LECA REALTY CORPORATION vs. MANUELA CORPORATION 7.
7. Leca Realty Corporation (Leca) filed its Comment and/or Formal Claim
G.R. No. 166800 September 25, 2007
FACTS:
1. Manuela Corporation (Manuela) is a duly registered domestic
corporation, principally engaged in the business of leasing commercial
spaces in shopping malls to retailers. At the time, respondent owned
and operated M Star One, M Star, Starmall, Metropolis Star, and Pacific
Mall.
2. Manuela obtained several loans from two syndicates of lenders to
finance the costs of two of its buildings. Aside from its Php2.174 billion
loan from banks, the company also had Php1.476 billion indebtedness
to Hero Holdings, Inc. and its trade suppliers, and other parties.
3. The region was then beset by the 1997 Asian financial crisis which
prompted banks to stop their lending activities. This severely affected
Manuela whose malls did not operate sufficiently, causing serious
losses to the company. The adjusted interest rates on Manuela’s loans
were around 18% to 30%, which contributed to its liquidity problems.
4. The company, however, exerted all efforts to cushion the financial blow
by “closing down non-income generating businesses, concentrating on
its business of leasing commercial spaces, intensifying collection efforts,
reducing personnel, negotiating for restructuring of loan with creditors,
and working out a viable payment scheme without giving undue
preference to any creditor.” In spite of all these initiatives, Manuela still
failed to pay its financial obligations.
5. This forced the company to ask the court to issue a Stay Order and
approve its proposed Rehabilitation Plan, which if successfully
implemented will “enable it to settle its remaining obligations in an
orderly manner, restore its financial viability, and allow it to resume its
normal operations.” The trial court subsequently issued the Stay Order,
which stated:’
a) a stay in the enforcement of all claims, whether for money or
otherwise and whether such enforcement is by court action or
otherwise, against petitioner MANUELA, its guarantors and
sureties not solidarily liable with it; …
e) directing the payment in full of all administrative expenses
incurred after the issuance of this Stay Order.
6. The trial court appointed Marilou Adea as rehabilitation receiver. Adea
recommended the approval of Manuela’s Rehabilitation Plan and
convened with Manuela’s creditors for the latter to air their concerns.
against Manuela amounting to Php193.7 million, comprised of unpaid
rentals, security deposits, interests, and penalty charges. After Leca’s
receipt of Adea’s Report and Recommendation, petitioner questioned the
reduction of Manuela’s liability, “considering its contractual nature
which cannot be impaired during the process of rehabilitation.” The trial
court eventually approved the Rehabilitation Plan. Leca’s appeal to the
Court of Appeals was dismissed for lack of merit.
8. The disagreement is grounded on the fact that the rental rates agreed
upon by Leca and Manuela were reduced in the Rehabilitation Plan.
There was a gross discrepancy between the amounts of rent agreed
upon by the parties and those provided in the Rehabilitation Plan.
9. Leca filed another petition before the appellate court alleging violation
of its constitutional right to non-impairment contract and the Interim
Rules of Procedure on Corporate Rehabilitation. The Court of Appeals,
in denying the petition, ruled:
The pendency of the rehabilitation proceedings cannot be
interpreted to impair the contractual obligations previously
entered into by the contracting parties because the automatic
stay of all actions is sanctioned by P.D. [No.] 902-A which
provides that “all actions for claims against corporations,
partnerships or associations under management or receivership
pending before any court, tribunal, board or body shall be
suspended accordingly.”
10. Thus, Leca filed a petition for review on certiorari before the Supreme
Court.
ISSUE:
Whether the pendency of the rehabilitation proceedings can justify
impairment of contractual obligations previously entered into by the
parties?
HELD:
No, the pendency of the rehabilitation plan can no justify the impairment of
contractual obligations. The amount provided in the rehabilitation plan is
null and void.
RATIO:
Petitioner, in support of its contention, cites in its Memorandum the
treatises of Ateneo Law Dean Cesar L. Villanueva and former SEC
Commissioner Danilo L. Concepcion, both known authorities on
Corporation Law. In his Article which appeared in the Ateneo Law Journal,
Dean Villanueva said:
The nature and extent of the power of
the SEC to approve and enforce a rehabilitation
plan is certainly an important issue. Often, a
rehabilitation plan would require a diminution,
if not destruction, of contractual and property
rights of some, if not most of the various
stakeholders in the petitioning corporation. In
the absence of clear coercive legal provisions, the
courts of justice and much less the SEC would
have no power to amend or destroy the property
and contractual rights of private parties, much
less relieve a petitioning corporation from its
contractual commitments.
On the other hand, Professor Concepcion stated that what is allowed in
rehabilitation proceedings is only the suspension of payments, or the
stay of all actions for claims of distressed corporations, and upon its
successful rehabilitation, the claims must be settled in full.
The Supreme Court, in agreeing with Leca, cited its ruling in The Insular
LifeAssurance Company, Ltd. v. Court of Appeals, which provides:
When the language of the contract is explicit leaving no doubt as to
the intention of the drafters thereof, the courts may not read into it
any other intention that would contradict its plain import. The
Court would be rewriting the contract of lease between Insular and
Sun Brothers under the guise of construction were we to interpret
the ‘option to renew’ clause as Sun Brothers propounds it, despite
the express provision in the original contract of lease and the
contracting parties’ subsequent acts. As the Court has held in
Riviera Filipina, Inc. vs. Court of Appeals, ‘a court, even the
Supreme Court, has no right to make new contracts for the parties
or ignore those already made by them, simply to avoid seeming
hardships. Neither abstract justice nor the rule of liberal
construction justifies the creation of a contract for the parties which
they did not make themselves or the imposition upon one party to
a contract of an obligation not assumed.
The Court voided the Rehabilitation Plan insofar as it amends the rental
rates agreed upon by the parties. It opined that the change is not justified
as the amount of rent is an “essential condition of any lease contract;” thus,
any alteration on the rate is tantamount to impairment of stipulation of the
parties.
MWSS vs. DAWAY AND MAYNILAD
G.R. No. 160732.
June 21, 2004
FACTS: MWSS granted Maynilad under a Concession Agreement to manage,
operate, repair, decommission and refurbish the existing MWSS water
delivery and sewerage services in the West Zone Service Area, for which
Maynilad undertook to pay the corresponding concession fees which, among
other things, consisted of payments of petitioners mostly foreign loans.
To secure the concessionaires performance of its obligations, Maynilad was
required under Section 6.9 of said contract to put up a bond, bank
guarantee or other security acceptable to MWSS.
In compliance with this requirement, Maynilad arranged for a three-year
facility with a number of foreign banks, led by Citicorp Int’l Ltd., for the
issuance of an Irrevocable Standby Letter of Credit in favor of MWSS for the
full and prompt performance of Maynilads obligations to MWSS as
aforestated.
Later, the parties agreed to resolve the issues between them [Maynilad is
asking for a mechanism by which it hoped to recover the losses it had
allegedly incurred and would be incurring as a result of the depreciation of
the Philippine Peso against the US Dollar and in filing to get what it desired,
Maynilad unilaterally suspended the payment of the concession fees]
through an amendment of the Concession Agreement which was based on
the terms set down in MWSS Board of Trustees Resolution which provided
inter alia for a formula that would allow Maynilad to recover foreign
exchange losses it had incurred or would incur under the terms of the
Concession Agreement.
However Maynilad served upon MWSS a Notice of Event of Termination,
claiming that MWSS failed to comply with its obligations under the
Concession Agreement and its Amendment regarding the adjustment
mechanism that would cover Maynilads foreign exchange losses. Maynilad
filed a Notice of Early Termination of the concession, which was challenged
by MWSS. This matter was eventually brought before the Appeals Panel by
MWSS. the Appeals Panel ruled that there was no Event of Termination as
defined under Art. 10.2 (ii) or 10.3 (iii) of the Concession Agreement and
that, therefore, Maynilad should pay the concession fees that had fallen due.
The award of the Appeals Panel became final. MWSS, thereafter, submitted
a written notice to Citicorp Int’l Ltd, as agent for the participating banks,
that by virtue of Maynilads failure to perform its obligations under the
Concession Agreement, it was drawing on the Irrevocable Standby Letter of
Credit and thereby demanded payment.
Prior to this, however, Maynilad had filed on a petition for rehabilitation
before the RTC of Quezon City which resulted in the issuance of the Stay
Order and the disputed Order of November 27, 2003.
ISSUE: WON the rehabilitation court sitting as such, act in excess of its
authority or jurisdiction when it enjoined herein petitioner from seeking the
payment of the concession fees from the banks that issued the Irrevocable
Standby Letter of Credit in its favor
HELD: the petition for certiorari is granted.The Order of November 27, 2003
of the RTC of Quezon City 90, is hereby declared null and voidand set aside.
YES
First, the claim is not one against the debtor but against an entity that
respondent Maynilad has procured to answer for its non-performance of
certain terms and conditions of the Concession Agreement, particularly the
payment of concession fees.
Secondly, Sec. 6 (b) of Rule 4 of the Interim Rules does not enjoin the
enforcement of all claims against guarantors and sureties, but only those
claims against guarantors and sureties who are not solidarily liable with the
debtor. Respondent Maynilads claim that the banks are not solidarily liable
with the debtor does not find support in jurisprudence.
Letters of credit were developed for the purpose of insuring to a seller
payment of a definite amount upon the presentation of documentsand is
thus a commitment by the issuer that the party in whose favor it is issued
and who can collect upon it will have his credit against the applicant of the
letter, duly paid in the amount specified in the letter They are in effect
absolute undertakings to pay the money advanced or the amount for which
credit is given on the faith of the instrument. They are primary obligations
and not accessory contracts and while they are security arrangements, they
are not converted thereby into contracts of guaranty. What distinguishes
letters of credit from other accessory contracts, is the engagement of the
issuing bank to pay the seller once the draft and other required shipping
documents are presented to it. They are definite undertakings to pay at sight
once the documents stipulated therein are presented.
The prohibition under Sec 6 (b) of Rule 4 of the Interim Rules does not apply
to herein petitioner as the prohibition is on the enforcement of claims
against guarantors or sureties of the debtors whose obligations are not
solidary with the debtor. The participating banks obligation are solidary
with respondent Maynilad in that it is a primary, direct, definite and an
absolute undertaking to pay and is not conditioned on the prior exhaustion
of the debtors assets. These are the same characteristics of a surety or
solidary obligor. And being solidary, the claims against them can be pursued
separately from and independently of the rehabilitation case.
The terms of the Irrevocable Standby Letter of Credit do not show that the
obligations of the banks are not solidary with those of respondent Maynilad.
On the contrary, it is issued at the request of and for the account of
Maynilad in favor of the MWSS as a bond for the full and prompt
performance of the obligations by the concessionaire under the Concession
Agreement and herein MWSS is authorized by the banks to draw on it by
the simple act of delivering to the agent a written certification substantially
in the form of the Letter of Credit.
Taking into consideration our own rulings on the nature of letters of credit
and the customs and usage developed over the years in the banking and
commercial practice of letters of credit, we hold that except when a letter of
credit specifically stipulates otherwise, the obligation of the banks issuing
letters of credit are solidary with that of the person or entity requesting for
its issuance, the same being a direct, primary, absolute and definite
undertaking to pay the beneficiary upon the presentation of the set of
documents required therein.
The public respondent, therefore, exceeded his jurisdiction, in holding that
he was competent to act on the obligation of the banks under the Letter of
Credit under the argument that this was not a solidary obligation with that
of the debtor. Being a solidary obligation, the letter of credit is excluded from
the jurisdiction of the rehabilitation court and therefore in enjoining
petitioner from proceeding against the Standby Letters of Credit to which it
had a clear right under the law and the terms of said Standby Letter of
Credit, public respondent acted in excess of his jurisdiction.
NOTES:
We held in Feati Bank & Trust Company v. Court of Appeals that the
concept of guarantee vis–vis the concept of an irrevocable letter of credit are
inconsistent with each other.The guarantee theory destroys the
independence of the banks responsibility from the contract upon which it
was opened and the nature of both contracts is mutually in conflict with
each other. In contracts of guarantee, the guarantors obligation is merely
collateral and it arises only upon the default of the person primarily liable.
On the other hand, in an irrevocable letter of credit, the bank undertakes a
primary obligation. We have also defined a letter of credit as an engagement
by a bank or other person made at the request of a customer that the issuer
shall honor drafts or other demands of payment upon compliance with the
conditions specified in the credit.
MANUEL D. YNGSON, JR. vs PHILIPPINE NATIONAL BANK
G.R. No. 171132 August 15, 2012
Digest of digest:
ARCAM entered into a loan with PNB secured by several property mortgages.
ARCAM failed to pay hence PNB foreclosed the properties. Before the
auction sale of the properties, SEC issued a TRO and subsequently a writ
of preliminary injunction enjoining PNB and RTC’s sheriff from proceeding
with the foreclosure. 6 years had passed but ARCAM was not rehabilitated
because its expected investor did not push through with its promise. SEC
then decreed petitioner Yngson as liquidator of ARCAM.
PNB then proceeded with the foreclosure sale. After the sale, petitioner filed
motion to nullify the sale on the ground that all actions against companies
under liquidation are suspended because liquidation is a continuation of
the suspension proceedings. SEC ruled in favor of PNB; CA also denied
petitioner’s appeal. Issue is whether foreclosure sale of PNB is valid. Yes,
NCC and FRIA provide that a secured creditor enjoys preference over a
specific mortgaged property.
Facts:
ARCAM is engaged in the operation of a sugar mill in Pampanga. Between
1991 and 1993, ARCAM applied for and was granted a loan by respondent
PNB. To secure the loan, ARCAM executed a Real Estate Mortgage to its
personal and real properties.
ARCAM defaulted hence PNB initiated extrajudicial foreclosure proceedings
in the Office of the Clerk of Court/Ex Officio Sheriff of the RTC of Guagua,
Pampanga. The public auction was scheduled on December 29, 1993 for the
mortgaged real properties and December 8, 1993 for the mortgaged personal
properties.
The SEC issued a TRO and subsequently a writ of preliminary injunction,
enjoining PNB and the Sheriff of the RTC of Guagua, Pampanga from
proceeding with the foreclosure sale of the mortgaged properties. An interim
management committee was also created.
On February 9, 2000, the SEC ruled that ARCAM can no longer be
rehabilitated. The SEC noted that the petition for suspension of payment
was filed in December 1993 and six years had passed but the potential white
knight investor had not infused the much needed capital to bail out ARCAM
from its financial difficulties. Thus, the SEC decreed that ARCAM be
dissolved and placed under liquidation. SEC appointed Atty. Manuel D.
Yngson, Jr. & Associates as Liquidator for ARCAM.
Petitioner filed with the SEC a Motion for the Issuance of a TRO and/or Writ
of Preliminary Injunction to enjoin the foreclosure sale of ARCAM’s assets.
The SEC en banc issued a TRO effective for 72 hours, but said TRO lapsed
without any writ of preliminary injunction being issued by the SEC.
Consequently, on July 28, 2000, PNB resumed the proceedings for the
extrajudicial foreclosure sale of the mortgaged properties. PNB emerged as
the highest winning bidder in the auction sale, and certificates of sale were
issued in its favor.
Petitioner filed with the SEC a motion to nullify the auction sale. Petitioner
posited that all actions against companies that are under liquidation are
suspended because liquidation is a continuation of the petition for
suspension proceedings. Petitioner argued that the prohibition against
foreclosure subsisted during liquidation because payment of all of ARCAM’s
obligations was proscribed except those authorized by the Commission.
SEC denied petitioner’s motion to nullify the foreclosure sale. CA denied the
appeal of petitioner mainly on procedural grounds.
Issue:
WON SEC erred in ruling that PNB was not barred from foreclosing on the
mortgages
Decision:
No, PNB, as a secured creditor, enjoys preference over a specific mortgaged
property and has a right to foreclose the mortgage under Section 2248 of
the Civil Code. The creditor-mortgagee has the right to foreclose the
mortgage over a specific real property whether or not the debtor-mortgagor
is under insolvency or liquidation proceedings.
The right to foreclose such mortgage is merely suspended upon the
appointment of a management committee or rehabilitation receiver or upon
the issuance of a stay order by the trial court. However, the creditor-
mortgagee may exercise his right to foreclose the mortgage upon the
termination of the rehabilitation proceedings or upon the lifting of the stay
order.
SEC. 114 (Rights of Secured Creditors) of the FRIA Law provides that the
Liquidation Order shall not affect the right of a secured creditor to enforce
his lien in accordance with the applicable contract or law.
PNB elected to maintain its rights under the security or lien; hence, its right
to foreclose the mortgaged properties should be respected.
Rosario v. Co
G.R. No. 133608
August 26, 2008
Corporate Dissolution
- Rehabilitation (Financial Rehabilitation and Insolvency Act of 2010,
R.A. No. 10142)
Facts:
Petitioner Tiong Rosario is the proprietor of TR Mercantile (TRM), a
single proprietorship engaged in the business of selling and trading paper
products and supplies of various kinds; while respondent Alfonso Co is the
Chairman and President of Modern Paper Products, Inc. (MPPI). In the
course of its business, MPPI purchased from TRM a variety of paper
products on credit. As payment for his purchases, respondent issued the
three (3) China Banking Corporation checks in favor of TRM which, upon
presentment for payment, were dishonored by the drawee bank on May 11,
1995, April 6, 1995, and April 28, 1995, respectively, for the reason that the
payment was either stopped or that the checks were drawn against
insufficient funds. TRM, through a demand letter, demanded that
respondent make good the checks and pay MPPI’s outstanding obligations
within five (5) banking days from receipt of the letter, otherwise, it would be
constrained to file both criminal and civil actions to protect its interest.
Respondent, however, failed to heed the demand. So petitioner filed a
complaint against respondent for violation of Batas Pambansa (B.P.) Blg. 22
with the Office of the City Prosecutor, Pasig City; upon finding probable
cause against respondent, the investigating prosecutor filed three separate
informations against him for violation of B.P. Blg. 22 before the Metropolitan
Trial Court (MeTC), Pasig City.
Prior thereto, MPPI and its principal stockholders, the Spouses Alfredo and
Elizabeth Co filed before the Securities and Exchange Commission (SEC),
under P.D. No. 902-A, a Petition for Suspension of Payments for
Rehabilitation Purposes with prayer for the creation of a management
committee and for a temporary restraining order and/or preliminary
injunction. The SEC issued an Omnibus Order creating a Management
Committee and consequently suspending all actions for claims against MPPI
pending before any court, tribunal, branch or body.
Meanwhile, in the criminal cases pending before the MeTC, respondent was
arraigned, and the cases were set for trial. Prior to initial trial, respondent
filed a Motion to Suspend Proceedings which petitioner opposed. The SEC,
through an order, granted respondents Motion to Compel Compliance and
For Issuance of Orders of Suspension in the Criminal Cases. On September
3, 1996, the MeTC issued an Order denying respondents motion to suspend
proceedings. It held that the elements of a prejudicial question do not exist.
Respondent filed a Motion for Reconsideration but it was denied. Aggrieved,
respondent filed a petition for certiorari before the RTC questioning the
above orders. The RTC enjoined the MeTC from further proceeding with
Criminal Cases during the pendency of the action before it. Then, petitioner
filed a Motion for Partial Reconsideration. However, upon agreement of the
parties, resolution on the motion was held in abeyance awaiting the RTC
resolution in the main case, the issues raised being identical. The RTC
issued the assailed Resolution granting respondent’s petition stating that
the respondent Court is directed to suspend the proceedings in Criminal
Cases during the pendency of the petition in SEC Case. Hence, this petition.
Issue: Whether a criminal case against a corporate officer for violation of
B.P. 22 could be suspended on account of the pendency of a petition for
suspension of payments filed by that officer’s corporation with the Securities
and Exchange Commission?
Ruling:
No. A criminal case against a corporate officer for violation of BP 22 could
not be suspended on account of the pendency of a petition for suspension
of payments filed by that officer’s corporation with the Securities and
Exchange Commission.
As early as Finasia Investment and Finance Corp. v. Court of Appeals, this
Court clarified that the word claim used in Sec. 6 (c) of P.D. No. 902-A, as
amended, refers to debts or demands of a pecuniary nature and the
assertion of a right to have money paid. It is used in special proceedings like
those before an administrative court on insolvency. In Arranza v. B.F.
Homes, Inc., claim was defined as an action involving monetary
considerations. Clearly, the suspension contemplated under Sec. 6 (c) of
P.D. No. 902-A refers only to claims involving actions which are pecuniary
in nature.
The purpose of suspending the proceedings under P.D. No. 902-A is to
prevent a creditor from obtaining an advantage or preference over another
and to protect and preserve the rights of party litigants as well as the
interest of the investing public or creditors. It is intended to give enough
breathing space for the management committee or rehabilitation receiver to
make the business viable again, without having to divert attention and
resources to litigations in various fora.
Whereas, the gravamen of the offense punished by B.P. Blg. 22 is the act of
making and issuing a worthless check; that is, a check that is dishonored
upon its presentation for payment. It is designed to prevent damage to trade,
commerce, and banking caused by worthless checks. In Lozano v. Martinez,
the SC declared that it is not the nonpayment of an obligation which the
law punishes. The thrust of the law is to prohibit, under pain of penal
sanctions, the making and circulation of worthless checks. Because of its
deleterious effects on the public interest, the practice is proscribed by the
law. The law punishes the act not as an offense against property, but an
offense against public order. The prime purpose of the criminal action is to
punish the offender in order to deter him and others from committing the
same or similar offense, to isolate him from society, to reform and
rehabilitate him or, in general, to maintain social order. Hence, the criminal
prosecution is designed to promote the public welfare by punishing
offenders and deterring others.
Consequently, the filing of the case for violation of B.P. Blg. 22 is not a claim
that can be enjoined within the purview of P.D. No. 902-A. True, although
conviction of the accused for the alleged crime could result in the
restitution, reparation or indemnification of the private offended party for
the damage or injury he sustained by reason of the felonious act of the
accused, nevertheless, prosecution for violation of B.P. Blg. 22 is a criminal
action.
A criminal action has a dual purpose, namely, the punishment of the
offender and indemnity to the offended party. The dominant and primordial
objective of the criminal action is the punishment of the offender. The civil
action is merely incidental to and consequent to the conviction of the
accused. The reason for this is that criminal actions are primarily intended
to vindicate an outrage against the sovereignty of the state and to impose
the appropriate penalty for the vindication of the disturbance to the social
order caused by the offender. On the other hand, the action between the
private complainant and the accused is intended solely to indemnify the
former.
As far as the criminal aspect of the cases is concerned, the provisions of
Sec. 6 (c) of P.D. No. 902-A should not interfere with the prosecution of a
case for violation of B.P. Blg. 22, even if restitution, reparation or
indemnification could be ordered, because an absurdity would result, i.e.,
one who has engaged in criminal conduct could escape punishment by the
mere filing of a petition for rehabilitation by the corporation of which he is
an officer. At any rate, should the court deem it fit to award indemnification,
such award would now fall under the category of a claim under Sec. 6 (c) of
P.D. No. 902-A, considering that it is already one for monetary or pecuniary
consideration. Only to this extent can the order of suspension be considered
obligatory upon any court, tribunal, branch or body where there are pending
actions for claims against the distressed corporation.
Gelano V. CA (1981)
G.R. No. L-39050 February 24, 1981
Lessons Applicable: Who are liable after dissolution and winding-up?
(Corporate Law)
FACTS:
Insular Sawmill, Inc. leased the paraphernal property of Guillermina M.
Gelano (wife) for P1.2K/month
November 19, 1947-December 26, 1950: Carlos Gelano (husband) obtained
cash advances of P25,950 on account of rentals
agreement: Insular Sawmill, Inc. could deduct the same from the monthly
rentals of the leased premises until the cash advances are fully paid
Carlos Gelano was able to pay only P5,950.00 thereby leaving an unpaid
balance of P20,000.00 which he refused to pay
Guillermina M. Gelano refused to pay on the ground that said amount was
for the personal account of her husband asked for by, and given to him,
without her knowledge and consent and did not benefit the family
May 4, 1948 to September 11, 1949: Spouses Gelanos purchased lumber
materials on credit leaving P946.46 unpaid
July 14, 1952: Joseph Tan Yoc Su, as accomdating party, executed a joint
and several promissory note with Carlos Gelano in favor of China Banking
Corporation bank in the amount of P8,000.00 payable in 60 days to help
renew the previous loan of the spouses
the bank collected P9,106.00 including interests by debiting the current
account of the corp.
Carlos only paid P5,000
Guillermina refused to pay on the ground that she had no knowledge of
such accomodation
May 29, 1959: Insular thru Atty. German Lee, filed a complaint for collection
against the spouses before the CFI
In the meantime, private respondent amended its Articles of Incorporation
to shorten its term of existence up to December 31, 1960 only
November 20, 1964: CFI favored Insular holding Carlos Gelano liable
August 23, 1973: held spouses jointly ad severally liable
ISSUE: W/N a corporation, whose corporate life had ceased by the
expiration of its term of existence, could still continue prosecuting and
defending suits after its dissolution and beyond the period of 3 years
provided for under Act No. 1459, otherwise known as the Corporation law,
to wind up its affairs, without having undertaken any step to transfer its
assets to a trustee or assignee.
HELD: YES. Affirmed with mod - conjugal property is liable
time during which the corporation, through its own officers, may conduct
the liquidation of its assets and sue and be sued as a corporation is limited
to 3 years from the time the period of dissolution commences; but that there
is no time limited within which the trustees must complete a liquidation
placed in their hands
only the conveyance to the trustees must be made within the 3-year period
effect of the conveyance is to make the trustees the legal owners of the
property conveyed, subject to the beneficial interest therein of creditors and
stockholders
trustee may commence a suit which can proceed to final judgment even
beyond the 3-year period
"trustee" = general concept - include the counsel to whom was entrusted in
the instant case
The purpose in the transfer of the assets of the corporation to a trustee upon
its dissolution is more for the protection of its creditor and stockholders
Debtors may not take advantage of the failure of the corporation to transfer
its assets to a trustee
Section 77 of the Corporation Law, when the corporate existence is
terminated in any legal manner, the corporation shall nevertheless continue
as a body corporate for 3 years after the time when it would have been
dissolved, for the purpose of prosecuting and defending suits by or against
it.
LUIS C. CLEMENTE, LEONOR CLEMENTE DE ELEPAÑO, HEIRS OF
ARCADIO C. OCHOA, represented by FE O. OCHOA-BAYBAY,
CONCEPCION, MARIANO, ARTEMIO, VICENTE, ANGELITA, ROBERTO,
HERNANDO AND LOURDES, all surnamed ELEPAÑO, petitioners, vs.
THE HON. COURT OF APPEALS, ELVIRA PANDINCO-CASTRO AND
VICTOR CASTRO, respondents.
G.R. No. 82407 March 27, 1995
VITUG, J.:
FACTS: Petitioners sought to be declared the owners of a piece of land
situated in Calamba, Laguna bought by "Sociedad Popular Calambeña". The
“sociedad” was organized at the advent of the early American occupation of
the Philippines. It did business and held itself out as a corporation from
1909 up to 1932. Its principal business was cockfighting or the operation
and management of a cockpit. The "Sociedad" acquired the subject parcel
of land from the Friar Lands Estate of Calamba. Patent was issued and the
Real Property Tax Register of the Office of the Treasurer of Calamba, Laguna
showed that the lot was declared and assessed for taxation purposes.
Plaintiffs show that Mariano Elepaño and Pablo Clemente, now both
deceased, were the original stockholders of the "sociedad." Pablo Clemente's
shares of stocks were later distributed and apportioned to his heirs. The
"sociedad" then issued stock certificates to the heirs. On the basis of their
respective stocks certificates, they, along with the heirs of Mariano Elepaño
jointly claimed ownership over the subject parcel of land, asserting that
their fathers being the only known stockholders of the "sociedad" they, to
the exclusion of all others, are entitled to be declared owners of the lot.
Private respondents, in their answer; likewise claimed ownership of the
property by virtue of acquisitive prescription.
The trial court dismissed the complaint on the grounds of insufficiency of
evidence and absent a corporate liquidation, it is the corporation, not the
stockholders, which can assert, if at all, any title to the corporate assets.
The CA sustained the dismissal of the complaint.
ISSUE: Whether or not petitioners can be held to have succeeded in
establishing for themselves a firm title to the property in question.
HELD: NO. Except in showing that they are the successors-in-interest of
Elepaño and Clemente, petitioners have been unable to come up with any
evidence to substantiate their claim of ownership of the corporate asset.
If, indeed, the sociedad has long become defunct, it should behoove
petitioners, or anyone else who may have any interest in the corporation, to
take appropriate measures before a proper forum for a peremptory
settlement of its affairs. We might invite attention to the various modes
provided by the Corporation Code for dissolving, liquidating or winding up,
and terminating the life of the corporation.
Among the causes for such dissolution are when the corporate term has
expired or when, upon a verified complaint and after notice and hearing, the
SEC orders the dissolution of a corporation for its continuous inactivity for
at least 5 years. The corporation continues to be a body corporate for 3 years
after its dissolution for purposes of prosecuting and defending suits by and
against it and for enabling it to settle and close its affairs, culminating in
the disposition and distribution of its remaining assets. It may, during the
3-year term, appoint a trustee or a receiver who may act beyond that period.
If the 3-year extended life has expired without a trustee or receiver having
been expressly designated by the corporation, the board of directors (or
trustees) itself may be permitted to so continue as "trustees" by legal
implication to complete the corporate liquidation. Still in the absence of a
board of directors or trustees, those having any pecuniary interest in the
assets, including not only the shareholders but likewise the creditors of the
corporation, acting for and in its behalf, might make proper representations
with the SEC for working out a final settlement of the corporate concerns.
Benigno Vigilla, et al. v Philippine College of Criminology, Inc. GR No.
200094, June 10, 2013
Law Principle:
Anything favorable to the labor-only contractor redounds to the benefit of
the employer under the principle of solidary liability
Facts:
The petitioners work for the Philippine College of Criminology Inc. (PCCr) as
janitors, janitress and supervisor in its maintenance department. The
petitioners were made to understand by the respondent PCCr that they are
under the Metropolitan Building Services, Inc. (MBMSI) which is a
corporation engaged in providing janitorial services. PCCr terminated the
services of MBMSI on 2009 which resulted in the dismissal of the
petitioners. An illegal dismissal complaint was then filed against PCCr by
the petitioners contending that it is their real employer and not MBMSI.
Subsequently, the PCCr submitted to the Labor Arbiter waivers, releases
and quitclaims that were executed by the petitioners in favor to MBMSI.
The Labor Arbiter and NLRC ruled in favor of the petitioner, however upon
filing the petition for review on certiorari before the Court of Appeals, the
CA ruled that the quitclaims, releases and waivers executed by the
petitioners in favor to MBMSI redounds to the benefit of PCCr by virtue of
solidary liability under Article 1217 of the NewCivil Code. The petitioners
contend that under Article 106 of the Labor Code a labor-only contractor's
liability is not solidary as it is the employer who should be directly
responsible to the supplied worker.
Issue
Whether or not the quitclaims, releases and waivers executed by the
petitioners in favor to MBMSI redounds to the benefit of PCCr?
Held
Yes.
The Supreme Court held that the basis of the solidary liability of the
principal with those engaged in labor-only contracting is the last paragraph
of Article 106 of the Labor Code that provides, "In such cases of labor-only
contracting, the person or intermediary shall be considered merely as an
agent of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him."
It also pointed out D.O. No. 18-A, s. 2011 section 27 providing for the effects
of labor-only contracting "where upon the finding by competent authority of
labor-only contracting shall render the principal jointly and severally liable
with the contractor to the latter's employees, in the same manner and extent
that the principal is liable to employees directly hired by him/her, as
provided in Article 106 of the Labor Code."
Hence, the PCCr's solidary liability was already expunged by virtue of the
releases, waivers and quitclaims executed by the petitioners in favor of
MBMSI by virtue of Article 1217 of the Civil Code providing that "payment
made by one of the solidary debtors extinguishes the obligation."
Metropolitan Bank & Trust Company, Inc. vs. Board of Trustees of
Riverside Mills Corporation Provident and Retirement Fund 630
SCRA 350
FACTS:
The Riverside Mills Corporation (RMC) established a Plan for its regular
employees. The contributions to the plan shall form part of the Fund which
shall be held, invested and distributed by the Commercial Bank and Trust
Company. The BOT of the fund entered into an agreement with Philbank to
act as an agent of the BOT and to hold, manage, invest and reinvest the
Fund in Trust Account No. 1797 in its behalf. When RMC ceased its
business operations, the BOD of Philbank decided to apply the remaining
trust assets held by it in the name of the Fund against part of the RMC’s
outstanding obligations.
When the unpaid employees of RMC learned of the trust account, they
demanded the payment of their share, which went unheeded. They, together
with the members of the Fund, filed a complaint for accounting against the
BOD of Philbank and its officers. The trial court ruled in favor of the BOT of
RMC and was affirmed on appeal. The BOD on petition for review on
certiorari under Rule 45 of the Rules of Court contends that without known
claimants of the Fund for eleven (11) years since RMC closed shop, it was
justifiable for petitioner to consider the Fund to have “technically reverted”
to, and formed part of RMC’s assets. Hence, it could be applied to satisfy
RMC’s debts to Philbank.
ISSUE:
Whether the BOD’s contention is correct.

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