DE BARRETO VS. VILLANUEVA, G.R. L-14938, DECEMBER 29, 1962 Fact! Cruzado sold land (which was foreclosed by RFC but later resold to Cruzado) to Villanueva with a stipulation that Villanueva Villanueva will continue payment to RFC (for the reselling price). Villanueva mortgaged the land to De arreto when it obtained a loan from the latter. Villanueva failed to pay both Cruzado and De arreto. !n the one hand" De arreto sued for foreclosure and won. !n the other hand" Cruzado #led a motion in that foreclosure proceeding for the recognition of his $vendor%s lien.& R'C granted Cruzado%s motion that his lien be satis#ed by the foreclosure proceeds. C a*rmed R'C. ut on +otion For Reconsideration" reversed R'C ruling. I"#! ,!- Cruzado%s lien can be satis#ed by the foreclosure proceedings in accordance with the relevant provisions of the Civil Code $#%&! 'he /uestion as to whether the Civil Code and and the 0nsolvency 0nsolvency 1aw can be harmonized is settled by 2rticle 3345" Civil Code. 'he preferences named in 2rticles 3346 and 3343 are to be enforced in accordance with the 0nvolvency 1aw. 'hus" it becomes becomes evident that one one preferred preferred creditor7s creditor7s third8party third8party claim to the proceeds of a foreclosure sale (as in the case now before us) is not the proceeding contemplated by law for the enforcement of preferences under 2rticle 3343" unless the claimant were enforcing a credit for ta9es that en:oy absolute priority. 0f none of the claims is for ta9es" a dispute between two creditors will not enable the Court to ascertain the pro rata dividend corresponding to each" because the rights of the other creditors li;ewise en:oying preference under 2rticle 3343 can not be ascertained. ,herefore" the order of the Court of First 0nstance of +anila now appealed from decreeing that the proceeds of the foreclosure sale be apportioned only between appellant and appellee" is incorrect and must be reversed. 0n the absence of insolvency proceedings (or other e/uivalent general li/uidation of the debtor7s estate)" the con
character and ran; of a statutory lien co8e/ual to the mortgagee7s recorded encumbrance" and must remain subordinate to the latter.
DEVELO'MENT BAN( OF T$E '$ILI''INES V. COURT OF A''EALS, GR 1262)), AUGUST 16, 2))1 FACTS! Remington 0ndustrial upplies ales Corporation" which sold and delivered construction materials and other merchandise worth >?36"@AA.?A" which purchases remained unpaid" sought to recover payment by #ling a complaint for sum of money and damages against the debtor" +arindu/ue +ining" and its creditors" >- and D>" which e9tra8:udicially foreclosed on the mortgages e9ecuted by +arindu/ue over its assets" as well as" the corporations they formed to ma;e use of the assets of +arindu/ue. ISSUE 6. ,!- the articles of the Civil Code on concurrence and preference of credits are applicable only to the insolvent debtor 3. ,hat is the remedy of a preferred creditor under the articles on concurrence and preference of credits $ELD 6. -!. 'here is nothing in the law that shows such limitations. 0f we are to interpret this portion of the Code as intended only for insolvency cases" then other creditor8debtor relationships where there are concurrence of credits would be left without any rules to govern them" and it would render purposeless the special laws on insolvency. 3. B C2- C!11C' B0 >R! R2'2 B2R -DR 2R'. 334?" which provides that $if there are two or more credits with respect to the same speci#c real property or real rights" they shall be satis#ed pro rata" after the payment of the ta9es and assessments upon the immovable property or real right.& Bowever" in order to ma;e this prorating fully eEective" the preferred creditors enumerated in -os. 3 to 64 of 2rticle 3343 (or such of them as have credits outstanding) must necessarily be convened" and the import of their claims ascertained. 0t is thus apparent that the full application of 2rticles 334? and 3343 demands that there must be #rst some proceeding where the claims of all the preferred creditors may be bindingly ad:udicated" such as insolvency" the settlement of decedent7s estate under Rule @ of the Rules of Court" or other li/uidation proceedings of similar import.
2n e9ception applies to ta9es" which en:oy a similar absolute preference. 0f none of the claims is for ta9es" a dispute between two creditors will not enable the Court to ascertain the pro rata dividend corresponding to each" because the rights of the other creditors li;ewise en:oying preference under 2rticle 3343 cannot be ascertained. 'he e9tra8:udicial foreclosure instituted by >- and D> is not the li/uidation proceeding contemplated by the Civil Code" so Remington cannot claim its pro rata share from D>.
*.L. BERNARDO CONSTRUCTION +. CA, GR 1)82, *ANUAR 31, 2))) Fact! 'he +unicipality of an 2ntonio failed to pay petitioners for the latter%s construction of the public mar;et of an 2ntonio. >etitioners then sued the municipality for breach of contract" speci#c performance" etc. with a prayer for the enforcement of contractor%s lien (based on 2rt. 3343 of the Civil Code). R'C granted petitioners% motion and awarded possession and use of the building to them. C2 reversed R'C. C a*rmed C2 I"#! ,!- a statutory lien can be enforced through an action for speci#c performance plus damages $#%&! 2rticle 3343 only #nds application when there is a concurrence of credits" i.e. when the same speci#c property of the debtor is sub:ected to the claims of several creditors and the value of such property of the debtor is insu*cient to pay in full all the creditors. 0n such a situation" the /uestion of preference will arise" that is" there will be a need to determine which of the creditors will be paid ahead of the others. Fundamental tenets of due process will dictate that this statutory lien should then only be enforced in the conte9t of some ;ind of a proceeding where the claims of all the preferred creditors may be bindingly ad:udicated" such as insolvency proceedings. 'his is made e9plicit by 2rticle 3345 which states that the claims and liens enumerated in articles 3346 and 3343 shall be considered as mortgages or pledges of real or personal property" or liens within the purview of legal provisions governing insolvency. 'he action #led by petitioners in the trial court does not parta;e of the nature of an insolvency proceeding. 0t is basically for speci#c performance and damages. 'hus" even if it is #nally ad:udicated that petitioners herein actually stand in the position of unpaid contractors and are entitled to invo;e the contractor7s lien granted under 2rticle 3343" such lien cannot be enforced in the present action for there is no way of determining whether or not there e9ist other preferred creditors with claims over the an 2ntonio >ublic +ar;et. 'he records do not contain any allegation that petitioners are the only creditors with respect to such property. 'he fact that no third party claims have been #led in the trial court will not bar other creditors from subse/uently bringing actions and claiming that they also have preferred liens against the property involved.
RCBC +. IAC, GR 481, DECEMBER 9, 1999 Fact! F Bomes #led a $>etition for Rehabilitation and for Declaration of uspension of >ayments& (C Case -o. GG3H?5) with the C. !ne of the creditors listed in its inventory of creditors and liabilities was RCC. RCC re/uested the >rovincial heriE of Rizal to e9tra8:udicially foreclose its R+ on some properties of F Bomes. 0n the auction sale" RCC was the highest bidder. RCC argued that the C Case -o. 3H?5 cannot be invo;ed to suspend the e9tra8 :udicial foreclosure of the R+ in petitioner%s favor" as these do not constitute actions against private respondent contemplated under ection H(c) of >D ?G382. I"#! ,hen should the suspension of actions for claims against F Bomes ta;e eEect $#%&! 'he issue of whether or not preferred creditors of distressed corporations stand on e/ual footing with all other creditors gains relevance and materiality only upon the appointment of a management committee" rehabilitation receiver" board or body. pon cursory reading of ection H" par (c) of >D ?G382" it is ade/uately clear that suspension of claims against a corporation under rehabilitation is counted or #gured up only upon the appointment of a management committee or a rehabilitation ta;es eEect as soon as the application or a petition for rehabilitation is #led with the C may to some" be more logical and wise but unfortunately" such is incongruent with the clear language of the law. 'o insist on such ruling" no matter how practical and noble would be to encroach upon legislative prerogative to de#ne the wisdom of the law 888 plainly :udicial legislation. !nce a management committee" rehabilitation receiver" board or body is appointed pursuant to >D ?G382" all actions for claims against a distressed corporation pending before any court" tribunal" board or body shall be suspended accordingly= uspension shall not pre:udice or render ineEective the status of a secured creditor as compared to a totally unsecured creditor. ,hat it merely provides is that all actions for claims against the corporation" partnership or association shall be suspended. 'his should give the receiver a chance to rehabilitate the corporation if there should still be a possibility for doing so. 0n the event that rehabilitation is no longer feasible and claims against the distressed corporation would eventually have to be settled" the secured creditors shall en:oy preference over the unsecured
creditors sub:ect only to the provisions of the Civil Code on Concurrence and >references of Credit.
SOBRE*UANITE +. ASB DEV/T. COR'., G.R. N0. 166, 3) S#t## 2)) F2C' !n +arch @" 3GG6" spouses duardo and Fidela obre:uanite (obre:uanite) #led a Complaint for rescission of contract" refund of payments and damages" against 2 Development Corporation (2DC) before the Bousing and 1and se Regulatory oard (B1R). obre:uanite alleged that they entered into a Contract to ell with 2DC over a condominium unit and a par;ing space in the 2 'win 'ower8 Condominum located at an; Drive" !rtigas Center" +andaluyong City. 'hey averred that despite full payment and demands" 2DC failed to deliver the property on or before December 6??? as agreed. 'hey prayed for the rescission of the contract= refund of payments amounting to >3"H@4"
[email protected]= payment of moral and e9emplary damages" attorney%s fees" litigation e9penses" appearance fee and costs of the suit. 0 ,!- the claim of rescission of contracts with damages is a claim within the contemplation of >D ?G382 B1D I. 'he 0nterim Rules de#ne a $claim& as referring to all claims or demands" of whatever nature or character against a debtor or its property" whether for money or otherwise. ('he de#nition is all encompassing.) 2lthough the petition for rehabilitation was #led >R0!R to the eEectivity of the 0nterim Rules" the same would still apply pursuant to ection 6 of Rule 6 thereof. ven under the rulings in Finasia and 2rranza" the complaint for rescission with damages would still fall under the category of a claim considering that it is for pecuniary considerations. 0n this case" the B1R gave undue preference to obre:uanite over other creditors of 2.
M5SS +. DA5A AND MANILAD, G.R. N0. 16)32, *"# 21, 2))4 F2C' +aynilad obtained a 3G8year concession to manage" repair" refurbish" and upgrade e9isting +etropolitan ,aterwor;s and ewerage ystem (+,) water delivery and sewerage services in +etro +anila%s west zone. +aynilad" under the concession agreement undertoo; to pay concession fees and itsforeign loans. 'o secure its obligations" +aynilad was re/uired under ection ? of the concession contract to put up a bond" ban; guarantee or other security acceptable to +,. >ursuant to this re/uirement" +aynilad arranged on for a three8year facility with a number of foreign ban;s led by Citicorp 0ntl for the issuance of an irrevocable standby letter of credit (1C) in the amount of J 63G million in favor of +, for the full and prompt payment of +aynilad%s obligations to +,. Due to devaluation of the peso and other business reversals of +aynilad" +, #led a notice of early termination of the concession contract. pon certi#cation of the non performance of +aynilad obligation" the +, moved to collect from Citicorp on the standby letters of credit issued. +aynilad #led for corporate rehabilitation. Kudge Daway stayed the payment of the letter of credit by Citicorp pursuant to ec H (b) of Rule 4 of the 0nterim Rules on Corporate Rehabilitation. 0 ,!- the 1C is a solidary obligation and therefore does -!' fall under the coverage of the tay !rder B1D 'B 1C 0 !10D2RI 2-D 0 L+>' FR!+ 'B '2I !RDR. 1Cs were developed for the purpose of insuring to seller payment of a de#nite amount upon the presentation of documents and 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 1C duly paid of the amount speci#ed therein. 'hey are in eEect absolute underta;ings. 'hey are primarily obligations and not accessory contracts. ,hile they are security arrangements" they are not converted thereby into contracts of guaranty. 0t is distinct from an accessory contract in that it engages the issuing ban; to pay the seller once he documents and draft are presented to it. 'he prohibition in the rules does -!' apply to +, as the prohibition is on the enforcement of claims against guarantors whose obligations are not solidary with the debtor. 'he ban;s% ibligations are solidary with +aynilad as it is primarily" direct and de#nite and an absolute underta;ing to pay and is not conditioned on prior e9haustion of debtor%s assets. 'herefore" being a solidary obligation" the 1C is e9cluded from the :urisdiction of the Rehabilitation Court.
'ANLILIO ET AL., +. REGIONAL TRIAL COURT, GR 13846, FEBRUAR 2, 2)11 F2C' >etitioners are charged with violations of ection 3 (h) of the law" in relation to 2rticle 56A (6) (b) of the Revised >enal Code" or stafa. 'he law clearly $criminalizes& the non8remittance of contributions by an employer to protect the employees from unscrupulous employers. 'herefore" public interest re/uires that the said criminal acts be immediately investigated and prosecuted for the protection of society. 0ssue Does the suspension of $all claims& as an incident to a corporate rehabilitation also contemplate the suspension of criminal charges #led against the corporate o*cers of the distressed corporation R10-M -o" the criminal charges are not included. 'he upreme Court D-0D the petition and 2FF0R+D the Decision of the Court of 2ppeals. 'he Regional 'rial Court of +anila" ranch A6" was !RDRD to proceed with the criminal cases #led against petitioners. 0n Rosario v. Co (Rosario)" a case of recent vintage" the issue resolved by the Court was whether or not during the pendency of rehabilitation proceedings" criminal charges for violation of atas >ambansa ilang33 should be suspended and it was ruled that the #ling of the case for violation of .>. lg. 33 is not a NclaimN that can be en:oined within the purview of >.D. -o. ?G382. 'rue" although conviction of the accused for the alleged crime could result in the restitution" reparation or indemni#cation of the private oEended party for the damage or in:ury he sustained by reason of the felonious act of the accused" nevertheless" prosecution for violation of .>. lg. 33 is a criminal action. 2 criminal action has a dual purpose" namely" the punishment of the oEender and indemnity to the oEended party. 'he dominant and primordial ob:ective of the criminal action is the punishment of the oEender. 'he civil action is merely incidental to and conse/uent to the conviction of the accused. 'he rehabilitation of 0B0 and the settlement of claims against the corporation is not a legal ground for the e9tinction of petitioners% criminal liabilities. 'here is no reason why criminal proceedings should be suspended during corporate rehabilitation" more so" since the prime purpose of the criminal action is to punish the oEender in order to deter him and others from committing the same or similar oEense" to isolate him from society" reform and rehabilitate him or" in general" to maintain social order. 2s correctly observed in Rosario" it would be absurd for one who has engaged in criminal conduct could escape punishment by the mere #ling of a petition for rehabilitation by the corporation of which he is an o*cer.
'he prosecution of the o*cers of the corporation has no bearing on the pending rehabilitation of the corporation" especially since they are charged in their individual capacities. uch being the case" the purpose of the law for the issuance of the stay order is not compromised" since the appointed rehabilitation receiver can still fully discharge his functions as mandated by law. B'I VS. SEC, GR 164641, DECEMBER 2), 2)) F2C' 'he 2 Mroup #led a petition for rehabilitation and suspension of payments before the C. 'he Rehabilitation >lan provides a dacion en pago by the 2 Mroup to >0 of one of the properties mortgaged to the latter at the 2 Mroup. 'he dacion would constitute full payment of the entire obligation due to >0 because the balance was then to be considered waived" as per the Rehabilitation >lan. >0 opposed the Rehabilitation >lan and moved for the dismissal of the 2 Mroup%s petition for rehabilitation. >0 argued that the !rder constituted an arbitrary violation of >0%s freedom and right to contract since the Rehabilitation >lan compelled >0 to enter into a dacion en pago agreement with the 2 Mroup. 0 ,!- the rehabilitation plan impaired >07s right to contract B1D Rehabilitation proceedings in our :urisdiction have e/uitable and rehabilitative purposes. !n the one hand" they attempt to provide for the e*cient and e/uitable distribution of an insolvent debtor%s remaining assets to its creditors= and on the other" to provide debtors with a $fresh start& by relieving them of the weight of their outstanding debts and permitting them to reorganize their aEairs. 'he rationale of >.D. -o. ?G382" as amended" is to $eEect a feasible and viable rehabilitation"& by preserving a foundering business as going concern" because the assets of a business are often more valuable when so maintained than they would be when li/uidated. 'he Court reiterates that the C%s approval of the Rehabilitation >lan did not impair >0%s right to contract. 2s correctly contended by private respondents" the non8 impairment clause is a limit on the e9ercise of legislative power and not of :udicial or /uasi8:udicial power. 'he C" through the hearing panel that heard the petition for approval of the Rehabilitation >lan" was acting as a /uasi8:udicial body and thus" its order approving the plan cannot constitute an impairment of the right and the freedom to contract. esides" the mere fact that the Rehabilitation >lan proposes a dacion en pago approach does not render it defective on the ground of impairment of the right to contract. Dacion en pago is a special mode of payment where the debtor oEers
another thing to the creditor who accepts it as e/uivalent of payment of an outstanding debt. 'he underta;ing really parta;es in a sense of the nature of sale" that is" the creditor is really buying the thing or property of the debtor" the payment for which is to be charged against the debtor%s debt. 2s such" the essential elements of a contract of sale" namely= consent" ob:ect certain" and cause or consideration must be present. eing a form of contract" the dacion en pago agreement cannot be perfected without the consent of the parties involved.
CONSUELO METAL COR'ORATION +. 'LANTERS DEVELO'MENT BAN(, GR 128), *UNE 26, 2))8 F2C' !n 6 2pril 6??H" C+C #led before the C a petition to be declared in a state of suspension of payment" for rehabilitation" and for the appointment of a rehabilitation receiver or management committee under ection A(d) of >residential Decree -o. ?G382. !n 3 2pril 6??H" the C" #nding the petition su*cient in form and substance" declared that Nall actions for claims against C+C pending before any court" tribunal" o*ce" board" body andOor commission are deemed suspended immediately until further orderN from the C. !n 3? -ovember 3GGG" upon the management committee%s recommendation" the C issued an !mnibus !rder directing the dissolution and li/uidation of C+C. 'he C also directed that Nthe proceedings on and implementation of the order of li/uidation be commenced at the Regional 'rial Court to which this case shall be transferred.N 'hereafter" respondent >lanters Development an; (>lanters an;)" one of C+C%s creditors" commenced the e9tra8:udicial foreclosure of C+C%s real estate mortgage. >ublic auctions were scheduled on 5G Kanuary 3GG6 and H February 3GG6. 0 ,hether >lanters an;%s foreclosure of the real estate mortgage is valid. B1D Foreclosure of real estate mortgage is valid. 0f rehabilitation is no longer feasible and the assets of the corporation are #nally li/uidated" secured creditors shall en:oy preference over unsecured creditors" sub:ect only to the provisions of the Civil Code on concurrence and preference of credits. Creditors of secured obligations may pursue their security interest or lien" or they may choose to abandon the preference and prove their credits as ordinary claims. +oreover" ection 334 of the Civil Code provides" $'hose credits which
en:oy preference in relation to speci#c real property or real rights" e9clude all others to the e9tent of the value of the immovable or real right to which the preference refers.& 0n this case" >lanters an;" as a secured creditor" en:oys preference over a speci#c mortgaged property and has a right to foreclose the mortgage under ection 334 of the Civil Code. 'he creditor8mortgagee has the right to foreclose the mortgage over a speci#c real property whether or not the debtor8mortgagor is under insolvency or li/uidation proceedings. 'he 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. Bowever" the creditor8mortgagee may e9ercise his right to foreclose the mortgage upon the termination of the rehabilitation proceedings or upon the lifting of the stay order.
