LECA REALTY CORPORATION vs. MANUELA CORPORATION deposits, interests, and penalty charges.

deposits, interests, and penalty charges. After Leca’s receipt of Adea’s Report
G.R. No. 166800 September 25, 2007 and Recommendation, petitioner questioned the reduction of Manuela’s
FACTS: liability, “considering its contractual nature which cannot be impaired during
1. Manuela Corporation (Manuela) is a duly registered domestic corporation, the process of rehabilitation.” The trial court eventually approved the
principally engaged in the business of leasing commercial spaces in shopping Rehabilitation Plan. Leca’s appeal to the Court of Appeals was dismissed for
malls to retailers. At the time, respondent owned and operated M Star One, M lack of merit.
Star, Starmall, Metropolis Star, and Pacific Mall. 8. The disagreement is grounded on the fact that the rental rates agreed upon
2. Manuela obtained several loans from two syndicates of lenders to finance the by Leca and Manuela were reduced in the Rehabilitation Plan. There was a
costs of two of its buildings. Aside from its Php2.174 billion loan from banks, gross discrepancy between the amounts of rent agreed upon by the parties
the company also had Php1.476 billion indebtedness to Hero Holdings, Inc. and those provided in the Rehabilitation Plan.
and its trade suppliers, and other parties. 9. Leca filed another petition before the appellate court alleging violation of its
3. The region was then beset by the 1997 Asian financial crisis which prompted constitutional right to non-impairment contract and the Interim Rules of
banks to stop their lending activities. This severely affected Manuela whose Procedure on Corporate Rehabilitation. The Court of Appeals, in denying the
malls did not operate sufficiently, causing serious losses to the company. The petition, ruled:
adjusted interest rates on Manuela’s loans were around 18% to 30%, which The pendency of the rehabilitation proceedings cannot be interpreted
contributed to its liquidity problems. to impair the contractual obligations previously entered into by the
4. The company, however, exerted all efforts to cushion the financial blow by contracting parties because the automatic stay of all actions is
“closing down non-income generating businesses, concentrating on its sanctioned by P.D. [No.] 902-A which provides that “all actions for
business of leasing commercial spaces, intensifying collection efforts, reducing claims against corporations, partnerships or associations under
personnel, negotiating for restructuring of loan with creditors, and working management or receivership pending before any court, tribunal, board
out a viable payment scheme without giving undue preference to any or body shall be suspended accordingly.”
creditor.” In spite of all these initiatives, Manuela still failed to pay its financial 10. Thus, Leca filed a petition for review on certiorari before the Supreme Court.
obligations.
5. This forced the company to ask the court to issue a Stay Order and approve ISSUE:
its proposed Rehabilitation Plan, which if successfully implemented will Whether the pendency of the rehabilitation proceedings can justify impairment of
“enable it to settle its remaining obligations in an orderly manner, restore its contractual obligations previously entered into by the parties?
financial viability, and allow it to resume its normal operations.” The trial court HELD:
subsequently issued the Stay Order, which stated:’ No, the pendency of the rehabilitation plan can no justify the impairment of
a) a stay in the enforcement of all claims, whether for money or contractual obligations. The amount provided in the rehabilitation plan is null and
otherwise and whether such enforcement is by court action or void.
otherwise, against petitioner MANUELA, its guarantors and sureties not
solidarily liable with it; … RATIO:
e) directing the payment in full of all administrative expenses incurred Petitioner, in support of its contention, cites in its Memorandum the treatises of
after the issuance of this Stay Order. Ateneo Law Dean Cesar L. Villanueva and former SEC Commissioner Danilo L.
Concepcion, both known authorities on Corporation Law.  In his Article which
6. The trial court appointed MarilouAdea as rehabilitation receiver. Adea appeared in the Ateneo Law Journal, Dean Villanueva said:
recommended the approval of Manuela’s Rehabilitation Plan and convened The nature and extent of the power of
with Manuela’s creditors for the latter to air their concerns. the SEC to approve and enforce a rehabilitation plan
7. Leca Realty Corporation (Leca) filed its Comment and/or Formal Claim against is certainly an important issue.  Often, a
Manuela amounting to Php193.7 million, comprised of unpaid rentals, security rehabilitation plan would require a diminution, if not
 destruction, of contractual and property rights of June 21, 2004
some, if not most of the various stakeholders in the
petitioning corporation.  In the absence of clear FACTS: MWSS granted Maynilad under a Concession Agreement to manage,
coercive legal provisions, the courts of justice and operate, repair, decommission and refurbish the existing MWSS water delivery and
much less the SEC would have no power to amend sewerage services in the West Zone Service Area, for which Maynilad undertook to
or destroy the property and contractual rights of pay the corresponding concession fees which, among other things, consisted of
private parties, much less relieve a petitioning payments of petitioners mostly foreign loans.
corporation from its contractual commitments.
To secure the concessionaires performance of its obligations, Maynilad was
On the other hand, Professor Concepcion stated that what is allowed in required under Section 6.9 of said contract to put up a bond, bank guarantee or
rehabilitation proceedings is only the suspension of payments, or the stay of other security acceptable to MWSS.
all actions for claims of distressed corporations, and upon its successful
rehabilitation, the claims must be settled in full. In compliance with this requirement, Maynilad arranged for a three-year facility
with a number of foreign banks, led by Citicorp Int’l Ltd., for the issuance of an
The Supreme Court, in agreeing with Leca, cited its ruling in The Insular Irrevocable Standby Letter of Credit in favor of MWSS for the full and prompt
LifeAssurance Company, Ltd. v. Court of Appeals, which provides: performance of Maynilads obligations to MWSS as aforestated.

When the language of the contract is explicit leaving no doubt as to the Later, the parties agreed to resolve the issues between them [Maynilad is asking
intention of the drafters thereof, the courts may not read into it any other for a mechanism by which it hoped to recover the losses it had allegedly incurred
intention that would contradict its plain import. The Court would be and would be incurring as a result of the depreciation of the Philippine Peso
rewriting the contract of lease between Insular and Sun Brothers under against the US Dollar and in filing to get what it desired, Maynilad unilaterally
the guise of construction were we to interpret the ‘option to renew’ suspended the payment of the concession fees] through an amendment of the
clause as Sun Brothers propounds it, despite the express provision in the Concession Agreement which was based on the terms set down in MWSS Board of
original contract of lease and the contracting parties’ subsequent acts. As Trustees Resolution which provided inter alia for a formula that would allow
the Court has held in Riviera Filipina, Inc. vs. Court of Appeals, ‘a court, Maynilad to recover foreign exchange losses it had incurred or would incur under
even the Supreme Court, has no right to make new contracts for the the terms of the Concession Agreement.
parties or ignore those already made by them, simply to avoid seeming
hardships. Neither abstract justice nor the rule of liberal construction However Maynilad served upon MWSS a Notice of Event of Termination, claiming
justifies the creation of a contract for the parties which they did not make that MWSS failed to comply with its obligations under the Concession Agreement
themselves or the imposition upon one party to a contract of an and its Amendment regarding the adjustment mechanism that would cover
obligation not assumed. Maynilads foreign exchange losses. Maynilad filed a Notice of Early Termination of
the concession, which was challenged by MWSS. This matter was eventually
The Court voided the Rehabilitation Plan insofar as it amends the rental rates brought before the Appeals Panel by MWSS. the Appeals Panel ruled that there
agreed upon by the parties. It opined that the change is not justified as the was no Event of Termination as defined under Art. 10.2 (ii) or 10.3 (iii) of the
amount of rent is an “essential condition of any lease contract;” thus, any Concession Agreement and that, therefore, Maynilad should pay the concession
alteration on the rate is tantamount to impairment of stipulation of the parties. fees that had fallen due.

The award of the Appeals Panel became final. MWSS, thereafter, submitted a
MWSS vs. DAWAY AND MAYNILAD written notice to Citicorp Int’l Ltd, as agent for the participating banks, that by
G.R. No. 160732. virtue of Maynilads failure to perform its obligations under the Concession
Agreement, it was drawing on the Irrevocable Standby Letter of Credit and
thereby demanded payment. The prohibition under Sec 6 (b) of Rule 4 of the Interim Rules does not apply to
herein petitioner as the prohibition is on the enforcement of claims against
Prior to this, however, Maynilad had filed on a petition for rehabilitation before the guarantors or sureties of the debtors whose obligations are not solidary with the
RTC of Quezon City which resulted in the issuance of the Stay Order and the debtor. The participating banks obligation are solidary with respondent Maynilad in
disputed Order of November 27, 2003. that it is a primary, direct, definite and an absolute undertaking to pay and is not
conditioned on the prior exhaustion of the debtors assets. These are the same
ISSUE: WON the rehabilitation court sitting as such, act in excess of its authority characteristics of a surety or solidary obligor. And being solidary, the claims
or jurisdiction when it enjoined herein petitioner from seeking the payment of the against them can be pursued separately from and independently of the
concession fees from the banks that issued the Irrevocable Standby Letter of rehabilitation case.
Credit in its favor
The terms of the Irrevocable Standby Letter of Credit do not show that the
HELD: the petition for certiorari is granted.The Order of November 27, 2003 of the obligations of the banks are not solidary with those of respondent Maynilad. On
RTC of Quezon City 90, is hereby declared null and voidand set aside. the contrary, it is issued at the request of and for the account of Maynilad in favor
of the MWSS as a bond for the full and prompt performance of the obligations by
YES the concessionaire under the Concession Agreement and herein MWSS is
authorized by the banks to draw on it by the simple act of delivering to the agent
First, the claim is not one against the debtor but against an entity that respondent a written certification substantially in the form of the Letter of Credit.
Maynilad has procured to answer for its non-performance of certain terms and
conditions of the Concession Agreement, particularly the payment of concession Taking into consideration our own rulings on the nature of letters of credit and the
fees. customs and usage developed over the years in the banking and commercial
practice of letters of credit, we hold that except when a letter of credit specifically
Secondly, Sec. 6 (b) of Rule 4 of the Interim Rules does not enjoin the stipulates otherwise, the obligation of the banks issuing letters of credit are
enforcement of all claims against guarantors and sureties, but only those claims solidary with that of the person or entity requesting for its issuance, the same
against guarantors and sureties who are not solidarily liable with the debtor. being a direct, primary, absolute and definite undertaking to pay the beneficiary
Respondent Maynilads claim that the banks are not solidarily liable with the debtor upon the presentation of the set of documents required therein.
does not find support in jurisprudence.
The public respondent, therefore, exceeded his jurisdiction, in holding that he was
Letters of credit were developed for the purpose of insuring to a seller payment of competent to act on the obligation of the banks under the Letter of Credit under
a definite amount upon the presentation of documentsand is thus a commitment the argument that this was not a solidary obligation with that of the debtor. Being
by the issuer that the party in whose favor it is issued and who can collect upon it a solidary obligation, the letter of credit is excluded from the jurisdiction of the
will have his credit against the applicant of the letter, duly paid in the amount rehabilitation court and therefore in enjoining petitioner from proceeding against
specified in the letter They are in effect absolute undertakings to pay the money the Standby Letters of Credit to which it had a clear right under the law and the
advanced or the amount for which credit is given on the faith of the instrument. terms of said Standby Letter of Credit, public respondent acted in excess of his
They are primary obligations and not accessory contracts and while they are jurisdiction.
security arrangements, they are not converted thereby into contracts of guaranty.
What distinguishes letters of credit from other accessory contracts, is the NOTES:
engagement of the issuing bank to pay the seller once the draft and other
required shipping documents are presented to it. They are definite undertakings to We held in Feati Bank & Trust Company v. Court of Appeals that the concept of
pay at sight once the documents stipulated therein are presented. guarantee vis–vis the concept of an irrevocable letter of credit are inconsistent
with each other.The guarantee theory destroys the independence of the banks
responsibility from the contract upon which it was opened and the nature of both The SEC issued a TRO and subsequently a writ of preliminary injunction, enjoining
contracts is mutually in conflict with each other. In contracts of guarantee, the PNB and the Sheriff of the RTC of Guagua, Pampanga from proceeding with the
guarantors obligation is merely collateral and it arises only upon the default of the foreclosure sale of the mortgaged properties. An interim management committee
person primarily liable. On the other hand, in an irrevocable letter of credit, the was also created.
bank undertakes a primary obligation. We have also defined a letter of credit as an
engagement by a bank or other person made at the request of a customer that On February 9, 2000, the SEC ruled that ARCAM can no longer be rehabilitated.
the issuer shall honor drafts or other demands of payment upon compliance with The SEC noted that the petition for suspension of payment was filed in December
the conditions specified in the credit. 1993 and six years had passed but the potential white knight investor had not
infused the much needed capital to bail out ARCAM from its financial difficulties.
Thus, the SEC decreed that ARCAM be dissolved and placed under liquidation. SEC
MANUEL D. YNGSON, JR. vs PHILIPPINE NATIONAL BANK appointed Atty. Manuel D. Yngson, Jr. & Associates as Liquidator for ARCAM.
G.R. No. 171132 August 15, 2012
Petitioner filed with the SEC a Motion for the Issuance of a TRO and/or Writ of
Digest of digest: Preliminary Injunction to enjoin the foreclosure sale of ARCAM’s assets. The SEC
ARCAM entered into a loan with PNB secured by several property mortgages. en banc issued a TRO effective for 72 hours, but said TRO lapsed without any writ
ARCAM failed to pay hence PNB foreclosed the properties. Before the auction sale of preliminary injunction being issued by the SEC.
of the properties, SEC issued a TRO and subsequently a writ of preliminary
injunction enjoining PNB and RTC’s sheriff from proceeding with the foreclosure. 6 Consequently, on July 28, 2000, PNB resumed the proceedings for the extrajudicial
years had passed but ARCAM was not rehabilitated because its expected investor foreclosure sale of the mortgaged properties. PNB emerged as the highest winning
did not push through with its promise. SEC then decreed petitioner Yngson as bidder in the auction sale, and certificates of sale were issued in its favor.
liquidator of ARCAM.
Petitioner filed with the SEC a motion to nullify the auction sale. Petitioner posited
PNB then proceeded with the foreclosure sale. After the sale, petitioner filed that all actions against companies that are under liquidation are suspended
motion to nullify the sale on the ground that all actions against companies under because liquidation is a continuation of the petition for suspension proceedings.
liquidation are suspended because liquidation is a continuation of the suspension Petitioner argued that the prohibition against foreclosure subsisted during
proceedings. SEC ruled in favor of PNB; CA also denied petitioner’s appeal. Issue is liquidation because payment of all of ARCAM’s obligations was proscribed except
whether foreclosure sale of PNB is valid. Yes, NCC and FRIA provide that a those authorized by the Commission.
secured creditor enjoys preference over a specific mortgaged property.
SEC denied petitioner’s motion to nullify the foreclosure sale. CA denied the appeal
Facts: of petitioner mainly on procedural grounds.
ARCAM is engaged in the operation of a sugar mill in Pampanga. Between 1991
and 1993, ARCAM applied for and was granted a loan by respondent PNB. To Issue:
secure the loan, ARCAM executed a Real Estate Mortgage to its personal and real WON SEC erred in ruling that PNB was not barred from foreclosing on the
properties. mortgages

ARCAM defaulted hence PNB initiated extrajudicial foreclosure proceedings in the Decision:
Office of the Clerk of Court/Ex Officio Sheriff of the RTC of Guagua, Pampanga. No, PNB, as a secured creditor, enjoys preference over a specific mortgaged
The public auction was scheduled on December 29, 1993 for the mortgaged real property and has a right to foreclose the mortgage under Section 2248 of the Civil
properties and December 8, 1993 for the mortgaged personal properties. Code. The creditor-mortgagee has the right to foreclose the mortgage over a
specific real property whether or not the debtor-mortgagor is under insolvency or in favor of TRM which, upon presentment for payment, were dishonored by the
liquidation proceedings. drawee bank on May 11, 1995, April 6, 1995, and April 28, 1995, respectively, for
the reason that the payment was either stopped or that the checks were drawn
The right to foreclose such mortgage is merely suspended upon the appointment against insufficient funds. TRM, through a demand letter, demanded that
of a management committee or rehabilitation receiver or upon the issuance of a respondent make good the checks and pay MPPI’s outstanding obligations within
stay order by the trial court. However, the creditor-mortgagee may exercise his five (5) banking days from receipt of the letter, otherwise, it would be constrained
right to foreclose the mortgage upon the termination of the rehabilitation to file both criminal and civil actions to protect its interest. Respondent, however,
proceedings or upon the lifting of the stay order. failed to heed the demand. So petitioner filed a complaint against respondent for
violation of Batas Pambansa (B.P.) Blg. 22 with the Office of the City Prosecutor,
SEC. 114 (Rights of Secured Creditors) of the FRIA Law provides that the Pasig City; upon finding probable cause against respondent, the investigating
Liquidation Order shall not affect the right of a secured creditor to enforce his lien prosecutor filed three separate informations against him for violation of B.P. Blg.
in accordance with the applicable contract or law. 22 before the Metropolitan Trial Court (MeTC), Pasig City.

PNB elected to maintain its rights under the security or lien; hence, its right to Prior thereto, MPPI and its principal stockholders, the Spouses Alfredo and
foreclose the mortgaged properties should be respected. Elizabeth Co filed before the Securities and Exchange Commission (SEC), under
P.D. No. 902-A, a Petition for Suspension of Payments for Rehabilitation Purposes
with prayer for the creation of a management committee and for a temporary
restraining order and/or preliminary injunction. The SEC issued an Omnibus Order
creating a Management Committee and consequently suspending all actions for
claims against MPPI pending before any court, tribunal, branch or body.

Meanwhile, in the criminal cases pending before the MeTC, respondent was
arraigned, and the cases were set for trial. Prior to initial trial, respondent filed a
Motion to Suspend Proceedings which petitioner opposed. The SEC, through an
order, granted respondents Motion to Compel Compliance and For Issuance of
Rosario v. Co Orders of Suspension in the Criminal Cases. On September 3, 1996, the MeTC
G.R. No. 133608 issued an Order denying respondents motion to suspend proceedings. It held that
August 26, 2008 the elements of a prejudicial question do not exist. Respondent filed a Motion for
Corporate Dissolution Reconsideration but it was denied. Aggrieved, respondent filed a petition for
- Rehabilitation (Financial Rehabilitation and Insolvency Act of 2010, certiorari before the RTC questioning the above orders. The RTC enjoined the
R.A. No. 10142) MeTC from further proceeding with Criminal Cases during the pendency of the
action before it. Then, petitioner filed a Motion for Partial Reconsideration.
However, upon agreement of the parties, resolution on the motion was held in
Facts: abeyance awaiting the RTC resolution in the main case, the issues raised being
Petitioner Tiong Rosario is the proprietor of TR Mercantile (TRM), a single identical. The RTC issued the assailed Resolution granting respondent’s petition
proprietorship engaged in the business of selling and trading paper products and stating that the respondent Court is directed to suspend the proceedings in
supplies of various kinds; while respondent Alfonso Co is the Chairman and Criminal Cases during the pendency of the petition in SEC Case. Hence, this
President of Modern Paper Products, Inc. (MPPI). In the course of its business, petition.
MPPI purchased from TRM a variety of paper products on credit. As payment for
his purchases, respondent issued the three (3) China Banking Corporation checks
Issue: Whether a criminal case against a corporate officer for violation of B.P. 22 rehabilitate him or, in general, to maintain social order. Hence, the criminal
could be suspended on account of the pendency of a petition for suspension of prosecution is designed to promote the public welfare by punishing offenders and
payments filed by that officer’s corporation with the Securities and Exchange deterring others.
Commission?
Consequently, the filing of the case for violation of B.P. Blg. 22 is not a claim that
can be enjoined within the purview of P.D. No. 902-A. True, although conviction of
the accused for the alleged crime could result in the restitution, reparation or
Ruling: indemnification of the private offended party for the damage or injury he
No. A criminal case against a corporate officer for violation of BP 22 could not be sustained by reason of the felonious act of the accused, nevertheless, prosecution
suspended on account of the pendency of a petition for suspension of payments for violation of B.P. Blg. 22 is a criminal action.
filed by that officer’s corporation with the Securities and Exchange Commission.
A criminal action has a dual purpose, namely, the punishment of the offender and
As early as Finasia Investment and Finance Corp. v. Court of Appeals, this Court indemnity to the offended party. The dominant and primordial objective of the
clarified that the word claim used in Sec. 6 (c) of P.D. No. 902-A, as amended, criminal action is the punishment of the offender. The civil action is merely
refers to debts or demands of a pecuniary nature and the assertion of a right to incidental to and consequent to the conviction of the accused. The reason for this
have money paid. It is used in special proceedings like those before an is that criminal actions are primarily intended to vindicate an outrage against the
administrative court on insolvency. In Arranza v. B.F. Homes, Inc., claim was sovereignty of the state and to impose the appropriate penalty for the vindication
defined as an action involving monetary considerations. Clearly, the suspension of the disturbance to the social order caused by the offender. On the other hand,
contemplated under Sec. 6 (c) of P.D. No. 902-A refers only to claims involving the action between the private complainant and the accused is intended solely to
actions which are pecuniary in nature. indemnify the former.

The purpose of suspending the proceedings under P.D. No. 902-A is to prevent a As far as the criminal aspect of the cases is concerned, the provisions of Sec. 6 (c)
creditor from obtaining an advantage or preference over another and to protect of P.D. No. 902-A should not interfere with the prosecution of a case for violation
and preserve the rights of party litigants as well as the interest of the investing of B.P. Blg. 22, even if restitution, reparation or indemnification could be ordered,
public or creditors. It is intended to give enough breathing space for the because an absurdity would result, i.e., one who has engaged in criminal conduct
management committee or rehabilitation receiver to make the business viable could escape punishment by the mere filing of a petition for rehabilitation by the
again, without having to divert attention and resources to litigations in various corporation of which he is an officer. At any rate, should the court deem it fit to
fora. award indemnification, such award would now fall under the category of a claim
under Sec. 6 (c) of P.D. No. 902-A, considering that it is already one for monetary
Whereas, the gravamen of the offense punished by B.P. Blg. 22 is the act of or pecuniary consideration. Only to this extent can the order of suspension be
making and issuing a worthless check; that is, a check that is dishonored upon its considered obligatory upon any court, tribunal, branch or body where there are
presentation for payment. It is designed to prevent damage to trade, commerce, pending actions for claims against the distressed corporation.
and banking caused by worthless checks. In Lozano v. Martinez, the SC declared
that it is not the nonpayment of an obligation which the law punishes. The thrust Gelano V. CA (1981)
of the law is to prohibit, under pain of penal sanctions, the making and circulation G.R. No. L-39050 February 24, 1981
of worthless checks. Because of its deleterious effects on the public interest, the Lessons Applicable: Who are liable after dissolution and winding-up?
practice is proscribed by the law. The law punishes the act not as an offense (Corporate Law)
against property, but an offense against public order. The prime purpose of the
criminal action is to punish the offender in order to deter him and others from FACTS:
committing the same or similar offense, to isolate him from society, to reform and
Insular Sawmill, Inc. leased the paraphernal property of Guillermina M. Gelano August 23, 1973: held spouses jointly ad severally liable
(wife) for P1.2K/month
ISSUE: W/N a corporation, whose corporate life had ceased by the expiration of its
November 19, 1947-December 26, 1950: Carlos Gelano (husband) obtained cash term of existence, could still continue prosecuting and defending suits after its
advances of P25,950 on account of rentals dissolution and beyond the period of 3 years provided for under Act No. 1459,
otherwise known as the Corporation law, to wind up its affairs, without having
agreement: Insular Sawmill, Inc. could deduct the same from the monthly rentals undertaken any step to transfer its assets to a trustee or assignee.
of the leased premises until the cash advances are fully paid
HELD: YES. Affirmed with mod - conjugal property is liable
Carlos Gelano was able to pay only P5,950.00 thereby leaving an unpaid balance time during which the corporation, through its own officers, may conduct the
of P20,000.00 which he refused to pay liquidation of its assets and sue and be sued as a corporation is limited to 3 years
from the time the period of dissolution commences; but that there is no time
Guillermina M. Gelano refused to pay on the ground that said amount was for the limited within which the trustees must complete a liquidation placed in their hands
personal account of her husband asked for by, and given to him, without her
knowledge and consent and did not benefit the family only the conveyance to the trustees must be made within the 3-year period

May 4, 1948 to September 11, 1949: Spouses Gelanos purchased lumber materials effect of the conveyance is to make the trustees the legal owners of the property
on credit leaving P946.46 unpaid conveyed, subject to the beneficial interest therein of creditors and stockholders

July 14, 1952: Joseph Tan Yoc Su, as accomdating party, executed a joint and trustee may commence a suit which can proceed to final judgment even beyond
several promissory note with Carlos Gelano in favor of China Banking Corporation the 3-year period
bank in the amount of P8,000.00 payable in 60 days to help renew the previous
loan of the spouses "trustee" = general concept - include the counsel to whom was entrusted in the
instant case
the bank collected P9,106.00 including interests by debiting the current account of
the corp. The purpose in the transfer of the assets of the corporation to a trustee upon its
dissolution is more for the protection of its creditor and stockholders
Carlos only paid P5,000
Debtors may not take advantage of the failure of the corporation to transfer its
Guillermina refused to pay on the ground that she had no knowledge of such assets to a trustee
accomodation
Section 77 of the Corporation Law, when the corporate existence is terminated in
May 29, 1959: Insular thru Atty. German Lee, filed a complaint for collection any legal manner, the corporation shall nevertheless continue as a body corporate
against the spouses before the CFI for 3 years after the time when it would have been dissolved, for the purpose of
prosecuting and defending suits by or against it.
In the meantime, private respondent amended its Articles of Incorporation to
shorten its term of existence up to December 31, 1960 only
LUIS C. CLEMENTE, LEONOR CLEMENTE DE ELEPAÑO, HEIRS OF
November 20, 1964: CFI favored Insular holding Carlos Gelano liable ARCADIO C. OCHOA, represented by FE O. OCHOA-BAYBAY,
CONCEPCION, MARIANO, ARTEMIO, VICENTE, ANGELITA, ROBERTO,
HERNANDO AND LOURDES, all surnamed ELEPAÑO, petitioners, vs. THE Among the causes for such dissolution are when the corporate term has expired or
HON. COURT OF APPEALS, ELVIRA PANDINCO-CASTRO AND VICTOR when, upon a verified complaint and after notice and hearing, the SEC orders the
CASTRO, respondents. dissolution of a corporation for its continuous inactivity for at least 5 years. The
G.R. No. 82407 March 27, 1995 corporation continues to be a body corporate for 3 years after its dissolution for
VITUG, J.: 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
FACTS: Petitioners sought to be declared the owners of a piece of land situated in remaining assets. It may, during the 3-year term, appoint a trustee or a receiver
Calamba, Laguna bought by "Sociedad Popular Calambeña". The “sociedad” was who may act beyond that period. If the 3-year extended life has expired without a
organized at the advent of the early American occupation of the Philippines. It did trustee or receiver having been expressly designated by the corporation, the board
business and held itself out as a corporation from 1909 up to 1932. Its principal of directors (or trustees) itself may be permitted to so continue as "trustees" by
business was cockfighting or the operation and management of a cockpit. The legal implication to complete the corporate liquidation. Still in the absence of a
"Sociedad" acquired the subject parcel of land from the Friar Lands Estate of board of directors or trustees, those having any pecuniary interest in the assets,
Calamba. Patent was issued and the Real Property Tax Register of the Office of including not only the shareholders but likewise the creditors of the corporation,
the Treasurer of Calamba, Laguna showed that the lot was declared and assessed acting for and in its behalf, might make proper representations with the SEC for
for taxation purposes. working out a final settlement of the corporate concerns.
Plaintiffs show that Mariano Elepaño and Pablo Clemente, now both deceased,
were the original stockholders of the "sociedad." Pablo Clemente's shares of stocks BenignoVigilla, et al. v Philippine College of Criminology, Inc. GR No.
were later distributed and apportioned to his heirs. The "sociedad" then issued 200094, June 10, 2013
stock certificates to the heirs. On the basis of their respective stocks certificates, Law Principle:
they, along with the heirs of Mariano Elepaño jointly claimed ownership over the Anything favorable to the labor-only contractor redounds to the benefit of the
subject parcel of land, asserting that their fathers being the only known employer under the principle of solidary liability
stockholders of the "sociedad" they, to the exclusion of all others, are entitled to
be declared owners of the lot. Private respondents, in their answer; likewise Facts:
claimed ownership of the property by virtue of acquisitive prescription.
The trial court dismissed the complaint on the grounds of insufficiency of evidence The petitioners work for the Philippine College of Criminology Inc. (PCCr) as
and absent a corporate liquidation, it is the corporation, not the stockholders, janitors, janitress and supervisor in its maintenance department. The petitioners
which can assert, if at all, any title to the corporate assets. The CA sustained the were made to understand by the respondent PCCr that they are under the
dismissal of the complaint. Metropolitan Building Services, Inc. (MBMSI) which is a corporation engaged in
providing janitorial services. PCCr terminated the services of MBMSI on 2009 which
ISSUE: Whether or not petitioners can be held to have succeeded in establishing resulted in the dismissal of the petitioners. An illegal dismissal complaint was then
for themselves a firm title to the property in question. filed against PCCr by the petitioners contending that it is their real employer and
not MBMSI. Subsequently, the PCCr submitted to the Labor Arbiter waivers,
HELD: NO. Except in showing that they are the successors-in-interest of Elepaño releases and quitclaims that were executed by the petitioners in favor to MBMSI.
and Clemente, petitioners have been unable to come up with any evidence to
substantiate their claim of ownership of the corporate asset. The Labor Arbiter and NLRC ruled in favor of the petitioner, however upon filing
If, indeed, the sociedad has long become defunct, it should behoove petitioners, the petition for review on certiorari before the Court of Appeals, the CA ruled that
or anyone else who may have any interest in the corporation, to take appropriate the quitclaims, releases and waivers executed by the petitioners in favor to MBMSI
measures before a proper forum for a peremptory settlement of its affairs. We redounds to the benefit of PCCr by virtue of solidary liability under Article 1217 of
might invite attention to the various modes provided by the Corporation Code for the NewCivil Code. The petitioners contend that under Article 106 of the Labor
dissolving, liquidating or winding up, and terminating the life of the corporation.
Code a labor-only contractor's liability is not solidary as it is the employer who and to hold, manage, invest and reinvest the Fund in Trust Account No. 1797 in its
should be directly responsible to the supplied worker. behalf. When RMC ceased its business operations, the BOD of Philbank decided to
apply the remaining trust assets held by it in the name of the Fund against part of
Issue the RMC’s outstanding obligations.

Whether or not the quitclaims, releases and waivers executed by the petitioners in When the unpaid employees of RMC learned of the trust account, they demanded
favor to MBMSI redounds to the benefit of PCCr? the payment of their share, which went unheeded. They, together with the
members of the Fund, filed a complaint for accounting against the BOD of
Held Philbank and its officers. The trial court ruled in favor of the BOT of RMC and was
affirmed on appeal. The BOD on petition for review on certiorari under Rule 45 of
Yes. the Rules of Court contends that without known claimants of the Fund for eleven
(11) years since RMC closed shop, it was justifiable for petitioner to consider the
The Supreme Court held that the basis of the solidary liability of the principal with Fund to have “technically reverted” to, and formed part of RMC’s assets. Hence, it
those engaged in labor-only contracting is the last paragraph of Article 106 of the could be applied to satisfy RMC’s debts to Philbank.
Labor Code that provides, "In such cases of labor-only contracting, the person or
intermediary shall be considered merely as an agent of the employer who shall be ISSUE:
responsible to the workers in the same manner and extent as if the latter were Whether the BOD’s contention is correct.
directly employed by him."
RULING:
It also pointed out D.O. No. 18-A, s. 2011 section 27 providing for the effects of No. The Court held that “a trust is a “fiduciary relationship with respect to property
labor-only contracting "where upon the finding by competent authority of labor- which involves the existence of equitable duties imposed upon the holder of the
only contracting shall render the principal jointly and severally liable with the title to the property to deal with it for the benefit of another.” A trust is either
contractor to the latter's employees, in the same manner and extent that the express or implied. Express trusts are those which the direct and positive acts of
principal is liable to employees directly hired by him/her, as provided in Article 106 the parties create, by some writing or deed, or will, or by words evincing an
of the Labor Code." intention to create a trust.”

Hence, the PCCr's solidary liability was already expunged by virtue of the releases,
waivers and quitclaims executed by the petitioners in favor of MBMSI by virtue of
Article 1217 of the Civil Code providing that "payment made by one of the solidary
debtors extinguishes the obligation."

Metropolitan Bank & Trust Company, Inc. vs. Board of Trustees of

FACTS:
The Riverside Mills Corporation (RMC) established a Plan for its regular employees.
The contributions to the plan shall form part of the Fund which shall be held,
invested and distributed by the Commercial Bank and Trust Company. The BOT of
the fund entered into an agreement with Philbank to act as an agent of the BOT