8. METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM V. HON.

REYNALDO
B. DAWAY, G.R. NO. 160732, 21 JUNE 2004

FACTS:
On February 21, 1997, 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, for which Maynilad undertook to pay the corresponding
concession fees on the dates agreed upon in said agreement which, among other things, consisted of
payments of petitioners mostly foreign loans.To secure the concessionaires performance of its obligations
under the Concession Agreement, Maynilad was required under Section 6.9 of said contract to put up a
bond, bank guarantee or other security acceptable to MWSS.

Sometime in September 2000, Maynilad requested MWSS 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. Failing to get what it desired, Maynilad issued a Force Majeure Notice on
March 8, 2001 and unilaterally suspended the payment of the concession fees. But the parties settled this
issue. Maynilad was allowed to recover foreign exchange losses under a formula agreed upon between
them. Sometime in August 2001 Maynilad again filed another Force Majeure Notice and, since MWSS
could not agree with the terms of said Notice, the matter was referred on August 30, 2001 to the Appeals
Panel for arbitration. This resulted in the parties agreeing to resolve the issues through an amendment of
the Concession Agreement on October 5, 2001, known as Amendment No. 1, which was based on the
terms set down in MWSS Board of Trustees Resolution No. 457-2001, as amended by MWSS Board of
Trustees Resolution No. 487-2001, 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 had filed on November 13, 2003, a petition for rehabilitation before the court a
quo which resulted in the issuance of the Stay Order of November 17, 2003 and the disputed Order of
November 27, 2003.12

ISSUE: Did 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 and for the account of respondent Maynilad?

RULING: We disagree.

Letters of credit were developed for the purpose of insuring to a seller payment of a definite 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 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

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 Water Services, Inc., in favor of the Metropolitan Waterworks and Sewerage
System.

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.
 9. JOSE MARCEL PANLILIO V. REGIONAL TRIAL COURT, BRANCH 51, CITY OF
MANILA, G.R. NO. 173846, 2 FEBRUARY 2011

FACTS:
On October 15, 2004, Jose Marcel Panlilio, Erlinda Panlilio, Nicole Morris and Marlo Cristobal
(petitioners), as corporate officers of SILAHIS INTERNATIONAL HOTEL, INC. (SIHI), filed with the
Regional Trial Court a petition for Suspension of Payments and Rehabilitation in SEC Corp. Case No. 04-
111180.
At the time, however, of the filing of the petition for rehabilitation, there were a number of criminal
charges pending against petitioners in Branch 51 of the RTC of Manila. These criminal charges were
initiated by respondent Social Security System (SSS) and involved charges of violations of Section 28
(h) of Republic Act 8282, or the Social Security Act of 1997 (SSS law), in relation to Article 315 (1)
(b) of the Revised Penal Code, or ESTAFA. Consequently, petitioners filed with the RTC of Manila,
Branch 51, a Manifestation and Motion to Suspend Proceedings. Petitioners argued that the stay order
issued by Branch 24 should also apply to the criminal charges pending in Branch 51. Petitioners, thus,
prayed that Branch 51 suspend its proceedings until the petition for rehabilitation was finally resolved.

ISSUE:
Whether or not the suspension of "all claims" as an incident to a corporate rehabilitation also contemplate
the suspension of criminal charges filed against the corporate officers of the distressed corporation?
RULING:
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.
Petitioners are charged with violations of Section 28 (h) of the SSS law, in relation to Article 315 (1) (b)
of the Revised Penal Code, or Estafa. The SSS law clearly "criminalizes" the non-remittance of SSS
contributions by an employer to protect the employees from unscrupulous employers. Therefore, public
interest requires that the said criminal acts be immediately investigated and prosecuted for the protection
of society.

The rehabilitation of SIHI and the settlement of claims against the corporation is not a legal ground for
the extinction of petitioners' criminal liabilities. There 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 offender in order to deter him and others from committing the same or similar offense, to
isolate him from society, reform and rehabilitate him or, in general, to maintain social order.
On a final note, this Court would like to point out Republic Act No. 10142, or the Financial Rehabilitation
and Insolvency Act of 2010. Section 18 thereof explicitly provides that criminal actions against the
individual officer of a corporation are not subject to the Stay or Suspension Order in rehabilitation
proceedings.
 10. RIZAL COMMERCIAL BANKING CORPORATION V. INTERMEDIATE APPELLATE
COURT, G.R. NO. 74851

FACTS:
On September 28, 1984, BF Homes filed a "Petition for Rehabilitation and for Declaration of Suspension
of Payments" with the Securities and Exchange Commission (SEC). One of the creditors listed in its
inventory of creditors and liabilities was RCBC.

On October 26, 1984, RCBC requested the Provincial Sheriff of Rizal to extra-judicially foreclose its real
estate mortgage on some properties of BF Homes. A notice of extra-judicial foreclosure sale was issued
by the Sheriff on October 29, 1984, scheduled on November 29, 1984, copies furnished both BF Homes
and RCBC. On motion of BF Homes, the SEC issued on November 28, 1984 in SEC Case No. 002693 a
temporary restraining order (TRO), effective for 20 days, enjoining RCBC and the sheriff from
proceeding with the public auction sale.

Because of the proceedings in the SEC, the sheriff suspended the delivery to RCBC of a certificate of sale
covering the auctioned properties. On February 13, 1985, the SEC in Case No. 002693 belatedly issued a
writ of preliminary injunction stopping the auction sale which had been conducted by the sheriff two
weeks earlier.

On March 13, 1985, despite SEC Case, RCBC filed with the Regional Trial Court, an action for
mandamus against the provincial sheriff of Rizal and his deputy to compel them to execute in its favor a
certificate of sale of the auctioned properties. In answer, the sheriffs alleged that they proceeded with the
auction sale on January 29, 1985 because no writ of preliminary injunction had been issued by SEC as of
that date, but they informed the SEC that they would suspend the issuance of a certificate of sale to
RCBC. Consequently, the trial court granted the RCBC’s motion and orders respondent sheriff to execute
the and deliver to petitioner the Certification of Auction Sale.

ISSUE: Whether or not preferred creditors of distressed corporations stand on equal footing with all other
creditor’s gains relevance and materiality only upon the appointment of a management committee,
rehabilitation receiver, board, or body?

RULING: Insofar as petitioner RCBC is concerned, the provisions of Presidential Decree No. 902-A are
not yet applicable and it may still be allowed to assert its preferred status because it foreclosed on the
mortgage prior to the appointment of the management committee on March 18, 1985. The Court,
therefore, grants the motion for reconsideration on this score.
It is thus adequately clear that suspension of claims against a corporation under rehabilitation is counted
or figured up only upon the appointment of a management committee or a rehabilitation receiver. The
holding that suspension of actions for claims against a corporation under rehabilitation takes effect as
soon as the application or a petition for rehabilitation is filed with the SEC - may, to some, be more
logical and wiser but unfortunately, such is incongruent with the clear language of the law. To insist on
such ruling, no matter how practical and noble, would be to encroach upon legislative prerogative to
define the wisdom of the law- plainly judicial legislation.

Petitioner additionally argues in its motion for reconsideration that, being a mortgage creditor, it is
entitled to rely on its security and that it need not join the unsecured creditors in filing their claims before
the SEC-appointed receiver.
 11. SITUS DEVELOPMENT CORPORATION V. ASIATRUST BANK, G.R. NO. 180036, 25
JULY 2012

FACTS:
In 1972, the Chua Family, headed by its patriarch, Cua Yong Hu, a.k.a. Tony Chua, started a printing
business and put up Color Lithographic Press, Inc. (COLOR). On June 6, 1995, the Chua Family ventured
into real estate development/leasing by organizing Situs Development Corporation (SITUS) in order to
build a shopping mall complex, known as Metrolane Complex (COMPLEX) at 20th Avenue corner P.
Tuazon, Cubao, Quezon City.
To finance the construction of the COMPLEX, SITUS, COLOR Tony Chua and his wife, Siok Lu Chua,
obtained several loans from (1) ALLIED secured by real estate mortgages over two lots covered by
TCT Nos. RT-13620 and RT-13621; (2) ASIATRUST secured by a real estate mortgage over a lot
covered by TCT No. 79915; and (3) Global Banking Corporation, now METROBANK, secured by
a real estate mortgage over a lot covered by TCT No. 79916. The COMPLEX was built on said four
(4) lots, all of which are registered in the names of Tony Chua and his wife, Siok Lu Chua. On March 21,
1996, the Chua Family expanded into retail merchandising and organized Daily Supermarket, Inc.
(DAILY). SITUS, COLOR and DAILY obtained additional loans from ALLIED, ASIATRUST and
METROBANK and their real estate mortgages were updated and/or amended. Spouses Chua likewise
executed five (5) Continuing Guarantee/Comprehensive Surety in favor of ALLIED to guarantee the
payment of the loans of SITUS and DAILY. SITUS, COLOR, DAILY and the spouses Chua failed to pay
their obligations as they fell due, despite demands.

Allied and Metrobank successfully foreclosed the properties mortgaged by Situs on their favor and
respective Certificate of Sales were issued.

On May 16, 2002, ASIATRUST sent a demand letter to DAILY and COLOR for the payment of their
outstanding obligations. On June 11, 2002, SITUS, DAILY and COLOR, herein petitioners, filed a
petition for the declaration of state of suspension of payments with approval of proposed rehabilitation
plan, with the Regional Trial Court.
On October 9, 2002, petitioners filed a motion for the cancellation of the certificate of sale in favor of
Metrobank, as the same were done in violation of the Stay Order dated June 17, 2002. A vehement
opposition was filed by ALLIED arguing that the foreclosure proceedings cannot be considered as a
“claim”. On October 21, 2002, ASIATRUST filed an urgent manifestation praying for the outright
dismissal of the petition inasmuch as METROBANK and ALLIED had already foreclosed the mortgages
on the properties that stood as securities for petitioners’ obligations, as well as the lifting of the Stay
Order.

ISSUE: Whether the Stay Order affects foreclosure proceedings involving properties mortgaged by
stockholders to secure corporate debts; and
RULING
The Stay Order does not suspend the foreclosure of a mortgage constituted over the property of a third-
party mortgagor. Based on a reading of the Rules, we rule that the Stay Order cannot suspend foreclosure
proceedings already commenced over properties belonging to spouses Chua. The Stay Order can only
cover those claims directed against petitioner corporations or their properties, against petitioners’
guarantors, or against petitioners’ sureties who are not solidarily liable with them.
 12. SPS. EDUARDO AND FIDELA SOBREJUANITE V. ASB DEVELOPMENT
CORPORATION, G.R. NO. 165675, 30 SEPTEMBER 2005

FACTS
On March 7, 2001, spouses Eduardo and Fidela Sobrejuanite (Sobrejuanite) filed a Complaint for
rescission of contract, refund of payments and damages, against ASB Development Corporation
(ASBDC) before the Housing and Land Use Regulatory Board (HLURB). Sobrejuanite alleged that they
entered into a Contract to Sell with ASBDC over a condominium unit and a parking space in the BSA
Twin Tower-B Condominum located at Bank Drive, Ortigas Center, Mandaluyong City. They averred
that despite full payment and demands, ASBDC failed to deliver the property on or before December
1999 as agreed. They prayed for the rescission of the contract; refund of payments amounting to
P2,674,637.10; payment of moral and exemplary damages, attorney's fees, litigation expenses, appearance
fee and costs of the suit.

ASBDC filed a motion to dismiss or suspend proceedings in view of the approval by the Securities and
Exchange Commission (SEC) on April 26, 2001 of the rehabilitation plan of ASB Group of Companies,
which includes ASBDC, and the appointment of a rehabilitation receiver. The HLURB arbiter however
denied the motion and ordered the continuation of the proceedings.

The arbiter found that under the Contract to Sell, ASBDC should have delivered the property to
Sobrejuanite in December 1999; that the latter had fully paid their obligations except the P50,000.00
which should be paid upon completion of the construction; and that rescission of the contract with
damages is proper. The HLURB Board of Commissioners affirmed the ruling of the arbiter that the
approval of the rehabilitation plan and the appointment of a rehabilitation receiver by the SEC did not
have the effect of suspending the proceedings before the HLURB. The board also found that ASBDC
failed to deliver the property to Sobrejuanite within the prescribed period. The dispositive portion of the
Decision reads:
The Court of Appeals held that the approval by the SEC of the rehabilitation plan and the appointment of
the receiver caused the suspension of the HLURB proceedings. It also ruled that ASBDC was obliged to
deliver the property in December 1999 but its financial reverses warranted the extension of the period.

ISSUE: Whether or not the claim of Spouses Sobrejuanite lies within the jurisdiction of SEC?
RULING: Yes.
As provided under Section 6(c) of PD No. 902-A, 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 afore cited law defines claim as the debts or demands of a pecuniary
nature. In settled jurisprudence, claim means actions involving monetary considerations or all claims or
demands, of whatever nature or character against a debtor or its property, whether for money or
otherwise. It is evident that the spouses claim falls within the definition of PD 902-A and settled
jurisprudence. Hence, jurisdiction, as correctly held by the Court of Appeals, lies with SEC and not
HLURB. When a corporation threatened by bankruptcy is taken over by a receiver, all the creditors
should stand on equal footing. Not anyone of them should be given any preference by paying one or some
of them ahead of the others. This is precisely the reason for the suspension of all pending claims against
the corporation under receivership. Instead of creditors vexing the courts with suits against the distressed
firm, they are directed to file their claims with the receiver who is a duly appointed officer of the SEC.