Panlilio vs Regional Trial Court Branch 51 City of Manila

G.R. No. 173846 February 2, 2011

J. Peralta

Facts: On October 15, 2004, Jose Marcel Panlilio, Erlinda Panlilio, Nicole Morris and Mario Cristobal (petitioners),
as corporate officers of Silahis International Hotel, Inc. (SIHI), filed with the Regional Trial Court (RTC) of Manila,
Branch 24, a petition for Suspension of Payments and Rehabilitation in SEC Corp. Case No. 04-111180. On October
18, 2004, the RTC of Manila, Branch 24, issued an Order staying all claims against SIHI upon finding the petition
sufficient in form and substance.

At the time, however, of the filing of the petition for rehabilitation, there were a number of criminal charges pending
against petitioners in RTC Manila Branch 51. These criminal charges were initiated by respondent Social Security
System (SSS) and involved charges of violations of Section 28 (h) of Republic Act 8282, or the Social Security Act
of 1997 (SSS law), in relation to Article 315 (1) (b) of the Revised Penal Code, or Estafa. Consequently, petitioners
filed with the RTC of Manila, Branch 51, a Manifestation and Motion to Suspend Proceedings. Petitioners argued
that the stay order issued by Branch 24 should also apply to the criminal charges pending in Branch 51. Petitioners,
thus, prayed that Branch 51 suspend its proceedings until the petition for rehabilitation was finally resolved.

Issue: Whether or not suspension of claims during corporate rehabilitation includes suspension of the criminal
action against it.

Held: No. To begin with, corporate rehabilitation connotes the restoration of the debtor to a position of successful
operation and solvency, if it is shown that its continued operation is economically feasible and its creditors can
recover more, by way of the present value of payments projected in the rehabilitation plan, if the corporation
continues as a going concern than if it is immediately liquidated. It contemplates a continuance of corporate life and
activities in an effort to restore and reinstate the corporation to its former position of successful operation and
solvency, the purpose being to enable the company to gain a new lease on life and allow its creditors to be paid their
claims out of its earnings.

A principal feature of corporate rehabilitation is the suspension of claims against the distressed corporation. Section
6 (c) of Presidential Decree No. 902-A, as amended, provides for suspension of claims against corporations
undergoing rehabilitation, to wit:

Section 6 (c). . . . . .. Provided, finally, that upon appointment of a management committee, rehabilitation
receiver, board or body, pursuant to this Decree, 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 rehabilitation of SIHI and the settlement of claims against the corporation is not a legal ground for the
extinction of petitioners’ criminal liabilities. There is no reason why criminal proceedings should be suspended
during corporate rehabilitation, more so, since the prime purpose of the criminal action is to punish the offender in
order to deter him and others from committing the same or similar offense, to isolate him from society, reform and
rehabilitate him or, in general, to maintain social order.  As correctly observed in Rosario, it would be absurd for one
who has engaged in criminal conduct could escape punishment by the mere filing of a petition for rehabilitation by
the corporation of which he is an officer.

The prosecution of the officers of the corporation has no bearing on the pending rehabilitation of the corporation,
especially since they are charged in their individual capacities. Such being the case, the purpose of the law for the
issuance of the stay order is not compromised, since the appointed rehabilitation receiver can still fully discharge his
functions as mandated by law. It bears to stress that the rehabilitation receiver is not charged to defend the officers
of the corporation. If there is anything that the rehabilitation receiver might be remotely interested in is whether the
court also rules that petitioners are civilly liable. Such a scenario, however, is not a reason to suspend the criminal
proceedings, because as aptly discussed in Rosario, should the court prosecuting the officers of the corporation find
that an award or indemnification is warranted, such award would fall under the category of claims, the execution of
which would be subject to the stay order issued by the rehabilitation court. The penal sanctions as a consequence of
violation of the SSS law, in relation to the revised penal code can therefore be implemented if petitioners are found
guilty after trial. However, any civil indemnity awarded as a result of their conviction would be subject to the stay
order issued by the rehabilitation court. Only to this extent can the order of suspension be considered obligatory
upon any court, tribunal, branch or body where there are pending actions for claims against the distressed
corporation.