Viva Shipping Lines filed a Petition for Review under Rule 43 of the Rules to disregard all the other provisions. Resort to liberal construction must be
of Court before the Court of Appeals.42 It only impleaded Hon. Adolfo V. rational and well-grounded, and its factual bases must be so clear such
Encomienda, the Presiding Judge of the trial court that rendered the that they outweigh the intent or purpose of an apparent reading of the
assailed decision. It did not implead any of its creditors, but served copies rules.
of the Petition on counsels for Metrobank, Keppel Philippines Marine, Inc.,
Pilipinas Shell, City of Batangas, Province of Quezon, and City of Rule 43 prescribes the mode of appeal for corporate rehabilitation cases:
Lucena.43 Viva Shipping Lines neither impleaded nor served a copy of the
Petition on its former employees or their counsels. Sec. 5. How appeal taken. – Appeal shall be taken by filing a verified
petition for review in seven (7) legible copies with the Court of
Viva Shipping Lines filed a Petition for Review under Rule 43 of the Rules Appeals, with proof of service of a copy thereof on the adverse party and
of Court before the Court of Appeals.42 It only impleaded Hon. Adolfo V. on the court or agency a quo. The original copy of the petition intended for
Encomienda, the Presiding Judge of the trial court that rendered the the Court of Appeals shall be indicated as such by the petitioner.
assailed decision. It did not implead any of its creditors, but served copies
of the Petition on counsels for Metrobank, Keppel Philippines Marine, Inc., ....
Pilipinas Shell, City of Batangas, Province of Quezon, and City of
Lucena.43 Viva Shipping Lines neither impleaded nor served a copy of the Sec. 6. Contents of the petition. – The petition for review shall (a) state the
Petition on its former employees or their counsels. full names of the parties to the case, without impleading the court or
agencies either as petitioners or respondents; (b) contain a concise
ISSUES: statement of the facts and issues involved and the grounds relied upon for
the review; (c) be accompanied by a clearly legible duplicate original or a
First, whether the Court of Appeals erred in dismissing petitioner Viva certified true copy of the award, judgment, final order or resolution
Shipping Lines’ Petition for Review on procedural grounds; and appealed from, together with certified true copies of such material portions
of the record referred to therein and other supporting papers; and (d)
Second, whether petitioner was denied substantial justice when the Court contain a sworn certification against forum shopping as provided in the last
of Appeals did not give due course to its petition. paragraph of section 2, Rule 42. The petition shall state the specific
material dates showing that it was filed within the period fixed herein.
HELD: (Emphasis supplied)
1. New Frontier Sugar Corporation v. Regional Trial Court, Branch 39, Iloilo Petitioner did not comply with some of these requirements. First, it did not
City124 clarifies that an appeal from a final order or decision in corporate implead its creditors as respondents. Instead, petitioner only impleaded the
rehabilitation proceedings may be dismissed for being filed under the Presiding Judge of the Regional Trial Court, contrary to Section 6(a) of
wrong mode of appeal.125 Rule 43. Second, it did not serve a copy of the Petition on some of its
creditors, specifically, its former employees. Finally, it did not serve a copy
New Frontier Sugar doctrinally requires compliance with the procedural of the Petition on the Regional Trial Court.
rules for appealing corporate rehabilitation decisions. It is true that Rule 1,
4
Petitioner justified its failure to furnish its former employees with copies of appeal in the absence of its creditors will not result in judgment that is
the Petition by stating that the former employees were late in filing their effective, complete, and equitable.
opposition before the trial court.126 It also stated that its failure to furnish the
Regional Trial Court with a copy of the Petition was unintentional.127 This court cannot exercise its equity jurisdiction and allow petitioner to
circumvent the requirement to implead its creditors as respondents.
The Court of Appeals correctly dismissed petitioner’s Rule 43 Petition as a Tolerance of such failure will not only be unfair to the creditors, it is
consequence of non-compliance with procedural rules. Rule 43, Section 7 contrary to the goals of corporate rehabilitation, and will invalidate the
of the Rules of Court states: cardinal principle of due process of law.
Sec. 7. Effect of failure to comply with requirements. – The failure of the The failure of petitioner to implead its creditors as respondents cannot be
petitioner to comply with any of the foregoing requirements regarding the cured by serving copies of the Petition on its creditors. Since the creditors
payment of the docket and other lawful fees, the deposit of costs, proof of were not impleaded as respondents, the copy of the Petition only serves to
service of the petition, and the contents of and the documents which should inform them that a petition has been filed before the appellate court. Their
accompany the petition shall be sufficient ground for the dismissal thereof. participation was still significantly truncated. Petitioner’s failure to implead
them deprived them of a fair hearing. The appellate court only serves court
2. The first rule breached by petitioner is the failure to implead all the orders and processes on parties formally named and identified by the
indispensable parties. Petitioner did not even interpose reasons why it petitioner. Since the creditors were not named as respondents, they could
should be excused from compliance with the rule to "state the full names of not receive court orders prompting them to file remedies to protect their
the parties to the case, without impleading the court . . . as . . . property rights.
respondents." Petitioner did exactly the opposite. It failed to state the full
names of its creditors as respondents. Instead, it impleaded the Presiding 3. petitioner pleaded to suspend is the rule requiring it to furnish all
Judge of the originating court. parties with copies of the Rule 43 Petition. Petitioner admitted its
failure to furnish its former employees with copies of the Petition
The Rules of Court requires petitioner to implead respondents as a matter because they belatedly filed their claims before the Regional Trial
of due process. Under the Constitution, "[n]o person shall be deprived of Court.
life, liberty or property without due process of the law."134 An appeal to a The former employees were unable to raise their claims on time because
corporate rehabilitation case may deprive creditor-stakeholders of property. petitioner did not declare them as creditors. The Amended Petition did not
Due process dictates that these creditors be impleaded to give them an contain any information regarding pending litigation between petitioner and
opportunity to protect the property owed to them. its former employees. The only way the former employees could become
aware of the corporate rehabilitation proceedings was either through the
Creditors are indispensable parties to a rehabilitation case, even if a required publication or through news informally circulated among their
rehabilitation case is non-adversarial. colleagues. Clearly, it was petitioner who caused the belated filing of its
former employees’ claims when it failed to notify its employees of the
A corporate rehabilitation case cannot be decided without the creditors’ corporate rehabilitation proceedings. Petitioner’s failure was conveniently
participation. The court’s role is to balance the interests of the corporation, and disreputably hidden from this court.
the creditors, and the general public. Impleading creditors as respondents
on appeal will give them the opportunity to present their legal arguments Petitioner’s belated compliance with the requirement to serve the Petition
before the appellate court. The courts will not be able to balance these for Review on its former employees did not cure the procedural lapse.
interests if the creditors are not parties to a case. Ruling on petitioner’s There were two sets of employees with claims against petitioner:
5
Luzviminda C. Cueto and Alejandro Olit, et al. When the Court of Appeals Rehabilitation covers petitions for rehabilitation filed before the Regional
dismissed petitioner’s appeal, petitioner only served a copy on Alejandro Trial Court. Thus, Rule 2, Section 2 of the Interim Rules of Procedure on
Olit, et al. Petitioner still did not serve a copy on Luzviminda C. Cueto. Corporate Rehabilitation, which refers to liberal construction, is limited to
the Regional Trial Court. The liberality was given "to assist the parties in
We do not see how it will be in the interest of justice to allow a petition that obtaining a just, expeditious, and inexpensive disposition of the case."
fails to inform some of its creditors that the final order of the corporate
rehabilitation proceeding was appealed. By not declaring its former 4. The Regional Trial Court correctly dismissed the Amended Petition for
employees as creditors in the Amended Petition for Corporate Corporate Rehabilitation. The dismissal of the Amended Petition did not
Rehabilitation and by not notifying the same employees that an appeal had emanate from petitioner’s failure to provide complete details on its assets
been filed, petitioner consistently denied the due process rights of these and liabilities but on the trial court’s finding that rehabilitation is no longer
employees. viable for petitioner. Under the Interim Rules of Procedure on Corporate
Rehabilitation, a "petition shall be dismissed if no rehabilitation plan is
Petitioner also pleaded to be excused from the requirement under Rule 6, approved by the court upon the lapse of one hundred eighty (180) days
Section 5 of the Rules of Court to serve a copy of the Petition on the from the date of the initial hearing."143 The proceedings are also deemed
originating court. According to petitioner, the annexes for the Petition for terminated upon the trial court’s disapproval of a rehabilitation plan, "or a
Review filed before the Court of Appeals arrived from Lucena City on the determination that the rehabilitation plan may no longer be implemented in
last day of filing the petition. Petitioner’s representative from Lucena City accordance with its terms, conditions, restrictions, or assumptions."144
and petitioner’s counsel rushed to compile and reproduce all the
documents, and in such rush, failed to send a copy to the Regional Trial The Regional Trial Court correctly dismissed petitioner’s rehabilitation plan.
Court. When petitioner realized that it failed to furnish the originating court It found that petitioner’s assets are non-performing.152 Petitioner admitted
with a copy of the Petition, a copy was immediately sent by registered this in its Amended Petition when it stated that its vessels were no longer
mail.137 serviceable.153 In Wonder Book Corporation v. Philippine Bank of
Communications,154 a rehabilitation plan is infeasible if the assets are
Again, petitioner’s excuse is unacceptable. Petitioner had 15 days to file a nearly fully or fully depreciated. This reduces the probability that
Rule 43 petition, which should include the proof of service to the originating rehabilitation may restore and reinstate petitioner to its former position of
court. Rushing the compilation of the pleading with the annexes has successful operation and solvency.
nothing to do with being able to comply with the requirement to submit a
proof of service of the copy of the petition for review to the originating court. Petitioner’s rehabilitation plan should have shown that petitioner has
If at all, it further reflects the unprofessional way that petitioner and its enough serviceable assets to be able to continue its business. Yet, the plan
counsel treated our rules. showed that the source of funding would be to sell petitioner’s old vessels.
Disposing of the assets constituting petitioner’s main business cannot
As this court has consistently ruled, "[t]he right to appeal is not a natural result in rehabilitation. A business primarily engaged as a shipping line
right[,] nor a part of due process; it is merely a statutory privilege, and may cannot operate without its ships. On the other hand, the plan to purchase
be exercised only in the manner and in accordance with the provisions of new vessels sacrifices the corporation’s cash flow. This is contrary to the
the law."138 goal of corporate rehabilitation, which is to allow present value recovery for
creditors. The plan to buy new vessels after selling the two vessels it
In line with this, liberality in corporate rehabilitation procedure only currently owns is neither sound nor workable as a business plan.
generally refers to the trial court, not to the proceedings before the
appellate court. The Interim Rules of Procedure on Corporate
6
The other part of the rehabilitation plan entails selling properties of On September 1, 1994, Bisig Pagkakaisa-
petitioner’s sister company.1âwphi1 As pointed out by the Regional Trial NAFLU staged a strike .
Court, this plan requires conformity from the sister company. Even if the As a result, Rubberworld's premises closed prematurely even before the
two companies have the same directorship and ownership, they are still date set for the start of its temporary partial shutdown. On September 9,
two separate juridical entities. In BPI Family Savings Bank v. St. Michael 1994, petitioner union, represented by
Medical Center,155 this court refused to include in the financial and liquidity its President, Sonia Esperanza, filed a complaint against Rubberworld and
assessment the financial statements of another corporation that the its Vice Chairperson for ULP, illegal shutdown, and non-payment of
petitioning-corporation plans to merge with. salaries and separation pay. The said complaint was referred to Labor
Arbiter for appropriate action. On November 22, 1994, while the
aforementioned complaint was pending, Rubberworld filed with the SEC a
Petition for Declaration of a State of Suspension of Payments with
Proposed Rehabilitation Plan. Notwithstanding the SEC's aforementioned
suspension order and despite Rubberworld's submission on January 10,
1995 of a Motion to Suspend Proceedings, the Labor Arbiter went ahead
with the ULP case and rendered his decision denying respondents motion
3. REV. LUIS AO-AS, REV. JOSE LAKING, EUSQUICIO GALANG, REV. to suspend proceedings and declaring respondent Rubberworld Phils., Inc.
ISABELO MONONGGIT, REV. EDWINO MERCADO, REV. DANIEL to have committed ULP. Its MR having been denied by the NLRC,
PONDEVIDA, REV. TEODORICO TARAN and DR. BENJAMIN Rubberworld directly went to the Supreme Court on a Petition for Certiorari.
GALAPIA, The SEC issued an Order stating that the continuance in business of
Petitioners, versus HON. COURT OF APPEALS, THOMAS P. BATONG, Rubberworld would neither be profitable nor work to the best of interest of
JUANITO BASALONG, AUGUSTO CATANGI, PAUL GARCIA, QUIDO the parties and general public. Eventually, in the assailed Decision, the CA
RIVERA, VICTORIO Y. SAQUILAYAN and DANILO ZAMORA, granted Rubberworld‘s petition on the finding that the Labor Arbiter had
Respondents. indeed committed grave abuse of discretion when it proceeded with the
ULP case despite the SEC‘s suspension, hence this petition.
ISSUES:
1) Whether the CA had committed grave abuse of discretion when it gave
due course to the petition filed by Rubberworld and annulled the decisions
4. LINGKOD MANGGAGAWA SA RUBBERWORLD, ADIDAS-ANGLO,
rendered by the labor arbiter, when the said decisions had become final
its officers and members as represented by SONIA ESPERANZA,
and executory warranting the outright dismissal ofthe aforesaid petition
Petitioners, - versus -RUBBERWORLD (PHILS.) INC. and ANTONIO
2) Whether the CA had committed grave abuse of discretion and reversible
YANG, LAYA MANANGHAYA SALGADO & CO., CPAs (In its capacity
error when it applied Section 5(d) andSection 6 (c) of P.D. No. 902-A, as
as liquidator of Rubberworld (Phils., Inc.),
amended, to the case at bar;
Respondents.
FACTS: RULING:
Rubberworld announced a company shutdown due to financial crisis, and a The Court ruled in the negative and stated that CA did not commit grave
copy of which was serve d on the recognized labor union of Rubberworld, abuse of discretion. It cannot be said that the decision of the Labor Arbiter,
the Bisig Pagkakaisa-NAFLU, the union with which the corporation had a or the decision/dismissal order and writ of execution issued by the NLRC,
CBA. could ever attain final and executory status.
7
The Labor Arbiter completely disregarded and violated Section 6(c)of 5. NEGROS NAVIGATION CO., INC.,Petitioner,- versus -
Presidential Decree 902-A, as amended, which categorically mandates the COURT OF APPEALS, SPECIAL TWELFTH DIVISION AND TSUNEISHI
suspension of all actions for claims against a corporation placed under a HEAVY INDUSTRIES (CEBU), INC.,
management committee by the SEC. The proceedings before the Labor Respondents.
Arbiter and the order and writ subsequently issued by the NLRC are all null
and void for having been undertaken or issued in violation of the SEC FACTS:
suspension Order. Acts executed against provisions of mandatory and
prohibitory laws are void, except when the law itself authorizes their On February 9, 2004, THI filed a case for sum of money and damages with
validity. The labor arbiters decision is void ab initio and a void judgment is
non-existent. The Court also believed that CA is correct in ruling the issue prayer for issuance of writ of attachment against NNC before the Regional
of applicability in labor cases of the aforequoted provisions of PD 902-A. It Trial Court of Cebu (Cebu RTC), docketed as Civil Case No. CEB-29899
is plain from the foregoing provisions of the entitled Tsuneishi Heavy Industries (Cebu), Inc. v. Negros Navigation Co.,
law that ―upon the appointment by SECof a management committee or a Inc. The action is based on the unpaid services for the repair of NNCs
rehabilitation receiver,‖ all actions for claims against the corporation vessels, otherwise known as repairmans lien.
pending before any court, tribunal or board shall ipso jure be suspended.
The justification for the automatic stay of all pending actions for claims ―is
to enable the management committee or the rehabilitation receiver to On March 5, 2004, the Cebu RTC issued an Order granting the issuance of
effectively exercise its/his powers free from any judicial or extra-judicial a writ of preliminary attachment against the properties of NNC. It reasoned
interference that might unduly hinder or prevent the rescue of the debtor that based on the affidavit in support of the application for the writ, NNC
company. committed fraud in contracting the debt or in incurring the obligation upon
The law states that upon the creation of a management committee or the which the action was brought, thus, justifying the issuance of the writ as
appointment of a rehabilitation receiver, all claims for actions ―shall be mandated by Section 1(d) of Rule 57. It added that the repairmans lien of
suspended accordingly.‖ Since the law makes no distinction or exemptions, THI constituted a superior maritime lien that is enforceable by suit in rem,
neither should this Court. Ubi lex non distinguit nec nos distinguere as decreed by Presidential Decree No. 1521 (PD 1521).
debemos.
Allowing labor cases to proceed clearly defeats the purpose of the
automatic stay and severely encumbers the management committee's time On March 12, 2004, by virtue of the writ of preliminary attachment, Sheriff
and resources. The said committee would need to defend against these Rogelio T. Pinar levied on one of the vessels of NNC, the M/V St. Peter the
suits, to the detriment of its primary and urgent duty to work towards
Apostle.
rehabilitating the corporation and making it viable again.
Thus, when NLRC proceeded to decide the case despite the SEC
suspension On March 29, 2004, NNC filed a Petition for Corporate Rehabilitation with
order, the NLRC acted without or in excess of its jurisdiction to hear and
decide cases. As a consequence, any resolution, decision or order that it Prayer for Suspension of Payments with the RTC of Manila (Manila RTC),
rendered or issued without jurisdiction is a nullity Branch 46, which was docketed as Special Proceeding No. 0409532. The
.
Manila RTC granted the NNCs petition and issued a Stay Order on April 1,
2004.
8
Upon the issuance of the stay order by the Manila RTC, NNC filed a 2. THI argues that the Manila RTC, in granting the stay order, divested
the Cebu RTC, which is acting as an admiralty court, of its
Manifestation and Motion to Suspend Proceedings and to Lift Preliminary jurisdiction over the maritime case of THI. It insists that its maritime
Attachment with the Cebu RTC.[14] liens over the vessels of NNC must be upheld, notwithstanding
NNCs rehabilitation proceedings. It stresses that in in
rem proceedings to enforce maritime liens, the vessels alone may
On April 5, 2004, THI filed an Amended Complaint[15] in the Cebu RTC. In be impleaded as defendants. The vessels themselves answer for
the liens, and lienholders like THI have the substantive statutory
the amended complaint, THI impleaded the following vessels of NNC as
right under PD 1521 to insist on the vessels responsibility because
co-defendants in the suit: M/V San Sebastian, M/S Princess of Negros, an action in rem is a proceeding against the ship itself.
M/V Nossa Senhora (Nuestra Seora) De Fatima, M/V St. Peter the Apostle, Furthermore, it emphasizes that a maritime lien is not affected by
bankruptcy or reorganization, citing Gilmore and Black as
M/V Santa Ana and M/V San Paolo. reference.[43]
On April 13, 2004, NNC filed a Motion to Suspend Proceedings and to Lift
the Writ of Attachment and Arrest Orders[23] before the Cebu RTC by virtue
of the April 12, 2004 Order of the Manila RTC. However, on April 29, 2004, HELD:
the CA issued the Resolution[24] assailed in what is before this Court
as G.R. No. 163156, wherein the appellate court temporarily restrained the 1. There is no conflict as to which law should apply to the case at bench.
implementation of the Orders of the Manila RTC dated April 1, THI wishes to impress this Court that its claim for repairmans lien is a
2004 and April 12, 2004.
maritime lien and, accordingly, may be enforced only in a proceeding in
On October 6, 2004, the CA issued the Decision[27] assailed in what is now
G.R. No. 166845, denying the petition of THI that sought to annul and rem. The Court agrees that PD 1521 is the governing law concerning its
enjoin the enforcement and implementation of the Orders of the Manila maritime lien for the services it rendered to NNC. However, when NNC filed
RTC dated April 1, 2004 and April 12, 2004.
a petition for corporate rehabilitation and suspension of payments, and the
Manila RTC found that the petition was sufficient in form and in substance
and appointed the rehabilitation receiver, the admiralty proceeding was
Contention: appropriately suspended in accordance with Section 6 of the Interim Rules
1. THI maintains that its maritime liens against the vessels of NNC on Corporate Rehabilitation.[35]
were impaired by the issuance of the stay order. THI argues that
the issuance of the stay order by the Manila RTC, acting as
rehabilitation court, was erroneous considering that maritime liens Rehabilitation contemplates continuance of corporate life and activities in
cannot be enforced, divested, and otherwise affected or dealt with an effort to restore and reinstate the corporation to its former position of
except by an admiralty court in an admiralty proceeding in rem. THI
successful operation and solvency.[36] The purpose of rehabilitation
cited various foreign jurisprudence to the effect that maritime liens
are enforceable only by a suit in rem.[33] It further averred that the proceedings is precisely to enable the company to gain a new lease on life
mere suspension of the in rem proceedings in the admiralty case and thereby allow creditors to be paid their claims from its earnings. The
prejudiced its substantive rights under Presidential Decree (PD)
1521.
9
rehabilitation of a financially distressed corporation benefits its employees,
creditors, stockholders and, in a larger sense, the general public.[37] The justification for the suspension of actions or claims, without distinction,
The governing law concerning rehabilitation and suspension of actions for pending rehabilitation proceedings is to enable the management committee
claims against corporations is PD 902-A, as amended. Republic Act No. or rehabilitation receiver to effectively exercise its/his powers free from any
8799 (RA 8799), otherwise known as The Securities Regulation Code, judicial or extra-judicial interference that might unduly hinder or prevent the
amended Section 5 of PD 902-A, thereby transferring to the Regional Trial "rescue" of the debtor company. To allow such other actions to continue
Courts the jurisdiction of the Securities and Exchange Commission (SEC) would only add to the burden of the management committee or
over cases, among others, involving petitions of corporations, partnerships rehabilitation receiver, whose time, effort and resources would be wasted in
or associations to be declared in the state of suspension of payments defending claims against the corporation instead of being directed toward
where the corporation, partnership or association possesses property to its restructuring and rehabilitation.[39]
cover all its debts but foresees the impossibility of meeting them when they
respectively fall due, or where the corporation, partnership or association It is undisputed that THI holds a preferred maritime lien over NNCs assets
has no sufficient assets to cover its liabilities, but is under the management by virtue of THIs unpaid services. The issuance of the stay order by the
of a rehabilitation receiver or a management committee. rehabilitation court does not impair or in any way diminish THIs preferred
The Court adopted the Interim Rules of Procedure on Corporate status as a creditor of NNC. The enforcement of its claim through court
Rehabilitation on December 15, 2000, and these rules apply to petitions for action was merely suspended to give way to the speedy and effective
rehabilitation filed by corporations, partnerships, and associations pursuant rehabilitation of the distressed shipping company. Upon termination of the
receivership pending before any court, tribunal, board or body shall be of a management committee follows to avoid collusion between the
suspended. PD 902-A does not make any distinction as to what claims are previous management and creditors it might favor, to the prejudice of the
covered by the suspension of actions for claims against corporations under other creditors. The stay order is effective on all creditors of the corporation
rehabilitation. No exception is made therein in favor of maritime claims. without distinction, whether secured or unsecured. All assets of a
Thus, since the law does not make any exemptions or distinctions, neither corporation under rehabilitation receivership are held in trust for the equal
should we. Ubi lex non distinguit nec nos distinguere debemos. benefit of all creditors to preclude one from obtaining an advantage or
10
preference over another by the expediency of attachment, execution or enforcement of its claims against NNC, we would, in effect, violate
provisions of PD 902-A. To reiterate, the rationale behind PD 902-A is to
otherwise. As between the creditors, the key phrase is equality in equity. effect a feasible and viable rehabilitation of an ailing corporation.
Once the corporation threatened by bankruptcy is taken over by a receiver,
There is no conflict between PD 1521 and PD 902-A. The Manila RTC
all the creditors ought to stand on equal footing. Not any one of them acting as a rehabilitation court merely suspended the proceedings in the
should be paid ahead of the others. This is precisely the reason for admiralty case in the Cebu RTC. It did not divest the Cebu RTC of its
jurisdiction over the maritime claims of THI against NNC. The preferred
suspending all pending claims against the corporation under
maritime lien of THI can still be enforced upon the termination of the
[40]
receivership. rehabilitation proceedings, or if it such be unsuccessful, upon the
Rizal Commercial Banking Corporation v. Intermediate Appellate dissolution of the corporation.
[41]
Court, promulgated by the Court en banc before the effectivity of the
Interim Rules on Corporate Rehabilitation, is still valid case law up to the
6. JUANITO A. GARCIA and ALBERTO J. DUMAGO,
present. It enumerates the guidelines in the treatment of claims involving
Petitioners,- versus -PHILIPPINE AIRLINES, INC.,
corporations undergoing rehabilitation, viz.: Respondent. (G.R. No. 164856. August 29, 2007)
Reinstatement pending appeal necessitates its immediate execution during which Maynilad undertook to pay the corresponding concession fees
the pendency of the appeal, if the law is to serve its noble purpose. At the which, among other things, consisted of payments of petitioners mostly
same time, any attempt on the part of the employer to evade or delay its
execution, should not be countenanced. After the labor arbiter’s decision foreign loans.
is reversed by a higher tribunal, the employee may be barred from
To secure the concessionaires performance of its obligations, Maynilad
collecting the accrued wages, if it is shown that the delay in enforcing the
reinstatement pending appeal was without fault on the part of the employer. was required under Section 6.9 of said contract to put up a bond, bank
The new NLRC Rules of Procedure, now require the employer to submit a
report of compliance within 10 calendar days from receipt of the Labor guarantee or other security acceptable to MWSS.
Arbiter’s decision, disobedience to which clearly denotes a refusal to
reinstate. It is apparent that there was inaction on the part of respondent to
reinstate them, but whether such omission was justified depends on the
15
In compliance with this requirement, Maynilad arranged for a three-year defined under Art. 10.2 (ii) or 10.3 (iii) of the Concession Agreement and
facility with a number of foreign banks, led by Citicorp Int’l Ltd., for the that, therefore, Maynilad should pay the concession fees that had fallen
issuance of an Irrevocable Standby Letter of Credit in favor of MWSS for due.
the full and prompt performance of Maynilads obligations to MWSS as
aforestated. The award of the Appeals Panel became final. MWSS, thereafter,
submitted a written notice to Citicorp Int’l Ltd, as agent for the participating
Later, the parties agreed to resolve the issues between them [Maynilad is banks, that by virtue of Maynilads failure to perform its obligations under
asking for a mechanism by which it hoped to recover the losses it had the Concession Agreement, it was drawing on the Irrevocable Standby
allegedly incurred and would be incurring as a result of the depreciation of Letter of Credit and thereby demanded payment.
the Philippine Peso against the US Dollar and in filing to get what it
desired, Maynilad unilaterally suspended the payment of the concession Prior to this, however, Maynilad had filed on a petition for rehabilitation
fees] through an amendment of the Concession Agreement which was before the RTC of Quezon City which resulted in the issuance of the Stay
based on the terms set down in MWSS Board of Trustees Resolution which Order and the disputed Order of November 27, 2003.
providedinter alia for a formula that would allow Maynilad to recover foreign
exchange losses it had incurred or would incur under the terms of the ISSUE: WON the rehabilitation court sitting as such, act in excess of its
Concession Agreement. authority or jurisdiction when it enjoined herein petitioner from seeking the
payment of the concession fees from the banks that issued the Irrevocable
However Maynilad served upon MWSS a Notice of Event of Termination, Standby Letter of Credit in its favor
claiming that MWSS failed to comply with its obligations under the HELD: the petition for certiorari is granted.The Order of November 27,
Concession Agreement and its Amendment regarding the adjustment 2003 of the RTC of Quezon City 90, is hereby declared null and voidand
mechanism that would cover Maynilads foreign exchange losses. Maynilad set aside.
filed a Notice of Early Termination of the concession, which was challenged YES
by MWSS. This matter was eventually brought before the Appeals Panel by
MWSS. the Appeals Panel ruled that there was no Event of Termination as First, the claim is not one against the debtor but against an entity that
respondent Maynilad has procured to answer for its non-performance of
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certain terms and conditions of the Concession Agreement, particularly the The prohibition under Sec 6 (b) of Rule 4 of the Interim Rules does not
payment of concession fees. apply to herein petitioner as the prohibition is on the enforcement of claims
against guarantors or sureties of the debtors whose obligations are not
Secondly, Sec. 6 (b) of Rule 4 of the Interim Rules does not enjoin the solidary with the debtor. The participating banks obligation are solidary
enforcement of all claims against guarantors and sureties, but only those with respondent Maynilad in that it is a primary, direct, definite and an
claims against guarantors and sureties who are not solidarily liable absolute undertaking to pay and is not conditioned on the prior exhaustion
with the debtor. Respondent Maynilads claim that the banks are not of the debtors assets. These are the same characteristics of a surety or
solidarily liable with the debtor does not find support in jurisprudence. solidary obligor. And being solidary, the claims against them can be
Letters of credit were developed for the purpose of insuring to a seller pursued separately from and independently of the rehabilitation case.
payment of a definite amount upon the presentation of documentsand is The terms of the Irrevocable Standby Letter of Credit do not show that the
thus a commitment by the issuer that the party in whose favor it is issued obligations of the banks are not solidary with those of respondent Maynilad.
and who can collect upon it will have his credit against the applicant of the On the contrary, it is issued at the request of and for the account of
letter, duly paid in the amount specified in the letter They are in effect Maynilad in favor of the MWSS as a bond for the full and prompt
absolute undertakings to pay the money advanced or the amount for which performance of the obligations by the concessionaire under the
credit is given on the faith of the instrument. They are primary obligations Concession Agreement and herein MWSS is authorized by the banks to
and not accessory contracts and while they are security arrangements, draw on it by the simple act of delivering to the agent a written certification
they are not converted thereby into contracts of guaranty. What substantially in the form of the Letter of Credit.
distinguishes letters of credit from other accessory contracts, is the
engagement of the issuing bank to pay the seller once the draft and other Taking into consideration our own rulings on the nature of letters of credit
required shipping documents are presented to it. They are definite and the customs and usage developed over the years in the banking and
undertakings to pay at sight once the documents stipulated therein are commercial practice of letters of credit, we hold that except when a letter of
presented. credit specifically stipulates otherwise, the obligation of the banks issuing
letters of credit are solidary with that of the person or entity requesting for
its issuance, the same being a direct, primary, absolute and definite
17
undertaking to pay the beneficiary upon the presentation of the set of
documents required therein.
The public respondent, therefore, exceeded his jurisdiction, in holding that
he was competent to act on the obligation of the banks under the Letter of
Credit under the argument that this was not a solidary obligation with that
of the debtor. Being a solidary obligation, the letter of credit is excluded
from the jurisdiction of the rehabilitation court and therefore in enjoining
petitioner from proceeding against the Standby Letters of Credit to which it
had a clear right under the law and the terms of said Standby Letter of
Credit, public respondent acted in excess of his jurisdiction.
NOTES:
We held in Feati Bank & Trust Company v. Court of Appeals that the
concept of guarantee vis–vis the concept of an irrevocable letter of credit
are inconsistent with each other.The guarantee theory destroys the
independence of the banks responsibility from the contract upon which it
was opened and the nature of both contracts is mutually in conflict with
each other. In contracts of guarantee, the guarantors obligation is merely
collateral and it arises only upon the default of the person primarily liable.
On the other hand, in an irrevocable letter of credit, the bank undertakes a
primary obligation. We have also defined a letter of credit as an
engagement by a bank or other person made at the request of a customer
that the issuer shall honor drafts or other demands of payment upon
compliance with the conditions specified in the credit.
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