Source: http://lawlibrary.chanrobles.com/index.php?option=com_content&amp;view=article&amp;id=50143:gr-166800-2007&amp;catid=1496&amp;Itemid=566
Timestamp: 2019-04-21 12:54:38+00:00

Document:
G.R. No. 166800 and G.R. NO. 168924 - Leca Realty Corp. v. Manuela Corp, et al/Leca Realty Corp. v. Manuel Corp, et al.
LECA REALTY CORPORATION, Petitioner, v. MANUELA CORPORATION and MS. MARILOU O. ADEA, as REHABILITATION RECEIVER for MANUELA CORPORATION, Respondents.
These are consolidated Petitions for Review on Certiorari filed by Leca Realty Corporation (LECA), petitioner, assailing the separate related Decisions of the Court of Appeals in CA-G.R. SP No. 87185 and CA-G.R. SP No. 80861.
In a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, petitioner LECA assails the Decision of the Court of Appeals (Special 8th Division) dated April 28, 2005 and its Resolution of July 15, 2005 in CA-G.R. SP No. 87185.
In its Decision, the Court of Appeals sustained the Rehabilitation Plan of Manuela Corporation (Manuela), respondent. Petitioner now contends that the Rehabilitation Plan has impaired its contract of lease with respondent over a tract of land consisting of almost three (3) hectares. Petitioner is the owner of the property situated on Shaw Boulevard, Mandaluyong City.
This is a Petition for Review on Certiorari under the same Rule questioning the Decision dated September 30, 2004 of the Court of Appeals (17th Division) and its Resolution dated January 25, 2005 in CA-G.R. SP No. 80861.
In its Decision, the Court of Appeals affirmed the trial court's Order denying petitioner's motion for extension of time to file its Record on Appeal in Civil Case No. LP-02-0028, entitled "In the Matter of the Petition for Rehabilitation of Manuela Corporation."
On January 31, 2002, respondent filed with the Regional Trial Court (RTC), Branch 253, Las PiÃ±as City, a Petition for Rehabilitation, docketed as Civil Case No. LP-02-0028.
The petition alleges inter alia that respondent is a corporation duly organized and existing under the laws of the Republic of the Philippines, primarily engaged in the business of leasing to retailers commercial spaces in shopping malls. Its principal office address is Alabang-Zapote Road, Pamplona, Las PiÃ±as City.
Respondent has assets valued at P12.43 billion and total liabilities of P4.87 billion as of December 31, 2001.
However, due to reasons that shall be discussed below, respondent is now having severe cash flow problems which prevent it from paying its debts as they fall due.
In order to finance the costs of building the Metropolis Star and the Pacific Mall, respondent obtained several loans from two syndicates of lenders. The first syndicate is composed of Bank of Philippine Islands, BPI Family Bank, Metropolitan Bank and Trust Company, Allied Bank, and Bank of Commerce; the second syndicate is composed of Allied Bank, Bank of Commerce, Philippine National Bank, and Equitable PCI Bank. Respondent's loans are governed by the Loan Agreement dated July 5, 1995 and the Syndicated Loan Agreement dated December 16, 1996.
Respondent's total outstanding loan from the syndicates (e.g., principal plus interest) is P2.174 billion as of December 31, 2001. These loans are secured by a mortgage over M Star One and M Star, both located in Las PiÃ±as City.
Respondent also has liabilities to the Hero Holdings, Inc. and its trade suppliers and other parties in the sum of P1.476 billion as of December 31, 2001.
At the onset of the Asian financial crisis in 1997, the banks stopped their lending activities to borrowers, including respondent. This event took its toll upon respondent since its malls failed to operate sufficiently resulting in heavy losses.
Matters finally came to a head in 1997 when respondent could no longer pay its trade suppliers for maturing obligations. Neither could it pay its creditor banks. The adjusted interest rates on its outstanding loans, as a result of the Asian financial crisis, were between 18% to 30% which added to respondent's liquidity problems.
Nonetheless, respondent has been acting in good faith and has exerted earnest efforts to avert its worsening financial problems. It closed down non-income generating businesses, concentrated on its business of leasing commercial spaces, intensified collection efforts, reduced personnel, negotiated for restructuring of loans with creditors, and worked out a viable payment scheme without giving undue preference to any creditor. Despite its efforts, respondent could no longer pay its suppliers and the maturing interests on its loans.
The petition further alleges that respondent can only be brought back to its financial viability if its proposed Rehabilitation Plan is approved and that it is given a respite from its creditors' demands through the issuance of a Stay Order. The successful implementation of the proposed Rehabilitation Plan will enable it to settle its remaining obligations in an orderly manner, restore its financial viability, and allow it to resume its normal operations.
In the same Stay Order, the trial court appointed Marilou Adea, also a respondent, as Rehabilitation Receiver. On February 12, 2002, respondent Adea accepted her appointment.
In its Order dated May 21, 2002, the trial court referred the petition to respondent Adea for evaluation and recommendation. On September 28, 2002, she submitted to the trial court her Report and Recommendation finding respondent Manuela's Rehabilitation Plan viable and feasible and recommending its approval.
Respondent Adea then held several consultative meetings with respondent Manuela's creditors to discuss their respective concerns and suggestions relative to its rehabilitation. For their part, the creditors filed their various comments/oppositions to respondent Manuela's Petition for Rehabilitation and Rehabilitation Plan.
On July 31, 2002, petitioner filed with the trial court its Comment and/or Formal Claim with Leave of Court against respondent Manuela amounting to P193,724,262.34 as of February 28, 2002, representing unpaid rentals, security deposits, interests, and penalty charges.
On September 30, 2002, respondent Adea issued a Notice informing all creditors, claimants, suppliers, lot and/or house buyers, counsels, oppositors, and other parties that copies of her Report and Recommendation on respondent Manuela's Petition for Rehabilitation are available and on file with the trial court for distribution to all parties concerned.
On October 22, 2002, petitioner filed its comment on respondent Adea's Report and Recommendation. Petitioner opposed her recommendation to reduce respondent Manuela's liability, considering its contractual nature which cannot be impaired during the process of rehabilitation.
Before the Court is a Notice of Appeal with Motion forExtension of Time filed by creditor Leca Realty Corporation praying for a period of thirty (30) days from August 21, 2003 to September 20, 2003 to file its intended record on appeal.
However, under Rule 3, Section 1 of the Interim Rules of Procedure on Corporate Rehabilitation, a motion for extension is a prohibited pleading.
WHEREFORE, the subject motion is DENIED.
Petitioner then elevated the case to the Court of Appeals through a Petition for Certiorari and Mandamus, docketed as CA-G.R. SP No. 80861 and assigned to the 17th Division.
Hence, the instant Petition for Review on Certiorari, docketed as G.R. No. 166800.
In the meantime, petitioner seasonably filed with the Court of Appeals a Petition for Review under Rule 43 of the 1997 Rules of Civil Procedure, as amended, alleging that the RTC erred in approving respondent Manuela's Rehabilitation Plan as it violates its (petitioner's) constitutional right to non-impairment of contract and the Interim Rules of Procedure on Corporate Rehabilitation.
x x x The pendency of the rehabilitation proceedings cannot be interpreted to impair the contractual obligations previously entered into by the contracting parties because the automatic stay of all actions is sanctioned by P.D. 902-A which provides that "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 [Rubberworld (Phils.), Inc. v. NLRC, 391 Phil. 318 (2000)].
On May 20, 2005, petitioner filed with the Court of Appeals a motion for reconsideration but it was denied in its Resolution dated July 15, 2005.
Hence, petitioner filed with this Court a Petition for Review on Certiorari, docketed as G.R. No. 168924.
In view of the identity of parties and the inter-relationship of the issues involved in G.R. No. 166800 and G.R. No. 168924, we resolved to consolidate the two petitions.
Section 1. Nature of Proceedings. - Any proceeding initiated under these Rules shall be considered in rem. Jurisdiction over all those affected by the proceedings shall be considered as acquired upon publication of the notice of the commencement of the proceedings in any newspaper of general circulation in the Philippines in the manner prescribed by these Rules.
The review of any order or decision of the court or on appeal therefrom shall be in accordance with the Rules of Court.
Extension of time to plead. - Upon motion and on such terms as may be just, the court may extend the time to plead provided in these Rules.
Verily, the trial court erred in denying petitioner's motion for extension of time to file record on appeal. At any rate, this petition has become moot considering that the Court of Appeals gave due course to LECA's Petition for Review (CA-G.R. SP No. 80861) which eventually reached this Court via a Petition for Review on Certiorari, docketed as G.R. No. 168924.
1. THE COURT OF APPEALS GRIEVOUSLY ERRED IN RULING THAT THE "PENDENCY OF THE REHABILITATION PROCEEDINGS CANNOT BE INTERPRETED TO IMPAIR THE CONTRACTUAL OBLIGATIONS PREVIOUSLY ENTERED INTO BY THE CONTRACTING PARTIES BECAUSE THE AUTOMATIC STAY OF ALL ACTIONS IS SANCTIONED BY P.D. 902-A WHICH PROVIDES THAT "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," CITING RUBBERWORLD (PHILS.), INC. V. NLRC, G.R. NO. 128003, JULY 26, 2000, 336 SCRA 433.
2. THE COURT OF APPEALS ERRED IN SUSTAINING THE LOWER COURT'S APPROVAL OF RESPONDENT MANUELA'S REHABILITATION PLAN EVEN IF SUCH PLAN IS NOT VIABLE OR FEASIBLE BECAUSE RESPONDENT MANUELA CORPORATION COULD NOT EVEN COMPLY WITH THE TERMS AND PROVISIONS OF THE COURT-APPROVED REHABILITATION PLAN.
3. THE COURT OF APPEALS ALSO ERRED IN NOT ADDRESSING THE ISSUE OF THE LOWER COURT'S FAILURE TO ACT, THAT IS, APPROVE OR DISAPPROVE, THE REHABILITATION PLAN OF MANUELA CORPORATION WITHIN EIGHTEEN MONTHS AFTER THE FILING OF THE PETITION FOR REHABILITATION.
Petitioner contends that the approved Rehabilitation Plan drastically altered the terms of its lease contract with respondent Manuela, hence, should be declared void.
Clearly, there is a gross discrepancy between the amounts of rent agreed upon by the parties and those provided in the Rehabilitation Plan.
In its Decision, the Court of Appeals rejected petitioner's contention that the approved Rehabilitation Plan impairs the obligation of contract, ratiocinating that the automatic stay of all actions is sanctioned by Section 5 (c) of Presidential Decree (P.D.) No. 902-A which provides that "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."
The amount of rental is an essential condition of any lease contract. Needless to state, the change of its rate in the Rehabilitation Plan is not justified as it impairs the stipulation between the parties. We thus rule that the Rehabilitation Plan is void insofar as it amends the rental rates agreed upon by the parties.
It must be emphasized that there is nothing in Section 5 (c) of P.D. No. 902-A authorizing the change or modification of contracts entered into by the distressed corporation and its creditors.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.
WHEREFORE, we GRANT the Petition for Review in G.R. No. 168924. The assailed Decision of the Court of Appeals in CA-G.R. SP No. 87185 is AFFIRMED with MODIFICATION. The Rehabilitation Plan, insofar as it modifies the rental rates agreed upon by petitioner LECA and respondent Manuela, is declared VOID.
Respondent Manuela is ordered to pay the rentals and all arrearages at the rates stipulated in the lease contract with interest at 6% per annum. Upon the finality of this Decision, the interest shall be 12% per annum until fully paid.
The Petition for Review on Certiorari in G.R. No. 166800 is DENIED for being moot. It has been overtaken by events. No costs.
1 Rollo of CA-G.R. SP No. 80861, p. 643.
6 Rollo of CA-G.R. SP No. 80861, p. 1733.
7 Annex "C," Petition, in G.R. No. 168924.
8 Ateneo Law Journal, Vol. XLIII, Number 2, May 1999.
9 Concepcion, Danilo L., "Insolvency Systems in Asia: An Efficiency Perspective. Corporate Rehabilitation: The Philippine Experience"; cited in the Memorandum for the Petitioner, G.R. No. 168924, p. 23.
10 G.R. No. 126850, April 28, 2004, 428 SCRA 79.
11 "Administrative Expense," Dictionary of Insurance Terms. Barron's Educational Series, Answers.com 14 September 2007. http://www.answer.com/topic/administrative expense.
12 Victory Liner, Inc. v. Gammad, et al., G.R. No. 159636, November 25, 2004, 444 SCRA 355; citing Eastern Shipping Lines, Inc. v. Court of Appeals, 234 SCRA 78, 95-96 (1994).

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