Case Title: BIR VS.

LEPANTO

GR No: G.R. NO. 224764; Date: APRIL 24, 2017

Ponente: PERLAS-BERNABE,, J.

Doctrine: Section 16 of RA 10142 provides, inter alia, that upon the issuance of a
Commencement Order which includes a Stay or Suspension Order - all actions or proceedings,
in court or otherwise, for the enforcement of "claims" against the distressed company shall be
suspended. including, but not limited to; (1) all claims of the government, whether national or
local, including taxes, tariffs and customs duties

FACTS:
Lepanto Ceramics, Inc. (LCI) filed a petition for corporate rehabilitation under RA 10142 with the
RTC in Calamba City. Aside from financial difficulties, the petition for rehab also alleged LCI's tax
liability at 6.3 million pesos. The Rehabilitation (Rehab Court) issued a Commencement Order
(Order).

The Order declared LCI under rehab and suspended all actions or proceedings, in court or
otherwise, for the enforcement of claims against LCI. It also directed the BIR to file and serve on
LCI its comment or opposition to the petition, or its claims against LCI.

Despite this, petitioners, acting as Assistant Commissioner, Group Supervisor, and Examiner,
sent LCI a notice of informal conference, informing the latter of its tax liabilities for the fiscal year
ending June 30, 2010. Despite receiving LCI's letter-reply regarding the pendency of a rehab
proceeding, the BIR sent LCI a Formal Letter of Demand.

A petition for indirect contempt of court was filed by LCI against petitioners for defying the Order.
In their defense, petitioners insist that the issue has already become moot and academic because,
in the meantime, LCI had already been declared rehabilitated. Also, petitioners argue that their
acts do not amount to a defiance of the Commencement Order as it was done merely to toll the
prescriptive period in collecting deficiency taxes, that their acts of sending a Notice of Informal
Conference and Formal Letter of Demand do not amount to a "legal action or other recourse"
against LCI outside of the rehabilitation proceedings and that the indirect contempt proceedings
interferes with the exercise of their functions to collect taxes due to the govenment.

ISSUE/S:
1. Whether or not the issuance of Commencement Order for the rehabilitation of a distressed
Corporation suspends the collection of taxes against it.
2. Are petitioners guilty of indirect contempt for issuing a notice of informal conference
despite the fact that they simple wanted to toll the prescriptive period and considering the
lifeblood doctrine?

HELD:
1. YES. Section 16 of RA 10142 provides, inter alia, that upon the issuance of a
Commencement Order which includes a Stay or Suspension Order - all actions or
proceedings, in court or otherwise, for the enforcement of "claims" against the distressed
company shall be suspended. Under the same law, claim "shall refer to all claims or
demands of whatever nature or character against the debtor or its property, whether for
money or otherwise, liquidated or unliquidated, fixed or contingent, matured or unmatured,
disputed or undisputed, including, but not limited to; (1) all claims of the government,
whether national or local, including taxes, tariffs and customs duties; and (2) claims
 against directors and officers of the debtor arising from acts done in the discharge of their
functions falling within the scope of their authority: Provided, That, this inclusion does not
prohibit the creditors or third parties from filing cases against the directors and officers
acting in their personal capacities."

2. According to RA 10142, upon the issuance of a commencement order, the distressed

corporation shall be temporarily immune from the enforcement of all claims against it,
including all claims of the government, whether national or local, including taxes, tariffs
and customs duties.

To clarify, however, creditors of the distressed corporation are not without remedy as they
may still submit their claims to the rehabilitation court for proper consideration so that they
may participate in the proceedings, keeping in mind the general policy of the law.

Petitioners' act of issuing a notice of informal conference and later a formal letter of
demand, all despite the written reminder by LCI regarding the pendency of the rehab
proceeding, is in clear defiance of the Commencement Order.

As aptly put by the RTC Br. 35, they could have easily tolled the running of such
prescriptive period, and at the same time, perform their functions as officers of the BIR,
without defying the Commencement Order and without violating the laudable purpose of
RA 10142 by simply ventilating their claim before the Rehabilitation Court.