SIOCHI FISHERY ENTERPRISES INC. V. BPI Citation: G.R. 193872Year: October 19, 2011

Doctrine:

The Interim Rules of Procedure are construed liberally. However, this does not mean that courts may disregard the Rules.

Facts:

Siochi Fishery Enterprises et al. are domestic corporations of the Siochi family. Petitioners are engaged in various businesses and have interlocking stockholders and directors.

In the course of their business, petitioners borrowed from BPI and from Ayala Life Assurance, Inc. Petitioners’ total obligation amounted to P85,362,262.05. Petitioners filed with the RTC a petition for corporate rehabilitation. Petitioners prayed that the RTC (1) issue a stay order; (2) declare petitioners in a state of suspension of payments; (3) approve petitioners

proposed rehabilitation plan; and (4) appoint a rehabilitation receiver. The RTC (1) stayed enforcement of all claims against petitioners; (2) prohibited petitioners from disposing their properties, except in the

ordinary course of business; (3) prohibited petitioners from paying their obligations; (4) prohibited petitioners suppliers from withholding supply of goods and services; and (5) appointed Atty. Cruz as rehabilitation receiver.

BPI filed with the RTC a comment. BPI alleged, among others, that (1) the RTC had no jurisdicttion over Blue Crest Aqua-Farms, Inc. and Iloilo Property Ventures, Inc.; (2)

petitioners submitted only one affidavit of general financial condition for all five corporations; (3) the market values of petitioners real properties were unsubstantiated and inconsistent; (4) the photocopies of the Transfer Certificates of Title were incomplete; (5) the interest rate had already been reduced to 12%; (6) typhoons were not an excuse to default on payments; (7) the Asian financial crisis and the peso devaluation did not affect petitioners; (8) petitioners total liability should have been lowered from P79,848,920.23 to P70,135,649.50; (9) petitioners had no sufficient cash flow to pay their debts; (10) the rehabilitation plan was unfeasible and prejudicial to BPI; and (11) petitioners did not present a liquidation analysis.

The RTC approved petitioners rehabilitation plan. The RTC held:o Jurisdiction over the instant petition has been acquired upon the publication of the stay order which serves as the notice of the commencement of the proceedings. In the instant petition, all

the petitioning corporations have, as admitted also by BPI, interlocking directors which means that the said directors are all members of the Siochi family. In addition thereto, three (3) of the petitioning corporations hold their respective principal offices in Malabon City. In line therefore with the settled policy of avoiding multiplicity of suits, the Court finds it proper to include Blue Crest Aqua-Farms, Inc. and Iloilo Property Ventures in the instant petition.

o Accordingly, the petitioning corporations could still be considered net worthy, capable of being rehabilitated.o As regards the rehabilitation plan, the Court, contrary to BPI and ALAIs stand, finds the same feasible, and viable. A moratorium period of five (5) years on the payment of its loans/obligations

will enable said petitioners to generate additional capital/funds to continue its business operations. This is in line with the petitioners intention to source fund from its internal operations, the growth of which is expected to favorably expand. To achieve this goal, an extension period for the payment of petitioners obligations is just and proper. This is precisely the main reason why petitioners filed the instant petition as corporate rehabilitation can, in one way, be effected by suspension of payments of obligation for a certain period. Thereafter, payment of their loan/obligations could be ably resumed.

o Further, petitioners, thru its President, is in the process of negotiating with prospective investors to put up additional capital and diversifying its operation and, if still necessary, funds can still be generated from the real estate properties of the petitioners mentioned in Exhibit I whose value has not been exposed to the limit of their loan value.

o The sale of petitioners assets, as claimed by BPI, in order to pay off their matured obligation/s with it and not the suspension of payments is, as the Court sees, not a solution because this would mean a forced sale of their assets at a much lower price thereby adding significant loss in the value of the petitioners assets, making said petitioners insolvent rather than giving it a chance to rehabilitate their business operations.

o The success therefore of the rehabilitation plan largely depends on its ability to reduce its debt obligations to a manageable level by the suspension of payments of obligations. This scheme enables the petitioners to restore their profitability and solvency and maintain it as an on-going business, to the benefit not only of the stockholders and investors but to BPI and ALAI as petitioners creditors.

BPI appealed to the Court of Appeals. The Court of Appeals set aside the RTC’s Order. Court of Appeals held:

o The proceeding before the court a quo was rife with procedural infirmities. o Under the Interim Rules, the court is directed to summarily hear the parties on any matter relating to the petition as well as any comment and/or opposition filed in connection therewith.

Accordingly, the creditor or any interested party is required to file a verified opposition to or comment on the petition for rehabilitation so as to aid the court in making an informed and rational decision as to whether or not the petition for rehabilitation should be given due course. Instead of discussing these issues, the court a quo merely confined the hearing on the issue of jurisdiction. It should be pointed out that while the Interim Rules direct the court to summarily hear the parties, it do not authorize the court to disregard the comment and/or opposition filed by the parties, especially when there are material issues raised therein, as in the present case.

o The rules itself mandate a just, expeditious and inexpensive determination of cases. Certainly, disregarding the arguments raised by petitioner would not result in a just determination of the case.

o The most glaring procedural infirmity committed by the court a quo, however, is its failure to refer respondent corporations petition for rehabilitation and Rehabilitation Plan to the rehabilitation receiver despite the explicit and clear mandate of the Interim Rules that if the court is satisfied that there is merit in the petition, it shall give due course to the petition and immediately refer the same and its annexes to the rehabilitation receiver.

o In cases where the creditors oppose the approval of the rehabilitation plan, the court may only approve the same upon the concurrence of two conditions one, that the rehabilitation of the debtor is feasible and two, that the opposition of the creditors is manifestly unreasonable.

Issue:

Whether the Court of Appeals erred in setting aside the RTC’s Order because it is within the RTC’s discretion to disregard the procedural formalities.

Held:

No, Petitioners claim that the Interim Rules of Procedure are construed liberally; thus, the RTC may disregard the Rules. The Court disagrees. Indeed, the Rules are construed liberally. However, this does not mean that courts may disregard the Rules.

Ratio:

In North Bulacan Corporation v. Philippine Bank of Communications, the Court held that, these rules are to be construed liberally to obtain for the parties a just, expeditious, and inexpensive disposition of the case. The parties may not, however, invoke such liberality if it will result in the utter disregard of the rules.

In New Frontier Sugar Corporation v. Regional Trial Court, the Court enumerated the basic procedure in corporate rehabilitation cases. The Court held: As provided in the Interim Rules, the basic procedure is as follows:1. The petition is filed with the appropriate Regional Trial Court;2. If the petition is found to be sufficient in form and substance, the trial court shall issue a Stay Order, which shall provide, among others, for the appointment of a Rehabilitation Receiver; the fixing of the initial hearing on the petition; a directive to the petitioner to publish the Order in a newspaper of general circulation in the Philippines once a week for two (2) consecutive weeks; and a directive to 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; 3. Publication of the Stay Order;4. Initial hearing on any matter relating to the petition or on any comment and/or opposition filed in connection therewith. If the trial court is satisfied that there is merit in the petition, it shall give due course to the petition;5. Referral for evaluation of the rehabilitation plan to the rehabilitation receiver who shall submit his recommendations to the court;6. Modifications or revisions of the rehabilitation plan as necessary;

7. Submission of final rehabilitation plan to the trial court for approval;8. Approval/disapproval of rehabilitation plan by the trial court.

In the present case, the RTC hastily approved the rehabilitation plan in the same order giving due course to the petition. The RTC confined the initial hearing to the issue of jurisdiction and failed to address other more important matters relating to the petition and

comment. The RTC also failed to refer for evaluation the rehabilitation plan to the rehabilitation receiver. Thus, the rehabilitation receiver was unable to submit his recommendations and make modifications or revisions to the rehabilitation plan as

necessary.

URBAN BANK, INC. V. PENACitation: G.R. Nos. 145817, 145822 & 162562Year: October 19, 2011

Doctrine:

Whether or not an agency has been created is determined by the fact that one is representing and acting for another. The law makes no presumption of agency; proving its existence, nature and extent is incumbent upon the person alleging it.

Agency is presumed to be for compensation. Unless the contrary intent is shown, a person who acts as an agent does so with the expectation of payment according to the agreement and to the services rendered or results effected.

Facts:

Peña, a lawyer, was formerly a stockholder, director and corporate secretary of Isabel Sugar Company, Inc. (ISCI). ISCI owned a parcel of land. ISCI leased the land. Without its consent and in violation of the lease contract, the lessee subleased the land to

several tenants, who in turn put up nightclubs inside the compound. Before the expiration of the lease contract, ISCI informed the lessee and his tenants that the lease would no longer be renewed because the

land will be sold. ISCI and Urban Bank executed a Contract to Sell, and they agreed that the final installment released by the bank upon ISCI’s delivery of full

and actual possession of the land, free from any tenants. ISCI then instructed Peña, to act as its agent and handle the eviction of the tenants. The lessee left, but the unauthorized sub-tenants refused to leave. Peña had the gates of the property closed and he also posted security

guards—services for which he advanced payments. Despite the closure of the gates and the posting of the guards, the sub-tenants would force open the gates, and proceed to carry on with their

businesses. Peña then filed a complaint with the RTC, which issued a TRO. At the time the complaint was filed, a new title to the had already been issued in the name of Urban Bank. When information reached the judge

that the had already been transferred by ISCI to Urban Bank, the trial court recalled the TRO and issued a break-open order for the property. Peña immediately contacted ISCI’s presidentand told him that because of the break-open order of the RTC, he (Peña) would be recalling the security guards he had posted to secure the property.

The President asked him to suspend thewithdrawal of the posted guards, so that ISCI could get in touch first with Urban Bank.Peña also called Urban Bank’s President. The President allegedly assured him that the bank was going to retain his services, and that the he should not give up possession of the subject land.

Thereafter, Peña, in representation of Urban Bank, filed a separate complaint with the RTC-Makati City, to enjoin the tenants from entering the Pasay property. Acting on Urban Bank’s preliminary prayer, the RTC-Makati City issued a TRO. While the 2nd complaint was pending, Peña made efforts to settle the issue of possession of the with the sub-tenants. During the negotiations, he was exposed to several civil and crimal cases and received several threats against his life.

The sub-tenants eventually agreed to stay off the property for a total consideration of PhP1.5M. Peña advanced the payment for the full and final settlement of their claims against Urban Bank.

Peña formally informed Urban Bank that it could already take possession of the Pasay property. There was however no mention of the compensation due and owed to him for the serviceshe had rendered. The bank subsequently took actual possession of the property and installed its own guards at the premises.

Peña thereafter made several attempts to contact Urban Bank, but the bank officers would not take any of his calls. Peña formally demanded from Urban Bank the payment of the 10% compensation and attorney’s fees allegedly promised to him during his telephone conversation with Urban Bank’s President for securing and maintaining peaceful possession of the property.

Urban Bank and individual bank officers and directors argued that it was ISCI, the original owners of the Pasay property, that had engaged the services of Peña in securing the premises; and, consequently, they could not be held liable for the expenses Peña had incurred.

Issue:

(1) Whether Pena is entitled to payment for the services he rendered as agent of Urban Bank.

Held:

(1) Yes.

Ratio:

Peña should be paid for services rendered under the agency relationship that existed between him and Urban Bank based on the civil law principle against unjust enrichment, and not on the basis of the purported oral contract.

Whether or not an agency has been created is determined by the fact that one is representing and acting for another. The law makes no presumption of agency; proving its existence, nature and extent is incumbent upon the person alleging it.

Agency is presumed to be for compensation. Unless the contrary intent is shown, a person who acts as an agent does so with the expectation of payment according to the agreement and to the services rendered or results effected.

In this case there’s no evidence that Urban Bank agreed to pay Peña a specific amount or percentage of amount for his services, so the court applies the principle against unjust enrichment and on the basis of quantum meruit.

The agency of Peña comprised of services ordinarily performed by a lawyer who is tasked with the job of ensuring clean possession by the owner of a property. The court measured the amount Pena is entitled to for the services he rendered (as opposed to the 10% compensation demanded by Pena).

ZACARIA CANDAO V. PEOPLE Citation: G.R. Nos. 186659-710Year: October 19, 2011

Doctrine:

Under the equipoise rule, where the evidence on an issue of fact is in equipoise or there is doubt on which side the evidence preponderates, the party having the burden of proof loses. The equipoise rule finds application if the inculpatory facts and circumstances are capable of two or more explanations, one of which is consistent with the innocence of the accused and the other consistent with his guilt, for then the evidence does not fulfill the test of moral certainty, and does not suffice to produce a conviction.

Facts:

On August 5, 1993, Chairman Pascasio S. Banaria of the Commission on Audit (COA) constituted a team of auditors from the central office to conduct an Expanded Special Audit of the Office of the Regional Governor, Autonomous Region for Muslim Mindanao (ORG-ARMM). State Auditors Heidi L. Mendoza (Team Leader) and Jaime Roxas (Member) were directed to conduct the said audit under the supervision of Jaime P. Naranjo (State Auditor V).

From August 24 to September 1, 1993, the expanded audit was thus conducted on the financial transactions and operations of ORG-ARMM for the period July 1992 to March 1993.

As stated in Special Audit Office (SAO) Report No. 93-25 submitted by the audit team, it was found that illegal withdrawals were made from the depository accounts of the agency through the issuance of checks payable to the order of petitioner Israel B. Haron (Disbursing Officer II) without the required disbursement vouchers.

In a letter dated September 10, 1993, Chairman Banaria demanded from petitioner Haron to produce and restitute to the ARMM-Regional Treasurer immediately the full amount of P21,045,570.64 and submit his explanation within seventy-two (72) hours together with the official receipt issued by the ARMM Regional Treasurer in acknowledgment of such restitution.

On April 17, 1998, the Office of the Special Prosecutor, Office of the Ombudsman-Mindanao, filed in the Sandiganbayan criminal cases for malversation of public funds against the following ORG-ARMM officials/employees: Zacaria A. Candao (Regional Governor), Israel B. Haron (Disbursing Officer II), Abas A. Candao (Executive Secretary) and Pandical M. Santiago (Cashier). They were charged with violation of Article 217 of the Revised Penal Code, as amended, under the following informations with identical allegations except for the varying date, number and amount of the check involved in each case.

Sandiganbayan ruling: By Decision dated October 29, 2008, the Sandiganbayan found petitioner Haron guilty beyond reasonable doubt of malversation of public funds under Article 217 of the Revised Penal Code, as amended, committed in conspiracy with petitioners Zacaria A. Candao and Abas A. Candao who were likewise sentenced to imprisonment and ordered to pay a fine equivalent to the amount of the check in each case.

The Sandiganbayan noted that petitioners presented no proof that the cash advances intended for "peace and order campaign" were spent for public purposes, as in fact the alleged disbursement vouchers did not indicate any detail as to the nature of the expense/s such as purchase of equipment, services, meals, travel, etc. and there were no supporting documents such as the Request for Issuance of Voucher, Purchase Request and Inspection Report of the items supposedly purchased. More importantly, the vouchers were not accomplished in accordance with existing COA circulars because they are unnumbered and undated. Hence, the belatedly submitted vouchers are of doubtful veracity or origin, nay, a fabricated evidence or, as pointed out by the prosecution, "self-serving or an afterthought, belatedly prepared to give the illegal disbursements amounting to the aggregate amount of more than P21M, a semblance of regularity."21 As to the JAO and Certification dated August 18, 1998 issued by Chief Accountant Fontanilla, the Sandiganbayan found there is nothing therein to indicate the particular disbursement voucher that corresponds to each of the subject 52 checks which were neither reflected in the JAO.

With respect to petitioners’ assertion that the audit conducted by the COA special audit team was incomplete and tainted as it did not follow procedures because the person audited were not notified thereof, the Sandiganbayan found these allegations unsubstantiated as in fact at the start of the audit on August 24, 1993, the audit team thru their team leader State Auditor Naranjo, informed the management of ORG-ARMM thru the COA Resident Auditor of the expanded special audit to be conducted as they even requested for the original copies of the disbursement vouchers together with their complete supporting documents covering the 52 checks. But despite said letter, the ORG-ARMM failed to heed the audit team’s request. For the failure of petitioner Haron to account for the funds involved in the illegal withdrawals when asked to do so, the presumption arose that he misappropriated the same, which presumption was not overcome by defense evidence.

On the respective liabilities of petitioners Zacaria A. Candao and Abas A. Candao, the Sandiganbayan held that by their act of co-signing the subject checks, petitioner Haron was able to consummate the illegal withdrawals without the required disbursement vouchers of the amounts covered by the 43 checks (for Abas) and 9 checks (for Zacaria). Thus, by their collective acts, said court concluded that petitioners conspired to effect the illegal withdrawals of public funds which, when required by the COA to be properly accounted for, petitioners failed to do so.

Issue:

(1) Whether the Sandiganbayan committed a reversible error in not applying the "Equipoise Rule" which if applied would have resulted in the acquittal of the accused-petitioners?

Held:

(1) No.

Ratio:

In fine, the Sandiganbayan committed no reversible error in holding that the testimonial and documentary evidence presented by the petitioners failed to overcome the prima facie evidence of misappropriation arising from Haron’s failure to give a satisfactory explanation for the illegal withdrawals from the ARMM funds under his custody and control.

Petitioners likewise did not accomplish the proper liquidation of the entire amount withdrawn, during the expanded audit or any time thereafter. There is therefore no merit in petitioners’ argument that the Sandiganbayan erred in not applying the equipoise rule.

Under the equipoise rule, where the evidence on an issue of fact is in equipoise or there is doubt on which side the evidence preponderates, the party having the burden of proof loses. The equipoise rule finds application if the inculpatory facts and circumstances are capable of two or more explanations, one of which is consistent with the innocence of the accused and the other consistent with his guilt, for then the evidence does not fulfill the test of moral certainty, and does not suffice to produce a conviction.

Such is not the situation in this case because the prosecution was able to prove by adequate evidence that Disbursing Officer Haron failed to account for funds under his custody and control upon demand, specifically for the P21,045,570.64 illegally withdrawn from the said funds. In the crime of malversation, all that is necessary for conviction is sufficient proof that the accountable officer had received public funds, that he did not have them in his possession when demand therefor was made, and that he could not satisfactorily explain his failure to do so.

Direct evidence of personal misappropriation by the accused is hardly necessary in malversation cases.