Corporate Rehabilitation

1. Veterans Philippine Scout Security Agency, Inc. v. First Dominion Prime

Holdings, Inc., G.R. No. 190907, August 23, 2012.
DOCTRINE: The actions to be 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 pecuniary nature. Jurisprudence is
settled that the suspension of proceedings referred to in the law uniformly applies
to "all actions for claims" filed against the corporation, partnership or association
under management or receivership, without distinction, except only those expenses
incurred in the ordinary course of business. The stay order is effective on all
creditors of the corporation without distinction, whether secured or unsecured.
2. Situs Development Corporation et al v. Asia Trust Bank et al., G.R. No.
180036, July 25, 2012.
DOCTRINE: The Stay Order cannot suspend foreclosure proceedings already
commenced over properties belonging to third party mortgagors. 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. Likewise, the enforcement of the mortgage lien
cannot be considered as a claim against a guarantor or a surety not solidarily liable
with the debtor corporations. While the third party mortgagors also executed
Continuing Guaranty and Comprehensive Surety undertakings in favor of the bank,
the latter did not proceed against them as individual guarantors or sureties. Rather,
by initiating extrajudicial foreclosure proceedings, the bank was directly proceeding
against the property mortgaged to them by the spouses as security.
3. Yngson, Jr. (in his capacity as Liquidator of Arcam & Company, Inc.) v.
Philippine National Bank, G.R. No. 171132, August 15, 2012
DOCTRINE: 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
liquidation proceedings. The right to foreclose such mortgage is merely suspended
upon the appointment of a management committee or rehabilitation receiver or
upon the issuance of a stay order by the trial court. However, the creditormortgagee
may exercise his right to foreclose the mortgage upon the termination of the
rehabilitation proceedings or upon the lifting of the stay order.
The court has already settled and upheld the right of the secured creditor to
foreclose the mortgages in its favor during the liquidation of a debtor corporation.
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 liquidation
proceedings. The right to foreclose such mortgage is merely suspended upon the
appointment of a management committee or rehabilitation receiver or upon the

issuance of a stay order by the trial court. However, the creditor mortgagee may
exercise his right to foreclose the mortgage upon the termination of the
rehabilitation proceedings or upon the lifting of the stay order.

4. Town and Country Enterprises Inc v. Honorable Quisumbing, G.R. No.

173610, 01 October 2012.
DOCTRINE: Considering that Metrobank acquired ownership over the mortgaged
properties upon the expiration of the redemption period on 6 February 2002, TCEI is
also out on a limb in invoking the Stay Order issued by the Rehabilitation Court on 8
October 2002 and the approval of its rehabilitation plan. An essential function of
corporate rehabilitation is, admittedly, the Stay Order which is a mechanism of
suspension of all actions and claims against the distressed corporation upon the due
appointment of a management committee or rehabilitation receiver. The Stay Order
issued by the Rehabilitation Court cannot, however, apply to the mortgage
obligations owing to Metrobank which had already been enforced even before TCEIs
filing of its petition for corporate rehabilitation on 1 October 2002. In Equitable PCI
Bank, Inc v. DNG Realty and Development Corporation, the Court upheld the validity
of the writ of possession procured by the creditor despite the subsequent issuance
of a stay order in the rehabilitation proceedings instituted by the debtor.