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02 S2 Special Topics in Mercantile Law
02 S2 Special Topics in Mercantile Law
• The must carry rule mandates that the local television (TV)
broadcast signals of an authorized TV broadcast station, such as
the GMA Network, Inc., should be carried in full by the cable
antenna television (CATV) operator, without alteration or
deletion. In this case, the Central CATV, Inc. was found not to
have violated the must-carry rule when it solicited and showed
advertisements in its cable television (CATV) system. Such
solicitation and showing of advertisements did not constitute an
infringement of the “television and broadcast markets” under
Section 2 of E.O. No. 205.
MICROSOFT CORPORATION v. ROLANDO D. MANANSALA
AND/OR MEL MANANSALA, DOING BUSINESS AS DATAMAN
TRADING COMPANY AND/OR COMIC ALLEY
G.R. No. 166391, October 21, 2015, BERSAMIN, J.
Suspension of payments
Voluntary liquidation
Involuntary Liquidation
3. What do you mean by insolvent
debtor?
Insolvent shall refer to the financial condition of a
debtor that is generally unable to pay its or his
liabilities as they fall due in the ordinary course of
business or has liabilities that are greater than its or his
assets
Previous ruling ( New Frontier vs Equitable Bank case (
2007), that an insolvent debtor can not file petition for
rehabilitation no longer holds.
4. What is the objective of rehabilitation?
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. Thus, the basic issues in rehabilitation
proceedings concern the viability and desirability of continuing the
business operations of the distressed corporation, all with a view of
effectively restoring it to a state of solvency or to its former healthy
financial condition through the adoption of a rehabilitation plan.
Philippine Asset Growth Two, Inc. and Planters Development Bank vs.
Fastech Synergy Philippines Inc., et al. G.R. No. 206528, 28 June 2016
4. What is the objective of
rehabilitation
Sec. 146 of the FRIA, which makes it applicable to "all further proceedings in
insolvency, suspension of payments and rehabilitation cases x x x except to the
extent that in the opinion of the court their application would not be feasible or
would work injustice," still presupposes a prospective application. The wording of
the law clearly shows that it is applicable to all further proceedings. In no way
could it be made retrospectively applicable to the Stay Order issued by the
rehabilitation court back in 2002.
IMPORTANT POINTS
At the time of the issuance of the Stay Order, the rules in force were the 2000 Interim
Rules of Procedure on Corporate Rehabilitation (the "Interim Rules"). Under those rules, one of
the effects of a Stay Order is the stay of the "enforcement of all claims, whether for money or
otherwise and whether such enforcement is by court action or otherwise, against the debtor,
its guarantors and sureties not solidarily liable with the debtor." Nowhere in the Interim Rules
is the rehabilitation court authorized to suspend foreclosure proceedings against properties of
third-party mortgagors. In fact, we have expressly ruled in Pacific Wide Realty and
Development Corp. v. Puerto Azul Land, Inc. that the issuance of a Stay Order cannot suspend
the foreclosure of accommodation mortgages. Whether or not the properties subject of the
third-party mortgage are used by the debtor corporation or are necessary for its operation is
of no moment, as the Interim Rules do not make a distinction. To repeat, when the Stay Order
was issued, the rehabilitation court was only empowered to suspend claims against the
debtor, its guarantors, and sureties not solidarily liable with the debtor. Thus, it was beyond
the jurisdiction of the rehabilitation court to suspend foreclosure proceedings against
properties of third-party mortgagors. SITUS DEV. CORPORATION ET AL., VS. ASIATRUST BANK
ET AL., G.R. NO. 180036, 16 JANUARY 2013, C.J. SERENO
The Court, however, finds no legal basis to retroactively apply
the 2008 Rules. Rule 9, Section 2 of the 2008 Rules allows the
retroactive application of the 2008 Rules to pending
rehabilitation proceedings only when these have not yet
undergone the initial hearing stage at the time of the effectivity
of the 2008 Rules. In the present case, the rehabilitation court
conducted the initial hearing on January 22, 2007, and approved
the rehabilitation plan on April 15, 2008 - long before the
effectivity of the 2008 Rules on January 16, 2009. Clearly, the
2008 Rules cannot be retroactively applied to the rehabilitation
petition filed by the petitioners. The petitioners cannot jointly
file the petition for rehabilitation under the Interim Rules.
The rules in effect at the time the rehabilitation petition was
filed were the Interim Rules. The Interim Rules took effect
on December 15, 2000, and did not allow the joint or
consolidated filing of rehabilitation petitions. MERVIC REALTY,
INC. AND VICCY REALTY, INC., Petitioners, v. CHINA BANKING
CORPORATION, Respondent.
G.R. No. 193748, February 03, 2016,
c. The court not bound by the
report of the receiver
The CA' s reliance on the expertise of the court-appointed Rehabilitation Receiver,
who opined that respondents' rehabilitation is viable, in order to justify its finding that the
financial statements submitted were reliable, overlooks the fact that the determination of
the validity and the approval of the rehabilitation plan is not the responsibility of the
rehabilitation receiver, but remains the function of the court. The rehabilitation receiver's
duty prior to the court's approval of the plan is to study the best way to rehabilitate the
debtor, and to ensure that the value of the debtor's properties is reasonably maintained; and
after approval, to implement the rehabilitation plan.103 Notwithstanding the credentials of
the court-appointed rehabilitation receiver, the duty to determine the feasibility of the
rehabilitation of the debtor rests with the court. While the court may consider the receiver's
report favorably recommending the debtor's rehabilitation, it is not bound thereby if, in its
judgment, the debtor's rehabilitation is not feasible. PHILIPPINE ASSET GROWTH TWO,
INC. AND PLANTERS DEVELOPMENT BANK VS. FASTECH SYNERGY PHILIPPINES
INC., ET AL. G.R. NO. 206528, 28 JUNE 2016, J. PERLAS-BERNABE
d. The court may terminate rehab if there is
no material financial commitment of the
debtor to make it work
Rule 43 of the Rules of Court prescribes the procedure to assail the final orders and
decisions in corporate rehabilitation cases filed under the Interim Rules of Procedure
on Corporate Rehabilitation. Liberality in the application of the rules is not an end in
itself. It must be pleaded with factual basis and must be allowed for equitable ends.
There must be no indication that the violation of the rule is due to negligence or
design. Liberality is an extreme exception, justifiable only when equity exists.
An insolvent debtor may apply for liquidation by filing a petition for
liquidation with the court. The petition shall be verified, shall establish
the insolvency of the debtor and shall contain (a) a schedule of the
debtor's debts and liabilities including a list of creditors with their
addresses, amounts of claims and collaterals, or securities, if any; (b) an
inventory of all its assets including receivables and claims against third
parties; and (c) the names of at least three (3) nominees to the position
of liquidator.
If the petitionis sufficient in form and substance, the court shall issue a
Liquidation Order.
Act No. 1956, more popularly known as The
Insolvency Law, deals with XXX voluntary
insolvency and involuntary insolvency.
If the petition is sufficient in form and substance, the court shall issue
an Order: (1) directing the publication of the petition or motion in a
newspaper of general circulation once a week for two (2) consecutive
weeks; and (2) directing the debtor and all creditors who are not the
petitioners to file their comment on the petition or motion within
fifteen (15) days from the date of last publication.
If,after considering the comments filed, the court determines that
the petition or motion is meritorious, it shall issue the Liquidation
Order.
Act No. 1956, more popularly known as The
Insolvency Law, deals with XXX involuntary
insolvency.
1) Said creditors with credits accrued in the Philippines and in the aggregate amount not
less than
P1,000, and NB NOW AT LEAST ONE MILLION OR 25% OF SUBSCRIBED CAPITAL
STOCK
1) Setting forth in the petition one or more acts of insolvency mentioned in Section 20 of
the
Insolvency Law; and NB THIS IS ONLY IF DEBTOR IS A NATURAL PERSON
1) To be verified by at least 3 of the petitioning creditors.
A) PETITION: TO BE FILED,
B) DOCUMENT TO ACCOMPANY THE PETITION: A BOND,
APPROVED BY THE COURT, WITH AT LEAST TWO (2)
SURETIES, IN SUCH PENAL SUM AS THE COURT SHALL
DIRECT.
C) VENUE: RTC OF THE PROVINCE OR CITY IN WHICH THE
DEBTOR RESIDES OR HAS PRINCIPAL PLACE OF
BUSINESS (NO NEED OF 6 MONTHS RESIDENCE). (BAR
1985)
Distinguish between voluntary insolvency and
involuntary insolvency.
Answer:
In voluntary insolvency, it is the debtor himself who
files the petition for insolvency, while in involuntary
insolvency, at least 3 creditors are the ones who file
the petition for insolvency against the insolvent
debtor. (BAR 1995)
Add: In voluntary liquidation by juridical debtor or voluntary
insolvency by a natural person, the filing of the petition is by
itself the act of insolvency whereas in involuntary insolvency
filed by creditors against an insolvent natural person debtor,
the latter must have committed acts of insolvency.
NB same
b. Can the corporation file a petition for
rehabilitation first, and after it is
dismissed file a petition for insolvency?
Why?
Answer:
Yes, the dismissal of a petition for rehabilitation
means that the corporation can no longer be restored
to solvency. Hence, it can file a petition for
insolvency.
ANSWER:
In insolvency, the liabilities of the debtor are more than his assets,
while in suspension of payments, assets of the debtor are more
than his liabilities.
ANSWER:
No. Horacio may not be declared insolvent. His assets worth
P1.5 M are more than his liabilities worth P1.2 M. (BAR 1998)
1. Distinguish between “suspension of payments” and
“insolvency”.
2. Who has jurisdiction over suspension of payments filed by
corporations, partnerships, or association?
1) that two-thirds (2/3) of the creditors voting unite upon the same
proposition; and
2) that the claims represented by said majority vote amount to at least
three-fifths (3/5) of the total liabilities of the debtor mentioned in the
petition; and
Partnership;
(2)
Insane person
(3)
(b) That being absent from the Republic of the Philippines, with intent
to defraud his creditors, he remains absent;
(c) That he conceals himself to avoid the service of legal process for
the purpose of hindering or delaying the liquidation or of
defrauding his creditors;
(l) That for a period of thirty (30) days, he has failed, after
demand, to pay any moneys deposited with him or
received by him in a fiduciary; and
(a) (Note: The question in letter (b) calls for the classification and preference of
creditors which are exclusively governed by the new Civil Code and already
excluded from the coverage of Insolvency Law, for purposes of Bar
Examination.) (BAR 1982)
As to petitioner's argument on the right of first preference as
regards unpaid wages, the Court has elucidated in the case of
Development Bank of the Philippines v. NLRC that a
distinction should be made between a preference of credit and
a lien. A preference applies only to claims which do not attach
to specific properties. A lien creates a charge on a particular
property. The right of first preference as regards unpaid wages
recognized by Article 110 of the Labor Code, does not
constitute a lien on the property of the insolvent debtor in
favor of workers. It is but a preference of credit in their favor, a
preference in application. . .
. . It is a method adopted to determine and specify the order in
which credits should be paid in the final distribution of the
proceeds of the insolvent's assets. It is a right to a first
preference in the discharge of the funds of the judgment
debtor. Consequently, the right of first preference for unpaid
wages may not be invoked in this case to nullify the
foreclosure sales conducted pursuant to PNB 's right as a
secured creditor to enforce its lien on specific properties of its
debtor, ARCAM. Manuel D. Yngson Jr., vs. Philippine
National Bank, G.R. No. 171132, 15 August 2012, J.
Villarama Jr.
During liquidation proceedings, a secured
creditor may waive its security or lien,
prove its claim, and share in the
distribution of the assets of the debtor, in
which case it will be admitted as an
unsecured creditor; or maintain its rights
under the security or lien, in which case:
1. The value of the property may be fixed in a manner agreed
upon by the creditor and the liquidator. When the value of the
property is less than the claim . . . the [creditor] will be
admitted . . . as a creditor for the balance. If its value exceeds
the claim . . . the liquidator may convey the property to the
creditor and waive the debtor’s right of redemption upon
receiving the excess from the creditor;
2. The liquidator may sell the property and satisfy the secured
creditor’s entire claim from the proceeds of the sale; or
3. The secured creditor may enforce the lien or foreclose on the
property pursuant to applicable laws.
A secured creditor, however, is subject to the
temporary stay of foreclosure proceedings for a
period of 180 days, upon the issuance by the
court of the Liquidation Order. Metropolitan
Bank and Trust Company vs. S.F. Naguiat
Enterprises, G.R. No. 178407, 18 March 2015,
J. Leonen
It is worth mentioning that under Republic Act No.
10142, otherwise known as the Financial Rehabilitation
and Insolvency Act (FRIA) of 2010, the right of a secured
creditor to enforce his lien during liquidation proceedings
is retained.
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