Aguirre vs FQG+7

SEC vs Interport
Asiatrust Development Bank vs First Aikka
BPI vs St. Michael Medical Center
Ao-as vs CA
Metropolitan Waterworks vs Daway
Victorio-Aquino vs Pacific Plans, Inc.

AGUIRRE VS. FQB+7, INC. [INTRA-CORPORATE CONTROVERSY]

Facts: Vitaliano filed, in his individual capacity and on behalf of FQB+7, Inc.
(FQB+7), a Complaint for intra-corporate dispute, injunction, inspection of corporate
books and records, and damages, against respondents. Aguirre argues that
respondents’ continuous representation of the corporation is a usurpation of the
management powers and prerogatives of the “real” Board of Directors. In the
meantime, the SEC had already revoked FQB+7’s Certificate of Registration on
September 29, 2003 for its failure to comply with the SEC reportorial requirements.
Issue: Whether the case involves an intra-corporate dispute
Ruling: Yes. To determine whether a case involves an intra-corporate controversy,
and is to be heard and decided by the branches of the RTC specifically designated
by the Court to try and decide such cases, two elements must concur: (a) the status
or relationship of the parties, and [b] the nature of the question that is the subject
of their controversy.
Thus, to be considered as an intra-corporate dispute, the case: (a) must arise out
of intra-corporate or partnership relations, and (b) the nature of the question subject
of the controversy must be such that it is intrinsically connected with the regulation
of the corporation or the enforcement of the parties’ rights and obligations under
the Corporation Code and the internal regulatory rules of the corporation. So long
as these two criteria are satisfied, the dispute is intra-corporate and the RTC, acting
as a special commercial court, has jurisdiction over it.
Examining the case in relation to these two criteria, the Court finds that the case is
essentially an intra-corporate dispute. It arose from the intra-corporate relations
between the parties, and the questions involved pertain to their rights and
obligations under the Corporation Code and matters relating to the regulation of the
corporation. The court held that the nature of the case as an intra-corporate dispute
was not affected by the subsequent dissolution of the corporation.

SEC VS. INTERPORT

Facts: On 6 August 1994, the Board of Directors of IRC approved a Memorandum
of Agreement with Ganda Holdings Berhad (GHB). Under the Memorandum of
Agreement, IRC acquired 100% or the entire capital stock of Ganda Energy
Holdings, Inc. (GEHI). In exchange, IRC will issue to GHB 55% of the expanded
capital stock of IRC amounting to 40.88 billion shares which had a total par value of
P488.44 million. On the side, IRC would acquire 67% of the entire capital stock of
Philippine Racing Club, Inc. (PRCI).
The SEC averred that it received reports that IRC failed to make timely public
disclosures of its negotiations with GHB and that some of its directors, respondents
herein, heavily traded IRC shares utilizing this material insider information. In
addition, the SEC pronounced that some of the officers and directors of IRC entered
into transactions involving IRC shares in violation of Section 30, in relation to Section
36, of the Revised Securities Act.
Issue: Whether the officers and directors of IRC violated Sec 30 of RSA pertaining
to insider’s duty to disclose when trading.
Ruling: Yes. Under Section 30 of the Revised Securities Act, "Insider" means (1)
the issuer, (2) a director or officer of, or a person controlling, controlled by, or under
common control with, the issuer, (3) a person whose relationship or former
relationship to the issuer gives or gave him access to a fact of special significance
about the issuer or the security that is not generally available, or (4) a person who
learns such a fact from any of the foregoing insiders as defined in this subsection,
with knowledge that the person from whom he learns the fact is such an insider.
The provision under Sec. 30 of RSA explains in simple terms that the insider's misuse
of nonpublic and undisclosed information is the gravamen of illegal conduct. The
intent of the law is the protection of investors against fraud, committed when an
insider, using secret information, takes advantage of an uninformed investor.
Insiders are obligated to disclose material information to the other party or abstain
from trading the shares of his corporation. This duty to disclose or abstain is based
on two factors: first, the existence of a relationship giving access, directly or
indirectly, to information intended to be available only for a corporate purpose and
not for the personal benefit of anyone; and second, the inherent unfairness involved
when a party takes advantage of such information knowing it is unavailable to those
with whom he is dealing.

ASIATRUST DEVELOPMENT BANK VS. FIRST AIKKA [CONSTRUCTION OF

FRIA RULES]
Facts: Respondents filed a consolidated Petition for Corporate Rehabilitation with
Prayer for Suspension of Payments with the Regional Trial Court. On the day of the
initial hearing, petitioner went to court with a Motion for Leave of Court to Admit
Opposition to Rehabilitation Petition with the attached Opposition to Petition for
Rehabilitation, however, the RTC denied the motion. Subsequently, the
rehabilitation receiver called for a conference and presented the draft of the
rehabilitation report to petitioner. Petitioner filed a manifestation and motion in court
calling its attention to the alleged refusal of the receiver to hear its side. Petitioner
thus asked for judicial assistance to enable it to actively participate in the
rehabilitation proceedings and protect its interest. However, the RTC denied the
motion of the petitioner. Petitioner avers that it was denied due process when the
rehabilitation court refused to admit its opposition to the petition for rehabilitation
and to comment on the rehabilitation plan.
Issue: Whether the rehabilitation court correctly denied petitioner's prayer to
participate in the rehabilitation proceedings because of the belated filing of its
Comment/Opposition to respondents' petition for rehabilitation
Ruling: No. The Court promulgated the Rules in order to provide a remedy for
summary and non-adversarial rehabilitation proceedings of distressed but viable
corporations. These Rules are to be construed liberally to obtain for the parties a
just, expeditious, and inexpensive disposition of the case. To be sure, strict
compliance with the rules of procedure is essential to the administration of justice.
Nonetheless, technical rules of procedure are mere tools designed to facilitate the
attainment of justice. strict application of technical rules of procedure should be
shunned when they hinder rather than promote substantial justice.
While the court has the discretion whether or not to admit the opposition belatedly
filed by petitioner, the RTC gravely abused its discretion when it refused to grant
the motion, even as the factual circumstances of the case require that the Rules be
liberally construed in the interest of justice.

BPI vs ST. MICHAEL MEDICAL CENTER [DEFINITION AND CONCEPT OF

REHABILITATION]
Facts: Spouses Rodil are the owners and sole proprietors of St. Michael Hospital.
Later on, St. Michael Medical Center, Inc. (SMMCI) was incorporated with which
entity they planned to eventually consolidate St. Michael Hospital’s operations. With
a vision to upgrade St. Michael Hospital into a modern, well-equipped and full service
tertiary 11-storey hospital, SMMCI applied for a loan with petitioner BPI Family
Savings Bank. On August 11, 2010, SMMCI filed a Petition for Corporate
Rehabilitation, docketed as SEC Case No. 086-10, before the RTC, with prayer for
the issuance of a Stay Order as it foresaw the impossibility of meeting its obligation
to BPI Family, its purported sole creditor. BPI argues that the approval of the
Rehabilitation Plan violated its rights as an unpaid creditor/mortgagee and that the
same was submitted without prior consultation with creditors.
Issue: Whether or not the CA correctly affirmed SMMCI’s Rehabilitation Plan as
approved by the RTC
Ruling: No. Restoration is the central idea behind the remedy of corporate
rehabilitation. In common parlance, to “restore” means “to bring back to or put back
into a former or original state.” Case law explains that corporate rehabilitation
contemplates a continuance of corporate life and activities in an effort to restore
and reinstate the corporation to its former position of successful operation and
solvency, the purpose being to enable the company to gain a new lease on life and
allow its creditors to be paid their claims out of its earnings. In other words,
rehabilitation assumes that the corporation has been operational but for some
reasons like economic crisis or mismanagement had become distressed or insolvent.
In this case, it cannot be said that the petitioning corporation, SMMCI, had been in
a position of successful operation and solvency at the time the Rehabilitation Petition
was filed on August 11, 2010. While it had indeed “commenced business” through
the preparatory act of opening a credit line with BPI Family to finance the
construction of a new hospital building for its future operations, SMMCI itself admits
that it has not formally operated nor earned any income since its incorporation.

AO-AS VS. CA
Facts: Petitioners filed SEC-SICD Case No. 3857 for accounting and damages with
prayer for preliminary injunction and appointment of a management committee on
the ground that there are acquisition of some lands using the corporate funds in the
name of some person other than the LCP, and various cash advances of corporate
funds by the respondents are not liquidated up to the present. Respondents are the
duly elected board of directors of the Lutheran Church in the Philippines at the time
of the filing of SEC-SICD Case No. 3857.
Issue: Whether the grounds alleged by petitioners warrant the appointment of
management committee
Ruling: No. Where the corporation is solvent, a receiver will not be appointed
because of past misconduct and a subsequent mere apprehension of a future
misdoing, where the present situation and the prospects for the future are not
such as to warrant a receivership. It is the general rule that a receiver (or a
management committee) will not be appointed unless it appears that the
appointment is necessary either to prevent fraud, or to save the property from
fraud or threatened destruction, or at least in case of solvent corporation.
Similarly, a receiver (or a management committee) should not be appointed in an
action by a minority stockholder against corporate officers for an accounting where
the corporation is solvent and going concern and a receiver is not necessary to
preserve the corporate property pending the accounting.
The appointment of a receiver for a going corporation is a last resort remedy, and
should not be employed when another remedy is available. Bad judgment by
directors, or even unauthorized use and misapplication of the company’s funds,
will not justify the appointment of a receiver for the corporation if appropriate
relief can otherwise be had.

METROPOLITAN WATERWORKS VS. DAWAY

Facts: MWSS granted Maynilad under a Concession Agreement a twenty-year
period to manage, operate, repair, decommission and refurbish the existing MWSS
water delivery and sewerage services in the West Zone Service Area. To secure the
concessionaire’s performance of its obligations under the Concession Agreement,
Maynilad was required to put up a security acceptable to MWSS. Thereafter,
Maynilad arranged for a three-year facility with a number of foreign banks, led by
Citicorp International Limited, for the issuance of an Irrevocable Standby Letter of
Credit in favor of MWSS for the full and prompt performance of Maynilad’s
obligations to MWSS as aforestated. On November 22, 2003, MWSS, submitted a
written notice to Citicorp International Limited, as agent for the participating banks,
that by virtue of Maynilad’s 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 November 13,
2003, a petition for rehabilitation before the court a quo which resulted in the
issuance of the Stay Order. Maynilad argues that MWSS may not call the Letters of
Credit because it is part of the assets of Maynilad subject of the Stay Order.
Issue: Whether the Letters of Credit is an exemption to Stay Orders
Ruling: Yes. 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. 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 debtor’s assets. These are the same characteristics
of a surety or solidary obligor.
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.
Being a solidary obligation, the letter of credit is excluded from the jurisdiction of
the rehabilitation court and therefore in enjoining.

VICTORIO-AQUINO VS. PACIFIC PLANS, INC.

Facts: On April 7, 2005, foreseeing the impossibility of meeting its obligations to
the availing planholders as they fall due, respondent filed a Petition for Corporate
Rehabilitation with the Regional Trial Court. The Rehabilitation Receiver submitted
an Alternative Rehabilitation Plan (ARP) which was approved by the court. However,
respondent submitted a manifestation with the Rehabilitation Court, stating that the
value of the U.S. Dollar-denominated NAPOCOR bonds — the assets covering the
trust fund subject of the traditional education plan — has already been substantially
diluted because of the stronger value of the Philippine Peso. Because of this event,
the Rehabilitation Receiver submitted a Modified Rehabilitation Plan (MRP) which
was approved by the court. Petitioner claims that it was beyond the authority of the
Rehabilitation Court to sanction a rehabilitation plan, or the modification thereof,
when the essential feature of the plan involves forcing creditors to reduce their
claims against respondent.[
Issue: Whether the Rehabilitation Court may approve a rehabilitation plan even
over the opposition of the creditors.
Ruling: Yes. The Interim Rules or the rules in effect at the time the petition for
corporate rehabilitation was filed in 2004 adopts the cramdown principle which
"consists of two things:
(i) approval despite opposition and
(ii) binding effect of the approved plan x x x."
First, the Interim Rules allows the rehabilitation court to "approve a rehabilitation
plan even over the opposition of creditors holding a majority of the total liabilities
of the debtor if, in its judgment, the rehabilitation of the debtor is feasible and the
opposition of the creditors is manifestly unreasonable."
Second, it also provides that upon approval by the court, the rehabilitation plan and
its provisions "shall be binding upon the debtor and all persons who may be affected
by it, including the creditors, whether or not such persons have participated in the
proceedings or opposed the plan or whether or not their claims have been
scheduled.”