Professional Documents
Culture Documents
Lecture
Lecture
Lecture
BANKS
PRE-NEED COMPANIES
INSURANCE COMPANIES
THREE TYPES OF
PROCEEDINGS
SUSPENSION OF PAYMENTS
REHABILITATION
Court Supervised
Voluntary
Involuntary
Pre-Negotiated
Out-of Court
LIQUIDATION
Voluntary
involuntary
SUSPENSION OF
PAYMENTS
WHO? Individual debtor (juridical persons not allowed; creditors
not allowed)
WHY? Technical insolvency or illiquidity (sufficient assets to cover
liabilities but foresees difficulty in paying them as they fall due
WHERE? RTC of the province / city in which he resides for six (6)
months prior to the filing of petition
HOW? (1) File a verified petition.
(2) Creditors Meeting – Approval by 2/3 (#) and 3/5 (P)
If no approval by creditors? Cram Down rule? NO. Proceedings
terminated. Creditors can enforce their claims at will.
BAR QUESTION
Hortencio owned a modest grocery business in Laguna. Because of
the economic downturn, he incurred huge financial liabilities. He
remained afloat only because of the properties inherited from his
parents who had both come from landed families in Laguna. His main
creditor was Puresilver Company (Puresilver), the principal supplier of
the merchandise sold in his store. To secure his credit with Puresilver,
he executed a real estate mortgage with a dragnet clause involving
his family's assets worth several millions of pesos.
WHO?
IF VOLUNTARY -
SOLE PROPRIETORSHIP – Owner / Proprietor
(Sole Proprietor is one registered with the DTI; individual
debtor is not allowed)
PARTNERSHIP – Majority of the partners
CORPORATION – Majority of the directors / trustees +
2/3 OCS
BAR QUESTIONS
Wyatt, an internet entrepreneur, engaged in a sideline business
of creating computer programs for selected clients on a per
project basis and for servicing basic computer problems of his
friends and family members. His main job was being an IT
consultant at Futurex Co., a local computer company.
Because of his ill-advised investments in the stock market and
the fraud perpetrated against him by his trusted confidante,
Wyatt was already drowning in debt, that is, he had far more
liabilities than his entire assets.
What legal recourse remained available to Wyatt? Explain your
answer. (5%) (2017 BAR EXAM)
BAR QUESTIONS
Under the Financial Rehabilitation and Insolvency Act (FRIA), the filing of a
petition for voluntary rehabilitation must be approved by:
(A) a majority vote of the Board of Directors and authorized by the vote of the
stockholders representing at least a majority of the outstanding capital stock
(B) a majority vote of the Board of Directors and authorized by the vote of the
stockholders representing at least two-thirds of the outstanding capital stock
(C) two-thirds vote of the Board of Directors and authorized by the vote of the
stockholders representing at least a majority of the outstanding capital stock
(D) two-thirds vote of the Board of Directors and authorized by the vote of the
stockholders representing at least two-thirds of the outstanding capital stock (1%)
(2014 BAR EXAM)
REHABILITATION; COURT
SUPERVISED
WHO?
IF INVOLUNTARY -
CREDITORS with an aggregate claim of at least
P 1Million or at least 25% SCS or partner’s
contributions, whichever is higher
REHABILITATION; COURT-
SUPERVISED
HOW?
Citing the commencement order, Procopio and the other officers facing
the criminal charges moved to suspend the proceedings in
the estafa cases.
(b) Suppose you are the trial judge, will you grant the motion to suspend
of Procopio, et al.? Explain your answer. (4%) (2017 BAR)
BAR QUESTIONS
DMP Corporation (DMP) obtained a loan of P20 million from National Bank (NB)
secured by a real estate mortgage over a 63,380-square-meter land situated in
Cabanatuan City. Due to the Asian Economic Crisis, DMP experienced liquidity
problems disenabling it from paying its loan on time. For that reason, NB sought
the extra judicial foreclosure of the said mortgage by filing a petition for sale on
June 30, 2003. On September 4, 2003, the mortgaged property was sold at public
auction, which was eventually awarded to NBas the highest bidder. That same
day, the Sheriff executed a Certificate of Sale in favor of NB.
On October 21, 2003, DMP filed a Petition for Rehabilitation before the Regional
Trial Court (RTC). Pursuant to this, a Stay Order was issued by the RTC on
October 27, 2003.
On the other hand, NB caused the recording of the Sheriff’s Certificate of Sale on
December 3, 2003 with the Register of Deeds of Cabanatuan City. NB executed
an Affidavit of Consolidation of Ownership and had the same annotated on the
title of DMP. Consequently, the Register of Deeds cancelled DMP’s title and
issued a new title in the name of NB on December 10, 2003.
BAR QUESTIONS
NB also filed on March 17, 2004 an Ex-Parte Petition for
Issuance of Writ of Possession before the RTC of
Cabanatuan City. After hearing, the RTC issued on
September 6, 2004 an Order directing the Issuance of the
Writ of Possession, which was issued on October 4, 2004.
DMP claims that all subsequent actions pertaining to the
Cabanatuan property should have been held in abeyance
after the Stay Order was issued by the rehabilitation court.
Is DMP correct? (4%) (2014 BAR EXAM)
BAR QUESTIONS
Yellow Fin Tuna Corporation (Yellow Fin), a domestic corporation, applied for a
credit facility in the amount of PhP 50 million with Yengzi Financial Corporation
(YFC). The application was approved and the Credit Agreement was signed and
took effect. Ysko and Yuan, Yellow Fin Chairman and President, respectively,
executed a Continuing Suretyship Agreement in favor of YFC wherein they
guaranteed the due and full payment and performance of Yellow Fin's guarantee
obligations under the credit facility. YFC soon discovered material inconsistencies
in the financial statements given by Yellow Fin, drawing YFC to conclude that
Yellow Fin committed misrepresentation. Under the Credit Agreement, any
misrepresentation by Yellow Fin or its sureties will constitute an event of default.
YFC thus called an event of default and filed a complaint for sum of money
against Yellow Fin, Ysko, and Yuan. Immediately thereafter, Yellow Fin filed a
petition for rehabilitation. The court suspended the proceedings in YFC's
complaint until the rehabilitation court disposed of the petition for rehabilitation.
YFC posits that the suspension of the proceedings should only be with respect to
Yellow Fin but not with respect to Ysko and Yuan.
OUT-OF COURT
WHO? Debtor AND at least 85% total liabilities (
comprising of at least 67% secured, 75% unsecured)
STANDSTILL PERIOD – Not exceeding 120 days
CRAM DOWN RULE
LIQUIDATION
VOLUNTARY
Individual debtor with at least 500K debt who does not have
sufficient assets to cover liabilities
Insolvent debtor
INVOLUNTARY
Individual debtor – 1 or more creditors with total claim of
at least 500K
Sole Proprietor, partnership, corporation –
3 or more creditors, aggregate claim of at least 1M, or at
least 25% SCS, whichever is higher
LIQUIDATION
Claims are filed with the Liquidator;
the assets of the insolvent debtor are disposed,
The proceeds are divided among the creditors.
LIQUIDATION ORDER
Declares the debtor insolvent
Declares juridical person as dissolved
Orders liquidation of the debtor
Prohibit payments and/or transfers of property to the
debtor