BPI Family Savings Bank vs St Michael Medical Center

Issues:
1. Whether or not the SMMCI can be rehabilitated
2. Whether or not the petition for rehabilitation is sufficient in form and substance
3. WON the Rehabilitation Plan is sufficient in form or substance

Ruling:
1. No. Rehabilitation refers to the restoration of the debtor to a condition of successful operation and
solvency. It assumes that the corporation has been operational but for some reasons like economic crisis
or mismanagement become distressed or insolvent. It cannot be said that SMMCI had been in a position
of successful operation and solvency at the time of the rehabilitation petition. SMMCI had in fact
admitted that it has not formally operated nor earned any income since its operation.
2. No. SMMCI failed to submit its audited financial statement at the end of its last fiscal year and an
interim financial statement as of the end of the month prior to the filing of the rehabilitation plan. The
defect is not negated by the submission of the financial documents pertaining to St. Michael Hospital
which is a separate entity from SMMCI. There was even no showing of the purported merger of the two
entities. Control over the two entities by spouses Rodin was not sufficient to warrant the singular
treatment between the two. Lastly the petition is not a proper petition to pierce the corporate veil of
SMMCI as there was no creditor claiming to to be a victim of fraud, an essential requisite for the
application of the doctrine.
3. No. There was no material commitments to support the rehabilitation plan and a liquidation analysis.
Material financial commitment is necessary to guaranty the continued successful operation of the debtor
during the period of rehabilitation. The rehabilitation suggests that the capital of SMMCI would come to
potential investors which are merely pending. These borders on the speculative and does not fit as a
material financial commitment which would inspire confidence that the rehabilitation would be
successful. The lack of liquidation analysis prevents the court from ascertaining if the petitioner debtor’s
creditors can recover by way of the present value of payments projected in the plan, more if the debtor
continues as a going concern than if it is immediately liquidated. Again the submission of St. Michael
hospital would not be sufficient as it is a separate entity.

Wonderbook Corporation vs Philippine Bank of Communications

Issues:
1. Whether or not Wonderbook can still be rehabilitated
2. Whether or not the rehabilitation plan is sufficient in form and substance

Ruling:
1. No. Rehabilitation contemplates continuance of corporate life and activities in an effort to restore and
reinstate the corporation in its former position of successful operation and solvency. Rehabilitatio should
be denied to corporations whose insolvency appears to be irreversible and whose sole purpose is to delay
the enforcement of any of the rights of the creditors. Rehabilitation is available to a corporation who,
while illiquid, has assets to generate more cash if used in its daily opearations than sold. Hence,
rehabilitation is not the proper remedy for wonderbook’s dire financial condition. Given that it is
actually insolvent and not just suffering from temporary liquidity problems, rehabilitation is not a viable
option.
2. No. The rehabilitation plan did not contain material financial commitments. This is critical in
determining its resolve, determination, earnestness and good faith in financing its proposed
rehabilitation plan. The commitments of converting all deposits for future subscription to common
stocks and treating all its payables to its officers as trade payables. Treating its debts to its stockholders
as mere trade payables only signifies that no priority in payment will be accorded to them but this does
 not provide wonder books with the means to finance the activities supposedly ensuring its successful
rehabilitation. A rehabilitation plan is infeasible if assets are nearly or fully depreciated.

Viva Shipping Lines vas Kepler

Issues:
1. Whether or not the rule requiring the exercise of liberality as to the impleading of the creditors of Viva
should be granted.
2. Whether or not the rehabilitation of Viva should be sustained.

Ruling:
1. Not important
2. No. The RTC correctly dismissed the rehabilitation of Viva. The rehabilitation plan must be feasible.
There must be a showing that there is a real opportunity to rehabilitate the corporation in view of the
assumptions made and financial goals stated in the rehabilitation plan. A corporation’s assets may be
more than its current liabilities but some assets may be in the form of land or capital equipment.
Rehabilitation sees to it that those assets genarate more value if used efficiently rather than if liquidated.
The RTC correctly found that the petitioner’s assets are non performing when it dismissed the amended
petition. The petitioner already admitted that its vessels were no longer serviceable. Petitioner’s
rehabilitation plan should have shown it has enough assets to be able to continue business. A
rehabilitation plan is infeasible if the assets are nearly or fully depreciated. While the rehabilitation plan
shows that it will entail the selling of the assets of its sister company’s assets, this plan requires the
conformity of the sister company. These two companies are still separate juridical entities even if they
have the same directorship and ownership.

Ao-as vs Court of Appeals

Issue:
1. Whether or not the creation of a management committee is proper.

Ruling:
1. No.

Lingcod Manggagawa as Rubberworld vs Rubberworld Philippines

Issue:
1. Whether or not the proceedings before the Labor Arbiter should have been suspended when the SEC
ordered the suspension of all claims against Rubberworld.

Ruling:
1. Yes. It cannot be said that the decision of the Labor Arbiter and the writ of execution of the NLRC
could ever attain final and executory status. The labor arbiter completely disregarded and violated PD
902A which mandates the suspension of all actions against a corporation placed under a management
committee by the SEC. Thus the proceedings before the Labor Arbiter and the writ and order issued by
the NLRC are null and void. It is immaterial whether an appeal from the labor arbiter’s decision was
perfected or not since a judgment void ab initio is non existent and cannot attain finality. No distinction
in favour of labour claims is mentioned in the law. Hence, all actions for claims should be suspended.
Moreover at the time the SEC issued the suspension order , the proceedings before the labour arbiter
were still very much pending. As such, no final and executors decision could validly emanated
therefrom.

Negros Navigation vs Court of Appeals

Issues:
1. Whether the maritime lien is suspended
2. Whether or not the RTC of Cebu acting as an admiralty court, was divested by the RTC of Manila of its
jurisdiction over the maritime claim of THI

Ruling:
1. Yes. PD 902A mandates that upon the appointment of the management committee, rehabilitation
receiver, board or body, all actions for claims against corporation, partnerships or association under
management committee or receivership pending before any court tribunal or board shall be suspended.
The law does not make any distinction as to what claims are covered. Therefore, no exceptions in favor
of maritime lien. The purpose of the suspension order is to enable the management committee or the
rehabilitation receiver to effectively exercise his powers free from any judicial interference that might
hinder or prevent the rescue of the company. The order is effective on all creditors of the corporation
without distinction, whether secured or unsecured. The properties of the corporation are held in trust for
the equal benefit of all creditors. The claim of THI is still a preferred maritime lien and it is not
diminished by the issuance of the stay order. The enforcement of its claim was merely suspended. Upon
the termination of the rehabilitation proceedings, in case of bankruptcy, THI can still enforce its claim.
2. No. The RTC of Manila acting as rehabilitation court merely suspended the proceedings in the admiralty
case in the RTC of Cebu. It did not divest the RTC of Cebu of its jurisdiction over the maritime lien of
THI against NCC. The same claim can still be enforced even after the rehabilitation proceedings. A
maritime lien is not affected by bankruptcy or reorganisation but the case however involves the
rehabilitation of NCC.

Garcia vs PAL

Issues:
1. Whether or not an employee who was declared to be reinstated by the Labor Arbiter is entitled to be
reinstated immediately pending appeal even if reinstatement is eventually denied on appeal.
2. Whether or not a corporation, under rehabilitation, is required to pay wages or reinstate an employee
ordered to be reinstated by the Labour Arbiter pending appeal even if the reinstatement was reversed on
appeal.

Ruling:

1. Yes. Even if the order or reinstatement of the Labour Arbiter is reversed on appeal, it is obligatory upon
the employer to reinstate and pay the wages of the dismissed employee during the period of appeal until
it is reversed by the higher court. It settles to the view that the Labour Arbiter’s decision is immediately
executory.
2. No. After the labour arbiter’s decision is reversed by the higher tribunal, the employee may be barred
from collecting unpaid wages, if it is shown that the delay in enforcing the reinstatement pending appeal
was without fault on the part of the employer. Moreover, unless there is a restraining order, the
implementation of the order of reinstatement is ministerial and mandatory. The injunction or suspension
of claims by legislative fiat partakes of the nature of a restraining order that constitutes as a legal
justification for the respondent’s non compliance with the reinstatement order. Under this circumstance
the employer-corporation itself is in a judicially monitored state of being resuscitated to survive.

Spouses Sobrejuanite vs ASB Development Corporation

Issue:
1. Whether or not HLURB should have suspended the proceedings before it.
Ruling:
1. Yes. The purpose of the proceedings is to prevent a creditor from obtaining an advantage or preference
over another and to protect and to preserve the rights of party litigants as well as the interest of the
investing public or creditors. The suspension would enable the management committee or rehabilitation
receiver to effectively exercise its/his powers free from any judicial or extrajudicial interference that
might unduly hinder or prevent the rescue of the debtor company. A claim that should be suspended
refers only to debts or demand pecuniary in nature. In Sobrejuanite’s complaint it prayed for the refund
of its purchase price with other damages. The reliance in the arranza case is misplaced as the said case
does not involve pecuniary claims.

MWSS vs Daway

Issue:
1. Whether or not the letter of credit issued by a bank is excluded from the jurisdiction of the rehabilitation
court and my thus pursued by the creditors

Ruling:
1. Yes. Maynilad’s financial statement do not show the irrevocable standby letter of credit as part of its
liabilities or assets. The interim rules on rehabilitation does not enjoin the enforcement of all claims
against guarantors and sureties, but only those claims against guarantors and sureties not solidarily liable
with the debtor. In an irrevocable letter of credit, the bank undertakes a primary obligation. The
participating banks are solidarly liable with Maynilad as it is a primary, direct, and an absolute
undertaking to pay ad not conditioned to prior exhaustion of the debtor’s assets. The terms of the
irrevocable standby letter of credit do not show that the obligations of the banks are not solitary with
those of maynilad. Being solitary, the claims can be pursued separately from and independently of the
rehabilitation case.

Panlilio vs RTC of Manila

Issue:
1. Whether or not the a criminal case against the officers of a corporation may be suspended by the stay
order.

Ruling:
1. No. The term claim has been defined as referring to debt or demands that are pecuniary in nature or an
assertion to have money paid. The prime purpose of the criminal action is to punish the offender in order
to deter him and others from committing the same offense. The prosecution of the corporation has no
bearing in the rehabilitation proceeding, especially since they were charged in their individual
capacities. Such being the case the purpose of the law is not compromised, since the rehabilitation
receiver can still discharge their duties. It bears stressing that the rehabilitation receiver is not the one
who will defend the officers of the corporation. If civil liability would be adjudicated, these claims
would necessarily be enjoined by the state order issued by the rehabilitation court.