ror 7 Tia te area | retro but subject to the redemption by the vendor Thing mortgaged must bea] Thieg mortgaged must be real Personal or movable property | of immovable property Aida of Good Fa Not fequired foe cs “Mortgagor cannot alienate | Mortgagor can, the the thing mortgaged without | thing m without the the written consent of the | consent ofthe mortgagee and mortgagee any such prohibition is void “No right offedemption "| There canbe rightof 7 : t 15° | redemption in extrajudicial ; foreciosure and injudicial* : foreclosure by banks ‘Car sepure future obligations ‘ACT 3135 as amended By 4118 Important: The law covers only real intended merely to regulate the extraj redemption of the property f and when the 2 spect power or eres uthory todo sah SUPA ‘rin a document annexed thereto. ‘Outtined Procedure of Extrajudicial Foreclosure: ‘file the petition of the extrajudicial foreclosure of reat ‘estate mortgage before the Executive Judge through the ‘Gerk of Court who is also &x Officio Sheriff. 2. Notice shall be given by posting notice of sale for not less ‘than 20 days in at least 3 places of the municipaity/city where the property is situated and the publication thereof in a newspaper of general circulation in such ‘municipality/city. (Sheriff's Office, Assessor's Office and Register of Deeds). Posting of notice on mortgaged property not required. 3.The sale shall be made in a public auction under the direction of the sherif. 4. After such sale, the debtor or his successors in interest oF any judicial creditor or judgment creditor of said debtor or any person having lien on the property may redeem it within one year from and after the date of registration of the certificate of sale with the appropriate Registry of Deeds. TT OPERATIONS 20/0 If no redemption is made within the prescribed petiod, the purchaser has the absolute right to a writ of possession. ‘+ Tite to the property sold remains with the mortgagor oF his grantee until the expiration of the redemption period. The fight of the purchaser at the foreclosure sale is merely Tnchoate until after the period of redemption has expired without the right being exercised. (Medida v CA, GR No, 98258 May 8, 1992) Remedy of Party Aggrieved by Foreclosure: The debtor may, the proceedings in which possession was requested, petition that the sale be set aside and the writ of ‘possession cancelled, because the mortgage was not violated or the sale was aot made in accordance with the provisions thereof. The law does not give the mortgagee the right to recover fter the public auction sale, neither does it expressly _ottipted hibit such recovery. y Nature of Power of Foreclosure by Extrajudical Sale: Z, Conferred for mortgagee’s protection 2 -Ananciltary stipulation __ B.A prerogative of the morteagee ‘* The exercise of the right of redemption is an implied admission of the regularity of the foreclosure sale and estops fhe mortgagor from later impugning its validity on that 4 4 Ground. Redemption is inconsistent with the claim of the | 97 Nnvalidity gf the sale. (Acion v CA, GR No, 106880 August 20, INSOLVENCY Insolvency generally denotes the state of 2 person whose liabilities are more than his assets. ‘There are two principal laws available to a corporation seeking debt relief. These are, (i) the Insolvency Law and (2) Presidential Decree No. 902-A. ‘Three (3) Principal Subjects af insolvency Law: 1. Suspension of Payments 2. Voluntary insolvency 3. Involuntary Insolvency 1m accordance with the provisions of the Insolvency Law "every insolvent debtor may be permitted to suspend payments or be slscharged from his debts and liabilities" (Sec. 1). Corporate debtors however are not given a discharge. ‘A petition for suspension of payments with a request for the appointment of a management committee or rehabilitation receiver where the corporation has no sufficient assets to cover its labitties is a creation of PD 902-A and not the Insolvency Law. —+ Advisers: Atty limener; Heads: Erman Baols,lavin Ompoc; Understadies: Nicolo Bernardo; Christian de los Santos; Volunteers Jennifer Cruz, Jay 110) ‘Ouhaylonesd, Francis Esprit, Jon Lina, Diane LpanaZz COMMERCIAL LAW REVIEWER Oe wn Viana Ta) : Sod OPERATIONS 2010 The Insolvency Law s both dsvibutve and ehabitatve + ..and the purpose ofthe fling ofthe petition was other than the purpose for which the Insolvency Law was enacted, which is to effect an equitable distribution of the bankrupt's properties among his creditors and to benefit the debtor by discharging him to start afresh with the property set apart for SUSPENSION OF PAYMENTS - the postponement, by court order, of the payment of debts of one who, while possessing sufficient property to cover his debts, foresees the impossibility ‘of meeting them when they respectively fall due. (Sec. 2) Distinctions between SUSPENSION OF PAYMENTS and him as exempt." (in Re: Estate of Mindanao Motor Line, Inc, INSOLVENCY: ‘57 SCRA 103} * In the Philippines, no person shall be imprisoned for debt (Sec. 20, Art, Il, Constitution). The penal provisions of the | Debtor has enough assets to | Debtor has more Rabilties Insolvency Law (Sec. 70 to 71) and the Revised Penat Code | meet. abilities but cannot | than assets (Art. 314) punish the commission of fraud by the insolent | meet themas they fall ue and not the non-payment of the debt | alivays initiated by debtor itiated by breditors/other | ; persons | Jurisdiction in INSOLVENCY MATTERS: involuntary; infiated by Pee see debtor if yoluntary Puiposeis to delay or suspend | Purpose &s to discharge the the payiieat of debts debtor from payment of ? | oebs “The amount of ndebiediess © | CredWors receive less thal their credits, andin cases ‘where there are preferences, ‘some creditors may not receive anything at all comnnttee a it 5 i AbpFling ofthe petition by the debtor (Se.2) cece Soc]. een 2) Petitions, for suspersonaf |: 15H a 3); Payments wher, the corporation’ |! 3. Publigtion ofthe order and service of summons (Sec; har no suhesSkiggssets but 4, Méetng of creditors forthe consideration of the debtor's companied wth 9 vest fa |! ropostion (ee: 4 the appointment with a request 5. Approval bythe creditors ofthe debtor's proposition for the appointment of a 6 Objections, if any, to the decision which must be made caine lee within 10 days following the meeting (Sec. 11), 7. tesuance of order bythe court directing thatthe agreement be caried aut in case the deckion is declared vail, or when no objection toa dedion has been presented (Sec. 11), 8. the decison of the meeting be negative, the proceeding shall be terminated and the creditor: shall at liberty to enforce the rights which may correspond to them (Sc. 12) ‘management rehabilitation receiver ‘However, f the SEC finds that the debtor is insolvent and can no longer be rehabilitated, the SEC can order the dissolution of the debtor and the distribution of its assets in accordance with the provisions of the Civil Code. Effect of insolvency Proceedings filed by Individual Debtors: 1 Suits pending in court a. secured obligations suspended until assignee appointed Effects of Fling of Petition: b. unsecured obligations terminated except to fl amount 1. No disposition in any manner of his property may be made bythe petitioner (See. 3} of obligation «. foreciosure suits pending continue 2. Suit not yet filed - cannot be fled ariymore, but claims may be presented to assignee 2. No payments may be made (Sec. 3); 3. Upon request to the court, ali pending executions against the debtor shall be suspended except execution against property especially mortgaged (Sec. 6) ‘The result is different if the petitioner is 2 CORPORATION, because under the Revised Rules on Corporate Recovery, ALL claims, whether secured or unsecure, are stayed. aand ~ Advisers: Atty. Sener; Heads: Erman Baois,Javin Ompoc; Understuilies: Nicolo Bernardo; Chistian de los Santos; Volunteers Jennifer Cruz, Jay 114. ‘Buhaylongsod, Franck Espiritu, Jon Lina, Diane Lipans‘VOLUNTARY INSOLVENCY ‘An insolvent debtor owing debts exceeding in amount the sum ‘of P1,000 may apply to be discharged from his debts and ‘abilities by petition to the Regional Trial Court of the province Or city in which he has resided for 6 months next preceding the filing ofthe petition. (Sec. 14) Procedure for Voluntary Insolvency: ‘The procedure is as follows: (FIP-MCLC-DOA) 1. Fling of petition by the debtor praying for the declaration ‘of insolvency (Sec. 14); 2 Issuance of an order of adjudication declaring the petitioner insolvent (Sec. 18); 3. Publication and service ofthe order (Sec. 19}; tothe assignee (Sec. 32); 6. Liquidation of the debtor's assets ($2633); 2s 7. Compostion, if agreed upon (Sec/63); 22! 8. Discharge ofthe debtor on is apocation, ph GE ze ‘3 corporation (sec. 52, ee Aa 8. sehen ote at a Bos 10. Appeal to the SCin certiorar! © ed 2d OPERATIONS 20/0 [Nature of involuntary insolvency: ‘© Not a mere personal action against the insolent for the collection of debts ‘Purpose is to impound all of his non-exempt property, to distribute it equitably among his creditors, and to release him from further lability ‘+ Action i 2 proceeding in rem as well as in personam (Sec. 46) Procedure for involuntary insolvency: (PISA-HIP-MCLC-DOA} 1 Fling ofthe petition by three or more creditors (Sec. 20}; 2. tssuance of the order requiring the debtor to show cause why he should not be adjudged insolvent (Sec. 24); 3. Service of order to show cause (Sec. 22); 4. Fling of answer or motion to dismiss (Sec. 23); 5, Hearing of the case (Sec. 24); 6. Issuance of order for decision adjudging debtor insolvent (Sec. 24); Of the debtor's property by the clerk of court to the assignee (Sec. 32); 40. tiuidation ofthe debtor's assets and payment of his debts (Sec. 33); “1.Gémpositin, if agreed upon (Se. 63) 12. Discharge of the debtor on his application (Sec. $2); pee £4) 13. Objection, ifany, to the discharge (Sec. 66); Etiact of Fling of Petition: gg CERTRAL renner + Once the petition i filed, ipso facto takes away and Gbprives S11 = an agreement, made upon 2 sufficient 1p oo ‘the debtor petitioner of the right to do preference as to creditors, pending the ft udication. (Phil. Trust Co. vs. National Bonk, GR No. 16483 December. 7, 1221) Effect of Court Order dectaring Debtor Insolvent: 1.All the assets of the debtor not exempt from execution are ‘taken possession of by the sheriff until the appointment of receiver or assignee; 2. The payment to the debtor of any debts due to him and the dativery to the debtor or to any person for him of any property belonging to him, and the transfer of any property by him are forbidden; 3.,l civil proceedings pending against the Insolvent debtor shall be stayed; 4.Mortgages or pledges, attachments or executions on property of the debtor duly recorded and not dissolved are not, however, affected by the order INVOLUNTARY INSOLVENCY ‘An adjudication of insolvency may be made on the petition of three or more creditors, residents of the Philippines, whose creditors or demands accrued in the Philippines, and the amount of which creditors or demands are in the aggregate of _iotless than 1,000. ymmit any act of! (3 Pas ‘between an insolvent or embarrassed debtor and his, ‘whereby the latter for the sake of immediate or payment, agree to accept a dividend less than the whole ‘amount of their claims, to be distributed pro rata, in discharge _and satisfaction of the whole debt. [ACTS OF INSOLVENCY: ‘In voluntary insolvency — filing ofa petition {In involuntary insolvency ~ the following are considered act of insolvency and the petition for involuntary insolvency must set forth ore or more ofthe following: L.intention to depart from the Philippines to defraud creditors 2, Absence from the Philippines to defraud creditors 3. Concealing self to avold service of legal processes 4. concealing pr removing property to avoid its being attached ‘or taken on legal process 5.confession of judgment in favor of a creditor to defraud other creditors 6. allowing default judgment in favor of a creditor to defraud other creditors 7.Allowing, property to be taken under legat process in preference of a particular creditor to defraud other ot Adviser: Atty. Jimenes; Heads: Erman Baos, avin Omnpoc; Understudies: Nolo Bernard; Christan de fos Santas; Volunteers: ennifer Cruz, Jay 11 ‘Duhaylongso, Francs Esprit, Jon Una, Diane LianaCOMMERCIAL LAW REVIEWER Yall Oren ‘8. Making conveyance, assignment or transfer of his property to defraud his creditors PARTNERSHIPS AND CORPORATIONS ‘9. Making conveyance, assignment or transfer of his property in contemplation of insolvency ‘Apartnership may be declared insolvent 10. Default of a merchant or tradesman to pay his current = BY APETITION of the partners or any one of them or three ‘obligations fora period of 30 days ‘or more creditors who can aso petition for insolvency. 11. Failure to pay money on depositor received in a fiduciary = may be done DURING THE CONTINUATION of the capacity fora period of 30 days after demand partnership business or AFTER TTS DISSOLUTION and 12. Insufficiency of property to satisfy execution against him BEFORE THE FINAL SETTLEMENT thereof. (Sec. 20) ¢ A partnership may be declared insolvent Assets of the insolvent which are nat exempt from execution will notwithstanding the soWency of the partners ‘then be distributed among his creditors in accordance with the ‘constituting the same. (Campos Rueda & Co. v. Pacific ‘ules of concurrence in preference of credits in the Civil Code. (Commercial Co,, GR No. 18703 August 28, 1922) ‘There is a provision in the Labor Code which says the claim of laborer’s take over and priority over all other place Who may file petition for dedaration of insolvency of a toes te gorermert goonies Distinctions between VOLUNTARY LVENCY and “ALL the partners, or ANY ONE of them ao mes ‘ONE OR MORE of the partners or THREE Of MORE creditors ofthe partnership 2 may file petition for the declaration of Insolvency of 3 ‘One creditor is sufficient Filed by the insolvent Gebtor se ‘Gisincatisis eaneod bv iad: ‘The petition may be fled by ANY OFFICER DULY AUTHORIZED by Debtor must not be gully of | Debtor must:hie commigied | WY fthe vote of the board of directors oF trustees at a meeting co thor gf aehoSE NT AL ally called. for that purpose, or by the assent in waiting of “Pag faery off directors, or wastes, a the case maybe, Tat not be fess an P3000 [219 errecr with a corporation Is deciared insolvent Petition accompany bond ‘any corporation is declared insolent, its property Sana iaaia eae ‘assets shall be distibuted to the ceditors, but NO DISCHARGE shall be granted to any corporation. Petition is filed in RTC where | Length of reskdence is DISCHARGE f ided for 6 | immaterial Discharge isthe formal and judicial release of an insolvent motte detor tom i dats wth Ue econo ee eres Court ese onder oi] Canning reserved by law. oe | dedaring| a ase ; 1L Taxes due the National government of any provincial or ‘municipal government; 2. Debts created by fraud, embezzlement, defalcation as a public officer or while ating in a fiduciary capacity Order of Distribution/Preference: 1. Equitable Claims; 2. Preferred claims with respect to specific movable property and specific immovable property under Article 2241 and 2282 of the Civil Code; 3. Preferred daims as to unencumbered property of the debtor which shall be paid in the order named in Article 2. Any debt created by the fraud or embezzlement of the ‘More Specifically, (these debts not discharged are the following): 1. Taxes and assessments due the Government, whether ‘ational or local debtor; 244 of the Civil Code: i 4. Common or ordinary credits which shall be paid pro rata ee ee ee regardless of dates under Article 2245 of the Civil Code public officer or while acting ina fiduciary capacity; co —+ Advisers: Atty. Jimenez; Heads: Erman Blois, Javin Ompoc; Understudies: Neolo Bernard; Chistian de fs Santas; Volunteers: Jennifer Cru, y 113, ‘Duhaylongsod, Francs Espirit, Jon Una, Diane LipanaCOMMERCIAL LAW REVIEWER als 3 4. Debt of any person Fable for the same debt, for or with the insolvent debtor, either as partner, joint contractor, Indorser, surety or otherwise 5. Debts of a corporation 6. Claim for support 7. Discharged debt but revived by a subsequent new promise topay 8. Debts which have not been duly scheduled in time for roof and allowance, uniess the creditors had notice or actual knowledge of the insolvency proceedings, are not discharged as to such creditors; 9. Claims for unliquidated damages arising out of pure tort; 10. Claims of secured creditors 11. Claims not in existence or not mature at the time of discharge 412. Claims that are contingent atthe time of discharge, Fraudulent Preference - & fraudulent committed when the debtor procures any part of,fi8 property to be attached, sequestered, or selzed on or makes any conveyance of any part of his property, whether divecty or indirectly, absolutely or condtionahy, to LEGER following circumstances: is oy VAS ' 1. The debtors insolvent o in cont i hevocee nasin bona es oor Me the fling ofa petition by oragainstthe debtor: = ¢ 3. ttis made Wath’a view to giving ‘or person having a claim against hr’ a 4. and the person receiving 3 beneft cavetobeleve so he ny ma wt on perty from coming to his assignee in insolvency or to prevent the same from being distributed ratably among his creditors or to defeat the object of or any way hinder the ‘operation of or evade the provisions of the insolvency Law. Presumption of Fraud {such payment, pledge, mortgage, assigament, transfer, sale or ‘conveyance is not made in the usual and ordinary course of business of the debtor, or if such seizure is made under a judgment which the debtor has confessed or offered to allow, that fact shall be prima facie evidence of fraud. (If tts made in {good faith and for value—it i a valid conveyance). Transfer ‘Transfer includes the sale and every other and different modes of disposing of or parting with property, or the possession of property, absolutely or conditionally, as @ payment, pledge, mortgage, gift or security ‘A deposit of money is NOT transfer. rom 2 ad OPERATIONS 2010 cy oF Act NOT APPLICABLE The‘Brovisiens ofthe Act shall not apply to corporations <2 iis i BANG BUSINESS o any other corporation as armen lees, monene, eign, ter, ta «| hhas reasonable! (3! ‘An exchange of securtles within the 30-day period is not 2 fraudulent preference under the law even when both parties know that the debtor is insolvent, ifthe security given up is 2 valid one at the time the exchange is made and of equal value with the one received in exchange. The reason is that the ‘exchange takes away nothing from the other creditor. Effect of Fraudulent Transfer: ‘As against the crecitors ofthe insolvent debtor, any conveyance ‘or assignment fraudulently made is void. {mall actions to sat aside or nullify fraudulent preference or transactions as void under the provisions of Sec. 70, the assignee ‘appears for, and represents, the general creditors. The creditors, (of the insolvent are not authorized to institute an independent action to annul such fraudulent preferences. fc there is any SPECIAL PROVISION OF LAW for its . liquidation in case of insolvency. ‘Suspensive effect covers {:sécured and unsecured | creditors only, and not secured editors eeditors Ho time’ Gili si lng the | Absent any dpretmedt shioha | corporation, partnership or ‘eaters stomatal ees | association debtor is under | after 3 months management s cormmitefrehainaten 2 j | No need to ‘obtain approval of ‘Agreement is subject to | erectors qualifying majority votes Effective January 16, 2009, ‘CORPORATE REHABILITATION Is 2 process by which a corporate debtor tries to conserve and administer its assets in the hope that it may eventually be able to return from financial stress to its former condition of stability and profitability —+ Advisers: Atty. limener; Heads: Erman Blas avin Ompoc; Understues: Nicolo Bernardo; Cristian de los Santos; Volunteers: Jennifer Cruz 447 114, ‘Duhaylongsod, Francis Espirit, Jon Una, Dane panaMaa Orne Sec. 1. Scope. ~ These rules shall apply to petitions for rehabilitation filed by corporations, partnerships, and associations pursuant to Presidential Decree No. 902-A as amended. he Reabitation Court The habitation court i any ofthe REGIONAL TRIAL COURT, designated bythe Supreme Court tobe a rehabilitation cour. a et ar ramen oe These designated cours ace vested wi excuse and oral mecca, sand | on Iain to ty and dee corporate reabitaton ses a oon en Drsng within thei respetve tetra juttons reared to ues for © Origa: rehbitaton courts have the je te ‘to take cognizance of corporate rehz % their eesion ty Ge, apes lcgment ‘upon the law and thefacts. 6" ‘© Exclusive: their assumption of jurisdiction is to a ctl of ote ort, Effect of Jurisdiction of Rehabilitation Courts: 1. Fal, complete, and exclusive The court chtalns full andl ee Jurisdiction over the property of the debtor and over ali erent set qofemments belong. 2. Jurisdiction édinnot be interfered To allow coordinate courts to Payment is deferred to Judgments or decrees by injunctior 203 allow the creditors to ‘confusion and might seriously hindSk deferred to allow the | meet and determine how ‘administration of justice, especially if they debtor a breathing | best the debtor could the same court. spell from the | make payment of their 3. Contempt aspect of jurisdiction ‘enforcement of | claims: The rehabilitation court having assumed jurisdiction over the , COMMERCIAL LAW REVIEWER Waa maturity, and the degree of collectibitty categorizing them as highly collectible to remotely collectible; A rehabilitation plan which conforms to the minimat requirements set outin the Section 5, Rule 4 ofthese Rules; A Schedule of Payments and disposition of assets which ‘the debtor may have effected within three (3) months immediately preceding the filing ofthe petition; ‘A Schedule of the Cash Flow of the debtor for three (3) est 2 a) TIONS 2010 If the Schedule of Debts and Liabilities omits a claim or ability, ‘the creditor concerned shall attach to its comment or opposition 2 verified statementof the obligations allegedly due it. ‘The mandatory requirements in a debtor initiated petition are not required ina creditor initiated one. But, stil, the petition must be verified and its allegations must & months immediately preceding the filing of the petition, show: and a detailed schedule of the projected cashflow for the 2. That the petitioners qualified to file the petition; and succeeding thre (2) months; b. That the facts and circumstances are extant and sufficient ‘fh. A Statement of Possible Claims by or against the debtor to sustain the rehabilitation of the debtor. which must contain 9 bret statement of the facts wich right give rise to the claim and an estimate ofthe probable Sec. 8. Creeors Meeting. ~ At any time before he submits his amount thereof; evaluation on the rehabilitation plan to the court as prescribed An Affidavit of General Financial Contin at in section 9, Rule 4 ofthis Rule, the Rehabltation Receiver may, contain answers tothe question: of ia alone or with the debtor, meet with the creditors or any Annex “A* hereof; ra re ty to discuss the plan with a view to clarifying or 1. At least. three (@) nominees forthe position of resolving afly matter connected therewith. Rehabilitation Receiver as well as_ cr qualifications and sf i: addresses,: including, but not limited to their ‘eleabone Set, 10. Modification of the Proposed Rehabilitation Plan, — ‘numbers, fax number and e-mail address, and on 2't ee "| The debtor may modify its rehabilitation plan inthe light of the k Acca ctr a oh that ‘eben F comnments of the Rehabilitation Receiver and creditor oF any petition his been duly authori se 18:-< interested party and submit a revised or substitute rehabilitation Soctholders have irrevocably re “genta © plan forthe final approval of the cout Such reehilation plan +t, in accordance with existing laws: oe ‘must be submitted to the court not later than one (1) year from necessary and desirable to! eons “the | debitof & 5 [2 {) the date ofthe inal hearing. including, but not imited to, amendments to the ais fr 4) Kj incorporation and bylaws or articles of mane Ss bee. of the Rehabilitation Plan. - The court may inerease oF decrease in the authoyized capi * Epprove 2. géhabitation plan even over the opposition of ‘issuance of bonded indebtedness; ali 1 transfer, of! creditors, ‘a majority of the total liabilities of the debtor encumbrance of assets of the debtor; shareholders" rights. Five (5) copies of its petition shall be filed with the court. Inapplicability of the Doctrine on “Utimate Facts”: In ordinary complaints, the rule is that what should be pleaded are only the “ultimate facts” or the essential facts constituting the pleader’s cause of action. Such rule does not apply to pleadings in corporate rehabilitation. ‘This is because there is a need to fully and fatty disclose to the: creditors and other interested parties information suffcientiy adequate for them to make an informed decision whether to ‘oppose or merely comment on the petition. Sec. 4. Opposition to or Comment on Petition - Every creditor ‘of the debtor or any interested party shall file his verified ‘opposition to or comment on the petition not later that 15 days before the date of the initial hearing fixed in the stay order. ‘After such time, no creditor or interested party shall be allowed to file any comment thereon or opposition thereto without leave of court. eee EEE Advisers Atty Jimenez; Heads: Erman Balls, lavin Ompoc; Understu nt, the rehabilitation ofthe debtor is feasible and .Atié Spposttion ofthe creditors is manifestly unreasonable. {In determining whether or not the opposition of the creditors is manifestly unreasonable, the court shall consider the followir a. That the plan would likely provide the objecting class of ‘creditors with compensation greater than that which they would have received if the assets of the debtor were sold by a liquidator within a three-month period; ‘That the shareholders or owners of the debtor lose at least their controlling interest asa resut ofthe plan; and The Rehabilitation Receiver has recommended approval of the plan, In approving the rehabilitation plan, the court shall issue the necessary orders or processes for its immediate and successful ‘implementation. it may impose such terms, conditions, or restrictions as the effective implementation and monitoring thereof may reasonabiy require, or for the protection and preservation ofthe interests ofthe creditors should the pian fall. + dies: Ncolo Bernardo; Custan de los Santos; Volunteers: Jennifer Cuz Jay 14.9 Duhaylongsod, Francs Espiritu, Jon Lin, Diane Lipana=~, COMMERCIAL LAW REVIEWER ‘Meeting of the Creditors: No specific format for the meeting has been provided by the ules, but the meeting may be conducted following the manner (or procedure of an ordinary meeting of stockholders of @ corporation. (Cram down: ‘Agproval by the court of the rehabilitation plan whether in its ‘original form or as modified is made under the cram down method. Séction 14, Rule 4 implements cram down as provided by the tow by providing that approval of the rehabitation plan may be done by the court even over the oppostion of the creditors holding a majority of the total abilities of the debtor fin its Hudgment, the rehabilitation of the debtor is feasible and thes opposton ofthe cretorsis manfestyanveaonables™ When itis considered feasible: ‘The plan's feaible fit has a reasonable surance of success or that it could probably be carried out by the debtor cae resultinthe iauiition ofits obigatns to tcrediosy hen tsconddered mantesty igang es ‘The opposition may be considered Piglet the following are present: : + The rehabilitation plan complies specified in Section 18, Rule3; + The rehabilitation plan would provide the dbjecti creditors with payments whose present yale project plan would be greater than that whinghey would have received i the assets ofthe debtor were soldby a iquidator within a month period from the date of Fling + The rchabiltation receiver has recommended the approval the pan Period to Decide Petitions: ‘= The Court shall decide the petition within 1 year from the date of filing of the petition, unless the court, for good cause shown, is able to secure an extension of the period from the Supreme Court. (Sec. 12, Rule 4) RULES, Creditor-nitiated Rehabilitation ‘Who may file petition: ‘Any creditor or creditors holding at least 20% of the debtor's total liabilities may file the petition with the proper regional trial ‘court for rehabiltation of a debtor that cannot meet its debts as. they respectively fall due. Requirements: It shall be sufficient that the petition is accompanied by a rehabiltation plan and a list of at least 3 nominees to the + ea) OPERATIONS 2010 ‘ie tel etenee position of rehabittation receiver and a verified swom statement. RULES Pre-Negotiated Rehabilitation ‘A debtor that foresees the impossibility of meeting its debts as ‘they fal due, may, by itself or jointly with any of ts creditors, file a verified petition for the approval of a pre-negotiated rehabilitation plan. The petition shall comply with Section 2, Rule 4 and be supported by an affidavit showing the written approval or endorsements of creditors holding at least 2/3 ofthe total Habits of the debxor, including secured creditors holding ‘more than 50% of the total secured claims of the debtor and unsecured creditors holding more than 50% of the total cyano cms ofthe debtor, Order f the court finds the pettion suffiient in tonne ince, it shalt, not later than five (5) working days 1 from the fling ofthe petiion, bsue an order which salt: ach th stor, te pel roe or acts and its principal place of business; “Direct the publication of the order in 2 newspaper of general circulation once a week for at least two {2) eonsecutve weeks, with the fist pubation to be made within seven (7) dys from the time ofits issuance; Efi € Direct the service by personal delivery of a copy ofthe 4 gh each creditor whe is not a petitioner holding stiJive percent (5%) of the total liabilities of the Fas determined in the schedule attached to the within thre (3) days: the petitioner to furnish a copy ofthe petition and its annexes, 25 well the sta order, to the relevant regulatory agency State that copies of the petition ad the rehabitation plan ace available for examination and copying by any Interested party: (Direct creditors and other parties interested (cluding the Securities and Exchange Commission and the relevant regulatory agencies such as, but not limited to, the Bacgko Sentral ng. Pilipinas, the Inurance Commission, the National Telecommunication= Commission, the Housing and Land Use Reguatory Board and the Enery Regulatory Commision) ia opposing the petition oF rehabilitation plan to fie their verfied Abjections thereto or comments thereon within a period of not later than twenty (20) days from the second publeation of the order, wth a warning that failure to do So will bar them from participating in the proceedings; £ Ropoint the rehabitation receiver named in the pian, unless the cout fads that he snot quatfied under these Rules in which case it may appoint a qualified cchablitation recever ofits choice; f at Advisors: Atty. Simancr; Heads: Eman Baois, Java Onipee; Understudies: Nolo Bernardo; Christin de fos Santor; Volunteers: Jennifer Crs, 437 1.20) Duhaylongsod, Francis Espirit, Jn Lina, Diane Lipanah.Stay enforcement of all daims, whether for money o ‘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 nat sotidarily Nable, said ‘owner shall be entitled to be beneft of excussion as such guarantor; i. Prohibit “the debtor from selling, er transferring, or disposing in any mant ‘of its properties except in the ordinary course6f business: |. Probibit the debtor from making dy payment of its labilties outstanding as of the date of fling of the petitions s rab be cei wren sono ‘withholding supply of goods and services inthe course of business for as long. ae bs payments for the services a ‘ad oe pinto Issuance ofthe stay order; = | Direct the payment in full of all diminisfative expense Incurred aftertheisuance ofthe stay order; andy = 5 ‘m. Direct the payment of new loans pr otter forms § accommodations obtained for the rehabilitation of the * ‘debtor with prior court approval. (See22, Rue 6) ‘Approval ofthe Plan: ea Within 10 days from the date of the second publication of t ‘order referred to in Section 2 Rule 6, the court shall approve the rehabilitation plan unless a creditor or other interested party submits a verified objection to it in accordance with Section 4 Rule 6, limited to the following: The petition or the rehabilitation plan or their attachments contain material omissions or are materially false or misleading: 2. The terms ofthe rehabilitation are unattainable; or 3. The approval or endorsement of creditors required under Section 1 of this Rule has not been obtained. (See. 4, Rule 9 Hearing on the Objections: ‘The court shall set the case for hearing not earlier than 10 days ‘and no later than 20 days from the date of the second publication of the order mentioned in Section 2 of this Rule. If the court finds that the objection is in accordance with the immediately preceding section, it shall direct the petitioner to ‘cure the defect within a period of 15 days from the recelpt of the order. (Sec. 5, Rule 6) — aL OPERATIONS 2010 Advisors Atty. Simenes; Heads: Erman Baal, lavin Ompor; Undrstudies: Neolo Bernardo; Chistian de los Santos; Volunteers: Jenifer Cruz Jey 1.94 Period for Approval of the Rehabilitation Plan: “The court shal decide the petition not later than 120 days from the date of the filing ofthe patition. The rehabilitation plan shall, bbe deemed approved if the court fails to do so within the said period. (Sec. 6, Rule 6) RULET Recognition of Foreign Proceedings ‘Scope of Application (Section 3}: This Rule shall apply when: (FC) a. Assistance is sought in a Philippine court by a foreign ‘court or foreign representative in connection with a foreign proceedings ». Asitance is sought ina foreign stat in connection with sian, Somestic proceeding governed by these Rules; or ereenstcrei eae aaa ‘the Philippines; bilf there ig.a finding that the country of which the petitioner is a national does not grant recognition to a ‘Philippine rehabilitation proceeding in a manner substantially in accordance with this rule. Petition for Recognition shall be accompanied by any of the A coffe copy of he deckon cormencng he foreign sng and appointing the orn representative; pak corteate from the forcgn court affirming the atence of the foreign proceeding and of the topeintment ofthe foreign repesetaties é.Any other acceptable to the cour inthe absence of evidence referetain(a)and ()- Section 7. Provisional Relief that Moy be Gronted ypon Application for Recognition of Foreign Proceeding. - From the time of filing 2 petition for recognition until the same is decided "upon, the court may, upon motion of the foreign representative where relief is urgently needed to protect the assets of the debtor oF the interests of the creditors, grant reli of a provisional nature, including: (SEA) 2. Staying execution agains the debtors assets; b.Entrusting the administration or realization of allo part of the debtor's assets located in the Philippines to the foreign representative or another person designated by the court in order to protect and preserve the value of assets that, by their nature or because of other Circumstances, are perishable, susceptible to devaluation or otherwise in jeopardy; Any relief mentioned in Section 9(2)3), (2) and (7] ofthis Pale — ‘Duhaylongsod, Francis Espirt, Jon Lina, Diane Lipanaa) ‘Section 8, Effects of Recognition of Foreign Proceeding. - Upon recognition of a foreign proceeding: (IRE) ‘2. Commencement or continuation of individual actions or individual proceedings concerning the debtor's assets, rights, obligations or liabilities is stayed; provided, that ‘such stay does not affect the right to commence individual actions or proceedings to the extent necessary to preserve a claim against the debtor. b. Execution against the debtor's assets is stayed; and . The right to transfer, encumber or otherwise dispose of any assets ofthe debtor is suspended. Section 9. Relief That May be Granted After Recognition of Foreign Proceeding. - ‘2.Upon recognition of a foreign proceeding, where necessary to protect the assets of the debtor interests of the creditors, the court may, u OPERATIONS 2010 ¥. Entrusting the administration or realization of all or part ofthe debtor's assets located inthe Philippines to the foreign representative or another person designated by the court; vi. Extending the relief granted under Section 7 of this ule; wl. Granting any additional relief that may be avaiiable to the rehabilitation receiver under these laws. ». Upon recognition of a foreign proceeding, the court may, at the request of the foreign representative, entrust the distribution of all or part of the debtor's assets located in the Philippines to the foreign representative or another ‘person designated by the court; provided that the court [s satisfied that the interests of local creditors are adequately protected. including: (EERIERS) for, Reconsideration. - A party may file a Staying the commencemenyor Ceaser of gt <2 mation es ‘of any order issued by the court prior individual actions or itlvidual ‘approval of the rehabilitation plan. No relief can be ‘concerning the debtor's assets, rights, bietonese pe to the party aggrieved by the court's order on the lablis to the etent they have-got been aed & 3 under Seton 8(a) ofthis Re: 82. 9. oe i “motion through a special civil action for certiorari under Rule 65 {af the rules of Court. Such order can only be elevated to the rn Staying exoaition agains te Sent ato tf Count-6f Appeals as an assigned error in the petition for review of ce ‘extent it igs not been stayed tinder Séétion B(6) ofthis Rule; ae ATENEO seamen r W. Suspending. the right to transfer, encu : ‘othecwilt depose of any asets of the debiog fentent this right has not beep Sopended Section 8) ofthis Rule; a iv, Providing for the examination of the taking of evidence or the delivery of informat the debtors assets, aff, rights, oblentions or ee decision or order approving or disapproving the the approval of the rehabilitation plan can ‘through a special civil action for certiorari the Rules of Court. ‘Review of Decision or Order on Rehabilitation Plan. - F approving or disapproving. a rehabilitation plan can ‘only be reviewed through a petition for review to the Court of, liabilities; ‘Appeals under Rule 43 of the Rules of Court within fifteen (15) days from notice of the decision or order. eee ny —Aévisers: Atty. Simener; Heads: Erman Bales, Javia Ompoc; Understudies: Neale Bernardo; Culstian de fos Santos; Volunteers: nner Crue, Jay 1.79 DDuhaylongsod, Francis Esprit, fon Lina, Diane Lpana, COMMERCIAL LAW REVIEWER % me Tad OPERATIONS 2010 ‘Annex A Common Types of Letters of Credit TL Irevocable vs. | Revocable - can be cancelled or amended at any time before payment; itis intended to serve as a Revocable ‘means of arranging payment but not as a guarantee of payment. Irrevocable ~ obligates the issuing bank to honor drafts drawn in compliance with the credit and can be neither cancelled nor modified without the consent of all parties, including in particular the beneficary/exporter. ‘Confirmed — Bott the drawer oy ane Baik “ate Obligated! to honor drafts if | | compliance with the credit. ed Unconfirmed = esnb bined aol ts Gi are | Hegre i ng Vaan 9 en pt on ako amon Most nag ato oeliRageed ravecac ton son eats one tae vad fr one ton on CGelative- ove wereli the udrawn amouns carry over to tHe RUS TBH, ‘Non-cumislative ~ is one wherein any amount not used by the beneficiary during the specified | period may not be drawn against in a later period. ‘Standby Letter “of | A security arrangement for the petformarice of certain obligations. it can be drawn against only if Credit another Bdsiness transaction fs not performed. It may be issued in leu of a performance bond. the pte topo STEA Glace garnets we ot shed worn rg a oe oncneeene ned This class of letters of credit are primary obligations, not sccesstry Gitveds Misdlor Bank Ws. IAC et.al, G.R. No. 74834, November 17, 1988) © STR ereit With Wentical docurentary requirements and Covarig WS Sam merchandise as another | letter of credit, except for a difference in the price of the merchandise as eeiete fri al the draft, The second letter can be negotiated only after the first s negotiated. at Crus Jay 173 —Advisers: Atty. mene; Heads: Erman Balos, Savin Ompoc; Understudies: Neole Bernardo; Cristian de los Santo; Volunteers: Jey ‘Duhaylonesod, Francis Esprit, Jon tia, Diane tipanaCOMMERCIAL. oe BIS) »ATENEO LAW REVIEWER eld fay, “upon RECEIPT of the goods 5 : [(&) Dainage NOT apparent: Notice must be given within 28h, cegardlessifin bores or not. f fent is. NOT.) the ‘consignee, or (2) an authorized eee of the consignee. OPERATIONS 2010 Payment (freight) (@) Payment of Freight charges deemed as a | — connotea even yh amniotic, oF 1) Beepton: fe ‘eit ‘90 condonation because: wstbeaviewfirst. —_.citf 1 flask ot notice, payinencof eight GARSACTIONS. | Dost not bar actions: Common GR presumed to bee ene : Nets ete ihe ons the condition as stated in. defense. Cores. of doly, joint survey or inspection, and isdelivery. Cause of Action in this regard is under TORT, not COSA. ‘year fom dilvery; or 1 year -| should have been delivered. in when the goods: ‘Annex € Notice Requirements | Damage of baggage -Dathage of goods“ , Delay within 21 days from receipt — - + Advisers Atty. Sener; Heads: rman Balois, avin Ompoc; Understies: Nicolo Bemnardo; Cision de los Santos; Volunteers: Jenifer Cru, Jay 1.74 DDuhaylongsod, Francis Epi, on ina Dane panaCOMMERCIAL LAW REVIEWER 2 aD OPERATIONS 2010 SREESrsn ‘The examiner also checks ifthe mark does not violate the rights oF others. t must not: 1. Consist the flag or coat-ofarms of other insignia of the 1. Be a generic term for the goods oF services | Philippines or of anyother foreign nation; specified in the application; 2. Consist of a name, portrait or signature identilying a living 2. Designate the quality, quantity, value, geographic | _individua or the name, signature of a deceased president of the origin or other characteristics ofthe goods: Philippines during the life of his widow (written waivers are 3. Become a customary sign in everyday language or | __ allowed to obtain thei registration}; ina bona fide and established trade practice; 3. Be identical with or nearly resembles a prior registered mark or a 4. Consist of shapes that may be necessitated by| mark with an earlier filing date with respect of the same or technical factors or by the nature of or the i ‘elated goods or services as to likely decelve or confuse value ofthe goods or services; Rage Fearing the source oon of the goods o 5. Consist of eolor alone; and “ty, 6 Be contrary to public order or mora ‘wit or edifisingly similar to an internationally well wn__mark, whether or not registered in the Philippines; d that: “Hit is not registered in the Philippines, itcan be a basis to Fefuse the registration of a mark only if the goods or 3s specified in the application are identical or similar to those in respect of which the internationally well-known »markis known oF used inthe Philipines; and 28 in the Philippines, it can be a basis to refuse BE rsa of» mak even the gots or sve application are not identical or sii with those cai a ‘of which the internationally well-known ‘egistered in the Philippines. “The examiner checks if the mark can distinguish the goods ‘of one person from those of another. it must not: Time ‘Annex E ~ Trademark infringement v. Unfair Competition Passing off of one’s product for another based on general ‘appearance What Is? ‘Bad faith/intent necessary? | NOL | intent to aeceive/roudulent intent is essential, Registration of the trademark | Prior registration is required Registration fs not necessary. required? pee 7 7 =e Advisers: Atty Simenes; Heads: Erman Baki, avin Ompoc; Understuies Neolo Bernardo; Christan de los Sants; olunters Jenifer Cruz ay 195 ‘Ouhaytongsod, Francis Esprit, fn Lina, Diane UpanaATENEO re 2 Ue) Ee) IMINAL AND. If the amount of the damages dalimed is not less than 200,000, the registrant may ‘choose to seek redress against the infringer by filing an administrative action against the infringer with the BLA. ‘The questions that the BLA will have to tesolve are also the same as in the civil action for infringement as discussed above, ‘The registrant may likewise ask the BLA for an:erder directing the infringer to immediately stop the manufacture and sale of the infringing goods while the administrative case is being heard. The BLA ‘may, like the courts, in case of.a finding that infringement." as been committed, direct the infringer to pay the registrant damages and to permanently stop from Using the infringing mark. In addition, the BLA may also impose a fine which the infringer will pay to the ‘government. REMEDIES AGAIN: To quickly prevent the infringer from ‘causing damage to his business, the ‘owner of a registered mark may, at the early stage ofthe trial of the case, ask the court to issue a preliminary injunction, The court usually grants this request if the case for infringement is strong. In case of @ finding that there is an infringement, the defendant so'fiay damages to the of thethark (provided the defendant.is | shoyé to have had _notie,of ‘the registration of the mark Which is Presumed if, it eerde Bf yPpended tthe mdik) and: Stop hi or fatmart the ingre a a z ae Eat e sign which is deceive d?tanfuse, cons at the goods of the infringer are the products of the presentation of the goods or labels Using the registered mark and the registrant. A goods or labels bearing the infringing mark may be necessary. The first step is to carry out an investigation of the operations of the infringer to determine: 1. The identity of the manufacturer or its afflates; where he manufactures the Infinging goods; and 2. His marketing network The next step is to apply with the court for the issuance of an order to search the places where the infringement is being carried out and to seize the infringing goods, The judge, after a hearing, issues the search and seizure warrants only if there is “probable cause” that infringement has [been “Cortimitted. The police or the National Bureau of investigation (NBI) will conduct the raid and the infinging goods seized will be placed under custody ofthe court. Thereafter, a complaint wil be filed with the State Prosecutor who will hold a hearing and, on the basis of evidence presented, decide whether to charge the alleged infringer ofthe crime of trademark or sergite mark infringement. if he decides 1, nappropriate “information” is led the court. A warrant of arrest will then be issued. ‘The requirements to establish infringement in a criminal action are the same as thase in the iil except that in the criminal action, the infringement _must be shown to have’ been ‘committed deliberately. ‘The criminal penalty for trademark infringements claimed consists of imprisonment from two (2) years to five (5) years and a fine ranging from $50,000.00 to 200,000.00, pana ee a -— mt Ads Atty Jimener: Heads: Eman Bao, avin Ompoc;Understusies Nicole Bernardo; Cision de los Santos; olnters:emifer Cuz, 2Y 16 ‘Dunayiongsod, Francs Esprit, Jon Lina, Diane Uipana> ep, COMMERCIAL LAW REVIEWER AEN serireen ‘Annex G ~ CAUSES OF ACTI {FRINGEMENT. RELIEFS SUS REMEDIES ‘Trademark Infringement Gwil Actions 2. Unfair Competition Criminal Actions 3. Trademark Dilution ~ lessening of the Administrative ~ if value capacity of a famous mark to identify involved exceeds 200k, file it ‘and distinguish goods or services, in the 1PO but if less than regardless of the presence or absence 200K, filet in DT. ‘of: (1) competition between the owner of the famous work and other parties or (2) likelihood of confusion, mistake or deception. To be eligible for protection from dilution, there has to be a finding that: a trademark sought © to protected is famousnd distinctive 4 tse ty respondent tan after "othe petitioner's niark became famous . @ © went use subsequent use des eee 4 Adios: Ay Jimener; Heads: Eman Bai, avin Onpoc;Understudes Nelo Bernardo; Cristian dels Santos; Vokutoes: Jenifer Cru, Joy 427 ‘Ouiaylongsod, Francs Esp, Jon Lina, Diane pana