Spouses Ong VS BPI

Section 80. Effects of merger or consolidation. - The merger or consolidation shall

have the following effects:

1. The constituent corporations shall become a single corporation which, in case of

merger, shall be the surviving corporation designated in the plan of merge; and, in
case of consolidation, shall be the consolidated corporation designated in the plan
of consolidation;

4. The surviving or the consolidated corporation shall thereupon and thereafter

possess all the right, privileges, immunities and franchises of each of the
constituent corporations; and all property, real or personal, and all receivable due
on whatever account, including subscriptions to shares and other choses in action,
and all and every other interest of, or belonging to, or due to each constituent
corporation, shall be deemed transferred to and vested in such surviving or
consolidated corporation without further act or deed; and

5. The surviving or consolidated corporation shall be responsible and liable for all
the liabilities and obligations of each of the constituent corporations in the same
manner as if such surviving or consolidated corporation had itself incurred such
liabilities or obligations; and any pending claim, action, or proceeding brought by
or against any of such constituent corporations may be prosecuted by or against
the surviving or consolidated corporation. The rights of creditors or liens upon the
property of any of such constituent corporations shall not be impaired by such
merger or consolidation.

Edward J. Nell Co. VS Pacific Farms, Inc.

Generally where one corporation sells or otherwise transfers all of its assets to
another corporation, the latter is not liable for the debts and liabilities of the
transferor, except: (1) where the purchaser expressly or impliedly agrees to
assume such debts; (2) where the transaction amounts to a consolidation or
merger of the corporations; (3) where the purchasing corporation is merely a
continuation of the selling corporation; and (4) where the transaction is entered
into fraudulently in order to escape liability for such debts.

Y-1 Leisure Phils., Inc. VS Yu

The Nell Doctrine states the general rule that the transfer of all the assets of a
corporation to another shall not render the latter liable to the liabilities of the
transferor. If any of the above-cited exceptions are present, then the transferee
corporation shall assume the liabilities of the transferor. The exception of the Nell
doctrine, which finds its legal basis under Section 40, provides that the transferee
corporation assumes the debts and liabilities of the transferor corporation because
it is merely a continuation of the latter's business. A cursory reading of the
exception shows that it does not require the existence of fraud against the
creditors before it takes full force and effect.

Indeed, under the Nell Doctrine, the transferee corporation may inherit the
liabilities of the transferor despite the lack of fraud due to the continuity of the
latter's business.
The purpose of the business-enterprise transfer is to protect the creditors of the
business by allowing them a remedy against the new owner of the assets and
business enterprise. Otherwise, creditors would be left "holding the bag," because
they may not be able to recover from the transferor who has "disappeared with
the loot," or against the transferee who can claim that he is a purchaser in good
faith and for value.

Based on the foregoing, as the exception of the Nell doctrine relates to the
protection of the creditors of the transferor corporation, and does not depend on
any deceit committed by the transferee -corporation, then fraud is certainly not an
element of the business enterprise doctrine. Bearing in mind that fraud is not
required to apply the business-enterprise transfer, the next issue to be resolved is
whether the petitioners indeed became a continuation of MADCI's business.

Synthesizing Section 40 and the previous rulings of this Court, it is apparent that
the business-enterprise transfer rule applies when two requisites concur: (a) the
transferor corporation sells all or substantially all of its assets to another entity;
and (b) the transferee corporation continues the business of the transferor
corporation.

Sundowner Development Corporation VS Drilon

As a general rule, there is no law requiring a bona fide purchaser of assets of an
on-going concern to absorb in its employ the employees of the latter. However,
although the purchaser of the assets or enterprise is not legally bound to absorb in
its employ the employers of the seller of such assets or enterprise, the parties are
liable to the employees if the transaction between the parties is colored or clothed
with bad faith.

Central Azucarera del Danao VS CA

The rule has been laid down that the sale or disposition must be motivated by
good faith as an element of exemption from liability. Indeed, an innocent
transferee of a business establishment has no liability to the employees of the
transferor to continue employing them. Nor is the transferee liable for past unfair
labor practices of the previous owner, except, when the liability therefor is
assumed by the new employer under the contract of sale, or when liability arises
because of the new owner's participation in thwarting or defeating the rights of
the employees.

PNB VS Andrada Electric and Engineering Co.

A consolidation is the union of two or more existing entities to form a new entity
called the consolidated corporation. A merger, on the other hand, is a union
whereby one or more existing corporations are absorbed by another corporation
that survives and continues the combined business.

The merger, however, does not become effective upon the mere agreement of the
constituent corporations. Since a merger or consolidation involves fundamental
changes in the corporation, as well as in the rights of stockholders and creditors,
there must be an express provision of law authorizing them.
For a valid merger or consolidation, the approval by the Securities and Exchange
Commission (SEC) of the articles of merger or consolidation is required. These
articles must likewise be duly approved by a majority of the respective
stockholders of the constituent corporations. In the case at bar, the Court holds
that there is no merger or consolidation with respect to PASUMIL and PNB.

Poliand Industrial Ltd. VS NDC

As specifically provided under Section 79 of said Code, the merger shall only be
effective upon the issuance of a certificate of merger by the Securities and
Exchange Commission (SEC), subject to its prior determination that the merger is
not inconsistent with the Code or existing laws. Where a party to the merger is a
special corporation governed by its own charter, the Code particularly mandates
that a favorable recommendation of the appropriate government agency should
first be obtained.

The issuance of the certificate of merger is crucial because not only does it bear
out SEC’s approval but also marks the moment whereupon the consequences of a
merger take place. By operation of law, upon the effectivity of the merger, the
absorbed corporation ceases to exist but its rights, and properties as well as
liabilities shall be taken and deemed transferred to and vested in the surviving
corporation.

Associated Bank VS CA
Ordinarily, in the merger of two or more existing corporations, one of the
combining corporations survives and continues the combined business, while the
rest are dissolved and all their rights, properties and liabilities are acquired by the
surviving corporation.

Although there is a dissolution of the absorbed corporations, there is no winding

up of their affairs or liquidation of their assets, because the surviving corporation
automatically acquires all their rights, privileges and powers, as well as their
liabilities.

The merger, however, does not become effective upon the mere agreement of the
constituent corporations. The procedure to be followed is prescribed under the
Corporation Code. Section 79 of said Code requires the approval by the SEC of the
articles of merger which, in turn, must have been duly approved by a majority of
the respective stockholders of the constituent corporations.

Upon effective date of the Merger, all rights, privileges, powers, immunities,
franchises, assets and property of CBTC, whether real, personal or mixed, and
including CBTC's goodwill and tradename, and all debts due to CBTC on whatever
act, and all other things in action belonging to CBTC as of the effective date of the
merger shall be vested in ABC, the SURVIVING BANK.

Global Business Holdings, Inc. VS Surecompsoftware, BV

As a rule, unlicensed foreign non-resident corporations doing business in the
Philippines cannot file suits in the Philippines. The exception to this rule is the
doctrine of estoppel. Global is estopped from challenging Surecomp’s capacity to
sue. A foreign corporation doing business in the Philippines without license may
sue in Philippine courts a Filipino citizen or a Philippine entity that had contracted
with and benefited from it.

A party is estopped from challenging the personality of a corporation after having

acknowledged the same by entering into a contract with it. The principle is applied
to prevent a person contracting with a foreign corporation from later taking
advantage of its noncompliance with the statutes, chiefly in cases where such
person has received the benefits of the contract.

Due to Global’s merger with ABC and because it is the surviving corporation, it is
as if it was the one which entered into contract with Surecomp. In the merger of
two existing corporations, one of the corporations survives and continues the
business, while the other is dissolved, and all its rights, properties, and liabilities
are acquired by the surviving corporation.

Republic VS Sunlife Assurance Company of Canada

The tax code defines cooperative as an association conducted by the members
thereof with the money collected from among themselves and solely for their own
protection and not for profit. Respondent is without doubt a cooperative because
of the following reasons: First, it is managed by its members.

Second, it operated with money collected from its members. Since respondent is
composed entirely of members who are also it policyholders, all premiums
obviously comes only from them. The member-policyholders constitute both
insurer and insured who contribute, by a system of premiums or assessments, to
the creation of a fund from which all losses and liabilities are paid. The premiums
pooled into this fund are earmarked for the payment of their indemnity and benefit
claims.

Third, it is licensed for the mutual protection of its members, not for the profit of
anyone. A mutual life insurance company is conducted for the benefit of its
member-policyholders, who pay into its capital by way of premiums. To that
extent, they are responsible for the payment of all its losses. The cash paid in for
premiums and the premium notes constitute their assets. In the event that the
company itself fails before the terms of the policies expire, the member-
policyholders do not acquire the status of creditors.

Bustos VS Millians Shoe, Inc.

To be considered a close corporation, an entity must abide by the requirements
laid out in Section 96 of the Corporation Code, which reads: Sec. 96. Definition and
applicability of Title. - A close corporation, within the meaning of this Code, is one
whose articles of incorporation provide that:

(1) All the corporation's issued stock of all classes, exclusive of treasury shares,
shall be held of record by not more than a specified number of persons, not
exceeding twenty (20);

(2) all the issued stock of all classes shall be subject to one or more specified
restrictions on transfer permitted by this Title; and
(3) The corporation shall not list in any stock exchange or make any public
offering of any of its stock of any class. Notwithstanding the foregoing, a
corporation shall not be deemed a close corporation when at least two-thirds
(2/3) of its voting stock or voting rights is owned or controlled by another
corporation which is not a close corporation within the meaning of this Code.

Barayuga VS Adventist University of the Philippines

Unless otherwise provided in the articles of incorporation or the by-laws, the
board of trustees of incorporated schools, colleges, or other institutions of
learning shall, as soon as organized, so classify themselves that the term of office
of one-fifth (1/5) of their number shall expire every year. Trustees thereafter
elected to fill vacancies, occurring before the expiration of a particular term, shall
hold office only for the unexpired period. Trustees elected thereafter to fill
vacancies caused by expiration of term shall hold office for five (5) years.

Roman Catholic Apostolic Administrator of Davao VS Land Registration

Commission
The framers of the same did not have in mind or overlooked this particular form of
corporation. If this were so, as the facts and circumstances already indicated tend
to prove it to be so, then the inescapable conclusion would be that this
requirement of at least 60 per cent of Filipino capital was never intended to apply
to corporations’ sole, and the existence or not a vested right becomes
unquestionably immaterial.

Expertravel & Tours VS CA

In a case where the plaintiff is a private corporation, the certification may be
signed, for and on behalf of the said corporation, by a specifically authorized
person, including its retained counsel, who has personal knowledge of the facts
required to be established by the documents. Unlike natural persons, corporations
may perform physical actions only through properly delegated individuals; namely,
its officers and/or agents.

In this case, the petitioner, as the defendant in the RTC, assailed the authority of
Atty. Aguinaldo to execute the requisite verification and certificate of non-forum
shopping as the resident agent and counsel of the respondent. It was, thus,
incumbent upon the respondent, as the plaintiff, to allege and establish that Atty.
Aguinaldo had such authority to execute the requisite verification and certification
for and in its behalf.

As gleaned from the certification, there was no allegation that Atty. Aguinaldo had
been authorized to execute the certificate of non-forum shopping by the
respondent’s Board of Directors; moreover, no such board resolution was
appended thereto or incorporated therein.

While Atty. Aguinaldo is the resident agent of the respondent in the Philippines,
this does not mean that he is authorized to execute the requisite certification
against forum shopping. Under the law, Atty. Aguinaldo was not specifically
authorized to execute a certificate of non-forum shopping as required by Section
5, Rule 7 of the Rules of Court. This is because while a resident agent may be
aware of actions filed against his principal (a foreign corporation doing business in
the Philippines), such resident may not be aware of actions initiated by its
principal, whether in the Philippines against a domestic corporation or private
individual, or in the country where such corporation was organized and registered,
against a Philippine registered corporation or a Filipino citizen.

The respondent knew that its counsel, Atty. Aguinaldo, as its resident agent, was
not specifically authorized to execute the said certification. It attempted to show
its compliance with the rule subsequent to the filing of its complaint by submitting
a resolution purporting to have been approved by its Board of Directors during a
teleconference held allegedly with Atty. Aguinaldo and Suk Kyoo Kim in
attendance. However, such attempt of the respondent casts veritable doubt not
only on its claim that such a teleconference was held, but also on the approval by
the Board of Directors of the resolution authorizing Atty. Aguinaldo to execute the
certificate of non-forum shopping.

Commissioner of Internal Revenue VS Interpublic Group of Companies

An unlicensed foreign corporation doing business in the Philippines cannot sue
before Philippine courts. On the other hand, an unlicensed foreign corporation not
doing business in the Philippines can sue before Philippine courts.

The purpose of the law in requiring that foreign corporations doing business in the
country be licensed to do so, is to subject the foreign corporations doing business
in the Philippines to the jurisdiction of the courts, otherwise, a foreign corporation
illegally doing business here because of its refusal or neglect to obtain the
required license and authority to do business may successfully though unfairly
plead such neglect or illegal act so as to avoid service and thereby impugn the
jurisdiction of the local courts.

The same danger does not exist among foreign corporations that are indubitably
not doing business in the Philippines. Indeed, if a foreign corporation does not do
business here, there would be no reason for it to be subject to the State's
regulation. As we observed, in so far as the State is concerned, such foreign
corporation has no legal existence. Therefore, to subject such corporation to the
courts' jurisdiction would violate the essence of sovereignty.

Section 3(d) of R.A. No. 7042 provides:

SEC. 3. Definitions. – d) The phrase "doing business" shall include soliciting

orders, service contracts, opening offices, whether called "liaison" offices or
branches; appointing representatives or distributors domiciled in the Philippines
or who in any calendar year stay in the country for a period or periods totalling
one hundred eighty (180) days or more; participating in the management,
supervision or control of any domestic business, firm, entity or corporation in the
Philippines; and any other act or acts that imply a continuity of commercial
dealings or arrangements, and contemplate to that extent the performance of acts
or works, or the exercise of some of the functions normally incident to, and in
progressive prosecution of, commercial gain or of the purpose and object of the
business organization: Provided, however, That the phrase "doing business" shall
not be deemed to include mere investment as a shareholder by a foreign entity in
domestic corporations duly registered to do business, and/or the exercise of
rights as such investor; nor having a nominee director or officer to represent its
interests in such corporation; nor appointing a representative or distributor
domiciled in the Philippines which transacts business in its own name and for its
own account.

Mere investment as a shareholder by a foreign corporation in a duly registered

domestic corporation shall not be deemed "doing business" in the Philippines.

It is clear then that the IGC's act of subscribing shares of stocks from McCann, a
duly registered domestic corporation, maintaining investments therein, and
deriving dividend income therefrom, does not qualify as "doing business"
contemplated under R.A. No. 7042. Hence, the IGC is not required to secure a
license before it can file a claim for tax refund.

The general rule that a foreign corporation is the same juridical entity as its
branch office in the Philippines cannot apply here. This rule is based on the
premise that the business of the foreign corporation is conducted through its
branch office, following the principal-agent relationship theory. It is understood
that the branch becomes its agent here. So that when the foreign corporation
transacts business in the Philippines independently of its branch, the principal-
agent relationship is set aside.

The transaction becomes one of the foreign corporation, not of the branch.
Consequently, the taxpayer is the foreign corporation, not the branch or the
resident foreign corporation. Corollarily, if the business transaction is conducted
through the branch office, the latter becomes the taxpayer, and not the foreign
corporation.

Cargill, Inc. VS Intra Strata Assurance Corporation

Under Article 123 of the Corporation Code, a foreign corporation must first obtain
a license and a certificate from the appropriate government agency before it can
transact business in the Philippines. Where a foreign corporation does business in
the Philippines without the proper license, it cannot maintain any action or
proceeding before Philippine courts as provided under Section 133 of the
Corporation Code.

Since respondent is relying on Section 133 of the Corporation Code to bar

petitioner from maintaining an action in Philippine courts, respondent bears the
burden of proving that petitioner’s business activities in the Philippines were not
just casual or occasional, but so systematic and regular as to manifest continuity
and permanence of activity to constitute doing business in the Philippines.

In this case, the Court finds that respondent failed to prove that petitioner’s
activities in the Philippines constitute doing business as would prevent it from
bringing an action. The determination of whether a foreign corporation is doing
business in the Philippines must be based on the facts of each case.

In the case of Antam Consolidated, Inc. v. CA, in which a foreign corporation filed
an action for collection of sum of money against petitioners therein for damages
and loss sustained for the latter’s failure to deliver coconut crude oil, the Court
emphasized the importance of the element of continuity of commercial activities to
constitute doing business in the Philippines.

In the case at bar, the transactions entered into by the respondent with the
petitioners are not a series of commercial dealings which signify an intent on the
part of the respondent to do business in the Philippines but constitute an isolated
one which does not fall under the category of "doing business."

Other factors which support the finding that petitioner is not doing business in the
Philippines are:

(1) petitioner does not have an office in the Philippines;

(2) petitioner imports products from the Philippines through its non-exclusive
local broker, whose authority to act on behalf of petitioner is limited to soliciting
purchases of products from suppliers engaged in the sugar trade in the
Philippines; and

(3) the local broker is an independent contractor and not an agent of petitioner.

Columbia Pictures VS CA
Although a foreign corporation is without license to transact business in the
Philippines, it does not follow that it has no capacity to bring an action. Such
license is not necessary if it is not engaged in business in the Philippines.

As a general rule, a foreign corporation will not be regarded as doing business in

the State simply because it enters into contracts with residents of the State,
where such contracts are consummated outside the State. In fact, a view is taken
that a foreign corporation is not doing business in the State merely because sales
of its product are made there or other business furthering its interests is
transacted there by an alleged agent, whether a corporation or a natural person,
where such activities are not under the direction and control of the foreign
corporation but are engaged in by the alleged agent as an independent business.

Aguirre II VS FQB+7, Inc.

A corporation’s board of directors is not rendered functus officio by its dissolution.
Since Section 122 allows a corporation to continue its existence for a limited
purpose, necessarily there must be a board that will continue acting for and on
behalf of the dissolved corporation for that purpose. In fact, Section 122
authorizes the dissolved corporation’s board of directors to conduct its liquidation
within three years from its dissolution. Jurisprudence has even recognized the
board’s authority to act as trustee for persons in interest beyond the said three-
year period. Thus, the determination of which group is the bona fide or rightful
board of the dissolved corporation will still provide practical relief to the parties
involved.

Tan Tiong Bio VS Commissioner

It is true that sections 77 and 78 of our Corporation Law contemplate that
corporate existence can be prolonged only for three years from and after the
termination of the corporate term, for the purpose of winding up its affairs; and in
the case of the Central Syndicate, the three years expired in 1951. On this basis, if
it be true that the Syndicate thereafter had no personality to dispute the
assessment, it would be equally true that no valid assessment could be imposed
on a corporation that no longer had juridical personality.

Buenaflor VS Camarines Sur Industry Corporation

When the old Camarines Corporation docketed its application October 1, 1957, it
had no juridical personality, it had ceased to exist as a corporation and could not
sue nor apply for certificate, for it was incapable of receiving a grant. It was not
even a corporation de facto. And then, there is no application subscribed by the
new Camarines Corporation. Far from being mere technicality, these point support
a conclusion which appears to be just and equitable, not only for the reasons
already indicated, but also to compensate Buenaflor's diligence and courage in
exposing the irregular practice of a "ghost" corporation foisting its services upon
the unsuspecting public of Sabang and neighboring territory — enjoying a
franchise without paying, perhaps, the corporate income tax and other burdens
attached to corporate existence.

Clemente VS CA
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 Securities and
Exchange Commission orders the dissolution of a corporation for its continuous
inactivity for at least five (5) years. The corporation continues to be a body
corporate for three (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 three-year term, appoint a trustee or a receiver who may act
beyond that period. The termination of the life of a juridical entity does not by
itself cause the extinction or diminution of the rights and neither liabilities of such
entity nor those of its owners and creditors.

If the three-year extended life has expired without a trustee or receiver. having
been expressly designated by the corporation within that period, the board of
directors (or trustees) itself, following the rationale of the Supreme Court's
decision in Gelano vs. Court of Appeals (103 SCRA 90) 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 Securities and Exchange commission, which has primary
and sufficiently broad jurisdiction in matters of this nature, for working out a final
settlement of the corporate concerns.

Gelano VS CA
Section 77 of the Corporation Law provides that the corporation shall "be
continued as a body corporate for three (3) years after the time when it would
have been ... dissolved, for the purpose of prosecuting and defending suits By or
against it ...," so that, thereafter, it shall no longer enjoy corporate existence for
such purpose.

Section 78 of the same law authorizes the corporation, "at any time during said
three years to convey all of its property to trustees for the benefit of members,
Stockholders, creditors and other interested," evidently for the purpose, among
others, of enabling said trustees to prosecute and defend suits by or against the
corporation begun before the expiration of said period.

However, a corporation that has a pending action and which cannot be terminated
within the three year period after its dissolution is authorized under Section 78 to
convey all its property to trustees to enable it to prosecute and defend suits by or
against the corporation beyond the Three-year period although private respondent
did not appoint any trustee, yet the counsel who prosecuted and defended the
interest of the corporation in the instant case and who in fact appeared in behalf
of the corporation may be considered a trustee of the corporation at least with
respect to the matter in litigation only.

Bureau of Internal Revenue VS Lepanto Ceramics, Inc.

Section 4 (gg) of RA 10142 states: Section 4. Definition of Terms. - As used in this
Act, the term: (gg) Rehabilitation shall refer to the restoration of the debtor to a
condition of successful operation and solvency, if it is shown that its continuance
of operation is economically feasible and its creditors can recover by way of the
present value of payments projected in the plan, more if the debtor continues as a
going concern than if it is immediately liquidated.

Case law has defined corporate rehabilitation as an attempt to conserve and

administer the assets of an insolvent corporation in the hope of its eventual return
from financial stress to solvency. It contemplates the continuance of corporate life
and activities in an effort to restore and reinstate the corporation to its former
position of successful operation and liquidity.

Verily, the inherent purpose of rehabilitation is to find ways and means to

minimize the expenses of the distressed corporation during the rehabilitation
period by providing the best possible framework for the corporation to gradually
regain or achieve a sustainable operating form.

It enables the company to gain a new lease in life and thereby allow creditors to
be paid their claims from its earnings. Thus, rehabilitation shall be undertaken
when it is shown that the continued operation of the corporation is economically
more feasible and its creditors can recover, by way of the present value of
payments projected in the plan, more, if the corporation continues as a going
concern than if it is immediately liquidated.
Under the same law, claim "shall refer to all claims or demands of whatever nature
or character against the debtor or its property, whether for money or otherwise,
liquidated or unliquidated, fixed or contingent, matured or unmatured, disputed or
undisputed, including, but not limited to; (1) all claims of the government,
whether national or local, including taxes, tariffs and customs duties; and (2)
claims against directors and officers of the debtor arising from acts done in the
discharge of their functions falling within the scope of their authority: Provided,
That, this inclusion does not prohibit the creditors or third parties from filing cases
against the directors and officers acting in their personal capacities."

Philippine Asset Growth Two, Inc. VS Fastech Synergy Philippines, Inc.

The specific characteristics of an economically feasible rehabilitation plan:

a. The debtor has assets that can generate more cash if used in its daily operations
than if sold.

b. Liquidity issues can be addressed by a practicable business plan that will

generate enough cash to sustain daily operations.

c. The debtor has a definite source of financing for the proper and full
implementation of a Rehabilitation Plan that is anchored on realistic assumptions
and goals.

On the other hand, this court enumerated the characteristics of a rehabilitation

plan that is infeasible: (a) the absence of a sound and workable business plan; (b)
baseless and unexplained assumptions, targets and goals; (c) speculative capital
infusion or complete lack thereof for the execution of the business plan; (d) cash
flow cannot sustain daily operations; and (e) negative net worth and the assets
are near full depreciation or fully depreciated.

Present value recovery acknowledges that, in order to pave way for rehabilitation,
the creditor will not be paid by the debtor when the credit falls due. The court may
order a suspension of payments to set a rehabilitation plan in motion; in the
meantime, the creditor remains unpaid. By the time the creditor is paid, the
financial and economic conditions will have been changed. Money paid in the past
has a different value in the future. It is unfair if the creditor merely receives the
face value of the debt. Present value of the credit takes into account the interest
that the amount of money would have earned if the creditor were paid on time.

Trial courts must ensure that the projected cash flow from a business'
rehabilitation plan allows for the closest present value recovery for its creditors. If
the projected cash flow is realistic and allows the corporation to meet all its
obligations, then courts should favor rehabilitation over liquidation. However, if
the projected cash flow is unrealistic, then courts should consider converting the
proceedings into that for liquidation to protect the creditors.

Metropolitan Bank and Trust Co. VS. Fortuna Paper Mill and Packaging
Corporation
Rehabilitation refers to the restoration of the debtor to a condition of successful
operation and solvency, if it is shown that its continuance of operation is
economically feasible and its creditors can recover by way of the present value of
payments projected in the plan, more if the debtor continues as a going concern
than if it is immediately liquidated.

Section 1, Rule 4 of the Interim Rules on the Procedure on Corporate

Rehabilitation provides for the qualifications of a corporation to file a petition for
corporate rehabilitation, to wit:

Sec. 1. Who May Petition. - Any debtor who foresees the impossibility of meeting
its debts when they respectively fall due, or any creditor or creditors holding at
least twenty-five percent (25%) of the debtor's total liabilities, may petition the
proper Regional Trial Court to have the debtor placed under rehabilitation.

A plain reading of the provision shows that the Interim Rules does not make any
distinction between a corporation which is already in debt and a corporation which
foresees the possibility of debt, or which would eventually yet surely fall into the
same, but may at present be free from any financial liability.

Philippine Veterans Bank Employees Union-NUBE VS Vega

Liquidation, in corporation law, connotes a winding up or settling with creditors
and debtors. It is the winding up of a corporation so that assets are distributed to
those entitled to receive them. It is the process of reducing assets to cash,
discharging liabilities and dividing surplus or loss.

On the opposite end of the spectrum is rehabilitation which connotes a reopening

or reorganization. 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.

Viva Shipping Lines, Inc. VS Keppel Mining Philippines, Inc., et al.

A corporate rehabilitation case cannot be decided without the creditors'
participation. The court's role is to balance the interests of the corporation, the
creditors, and the general public. Impleading creditors as respondents on appeal
will give them the opportunity to present their legal arguments before the
appellate court. The courts will not be able to balance these interests if the
creditors are not parties to a case. Ruling on petitioner's appeal in the absence of
its creditors will not result in judgment that is effective, complete, and equitable.

The failure of petitioner to implead its creditors as respondents cannot be cured by

serving copies of the Petition on its creditors. Since the creditors were not
impleaded as respondents, the copy of the Petition only serves to inform them that
a petition has been filed before the appellate court. Their participation was still
significantly truncated.

Petitioner's failure to implead them deprived them of a fair hearing. The appellate
court only serves court orders and processes on parties formally named and
identified by the petitioner. Since the creditors were not named as respondents,
they could not receive court orders prompting them to file remedies to protect
their property rights.

Under the Interim Rules of Procedure on Corporate Rehabilitation, a "petition shall

be dismissed if no rehabilitation plan is approved by the court upon the lapse of
one hundred eighty (180) days from the date of the initial hearing." The
proceedings are also deemed terminated upon the trial court's disapproval of a
rehabilitation plan, "or a determination that the rehabilitation plan may no longer
be implemented in accordance with its terms, conditions, restrictions, or
assumptions."

Allied Banking VS In the Matter of the Petition to Have Steel Corp place
under Corporate Rehabilitation
Under the same Rules, the effects of such commencement order shall retroact to
the date that the petition was filed, and renders void any attempt to collect on or
enforce a claim against the debtor or to set off any debt by the debtor's creditors,
after the commencement date, to wit:

SEC. 9. EFFECTS OF THE COMMENCEMENT ORDER. - The effects of the court's

issuance of a Commencement Order shall retroact to the date of the filing of the
petition and, in addition to the effects of a Stay or Suspension Order described in
the foregoing section, shall;

B) prohibit or otherwise serve as the legal basis for rendering null and void the
results of any extrajudicial activity or process to seize property, sell encumbered
property, or otherwise attempt to collect on or enforce a claim against the debtor
after the commencement date unless otherwise allowed under these Rules,
subject to the provisions of Section 49 of this Rule;

(C) serve as legal basis for rendering null and void any set-off after the
commencement date of any debt owed to the debtor by any of the debtor's
creditors;

The filing of a petition for the rehabilitation of a debtor, when the court finds that
it is sufficient in form and substance, is both (1) an acknowledgment that the
debtor is presently financially distressed; and (2) an attempt to conserve and
administer its assets in the hope that it will eventually return to its former state of
successful financial operation and liquidity.

The inherent purpose of rehabilitation is to find ways and means to minimize the
expenses of the distressed corporation during the rehabilitation period by
providing the best possible framework for the corporation to gradually regain or
achieve a sustainable operating form.

Certainly, when a petition for rehabilitation is filed and subsequently granted by

the court, its purpose will be defeated if the debtors are still allowed to arbitrarily
dispose of their property and pay their liabilities, outside of the ordinary course of
business and what is allowed by the court, after the filing of the said petition.
Such a scenario does not promote an environment where the debtor could regain
its operational footing, contrary to the dictates of rehabilitation.

Malayan Insurance Company, Inc. VS Victorias Milling Company, Inc.

The interim rules define 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. The definition is all-encompassing as it refers to all actions whether for
money or otherwise. There are no distinctions or exemptions.

It is settled that upon appointment by the SEC of a rehabilitation receiver, all

actions for claims before any court, tribunal or board against the corporation shall
ipso jure be suspended. As stated early on, during the pendency of petitioners’
complaint before the Labor Arbiter, the SEC placed respondent under an Interim
Rehabilitation Receiver. After the Labor Arbiter rendered his decision, the SEC
replaced the Interim Rehabilitation Receiver with a Permanent Rehabilitation
Receiver.

The suspension of action for claims against a corporation under rehabilitation

receiver or management committee embraces all phases of the suit, be it before
the trial court or any tribunal or before this Court. Otherwise stated, what are
automatically stayed or suspended are the proceedings of an action or suit and not
just the payment of claims. Furthermore, the actions that are suspended cover all
claims against a distressed corporation whether for damages founded on a breach
of contract of carriage, labor cases, collection suits or any other claims of a
pecuniary nature.

Section 6 (d) of P.D. 902-A, the management committee or rehabilitation receiver

is given the following powers: (d) To create and appoint a management
committee, board, or body upon petition or motu proprio to undertake the
management of corporations, partnerships or other associations not supervised or
regulated by other government agencies in appropriate cases when there is
imminent danger of dissipation, loss, wastage or destruction of assets or other
properties or paralyzation of business operations of such corporations or entities
which may be prejudicial to the interest of minority stockholders, parties-litigants
or the general public:

Provided, further, That the Commission may create or appoint a management

committee, board or body to undertake the management of corporations,
partnerships or other associations supervised or regulated by other government
agencies, such as banks and insurance companies, upon request of the
government agency concerned.

The management committee or rehabilitation receiver, board or body shall have

the power to take custody of, and control over, all the existing assets and property
of such entities under management; to evaluate the existing assets and liabilities,
earnings and operations of such corporations, partnerships, or other associations,
to determine the best way to salvage and protect the interest of the investors and
creditors; to study, review and evaluate the feasibility of continuing operations
and restructure and rehabilitate such entities if determined to be feasible by the
Commission.

It shall report and be responsible to the Commission until dissolved by order of

the Commission: Provided, however, That the Commission may, on the basis of the
findings and recommendation of the management committee, or rehabilitation
receiver, board or body, or on its own findings, determine that the continuance in
business of such corporation or entity would not be feasible or profitable nor work
to the best interest of the stockholders, parties-litigants, creditors, or the general
public, order the dissolution of such corporation entity and its remaining assets
liquidated accordingly.

The management committee or rehabilitation receiver, board or body may overrule

or revoke the actions of the previous management and board of directors of the
entity or entities under management notwithstanding any provision of law,
articles of incorporation or by-laws to the contrary.

Sps. Sobrejuanite VS ASB Development Corporation

Section 6(c) of PD No. 902-A empowers the SEC:

c) To appoint one or more receivers of the property, real and personal, which is
the subject of the action pending before the Commission whenever necessary in
order to preserve the rights of the parties-litigants and/or protect the interest of
the investing public and creditors: Provided, finally, That upon appointment of a
management committee, rehabilitation receiver, board or body, pursuant to this
Decree, 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.

The purpose for the suspension of the proceedings 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. Such suspension 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.

The suspension would enable the management committee or rehabilitation

receiver to effectively exercise its/his powers free from any judicial or extra-
judicial interference that might unduly hinder or prevent the "rescue" of the
debtor company. To allow such other action to continue would only add to the
burden of the management committee or rehabilitation receiver, whose time,
effort and resources would be wasted in defending claims against the corporation
instead of being directed toward its restructuring and rehabilitation.

Power Homes Unlimited Corporation VS SEC

An investment contract is defined in the Amended Implementing Rules and
Regulations of R.A. No. 8799 as a contract, transaction or scheme (collectively
contract) whereby a person invests his money in a common enterprise and is led
to expect profits primarily from the efforts of others.

Under Howey Test, it requires a transaction, contract, or scheme whereby a

person (1) makes an investment of money, (2) in a common enterprise, (3) with
the expectation of profits, (4) to be derived solely from the efforts of others.
SEC VS Interport Resources Corporation
The mere absence of implementing rules cannot effectively invalidate provisions of
law where a reasonable construction that will support the law may be given. It is
well established that administrative authorities have the power to promulgate
rules and regulations to confirm to the terms and standards prescribed by the
statute as well as purport to carry into effect its general policies. 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 2 factors:

1) 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

2) the inherent unfairness involved when a party takes advantage of such

information knowing it is unavailable to those with whom he is dealing.

Abacus VS Tabujara
Applying the pronouncement in the Perez case, the fundamental function of the
money market device in its operation is to match and bring together in a most
impersonal manner both the "fund users" and the "fund suppliers." The money
market is an "impersonal market", free from personal considerations. "The market
mechanism is intended to provide quick mobility of money and securities."

The impersonal character of the money market device overlooks the individuals or
entities concerned. The issuer of a commercial paper in the money market
necessarily knows in advance that it would be expeditiously transacted and
transferred to any investor/lender without need of notice to said issuer.

In practice, no notification is given to the borrower or issuer of commercial paper

of the sale or transfer to the investor. In this case, Tabujara as the investor is the
lender or the "funder" who loaned his P3M to IFSC through Abacus. Thus, when
the loaned amount was not paid together with the contracted interest, Tabajura
may recover from Abacus the amount so invested together with damages.