G.R. No.

171681

September 11, 2009

KEI MARIE and BIANCA ANGELICA, all surnamed ABRERA, minors and represented by their parent EVELYN C. ABRERA; ASTRID NOELLE S. ALMEDA, minor, represented by his parent MA. ROMINA FRANCHESCA S. ALMEDA; JOHN KENNETH P. ANDALIS, minor, represented by his parent ELSA P. ANDALIS; RONALD B. ANG, minor, represented by his parent MA. JUDY B. ANG; MARIEL ANGELES, minor, represented by her parent ENRIQUE E. ANGELES; JEREMIAH M. ANTONIO, minor, represented by his parent ELSA M. ANTONIO; LESTER C. ARAO, minor, represented by his parent ROSALINA C. ARAO; MA. LIRIO A. AROMIN, minor, represented by his parent FREDERICK A. AROMIN; ELDY S. AZURIN, minor, represented by her parent ELSA S. AZURIN; MARION JANINE J. AZURIN, minor, represented by her parent MA. THERESA J. AZURIN; PIOLO MIGUEL G. BARLETA, minor, represented by his parent HENRY LUIS E. BARLETA; VIANCA SOPHIA, VINCE PATRICK and VOLTAIRE BYRONE, all surnamed BASAS, minors, and respresented by their parents NERIO and MARIBEL D. BASAS; LAWRENCE CARLOS and LUIS PAULO, all surnamed BATAC, minors, and represented by their parent RAQUEL C. BATAC; DARREL L. BAUTISTA, minor, represented by his parent NILDA L. BAUTISTA; JUAN CARLOS and MARIA ANGELA, all surnamed BAUZA, minors, and represented by their parent NESTOR A. BAUZA; MARK GERALD and LUIGI, all surnamed BENTULAN, minors, and represented by their parent FLORENCIO M. BENTULAN; PIERRE ANGELI M. BLASCO, minor, represented by her parent NARDA A. BLASCO; SARAH CATHERINE A. CABACES, minor, represented by her parent LUZ A. CABACES; KIRK ANTHONY and JOHN MICHAEL, all surnamed CAMUS, minors, represented by their parent MABEL B. CAMUS; PRECIOUS JOY V. CAPISTRANO, minor, represented by her parent JOSEPH F. CAPISTRANO; SHELLAH MAE P. CARINO, minor, represented by her parent RUPERTO L. CARINO; JOHN LAWRENCE A. CATAN, minor, represented by his parent BERNARDINO O. CATAN, JR.; CZARINA ROSE S. CHAN, minor, represented by her parent LUCILA S. CHAN; ANTHONY S. CHAN, minor, represented by his parent WILLY L. CHAN; ADRIAN CHRISTIAN S. CHUA, minor, represented by his parent VINSON G. CHUA; CHRISTOFFER RYAN and CARL BENEDICT, all surnamed CHUA, minors, represented by their parent EDGARDO A. CHUA; SHIELA CERNIAS, minor, represented by her parent YOLANDA CERNIAS; GENE LOUISE B. COMENDADOR, minor, represented by his parent HERMOGENES A. COMENDADOR; JOHN KENNETH and MICHAEL ANGELO, all surnamed CRUZ, minors, and represented by their parent AIDA L. CRUZ; WENDELL JAKE D. CRUZ, minor, represented by his parent EDWIN I. CRUZ; SYMON GABRIEL M. DAVID, minor, represented by his parent ARSENIO P. DAVID; JENNILYN M. DE JESUS, minor, represented by her parent MARCIAL S. DE JESUS; DYLEEN MAY M. DELA ROSA, minor, represented by her parent ANALEN M. DELA ROSA; MA. ANGELIKA B. DELA ROSA, minor, represented by her parent ROMULO R. DELA ROSA; MARK KEVIN H. DELA TORRE, minor, represented by his parent LEONORA H. DELA TORRE; ALVIN MERCK C. DE LEON, minor, represented by his parent MERCEDITA C. DE LEON; RICHARD ANTHONY B. DELIZO, minor, represented by his parent RICHMOND JOHN DELIZO; REYNOLD JOHN A. DEMIN, minor, represented by his parents MERLIN and HERNANDO A. DEMIN; MIRCO M. DESPABELADERA, minor, represented by his parent ELINITA M. DESPABELADERA; CARLO D. DIALA, minor, represented by his parent LEONOR D. DIALA; PATRICK JEROME and FRANCIS, all surnamed DIAZ, minors, represented by their parents ESMERALDO and CARMENCITA DIAZ; HILTELYN C. DOMINGUIANO, minor, represented by her parent HILTON D. DOMINGUIANO; ROGIELYN G. EBETO, minor, represented by his parent ROGER R. EBETO; ERIN and EINRE, all surnamed ERMINO, minors, and represented by their parent EVA H. ERMINO; ARRON LEVIN G. ESGUERRA, minor, represented by his parent RICHARD MARTIN G. ESGUERRA; MA. ANGELICA GRACIA C. ESTRADA, minor, represented by her parent CHARITA C. ESTRADA; FEDERICO C. FAUSTINO, JR., minor, represented by his parent SALVACION C. FAUSTINO; MIA RUTH M. FERNANDEZ, minor, represented by her parent MILAGROS M. FERNANDEZ; FAITH and CHARITY, all surnamed GABRIEL, minors, and represented by their parent FE G.

GABRIEL; C JAY and ELAINE JOY, all surnamed GAHUMAN, minors, and represented by their parents JOSEPHINE and CASTOR V. GAHUMAN, JR.; MARY KAYCY N. GALLARDO, minor, represented by her parent GRIZELA N. GALLARDO; DALRU MARPIN C. GAVIOLA, minor, represented by his parent DALIA C. GAVIOLA; MARIEL CARLA and JONALYN, all surnamed GEPULLANO, minors, and represented by their parent MANUELA A. GEPULLANO; JOEL ROY D. GONZALES, minor, represented by his parent ENELIA D. GONZALES; KIM ARRIZA P. HENSON, minor, represented by her parent MERCEDITA G. PASTRANA; EFFIE FIELLE and GIUSEPPE LORENZO, all surnamed IGNACIO, minors, and represented by their parent GEMMA M. IGNACIO; HANS CHRISTIAN C. GOLONG, minor, represented by his parent BENSON C. GOLONG; JOSEPHINE V. JORGE, minor, represented by her parent ELEUTERIO C. JORGE; MARY JUDE C. LOMARDA, minor, represented by her parent BENJAMIN A. LOMARDA; JERLIN and JERUSALEM, all surnamed LOPEZ, minors, and represented by their parents MERLINDA and JERUSALEM P. LOPEZ, SR.; DHAN COLINS, MA. LIANA, MARIA VIRGINIA and RIZALDY, all surnamed MABBORANG, minors, represented by their parents MERCELITA and DANIEL T. MABBORANG, JR.; OSCAR R. MACHICA, minor, represented by his parent ROSE R. MACHICA; NERSON and NERIEL, all surnamed MADRIAGA, minors, and represented by their parent NOEL B. MADRIAGA; MOISES M. MADRID, minor, represented by his parent, FEDERICO S. MADRID II; CHRISTINE ALYSSA A. MARQUEZ, minor, represented by her parent BERNARDO T. MARQUEZ, JR.; CATHLEEN R. MARQUEZ, minor represented by her parent CARMELITA P. MARQUEZ; KRISTEL CANE A. MARQUEZ, minor, represented by her parent FILOMENA A. MARQUEZ; CHRYL BHEFER M. MARTINEZ, minor, represented by ESPERANZA M. MARTINEZ; JESSICA J. MARTINEZ, minor, represented by her parent DAISY J. MARTINEZ; IVAN GERARD G. MASILUNGAN, minor, represented by his parent LILIAN G. MASILUNGAN; MONA JAMYLA and KARLA VENICE, all surnamed MENDOZA, minors, and represented by their parents LILIBETH and OSCAR U. MENDOZA; MARY JOYCE O. MONTEVERDE, minor, represented by her parent MANUELITO C. MONTEVERDE; CHRISTIAN PAULO O. MORALES, minor, represented by his parent ELY O. MORALES; JOHN ADRIAN M. DADOR and KRIZIA ARRA G. MUNCAL, minors, and represented by their parent LOLITA C. MUNCAL; KENNETH R. MUYA, minor, represented by his parent EMILY R. MUYA; JACOB YSRAEL C. NUCUM, minor, represented by his parent MARIA VICI C. NUCUM; JERIEL JAMES S. NG, minor, represented by his parent JAIME RAMON J. NG; JOHN MARVIN and JOHN MICHAEL, all surnamed NORADA, minors, and represented by their parents NORMA and RODEL P. NORADA; KERVIN M. OCAMPO, minor, represented by his parent JESUS V. OCAMPO; MARIA ANA and ANGELO LEO, all surnamed OLANDAY, minors, and represented by their parent ROLANDO P. OLANDAY; PHOEBE GAYLE Y. ONG, minor, rerepsented by her parent PEPITO C. ONG; MARTIN JOHN and MARC JASON, all surnamed ORIBIANA, minors, and represented by their parents MYRNA and JOSE JERRY G. ORIBIANA; MARY ANN M. ORTEGA, minor, represented by her parent VIRGILIO L. ORTEGA; PHILLIP JULIUS, PHILLIP JOBILL, all surnamed PARANE and HAYLEY G. SABANGAN, minors, and represented by their parent and guardian ANNABELLE G. PARANE; RAY BERNARD and REYNEDEN, all surnamed PAYUYO, minors, represented by their parent EDEN A. PAYUYO; JUSTIN GODFRED B. PERALTA, minor, represented by his parent MA. TERESA B. PERALTA; PATRICK JOHN C. PEREZ, minor, represented by his parent ROSILYN C. PEREZ; RAMON MIGUEL C. PINEDA, minor, represented by his parent MELINA C. PINEDA; ERIKA R. PRADO, minor, represented by her parent VIRGILIO C. PRADO; LAARNI YVETTE M. QUIJANO, minor, represented by her parent ARNELSON R. QUIJANO; JOSEPH DAVID Q. SERRANO, minor, represented by his parents MA. AIDA F. QUINIT; SHAYNE ANNE and SHEENA APRIL, all surnamed RABIT, minors, and represented by their parent MILA S. RABIT; JELYNNE and JENNIFER, all surnamed REYES, minors, and represented by their parents FE and JUANITO G. REYES; PAULA KATE ROCABERTE, minor, represented by her parent MA. KATHRYN A. ROCABERTE; EDRIANE JAMES E. ROMERO, minor, represented by his parent RIZALITA E. ROMERO; CHRISTOPHER NEIL B. SACLOLO, minor, represented by his parent ROBERTO C. SACLOLO; FRANZ HENDRIX FELIX G. SALCEDO, minor, represented by his parent

ROXANIETTE G. SALCEDO; JOHN EDWARD F. SANTOS, minor, represented by his parent ANITA F. SANTOS; DAVID T. SANTOS, minor, represented by his parent ESTRELLA T. SANTOS; MARK ANTHONY E. SINOHIN, minor, represented by his parents DOLORES and MAMERTO M. SINOHIN; FRANCIS ADRIAN and FRANCIS DAVID, all surnamed SUMULONG, minors, represented by their parent FRANCISCO M. SUMULONG; SEAN LAWRENCE A. SY, minor, represented by his parent ERLANI S. SY; JOSEPH MAR G. TALAG, minor, represented by his parent JOSE MARCIAL P. TALAG; KIM ANDREW D. TAMPO, minor, represented by her parent FRANCISCO S. TAMPO, JR.; LANCE MICHAEL S. TIU, minor, represented by his parent GIRLIELYN S. TIU; JULIAN BERNARDO FERICO TORRALBA, minor, represented by his parent FEDERICO C. TORRALBA; JENAVEE A. VALENZUELA, minor, represented by her parent EDNA A. VALENZUELA; MYSTICA R. VARGAS, minor, represented by her parent ROSA R. VARGAS; DIANE V. VERGARA, minor, represented by her parent VILMA VERGARA; KRISTOFER LORENZ J. VICEDO, minor, represented by his parent CESAR M. VICEDO; MERRY GRACE and MIZZAH-MYRRH, all surnamed VILLALON, minors, and represented by their parent MYRNA M. VILLALON; BILLY JOE P. VILLAREAL, minor, represented by his parent ANITA P. VILLAREAL; REGINE A. VINA; minor, represented by her parent MA. ERMINDA A. VINA, ROWAME LAR, DING BERNALD and KAMILLE SHANE, all surnamed WAJE, minors, and represented by their parent ZOILA M. WAJE; KRISTINE RAY O. ZAPANTA, represented by her parent CRISTINA O. ZAPANTA; JEANAFE ABELARDE, represented by her guardian FE LILIA M. ABELARDE; JOHN JASPER C. ABRERA, represented by his parent EVELYN C. ABRERA; AILEEN and ALLAN, all surnamed ACIELO, represented by their parent ALBERTO P. ACIELO; MARJORIE, MARK DAVE, OLIVE MARIE, all surnamed ADANZA and LUIS EDISON RANA, represented by their guardian/parents MYRNA and ORESTE P. ADANZA; JOSEL AMOR E. AGUILAR, represented by his parent JOSE L. AGUILAR; JOSUELLE A. ALCANTARA, represented by her parent ALICIA A. ALCANTARA; ELINOR JOY J. ANTONIO, represented by her parent TERESITA J. ANTONIO; DESIREE CLARRISSE K. ARANZASO, represented by her parent GERMELYN GRACE K. ARANZASO; MARK JEREMIAH J. AZURIN, represented by his parent MA. THERESA J. AZURIN; ADAMSON S. BAETA, represented by his parent ADAM Q. BAETA; LEO A. BALACUIT; SYDNEY ADRIANE C. BALOD, represented by her parent ANDRES P. BALOD, SR.; ANTONIO A. BALTAZAR; JAY-R B. BANOGON, represented by his parent EDUARDO E. BANOGON; SHARYLEN C. BARLIN, represented by her parent MAXIMA C. BARLIN; JAYZON S. BAUTISTA, represented by his parent ESTER S. BAUTISTA; ROSALITA B. BENIG, repesented by her parent LILLOSA B. BENIG; ROSIELYN and REMILYN, all surnamed BERMUDEZ, represented by their parent MARINA C. BERMUDEZ; JUDITH L. BERNAL; JOELIE LELAINE D. BOCAR, represented by her parent JOSEPH G. BOCAR; JEAN CARLO BUENO, represented by her guardian JEMMA G. TERRADO; JANINA S. BUSTOS, represented by her parent CRISTINA S. BUSTOS; DOMINADOR D. CAMACHO; EVA CAMERO, represented by her parent MERLINDA C. CAMERO; DENNIS ANGELO C. CANLAS, represented by his parent ARMANDO L. CANLAS; EZRA P. CANLAS, represented by her parent ROMULO T. CANLAS; MARIA VICTORIA B. CARLOS; VISAMINDA Z. CARLOS, represented by her parent MA. JOSEFINA Z. CARLOS; RHENY FRANCES F. CATIMBANG, represented by her parent HENRY T. CATIMBANG; ADDISON S. CHAN, represented by his parent WILLY CHAN; ACE PAREJA CHUMACERA, represented by his parent YOLANDA PAREJA CHUMACERA; ELLAN MARIE P. CIPRIANO, represented by her parent MARIZA P. CIPRIANO; JASON CARLO U. CONCEPCION, represented by his parent FEDERICO A. CONCEPCION; MARK SHERWIN A. CREUS, represented by his parent MEDENCIA A. CREUS; IMELDA V. CRUZ; ARVILYNNE L. DALANGIN, represented by her parent EVA L. DALANGIN; DENNIS and KATHRYN, all surnamed DE JESUS, represented by their parent MARCIAL S. DE JESUS; RHODA PIA B. DELIZO; RANIER SAN JOSE DEL ROSARIO, represented by his parent CEFERINO S. DEL ROSARIO; FRANCIS J. DIAZ, represented by his parent ESMERALDO G. DIAZ; MEDYLEN P. DIMDIMAN, represented by her parent DANILO D. DIMDIMAN; ARMAND ARNEL MILLAN T. DIVINAGRACIA, represented by his parent MARIETTA T. DIVINAGRACIA; ROBERTO NEIL DIZON, represented by his parent ROBERTO V. DIZON; CATHERINE DONES,

represented by her parent TERESITA L. DONES; SHERYL BUDIONGAN ESQUILLA, represented by her parent EUSEBIA B. ESQUILLA; RUEL A. FERNANDO, represented by his parent REMEDIOS C. FERNANDO; RAYES, RYAN and RICHARD, all surnamed FRIAS, represented by their parent ESTELLA P. FRIAS; KATRINA GRACE R. GALANG, represented by her parent MA. VICTORIA R. GALANG; JIMMY and JOANNE MARIE, all surnamed GO, represented by their parent MIRIAM MARGARETTE M. GO; JUNALIN B. AQUINO, represented by her guardian SUSANA B. GOLOCINO; HANS CHRISTIAN C. GOLONG, represented by his parent BENSON C. GOLONG; KRISTINE GONZALES, represented by her parent EDNA L. GONZALES; AGNES L. GUIANG; LOURDES JOY and ERIK MARKUS, all surnamed HERNAL, represented by their parent NORMAN HERNAL; MARK TIMOTHY A. HERNANDEZ, represented by his parent MARIO G. HERNANDEZ; RACHEL JOY M. IBANEZ, represented by her parent BRENDA M. IBANEZ; CARLO MIGUEL A. IBARRA, represented by his parent MARY CLAIR A. IBARRA; SHALIMAR S. ICABANDI, represented by his parent LADISLAO I. ICABANDI; DANILO IDOS; EDISON O. INGALLA, represented by his parent EDUARDO I. INGALLA; JOMARI M. JAVILINAR, represented by his parent MILAGROS M. JAVILINAR; JOSEPHINE S. JOVES; VICTORIA P. JUMANOG; ANNA CAMILLE R. LALATA, represented by her parent CORAZON R. LALATA; LAWRENCE CHRISTIAN LAM, represented by his parent MILA DE LEON LAM; KATHERINE and JULIE ANN, all surnamed CABALLA, represented by their guardian CECILIA C. LUBBERTS; DANICA MAE M. MABBORANG, represented by her parent DANIEL T. MABBORANG, JR.; GRACE, ROBERTO JOSHUE and JOSEPH, all surnamed MALAZARTE, represented by their parent LUCAS L. MALAZARTE, JR.; ADAM LESTER E. MANALANG, represented by his parent MARISSA E. MANALANG; CHIARA A. MARASIGAN, represented by her parent EUFROSINA A. MARASIGAN; ROSE E. MARQUEZ, represented by her parent FEDERICO T. MARQUEZ; RICHARD J. MARTINEZ, represented by his parent DAISY J. MARTINEZ; IVAN ISRA and EXEQUIEL, all surnamed MASILUNGAN, represented by their parent LILIAN G. MASILUNGAN; KENO A. MENDEZ, represented by his parent MA. CLARA A. MENDEZ; LIGAYA J. MENESES; RIA and RUBY, all surnamed MIRASOL, represented by their parent MARILOU S. MIRASOL; EMMANUEL L. MISA, represented by his parent LETICIA L. MISA; MA. KATRINA M. MAYO; NATHANIEL and MARVIN NOEL, all surnamed MURILLO, represented by their parent NERISSA T. MURILLO; ERIC and MICHAEL, all surnamed MUYA, represented by their parent EMILY R. MUYA; IDA AYESAW. NECIA, represented by her parent ROBERTO P. NECIA; JETHRO FRANCIS S. NG, represented by his parent PRISCILLA S. NG; MARY ANN G. MERCADO, represented by her guardian CYNTHIA M. NOVENCIDO; MA. KATRINA M. OCAMPO, represented by her parent JESUS V. OCAMPO; KATHLEEN KAY and RUFFA, all surnamed OLIMAN, represented by their parent ANGELES L. OLIMAN; RAYMOND JOSEPH R. OLIVERA; RONA M. OPULENCIA, represented by her parent GLORIA M. OPULENCIA; JESSICA MAE G. ORIBIANA, represented by her parent JOSE JERRY G. ORIBIANA; JOSE CONRADO T. OROPILLA, represented by his parent REBECCA T. OROPILLA; ANN FRANCIS M. ORTIZ, represented by her parent ANTONIO S. ORTIZ; JOHN PETER PALENCIA, represented by his parent TSG. PETER K. PALENCIA; DOM DANIEL M. PATERNO, represented by his parent MYRNA M. PATERNO; AUSTIN RAINER M. PEREZ, represented by his parent FE M. PEREZ; FRANCISCO and ANGELICA, all surnamed POBOCAN, represented by their parent MEDALLA T. POBOCAN; DIANA and CARMELA, all surnamed PRADO, represented by their parents ARCELI and VIRGILIO C. PRADO; FELIX and SAHARA, all surnamed RABIT, represented by their parent MILA S. RABIT; MA. CRISTINA PAULA A. RAMIREZ, represented by her parent ISMAEL M. RAMIREZ; GLENN JOSEPH R. ARBOLEDA, represented by his guardian NANETTE S. RAMIREZ; RICARDO R. ONG, represented by his guardian CARMEN R. RAMOS; GIAN FRANCIS B. RAMOS, represented by his parent ELIZABETH B. RAMOS; CHRISTIAN REY G. RAMOS, represented by his parent IRINEO B. RAMOS, JR.; PRINCESS RUTH L. RAYNERA, represented by her parent PURISIMA L. RAYNERA; MARISSA TESSA Y. REDOR, represented by her parent FLORDELIZA Y. REDOR; PAULO and DENNIS, all surnamed ROMERO, represented by their parents LERMA and EDUARDO C. ROMERO; JILLIAN ROSE L.

ROSARIO, represented by her parent LYDIA L. ROSARIO; VALERIE C. RUBIALES, represented by her parent DELFIN A. RUBIALES; ANITA S. SAAVEDRA; GIAN CARLO L. SALAZAR, represented by his parent VIRGILIO B. SALAZAR; TROT ZARDOZ and GAIA KASSIOPEIA, all surnamed SALCEDO, represented by their parent ROXANIETTE G. SALCEDO; RICHARD D. SANTOS, represented by his parent ELENA D. SANTOS; TWINKLE I. SAQUITAN, represented by her parent DOLORES I. SAQUITAN; ROCKY and JENNIFER, all surnamed SARDUAL, represented by their parent JEFFERSON SARDUAL; MARIA LOURDES SARMIENTO, represented by her parent MA. EVELYN L. SARMIENTO; OINECA LOVE Q. MANUEL, represented by her guardian GRACE Q. SHARIEM; JOHN RUSSELL I. SUAREZ, represented by his parent SONIA I. SUAREZ; KRESTA J. SUICO, represented by her parent MARISSA J. SUICO; ANNA MICHELLE and MAY JOANNA, all surnamed SUMULONG, represented by their parent FRANCISCO M. SUMULONG; MA. ELAINE TALOSIG, represented by her parent AURORA A. TALOSIG; CHARLENE AIKA TAN, represented by her parent ENG KUI C. TAN; KENO B. TIMPUG, represented by his parent JAIME A. TIMPUG; MA. KATRINA M. TOLENTINO, represented by her parent ASTERIA M. TOLENTINO; ROMMEL JOHN PAUL and ROLANDO, all surnamed TORRES, represented by their parent DOMINGA TORRES; KIM CHARLES R. TRINIDAD, represented by his parent MELCHOR S. TRINIDAD; LIBERY ANNE A. TICZON, represented by LIBRADO D. TICZON; CINDY ANNE T. UMAGUING, represented by her parent ZENAIDA T. UMAGUING; APRIL ABIGAIL A. VALENZUELA, represented by her parent EDNA A. VALENZUELA; ORLANDO and EVELINA, all surnamed VERGARA, represented by their parent EVELINA R. VERGARA; JOHANN and DERIKKO, all surnamed VICENTE, represented by their parent CECILIA M. VICENTE; DIANA RUBY and CLAIRE ANN, all surnamed VILLANUEVA, represented by their parent LYDIA VILLANUEVA; MARIE FRANCE and ANTHONY, all surnamed VILLAREAL, represented by their parent ANITA P. VILLAREAL; TASEI YOSHIDA and NEMUEL O. VILLAROJAS, JR., represented by their guardian NELIA G. VILLAROXAS; NILO P. VILLARUEL; FREDERICK A. VINAS, represented by his parent BONIFACIO B. VINAS, JR.; DIANE CHRISTINE and DARLENE, all surnamed VISPO, represented by their parent ADELAIDA P. VISPO; RAY KRISTOFFER O. ZAPANTA, represented by his parent CRISTINA O. ZAPANTA, in their individual capacities as defrauded purchasers of policies of CAP shares and for and in behalf of 780,603 others similarly situated,Petitioners, vs. HON. ROMEO F. BARZA,* in his capacity as the Presiding Judge of the Regional Trial Court of Makati City, Branch 61, and COLLEGE ASSURANCE PLAN PHILIPPINES, INC., Respondents. DECISION PERALTA, J.: This is a petition for certiorari and prohibition alleging that respondent Judge Romeo F. Barza of the Regional Trial Court (RTC) of Makati City, Branch 61, committed grave abuse of discretion amounting to lack or excess of jurisdiction in issuing the Orders dated September 13, 2005 and December 16, 2005 in Special Proceedings (Sp. Proc.) No. M-6144. The Order dated September 13, 2005 found the petition for corporate rehabilitation of the College Assurance Plan Philippines, Inc. (CAP) to be sufficient in form and substance and stayed the enforcement of all claims against CAP. While the Order dated December 16, 2005 gave due course to CAPs petition for corporate rehabilitation. The facts are as follows: CAP was incorporated on February 14, 1980 for the purpose of engaging in the sale of pre-need educational plans. Initially, it sold open-ended educational plans which guaranteed the payment of

tuition and other standard school fees to the planholder irrespective of the cost at the time of availment. Later, it engaged in the sale of fixed value plans which guaranteed the payment of a predetermined amount to the planholder. In 1982, CAP was among the countrys top 2000 corporations. It started sending its scholars to college in 1984 and saw its first batch of graduates in 1988. However, it subsequently suffered financial difficulties.1 On April 28, 2005, six petitioners herein,2 together with other CAP planholders, filed an action with the RTC of Makati City for Specific Performance and/or Annulment of Contract due to Fraud, Return and Disgorgement of Illegal Profits, Damages with Application for Receiver and/or Management Committee against CAP, its Directors and Officers, and the Fil-Estate Group of Companies. The case, docketed as Securities and Exchange Commission (SEC) Case. No. 05-365,3 was assigned to respondent Judge Romeo Barza of the RTC of Makati City, Branch 61. Petitioners alleged that proceedings commenced in SEC Case No. 05-365, but the prayer for the appointment of a receiver and creation of a management committee was not acted upon by the RTC. On September 8, 2005, CAP filed a Petition for Corporate Rehabilitation, docketed as Sp. Proc. No. M-6144, which was raffled to the RTC of Makati City, Branch 61, presided by respondent Judge Romeo F. Barza. On September 13, 2005, Judge Barza issued an Order4 in Sp. Proc. No. M-6144 staying the enforcement of all claims against CAP, thus: Before this court is a Petition for Rehabilitation filed by COLLEGE ASSURANCE [PLAN] PHILIPPINES, INC. (CAP), a corporation with principal office address at CAP Building, Amorsolo Street, Legaspi Village, Makati City. Finding the petition to be sufficient in form and substance, the enforcement of all claims, whether for money or otherwise, and whether such enforcement is by court action or otherwise, against COLLEGE ASSURANCE [PLAN] PHILIPPINES, INC., its guarantors and sureties not solidarily liable with it, is stayed. As a consequence of the stay order, the COLLEGE ASSURANCE [PLAN] PHILIPPINES, INC. is prohibited from selling, encumbering, transferring, or disposing in any manner any of its properties except in the ordinary course of business. It is further prohibited from making any payment of its liabilities outstanding as of the date of the filing of this petition on September 8, 2005. Its suppliers of goods and services are likewise prohibited from withholding supply of goods and services in the ordinary course of business for as long as it makes payments for the services and goods supplied after the issuance of the stay order. xxxx All creditors and interested parties, including the Securities and Exchange Commission, are directed to file and serve on petitioner COLLEGE ASSURANCE [PLAN] PHILIPPINES, INC., a verified comment on or opposition to the petition with supporting affidavits and documents, not later than ten (10) days before the date of the initial hearing. Failure to do so will bar them from participating in the proceedings. Copies of the petition and its annexes may be secured from the court within such time as to enable them to file their comment on or opposition to the petition to prepare for its initial hearing. xxxx

Mr. Mamerto A. Marcelo, Jr., CPA, with address at 1407 Cityland Condominium 10 Tower 2, Ayala Avenue, cor. H.V. Dela Costa St., Salcedo Village, Makati City is appointed Interim Rehabilitation Receiver of COLLEGE ASSURANCE [PLAN] PHILIPPINES, INC. He may discharge his duties and functions as such after taking his oath to perform his powers, duties and functions faithfully and posting a bond in the amount of P100,000.00 to guarantee the faithful discharge of his duties and obedience to the orders of the court. Petitioner COLLEGE ASSURANCE [PLAN] PHILIPPINES, INC. is directed to immediately serve a copy of this Order to Mr. Mamerto A. Marcelo, Jr., who is directed to manifest his acceptance or nonacceptance of his appointment not later than ten (10) days from receipt of this Order. SO ORDERED. On October 17, 2005, ten planholders, who are also petitioners in this case,5 filed an Opposition to the Rehabilitation and Motion to Exclude Planholders from Stay Order and Terminate Proceeding on the ground that planholders are not creditors as they have a trust relationship with the pre-need company. On December 16, 2005, Judge Barza issued an Order6 in Sp. Proc. No. M-6144 giving due course to the petition for rehabilitation, thus: For determination is the issue of whether or not the petition for corporate rehabilitation of College Assurance [Plan] Philippines, Inc. (CAP) should be given due course. The petition alleges that CAP is a domestic corporation engaged in the business of selling pre-need educational plans. It was incorporated in 1980 with an initial authorized capital of P10,000,000.00. Within two years of starting business, it was among the countrys top 2000 corporations, and by 2004, it had climbed in ranking to 146th place with a 21% share of the pre-need market. CAP has had 110,000 scholars enrolled; 84,490 scholars graduated; 780,000 planholders; 174,720 planholders being served; and has paid over P11.3 billion in tuition fees. However, it was brought to financial difficulties by reason of the policy of deregulation adopted by the Department of Education which resulted in the unbridled increase in tuition fees over the years; the effect of the Asian financial crisis on CAPs trust fund investments; the onerous application by the Securities and Exchange Commission (SEC) of the Pre-Need Uniform Chart Accounts (PNUCA) beginning in 2002; and the refusal of the SEC to renew CAPs dealership license after its expiration in September 2004 and the cancellation of its permit to sell in August 2004. It is unable to service its debts as they fall due and its assets are insufficient to cover its liabilities, owing in great part to a bloated yet theoretical trust fund deficit and capital deficiency reflected in its financial statements under the SECs Pre-Need Rules, which it has asked the SEC to re-audit in light of the essential nature of pre-need plans as investment contracts rather than insurance contracts. In support of its petition, CAP has submitted an eight-year Business Development Plan under which it proposes to build up its equity and liquidity to meet projected cash requirements and eliminate any equity impairment, and to build up the asset base and liquidity of its trust fund to cover its trust variance and meet its maturing obligations. Pursuant to this courts Stay Order of September 13, 2005, several pleadings were filed with the Court by interested parties, including the Securities and Exchange Commission (SEC), by way of comment on the verified Petition dated August 23, 2005. During the summary hearing on November 23, 2005, representatives from the SEC admitted that "actuarial reserve liabilities" are not actual and present liabilities of the petitioner.

The Court has carefully evaluated the Petition and the comments filed by the various parties relative thereto, and hereby resolves to give due course to the petition. Even as the Court notes the substantial questions posed by the SEC and some creditors on the solvency of the corporation, it finds the interests of the planholder/investing public as an overriding consideration which cannot be summarily or injudiciously dismissed without a thorough evaluation by the Rehabilitation Receiver of the corporations chances of being restored to a successful operation and solvency if given the opportunity and considering particularly the adverse results to the planholders of a liquidation scenario as against its proposed rehabilitation under which they may possibly recover 100% of their contributions. On the basis of the allegations of the petition and the Business Development Plan, and in order that it may be well-guided in its final disposition of the petition, the Court finds merit in the Petition sufficient to warrant its referral to the Rehabilitation Receiver for study and evaluation. WHEREFORE, the Court resolves to GIVE DUE COURSE to the petition and to REFER the same, together with its Annexes and the comments on the Petition, to the court-appointed Rehabilitation Receiver who is directed to evaluate the rehabilitation plan and submit his recommendation within thirty (30) days from receipt hereof.
1avv phi1

Petitioners alleged that the Stay Order dated September 13, 2005 and the Order dated December 16, 2005 had been cited for the non-resolution of pending matters in SEC Case. No. 05-365 for Specific Performance and/or Annulment of Contract due to Fraud, Return and Disgorgement of Illegal Profits and Damages. Petitioners averred that the proceedings in Sp. Proc. Case No. M-6144 were summary and nonadversarial in nature, and the filing of a petition for relief or a motion to dismiss or for reconsideration was prohibited. Having no speedy and adequate remedy in the ordinary course of law, they filed this petition. The pertinent issues raised are as follows: 1. WHETHER THE STAY ORDER AND THE ORDER GRANTING THE PETITION FOR REHABILITATION WAS ISSUED WITHOUT OR IN EXCESS OF JURISDICTION, CONSIDERING THAT THE TUITION FEE PAYMENTS DUE PLANHOLDERS BENEFICIARIES ARE FROM TRUST FUND ASSETS NOT INCLUDED IN REHABILITATION PROCEEDINGS, IT BEING PROPERTY NOT BELONGING TO THE DEBTOR. 2. WHETHER THE STAY ORDER AND ORDER GRANTING THE PETITION FOR REHABILITATION WAS ISSUED WITHOUT OR IN EXCESS OF JURISDICTION CONSIDERING THAT ALL THE REMAINING ASSETS OF THE CORPORATION IS TRACEABLE FROM FUNDS COLLECTED FROM PLANHOLDERS; HENCE, SUBJECT TO TRUST FOR THE BENEFIT OF THE PLANHOLDERS BENEFICIARIES. 3. WHETHER THE ORDER APPOINTING A REHABILITATION RECEIVER WAS ISSUED IN EXCESS OF JURISDICTION CONSIDERING THAT A PREVIOUS INTRACORPORATE DISPUTE WITH PRAYER FOR [THE] IMMEDIATE APPOINTMENT FOR RECEIVER WAS FILED AHEAD OF THE REHABILITATION PROCEEDINGS. 4. WHETHER THE PUBLIC RESPONDENTS ORDER DATED DECEMBER 16, 2005 WAS ISSUED IN EXCESS OF JURISDICTION BY NOT ACCORDING DUE RESPECT TO THE FINDINGS OF A SPECIALIZED ADMINISTRATIVE AGENCY.7

At the outset, it must be pointed out that the special civil action for certiorari under Rule 65 of the Rules of Court8is a remedy designed only for the correction of errors of jurisdiction or grave abuse of discretion amounting to lack or excess of jurisdiction.9 In this case, it is undisputed that the RTC has jurisdiction over the petition for rehabilitation under Section 2, Rule 3 of the Interim Rules of Procedure on Corporate Rehabilitation (2000).10 The main issue is whether or not respondent Judge committed grave abuse of discretion amounting to lack or excess of jurisdiction in issuing the Order dated September 13, 2005 staying enforcement of all claims against CAP and the Order dated December 16, 2005 giving due course to CAPs petition for rehabilitation. Petitioners allege that the relationship between a planholder and a pre-need corporation was one of trust and not a debtor-creditor relationship. They avered that in 2002, the Securities and Exchange Commission (SEC) implemented the New Pre-Need Rules, which mandated a pre-need company to set up a trust fund for the benefit of the beneficiary and in compliance with the agreement; hence, they contend that an express trust relationship exists between the policyholder as trustor, the preneed firm as trustee, and the beneficiary as cestui que trust. Petitioners add that Section 1.9 of the Pre-Need Rules defines "trust fund" as a fund set up from the planholders payments, separate and distinct from the paid-up capital of a registered Pre-Need Company, established with a trustee under a trust agreement approved by the Commission, to pay for the benefits as provided in the Pre-Need Plan. Petitioners assert that since a trust relationship exists between a planholder and a pre-need company, CAP may not avail itself of rehabilitation proceedings to stop payments from its trust assets to the beneficiaries. Petitioners contend that respondent Judge "acted completely without jurisdiction in giving due course to the petition for rehabilitation, including planholders in the Stay Order and including trust assets in the rehabilitation proceedings notwithstanding the fact that there was a prior case filed by planholders for receivership and management committee and that the assets of debtors do not include the funds collected from planholders." Petitioners arguments do not persuade. CAP is a domestic corporation engaged in the business of selling pre-need educational plans. Republic Act (R.A.) No. 8799, otherwise known as The Securities Regulation Code, defines "preneed plans" as "contracts which provide for the performance of future services or the payment of future monetary considerations at the time of actual need, for which planholders pay in cash or installment at stated prices, with or without interest or insurance coverage, and includes life, pension, education, interment, and other plans which the Commission may from time to time approve." Section 16, Chapter IV of R.A. No. 8799 provides for the regulation of pre-need plans by SEC, thus: SEC.16. Pre-Need Plans. -- No person shall sell or offer for sale to the public any pre-need plan except in accordance with rules and regulations which the Commission (SEC) shall prescribe. Such rules shall regulate the sale of pre-need plans by, among other things, requiring the registration of pre-need plans, licensing persons involved in the sale of pre-need plans, requiring disclosures to prospective planholders, prescribing advertising guidelines, providing for uniform accounting system, reports and recordkeeping with respect to such plans, imposing capital, bonding and other financial responsibility, and establishing trust funds for the payment of benefits under such plans.

The law governing corporate rehabilitation and suspension of actions for claims against corporations is Presidential Decree (P.D.) No. 902-A,11 as amended. Section 5 of P.D. No. 902-A, as amended by P.D. No. 1758, enumerates the cases over which SEC has jurisdiction to hear and decide, which includes "[p]etitions of corporations, partnerships or associations to be declared in the state of suspension of payments in cases where the corporation, partnership or association possesses sufficient property to cover all its debts, but foresees the impossibility of meeting them when they respectively fall due or in cases where the corporation, partnership or association has no sufficient assets to cover its liabilities, but is under the management of a Rehabilitation Receiver or Management Committee." R.A. No. 8799, which took effect on August 8, 2000, transferred SECs jurisdiction over all cases enumerated under Section 5 of P.D. No. 902-A, as amended, to the courts of general jurisdiction or the appropriate Regional Trial Court. On November 21, 2000, this Court approved the Interim Rules of Procedure on Corporate Rehabilitation of 2000 (Interim Rules), which took effect on December 15, 2000. The Interim Rules apply to petitions for rehabilitation filed by corporations, partnerships, and associations pursuant to P.D. No. 902-A, as amended. The Interim Rules governed the proceedings in Sp. Proc. No. M-6144. CAP filed the petition for corporate rehabilitation, because it is "unable to service its debts as they fall due and its assets are insufficient to cover its liabilities."12 CAP filed the petition under Section 1, Rule 4 of the Interim Rules, which provides: SECTION 1. Who May Petition. Any debtor who foresees the impossibility of meeting its debts when they respectively fall due, or any creditor or creditors holding at least twenty-five percent (25%) of the debtors total liabilities, may petition the proper Regional Trial Court to have the debtor placed under rehabilitation.13 Under the Interim Rules, "debtor" shall mean "any corporation, partnership, or association, whether supervised or regulated by the Securities and Exchange Commission or other government agencies, on whose behalf a petition for rehabilitation has been filed under these Rules."14 The Interim Rules does not distinguish whether a pre-need corporation like CAP cannot file a petition for rehabilitation before the RTC. Courts are not authorized to distinguish where the Interim Rules makes no distinction.15 Moreover, under the Interim Rules, "claim" shall include "all claims or demands of whatever nature or characteragainst a debtor or its property, whether for money or otherwise." "Creditor" shall mean "any holder of a claim." Hence, the claim of petitioners for payment of tuition fees from CAP is included in the definition of "claims" under the Interim Rules. What is to be determined at this point is whether or not claims arising from the pre-need contracts between petitioners and CAP can be stayed under Section 6, Rule 4 of the Interim Rules or Section 6(c) of P.D. No. 902-A. Section 6, Rule 4 of the Interim Rules provides: SEC. 6. Stay Order. -- If the court finds the petition to be sufficient in form and substance, it shall, not later than five (5) days from the filing of the petition, issue an Order: (a) appointing a Rehabilitation Receiver and fixing his bond; (b) staying 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; (c) prohibiting the debtor from selling, encumbering, transferring, or disposing in any manner any of its properties except in the ordinary course of business; (d) prohibiting the debtor from making any payment of its liabilities outstanding as of the date of filing of the petition; (e) prohibiting the debtor's suppliers of goods or services from withholding supply of goods and services in the ordinary course of business for as long as the debtor makes payments for the services and goods supplied after the issuance of the stay order; (f) directing the payment, in full, of all administrative expenses incurred after the issuance of the stay order; (g) fixing the initial hearing on the petition not earlier than forty-five (45) days but not later than sixty (60) days from the filing thereof; (h) directing the petitioner to publish the Order in a newspaper of general circulation in the Philippines once a week for two (2) consecutive weeks; (i) directing all creditors and all interested parties (including the Securities and Exchange Commission) to file and serve on the debtor a verified comment on or opposition to the petition, with supporting affidavits and documents, not later than ten (10) days before the date of the initial hearing and putting them on notice that their failure to do so will bar them from participating in the proceedings; and (j) directing the creditors and interested parties to secure from the court copies of the petition and its annexes within such time as to enable themselves to file their comment on or opposition to the petition and to prepare for the initial hearing of the petition. The above provision does not provide that a claim arising from a pre-need contract is an exception to the power of the trial court to stay enforcement of all claims upon the finding that the petition for rehabilitation is sufficient in form and substance. The foregoing provision echoes the provision in Section 6(c) of the governing law, P.D. No. 602-A, as amended by P.D. No. 1758, which mandates that "upon appointment of a management committee, rehabilitation receiver, board or body, x x x all actions for claims against corporations, partnerships or associations under management or receivership pending before any court, tribunal, board or body shall be suspended accordingly." In Negros Navigation Co., Inc. v. Court of Appeals,16 the Court held that "P.D. No. 902-A does not make any distinction as to what claims are covered by the suspension of actions for claims against corporations under rehabilitation x x x Thus, since the law does not make any exemptions or distinctions, neither should we." The Interim Rules of Procedure on Corporate Rehabilitation of 2000 has been amended by the Rules of Procedure on Corporate Rehabilitation of 2009, which took effect on January 16, 2009. Under the 2009 Rules of Procedure, the power of the RTC to issue a Stay Order when it finds the petition for rehabilitation to be sufficient in form and substance is contained in Section 7, Rule 3,17 which likewise does not exempt claims arising from pre-need contracts from the Stay Order. Petitioners contend that the relationship between a planholder and a pre-need corporation is one of trust and not a debtor-creditor relationship. However, such a relationship has not been properly established by petitioners. This Court is not a trier of facts and cannot rule in this petition on whether the relationship between CAP and the planholders is one of trust, absent a factual finding by the trial court. Nevertheless, even if the relationship is one of trust, there is no provision in the Interim Rules that a claim arising from a trust relationship is excluded from the Stay Order. Negros Navigation Co., Inc. v. Court of Appeals18 explained the reason for suspending all pending claims against a corporation under receivership, thus: x x x x The stay order is effective on all creditors of the corporation without distinction, whether secured or unsecured. All assets of a corporation under rehabilitation receivership are held in trust for the equal benefit of all creditors to preclude one from obtaining an advantage or preference over

another by the expedience of attachment, execution or otherwise. As between the creditors, the key phrase is equality in equity. Once the corporation threatened by bankruptcy is taken over by a receiver, all the creditors ought to stand on equal footing. Not one of them should be paid ahead of the others. Petitioners also contend that the Rehabilitation Court may not appoint a rehabilitation receiver when a previous intra-corporate dispute (SEC Case No. 05-365) with prayer for the immediate appointment of a receiver has been filed ahead of the petition for rehabilitation. The contention is without merit. The case for specific performance and/or annulment of contract (SEC Case No. 05-365) and CAPs petition for rehabilitation (Sp. Proc. No. M 6144) are two different cases; hence, respondent Judge has the discretion to decide each case according to its merits. The case for specific performance and/or annulment of contract was filed pursuant to the Interim Rules of Procedure for Intra-Corporate Controversies, while CAPs petition for rehabilitation was filed under the Interim Rules of Procedure on Corporate Rehabilitation. Under Section 6, Rule 4 of the latter Interim Rules,19 respondent Judge has the authority to appoint a rehabilitation receiver after finding the petition for rehabilitation to be sufficient in form and substance. Absent any provision in the Interim Rules, as amended, or P.D. No. 902-A exempting claims arising from pre-need contracts from a court order staying enforcement of all claims against the debtor/preneed company, the Court holds that respondent Judge did not commit grave abuse of discretion in enforcing the Stay Order against petitioners. In addition, respondent Judge did not gravely abuse its discretion in giving due course to the petition for rehabilitation. In the Order dated December 16, 2005, the RTC considered the comments of the SEC and CAPs creditors before resolving the petition. It explained its decision, thus: The Court has carefully evaluated the Petition and the comments filed by the various parties relative thereto, and hereby resolves to give due course to the petition. Even as the Court notes the substantial questions posed by the SEC and some creditors on the solvency of the corporation, it finds the interests of the planholder/investing public as an overriding consideration which cannot be summarily or injudiciously dismissed without a thorough evaluation by the Rehabilitation Receiver of the corporations chances of being restored to a successful operation and solvency if given the opportunity and considering particularly the adverse results to the planholders of a liquidation scenario as against its proposed rehabilitation under which they may possibly recover 100% of their contributions. On the basis of the allegations of the petition and the Business Development Plan, and in order that it may be well-guided in its final disposition of the petition, the Court finds merit in the Petition sufficient to warrant its referral to the Rehabilitation Receiver for study and evaluation.20 Grave abuse of discretion implies capricious and whimsical exercise of judgment amounting to lack of jurisdiction, or arbitrary and despotic exercise of power because of passion or personal hostility.21 It must be as patent and gross as to amount to an evasion or refusal to perform a duty enjoined by law.22 It is absent in this case. Despite the Courts finding that respondent judge did not gravely abuse his discretion in issuing the Orders staying the enforcement of all claims against CAP and in giving due course to CAPs petition for rehabilitation, petitioners are not precluded from seeking other remedies available to them with the lower court.

The other issues raised pertain to matters that were not discussed in the subject RTC Orders or are not pertinent to the main issue of whether or not respondent Judge gravely abused its discretion in including the claims of petitioners in the Stay Order; hence, they do not fall within the scope of this petition for certiorari. WHEREFORE, the petition for certiorari is DISMISSED. No costs. SO ORDERED. DIOSDADO M. PERALTA Associate Justice WE CONCUR: CONSUELO YNARES-SANTIAGO Associate Justice Chairperson MINITA V. CHICO-NAZARIO Associate Justice PRESBITERO J. VELASCO, JR. Associate Justice

ANTONIO EDUARDO B. NACHURA Associate Justice ATTESTATION I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. CONSUELO YNARES-SANTIAGO Associate Justice Third Division, Chairperson CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons Attestation, I certify that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. REYNATO S. PUNO Chief Justice

Footnotes
*

Now an Associate Justice of the Court of Appeals. Comment, rollo, pp. 852-913

Edna Valenzuela, Elsa S. Azurin, Theresa J. Azurin, Mabel B. Camus, Eden A. Payuyo and Remedios C. Fernando.
3

Valenzuela, et al. v. Sobrepea, Jr., et al. Rollo, pp. 336-337.

Rosalina C. Arao, Florencion Bentulan, Yolanda Cernias, Juancito Dacanay, Richard Martin Esguerra, Manuela Gepullano, Nancy Hilario, Marilyn Lajo, Carmen Ramos, and Lydia Rosario.
6

Rollo, pp. 341-342. Memorandum, rollo, pp. 1057-1058.

Rule 65, Sec. 1. Petition for certiorari.When any tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal, or any plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be rendered annulling or modifying the proceedings of such tribunal, board or officer, and granting such incidental reliefs as law and justice may require.
8 9

Land Bank of the Philippines v. Court of Appeals, 456 Phil. 755 (2003).

Rule 3, Sec. 2. Venue. Petitions for rehabilitation pursuant to these Rules shall be filed in the Regional Trial Court having jurisdiction over the territory where the debtors principal office is located.
10 11

P.D. No. 902-A is entitled Reorganization of the Securities and Exchange Commission with Additional Powers and Placing the Said Agency under the Administrative Supervision of the Office of the President.
12

RTC Order dated December 16, 2005, rollo, pp. 341-342. (Emphasis supplied.) (Emphasis supplied.) Agpalo, Statutory Construction, Fifth Edition (2003), p. 198. G.R. Nos. 163156 & 166845, December 10, 2008.

13

14

15

16

17

SEC. 7. Stay Order. -- If the court finds the petition to be sufficient in form and substance, it shall, not later than five (5) working days from the filing of the petition, issue an Order: (a) appointing a Rehabilitation Receiver and fixing his bond; (b) staying 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 persons not solidarily liable with the debtor; provided, that the stay order shall not cover claims against letters of credit and similar security arrangements issued by a third party to secure the payment of the debtor's

obligations; provided, further, that the stay order shall not cover foreclosure by a creditor of property not belonging to a debtor under corporate rehabilitation; provided, however, that where the owner of such property sought to be foreclosed is also a guarantor or one who is not solidarily liable, said owner shall be entitled to the benefit of excussion as such guarantor; (c) prohibiting the debtor from selling, encumbering, transferring, or disposing in any manner any of its properties except in the ordinary course of business; (d) prohibiting the debtor from making any payment of its liabilities except as provided in items (e), (f) and (g) of this Section or when ordered by the court pursuant to Section 10 of Rule 3; (e) prohibiting the debtor's suppliers of goods or services from withholding supply of goods and services in the ordinary course of business for as long as the debtor makes payments for the services and goods supplied after the issuance of the stay order; (f) directing the payment in full of all administrative expenses incurred after the issuance of the stay order; (g) directing the payment of new loans or other forms of credit accommodations obtained for the rehabilitation of the debtor with prior court approval; (h) fixing the dates of the initial hearing on the petition not earlier than forty-five (45) days but not later than sixty (60) days from the filing thereof; (i) directing the petitioner to publish the Order in a newspaper of general circulation in the Philippines once a week for two (2) consecutive weeks; (j) directing the petitioner to furnish a copy of the petition and its annexes, as well as the stay order, to the creditors named in the petition and the appropriate regulatory agencies such as, but not limited to, the Securities and Exchange Commission, the Bangko Sentral ng Pilipinas, the Insurance Commission, the National Telecommunications Commission, the Housing and Land Use Regulatory Board and the Energy Regulatory Commission; (k) directing the petitioner that foreign creditors with no known addresses in the Philippines be individually given a copy of the stay order at their foreign addresses; (l) directing all creditors and all interested parties (including the regulatory agencies concerned) to file and serve on the debtor a verified comment on or opposition to the petition, with supporting affidavits and documents, not later than fifteen (15) days before the date of the first initial hearing and putting them on notice that their failure to do so will bar them from participating in the proceedings; and (m) directing the creditors and interested parties to secure from the court copies of the petition and its annexes within such time as to enable themselves to file their comment on or opposition to the petition and to prepare for the initial hearing of the petition. The issuance of a stay order does not affect the right to commence actions or proceedings insofar as it is necessary to preserve a claim against the debtor.
18

Supra note 16.

19

SEC. 6. Stay Order. -- If the court finds the petition to be sufficient in form and substance, it shall, not later than five (5) working days from the filing of the petition, issue an Order: (a) appointing a Rehabilitation Receiver and fixing his bond; (b) staying 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; xxx.
20

Rollo, p. 342. (Emphasis supplied.) Batul v. Bayron, 468 Phil. 131, 148 (2004). Id.

21

22

[G.R. No. 183140 : August 02, 2010] NORTH BULACAN CORPORATION, PETITIONER, VS. PHILIPPINE BANK OF COMMUNICATIONS, RESPONDENT. DECISION ABAD, J.: This case is about the need for petitioners in corporate rehabilitation cases to consistently abide by the rules governing the same and to meet the creditors' substantial opposition to their petitions. The Facts and the Case Petitioner North Bulacan Corporation (NBC) is engaged in the business of developing low and medium-cost housing projects. On December 11, 2000 its parent company, Centro Ville, Inc. (CVI), entered into a joint venture agreement (JVA) with First Sarmiento Property Holdings, Inc. (FSPHI) to develop the latter's 15.5hectare property into low and medium-cost housing projects. FSPHI will supply the land and CVI will develop it. The parties amended the JVA on April 26, 2001 to enable NBC to substitute for CVI. On August 1, 2001 NBC bought a 21-hectare property from FSPHI for P84,499,800.00. At the onset, the Land Bank of the Philippines (Land Bank) offered P100 million to finance the construction of the houses. Later, however, respondent Philippine Bank of Communications (PBCom) offered to finance the whole project and immediately provide NBC a P100 million loan facility on the condition that the PagIBIG/Home Development Mutual Fund (Pag-IBIG) directly paid PBCom for the houses upon completion of construction, whether or not these had been sold. Relying on PBCom's commitment, NBC accepted the bank's offer. On July 11, 2003 NBC executed a deed of assignment, assigning to PBCom its rights and interests over all payments that may be due it from the PagIBIG. After a time, however, PBCom discontinued its financial support to NBC reportedly because Bangko Sentral ng Pilipinas (BSP) had issued a cease-and-desist order against the bank. When it became apparent that PBCom had no intention of complying with its commitment, NBC sought help from Cocolife and Land Bank which expressed their intention to finance the project by taking out NBC's loan from PBCom. But the latter refused the offer, insisting on the supposed BSP cease-and-desist order. NBC's construction eventually stopped for lack of funds. On December 28, 2006 NBC filed a petition for corporate rehabilitation with the Mandaluyong Regional Trial Court (RTC). On June 15, 2007 NBC filed with the court a manifestation and urgent motions a) to order PBCom to release 12 Transfer Certificates of Title of finished housing units, b) to order Pag-IBIG to issue Letters of Guaranty to PBCom representing the take-out value of the finished units, and c) to allow NBC to use the proceeds to make emergency repairs and restoration works. On July 17, 2007 Judge Paulita AcostaVillarante granted NBC's motions. PBCom refused, however, to comply with it. Meantime, Judge Villarante retired and Judge Edwin Sorongon took over. On January 24, 2008 the RTC, presided over by the latter judge, issued an order giving due course to NBC's petition for rehabilitation. PBCom filed a petition for certiorari before the Court of Appeals (CA) to challenge the RTC order. On May 20, 2008 the CA granted PBCom's petition, stating that since the RTC was unable to approve a rehabilitation plan for NBC after 180 days from the date of the initial hearing in the case, it should have dismissed the petition for rehabilitation. This prompted NBC to take recourse to this Court. The Issue Presented The only issue presented in this case is whether or not the CA erred in dismissing NBC's action for corporate rehabilitation. The Ruling of the Court The Court enacted the Interim Rules of Procedure on Corporate Rehabilitation to provide a remedy for summary and non-adversarial rehabilitation proceedings of distressed but viable corporations.[1] The intent

is consistent with the commercial nature of rehabilitation, which seeks to expedite its resolution for the benefit, not only of the petitioner-corporation, but of all the parties involved and the economy in general.[2] These rules are to be construed liberally to obtain for the parties a just, expeditious, and inexpensive disposition of the case.[3] The parties may not, however, invoke such liberality if it will result in the utter disregard of the rules or cause needless delay in the administration of justice.[4] Here, as PBCom pointed out, NBC violated several rules on corporate rehabilitation. In contravention of Rule 3, Section 1 on prohibited pleadings, NBC filed motions for extension and a memorandum in the case,[5] which the RTC blindly allowed. NBC likewise filed various pleadings,[6] ignoring the requirement under the Rules that these be verified by the affiants.[7] Also, NBC filed a couple of motions for indirect contempt[8] against PBCom without complying with the requirement that these, too, had to be verified.[9] Further, the documents that accompanied NBC's petition fell short of what the rules required.[10] For instance, the Schedule of Debts and Liabilities[11] did not show the creditors' addresses and, although it reflected the principal amount of each debt, nowhere did it state the amount of accrued interests, the penalties, the nature of the obligation, and any pledge, lien, mortgage judgment, or other security given for the debt. Additionally, the NBC's Inventory of Assets[12] failed to state the nature of its assets, their location and condition. NBC did not likewise disclose the encumbrances, liens, or claims on its properties and the identities as well as the addresses of the lien holders or claimants. Largely because of NBC's numerous prohibited pleadings, nearly a year had passed since the petition's initial hearing on February 15, 2007 and still the RTC had not approved a rehabilitation plan for the company. Under the Rehabilitation Rules, if upon the lapse of 180 days from the date of the initial hearing there is still no approved rehabilitation plan, the RTC must dismiss the petition.[13] NBC argues that the RTC could not have committed grave abuse of discretion in extending the 180-day period since the rules allowed such an extension provided it was not to exceed 18 months from the filing of the petition. True, such an extension is allowed but only if there appeared to be convincing and compelling evidence that the debtor-corporation can be successfully rehabilitated.[14] Here, however, the RTC proceeded beyond the 180-day period even in the absence of a motion to extend the same and despite the lack of strong and compelling evidence which showed that NBC's continued operation was still economically feasible. Quite the contrary, aside from the substantial inadequacy of NBC's listed assets, the creditors' opposition to rehabilitation critically placed in serious doubt the likelihood of its success. PBCom claimed that, out of 1,202 real properties listed as NBC's assets, at least 1,075 actually belonged to FSPHI and were mortgaged to PBCOM. FSPHI, for its part, said that NBC's obligation to it amounted to P48,333,914.00 and not P43,845,000.00 as listed. Pag-IBIG pointed out that NBC owed it more than P188 Million. The RTC did not properly address these oppositions to the rehabilitation. Moreover, even assuming that the extension was just, the petition had to be dismissed just the same because the RTC had not approved any rehabilitation plan as of June 28, 2008 or within 18 months from the date of filing of the petition on December 28, 2006.[15] In fact, there is nothing in the records of the case that would show that the RTC ever approved any rehabilitation plan. Ordinarily, the evaluation of petitioner-company's business viability in a corporate rehabilitation case involves factual issues that this Court will not take cognizance of since it is not a trier of facts.[16] But when it is shown that the RTC gravely abused its discretion in finding what the facts are,[17] it may grant an exception. Here, the RTC did just that when it utterly disregarded the Rules on Corporate Rehabilitation in the guise of liberal construction and granted the petition for rehabilitation based on insufficient evidence. The RTC admitted NBC's pleadings and their attachments despite blatant non-compliance with the rules. It gave due course to the petition allegedly because the "NBC was able to convince the court of the feasibility of its rehabilitation by showing the condition and value of its assets, the viability of its business, and the cause for its present financial problems."[18] On closer examination, however, the NBC inventory actually did not mention the condition of its listed assets. It merely enumerated certain real properties and their respective sizes and market values. Further, the RTC refused to dismiss the petition notwithstanding that it had not approved any rehabilitation plan within the period specified by law. Clearly, the rehabilitation court grossly abused its authority in granting NBC's petition while ignoring the requirements for it. Even brushing technicalities aside, NBC's petition for corporate rehabilitation must still fail. As the CA aptly noted, the RTC failed to address NBC's misrepresentation as to its true accountabilities with Pag-IBIG and FSPHI. For instance, NBC claims that as of November 30, 2006 its total assets amounted to

P412,193,537.50 while its obligations reached P367,926,823.05. But FSPHI asserts that NBC owed it P48,333,914.00, not just P43,845,000.00, indicating a need to examine the claims. For its part, Pag-IBIG asserts that NBC owed it P188,425,476.49 as a result of the latter's unjustified refusal to register its covered employees and to remit their compulsory monthly contributions as mandated by law.[19] If these claims were taken into consideration, it would readily be apparent that NBC's liabilities were far greater than its claimed properties. Under the circumstances, NBC's total debts would balloon to P560,841,213.54, exclusive of interests, penalties, and other charges. Obviously, its continued operation would no longer be viable. The Court holds that the RTC should have ruled on the creditors' objections instead of merely treating them as premature. The RTC of course claims that the rehabilitation plan would still have to be referred to the receiver for study and evaluation. But there would be no need to go that far when the petitioning corporation declined to comply with the simple rules of rehabilitation, when the documentation of its assets were inadequate, and when the creditors' opposition offered insurmountable basis for shelving the entire effort. WHEREFORE, the Court DENIES the petition and AFFIRMS the decision of the Court of Appeals in CA-G.R. SP 102555 dated May 20, 2008 which dismissed petitioner North Bulacan Corporation's petition for corporate rehabilitation. SO ORDERED. Carpio, (Chairperson), Peralta, Perez,* and Mendoza, JJ., concur. Endnotes:

Designated as additional member in lieu of Associate Justice Antonio Eduardo B. Nachura, per raffle dated June 7, 2010.
[1]

Interim Rules of Procedure on Corporate Rehabilitation (2000), Rule 3, Section 1.

[2]

New Frontier Sugar Corporation v. Regional Trial Court, Branch 39, Iloilo City, G.R. No. 165001, January 31, 2007, 513 SCRA 601, 608.
[3]

Supra note 1, Rule 2, Section 2. El Reyno Homes, Inc. v. Ong, 445 Phil. 610, 618 (2003). Rollo, p. 491. Id. at 491-492. Supra note 1. Rollo, p. 492. Rules of Court, Rule 71, Section 4. Supra note 1, Rule 4, Section 2. Rollo, p. 175. Id. at 29. Supra note 1, Rule 4, Section 11. Id. Id. Ignacio v. Magsimpan, G.R. No. 165710, April 6, 2005.

[4]

[5]

[6]

[7]

[8]

[9]

[10]

[11]

[12]

[13]

[14]

[15]

[16]

[17]

Rosario v. PCI Leasing and Finance, Inc., G.R. No. 139233, November 11, 2005, 474 SCRA 500, 506. Rollo, p. 277. Implementing Rules and Regulations of R.A. 7742, Rule V, Section 1 and Rule VI, Section 5.

[18]

[19]

G.R. No. 84606 June 28, 1989 SPOUSES RAMON A. GONZALES and LILIA Y. GONZALES, petitioners, vs. SUGAR REGULATORY ADMINISTRATION, respondent. Ramon A. Gonzales for petitioners. The Government Corporate Counsel for respondent.

FELICIANO, J.: This is a Petition for Certiorari which asks this Court to reverse the order of the Regional Trial Court, Branch 33, Iloilo City in Civil Case No. 17926, dismissing petitioners' complaint as against herein respondent Sugar Regulatory Administration ("SRA"). The background facts of this case are quickly summarized: On 23 December 1987, petitioner spouses, Ramon A. Gonzales and Lilia Y. Gonzales, filed a complaint seeking cancellation of a mortgage and recovery of a sum of money against the Republic Planters Bank ("RPBank"), Philippine Sugar Commission ("Philsucom") and the SRA The complaint alleged that on 13 May 1980, petitioners obtained a loan from the RPBank in the amount of P 176,000.00 secured by a real estate mortgage. The proceeds of the loan were released on a staggered basis and the loan was "payable from [the] 1980-1981 sugar crop, " 1 the amortization
payments to be remitted by the Philsucom to the RPBank. The RPBank is owned and controlled by the Philsucom. The complaint also stated that on 24 September 1987, petitioners received a statement of account from the RPBank setting forth that petitioners had an outstanding loan balance due to the bank of P 652,446.38. Petitioners then requested copies of the promissory notes executed by them as well as the breakdown of re-payments they had made on their loan. On the basis of the promissory notes and the list of re-payments made, the complaint continued, it appeared that petitioners had received the total amount of P l,041,610.55 in loan funds from the RPBank and that petitioners had re-paid thereon the total amount of P 1,051,296.77; in other words, petitioners had already more than fully repaid their loan. The complaint further averred that Philsucom had deducted from the export sugar proceeds of petitioners the amount of P 421,517.32 without the authority and consent of petitioners with the result that petitioners had overpaid the RPBank by P 289,260.88. Petitioners prayed that the real estate mortgage be cancelled, and that Philsucom and SRA be required jointly and severally to reimburse the petitioners the amount of P 289,260.88 as well as moral damages of P 50,000.00 and attorney's fees of another P 50,000.00.

The RPBank, Philsucom and herein respondent SRA moved to dismiss the complaint upon the ground of lack of cause of action. Philsucom and respondent SRA through the Solicitor General, denied any obligation on the part of the Philsucom to return any amount to petitioners on account of allegedly unauthorized deductions from the proceeds of petitioners' sugar sold by the Philsucom. For

its part, the SRA also noted that while the deductions complained of were made by the Philsucom during the period from 1980 to 1984, the SRA itself had been created by Executive Order No. 18 only on 18 May 1986 and that it was not a party to the real estate mortgage between petitioners and the RPBank. Petitioners filed, on 17 March 1988, an amended complaint which assailed the constitutionality of Executive Order No. 18. Petitioners urged that the abolition of the Philsucom by Executive Order No. 18 in effect destroyed the petitioners' right to recover from Philsucom what petitioners claim in their complaint is due to them. Petitioners hence assert that they had been deprived of property without due process of law and that the abolition of Philsucom and the transfer of assets from Philsucom to respondent SRA are unconstitutional and ineffective. In a separate pleading, petitioners also opposed the motions to dismiss arguing, once more, that Executive Order No. 18, to the extent it abolished the Philsucom and transferred its assets to respondent SRA deprived petitioners of a property right without due process of law. On 2 August 1988, the trial court issued an order granting the motion to dismiss insofar as SRA was concerned, while denying that same motion insofar as RPBank and Philsucom were concerned. Hence, this Petition for Review of the trial court's Order to the extent that order would dismiss the complaint vis-a-vis respondent SRA It is petitioners' position, as already noted, that dismissal of the complaint as against SRA was erroneous because the abolition of Philsucom and transfer of assets from Philsucom to respondent SRA constitute an unconstitutional taking of property rights and, therefore, ineffective. The implicit theory of petitioners is that they have a right to follow Philsucom's assets in the hands of the SRA. Petitioners' argument on unconstitutionality is too impressionistic and needs to be more sharply focused. One who asserts a claim against a juridical entity has no constitutional right to the perpetual existence of such entity. Juridical persons, whether incorporated or not, whether owned by the government or the private sector, may come to an end at one time or another for a variety of reasons, e.g., the fulfillment or the abandonment of the business purposes for which a corporation was set up. Thus, the Corporation Code provides for termination of corporate life, the dissolution of the corporation, the winding up of its operations, the liquidation of its assets, the payment of its obligations and distribution of any residual assets to its stockholders. 2 The termination of the life of a
juridical entity does not by itself imply the diminution or extinction of rights demandable against such juridical entity. 3

Executive Order No. 18, promulgated on 28 May 1986, abolished the Philsucom, created the SRA and authorized the transfer of assets from Philsucom to SRA. Section 13 of Executive Order No. 18 reads as follows: Sec. 13. Transitory Provisions.- The Philippine Sugar Commission (Philsucom) is hereby abolished. The Sugar Regulatory Administration may retain some of the personnel of said agency as it may deem necessary. Any public officer or employee separated from service as a result of the abolition of Philsucom effected under the laws then in force, receive the retirement and other benefits accruing thereunder. In case of lack of funds to support the retirement and separation pay of affected officers and employees of the Philsucom, a special fund shall be set aside by the Ministry of Budget for this purpose

Assets and records that, as determined by the Sugar Regulatory Administration, are required in its operation are hereby transferred to the Sugar Regulatory Administration. Although the Philsucom is hereby abolished, it shall nevertheless continue as a juridical entity for three years after the time when it would have been so abolished, for the purpose of prosecuting and defending suits by or against it and enabling it to settle and close its affairs, to dispose of and convey its property and to distribute its assets, but not for the purpose of continuing the functions for which it was established, under the supervision of the Sugar Regulatory Administration. (Emphasis supplied) We note that Executive Order No. 18 did not provide for universal succession, as it were, of SRA to Philsucom, or more specifically to the assets and liabilities of Philsucom. Under the second paragraph of Section 13 quoted above, the SRA has been authorized to determine which of the assets and records of Philsucom are required for the carrying out of the activities which the SRA is to carry on or undertake. The succession of the SRA to the assets and records of the Philsucom is thus limited in nature; the extent of such succession is left to the discretionary determination of the SRA itself. More importantly, Executive Order No. 18 is silent as to the liabilities of Philsucom; it does not speak of assumption of such liabilities by the SRA. We must assume that this limited statutory succession was deliberately rather than inadvertently prescribed. For the second paragraph of Section 13 of Executive Order No. 18 stands in sharp contrast with Section 10 of P.D. No. 388, as amended, promulgated on 2 February 1974 which created the Philsucom and in turn abolished the pre-existing Philippine Sugar Institute and the Sugar Quota Administration. Section 10 of P.D. No. 388, as amended, provided as follows: Sec. 10. Transitory Provisions. - The Philippine Sugar Institute and the Sugar Quota Administration are hereby abolished and absorbed effective upon the organization of the Commission and all their assets, liabilities and records shall be- transferred to the Commission. The Commission may retain the personnel of said agencies as it may deem necessary. Those of the personnel who may not be retained shall be entitled to retirement benefits, otherwise they shall be granted gratuity to be determined by the Commission. (Emphasis supplied) The Philsucom, it will be seen, succeeded as a matter of course to all the assets, liabilities and records of the Philippine Sugar Institute and the Sugar Quota Administration. The SRA did not, quite possibly because the Government wanted the opportunity to examine the assets, liabilities and records carefully and to determine the compatibility of (asserted) liabilities of the Philsucom with applicable law and relevant requirements of public policy and the public interest. 4 That the assets of the Philsucom must respond for payment of lawful obligations of Philsucom, does not appear to require demonstration. The assets which, in accordance with the second paragraph of Section 13 of Executive Order No. 18, may be taken over by the SRA can thus be only net or residual assets, assets remaining after payment of the valid and enforceable liabilities of Philsucom has been made or been adequately provided for. We believe, in other words, that Section 13 of Executive Order No. 18 is not to be interpreted as authorizing respondent SRA to disable Philsucom from paying Philsucom's demandable obligations by simply taking over Philsucom's assets and immunizing them from legitimate claims against Philsucom. The right of those who have previously contracted with, or otherwise acquired lawful claims against, Philsucom, to have the assets of Philsucom applied to the satisfaction of those claims, is a substantive right and not merely a procedural remedy. Section 13 cannot be read as permitting the SRA to destroy that substantive

right. We think that such an interpretation would result in Section 13 of Executive Order No. 18 colliding with the non-impairment of contracts clause of the Constitution insofar as contractual claims are concerned, and with the due process clause insofar as the non-contractual claims are concerned. 5 To avoid such a result, we believe and so hold that should the assets of Philsucom
remaining in Philsucom at the time of its abolition not be adequate to pay for all lawful claims against Philsucom, respondent SRA must be held liable for such claims against Philsucom to the extent of the fair value of assets actually taken over by the SRA from Philsucom, if any. To this extent, claimants against Philsucom do have a right to follow Philsucom's assets in the hands of SRA or any other agency for that matter. This result appears no more than a dictate of elementary fairness, particularly when one takes into account that under Section 11 of Executive Order No. 18, the SRA will continue, "until otherwise provided, as directed and ordered by the President of the Philippines," to collect and receive the proceeds of "levies, charges and other impositions as [then] granted by law, decree and/or executive order, to the [Philsucom]." Whether the deductions here assailed by petitioners are included among the "levies, charges and other impositions" then made by Philsucom and now continued by SRA must be determined by the trial court.

Petitioners have noted in this connection that the three (3) year period provided for in the third paragraph of Section 13 of Executive Order No. 18 is about to expire. There is nothing to prevent Philsucom from appointing a trustee SRA for instance and conveying all its properties to such trustee, for the benefit of the Government, creditors and other persons in interest, following at least by analogy the provisions of the second paragraph of Section 122 of the Corporation Code. Should Philsucom decline to so appoint SRA as trustee, the principles set forth above would of course apply, mutatis mutandis, in respect of whichever public agency may find itself actually holding the assets and records of Philsucom. We conclude that dismissal of petitioners' complaint against respondent SRA was clearly premature. Petitioners have a cause of action against SRA to the extent that they are able to prove lawful claims against Philsucom, which claims Philsucom is or may be unable to satisfy, and to the extent respondent SRA did, or does, in fact take over all or some of the assets of Philsucom. At the very least, the motion to dismiss was not shown to rest upon indubitable grounds and should, therefore, have been denied not only in respect of Philsucom but also in respect of respondent SRA. WHEREFORE, the order of the trial court dated 2 August 1988 in Civil Case No. 17926 is hereby SET ASIDE to the extent that such order dismissed petitioners' complaint against respondent SRA . SO ORDERED. Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Gancayco, Padilla, Bidin, Sarmiento, Cortes, Grio-Aquino, Medialdea and Regalado, JJ., concur.

Footnotes 1 Petition, Rollo, p. 2. 2 Sections 117-122, Batas Pambansa Blg. 68. 3 Thus, Section 122 of the Corporation Code provides, in part: Sec. 122. Corporate liquidation. - Every corporation whose charter expires by its own limitation or is annulled by forfeiture or otherwise, or whose corporate existence for

other purposes is terminated in any other manner, shall nevertheless be continued as a body corporate for three (3) years after the time when it would have been so dissolved, for the purpose of prosecuting and defending suits by or against it and enabling it to settle and close its affairs, to dispose of and convey its property and to distribute its assets, but not for the purpose of continuing the business for which it was established. At any time during said three (3) years, the corporation is authorized and empowered to convey all of its property to trustees for the benefit of stockholders, members, creditors, and other persons in interest. From and after any such conveyance by the corporation of its property in trust for the benefit of its stockholders, members, creditors and others in interest, all interest which the corporation had in the property terminates, the legal interest vests in the trustees, and the beneficial interest in the stockholders, members, creditors or other persons in interest. xxx xxx xxx (Emphasis supplied) 4 It seems relevant to note that the Philsucom had a wide range of extraordinary powers during the martial law administration of former President Marcos. The range of these powers is indicated by Section 4 of Presidential Decree No. 388 as amended by Presidential Decrees Nos. 11 92, 1905, 1918 and 1944 which included among the powers of Philsucom the following: xxx xxx xxx (d) To act as a buying and selling agency of sugar thru its affiliate/subsidiary for the purchase and/or local marketing of sugar on a voluntary and contractual basis in order to promote the effective merchandising of sugar and to act as the country's sole export trading agency for sugar to ensure generation of optimum foreign exchange earnings from sugar exports; (f) To borrow money from local and foreign sources as may be necessary for its operations; xxx xxx xxx (i) To hold lands and acquire rights over agricultural lands in excess of the areas permitted to private corporations, associations and persons of statute; (j) To engage in export and import business of sugar and its derivatives, as well as in related activities; xxx xxx xxx (p) To assume control and/or supervision of sugar mill and refinery that has failed to meet its financial and other contracted obligations for two years or has become inefficient in its operation; (q) To organize, register, regulate and maintain exclusive control and supervision over sugar planters and sugar producers marketing cooperatives and to restore

those existing under laws before their repeal by the provisions of Presidential Decree No. 175; ...; (r) To allow sugar planters and/or sugar producers marketing cooperatives to enjoy privileges and incentives heretofore granted under laws of their creation before their repeal by the provisions of Presidential Decree No. 175, and those granted by all government agencies to business organization under existing laws; ...; (s) To determine the manner and extent by which powers, privileges and incentives provided by existing laws shall be exercised or enjoyed by sugar planters and/or sugar producers marketing cooperatives; ...; (t) To suspend the operation or cancel the registration of any sugar planters and/or sugar producers marketing cooperatives after hearing and when in its judgment based on findings, such cooperative is operating in violation of this Decree, rules and regulations existing laws as well as the by-laws of the sugar cooperatives; (u) To finance the activities of the sugar industry, or any of its component elements, where such assistance is needed and conducive to the progress of the industry in all its phases; (v) To organize affiliate corporations for the purpose of carrying out any of the above functions. ...; xxx xxx xxx" 5 See, generally, Clemons v. Molting, 42 Phil. 702 (1922); Government of the Philippines v. Visayan Surety, 66 Phil. 326 (1938); Rutter v. Esteban, 93 Phil. 68 (1953); and Coombes v. Getz, 285 U.S. 434, 76 L.ed. 866 (1932). Lothrop and others v. Stedman, etc., 42 Conn 583 (1875), while fairly ancient, still apropos: A repeal of a charter does not of itself violate or impair the obligation of any contract which the corporation has entered into. But the legislature cannot establish such rules in regard to the management and disposition of the assets of the corporation, that the avails shall be diverted from or divided unfairly and unequally among the creditors, and thus impair the obligation of contracts, or that the portion of the avails which belong to the stockholders shall be sequestered and diverted from the owners, and thus injure vested rights. x x x x x x x x x (42 Conn at 591) G.R. No. 139256 December 27, 2002

REPUBLIC OF THE PHILIPPINES, represented by Sugar Regulatory Administration, petitioner, vs. SULPICIO TANCINCO, respondent. DECISION

AUSTRIA-MARTINEZ, J.: Assailed via a petition for review on certiorari by the Sugar Regulatory Administration (SRA for brevity) is the decision of the Court of Appeals in CA-G.R. CV No. 36110 dismissing SRAs appeal and affirming the decision of the Regional Trial Court of Cagayan de Oro City (Branch 24) in Civil Case No. 10117 for Damages. The facts of this case are undisputed: The National Sugar Trading Corporation (NASUTRA), a domestic corporation created for the purpose of engaging in the trading of sugar, and a subsidiary of the Philippine Sugar Commission (Philsucom), an entity owned and controlled by the Philippine government, leased the warehouse of Sulpicio Tancinco in Cagayan de Oro City. The contract was for a period of 3 months starting November 23, 1984 renewable for another 3 years.1 On December 29, 1984, the eastern wall of the warehouse collapsed causing death and injuries to several persons and damage to houses within the area. Tancinco was constrained to incur expenses for the repair and restoration of the warehouse and indemnity for the victims. Due to NASUTRAs refusal to reimburse Tancinco, the latter filed on March 28, 1985 a complaint for Damages with the Regional Trial Court of Cagayan de Oro City (Branch 23).2 NASUTRA filed its Answer disclaiming any liability.3 In the meantime, NASUTRA was converted into a private corporation called the Philippine Sugar Marketing Corporation (Philsuma), the sole marketing agency for the sugar industry to be owned completely by sugar producers.4 Thereafter, Philsucom was phased out by Executive Order No. 18 in 1986, at same time creating petitioner SRA.5 NASUTRA substituted petitioner SRA and filed on February 8, 1988, an Answer putting up the defenses that it cannot be liable for NASUTRAs obligation as it was created after the incident took place and that it is a separate and distinct entity from the former.6 On May 17, 1990, respondent Tancinco died and he was substituted by his heirs. On January 10, 1991, the trial court received Tancincos evidence ex parte as SRA was declared in default.7 On February 18, 1991, the RTC rendered its decision in favor of Tancinco. The dispositive portion of the decision reads: "WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff and against the SUGAR REGULATORY ADMINISTRATION as liquidator and defendant NASUTRA and other defendants to pay jointly and severally the former the following sums: "a) P229,006.00 for materials used in the repair of the warehouse; "b) P79.775.60 for labor; "c) P1,658.22 for fule (sic) and oil; "d) P972.80 for light and power; "e) P6,157.82 for medicines to victims; "f) P436.00 for miscellaneous expenses;

"g) P19,680.00 spent for the guards; "h) P30,000.00 as attorneys fees all with legal rate of interest from December 29, 1984 until fully paid. "Without pronouncement as to cost. "SO ORDERED."8 The trial court ruled that under Section 13, paragraph 3 of E.O. No. 18 and reiterated in E. O. No. 114,9 SRA, as the liquidator of Philsuma, was, together with its co-defendants, jointly liable to Tancinco. SRA appealed to the Court of Appeals which rendered the herein assailed decision dated February 19, 1999. The appellate court held that "(S)ince PHILSUCOM had succeeded NASUTRA, and the appellant SRA in turn assumed the liabilities of PHILSUCOM, even if only to a limited extent, it logically follows that appellant SRA may still be held liable for the herein claim for damages of the appellee", citing the case of Spouses Gonzales v. Sugar Regulatory Administration, 174 SCRA 377 [1989].10 Hence, the present petition for review, on the following grounds: "By affirming the decision of the court Lower court (sic), the Court of Appeals disregarded the ruling of this Honorable Court in Gonzales vs. Sugar Regulatory Administration (174 SCRA 377), which provided for limited assumption of liability of PHILSUCOM by SRA. It also acted not in accordance with law on the nature of ordinary obligation as not joint and solidary."11 SRA insists that the ruling in the Gonzales case sets a condition upon which it may assume liability, i.e.., that respondent must show that SRA is holding Philsucoms assets which could answer for NASUTRAs liability.12Moreover, SRA also maintains that E.O. No. 18 did not make it the liquidator of Philsucom nor jointly and solidarily liable with NASUTRA.13 The principal issue in this case is whether Tancinco or his heirs may recover NASUTRAs adjudged liability from SRA. We answer in the affirmative. There is no question that Executive Order No. 18 abolished the Philippine Sugar Commission (Philsucom) and created the Sugar Regulatory Administration (SRA). However, the abolition of NASUTRA and eventually Philsucom did not abate the pendency of the suits filed against them. The termination of the life of a juridical entity does not by itself cause the extinction or diminution of the rights and liabilities of such entity14; specially in this case where, pursuant to the transitory provision of E.O. No. 18, Philsucom, under the supervision of SRA, was allowed to continue as a juridical entity for 3 years for the purpose of prosecuting and defending suits by or against it and enabling it to settle and close its affairs, to dispose of and convey its property; and to distribute its assets.15 If and when a pending action cannot be terminated within said 3-year period, SRA, which has been appointed by law to supervise the closing affairs of Philsucom, is considered a trustee which shall continue to prosecute and defend suits filed by or against it. We ruled in Gelano vs. Court of Appeals,16 viz.:

"However, a corporation that has a pending action and which cannot be terminated within the threeyear period after its dissolution is authorized under Sec. 78 [now 122] of the Corporation Law to convey all its property to trustees to enable it to prosecute and defend suits by or against the corporation beyond the three-year period. Although private respondent did not appoint any trustee, yet the counsel who prosecuted "and defended the interest of the corporation in the instant case and who in fact appeared in behalf of the corporation may be considered a trustee of the corporation at least with respect to the matter in litigation only. Said counsel had been handling the case when the same was pending before the trial court until it was appealed before the Court of Appeals and finally to this Court. We therefore hold that there was substantial compliance with Sec. 78 [now 122] of the Corporation Law and such private respondent Insular Sawmill, Inc. could still continue prosecuting the present case even beyond the period of three (3) years from the time of dissolution. "...[T]he trustee may commence a suit which can proceed to final judgment even beyond the threeyear period. No reason can be conceived why a suit already commenced by the corporation itself during its existence, not by a mere trustee who, by fiction, merely continues the legal personality of the dissolved corporation should not be accorded similar treatment allowed - to proceed to final judgment and execution thereof." Said ruling was reiterated in Reburiano vs. Court of Appeals,17 thus: "There is, therefore, no reason why the suit filed by private respondent should not be allowed to proceed to execution. It is conceded by petitioners that the judgment against them and in favor of private respondent in C.A. G.R. No. 16070 had become final and executory. The only reason for their refusal to execute the same is that there is no existing corporation to which they are indebted. Such argument is fallacious. As previously mentioned, the law specifically allows a trustee to manage the affairs of the corporation in liquidation. Consequently, any supervening fact, such as the dissolution of the corporation, repeal of a law, or any other fact of similar nature would not serve as an effective bar to the enforcement of such right." (Emphasis Ours) It being the trustee, SRA must therefore continue the legal personality of the defunct NASUTRA and Philsucom until final judgment and execution stage of the case. This is bolstered by our pronouncement in the case of Gonzales vs. Sugar Regulatory Administration,18 wherein we stated that "(S)ection 13 of Executive Order No. 18 is not to be interpreted as authorizing respondent SRA to disable Philsucom from paying Philsucoms demandable obligations by simply taking over Philsucoms assets and immunizing them from legitimate claims against Philsucom.19 Contrary to SRAs contention, there is nothing in the Gonzales case which sets the condition that a claimant should first prove that SRA is holding the assets of Philsucom before the former could be made to assume liability. What was declared in the Gonzales case is that the claimants can recover lawful claims against NASUTRA/Philsucom as determined by the trial court to have been proved, to the extent of Philsucoms assets being held by SRA.20 Accordingly, SRA can be held liable for Tancincos claim for damages against NASUTRA, which claim has already been proven before the trial court. However, the matter of whether the assets being held by SRA is sufficient to answer for such claims is a different matter altogether, a matter which we cannot resolve in the present petition. Lastly, we agree with SRA that it cannot be made jointly and severally liable for NASUTRAs obligation. As previously stated, it is merely a trustee of NASUTRA/Philsucoms assets, and as such, its liability under the arrangement should merely be co-extensive with the amount of assets it took over from NASUTRA/Philsucom. As stated in the Gonzales case, SRA must be held liable for such

claims against Philsucom "to the extent of the fair value of assets actually taken over by the SRA from Philsucom, if any".21 WHEREFORE, the instant petition for review is hereby PARTIALLY GANTED. The decision of the Regional Trial Court of Cagayan de Oro City (Branch 24) in Civil Case No. 10117 is MODIFIED to the effect that petitioner Sugar Regulatory Administration is hereby ORDERED to pay respondents the sums awarded by the trial court but only up to the extent of Philsucoms assets which are being held by petitioner as trustee, the same to be determined by the same trial court in the same case. No pronouncement as to costs. SO ORDERED. Bellosillo, (Chairman), Mendoza, Quisumbing, and Callejo, Sr., JJ., concur.

Footnotes

Original Records, vol. II, pp. 414-418. Original Records, vol. I, pp. 2-6. Id., pp. 24-31.

By virtue of Presidential Decree No. 1791 issued by President Ferdinand E. Marcos on February 21, 1985.
5

Issued by President Corazon C. Aquino on May 28, 1986. Original Records, vol. I, pp. 213-214. Id., pp. 368-369. Id., p. 400; RTC Decision, p. 8. Id., p. 399-400; id., pp. 7-8. CA Rollo, p. 94; CA Decision, p. 17. Petition, p. 6; Rollo, p. 13. Id., pp. 7-9; id., pp. 14-16. Id., pp. 10-11; id., pp. 17-18.

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14

Clemente vs. Court of Appeals, 242 SCRA 717, 722-723 [1995], citing Gonzales vs. Sugar Regulatory Administration, 174 SCRA 377.
15

Section 13, 3rd para. of E.O. No. 18. 103 SCRA 90 [1981]. G.R. No. 102965, January 29, 1999. 174 SCRA 377 [1989]. Id., p. 385. Id., pp. 386-387. Id., p. 386.

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