Specpro Finals Reviewer

DELA CRUZ, A.I.P. | of 148

UNLESS OTHERWISE INDICATED, REFERENCES TO SECTIONS AND PORTIONS OF PROVISIONS IN THIS REVIEWER PERTAIN THE RULES OF COURT.

PART ONE. I. INTRODUCTION A. Rule 72. Meaning and scope of special proceedings

RULE 72. SUBJECT MATTER AND APPLICABILITY OF GENERAL RULES

SECTION 1. Subject matter of special proceedings.—Rules of special proceedings are provided for in the following cases:

(a) Settlement of estate of deceased persons; (b) Escheat; (c) Guardianship and custody of children; (d) Trustees; (e) Adoption; (f) Rescission and revocation of adoption; (g) Hospitalization of insane persons; (h) Habeas corpus; (i) Change of name; (j) Voluntary dissolution of corporations; (k) Judicial approval of voluntary recognition of minor

natural children; (l) Constitution of family home; (m) Declaration of absence and death (n) Cancellation or correction of entries in the civil

registry. SEC. 2. Applicability of rules of civil actions.—In the absence of special provisions, the rules provided for in ordinary actions shall be, as far as practicable, applicable in special proceedings.

CASE NOTES

Vda. de Manalo v. Court of Appeals (2001) It is a fundamental rule that in the determination of the nature of an action or proceeding, the averments and the character of the relief sought in the complaint or petition shall be controlling. A careful scrutiny of the children’s petition reveals that it is an ordinary civil action. The jurisdictional requirements were: (1) the fact of the death of

the decedent; and (2) the place of his residence within the Philippines. Both were present in the complaint. Pilar’s co-called Opposition in actually an Answer containing admissions and denials, special and affirmative defenses and compulsory counterclaims for actual, moral and exemplary damages. The argument based on Article 222 of the Civil Code is a mere afterthought, and only applies to ordinary civil actions.

Natcher v. Court of Appeals (2001) There lies a marked distinction between an action and a special proceeding. An ACTION is a formal demand of one’s rights in a court of justice in the manner prescribed by the law or by the court. It is the method of applying legal remedies accourding to established rules. A SPECIAL PROCEEDING is an application or proceeding to establish the STATUS or RIGHT of a party, or a particular fact. Usually, in a SPECIAL PROCEEDING, no formal pleadings are required unless the statute so provides. In SPECIAL PROCEEDINGS, the remedy is generally granted upon an application or a motion. Section 2, Rule 90 provides that advancements made from the legitime shall be determined by the court having jurisdiction over the estate proceedings. Thus, the RTC, acting in its general jurisdiction, is devoid of authority to render an adjudication to resolve the issue of advancement of the real property in favor of Natcher.

Republic v. Court of Appeals (2005) The petition for declaration of presumptive death IS a special proceeding. The petition merely seeks for a declaration by the RTC of the presumptive death of Clemente Jomoc. It does not seek enforcement or protection of a right or prevention or redress of a wrong. The denial of the Solicitor General’s motion for reconsideration was correct, and what the Solicitor General should have done was to file, in addition to a Notice of Appeal, a record on appeal in accordance with Section 19 of the IRR to B.P. Blg. 129. Distinguished from civil actions

RULE 2. CAUSE OF ACTION SECTION 1. Ordinary civil actions, basis of.—Every ordinary civil action must be based on a cause of action. (n) SEC. 2. Cause of action, defined.—A cause of action is the act or omission by which a party violates a right of another. (n)

B. Importance of procedural rules

CASE NOTES

Republic v. Kenrick Development Corporation (2006) A signed pleading is one that is signed by either the party himself or by his counsel. Section 3, Rule 7 is clear: it requires that a pleading be signed by the party or counsel representing him. Counsel’s authority and duty to sign pleadings are personal to him. He cannot delegate this duty. The Court

Remedial Law

SPECIAL PROCEEDINGS Statutes and Case Notes REVIEWER Prepared by A.I.P. Dela Cruz based on the outline of Prof. C.A. Dela Cerna


refused to liberally interpret the Rules because they are not mere technicalities. To summarily brush them aside may lead to arbitrariness or injustice. C. Applicability of rules of civil action – See Section 2, Rule 72 above.

RULE 35. SUMMARY JUDGMENTS SECTION 1. Summary judgment for claimant.—A party seeking to recover upon a claim, counterclaim, or cross-claim or to obtain a declaratory relief may, at any time after the pleading in answer thereto has been served, move with supporting affidavits, depositions or admissions for a summary judgment in his favor upon all or any part thereof. (1a, R34) SEC. 2. Summary judgment for defending party.—A party against whom a claim, counterclaim or cross-claim is asserted or a declaratory relief is sought may, at any time, move with supporting affidavits, depositions or admissions for a summary judgment in his favor as to all or any part thereof. (2a, R34) SEC. 3. Motion and proceedings thereon .—The motion shall be served at least ten (10) days before the time specified for the hearing. The adverse party may serve opposing affidavits, depositions, or admissions at least three (3) days before the hearing. After the hearing, the judgment sought shall be rendered forthwith if the pleadings, supporting affidavits, depositions, and admissions on file, show that, except as to the amount of damages, there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. (3a, R34) SEC. 4. Case not fully adjudicated on motion.—If on motion under this Rule, judgment is not rendered upon the whole case or for all the reliefs sought and a trial is necessary, the court at the hearing of the motion, by examining the pleadings and the evidence before it and by interrogating counsel shall ascertain what material facts exist without substantial controversy and what are actually and in good faith controverted. It shall thereupon make an order specifying the facts that appear without substantial controversy, including the extent to which the amount of damages or other relief is not in controversy, and directing such further proceedings in the action as are just. The facts so specified shall be deemed established, and the trial shall be conducted on the controverted facts accordingly. (4a, R34) SEC. 5. Form of affidavits and supporting papers.—Supporting and opposing affidavits shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein. Certified true copies of all papers or parts thereof referred to in the affidavit shall be attached thereto or served therewith. (5a, R34) SEC. 6. Affidavits in bad faith.—Should it appear to its satisfaction at any time that any of the affidavits presented pursuant to this Rule are presented in bad faith, or solely for the purpose of delay, the court shall forthwith order the offending party or counsel to pay to the other party the amount of the reasonable expenses which the filing of the affidavits caused him to incur, including

attorney’s fees. It may, after hearing, further adjudge the offending party or counsel guilty of contempt. (6a, R34)

CASE NOTES

Matute v. Court of Appeals (1969) Instead of resolving the motion, the probate judge issued the controverted order removing the respondent as co-administrator without giving him the opportunity to adduce his own evidence despite his explicit reservation that he be afforded the chance to introduce evidence in his behalf in the event of denial of his motion to dismiss and/or demurrer to evidence. The Court held that the above actuation of the probate judge constituted grave abuse of discretion which dooms his improvident order as a nullity. In fact, even without the respondent's reservation, it was the bounden duty of the probate judge to schedule the presentation and reception of the respondent's evidence before disposing of the case on the merits because only the movants at that time had presented their evidence. This duty is projected into bolder relief if it is considered that the aforesaid motion is in form as well as in substance a demurrer to evidence allowed by Rule 35, by virtue of which the defendant does not lose his right to offer evidence in the event that his motion is denied. Said Rule states: After the plaintiff has completed the presentation of his evidence, the defendant without waiving his right to offer evidence in the event the motion is not granted, may move for a dismissal on the ground that upon the facts and law the plaintiff has shown no right to relief. (Italics supplied). The application of the abovecited Rule in special proceedings, like the case at bar, is authorized by section 2 of Rule 72 which direct that in the "absence of special provisions, the rules provided for in ordinary civil actions shall be, as far as practicable, applicable in special proceedings." PART TWO. SETTLEMENT OF ESTATE OF DECEASED PERSONS I. VENUE

RULE 73. VENUE AND PROCESS SECTION 1. Where estate of deceased persons settled.—If the decedent is an inhabitant of the Philippines at the time of his death, whether a citizen or an alien, his will shall be proved, or letters of administration granted, and his estate settled, in the Regional Trial Court in the province in which he resides at the time of his death, and if he is an inhabitant of a foreign country, the Regional Trial Court of any province in which he had estate. The court first taking cognizance of the settlement of the estate of a decedent, shall exercise jurisdiction to the exclusion of all other courts. The jurisdiction assumed by a court, so far as it depends on the place of residence of the decedent, or of the location of his estate, shall not be contested in a suit or proceeding, except in an appeal from that court, in the original case, or when the want of jurisdiction appears on the record.


SEC. 2. Where estate settled upon dissolution of marriage.— When the marriage is dissolved by the death of the husband or wife, the community property shall be inventoried, administered, and liquidated, and the debts thereof paid, in the testate or intestate proceedings of the deceased spouse. If both spouses have died, the conjugal partnership shall be liquidated in the testate or intestate proceedings of either. SEC. 3. Process.—In the exercise of probate jurisdiction, Regional Trial Court may issue warrants and process necessary to compel the attendance of witnesses or to carry into effect their orders and judgments, and all other powers granted them by law. If a person does not perform an order or judgment rendered by a court in the exercise of its probate jurisdiction, it may issue a warrant for the apprehension and imprisonment of such person until he performs such order or judgment, or is released. SEC. 4. Presumption of death.—For purposes of settlement of his estate, a person shall be presumed dead if absent and unheard from for the periods fixed in the Civil Code. But if such person proves to be alive, he shall be entitled to the balance of his estate after payment of all his debts. The balance may be recovered by motion in the same proceeding.

CASE NOTES

Eusebio v. Eusebio (1956) It was undisputed that up to at least 29 October 1952 Andres was, and has always been, domiciled in San Fernando, Pampanga where he had his home, as well as some other properties. To seek medical attention, (he had a heart condition), he and his son whot treated him, Dr. Jesus Eusebio, resided in Quezon City. Thus, since the domicile of origin of the decedent was San Fernando, Pampanga, where he resided for 70 years, the presumption is that he retained that domicile and hence, residence, in the absence of satisfactory proof to the contrary, for well-settled is the rule that “a domicile once acquired is retained until a new one is gained.” Admittedly, the decedent was juridically capable of choosing a domicile and had been in Quezon City several days before his demise. Did he intend to stay in Quezon City permanently? The Court ruled that there was no such intent. Neither did the decedent appear to have manifested his wish to live indefinitely in said city. The Court found untenable the RTC’s finding that Andres’s purchase of a house in Quezon City was indicative of animus manendi. The house was bought because he had been advised to do so because of his illness. It is well-settled that “domicile is not commonly changed by presence in a place merely for one’s own health,” even if coupled “with knowledge that one will never again be, on account of illness, able to return home.”

Fule v. Court of Appeals (1976)1

The Judiciary Act of 1948 confers upon CFIs jurisdiction over all probate cases independently of the place of the residence of the deceased. But the Rules of Court fixes the venue or the place where each case shall be brought. Place of residence does not constitute an element of jurisdiction ratione materiae.

1 Prevailing doctrine.

“Resides” means or connotes ex vi termini “actual residence” as distinguished from legal residence or domicile.” In the application of the rules on venue, the Revised Rules of Court is of such nature and residence, rather than domicile, is the significant factor. Even if the word used is domicile, the meaning is residence rather than domicile. No particular length of time is required, bodily presence suffices. Amado’s last place of residence is Quezon City, and both Preciosa and Virginia presented evidence to that effect.

Malig v. Bush (1969) Section 1, Rule 75 of the old Rules of Court is really a rule on venue, not of jurisdiction, as the caption of the Rule indicates, and in order to preclude different courts from exercising jurisdiction, the Rule specifis that “the court first taking cognizance of the settlement of the estate of a decedent shall exercise jurisdiction to the exclusion of all other courts.”

Rodriguez v. de Borja (1966) The jurisdiction of the Bulacan CFI became vested upon the delivery thereto of the will of the will of the late Fr. Rodriguez on 4 March 1963, even without a petition for its allowance was filed until 12 March (Section 3, Rule 77 of the old Rules). But the Rodriguezes object because the Rules speak of a will being delivered to the court having jurisdiction and in this case the Bulacan CFI did not have it because the decedent was domiciled in Rizal. The Court could not discount Fr. Rodriguez’s 33-year residence in Hagonoy, Bulacan as parish priest, but even so, animus revertedni points to Parañaque, but still that does not imply that the Bulacan CFI had no jurisdiction. As ruled in previous decisions, the power to settle the decedent’s estate is conferred by law upon all courts of first instance, and the domicile of the testator only affects the venue but not jurisdiction of the court.

Cuenco v. Court of Appeals (1973) The Judiciary Act concededly confers original jurisdiction upon all CFIs over “all matters of probate, both of testate and intestate estates.” Rule 73 of the Rules of Court lays down the rule on venue as the very caption of the Rule indicates, and in order to prevent conflict among different courts which may otherwise properly assume jurisdiction from doing so. It should be noted that the Rule on venue does not state that the court with whom the testate or the intestate petition is first filed acquires exclusive jurisdiction. A court, upon learning that a petition for the probate of the decedent’s last will and testatment may decline to take cognizance of the petition and defer to the second court.

De Borja v. Tan (1955) The powers and functions of a special administrator are quite limited. Under Section 1 of Rule 81, a special administrator is only appointed where there is a delay in the grant of letters of administration occasioned by an appeal from allowance or disallowance of a will or from any other cause.


Since Jose’s appointment as co-administrator was because Francisco was physically incapable, Jose is practically a regular administrator, hence the order appointing Jose as such was appealable.

Macias v. Uy Kim (1972) Even in other cases it is also a general principle that the branch of the CFI that first acquired jurisdiction over the case retains such jurisdiction to the exclusion of all other branches of the same CFI. B. Dissolution of marriage

CASE NOTES

Bernardo v. Court of Appeals (1963) The question of ownership of certain properties involved – whether or not the belong to the conjugal partnership of gains or to the husband exclusively – is a matter properly within the jurisdiction of the probate court which necessarily has to liquidate the partnership in order to determine Capili’s estate which is to be distributed among his heirs who are all parties in the proceedings, including the widow now represented on account of her death by her heirs who have been substituted upon petition of the executor himself. In this case, no third persons were present whose rights must be considered.

Falcatan v. Sanchez (1957) While a court in a summary proceeding for the settlement of the estate of a deceased person may pass upon the question of title to the property, this is only true where the title is disputed by a third person not the surviving spouse or heir of the deceased, as successors of the latter. It would be fair to hold that the property in question in this case belongs to the conjugal partnership.

Ermac v. Medelo (1975) The Court held that it was proper for the lower court to approve the project of partition notwithstanding claims by Ermac in a separate civil action. The policy of the law is to terminate proceedings for the settlement of the estate of deceased persons with the least loss of time. Definitely, probate court is not the best forum for the resolution of adverse claims of ownership of any property ostensibly belonging to the estate.

Calma v. Tañedo (1938) The Court held the sheriff’s sale to be void. It appears that Tañedo brought the collection suit against Eulalio as administrator of the conjugal partnership while Fausta was still alive. But the administration has since passed to Maria. Thus, no complaint for its collection may be brought against Eulalio, and the claim had to be filed in the testamentary proceedings for the estate of Fausta Macasaquit. The sheriff’s sale in the action against Eulalio is thus null and void.

Ocampo v. Potenciano (1951) Potenciano did not have authority to enter into an option to repurchase agreement after Rufina’s death. The Court of

Appeals erred in supposing that Potenciano had such authority as de facto administrator of Rufina’s estate. OLD RULE: Upon dissolution of marriage, the husband must liquidate. PRESENT RULE: Liquidation must be done in testate or intestate proceedings. Husband cannot now liquidate on his own. C. Jurisdiction of probate court

RULE 90. DISTRIBUTION AND PARTITION OF THE ESTATE SECTION 1. When order for distribution of residue made.—When the debts, funeral charges, and expenses of administration, the allowance to the widow, and inheritance tax, if any, chargeable to the estate in accordance with law, have been paid, the court, on the application of the executor or administrator, or of a person interested in the estate, and after hearing upon notice, shall assign the residue of the estate to the persons entitled to the same, naming them and the proportions, or parts, to which each is entitled, and such persons may demand and recover their respective shares from the executor or administrator, or any other person having the same in his possession. If there is a controversy before the court as to who are the lawful heirs of the deceased person or as to the distributive shares to which each person is entitled under the law, the controversy shall be heard and decided as in ordinary cases.

No distribution shall be allowed until the payment of the obligations above mentioned has been made or provided for, unless the distributees, or any of them, give a bond, in a sum to be fixed by the court, conditioned for the payment of said obligations within such time as the court directs.

CASE NOTES

Reyes v. Ysip (1955) In the hearing for probate of a will, the court is not obliged to accept or receive evidence of filiation. To allow Reyes, oppositor to the probate proceedings, to prove her filiation would be injecting matters different from the issues involved in the probate of a will.

Torres v. Javier (1916) In this case, the Court held that a third person can be appointed administrator. The Code of Civil Procedure provides that the following persons can be appointed administrator:

(1) Surviving husband or wife; (2) Other relatives; (3) If the first two are unsuitable, some other

person (4) Any person the court may appoint Since two women were contesting as to who was

the legal wife, a third person, disinterested, should be appointed.

Intestate Estate of Borromeo, Patrocino Borromeo-Herrera, administrator v. Borromeo (1987) The petitioners argue that the present status of Special Proceeding No. 916-R requires only the appraisal of the attorney's fees of the lawyers-claimants who were


individually hired by their respective heirs-clients, so their attorney's fees should be legally charged against their respective clients and not against the estate. The Court agreed with the petitioners' contention that attorney's fees are not the obligation of the estate but of the individual heirs who individually hired their respective lawyers. The portion, therefore, of the Order of August 15, 1969, segregating the exhorbitantly excessive amount of 40% of the market value of the estate from which attorney's fees shall be taken and paid should be deleted.

Morales et al. v. Court of First Instance (1986) It is a well-settled rule that a probate court or one in charge of proceedings whether testate or intestate cannot adjudicate or determine title to properties claimed to be a part of the estate and which are equally claimed to belong to outside parties. All that the said court could do as regards said properties is to determine whether they should or should not be included in the inventory or list of properties to be administered by the administrator. If there is no dispute, well and good; but if there is, then the parties, the administrator, and the opposing parties have to resort to an ordinary action for a final determination of the conflicting claims of title because the probate court cannot do so.

The controversy was not whether or not the redemption ordered by the respondent court was done, but whether or not such redemption, as done, was valid, According to settled jurisprudence, such controversy is outside the jurisdiction of the probate court. Parenthetically, it must be mentioned that the respondent court itself had, at that time, already determined that the petitioners are intervenors in the settlement proceedings of Simona's estate not as heirs but as "co-owners" with the intestate estates, and the respondent court in fact would later state in the January 13, 1977 order that the petitioners have "not been called to participate in the proceedings." The petitioners, are, therefore, outside parties claiming title to property included in the inventory of properties under administration.

Heirs of Reyes v. Reyes (2000) The pronouncements in this case should not by any means diminish or deprive the oppositor of whatever rights or properties he believes or considers to be rightfully his. Although the circumstances and factors he has given to the Court herein may have legal consequences that could have defeated opposing-claims and rendered oppositor’s claim on the properties unassailable, this Court’s competence to adjudicate thus in this proceedings is clearly non-existent. In Baybayan vs. Aquino, it was held that the question of ownership of a property alleged to be part of the estate must be submitted to the Regional Trial Court in the exercise of its general jurisdiction. This ruling then, cannot be a final adjudication on the present and existing legal ownership of the properties. Whatever is declared herein ought not to preclude oppositor from prosecuting an ordinary action for the purpose of having his claims or rights established over the properties. If he still cares hereafter to prosecute such claim of ownership adversely to the estate and the apparent co-owner, his mother Felisa. As stated in Valera, et al. vs. Judge Inserto, et al., the Court, acting as a probate court, exercises but limited jurisdiction; accordingly, its determination that

property should be included in the inventory or not is within its probate jurisdiction, but such determination is only provisional in character, not conclusive, and is subject to the final decision in a separate action that may be instituted by the parties.

Cunanan v. Amparo (1948) The Court does not agree with the respondents that the lower court lacked jurisdiction to order the delivery of the possession of the lots to the estate. This power is a mere consequence of the power to approve Soriano's claim; a power which the court undoubtedly had and which Soriano himself invoked with full knowledge of the facts. As a general rule, with the consent of the parties matters affecting property under judicial administration may be taken cognizance of by the court in the course of the intestate proceeding provided the interests of third persons are not prejudiced. Determination of title to property is within the jurisdiction of Courts of First Instance. The respondent Soriano's objection relates exclusively to the procedure, which is distinct from jurisdiction. It affects only personal rights to a mode of practice which may be waived. Certainly, there is waiver where, as here, and as has been pointed out, the party who raises the objection was the one who set the court in motion, and who, by failing to disclose the existence of a sale under pacto de retro, suppressed jurisdictional facts that might be in the way of his claim's success.

Valera v. Inserto (1987) Settled is the rule that a Court of First Instance (now Regional Trial Court), acting as a Probate Court, exercises but limited jurisdiction, and thus has no power to take cognizance of and determine the issue of title to property claimed by a third person adversely to the decedent, unless the claimant and all the other parties having legal interest in the property consent, expressly or impliedly, to the submission of the question to the Probate Court for adjudgment, or the interests of third persons are not thereby prejudiced, the reason for the exception being that the question of whether or not a particular matter should be resolved by the Court in the exercise of its general jurisdiction or of its limited jurisdiction as a special court (e.g., probate, land registration, etc), is in reality not a jurisdictional but in essence of procedural one, involving a mode of practice which may be waived. The facts obtaining in this case, however, do not call for the application of the exception to the rule. As already earlier stressed, it was at all times clear to the Court as well as to the parties that if cognizance was being taken of the question of title over the fishpond, it was not for the purpose of settling the issue definitely and permanently, and writing " finis" thereto, the question being explicitly left for determination "in an ordinary civil action," but merely to determine whether it should or should not be included in the inventory. This function of resolving whether or not property should be included in the estate inventory is, to be sure, one clearly within the Probate Court's competence, although the Court's determination is only provisional in character, not conclusive, and is subject to the final decision in a separate action that may be instituted by the parties.


Dinglasan v. Ang Chia (1951) The act of the lower court in taking cognizance of civil case No. V-331 is not tantamount to assuming jurisdiction over said case nor does it violate the ruling of the Court which says that "when questions arise as to the ownership of property, alleged to be part of the estate of a deceased person, but claimed by some other person to be his property, not by virtue of any right of inheritance from the deceased, but by title adverse to that of the deceased and his estate, such questions cannot be determined in the course of administration proceedings. The Court of First Instance, acting as probate court, has no jurisdiction to adjudicate such contentions, which must be submitted to the court in the exercise of its general jurisdiction as a Court of First Instance to try and determine ordinary actions. . . ."

If the appellants filed a claim in intervention in the intestate proceedings it was only pursuant to their desire to protect their interests it appearing that the property in litigation is involved in said proceedings and in fact is the only property of the estate left subject of administration and distribution; and the court is justified in taking cognizance of said civil case because of the unavoidable fact that whatever is determined in said civil case will necessarily reflect and have a far reaching consequence in the determination and distribution of the estate. In so taking cognizance of civil case No. V-331 the court does not assume general jurisdiction over the case but merely makes of record its existence because of the close interrelation of the two cases and cannot therefore be branded as having acted in excess of its jurisdiction.

Ortañez-Enderes v. Court of Appeals (1999) It is admitted that the special proceedings are still pending with the court and the estate had not been partitioned and distributed. Notwithstanding the proceedings being conducted by the intestate court, the petitioners’ rights or interests over the estate or over the assailed shareholdings in the name of private respondents are still future and unsettled rights which cannot be protected by the writ of injunction. The rule is well settled that the jurisdiction of the RTC as a probate or intestate court relates only to matters having to do with the settlement of the estate and the probate of wills of deceased persons but does not extend to the determination of questions of ownership that arise during the proceedings. The intestate court may pass upon the title to a certain property for the purpose of determining whether the same should or should not be included in the inventory but such determination is not conclusive and is subject to final decision in a separate action regarding ownership which may be constituted by the parties. The court in charge of the intestate proceedings cannot adjudicate or determine title to properties claimed to be a part of the estate and which are equally claimed to belong to outside parties. Therefore the possibility of irreparable damage without proof of violation of an actually existing right of petitioners over the assailed shareholdings presently in the possession of the private respondents is no ground for an injunction being a mere damnum absque injuria. Moreover, the grant or denial of an injunction rests in the sound discretion of the lower court. SEC even found that the private respondents actually own 94% of the outstanding capital stock of Philinterlife!

D. Presumption of death – See Sections 3 and 4, Rule 73 above.

CIVIL CODE Article 391. The following shall be presumed dead for all purposes, including the division of the estate among the heirs:

(1) A person on board a vessel lost during a sea voyage, or an aeroplane which is missing, who has not been heard of for four years since the loss of the vessel or aeroplane;

(2) A person in the armed forces who has taken part in war, and has been missing for four years;

(3) A person who has been in danger of death under other circumstances and his existence has not been known for four years. (n) Article 392. If the absentee appears, or without appearing his existence is proved, he shall recover his property in the condition in which it may be found, and the price of any property that may have been alienated or the property acquired therewith; but he cannot claim either fruits or rents. (194)

III. SUMMARY SETTLEMENT OF ESTATES

RULE 74. SUMMARY SETTLEMENT OF ESTATES SECTION 1. Extrajudicial settlement by agreement between heirs.—If the decedent left no will and no debts and the heirs are all of age, or the minors are represented by their judicial or legal representatives duly authorized for the purpose, the parties may, without securing letters of administration, divide the estate among themselves as they see fit by means of a public instrument filed in the office of the register of deeds, and should they disagree, they may do so in an ordinary action of partition. If there is only one heir, he may adjudicate to himself the entire estate by means of an affidavit filed in the office of the register of deeds. The parties to an extrajudicial settlement, whether by public instrument or by stipulation in a pending action for partition, or the sole heir who adjudicates the entire estate to himself by means of an affidavit shall file, simultaneously with and as a condition precedent to the filing of the public instrument, or stipulation in the action for partition, or of the affidavit in the office of the register of deeds, a bond with the said register of deeds, in an amount equivalent to the value of the personal property involved as certified to under oath by the parties concerned and conditioned upon the payment of any just claim that may be filed under section 4 of this rule. It shall be presumed that the decedent left no debts if no creditor files a petition for letters of administration within two (2) years after the death of the decedent.

The fact of the extrajudicial settlement or administration shall be published in a newspaper of general circulation in the manner provided in the next succeeding section; but no extrajudicial settlement shall be binding upon any person who has not participated therein or had no notice thereof. SEC. 2. Summary settlement of estates of small value.—Whenever the gross value of the estate of a deceased person, whether he died testate or intestate, does not exceed ten thousand pesos, and that fact if made to appear to the Regional Trial Court having jurisdiction of the estate by the petition of an interested person and upon hearing, which shall be held not less


than one (1) month nor more than three (3) months from the date of the last publication of a notice which shall be published once a week for three (3) consecutive weeks in a newspaper of general circulation in the province, and after such other notice to interested persons as the court may direct, the court may proceed summarily, without the appointment of an executor or administrator, and without delay, to grant, if proper, allowance of the will, if any there be, to determine who are the persons legally entitled to participate in the estate and to apportion and divide it among them after the payment of such debts of the estate as the court shall then find to be due; and such persons, in their own right, if they are lawful age and legal capacity, or by their guardians or trustees legally appointed and qualified, if otherwise, shall thereupon be entitled to receive and enter into the possession of the portions of the estate so awarded to them respectively. The court shall make such order as may be just respecting the costs of the proceedings, and all orders and judgments made or rendered in the course thereof shall be recorded in the office of the clerk, and the order of partition or award, if it involves real estate, shall be recorded in the proper register’s office. SEC. 3. Bond to be filed by distributees.—The court, before allowing a partition in accordance with the provisions of the preceding section, may require the distributees, if property other than real is to be distributed, to file a bond in an amount to be fixed by court, conditioned for the payment of any just claim which may be filed under the next succeeding section. SEC. 4. Liability of distributees and estate.—If it shall appear at any time within two (2) years after the settlement and distribution of an estate in accordance with the provisions of either of the first two sections of this rule, that an heir or other person has been unduly deprived of his lawful participation in the estate, such heir or such other person may compel the settlement of the estate in the courts in the manner hereinafter provided for the purpose of satisfying such lawful participation. And if within the same time of two (2) years, it shall appear that there are debts outstanding against the estate which have not been paid, or that an heir or other person has been unduly deprived of his lawful participation payable in money, the court having jurisdiction of the estate may, by order for that purpose, after hearing, settle the amount of such debts or lawful participation and order how much and in what manner each distributee shall contribute in the payment thereof, and may issue execution, if circumstances require, against the bond provided in the preceding section or against the real estate belonging to the deceased, or both. Such bond and such real estate shall remain charged with a liability to creditors, heirs, or other persons for the full period of two (2) years after such distribution, notwithstanding any transfers of real estate that may have been made. SEC. 5. Period for claim of minor or incapacitated person.—If on the date of the expiration of the period of two (2) years prescribed in the preceding section the person authorized to file a claim is a minor or mentally incapacitated, or is in prison or outside the Philippines, he may present his claim within one (1) year after such disability is removed.

CIVIL CODE

Article 320. The father, or in his absence the mother, is the legal administrator of the property pertaining to the child under

parental authority. If the property is worth more than two thousand pesos, the father or mother shall give a bond subject to the approval of the Court of First Instance. (159a)

FAMILY CODE Art. 234. Emancipation takes place by the attainment of majority. Unless otherwise provided, majority commences at the age of twenty-one years. Emancipation also takes place: (1) By the marriage of the minor; or (2) By the recording in the Civil Register of an agreement in a public instrument executed by the parent exercising parental authority and the minor at least eighteen years of age. Such emancipation shall be irrevocable. (397a, 398a, 400a, 401a) Art. 236. Emancipation for any cause shall terminate parental authority over the person and property of the child who shall then be qualified and responsible for all acts of civil life. (412a)

A. Extra-judicial settlement by agreement between heirs – See Sections 1, 4 and 5, Rule 74 above. CASE NOTES

Monserrat v. Ibañez (1950)2

Where there are no debts, the heirs are not bound to submit the property to a judicial administration which is always long and costly or to apply for an appointment of an admin by the court. These proceedings are superfluous and unnecessary.

Vda. de Rodriguez v. Tan (1952) Section 1, Rule 74 of the Rules of Court does not preclude heirs from instituting administration proceedings evend if the estate has no debts or obligations, if they do not desire to resort for good reasons to an ordinary action of partition. While Section 1 allows heirs to divide the estate among themselves as they may deem fit, it does not compel them to take another course of action.

Pereira v. Court of Appeals (1989) The general rule is that when a person dies leaving property, the same should be judicially administered and the competent court should appoint a qualified administrator under the Rules of Court. An exception is Section 1, Rule 74 of the Rules of Court. Under this Rule, when all heirs are of age and there exist no debts from the estate, they may agree in writing to partition the estate. There is no good reason to burden the estate with the costs of judicial administration.

Guico v. Bautista (1960) Guico’s action for partition and liquidation was deemed premature. While there are Rules allowing for summary settlement of estates, this only applies when the decedent

2 Based from the digest of Roxan Roxas, C2013


left no debts or obligations and all heirs are of legal age. The debts must be paid first. However, the question of whether the donated properties are subject to collation may nonetheless be passed upon in the special proceedings.

Rebong v. Ibañez (1947) Since the registered or annotated contingent interest of the creditors or other heirs of Rebong’s predecessors in interest was established Section 4, Rule 74 has not yet terminated, (two-year lien), Judge Ibañez had no jurisdiction to order cancellation of lien.

McMicking v. Sy Conbieng (1912) Under the broad interpretation and application of the provisions of the Code of Civil Procedure, the division of Lao Sempco’s properties is in conformity with said Rules and may be termed extrajudicial partition. The fact of prior appointment of an administrator and the filing of an inventory before such partition is of no consequence so far the right of the owners to partition is concerned. When the condition that there are no debts or all the debts have been paid by the heirs has been complied with , partition may take place no matter what stage the administration has reached.

Gerona v. de Guzman (1964) The Court held that the extrajudicial partition held by the de Guzmans was valid because while as a general rule an action for partition among co-heirs does not prescribe, this is true only as long as the defendants do not hold the property in question under an adverse title. When the de Guzmans executed the deed of extrajudicial partition stating therein that they are the sole heirs of the deceased, and secured new TCTs in their name, they hereby excluded the Geronas from the deceased’s estate, thus an adverse title. This is why the Geronas should have brought an annulment action on the ground of fraud instead of claiming deprivation.

Pedrosa v. Court of Appeals (2001) The Court held that the 1983 partition was invalid. The two-year prescriptive period in Section 4, Rule 74 does not apply if a person interested in the estate did not participate in the partition. Pedrosa did not participate. She therefore had four years to question the deed of partition, following the ruling in Gerona v. de Guzman. Section 1, Rule 74 governs the publication requirement.

Pada-Kilario v. Court of Appeals (2000) The Court held that the 1951 partition of Jacinto Pada’s estate was valid and conclusive against the Kilarios. The extrajudicial partition of the estate of Jacinto is valid although executed in a private document. No law requires partition among heirs to be in writing and registered in order to be valid. The requirement in Section 1, Rule 74 that a partition be put in writing has the purpose of constructive notice, not affecting the intrinsic validity of the partition where no creditors are involved. The extrajudicial partition has produced a legal status. As such, their division is conclusive unless and until

it is shown that there were debts existing against the estate that were still unpaid.

Tan v. Benolirao (2009) An annotation under Section 4, Rule 74 is an encumbrance on the property. The provision of the said Rule prescribes the procedure to be followed if within two years after an extrajudicial partition of estate. An annotation is placed on the new TCTs pursuant to distribution and partition of a deceased’s real properties to warn third persons on possible interests of excluded heirs or unpaid creditors. B. Summary settlement – See Sections 2 to 5, Rule 74 above.

CASE NOTES

Sampilo v. Court of Appeals (1958) The Court held that Felisa Sinopera is not barred by the statute of limitations from making a claim against the estate of Tolete. Citing the provisions of Section 4, Rule 74 barring distributes or the heirs from objecting to an extrajudicial partition after the expiration of two years from such extrajudicial partition is applicable only to (1) persons who have participated or taken part or had notice of the extrajudicial partition, and (2) when the provisions of Section 1, Rule 74 have been strictly complied with in that all persons or heirs of the deceased have taken part in the extrajudicial settlement or are represented by themselves or through guardians. These conditions do not obtain in this case. Also, there is nothing in Section 4, Rule 74 which shows a statute of limitations barring action by third persons. It is a bar against the parties who have taken part in the extrajudicial proceedings, but not against third persons not parties thereto. Even so, Section 4, Rule 74 is still unavailing to Sampilo and Salacup because the action taken by the estate of Tolete is one based on fraud. IV. PRODUCTION AND ALLOWANCE OF WILLS

RULE 75. PRODUCTION OF WILL. ALLOWANCE OF WILL NECESSARY

SECTION 1. Allowance necessary. Conclusive as to execution.—No will shall pass either real or personal estate unless it is proved and allowed in the proper court. Subject to the right of appeal, such allowance of the will shall be conclusive as to its due execution. SEC. 2. Custodian of will to deliver.—The person who has custody of a will shall, within twenty (20) days after he knows of the death of the testator, deliver the will to the court having jurisdiction, or to the executor named In the will. SEC. 3. Executor to present will and accept or refuse trust.—A person named as executor in a will shall, within twenty (20) days after he knows of the death of the testator, or within twenty (20) days after he knows that be is named executor if he obtained such knowledge after the death of the testator, present such will to the court having jurisdiction, unless the will has reached the


court in any other manner, and shall, within such period, signify to the court in writing his acceptance of the trust or his refusal to accept it. SEC. 4. Custodian and executor subject to fine for neglect.—A person who neglects any of the duties required in the two last preceding sections without excuse satisfactory to the court shall be fined not exceeding two thousand pesos. SEC. 5. Person retaining will may be committed.—A person having custody of a will after the death of the testator who neglects without reasonable cause to deliver the same, when ordered so to do, to the court having jurisdiction, may be committed to prison and there kept until he delivers the will.

A. Meaning of probate

1. Due execution and extrinsic validity

CIVIL CODE Article 783. A will is an act whereby a person is permitted, with the formalities prescribed by law, to control to a certain degree the disposition of this estate, to take effect after his death. (667a) Article 838. No will shall pass either real or personal property unless it is proved and allowed in accordance with the Rules of Court.

The testator himself may, during his lifetime, petition the court having jurisdiction for the allowance of his will. In such case, the pertinent provisions of the Rules of Court for the allowance of wills after the testator's a death shall govern.

The Supreme Court shall formulate such additional Rules of Court as may be necessary for the allowance of wills on petition of the testator.

Subject to the right of appeal, the allowance of the will, either during the lifetime of the testator or after his death, shall be conclusive as to its due execution. (n)

CASE NOTES

Spouses Pastor v. Court of Appeals (1983) In the absence of a resolution on the intrinsic validity of the will, there was no basis for the probate court to hold that Quemada is entitled to the payment of the questioned legacy.

In re Estate of Johnson (1918) The Court held that the probate order was issued with sufficient court jurisdiction. The proceeding as to the probate of a will is essentially one in rem, and the very nature of things the state is allowed wide latitutde in determining the character of the constructive notice given to the world in a prceeding where it has absolute possession the res.

Manahan v. Manahan (1933) Once a will has been authenticated and admitted to probate, questions relative to the validity thereof can no longer be raised on appeal. The probate decree is conclusive with respect to due execution and cannot be impugned except for

fraud, in any separate or independent action or proceedings. � in rem.

Balanay v. Martinez (1975) The Court held that the probate court was correct in passing upon the intrinsic validity of the will. In view of the certain unusual provisions of the will, which are of dubious legality, the trial court was correct in passing upon the will’s intrinsic validity even before its formal validity has been established. The probate of a will is a useless ceremony if on its face it already appears to be void.

Maninang v. Court of Appeals (1982) The lower court acted in excess of its jurisdiction in dismissing the testate case. Generally, the probate of a will is NECESSARY. Opposition to the intrinsic validity of the will or the legality of its provisions cannot be entertained in the probate proceedings. Because of the dismissal of the testate case, the determination of other controversial issues has not been considered.

2. Nature of proceedinsg

CASE NOTES

Fernandez v. Dimagiba (1967) The order allowing the will is not interlocutory. A probate decree finally and definitely settles all questions covering the capacity of the testator and the proper execution and witnessing of his last will and testament, irrespective of whethere its provisions are valid or not.

Alsua-Betts v. Court of Appeals (1979) Probate proceedings involve public interest, and the application of the rule on estoppel therein, when it will bloack the ascertainment of the truth as to circumstances surrounding the execution of a testament would seem inimical to public policy. B. Responsible person –See Sections 2 and 5, Rule 75, above. C. Discovery of will during intestate proceedings

CASE NOTES

Cuenco v. Court of Appeals (1973) A court, upon learning that a petition for the probate of the decedent’s last will and testament has been presented in another court may decline to take cognizance of the petition and hold the petition before it in abeyance, and instead defer to the second court for the probate of the decedent’s will.

Casiano v. Maloto (1977) An intestate court does not have jurisdiction to entertain the petition of the probate of a will that was discovered during the proceedings. The petition for the probate of said will should have been filed in a separate action and not with the intestate court.


V. ALLOWANCE OR DISALLOWANCE OF WILLS

RULE 76. ALLOWANCE OR DISALLOWANCE OF WILL SECTION 1. Who may petition for the allowance of will.—Any executor, devisee, or legatee named in a will, or any other person interested in the estate, may, at any time after the death of the testator, petition the court having jurisdiction to have the will allowed, whether the same be in his possession or not, or is lost or destroyed.

The testator himself may, during his lifetime, petition the court for the allowance of his will. SEC. 2. Contents of petition.—A petition for the allowance of a will must show, so far as known to the petitioner:

(a) The jurisdictional facts; (b) The names, ages, and residences of the heirs,

legatees, and devisees of the testator or decedent; (c) The probable value and character of the property of

the estate; (d) The name of the person for whom letters are

prayed; (e) If the will has not been delivered to the court, the

name of the person having custody of it. But no defect in the petition shall render void the

allowance of the will, or the issuance of letters testamentary or of administration with the will annexed. SEC. 3. Court to appoint time for proving will. Notice thereof to be published.—When a will is delivered to, or a petition for the allowance of a will is filed in, the court having jurisdiction, such court shall fix a time and place for proving the will when all concerned may appear to contest the allowance thereof, and shall cause notice of such time and place to be published three (3) weeks successively, previous to the time appointed, in a newspaper of general circulation in the province.

But no newspaper publication shall be made where the petition for probate has been filed by the testator himself. SEC. 4. Heirs, devisees, legatees, and executors to be notified by mail or personally.—The court shall also cause copies of the notice of the time and place fixed for proving the will to be addressed to the designated or other known heirs, legatees, and devisees of the testator resident in the Philippines at their places of residence, and deposited in the post office with the postage thereon prepaid at least twenty (20) days before the hearing, if such places of residence be known. A copy of the notice must in like manner be mailed to the person named as executor, if he be not the petitioner, also, to any person named as co-executor not petitioning, if their places of residence be known. Personal service of copies of the notice at least ten (10) days before the day of hearing shall be equivalent to mailing.

If the testator asks for the allowance of his own will, notice shall be sent only to his compulsory heirs. SEC. 5. Proof at hearing. What sufficient in absence of contest.—At the hearing compliance with the provisions of the last two preceding sections must be shown before the introduction of testimony in support of the will. All such testimony shall be taken under oath and reduced to writing. If no person appears to contest the allowance of the will, the court may grant allowance thereof on the testimony of one of the subscribing witnesses

only, if such witness testify that the will was executed as is required by law.

In the case of a holographic will, it shall be necessary that at least one witness who knows the handwriting and signature of the testator explicitly declare that the will and the signature are in the handwriting of the testator. In the absence of any such competent witness, and if the court deem it necessary, expert testimony may be resorted to. SEC. 6. Proof of lost or destroyed will. Certificate thereupon.—No will shall be proved as a lost or destroyed will unless the execution and validity of the same be established and the will is proved to have been in existence at the time of the death of the testator, or is shown to have been fraudulently or accidentally destroyed in the lifetime of the testator without his knowledge, nor unless its provisions are clearly and distinctly proved by at least two (2) credible witnesses. When a lost will is proved, the provisions thereof must be distinctly stated and certified by the judge, under the seal of the court, and the certificate must be filed and recorded as other wills are filed and recorded. SEC. 7. Proof when witnesses do not reside in province.—If it appears at the time fixed for the hearing that none of the subscribing witnesses resides in the province, but that the deposition of one or more of them can be taken elsewhere, the court may, on motion, direct It to be taken, and may authorize a photographic copy of the will to be made and to be presented to the witness on his examination, who may be asked the same questions with respect to it and to the handwriting of the testator and others, as would be pertinent and competent if the original will were present. SEC. 8. Proof when witnesses dead or insane or do not reside in the Philippines.—If it appears at the time fixed for the hearing that the subscribing witnesses are dead or insane, or that none of them resides in the Philippines, the court may admit the testimony of other witnesses to prove the sanity of the testator, and the due execution of the will; and as evidence of the execution of the will, it may admit proof of the handwriting of the testator and of the subscribing witnesses, or of any of them. SEC. 9. Grounds for disallowing will.—The will shall be disallowed in any of the following cases:

(a) If not executed and attested as required by law; (b) If the testator was insane, or otherwise mentally

incapable to make a will, at the time of its execution; (c) If it was executed under duress, or the influence of

fear, or threats; (d) If it was procured by undue and improper pressure

and influence, on the part of the beneficiary, or of some other person for his benefit;

(e) If the signature of the testator was procured by fraud or trick, and he did not intend that the instrument should be his will at the time of fixing his signature thereto. SEC. 10. Contestant to file grounds of contest.—Anyone appearing to contest the will must state in writing his grounds for opposing its allowance, and serve a copy thereof on the petitioner and other parties interested in the estate. SEC. 11. Subscribing witnesses produced or accounted for where will contested.—If the will is contested, all the subscribing witnesses, and the notary in the case of wills executed under the Civil Code of the Philippines, if present in the Philippines, and not


insane, must be produced and examined, and the death, absence, or insanity of any of them must be satisfactorily shown to the court. If all or some of such witnesses are present in the Philippines but outside the province where the will has been filed, their deposition must be taken. If any or all of them testify against the due execution of the will, or do not remember having attested to it, or are otherwise of doubtful credibility, the will may, nevertheless, be allowed if the court is satisfied from the testimony of other witnesses and from all the evidence presented that the will was executed and attested in the manner required by law.

If a holographic will is contested, the same shall be allowed if at least three (3) witnesses who know the handwriting of the testator explicitly declare that the will and the signature are in the handwriting of the testator; in the absence of any competent witness, and if the court deem it necessary, expert testimony may be resorted to. SEC. 12. Proof where testator petitions for allowance of holographic will.—Where the testator himself petitions for the probate of his holographic will and no contest is filed, the fact that he affirms that the holographic will and the signature are in his own handwriting, shall be sufficient evidence of the genuineness and due execution thereof. If the holographic will is contested, the burden of disproving the genuineness and due execution thereof shall be on the contestant The testator may, in his turn, present such additional proof as may be necessary to rebut the evidence for the contestant. SEC. 13. Certificate of allowance attached to proved will. To be recorded in the Office of Register of Deeds.—If the court is satisfied, upon proof taken and filed, that the will was duly executed, and that the testator at the time of its execution was of sound and disposing mind, and not acting under duress, menace, and undue influence, or fraud, a certificate of its allowance, signed by the judge, and attested by the seal of the court shall be attached to the will and the will and certificate filed and recorded by the clerk. Attested copies of the will devising real estate and of certificate of allowance thereof, shall be recorded in the register of deeds of the province in which the lands lie.

A. Who and when to file

CASE NOTES

Guevara v. Guevara (1956) The petition for probate was not barred by the statute of limitations. The presentation of a decedent’s will to the competent court has always been deemed in law as more of a duty than a right, and neglect carries penalty. The doctrine of prescription is destructive of the right of testamentary disposition and violative of the owner’s right to control his property within the legal limits. It is not without purpose that Rule 77 of the Rules of Court prescribes that any person interested in the estate may, at anytime after the death of the testator, petition the court having jurisdiction to have the will allowed. This means that the statute of limitations has no application to the probate of wills.

Duran v. Duran (1967) The deed of assignment rendered Cipriano Duran a person not interested in the estate of Pio Duran. In In re Santos,

since the approval of the court is deemed not final until the estate is closed, the assigning heir remains an interested person in the proceeding even after said approval, which can be vacated, is given. In the present case, however, the assignment took place when no settlement proceedings were pending. The properties subject matter of the assignment were not under the jurisdiction of the court. The assigning heir of cannot initiate a settlement proceeding for until the deed of assignment is annulled or rescinded, it is deemed valid and effective against him so that he is left without that ‘interest’ in the estate required to petition for settlement proceedings. B. Contents of petition – See Section 2, Rule 76 above.

CASE NOTES

Salazar v. Court of First Instance (1937) Under the provisions of the former Code of Civil Procedure, a CFI acquires jurisdiction to probate a will when it is shown by evidence before it:

(1) That a person has died leaving a will; (2) In case of a resident of the Philippines, that he died

in the province where the court exercises territorial jurisdiction;

(3) In case of a nonresident, that he has left an estate in the province where the court is situated; and

(4) That the testament or last will of the deceased has been delivered to the court and is in the possession thereof.

NOTE: Section 2(a), Rule 74 of the current Rules provides that a petition for probate of a will must show the jurisdictional facts. The law is silent as to the specific manner of bringing the jurisdictional allegations before the court, but practice and jurisprudence have established that they should be made in the form of an applicationand filed with the original of the will attached thereto. According to the facts alleged and admitted by the parties, it is evident that the court has acquired jurisdiction to probate the second will, in view of the presence of all the jurisdictional facts above stated. C. Nature of proceedings – See Sections 3 and 4, Rule 76 above.

CASE NOTES

In re Estate of Johnson (1918), supra As was said in the case of In re Davis, “the proceeding as to the probate of a will is essentially one in rem, and the very nature of things the state is allowed a wide latitude in determining the character of the constructive notice to be given to the world in a proceeding where it has absolute possession of the res. It would be an exceptional case where the court would declare a statute void, as depriving a party of his property without due process of law, the proceeding being strictly in rem, and the res within the state, upon the


ground that the constructive notice prescribed by the statute was unreasonably short.

In re Estate of Suntay (1954) A probate is a proceeding in rem and for the validity of such proceedings personal notice or notice by publication must be made to all interested parties. The interested parties in the case were known to reside in the Philippines. Evidence shows that no such notice was received by the interested parties residing in the Philippines. The Chinese court’s order does not even purport to allow the will to probate and cannot be said to have been done according to the basic principles followed in the probate of wills.

Abut v. Abut (1972) The jurisdiction of the court became vested upon the filing of the original petition and upon compliance with Sections 3 and 4, Rule 76. A proceeding for probate is one in rem, such that with the correspoingding publication of the petition, the court’s jurisdiction extends to all persons interested in sai will or in the settlement of the estate of the decedent. The fact that the amended petition named Gavina Abut and additional heirs were not included in the original petition did not require notice of the amended petition to be published anew. Service of notice on individual heirs or legatees or devisees is a matter of procedural convenience, not a jurisdictional requisite, so much so that even if the names of some legatees or heirs had been omitted from the petition for allowance of the will and therefore were not advised of the decree allowing the will does not ipso facto become void for want of jurisdiction.

R-Infante de Aranz v. Galing (1988) It is clear from Section 4, Rule 76 that noticeof the time and place of the hearing for the allowance of a will shall be forwarded to the designated or other known heirs, legatees and devisees residing in the Philippines at their places of residence if known. It is not contested that the residences of herein petitioners legatees and devisees were known to the Pasig RTC; the petition itself contained those facts, and yet despite such knowledge, Judge Galing did not cause copies of the notice to be sent to petitioners. The requirement of the law for the allowance of the will was not satisfied by mere publication of notice of hearing in a newspaper of general circulation.

� Proceeding in rem: Personal notice or by publication or both is necessary.

Basa v. Mercado (1935) The Court ruled that it was not necessary for publication to be done in three full weeks. Citing a decision of the Vermont State Supreme Court, from whose jurisdiction Section 630 of the Philippine Code of Civil Procedure originated, the Supreme Court held that said rule does not contemplate that the notice referred to therein should be published for three full weeks before the date set for hearing on the will; i.e., the first publication of notice need not be done 21 days before the scheduled hearing date. There is also no need for

publication be done in the newspaper with the largest circulation. D. Proof – See Sections 5 to 8, 11 and 12, Rule 76 above. E. Kinds of will

CIVIL CODE Article 811. In the probate of a holographic will, it shall be necessary that at least one witness who knows the handwriting and signature of the testator explicitly declare that the will and the signature are in the handwriting of the testator. If the will is contested, at least three of such witnesses shall be required.

In the absence of any competent witness referred to in the preceding paragraph, and if the court deems it necessary, expert testimony may be resorted to. (619a)

CASE NOTES

Cayetano v. Leonidas (1984) The Court held that there was no denial of due process in this case. As regards the alleged absence of notice of hearing for the petition for relief, the records will bear that what was repeatedly scheduled for hearing on separate dates was Hermogenes’ petition for relief and not his motion to vacate order. There is no reason why he was led to believe otherwise. The Court even admonished Hermogenes for his failure to adduce evidence when his petition for relief was repeatedly set for hearing. There was no denial of due process.

Fernandez v. Tantoco (1926) The denial of probate in this case was held to be improper. In case of opposition to the probate of a will the proponent is legally bound to introduce all of the subscribing witnesses, if available. They are therefore forced witnesses so far as the proponent is concerned, and he is not bound by their testimony to the same extent that a lititgant is bound by the testimony of a witness introduced in ordinary course. It follows that the proponent of a will may avail himself of other proof to establish the instrument, even contrary to the testimony of some of the subscribing witnesses, or all of them.

Vda. de Ramos v. Court of Appeals (1978) It positively appears that the will and codicil were executed in accordance with the formalities required by law. The documents were prepared by a lawyer, Atty. Manuel Alvero. The execution of the same was evidently supervised by his associate, Atty. Ricardo Barcena who also acknowledged the deeds. The solemnitites surrounding the execution of a will is attended by some intricacies not usually within the comprehension of an ordinary layman, so as to close the door against bad faith and fraud, to avoid substitution of the will, and to guarantee their truth and authenticity. There is no showing that the above named lawyers had been remiss in their sworn duty. Consequently, the Court of Appeals failed to consider the presumption of regularity in the execution of the documents.


Azaola v. Singson (1960) In the case of a holographic will, it is not mandatory that witnesses first be presented before expert testimony may be resorted to, unlike notarial wills wherein attesting witnesses must be presented or accounted for. This is because holographic wills are not required to be witnessed and the existence of a qualified witness may be beyond the control or knowledge of the proponent of the will. F. Lost wills

CASE NOTES

Gan v. Yap (1958) Unlike holographic wills, ordinary wills may be proved by testimonial evidence when lost or destroyed. The difference lies in the nature of the wills. In the first, the only guarantee of authencity is the handwriting itself. In the second, it is the testimony of the subscribing witness (and of the notary). The loss of the holographic will entails the loss of the only medium of proof. If the ordinary will is lost, the subscribing witnesses are available to authenticate. In holographic wills, if oral testimony were admissible only one man could engineer the whole fraud so easily.

Rodelas v. Aranza (1982) A photostatic or Xerox copy of the holographic will may be allowed as proof of the holographic will because comparison can be made with the standard writings of the testator. G. Grounds for disallowance – See Sections 9, 10 and 13, Rule 76 above.

CIVIL CODE Article 839. The will shall be disallowed in any of the following cases:

(1) If the formalities required by law have not been complied with;

(2) If the testator was insane, or otherwise mentally incapable of making a will, at the time of its execution;

(3) If it was executed through force or under duress, or the influence of fear, or threats;

(4) If it was procured by undue and improper pressure and influence, on the part of the beneficiary or of some other person;

(5) If the signature of the testator was procured by fraud;

(6) If the testator acted by mistake or did not intend that the instrument he signed should be his will at the time of affixing his signature thereto. (n)

VI. ALLOWANCE OF WILL OUTSIDE THE PHILIPPINES

RULE 77. ALLOWANCE OF WILL PROVED OUTSIDE OF PHILIPPINES AND ADMINISTRATION OF ESTATE

THEREUNDER SECTION 1. Will proved outside Philippines may be allowed here.—Wills proved and allowed in a foreign country, according to the laws of such country, may be allowed, filed, and recorded by the proper Regional Trial Court in the Philippines. SEC 2. Notice of hearing for allowance.—When a copy of such will and of the order or decree of the allowance thereof, both duly authenticated, are filed with a petition for allowance in the Philippines, by the executor or other person interested in the court having jurisdiction, such court shall fix a time and place for the hearing, and cause notice thereof to be given as in case of an original will presented for allowance. SEC. 3. When will allowed, and effect thereof.—If it appears at the hearing that the will should be allowed in the Philippines, the court shall so allow it, and a certificate of its allowance, signed by the judge, and attested by the seal of the court, to which shall be attached a copy of the will, shall be filed and recorded by the clerk, and the will shall have the same effect as if originally proved and allowed in such court. SEC. 4. Estate, how administered.—When a will is thus allowed, the court shall grant letters testamentary, or letters of administration with the will annexed, and such letters testamentary or of administration, shall extend to all the estate of the testator in the Philippines. Such estate, after the payment of just debts and expenses of administration, shall be disposed of according to such will, so far as such will may operate upon it; and the residue, if any, shall be disposed of as is provided by law in cases of estates in the Philippines belonging to persons who are inhabitants of another state or country.

CASE NOTES

Vda. de Perez v. Tolete (1994) The evidence necessary for the reprobate of wills previously probated outside the Philippines are (1) the due execution of the will according to foreign laws; (2) the testator has his domicile in the foreign country and not the Philippines; (3) the will has been probated in such country; (4) the fact that the foreign tribunal is a foreign court; and (5) the laws of a foreign country on procedure and allowance of wills. Except for (1) and (5), Salud submitted all the required evidence.

In re Estate of Suntay (1954), supra

Ancheta v. Guersey-Dalaygon (2006) Ancheta, as ancillary administrator, was under duty to prove Maryland law on succession. He admitted that he merely relied on processual presumption. Thus the RTC disregarded the terms of Audrey’s will.


VII. LETTERS TESTAMENTARY AND OF ADMINISTRATION

RULE 78. LETTERS TESTAMENTARY AND OF ADMINISTRATION, WHEN AND TO WHOM ISSUED

SECTION 1. Who are incompetent to serve as a executors or administrators.—No person is competent to serve as executor or administrator who:

(a) Is a minor; (b) Is not a resident of the Philippines; and (c) Is in the opinion of the court unfit to execute the

duties of the trust by reason of drunkenness, improvidence, or want of understanding or integrity, or by reason of conviction of an offense involving moral turpitude. SEC. 2. Executor of executor not to administer estate.—The executor of an executor shall not, as such, administer the estate of the first testator. SEC. 3. Married women may serve.—A married woman may serve as executrix or administratrix, and the marriage of a single woman shall not affect her authority so to serve under a previous appointment SEC 4 Letters testamentary issued when will allowed.—When a will has been proved and allowed, the court shall issue letters testamentary thereon to the person named as executor therein, if he is competent, accepts the trust, and gives bond as required by these rules SEC. 5. Where some coexecutors disqualified others may act.—When all of the executors named in a will can not act because of incompetency, refusal to accept the trust, or failure to give bond, on the part of one or more of them, letters testamentary may issue to such of them as are competent, accept and give bond, and they may perform the duties and discharge the trust required by the will. SEC. 6. When and to whom letters of administration granted.—If no executor is named in the will, or the executor or executors are incompetent, refuse the trust, or fail to give bond, or a person dies intestate, administration shall be granted:

(a) To the surviving husband or wife, as the case may be, or next of kin, or both, in the discretion of the court, or to such person as such surviving husband or wife, or next of kin, requests to have appointed, if competent and willing to serve;

(b) If such surviving husband or wife, as the case may be, or next of kin, or the person selected by them, be incompetent or unwilling, or if the husband or widow, or next of kin, neglects for thirty (30) days after the death of the person to apply for administration or to request that administration be granted to some other person, it may be granted to one or more of the principal creditors, if competent and willing to serve;

(c) If there is no such creditor competent and willing to serve, it may be granted to such other person as the court may select.

A. Qualification – See Sections 1 and 2, Rule 78 above.

CASE NOTES

Lim v. Diaz-Millares (1966)3

In this jurisdiction, one is considered to be unsuitable for appointment as administrator when he has adverse interest of some kind or hostility to those immediately interested in the estate. As shown by the Civil Case above, Cirilo Lim as a relative of the deceased has some interest adverse to that of Basilisa. Having some liabilities to Basilisa and to the estate as a whole, Cirilo can not compatibly perform the duties of an administrator. The determination of a person's suitability for the office of judicial administrator rests, to a great extent, in the sound judgment of the court exercising the power of appointment and said judgment is not to be interfered with on appeal unless the said court is clearly in error.

Medina v. Court of Appeals4

The Court does not look with favor on such practice of clerks of court or other court employees being appointed as administrators of estates of decedents pending settlement before the probate court. The objectivity and impartiality of such clerks of court or other employees so appointed as administrators in discharging their regular functions may be easily compromised by extraneous considerations. Furthermore, because of the administrator's fees and compensation payable to them, it is not inconceivable that self-interest intrudes and consciously or unconsciously, obstacles are placed against the prompt settlement and termination of the proceedings.

Maloles II v. Phillips (2000) In this case, an oppositor to the issuance of letters testamentary in favor of respondent posits that the probate proceedings in a branch of the Makati RTC did not terminate upon the issuance of a probate decree, thus barring another branch of the same court to act upon respondent’s petition for the issuance of letters testamentary. The Court held otherwise, ruling that after the issuance of a probate decree, there was nothing else for a probate court to do except to issue a certificate of allowance of the will in accordance with Section 12, Rule 73 of the Rules of Court.

Republic v. Marcos (2009)5

The choice of his executor is a precious prerogative of a testator, a necessary concomitant of his right to dispose of his property in the manner he wishes. It is natural that the testator should desire to appoint one of his confidence, one who can be trusted to carry out his wishes in the disposal of the estate. The curtailment of this right may be considered as a curtailment of the right to dispose. As the rights granted by will take effect from the time of death (Article 777, Civil Code of the Philippines), the management of his estate by the administrator of his choice should be made as soon as practicable, when no reasonable objection to his assumption of the trust can be interposed

3 Based on the digest of Venus Ambrona, C2013 4 Based on the digest of Nickie Bolos, C2013 5 Based on the digest of Gianna de Jesus, C2013


any longer. It has been held that when a will has been admitted to probate, it is the duty of the court to issue letters testamentary to the person named as executor upon his application The Rules of Court gives the lower court the duty and discretion to determine whether in its opinion an individual is unfit to serve as an executor. The sufficiency of any ground for removal should thus be determined by the said court, whose sensibilities are, in the first place, affected by any act or omission on the part of the administrator not conformable to or in disregard of the rules of orders of the court. An appellate court is disinclined to interfere with the action taken by the probate court in the matter of removal of an executor or administrator unless positive error or gross abuse of discretion is shown. B. Procedure – See Sections 2, 4 and 5, Rule 78 above.

CASE NOTES

In re Testate Estate of Margarita David (1956) The old rules provide:

"The personal estate of the deceased shall be first chargeable with the payment of debts and expenses; and if the personal estate is not sufficient for that purpose, or its sale would redound to the detriment of the participants in the estate, the whole of the real estate, or so much thereof as is necessary, may be sold, mortgaged, or otherwise encumbered for that purpose by the executor or administrator, after obtaining the authority of the court therefor."

And according to section 6 of Rule 89, the Court has authority to fix the contributive shares of the devisees, legatees or heirs for the payment of a claim if they have entered into possession of portions of the estate before the debts and expenses thereof have been settled and paid. Appellant argues, however, that section 3 of Rule 89, Rules of Court, is not applicable to the instant case on the ground that it refers to the personal and real properties of the deceased which are in the hands of the administrator, and not to the properties of the estate which are already in the hands of the heiresses. This contention is likewise untenable. The residuary funds in the hands of the appellant are funds of the estate and the Court has jurisdiction over them and, therefore, it could compel the appellant to deliver to the administrator of this estate the necessary portion of such fund for the payment of the Sideco claim.

Baluyut v. Paño (1976) While the probate court correctly assumed that Mrs. Baluyut as surviving spouse enjoys preference in the granting of letters of administration, it does not follow that she should be named administratrix without conducting a full-dress hearing on her competency to discharge that trust. The directive of the testator in his will designating that a certain person should act as executor is not binding on the probate court and does not automatically entitle him to the issuance of letters testamentary. A hearing has to be held in order to ascertain his fitness to act as executor. A hearing is necessary in order to determine the suitability of the person to be appointed administrator by giving him the opportunity to prove his qualifications and

affording oppositors a chance to contest the petition. In this case the probate court briefly and perfunctorily interrogated Mrs. Baluyut in order to satisfy itself on her mental capacity. The court did not give Alfredo G. Baluyut a chance to contest her qualifications. He had squarely raised the issue as to her competency. The probate court assumed that Alfredo G. Baluyut had no interest in the decedent's estate. As it now turned out, he is one of the legatees named in the decedent's alleged will. C. Order of preference – See Section 6, Rule 78 above.

CASE NOTES

Capistrano v. Nadurata (1922) The selection of an administrator of the estate of a deceased lies within the discretion of the court (sec. 642, subsec. 1, Code of Civil Procedure). And the record does not contain anything tending to show an abuse of discretion on the part of the lower court. On the contrary, the act of the lower court in overruling the objection of the opponents and confirming the appointment as administrator of the person proposed by the applicants is not only indicative of sound discretion, but is right and just; for the evidence shows that Leon Nadurata is not surviving spouse of Petra de los Santos, who died widow and not twice widow, and that the opponents Pedro de los Santos and Juan de los Santos are not, as they pretend to be, brother of the aforesaid deceased.

Arevalo v. Bustamante (1940) It falls within the discretion of the court, to appoint to the office of judicial administrator a person considered to be most qualified to defend and ensure, freely and in a disengaged manner, the interests pertaining to a testate or intestate proceeding. As a consequence, the first assignment of error to the lower court is without basis, it not being contrary to article 653 of the Code of Civil Procedure which provides for the removal of an administrator for failure to render accounts or failure to administer the estate entrusted to his care, or for failure to comply with the orders given to him, which is not here the case. On the other hand, be it removal or be it dismissal, or whatever the court purports it to be, the stoppage of Aristón Bustamante from carrying out the duties of administrator can only be ascribed to the ignorance of the lower court of the valid grounds for the incapacity to discharge those duties. Because the inferior court allowed the petition for the application for administratorship to be presented ex parte, it effectively denied the heirs of the deceased Bérnabe Bustamante an opportunity to be heard in relation to their objections as to Aristón’s capacity as Administrator.

Gabriel v. Court of Appeals (1992) In the case at bar, there is no compelling reason sufficient to disqualify Felicitas Jose-Gabriel from appointment as administratrix of the decedent's estate. Moreover, just as the order of preference is not absolute and may be disregarded for valid cause 18 despite the mandatory tenor in the opening sentence of Rule 78 for its observance, so may the 30-day period be likewise waived under the permissive tone in paragraph (b) of said rule which merely provides that said


letters, as an alternative, "may be granted to one or more of the principal creditors."

Silverio v. Court of Appeals (1999) The order of preference in the appointment of an administrator depends on the attendant facts and circumstances. In this case, the appointment of Edgardo S. Silverio as administrator is proper. In Sioca v. Jose Garcia, the court disregarded the order of preference ratiocinating, thus:

“. . . The determination of a person's suitability for the office of administrator rests, to a great extent, in the sound judgment of the court exercising the power of appointment and such judgment will not be interfered with on appeal unless it appears affirmatively that the court below was in error.”

A probate court cannot arbitrarily disregard the preferential rights of the surviving spouse to the administration of the estate of a deceased person; but if the person enjoying such preferential rights is unsuitable the court may appoint another person. In Esler v. Tad-y, the Court answered in the affirmative the query whether the probate court, in the exercise of its discretion, may disregard the order of preference to the administration, set forth in the Rules of Court. VIII. OPPOSING THE ISSUANCE OF LETTERS TESTAMENTARY; PETITION AND CONTEST FOR LETTERS OF ADMINISTRATION

RULE 79. OPPOSING ISSUANCE OF LETTERS TESTAMENTARY. PETITION AND CONTEST FOR LETTERS OF

ADMINISTRATION SECTION 1. Opposition to issuance of letters testamentary. Simultaneous petition for administration.—Any person interested in a will may state in writing the grounds why letters testamentary should not issue to the persons named therein as executors, or any of them, and the court, after hearing upon notice, shall pass upon the sufficiency of such grounds. A petition may, at the same time, be filed for letters of administration with the will annexed. SEC. 2. Contents of petition for letters of administration.—A petition for letters of administration must be filed by an interested person and must show, so far as known to the petitioner.

(a) The jurisdictional facts; (b) The names, ages, and residences of the heirs, and

the names and residences of the creditors, of the decedent; (c) The probable value and character of the property of

the estate; (d) The name of the person for whom letters of

administration are prayed. But no defect in the petition shall render void the

issuance of letters of administration. SEC. 3. Court to set time for hearing. Notice thereof.—When a petition for letters of administration is filed in the court having

jurisdiction, such court shall fix a time and place for hearing the petition, and shall cause notice thereof to be given to the known heirs and creditors of the decedent, and to any other persons believed to have an interest in the estate, in the Manner provided in sections 3 and 4 of Rule 76. SEC. 4. Opposition to petition for administration.—Any Interested person may, by filing a written opposition, contest the petition on the ground of the incompetency of the person for whose letters are prayed therein, or on the ground of the contestant’s own right to the administration, and may pray that letter issue to himself, or to any competent person or persons named In the opposition. SEC. 5. Hearing and order for letters to issue.—At the hearing of the petition, it must first be shown that notice has been given as hereinabove required, and thereafter the court shall hear the proofs of the parties in support of their respective allegations, and if satisfied that the decedent left no will, or that there is no competent and willing executor, it shall order the issuance of letters of administration to the party best entitled thereto. SEC. 6. When letters of administration granted to any applicant.–Letters of administration may be granted to any qualified applicant, though it appears that there are other competent persons having better right to the administration, if such persons fail to appear when notified and claim the issuance of letters to themselves.

A. Contents of petition – See Section 2, Rule 79 above. B. Interested party – See Sections 1 and 2.

CASE NOTES

Espinosa v. Barrios (1940)6

In relation to the testate estate of Florencio Jagunap, a stranger who has no material or direct interest in the estate of the estate has no right to intervene nor to appeal from any order given by the court, although apparently it would prejudice him.

Trillana v. Crisostomo (1951) Appellants argue that they are interested parties and therefore may appeal in the present case, because in the event the will of October 19 is disallowed and in its stead that of August 16 is allowed, and the legacies made in the latter are declared invalid or the legatees incapable to inherit, the legacies will go to appellants. This argument has no merit. In civil actions and special proceedings, unless otherwise provided by law, the interest required in order that a person may be a party on appeal must be material and direct, so that he will be materially and directly benefited or injured by the court's order, decree or judgment; and not indirect or contingent. The interest claimed by the appellants is purely contingent or dependent upon several uncertain and future events, to wit: (1) The disallowance of the will of October 19, 1948, (2) The allowance of the will of August 16, 1948, and (3) The invalidation of certain legacies left in the said will of August 16, 1948.

6 Based on the digest of Gianna de Jesus, C2013


Duran v. Duran (1967), supra

In re Intestate Estate of Irene Santos (1962)7

It cannot be successfully denied that Adela Santos Gutierrez is an indispensable party to the proceedings in question. Her interest in the estate is not inchoate, it was established at the time of death of Irene Santos. While it is true that she executed a deed of assignment, it is also a fact that she asked the same to be annulled, which action is now pending before the Rizal CFI. Although Adela had filed a manifestation dropping herself from the proceedings and presenting therewith the supposed Deed of Assignment, the record, nevertheless fails to show that action thereon had been taken by the probate Court. Every act intended to put an end to indivision among co-heirs and legatees or devisees is deemed to be a partition, although it should purport to be a sale, an exchange, a compromise, or any other transaction (Art. 1082, Civil Code). No serious argument can be offered to deny the co-heirship of appellee in the estate under probate. It appearing that the transaction is in the nature of extrajudicial partition, court approval is imperative, and the heirs cannot just divest the court of its jurisdiction over the estate and over their persons, by the mere act of assignment and desistance. But even if the partition had been judicially approved on the basis of the alleged deed of assignment, an aggrieved heir does not lose her standing in the probate court.

Tayag v. Tayag-Gallor (2008)8

Respondent in this case had not been given the opportunity to present evidence to show whether she had been voluntarily recognized and acknowledged by her deceased father because of petitioner’s opposition to her petition and motion for hearing on affirmative defenses. There is, as yet, no way to determine if her petition is actually one to compel recognition which had already been foreclosed by the death of her father, or whether indeed she has a material and direct interest to maintain the suit by reason of the decedent’s voluntary acknowledgment or recognition of her illegitimate filiation. The Court found that the allegation that respondent is an illegitimate child of the decedent suffices even without further stating that she has been so recognized or acknowledged. A motion to dismiss on the ground of failure to state a cause of action in the complaint hypothetically admits the truth of the facts alleged therein. Assuming the fact alleged to be true, i.e., that respondent is the decedent’s illegitimate child, her interest in the estate as such would definitely be material and direct. The appellate court was, therefore, correct in allowing the proceedings to continue, ruling that, "respondent still has the duty to prove the allegation (that she is an illegitimate child of the decedent), just as the petitioner has the right to disprove it, in the course of the settlement proceedings."

7 Based on the digest of Giselle Mauhay, C2013 8 Based on the digest of Charles Icasiano, C2013

C. Procedure – See Sections 3 to 6, Rule 79 above.

CASE NOTES

Avelino v. Court of Appeals (2000) When a person dies intestate, or, if testate, failed to name an executor in his will or the executor so named is incompetent, or refuses the trust, or fails to furnish the bond required by the Rules of Court, then the decedent's estate shall be judicially administered and the competent court shall appoint a qualified administrator in the order established in Section 6 of Rule 78. The exceptions to this rule are found in Sections 1 and 2 of Rule 74, on the extrajudicial settlement by agreement between heirs and the summary settlement of estates of small value. The Court of Appeals found that in this case "the decedent left no debts and the heirs and legatees are all of age.” With this finding, the Supreme Court ruled that Section 1, Rule 74 of the Rules of Court should apply. Where the more expeditious remedy of partition is available to the heirs, then the heirs or the majority of them may not be compelled to submit to administration proceedings. The trial court appropriately converted petitioner's action for letters of administration into a suit for judicial partition, upon motion of the private respondents. IX. SPECIAL ADMINISTRATOR

RULE 80. SPECIAL ADMINISTRATOR SECTION 1. Appointment of special administrator.—When there is delay in granting letters testamentary or of administration by any cause including an appeal from the allowance or disallowance of a will, the court may appoint a special administrator to take possession and charge of the estate of the deceased until the questions causing the delay are decided and executors or administrators appointed. SEC. 2. Powers and duties of special administrator.—Such special administrator shall take possession and charge of the goods, chattels, rights, credits, and estate of the deceased and preserve the same for the executor or administrator afterwards appointed, and for that purpose may commence and maintain suits as administrator. He may sell only such perishable and other property as the court orders sold. A special administrator shall not be liable to pay any debts of the deceased unless so ordered by the court. SEC. 3. When powers of special administrator cease. Transfer of effects. Pending suits.—When letters testamentary or of administration are granted on the estate of the deceased, the powers of the special administrator shall cease, and he shall forthwith deliver to the executor or administrator the goods, chattels, money, and estate of the deceased in his hands. The executor or administrator may prosecute to final judgment suits commenced by such special administrator.


A. Necessity for, and qualifications of, a special administrator – See Section1, Rule 80 above.

RULE 86. CLAIMS AGAINST ESTATE SEC. 8. Claim of executor or administrator against an estate.—If the executor or administrator has a claim against the estate he represents, he shall give notice thereof, in writing, to the court, and the court shall appoint a special administrator, who shall, in the adjustment of such claim, have the same power and be subject to the same liability as the general administrator or executor in the settlement of other claims. The court may order the executor or administrator to pay to the special administrator necessary funds to defend such claim.

CASE NOTES

Vda. de Roxas v. Pecson (1948) It is well settled that the statutory provisions as to the prior or preferred right of certain persons to the appointment of administrator under section 1, Rule 81, as well as the statutory provisions as to causes for removal of an executor or administrator under section 653 of Act No. 190, now section 2, Rule 83, do not apply to the selection or removal of special administrator. As the law does not say who shall be appointed as special administrator and the qualifications the appointee must have, the judge or court has discretion in the selection of the person to be appointed, discretion which must be sound, that is, not whimsical or contrary to reason, justice or equity. There is nothing wrong in that the respondent judge, in exercising his discretion and appointing the petitioner as special administratrix, had taken into consideration the beneficial interest of the petitioner in the estate of the decedent and her being designated in the will as executrix thereof. But the respondent's subsequent act of appointing her as special administratrix only of the conjugal or community property, and Maria Roxas as special administratrix of the capital or exclusive property of the decedent, does not seem to be in conformity with logic or reason. The petitioner has or claims to have the same beneficial interest after the decision of the court disapproving the will, which is now pending on appeal, as she had prior to it, because the decision is not yet final and may be reversed by the appellate court.

Matias v. Gonzales (1957) The rule, laid down in Roxas v. Pecson (supra), to the effect that "only one special administrator may be appointed to administrator temporarily" the estate of the deceased, must be considered in the light of the facts obtaining in said case. The lower court appointed therein one special administrator for some properties forming part of said estate, and a special administratrix for other properties thereof. Thus, there were two (2) separate and independent special administrators. In the case at bar there is only one (1) special administration, the powers of which shall be exercised jointly by two special co-administrators. In short, the Roxas case is not squarely in point. Moreover, there are authorities in support of the power of courts to appoint several special co-administrators.

B. Powers and duties – See Sections 2 and 3, Rule 80 above.

RULE 81. BONDS OF EXECUTORS AND ADMINISTRATORS SEC. 4. Bond of special administrator.—A special administrator before entering upon the duties of his trust shall give a bond, in such sum as the court directs, conditioned that he will make and return a true inventory of the goods, chattels, rights, credits, and estate of the deceased which come to his possession or knowledge, and that he will truly account for such as are received by him when required by the court, and will deliver the same to the person appointed executor or administrator, or to such other person as may be authorized to receive them.

CASE NOTES

De Gala v. Gonzales (1929) The Court of First Instance ordered Sinforoso Ona to deliver to Serapia de Gala all the property left by the deceased. Instead of delivering the property as ordered, Sinforoso filed a motion asking that the appointment of Serapia de Gala as special administratrix be cancelled and that he, Sinforoso, be appointed in her stead. The motion was opposed both by Apolinario Gonzales and by Serapia de Gala, but on March 3, 1928, it was nevertheless granted, Serapia was removed, and Sinforoso was appointed special administrator in her place, principally on the ground that he had possession of the property in question and that his appointment would simplify the proceedings. In the meantime and after various continuances and delays, the court below in an order dated January 20, 1928, declared the will valid and admitted it to probate. All of the parties appealed, Serapia de Gala from the order removing her from the office of special administratrix, and Apolinario Gonzales and Sinforoso Ona from the order probating the will. Serapia's appeal requires but little discussion. The burden of the argument of her counsel is that a special administrator cannot be removed except for one or more of the causes stated in section 653 of the Code of Civil Procedure. But that section can only apply to executors and regular administrators, and the office of a special administrator is quite different from that of regular administrator. The appointment of a special administrator lies entirely in the sound discretion of the court; the function of such an administrator is only to collect and preserve the property of the deceased and to return an inventory thereof; he cannot be sued by a creditor and cannot pay any debts of the deceased. The fact that no appeal can be taken from the appointment of a special administrator indicates that both his appointment and his removal are purely discretionary, and we cannot find that the court below abused its discretion in the present case. In removing Serapia de Gala and appointing the present possessor of the property, pending the final determination of the validity of the will, the court probably prevented useless litigation.

Liwanag v. Court of Appeals (1965) The Rules of Court do not expressly prohibit making the special administratrix a defendant in a suit against the estate. Otherwise, creditors would find the adverse effects of the statute of limitations running against them in cases where the appointment of a regular administrator is delayed.


So that if the Court were now to deny the present action on this technical ground alone, and the appointment of a regular administrator will be delayed, the very purpose for which the mortgage was constituted will be defeated.

Anderson v. Perkins (1961) It is true that the function of a special administrator is only to collect and preserve the property of the deceased until a regular administrator is appointed. But it is not alone the specific property of the estate which is to be preserved, but its value as well, as shown by the legal provision for the sale by a special administrator of perishable property. It is in line with this general power of the special administrator to preserve not only the property of the estate but also its value, that section 2, Rule 81, also empowers such administrator to sell "other property as the court ordered sold."

Silverio v. Court of Appeals (1999), supra Heirs of Castillo v. Lacuata-Gabriel (2005) The Court has repeatedly held that the appointment of a special administrator lies in the sound discretion of the probate court. A special administrator is a representative of a decedent appointed by the probate court to care for and preserve his estate until an executor or general administrator is appointed. When appointed, a special administrator is regarded not as a representative of the agent of the parties suggesting the appointment, but as the administrator in charge of the estate, and, in fact, as an officer of the court. As such officer, he is subject to the supervision and control of the probate court and is expected to work for the best interests of the entire estate, especially its smooth administration and earliest settlement. The principal object of appointment of temporary administrator is to preserve the estate until it can pass into hands of person fully authorized to administer it for the benefit of creditors and heirs. In many instances, the appointment of administrators for the estates of decedents frequently become involved in protracted litigations, thereby exposing such estates to great waste and losses unless an authorized agent to collect the debts and preserve the assets in the interim is appointed. The occasion for such an appointment, likewise, arises where, for some cause, such as a pendency of a suit concerning the proof of the will, regular administration is delayed. X. BONDS OF EXECUTORS AND ADMINISTRATORS

RULE 81. BONDS OF EXECUTORS AND ADMINISTRATORS

SECTION 1. Bond to be given before issuance of letters. Amount. Conditions.—Before an executor or administrator enters upon the execution of his trust, and letters testamentary or of administration issue, he shall give a bond, in such sum as the court directs, conditioned as follows:

(a) To make and return to the court, within three (3) months, a true and complete inventory of all goods, chattels,

rights, credits, and estate of the deceased which shall come to his possession or knowledge or to the possession of any other person for him;

(b) To administer according to these rules, and, if an executor, according to the will of the testator, all goods, chattels, rights, credits, and estate which shall at any time come to his possession or to the possession of any other person for him, and from the proceeds to pay and discharge all debts, legacies, and charges on the same, or such dividends thereon as shall be decreed by the court;

(c) To render a true and just account of his administration to the court within one (1) year, and at any other time when required by the court;

(d) To perform all orders of the court by him to be performed. SEC. 2. Bond of executor where directed in will. When further bond required.—If the testator in his will directs that the executor serve without bond, or with only his Individual bond, he may be allowed by the court to give bond in such sum and with such surety as the court approves conditioned only to pay the debts of the testator; but the court may require of the executor a further bond in case of a change in his circumstances, or for other sufficient cause, with the conditions named in the last preceding section. SEC. 3. Bonds of joint executors and administrators.—When two or more persons are appointed executors or administrators the court may take a separate bond from each, or a joint bond from all. SEC. 4. Bond of special administrator.—A special administrator before entering upon the duties of his trust shall give a bond, in such sum as the court directs, conditioned that he will make and return a true inventory of the goods, chattels, rights, credits, and estate of the deceased which come to his possession or knowledge, and that he will truly account for such as are received by him when required by the court, and will deliver the same to the person appointed executor or administrator, or to such other person as may be authorized to receive them.

A. Kinds – See Sections 1 to 4, Rule 81 above. B. Conditions – See Sections 1, 2 and 4.

CASE NOTES

Cosme de Mendoza v. Pacheco (1937) The Court ruled that a probate court acting as such has jurisdiction to order the execution of a bond. A probate court, exercising probate jurisdiction, is empowered with an all-embracing power over the administrator’s bond and over administration proceedings, and thus cannot be devoid of legal authority to execute and make that bond answerable for the very purpose for which it was filed. It is true that the law does not expressly state that such court has the power to execute the bond of an administrator, but by necessary and logical implication, the power is there as eloquently as if it were phrased in unequivocal terms. The remedy of the surety is the exercise of the right to be admitted as a party to the accounting with which a surety may not be charged with liability upon the bond


during the process of accounting within the confines of the probate proceedings and not in an action apart and distinct from such proceedings. The execution of an administrator’s bond clearly stands upon a different footing, and is necessarily a part and incident of the administration proceedings as the filing of such bond or the fixing of its amount.

Ocampo v. Ocampo (2010) The RTC does not need to resolve first the pending motion for exemption from administrator’s bond by Renato and Erlinda before revoking their appointment as special joint administrators on their failure to post bond. The RTC revoked Renato and Erlinda’s appointment for failure to post bond and submit inventory, which is tantamount to failure to comply with the court’s lawful orders. Under Section1, Rule 81, the bond secures the performance of the duties and obligations of an administrator. The purpose of the bond is for the benefit of the creditors and the heirs, as it compels the administrator, regular or special, to perform the trust reposed in and incumbent upon him. Posting a bond is in itself a qualification for administrators. XI. REVOCATION OF ADMINISTRATION, DEATH, RESIGNATION, REMOVAL OF EXECUTORS/ ADMINISTRATORS

RULE 82. REVOCATION OF ADMINISTRATION, DEATH, RESIGNATION, AND REMOVAL OF EXECUTORS AND

ADMINISTRATORS

SECTION 1. Administration revoked if will discovered. Proceedings thereupon.—If after letters of administration have been granted on the estate of a decedent as if he had died intestate, his will is proved and allowed by the court, the letters of administration shall be revoked and all powers thereunder cease and the administrator shall forthwith surrender the letters to the court, and render his account within such time as the court directs. Proceedings for the issuance of letters testamentary or of administration under the will shall be as hereinbefore provided. SEC. 2. Court may remove or accept resignation of executor or administrator. Proceedings upon death, resignation, or removal.—If an executor or administrator neglects to render his account and settle the estate according to law, or to perform an order or judgment of the court, or a duty expressly provided by these rule., or absconds, or becomes insane, or otherwise incapable or unsuitable to discharge the trust, the court may remove him, or, in its discretion, may permit him to resign. When an executor or administrator dies, resigns, or is removed, the remaining executor. or administrator may administer the trust alone, unless the court grants letters to someone to act with him. If there is no remaining executor or administrator, administration may be granted to any suitable person. SEC. 3. Acts before revocation, resignation, or removal to be valid.—The lawful acts of an executor or administrator before the revocation of his letters testamentary or of administration, or

before his resignation or removal, shall have the like validity if there has been no such revocation resignation, or removal. SEC. 4. Powers of new executor or administrator. Renewal of license to sell real estate.–The person to whom letters testamentary or of administration are granted after the revocation of former letters, or the death, resignation, or removal of a former executor or administrator, shall have the like powers to collect and settle the estate not administered that the former executor or administrator had, and may prosecute of defend actions commenced by or against the former executor or administrator, and have execution on judgments recovered in the name of such former executor or administrator. An authority granted by the court to the former executor administrator for the sale or mortgage of real estate may be renewed in favor of such person without further notice or hearing.

A. Reasons – See Sections 1 and 2, Rule 81 above. B. Effects – See Sections 3 and 4.

CASE NOTES

Quasha v. LCN Construction Corporation (2008) The court has jurisdiction to appoint an administrator of an estate by granting letters of administration to a person not otherwise disqualified following Section 6, Rule 78 of the Rules of Court. In connection, Section 2, Rule 82 provides the modes for replacing an administrator in case of his death. The records of the case do not show that neither Quasha Law nor any of its lawyers substituted Atty. Quasha as co-administrator of the estate. While it had helped in the settlement of the estate of Triviere, Quasha Law had not even been issued letters of administration. Therefore, the prohibition against an attorney from collecting his fees against the estate under Section 7, Rule 85 does not apply to Quasha Law. XII. INVENTORY AND APPRAISAL; PROVISIONS FOR SUPPORT OF FAMILY

RULE 83. INVENTORY AND APPRAISAL. PROVISION FOR SUPPORT OF FAMILY

SECTION 1. Inventory and appraisal to be returned within three months.—Within three (3) months after his appointment every executor or administrator shall return to the court a true inventory and appraisal of all the real and personal estate of the deceased which has come into his possession or knowledge. In the appraisement of such estate, the court may order one or more of the inheritance tax appraisers to give his or their assistance. SEC. 2. Certain articles not to be inventoried.—The wearing apparel of the surviving husband or wife and minor children, the marriage bed and bedding, and such provisions and other articles as will necessarily be consumed in the subsistence of the family of the deceased, under the direction of the court, shall not be


considered as assets, nor administered as such, and shall not be included in the inventory. SEC. 3. Allowance to widow and family.—The widow and minor or incapacitated children of a deceased person, during the settlement of the estate, shall receive therefrom, under the direction of the court, such allowance as are provided by law.

A. Period– See Section 1, Rule 83 above.

CASE NOTES

Sebial v. Sebial (1975) Failure to file an inventory within 3 months after an administrator’s appointment does not deprive the court of jurisdiction to approve it. The 3-month period prescribed in Section 1, Rule 83 is not mandatory. After the filing of a petition for the issuance of letters of administration and the publication of notice of hearing, the proper CFI acquires jurisdiction until the proceeding is closed. The fact that an inventory was filed after the 3-month period would not deprive the probate court of jurisdiction to approve it. However, an administrator’s unexplained delay in filing the inventory may be considered a ground for his removal under Section 2, Rule 82. B. Contents- See Sections 2 and 3.

FAMILY CODE Art. 102. Upon dissolution of the absolute community regime, the following procedure shall apply:

(1) An inventory shall be prepared, listing separately all the properties of the absolute community and the exclusive properties of each spouse.

(2) The debts and obligations of the absolute community shall be paid out of its assets. In case of insufficiency of said assets, the spouses shall be solidarily liable for the unpaid balance with their separate properties in accordance with the provisions of the second paragraph of Article 94.

(3) Whatever remains of the exclusive properties of the spouses shall thereafter be delivered to each of them.

(4) The net remainder of the properties of the absolute community shall constitute its net assets, which shall be divided equally between husband and wife, unless a different proportion or division was agreed upon in the marriage settlements, or unless there has been a voluntary waiver of such share provided in this Code. For purpose of computing the net profits subject to forfeiture in accordance with Articles 43, No. (2) and 63, No. (2), the said profits shall be the increase in value between the market value of the community property at the time of the celebration of the marriage and the market value at the time of its dissolution.

(5) The presumptive legitimes of the common children shall be delivered upon partition, in accordance with Article 51.

(6) Unless otherwise agreed upon by the parties, in the partition of the properties, the conjugal dwelling and the lot on which it is situated shall be adjudicated to the spouse with whom the majority of the common children choose to remain. Children below the age of seven years are deemed to have chosen the mother, unless the court has decided otherwise. In case there in

no such majority, the court shall decide, taking into consideration the best interests of said children. (n) Art. 103. Upon the termination of the marriage by death, the community property shall be liquidated in the same proceeding for the settlement of the estate of the deceased.

If no judicial settlement proceeding is instituted, the surviving spouse shall liquidate the community property either judicially or extra-judicially within six months from the death of the deceased spouse. If upon the lapse of the six months period, no liquidation is made, any disposition or encumbrance involving the community property of the terminated marriage shall be void.

Should the surviving spouse contract a subsequent marriage without compliance with the foregoing requirements, a mandatory regime of complete separation of property shall govern the property relations of the subsequent marriage. (n) Art. 129. Upon the dissolution of the conjugal partnership regime, the following procedure shall apply:

(1) An inventory shall be prepared, listing separately all the properties of the conjugal partnership and the exclusive properties of each spouse.

(2) Amounts advanced by the conjugal partnership in payment of personal debts and obligations of either spouse shall be credited to the conjugal partnership as an asset thereof.

(3) Each spouse shall be reimbursed for the use of his or her exclusive funds in the acquisition of property or for the value of his or her exclusive property, the ownership of which has been vested by law in the conjugal partnership.

(4) The debts and obligations of the conjugal partnership shall be paid out of the conjugal assets. In case of insufficiency of said assets, the spouses shall be solidarily liable for the unpaid balance with their separate properties, in accordance with the provisions of paragraph (2) of Article 121.

(5) Whatever remains of the exclusive properties of the spouses shall thereafter be delivered to each of them.

(6) Unless the owner had been indemnified from whatever source, the loss or deterioration of movables used for the benefit of the family, belonging to either spouse, even due to fortuitous event, shall be paid to said spouse from the conjugal funds, if any.

(7) The net remainder of the conjugal partnership properties shall constitute the profits, which shall be divided equally between husband and wife, unless a different proportion or division was agreed upon in the marriage settlements or unless there has been a voluntary waiver or forfeiture of such share as provided in this Code.

(8) The presumptive legitimes of the common children shall be delivered upon the partition in accordance with Article 51.

(9) In the partition of the properties, the conjugal dwelling and the lot on which it is situated shall, unless otherwise agreed upon by the parties, be adjudicated to the spouse with whom the majority of the common children choose to remain. Children below the age of seven years are deemed to have chosen the mother, unless the court has decided otherwise. In case there is no such majority, the court shall decide, taking into consideration the best interests of said children. (181a, 182a, 183a, 184a, 185a) Art. 130. Upon the termination of the marriage by death, the conjugal partnership property shall be liquidated in the same proceeding for the settlement of the estate of the deceased.

If no judicial settlement proceeding is instituted, the surviving spouse shall liquidate the conjugal partnership property


either judicially or extra-judicially within six months from the death of the deceased spouse. If upon the lapse of the six-month period no liquidation is made, any disposition or encumbrance involving the conjugal partnership property of the terminated marriage shall be void.

Should the surviving spouse contract a subsequent marriage without compliance with the foregoing requirements, a mandatory regime of complete separation of property shall govern the property relations of the subsequent marriage. (n) Art. 131. Whenever the liquidation of the conjugal partnership properties of two or more marriages contracted by the same person before the effectivity of this Code is carried out simultaneously, the respective capital, fruits and income of each partnership shall be determined upon such proof as may be considered according to the rules of evidence. In case of doubt as to which partnership the existing properties belong, the same shall be divided between the different partnerships in proportion to the capital and duration of each. (189a) Art. 132. The Rules of Court on the administration of estates of deceased persons shall be observed in the appraisal and sale of property of the conjugal partnership, and other matters which are not expressly determined in this Chapter. (187a) Art. 133. From the common mass of property support shall be given to the surviving spouse and to the children during the liquidation of the inventoried property and until what belongs to them is delivered; but from this shall be deducted that amount received for support which exceeds the fruits or rents pertaining to them. (188a)

CASE NOTES

Heirs of Sy Bang v. Sy (2009) A guardianship court cannot direct payment of the of the widow’s allowance where settlement of estate proceedings are pending in another court. The guardianship court had limited jurisdiction. It cannot enforece payment of the widow’s allowance ordered by the Supreme Court. It must be recalled that the case in which the Court ordered the payment of the widow’s allowance emanated from the estate settlement proceedings still pending before the Lucena City RTC. Section 3, Rule 83 applies. The court referred to this provision it the court hearing the settlement of the estate. XIII. GENERAL POWERS AND DUTIES OF EXECUTORS AND ADMINISTRATORS

RULE 84. GENERAL POWERS AND DUTIES OF EXECUTORS AND ADMINISTRATORS

SECTION 1. Executor or administrator to have access to partnership books and property. How right enforced.—The executor or administrator of the estate of a deceased partner shall at all times have access to, and may examine and take copies of, books and papers relating to the partnership business, and may examine and make invoices of the property belonging

to such partnership; and the surviving partner or partners, on request, shall exhibit to him all such books, papers, and property in their hands or control. On the written application of such executor or administrator, the Court having jurisdiction of the estate may order any such surviving partner or partners to freely permit the exercise of the rights, and to exhibit the books, papers, and property, as in this section provided, and may punish any partner failing to do so for contempt. SEC. 2. Executor or administrator to keep buildings in repair.—An executor or administrator shall maintain in tenantable repair the houses and other structures and fences belonging to the estate, and deliver the same in such repair to the heirs or devisees when directed so to do by the court. SEC. 3. Executor or administrator to retain whole estate to pay debts, and to administer estate not willed.—An executor or administrator shall have the right to the possession and management of the real as well as the personal estate of the deceased so long as it is necessary for the payment of the debts and the expenses of administration.

CASE NOTES

Jocson de Hilado v. Nava (1939) The contract in question in this case, being a mere act of administration, could validly be entered into by the administratrix within her powers of administration, even without the court’s previous authority. And the court had no power to annul or invalidate the contract in the intestate proceedings wherein it had no jurisdiction over the person of the lessee. A separate ordinary action is necessary to that effect.

Estate of Ruiz v. Court of Appeals (1996) The right of an executor/administrator to the possession and management of the real and personal properties of the decedent is not absolute and can only be exercised “so long as it is necessary for the payment of the debts and expenses of administration” (Section 3, Rule 84). When Edmond movef for further release of funds deposited with the Clerk of Court, he had been previously granted amounts for the repair and maintenance expenses on the properties of the estate, and payment of the real estate taxes thereon. It was correct for the probate court to require him to submit an accounting of the necessary expenses for administration before releasing any further money in his favor.

Silverio v. Court of Appeals (2009) Until the estate is partitioned, each heir only has an inchoate right to the properties of the estate, such that no heir may lay claim to a particular property belonging to the estate. The subject property is part of an estate and subject to intestate proceedings before the courts. Section 2, Rule 84 states that the administrator may only deliver the properties of the estate to the heirs upon order of the court.


XIV. ACCOUNTABILITY AND COMPENSATION OF EXECUTORS AND ADMINISTRATORS

RULE 85. ACCOUNTABILITY AND COMPENSATION OF EXECUTORS AND ADMINISTRATORS

SECTION 1. Executor or administrator chargeable with all estate and income.—Except as otherwise expressly provided in the following sections, every executor or administrator is chargeable in his account with the whole of the estate of the deceased which has come into his possession, at the value of the appraisement contained in the inventory; with all the interest, profit, and income of such estate; and with the proceeds of so much of the estate as is sold by him, at the price at which it was sold. SEC. 2. Not to profit by increase or lose by decrease in value.—No executor or administrator shall profit by the increase, or suffer loss by the decrease or destruction, without his fault, of any part of the estate. He must account for the excess when he sells any part of the estate for more than the appraisement, and if any is sold for less than the appraisement, he is not responsible for the loss, if the sale has been justly made. If he settles any claim against the estate for less than its nominal value, he is entitled to charge in his account only the amount he actually paid on the settlement. SEC. 3. When not accountable for debts due estate.—No executor or administrator shall be accountable for debts due the deceased which remain uncollected without his fault. SEC. 4. Accountable for income from realty used by him.—If the executor or administrator uses or occupies any part of the real estate himself, he shall account for it as may be agreed upon between him and the parties interested, or adjusted by the court with their assent; and if the parties do not agree upon the sum to be allowed, the same may be ascertained by the court, whose determination in this respect shall be final. SEC. 5. Accountable if he neglects or delays to raise or pay money.—When an executor or administrator neglects or unreasonably delays to raise money, by collecting the debts or selling the real or personal estate of the deceased, or neglects to pay over the money he has in his hands, and the value of the estate is thereby lessened or unnecessary cost or interest accrues, or the persons interested suffer loss, the same shall be deemed waste and the damage sustained may be charged and allowed against him in his account, and he shall be liable therefor on his bond. SEC. 6. When allowed money paid as costs.—The amount paid by an executor or administrator for costs awarded against him shall be allowed in his administration account, unless it appears that the action or proceeding in which the costs are taxed was prosecuted or resisted without just cause, and not in good faith. SEC. 7. What expenses and fees allowed executor or administrator. Not to charge for services as attorney. Compensation provided by will controls unless renounced.—An executor or administrator shall be allowed the necessary expenses in the case, management, and settlement of the estate, and for his services, four pesos per day for the time actually and necessarily employed, or a commission upon the value of so much of the estate as comes into his possession and is finally

disposed of by him in the payment of debts, expenses, legacies, or distributive shares, or by delivery to heirs or devisees, of two per centum of the first five thousand pesos of such value, one per centum of so much of such value as exceeds five thousand pesos and does not exceed thirty thousand pesos, one-half per centum of so much of such value as exceeds thirty thousand pesos and does not exceed one hundred thousand pesos, and one-quarter per centum of so much of such value as exceeds one hundred thousand pesos. But in any special case, where the estate is large, and the settlement has been attended with great difficulty, and has required a high degree of capacity on the part of the executor or administrator, a greater sum may be allowed. If objection to the fees allowed be taken, the allowance may be re-examined on appeal.

If there are two or more executors or administrators, the compensation shall be apportioned among them by the court according to the services actually rendered by them respectively.

When the executor or administrator is an attorney, he shall not charge against the estate any professional fees for legal services rendered by him.

When the deceased by will makes some other provision for the compensation of his executor, that provision shall be a full satisfaction for his services unless by a written instrument filed in the court he renounces all claim to the compensation provided by the will. SEC. 8. When executor or administrator to render account.—Every executor or administrator shall render an account of his administration within one (1) year from the time of receiving letters testamentary or of administration, unless the court otherwise directs because of extensions of time for presenting claims against, or paying the debts of, the estate, or for disposing of the estate; and he shall render such further accounts as the court may require until the estate is wholly settled. SEC. 9. Examinations on oath with respect to account .—The court may examine the executor or administrator upon oath with respect to every matter relating to any account rendered by him, and shall so examine him as to the correctness of his account before the same is allowed, except when no objection is made to the allowance of the account and its correctness is satisfactorily established by competent proof. The heirs, legatees, distributees, and creditors of the estate shall have the same privilege as the executor or administrator of being examined on oath on any matter relating to an administration account. SEC. 10. Account to be settled on notice.—Before the account of an executor or administrator is allowed, notice shall be given to persons interested of the time and place of examining and allowing the same; and such notice may be given personally to such persons interested or by advertisement in a newspaper or newspapers, or both, as the court directs. SEC. 11. Surety on bond may be party to accounting.—Upon the. settlement of the account of an executor or administrator, a person liable as surety in respect to such account may, upon application, be admitted as party to such accounting.

A. Improper charges

CASE NOTES


Sison v. Teodoro (1957) The ability to furnish a bond is in the nature of a qualification for the office of administrator. The execution and approval of a bond constitute a condition precedent to the acceptance of the responsibilities of the trust.

Borja v. Borja (1957) A counterclaim for moral damages demanded by an administrator against the heirs for alleged utterances, pleadings and actuations made in the course of the proceedings is an extraneous matter to a testate or intestate proceeding.

Uy Tioco v. Imperial (1928) Attorney’s fees for services rendered to the administrator/executor for the execution of his trust is not chargeable against the estate.

Rodriguez v. Ynza (1955) Appeal from the orders of the Court of First Instance of Iloilo, authorizing payment to Atty. Benjamin H. Tirol for professional services. Appellant José Ynza objects to said payment on the ground that Hugo P. Rodriguez, trustee of the estate of the late Julia Ynza, being a member of the bar, he had no need for the assistance of Atty. Tirol, and that at any rate, the latter had rendered services, not to the estate of Julia Ynza, but to Hugo Rodriguez in his individual capacity. Held: The objection does not persuade. Rodriguez was appointed trustee by reason of his qualifications as an administrator and not as a lawyer. It appears that Rodriguez was involved in eight cases, not in his private capacity, but as trustee or administrator of the estate of Julia Ynza. It is apparent therefore that as counsel for Rodriguez in said cases, Atty. Tirol had rendered services for the benefit of the estate of Julia Ynza, which obtained a favorable decision in every one of said cases. B. Accounting

CASE NOTES

Tumang v. Laguio (1980) The lower court should have required Tumang to render an accounting of the cash and stock dividends received after the approval of her final accounts. In this case, further accounts by the executrix appear to be in order in view of the fact that the dividends sought for are not included in the final accounts rendered by her. It appears that the interests of all the parties will be better served and the conflict between petitioners and respondent will be resolved if the accounting is made. It has also been held that an executor/administrator who receives assets of the estate after he has filed an accounting should file a supplementary account thereof, and may be compelled to do so, but that is only with respect to matters occurring after the settlement of final accounts that representatives will be compelled to file supplementary accounts.

Punongbayan v. Punongbayan (2004) The denial of Danilo’s petition to have Sotero render accounting did not settle with finality the question of

Sotero’s liability therefore. The order is a mere interlocutory order. Applying Section 8, Rule 85, the intestate court denied the motion on the ground that it was premature considering that Sotero has been co-administrator for only 1 day when it was filed. It denial in no way settled or forestall future accountings by him which he is obliged to render 1 year from receipt of letters of administration.

Quasha v. LCN Construction Corporation (2008), supra XV. CLAIMS AGAINST ESTATE

RULE 86. CLAIMS AGAINST ESTATE SECTION 1. Notice to creditors to be issued by court.— Immediately after granting letters testamentary or of administration, the court shall issue a notice requiring all persona having money claims against the decedent to file them in the office of the clerk of said court. SEC. 2. Time within which claims shall be filed.—In the notice provided in the preceding section, the court shall state the time for the filing of claims against the estate, which shall not be more than twelve (12) nor less than six (6) months after the date of the first publication of the notice. However, at any time before an order of distribution is entered, on application of a creditor who has failed to file his claim within the time previously limited, the court may, for cause shown and on such terms as are equitable, allow such claim to be filed within a time not exceeding one (1) month. SEC. 3. Publication of notice to creditors.—Every executor or administrator shall, immediately alter the notice to creditors is issued, cause the same to be published three (3) weeks successively in a newspaper of general circulation in the province, and to be posted for the same period in four public places in the province, and in two public places in the municipality where the decedent last resided SEC. 4. Filing copy of printed notice.—Within ten (10) days after the notice has been published and posted n accordance with the preceding section, the executor or administrator shall file or cause to be filed in the court a printed copy of the notice accompanied with an affidavit setting forth the dates of the first and last publication thereof and the name of the newspaper in which the same is printed. SEC. 5. Claims which must be filed under the notice. If not filed, barred; exceptions.—All claims for money against the decedent, arising from contract, express or implied, whether the same be due, not due, or contingent, all claims for funeral expenses and expenses for the last sickness of the decedent, and judgment for money against the decedent, must be filed within the time limited in the notice; otherwise they are barred forever, except that they may be set forth as counterclaims in any action that the executor or administrator may bring against the claimants. Where an executor or administrator commences an action, or prosecutes an action already commenced by the deceased in his lifetime, the debtor may set forth by answer the claims he has against the decedent, instead of presenting them independently


to the court as herein provided, and mutual claims may be set off against each other in such action; and if final judgment is rendered in favor of the defendant, the amount so determined shall be considered the true balance against the estate, as though the claim had been presented directly before the court in the administration proceedings. Claims not yet due, or contingent, may be approved at their present value. SEC. 6. Solidary obligation of decedent.—Where the obligation of the decedent is solidary with another debtor, the claim shall be filed against the decedent as if he were the only debtor, without prejudice to the right of the estate to recover contribution from the other debtor. In a joint obligation of the decedent, the claim shall be confined to the portion belonging to him. SEC. 7. Mortgage debt due from estate.—A creditor holding a claim against the deceased secured by mortgage or other collateral security, may abandon the security and prosecute his claim in the manner provided in this rule, and share in the general distribution of the assets of the estate; or he may foreclose his mortgage or realize upon his security, by action in court, making the executor or administrator a party defendant, and if there is a judgment for a deficiency, after the sale of the mortgaged premises, or the property pledged, in the foreclosure or other proceedings to realize upon the security, he may claim his deficiency judgment in the manner provided in the preceding section; or he may rely upon his mortgage or other security alone, and foreclose the same at any time within the period of the statute of limitations, and in that event he shall not be admitted as a creditor, and shall receive no share in the distribution of the other assets of the estate; but nothing herein contained shall prohibit the executor or administrator from redeeming the property mortgaged or pledged, by paying the debt for which it is held as security, under the direction of the court, if the court shall adjudge it to be for the best interest of the estate that such redemption shall be made. SEC. 8. Claim of executor or administrator against an estate.—If the executor or administrator has a claim against the estate he represents, he shall give notice thereof, in writing, to the court, and the court shall appoint a special administrator, who shall, in the adjustment of such claim, have the same power and be subject to the same liability as the general administrator or executor in the settlement of other claims. The court may order the executor or administrator to pay to the special administrator necessary funds to defend such claim. SEC. 9. How to file a claim. Contents thereof Notice to executor or administrator.—A claim may be filed by delivering the same with the necessary vouchers to the clerk of court and by serving a copy thereof on the executor or administrator. If the claim be founded on a bond, bill, note, or any other instrument, the original need not be filed, but a copy thereof with all indorsements shall be attached to the claim and filed therewith. On demand, however, of the executor or administrator, or by order of the court or judge, the original shall be exhibited, unless it be lost or destroyed, in which case the claimant must accompany his claim with affidavit or affidavits containing a copy or particular description of the instrument and stating its loss or destruction. When the claim is due, it must be supported by affidavit stating the amount justly due, that no payments have been made thereon which are not credited, and that there are no offsets to the same, to the knowledge of the affiant. If the claim is not due, or is contingent, when filed, it must also be supported

by affidavit stating the particulars thereof. When the affidavit is made by a person other than the claimant, he must set forth therein the reason why it is not made by the claimant. The claim once filed shall be attached to the record of the case in which the letters testamentary or of administration were issued, although the court, in its discretion, and as a matter of convenience, may order all the claims to be collected in a separate folder. SEC. 10. Answer of executor or administrator. Offsets.—Within fifteen (15) days after service of a copy of the claim on the executor or administrator, he shall file his answer admitting or denying the claim specifically, and setting forth the substance of the matters which are relied upon to support the admission or denial. If he has no knowledge sufficient to enable him to admit or deny specifically, he shall state such want of knowledge. The executor or administrator in his answer shall allege in offset any claim which the decedent before death had against the claimant, and his failure to do so shall bar the claim forever. A copy of the answer shall be served by the executor or administrator on the claimant. The court in its discretion may extend the time for filing such answer. SEC. 11. Disposition of admitted claim.—Any claim admitted entirely by the executor or administrator shall immediately be submitted by the clerk to the court who may approve the same without hearing; but the court, in its discretion, before approving the claim, may order that known heirs, legatees, or devisees be notified and heard. If upon hearing, an heir, legatee, or devisee opposes the claim, the court may, in its discretion, allow him fifteen (15) days to file an answer to the claim in the manner prescribed in the preceding section. SEC. 12. Trial of contested claim.—Upon the filing of an answer to a claim, or upon the expiration of the time for such filing, the clerk of court shall set the claim for trial with notice to both parties. The court may refer the claim to a commissioner. SEC. 13. Judgment appealable.—The judgment of the court approving or disapproving a claim, shall be filed with the record of the administration proceedings with notice to both parties, and is appealable as in ordinary cases. A judgment against the executor or administrator shall be that he pay, in due course of administration, the amount ascertained to be due, and it shall not create any lien upon the property of the estate, or give to the judgment creditor any priority of payment. SEC. 14. Costs.—When the executor or administrator, in his answer, admits and offers to pay part of a claim, and the claimant refuses to accept the amount offered in satisfaction of his claim, if he fails to obtain a more favorable judgment, he cannot recover costs, but must pay to the executor or administrator costs from the time of the offer. Where an action commenced against the deceased for money has been discontinued and the claim embraced therein presented as in this rule provided, the prevailing party shall be allowed the costs of his action up to the time of its discontinuance.

A. Notice and period – See Sections 1 to 4, Rule 86 above. Notice is jurisdictional.

CASE NOTES


Santos v. Manarang (1914) Section 689 of the Code of Civil Procedure provides that the court shall allow such time as the circumstances of the case require for the creditors to present their claims to the committee for examination and allowance, but not, in the first instance, more than 12 months or less than 6 months. The court may extend the time as circumstances require, but not so that the whole time should exceed 18 months. Because of its comparative shortness as compared with the ordinary statute of limitations, the statute of non-claims does not have the finality of the ordinary statute of limitations. The saving clause to Section 690 provides:

(1) The creditor who failed to present claim made the claim within 6 months after the time previously limited;

(2) If the committee fails to comply with the notice requirement; and

(3) The application is made before the final settlement of estates. In which case, the court may renew the commission

and allow further time not exceeding 1 month. The saving clause would only be operative if the

committee did not comply with the notice requirement. But that is not the situation in this case. Thus, the bar of the statute of non-claims is conclusive under these circumstances like the bar of the ordinary statute of limitations.

Tan Sen Guan v. Go Siu San (1924) Section 693 requires the committee to report on the manner in which notice was given to claimants. Facts relating to this were provided, thus, with compliance with the notice requirement, so Tan Sen Guan cannot escape the effect of Section 695. His claim was barred.

Heirs of Ramon Pizarro v. Consolacion (1988) The Court held that the lower court erred in dismissing the claims out of time. The period must be 6 to 12 months from the date of the publication of the notice thereof. This period is mandatory. However in this case the trial court set the period for filing within 6 months from the date of the first publication. This period was held to be too short.

Barredo v. Court of Appeals (1962) The 1-month period under Section 2, Rule 87 does not commence from the expiration of the original period for filing claims. Citing Paulin v. Aquino, the Court held that the 1-month period begins from the order authorizing the filing of claims. It does not mean that the extension of 1 month stars from the expiration of the original period fixed by the court.

Villanueva v. Philippine National Bank (1963) In this case, the claim of the Philippine National Bank was held to be a belated claim, hence not allowed. The period fixed in the notice lapsed on 16 November 1951 and the claim was filed on 20 July 1953 – about a year and 8 months late. PNB claims not to have been informed. The Court ruled that the petition for letters of administration and the notice to creditors were duly published in the Manila Daily

Bulletin and in the Morning Times, respectively, which was full compliance of the requirements of the Rules of Court. B. Nature of claims – See Sections 5 to 8.

CASE NOTES

Aguas v. Llemos (1962) It is apparent that actions for damages caused by tortuous conduct of a defendant survive the death of the latter. Under Section 5, Rule 87 of the old Rules of Court, the actions that are abated by death are (1) claims for funeral expenses and those for the last sickness of the decedent; (2) judgments for money; and (3) all claims for money against the decedent arising from contact expressly or impliedly. None of these includes the claim of the plaintiffs, for it is not enough that the claim against the decedent be for money, but it must arise from contract express or implied. On the other hand, Section 1, Rule 88 enumerates actions that survive a decedent’s executor/administrator: (1) actions to recover real and personal property from the estate; (2) actions to enforce a lien thereon; and (3) actions to recover damages for injury to persons or property. This case is one for damages under (3), it having been held that “injury to property” is not limited to injuries to specific property, but extends to other wrongs by which the personal estate is injured or diminished.

Vera v. Fernandez (1979) A perusal of Section 5, Rule 86 reveals no mention of claims for monetary obligations created by law such as taxes which are entirely of a different character from the claims expressly enumerated therein. Therefore, the statute of non-claims does not and cannot bar the Bureau of Internal Revenue from claiming for unpaid tazes.

Gotamco v. Chang Seng (1924) When the claim in this case was allowed, Tan Kim Hong was only 12 years old, and that all other parties were minors. He had no guardian. There is no showing that the claim was ever presented to the commissioners regarding the claim. Hence, the commissioners had no authority to allow or reject the claim.

Paredes v. Moya (1974) A judgment for money against the decedent must be filed at the time limited in the notice to creditors before the court where the administration proceedings over the estate of Kuntze is pending.

De Bautista v. De Guzman (1983) Section 5, Rule 86 is mandatory. This is to protect the estate of the deceased. Thus, when their claim was dismissed for the first time, the Bautistas should have filed a claim in the settlement proceedings over Rosendo’s estate. They slept on their rights.


Philippine National Bank v. Court of Appeals (2001) Under Section 7, Rule 86 there are 3 alternative remedies which a mortgagee of a deceased can avail satisfaction for his claim against the estate:

(1) Waive the mortgage and claim the entire debt from the estate of the mortgagor as an ordinary claim;

(2) Foreclose the mortgage judicially and prove any deficiency as an ordinary claim;

(3) Rely on the mortgage exclusively, foreclosing the same at any time before it is barred by prescription without a right to file a claim for any deficiency.

By choosing to foreclose extrajudicially, PNB in effect chose (3). It can therefore have no more claim for deficiency. C. Procedure – See Sections 9 to 14.

CASE NOTES Ignacio v. Pampanga Bus Co. (1967) It is correct to say that upon the demise of a decedent-defendant in a civil action, said action does not survive and such claim should be presented to the probate court for allowance if death occurs before final judgment in the CFI. But revival of civil action against the administrator is tantamount to presentment, dispensing of presentation requirements before the probate court.

Bachrach v. Icarañgal (1939) The remedies under Section 7, Rule 86 are alternative.

Soriano v. Parsons (1970) The election by a creditor of any of the three options under Section 7, Rule 86 is not jurisdictional. As long as no positive forward step is taken, he his not precluded from dropping the option already chosen and resorting to other options available.

Manalansan v. Castañeda (1978) The saving clause of Section 7, Rule 86 does not confer jurisdiction upon the probate court, of limited jurisdiction, to enforce a lien.

De los Reyes v. Court of First Instance (1930) Under section 424 of the Code of Civil Procedure, an attachment may be obtained at or after the commencement of the plaintiff's "action." The word "action," as used in that provision, includes a proceeding for the foreclosure of a mortgage. This is of course directed primarily to the property covered by the mortgage, but under section 260 of the Code of Civil Procedure, the mortgage creditor is entitled to judgment for any excess remaining due upon the mortgage debt after the mortgaged property shall have been sold; and this judgment for the balance due is entered upon motion in the foreclosure proceeding itself. This fact, taken in connection with the statement of the affidavit to the effect that the mortgaged property was insufficient in value to cover the indebtedness due to the plaintiff, made a case where it was proper to grant an attachment upon the facts stated.

XVI. ACTIONS BY AND AGAINST EXECUTORS AND ADMINISTRATORS

RULE 87. ACTIONS BY AND AGAINST EXECUTORS AND ADMINISTRATORS

SECTION 1. Actions which may and which may not be brought against executor or administrator.—No action upon a claim for the recovery of money or debt or interest thereon shall be commenced against the executor or administrator; but actions to recover real or personal property, or an interest therein, from the estate, or to enforce a lien thereon, and actions to recover damages for an injury to person or property, real or personal, may be commenced against him. SEC. 2. Executor or administrator may bring or defend actions which survive.—For the recovery or protection of the property or rights of the deceased, an executor or administrator may bring or defend, in the right of the deceased, actions for causes which survive. SEC. 3. Heir may not sue until share assigned.—When an executor or administrator is appointed and assumes the trust, no action to recover the title or possession of lands or for damages done to such lands shall be maintained against him by an heir or devisee until there is an order of the court assigning such lands to such heir or devisee or until the time allowed for paying debts has expired. SEC. 4. Executor or administrator may compound with debtor.—With the approval of the court, an executor or administrator may compound with the debtor of the deceased for a debt due, and may give a discharge of such debt on receiving a just dividend of the estate of the debtor. SEC. 5. Mortgage due estate may be foreclosed.—A mortgage belonging to the estate of a deceased person, as mortgagee or assignee of the right of a mortgagee, may be foreclosed by the executor or administrator. SEC. 6. Proceedings when property concealed, embezzled, or fraudulently conveyed.—If an executor or administrator, heir, legatee, creditor, or other individual interested in the estate of the deceased, complains to the court having jurisdiction of the estate that a person is suspected of having concealed, embezzled, or conveyed away any of the money, goods, or chattels of the deceased, or that such person has in his possession or has knowledge of any deed, conveyance, bond, contracts, or other writing which contains evidence of or tends to disclose the right, title, interest, or claim of the deceased to real or personal estate, or the last will and testament of the deceased, the court may cite such suspected person to appear before it and may examine him on oath on the matter of such complaint; and if the person so cited refuses to appear, or to answer on such examination such interrogatories as are put to him, the court may punish him for contempt, and may commit him to prison until he submits to the order of the court. The interrogatories put to any such person, and his answers thereto, shall be in writing and shall be filed in the clerk’s office. SEC. 7. Person entrusted with estate compelled to render account.—The court, on complaint of an executor or administrator, may cite a person entrusted by an executor or


administrator with any part of the estate of the deceased to appear before it, and may require such person to render a full account, on oath, of the money, goods, chattels, bonds, accounts, or other papers belonging to such estate as came to his possession in trust for such executor or administrator, and of his proceedings thereon; and if the person so cited refuses to appear to render such account, the court may punish him for contempt as having disobeyed a lawful order of the court. SEC. 8. Embezzlement before letters issued.—If a person, before the granting of letters testamentary or of administration on the estate of the deceased, embezzles or alienates any of the money, goods, chattels, or effect of such deceased, such person shall be liable to an action in favor of the executor or administrator of the estate for double the value of the property sold, embezzled, or alienated, to be recovered for the benefit of such estate. SEC. 9. Property fraudulent conveyed by deceased may be recovered. When executor or administrator must bring action.—When there is a deficiency of assets in the hands of an executor or administrator for the payment of debts and expenses of administration, and the deceased in his lifetime had conveyed real or personal property, or a right or interest therein, or debt or credit, with intent to defraud his creditors or to avoid any right debt, or duty; or had so conveyed such property, right, interest, debt, or creditors, and the subject of the attempted conveyance would be liable to attachment by any of them in his lifetime, the executor or administrator may commence and prosecute to final judgment an action for the recovery of such property, right, interest, debts, or credit for the benefit of the creditors; but he shall not be bound to commence the action unless the creditors making the application pay such part of the costs and expenses, or give security therefor to the executor or administrator, as the court deems equitable. SEC. 10. When creditor may bring action. Lien for cost.—When there is such a deficiency of assets, and the deceased in his lifetime had made or attempted such a conveyance, as is stated in the last preceding section, and the executor and administrator has not commenced the action therein provided for, any creditor of the estate may, with the permission of the court, commence and prosecute to final judgment, in the name of the executor or administrator, a like action for the recovery of the subject of the conveyance or attempted conveyance for the benefit of the creditors. But the action shall not be commenced until the creditor has filed in a court a bond executed to the executor or administrator, in an amount approved by the judge, conditioned to indemnify the executor or administrator against the costs and expenses incurred by reason of such action. Such creditor shall have a lien upon any judgment recovered by him in the action for such costs and other expenses incurred therein as the court deems equitable. Where the conveyance or attempted conveyance has been made by the deceased in his lifetime in favor of the executor or administrator, the action which a creditor may bring shall be in the name of all the creditors, and permission of the court and filing of bond as above prescribed, are not necessary.

CASE NOTES Romualdez v. Tiglao (1981) The original judgment which was rendered in May 1960 has become stale because of its non-execution after the lapse of 5

years under Section 6, Rule 39. Accordingly, it cannot be presented against the estate of Felisa Tiglao unless it is first revived by action. The purpose of the second suit is not to make the estate of Felisa Tiglao pay the sums of money adjudge in the first judgment byt merely to keep alive said judgment.

Pascual v. Pascual (1942) The old Section 1, Rule 86, on action fro the recovery or protection of the property or rights of the deceased for causes which may survive may be prosecuted or defended by his administrator/executor. Upon the commencement of settlement proceedings the heirs have no standing in court except if the executor/administrator is unwilling or refuses to act.

Velasquez v. George (1983) Villanueva’s contention that the exception to Section 3, Rule 87 is unavailing to Velasquez et al. is untenable because Andres Muñoz, the administrator, is the same person charged by Velasquez et al. to have voted in the board of directors without securing the proper authority from the probate court to which he is accountable as administrator.

Valera v. Inserto (1987), supra Rioferio v. Court of Appeals (2004) Article 777 of the Civil Code governs. The rights of heirs are transmitted at the death of the decedent. If there is no administrator, the heirs cannot be expected to wait for the appointment of an administrator, then wait further to see if the administrator would care enough to file a suit to protect the rights and interests of the decedent. XVII. PAYMENTS OF THE DEBTS OF THE ESTATE

RULE 88. PAYMENT OF THE DEBTS OF THE STATE SECTION 1. Debts paid in full if estate sufficient.—If, after hearing all the money claims against the estate, and after ascertaining the amount of such claims, it appears that there are sufficient assets to pay the debts, the executor or administrator shall pay the same within the time limited for that purpose. SEC. 2. Part of estate from which debt paid when provision made by will.—If the testator makes provision by his will, or designates the estate to be appropriated for the payment of his debts, the expenses of administration, or the family expenses, they shall paid according to the provisions of the will; but if the provision made by the will or the state appropriated, is not sufficient for that purpose, such part of the state of the testator, real or personal, as is not disposed of by will, if any, shall be appropriated for that purpose. SEC. 3. Personalty first chargeable for debts, then realty.—The personal estate of the deceased not disposed of by will shall be first chargeable with the payment of debts and expenses; and if said personal estate is not sufficient for that purpose, or its sale would redound to the detriment of the participants of the estate,


the whole of the real estate not disposed of by will, or so much thereof as is necessary, may be sold, mortgaged, or otherwise encumbered for that purpose by the executor or administrator, after obtaining the authority of the court thereof. Any deficiency shall be met by contributions in accordance with the provisions of section 6 of this rule. SEC. 4. Estate to be retained to meet contingent claims.—If the court is satisfied that a contingent claim duly filed is valid, it may order the executor or administrator to retain in his hands sufficient estate to pay such contingent claim when the same becomes absolute, or, if the estate is insolvent, sufficient to pay a portion equal to the dividend of the other creditors. SEC. 5. How contingent claim becoming absolute in two years allowed and paid. Action against distributes later.—If such contingent claim becomes absolute and is presented to the court, or to the executor or administrator, within two (2) years from the time limited for other creditors to present their claims, it may be allowed by the court if not disputed by the executor or administrator, and, if disputed, it may be proved and allowed or disallowed by the court as facts may warrant. If the contingent claim is allowed, the creditor shall receive payment to the same extent as the other creditors if the estate retained by the executor or administrator is sufficient. But if the claim is not so presented, after having become absolute, within said two (2) years, and allowed, the assets retained in the hands of the executor or administrator, not exhausted in the payment of claims, shall be distributed by the order of the court to the persons entitled to the same; but the assets so distributed may still be applied to the payment of the claim when established, and the creditor may maintain an action against the distributees to recover the debt, and such distributees and their estates shall be liable for the debt in proportion to the estate they have respectively received form the property of the deceased. SEC. 6. Court to fix contributive shares where devisees, legatees, or heirs have been in possession. — Where devisees, legatees, or heirs have entered into possession of portions of the estate before the debts and expenses have been settled and paid, and have become liable to contribute for the payment of such debts and expenses, the court having jurisdiction of the estate may, by order for that purpose, after hearing, settle the amount of their several liabilities, and order how much and in what manner each person shall contribute, and may issue execution as circumstances require. SEC. 7. Order of payment if estate insolvent. — If the assets which can be appropriated for the payment of debts are not sufficient for that purpose, the executor or administrator shall pay the debts against the estate, observing the provisions of Articles 1059 and 2239 to 2251 of the Civil Code. SEC. 8. Dividends to be paid in proportion to claims. — If there are no assets sufficient to pay the credits of any one class of creditors after paying the credits entitled to preference over it, each creditor within such class shall be paid a dividend in proportion to his claim. No creditor of any one class shall receive any payment until those of the preceding class are paid. SEC. 9. Estate of insolvent nonresident, how disposed of. — In case administration is taken in the Philippines of the estate of a person who was at the time of his death an inhabitant of another country, and who died insolvent, his estate found in the

Philippines shall, as far as practicable, be so disposed of that his creditors here and elsewhere may receive each an equal share, in proportion to their respective credits. SEC. 10. When and how claim proved outside the Philippines against insolvent resident's estate paid. — If it appears to the court having jurisdiction that claims have been duly proven in another country against the estate of an insolvent who was at the time of his death an inhabitant of the Philippines, and that the executor or administrator in the Philippines had knowledge of the presentation of such claims in such country and an opportunity to contest their allowance, the court shall receive a certified list of such claims, when perfected in such country, and add the same to the list of claims proved against the deceased person in the Philippines so that a just distribution of the whole estate may be made equally among all its creditors according to their respective claims; but the benefit of this and the preceding sections shall not be extended to the creditors in another country if the property of such deceased person there found is not equally apportioned to the creditors residing in the Philippines and the other creditors, according to their respective claims. SEC. 11. Order for payment of debts. — Before the expiration of the time limited for the payment of the debts, the court shall order the payment thereof, and the distribution of the assets received by the executor or administrator for that purpose among the creditors, as the circumstances of the estate require and in accordance with the provisions of this rule. SEC. 12. Orders relating to payment of debts where appeal is taken. — If an appeal has been taken from a decision of the court concerning a claim, the court may suspend the order for the payment of the debts or may order the distribution among the creditors whose claims are definitely allowed, leaving in the hands of the executor or administrator sufficient assets to pay the claim disputed and appealed. When a disputed claim is finally settled the court having jurisdiction of the estate shall order the same to be paid out of the assets retained to the same extent and in the same proportion with the claims of other creditors. SEC. 13. When subsequent distribution of assets ordered. — If the whole of the debts are not paid on the first distribution, and if the whole assets are not distributed, or other assets afterwards come to the hands of the executor or administrator, the court may from time to time make further orders for the distribution of assets. SEC. 14. Creditors to be paid in accordance with terms of order. — When an order is made for the distribution of assets among the creditors, the executor or administrator shall, as soon as the time of payment arrives, pay the creditors the amounts of their claims, or the dividend thereon, in accordance with the terms of such order. SEC. 15. Time for paying debts and legacies fixed, or extended after notice, within what periods. — On granting letters testamentary or administration the court shall allow to the executor or administrator a time for disposing of the estate and paying the debts and legacies of the deceased, which shall not, in the first instance, exceed one (1) year; but the court may, on application of the executor or administrator and after hearing on such notice of the time and place therefor given to all persons interested as it shall direct, extend the time as the circumstances


of the estate require not exceeding six (6) months for a single extension nor so that the whole period allowed to the original executor or administrator shall exceed two (2) years. SEC. 16. Successor of dead executor or administrator may have time extended on notice within certain period. — When an executor or administrator dies, and a new administrator of the same estate is appointed, the court may extend the time allowed for the payment of the debts or legacies beyond the time allowed to the original executor or administrator, not exceeding six (6) months at a time and not exceeding six (6) months Beyond the time which the court might have allowed to such original executor or administrator; and notice shall be given of the time and place for hearing such application, as required in the last preceding section.

XVIII. SALES, MORTGAGES, ENCUMBRANCES

RULE 89. SALES, MORTGAGES, AND OTHER ENCUMBRANCES OF PROPERTY OF DECEDENT

SECTION 1. Order of sale of personalty.—Upon the application of the executor or administrator, and on written notice to the heirs and other persons interested, the court may order the whole or a part of the personal estate to be sold, if it appears necessary for the purpose of paying debts, expenses of administration, or legacies, or for the preservation of the property. SEC. 2. When court may authorize sale, mortgage, or other encumbrance of realty to pay debts and legacies through personalty not exhausted.—When the personal estate of the deceased is not sufficient to pay the debts, expenses of administration, and legacies, or where the sale of such personal estate may injure the business or other interests of those interested in the estate, and where a testator has not otherwise made sufficient provision for the payment of such debts, expenses and legacies, the court, on the application of the executor or administrator and on written notice to the heirs, devisees, and legatees residing in the Philippines, may authorize the executor or administrator to sell, mortgage, or otherwise encumber so much as may be necessary of the real estate, in lieu of personal estate, for the purpose of paying such debts, expenses, and legacies, if it clearly appears that such sale, mortgage, or encumbrance would be beneficial to the persons interested; and if a part cannot be sold, mortgaged, or otherwise encumbered without injury to those interested in the remainder, the authority may be for the sale, mortgage, or other encumbrance of the whole of such real estate, or so much thereof as is necessary or beneficial under the circumstances. SEC. 3. Persons interested may prevent such sale, etc., by giving bond.—No such authority to sell, mortgage, or otherwise encumber real or personal estate shall be granted if any person interested in the estate gives a bond, in a sum to be fixed by the court, conditioned to pay the debts, expenses of administration, and legacies within such time as the court directs; and such bond shall be for the security of the creditors, as well as of the executor or administrator, and may be prosecuted for the benefit of either.

SEC. 4. When court may authorize sale of estate as beneficial to interested persons. Disposal of proceeds.—When it appears that the sale of the whole or a part of the real or personal estate, will be beneficial to the heirs, devisees, legatees, and other interested persons, the court may, upon application of the executor or administrator and on written notice to the heirs, devisees, and legatees who are interested in the estate to be sold, authorize the executor or administrator to sell the whole or a part of said estate, although not necessary to pay debts, legacies, or expenses of administration; but such authority shall not be granted if inconsistent with the provisions of a will. In case of such sale, the proceeds shall be assigned to the persons entitled to the estate in the proper proportions. SEC. 5. When court may authorize sale, mortgage, or other encumbrance of estate to pay debts and legacies in other countries.— When the sale of personal estate, or the sale, mortgage, or other encumbrance of real estate is not necessary to pay the debts, expenses of administration, or legacies in the Philippines, but it appears from records of proceedings of a probate court in another country that the estate of the deceased in such other country is not sufficient to pay the debts, expenses and administration, and legacies there, the court here may authorize the executor or administrator to sell the personal estate or to sell, mortgage, or otherwise encumber the real estate for the payment of debts or legacies in the other country, in the same manner as for the payment of debts or legacies in the Philippines. SEC. 6. When court may authorize sale, mortgage, or other encumbrance of realty acquired on execution or foreclosure.—The court may authorize an executor or administrator to sell, mortgage, or otherwise encumber real estate acquired by him on execution or foreclosure sale, under the same circumstances and under the same regulations as prescribed in this rule for the sale, mortgage, or other encumbrance of other real estate. SEC. 7. Regulations for granting authority to sell, mortgage, or otherwise encumber estates.—The court having jurisdiction of the estate of the deceased may authorize the executor or administrator to sell personal estate, or to sell, mortgage, or otherwise encumber real estate, in cases provided by these rules and when it appears necessary or beneficial, under the following regulations:

(a) The executor or administrator shall file a written petition setting forth the debts due from the deceased, the expenses of administration, the legacies, the value of the personal estate, the situation of the estate to be sold, mortgaged, or otherwise encumbered, and such other facts as show that the sale, mortgage, or other encumbrance is necessary or beneficial;

(b) The court shall thereupon fix a time and place for hearing such petition, and cause notice stating the nature of the petition, the reason for the same, and the time and place of hearing, to be given personally or by mail to the persons interested, and may cause such further notice to be given, by publication or otherwise, as it shall deem proper;

(c) If the court requires it, the executor or administrator shall give an additional bond, in such sum as the court directs, conditioned that such executor or administrator will account for the proceeds of the sale, mortgage, or other encumbrance;

(d) If the requirements in the preceding subdivisions of this section have been complied with, the court, by order


stating such compliance, may authorize the executor or administrator to sell, mortgage, or otherwise encumber, in proper cases, such part of the estate as is deemed necessary, and in case of sale the court may authorize it to be public or private, as would be most beneficial to all parties concerned. The executor or administrator shall be furnished with a certified copy of such order;

(e) If the estate is to be sold at auction, the mode of giving notice of the time and place of the sale shall be governed by the provisions concerning notice of execution sale;

(f) There shall be recorded in the registry of deeds of the province in which the real estate thus sold, mortgaged, or otherwise encumbered is situated, a certified copy of the order of the court, together with the deed of the executor or administrator for such real estate, which shall be as valid as if the deed had been executed by the deceased in his lifetime. SEC. 8. When court may authorize conveyance of realty which deceased contracted to convey. Notice. Effect of deed.—Where the deceased was in his lifetime under contract, binding in law, to deed real property, or an interest therein, the court having jurisdiction of the estate may, on application for that purpose, authorize the executor or administrator to convey such property according to such contract, or with such modifications as are agreed upon by the parties and approved by the court; and if the contract is to convey real property to the executor or administrator, the clerk of the court shall execute the deed. The deed executed by such executor, administrator, or clerk of court shall be as effectual to convey the property as if executed by the deceased in his lifetime; but no such conveyance shall be authorized until notice of the application for that purpose has been given personally or by mail to all persons interested, and such further notice has been given, by publication or otherwise, as the court deems proper; nor if the assets in the hands of the executor or administrator will thereby be reduced so as to prevent a creditor from receiving his full debt or diminish his dividend. SEC. 9. When court may authorize conveyance of lands which deceased held in trust.—Where the deceased in his lifetime held real property in trust for another person, the court may, after notice given as required in the last preceding section, authorize the executor or administrator to deed such property to the person, or his executor or administrator, for whose use and benefit it was so held; and the court may order the execution of such trust, whether created by deed or by law.

CASE NOTES De la Cruz v. De la Cruz (1934) The petition of the administrator in this case does not set forth the value of the personal estate nor does it allege that there is neither personal estate nor that if there be such its sale would redound to the detriment of the interest of the participants therein as mandated by Section 714 of the Code of Civil Procedure. Notice by publication or personal notice to the persons interested is still required by regulation no. 3 of Section 722.

Godoy v. Orellano (1921) The sale in this case was not held to be valid. In the sale of the property of an intestate estate for the benefit of heirs, it

is necessary to comply with Sections 717 to 718 and 722 of the Code of Civil Procedure. Otherwise, the sale is void and transfers no title to the vendee.

Manotok Realty v. Court of Appeals (1987) Although the Rules of Court do not specifically state that the sale of an immovable belonging to an estate in a special proceeding should be made with court approval, this authority is necessarily included in its capacity as a probate court.

Rafols v. Barba (1982) The lack of any indication on the documents that they were served with copies of the same does not mean that they had no notice thereof. Regularity in the performance of duties must always be presumed. The record reveals sufficient indicia that the Rafols heirs were fully aware of the sale of the subject land in favor of Barba. The Rafols heirs could not have been ignorant of the fact that the estate of their late father was under administration proceedings. When Montayre died, the new administrator, Ricardo Rafols, one of the Rafols heirs, filed a report expressly stating that the parcel of land in question was sold to Barba for P18,000.

WT Construction v. Cañete (2008)9

The deed of sale in question is the sale of the property of the estate to pay for taxes, a matter definitely within the power of the probate/estate court to order. The power to enforce obligations under the deed of sale of a property ordered sold to pay debts of the estate is but a necessary incident of the power of a probate/estate court to order and effect such sale in the first place. Otherwise, they would not be able to secure the proceeds to pay for the taxes and this would defeat the purpose of the proceedings to settle the estate.

Pahamotang v. Philippine National Bank (2005) A direct action to annul the assailed orders of an intestate court is not necessary to nullify them. The trial court made a factual finding that there was actually no compliance by Agustin of the notice requirement under Rule 89, and as a consequence, the rule is settled that when an order authorizing the sale or encumbrance of real property was issued by the testate court without previous notice to the heirs, devisees and legatees as required by the Rules, it is not only the contract itself which is null and void but also the order of the court authorizing the same.

XIX. DISTRIBUTION AND PARTITION OF THE ESTATE

RULE 90. DISTRIBUTION AND PARTITION OF THE ESTATE SECTION 1. When order for distribution of residue made.—When the debts, funeral charges, and expenses of administration, the allowance to the widow, and inheritance tax, if any, chargeable to the estate in accordance with law, have been

9 Based on the digest of Jian Boller, C2013.


paid, the court, on the application of the executor or administrator, or of a person interested in the estate, and after hearing upon notice, shall assign the residue of the estate to the persons entitled to the same, naming them and the proportions, or parts, to which each is entitled, and such persons may demand and recover their respective shares from the executor or administrator, or any other person having the same in his possession. If there is a controversy before the court as to who are the lawful heirs of the deceased person or as to the distributive shares to which each person is entitled under the law, the controversy shall be heard and decided as in ordinary cases.

No distribution shall be allowed until the payment of the obligations above mentioned has been made or provided for, unless the distributees, or any of them, give a bond, in a sum to be fixed by the court, conditioned for the payment of said obligations within such time as the court directs. SEC. 2. Questions as to advancement to be determined.—Questions as to advancement made, or alleged to have been made, by the deceased to any heir may be heard and determined by the court having jurisdiction of the estate proceedings; and the final order of the court thereon shall be binding on the person raising the questions and on the heir. SEC. 3. By whom expenses of partition paid.—If at the time of the distribution the executor or administrator has retained sufficient effects in his hands which may lawfully be applied for the expenses of partition of the properties distributed, such expenses of partition may be paid by such executor or administrator when it appears equitable to the court and not inconsistent with the intention of the testator; otherwise, they shall be paid by the parties in proportion to their respective shares or interest in the premises, and the apportionment shall be settled and allowed by the court, and, if any person interested in the partition does not pay his proportion or share, the court may issue an execution in the name of the executor or administrator against the party not paying for the sum assessed. SEC. 4. Recording the order of partition of estate.—Certified copies of final orders and judgments of the court relating to the real estate or the partition thereof shall be recorded in the registry of deeds of the province where the property is situated.

CASE NOTES Dael v. Intermediate Appellate Court (1989) The order for partial distribution of funds as advance inheritance is valid. Said order is within the contemplation of Section 2, Rule 109: notwithstanding a pending controversy or appeal in proceedings to settle the estate of a decedent, the court may permit that such part of the estate as may not be affected by the controversy or appeal be distributed among the heirs or legatees with compliance with Rule 90, under which Section 1 requires the giving of a bond. The order is valid because it does not appear that the estate has unpaid obligations under Rule 90 calling for the posting of a bond.

Camia de Reyes v. Reyes de Ilano (1936) There is nothing in the law that imposes upon the executor/administrator the obligation to present a project of partition for the distribution of the estate of a deceased

person. Section 753 of the Code of Civil Procedure authorizes the court to assign the residue of the estate to persons entitled to the same while Section 754 requires that the order be issued on application of executor/administrator/person interested.

Garcia v. Orozco (1978) In this case, the formalities required by law were not followed by Albina. Here the conjugal partnership of gains of Epifanio and Albina consisted of numerous lots and properties from Guinobatan, Albay and until a liquidation and partition was made upon the death of Epifanio, no particular lot or property can be said to appertain to Albina or to the heirs of Epifanio. At the time of the sale, the rights of the widow and the heirs were not yet fully vested in the particular lot or property in specific metes and bounds.

Sanchez v. Court of Appeals (1997) Article 2028 of the Civil Code defines a compromise agreement as a "contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced." Being a consensual contract, it is perfected upon meeting of the minds of the parties. Judicial approval is not required for its perfection. However, while denominated as a compromise agreement, the document here in question is in effect a deed of partition pursuant to Article 1082 of the Civil Code: "Every act which is intended to put an end to indivision among co-heirs and legatees or devisees is deemed to be a partition although it should purport to be a sale, an exchange, a compromise, or any other transaction." (Italics mine). Be that as it may, it is significant that all the parties herein had already consummated and availed themselves of the benefits of their compromise. A compromise entered into and carried out in good faith will not be discarded evene if there was a mistake of law or fact because courts have not power to relieve parties from obligations voluntarily assumed simply because their contracts turned out to be disastrous deals or unwise investments. Volenti non fit injuria. The petitioners argue that the administration proceedings are not yet closed and terminated because there no order of distribution of the estate pursuant to Rule 90 of the Rules of Court. The Supreme Court disagreed, holding that under Sec. 1, Rule 90, an order for the distribution of the estate may be made when the "debts, funeral charges, and expenses of administration, the allowance to the widow and the inheritance tax, if any," had been paid. The record of the case reveals that all the requirements in Rule 90 had concurred in this case. The foregoing shows clearly that the probate court had essentially finished said intestate proceedings which, consequently, should be deemed closed and terminated.

De Leon v. Court of Appeals (2002) The order of inclusion is only an interlocutory order. The Court of Appeals erred in considering the Order for collation as final or binding upon heirs or third persons who dispute the inclusion of certain properties in the intestate estate of Nicolas. Ramon Nicolas’ reliance on Section 2, Rule 90 of the Rules of Court in support of his claim that the assailed


order is final is not feasible. In the first place, it is not an order of collation. It is just an order of inclusion in the inventory.

PART THREE. ESCHEAT

RULE 91. ESCHEATS

SECTION 1. When and by whom petition filed.—When a person dies intestate, seized of real or personal property in the Philippines, leaving no heir or person by law entitled to the same, the Solicitor General or his representative in behalf of the Republic of the Philippines, may file a petition in the Regional Trial Court of the province where the deceased last resided or In which he had estate, if he resided out of the Philippines, setting forth the facts, and praying that the estate of the deceased be declared escheated. SEC. 2. Order for hearing.—If the petition is sufficient in form and substance, the court, by an order reciting the purpose of the petition, shall fix a date and place for the hearing thereof, which date shall be not more than six (6) months after the entry of the order, and shall direct that a copy of the order be published before the hearing at least once a week for six (6) successive weeks in some newspaper of general circulation published in the province, as the court shall deem best. SEC. 3. Hearing and judgment.—Upon satisfactory proof in open court on the date fixed in the order that such order has been published as directed and that the person died intestate, seized of real or personal property in the Philippines, leaving no heir or person entitled to the same, and no sufficient cause being shown to the contrary, the court shall adjudge that the estate of the deceased in the Philippines, after the payment of just debts and charges, shall escheat; and shall, pursuant to law, assign the personal estate to the municipality or city where he last resided in the Philippines, and the real estate to the municipalities or cities, respectively, in which the same is situated. If the deceased never resided in the Philippines, the whole estate may be assigned to the respective municipalities or cities where the same is located. Such estate shall be for the benefit of public schools, and public charitable institutions and centers in said municipalities or cities.

The court, at the instance of an interested party, or on its own motion, may order the establishment of a permanent trust, so that only the income from the property shall be used. SEC. 4. When and by whom claim to estate filed.—If a devisee, legatee, heir, widow, widower, or other person entitled to such estate appears and files a claim thereto with the court within five (5) years from the date of such judgment such person shall have possession of and title to the same, or if sold, the municipality or city shall be accountable to, him for the proceeds, after deducting reasonable charges for the care of the estate; but a claim not made within said time shall be forever barred. SEC. 5. Other actions for escheat.—Until otherwise provided by law, actions for reversion or escheat of properties alienated in violation of the Constitution or of any statute shall be governed

by this rule, except that the action shall be instituted in the province where the land lies in whole or in part.

CASE NOTES Municipal Council of San Pedro, Laguna v. Colegio de San Jose (1937) The essential facts should be alleged in the petition for escheat because they are jurisdictional. Without them, the court could not take cognizance of the petition.

In re Estate of Bernardo Rafanan Lao Sayco (1912) From the record of these proceedings it does not appear tha there was made, at the motion of the Municipality of Mambajao, the hearing required by law under Section 750 of the Code of Civil Procedure, for the record is not accompanied by any certified copy of the inventory of the real and personal property that belonged to the said decedent, with a statement of the places where the realty is located. Neither is it shown to have ascertained whether Rafanan left a will or if he left possible heirs. Also, notice was only for three weeks, instead of six as mandated by the law. PART FOUR. GUARDIANSHIP I. Of incompetents who are not minors

RULE 92. VENUE

Section 1. Where to institute proceedings. — Guardianship of a person or estate of a minor or incompetent may be instituted in the (a) Court of First Instance of the province, (b) or in the justice of the peace court of the municipality, (c) or in the municipal court of the chartered city where the minor or incompetent persons resides, and if he resides in a foreign country, in the Court of First Instance of (d) the province wherein his property or the party thereof is situated; provided, however, that where the value of the property of such minor or incompetent exceeds that jurisdiction of the justice of the peace or municipal court, the proceedings shall be instituted in the Court of First Instance. In the City of Manila the proceedings shall be instituted in the Juvenile and Domestic Relations Court. Section 2. Meaning of word "incompetent." — Under this rule, the word "incompetent" includes persons suffering the penalty of (a) civil interdiction or who are (b) hospitalized lepers, (c) prodigals, (d) deaf and dumb who are unable to read and write, those who are of (e) unsound mind, even though they have lucid intervals, and persons not being of unsound mind, but by reason of age, disease, weak mind, and other similar causes, (f) cannot, without outside aid, take care of themselves and manage their property, becoming thereby an easy prey for deceit and exploitation. Section 3. Transfer of venue. — The court taking cognizance of a guardianship proceeding, may transfer the same to the court of


another province or municipality wherein the ward has acquired real property, if he has transferred thereto his bona-fide residence, and the latter court shall have full jurisdiction to continue the proceedings, without requiring payment of additional court fees.

CASE NOTES Parco v. Court of Appeals (1982) In this case, the Supreme Court deemed it premature to rule that Soledad Rodriguez has the right or title over the three parcels of land in question. What is certain here is the fact that the sale of the properties in question were duly approved by Judge Kayanan in accordance with the provisions on selling and encumbering of the property of the ward under Rule 97 of the Rules of Court. The original petition asked to cite Parco and Bautista in contempt; the amended petition asked for reconveyance. There being a cloud of doubt as to who has a better right or title to the disputed properties, the determination therefore of title or ownership of the three parcels of land in dispute is a matter that lies beyond the jurisdiction of the guardianship court which must be threshed out in a separate ordinary action and not in a guardianship proceeding as held in Cui v. Piccio.

Paciente v. Dacuycuy (1982) The jurisdiction of guardianship courts, ordinarily, is to cite persons suspected of having embezzled, concealed or conveyed property belonging to the ward for the purpose of obtaining information which may be used in action later to be instituted by the guardian to protect the ward; only in extreme cases may the court direct delivery to the ward.

However, the acts of the guardianship court intended to effect the delivery or return of the property conveyed are valid because the right or title of the two minors to the property is clear and undisputable. They inherited a part of the land in question from their father. The sale of this land, where they are co-owners, by their mother without the authority of the guardianship court is illegal.

Garcia vda. de Chua v. Court of Appeals (1998) Venue was improperly laid. Rule 92, Sec. 1 is clear on this point.

The jurisdictional facts required in a petition for issuance of letters of administration are: (1) the death of the testator; (2) residence at the time of death; and (3) if decedent was a non-resident, the fact of being the resident of a foreign country.

Garcia was not able to prove her status as the widow of Chua. She failed to produce marriage contract.

Garcia’s reliance in Gomez v. Imperial is misplaced. In the Gomez case, the action before the lower court was merely for guardianship. Therefore said court did not have the jurisdiction to distribute the estate of the deceased. In this case, the petition filed before the court was both for guardianship and settlement of estate.

II. APPOINTMENT OF GUARDIANS

RULE 93. APPOINTMENT OF GUARDIANS Section 1. Who may petition for appointment of guardian for resident. — Any relative, friend, or other person on behalf of a resident minor or incompetent who has no parent or lawful guardian, or the minor himself if fourteen years of age or over, may petition the court having jurisdiction for the appointment of a general guardian for the person or estate, or both, of such minor or incompetent. An officer of the Federal Administration of the United States in the Philippines may also file a petition in favor of a ward thereof, and the Director of Health, in favor of an insane person who should be hospitalized, or in favor of an isolated leper. Section 2. Contents of petition. — A petition for the appointment of a general guardian must show, so far as known to the petitioner:

(a) The jurisdictional facts; (b) The minority or incompetency rendering the

appointment necessary or convenient; (c) The names, ages, and residence of the relatives of

the minor or incompetent, and of the person having him in their care;

(d) The probable value and character of his estate; (e) The name of the person for whom letters of

guardianship are prayed. The petition shall be verified; but no defect in the

petition or verification shall render void the issuance of letters of guardianship. Section 3. Court to set time for hearing. Notice thereof. — When a petition for the appointment of a general guardian is filed, the court shall fix a time and place for hearing the same, and shall cause reasonable notice thereof to be given to the persons mentioned in the petition residing in the province, including the minor if above 14 years of age or the incompetent himself, and may direct other general or special notice thereof to be given. Section 4. Opposition to petition. — Any interested person may, by filing a written opposition, contest the petition on the ground of majority of the alleged minor, competency of the alleged incompetent, or the unsuitability of the person for whom letters are prayed, and may pray that the petition be dismissed, or that letters of guardianship issue to himself, or to any suitable person named in the opposition. Section 5. Hearing and order for letters to issue. — At the hearing of the petition the alleged incompetent must be present if able to attend, and it must be shown that the required notice has been given. Thereupon the courts shall hear the evidence of the parties in support of their respective allegations, and, if the person in question is a minor, or incompetent it shall be appoint a suitable guardian of his person or estate, or both, with the powers and duties hereinafter specified. Section 6. When and how guardian for non-resident appointed. Notice. — When a person liable to be put under guardianship resides without the Philippines but the estate therein, any relative or friend of such person, or anyone interested in his estate, in expectancy or otherwise, may petition a court having jurisdiction for the appointment of a guardian for the estate, and if, after


notice given to such person and in such manner as the court deems proper, by publication or otherwise, and hearing, the court is satisfied that such non-resident is a minor or incompetent rendering a guardian necessary or convenient, it may appoint a guardian for such estate. Section 7. Parents as guardians. — When the property of the child under parental authority is worth two thousand pesos or less, the father or the mother, without the necessity of court appointment, shall be his legal guardian. When the property of the child is worth more than two thousand pesos, the father or the mother shall be considered guardian of the child's property, with the duties and obligations of guardians under this rules, and shall file the petition required by section 2 hereof. For good reasons the court may, however, appoint another suitable person. Section 8. Service of judgment. — Final orders or judgments under this rule shall be served upon the civil registrar of the municipality or city where the minor or incompetent person resides or where his property or part thereof is situated.

FAMILY CODE

Art. 222. The courts may appoint a guardian of the child's property or a guardian ad litem when the best interests of the child so requires. (317) Art. 223. The parents or, in their absence or incapacity, the individual, entity or institution exercising parental authority, may petition the proper court of the place where the child resides, for an order providing for disciplinary measures over the child. The child shall be entitled to the assistance of counsel, either of his choice or appointed by the court, and a summary hearing shall be conducted wherein the petitioner and the child shall be heard.

However, if in the same proceeding the court finds the petitioner at fault, irrespective of the merits of the petition, or when the circumstances so warrant, the court may also order the deprivation or suspension of parental authority or adopt such other measures as it may deem just and proper. (318a)

Art. 224. The measures referred to in the preceding article may include the commitment of the child for not more than thirty days in entities or institutions engaged in child care or in children's homes duly accredited by the proper government agency.

The parent exercising parental authority shall not interfere with the care of the child whenever committed but shall provide for his support. Upon proper petition or at its own instance, the court may terminate the commitment of the child whenever just and proper. (391a) Art. 225. The father and the mother shall jointly exercise legal guardianship over the property of the unemancipated common child without the necessity of a court appointment. In case of disagreement, the father's decision shall prevail, unless there is a judicial order to the contrary.

Where the market value of the property or the annual income of the child exceeds P50,000, the parent concerned shall be required to furnish a bond in such amount as the court may determine, but not less than ten per centum (10%) of the value of the property or annual income, to guarantee the performance of the obligations prescribed for general guardians.

A verified petition for approval of the bond shall be filed in the proper court of the place where the child resides, or, if the child resides in a foreign country, in the proper court of the place where the property or any part thereof is situated.

The petition shall be docketed as a summary special proceeding in which all incidents and issues regarding the performance of the obligations referred to in the second paragraph of this Article shall be heard and resolved.

The ordinary rules on guardianship shall be merely suppletory except when the child is under substitute parental authority, or the guardian is a stranger, or a parent has remarried, in which case the ordinary rules on guardianship shall apply. (320a) Art. 226. The property of the unemancipated child earned or acquired with his work or industry or by onerous or gratuitous title shall belong to the child in ownership and shall be devoted exclusively to the latter's support and education, unless the title or transfer provides otherwise.

The right of the parents over the fruits and income of the child's property shall be limited primarily to the child's support and secondarily to the collective daily needs of the family. (321a, 323a) Art. 227. If the parents entrust the management or administration of any of their properties to an unemancipated child, the net proceeds of such property shall belong to the owner. The child shall be given a reasonable monthly allowance in an amount not less than that which the owner would have paid if the administrator were a stranger, unless the owner, grants the entire proceeds to the child. In any case, the proceeds thus give in whole or in part shall not be charged to the child's legitime. (322a)

CASE NOTES Yangco v. Court of First Instance (1915) In proceedings of this case notice as required by the statute is jurisdictional and the lack of it deprives the court of the power to make a valid decree in the premises. Section 559 of the Code of Civil Procedure requires personal notice to the alleged spendthrift when he is a resident of the Philippines.

The statute does not authorize substituted service where the person for whose property the guardian is sought to be appointed is a resident of a foreign country. Personal notice being essential under the statute, the notice to Julia Stanton de Regidor and Cristobal Regidor was immaterial.

To declare a person of full age to be incompetent to manage his affairs and thereby deprive him of the possession and of the right to manage and hold his property is a serious thing. Thus, procedure must be strictly followed, and any material departure therefrom, especially with respect to notice, necessarily results in loss of jurisdiction.

Teodoro Yangco filed as a “friend” because he thought that the petition for guardianship would prosper under section 572 of the Code of Civil Procedure for incompetents resident without the Philippines. Yet in this case Luis Yangco did not reside “without the Philippines.” He resided here and was temporarily absent for travel and not for residence.

Guerrero v. Teran (1909)


There is nothing in the law which requires the courts to appoint residents only as administrators or guardians. However, notwithstanding the fact that there are no statutory requirements upon this question, the courts, charged with the responsibilities of protecting the estates of deceased persons, wards of the estate, etc., will find much difficulty in complying with this duty by appointing administrators and guardians who are not personally subject to their jurisdiction. Therefore, the courts should not consent to the appointment of administrators and guardians who are not personally subject to the jurisdiction of Philippine courts.

Nery v. Lorenzo (1972) "Service of the notice upon the minor if above 14 years of age or upon the incompetent, is jurisdictional. Without such notice, the court acquires no jurisdiction to appoint a guardian." The case cited by him in support of such view is Yangco v. Court of First Instance, a 1915 decision. As was therein made clear: "There is no need for interpretation or construction of the word in the case before us. Its meaning is so clear that interpretation and construction are unnecessary. Where language is plain, subtle refinements which tinge words so as to give them the color of a particular judicial theory are not only unnecessary but decidedly harmful.

Zafra-Sarte v. Court of Appeals (1970) Mercader v. Wislizenus: “The order declaring the incompetency and appointing a guardian was good, until reversed and set aside, and authorized the guardian, in spite of the appeal, to do whatever was necessary under the direction of the Court, to protect the property of the incompetent.” III. BONDS OF GUARDIANS

RULE 94. BONDS OF GUARDIANS Section 1. Bond to be given before issuance of letters. Amount. Condition. — Before a guardian appointed enters upon the execution of his trust, or letters of guardianship issue, he shall give a bond, in such sum as the court directs, conditioned as follows:

(a) To make and return to the court, within three (3) months, a true and complete inventory of all the estate, real and personal, of his ward which shall come to his possession or knowledge of any other person for him;

(b) To faithfully execute the duties of his trust, to manage and dispose of the estate according to these rules for the best interests of the ward, and to provide for the proper care, custody, and education of the ward;

(c) To render a true and just account of all the estate of the ward in his hands, and of all proceeds or interest derived therefrom, and of the management and disposition of the same, at the time designated by these rules and such other times as the courts directs, and at the expiration of his trust to settle his accounts with the court and deliver and pay over all the estate, effects, and moneys remaining in his hands, or due from him on such settlement, to the person lawfully entitled thereto;

(d) To perform all orders of the court by him to be performed.

Section 2. When new bond may be required and old sureties discharged. — Whenever it is deemed necessary, the court may require a new bond to be given by the guardian, and may discharge the sureties on the old bond from further liability, after due notice to interested persons, when no injury can result therefrom to those interested in the estate. Section 3. Bonds to be filed. Actions thereon. — Every bond given by a guardian shall be filed in the office of the clerk of the court, and, in case of the breach of a condition thereof, may be prosecuted in the same proceeding or in a separate action for the use and benefit of the ward or of any other person legally interested in the estate.

IV. SELLING AND ENCUMBERING PROPERTY OF WARD

RULE 95. SELLING AND ENCUMBERING PROPERTY OF WARD Section 1. Petition of guardian for leave to sell or encumber estate. — When the income of the estate under guardianship is insufficient to maintain the ward and his family, or to maintain and educate the ward when a minor, or when it appears that it is for the benefit of the ward that his real estate or some part thereof be sold, or mortgaged or otherwise encumbered, and the proceeds thereof put out at interest, or invested in some productive security, or in the improvement or security or other real estate of the ward, the guardian may present a verified petition to the court by which he was appointed setting forth such facts, and praying that an order issue authorizing the sale or encumbrance. Section 2. Order to show cause thereupon. — If it seems probable that such sale or encumbrance is necessary, or would be beneficial to the ward, the court shall make an order directing the next of kin of the ward, and all persons interested in the estate, to appear at a reasonable time and place therein specified to show cause why the prayer of the petition should not be granted. Section 3. Hearing on return of order. Costs. — At the time and place designated in the order to show cause, the court shall hear the proofs and allegations of the petitioner and next of kin, and other persons interested, together with their witnesses, and grant and refuse the prayer of the petition as the best interest of the ward require. The court shall make such order as to cost of the hearing as may be just. Section 4. Contents of order for sale or encumbrance, and how long effective. Bond. — If, after full examination, it appears that it is necessary, or would be beneficial to the ward, to sell or encumber the estate, or some portion of it, the court shall order such sale or encumbrance and that the proceeds thereof be expended for the maintenance of the ward and his family, or the education of the ward, if a minor, or for the putting of the same interest, or the investment of the same as the circumstances may require. The order shall specify the causes why the sale or encumbrance is necessary or beneficial, and may direct that estate ordered sold be disposed of at either public or private sale, subject to such conditions as to the time and manner of payment, and security where a part of the payment is deferred as in the discretion of the court are deemed most beneficial to the ward. The original bond of the guardian shall stand as security for


the proper appropriation of the proceeds of the sale, but the judge may, if deemed expedient, require an additional bond as a condition for the granting of the order of sale. No order of sale granted in pursuance of this section shall continue in force more than one (1) year after granting the same, without a sale being had. Section 5. Court may order investment of proceeds and direct management of estate. — The court may authorize and require the guardian to invest the proceeds of sales or encumbrances, and any other of his ward's money in his hands, in real estate or otherwise, as shall be for the best interest of all concerned, and may make such other orders for the management, investment, and disposition of the estate and effects, as circumstances may require.

CASE NOTES Pardo de Tavera v. El Hogar Filipino (1956) (1) Carmen contends that the probate court had no jurisdiction because it failed to comply with the requirements of section 569 of Act No. 190. She alleges that the petition was not verified and that it did not set forth the condition of the estate of the ward and the circumstances upon which the petition was founded tending to show the necessity of the sale. The court did not even direct the next of kin of the ward and all persons interested in the estate to appear before the judge, etc. Thus, Carmen contends the order granting authority to her mother was issued without jurisdiction. The Supreme Court ruled that lack of verification is not a jurisdictional defect. Also, in the guardian’s petition, it was alleged that the transfer of the ward’s share in the property to the corporation then to be organized would be to or for her benefit and she expected that the construction of a new building would enhance the value of her ward’s share in the property and increase her income. That part of the section, requiring the probate court to enter an order directing the next of kin to the ward and all persons interested in the estate to appear before the court at a time and place therein specified, was substantially complied with, because the next kin to the ward was her own guardian and mother and all persons interested in the estate of the ward were her uncles and aunt who agreed to make the transfer of their respective shares in the property to the corporation, Tavera-Luna, Inc. Moreover, "next of kin" are those whose relationship is such that they are entitled to share in the estate as distributees. There were no creditors to the ward's estate. (2) Sec. 579 of Act No. 190 provides: “No action for the recovery of any estate sold by a guardian can be maintained by the ward, or by any person claiming under him, unless it is commenced within three years next after the termination of the guardianship, or, when a legal disability to sue exists by reason of minority or otherwise, at the time when the cause of action accrues, within three years next after the removal of such disability.”

V. GENERAL POWERS AND DUTIES OF GUARDIANS

RULE 96. GENERAL POWERS AND DUTIES OF GUARDIANS Section 1. To what guardianship shall extend. — A guardian appointed shall have the care and custody of the person of his ward, and the management of his estate, or the manangement of the estate only, as the case may be. The guardian of the estate of a non-resident shall have the management of all the estate of the ward within the Philippines, and no court other than that in which such guardian was appointed shall have jurisdiction over the guardianship. Section 2. Guardian to pay debts of ward. — Every guardian must pay the ward's just debts out of his personal estate and the income of his real estate, if sufficient; if not, then out of his real estate upon obtaining an order for the sale or encumbrance thereof. Section 3. Guardian to settle accounts, collect debts, and appear in actions for ward. — A guardian must settle all accounts of his ward, and demand, sue for, and receive all debts due him, or may, with the approval of the court, compound for the same and give discharges to the debtor, on receiving a fair and just dividend of the estate and effects; and he shall appear for and represent his ward in all actions and special proceedings, unless another person be appointed for that purpose. Section 4. Estate to be managed frugally, and proceeds applied to maintenance of ward. — A guardian must manage the estate of his ward frugally and without the waste, and apply the income and profits thereof, so far as may be necessary, to the comfortable and suitable maintenance of the ward and his family, if there be any; and if such income and profits be insufficient for that purpose, the guardian may sell or encumber the real estate, upon being authorized by order so to do, and apply to such of the proceeds as may be necessary to such maintenance. Section 5. Guardian may be authorized to join in partition proceedings after hearing. — The court may authorize the guardian to join in an assent to a partition of real or personal estate held by the ward jointly or in common with others, but such authority shall only be granted after hearing, upon such notice to relatives of the ward as the court may direct, and a careful investigation as to the necessity and propriety of the proposed action. Section 6. Proceedings when the person suspected of embezzling or concealing property of ward. — Upon complaint of the guardian or ward, or of any person having actual or prospective interest in the estate of the ward as creditor, heir, or otherwise, that anyone is suspected of having embezzled, concealed, or conveyed away any money, goods, or interest, or a written instrument, belonging to the ward or his estate, the court may cite the suspected person to appear for examination touching such money, goods, interest, or instrument, and make such orders as will secure the estate against such embezzlement, concealment or conveyance. Section 7. Inventories and accounts of guardians, and appraisement of estates. — A guardian must render to the court


an inventory of the estate of his ward within three (3) months after his appointment, and annually after such appointment an inventory and account, the rendition of any of which may be compelled upon the application of an interested person. Such inventories and accounts shall be sworn to by the guardian. All the estate of the ward described in the first inventory shall be appraised. In the appraisement the court may request the assistance of one or more of the inheritance tax appraisers. And whenever any property of the ward not included in an inventory already rendered is discovered, or suceeded to, or acquired by the ward, like proceedings shall be had for securing an inventory and appraisement thereof within three (3) months after such discovery, succession, or acquisition. Section 8. When guardian's accounts presented for settlement. Expenses and compensation allowed. — Upon the expiration of a year from the time of his appointment, and as often thereafter as may be required, a guardian must present his account to the court for settlement and allowance. In the settlement of the account, the guardian, other than a parent, shall be allowed the amount of his reasonable expenses incurred in the execution of his trust and also such compensation for his services as the court deems just, not exceeding fifteen per centum of the net income of the ward.

CIVIL CODE

Article 736. Guardians and trustees cannot donate the property entrusted to them.

VI. TERMINATION OF GUARDIANSHIP

RULE 97. TERMINATION OF GUARDIANSHIP Section 1. Petition that competency of ward be adjudged, and proceedings thereupon. — A person who has been declared incompetent for any reason, or his guardian, relative, or friend, may petition the court to have his present competency judicially determined. The petition shall be verified by oath, and shall state that such person is then competent. Upon receiving the petition, the court shall fix a time for hearing the questions raised thereby, and cause reasonable notice thereof to be given to the guardian of the person so declared incompetent, and to the ward. On the trial, the guardian or relatives of the ward, and, in the discretion of the court, any other person, may contest the right to the relief demanded, and witnesses may be called and examined by the parties or by the court on its own motion. If it be found that the person is no longer incompetent, his competency shall be adjudged and the guardianship shall cease. Section 2. When the guardian removed or allowed to resign. New appointment. — When a (a) guardian becomes insane or otherwise (b) incapable of discharging his trust or (c) unsuitable therefor, or has (d) wasted or mismanaged the estate, or (e) failed for thirty (30) days after it is due to render an account or make a return, the court may, upon reasonable notice to the guardian, remove him, and compel him to surrender the estate of the ward to the person found to be lawfully entitled thereto. A guardian may resign when it appears proper to allow the same; and upon

his resignation or removal the court may appoint another in his place. Section 3. Other termination of guardianship. — The marriage or voluntary emancipation of a minor ward terminates the guardianship of the person of the ward, and shall enable the minor to administer his property as though he were of age, but he cannot borrow the money or alienate or encumber real property without the consent of his father or mother, or guardian. He can sue and be sued in court only with the assistance of his father, mother or guardian. The guardian of any person may be discharged by the court when it appears, upon the application of the ward or otherwise, that the guardianship is no longer necessary. Section 4. Record to be kept by the justice of the peace or municipal judge. — When a justice of the peace or municipal court takes cognizance of the proceedings in pursuance of the provisions of these rules, the record of the proceedings shall be kept as in the Court of First Instance. Section 5. Service of judgment. — Final orders of judgments under this rule shall be served upon the civil registrar of the municipality or city where the minor or incompetent person resides or where his property or part thereof is situated.

FAMILY CODE Art. 234. Emancipation takes place by the attainment of majority. Unless otherwise provided, majority commences at the age of twenty-one years.

Emancipation also takes place: (1) By the marriage of the minor; or (2) By the recording in the Civil Register of an

agreement in a public instrument executed by the parent exercising parental authority and the minor at least eighteen years of age. Such emancipation shall be irrevocable. (397a, 398a, 400a, 401a) Art. 235. The provisions governing emancipation by recorded agreement shall also apply to an orphan minor and the person exercising parental authority but the agreement must be approved by the court before it is recorded. (n) Art. 236. Emancipation for any cause shall terminate parental authority over the person and property of the child who shall then be qualified and responsible for all acts of civil life. (412a) Republic Act No. 6809 December 13, 1989 AN ACT LOWERING THE AGE OF MAJORITY FROM TWENTY-ONE TO EIGHTEEN YEARS, AMENDING FOR THE PURPOSE EXECUTIVE ORDER NUMBERED TWO HUNDRED NINE, AND FOR OTHER PURPOSES Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:: Section 1. Article 234 of Executive Order No. 209, the Family Code of the Philippines, is hereby amended to read as follows:


"Art. 234. Emancipation takes place by the attainment of majority. Unless otherwise provided, majority commences at the age of eighteen years." Section 2. Articles 235 and 237 of the same Code are hereby repealed. Section 3. Article 236 of the same Code is also hereby amended to read as follows: "Art. 236. Emancipation shall terminate parental authority over the person and property of the child who shall then be qualified and responsible for all acts of civil life, save the exceptions established by existing laws in special cases.

"Contracting marriage shall require parental consent until the age of twenty-one.

"Nothing in this Code shall be construed to derogate from the duty or responsibility of parents and guardians for children and wards below twenty-one years of age mentioned in the second and third paragraphs of Article 2180 of the Civil Code." Section 4. Upon the effectivity of this Act, existing wills, bequests, donations, grants, insurance policies and similar instruments containing references and provisions favorable to minors will not retroact to their prejudice. Section 5. This Act shall take effect upon completion of its publication in at least two (2) newspapers of general circulation. Approved: December 13, 1989.

CASE NOTES Crisostomo v. Endencia (1938) In order that a court taking cognizance of the guardianship of an incompetent may issue a valid order restoring him to capacity it is necessary, under the rules, (1) that a verified petition be presented by the incompetent, his guardian or any relative of such person within the third degree, or any friend of his; (2) that said petition should allege that the incompetent has recovered his mental faculties or his legal capacity, as the case may be; and that (3) upon receiving the petition the court should set the same for hearing and notify the guardian and the incompetent thereof. The rule does not require notice of the hearing to any other person except the guardian and the incompetent. The right given to Ramon to appear in the hearing and present his objections to the petition is not absolute in the sense that would entitle him to personal notice thereof.

Vda. de Bengson v. Philippine National Bank (1961) The grounds for which a guardian may be removed are found in Section 2, Rule 98 of the Rules.

When a guardian becomes insane or otherwise incapable of discharging his trust or unsuitable therefor, or has wasted or mismanaged the estate, or failed for thirty days after it is due to render an account or make a return, the court may, upon reasonable notice to the guardian, remove him, and compel him to surrender the estate of the ward to the person found to be lawfully entitled thereto.... (emphasis supplied).

Since the Rules enumerate the grounds for removal of a guardian, a guardian cannot be legally removed from

office except for the causes therein mentioned. To the extent that a court uses its discretion in appraising whether a person is insuitable or incapable of discharging his trust, that much it can be said that removal is discretionary. But the discretion must be exercised within the law.

In this case, there was no legal ground upon which the removal of the Philippine National Bank as guardian was founded. Philippine National Bank was not show to have become incapable of discharging its trust or was unsuitable therefor, or that it had committed anything which the Rules includes as grounds for removal.

That PNB has received commissions for its services is no ground to remove it, especially since the Bank's commission averages no more than P100.00 a year and is offset by interest on the ward's deposit and the sum that the son would probably have to disburse in bond premiums.

Neither is it sufficient to base removal on the opinion that it would be more beneficial to the ward and more convenient for the administration of the estate. A guardian should not be removed except for the most cogent reasons.

PNB may be asked to keep part of the moneys in its La Union branch for purposes of convenience, however this may be done without altering the guardianship.

In re guardianship of Inchausti (1920) The notification of the ward required in section 562 of the Code of Civil Procedure is not intended as a personal service of process in the sense necessary to give the court jurisdiction over the ward. It is, therefore, of no moment that the person to be notified was living in a foreign country and thus beyond the territorial jurisdiction of the Manila court. Nor is the manner in which the court procured service of the notice of any importance. It is sufficient that the notice was given. The notification to the ward is required merely as an assurance that the individual chiefly concerned shall have cognizance of what is being done. It at least gives him an opportunity to advise the court in case action taken by the mover of the petition was officious or unauthorized.

Propriety of order declaring ward of sound mind >> violent access of dementia which manifested itself prior to the original appointment of the guardian passed off after Inchausti was taken away from Manila in 1915 and the same extreme manifestations of derangement have not reappeared. Furthermore, the evidence shows that at the time the petition for his rehabilitation was heard, the ward was in normal mental state and had been in this condition for a period sufficiently long to justify the belief that he is permanently restored.

The opposition to the termination of the guardianship seems to be based chiefly on the fear, entertained by his mother, that Inchausti, if placed in control of the large property to which he is heir, will prove to be a spendthrift. Even though this fear should be well-founded, it affords no reason for maintaining a guardianship which had its origin in his mental incapacity. Of course if he is, or should hereafter prove to be, a spendthrift, proper proceedings can be instituted to protect him from wasteful proclivities.


VII. GUARDIANSHIP OF MINORS

[A.M. No. 03-02-05-SC 2003-05-01] RE: PROPOSED RULE ON GUARDIANSHIP OF MINORS

R E S O L U T I O N

Acting on the letter of the Chairman of the Committee on Revision of the Rules of Court submitting for this Court’s consideration and approval the Proposed Rule on Guardianship of Minors, the Court Resolved to APPROVE the same. The Rule shall take effect on May 1, 2003 following its publication in a newspaper of general circulation not later than April 15, 2003. April 1, 2003. <>I>Davide, Jr. C.J., Bellosillo, Puno, Vitug, Mendoza, Panganiban, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio, Austria-Martinez, Corona, Carpio-Moralez,Callejo Sr., Azcuna, JJ., concur

RULE ON GUARDIANSHIP OF MINORS Section 1. Applicability of the Rule. – This Rule shall apply to petitions for guardianship over the person or property, or both, of a minor.

The father and the mother shall jointly exercise legal guardianship over the person and property of their unemancipated common child without the necessity of a court appointment. In such case, this Rule shall be suppletory to the provisions of the Family Code on guardianship.

Sec. 2. Who may petition for appointment of guardian. – On grounds authorized by law, any relative or other person on behalf of a minor, or the minor himself if fourteen years of age or over, may petition the Family Court for the appointment of a general guardian over the person or property, or both, of such minor. The petition may also be filed by the Secretary of Social Welfare and Development and by the Secretary of Health in the case of an insane minor who needs to be hospitalized.

Sec. 3. Where to file petition. – A petition for guardianship over the person or property, or both, of a minor may be filed in the Family Court of the province or city where the minor actually resides. If he resides in a foreign country, the petition shall be flied with the Family Court of the province or city where his property or any part thereof is situated.

Sec. 4. Grounds of petition.-The grounds for the appointment of a guardian over the person or property, or both, of a minor are the following:

(a) death, continued absence, or incapacity of his parents;

(b) suspension, deprivation or termination of parental authority;

(c) remarriage of his surviving parent, if the latter Is found unsuitable to exercise parental authority; or

(d) when the best interests of the minor so require. Sec. 5. Qualifications of guardians. – In appointing a guardian, the court shall consider the guardian’s:

(a) moral character; (b) physical, mental and psychological condition; (c) financial status; (d) relationship of trust with the minor; (e) availability to exercise the powers and duties of a

guardian for the full period of the guardianship; (f) lack of conflict of interest with the minor; and (g) ability to manage the property of the minor.

Sec. 6. Who may be appointed guardian of the person or property, or both, of a minor. – In default of parents or a court-appointed guardian, the court may appoint a guardian of the person or property, or both, of a minor, observing as far as practicable, the following order of preference:

(a) the surviving grandparent and In case several grandparents survive, the court shall select any of them taking Into account all relevant considerations;

(b) the oldest brother or sister of the minor over twenty-one years of age, unless unfit or disqualified;

(c) the actual custodian of the minor over twenty-one years of age, unless unfit or disqualified; and

(d) any other person, who in the sound discretion of the court, would serve the best interests of the minor. Sec. 7. Contents of petition. – A petition for the appointment of a general guardian must allege the following:

(a) The jurisdictional facts; (b) The name, age and residence of the prospective

ward; (c) The ground rendering the appointment necessary or

convenient; (d) The death of the parents of the minor or the

termination, deprivation or suspension of their parental authority; (e) The remarriage of the minor’s surviving parent; (f) The names, ages, and residences of relatives within

the 4th civil degree of the minor, and of persons having him in their care and custody;

(g) The probable value, character and location of the property of the minor; and (h) The name, age and residence of the person for whom letters of guardianship are prayed.

The petition shall be verified and accompanied by a certification against forum shopping. However, no defect in the petition or verification shall render void the issuance of letters of guardianship. Sec. 8. Time and notice of hearing. – When a petition for the appointment of a general guardian is filed, the court shall fix a time and place for its hearing, and shall cause reasonable notice to be given to the persons mentioned in the petition, including the minor if he is fourteen years of age or over, and may direct other general or special notice to be given. Sec. 9. Case study report. – The court shall order a social worker to conduct a case study of the minor and all the prospective guardians and submit his report and recommendation to the court for its guidance before the scheduled hearing. The social worker may intervene on behalf of the minor if he finds that the petition for guardianship should be denied. Sec. 10. Opposition to petition. – Any interested person may contest the petition by filing a written opposition based on such grounds as the majority of the minor or the unsuitability of the person for whom letters are prayed, and pray that the petition be


denied, or that letters of guardianship issue to himself, or to any suitable person named in the opposition. Sec. 11. Hearing and order for letters to issue. – At the hearing of the petition, it must be shown that the requirement of notice has been complied with. The prospective ward shall be presented to the court. The court shall hear the evidence of the parties in support of their respective allegations. If warranted, the court shall appoint a suitable guardian of the person or property, or both, of the minor.

At the discretion of the court, the hearing on guardianship may be closed to the public and the records of the case shall not be released without its approval. Sec. 12. When and how a guardian of the property for non-resident minor is appointed; notice. – When the minor resides outside the Philippines but has property in the Philippines, any relative or friend of such minor, or any one interested in his property, in expectancy or otherwise, may petition the Family Court for the appointment of a guardian over the property.

Notice of hearing of the petition shall be given to the minor by publication or any other means as the court may deem proper. The court may dispense with the presence of the non-resident minor.

If after hearing the court is satisfied that such non-resident is a minor and a guardian is necessary or convenient, it may appoint a guardian over his property. Sec. 13. Service of final and executory judgment or order. – The final and executory judgment or order shall be served upon the Local Civil Registrar of the municipality or city where the minor resides and the Register of Deeds of the place where his property or part thereof is situated shall annotate the same in the corresponding title, and report to the court his compliance within fifteen days from receipt of the order. Sec. 14. Bond of guardian; amount; conditions.-Before he enters upon the execution of his trust, or letters of guardianship issue, an appointed guardian may be required to post a bond in such sum as the court shall determine and conditioned as follows:

(a) To make and return to the court, within three months after the issuance of his letters of guardianship, a true and complete Inventory of all the property, real and personal, of his ward which shall come to his possession or knowledge or to the possession or knowledge of any other person in his behalf;

(b) To faithfully execute the duties of his trust, to manage and dispose of the property according to this rule for the best interests of the ward, and to provide for his proper care, custody and education;

(c) To render a true and Just account of all the property of the ward in his hands, and of all proceeds or interest derived therefrom, and of the management and disposition of the same, at the time designated by this rule and such other times as the court directs; and at the expiration of his trust, to settle his accounts with the court and deliver and pay over all the property, effects, and monies remaining in his hands, or due from him on such settlement, to the person lawfully entitled thereto; and

(d) To perform all orders of the court and such other duties as may be required by law. Sec. 15. Where to file the bond; action thereon. – The bond posted by a guardian shall be filed in the Family Court and, In case of breach of any of its conditions, the guardian may be prosecuted in the same proceeding for the benefit of the ward or of any other person legally interested in the property.

Whenever necessary, the court may require the guardian to post a new bond and may discharge from further liability the sureties on the old bond after due notice to interested persons, if no injury may result therefrom to those interested in the property. Sec. 16. Bond of parents as guardians of property of minor. – lf the market value of the property or the annual Income of the child exceeds P50,000.00, the parent concerned shall furnish a bond In such amount as the court may determine, but in no case less than ten per centurn of the value of such property or annual income, to guarantee the performance of the obligations prescribed for general guardians.

A verified petition for approval of the bond shall be flied in the Family Court of the place where the child resides or, if the child resides in a foreign country, in the Family Court of the place where the property or any part thereof is situated.

The petition shall be docketed as a summary special proceeding In which all incidents and issues regarding the performance of the obligations of a general guardian shall be heard and resolved. Sec. 17. General duties of guardian. – A guardian shall have the care and custody of the person of his ward and the management of his property, or only the management of his property. The guardian of the property of a nonresident minor shall have the management of all his property within the Philippines. A guardian shall perform the following duties:

(a) To pay the just debts of the ward out of the personal property and the income of the real property of the ward, If the same is sufficient; otherwise, out of the real property of the ward upon obtaining an order for its sale or encumbrance;

(b) To settle all accounts of his ward, and demand, sue for, receive all debts due him, or may, with the approval of the court, compound for the same and give discharges to the debtor on receiving a fair and just dividend of the property and effects; and to appear for and represent the ward in all actions and special proceedings, unless another person is appointed for that purpose;

(c) To manage the property of the ward frugally and without waste, and apply the income and profits thereon, insofar as may be necessary, to the comfortable and suitable maintenance of the ward; and if such income and profits be insufficient for that purpose, to sell or encumber the real or personal property, upon being authorized by the court to do so;

(d) To consent to a partition of real or personal property owned by the ward jointly or in common with others upon authority granted by the court after hearing, notice to relatives of the ward, and a careful investigation as to the necessity and propriety of the proposed action;

(e) To submit to the court a verified inventory of the property of his ward within three months after his appointment, and annually thereafter, the rendition of which may be required upon the application of an interested person;

(f) To report to the court any property of the ward not included in the inventory which is discovered, or succeeded to, or acquired by the ward within three months after such discovery, succession, or acquisition; and

(g) To render to the court for its approval an accounting of the property one year from his appointment, and every year thereafter or as often as may be required. Sec. 18. Power and duty of the court – The court may:


(a) Request the assistance of one or more commissioners in the appraisal of the property of the ward reported in the initial and subsequent inventories;

(b) Authorize reimbursement to the guardian, other than a parent, of reasonable expenses incurred in the execution of his trust, and allow payment of compensation for his services as the court may deem just, not exceeding ten per centum of the net income of the ward, if any; otherwise, in such amount the court determines to be a reasonable compensation for his services; and

(c) Upon complaint of the guardian or ward, or of any person having actual or prospective interest in the property at the ward, require any person suspected of having embezzled, concealed, or disposed of any money, goods or interest, or a written instrument belonging to the ward or his property to appear for examination concerning any thereof and issue such orders as would secure the property against such embezzlement, concealment or conveyance. Sec. 19. Petition to sell or encumber property.-When the income of a property under guardianship is insufficient to maintain and educate the ward, or when it is for his benefit that his personal or real property or any part thereof be sold, mortgaged or otherwise encumbered, and the proceeds invested in safe and productive security, or in the improvement or security of other real property, the guardian may file a verified petition setting forth such facts, and praying that an order issue authorizing the sale or encumbrance of the property. Sec. 20. Order to show cause. – If the sale or encumbrance is necessary or would be beneficial to the ward, the court shall order his next of kin and all person/s interested in the property to appear at a reasonable time and place therein specified and show cause why the petition should not be granted. Sec. 21. Hearing on return of order; costs. – At the time and place designated in the order to show cause, the court shall hear the allegations and evidence of the petitioner and next of kin, and other persons interested, together with their witnesses, and grant or deny the petition as the best interests of the ward may require. Sec. 22. Contents of order for sale or encumbrance and its duration; bond. – If, after full examination, it is necessary, or would be beneficial to the ward, to sell or encumber the property, or some portion of it, the court shall order such sale or encumbrance the proceeds of which shall be expended for the maintenance or the education of the ward, or invested as the circumstances may require. The order shall specify the grounds for the sale or encumbrance and may direct that the property ordered sold be disposed of at public sale, subject to such conditions as to the time and manner of payment, and security where a part of the payment is deferred. The original bond of the guardian shall stand as security for the proper appropriation of the proceeds of the sale or encumbrance, but the court may, if deemed expedient, require an additional bond as a condition for the sale or encumbrance. The authority to sell or encumber shall not extend beyond one year, unless renewed by the court. Sec. 23. Court may order investment of proceeds and direct management of property.– The court may authorize and require the guardian to invest the proceeds of sales or encumbrances, and any other money of his ward in his hands, in real or personal property, for the best interests of the ward, and may make such

other orders for the management, investment, and disposition of the property and effects, as circumstances may warrant. Sec. 24. Grounds for removal or resignation of guardian. – When a guardian becomes insane or otherwise incapable of discharging his trust or is found thereafter to be unsuitable, or has wasted or mismanaged the property of the ward, or has failed to render an account or make a return for thirty days after it is due, the court may, upon reasonable notice to the guardian, remove him as such and require him to surrender the property of the ward to the person found to be lawfully entitled thereto.

The court may allow the guardian to resign for justifiable causes.

Upon the removal or resignation of the guardian, the court shall appoint a new one.

No motion for removal or resignation shall be granted unless the guardian has submitted the proper accounting of the property of the ward and the court has approved the same. Sec. 25. Ground for termination of guardianship. – The court motu proprio or upon verified motion of any person allowed to file a petition for guardianship may terminate the guardianship on the ground that the ward has come of age or has died. The guardian shall notify the court of such fact within ten days of its occurrence. Sec. 26. Service of final and executory judgment or order. – The final and executory judgment or order shall be served upon the Local Civil Registrar of the municipality or city where the minor resides and the Register of Deeds of the province or city where his property or any part thereof is situated. Both the Local Civil Registrar and’ the Register of Deeds shall enter the final and executory judgment or order in the appropriate books in their offices. Sec. 27. Effect of the rule. – This Rule amends Rules 92 to 97 inclusive of the Rules of Court on guardianship of minors. Guardianship of incompetents who are not minors shall continue to be under the jurisdiction of the regular courts and governed by the Rules of Court. Sec. 28. Effectivity. - This Rule shall take effect on May 1, 2003 following its publication in a newspaper of general circulation not later than April 15, 2003.

PART FIVE. TRUSTEESHIP

RULE 98. TRUSTEES SECTION 1. Where trustee appointed.—A trustee necessary to carry into effect the provisions of a will or written instrument shall be appointed by the Regional Trial Court in which the will was allowed, if it be a will allowed in the Philippines, otherwise by the Regional Trial Court of the province in which the property, or some portion thereof, affected by the trust is situated. SEC. 2. Appointment and powers of trustee under will. Executor of former trustee need not administer trust.—If a testator has omitted in his will to appoint a trustee in the Philippines, and if such appointment is necessary to carry into effect the provisions


of the will, the proper Regional Trial Court may, after notice to all persons interested, appoint a trustee who shall have the same rights, powers, and duties, and in whom the estate shall vest, as if he had been appointed by the testator. No person succeeding to a trust as executor or administrator of a former trustee shall be required to accept such trust. SEC. 3. Appointment and powers of new trustee under written instrument.—When a trustee under a written instrument declines, resigns, dies, or is removed before the objects of the trust are accomplished, and no adequate provision is made in such instrument for supplying the vacancy, the proper Regional Trial Court may, after due notice to all persons interested, appoint a new trustee to act alone or jointly with the others, as the case may be. Such new trustee shall have and exercise the same powers, rights, and duties as if he had been originally appointed, and the trust estate shall vest in him in like manner as it had vested or would have vested, in the trustee in whose place he is substituted; and the court may order such conveyance to be made by the former trustee or his representatives, or by the other remaining trustees, as may be necessary or proper to vest the trust estate in the new trustee, either alone or jointly with the others. SEC. 4. Proceedings where trustee- appointed abroad.— When land in the Philippines is held in trust for persons resident here by a trustee who derives his authority from without the Philippines, such trustee shall, on petition filed in the Regional Trial Court of the province where the land is situated, and after due notice to all persons interested, be ordered to apply to the court for appointment as trustee; and upon his neglect or refusal to comply with such order, the court shall declare such trust vacant, and shall appoint a new trustee in whom the trust estate shall vest in like manner as if he had been originally appointed by such court. SEC. 5. Trustee must file bond.—Before entering on the duties of his trust, a trustee shall file with the clerk of the court having jurisdiction of the trust a bond in the amount fixed by the judge of said court, payable to the Government of the Philippines and sufficient and available for the protection of any party in interest, and a trustee who neglects to file such bond shall be considered to have declined or resigned the trust; but the court may, until further order exempt a trustee under a will from giving a bond when the testator has directed or requested such exemption, and may so exempt any trustee when all persons beneficially interested in the trust, being of full age, request the exemption. Such exemption may be cancelled by the court at any time, and the trustee required to forthwith file a bond. SEC. 6. Conditions included in bond.—The following conditions shall be deemed to be a part of the bond whether written therein or not:

(a) That the trustee will make and return to the court, at such time as it may order, a true inventory of all the real and personal estate belonging to him as trustee, which at the time of the making of such inventory shall have come to his possession or knowledge;

(b) That he will manage and dispose of all such estate, and faithfully discharge his trust in relation thereto, according to law and the will of the testator or the provisions of the instrument or order under which he is appointed;

(c) That he will render upon oath at least once a year until his trust is fulfilled, unless he is excused therefrom in any

year by the court, a true account of the property in his hands and of the management and disposition thereof, and will render such other accounts as the court may order;

(d) That at the expiration of his trust he will settle his accounts in court and pay over and deliver all the estate remaining in his hands, or due from him on such settlement, to the person or persons entitled thereto.

But when the trustee is appointed as a successor to a prior trustee, the court may dispense with the making and return of an inventory, if one has already been filed, and in such case the condition of the bond shall be deemed to be altered accordingly. SEC. 7. Appraisal. Compensation of trustee.—When an inventory is required to be returned by a trustee, the estate and effects belonging to the trust shall be appraised and the court may order one or more inheritance tax appraisers to assist in the appraisement. The compensation of the trustee shall be fixed by the court, if it be not determined in the instrument creating the trust. SEC. 8. Removal or resignation of trustee.—The proper Regional Trial Court may, upon petition of the parties beneficially interested and after due notice to the trustee and hearing, remove a trustee if such removal appears essential in the interests of the petitioners. The court may also, after due notice to all persons interested, remove a trustee who is insane or otherwise incapable of discharging his trust or evidently unsuitable therefor. A trustee, whether appointed by the court or under a written instrument, may resign his trust if it appears to the court proper to allow such resignation. SEC. 9. Proceedings for sale or encumbrance of trust estate.—When the sale or encumbrance of any real or personal estate held in trust is necessary or expedient, the court having jurisdiction of the trust may, on petition and after due notice and hearing, order such sale or encumbrance to be made, and the reinvestment and application of the proceeds thereof in such manner as will best effect the objects of the trust. The petition, notice, hearing, order of sale or encumbrance, and record of proceedings, shall conform as nearly as may be to the provisions concerning the sale or encumbrance by guardians of the property of minors or other wards.

CIVIL CODE

CHAPTER 2 Express Trusts

Article 1443. No express trusts concerning an immovable or any interest therein may be proved by parol evidence. Article 1444. No particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended. Article 1445. No trust shall fail because the trustee appointed declines the designation, unless the contrary should appear in the instrument constituting the trust. Article 1446. Acceptance by the beneficiary is necessary. Nevertheless, if the trust imposes no onerous condition upon the beneficiary, his acceptance shall be presumed, if there is no proof to the contrary.


CASE NOTES De Leon v. Molo-Peckson (1962)

10

That the document represents a recognition of pre-existing trust or a declaration of an express trust impressed on the ten parcels of land in question is evident. A declaration of trust has been defined as an act by which a person acknowledges that the property, title to which he holds, is held by him for the use of another. Appellants obligingly complied with this duty by executing the document under consideration. Here the document in question clearly and unequivocally declares the existence of the trust even if the same was executed subsequent to the death of the trustor, Juana Juan, for it has been held that the right creating or declaring a trust need not be contemporaneous or inter-parties. It was even held that an express trust maybe declared by writing made after the legal estate has been vested in the trustee. The fact that the beneficiaries were not notified of the existence of the trust or that the latter have not been given an opportunity to accept it is of no importance, for it is not essential to the existence of a valid trust and to the right of the beneficiaries to enforce the same that they had knowledge thereof the time of its creation. Neither is it necessary that the beneficiary should consent to the creation of the trust. In fact it has been held that in case of a voluntary trust the assent of the beneficiary is not necessary to render it valid because as a general rule acceptance by the beneficiary is presumed. It is true that the alleged declaration of trust was revoked, and having been revoked it cannot be accepted, but the attempted revocation did not have any legal effect. The rule is that in the absence of any reservation of the power to revoke a voluntary trust is irrevocable without the consent of the beneficiary. It cannot be revoked by the creator alone, nor by the trustee. Here, there is no such reservation.

Heirs of Yap v. Court of Appeals (1999)11

In order to establish an implied trust in real property by parol evidence, the proof should be as fully convincing as if the acts giving rise to the trust obligation are proven by an authentic document. An implied trust cannot be established upon vague and inconclusive proof. Petitioners failed to adduce convincing evidence. Lorenzo’s widow herself admitted that the business establishment of her husband Lorenzo was razed by fire in 1964 that would somehow place to doubt the claim that he indeed had the means to purchase the subject land about two years later from the Nery spouses. On the other hand, Ramon Yap was by then an accountant with apparent means to buy the property himself. ALSO, assuming there was a trust agreement, it would have been in contravention of the Constitution. Section 5, Article XIII, of the 1935 Constitution has provided that “Save in cases of hereditary succession, no private agricultural land shall be transferred or assigned except to individuals, corporations, or associations, qualified to acquire or hold lands of the public domain in the Philippines.”

10 Based on the digest of Jian Boller, C2013 11 Based on the digest of Gianna de Jesus, C2013.

The mandate has also been adopted in Section 14, Article XIV, of the 1973 Constitution and now reiterated under Section 7, Article XII, of the 1987 Constitution. A trust or a provision in the terms of a trust would be invalid if the enforcement of the trust or provision is against the law even though its performance does not involve the commission of a criminal or tortuous act. It likewise must follow that what the parties are not allowed to do expressly is one that they also may not do impliedly as, for instance, in the guise of a resulting trust. PART SIX. ADOPTION AND CUSTODY OF MINORS I. ADOPTION AND CUSTODY OF MINORS

A. Adoption

RULE ON ADOPTION (A.M. No. 02-6-02) A. DOMESTIC ADOPTION Section 1. Applicability of the Rule. – This Rule covers the domestic adoption of Filipino children. Sec. 2. Objectives. – (a) The best interests of the child shall be the paramount consideration in all matters relating to his care, custody and adoption, in accordance with Philippine laws, the United Nations (UN) Convention on the Rights of the Child, UN Declaration on Social and Legal Principles Relating to the Protection and Welfare of Children with Special Reference to Foster Placement and Adoption, Nationally and Internationally, and the Hague Convention on the Protection of Children and Cooperation in Respect of Inter-country Adoption.

(b) The State shall provide alternative protection and assistance through foster care or adoption for every child who is a foundling, neglected, orphaned, or abandoned. To this end, the State shall:

(i) ensure that every child remains under the care and custody of his parents and is provided with love, care, understanding and security for the full and harmonious development of his personality. Only when such efforts prove insufficient and no appropriate placement or adoption within the child’s extended family is available shall adoption by an unrelated person be considered.

(ii) safeguard the biological parents from making hasty decisions in relinquishing their parental authority over their child;

(iii) prevent the child from unnecessary separation from his biological parents;

(iv) conduct public information and educational campaigns to promote a positive environment for adoption;

(v) ensure that government and private sector agencies have the capacity to handle adoption inquiries, process domestic adoption applications and offer adoption-related services including, but not limited to, parent preparation and post-adoption education and counseling;

(vi) encourage domestic adoption so as to preserve the child’s identity and culture in his native land, and only when this is not available shall inter-country adoption be considered as a last resort; and

(vii) protect adoptive parents from attempts to disturb their parental authority and custody over their adopted child.


Any voluntary or involuntary termination of parental authority shall be administratively or judicially declared so as to establish the status of the child as “legally available for adoption” and his custody transferred to the Department of Social Welfare and Development or to any duly licensed and accredited child-placing or child-caring agency, which entity shall be authorized to take steps for the permanent placement of the child. Sec. 3. Definition of Terms. – For purposes of this Rule:

(a) “Child” is a person below eighteen (18) years of age at the time of the filing of the petition for adoption.

(b) “A child legally available for adoption” refers to a child who has been voluntarily or involuntarily committed to the Department or to a duly licensed and accredited child-placing or child-caring agency, freed of the parental authority of his biological parents, or in case of rescission of adoption, his guardian or adopter(s).

(c) “Voluntarily committed child” is one whose parents knowingly and willingly relinquish parental authority over him in favor of the Department.

(d) “Involuntarily committed child” is one whose parents, known or unknown, have been permanently and judicially deprived of parental authority over him due to abandonment; substantial, continuous or repeated neglect and abuse; or incompetence to discharge parental responsibilities.

(e) “Foundling” refers to a deserted or abandoned infant or child whose parents, guardian or relatives are unknown; or a child committed to an orphanage or charitable or similar institution with unknown facts of birth and parentage and registered in the Civil Register as a “foundling.”

(f) “Abandoned child” refers to one who has no proper parental care or guardianship or whose parents have deserted him for a period of at least six (6) continuous months and has been judicially declared as such.

(g) “Dependent child” refers to one who is without a parent, guardian or custodian or one whose parents, guardian or other custodian for good cause desires to be relieved of his care and custody and is dependent upon the public for support.

(h) “Neglected child” is one whose basic needs have been deliberately not attended to or inadequately attended to, physically or emotionally, by his parents or guardian.

(i) “Physical neglect” occurs when the child is malnourished, ill-clad and without proper shelter.

(j) “Emotional neglect” exists when a child is raped, seduced, maltreated, exploited, overworked or made to work under conditions not conducive to good health or made to beg in the streets or public places, or placed in moral danger, or exposed to drugs, alcohol, gambling, prostitution and other vices.

(k) “Child-placement agency” refers to an agency duly licensed and accredited by the Department to provide comprehensive child welfare services including, but not limited to, receiving applications for adoption, evaluating the prospective adoptive parents and preparing the adoption home study report.

(l) “Child-caring agency” refers to an agency duly licensed and accredited by the Department that provides 24-hour residential care services for abandoned, orphaned, neglected or voluntarily committed children.

(m) “Department” refers to the Department of Social Welfare and Development.

(n) “Deed of Voluntary Commitment” refers to the written and notarized instrument relinquishing parental authority and committing the child to the care and custody of the Department executed by the child’s biological parents or in their absence, mental incapacity or death, by the child’s legal guardian,

to be witnessed by an authorized representative of the Department after counseling and other services have been made available to encourage the biological parents to keep the child.

(o) “Child Study Report” refers to a study made by the court social worker of the child’s legal status, placement history, psychological, social, spiritual, medical, ethno-cultural background and that of his biological family needed in determining the most appropriate placement for him.

(p) “Home Study Report” refers to a study made by the court social worker of the motivation and capacity of the prospective adoptive parents to provide a home that meets the needs of a child.

(q) “Supervised trial custody” refers to the period of time during which a social worker oversees the adjustment and emotional readiness of both adopters and adoptee in stabilizing their filial relationship.

(r) “Licensed Social Worker” refers to one who possesses a degree in bachelor of science in social work as a minimum educational requirement and who has passed the government licensure examination for social workers as required by Republic Act No. 4373.

(s) “Simulation of birth” is the tampering of the civil registry to make it appear in the birth records that a certain child was born to a person who is not his biological mother, thus causing such child to lose his true identity and status.

(t) “Biological Parents” refer to the child’s mother and father by nature.

(u) “Pre-Adoption Services” refer to psycho-social services provided by professionally-trained social workers of the Department, the social services units of local governments, private and government health facilities, Family Courts, licensed and accredited child-caring and child-placement agencies and other individuals or entities involved in adoption as authorized by the Department.

(v) “Residence” means a person’s actual stay in the Philippines for three (3) continuous years immediately prior to the filing of a petition for adoption and which is maintained until the adoption decree is entered. Temporary absences for professional, business, health, or emergency reasons not exceeding sixty (60) days in one (1) year does not break the continuity requirement.

(w) “Alien” refers to any person, not a Filipino citizen, who enters and remains in the Philippines and is in possession of a valid passport or travel documents and visa. SEC. 4. Who may adopt. – The following may adopt:

(1) Any Filipino citizen of legal age, in possession of full civil capacity and legal rights, of good moral character, has not been convicted of any crime involving moral turpitude; who is emotionally and psychologically capable of caring for children, at least sixteen (16) years older than the adoptee, and who is in a position to support and care for his children in keeping with the means of the family. The requirement of a 16-year difference between the age of the adopter and adoptee may be waived when the adopter is the biological parent of the adoptee or is the spouse of the adoptee’s parent;

(2) Any alien possessing the same qualifications as above-stated for Filipino nationals: Provided, That his country has diplomatic relations with the Republic of the Philippines, that he has been living in the Philippines for at least three (3) continuous years prior to the filing of the petition for adoption and maintains such residence until the adoption decree is entered, that he has been certified by his diplomatic or consular office or any appropriate government agency to have the legal capacity to


adopt in his country, and that his government allows the adoptee to enter his country as his adopted child. Provided, further, That the requirements on residency and certification of the alien’s qualification to adopt in his country may be waived for the following:

(i) a former Filipino citizen who seeks to adopt a relative within the fourth (4th) degree of consanguinity or affinity; or

(ii) one who seeks to adopt the legitimate child of his Filipino spouse; or

(iii) one who is married to a Filipino citizen and seeks to adopt jointly with his spouse a relative within the fourth (4th) degree of consanguinity or affinity of the Filipino spouse.

(3) The guardian with respect to the ward after the termination of the guardianship and clearance of his financial accountabilities.

Husband and wife shall jointly adopt, except in the following cases:

(i) if one spouse seeks to adopt the legitimate child of one spouse by the other spouse; or

(ii) if one spouse seeks to adopt his own illegitimate child: Provided, however, That the other spouse has signified his consent thereto; or

(iii) if the spouses are legally separated from each other. In case husband and wife jointly adopt or one spouse

adopts the illegitimate child of the other, joint parental authority shall be exercised by the spouses. SEC. 5. Who may be adopted. – The following may be adopted:

(1) Any person below eighteen (18) years of age who has been voluntarily committed to the Department under Articles 154, 155 and 156 of P.D. No. 603 or judicially declared available for adoption;

(2) The legitimate child of one spouse, by the other spouse;

(3) An illegitimate child, by a qualified adopter to raise the status of the former to that of legitimacy;

(4) A person of legal age regardless of civil status, if, prior to the adoption, said person has been consistently considered and treated by the adopters as their own child since minority;

(5) A child whose adoption has been previously rescinded; or

(6) A child whose biological or adoptive parents have died: Provided, That no proceedings shall be initiated within six (6) months from the time of death of said parents.

(7) A child not otherwise disqualified by law or these rules. Sec. 6. Venue. – The petition for adoption shall be filed with the Family Court of the province or city where the prospective adoptive parents reside. Sec. 7. Contents of the Petition. – The petition shall be verified and specifically state at the heading of the initiatory pleading whether the petition contains an application for change of name, rectification of simulated birth, voluntary or involuntary commitment of children, or declaration of child as abandoned, dependent or neglected.

(1) If the adopter is a Filipino citizen, the petition shall allege the following:

(a) The jurisdictional facts; (b) That the petitioner is of legal age, in possession of

full civil capacity and legal rights; is of good moral character; has not been convicted of any crime involving moral turpitude; is

emotionally and psychologically capable of caring for children; is at least sixteen (16) years older than the adoptee, unless the adopter is the biological parent of the adoptee or is the spouse of the adoptee’s parent; and is in a position to support and care for his children in keeping with the means of the family and has undergone pre-adoption services as required by Section 4 of Republic Act No. 8552.

(2) If the adopter is an alien, the petition shall allege the following:

(a) The jurisdictional facts; (b) Sub-paragraph 1(b) above; (c) That his country has diplomatic relations with the

Republic of the Philippines; (d) That he has been certified by his diplomatic or

consular office or any appropriate government agency to have the legal capacity to adopt in his country and his government allows the adoptee to enter his country as his adopted child and reside there permanently as an adopted child; and

(e) That he has been living in the Philippines for at least three (3) continuous years prior to the filing of the petition and he maintains such residence until the adoption decree is entered.

The requirements of certification of the alien’s qualification to adopt in his country and of residency may be waived if the alien:

(i) is a former Filipino citizen who seeks to adopt a relative within the fourth degree of consanguinity or affinity; or

(ii) seeks to adopt the legitimate child of his Filipino spouse; or

(iii) is married to a Filipino citizen and seeks to adopt jointly with his spouse a relative within the fourth degree of consanguinity or affinity of the Filipino spouse.

(3) If the adopter is the legal guardian of the adoptee, the petition shall allege that guardianship had been terminated and the guardian had cleared his financial accountabilities.

(4) If the adopter is married, the spouse shall be a co-petitioner for joint adoption except if:

(a) one spouse seeks to adopt the legitimate child of the other, or

(b) if one spouse seeks to adopt his own illegitimate child and the other spouse signified written consent thereto, or

(c) if the spouses are legally separated from each other. (5) If the adoptee is a foundling, the petition shall allege

the entries which should appear in his birth certificate, such as name of child, date of birth, place of birth, if known; sex, name and citizenship of adoptive mother and father, and the date and place of their marriage.

(6) If the petition prays for a change of name, it shall also state the cause or reason for the change of name.

In all petitions, it shall be alleged: (a) The first name, surname or names, age and

residence of the adoptee as shown by his record of birth, baptismal or foundling certificate and school records.

(b) That the adoptee is not disqualified by law to be adopted.

(c) The probable value and character of the estate of the adoptee.

(d) The first name, surname or names by which the adoptee is to be known and registered in the Civil Registry.

A certification of non-forum shopping shall be included pursuant to Section 5, Rule 7 of the 1997 Rules of Civil Procedure. Sec. 8. Rectification of Simulated Birth. – In case the petition also seeks rectification of a simulated of birth, it shall allege that:


(a) Petitioner is applying for rectification of a simulated birth;

(b) The simulation of birth was made prior to the date of effectivity of Republic Act No. 8552 and the application for rectification of the birth registration and the petition for adoption were filed within five years from said date;

(c) The petitioner made the simulation of birth for the best interests of the adoptee; and

(d) The adoptee has been consistently considered and treated by petitioner as his own child. Sec. 9. Adoption of a foundling, an abandoned, dependent or neglected child. – In case the adoptee is a foundling, an abandoned, dependent or neglected child, the petition shall allege:

(a) The facts showing that the child is a foundling, abandoned, dependent or neglected;

(b) The names of the parents, if known, and their residence. If the child has no known or living parents, then the name and residence of the guardian, if any;

(c) The name of the duly licensed child-placement agency or individual under whose care the child is in custody; and

(d) That the Department, child-placement or child-caring agency is authorized to give its consent. Sec. 10. Change of name. – In case the petition also prays for change of name, the title or caption must contain:

(a) The registered name of the child; (b) Aliases or other names by which the child has been

known; and (c) The full name by which the child is to be known.

Sec. 11. Annexes to the Petition. – The following documents shall be attached to the petition:

A. Birth, baptismal or foundling certificate, as the case may be, and school records showing the name, age and residence of the adoptee;

B. Affidavit of consent of the following: 1. The adoptee, if ten (10) years of age or over; 2. The biological parents of the child, if known, or the

legal guardian, or the child-placement agency, child-caring agency, or the proper government instrumentality which has legal custody of the child;

3. The legitimate and adopted children of the adopter and of the adoptee, if any, who are ten (10) years of age or over;

4. The illegitimate children of the adopter living with him who are ten (10) years of age or over; and

5. The spouse, if any, of the adopter or adoptee. C. Child study report on the adoptee and his biological

parents; D. If the petitioner is an alien, certification by his

diplomatic or consular office or any appropriate government agency that he has the legal capacity to adopt in his country and that his government allows the adoptee to enter his country as his own adopted child unless exempted under Section 4(2);

E. Home study report on the adopters. If the adopter is an alien or residing abroad but qualified to adopt, the home study report by a foreign adoption agency duly accredited by the Inter-Country Adoption Board; and

F. Decree of annulment, nullity or legal separation of the adopter as well as that of the biological parents of the adoptee, if any.

Sec. 12. Order of Hearing. – If the petition and attachments are sufficient in form and substance, the court shall issue an order which shall contain the following:

(1) the registered name of the adoptee in the birth certificate and the names by which the adoptee has been known which shall be stated in the caption;

(2) the purpose of the petition; (3) the complete name which the adoptee will use if the

petition is granted; (4) the date and place of hearing which shall be set

within six (6) months from the date of the issuance of the order and shall direct that a copy thereof be published before the date of hearing at least once a week for three successive weeks in a newspaper of general circulation in the province or city where the court is situated; Provided, that in case of application for change of name, the date set for hearing shall not be within four (4) months after the last publication of the notice nor within thirty (30) days prior to an election.

The newspaper shall be selected by raffle under the supervision of the Executive Judge.

(5) a directive to the social worker of the court, the social service office of the local government unit or any child-placing or child-caring agency, or the Department to prepare and submit child and home study reports before the hearing if such reports had not been attached to the petition due to unavailability at the time of the filing of the latter; and

(6) a directive to the social worker of the court to conduct counseling sessions with the biological parents on the matter of adoption of the adoptee and submit her report before the date of hearing.

At the discretion of the court, copies of the order of hearing shall also be furnished the Office of the Solicitor General through the provincial or city prosecutor, the Department and the biological parents of the adoptee, if known.

If a change in the name of the adoptee is prayed for in the petition, notice to the Solicitor General shall be mandatory. Sec. 13. Child and Home Study Reports. – In preparing the child study report on the adoptee, the concerned social worker shall verify with the Civil Registry the real identity and registered name of the adoptee. If the birth of the adoptee was not registered with the Civil Registry, it shall be the responsibility of the social worker to register the adoptee and secure a certificate of foundling or late registration, as the case may be.

The social worker shall establish that the child is legally available for adoption and the documents in support thereof are valid and authentic, that the adopter has sincere intentions and that the adoption shall inure to the best interests of the child.

In case the adopter is an alien, the home study report must show the legal capacity to adopt and that his government allows the adoptee to enter his country as his adopted child in the absence of the certification required under Section 7(b) of Republic Act No. 8552.

If after the conduct of the case studies, the social worker finds that there are grounds to deny the petition, he shall make the proper recommendation to the court, furnishing a copy thereof to the petitioner. Sec. 14. Hearing. – Upon satisfactory proof that the order of hearing has been published and jurisdictional requirements have been complied with, the court shall proceed to hear the petition. The petitioner and the adoptee must personally appear and the former must testify before the presiding judge of the court on the date set for hearing.


The court shall verify from the social worker and determine whether the biological parent has been properly counseled against making hasty decisions caused by strain or anxiety to give up the child; ensure that all measures to strengthen the family have been exhausted; and ascertain if any prolonged stay of the child in his own home will be inimical to his welfare and interest. Sec. 15. Supervised Trial Custody. – Before issuance of the decree of adoption, the court shall give the adopter trial custody of the adoptee for a period of at least six (6) months within which the parties are expected to adjust psychologically and emotionally to each other and establish a bonding relationship. The trial custody shall be monitored by the social worker of the court, the Department, or the social service of the local government unit, or the child-placement or child-caring agency which submitted and prepared the case studies. During said period, temporary parental authority shall be vested in the adopter.

The court may, motu proprio or upon motion of any party, reduce the period or exempt the parties if it finds that the same shall be for the best interests of the adoptee, stating the reasons therefor.

An alien adopter however must complete the 6-month trial custody except the following:

a) a former Filipino citizen who seeks to adopt a relative within the fourth (4th) degree of consanguinity or affinity; or

b) one who seeks to adopt the legitimate child of his Filipino spouse; or

c) one who is married to a Filipino citizen and seeks to adopt jointly with his or her spouse the latter’s relative within the fourth (4th) degree of consanguinity or affinity.

If the child is below seven (7) years of age and is placed with the prospective adopter through a pre-adoption placement authority issued by the Department, the court shall order that the prospective adopter shall enjoy all the benefits to which the biological parent is entitled from the date the adoptee is placed with him.

The social worker shall submit to the court a report on the result of the trial custody within two weeks after its termination. Sec. 16. Decree of Adoption. – If the supervised trial custody is satisfactory to the parties and the court is convinced from the trial custody report and the evidence adduced that the adoption shall redound to the best interests of the adoptee, a decree of adoption shall be issued which shall take effect as of the date the original petition was filed even if the petitioners die before its issuance.

The decree shall: A. State the name by which the child is to be known

and registered; B. Order:

1) the Clerk of Court to issue to the adopter a certificate of finality upon expiration of the 15-day reglementary period within which to appeal;

2) the adopter to submit a certified true copy of the decree of adoption and the certificate of finality to the Civil Registrar where the child was originally registered within thirty (30) days from receipt of the certificate of finality. In case of change of name, the decree shall be submitted to the Civil Registrar where the court issuing the same is situated.

3) the Civil Registrar of the place where the adoptee was registered:

a. to annotate on the adoptee’s original certificate of birth the decree of adoption within thirty (30) days from receipt of the certificate of finality;

b. to issue a certificate of birth which shall not bear any notation that it is a new or amended certificate and which shall show, among others, the following: registry number, date of registration, name of child, sex, date of birth, place of birth, name and citizenship of adoptive mother and father, and the date and place of their marriage, when applicable;

c. to seal the original certificate of birth in the civil registry records which can be opened only upon order of the court which issued the decree of adoption; and

d. to submit to the court issuing the decree of adoption proof of compliance with all the foregoing within thirty days from receipt of the decree.

If the adoptee is a foundling, the court shall order the Civil Registrar where the foundling was registered, to annotate the decree of adoption on the foundling certificate and a new birth certificate shall be ordered prepared by the Civil Registrar in accordance with the decree. Sec. 17. Book of Adoptions. – The Clerk of Court shall keep a book of adoptions showing the date of issuance of the decree in each case, compliance by the Civil Registrar with Section 16(B)(3) and all incidents arising after the issuance of the decree. Sec. 18. Confidential Nature of Proceedings and Records. – All hearings in adoption cases, after compliance with the jurisdictional requirements shall be confidential and shall not be open to the public. All records, books and papers relating to the adoption cases in the files of the court, the Department, or any other agency or institution participating in the adoption proceedings shall be kept strictly confidential.

If the court finds that the disclosure of the information to a third person is necessary for security reasons or for purposes connected with or arising out of the adoption and will be for the best interests of the adoptee, the court may, upon proper motion, order the necessary information to be released, restricting the purposes for which it may be used. Sec. 19. Rescission of Adoption of the Adoptee. – The petition shall be verified and filed by the adoptee who is over eighteen (18) years of age, or with the assistance of the Department, if he is a minor, or if he is over eighteen (18) years of age but is incapacitated, by his guardian or counsel.

The adoption may be rescinded based on any of the following grounds committed by the adopter:

1) repeated physical and verbal maltreatment by the adopter despite having undergone counseling;

2) attempt on the life of the adoptee; 3) sexual assault or violence; or 4) abandonment or failure to comply with parental

obligations. Adoption, being in the best interests of the child, shall

not be subject to rescission by the adopter. However, the adopter may disinherit the adoptee for causes provided in Article 919 of the Civil Code. Sec. 20. Venue. – The petition shall be filed with the Family Court of the city or province where the adoptee resides. Sec. 21. Time within which to file petition. – The adoptee, if incapacitated, must file the petition for rescission or revocation of adoption within five (5) years after he reaches the age of majority,


or if he was incompetent at the time of the adoption, within five (5) years after recovery from such incompetency. Sec. 22. Order to Answer. – The court shall issue an order requiring the adverse party to answer the petition within fifteen (15) days from receipt of a copy thereof. The order and copy of the petition shall be served on the adverse party in such manner as the court may direct. Sec. 23. Judgment. – If the court finds that the allegations of the petition are true, it shall render judgment ordering the rescission of adoption, with or without costs, as justice requires. The court shall order that the parental authority of the biological parent of the adoptee, if known, or the legal custody of the Department shall be restored if the adoptee is still a minor or incapacitated and declare that the reciprocal rights and obligations of the adopter and the adoptee to each other shall be extinguished.

The court shall further declare that successional rights shall revert to its status prior to adoption, as of the date of judgment of judicial rescission. Vested rights acquired prior to judicial rescission shall be respected.

It shall also order the adoptee to use the name stated in his original birth or foundling certificate.

The court shall further order the Civil Registrar where the adoption decree was registered to cancel the new birth certificate of the adoptee and reinstate his original birth or foundling certificate. Sec. 24. Service of Judgment. – A certified true copy of the judgment together with a certificate of finality issued by the Branch Clerk of the Court which rendered the decision in accordance with the preceding Section shall be served by the petitioner upon the Civil Registrar concerned within thirty (30) days from receipt of the certificate of finality. The Civil Registrar shall forthwith enter the rescission decree in the register and submit proof of compliance to the court issuing the decree and the Clerk of Court within thirty (30) days from receipt of the decree.

The Clerk of Court shall enter the compliance in accordance with Section 17 hereof. SEC. 25. Repeal. - This supersedes Rule 99 on Adoption and Rule 100 of the Rules of Court. B. Inter-Country Adoption Sec. 26. Applicability. – The following sections apply to inter-country adoption of Filipino children by foreign nationals and Filipino citizens permanently residing abroad. SEC. 27. Objectives. – The State shall:

a) consider inter-country adoption as an alternative means of child care, if the child cannot be placed in a foster or an adoptive family or cannot, in any suitable manner, be cared for in the Philippines;

b) ensure that the child subject of inter-country adoption enjoys the same protection accorded to children in domestic adoption; and

c) take all measures to ensure that the placement arising therefrom does not result in improper financial gain for those involved.

Sec. 28. Where to File Petition. – A verified petition to adopt a Filipino child may be filed by a foreign national or Filipino citizen permanently residing abroad with the Family Court having jurisdiction over the place where the child resides or may be found.

It may be filed directly with the Inter-Country Adoption Board. Sec. 29. Who may be adopted. – Only a child legally available for domestic adoption may be the subject of inter-country adoption. Sec. 30. Contents of Petition. – The petitioner must allege:

a) his age and the age of the child to be adopted, showing that he is at least twenty-seven (27) years of age and at least sixteen (16) years older than the child to be adopted at the time of application, unless the petitioner is the parent by nature of the child to be adopted or the spouse of such parent, in which case the age difference does not apply;

b) if married, the name of the spouse who must be joined as co-petitioner except when the adoptee is a legitimate child of his spouse;

c) that he has the capacity to act and assume all rights and responsibilities of parental authority under his national laws, and has undergone the appropriate counseling from an accredited counselor in his country;

d) that he has not been convicted of a crime involving moral turpitude;

e) that he is eligible to adopt under his national law; f) that he can provide the proper care and support and

instill the necessary moral values and example to all his children, including the child to be adopted;

g) that he agrees to uphold the basic rights of the child, as embodied under Philippine laws and the U. N. Convention on the Rights of the Child, and to abide by the rules and regulations issued to implement the provisions of Republic Act No. 8043;

h) that he comes from a country with which the Philippines has diplomatic relations and whose government maintains a similarly authorized and accredited agency and that adoption of a Filipino child is allowed under his national laws; and

i) that he possesses all the qualifications and none of the disqualifications provided in this Rule, in Republic Act No. 8043 and in all other applicable Philippine laws. Sec. 31. Annexes. - The petition for adoption shall contain the following annexes written and officially translated in English:

a) Birth certificate of petitioner; b) Marriage contract, if married, and, if applicable, the

divorce decree, or judgment dissolving the marriage; c) Sworn statement of consent of petitioner’s biological

or adopted children above ten (10) years of age; d) Physical, medical and psychological evaluation of the

petitioner certified by a duly licensed physician and psychologist; e) Income tax returns or any authentic document

showing the current financial capability of the petitioner; f) Police clearance of petitioner issued within six (6)

months before the filing of the petitioner; g) Character reference from the local church/minister,

the petitioner’s employer and a member of the immediate community who have known the petitioner for at least five (5) years;

h) Full body postcard-size pictures of the petitioner and his immediate family taken at least six (6) months before the filing of the petition.


Sec. 32. Duty of Court. – The court, after finding that the petition is sufficient in form and substance and a proper case for inter-country adoption, shall immediately transmit the petition to the Inter-Country Adoption Board for appropriate action. SEC. 33. Effectivity. - This Rule shall take effect on August 22, 2002 following its publication in a newspaper of general circulation. Republic Act No. 8552 February 25, 1998 AN ACT ESTABLISHING THE RULES AND POLICIES ON THE DOMESTIC ADOPTION OF FILIPINO CHILDREN AND FOR OTHER PURPOSES Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:: ARTICLE I. GENERAL PROVISIONS Section 1. Short Title. – This Act shall be known as the "Domestic Adoption Act of 1998." Section 2. Declaration of Policies. – (a) It is hereby declared the policy of the State to ensure that every child remains under the care and custody of his/her parent(s) and be provided with love, care, understanding and security towards the full and harmonious development of his/her personality. Only when such efforts prove insufficient and no appropriate placement or adoption within the child's extended family is available shall adoption by an unrelated person be considered.

(b) In all matters relating to the care, custody and adoption of a child, his/her interest shall be the paramount consideration in accordance with the tenets set forth in the United Nations (UN) Convention on the Rights of the Child; UN Declaration on Social and Legal Principles Relating to the Protection and Welfare of Children with Special Reference to Foster Placement and Adoption, Nationally and Internationally; and the Hague Convention on the Protection of Children and Cooperation in Respect of Intercountry Adoption. Toward this end, the State shall provide alternative protection and assistance through foster care or adoption for every child who is neglected, orphaned, or abandoned.

(c) It shall also be a State policy to: (i) Safeguard the biological parent(s) from making

hurried decisions to relinquish his/her parental authority over his/her child;

(ii) Prevent the child from unnecessary separation from his/her biological parent(s);

(iii) Protect adoptive parent(s) from attempts to disturb his/her parental authority and custody over his/her adopted child.

Any voluntary or involuntary termination of parental authority shall be administratively or judicially declared so as to establish the status of the child as "legally available for adoption" and his/her custody transferred to the Department of Social Welfare and Development or to any duly licensed and accredited child-placing or child-caring agency, which entity shall be authorized to take steps for the permanent placement of the child;

(iv) Conduct public information and educational campaigns to promote a positive environment for adoption;

(v) Ensure that sufficient capacity exists within government and private sector agencies to handle adoption inquiries, process domestic adoption applications, and offer adoption-related services including, but not limited to, parent preparation and post-adoption education and counseling; and

(vi) Encourage domestic adoption so as to preserve the child's identity and culture in his/her native land, and only when this is not available shall intercountry adoption be considered as a last resort. Section 3. Definition of Terms. – For purposes of this Act, the following terms shall be defined as:

(a) "Child" is a person below eighteen (18) years of age. (b) "A child legally available for adoption" refers to a

child who has been voluntarily or involuntarily committed to the Department or to a duly licensed and accredited child-placing or child-caring agency, freed of the parental authority of his/her biological parent(s) or guardian or adopter(s) in case of rescission of adoption.

(c) "Voluntarily committed child" is one whose parent(s) knowingly and willingly relinquishes parental authority to the Department.

(d) "Involuntarily committed child" is one whose parent(s), known or unknown, has been permanently and judicially deprived of parental authority due to abandonment; substantial, continuous, or repeated neglect; abuse; or incompetence to discharge parental responsibilities.

(e) "Abandoned child" refers to one who has no proper parental care or guardianship or whose parent(s) has deserted him/her for a period of at least six (6) continuous months and has been judicially declared as such.

(f) "Supervised trial custody" is a period of time within which a social worker oversees the adjustment and emotional readiness of both adopter(s) and adoptee in stabilizing their filial relationship.

(g) "Department" refers to the Department of Social Welfare and Development.

(h) "Child-placing agency" is a duly licensed and accredited agency by the Department to provide comprehensive child welfare services including, but not limited to, receiving applications for adoption, evaluating the prospective adoptive parents, and preparing the adoption home study.

(i) "Child-caring agency" is a duly licensed and accredited agency by the Department that provides twenty four (24)-hour residential care services for abandoned, orphaned, neglected, or voluntarily committed children.

(j) "Simulation of birth" is the tampering of the civil registry making it appear in the birth records that a certain child was born to a person who is not his/her biological mother, causing such child to lose his/her true identity and status. ARTICLE II. PRE-ADOPTION SERVICES Section 4. Counseling Service. – The Department shall provide the services of licensed social workers to the following:

(a) Biological Parent(s) – Counseling shall be provided to the parent(s) before and after the birth of his/her child. No binding commitment to an adoption plan shall be permitted before the birth of his/her child. A period of six (6) months shall be allowed for the biological parent(s) to reconsider any decision to relinquish his/her child for adoption before the decision becomes irrevocable. Counseling and rehabilitation services shall also be offered to the biological parent(s) after he/she has relinquished his/her child for adoption.


Steps shall be taken by the Department to ensure that no hurried decisions are made and all alternatives for the child's future and the implications of each alternative have been provided.

(b) Prospective Adoptive Parent(s) – Counseling sessions, adoption fora and seminars, among others, shall be provided to prospective adoptive parent(s) to resolve possible adoption issues and to prepare him/her for effective parenting.

(c) Prospective Adoptee – Counseling sessions shall be provided to ensure that he/she understands the nature and effects of adoption and is able to express his/her views on adoption in accordance with his/her age and level of maturity. Section 5. Location of Unknown Parent(s). – It shall be the duty of the Department or the child-placing or child-caring agency which has custody of the child to exert all efforts to locate his/her unknown biological parent(s). If such efforts fail, the child shall be registered as a foundling and subsequently be the subject of legal proceedings where he/she shall be declared abandoned. Section 6. Support Services. – The Department shall develop a pre-adoption program which shall include, among others, the above mentioned services. ARTICLE III. ELIGIBILITY Section 7. Who May Adopt. – The following may adopt:

(a) Any Filipino citizen of legal age, in possession of full civil capacity and legal rights, of good moral character, has not been convicted of any crime involving moral turpitude, emotionally and psychologically capable of caring for children, at least sixteen (16) years older than the adoptee, and who is in a position to support and care for his/her children in keeping with the means of the family. The requirement of sixteen (16) year difference between the age of the adopter and adoptee may be waived when the adopter is the biological parent of the adoptee, or is the spouse of the adoptee's parent;

(b) Any alien possessing the same qualifications as above stated for Filipino nationals: Provided, That his/her country has diplomatic relations with the Republic of the Philippines, that he/she has been living in the Philippines for at least three (3) continuous years prior to the filing of the application for adoption and maintains such residence until the adoption decree is entered, that he/she has been certified by his/her diplomatic or consular office or any appropriate government agency that he/she has the legal capacity to adopt in his/her country, and that his/her government allows the adoptee to enter his/her country as his/her adopted son/daughter: Provided, Further, That the requirements on residency and certification of the alien's qualification to adopt in his/her country may be waived for the following:

(i) a former Filipino citizen who seeks to adopt a relative within the fourth (4th) degree of consanguinity or affinity; or

(ii) one who seeks to adopt the legitimate son/daughter of his/her Filipino spouse; or

(iii) one who is married to a Filipino citizen and seeks to adopt jointly with his/her spouse a relative within the fourth (4th) degree of consanguinity or affinity of the Filipino spouse; or (c) The guardian with respect to the ward after the termination of the guardianship and clearance of his/her financial accountabilities.

Husband and wife shall jointly adopt, except in the following cases:

(i) if one spouse seeks to adopt the legitimate son/daughter of the other; or

(ii) if one spouse seeks to adopt his/her own illegitimate son/daughter: Provided, However, that the other spouse has signified his/her consent thereto; or

(iii) if the spouses are legally separated from each other. In case husband and wife jointly adopt, or one spouse adopts the illegitimate son/daughter of the other, joint parental authority shall be exercised by the spouses. Section 8. Who May Be Adopted. – The following may be adopted:

(a) Any person below eighteen (18) years of age who has been administratively or judicially declared available for adoption;

(b) The legitimate son/daughter of one spouse by the other spouse;

(c) An illegitimate son/daughter by a qualified adopter to improve his/her status to that of legitimacy;

(d) A person of legal age if, prior to the adoption, said person has been consistently considered and treated by the adopter(s) as his/her own child since minority;

(e) A child whose adoption has been previously rescinded; or

(f) A child whose biological or adoptive parent(s) has died: Provided, That no proceedings shall be initiated within six (6) months from the time of death of said parent(s). Section 9. Whose Consent is Necessary to the Adoption. – After being properly counseled and informed of his/her right to give or withhold his/her approval of the adoption, the written consent of the following to the adoption is hereby required:

(a) The adoptee, if ten (10) years of age or over; (b) The biological parent(s) of the child, if known, or the

legal guardian, or the proper government instrumentality which has legal custody of the child;

(c) The legitimate and adopted sons/daughters, ten (10) years of age or over, of the adopter(s) and adoptee, if any;

(d) The illegitimate sons/daughters, ten (10) years of age or over, of the adopter if living with said adopter and the latter's spouse, if any; and

(e) The spouse, if any, of the person adopting or to be adopted. ARTICLE IV. PROCEDURE Section 10. Hurried Decisions. – In all proceedings for adoption, the court shall require proof that the biological parent(s) has been properly counseled to prevent him/her from making hurried decisions caused by strain or anxiety to give up the child, and to sustain that all measures to strengthen the family have been exhausted and that any prolonged stay of the child in his/her own home will be inimical to his/her welfare and interest. Section 11. Case Study. – No petition for adoption shall be set for hearing unless a licensed social worker of the Department, the social service office of the local government unit, or any child-placing or child-caring agency has made a case study of the adoptee, his/her biological parent(s), as well as the adopter(s), and has submitted the report and recommendations on the matter to the court hearing such petition.

At the time of preparation of the adoptee's case study, the concerned social worker shall confirm with the Civil Registry the real identity and registered name of the adoptee. If the birth of the adoptee was not registered with the Civil Registry, it shall


be the responsibility of the concerned social worker to ensure that the adoptee is registered.

The case study on the adoptee shall establish that he/she is legally available for adoption and that the documents to support this fact are valid and authentic. Further, the case study of the adopter(s) shall ascertain his/her genuine intentions and that the adoption is in the best interest of the child.

The Department shall intervene on behalf of the adoptee if it finds, after the conduct of the case studies, that the petition should be denied. The case studies and other relevant documents and records pertaining to the adoptee and the adoption shall be preserved by the Department. Section 12. Supervised Trial Custody. – No petition for adoption shall be finally granted until the adopter(s) has been given by the court a supervised trial custody period for at least six (6) months within which the parties are expected to adjust psychologically and emotionally to each other and establish a bonding relationship. During said period, temporary parental authority shall be vested in the adopter(s).

The court may motu proprio or upon motion of any party reduce the trial period if it finds the same to be in the best interest of the adoptee, stating the reasons for the reduction of the period. However, for alien adopter(s), he/she must complete the six (6)-month trial custody except for those enumerated in Sec. 7 (b) (i) (ii) (iii).

If the child is below seven (7) years of age and is placed with the prospective adopter(s) through a pre-adoption placement authority issued by the Department, the prospective adopter(s) shall enjoy all the benefits to which biological parent(s) is entitled from the date the adoptee is placed with the prospective adopter(s). Section 13. Decree of Adoption. – If, after the publication of the order of hearing has been complied with, and no opposition has been interposed to the petition, and after consideration of the case studies, the qualifications of the adopter(s), trial custody report and the evidence submitted, the court is convinced that the petitioners are qualified to adopt, and that the adoption would redound to the best interest of the adoptee, a decree of adoption shall be entered which shall be effective as of the date the original petition was filed. This provision shall also apply in case the petitioner(s) dies before the issuance of the decree of adoption to protect the interest of the adoptee. The decree shall state the name by which the child is to be known. Section 14. Civil Registry Record. – An amended certificate of birth shall be issued by the Civil Registry, as required by the Rules of Court, attesting to the fact that the adoptee is the child of the adopter(s) by being registered with his/her surname. The original certificate of birth shall be stamped "cancelled" with the annotation of the issuance of an amended birth certificate in its place and shall be sealed in the civil registry records. The new birth certificate to be issued to the adoptee shall not bear any notation that it is an amended issue. Section 15. Confidential Nature of Proceedings and Records. – All hearings in adoption cases shall be confidential and shall not be open to the public. All records, books, and papers relating to the adoption cases in the files of the court, the Department, or any other agency or institution participating in the adoption proceedings shall be kept strictly confidential.

If the court finds that the disclosure of the information to a third person is necessary for purposes connected with or

arising out of the adoption and will be for the best interest of the adoptee, the court may merit the necessary information to be released, restricting the purposes for which it may be used. ARTICLE V. EFFECTS OF ADOPTION Section 16. Parental Authority. – Except in cases where the biological parent is the spouse of the adopter, all legal ties between the biological parent(s) and the adoptee shall be severed and the same shall then be vested on the adopter(s). Section 17. Legitimacy. – The adoptee shall be considered the legitimate son/daughter of the adopter(s) for all intents and purposes and as such is entitled to all the rights and obligations provided by law to legitimate sons/daughters born to them without discrimination of any kind. To this end, the adoptee is entitled to love, guidance, and support in keeping with the means of the family. Section 18. Succession. – In legal and intestate succession, the adopter(s) and the adoptee shall have reciprocal rights of succession without distinction from legitimate filiation. However, if the adoptee and his/her biological parent(s) had left a will, the law on testamentary succession shall govern. ARTICLE VI . RESCISSION OF ADOPTION Section 19. Grounds for Rescission of Adoption. – Upon petition of the adoptee, with the assistance of the Department if a minor or if over eighteen (18) years of age but is incapacitated, as guardian/counsel, the adoption may be rescinded on any of the following grounds committed by the adopter(s): (a) repeated physical and verbal maltreatment by the adopter(s) despite having undergone counseling; (b) attempt on the life of the adoptee; (c) sexual assault or violence; or (d) abandonment and failure to comply with parental obligations.

Adoption, being in the best interest of the child, shall not be subject to rescission by the adopter(s). However, the adopter(s) may disinherit the adoptee for causes provided in Article 919 of the Civil Code. Section 20. Effects of Rescission. – If the petition is granted, the parental authority of the adoptee's biological parent(s), if known, or the legal custody of the Department shall be restored if the adoptee is still a minor or incapacitated. The reciprocal rights and obligations of the adopter(s) and the adoptee to each other shall be extinguished.

The court shall order the Civil Registrar to cancel the amended certificate of birth of the adoptee and restore his/her original birth certificate.

Succession rights shall revert to its status prior to adoption, but only as of the date of judgment of judicial rescission. Vested rights acquired prior to judicial rescission shall be respected.

All the foregoing effects of rescission of adoption shall be without prejudice to the penalties imposable under the Penal Code if the criminal acts are properly proven. ARTICLE VII . VIOLATIONS AND PENALTIES Section 21. Violations and Penalties. – (a) The penalty of imprisonment ranging from six (6) years and one (1) day to twelve (12) years and/or a fine not less than Fifty thousand pesos (P50,000.00), but not more than Two hundred thousand pesos


(P200,000.00) at the discretion of the court shall be imposed on any person who shall commit any of the following acts:

(i) obtaining consent for an adoption through coercion, undue influence, fraud, improper material inducement, or other similar acts;

(ii) non-compliance with the procedures and safeguards provided by the law for adoption; or

(iii) subjecting or exposing the child to be adopted to danger, abuse, or exploitation.

(b) Any person who shall cause the fictitious registration of the birth of a child under the name(s) of a person(s) who is not his/her biological parent(s) shall be guilty of simulation of birth, and shall be punished by prision mayor in its medium period and a fine not exceeding Fifty thousand pesos (P50,000.00).

Any physician or nurse or hospital personnel who, in violation of his/her oath of office, shall cooperate in the execution of the abovementioned crime shall suffer the penalties herein prescribed and also the penalty of permanent disqualification.

Any person who shall violate established regulations relating to the confidentiality and integrity of records, documents, and communications of adoption applications, cases, and processes shall suffer the penalty of imprisonment ranging from one (1) year and one (1) day to two (2) years, and/or a fine of not less than Five thousand pesos (P5,000.00) but not more than Ten thousand pesos (P10,000.00), at the discretion of the court.

A penalty lower by two (2) degrees than that prescribed for the consummated offense under this Article shall be imposed upon the principals of the attempt to commit any of the acts herein enumerated. Acts punishable under this Article, when committed by a syndicate or where it involves two (2) or more children shall be considered as an offense constituting child trafficking and shall merit the penalty of reclusion perpetua.

Acts punishable under this Article are deemed committed by a syndicate if carried out by a group of three (3) or more persons conspiring and/or confederating with one another in carrying out any of the unlawful acts defined under this Article. Penalties as are herein provided, shall be in addition to any other penalties which may be imposed for the same acts punishable under other laws, ordinances, executive orders, and proclamations.

When the offender is an alien, he/she shall be deported immediately after service of sentence and perpetually excluded from entry to the country.

Any government official, employee or functionary who shall be found guilty of violating any of the provisions of this Act, or who shall conspire with private individuals shall, in addition to the above-prescribed penalties, be penalized in accordance with existing civil service laws, rules and regulations: Provided, That upon the filing of a case, either administrative or criminal, said government official, employee, or functionary concerned shall automatically suffer suspension until the resolution of the case. Section 22. Rectification of Simulated Births. – A person who has, prior to the effectivity of this Act, simulated the birth of a child shall not be punished for such act: Provided, That the simulation of birth was made for the best interest of the child and that he/she has been consistently considered and treated by that person as his/her own son/daughter: Provided, further, That the application for correction of the birth registration and petition for adoption shall be filed within five (5) years from the effectivity of this Act and completed thereafter: Provided, finally, That such person complies with the procedure as specified in Article IV of

this Act and other requirements as determined by the Department. VIII. FINAL PROVISIONS Section 23. Adoption Resource and Referral Office. – There shall be established an Adoption Resources and Referral Office under the Department with the following functions: (a) monitor the existence, number, and flow of children legally available for adoption and prospective adopter(s) so as to facilitate their matching; (b) maintain a nationwide information and educational campaign on domestic adoption; (c) keep records of adoption proceedings; (d) generate resources to help child-caring and child-placing agencies and foster homes maintain viability; and (e) do policy research in collaboration with the Intercountry Adoption Board and other concerned agencies. The office shall be manned by adoption experts from the public and private sectors. Section 24. Implementing Rules and Regulations. – Within six (6) months from the promulgation of this Act, the Department, with the Council for the Welfare of Children, the Office of Civil Registry General, the Department of Justice, Office of the Solicitor General, and two (2) private individuals representing child-placing and child-caring agencies shall formulate the necessary guidelines to make the provisions of this Act operative. Section 25. Appropriations. – Such sum as may be necessary for the implementation of the provisions of this Act shall be included in the General Appropriations Act of the year following its enactment into law and thereafter. Section 26. Repealing Clause. – Any law, presidential decree or issuance, executive order, letter of instruction, administrative order, rule, or regulation contrary to, or inconsistent with the provisions of this Act is hereby repealed, modified, or amended accordingly. Section 27. Separability Clause. – If any provision of this Act is held invalid or unconstitutional, the other provisions not affected thereby shall remain valid and subsisting. Section 28. Effectivity Clause. – This Act shall take effect fifteen (15) days following its complete publication in any newspaper of general circulation or in the Official Gazette. Approved: February 25, 1998 REPUBLIC ACT NO. 8043 AN ACT ESTABLISHING THE RULES TO GOVERN INTER-COUNTRY ADOPTION OF FILIPINO CHILDREN, AND FOR OTHER PURPOSES. ARTICLE I GENERAL PROVISIONS Section 1. Short Title. — This Act shall be known as the "Inter-Country Adoption Act of 1995." Sec. 2. Declaration of Policy. — It is hereby declared the policy of the State to provide every neglected and abandoned child with a family that will provide such child with love and care as well as


opportunities for growth and development. Towards this end, efforts shall be exerted to place the child with an adoptive family in the Philippines. However, recognizing that inter-country adoption may be considered as allowing aliens not presently allowed by law to adopt Filipino children if such children cannot be adopted by qualified Filipino citizens or aliens, the State shall take measures to ensure that inter-country adoptions are allowed when the same shall prove beneficial to the child's best interests, and shall serve and protect his/her fundamental rights. Sec. 3. Definition of Terms. — As used in this Act. the term:

(a) Inter-country adoption refers to the socio-legal process of adopting a Filipino child by a foreigner or a Filipino citizen permanently residing abroad where the petition is filed, the supervised trial custody is undertaken, and the decree of adoption is issued outside the Philippines.

(b) Child means a person below fifteen (15) years of age unless sooner emancipated by law.

(c) Department refers to the Department of Social Welfare and Development of the Republic of the Philippines.

(d) Secretary refers to the Secretary of the Department of Social Welfare and Development.

(e) Authorized and accredited agency refers to the State welfare agency or a licensed adoption agency in the country of the adopting parents which provide comprehensive social services and which is duly recognized by the Department.

(f) Legally-free child means a child who has been voluntarily or involuntarily committed to the Department, in accordance with the Child and Youth Welfare Code.

(g) Matching refers to the judicious pairing of the adoptive child and the applicant to promote a mutually satisfying parent-child relationship.

(h) Board refers to the Inter-country Adoption Board. ARTICLE II THE INTER-COUNTRY ADOPTION BOARD Sec. 4. The Inter-Country Adoption Board. — There is hereby created the Inter-Country Adoption Board, hereinafter referred to as the Board to act as the central authority in matters relating to inter-country adoption. It shall act as the policy-making body for purposes of carrying out the provisions of this Act, in consultation and coordination with the Department, the different child-care and placement agencies, adoptive agencies, as well as non-governmental organizations engaged in child-care and placement activities. As such, it shall:

(a) Protect the Filipino child from abuse, exploitation, trafficking and/or sale or any other practice in connection with adoption which is harmful, detrimental, or prejudicial to the child;

(b) Collect, maintain, and preserve confidential information about the child and the adoptive parents;

(c) Monitor, follow up, and facilitate completion of adoption of the child through authorized and accredited agency;

(d) Prevent improper financial or other gain in connection with an adoption and deter improper practices contrary to this Act;

(e) Promote the development of adoption services including post-legal adoption;

(f) License and accredit child-caring/placement agencies and collaborate with them in the placement of Filipino children;

(g) Accredit and authorize foreign adoption agency in the placement of Filipino children in their own country; and

(h) Cancel the license to operate and blacklist the child-caring and placement agency or adoptive agency involved from the accreditation list of the Board upon a finding of violation of any provision under this Act. Sec. 5. Composition of the Board. — The Board shall be composed of the Secretary of the Department as ex officio Chairman, and six (6) other members to be appointed by the President for a nonrenewable term of six (6) years: Provided, That there shall be appointed one (1) psychiatrist or psychologist, two (2) lawyers who shall have at least the qualifications of a regional trial court judge, one (1) registered social worker and two (2) representatives from non-governmental organizations engaged in child-caring and placement activities. The members of the Board shall receive a per diem allowance of One thousand five hundred pesos (P1,500) for each meeting attended by them: Provided, further, That no compensation shall be paid for more than four (4) meetings a month. Sec. 6. Powers and Functions of the Board. — The Board shall have the following powers and functions:

(a) to prescribe rules and regulations as it may deem reasonably necessary to carry out the provisions of this Act, after consultation and upon favorable recommendation of the different agencies concerned with the child-caring, placement, and adoption;

(b) to set the guidelines for the convening of an Inter-country Adoption Placement Committee which shall be under the direct supervision of the Board;

(c) to set the guidelines for the manner by which selection/matching of prospective adoptive parents and adoptive child can be made;

(d) to determine a reasonable schedule of fees and charges to be exacted in connection with the application for adoption;

(e) to determine the form and contents of the application for inter-country adoption;

(g) to institute systems and procedures to prevent improper financial gain in connection with adoption and deter improper practices which are contrary to this Act;

(h) to promote the development of adoption services, including post-legal adoption services,

(i) to accredit and authorize foreign private adoption agencies which have demonstrated professionalism, competence and have consistently pursued non-profit objectives to engage in the placement of Filipino children in their own country: Provided, That such foreign private agencies are duly authorized and accredited by their own government to conduct inter-country adoption: Provided, however, That the total number of authorized and accredited foreign private adoption agencies shall not exceed one hundred (100) a year;

(j) to take appropriate measures to ensure confidentiality of the records of the child, the natural parents and the adoptive parents at all times;

(k) to prepare, review or modify, and thereafter, recommend to the Department of Foreign Affairs, Memoranda of Agreement respecting inter-country adoption consistent with the implementation of this Act and its stated goals, entered into, between and among foreign governments, international organizations and recognized international non-governmental organizations;

(l) to assist other concerned agencies and the courts in the implementation of this Act, particularly as regards coordination with foreign persons, agencies and other entities


involved in the process of adoption and the physical transfer of the child; and

(m) to perform such other functions on matters relating to inter-country adoption as may be determined by the President. ARTICLE III PROCEDURE Sec. 7. Inter-Country Adoption as the Last Resort. — The Board shall ensure that all possibilities for adoption of the child under the Family Code have been exhausted and that inter-country adoption is in the best interest of the child. Towards this end, the Board shall set up the guidelines to ensure that steps will be taken to place the child in the Philippines before the child is placed for inter-country adoption: Provided, however, That the maximum number that may be allowed for foreign adoption shall not exceed six hundred (600) a year for the first five (5) years. Sec. 8. Who May be Adopted. — Only a legally free child may be the subject of inter-country adoption. In order that such child may be considered for placement, the following documents must be submitted to the Board:

(a)Child study; (b)Birth certificate/foundling certificate; (c)Deed of voluntary commitment/decree of

abandonment/death certificate of parents; (d)Medical evaluation /history; (e)Psychological evaluation, as necessary; and (f)Recent photo of the child.

Sec. 9. Who May Adopt. — An alien or a Filipino citizen permanently residing abroad may file an application for inter-country adoption of a Filipino child if he/she:

(a) is at least twenty-seven (27) years of age and at least sixteen (16) years older than the child to be adopted, at the time of application unless the adopter is the parent by nature of the child to be adopted or the spouse of such parent:

(b) if married, his/her spouse must jointly file for the adoption;

(c) has the capacity to act and assume all rights and responsibilities of parental authority under his national laws, and has undergone the appropriate counseling from an accredited counselor in his/her country;

(d) has not been convicted of a crime involving moral turpitude;

(e) is eligible to adopt under his/her national law; (f) is in a position to provide the proper care and

support and to give the necessary moral values and example to all his children, including the child to be adopted;

(g) agrees to uphold the basic rights of the child as embodied under Philippine laws, the U.N. Convention on the Rights of the Child, and to abide by the rules and regulations issued to implement the provisions of this Act;

(h) comes from a country with whom the Philippines has diplomatic relations and whose government maintains a similarly authorized and accredited agency and that adoption is allowed under his/her national laws; and

(i) possesses all the qualifications and none of the disqualifications provided herein and in other applicable Philippine laws.

Sec. 10. Where to File Application. — An application to adopt a Filipino child shall be filed either with the Philippine Regional Trial Court having jurisdiction over the child, or with the Board, through an intermediate agency, whether governmental or an authorized and accredited agency, in the country of the prospective adoptive parents, which application shall be in accordance with the requirements as set forth in the implementing rules and regulations to be promulgated by the Board.

The application shall be supported by the following documents written and officially translated in English.

(a) Birth certificate of applicant(s); (b) Marriage contract, if married, and divorce decree, if

applicable; (c) Written consent of their biological or adoptive

children above ten (10) years of age, in the form of sworn statement;

(d) Physical, medical and psychological evaluation by a duly licensed physician and psychologist;

(e) Income tax returns or any document showing the financial capability of the applicant(s);

(f) Police clearance of applicant(s); (g) Character reference from the local church/minister,

the applicant's employer and a member of the immediate community who have known the applicant(s) for at least five (5) years; and

(h) Recent postcard-size pictures of the applicant(s) and his immediate family;

The Rules of Court shall apply in case of adoption by judicial proceedings. Sec. 11. Family Selection/Matching. — No child shall be matched to a foreign adoptive family unless it is satisfactorily shown that the child cannot be adopted locally. The clearance, as issued by the Board, with the copy of the minutes of the meetings, shall form part of the records of the child to be adopted. When the Board is ready to transmit the Placement Authority to the authorized and accredited inter-country adoption agency and all the travel documents of the child are ready, the adoptive parents, or any one of them, shall personally fetch the child in the Philippines. Sec. 12. Pre-adoptive Placement Costs. — The applicant(s) shall bear the following costs incidental to the placement of the child;

(a) The cost of bringing the child from the Philippines to the residence of the applicant(s) abroad, including all travel expenses within the Philippines and abroad; and

(b) The cost of passport, visa, medical examination and psychological evaluation required, and other related expenses. Sec. 13. Fees, Charges and Assessments. — Fees, charges, and assessments collected by the Board in the exercise of its functions shall be used solely to process applications for inter-country adoption and to support the activities of the Board. Sec. 14. Supervision of Trial Custody. — The governmental agency or the authorized and accredited agency in the country of the adoptive parents which filed the application for inter-country adoption shall be responsible for the trial custody and the care of the child. It shall also provide family counseling and other related services. The trial custody shall be for a period of six (6) months from the time of placement. Only after the lapse of the period of trial custody shall a decree of adoption be issued in the said


country a copy of which shall be sent to the Board to form part of the records of the child.

During the trial custody, the adopting parent(s) shall submit to the governmental agency or the authorized and accredited agency, which shall in turn transmit a copy to the Board, a progress report of the child's adjustment. The progress report shall be taken into consideration in deciding whether or not to issue the decree of adoption.

The Department of Foreign Affairs shall set up a system by which Filipino children sent abroad for trial custody are monitored and checked as reported by the authorized and accredited inter-country adoption agency as well as the repatriation to the Philippines of a Filipino child whose adoption has not been approved. Sec. 15. Executive Agreements. — The Department of Foreign Affairs, upon representation of the Board, shall cause the preparation of Executive Agreements with countries of the foreign adoption agencies to ensure the legitimate concurrence of said countries in upholding the safeguards provided by this Act. ARTICLE IV PENALTIES Sec. 16. Penalties. — (a) Any person who shall knowingly participate in the conduct or carrying out of an illegal adoption, in violation of the provisions of this Act, shall be punished with a penalty of imprisonment ranging from six (6) years and one (1) day to twelve (12) years and/or a fine of not less than Fifty thousand pesos (P50,000), but not more than Two hundred thousand pesos (P200.000), at the discretion of the court. For purposes of this Act, an adoption is illegal if it is effected in any manner contrary to the provisions of this Act or established State policies, its implementing rules and regulations, executive agreements, and other laws pertaining to adoption. Illegality may be presumed from the following acts:

(1)consent for an adoption was acquired through, or attended by coercion, fraud, improper material inducement;

(2)there is no authority from the Board to effect adoption;

(3)the procedures and safeguards placed under the law for adoption were not complied with; and

(4)the child to be adopted is subjected to, or exposed to danger, abuse and exploitation.

(b)Any person who shall violate established regulations relating to the confidentiality and integrity of records, documents and communications of adoption applications, cases and processes shall suffer the penalty of imprisonment ranging from one (1) year and one (1) day to two (2) years, and/or a fine of not less than Five thousand pesos (P5,000), but not more than Ten thousand pesos (P10,000), at the discretion of the court.

A penalty lower by two (2) degrees than that prescribed for the consummated felony under this Article shall be imposed upon the principals of the attempt to commit any of the acts herein enumerated.

Acts punishable under this Article, when committed by a syndicate or where it involves two or more children shall be considered as an offense constituting child trafficking and shall merit the penalty of reclusion perpetua.

Acts punishable under this Article are deemed committed by a syndicate if carried out by a group of three (3) or more persons conspiring and/or confederating with one another in carrying out any of the unlawful acts defined under this

Article.Penalties as are herein provided shall be in addition to any other penalties which may be imposed for the same acts punishable under other laws, ordinances, executive orders, and proclamations. Sec. 17. Public Officers as Offenders. — Any government official, employee or functionary who shall be found guilty of violating any of the provisions of this Act, or who shall conspire with private individuals shall, in addition to the above-prescribed penalties, be penalized in accordance with existing civil service laws, rules and regulations: Provided, That upon the filing of a case, either administrative or criminal, said government official, employee or functionary concerned shall automatically suffer suspension until the resolution of the case. ARTICLE V FINAL PROVISIONS Sec. 18. Implementing Rules and Regulations. — The Inter-country Adoption Board, in coordination with the Council for the Welfare of Children, the Department of Foreign Affairs, and the Department of Justice, after due consultation with agencies involved in child-care and placement, shall promulgate the necessary rules and regulations to implement the provisions of this Act within six (6) months after its effectivity. Sec. 19. Appropriations. — The amount of Five million pesos (P5,000,000) is hereby appropriated from the proceeds of the Lotto for the initial operations of the Board and subsequently the appropriations of the same shall be included in the General Appropriations Act for the year following its enactment. Sec. 20. Separability Clause. — If any provision, or part hereof is held invalid or unconstitutional, the remainder of the law or the provision not otherwise affected, shall remain valid and subsisting. Sec. 21. Repealing Clause. — Any law, decree, executive order, administrative order or rules and regulations contrary to, or inconsistent with the provisions of this Act are hereby repealed, modified or amended accordingly. Sec. 22. Effectivity Clause. — This Act shall take effect fifteen (15) days after its publication in two (2) newspapers of general circulation. Approved: June 7, 1995

B. Custody

A.M. No. 03-04-04-SC April 22, 2003 RE: PROPOSED RULE ON CUSTODY OF MINORS AND WRIT OF HABEAS CORPUS IN RELATION TO CUSTODY OF MINORS

RESOLUTION Acting on the letter of the Chairman of the Committee on Revision of the Rules of Court submitting for this Court’s consideration and approval the Proposed Rule on custody of Minors and Writ of Habeas Corpus in Relation to Custody of Minors, the Court Resolved to APPROVE the same.


The Rule shall take effect on May 15, 2003 following its publication in a newspaper of general circulation not later than April 30, 2003. April 22, 2003 Davide, Jr., C.J., Bellosillo, Puno, Vitug, Panganiban, Ynares-Santiago, Sandoval-Gutierrez, Carpio, Austria-Martinez, Corona, Carpio-Morales, Callejo, Sr., and Azcuna, JJ., concur. Quisumbing, J., on official leave.

RULE ON CUSTODY OF MINORS AND WRIT OF HABEAS CORPUS IN RELATION TO CUSTODY OF MINORS

SECTION 1. Applicability. - This rule shall apply to petitions for custody of minors and writs of habeas corpus in relation thereto. The Rules of Court shall apply suppletorily. Section 2. Petition for custody of minors; who may file.- A verified petition for the rightful custody of a minor may be filed by any person claiming such right. The party against whom it may be filed shall be designated as the respondent. Section 3. Where to file petition. - The petition for custody of minors shall be filed with the Family Court of the province or city where the petitioner resides or where the minor may be found. Section 4. Contents of petition. - The verified petition shall allege the following:

(a) The personal circumstances of the petitioner and of the respondent;

(b) The name, age and present whereabouts of the minor and his or her relationship to the petitioner and the respondent;

(c) The material operative facts constituting deprivation of custody; and

(d) Such other matters which are relevant to the custody of the minor.

The verified petition shall be accompanied by a certificate against forum shopping, which the petitioner must sign personally. Section 5. Summons; personal service on respondent. - If the court is satisfied that the petition is sufficient in form and substance, it shall direct the clerk of court to issue summons, which shall be served together with a copy of the petition personally on the respondent. Section 6. Motion to Dismiss. - A motion to dismiss the petition is not allowed except on the ground of lack of jurisdiction over the subject matter or over the parties. Any other ground that might warrant the dismissal of the petition may be raised as an affirmative defense in the answer. Section 7. Verified Answer. - The respondent shall file an answer to the petition, personally verified by him, within five days after service of summons and a copy of the petition. Section 8. Case study; duty of social worker. - Upon the filing of the verified answer or the expiration of the period to file it, the court may order a social worker to make a case study of the minor and the parties and to submit a report and recommendation to the court at least three days before the scheduled pre-trial.

Section 9. Notice of mandatory pre-trial. - Within fifteen days after the filing of the answer or the expiration of the period to file answer, the court shall issue an order: (1) fixing a date for the pre-trial conference; (2) directing the parties to file and serve their respective pre-trial briefs in such manner as shall ensure receipt thereof by the adverse party at least three days before the date of pre-trial; and (3) requiring the respondent to present the minor before the court.

The notice of its order shall be served separately on both the parties and their respective counsels. The pre-trial is mandatory. Section 10. Contents of pre-trial brief. - The pre-trial brief shall contain the following:

(a) A statement of the willingness of the parties to enter into agreements that may be allowed by law, indicating its terms;

(b) A concise statement of their respective claims together with the applicable laws and authorities;

(c) Admitted facts and proposed stipulations of facts; (d) The disputed factual and legal issues; (e) All the evidence to be presented, briefly stating or

describing its nature and purpose; (f) The number and names of the witnesses and their

respective affidavits which shall serve as the affiant's testimony on direct examination; and

(g) Such other matters as the court may require to be included in the pre-trial brief.

Failure to file the pre-trial brief or to comply with its required contents shall have the same effect as failure to appear at the pre-trial. Section 11. Effect of failure to appear at the pre-trial.-(a) If the petitioner fails to appear personally at the pre-trial, the case shall be dismissed, unless his counsel or a duly authorized representative appears in court and proves a valid excuse for the non-appearance of the petitioner.

(b) If the respondent has filed his answer but fails to appear at the pre-trial, the petitioner shall be allowed to present his evidence ex parte. The court shall then render judgment on the basis of the pleadings and the evidence thus presented. Section 12. What may be done at pre-trial. - At the pre-trial, the parties may agree on the custody of the minor. If the parties fail to agree, the court may refer the matter to a mediator who shall have five days to effect an agreement between the parties. If the issue is not settled through mediation, the court shall proceed with the pre-trial conference, on which occasion it shall consider such other matters as may aid in the prompt disposition of the petition. Section 13. Provisional order awarding custody. - After an answer has been filed or after expiration of the period to file it, the court may issue a provisional order awarding custody of the minor. As far as practicable, the following order of preference shall be observed in the award of custody:

(a) Both parents jointly; (b) Either parent, taking into account all relevant

considerations, especially the choice of the minor over seven years of age and of sufficient discernment, unless the parent chosen is unfit;

(c) The grandparent, or if there are several grandparents, the grandparent chosen by the minor over seven years of age and of sufficient discernment, unless the grandparent chosen is unfit or disqualified;


(d) The eldest brother or sister over twenty-one years of age, unless he or she is unfit or disqualified;

(e) The actual custodian of the minor over twenty-one years of age, unless the former is unfit or disqualified; or

(f) Any other person or institution the court may deem suitable to provide proper care and guidance for the minor. Section 14. Factors to consider in determining custody. - In awarding custody, the court shall consider the best interests of the minor and shall give paramount consideration to his material and moral welfare. The best interests of the minor refer to the totality of the circumstances and conditions as are most congenial to the survival, protection, and feelings of security of the minor encouraging to his physical, psychological and emotional development. It also means the least detrimental available alternative for safeguarding the growth and development of the minor.

The court shall also consider the following: (a) Any extrajudicial agreement which the parties may

have bound themselves to comply with respecting the rights of the minor to maintain direct contact with the non custodial parent on a regular basis, except when there is an existing threat or danger of physical, mental, sexual or emotional violence which endangers the safety and best interests of the minor;

(b) The desire and ability of one parent to foster an open and loving relationship between the minor and the other parent;

(c) The health, safety and welfare of the minor; (d) Any history of child or spousal abuse by the person

seeking custody or who has had any filial relationship with the minor, including anyone courting the parent;

(e) The nature and frequency of contact with both parents;

(f) Habitual use of alcohol, dangerous drugs or regulated substances;

(g) Marital misconduct; (h) The most suitable physical, emotional, spiritual,

psychological and educational environment for the holistic development and growth of the minor; and

(i) The preference of the minor over seven years of age and of sufficient discernment, unless the parent chosen is unfit. Section 15. Temporary visitation rights. - The court shall provide in its order awarding provisional custody appropriate visitation rights to the non-custodial parent or parents, unless the court finds said parent or parents unfit or disqualified.

The temporary custodian shall give the court and non custodial parent or parents at least five days' notice of any plan to change the residence of the minor or take him out of his residence for more than three days provided it does not prejudice the visitation rights of the non-custodial parent or parents. Section 16. Hold Departure Order. - The minor child subject of the petition shall not be brought out of the country without prior order from the court while the petition is pending.

The court, motu proprio or upon application under oath, may issue ex parte a hold departure order, addressed to the Bureau of Immigration and Deportation, directing it not to allow the departure of the minor from the Philippines without the permission of the court.

The Family Court issuing the hold departure order shall furnish the Department of Foreign Affairs and the Bureau of Immigration and Deportation of the Department of Justice a copy of the hold departure order within twenty-four hours from

its issuance and through the fastest available means of transmittal.

The hold departure order shall contain the following information:

(a) The complete name (including the middle name), the date and place of birth, the nationality and the place of last residence of the person against whom a hold departure order has been issued or whose departure from the country has been enjoined;

(b) The complete title and docket number of the case in which the hold departure order was issued;

(c) The specific nature of the case; (d) The date of the hold departure order; and (e) A recent photograph, if available, of the party against

whom a hold departure order has been issued or whose departure from the country has been enjoined.

The court may recall the hold departure order motu proprio, or upon verified motion of any of the parties after summary hearing, subject to such terms and conditions as may be necessary for the best interests of the minor. Section 17. Protection Order. - The court may issue a Protection Order requiring any person:

(a) To stay away from the home, school, business, or place of employment of the minor, other parent or any other party, or from any other specific place designated by the court;

(b) To cease and desist from harassing, intimidating, or threatening such minor or the other parent or any person to whom custody of the minor is awarded;

(c) To refrain from acts of commission or omission that create an unreasonable risk to the health, safety, or welfare of the minor;

(d) To permit a parent, or a party entitled to visitation by a court order or a separation agreement, to visit the minor at stated periods;

(e) To permit a designated party to enter the residence during a specified period of time in order to take personal belongings not contested in a proceeding pending with the Family Court; and

(f) To comply with such other orders as are necessary for the protection of the minor. Section 18. Judgment. - After trial, the court shall render judgment awarding the custody of the minor to the proper party considering the best interests of the minor.

If it appears that both parties are unfit to have the care and custody of the minor, the court may designate either the paternal or maternal grandparent of the minor, or his oldest brother or sister, or any reputable person to take charge of such minor, or commit him to any suitable home for children.

In its judgment, the court may order either or both parents to give an amount necessary for the support, maintenance and education of the minor, irrespective of who may be its custodian. In determining the amount of support, the court may consider the following factors: (1) the financial resources of the custodial and non-custodial parent and those of the minor; (2) the physical and emotional health, special needs, and aptitude of the minor; (3) the standard of living the minor has been accustomed to; and (4) the non-monetary contributions that the parents would make toward the care and well-being of the minor.

The court may also issue any order that is just and reasonable permitting the parent who is deprived of the care and custody of the minor to visit or have temporary custody.


Section 19. Appeal. - No appeal from the decision shall be allowed unless the appellant has filed a motion for reconsideration or new trial within fifteen days from notice of judgment.

An aggrieved party may appeal from the decision by filing a Notice of Appeal within fifteen days from notice of the denial of the motion for reconsideration or new trial and serving a copy thereof on the adverse parties. Section 20. Petition for writ of habeas corpus. - A verified petition for a writ of habeas corpus involving custody of minors shall be filed with the Family Court. The writ shall be enforceable within its judicial region to which the Family Court belongs.

However, the petition may be filed with the regular court in the absence of the presiding judge of the Family Court, provided, however, that the regular court shall refer the case to the Family Court as soon as its presiding judge returns to duty. The petition may also be filed with the appropriate regular courts in places where there are no Family Courts.

The writ issued by the Family Court or the regular court shall be enforceable in the judicial region where they belong. The petition may likewise be filed with the Supreme Court, Court of Appeals, or with any of its members and, if so granted, the writ shall be enforceable anywhere in the Philippines. The writ may be made returnable to a Family Court or to any regular court within the region where the petitioner resides or where the minor may be found for hearing and decision on the merits.

Upon return of the writ, the court shall decide the issue on custody of minors. The appellate court, or the member thereof, issuing the writ shall be furnished a copy of the decision. Section 21. Confidentiality of proceedings. - The hearings on custody of minors may, at the discretion of the court, be closed to the public and the records of the case shall not be released to non-parties without its approval. Section 22. Effectivity. - This Rule shall take effect on May 15, 2003 following its publication in a newspaper of general circulation not later than April 30, 2003.

CASE NOTES Perez v. Court of Appeals (1996) The applicable law, when the parents of the child are separated in fact, is Article 213 of the Family Code. It provides: “In case of separation of the parents, parental authority shall be exercised by the parent designated by the Court. The Court shall take into account all relevant considerations, especially the choice of the child over seven years of age, unless the parent chosen in unfit. No child under seven years of age shall be separated from the mother, unless the court finds compelling reasons to order otherwise.” Since the Code does not qualify the word “separation” to mean “legal separation” decreed by a court, couples who are separated in fact, such as the Perezes, are covered within its terms.

Rule 99, Sec. 6 of the Rules of Court also contains a similar provision.

The provisions of law clearly mandate that a child under seven years of age shall not be separated from his mother unless the court finds compelling reasons to order otherwise. Rationale: “The general rule is recommended in order to avoid many a tragedy where a mother has seen her

baby torn away from her. No man can sound the deep sorrows of a mother who is deprived of her child of tender age..” Unless the court sees compelling reasons to order otherwise, custody of the child below seven years of age must be awarded to the mother.

Republic v. Hernandez (1996) he legal effects of adoption, under Article 189 of the Family Code, are that (1) the adopted shall be deemed a legitimate child of the adopters and both shall acquire the reciprocal rights and obligations arising from the relationship of parent and child, including the right of the adopted to use the surname of the adopters; (2) the parental authority of the parents by nature over the adopted shall terminate and be vested in the adopters, except if the adopter is the spouse of the parent by nature of the adopted, parental authority over the adopted shall be exercised jointly by both spouses; and (3) the adopted shall remain an intestate heir of his parents and other blood relatives.

Clearly, the law allows the adoptee, as a matter of right and obligation, to bear the surname of the adopter, upon issuance of the decree of adoption. It is the change of the adoptee’s surname to follow that of the adopter which is the natural and necessary consequence of a grant of adoption and must specifically be contained in the order of the court, in fact, even if not prayed for by petitioner.

However, the given or proper name of the adoptee must remain as it was originally registered in the Civil Register. The creation of an adoptive relationship does not confer upon the adopter the license to change the adoptee’s first name. The automatic change of a first name, premised solely upon the adoption as granted, is beyond the purview of an adoption proceeding, which an adoption court cannot properly grant.

Rule 103 of the Rules of Court governs petitions for change of name, which is a proceeding in rem, so strict compliance with all the requirements therefor is indispensable to vest the court with jurisdiction for its adjudication. It cannot be granted in conjunction with any other proceeding.

Sy v. Court of Appeals (2007) (1) The applicable provision of the law is Article 213 of the Family Code. The preference favouring the mother over the father is reiterated in Rule 99, Sec. 6 of the Rules of Court. (2) The Supreme Court held that the Rules of Court permits the ventilation of the question regarding the care and custody of the children as an incident to any proceeding, even a habeas corpus proceeding. Wilson Sy argues that since Mercedes Uy-Sy’s petition did not include a prayer for support of the children in accordance with Article 203 of the Family Code, the trial court erroneously awarded support in favor of Mercedes. However, applying Rule 10, Sec. 5 of the Rules of Court, since the issue of support was tried with the implied consent of the parties, it should be treated in all respects as if it had been raised in the pleadings. And since there is implied consent, even if no motion had been filed and no amendment had been ordered, the Court holds that the trial court validly rendered a judgment on the issue of support.


PART SEVEN. HOSPITALIZATION OF INSANE PERSONS

RULE 101. PROCEEDINGS FOR HOSPITALIZATION OF INSANE PERSONS

Section 1. Venue, Petition for commitment. — A petition for the commitment of a person to a hospital or other place for the insane may be filed with the Court of First Instance of the province where the person alleged to be insane is found. The petition shall be filed by the Director of Health in all cases where, in his opinion, such commitment is for the public welfare, or for the welfare of said person who, in his judgment, is insane and such person or the one having charge of him is opposed to his being taken to a hospital or other place for the insane. Section 2. Order for hearing. — If the petition filed is sufficient in form and substance, the court, by an order reciting the purpose of the petition, shall fix a date for the hearing thereof, and copy of such order shall be served on the person alleged to be insane, and to the one having charge him, or on such of his relatives residing in the province or city as the judge may deem proper. The court shall furthermore order the sheriff to produce the alleged insane person, if possible, on the date of the hearing. Section 3. Hearing and judgment. — Upon satisfactory proof, in open court on the date fixed in the order, that the commitment applied for is for the public welfare or for the welfare of the insane person, and that his relatives are unable for any reason to take proper custody and care of him, the court shall order his commitment to such hospital or other place for the insane as may be recommended by the Director of Health. The court shall make proper provisions for the custody of property or money belonging to the insane until a guardian be properly appointed. Section 4. Discharge of insane. — When, in the opinion of the Director of Health, the person ordered to be committed to a hospital or other place for the insane is temporarily or permanently cured, or may be released without danger he may file the proper petition with the Court of First Instance which ordered the commitment. Section 5. Assistance of fiscal in the proceeding. — It shall be the duty of the provincial fiscal or in the City of Manila the fiscal of the city, to prepare the petition for the Director of Health and represent him in court in all proceedings arising under the provisions of this rule.

CASE NOTES Chin Ah Foo v. Concepcion (1930) Section 1048 of the Administrative Code provides that “When in the opinion of the Director of Health any patient in any Government hospital or other place for the insane is temporarily or permanently cured, or may be released without danger, he may discharge such patient, and shall notify the Judge of the Court of First Instance who ordered the commitment, in case the patient is confined by order of the court.” However, under article 8 of the Penal Code, from which the judge of the court below based his order, provides that the permission of the court who orders the confinement of one accused of a grave felony in an insane asylum is a prerequisite for obtaining release from the institution. Which provision of the law should prevail? BOTH

SHOULD BE READ TOGETHER BECAUSE IMPLIED REPEALS ARE GENERALLY FROWNED UPON.

Thus, the net legal effect is that while the Director of Health could not have been vested by the Legislature with blanket authority to release without a court order any person confined by order of the court pursuant to article 8 of the Penal Code, the courts are also without power to discharge a person committed to an asylum for the insane without ascertaining or seeking for the views of the Director of Health as to propriety of such a release. The powers of the court and of the Director of Health are complementary with each other.

PART EIGHT. HABEAS CORPUS

RULE 102. HABEAS CORPUS

Sec. 1. To what habeas corpus extends. - Except as otherwise expressly provided by law, the writ of habeas corpus shall extend to all cases of illegal confinement or detention by which any person is deprived of his liberty, or by which the rightful custody of any person is withheld from the person entitled thereto. A writ of habeas corpus12 directs a person who detains another to produce the body of the prisoner at a certain time and place, with the day and the cause of his caption and detention, to do, submit to, and receive whatsoever the court or judge awarding the writ shall consider in that behalf. This is the remedy for all cases of (1) illegal detention or (2) where the rightful custody of a person is withheld from one entitled to such custody. To be entitled to the writ, the standard required is actual and effective restraint and not merely moral or nominal. Restraint. However, actual physical restraint is not always required; any restraint which will prejudice freedom of action is sufficient (Moncupa v. Enrile). The fact that no physical force was exerted to keep a person does not make less real the deprivation of his personal freedom which includes the freedom of movement, freedom to transfer from one place to another, freedom to choose one’s residence. Freedom may be lost due to internal moral compulsion, to founded or groundless fear, to erroneous belief in the existence of an imaginary power of an impostor to cause harm if not blindly obeyed, to any other psychological element, that may curtail the mental faculty of choice or the unhampered exercise of the will. If the actual effect of such psychological spell is to place a person at the mercy of another, the victim is entitled to the protection of the courts of justice as much as the individual who is illegally deprived of liberty by duress of physical coercion.

It may also be availed of where, as a consequence of a judicial proceeding, (a) there has been a deprivation of a constitutional right resulting in the restraint of a person; (b) the court had no jurisdiction to impose the sentence; or (c) an excessive penalty has been imposed, such sentence being void as to the excess. Where a deprivation of a

12 Latin. Literally, “You produce the body.”


constitutional right is established, the court that rendered the judgment is deemed ousted of jurisdiction and habeas corpus is the remedy to assail the legality of detention.

Nature. A petition for habeas corpus is like a proceeding in rem as it is an inquisition of the government, at the suggestion and instance of the individual, most probably, but still in the name and capacity of the sovereign. It is constituted for the purpose of fixing the status of a person. No judgment can be entered against anybody since there is no real plaintiff and defendant.

Habeas corpus is not in the nature of a writ of error, nor is it intended as substitute for the trial court’s function. It cannot take the place of appeal, certiorari or writ of error. Thus, it cannot be used to investigate and consider questions of error that may be raised relating to procedure or on the merits.

The inquiry in a habeas corpus proceeding is addressed to the question of whether the proceedings and the assailed order are, for any reason, null and void. It is a summary remedy.

In order for habeas corpus to lie, it is necessary that the judgment of the court which resulted in the allegedly illegal deprivation of liberty is no longer appealable, in which case the writ is in the nature of a collateral attack against a final but void judgment. If still appealable, the remedy is appeal because habeas corpus is not a substitute for appeal.

It is not issued as a matter of right but in the sound discretion of the court or judge. What are not grounds for issuance of the writ? The alleged circumstances that the information is invalid because the preliminary investigation is invalid and that the offense has already prescribed are not grounds for the issuance of writ of habeas corpus. If petitioner claims that no preliminary investigation had been validly conducted, his remedy is to ask the court which issued the warrant of commitment for an investigation or reinvestigation of the case. Habeas corpus will not lie where the person alleged to be restrained of his liberty is in the custody of an officer under process issued by a court which has jurisdiction to do so. The writ will not issue if the restraint is voluntary. Sec. 2. Who may grant the writ. - The writ of habeas corpus may be granted by the Supreme Court, or any member thereof, on any day and at any time, or by the Court of Appeals or any member thereof in the instances authorized by law, and if so granted it shall be enforceable anywhere in the Philippines, and may be made returnable before the court or any member thereof, or before the Court of First Instance, or any judge thereof for the hearing and decision on the merits. It may also be granted by a Court of First Instance, or a judge thereof, on any day and at any time, and returnable before himself, enforceable only within his judicial district. This is another exception to the rule that processes of the then CFIs are enforceable throughout the Philippines. Since the writ was enforceable only in the judicial district where the RTC sits, the venue of petitions in RTCs for the writ was fixed thereby and such petitions should be filed in the

RTC of the district where it is sought to be enforced. This was expanded to judicial region under Sec. 21, B.P. Blg. 129.

The writ, if issued by the Supreme Court, may be made returnable before the RTC. The latter court does not thereby become merely a recommendatory body, whose findings and conclusions are devoid of effect unless the Supreme Court acts on its recommendation, but such lower court acquires the authority and the duty to inquire into the facts and the law pertinent to the legality or illegality of the petitioner’s detention and to order his discharge from confinement should it find that he is unlawfully imprisoned or restrained. Sec. 3. Requisites of application therefor. - Application for the writ shall be by petition signed and verified either by the party for whose relief it is intended, or by some person on his behalf, and shall set forth:

(a) That the person in whose behalf the application is made is imprisoned or restrained of his liberty;

(b) The officer or name of the person by whom he is so imprisoned or restrained; or, if both are unknown or uncertain, such officer or person may be described by an assumed appellation, and the person who is served with the writ shall be deemed the person intended;

(c) The place where he is so imprisoned or restrained, if known;

(d) A copy of the commitment or cause of detention of such person, if it can be procured without impairing the efficiency of the remedy; or, if the imprisonment or restraint is without any legal authority, such fact shall appear. Petition must be verified but if not, it is not fatally defective in form. In Villavicencio v. Lukban, the Supreme Court has held that it is the duty of a court to issue the writ if there is evidence that a person is being unjustly restrained of his liberty within its jurisdiction even if there is no application therefor. However, it is necessary that the person on whose behalf the petition is filed is under actual and effective restraint or deprivation of liberty. Sec. 4. When writ not allowed or discharge authorized. - If it appears that the person alleged to be restrained of his liberty is in the custody of an officer under process issued by a court or judge or by virtue of a judgment or order of a court of record, and that the court or judge had jurisdiction to issue the process, render the judgment, or make the order, the writ shall not be allowed; or if the jurisdiction appears after the writ is allowed, the person shall not be discharged by reason of any informality or defect in the process, judgment, or order. Nor shall anything in this rule be held to authorize the discharge of a person charged with or convicted of an offense in the Philippines, or of a person suffering imprisonment under lawful judgment. The process referred to in this Section is not limited to that issued by the regular courts; it can also refer to process issued by a governmental agency authorized to order his confinement, as in the case of the Deportation Board. Sec. 5. When the writ must be granted and issued. - A court or judge authorized to grant the writ must, when a petition therefor is presented and it appears that the writ ought to issue, grant the same forthwith, and immediately thereupon the clerk of the court shall issue the writ under the seal of the court; or in case of


emergency, the judge may issue the writ under his own hand, and may depute any officer or person to serve it. Sec. 6. To whom writ directed, and what to require. - In case of imprisonment or restraint by an officer, the writ shall be directed to him, and shall command him to have the body of the person restrained of his liberty before the court or judge designated in the writ at the time and place therein specified. In case of imprisonment or restraint by a person not an officer, the writ shall be directed to an officer, and shall command him to take and have the body of the person restrained of his liberty before the court or judge designated in the writ at the time and place therein specified, and to summon the person by whom he is restrained then and there to appear before said court or judge to show the cause of the imprisonment or restraint. Where the person is detained under governmental authority and the illegality of his detention is not patent from the petition for the writ, the court may issue a citation to the government officer having the person in his custody to show cause why the writ of habeas corpus should not issue. This is known as a preliminary citation, as distinguished from the peremptory writ which is issued when the cause of the detention appears to be patently illegal, and the non-compliance therewith is punishable. Sec. 7. How prisoner designated and writ served. - The person to be produced should be designated in the writ by his name, if known, but if his name is not known he may be otherwise described or identified. The writ may be served in any province by the sheriff or other proper officer, or by a person deputed by the court or judge. Service of the writ shall be made by leaving the original with the person to whom it is directed and preserving a copy on which to make return of service. If that person cannot be found, or has not the prisoner in his custody, then the service shall be made on any other person having or exercising such custody. Sec. 8. How writ executed and returned. - The officer to whom the writ is directed shall convey the person so imprisoned or restrained, and named in the writ, before the judge allowing the writ, or, in case of his absence or disability, before some other judge of the same court, on the day specified in the writ, unless, from sickness or infirmity of the person directed to be produced, such person cannot, without danger, be brought before the court or judge; and the officer shall make due return of the writ, together with the day and the cause of the caption and restraint of such person according to the command thereof. Sec. 9. Defect of form. - No writ of habeas corpus can be disobeyed for defect of form, if it sufficiently appears therefrom in whose custody or under whose restraint the party imprisoned or restrained is held and the court or judge before whom he is to be brought. Sec. 10. Contents of return. - When the person to be produced is imprisoned or restrained by an officer, the person who makes the return shall state therein, and in other cases the person in whose custody the prisoner is found shall state, in writing to the court or judge before whom the writ is returnable, plainly and unequivocably:

(a) Whether he has or has not the party in his custody or power, or under restraint;

(b) If he has the party in his custody or power, or under restraint, the authority and the true and whole cause thereof, set forth at large, with a copy of the writ, order, execution, or other process, if any, upon which the party is held;

(c) If the party is in his custody or power or is restrained by him, and is not produced, particularly the nature and gravity of the sickness or infirmity of such party by reason of which he cannot, without danger, be brought before the court or judge;

(d) If he has had the party in his custody or power, or under restraint, and has transferred such custody or restraint to another, particularly to whom, at what time, for what cause, and by what authority such transfer was made. Sec. 11. Return to be signed and sworn to. - The return or statement shall be signed by the person who makes it; and shall also be sworn to by him if the prisoner is not produced, and in all other cases unless the return is made and signed by a sworn public officer in his official capacity. Sec. 12. Hearing on return; Adjournments. - When the writ is returned before one judge, at a time when the court is in session, he may forthwith adjourn the case into the court, there to be heard and determined. The court or judge before whom the writ is returned or adjourned must immediately proceed to hear and examine the return, and such other matters as are properly submitted for consideration, unless for good cause shown the hearing is adjourned, in which event the court or judge shall make such order for the safekeeping of the person imprisoned or restrained as the nature of the case requires. If the person imprisoned or restrained is not produced because of his alleged sickness or infirmity, the court or judge must be satisfied that it is so grave that such person cannot be produced without danger, before proceeding to hear and dispose of the matter. On the hearing the court or judge shall disregard matters of form and technicalities in respect to any warrant or order of commitment of a court or officer authorized to commit by law. Sec. 13. When the return evidence, and when only a plea. - If it appears that the prisoner is in custody under a warrant of commitment in pursuance of law, the return shall be considered prima facie evidence of the cause of restraint; but if he is restrained of his liberty by any alleged private authority, the return shall be considered only as a plea of the facts therein set forth, and the party claiming the custody must prove such facts. Section 13 lays down the rule on the burden of proof after the writ has been returned. If the detention is by reason of public authority, the return is considered prima facie evidence of the validity of the restraint and the petitioner has the burden of proving that the restraint is illegal. On the other hand, if the detention is by reason of private authority, the return is considered only a plea of the facts asserted therein and the person responsible for the detention has the burden of proof to establish that the detention is legal and justified. Sec. 14. When person lawfully imprisoned recommitted, and when let to bail. - If it appears that the prisoner was lawfully committed, and is plainly and specifically charged in the warrant of commitment with an offense punishable by death, he shall not be released, discharged, or bailed. If he is lawfully imprisoned or restrained on a charge of having committed an offense not so punishable, he may be recommitted to imprisonment or admitted to bail in the discretion of the court


or judge. If he be admitted to bail, he shall forthwith file a bond in such sum as the court or judge deems reasonable, considering the circumstances of the prisoner and the nature of the offense charged, conditioned for his appearance before the court where the offense is properly cognizable to abide its order or judgment; and the court or judge shall certify the proceedings, together with the bond, forthwith to the proper court. If such bond is not so filed, the prisoner shall be recommitted to confinement. Where the prisoner has been detained and held without bail although the offense is bailable, he may in a habeas corpus proceeding be allowed to post bail to ensure his appearance before the court where he was charged with said offense. If the offense is not bailable, as where it involves a capital offense and the evidence of guilt is strong, he cannot obtain his provisional liberty on bail by habeas corpus proceedings in another court. Sec. 15. When prisoner discharged if no appeal. - When the court or judge has examined into the cause of caption and restraint of the prisoner, and is satisfied that he is unlawfully imprisoned or restrained, he shall forthwith order his discharge from confinement, but such discharge shall not be effective until a copy of the order has been served on the officer or person detaining the prisoner. If the officer or person detaining the prisoner does not desire to appeal, the prisoner shall be forthwith released. Where the person is detained under governmental authority and the illegality of his detention is not patent from the petition for the writ, the court may issue a citation to the government officer having the person in his custody to show cause why the writ of habeas corpus should not issue. This is known as a preliminary citation, as distinguished from the peremptory writ which is issued when the cause of the detention appears to be patently illegal, and the non-compliance therewith is punishable. Sec. 16. Penalty for refusing to issue writ, or for disobeying the same. - A clerk of a court who refuses to issue the writ after allowance thereof and demand therefor, or a person to whom a writ is directed, who neglects or refuses to obey or make return of the same according to the command thereof, or makes false return thereof, or who, upon demand made by or on behalf of the prisoner, refuses to deliver to the person demanding, within six (6) hours after the demand therefor, a true copy of the warrant or order of commitment, shall forfeit to the party aggrieved the sum of one thousand pesos, to be recovered in a proper action, and may also be punished by the court or judge as for contempt. Sec. 17. Person discharged not to be again imprisoned. - A person who is set at liberty upon a writ of habeas corpus shall not be again imprisoned for the same offense unless by the lawful order or process of a court having jurisdiction of the cause or offense; and a person who knowingly, contrary to the provisions of this rule, recommits or imprisons, or causes to be committed or imprisoned, for the same offense, or pretended offense, any person so set at liberty, or knowingly aids or assists therein, shall forfeit to the party aggrieved the sum of one thousand pesos, to be recovered in a proper action, notwithstanding any colorable pretense or variation in the

warrant of commitment, and may also be punished by the court or judge granting writ as for contempt. Sec. 18. When prisoner may be removed from one custody to another. - A person committed to prison, or in custody of an officer, for any criminal matter, shall not be removed therefrom into the custody of another officer unless by legal process, or the prisoner be delivered to an inferior officer to carry to jail, or, by order of the proper court or judge, be removed from one place to another within the Philippines for trial, or in case of fire, epidemic, insurrection, or other necessity or public calamity; and a person who, after such commitment, makes, signs, or countersigns any order for such removal contrary to this section, shall forfeit to the party aggrieved the sum of one thousand pesos, to be recovered in a proper action. Sec. 19. Record of writ, fees and costs. - The proceedings upon a writ of habeas corpus shall be recorded by the clerk of the court, and upon the final disposition of such proceedings the court or judge shall make such order as to costs as the case requires. The fees of officers and witnesses shall be included in the costs taxed, but no officer or person shall have the right to demand payment in advance of any fees to which he is entitled by virtue of the proceedings. When a person confined under color of proceedings in a criminal case is discharged, the costs shall be taxed against the Republic of the Philippines, and paid out of its Treasury; when a person in custody by virtue or under color of proceedings in a civil case is discharged, the costs shall be taxed against him, or against the person who signed the application for the writ, or both, as the court shall direct. The release contemplated under a writ of habeas corpus is one which is free from any involuntary restraint. When the person so released continues to be denied one or more of his constitutional freedoms, where there is present a denial of due process, or where the restraints are not merely involuntary but appear to be unnecessary, the person concerned or those acting on his behalf may still avail of the privilege of the writ, as in the case of Moncupa v. Enrile. A writ of habeas corpus reaches the body but not the record, while a writ of certiorari reaches the record, but not the body. They are two different things. Thus, certiorari may lie with the writ of habeas corpus for the purpose of review, in recognition of the supervisory powers of superior courts, but the reverse is not true, or where the petitioner has resorted to the remedy of appeal or certiorari because habeas corpus, as stated earlier, cannot be made to perform the functions of a writ of error or appeal for the purpose of reviewing mere errors or irregularities in the proceedings of a court having jurisdiction over the person and the subject matter. The writ of habeas corpus is not intended as a substitute for the functions of a trial court and absent exceptional circumstances, the orderly course of trial should be pursued and the usual remedies be exhausted before the writ may be invoked. Habeas corpus is normally not available in advance of trial to determine jurisdictional errors that may arise. While the extraordinary writ of habeas corpus is the appropriate remedy to inquire into questions of constitutional rights, it does not find the conditions of the


detainee’s confinement to be a proper subject of inquiry therein. Habeas corpus only extends to the fact and duration of confinement. It exists as a speedy and effectual remedy to relieve persons from unlawful restraint, but is not a means for the redress of grievances or to seek injunctive relief or damages in the proceedings therein. However, this does not foreclose the right of the victims to seek redress of grievances in the proper actions or proceedings in court, or for the detainees to obtain injunctive relief or damages through the proper remedies provided by law.

CASE NOTES Moncupa v. Enrile (1986) The Supreme Court observed that certain restrictions were attached to Moncupa’s temporary release: (1) Moncupa needs to secure the approval of the respondents for travel outside of Metro Manila; (2) He also needs to secure prior approval of respondents before changing his place of residence; (3) His freedom of speech is limited in that “he must not participate in any interview conducted by any local of foreign mass media representatives nor give any press release or information that is inimical to the interest of national security”; and (4) He is required to regularly report to respondents or their representatives.

Moncupa thus argues that his temporary release did not render the case moot and academic but that “it merely shifted the inquiry from the legality of his actual detention to the legality of the conditions imposed by the respondents.”

The Court ruled that the attachment of restrictions to the temporary release of Moncupa constituted restraints upon his liberty. Such restrictions limit the freedom of movement of the petitioner. It is not physical restraint alone which is inquired into by the writ of habeas corpus. Therefore, the present petition by Moncupa has not yet become moot and academic.

Citing Toyoto v. Fidel Ramos (1985), the Court held that a petition for habeas corpus becomes moot and academic when the restraint on the liberty of the petitioners is lifted either temporarily or permanently. Thus, where a person continues to be unlawfully denied one or more of his constitutional freedoms, where there is present a denial of due process, where the restraints are not merely involuntary but appear to be unnecessary, and where a deprivation of freedom originally valid has, in the light of subsequent developments, become arbitrary, the person concerned or those applying on his behalf may still avail themselves of the privilege of the writ.

Villavicencio v. Lukban (1919) (1) The petitioners were relatives and friends of the deportees, the way the expulsion was conducted was such that it was impossible for the women to sign a petition for habeas corpus. It was consequently proper for the writ to be submitted by other persons on their behalf. In fact, even in the absence of a petition for habeas corpus, the law makes it the court’s duty to grant a writ of habeas corpus upon evidence that within such court’s jurisdiction, a person is

being unjustly imprisoned or deprived of his liberty (Sec. 93, Code of Criminal Procedure). (2) While the general rule is that the writ of habeas corpus must issue from the nearest judge of first instance, this is not a hard and fast rule. Sec. 79 of the Code of Criminal Procedure and Sec. 526 of the Code of Civil Procedure empower the Supreme Court or any judge thereof with the authority to grant the writ, which shall be enforceable throughout the Philippines. Whether the writ should be made returnable to the Supreme Court or to some inferior court falls within the discretion of the Supreme Court and depends upon certain circumstances. In this case it was not shown that the Davao CFI was in session, or that the women had any means to bring a petition for habeas corpus before said court. (3) The gravamen of a petition for habeas corpus is the restraint of liberty. Any restraint which will preclude freedom of action is sufficient. The forcible taking of these women from Manila and their subsequent deportation to a far-off region deprived these women of their freedom of locomotion just as effectively as if they had been imprisoned. Placed in Davao without either money or personal belongings, they were prevented from exercising the liberty of going when and where they pleased.

In re Engr. Ashraf Kunting (2006) Under Sec. 1, Rule 102 of the Rules of Court, the remedy of habeas corpus has one objective: to inquire into the cause of detention of a person, and if found to be illegal, the court orders the release of the detainee. If however, detention is found to be lawful, then the habeas corpus proceedings terminate.

Sec. 4, Rule 102 provides that if a person alleging to have been restrained of his liberty is in custody of an officer under process issued by a court or judge, the writ shall not be allowed.

In this case, Kunting’s detention was under process issued by the Basilan RTC. He was charged with four counts of kidnapping for ransom with serious illegal detention, so following Sec. 4, the writ cannot issue and Kunting cannot be discharged since he had been charged with a criminal offense.

Burgos v. Macapagal-Arroyo (2010) There are significant lapses in the handling of the investigation. PNP-CIDG failed to identify the cartographic sketches of the five abductors of Jonas based on their interview of the eyewitnesses to the abduction. No significant follow-through was made by PNP-CIDG in ascertaining the identities of the cartographic sketches of two of the abductors despite evidentiary leads by State Prosecutor Velasco of the DOJ.

The Court also directed the Commission on Human Rights to conduct appropriate investigative proceedings, including field investigations – acting as the Court’s commissioned agency for the purposes of the Rule on the Writ of Amparo – with the tasks of (a) ascertaining the identities of the persons appearing in the cartographic sketches and their whereabouts; (b) determining the identities and locations of the persons identified by State Prosecutor Velasco allegedly involved in the abduction of Jonas; (c) inquiring into the veracity of the claims of Lipio


and Manuel that Jonas was abducted by elements of the CPP-NPA; (d) determining the identities of these elements of the CPP-NPA; and (e) undertaking all measures that may be necessary to live up to the extraordinary measures required in addressing an enforced disappearance under the Rule on the Writ of Amparo. PART NINE. CHANGE OF NAME AND CANCELLATION OR CORRECTION OF ENTRIES IN THE CIVIL REGISTRY

RULE 103. CHANGE OF NAME

Section 1. Venue. — A person desiring to change his name shall present the petition to the Court of First Instance of the province in which he resides, or, in the City of Manila, to the Juvenile and Domestic Relations Court. Section 2. Contents of petition. — A petition for change of name shall be signed and verified by the person desiring his name changed, or some other person on his behalf, and shall set forth:

(a) That the petitioner has been a bona fide resident of the province where the petition is filed for at least three (3) years prior to the date of such filing;

(b) The cause for which the change of the petitioner's name is sought;

(c) The name asked for. Section 3. Order for hearing. — If the petition filed is sufficient in form and substance, the court, by an order reciting the purpose of the petition, shall fix a date and place for the hearing thereof, and shall direct that a copy of the order be published before the hearing at least once a week for three (3) successive weeks in some newspaper of general circulation published in the province, as the court shall deem best. The date set for the hearing shall not be within thirty (30) days prior to an election nor within four (4) month after the last publication of the notice. Section 4. Hearing. — Any interested person may appear at the hearing and oppose the petition. The Solicitor General or the proper provincial or city fiscal shall appear on behalf of the Government of the Republic. Section 5. Judgment. — Upon satisfactory proof in open court on the date fixed in the order that such order has been published as directed and that the allegations of the petition are true, the court shall, if proper and reasonable cause appears for changing the name of the petitioner, adjudge that such name be changed in accordance with the prayer of the petition. Section 6. Service of judgment. — Judgments or orders rendered in connection with this rule shall be furnished the civil registrar of the municipality or city where the court issuing the same is situated, who shall forthwith enter the same in the civil register.

RULE 108. CANCELLATION OR CORRECTION OF ENTRIES IN THE CIVIL REGISTRY

Section 1. Who may file petition. — Any person interested in any act, event, order or decree concerning the civil status of persons which has been recorded in the civil register, may file a verified petition for the cancellation or correction of any entry relating thereto, with the Court of First Instance of the province where the corresponding civil registry is located. Section 2. Entries subject to cancellation or correction. — Upon good and valid grounds, the following entries in the civil register may be cancelled or corrected: (a) births: (b) marriage; (c) deaths; (d) legal separations; (e) judgments of annulments of marriage; (f) judgments declaring marriages void from the beginning; (g) legitimations; (h) adoptions; (i) acknowledgments of natural children; (j) naturalization; (k) election, loss or recovery of citizenship; (l) civil interdiction; (m) judicial determination of filiation; (n) voluntary emancipation of a minor; and (o) changes of name. Section 3. Parties. — When cancellation or correction of an entry in the civil register is sought, the civil registrar and all persons who have or claim any interest which would be affected thereby shall be made parties to the proceeding. Section 4. Notice and publication. — Upon the filing of the petition, the court shall, by an order, fix the time and place for the hearing of the same, and cause reasonable notice thereof to be given to the persons named in the petition. The court shall also cause the order to be published once a week for three (3) consecutive weeks in a newspaper of general circulation in the province. Section 5. Opposition. — The civil registrar and any person having or claiming any interest under the entry whose cancellation or correction is sought may, within fifteen (15) days from notice of the petition, or from the last date of publication of such notice, file his opposition thereto. Section 6. Expediting proceedings. — The court in which the proceeding is brought may make orders expediting the proceedings, and may also grant preliminary injunction for the preservation of the rights of the parties pending such proceedings. Section 7. Order. — After hearing, the court may either dismiss the petition or issue an order granting the cancellation or correction prayed for. In either case, a certified copy of the judgment shall be served upon the civil registrar concerned who shall annotated the same in his record.

CIVIL CODE

Art. 376. No person can change his name or surname without judicial authority.

REPUBLIC ACT NO. 9048 March 22, 2001

AN ACT AUTHORIZING THE CITY OR MUNICIPAL CIVIL REGISTRAR OR THE CONSUL GENERAL TO CORRECT A CLERICAL OR TYPOGRAPHICAL ERROR IN AN ENTRY AND/OR CHANGE OF FIRST NAME OR NICKNAME IN THE


CIVIL REGISTER WITHOUT NEED OF A JUDICIAL ORDER, AMENDING FOR THIS PURPOSE ARTICLES 376 AND 412 OF THE CIVIL CODE OF THE PHILIPPINES

Be it enacted by the Senate and the House of Representatives of the Philippines in Congress assembled:

Section 1. Authority to Correct Clerical or Typographical Error and Change of First Name or Nickname – No entry in a civil register shall be changed or corrected without a judicial order, except for clerical or typographical errors and change of first name or nickname which can be corrected or changed by the concerned city or municipal civil registrar or consul general in accordance with the provisions of this Act and its implementing rules and regulations.

Section 2. Definition of Terms – As used in this Act, the following terms shall mean:

(1) "City or Municipal civil registrar" refers to the head of the local civil registry office of the city or municipality, as the case may be, who is appointed as such by the city or municipal mayor in accordance with the provisions of existing laws.

(2) "Petitioner" refers to a natural person filing the petition and who has direct and personal interest in the correction of a clerical or typographical error in an entry or change of first name or nickname in the civil register.

(3) "Clerical or typographical error" refers to a mistake committed in the performance of clerical work in writing, copying, transcribing or typing an entry in the civil register that is harmless and innocuous, such as misspelled name or misspelled place of birth or the like, which is visible to the eyes or obvious to the understanding, and can be corrected or changed only by reference to other existing record or records:Provided, however, That no correction must involve the change of nationality, age, status or sex of the petitioner.

(4) "Civil Register" refers to the various registry books and related certificates and documents kept in the archives of the local civil registry offices, Philippine Consulates and of the Office of the Civil Registrar General.

(5) "Civil registrar general" refers to the Administrator of the National Statistics Office which is the agency mandated to carry out and administer the provision of laws on civil registration.

(6) "First name" refers to a name or nickname given to a person which may consist of one or more names in addition to the middle and last names.

Section 3. Who May File the Petition and Where. – Any person having direct and personal interest in the correction of a clerical or typographical error in an entry and/or change of first name or nickname in the civil register may file, in person, a verified

petition with the local civil registry office of the city or municipality where the record being sought to be corrected or changed is kept.

In case the petitioner has already migrated to another place in the country and it would not be practical for such party, in terms of transportation expenses, time and effort to appear in person before the local civil registrar keeping the documents to be corrected or changed, the petition may be filed, in person, with the local civil registrar of the place where the interested party is presently residing or domiciled. The two (2) local civil registrars concerned will then communicate to facilitate the processing of the petition.

Citizens of the Philippines who are presently residing or domiciled in foreign countries may file their petition, in person, with the nearest Philippine Consulates.

The petitions filed with the city or municipal civil registrar or the consul general shall be processed in accordance with this Act and its implementing rules and regulations.

All petitions for the clerical or typographical errors and/or change of first names or nicknames may be availed of only once.

Section 4. Grounds for Change of First Name or Nickname. – The petition for change of first name or nickname may be allowed in any of the following cases:

(1) The petitioner finds the first name or nickname to be ridiculous, tainted with dishonor or extremely difficult to write or pronounce.

(2) The new first name or nickname has been habitually and continuously used by the petitioner and he has been publicly known by that by that first name or nickname in the community: or

(3) The change will avoid confusion.

Section 5. Form and Contents of the Petition. – The petition shall be in the form of an affidavit, subscribed and sworn to before any person authorized by the law to administer oaths. The affidavit shall set forth facts necessary to establish the merits of the petition and shall show affirmatively that the petitioner is competent to testify to the matters stated. The petitioner shall state the particular erroneous entry or entries, which are sought to be corrected and/or the change sought to be made.

The petition shall be supported with the following documents:

(1) A certified true machine copy of the certificate or of the page of the registry book containing the entry or entries sought to be corrected or changed.

(2) At least two (2) public or private documents showing the correct entry or entries upon which the correction or change shall be based; and


(3) Other documents which the petitioner or the city or municipal civil registrar or the consul general may consider relevant and necessary for the approval of the petition.

In case of change of first name or nickname, the petition shall likewise be supported with the documents mentioned in the immediately preceding paragraph. In addition, the petition shall be published at least once a week for two (2) consecutive weeks in a newspaper of general circulation. Furthermore, the petitioner shall submit a certification from the appropriate law enforcement agencies that he has no pending case or no criminal record.

The petition and its supporting papers shall be filed in three (3) copies to be distributed as follows: first copy to the concerned city or municipal civil registrar, or the consul general; second copy to the Office of the Civil Registrar General; and third copy to the petitioner.

Section 6. Duties of the City or Municipal Civil Registrar or the Consul General. – The city or municipal civil registrar or the consul general to whom the petition is presented shall examine the petition and its supporting documents. He shall post the petition in a conspicuous place provided for that purpose for ten (10) consecutive days after he finds the petition and its supporting documents sufficient in form and substance.

The city or municipal civil registrar or the consul general shall act on the petition and shall render a decision not later than five (5) working days after the completion of the posting and/or publication requirement. He shall transmit a copy of his decision together with the records of the proceedings to the Office of the Civil Registrar General within five (5) working days from the date of the decision.

Section 7. Duties and Powers of the Civil Registrar General. – The civil registrar general shall, within ten (10) working days from receipt of the decision granting a petition, exercise the power to impugn such decision by way of an objection based on the following grounds:

(1) The error is not clerical or typographical;

(2) The correction of an entry or entries in the civil register is substantial or controversial as it affects the civil status of a person; or

(3) The basis used in changing the first name or nickname of a person does not fall under Section 4.

The civil registrar general shall immediately notify the city or municipal civil registrar or the consul general of the action taken on the decision. Upon receipt of the notice thereof, the city or municipal civil registrar or the consul general shall notify the petitioner of such action.

The petitioner may seek reconsideration with the civil registrar general or file the appropriate petition with the proper court.

If the civil registrar general fails to exercise his power to impugn the decision of the city or municipal civil registrar or of the consul

general within the period prescribed herein, such decision shall become final and executory.

Where the petition is denied by the city or municipal civil registrar or the consul general, the petitioner may either appeal the decision to the civil registrar general or file the appropriate petition with the proper court.

Section 8. Payment of Fees. – The city or municipal civil registrar or the consul general shall be authorized to collect reasonable fees as a condition for accepting the petition. An indigent petitioner shall be exempt from the payment of the said fee.

Section 9. Penalty Clause. - A person who violates any of the provisions of this Act shall, upon conviction, be penalized by imprisonment of not less than six (6) years but not more than twelve (12) years, or a fine of not less than Ten thousand pesos (P10,000.00) but not more than One Hundred Thousand pesos (P100,000.00), or both, at the discretion of the court.

In addition, if the offender is a government official or employee he shall suffer the penalties provided under civil service laws, rules and regulations.

Section 10. Implementing Rules and Regulations. - The civil registrar general shall, in consultation with the Department of Justice, the Department of Foreign Affairs, the Office of the Supreme Court Administrator, the University of the Philippines Law Center and the Philippine Association of Civil Registrars, issue the necessary rules and regulations for the effective implementation of this Act not later than three (3) months from the effectivity of this law.

Section 11. Retroactivity Clause. - This Act shall have retroactive effect insofar as it does not prejudice or impair vested or acquired rights in accordance with the Civil Code and other laws.

Section 12. Separability Clause. - If any portion or provision of this Act is declared void or unconstitutional, the remaining portions or provisions thereof shall not be affected by such declaration.

Section 13. Repealing Clause - All laws, decrees, orders, rules and regulations, other issuances, or parts thereof inconsistent with the provisions of this Act are hereby repealed or modified accordingly.

Section 14. Effectivity Clause. - This Act shall take effect fifteen (15) days after its complete publication in at least two (2) national newspapers of general circulation.

Approved: March 22, 2001

(Sgd.)

GLORIA MACAPAGAL-ARROYO

President of the Philippines


IRR, R.A. No. 9048

ADMINISTRATIVE ORDER NO. 1, SERIES OF 2001

Subject: RULES AND REGULATIONS GOVERNING THE IMPLEMENTATION OF REPUBLIC ACT NO. 9048

Pursuant to Section 10 of R.A. No. 9048, which took effect on 22 April 2001, the following rules and regulations are hereby promulgated for the information, guidance and compliance of all concerned parties.

PRELIMINARY STATEMENT

Article 376 of the Civil Code provides that "No person can change his name or surname without judicial authority.". Article 412 of the same Code provides that "No entry in a civil register shall be changed or corrected, without a judicial order.".

Republic Act No. 9048 amended Articles 376 and 412. Section 1 of this amendatory law provides: "No entry in a civil register shall be changed or corrected without a judicial order, except for clerical or typographical errors and change of first name or nickname which can be corrected or changed by the concerned city or municipal civil registrar or consul general in accordance with the provisions of this Act and its implementing rules and regulations.".

As provided under Section 10 of Republic Act No. 9048, the Civil Registrar General promulgated these rules and regulations, in consultation with the representatives from the Department of Justice, Department of Foreign Affairs, Office of the Supreme Court Administrator, University of the Philippines Law Center and Philippine Association of Civil Registrars.

IMPLEMENTING RULES AND REGULATIONS

Rule 1. Authority to correct clerical or typographical error and to change first name or nickname. - The city/municipal civil registrar, Consul General, including the Clerk of the Shari'a Court in his capacity as District or Circuit Registrar of Muslim Marriages, Divorces, Revocations of Divorces and Conversions, are hereby authorized to correct clerical or typographical error and to change first name or nickname in the civil register.

Rule 2. Definition of terms. - As used in this Order, the following terms shall mean:

2.1. City or Municipal Civil Registrar (C/MCR) - Refers to the head of the local civil registry office (LCRO) of the city or municipality, as the case may be, who is appointed by the city or municipal mayor in accordance with the provisions of existing laws.

2.2. Consul General (CG) - Refers to an official of the Department of Foreign Affairs who has been issued the consular commissions by the President and/or the Secretary of Foreign Affairs. In a foreign service establishment of the Philippines where there is no Consul General, the civil registration function and duties

herein provided for the Consul General shall be exercised and performed by the Consul or Vice Consul who should be similarly issued consular commissions by the President and/or the Secretary of Foreign Affairs.

2.3. District/Circuit Registrar (D/CR) - Refers to the Clerk of the Shari'a District or Circuit Court acting in the performance of its civil registration function with regard to Muslim Marriages, Divorces, Revocations of Divorces and Conversions under Title VI, Book Two of Presidential Decree No. 1083 which is otherwise known as the Code of Muslim Personal Laws.

2.4. Civil Registrar General (CRG) - Refers to the Administrator of the National Statistics Office (NSO) which is the agency mandated to carry out and administer the provisions of laws on civil registration.

2.5. Local Civil Registry Office (LCRO) - Refers to an office or department in the city or municipal government that is mandated to perform civil registration function.

2.6. Petitioner - Refers to a natural person filing the petition and who has direct and personal interest in the correction of a clerical or typographical error in an entry or change of first name or nickname in the civil register.

2.7. Indigent petitioner - Refers to a destitute, needy and poor individual who is certified as such by the social welfare and development office of the city/municipal government.

2.8. Clerical or typographical error - Refers to a mistake committed in the performance of clerical work in writing, copying, transcribing or typing an entry in the civil register that is harmless and innocuous, such as misspelled name or misspelled place of birth or the like, which is visible to the eyes or obvious to the understanding, and can be corrected or changed only by reference to other existing record or records: Provided, however, That no correction must involve the change of nationality, age, status or sex of the petitioner.

2.9. First name - Refers to the name or nickname given to a person which may consist of one or more names in addition to the middle and last names.

2.10. Civil Register - Refers to the various registry books and related certificates and documents kept in the archives of the LCROs, Philippine Consulates, Office of the Civil Registrar General, and Shari'a District/Circuit Courts.

2.11. Newspaper of general circulation - Refers to a newspaper that is published for the dissemination of local news and general information; that has a bona fide subscription list of paying subscribers; and that is published at regular intervals.


2.12. Record-keeping civil registrar (RKCR) - Refers to the C/MCR in whose archive is kept the record, which contains the error to be corrected or the first name to be changed. This term shall be used only in cases involving migrant petitioner.

2.13. Petition-receiving civil registrar (PRCR) - Refers to the C/MCR of the city or municipality where the petitioner resides or is domiciled and who receives the petition on behalf of the RKCR in the case of a migrant petitioner.

2.14. Migrant petitioner (MP) - Refers to a petitioner whose present residence or domicile is different from the place where the civil registry record to be corrected was registered.

2.15. Spouse - Refers to one's legal wife or legal husband.

2.16. Guardian - Refers to a person lawfully invested with the power, and charged with the duty, of taking care of the person and managing the property and rights of another person, who, for defect of age, understanding, or self-control, is considered incapable of administering his own affairs. This term may refer also to those who, under Article 216 of the Family Code, are authorized to exercise substitute parental authority over the child in default of parents or a judicially appointed guardian. These persons are the following:

2.16.1. The surviving grandparent, as provided in Article 214 of the Family Code;

2.16.2. The oldest brother or sister, over twenty-one years of age, unless unfit or disqualified; and

2.16.3. The child's actual custodian, over twenty-one years of age, unless unfit or disqualified.

Rule 3. Who may file the petition. - Any person of legal age, having direct and personal interest in the correction of a clerical or typographical error in an entry and/or change of first name or nickname in the civil register, may file the petition. A person is considered to have direct and personal interest when he is the owner of the record, or the owner's spouse, children, parents, brothers, sisters, grandparents, guardian, or any other person duly authorized by law or by the owner of the document sought to be corrected: Provided, however, That when a person is a minor or physically or mentally incapacitated, the petition may be filed on his behalf by his spouse, or any of his children, parents, brothers, sisters, grandparents, guardians, or persons duly authorized by law.

Rule 4. Where to file the petition. - The verified petition may be filed, in person, with the LCRO of the city or municipality or with the Office of the Clerk of the Shari'a Court, as the case may be, where the record containing the clerical or typographical error to be corrected, or first name to be changed, is registered.

When the petitioner had already migrated to another place within the Philippines and it would not be practical for such party, in terms of transportation expenses, time and effort to appear in person before the RKCR, the petition may be filed, in person, with the PRCR of the place where the migrant petitioner is residing or domiciled.

Any person whose civil registry record was registered in the Philippines, or in any Philippine Consulate, but who is presently residing or domiciled in a foreign country, may file the petition, in person, with the nearest Philippine Consulate, or in accordance with Rule 3.

Rule 5. Processing of the petition. - The C/MCR shall:

5.1. Examine the petition as to completeness of requirements and supporting documents as required under Rule 8.

5.2. Determine whether or not the civil registry document, which is the subject of the petition, forms part of the civil register of his office. If it is part of the civil register of his office, he shall assume jurisdiction, otherwise, Rule 6 shall apply.

5.3. Receive the petition upon payment of the prescribed fees by the petitioner.

5.4. Ensure that posting or publication requirement is complied with in accordance with Rule 9.

5.5. Investigate and consider any third party intervention to the petition.

5.6. Enter all petitions in the appropriate record book, as may be prescribed by the CRG, indicating therein, among others, the following information:

5.6.1. Petition number

5.6.2. Name of petitioner

5.6.3. Type of petition

5.6.4. Date of petition

5.6.5. Date of receipt

5.6.6. Entry sought to be corrected/changed

5.6.7. Correction/Change made

5.6.8. Action taken or decision

5.7 Act on the petition within five (5) working days after the completion of the posting and/or publication requirement. In case the C/MCR, CG or D/CR approves the petition, he shall render his decision in a prescribed form in triplicate copies, indicating therein the entry


sought to be corrected or the first name sought to be changed in the civil register, and the corresponding correction or change made.

5.8 Deny the petition for correction of clerical or typographical error based on any of the following grounds:

5.8.1. The supporting documents are not authentic and genuine.

5.8.2. The C/MCR has personal knowledge that a similar petition is filed or pending in court or in any other LCRO.

5.8.3. The petition involves the same entry in the same document, which was previously corrected or changed under this Order.

5.8.4. The petition involves the change of the status, sex, age or nationality of the petitioner or of any person named in the document.

5.8.5. Such other grounds as the C/MCR may deem not proper for correction.

5.9. In the case of petition for change of first name or nickname, the C/MCR shall deny the petition based on any of the following grounds, in addition to Rule 5.8.1 to Rule 5.8.3:

5.9.1. The first name or nickname sought to be changed is neither ridiculous, nor tainted with dishonor nor extremely difficult to write or pronounce.

5.9.2. The new first name or nickname sought to be adopted has not been habitually and continuously used by the petitioner, and he has not been publicly known by that first name or nickname in the community.

5.9.3. There is no confusion to be avoided or created with the use of the registered first name or nickname of the petitioner.

5.10. Record the decision in the appropriate record book as mentioned in Rule 5.6, and shall transmit said decision together with the records of proceedings to the OCRG within five (5) working days after the date of decision.

Insofar as applicable, Rule 5 shall be observed also by the CG and D/CR.

Rule 6. Procedures for migrant petitioner. - When the petition is

for or from a person who is a resident or domiciled in a place different from the place where the document sought to be corrected was registered, the following procedures shall be observed:

6.1. The PRCR shall perform the following:

6.1.1. Examine the petition as to completeness of requirements and supporting documents as required under Rule 8.

6.1.2. Receive the petition upon payment by the petitioner of prescribed fees as required under Rule 18.

6.1.3. Ensure that posting or publication of the petition as required under Rule 9 is complied with.

6.1.4. Endorse the petition and its supporting documents, including the filing fee in postal money order or in any other mode of payment to the RKCR.

6.2. The RKCR shall perform the following:

6.1.1. Examine the petition as to completeness of requirements and supporting documents as required under Rule 8 and as transmitted by the PRCR.

6.1.2. Observe the procedures under Rule 5.5 to Rule 5.9.

Insofar as applicable, Rule 6 shall be observed also by the CG and D/CR.

Rule 7. Availment of the privilege. - The correction of clerical or

typographical error shall be availed of only once with respect to a particular entry or entries in the same civil registry record. However, with regard to the change of first name or nickname in the birth certificate, the privilege shall be availed of only once subject to Rule 12 hereunder.

Rule 8. Form and content of the petition. - The petition shall be in the prescribed form of an affidavit, subscribed and sworn to before any person authorized by law to administer oath. The affidavit shall set forth facts necessary to establish the merits of the petition and shall show affirmatively that the petitioner is competent to testify to the matters stated. The petitioner shall state the particular erroneous entry or entries sought to be corrected or the first name sought to be changed, and the correction or change to be made.

8.1. The petition for the correction of clerical or typographical error shall be supported with the following documents:

8.1.1. A certified true machine copy of the certificate or of the page of the registry book containing the entry or entries sought to be corrected or changed;

8.1.2. At least two (2) public or private documents showing the correct entry or


entries upon which the correction or change shall be based;

8.1.3. Notice or certification of posting

8.1.4. Other documents which the petitioner or the C/MCR, or the CG, or D/CR may consider relevant and necessary for the approval of the petition.

8.2. In case of change of first name or nickname, the petition shall be supported with the following documents and shall comply with the following requirements:

8.2.1. Documents required under Rule 8.1.

8.2.2. A clearance or a certification that the owner of the document has no pending administrative, civil or criminal case, or no criminal record, which shall be obtained from the following:

8.2.2.1. Employer, if employed

8.2.2.2. National Bureau of Investigation

8.2.2.3. Philippine National Police

8.2.3. Affidavit of publication from the publisher and a copy of the newspaper clipping.

8.3. The C/MCR, CG or D/CR shall not accept a petition unless all requirements and supporting documents are complied with by the petitioner.

8.4. The petition and its supporting documents shall be filed in three (3) copies, and upon acceptance, shall be distributed as follows:

8.4.1. First copy to the concerned C/MCR, CG or D/CR,

8.4.2. Second copy to the OCRG, and

8.4.3. Third copy to the petitioner.

Rule 9. Posting and publication of the petition. - The petition shall be posted by the concerned C/MCR, CG or D/CR in a conspicuous place provided for that purpose for ten (10) consecutive days after he finds the petition and its supporting documents sufficient in form and substance.

For a change of first name, the petition shall, in addition to the above-stated posting requirements, be published at least once a week for two (2) consecutive weeks in a newspaper of general circulation. As proof of publication, the petitioner shall attach to

the petition a clipping of the publication and an affidavit of publication from the publisher of the newspaper where publication was made.

In the case of migrant petitioner, the petition shall be posted first at the office of the PRCR for ten (10) consecutive days before sending it to the RKCR. Upon receipt, the RKCR shall post again the petition in his office for another ten (10) consecutive days. When the petition is for a change of first name, the migrant petitioner shall publish the petition in a newspaper of general and national circulation.

In the case where a person's civil registry record or records were registered in the Philippines or in any of the Philippine Consulates, but the persons presently resides or is domiciled in a foreign country, posting and/or publication, as the case may be, shall be done in the place where the petition is filed and in the place where the record sought to be corrected is kept.

Rule 10. Duties of the C/MCR. - The C/MCR shall have the following duties:

10.1. Examine the petition and its supporting documents.

10.2. If necessary, conduct investigation by interviewing and asking probing questions to the petitioner.

10.3. Post the petition in a conspicuous place provided for that purpose for ten (10) consecutive days after he finds the petition and its supporting documents sufficient in form and substance.

10.4. Act on the petition and render a decision not later than five (5) working days after the completion of the posting and/or publication requirement.

10.5. Transmit a copy of the decision together with the records of the proceedings to the OCRG within five (5) working days after the date of the decision.

10.6. Perform such other duties and functions as may be necessary to carry out the provisions of R.A. 9048.

Insofar as applicable, the CG and the D/CR shall perform the duties of the C/MCR as provided for under this Rule.

Rule 11. Duties and powers of the CRG. - The CRG shall have the following duties and powers:

11.1. Impugn the decision of the C/MCR or CG or D/CR within ten (10) working days after receipt of the decision granting the petition based on any of the following grounds:

11.1.1. The error is not clerical or typographical.

11.1.2. The correction of an entry in the civil register is substantial or controversial as it


involves the change of the age, sex, nationality or civil status of a person.

11.1.3. The petition for correction of clerical or typographical error was not posted, or the petition for change of first name was not published as required under Rule 9.

11.1.4. The basis used in changing the first name or nickname of the person does not fall under any of the following circumstances:

11.1.4.1. The name or nickname is ridiculous, tainted with dishonor or extremely difficult to write or pronounce.

11.1.4.2. The new first name or nickname has been habitually and continuously used by the petitioner and he has been publicly known by that first name or nickname in the community.

11.1.4.3. The change of first name or nickname will avoid confusion.

11.1.5. The C/MCR does not have authority to take cognizance of the case.

11.2. Notify the C/MCR or the CG or the D/CR of the action taken on the decision not later than ten (10) working days from the date of impugning or approving the decision.

11.3. Act on all appeals or reconsideration duly filed by the petitioner.

11.4. Devise or cause to be devised the forms necessary or required for the effective implementation of this Order.

11.5. Perform such other duties and functions as may be necessary to carry out the provisions of R.A. 9048.

Rule 12. Effect of approving the petition for change of name. - When the petition for a change of first name is approved by the C/MCR or CG or D/CR and such decision has not been impugned by the CRG, the change shall be reflected in the birth certificate by way of marginal annotation. In case there are other civil registry records of the same person which are affected by such change, the decision of approving the change of first name in the birth certificate, upon becoming final and executory, shall be sufficient to be used as basis in changing the first name of the same person in his other affected records without need for filing a similar petition. In such a case, the successful petitioner shall file a request in writing with the concerned C/MCR, CG or D/CR to make such marginal annotation, attaching thereto a copy of the decision.

Rule 13. Effect of denying the petition. - Where the petition is

not granted by the C/MCR, CG or D/CR, as the case may be, the petitioner may either appeal the decision to the CRG within ten (10) working days from receipt of the decision, or file the appropriate petition with the proper court. In case the petitioner opts to appeal the decision to the CRG, the latter shall render decision within thirty (30) calendar days after receipt of the appeal. The CRG shall furnish the C/MCR, CG or D/CR a copy of the decision not later than ten (10) working days after the date of the decision.

Rule 14. Appeal. - When the petition is denied by the C/MCR, the petitioner may appeal the decision to the CRG, in which case, the following guidelines shall be observed:

14.1. The adversely affected petitioner shall file the notice of appeal to the concerned C/MCR within ten (10) working days after the receipt of the latter's decision.

14.2. The C/MCR shall, within five (5) working days after the receipt of the notice of appeal from the petitioner, submit the petition and all supporting documents to the CRG.

14.3. The CRG shall render decision on the appeal within thirty (30) calendar days after receipt thereof. The decision of the CRG shall be transmitted to the concerned C/MCR within ten (10) working days after the date of the decision. Within ten (10) working days after receipt of the decision, the C/MCR shall notify the petitioner and shall carry out the decision.

14.4. When the petitioner fails to seasonably file the appeal, the decision of the C/MCR disapproving the petition shall become final and executory, and the only option left for the petitioner shall be to file the appropriate petition with the proper court.

14.5. The petitioner may file the appeal to the CRG on any of the following grounds:

14.5.1. A new evidence is discovered, which when presented, shall materially affect, alter, modify or reverse the decision of the C/MCR.

14.5.2. The denial of the C/MCR is erroneous or not supported with evidence.

14.5.3. The denial of the C/MCR is done with grave abuse of authority or discretion.

Insofar as applicable, Rule 14 shall be observed in the case of a petition denied by the CG or D/CR.

Rule 15. Failure of the CRG to impugn. - If the CRG fails to impugn the decision of the C/MCR, CG or D/CR within ten (10) working days after receipt of the decision granting the petition, such decision shall become final and executory.


Rule 16. Effect of impugning the decision. - Where the decision

of the C/MCR, CG or D/CR is impugned by the CRG, the petitioner may appeal the decision by way of reconsideration with the latter within fifteen (15) working days from receipt of the decision and shall be based only on the ground of new evidence discovered, or file the appropriate petition with the proper court. The decision which shall be rendered by the CRG within thirty (30) calendar days after receipt of the appeal shall be final and executory.

Rule 17. Recording, filing and retrieval of decision. - The CRG

shall prescribe the proper recording, filing and retrieval system of the decisions.

Rule 18. Authority to collect filing and other fees. - The C/MCR or the D/CR is hereby authorized to collect from every petitioner a filing fee in the amount of one thousand pesos (P1,000.00) for the correction of clerical or typographical error, and three thousand pesos (P3,000.00) for change of first name or nickname. An indigent petitioner as defined under Rule 2.7, shall be exempt from the payment of said fee.

In the case of a petition filed with the CG, a filing fee of fifty U.S. dollars ($50.00) or its equivalent value in local currency for the correction of clerical or typographical error, and one hundred fifty U.S. dollars ($150.00) or its equivalent value in local currency for the change of first name, shall be collected.

In the case of a migrant petitioner for correction of clerical or typographical error, there shall be a service fee of five hundred pesos (P500.00) to be collected by the PRCR. In case the petition is for change of name, the service fee is one thousand pesos (P1,000.00). The service fee shall accrue to the city or municipal government of the PRCR. The PRCR shall also collect the filing fee from the migrant petitioner, which shall be in the form of postal money order or other form of payment which shall be payable to and transmitted to the RKCR, together with the petition and supporting documents.

When the petitioner files petition for correction of clerical or typographical error, simultaneously with a petition for change of first name, and the same document is involved, the petitioner shall pay only the amount corresponding to the fee for the petition for change of first name.

The local legislative body shall ratify the fees herein prescribed upon effectivity of this Order. Prior to ratification by the local legislative body, all fees collected in connection with this Order shall go to the LCRO trust fund: Provided, however, That the fees prescribed herein shall be uniform in all cities and municipalities in the country, and in all Philippine Consulates.

Rule 19. Penalty clause. - A person who violates any of the provisions of R.A. No. 9048 and of this Order shall, upon conviction, be penalized by imprisonment of not less than six (6) years but not more than twelve (12) years, or a fine of not less than ten thousand pesos (P10,000.00) but not more than one hundred thousand pesos (P100,000.00), or both, at the discretion of the court. In addition, if the offender is a government official or employee, he shall suffer the penalties provided under existing civil service laws, rules and regulations.

Rule 20. Periodic review. - The Civil Registrar General may call for periodic review of the IRR as may be necessary.

Rule 21. Retroactivity clause. - This Order shall have retroactive effect insofar as it does not prejudice or impair vested or acquired rights in accordance with the Civil Code and other laws.

Rule 22. Separability clause. - If any portion or provision of this Order is declared void or unconstitutional, the remaining portions or provisions thereof shall not be affected by such declaration.

Rule 23. Repealing clause. - All circulars, memoranda, rules and

regulations or parts thereof inconsistent with the provisions of this Order are hereby repealed or modified accordingly.

Rule 24. Effectivity clause. - This Order shall take effect fifteen (15) days after its publication in a newspaper of general circulation.

APPROVED this 24th day of July 2001:

For the Office of the Civil Registrar General:

(Sgd.) CARMELITA N. ERICTA

CASE NOTES Haw Liong v. Republic (1966) The State is interested in the names borne by individuals for purposes of identification and that a change of name is a privilege and not a matter of right. Therefore, a person must show proper or reasonable cause or any compelling reason which may justify the change of his name. Otherwise, the request should be denied. Such grounds which may be considered as proper or reasonable causes are that (1) the name is ridiculous, dishonourable or is extremely difficult to write or pronounce; (2) the request for change of name is in consequence of a change of status, as when a natural child is acknowledged or legitimated; and (3) when change is necessary to avoid confusion.

Haw Liong has not shown any proper or compelling reason to justify such change. He only started using that name during the Japanese occupation.

Llaneta v. Agrava (1994) Teresita has established that she has been using the Ferrer surname for a long as she can remember. All her school records, were under the name Teresita Ferrer. There will be a lot of confusion if she is made to use Llaneta as her surname.

Moreover, his brothers who are legitimate members of the Ferrer family have come forward in support of Teresita’s petition for change of surname.

Secan Kok v. Republic (1973) To confer jurisdiction on the court, since petitions for change of name are proceedings in rem, strict compliance with the requirements is essential, namely, that such verified


petition should be published for three (3) successive weeks in some newspapers of general circulation in the province; and that both the title or caption of the petition and its body shall recite (1) the name or names or aliases of the applicant; (2) the cause for which the change of name is sought; and (3) the name or names or aliases of the applicant; (2) the cause for which the change of name is sought; and (3) the new name asked for. The reason for these requirements is that a change of name is a matter of public interest. The petitioner might be in, the rogues' gallery or hiding to avoid service of sentence or compliance with a judgment in a criminal case, or could have escaped from prison; or if an alien, he might have given cause for deportation or might be one against whom an order of deportation was issued or that the new name the petitioner desires to adopt may be similar to that of a respectable person and the latter might have evidence that petitioner is of unsavory reputation that might impair his own good name. Being a privilege and not a right, a change of name lies within the discretion of the court give or withhold. Failure to comply with these jurisdictional requirements, renders the proceedings a nullity.

To allow the change of name of the wife and other minor children of Secan Kok, upon a mere motion as an incident in the proceedings for his change of name, will not only deprive the government of the required filing fees therefor but will also dispense with the aforesaid essential requirements respecting the recitals in the title of the petition and the publication to apprise persons, who may be in possession of adverse information or evidence against the grant of the petition, so that they will come forward with such information or evidence in order to protect public interest as well as the interest of private individuals who may be prejudiced by the change of name of the Secan Kok.

Villegas v. Fernando (1969) The heirs of Manahan and Sampedro argue that their attaching a copy of the Court of Appeals' pre-war decision was substantially a step to reconstitute the records of the case. This argument deserves scant consideration, since there was no sufficient compliance with Act 3110, particularly section 2 thereof, providing for giving of notice of the destruction of the records to those persons who might be interested, such notice to be published for four consecutive weeks "in the Official Gazette and in one of the newspapers most widely read in the province"; nor with Section 3 of the same Act further prescribing that upon receipt of the application for reconstitution the Clerk of Court "shall send notice to all parties interested, or their counsel, of the day, hour and place when the Court may proceed to the reconstitution". Strict compliance of notice requirements under statutes governing reconstitution is the rule (Manila Railroad Co. vs. Moya,1965).

The records before the Court show that notice of the petition for approval of the amended plan for issuance of the corresponding decree was given only to the Director of Lands and to the Director of Forestry. This was plainly insufficient, since the law requires notice to "all other persons as might be interested". There is no showing that notice of the motion was given to the petitioners-appellees, who are possessors of lands affected by the decree, or even to the persons whose lots were ordered excluded by the decision of the Court of Appeals. That petitioners-appellees are merely applicants for homesteads or free patents, as

contended by appellants, does not excuse the lack of notice to them, considering the broad terms of sections 2 and 3 of the Reconstitution Act (No. 3110) requiring notice "to all persons as might be interested" through publication in the Official Gazette and in a newspaper widely read in the province. The jurisprudence of the Court is to the effect that upon failure to reconstitute destroyed judicial records within the period prescribed by law (which expired on 17 June 1963, pursuant to Republic Act No. 3081) the parties are deemed to have waived the effects of the decision rendered in their favor and their only alternative is to file an action anew for the registration in their names of the long in question". 10 Appellants not having applied in due time for proper reconstitution of their registration proceedings, the court below had no recourse but to set, aside the order for the issuance of the decree.

Republic v. Cagandahan (2008) The Court was of the view that where the person is biologically or naturally intersex the determining factor in his gender classification would be what the individual, like respondent, having reached the age of majority, with good reason thinks of his/her sex. Cagandahan here thinks of himself as a male and considering that his body produces high levels of male hormones (androgen) there is preponderant biological support for considering him as being male. Sexual development in cases of intersex persons makes the gender classification at birth inconclusive. It is at maturity that the gender of such persons, like respondent, is fixed.

Cagandahan has simply let nature take its course and has not taken unnatural steps to arrest or interfere with what he was born with. And accordingly, he has already ordered his life to that of a male. He could have undergone treatment and taken steps, like taking lifelong medication, to force his body into the categorical mold of a female but he did not. He chose not to do so. Nature has instead taken its due course in respondent's development to reveal more fully his male characteristics.

In the absence of a law on the matter, the Court will not dictate on respondent concerning a matter so innately private as one's sexuality and lifestyle preferences, much less on whether or not to undergo medical treatment to reverse the male tendency due to CAH. The Court will not consider respondent as having erred in not choosing to undergo treatment in order to become or remain as a female. Neither will the Court force respondent to undergo treatment and to take medication in order to fit the mold of a female, as society commonly currently knows this gender of the human species. Respondent is the one who has to live with his intersex anatomy. To him belongs the human right to the pursuit of happiness and of health. Thus, to him should belong the primordial choice of what courses of action to take along the path of his sexual development and maturation. In the absence of evidence that respondent is an "incompetent" and in the absence of evidence to show that classifying respondent as a male will harm other members of society who are equally entitled to protection under the law, the Court affirms as valid and justified the respondent's position and his personal judgment of being a male.

As for respondent's change of name under Rule 103, the Court has held that a change of name is not a


matter of right but of judicial discretion, to be exercised in the light of the reasons adduced and the consequences that will follow. The trial court's grant of respondent's change of name from Jennifer to Jeff implies a change of a feminine name to a masculine name. Considering the consequence that respondent's change of name merely recognizes his preferred gender, we find merit in respondent's change of name. Such a change will conform with the change of the entry in his birth certificate from female to male.

Braza v. Civil Register (2009) In a special proceeding for correction of entry under Rule 108 (Cancellation or Correction of Entries in the Original Registry), the trial court has no jurisdiction to nullify marriages and rule on legitimacy and filiation.

Rule 108 of the Rules of Court vis a vis Article 412 of the Civil Code charts the procedure by which an entry in the civil registry may be cancelled or corrected. The proceeding contemplated therein may generally be used only to correct clerical, spelling, typographical and other innocuous errors in the civil registry. A clerical error is one which is visible to the eyes or obvious to the understanding; an error made by a clerk or a transcriber; a mistake in copying or writing, or a harmless change such as a correction of name that is clearly misspelled or of a misstatement of the occupation of the parent. Substantial or contentious alterations may be allowed only in adversarial proceedings, in which all interested parties are impleaded and due process is properly observed.

The allegations of the petition filed before the trial court clearly show that petitioners seek to nullify the marriage between Pablo and Lucille on the ground that it is bigamous and impugn Patrick’s filiation in connection with which they ask the court to order Patrick to be subjected to a DNA test.

Christina insists, however, that the main cause of action is for the correction of Patrick’s birth records and that the rest of the prayers are merely incidental thereto.

This is untenable. Her cause of action is actually to seek the declaration of Pablo and Lucille’s marriage as void for being bigamous and impugn Patrick’s legitimacy, which causes of action are governed not by Rule 108 but by A.M. No. 02-11-10-SC which took effect on March 15, 2003, and Art. 171 of the Family Code, respectively, hence, the petition should be filed in a Family Court as expressly provided in said Code.

Corpuz v. Sto. Tomas (2010) As the RTC correctly stated, the provision was included in the law "to avoid the absurd situation where the Filipino spouse remains married to the alien spouse who, after obtaining a divorce, is no longer married to the Filipino spouse." The legislative intent is for the benefit of the Filipino spouse, by clarifying his or her marital status, settling the doubts created by the divorce decree. Essentially, the second paragraph of Article 26 of the Family Code provided the Filipino spouse a substantive right to have his or her marriage to the alien spouse considered as dissolved, capacitating him or her to remarry.24 Without the second paragraph of Article 26 of the Family Code, the judicial recognition of the foreign decree of divorce, whether in a proceeding instituted precisely for that purpose or as a related issue in another proceeding, would be of no

significance to the Filipino spouse since our laws do not recognize divorce as a mode of severing the marital bond;

Article 17 of the Civil Code provides that the policy against absolute divorces cannot be subverted by judgments promulgated in a foreign country. The inclusion of the second paragraph in Article 26 of the Family Code provides the direct exception to this rule and serves as basis for recognizing the dissolution of the marriage between the Filipino spouse and his or her alien spouse.

However, the Court qualified its above conclusion – i.e., that the second paragraph of Article 26 of the Family Code bestows no rights in favor of aliens – with the complementary statement that this conclusion is not sufficient basis to dismiss Gerbert’s petition before the RTC. In other words, the unavailability of the second paragraph of Article 26 of the Family Code to aliens does not necessarily strip Gerbert of legal interest to petition the RTC for the recognition of his foreign divorce decree. The foreign divorce decree itself, after its authenticity and conformity with the alien’s national law have been duly proven according to our rules of evidence, serves as a presumptive evidence of right in favor of Gerbert, pursuant to Section 48, Rule 39 of the Rules of Court which provides for the effect of foreign judgments.

But while the law requires the entry of the divorce decree in the civil registry, the law and the submission of the decree by themselves do not ipso facto authorize the decree’s registration. The law should be read in relation with the requirement of a judicial recognition of the foreign judgment before it can be given res judicata effect. In the context of the present case, no judicial order as yet exists recognizing the foreign divorce decree. Thus, the Pasig City Civil Registry Office acted totally out of turn and without authority of law when it annotated the Canadian divorce decree on Gerbert and Daisylyn’s marriage certificate, on the strength alone of the foreign decree presented by Gerbert.

Evidently, the Pasig City Civil Registry Office was aware of the requirement of a court recognition, as it cited NSO Circular No. 4, series of 1982, and Department of Justice Opinion No. 181, series of 1982 – both of which required a final order from a competent Philippine court before a foreign judgment, dissolving a marriage, can be registered in the civil registry, but it, nonetheless, allowed the registration of the decree. For being contrary to law, the registration of the foreign divorce decree without the requisite judicial recognition is patently void and cannot produce any legal effect.

The Court hastens to point out, however, that this ruling should not be construed as requiring two separate proceedings for the registration of a foreign divorce decree in the civil registry – one for recognition of the foreign decree and another specifically for cancellation of the entry under Rule 108 of the Rules of Court. The recognition of the foreign divorce decree may be made in a Rule 108 proceeding itself, as the object of special proceedings (such as that in Rule 108 of the Rules of Court) is precisely to establish the status or right of a party or a particular fact. Moreover, Rule 108 of the Rules of Court can serve as the appropriate adversarial proceeding41 by which the applicability of the foreign judgment can be measured and tested in terms of jurisdictional infirmities, want of notice to the party, collusion, fraud, or clear mistake of law or fact.


PART TEN. VOLUNTARY DISSOLUTION OF CORPORATIONS

CORPORATION CODE

TITLE XIV. DISSOLUTION

Sec. 117. Methods of dissolution. - A corporation formed or organized under the provisions of this Code may be dissolved voluntarily or involuntarily. (n) Sec. 118. Voluntary dissolution where no creditors are affected. - If dissolution of a corporation does not prejudice the rights of any creditor having a claim against it, the dissolution may be effected by majority vote of the board of directors or trustees, and by a resolution duly adopted by the affirmative vote of the stockholders owning at least two-thirds (2/3) of the outstanding capital stock or of at least two-thirds (2/3) of the members of a meeting to be held upon call of the directors or trustees after publication of the notice of time, place and object of the meeting for three (3) consecutive weeks in a newspaper published in the place where the principal office of said corporation is located; and if no newspaper is published in such place, then in a newspaper of general circulation in the Philippines, after sending such notice to each stockholder or member either by registered mail or by personal delivery at least thirty (30) days prior to said meeting. A copy of the resolution authorizing the dissolution shall be certified by a majority of the board of directors or trustees and countersigned by the secretary of the corporation. The Securities and Exchange Commission shall thereupon issue the certificate of dissolution. (62a) Sec. 119. Voluntary dissolution where creditors are affected. - Where the dissolution of a corporation may prejudice the rights of any creditor, the petition for dissolution shall be filed with the Securities and Exchange Commission. The petition shall be signed by a majority of its board of directors or trustees or other officers having the management of its affairs, verified by its president or secretary or one of its directors or trustees, and shall set forth all claims and demands against it, and that its dissolution was resolved upon by the affirmative vote of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock or by at least two-thirds (2/3) of the members at a meeting of its stockholders or members called for that purpose.

If the petition is sufficient in form and substance, the Commission shall, by an order reciting the purpose of the petition, fix a date on or before which objections thereto may be filed by any person, which date shall not be less than thirty (30) days nor more than sixty (60) days after the entry of the order. Before such date, a copy of the order shall be published at least once a week for three (3) consecutive weeks in a newspaper of general circulation published in the municipality or city where the principal office of the corporation is situated, or if there be no such newspaper, then in a newspaper of general circulation in the Philippines, and a similar copy shall be posted for three (3) consecutive weeks in three (3) public places in such municipality or city.

Upon five (5) day's notice, given after the date on which the right to file objections as fixed in the order has expired, the Commission shall proceed to hear the petition and try any issue made by the objections filed; and if no such objection is sufficient, and the material allegations of the petition are true, it

shall render judgment dissolving the corporation and directing such disposition of its assets as justice requires, and may appoint a receiver to collect such assets and pay the debts of the corporation. (Rule 104, RCa) Sec. 120. Dissolution by shortening corporate term. - A voluntary dissolution may be effected by amending the articles of incorporation to shorten the corporate term pursuant to the provisions of this Code. A copy of the amended articles of incorporation shall be submitted to the Securities and Exchange Commission in accordance with this Code. Upon approval of the amended articles of incorporation of the expiration of the shortened term, as the case may be, the corporation shall be deemed dissolved without any further proceedings, subject to the provisions of this Code on liquidation. (n) Sec. 121. Involuntary dissolution. - A corporation may be dissolved by the Securities and Exchange Commission upon filing of a verified complaint and after proper notice and hearing on the grounds provided by existing laws, rules and regulations. (n) Sec. 122. Corporate liquidation. - Every corporation whose charter expires by its own limitation or is annulled by forfeiture or otherwise, or whose corporate existence for other purposes is terminated in any other manner, shall nevertheless be continued as a body corporate for three (3) years after the time when it would have been so dissolved, for the purpose of prosecuting and defending suits by or against it and enabling it to settle and close its affairs, to dispose of and convey its property and to distribute its assets, but not for the purpose of continuing the business for which it was established.

At any time during said three (3) years, the corporation is authorized and empowered to convey all of its property to trustees for the benefit of stockholders, members, creditors, and other persons in interest. From and after any such conveyance by the corporation of its property in trust for the benefit of its stockholders, members, creditors and others in interest, all interest which the corporation had in the property terminates, the legal interest vests in the trustees, and the beneficial interest in the stockholders, members, creditors or other persons in interest.

Upon the winding up of the corporate affairs, any asset distributable to any creditor or stockholder or member who is unknown or cannot be found shall be escheated to the city or municipality where such assets are located.

Except by decrease of capital stock and as otherwise allowed by this Code, no corporation shall distribute any of its assets or property except upon lawful dissolution and after payment of all its debts and liabilities. (77a, 89a, 16a)

REPUBLIC ACT No. 10142 AN ACT PROVIDING FOR THE REHABILITATION OR LIQUIDATION OF FINANCIALLY DISTRESSED ENTERPRISES AND INDIVIDUALS Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled: CHAPTER I GENERAL PROVISIONS


Section 1. Title. - This Act shall be known as the "Financial Rehabilitation and Insolvency Act (FRIA) of 2010". Section 2. Declaration of Policy. - It is the policy of the State to encourage debtors, both juridical and natural persons, and their creditors to collectively and realistically resolve and adjust competing claims and property rights. In furtherance thereof, the State shall ensure a timely, fair, transparent, effective and efficient rehabilitation or liquidation of debtors. The rehabilitation or liquidation shall be made with a view to ensure or maintain certainly and predictability in commercial affairs, preserve and maximize the value of the assets of these debtors, recognize creditor rights and respect priority of claims, and ensure equitable treatment of creditors who are similarly situated. When rehabilitation is not feasible, it is in the interest of the State to facilities a speedy and orderly liquidation of these debtor's assets and the settlement of their obligations. Section 3. Nature of Proceedings. - The proceedings under this Act shall be in rem. Jurisdiction over all persons 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 the rules of procedure to be promulgated by the Supreme Court. The proceedings shall be conducted in a summary and non-adversarial manner consistent with the declared policies of this Act and in accordance with the rules of procedure that the Supreme Court may promulgate. Section 4. Definition of Terms. - As used in this Act, the term: (a) Administrative expenses shall refer to those reasonable and necessary expenses: (1) incurred or arising from the filing of a petition under the provisions of this Act; (2) arising from, or in connection with, the conduct of the proceedings under this Act, including those incurred for the rehabilitation or liquidation of the debtor; (3) incurred in the ordinary course of business of the debtor after the commencement date; (4) for the payment of new obligations obtained after the commencement date to finance the rehabilitation of the debtor; (5) incurred for the fees of the rehabilitation receiver or liquidator and of the professionals engaged by them; and (6) that are otherwise authorized or mandated under this Act or such other expenses as may be allowed by the Supreme Court in its rules. (b) Affiliate shall refer to a corporation that directly or indirectly, through one or more intermediaries, is controlled by, or is under the common control of another corporation. (c) 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. (d) Commencement date shall refer to the date on which the court issues the Commencement Order, which shall be retroactive to the date of filing of the petition for voluntary or involuntary proceedings. (e) Commencement Order shall refer to the order issued by the court under Section 16 of this Act. (f) Control shall refer to the power of a parent corporation to direct or govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. Control is presumed to exist when the parent owns, directly or indirectly through subsidiaries or affiliates, more than one-half (1/2) of the voting power of an enterprise unless, in exceptional circumstances, it can clearly be demonstrated that such ownership does not constitute control. Control also exists even when the parent owns one-half (1/2) or less of the voting power of an enterprise when there is power: (1) over more than one-half (1/2) of the voting rights by virtue of an agreement with investors; (2) to direct or govern the financial and operating policies of the enterprise under a statute or an agreement; (3) to appoint or remove the majority of the members of the board of directors or equivalent governing body; or (4) to cast the majority votes at meetings of the board of directors or equivalent governing body. (g) Court shall refer to the court designated by the Supreme Court to hear and determine, at the first instance, the cases brought under this Act. (h) Creditor shall refer to a natural or juridical person which has a claim against the debtor that arose on or before the commencement date. (i) Date of liquidation shall refer to the date on which the court issues the Liquidation Order. (j) Days shall refer to calendar days unless otherwise specifically stated in this Act. (k) Debtor shall refer to, unless specifically excluded by a provision of this Act, a sole proprietorship duly registered with the Department of Trade and Industry (DTI), a partnership duly registered with the Securities and Exchange Commission (SEC), a corporation duly organized and existing under Philippine laws, or an individual debtor who has become insolvent as defined herein.


(l) Encumbered property shall refer to real or personal property of the debtor upon which a lien attaches. (m) General unsecured creditor shall refer to a creditor whose claim or a portion thereof its neither secured, preferred nor subordinated under this Act. (n) Group of debtors shall refer to and can cover only: (1) corporations that are financially related to one another as parent corporations, subsidiaries or affiliates; (2) partnerships that are owned more than fifty percent (50%) by the same person; and (3) single proprietorships that are owned by the same person. When the petition covers a group of debtors, all reference under these rules to debtor shall include and apply to the group of debtors. (o) Individual debtor shall refer to a natural person who is a resident and citizen of the Philippines that has become insolvent as defined herein. (p) Insolvent shall refer to the financial condition of a debtor that is generally unable to pay its or his liabilities as they fall due in the ordinary course of business or has liabilities that are greater than its or his assets. (q) Insolvent debtor's estate shall refer to the estate of the insolvent debtor, which includes all the property and assets of the debtor as of commencement date, plus the property and assets acquired by the rehabilitation receiver or liquidator after that date, as well as all other property and assets in which the debtor has an ownership interest, whether or not these property and assets are in the debtor's possession as of commencement date: Provided, That trust assets and bailment, and other property and assets of a third party that are in the possession of the debtor as of commencement date, are excluded therefrom. (r) Involuntary proceedings shall refer to proceedings initiated by creditors. (s) Liabilities shall refer to monetary claims against the debtor, including stockholder's advances that have been recorded in the debtor's audited financial statements as advances for future subscriptions. (t) Lien shall refer to a statutory or contractual claim or judicial charge on real or personal property that legality entities a creditor to resort to said property for payment of the claim or debt secured by such lien. (u) Liquidation shall refer to the proceedings under Chapter V of this Act. (v) Liquidation Order shall refer to the Order issued by the court under Section 112 of this Act. (w) Liquidator shall refer to the natural person or juridical entity appointed as such by the court and entrusted with such powers and duties as set forth in this Act: Provided, That, if the liquidator is a juridical entity, it must designated a natural person who possesses all the qualifications and none of the disqualifications as its representative, it being understood that the juridical entity and the representative are solidarity liable for all obligations and responsibilities of the liquidator.

(x) Officer shall refer to a natural person holding a management position described in or contemplated by a juridical entity's articles of incorporation, bylaws or equivalent documents, except for the corporate secretary, the assistant corporate secretary and the external auditor. (y) Ordinary course of business shall refer to transactions in the pursuit of the individual debtor's or debtor's business operations prior to rehabilitation or insolvency proceedings and on ordinary business terms. (z) Ownership interest shall refer to the ownership interest of third parties in property held by the debtor, including those covered by trust receipts or assignments of receivables. (aa) Parent shall refer to a corporation which has control over another corporation either directly or indirectly through one or more intermediaries. (bb) Party to the proceedings shall refer to the debtor, a creditor, the unsecured creditors' committee, a stakeholder, a party with an ownership interest in property held by the debtor, a secured creditor, the rehabilitation receiver, liquidator or any other juridical or natural person who stands to be benefited or injured by the outcome of the proceedings and whose notice of appearance is accepted by the court. (cc) Possessory lien shall refer to a lien on property, the possession of which has been transferred to a creditor or a representative or agent thereof. (dd) Proceedings shall refer to judicial proceedings commenced by the court's acceptance of a petition filed under this Act. (ee) Property of others shall refer to property held by the debtor in which other persons have an ownership interest. (ff) Publication notice shall refer to notice through publication in a newspaper of general circulation in the Philippines on a business day for two (2) consecutive weeks. (gg) Rehabilitation shall refer to the restoration of the debtor to a condition of successful operation and solvency, if it is shown that its continuance of operation is economically feasible and its creditors can recover by way of the present value of payments projected in the plan, more if the debtor continues as a going concern than if it is immediately liquidated. (hh) Rehabilitation receiver shall refer to the person or persons, natural or juridical, appointed as such by the court pursuant to this Act and which shall be entrusted with such powers and duties as set forth herein. (ii) Rehabilitation Plan shall refer to a plan by which the financial well-being and viability of an insolvent debtor can be restored using various means including, but not limited to, debt forgiveness, debt rescheduling, reorganization or quasi-reorganization, dacion en pago, debt-equity conversion and sale of the business (or parts of it) as a going concern, or setting-up of new business entity as prescribed in Section 62 hereof, or other similar arrangements as may be approved by the court or creditors.


(jj) Secured claim shall refer to a claim that is secured by a lien. (kk) Secured creditor shall refer to a creditor with a secured claim. (ll) Secured party shall refer to a secured creditor or the agent or representative of such secured creditor. (mm) Securities market participant shall refer to a broker dealer, underwriter, transfer agent or other juridical persons transacting securities in the capital market. (nn) Stakeholder shall refer, in addition to a holder of shares of a corporation, to a member of a nonstock corporation or association or a partner in a partnership. (oo) Subsidiary shall refer to a corporation more than fifty percent (50%) of the voting stock of which is owned or controlled directly or indirectly through one or more intermediaries by another corporation, which thereby becomes its parent corporation. (pp) Unsecured claim shall refer to a claim that is not secured by a lien. (qq) Unsecured creditor shall refer to a creditor with an unsecured claim. (rr) Voluntary proceedings shall refer to proceedings initiated by the debtor. (ss) Voting creditor shall refer to a creditor that is a member of a class of creditors, the consent of which is necessary for the approval of a Rehabilitation Plan under this Act. Section 5. Exclusions. - The term debtor does not include banks, insurance companies, pre-need companies, and national and local government agencies or units. For purposes of this section: (a) Bank shall refer to any duly licensed bank or quasi-bank that is potentially or actually subject to conservatorship, receivership or liquidation proceedings under the New Central Bank Act (Republic Act No. 7653) or successor legislation; (b) Insurance company shall refer to those companies that are potentially or actually subject to insolvency proceedings under the Insurance Code (Presidential Decree No. 1460) or successor legislation; and (c) Pre-need company shall refer to any corporation authorized/licensed to sell or offer to sell pre-need plans. Provided, That government financial institutions other than banks and government-owned or controlled corporations shall be covered by this Act, unless their specific charter provides otherwise. Section 6. Designation of Courts and Promulgation of Procedural Rules. - The Supreme Court shall designate the court or courts that will hear and resolve cases brought under this Act and shall promulgate the rules of pleading, practice and procedure to govern the proceedings brought under this Act.

Section 7. Substantive and Procedural Consolidation. - Each juridical entity shall be considered as a separate entity under the proceedings in this Act. Under these proceedings, the assets and liabilities of a debtor may not be commingled or aggregated with those of another, unless the latter is a related enterprise that is owned or controlled directly or indirectly by the same interests: Provided, however, That the commingling or aggregation of assets and liabilities of the debtor with those of a related enterprise may only be allowed where: (a) there was commingling in fact of assets and liabilities of the debtor and the related enterprise prior to the commencement of the proceedings; (b) the debtor and the related enterprise have common creditors and it will be more convenient to treat them together rather than separately; (c) the related enterprise voluntarily accedes to join the debtor as party petitioner and to commingle its assets and liabilities with the debtor's; and (d) The consolidation of assets and liabilities of the debtor and the related enterprise is beneficial to all concerned and promotes the objectives of rehabilitation. Provided, finally, That nothing in this section shall prevent the court from joining other entities affiliated with the debtor as parties pursuant to the rules of procedure as may be promulgated by the Supreme Court. Section 8. Decisions of Creditors. - Decisions of creditors shall be made according to the relevant provisions of the Corporation Code in the case of stock or nonstock corporations or the Civil Code in the case of partnerships that are not inconsistent with this Act. Section 9. Creditors Representatives. - Creditors may designate representatives to vote or otherwise act on their behalf by filing notice of such representation with the court and serving a copy on the rehabilitation receiver or liquidator. Section 10. Liability of Individual Debtor, Owner of a Sole Proprietorship, Partners in a Partnership, or Directors and Officers. - Individual debtor, owner of a sole proprietorship, partners in a partnership, or directors and officers of a debtor shall be liable for double the value of the property sold, embezzled or disposed of or double the amount of the transaction involved, whichever is higher to be recovered for benefit of the debtor and the creditors, if they, having notice of the commencement of the proceedings, or having reason to believe that proceedings are about to be commenced, or in contemplation of the proceedings, willfully commit the following acts: (a) Dispose or cause to be disposed of any property of the debtor other than in the ordinary course of business or authorize or approve any transaction in fraud of creditors or in a manner grossly disadvantageous to the debtor and/or creditors; or (b) Conceal or authorize or approve the concealment, from the creditors, or embezzles or misappropriates, any property of the debtor.


The court shall determine the extent of the liability of an owner, partner, director or officer under this section. In this connection, in case of partnerships and corporations, the court shall consider the amount of the shareholding or partnership or equity interest of such partner, director or officer, the degree of control of such partner, director or officer over the debtor, and the extent of the involvement of such partner, director or debtor in the actual management of the operations of the debtor. Section 11. Authorization to Exchange Debt for Equity. - Notwithstanding applicable banking legislation to the contrary, any bank, whether universal or not, may acquire and hold an equity interest or investment in a debtor or its subsidiaries when conveyed to such bank in satisfaction of debts pursuant to a Rehabilitation or Liquidation Plan approved by the court: Provided, That such ownership shall be subject to the ownership limits applicable to universal banks for equity investments and: Provided, further, That any equity investment or interest acquired or held pursuant to this section shall be disposed by the bank within a period of five (5) years or as may be prescribed by the Monetary Board. CHAPTER II COURT-SUPERVISED REHABILITATION (A) Initiation Proceedings. (1) Voluntary Proceedings. Section 12. Petition to Initiate Voluntary Proceedings by Debtor. - When approved by the owner in case of a sole proprietorship, or by a majority of the partners in case of a partnership, or in case of a corporation, by a majority vote of the board of directors or trustees and authorized by the vote of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock, or in case of nonstock corporation, by the vote of at least two-thirds (2/3) of the members, in a stockholder's or member's meeting duly called for the purpose, an insolvent debtor may initiate voluntary proceedings under this Act by filing a petition for rehabilitation with the court and on the grounds hereinafter specifically provided. The petition shall be verified to establish the insolvency of the debtor and the viability of its rehabilitation, and include, whether as an attachment or as part of the body of the petition, as a minimum the following: (a) Identification of the debtor, its principal activities and its addresses; (b) Statement of the fact of and the cause of the debtor's insolvency or inability to pay its obligations as they become due; (c) The specific relief sought pursuant to this Act; (d) The grounds upon which the petition is based; (e) Other information that may be required under this Act depending on the form of relief requested; (f) Schedule of the debtor's debts and liabilities including a list of creditors with their addresses, amounts of claims and collaterals, or securities, if any; (g) An inventory of all its assets including receivables and claims against third parties;

(h) A Rehabilitation Plan; (i) The names of at least three (3) nominees to the position of rehabilitation receiver; and (j) Other documents required to be filed with the petition pursuant to this Act and the rules of procedure as may be promulgated by the Supreme Court. A group of debtors may jointly file a petition for rehabilitation under this Act when one or more of its members foresee the impossibility of meeting debts when they respectively fall due, and the financial distress would likely adversely affect the financial condition and/or operations of the other members of the group and/or the participation of the other members of the group is essential under the terms and conditions of the proposed Rehabilitation Plan. (2) Involuntary Proceedings. Section 13. Circumstances Necessary to Initiate Involuntary Proceedings. - Any creditor or group of creditors with a claim of, or the aggregate of whose claims is, at least One Million Pesos (Php1,000,000.00) or at least twenty-five percent (25%) of the subscribed capital stock or partners' contributions, whichever is higher, may initiate involuntary proceedings against the debtor by filing a petition for rehabilitation with the court if: (a) there is no genuine issue of fact on law on the claim/s of the petitioner/s, and that the due and demandable payments thereon have not been made for at least sixty (60) days or that the debtor has failed generally to meet its liabilities as they fall due; or (b) a creditor, other than the petitioner/s, has initiated foreclosure proceedings against the debtor that will prevent the debtor from paying its debts as they become due or will render it insolvent. Section 14. Petition to Initiate Involuntary Proceedings. - The creditor/s' petition for rehabilitation shall be verified to establish the substantial likelihood that the debtor may be rehabilitated, and include: (a) identification of the debtor its principal activities and its address; (b) the circumstances sufficient to support a petition to initiate involuntary rehabilitation proceedings under Section 13 of this Act; (c) the specific relief sought under this Act; (d) a Rehabilitation Plan; (e) the names of at least three (3) nominees to the position of rehabilitation receiver; (f) other information that may be required under this Act depending on the form of relief requested; and (g) other documents required to be filed with the petition pursuant to this Act and the rules of procedure as may be promulgated by the Supreme Court.


(B) Action on the Petition and Commencement of Proceedings. Section 15. Action on the Petition. - If the court finds the petition for rehabilitation to be sufficient in form and substance, it shall, within five (5) working days from the filing of the petition, issue a Commencement Order. If, within the same period, the court finds the petition deficient in form or substance, the court may, in its discretion, give the petitioner/s a reasonable period of time within which to amend or supplement the petition, or to submit such documents as may be necessary or proper to put the petition in proper order. In such case, the five (5) working days provided above for the issuance of the Commencement Order shall be reckoned from the date of the filing of the amended or supplemental petition or the submission of such documents. Section 16. Commencement of Proceedings and Issuance of a Commencement Order. - The rehabilitation proceedings shall commence upon the issuance of the Commencement Order, which shall: (a) identify the debtor, its principal business or activity/ies and its principal place of business; (b) summarize the ground/s for initiating the proceedings; (c) state the relief sought under this Act and any requirement or procedure particular to the relief sought; (d) state the legal effects of the Commencement Order, including those mentioned in Section 17 hereof; (e) declare that the debtor is under rehabilitation; (f) direct the publication of the Commencement Order in a newspaper of general circulation in the Philippines once a week for at least two (2) consecutive weeks, with the first publication to be made within seven (7) days from the time of its issuance; (g) If the petitioner is the debtor direct the service by personal delivery of a copy of the petition on each creditor holding at least ten percent (10%) of the total liabilities of the debtor as determined from the schedule attached to the petition within five (5) days; if the petitioner/s is/are creditor/s, direct the service by personal delivery of a copy of the petition on the debtor within five (5) days; (h) appoint a rehabilitation receiver who may or not be from among the nominees of the petitioner/s and who shall exercise such powers and duties defined in this Act as well as the procedural rules that the Supreme Court will promulgate; (i) summarize the requirements and deadlines for creditors to establish their claims against the debtor and direct all creditors to their claims with the court at least five (5) days before the initial hearing; (j) direct Bureau of internal Revenue (BIR) to file and serve on the debtor its comment on or opposition to the petition or its claim/s against the debtor under such procedures as the Supreme Court provide;

(k) prohibit the debtor's suppliers of goods or services from withholding the supply of goods and services in the ordinary course of business for as long as the debtor makes payments for the services or goods supplied after the issuance of the Commencement Order; (l) authorize the payment of administrative expenses as they become due; (m) set the case for initial hearing, which shall not be more than forty (40) days from the date of filing of the petition for the purpose of determining whether there is substantial likelihood for the debtor to be rehabilitated; (n) make available copies of the petition and rehabilitation plan for examination and copying by any interested party; (o) indicate the location or locations at which documents regarding the debtor and the proceedings under Act may be reviewed and copied; (p) state that any creditor or debtor who is not the petitioner, may submit the name or nominate any other qualified person to the position of rehabilitation receiver at least five (5) days before the initial hearing; (q) include s Stay or Suspension Order which shall: (1) suspend all actions or proceedings, in court or otherwise, for the enforcement of claims against the debtor; (2) suspend all actions to enforce any judgment, attachment or other provisional remedies against the debtor; (3) prohibit the debtor from selling, encumbering, transferring or disposing in any manner any of its properties except in the ordinary course of business; and (4) prohibit the debtor from making any payment of its liabilities outstanding as of the commencement date except as may be provided herein. Section 17. Effects of the Commencement Order. - Unless otherwise provided for in this Act, the court's issuance of a Commencement Order shall, in addition to the effects of a Stay or Suspension Order described in Section 16 hereof: (a) vest the rehabilitation with all the powers and functions provided for this Act, such as the right to review and obtain records to which the debtor's management and directors have access, including bank accounts or whatever nature of the debtor subject to the approval by the court of the performance bond filed by the rehabilitation receiver; (b) prohibit or otherwise serve as the legal basis rendering null and void the results of any extrajudicial activity or process to seize property, sell encumbered property, or otherwise attempt to collection or enforce a claim against the debtor after commencement date unless otherwise allowed in this Act, subject to the provisions of Section 50 hereof; (c) serve as the legal basis for rendering null and void any setoff after the commencement date of any debt owed to the debtor by any of the debtor's creditors;


(d) serve as the legal basis for rendering null and void the perfection of any lien against the debtor's property after the commencement date; and (e) consolidate the resolution of all legal proceedings by and against the debtor to the court Provided. However, That the court may allow the continuation of cases on other courts where the debtor had initiated the suit. Attempts to seek legal of other resource against the debtor outside these proceedings shall be sufficient to support a finding of indirect contempt of court. Section 18. Exceptions to the Stay or Suspension Order. - The Stay or Suspension Order shall not apply: (a) to cases already pending appeal in the Supreme Court as of commencement date Provided, That any final and executory judgment arising from such appeal shall be referred to the court for appropriate action; (b) subject to the discretion of the court, to cases pending or filed at a specialized court or quasi-judicial agency which, upon determination by the court is capable of resolving the claim more quickly, fairly and efficiently than the court: Provided, That any final and executory judgment of such court or agency shall be referred to the court and shall be treated as a non-disputed claim; (c) to the enforcement of claims against sureties and other persons solidarily liable with the debtor, and third party or accommodation mortgagors as well as issuers of letters of credit, unless the property subject of the third party or accommodation mortgage is necessary for the rehabilitation of the debtor as determined by the court upon recommendation by the rehabilitation receiver; (d) to any form of action of customers or clients of a securities market participant to recover or otherwise claim moneys and securities entrusted to the latter in the ordinary course of the latter's business as well as any action of such securities market participant or the appropriate regulatory agency or self-regulatory organization to pay or settle such claims or liabilities; (e) to the actions of a licensed broker or dealer to sell pledged securities of a debtor pursuant to a securities pledge or margin agreement for the settlement of securities transactions in accordance with the provisions of the Securities Regulation Code and its implementing rules and regulations; (f) the clearing and settlement of financial transactions through the facilities of a clearing agency or similar entities duly authorized, registered and/or recognized by the appropriate regulatory agency like the Bangko Sentral ng Pilipinas (BSP) and the SEC as well as any form of actions of such agencies or entities to reimburse themselves for any transactions settled for the debtor; and (g) any criminal action against individual debtor or owner, partner, director or officer of a debtor shall not be affected by any proceeding commend under this Act.

Section 19. Waiver of taxes and Fees Due to the National Government and to Local Government Units (LGUs). - Upon issuance of the Commencement Order by the court, and until the approval of the Rehabilitation Plan or dismissal of the petition, whichever is earlier, the imposition of all taxes and fees including penalties, interests and charges thereof due to the national government or to LGUs shall be considered waived, in furtherance of the objectives of rehabilitation. Section 20. Application of Stay or Suspension Order to Government Financial Institutions. - The provisions of this Act concerning the effects of the Commencement Order and the Stay or Suspension Order on the suspension of rights to foreclose or otherwise pursue legal remedies shall apply to government financial institutions, notwithstanding provisions in their charters or other laws to the contrary. Section 21. Effectivity and Duration of Commencement Order. - Unless lifted by the court, the Commencement Order shall be for the effective for the duration of the rehabilitation proceedings for as long as there is a substantial likelihood that the debtor will be successfully rehabilitated. In determining whether there is substantial likelihood for the debtor to be successfully rehabilitated, the court shall ensure that the following minimum requirements are met: (a) The proposed Rehabilitation Plan submitted complies with the minimum contents prescribed by this Act; (b) There is sufficient monitoring by the rehabilitation receiver of the debtor's business for the protection of creditors; (c) The debtor has met with its creditors to the extent reasonably possible in attempts to reach consensus on the proposed Rehabilitation Plan; (d) The rehabilitation receiver submits a report, based on preliminary evaluation, stating that the underlying assumptions and the goals stated in the petitioner's Rehabilitation Plan are realistic reasonable and reasonable or if not, there is, in any case, a substantial likelihood for the debtor to be successfully rehabilitated because, among others: (1) there are sufficient assets with/which to rehabilitate the debtor; (2) there is sufficient cash flow to maintain the operations of the debtor; (3) the debtor's, partners, stockholders, directors and officers have been acting in good faith and which due diligence; (4) the petition is not s sham filing intended only to delay the enforcement of the rights of the creditor's or of any group of creditors; and (5) the debtor would likely be able to pursue a viable Rehabilitation Plan; (e) The petition, the Rehabilitation Plan and the attachments thereto do not contain any materially false or misleading statement;


(f) If the petitioner is the debtor, that the debtor has met with its creditor/s representing at least three-fourths (3/4) of its total obligations to the extent reasonably possible and made a good faith effort to reach a consensus on the proposed Rehabilitation Plan if the petitioner/s is/are a creditor or group of creditors, that/ the petitioner/s has/have met with the debtor and made a good faith effort to reach a consensus on the proposed Rehabilitation Plan; and (g) The debtor has not committed acts misrepresentation or in fraud of its creditor/s or a group of creditors. Section 22. Action at the Initial Hearing. - At the initial hearing, the court shall: (a) determine the creditors who have made timely and proper filing of their notice of claims; (b) hear and determine any objection to the qualifications of the appointment of the rehabilitation receiver and, if necessary appoint a new one in accordance with this Act; (c) direct the creditors to comment on the petition and the Rehabilitation Plan, and to submit the same to the court and to the rehabilitation receiver within a period of not more than twenty (20) days; and (d) direct the rehabilitation receiver to evaluate the financial condition of the debtor and to prepare and submit to the court within forty (40) days from initial hearing the report provided in Section 24 hereof. Section 23. Effect of Failure to File Notice of Claim. - A creditor whose claim is not listed in the schedule of debts and liabilities and who fails to file a notice of claim in accordance with the Commencement Order but subsequently files a belated claim shall not be entitled to participate in the rehabilitation proceedings but shall be entitled to receive distributions arising therefrom. Section 24. Report of the Rehabilitation Receiver. - Within forty (40) days from the initial hearing and with or without the comments of the creditors or any of them, the rehabilitation receiver shall submit a report to the court stating his preliminary findings and recommendations on whether: (a) the debtor is insolvent and if so, the causes thereof and any unlawful or irregular act or acts committed by the owner/s of a sole proprietorship partners of a partnership or directors or officers of a corporation in contemplation of the insolvency of the debtor or which may have contributed to the insolvency of the debtor; (b) the underlying assumptions, the financial goals and the procedures to accomplish such goals as stated in the petitioner's Rehabilitation Plan are realistic, feasible and reasonable; (c) there is a substantial likelihood for the debtor to be successfully rehabilitated; (d) the petition should be dismissed; and (e) the debtor should be dissolved and/or liquidated.

Section 25. Giving Due Course to or Dismissal of Petition, or Conversion of Proceedings. - Within ten (10) days from receipt of the report of the rehabilitation receiver mentioned in Section 24 hereof the court may: (a) give due course to the petition upon a finding that: (1) the debtor is insolvent; and (2) there is a substantial likelihood for the debtor to be successfully rehabilitated; (b) dismiss the petition upon a finding that: (1)debtor is not insolvent; (2) the petition i8 a sham filing intended only to delay the enforcement of the rights of the creditor/s or of any group of creditors; (3)the petition, the Rehabilitation Plan and the attachments thereto contain any materially false or misleading statements; or (4)the debtor has committed acts of misrepresentation or in fraud of its creditor/s or a group of creditors; (c)convert the proceedings into one for the liquidation of the debtor upon a finding that: (1)the debtor is insolvent; and (2)there is no substantial likelihood for the debtor to be successfully rehabilitated as determined in accordance with the rules to be promulgated by the Supreme Court. Section 26.Petition Given Due Course. - If the petition is given due course, the court shall direct the rehabilitation receiver to review, revise and/or recommend action on the Rehabilitation Plan and submit the same or a new one to the court within a period of not more than ninety (90) days. The court may refer any dispute relating to the Rehabilitation Plan or the rehabilitation proceedings pending before it to arbitration or other modes of dispute resolution, as provided for under Republic Act No. 9285, Or the Alternative Dispute Resolution Act of 2004, should it determine that such mode will resolve the dispute more quickly, fairly and efficiently than the court. Section 27.Dismissal of Petition. - If the petition is dismissed pursuant to paragraph (b) of Section 25 hereof, then the court may, in its discretion, order the petitioner to pay damages to any creditor or to the debtor, as the case may be, who may have been injured by the filing of the petition, to the extent of any such injury. (C) The Rehabilitation Receiver, Management Committee and Creditors' Committee. Section 28.Who May Serve as a Rehabilitation Receiver. - Any qualified natural or juridical person may serve as a rehabilitation receiver: Provided, That if the rehabilitation receiver is a juridical entity, it must designate a natural person/s who possess/es all the qualifications and none of the disqualification’s as its


representative, it being understood that the juridical entity and the representative/s are solidarily liable for all obligations and responsibilities of the rehabilitation receiver. Section 29.Qualifications of a Rehabilitation Receiver. - The rehabilitation receiver shall have the following minimum qualifications: (a)A citizen of the Philippines or a resident of the Philippines in the six (6) months immediately preceding his nomination; (b)Of good moral character and with acknowledged integrity, impartiality and independence; (c)Has the requisite knowledge of insolvency and other relevant commercial laws, rules and procedures, as well as the relevant training and/or experience that may be necessary to enable him to properly discharge the duties and obligations of a rehabilitation receiver; and (d)Has no conflict of interest: Provided, That such conflict of interest may be waived, expressly or impliedly, by a party who may be prejudiced thereby. Other qualifications and disqualification’s of the rehabilitation receiver shall be set forth in procedural rules, taking into consideration the nature of the business of the debtor and the need to protect the interest of all stakeholders concerned. Section 30.Initial Appointment of the Rehabilitation Receiver. - The court shall initially appoint the rehabilitation receiver, who mayor may not be from among the nominees of the petitioner, However, at the initial hearing of the petition, the creditors and the debtor who are not petitioners may nominate other persons to the position. The court may retain the rehabilitation receiver initially appointed or appoint another who mayor may not be from among those nominated. In case the debtor is a securities market participant, the court shall give priority to the nominee of the appropriate securities or investor protection fund. If a qualified natural person or entity is nominated by more than fifty percent (50%) of the secured creditors and the general unsecured creditors, and satisfactory evidence is submitted, the court shall appoint the creditors' nominee as rehabilitation receiver. Section 31.Powers, Duties and Responsibilities of the Rehabilitation Receiver. - The rehabilitation receiver shall be deemed an officer of the court with the principal duty of preserving and maximizing the value of the assets of the debtor during the rehabilitation proceedings, determining the viability of the rehabilitation of the debtor, preparing and recommending a Rehabilitation Plan to the court, and implementing the approved Rehabilitation Plan, To this end, and without limiting the generality of the foregoing, the rehabilitation receiver shall have the following powers, duties and responsibilities: (a)To verify the accuracy of the factual allegations in the petition and its annexes; (b)To verify and correct, if necessary, the inventory of all of the assets of the debtor, and their valuation;

(c)To verify and correct, if necessary, the schedule of debts and liabilities of the debtor; (d)To evaluate the validity, genuineness and true amount of all the claims against the debtor; (e)To take possession, custody and control, and to preserve the value of all the property of the debtor; (f)To sue and recover, with the approval of the court, all amounts owed to, and all properties pertaining to the debtor; (g)To have access to all information necessary, proper or relevant to the operations and business of the debtor and for its rehabilitation; (h) To sue and recover, with the. approval of the court, all property or money of the debtor paid, transferred or disbursed in fraud of the debtor or its creditors, or which constitute undue preference of creditor/s; (i) To monitor the operations and the business of the debtor to ensure that no payments or transfers of property are made other than in the ordinary course of business; (j) With the court's approval, to engage the services of or to employ persons or entities to assist him in the discharge of his functions; (k) To determine the manner by which the debtor may be best rehabilitated, to review) revise and/or recommend action on the Rehabilitation Plan and submit the same or a new one to the court for approval; (1) To implement the Rehabilitation Plan as approved by the court, if 80 provided under the Rehabilitation Plan; (m) To assume and exercise the powers of management of the debtor, if directed by the court pursuant to Section 36 hereof; (n) To exercise such other powers as may, from time to time, be conferred upon him by the court; and To submit a status report on the rehabilitation proceedings every quarter or as may be required by the court motu proprio. or upon motion of any creditor. or as may be provided, in the Rehabilitation Plan. Unless appointed by the court, pursuant to Section 36 hereof, the rehabilitation receiver shall not take over the management and control of the debtor but may recommend the appointment of a management committee over the debtor in the cases provided by this Act. Section 32.Removal of the Rehabilitation Receiver. – The rehabilitation receiver may be removed at any time by the court either motu proprio or upon motion by any creditor/s holding more than fifty percent (50%) of the total obligations of the debtor, on such grounds as the rules of procedure may provide which shall include, but are not limited to, the following:


(a) Incompetence, gross negligence, failure to perform or failure to exercise the proper degree of care in the performance of his duties and powers; (b) Lack of a particular or specialized competency required by the specific case; (c) Illegal acts or conduct in the performance of his duties and powers; (d) Lack of qualification or presence of any disqualification; (e) Conflict of interest that arises after his appointment; and (f) Manifest lack of independence that is detrimental to the general body of the stakeholders. Section 33.Compensation and Terms of Service. The rehabilitation receiver and his direct employees or independent contractors shall be entitled to compensation for reasonable fees and expenses from the debtor according to the terms approved by the court after notice and hearing. Prior to such hearing, the rehabilitation receiver and his direct employees shall be entitled to reasonable compensation based on quantum meruit. Such costs shall be considered administrative expenses. Section 34.Oath and Bond of the Rehabilitation Receiver. Prior to entering upon his powers, duties and responsibilities, the rehabilitation receiver shall take an oath and file a bond, in such amount to be fixed by the court, conditioned upon the faithful and proper discharge of his powers, duties and responsibilities. Section 35.Vacancy. - Incase the position of rehabilitation receiver is vacated for any reason whatsoever. the court shall direct the debtor and the creditors to submit the name/s of their nominee/s to the position. The court may appoint any of the qualified nominees. or any other person qualified for the position. Section 36.Displacement of Existing Management by the Rehabilitation Receiver or Management Committee. – Upon motion of any interested party, the court may appoint and direct the rehabilitation receiver to assume the powers of management of the debtor, or appoint a management committee that will undertake the management of the debtor. upon clear and convincing evidence of any of the following circumstances: (a) Actual or imminent danger of dissipation, loss, wastage or destruction of the debtor’s assets or other properties; (b) Paralyzation of the business operations of the debtor; or (c) Gross mismanagement of the debtor. or fraud or other wrongful conduct on the part of, or gross or willful violation of this Act by. existing management of the debtor Or the owner, partner, director, officer or representative/s in management of the debtor. In case the court appoints the rehabilitation receiver to assume the powers of management of the debtor. the court may: (1) require the rehabilitation receiver to post an additional bond;

(2) authorize him to engage the services or to employ persona or entities to assist him in the discharge of his managerial functions; and (3) authorize a commensurate increase in his compensation. Section 37.Role of the Management Committee. – When appointed pursuant to the foregoing section, the management committee shall take the place of the management and the governing body of the debtor and assume their rights and responsibilities. The specific powers and duties of the management committee, whose members shall be considered as officers of the court, shall be prescribed by the procedural rules. Section 38.Qualifications of Members of the Management Committee. - The qualifications and disqualification’s of the members of the management committee shall be set forth in the procedural rules, taking into consideration the nature of the business of the debtor and the need to protect the interest of all stakeholders concerned. Section 39.Employment of Professionals. - Upon approval of the court, and after notice and hearing, the rehabilitation receiver or the management committee may employ specialized professionals and other experts to assist each in the performance of their duties. Such professionals and other experts shall be considered either employees or independent contractors of the rehabilitation receiver or the management committee, as the case may be. The qualifications and disqualification’s of the professionals and experts may be set forth in procedural rules, taking into consideration the nature of the business of the debtor and the need to protect the interest of all stakeholders concerned. Section 40.Conflict of Interest. - No person may be appointed as a rehabilitation receiver, member of a_ management committee, or be employed by the rehabilitation receiver or the management committee if he has a conflict of interest. An individual shall be deemed to have a conflict of interest if he is so situated as to be materially influenced in the exercise of his judgment for or against any party to the proceedings. Without limiting the generality of the foregoing, an individual shall be deemed to have a conflict of interest if: (a) he is a creditor, owner, partner or stockholder of the debtor; (b) he is engaged in a line of business which competes with that of the debtor; (c) he is, or was, within five (5) years from the filing of the petition, a director, officer, owner, partner or employee of the debtor or any of the creditors, or the auditor or accountant of the debtor; (d) he is, or was, within two (2) years from the filing of the petition, an underwriter of the outstanding securities of the debtor; (e) he is related by consanguinity or affinity within the fourth civil degree to any individual creditor, owners of a sale proprietorship-debtor, partners of a partnership- debtor or to any stockholder,


director, officer, employee or underwriter of a corporation-debtor; or (f) he has any other direct or indirect material interest in the debtor or any of the creditors. Any rehabilitation receiver, member of the management committee or persons employed or contracted by them possessing any conflict of interest shall make the appropriate disclosure either to the court or to the creditors in case of out-of-court rehabilitation proceedings. Any party to the proceeding adversely affected by the appointment of any person with a conflict of interest to any of the positions enumerated above may however waive his right to object to such appointment and, if the waiver is unreasonably withheld, the court may disregard the conflict of interest, taking into account the general interest of the stakeholders. Section 41.Immunity. - The rehabilitation receiver and all persons employed by him, and the members of the management committee and all persons employed by it, shall not be subject to any action. claim or demand in connection with any act done or omitted to be done by them in good faith in connection with the exercise of their powers and functions under this Act or other actions duly approved by the court.1awp++il Section 42.Creditors' Committee. - After the creditors' meeting called pursuant to Section 63 hereof, the creditors belonging to a class may formally organize a committee among themselves. In addition, the creditors may, as a body, agree to form a creditors' committee composed of a representative from each class of creditors, such as the following: (a) Secured creditors; (b) Unsecured creditors; (c) Trade creditors and suppliers; and (d) Employees of the debtor. In the . election of the creditors' representatives, the rehabilitation receiver or his representative shall attend such meeting and extend the appropriate assistance as may be defined in the procedural rules. Section 43.Role of Creditors' Committee. - The creditors' committee when constituted pursuant to Section 42 of this Act shall assist the rehabilitation receiver in communicating with the creditors and shall be the primary liaison between the rehabilitation receiver and the creditors. The creditors' committee cannot exercise or waive any right or give any consent on behalf of any creditor unless specifically authorized in writing by such creditor. The creditors' committee may be authorized by the court or by the rehabilitation receiver to perform such other tasks and functions as may be defined by the procedural rules in order to facilitate the rehabilitation process. (D) Determination of Claims. Section 44.Registry of Claims. - Within twenty (20) days from his assumption into office, the rehabilitation receiver shall establish a

preliminary registry of claims. The rehabilitation receiver shall make the registry available for public inspection and provide publication notice to the debtor, creditors and stakeholders on where and when they may inspect it. All claims included in the registry of claims must be duly supported by sufficient evidence. Section 45.Opposition or Challenge of Claims. – Within thirty (30) days from the expiration of the period stated in the immediately preceding section, the debtor, creditors, stakeholders and other interested parties may submit a challenge to claim/s to the court, serving a certified copy on the rehabilitation receiver and the creditor holding the challenged claim/so Upon the expiration of the thirty (30)-day period, the rehabilitation receiver shall submit to the court the registry of claims which shall include undisputed claims that have not been subject to challenge. Section 46.Appeal. - Any decision of the rehabilitation receiver regarding a claim may be appealed to the court. (E) Governance. Section 47.Management. - Unless otherwise provided herein, the management of the juridical debtor shall remain with the existing management subject to the applicable law/s and agreement/s, if any, on the election or appointment of directors, managers Or managing partner. However, all disbursements, payments or sale, disposal, assignment, transfer or encumbrance of property , or any other act affecting title or interest in property, shall be subject to the approval of the rehabilitation receiver and/or the court, as provided in the following subchapter. (F) Use, Preservation and Disposal of Assets and Treatment of Assets and Claims after Commencement Date. Section 48.Use or Disposition of Assets. - Except as otherwise provided herein, no funds or property of the debtor shall he used or disposed of except in the ordinary course of business of the debtor, or unless necessary to finance the administrative expenses of the rehabilitation proceedings. Section 49.Sale of Assets. - The court, upon application of the rehabilitation receiver, may authorize the sale of unencumbered property of the debtor outside the ordinary course of business upon a showing that the property, by its nature or because of other circumstance, is perishable, costly to maintain, susceptible to devaluation or otherwise injeopardy. Section 50.Sale or Disposal of Encumbered Property of the Debtor and Assets of Third Parties Held by Debtor. The court may authorize the sale, transfer, conveyance or disposal of encumbered property of the debtor, or property of others held by the debtor where there is a security interest pertaining to third parties under a financial, credit or other similar transactions if, upon application of the rehabilitation receiver and with the consent of the affected owners of the property, or secured creditor/s in the case of encumbered property of the debtor and, after notice and hearing, the court determines that: (a) such sale, transfer, conveyance or disposal is necessary for the continued operation of the debtor's business; and


(b) the debtor has made arrangements to provide a substitute lien or ownership right that provides an equal level of security for the counter-party's claim or right. Provided, That properties held by the debtor where the debtor has authority to sell such as trust receipt or consignment arrangements may be sold or disposed of by the .debtor, if such sale or disposal is necessary for the operation of the debtor's business, and the debtor has made arrangements to provide a substitute lien or ownership right that provides an equal level of security for the counter-party's claim or right. Sale or disposal of property under this section shall not give rise to any criminal liability under applicable laws. Section 51.Assets of Debtor Held by Third Parties. – In the case of possessory pledges, mechanic's liens or similar claims, third parties who have in their possession or control property of the debtor shall not transfer, conveyor otherwise dispose of the same to persons other than the debtor, unless upon prior approval of the rehabilitation receiver. The rehabilitation receiver may also: (a) demand the surrender or the transfer of the possession or control of such property to the rehabilitation receiver or any other person, subject to payment of the claims secured by any possessory Iien/s thereon; (b) allow said third parties to retain possession or control, if such an arrangement would more likely preserve or increase the value of the property in question or the total value of the assets of the debtor; or (c) undertake any otI1er disposition of the said property as may be beneficial for the rehabilitation of the debtor, after notice and hearing, and approval of the court. Section 52.Rescission or Nullity of Sale, Payment, Transfer or Conveyance of Assets. - The court may rescind or declare as null and void any sale, payment, transfer or conveyance of the debtor's unencumbered property or any encumbering thereof by the debtor or its agents or representatives after the commencement date which are not in the ordinary course of the business of the debtor: Provided, however, That the unencumbered property may be sold, encumbered or otherwise disposed of upon order of the court after notice and hearing: (a) if such are in the interest of administering the debtor and facilitating the preparation and implementation of a Rehabilitation Plan; (b) in order to provide a substitute lien, mortgage or pledge of property under this Act; (c) for payments made to meet administrative expenses as they arise; (d) for payments to victims of quasi delicts upon a showing that the claim is valid and the debtor has insurance to reimburse the debtor for the payments made; (e) for payments made to repurchase property of the debtor that is auctioned off in a judicial or extrajudicial sale under. This Act; or

(f) for payments made to reclaim property of the debtor held pursuant to a possessory lien. Section 53.Assets Subject to Rapid Obsolescence, Depreciation and Diminution of Value. - Upon the application of a secured creditor holding a lien against or holder of an ownership interest in property held by the debtor that is subject to potentially rapid obsolescence, depreciation or diminution in value, the court shall, after notice and hearing, order the debtor or rehabilitation receiver to take reasonable steps necessary to prevent the depreciation. If depreciation cannot be avoided and such depreciation is jeopardizing the security or property interest of the secured creditor or owner, the court shall: (a) allow the encumbered property to be foreclosed upon by the secured creditor according to the relevant agreement between the debtor and the secured creditor, applicable rules of procedure and relevant legislation: Provided. That the proceeds of the sale will be distributed in accordance with the order prescribed under the rules of concurrence and preference of credits; or (b) upon motion of, or with the consent of the affected secured creditor or interest owner. order the conveyance of a lien against or ownership interest in substitute property of the debtor to the secured creditor: Provided. That other creditors holding liens on such property, if any, do not object thereto, or, if such property is not available; (c) order the conveyance to the secured creditor or holder . of an ownership interest of a lien on the residual funds from the sale of encumbered property during the proceedings; or (d) allow the sale or disposition of the property: Provided. That the sale or disposition will maximize the value of the property for the benefit of the secured creditor and the debtor, and the proceeds of the sale will be distributed in accordance with the order prescribed under the rules of concurrence and preference of credits. Section 54.Post-commencement Interest. - The rate and term of interest, if any, on secured and unsecured claims shall be determined and provided for in the approved Rehabilitation Plan. Section 55.Post-commencement Loans and Obligations. - With the approval of the court upon the recommendation of the rehabilitation receiver, the debtor, in order to enhance its rehabilitation. may: (a) enter into credit arrangements; or (b) enter into credit arrangements, secured by mortgages of its unencumbered property or secondary mortgages of encumbered property with the approval of senior secured parties with regard to the encumbered property; or (c) incur other obligations as may be essential for its rehabilitation. The payment of the foregoing obligations shall be considered administrative expenses under this Act. Section 56.Treatment of Employees, Claims. Compensation of employees required to carry on the business shall be considered


an administrative expense. Claims of separation pay for months worked prior to the commencement date shall be considered a pre- ommencement claim. Claims for salary and separation pay for work performed after the commencement date shall be an administrative expense. Section 57.Treatment of Contracts. - Unless cancelled by virtue of a final judgment of a court of competent jurisdiction issued prior to the issuance of the Commencement Order, or at anytime thereafter by the court before which the rehabilitation proceedings are pending, all valid and subbsisting contracts of the debtor with creditors and other third parties as at the commencement date shall continue in force: Provided, That within ninety (90) days following the commencement of proceedings, the debtor, with the consent of the rehabilitation receiver, shall notify each contractual counter-party of whether it is confirming the particular contract. Contractual obligations of the debtor arising or performed during this period, and afterwards for confirmed contracts, shall be considered administrative expenses. Contracts not confirmed within the required deadline shall be considered terminated. Claims for actual damages, if any, arising as a result of the election to terminate a contract shall be considered a pre-commencement claim against the debtor. Nothing contained herein shall prevent the cancellation or termination of any contract of the debtor for any ground provided by law. (G) Avoidance Proceedings. Section 58.Rescission or Nullity of Certain Pre-commencement Transactions. Any transaction occurring prior to commencement date entered into by the debtor or involving its funds or assets may be rescinded or declared null and void on the ground that the same was executed with intent to defraud a creditor or creditors or which constitute undue preference of creditors. Without limiting the generality of the foregoing, a disputable presumption of such design shall arise if the transaction: (a) provides unreasonably inadequate consideration to the debtor and is executed within ninety (90) days prior to the commencement date; (b) involves an accelerated payment of a claim to a creditor within ninety (90) days prior to the commencement date; (c) provides security or additional security executed within ninety (90) days prior to the commencement date; (d) involves creditors, where a creditor obtained, or received the benefit of, more than its pro rata share in the assets of the debtor, executed at a time when the debtor was insolvent; or (e) is intended to defeat, delay or hinder the ability of the creditors to collect claims where the effect of the transaction is to put assets of the debtor beyond the reach of creditors or to otherwise prejudice the interests of creditors. Provided, however, That nothing in this section shall prevent the court from rescinding or declaring as null and void a transaction on other grounds provided by relevant legislation and jurisprudence: Provided, further, That the provisions of the Civil Code on rescission shall in any case apply to these transactions.

Section 59.Actions for Rescission or Nullity. - (a) The rehabilitation receiver or, with his conformity, any creditor may initiate and prosecute any action to rescind, or declare null and void any transaction described in Section 58 hereof. If the rehabilitation receiver does not consent to the filing or prosecution of such action, (b) If leave of court is granted under subsection (a), the rehabilitation receiver shall assign and transfer to the creditor all rights, title and interest in the chose in action or subject matter of the proceeding, including any document in support thereof. (c) Any benefit derived from a proceeding taken pursuant to subsection (a), to the extent of his claim and the costs, belongs exclusively to the creditor instituting the proceeding, and the surplus, if any, belongs to the estate. (d) Where, before an order is made under subsection (a), the rehabilitation receiver (or liquidator) signifies to the court his readiness to institute the proceeding for the benefit of the creditors, the order shall fix the time within which he shall do so and, m that case, the benefit derived from the proceeding, if instituted within the time limits so fixed, belongs to the estate. (H) Treatment of Secured Creditors. Section 60.No Diminution of Secured Creditor Rights. The issuance of the Commencement Order and the Suspension or Stay Order, and any other provision of this Act, shall not be deemed in any way to diminish or impair the security or lien of a secured creditor, or the value of his lien or security, except that his right to enforce said security or lien may be suspended during the term of the Stay Order. The court, upon motion or recommendation of the rehabilitation receiver, may allow a secured creditor to enforce his security or lien, or foreclose upon property of the debtor securing his/its claim, if the said property is not necessary for the rehabilitation of the debtor. The secured creditor and/or the other lien holders shall be admitted to the rehabilitation proceedings only for the balance of his claim, if any. Section 61.Lack of Adequate Protection. - The court, on motion or motu proprio, may terminate, modify or set conditions for the continuance of suspension of payment, or relieve a claim from the coverage thereof, upon showing that: (a) a creditor does not have adequate protection over property securing its claim; or (b) the value of a claim secured by a lien on property which is not necessary for rehabilitation of the debtor exceeds the fair market value of the said property. For purposes of this section, a creditor shall be deemed to lack adequate protection if it can be shown that: (a) the debtor fails or refuses to honor a pre-existing agreement with the creditor to keep the property insured; (b) the debtor fails or refuses to take commercially reasonable steps to maintain the property; or


(c) the property has depreciated to an extent that the creditor is under secured. Upon showing of a lack of protection, the court shall order the debtor or the rehabilitation receiver to make arrangements to provide for the insurance or maintenance of the property; or to make payments or otherwise provide additional or replacement security such that the obligation is fully secured. If such arrangements are not feasible, the court may modify the Stay Order to allow the secured creditor lacking adequate protection to enforce its security claim against the debtor: Provided, however, That the court may deny the creditor the remedies in this paragraph if the property subject of the enforcement is required for the rehabilitation of the debtor. (i) Administration of Proceedings. Section 62.Contents of a Rehabilitation Plan. – The Rehabilitation Plan shall, as a minimum: (a) specify the underlying assumptions, the financial goals and the procedures proposed to accomplish such goals; (b) compare the amounts expected to be received by the creditors under the Rehabilitation Plan with those that they will receive if liquidation ensues within the next one hundred twenty (120) days; (c) contain information sufficient to give the various classes of creditors a reasonable basis for determining whether supporting the Plan is in their financial interest when compared to the immediate liquidation of the debtor, including any reduction of principal interest and penalties payable to the creditors; (d) establish classes of voting creditors; (e) establish subclasses of voting creditors if prior approval has been granted by the court; (f) indicate how the insolvent debtor will be rehabilitated including, but not limited to, debt forgiveness, debt rescheduling, reorganization or quasi-reorganization. dacion en pago, debt-equity conversion and sale of the business (or parts of it) as a going concern, or setting-up of a new business entity or other similar arrangements as may be necessary to restore the financial well-being and visibility of the insolvent debtor; (g) specify the treatment of each class or subclass described in subsections (d) and (e); (h) provide for equal treatment of all claims within the same class or subclass, unless a particular creditor voluntarily agrees to less favorable treatment; (i) ensure that the payments made under the plan follow the priority established under the provisions of the Civil Code on concurrence and preference of credits and other applicable laws; (j) maintain the security interest of secured creditors and preserve the liquidation value of the security unless such has been waived or modified voluntarily; (k) disclose all payments to creditors for pre-commencement debts made during the proceedings and the justifications thereof;

(1) describe the disputed claims and the provisioning of funds to account for appropriate payments should the claim be ruled valid or its amount adjusted; (m) identify the debtor's role in the implementation of the Plan; (n) state any rehabilitation covenants of the debtor, the breach of which shall be considered a material breach of the Plan; (o) identify those responsible for the future management of the debtor and the supervision and implementation of the Plan, their affiliation with the debtor and their remuneration; (p) address the treatment of claims arising after the confirmation of the Rehabilitation Plan; (q) require the debtor and its counter-parties to adhere to the terms of all contracts that the debtor has chosen to confirm; (r) arrange for the payment of all outstanding administrative expenses as a condition to the Plan's approval unless such condition has been waived in writing by the creditors concerned; (s) arrange for the payment" of all outstanding taxes and assessments, or an adjusted amount pursuant to a compromise settlement with the BlR Or other applicable tax authorities; (t) include a certified copy of a certificate of tax clearance or evidence of a compromise settlement with the BIR; (u) include a valid and binding r(,solution of a meeting of the debtor's stockholders to increase the shares by the required amount in cases where the Plan contemplates an additional issuance of shares by the debtor; (v) state the compensation and status, if any, of the rehabilitation receiver after the approval of the Plan; and (w) contain provisions for conciliation and/or mediation as a prerequisite to court assistance or intervention in the event of any disagreement in the interpretation or implementation of the Rehabilitation Plan. Section 63.Consultation with Debtor and Creditors. – if the court gives due course to the petition, the rehabilitation receiver shall confer with the debtor and all the classes of creditors, and may consider their views and proposals ill the review, revision or preparation of a new Rehabilitation Plan. Section 64.Creditor Approval of Rehabilitation Plan. – The rehabilitation receiver shall notify the creditors and stakeholders that the Plan is ready for their examination. Within twenty (2Q) days from the said notification, the rehabilitation receiver shall convene the creditors, either as a whole or per class, for purposes of voting on the approval of the Plan. The Plan shall be deemed rejected unless approved by all classes of creditors w hose rights are adversely modified or affected by the Plan. For purposes of this section, the Plan is deemed to have been approved by a class of creditors if members of the said class holding more than fifty percent (50%) of the total claims of the said class vote in favor of the Plan. The votes of the creditors shall be based solely on the amount of their respective claims based on the registry of claims


submitted by the rehabilitation receiver pursuant to Section 44 hereof. Notwithstanding the rejection of the Rehabilitation Plan, the court may confirm the Rehabilitation Plan if all of the following circumstances are present: (a)The Rehabilitation Plan complies with the requirements specified in this Act. (b) The rehabilitation receiver recommends the confirmation of the Rehabilitation Plan; (c) The shareholders, owners or partners of the juridical debtor lose at least their controlling interest as a result of the Rehabilitation Plan; and (d) The Rehabilitation Plan would likely provide the objecting class of creditors with compensation which has a net present value greater than that which they would have received if the debtor were under liquidation. Section 65.Submission of Rehabilitation Plan to the Court. - 1fthe Rehabilitation Plan is approved, the rehabilitation receiver shall submit the same to the court for confirmation. Within five (5) days from receipt of the Rehabilitation Plan, the court shall notify the creditors that the Rehabilitation Plan has been submitted for confirmation, that any creditor may obtain copies of the Rehabilitation Plan and that any creditor may file an objection thereto. Section 66.Filing of Objections to Rehabilitation Plan. – A creditor may file an objection to the Rehabilitation Plan within twenty (20) days from receipt of notice from the court that the Rehabilitation Plan has been submitted for confirmation. Objections to a Rehabilitation Plan shall be limited to the following: (a) The creditors' support was induced by fraud; (b)The documents or data relied upon in the Rehabilitation Plan are materially false or misleading; or (c)The Rehabilitation Plan is in fact not supported by the voting creditors. Section 67.Hearing on the Objections. - If objections have been submitted during the relevant period, the court shall issue an order setting the time and date for the hearing or hearings on the objections. If the court finds merit in the objection, it shall order the rehabilitation receiver or other party to cure the defect, whenever feasible. If the court determines that the debtor acted in bad faith, or that it is not feasible to cure the defect, the court shall convert the proceedings into one for the liquidation of the debtor under Chapter V of this Act. Section 68.Confirmation of the Rehabilitation Plan. – If no objections are filed within the relevant period or, if objections are filed, the court finds them lacking in merit, or determines that the basis for the objection has been cured, or determines that the debtor has complied with an order to cure the objection, the court shall issue an order confirming the Rehabilitation Plan.

The court may confirm the Rehabilitation Plan notwithstanding unresolved disputes over claims if the Rehabilitation Plan has made adequate provisions for paying such claims. For the avoidance of doubt, the provisions of other laws to the contrary notwithstanding, the court shall have the power to approve or implement the Rehabilitation Plan despite the lack of approval, or objection from the owners, partners or stockholders of the insolvent debtor: Provided, That the terms thereof are necessary to restore the financial well-being and viability of the insolvent debtor. Section 69.Effect of Confirmation of the Rehabilitation Plan, - The confirmation of the Rehabilitation Plan by the court shall result in the following: (a) The Rehabilitation Plan and its provisions shall be binding upon the debtor and all persons who may be affected by . it, including the creditors, whether or not such persons have participated in the proceedings or opposed the Rehabilitation Plan or whether or not their claims have been scheduled; (b) The debtor shall comply with the provisions of the Rehabilitation Plan and shall take all actions necessary to carry out the Plan; (c) Payments shall be made to the creditors in accordance with the provisions of the Rehabilitation Plan; (d) Contracts and other arrangements between the debtor and its creditors shall be interpreted as continuing to apply to the extent that they do not conflict with the provisions of the Rehabilitation Plan; (e) Any compromises on amounts or rescheduling of timing of payments by the debtor shall be binding on creditors regardless of whether or not the Plan is successfully implement; and (f) Claims arising after approval of the Plan that are otherwise not treated by the Plan are not subject to any Suspension Order. The Order confirming the Plan shall comply with Rules 36 of the Rules of Court: Provided, however, That the court may maintain jurisdiction over the case in order to resolve claims against the debtor that remain contested and allegations that the debtor has breached the Plan. Section 70. Liability of General Partners of a Partnership for Unpaid Balances Under an Approved Plan. - The approval of the Plan shall not affect the rights of creditors to pursue actions against the general partners of a partnership to the extent they are liable under relevant legislation for the debts thereof. Section 71. Treatment of Amounts of Indebtedness or Obligations Forgiven or Reduced. - Amounts of any indebtedness or obligations reduced or forgiven in connection with a Plan's approval shall not be subject to any tax in furtherance of the purposes of this Act. Section 72. Period for Confirmation of the Rehabilitation Plan. - The court shall have a maximum period of one (1) year from the date of the filing of the petition to confirm a Rehabilitation Plan.


If no Rehabilitation Plan is confirmed within the said period, the proceedings may upon motion or motu propio, be converted into one for the liquidation of the debtor . Section 73. Accounting Discharge of Rehabilitation Receiver. - Upon the confirmation of the Rehabilitation Plan, the rehabilitation receiver shall provide a final report and accounting to the court. Unless the Rehabilitation Plan specifically requires and describes the role of the rehabilitation receiver after the approval of the Rehabilitation Plan, the court shall discharge the rehabilitation receiver of his duties. (j) Termination of Proceedings Section 74. Termination of Proceedings. - The rehabilitation proceedings under Chapter II shall, upon motion by any stakeholder or the rehabilitation receiver be terminated by order of the court either declaring a successful implementation of the Rehabilitation Plan or a failure of rehabilitation. There is failure of rehabilitation in the following cases: (a) Dismissal of the petition by the court; (b) The debtor fails to submit a Rehabilitation Plan; (c) Under the Rehabilitation Plan submitted by the debtor, there is no substantial likelihood that the debtor can be rehabilitated within a reasonable period; (d) The Rehabilitation Plan or its amendment is approved by the court but in the implementation thereof, the debtor fails to perform its obligations thereunder or there is a failure to realize the objectives, targets or goals set forth therein, including the timelines and conditions for the settlement of the obligations due to the creditors and other claimants; (e) The commission of fraud in securing the approval of the Rehabilitation Plan or its amendment; and (f) Other analogous circumstances as may be defined by the rules of procedure. Upon a breach of, or upon a failure of the Rehabilitation Plan the court, upon motion by an affected party may: (1) Issue an order directing that the breach be cured within a specified period of time, falling which the proceedings may be converted to a liquidation; (2) Issue an order converting the proceedings to a liquidation; (3) Allow the debtor or rehabilitation receiver to submit amendments to the Rehabilitation Plan, the approval of which shall be governed by the same requirements for the approval of a Rehabilitation Plan under this subchapter; (4) Issue any other order to remedy the breach consistent with the present regulation, other applicable law and the best interests of the creditors; or (5) Enforce the applicable provisions of the Rehabilitation Plan through a writ of execution.

Section 75. Effects of Termination. - Termination of the proceedings shall result in the following: (a) The discharge of the rehabilitation receiver subject to his submission of a final accounting; and (b) The lifting of the Stay Order and any other court order holding in abeyance any action for the enforcement of a claim against the debtor. Provided, however, That if the termination of proceedings is due to failure of rehabilitation or dismissal of the petition for reasons other than technical grounds, the proceedings shall be immediately converted to liquidation as provided in Section 92 of this Act. CHAPTER III PRE-NEGOTIATED REHABILITATION Section 76. Petition by Debtor. - An insolvent debtor, by itself or jointly with any of its creditors, may file a verified petition with the court for the approval of a pre-negotiated Rehabilitation Plan which has been endorsed or approved by creditors holding at least two-thirds (2/3) of the total liabilities of the debtor, including secured creditors holding more than fifty percent (50%) of the total secured claims of the debtor and unsecured creditors holding more than fifty percent (50%) of the total unsecured claims of the debtor. The petition shall include as a minimum: (a) a schedule of the debtor's debts and liabilities; (b) an inventory of the debtor's assets; (c) the pre-negotiated Rehabilitation Plan, including the names of at least three (3) qualified nominees for rehabilitation receiver; and (d) a summary of disputed claims against the debtor and a report on the provisioning of funds to account for appropriate payments should any such claims be ruled valid or their amounts adjusted. Section 77. Issuance of Order. - Within five (5) working days, and after determination that the petition is sufficient in form and substance, the court shall issue an Order which shall; (a) identify the debtor, its principal business of activity/ies and its principal place of business; (b) declare that the debtor is under rehabilitation; (c) summarize the ground./s for the filling of the petition; (d) direct the publication of the Order in a newspaper of general circulation in the Philippines once a week for at least two (2) consecutive weeks, with the first publication to be made within seven (7) days from the time of its issuance; (e) direct the service by personal delivery of a copy of the petition on each creditor who is not a petitioner holding at least ten percent (10%) of the total liabilities of the debtor, as determined in the schedule attached to the petition, within three (3) days; (f) state that copies of the petition and the Rehabilitation Plan are available for examination and copying by any interested party;


(g) state that creditors and other interested parties opposing the petition or Rehabilitation Plan may file their objections or comments thereto within a period of not later than twenty (20) days from the second publication of the Order; (h) appoint a rehabilitation receiver, if provided for in the Plan; and (i) include a Suspension or Stay Order as described in this Act. Section 78. Approval of the Plan. - Within ten (10) days from the date of the second publication of the Order, the court shall approve the Rehabilitation Plan unless a creditor or other interested party submits an objection to it in accordance with the next succeeding section. Section 79. Objection to the Petition or Rehabilitation Plan. - Any creditor or other interested party may submit to the court a verified objection to the petition or the Rehabilitation Plan not later than eight (8) days from the date of the second publication of the Order mentioned in Section 77 hereof. The objections shall be limited to the following: (a) The allegations in the petition or the Rehabilitation Plan or the attachments thereto are materially false or misleading; (b) The majority of any class of creditors do not in fact support the Rehabilitation Plan; (c) The Rehabilitation Plan fails to accurately account for a claim against the debtor and the claim in not categorically declared as a contested claim; or (d) The support of the creditors, or any of them was induced by fraud. Copies of any objection to the petition of the Rehabilitation Plan shall be served on the debtor, the rehabilitation receiver (if applicable), the secured creditor with the largest claim and who supports the Rehabilitation Plan, and the unsecured creditor with the largest claim and who supports the Rehabilitation Plan. Section 80. Hearing on the Objections. - After receipt of an objection, the court shall set the same for hearing. The date of the hearing shall be no earlier than twenty (20) days and no later than thirty (30) days from the date of the second publication of the Order mentioned in Section 77 hereof. If the court finds merit in the objection, it shall direct the debtor, when feasible to cure the detect within a reasonable period. If the court determines that the debtor or creditors supporting the Rehabilitation Plan acted in bad faith, or that the objection is non-curable, the court may order the conversion of the proceedings into liquidation. A finding by the court that the objection has no substantial merit, or that the same has been cured shall be deemed an approval of the Rehabilitation Plan. Section 81. Period for Approval of Rehabilitation Plan. - The court shall have a maximum period of one hundred twenty (120) days from the date of the filing of the petition to approve the Rehabilitation Plan. If the court fails to act within the said period, the Rehabilitation Plan shall be deemed approved.

Section 82. Effect of Approval. - Approval of a Plan under this chapter shall have the same legal effect as confirmation of a Plan under Chapter II of this Act. CHAPTER IV OUT-OF-COURT OR INFORMAL RESTRUCTURING AGREEMENTS OR REHABILITATION PLANS Section 83. Out-of-Court or Informal Restructuring Agreements and Rehabilitation Plans. - An out-of-curt or informal restructuring agreement or Rehabilitation Plan that meets the minimum requirements prescribed in this chapter is hereby recognized as consistent with the objectives of this Act. Section 84. Minimum Requirements of Out-of-Court or Informal Restructuring Agreements and Rehabilitation Plans. - For an out-of-court or informal restructuring/workout agreement or Rehabilitation Plan to qualify under this chapter, it must meet the following minimum requirements: (a) The debtor must agree to the out-of-court or informal restructuring/workout agreement or Rehabilitation Plan; (b) It must be approved by creditors representing at least sixty-seven (67%) of the secured obligations of the debtor; (c) It must be approved by creditors representing at least seventy-five percent (75%) of the unsecured obligations of the debtor; and (d) It must be approved by creditors holding at least eighty-five percent (85%) of the total liabilities, secured and unsecured, of the debtor. Section 85. Standstill Period. - A standstill period that may be agreed upon by the parties pending negotiation and finalization of the out-of-court or informal restructuring/workout agreement or Rehabilitation Plan contemplated herein shall be effective and enforceable not only against the contracting parties but also against the other creditors: Provided, That (a) such agreement is approved by creditors representing more than fifty percent (50%) of the total liabilities of the debtor; (b) notice thereof is publishing in a newspaper of general circulation in the Philippines once a week for two (2) consecutive weeks; and (c) the standstill period does not exceed one hundred twenty (120) days from the date of effectivity. The notice must invite creditors to participate in the negotiation for out-of-court rehabilitation or restructuring agreement and notify them that said agreement will be binding on all creditors if the required majority votes prescribed in Section 84 of this Act are met. Section 86. Cram Down Effect. - A restructuring/workout agreement or Rehabilitation Plan that is approved pursuant to an informal workout framework referred to in this chapter shall have the same legal effect as confirmation of a Plan under Section 69 hereof. The notice of the Rehabilitation Plan or restructuring agreement or Plan shall be published once a week for at least three (3) consecutive weeks in a newspaper of general circulation in the Philippines. The Rehabilitation Plan or restructuring agreement shall take effect upon the lapse of fifteen (15) days from the date of the last publication of the notice thereof. Section 87. Amendment or Modification. - Any amendment of an out-of-court restructuring/workout agreement or


Rehabilitation Plan must be made in accordance with the terms of the agreement and with due notice on all creditors. Section 88. Effect of Court Action or Other Proceedings. - Any court action or other proceedings arising from, or relating to, the out-of-court or informal restructuring/workout agreement or Rehabilitation Plan shall not stay its implementation, unless the relevant party is able to secure a temporary restraining order or injunctive relief from the Court of Appeals. Section 89. Court Assistance. - The insolvent debtor and/or creditor may seek court assistance for the execution or implementation of a Rehabilitation Plan under this Chapter, under such rules of procedure as may be promulgated by the Supreme Court. CHAPTER V LIQUIDATION OF INSOLVENT JURIDICAL DEBTORS Section 90. Voluntary Liquidation. - An insolvent debtor may apply for liquidation by filing a petition for liquidation with the court. The petition shall be verified, shall establish the insolvency of the debtor and shall contain, whether as an attachment or as part of the body of the petition; (a) a schedule of the debtor's debts and liabilities including a list of creditors with their addresses, amounts of claims and collaterals, or securities, if any; (b) an inventory of all its assets including receivables and claims against third parties; and (c) the names of at least three (3) nominees to the position of liquidator. At any time during the pendency of court-supervised or pre-negotiated rehabilitation proceedings, the debtor may also initiate liquidation proceedings by filing a motion in the same court where the rehabilitation proceedings are pending to convert the rehabilitation proceedings into liquidation proceedings. The motion shall be verified, shall contain or set forth the same matters required in the preceding paragraph, and state that the debtor is seeking immediate dissolution and termination of its corporate existence. If the petition or the motion, as the case may be, is sufficient in form and substance, the court shall issue a Liquidation Order mentioned in Section 112 hereof. Section 91. Involuntary Liquidation. - Three (3) or more creditors the aggregate of whose claims is at least either One million pesos (Php1,000,000,00) or at least twenty-five percent (25%0 of the subscribed capital stock or partner's contributions of the debtor, whichever is higher, may apply for and seek the liquidation of an insolvent debtor by filing a petition for liquidation of the debtor with the court. The petition shall show that: (a) there is no genuine issue of fact or law on the claims/s of the petitioner/s, and that the due and demandable payments thereon have not been made for at least one hundred eighty (180) days or that the debtor has failed generally to meet its liabilities as they fall due; and

(b) there is no substantial likelihood that the debtor may be rehabilitated. At any time during the pendency of or after a rehabilitation court-supervised or pre-negotiated rehabilitation proceedings, three (3) or more creditors whose claims is at least either One million pesos (Php1,000,000.00) or at least twenty-five percent (25%) of the subscribed capital or partner's contributions of the debtor, whichever is higher, may also initiate liquidation proceedings by filing a motion in the same court where the rehabilitation proceedings are pending to convert the rehabilitation proceedings into liquidation proceedings. The motion shall be verified, shall contain or set forth the same matters required in the preceding paragraph, and state that the movants are seeking the immediate liquidation of the debtor. If the petition or motion is sufficient in form and substance, the court shall issue an Order: (1) directing the publication of the petition or motion in a newspaper of general circulation once a week for two (2) consecutive weeks; and (2) directing the debtor and all creditors who are not the petitioners to file their comment on the petition or motion within fifteen (15) days from the date of last publication. If, after considering the comments filed, the court determines that the petition or motion is meritorious, it shall issue the Liquidation Order mentioned in Section 112 hereof. Section 92. Conversion by the Court into Liquidation Proceedings. - During the pendency of court-supervised or pre-negotiated rehabilitation proceedings, the court may order the conversion of rehabilitation proceedings to liquidation proceedings pursuant to (a) Section 25(c) of this Act; or (b) Section 72 of this Act; or (c) Section 75 of this Act; or (d) Section 90 of this Act; or at any other time upon the recommendation of the rehabilitation receiver that the rehabilitation of the debtor is not feasible. Thereupon, the court shall issue the Liquidation Order mentioned in Section 112 hereof. Section 93. Powers of the Securities and Exchange Commission (SEC). - The provisions of this chapter shall not affect the regulatory powers of the SEC under Section 6 of Presidential Decree No. 902-A, as amended, with respect to any dissolution and liquidation proceeding initiated and heard before it. CHAPTER VI INSOLVENCY OF INDIVIDUAL DEBTORS (A) Suspension of Payments. Section 94. Petition. - An individual debtor who, possessing sufficient property to cover all his debts but foreseeing the impossibility of meeting them when they respectively fall due, may file a verified petition that he be declared in the state of suspension of payments by the court of the province or city in which he has resides for six (6) months prior to the filing of his petition. He shall attach to his petition, as a minimum: (a) a schedule of debts and liabilities; (b) an inventory of assess; and (c) a proposed agreement with his creditors.


Section 95. Action on the Petition. - If the court finds the petition sufficient in form and substance, it shall, within five (5) working days from the filing of the petition, issue an Order: (a) calling a meeting of all the creditors named in the schedule of debts and liabilities at such time not less than fifteen (15) days nor more than forty (40) days from the date of such Order and designating the date, time and place of the meeting; (b) directing such creditors to prepare and present written evidence of their claims before the scheduled creditors' meeting; (c) directing the publication of the said order in a newspaper of general circulation published in the province or city in which the petition is filed once a week for two (2) consecutive weeks, with the first publication to be made within seven (7) days from the time of the issuance of the Order; (d) directing the clerk of court to cause the sending of a copy of the Order by registered mail, postage prepaid, to all creditors named in the schedule of debts and liabilities; (e) forbidding the individual debtor from selling, transferring, encumbering or disposing in any manner of his property, except those used in the ordinary operations of commerce or of industry in which the petitioning individual debtor is engaged so long as the proceedings relative to the suspension of payments are pending; (f) prohibiting the individual debtor from making any payment outside of the necessary or legitimate expenses of his business or industry, so long as the proceedings relative to the suspension of payments are pending; and (g) appointing a commissioner to preside over the creditors' meeting. Section 96. Actions Suspended. - Upon motion filed by the individual debtor, the court may issue an order suspending any pending execution against the individual debtor. Provide, That properties held as security by secured creditors shall not be the subject of such suspension order. The suspension order shall lapse when three (3) months shall have passed without the proposed agreement being accepted by the creditors or as soon as such agreement is denied. No creditor shall sue or institute proceedings to collect his claim from the debtor from the time of the filing of the petition for suspension of payments and for as long as proceedings remain pending except: (a) those creditors having claims for personal labor, maintenance, expense of last illness and funeral of the wife or children of the debtor incurred in the sixty (60) days immediately prior to the filing of the petition; and (b) secured creditors. Section 97. Creditors' Meeting. - The presence of creditors holding claims amounting to at least three-fifths (3/5) of the liabilities shall be necessary for holding a meeting. The commissioner appointed by the court shall preside over the meeting and the clerk of court shall act as the secretary thereof, subject to the following rules:

(a) The clerk shall record the creditors present and amount of their respective claims; (b) The commissioner shall examine the written evidence of the claims. If the creditors present hold at least three-fifths (3/5) of the liabilities of the individual debtor, the commissioner shall declare the meeting open for business; (c) The creditors and individual debtor shall discuss the propositions in the proposed agreement and put them to a vote; (d) To form a majority, it is necessary: (1) that two-thirds (2/3) of the creditors voting unite upon the same proposition; and (2) that the claims represented by said majority vote amount to at least three-fifths (3/5) of the total liabilities of the debtor mentioned in the petition; and (e) After the result of the voting has been announced, all protests made against the majority vote shall be drawn up, and the commissioner and the individual debtor together with all creditors taking part in the voting shall sign the affirmed propositions. No creditor who incurred his credit within ninety (90) days prior to the filing of the petition shall be entitled to vote. Section 98. Persons Who May Refrain From Voting. - Creditors who are unaffected by the Suspension Order may refrain from attending the meeting and from voting therein. Such persons shall not be bound by any agreement determined upon at such meeting, but if they should join in the voting they shall be bound in the same manner as are the other creditors. Section 99. Rejection of the Proposed Agreement. - The proposed agreement shall be deemed rejected if the number of creditors required for holding a meeting do not attend thereat, or if the two (2) majorities mentioned in Section 97 hereof are not in favor thereof. In such instances, the proceeding shall be terminated without recourse and the parties concerned shall be at liberty to enforce the rights which may correspond to them. Section 100. Objections. - If the proposal of the individual debtor, or any amendment thereof made during the creditors' meeting, is approved by the majority of creditors in accordance with Section 97 hereof, any creditor who attended the meeting and who dissented from and protested against the vote of the majority may file an objection with the court within ten (10) days from the date of the last creditors' meeting. The causes for which objection may be made to the decision made by the majority during the meeting shall be: (a) defects in the call for the meeting, in the holding thereof and in the deliberations had thereat which prejudice the rights of the creditors; (b) fraudulent connivance between one or more creditors and the individual debtor to vote in favor of the proposed agreement; or (c) fraudulent conveyance of claims for the purpose of obtaining a majority. The court shall hear and pass upon such objection as soon as possible and in a summary manner. In case the decision of the majority of creditors to approve the individual debtor's proposal or any amendment thereof made


during the creditors' meeting is annulled by the court, the court shall declare the proceedings terminated and the creditors shall be at liberty to exercise the rights which may correspond to them. Section 101. Effects of Approval of Proposed Agreement. - If the decision of the majority of the creditors to approve the proposed agreement or any amendment thereof made during the creditors' meeting is uphold by the court, or when no opposition or objection to said decision has been presented, the court shall order that the agreement be carried out and all parties bound thereby to comply with its terms. The court may also issue all orders which may be necessary or proper to enforce the agreement on motion of any affected party. The Order confirming the approval of the proposed agreement or any amendment thereof made during the creditors' meeting shall be binding upon all creditors whose claims are included in the schedule of debts and liabilities submitted by the individual debtor and who were properly summoned, but not upon: (a) those creditors having claims for personal labor, maintenance, expenses of last illness and funeral of the wife or children of the debtor incurred in the sixty (60) days immediately prior to the filing of the petition; and (b) secured creditors who failed to attend the meeting or refrained from voting therein. Section 102. Failure of Individual Debtor to Perform Agreement. - If the individual debtor fails, wholly or in part, to perform the agreement decided upon at the meeting of the creditors, all the rights which the creditors had against the individual debtor before the agreement shall revest in them. In such case the individual debtor may be made subject to the insolvency proceedings in the manner established by this Act. (B) Voluntary Liquidation. Section 103. Application. - An individual debtor whose properties are not sufficient to cover his liabilities, and owing debts exceeding Five hundred thousand pesos (Php500,000.00), may apply to be discharged from his debts and liabilities by filing a verified petition with the court of the province or city in which he has resided for six (6) months prior to the filing of such petition. He shall attach to his petition a schedule of debts and liabilities and an inventory of assets. The filing of such petition shall be an act of insolvency. Section 104. Liquidation Order. - If the court finds the petition sufficient in form and substance it shall, within five (5) working days issue the Liquidation Order mentioned in Section 112 hereof. (C) In voluntary Liquidation. Section 105. Petition; Acts of Insolvency. - Any creditor or group of creditors with a claim of, or with claims aggregating at least Five hundred thousand pesos (Php500, 000.00) may file a verified petition for liquidation with the court of the province or city in which the individual debtor resides. The following shall be considered acts of insolvency, and the petition for liquidation shall set forth or allege at least one of such acts:

(a) That such person is about to depart or has departed from the Republic of the Philippines, with intent to defraud his creditors; (b) That being absent from the Republic of the Philippines, with intent to defraud his creditors, he remains absent; (c) That he conceals himself to avoid the service of legal process for the purpose of hindering or delaying the liquidation or of defrauding his creditors; (d) That he conceals, or is removing, any of his property to avoid its being attached or taken on legal process; (e) That he has suffered his property to remain under attachment or legal process for three (3) days for the purpose of hindering or delaying the liquidation or of defrauding his creditors; (f) That he has confessed or offered to allow judgment in favor of any creditor or claimant for the purpose of hindering or delaying the liquidation or of defrauding any creditors or claimant; (g) That he has willfully suffered judgment to be taken against him by default for the purpose of hindering or delaying the liquidation or of defrauding his creditors; (h) That he has suffered or procured his property to be taken on legal process with intent to give a preference to one or more of his creditors and thereby hinder or delay the liquidation or defraud any one of his creditors; (i) That he has made any assignment, gift, sale, conveyance or transfer of his estate, property, rights or credits with intent to hinder or delay the liquidation or defraud his creditors; (j) That he has, in contemplation of insolvency, made any payment, gift, grant, sale, conveyance or transfer of his estate, property, rights or credits; (k) That being a merchant or tradesman, he has generally defaulted in the payment of his current obligations for a period of thirty (30) days; (l) That for a period of thirty (30) days, he has failed, after demand, to pay any moneys deposited with him or received by him in a fiduciary; and (m) That an execution having been issued against him on final judgment for money, he shall have been found to be without sufficient property subject to execution to satisfy the judgment. The petitioning creditor/s shall post a bond in such as the court shall direct, conditioned that if the petition for liquidation is dismissed by the court, or withdrawn by the petitioner, or if the debtor shall not be declared an insolvent the petitioners will pay to the debtor all costs, expenses, damages occasioned by the proceedings and attorney's fees. Section 106. Order to Individual Debtor to Show Cause. - Upon the filing of such creditors' petition, the court shall issue an Order requiring the individual debtor to show cause, at a time and place to be fixed by the said court, why he should not be adjudged an insolvent. Upon good cause shown, the court may issue an Order forbidding the individual debtor from making payments of any of his debts, and transferring any property belonging to him.


However, nothing contained herein shall affect or impair the rights of a secured creditor to enforce his lien in accordance with its terms. Section 107. Default. - If the individual debtor shall default or if, after trial, the issues are found in favor of the petitioning creditors the court shall issue the Liquidation Order mentioned in Section 112 hereof. Section 108. Absent Individual Debtor. - In all cases where the individual debtor resides out of the Republic of the Philippines; or has departed therefrom; or cannot, after due diligence, be found therein; or conceals himself to avoid service of the Order to show cause, or any other preliminary process or orders in the matter, then the petitioning creditors, upon submitting the affidavits requisite to procedure an Order of publication, and presenting a bond in double the amount of the aggregate sum of their claims against the individual debtor, shall be entitled to an Order of the court directing the sheriff of the province or city in which the matter is pending to take into his custody a sufficient amount of property of the individual debtor to satisfy the demands of the petitioning creditors and the costs of the proceedings. Upon receiving such Order of the court to take into custody of the property of the individual debtor, it shall be the duty of the sheriff to take possession of the property and effects of the individual debtor, not exempt from execution, to an extent sufficient to cover the amount provided for and to prepare within three (3) days from the time of taking such possession, a complete inventory of all the property so taken, and to return it to the court as soon as completed. The time for taking the inventory and making return thereof may be extended for good cause shown to the court. The sheriff shall also prepare a schedule of the names and residences of the creditors, and the amount due each, from the books of the debtor, or from such other papers or data of the individual debtor available as may come to his possession, and shall file such schedule or list of creditors and inventory with the clerk of court. Section 109. All Property Taken to be Held for All Creditors; Appeal Bonds; Exemptions to Sureties. - In all cases where property is taken into custody by the sheriff, if it does not embrace all the property and effects of the debtor not exempt from execution, any other creditor or creditors of the individual debtor, upon giving bond to be approved by the court in double the amount of their claims, singly or jointly, shall be entitled to similar orders and to like action, by the sheriff; until all claims be provided for, if there be sufficient property or effects. All property taken into custody by the sheriff by virtue of the giving of any such bonds shall be held by him for the benefit of all creditors of the individual debtor whose claims shall be duly proved as provided in this Act. The bonds provided for in this section and the preceding section to procure the order for custody of the property and effects of the individual debtor shall be conditioned that if, upon final hearing of the petition in insolvency, the court shall find in favor of the petitioners, such bonds and all of them shall be void; if the decision be in favor of the individual debtor, the proceedings shall be dismissed, and the individual debtor, his heirs, administrators, executors or assigns shall be entitled to recover such sum of money as shall be sufficient to cover the damages sustained by him, not to exceed the amount of the respective bonds. Such damages shall be fixed and allowed by the court. If either the petitioners or the debtor shall appeal from the decision of the court, upon final hearing of the petition, the appellant shall be required to give bond to the

successful party in a sum double the amount of the value of the property in controversy, and for the costs of the proceedings. Any person interested in the estate may take exception to the sufficiency of the sureties on such bond or bonds. When excepted to the petitioner's sureties, upon notice to the person excepting of not less than two (2) nor more than five (5) days, must justify as to their sufficiency; and upon failure to justify, or of others in their place fail to justify at the time and place appointed the judge shall issue an Order vacating the order to take the property of the individual debtor into the custody of the sheriff, or denying the appeal, as the case may be. Section 110. Sale Under Execution. - If, in any case, proper affidavits and bonds are presented to the court or a judge thereof, asking for and obtaining an Order of publication and an Order for the custody of the property of the individual debtor and thereafter the petitioners shall make it appear satisfactorily to the court or a judge thereof that the interest of the parties to the proceedings will be subserved by a sale thereof, the court may order such property to be sold in the same manner as property is sold under execution, the proceeds to de deposited in the court to abide by the result of the proceedings. CHAPTER VII PROVISIONS COMMON TO LIQUIDATION IN INSOLVENCY OF INDIVIDUAL AND JURIDICAL DEBTORS Section 111. Use of Term Debtor. - For purposes of this chapter, the term debtor shall include both individual debtor as defined in Section 4(o) and debtor as defined in Section 4(k) of this Act. (A) The Liquidation Order. Section 112. Liquidation Order. - The Liquidation Order shall: (a) declare the debtor insolvent; (b) order the liquidation of the debtor and, in the case of a juridical debtor, declare it as dissolved; (c) order the sheriff to take possession and control of all the property of the debtor, except those that may be exempt from execution; (d) order the publication of the petition or motion in a newspaper of general circulation once a week for two (2) consecutive weeks; (e) direct payments of any claims and conveyance of any property due the debtor to the liquidator; (f) prohibit payments by the debtor and the transfer of any property by the debtor; (g) direct all creditors to file their claims with the liquidator within the period set by the rules of procedure; (h) authorize the payment of administrative expenses as they become due; (i) state that the debtor and creditors who are not petitioner/s may submit the names of other nominees to the position of liquidator; and


(j) set the case for hearing for the election and appointment of the liquidator, which date shall not be less than thirty (30) days nor more than forty-five (45) days from the date of the last publication. Section 113. Effects of the Liquidation Order. - Upon the issuance of the Liquidation Order: (a) the juridical debtor shall be deemed dissolved and its corporate or juridical existence terminated; (b) legal title to and control of all the assets of the debtor, except those that may be exempt from execution, shall be deemed vested in the liquidator or, pending his election or appointment, with the court; (c) all contracts of the debtor shall be deemed terminated and/or breached, unless the liquidator, within ninety (90) days from the date of his assumption of office, declares otherwise and the contracting party agrees; (d) no separate action for the collection of an unsecured claim shall be allowed. Such actions already pending will be transferred to the Liquidator for him to accept and settle or contest. If the liquidator contests or disputes the claim, the court shall allow, hear and resolve such contest except when the case is already on appeal. In such a case, the suit may proceed to judgment, and any final and executor judgment therein for a claim against the debtor shall be filed and allowed in court; and (e) no foreclosure proceeding shall be allowed for a period of one hundred eighty (180) days. Section 114. Rights of Secured Creditors. - The Liquidation Order shall not affect the right of a secured creditor to enforce his lien in accordance with the applicable contract or law. A secured creditor may: (a) waive his right under the security or lien, prove his claim in the liquidation proceedings and share in the distribution of the assets of the debtor; or (b) maintain his rights under the security or lien: If the secured creditor maintains his rights under the security or lien: (1) the value of the property may be fixed in a manner agreed upon by the creditor and the liquidator. When the value of the property is less than the claim it secures, the liquidator may convey the property to the secured creditor and the latter will be admitted in the liquidation proceedings as a creditor for the balance. If its value exceeds the claim secured, the liquidator may convey the property to the creditor and waive the debtor's right of redemption upon receiving the excess from the creditor; (2) the liquidator may sell the property and satisfy the secured creditor's entire claim from the proceeds of the sale; or (3) the secure creditor may enforce the lien or foreclose on the property pursuant to applicable laws. (B) The Liquidator.

Section 115. Election of Liquidator. - Only creditors who have filed their claims within the period set by the court, and whose claims are not barred by the statute of limitations, will be allowed to vote in the election of the liquidator. A secured creditor will not be allowed to vote, unless: (a) he waives his security or lien; or (b) has the value of the property subject of his security or lien fixed by agreement with the liquidator, and is admitted for the balance of his claim. The creditors entitled to vote will elect the liquidator in open court. The nominee receiving the highest number of votes cast in terms of amount of claims, ad who is qualified pursuant to Section 118 hereof, shall be appointed as the liquidator. Section 116. Court-Appointed Liquidator. - The court may appoint the liquidator if: (a) on the date set for the election of the liquidator, the creditors do not attend; (b) the creditors who attend, fail or refuse to elect a liquidator; (c) after being elected, the liquidator fails to qualify; or (d) a vacancy occurs for any reason whatsoever, In any of the cases provided herein, the court may instead set another hearing of the election of the liquidator. Provided further, That nothing in this section shall be construed to prevent a rehabilitation receiver, who was administering the debtor prior to the commencement of the liquidation, from being appointed as a liquidator. Section 117. Oath and Bond of the Liquidator. -Prior to entering upon his powers, duties and responsibilities, the liquidator shall take an oath and file a bond, In such amount to be fixed by the court, conditioned upon the proper and faithful discharge of his powers, duties and responsibilities. Section 118. Qualifications of the Liquidator. - The liquidator shall have the qualifications enumerated in Section 29 hereof. He may be removed at any time by the court for cause, either motu propio or upon motion of any creditor entitled to vote for the election of the liquidator. Section 119. Powers, Duties and Responsibilities of the Liquidator. - The liquidator shall be deemed an officer of the court with the principal duly of preserving and maximizing the value and recovering the assets of the debtor, with the end of liquidating them and discharging to the extent possible all the claims against the debtor. The powers, duties and responsibilities of the liquidator shall include, but not limited to: (a) to sue and recover all the assets, debts and claims, belonging or due to the debtor; (b) to take possession of all the property of the debtor except property exempt by law from execution; (c) to sell, with the approval of the court, any property of the debtor which has come into his possession or control;


(d) to redeem all mortgages and pledges, and so satisfy any judgement which may be an encumbrance on any property sold by him; (e) to settle all accounts between the debtor and his creditors, subject to the approval of the court; (f) to recover any property or its value, fraudulently conveyed by the debtor; (g) to recommend to the court the creation of a creditors' committee which will assist him in the discharge of the functions and which shall have powers as the court deems just, reasonable and necessary; and (h) upon approval of the court, to engage such professional as may be necessary and reasonable to assist him in the discharge of his duties. In addition to the rights and duties of a rehabilitation receiver, the liquidator, shall have the right and duty to take all reasonable steps to manage and dispose of the debtor's assets with a view towards maximizing the proceedings therefrom, to pay creditors and stockholders, and to terminate the debtor's legal existence. Other duties of the liquidator in accordance with this section may be established by procedural rules. A liquidator shall be subject to removal pursuant to procedures for removing a rehabilitation receiver. Section 120. Compensation of the Liquidator. - The liquidator and the persons and entities engaged or employed by him to assist in the discharge of his powers and duties shall be entitled to such reasonable compensation as may determined by the liquidation court, which shall not exceed the maximum amount as may be prescribed by the Supreme Court. Section 121. Reporting Requiremen5ts. - The liquidator shall make and keep a record of all moneys received and all disbursements mad by him or under his authority as liquidator. He shall render a quarterly report thereof to the court , which report shall be made available to all interested parties. The liquidator shall also submit such reports as may be required by the court from time to time as well as a final report at the end of the liquidation proceedings. Section 122. Discharge of Liquidator. - In preparation for the final settlement of all the claims against the debtor , the liquidator will notify all the creditors, either by publication in a newspaper of general circulation or such other mode as the court may direct or allow, that will apply with the court for the settlement of his account and his discharge from liability as liquidator. The liquidator will file a final accounting with the court, with proof of notice to all creditors. The accounting will be set for hearing. If the court finds the same in order, the court will discharge the liquidator. (C) Determination of Claims Section 123. Registry of Claims. - Within twenty (20) days from his assumption into office the liquidator shall prepare a preliminary registry of claims of secured and unsecured creditors. Secured creditors who have waived their security or lien, or have fixed the value of the property subject of their security or lien by agreement with the liquidator and is admitted as a creditor for

the balance , shall be considered as unsecured creditors. The liquidator shall make the registry available for public inspection and provide publication notice to creditors, individual debtors owner/s of the sole proprietorship-debtor, the partners of the partnership-debtor and shareholders or members of the corporation-debtor, on where and when they may inspect it. All claims must be duly proven before being paid. Section 124. Right of Set-off. - If the debtor and creditor are mutually debtor and creditor of each other one debt shall be set off against the other, and only the balance, if any shall be allowed in the liquidation proceedings. Section 125. - Opposition or Challenge to Claims. - Within thirty (30 ) days from the expiration of the period for filing of applications for recognition of claims, creditors, individual debtors, owner/s of the sole proprietorship-debtor, partners of the partnership-debtor and shareholders or members of the corporation -debtor and other interested parties may submit a challenge to claim or claims to the court, serving a certified copy on the liquidator and the creditor holding the challenged claim. Upon the expiration of the (30) day period, the rehabilitation receiver shall submit to the court the registry of claims containing the undisputed claims that have not been subject to challenge. Such claims shall become final upon the filling of the register and may be subsequently set aside only on grounds or fraud, accident, mistake or inexcusable neglect. Section 126. Submission of Disputed to the Court. - The liquidator shall resolve disputed claims and submit his findings thereon to the court for final approval. The liquidator may disallow claims. (D) Avoidance Proceedings. Section 127. Rescission or Nullity of Certain Transactions. - Any transaction occurring prior to the issuance of the Liquidation Order or, in case of the conversion of the rehabilitation proceedings prior to the commencement date, entered into by the debtor or involving its assets, may be rescinded or declared null and void on the ground that the same was executed with intent to defraud a creditor or creditors or which constitute undue preference of creditors. The presumptions set forth in Section 58 hereof shall apply. Section 128. Actions for Rescission or Nullity. - (a) The liquidator or, with his conformity, a creditor may initiate and prosecute any action to rescind, or declare null and void any transaction described in the immediately preceding paragraph. If the liquidator does not consent to the filling or prosecution of such action, any creditor may seek leave of the court to commence said action. (b) if leave of court is granted under subsection (a) hereof, the liquidator shall assign and transfer to the creditor all rights, title and interest in the chose in action or subject matter of the proceeding, including any document in support thereof. (c) Any benefit derived from a proceeding taken pursuant to subsection (a) hereof, to the extent of his claim and the costs, belongs exclusively to the creditor instituting the proceeding, and the surplus, if any, belongs to the estate.


(d) Where, before an orders is made under subsection (a) hereof, the liquidator signifies to the court his readiness to the institute the proceeding for the benefit of the creditors, the order shall fix the time within which he shall do so and, in that case the benefit derived from the proceedings, if instituted within the time limits so fixed, belongs to the estate. (E) The Liquidation Plan. Section 129. The Liquidation Plan. - Within three (3) months from his assumption into office, the Liquidator shall submit a Liquidation Plan to the court. The Liquidation Plan shall, as a minimum enumerate all the assets of the debtor and a schedule of liquidation of the assets and payment of the claims. Section 130. Exempt Property to be Set Apart. - It shall be the duty of the court, upon petition and after hearing, to exempt and set apart, for the use and benefit of the said insolvent, such real and personal property as is by law exempt from execution, and also a homestead; but no such petition shall be heard as aforesaid until it is first proved that notice of the hearing of the application therefor has been duly given by the clerk, by causing such notice to be posted it at least three (3) public places in the province or city at least ten (10) days prior to the time of such hearing, which notice shall set forth the name of the said insolvent debtor, and the time and place appointed for the hearing of such application, and shall briefly indicate the homestead sought to be exempted or the property sought to be set aside; and the decree must show that such proof was made to the satisfaction of the court, and shall be conclusive evidence of that fact. Section 131. Sale of Assets in Liquidation. - The liquidator may sell the unencumbered assets of the debtor and convert the same into money. The sale shall be made at public auction. However, a private sale may be allowed with the approval of the court if; (a) the goods to be sold are of a perishable nature, or are liable to quickly deteriorate in value, or are disproportionately expensive to keep or maintain; or (b) the private sale is for the best interest of the debtor and his creditors. With the approval of the court, unencumbered property of the debtor may also be conveyed to a creditor in satisfaction of his claim or part thereof. Section 132. manner of Implementing the Liquidation Plan. - The Liquidator shall implement the Liquidation Plan as approved by the court. Payments shall be made to the creditors only in accordance with the provisions of the Plan. Section 133. Concurrence and Preference of Credits. - The Liquidation Plan and its Implementation shall ensure that the concurrence and preference of credits as enumerated in the Civil Code of the Philippines and other relevant laws shall be observed, unless a preferred creditor voluntarily waives his preferred right. For purposes of this chapter, credits for services rendered by employees or laborers to the debtor shall enjoy first preference under Article 2244 of the Civil Code, unless the claims constitute legal liens under Article 2241 and 2242 thereof. Section 134. Order Removing the Debtor from the List of Registered Entitles at the Securities and Exchange Commission. - Upon determining that the liquidation has been completed according to this Act and applicable law, the court shall issue an

Order approving the report and ordering the SEC to remove the debtor from the registry of legal entities. Section 135. Termination of Proceedings. - Upon receipt of evidence showing that the debtor has been removed from the registry of legal entities at the SEC. The court shall issue an Order terminating the proceedings. (F) Liquidation of a Securities Market Participant. Section 136. Liquidation of a Securities Market Participant. - The foregoing provisions of this chapter shall be without prejudice to the power of a regulatory agency or self- regulatory organization to liquidate trade-related claims of clients or customers of a securities market participant which, for purposes of investor protection, are hereby deemed to have absolute priority over other claims of whatever nature or kind insofar as trade-related assets are concerned. For purposes of this section, trade -related assets include cash, securities, trading right and other owned and used by the securities market participant in the ordinary course of this business. CHAPTER VIII PROCEEDINGS ANCILLARY TO OTHER INSOLVENCY OR REHABILITAION PROCEEDINGS (A) Banks and Other Financial Institutions Under Rehabilitation Receivership Pursuant to a State-funded or State-mandated Insurance System. Section 137. Provision of Assistance. - The court shall issue orders, adjudicate claims and provide other relief necessary to assist in the liquidation of a financial under rehabilitation receivership established by a state-funded or state-mandated insurance system. Section 138. Application of Relevant Legislation. - The liquidation of bank, financial institutions, insurance companies and pre-need companies shall be determined by relevant legislation. The provisions in this Act shall apply in a suppletory manner. (B) Cross-Border Insolvency Proceedings. Section 139. Adoption of Uncitral Model Law on Cross-Border Insolvency. - Subject to the provision of Section 136 hereof and the rules of procedure that may be adopted by the Supreme Court, the Model Law on Cross-Border Insolvency of the United Nations Center for International Trade and Development is hereby adopted as part of this Act. Section 140. Initiation of Proceedings. - The court shall set a hearing in connection with an insolvency or rehabilitation proceeding taking place in a foreign jurisdiction, upon the submission of a petition by the representative of the foreign entity that is the subject of the foreign proceeding. Section 141. Provision of Relief. - The court may issue orders: (a) suspending any action to enforce claims against the entity or otherwise seize or foreclose on property of the foreign entity located in the Philippines;


(b) requiring the surrender property of the foreign entity to the foreign representative; or (c) providing other necessary relief. Section 142. Factors in Granting Relief. - In determining whether to grant relief under this subchapter, the court shall consider; (a) the protection of creditors in the Philippines and the inconvenience in pursuing their claim in a foreign proceeding; (b) the just treatment of all creditors through resort to a unified insolvency or rehabilitation proceedings; (c) whether other jurisdictions have given recognition to the foreign proceeding; (d) the extent that the foreign proceeding recognizes the rights of creditors and other interested parties in a manner substantially in accordance with the manner prescribed in this Act; and (e) the extent that the foreign proceeding has recognized and shown deference to proceedings under this Act and previous legislation. CHAPTER IX FUNDS FOR REHABILITATION OF GOVERNMENT-OWNED AND CONTROLLED CORPORATIONS Section 143. Funds for Rehabilitation of Government -owned and Controlled Corporations. - Public funds for the rehabilitation of government-owned and controlled corporations shall be released only pursuant to an appropriation by Congress and shall be supported by funds actually available as certified by the National Treasurer. The Department of Finance, in collaboration with the Department of Budget and Management, shall promulgate the rules for the use and release of said funds. CHAPTER X MISCELLANEOUS PROVISIOS Section 144. Applicability of Provisions. - The provisions in Chapter II, insofar as they are applicable, shall likewise apply to proceedings in Chapters II and IV. Section 145. Penalties. - An owner, partner, director, officer or other employee of the debtor who commits any one of the following acts shall, upon conviction thereof, be punished by a fine of not more than One million pesos (Php 1, 000,000.00) and imprisonment for not less than three(3) months nor more than five (5) years for each offense; (a) if he shall, having notice of the commencement of the proceedings, or having reason to believe that proceedings are about to be commented, or in contemplation of the proceedings hide or conceal, or destroy or cause to be destroyed or hidden any property belonging to the debtor or if he shall hide, destroy, after mutilate or falsify, or cause to be hidden, destroyed, altered, mutilated or falsified, any book, deed, document or writing relating thereto; if he shall, with intent to defraud the creditors of the debtor, make any payment sale, assignment, transfer or conveyance of any property belongings to the debtor

(b) if he shall, having knowledge belief of any person having proved a false or fictitious claim against the debtor, fail to disclose the same to the rehabilitation receiver of liquidator within one (1) month after coming to said knowledge or belief; or if he shall attempt to account for any of the debtors property by fictitious losses or expense; or (c) if he shall knowingly violate a prohibition or knowingly fail to undertake an obligation established by this Act. Section 146. Application to Pending Insolvency, Suspension of Payments and Rehabilitation Cases. - This Act shall govern all petitions filed after it has taken effect. All further proceedings in insolvency, suspension of payments and rehabilitation cases then pending, except to the extent that in opinion of the court their application would not be feasible or would work injustice, in which event the procedures set forth in prior laws and regulations shall apply. Section 147. Application to Pending Contracts. - This Act shall apply to all contracts of the debtor regardless of the date of perfection. Section 148. Repeating Clause. - The Insolvency Law (Act No. 1956). As amended is hereby repealed. All other laws, orders, rules and regulations or parts thereof inconsistent with any provision of this Act are hereby repealed or modified accordingly. Section 149. Separability Clause. - If any provision of this Act shall be held invalid, the remainder of this Act not otherwise affected shall remain in full force effect Section 150. Effectivity Clause. - This Act shall take effect fifteen (15) days after its complete publication in the Official Gazette or in at least two (2) national newspaper of general circulation.

A.M. No. 00-8-10-SC December 2, 2008

RULES OF PROCEDURE ON CORPORATE REHABILITATION

R E S O L U T I O N

Acting on the recommendation of the Subcommittee on Special Rules for Special Commercial Courts, submitting for the consideration and approval of the Court the Resolved to APPROVED the same.

The Rule shall take effect on January 16, 2009 following its publication in two (2) newspapers of general circulation.

December 2, 2008

RULES OF PROCEDURE ON CORPORATE REHABILITATION (2008)

RULE 1. COVERAGE


Section 1. Scope. - These Rules shall apply to petitions for rehabilitation of corporations, partnerships and associations pursuant to Presidential Decree No. 902-A, as amended.

Section 2. Applicability to Rehabilitation Cases Transferred from the Securities and Exchange Commission. - Cases for rehabilitation transferred from Securities Exchange Commission to the Regional Trial Court pursuant to Republic Act No. 8799, otherwise known as The Securities Regulation Code, shall likewise be governed by these Rules.

RULE 2. DEFINITION OF TERMS AND CONSTRUCTION

Section 1. Definition of Terms. - For purpose of these Rules:

"Administrative Expenses" shall refer to (a) reasonable and necessary expenses that are incurred in connection with the filing of the petition; (b) expenses incurred in the ordinary course of business after the issuance of the stay order, excluding interest payable to the creditors for loans and credit accommodations existing at the time of the issuance of the stay order, and (c) other expenses that are authorized under this Rules.

"Affidavit of General Financial Condition" shall refer to a verified statement on the general financial condition of the debtor requiredin Section 2, Rule 4 of these Rules.

"Affiliate" is a corporation that directly or indirectly, through one or more intermediaries, is controlled by, or is under the common control of another corporation, which thereby becomes its parent corporation.

"Asset" is anything of value that can be in the form of money, such as cash at the bank or amounts owed; fixed assets such as property or equipment; or intangibles including intellectual property, the book value of which is shown in the last three audited financial statement immediately preceding the filing of the petition, In case the debtor is less than three years in operation, it is sufficient that the book value is based on the audited financial statement\s for the years or year immediately preceding the filing of petition, as the case may be.

"Board of Directors" shall include the executive committee or the management of partnership or association

"Claim" shall include all claims or demands of whatever nature or charter against a debtor or its property, whether for money or otherwise

"Control" is the power of a parent corporation to direct or govern the financial and operating policies of an enterprise so as to obtain benefits from its

activities. Control is presumed to exit when the parent owns, directly or indirectly though subsidiaries, more than one - half (½) of the voting power of the voting power of an enterprise unless, unless, in exception circumstances, it can clearly be demonstrated that such own ship does not constitute control. Control also exits even when the parents owns one-half (1/2) or less of the voting power of an enterprise when there is power.

(A) Over more than one-half (½) of agreement with investors;

(B) To direct or govern the financial and operating policies of the enterprise under a statute or agreement;

(C) To appoint or remove the majority of the member of the board of directors or equivalent governing body; or

(D) To cast the majority votes at meeting of the board of directors or equivalent governing body.

"Creditor" shall mean any holder or a Chain

"Court" shall refer to the proper Regional Trial Court designated to hear and decide the cases contemplated contemplated under these Rules.

"Days" shall refer to calendar days unless otherwise provided in these Rules.

"Debtor" shall mean any corporation, partnership or association or a group of companies, whether supervised or regulated by the Securities and Exchange Commission or other government agencies, on whose behalf a petition for rehabilitation has been filed under these rules.

"Foreign count" means a judicial or other authority competent to control or supervise a foreign proceeding.

"Foreign proceeding" means a collective judicial or administrative proceeding in a foreign State, interim proceeding, pursuant to a law re solvency in which proceeding the assets and affairs of the debtor are subject to control or supervision by a foreign count, for the purpose of rehabilitation or re-organization

"Foreign Representative" means person or entity, including one appointed on an interim basis, authorized in a foreign proceeding to administer the reorganization or rehabilitation of the debtor or act as a representative of the foreign proceeding.


"Group of companies" refers to, and can cover only, corporation that are financially refers to, and can cover only, corporations that are financially rated to one another as parent corporation, subsidiaries and affiliates.

When the petition covers a group of companies, all reference under these Rules to "debtor" shall include and apply include and apply to the group of companies.

"Liabilities" shall refer to monetary claims against the debtor, including stockholders advances that have been recoded in the debtor's audited financial statements as advances for subscription.

"Parent" is a corporation directly or indirectly though one or more intermediaries.

"Rehabilitation" shall mean the restoration of the debtor to a position of successful operation and solvency, if it is shown that its continuance of operation is economically feasible and its creditors can recover by way of the present value of payments projected in the plan more if the corporation continues as a going concern than if it immediately liquidated.

"Secured claim" shall refer to any clan whose payment or fulfillment is secured by contract or by law, including any clam or credit enumerated under Articles 2241 and 2242 of the civil Code and Article 110, as amended, of the Labor code of the Philippines.

"Subsidiary" mean a corporation more than fifty percent (50%) of the voting stock of which is owned or controlled directly or indirectly though one or more intermediaries by another corporation

"Unsecured clan" shall mean any clan other than a seared claim.

Section 2. Construction - These Rules shall be liberally construed to carry out the objectives of Section 5(d), 6(d) and 6(d) of Presidential Decree No. 902-A, as amended, and to assist the parties in obtaining a jut, expeditious and inexpensive determination of case. Where applicable, the Rules of Court shall apply supplementary to proceedings under these Rules.

RULE 3. GENERAL PROVISONS

Section 1. Nature of Proceeding - Any proceeding initiated under these Rules shall be considered in rem. Jurisdiction over all persons affected by the proceeding shall be considered as acquired upon publication of the notice of the commencement of the proceedings in any newspaper or general circulation in the Philippines in the manner prescribed by these rules.

The proceedings shall also be summary and non-adversarial in nature. The following pleading are prohibited:

(a) Motion to dismiss;

(b) Motion for a bill of particulars:

(c) Petition for relief;

(d) Motion for extension;

(e) Motion for postponement

(f) Third-party complaint;

(g) Intervention;

(h) Motion to hear affirmative defenses; and

(I) Any pleading or motion which is similar to or of like effect as any of the foregoing.

Any pleading, motion, opposition, defense or claim filed by any interested party shall be supported by verified statements that the affiant has read same and that the factual allegations therein are true and correct of his personal knowledge or based on authentic records, and correct of his personal knowledge or based on authentic records, and shall contain as annexes such documents as may be deemed by the party court may be decide matters on the basis of affidavits and other documentary evidence. Where necessary, the court shall conduct clarificatory hearings before resolving any matter submitted to it for resolution.

Section 2. Venue. - Petitions for rehabilitation pursuant to these Rules shall be filed in the regional trial court which has jurisdiction over the principal office of the debtor as specified in its articles of incorporation or partnership. Where the principal office of the corporation, partnership or association is registered in the Securities and Exchange Commission as Metro Manila, the action must be filed in the regional trial court of the city or municipality where the head office is located.

A joint petition by a group of companies shall be filed in the Regional Trial Court which has jurisdiction over the principal office of the parent company, as specified in its Articles of Incorporation.

Section 3. Service of Pleadings and Documents. - When so authorized by the court, any pleading and/or document required by these Rules may be filed with the court and/or served upon the other parties by facsimile transmission (fax) or electronic mail (e-mail). In such cases, the date of transmission shall be deemed to be the dtae of service. Where the pleading or document is voluminous, the court may, upon motion, waive the requirement of service; provided that a copy thereof together with all its attachments is duly filed with the court and is made


available for examination and reproduction by any party, and provided, further, that a notice of such filing and availability is duly served on the parties.

Section 4. Trade Secrets and Other Confidential Information. - Upon motion, the court may issue an order to protect trade secrets or other confidential research, development or commercial information belonging to the debtor.

Section 5. Executory Nature of Orders. - Any order issued by the court under these Rules is immediately executory. A petition to review the order shall not stay the execution of the order unless restrained or enjoined by the appellate court. Unless otherwise provided in these Rules, the review of any order or decision of the court or an appeal therefrom shall be in accordance with the Rules of Court; provided, however, that the reliefs ordered by the trial or appellate courts shall take into account the need for resolution of proceedings in a just, equitable and speedy manner.

Section 6. Nullification of Illegal Transfers and Preferences. - Upon motion the court may nullify any transfer of property or any other conveyance, sale, payment or agreement made in violation of its stay order or in violation of these Rules.

Section 7. Stay Order. - If the court finds the petition to be sufficient in form and substance, it shall; not later than five (5) working days from the filing of the petition, issue an order: (a) appointing a rehabilitation receive and fixing his bond; (b) staying enforcement of all claims, whether for money or 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 not solidarily liable, said owner shall be entitled to the benefit of excussion as such guarantor; (c) prohibiting the debtor from selling, encumbering, transferring, or disposing in any manner any of its properties except in the ordinary course of business; (d) prohibiting the debtor from making any payment of its liabilities except as provided in items (e), (f) and (g) of this Section or when ordered by the court pursuant to Section 10 of Rule 3; (e) prohibiting the debtor's suppliers of goods or services from withholding supply of goods and services in the ordinary course of business for as long as the debtor makes payments for the services and goods supplied after the issuance of the stay order; (f) directing the payment in full of all administrative expenses incurred after the issuance of the stay order; (g) directing the payment of new loans or other forms of credit accommodations obtained for the rehabilitation of the debtor with prior court approval; (h) fixing the dates of the initial hearing on the petition not earlier than forty-five (45) days but not later than sixty (60) days from the filing thereof; (I) directing the petitioner to publish the Order in a newspaper of general circulation in the Philippines once a week for two (2) consecutive weeks;

(j) directing the petitioner to furnish a copy of the petition and its annexes, as well as the stay order, to the creditors named in the petition and the appropriate regulatory agencies such as, but not limited to, the Securities and Exchange Commission, the Bangko Sentral ng Pilipinas, the Insurance Commission, the National Telecommunications Commission, the Housing and Land Use Regulatory Board and the Energy Regulatory Commission; (k) directing the petitioner that foreign creditors with no known addresses in the Philippines be individually given a copy of the stay order at their foreign addresses; (l) directing all creditors and all interested parties (including the regulatory agencies concerned) to file and serve on the debtor a verified comment on or opposition to the petition, with supporting affidavits and documents, not later than fifteen (15) days before the date of the first initial hearing and putting them on notice that their failure to do so will bar them from participating in the proceedings; and (m) directing the creditors and interested parties to secure from the court copies of the petition and its annexes within such time as to enable themselves to file their comment on or opposition to the petition and to prepare for the initial hearing of the petition.

The issuance of a stay order does not affect the right to commence actions or proceedings insofar as it is necessary to preserve a claim against the debtor.

Section 8. Service of Stay Order on Rehabilitation Receiver. - The petitioner shall immediately serve a copy of the stay order on the rehabilitation receiver appointed by the court, who shall manifest his acceptance or non-acceptance of his appointment not later than ten (10) days from receipt of the order.

Section 9. Period of Stay Order. - The stay order shall be effective from the date of its issuance until the approval of the rehabilitation plan or the dismissal of the petition.

Section 10. Relief from, Modification, or Termination of Stay Order. -

(a) The court may, upon motion, terminate, modify, or set conditions for the continuance of the stay order, or relieve a claim from the coverage thereof upon showing that (1) any of the allegations in the petition, or any of the contents of any attachment, or the verification thereof has ceased to be true; (2) a creditor does not have adequate protection over property securing its claims; (3) the debtor's secured obligation is more than the fair market value of the property subject of the stay and such property is not necessary for the rehabilitation of the debtor; or (4) the property covered by the stay order is not essential or necessary to the rehabilitation and the creditor's failure to enforce its claim will cause more damage to the creditor than to the debtor.

(b) For purposes of this Section, the creditor lacks adequate protection if it can be shown that:


(1) The debtor fails or refuses to honor a pre-existing agreement with the to keep the property insured;

(2) The debtor fails or refuses to take commercially reasonable steps to maintain the property; or

(3) The property has depreciated to an extent that the creditor is undersecured

(c) Upon showing the creditor's lack of adequate protection, the court shall order the rehabilitation receiver to (1) make arrangements to provide for the insurance or maintenance of the property, or (2) to make payments or otherwise provide additional or replacement security such as that the obligation is fully secured. If such arrangements are not feasible, the court shall modify the stay order to allow the secured creditor lacking adequate protection to enforce its claim against the debtor; provided, however, that the court may deny the creditor the remedies in this paragraph if such remedies would prevent the continuation of the debtor as a going concern or otherwise prevent the approval and implementation of a rehabilitation plan.

Section 11. Qualifications of Rehabilitation Receiver. -

(a) In the appointment of the rehabilitation receiver, the following qualifications shall be taken into consideration by the court:

(1) Expertise and acumen to manage and operate a business similar in size and complexity to that of the debtor;

(2) Knowledge in management, finance and rehabilitation of distressed companies;

(3) General familiarity with the rights of creditors in suspension of payments or rehabilitation and general understanding of the duties and obligations of a rehabilitation receiver;

(4) Good moral character, independence and integrity;

(5) Lack of conflict of interest as defined in this Section; and

(6) Willingness and ability to file a bond in such amount as may be determined by the court.

(b) Without limiting the generality of the following, a rehabilitation receiver may be deemed to have a conflict of interest if:

(1) He is creditor or stockholder of the debtor;

(2) He is engaged in a line of business which competes with the debtor;

(3) He is, or was within two (2) years from the filing of the petition, a director, officer, or employee or the auditor or accountant of the debtor;

(4) He is or was within two (2) years from the filing of the petition, an underwriter of the outstanding securities of the debtor;

(5) He is related by consanguinity or affinity within the fourth civil degree to any creditor, stockholder, director, officer, employee, or underwriter of the debtor; or

(6) He has any other direct or indirect material interest in the debtor or any creditor.

Section 12. Powers and Functions of Rehabilitation Receiver. - The rehabilitation receiver shall not take over the management and control of the debtor but shall closely oversee and monitor the operations of the debtor during the pendency of the proceedings. For this purpose, the rehabilitation receiver shall have the powers, duties and functions of a receiver under Presidential Decree No. 902-A, as amended, and the Rules of Court.

The rehabilitation receiver shall be considered as an officer of the court. He shall be primarily tasked to study the best way to rehabilitate the debtor and to ensure that the value of the debtor's property is reasonably maintained pending the determination of whether or not the debtor should be rehabilitated, as well as implement the rehabilitation plan after its approval. Accordingly, he shall have the following powers and functions:

(a) To verify the accuracy of the petition, including its annexes such as the Schedule of Debts and Liabilities and the Inventory of Assets submitted in support to the petition;

(b) To accept and incorporate, when justified, amendments to the Schedule of Debts and Liabilities;

(c) To recommend to the court the disallowance of claims and rejection of amendments t the Schedule of Debts and Liabilities that lack sufficient proof and justification;

(d) To submit to the court and make available for review by the creditors, a revised Schedule of Debts and Liabilities;


(e) To investigate the acts, conduct, properties, liabilities and financial condition of the debtor, the operation of its business and the desirability of the continuance thereof; and, any other matter relevant to the proceeding or to the formulation of a rehabilitation plan;

(f) To examine under oath the directors and officers of the debtor and any other witnesses that he may deem appropriate;

(g) To make available to the creditors documents and notices necessary for them to follow and participate in the proceedings;

(h) To report to the court any fact ascertained by him pertaining to the causes of the debtor's problems, fraud, preferences, dispositions, encumbrances, misconduct, mismanagement and irregularities committed by the stockholders, directors, management,, or any other person against the debtor;

(i) To employ such person or persons such as lawyers, accountants, appraisers and staff are necessary in performing his functions and duties as rehabilitation receiver;

(j) To monitor the operations of the debtor and to immediately report to the court any material adverse change in the debtor's business;

(k) To evaluate the existing assets and liabilities, earnings and operations of the debtor;

(l) To determine and recommend to the court the best way to salvage and protect the interests of the creditors, stockholders and the general public;

(m) To study the rehabilitation plan proposed by the debtor or any rehabilitation plan submitted during the proceedings, together with any comments made thereon;

(n) To prohibit and report to the court any encumbrance, transfer or disposition of the debtor's property outside of the ordinary course of business or what is allowed by the court;

(o) To prohibit and report to the court any payments outside of the ordinary course of business;

(p) To have unlimited access to the debtor's employees, premises, books, records and financial documents during business hours;

(q) To inspect, copy, photocopy or photograph any document, paper, book, account or letter, whether in the possession of the debtor or other persons;

(r) To gain entry into any property for the purpose of inspecting, measuring, surveying or photographing it or any designated relevant object or operation thereon;

(s) To take possession, control and custody of the debtor's assets;

(t) To notify counterparties and the court as to contracts that the debtor has decided to continue to perform the breach;

(u) To be notified of and to attend all meetings of the board of directors and stockholder of the debtor;

(v) To recommend any modification of an approved rehabilitation plan as he may deem appropriate;

(w) To bring to the attention of the court any material change affecting the debtor's ability to meet the obligations under the rehabilitation plan;

(x) To recommend the appointment of a management committee in the cases provided for under Presidential Decree No. 902-A, as amended;

(y) To recommend the termination of the proceedings and the dissolution of the debtor if he determines that the continuance in business of such entity is no longer feasible or profitable or no longer works to the best interest of the stockholders, parties-litigants, creditors or the general public;

(z) To apply to the court for any order or directive that he may deem necessary or desirable to aid him in the exercise of his powers and performance of his duties and functions; and

(aa) To exercise such other powers as may from time to time be conferred upon him by the court.

Section 13. Oath and Bond. - Before entering upon his powers, duties and functions, the rehabilitation receiver must be sworn in to perform them faithfully, and must post a bond executed in favor of the debtor in such sum as the court may direct, to guarantee that he will faithfully discharge his duties and obey the orders of the court. If necessary, he shall also declare under oath that he will perform the duties of a trustee of the assets of the debtor, will act honestly and in good faith, and deal with the assets of the debtor on a commercially reasonable manner.

Section 14. Fees and Expenses. - The rehabilitation receiver and the persons hired by him shall be entitled to reasonable professional fees and reimbursement of expenses which shall be considered as administrative expenses.


Section 15. Immunity from Suit. - The rehabilitation receiver shall not be subject to any action, claim or demand in connection with any act done or omitted by him in good faith in the exercise of his functions and powers herein conferred.

Section 16. Reports. - The rehabilitation receiver shall file a written report every three (3) months to the court or as often as the court may require on the general condition of the debtor. The report shall include, at the minimum, interim financial statements of the debtor.

Section 17. Dismissal of Rehabilitation Receiver. - A rehabilitation receiver may, upon motion, be dismissed by the court on the following grounds: (a) if he fails, without just cause, to perform any of his powers and functions under these Rules; or (b) on any of the grounds for removing a trustee under the general principles of trusts.

Section 18. Rehabilitation Plan. - The rehabilitation plan shall include (a) the desired business targets or goals and the duration and coverage of the rehabilitation; (b) the terms and conditions of such rehabilitation which shall include the manner of its implementation, giving due regard to the interests of secured creditors such as, but not limited, to the non-impairment of their security liens or interests; (c) the material financial commitments to support the rehabilitation plan; (d) the means for the execution of the rehabilitation plan, which may include debt to equity conversion, restructuring of the debts, dacion en pago or sale exchange or any disposition of assets or of the interest of shareholders, partners or members; (e) a liquidation analysis setting out for each creditor that the present value of payments it would receive under the plan is more than that which it would receive if the assets of the debtor were sold by a liquidator within a six-month period from the estimated date of filing of the petition; and (f) such other relevant information to enable a reasonable investor to make an informed decision on the feasibility of the rehabilitation plan.

Section 19. Repayment Period. - If the rehabilitation plan extends the period for the debtor to pay its contractual obligations, the new period should not extend beyond fifteen (15) years from the expiration of the stipulated term existing at the time of filing of the petition.

Section 20. Effects of Rehabilitation Plan. - The approval of the rehabilitation plan by the court shall result in the following:

(a) The plan and its provisions shall be binding upon the debtor and all persons who may be affected thereby, including the creditors, whether or not such persons have participated in the proceedings or opposed the plan or whether or not their claims have been scheduled;

(b) The debtor shall comply with the provisions of the plan and shall take all actions necessary to carry out the plan;

(c) Payments shall be made to the creditors in accordance with the provisions of the plan;

(d) Contracts and other arrangements between the debtor and its creditors shall be interpreted as continuing to apply to the extent that they do not conflict with the provisions of the plan; and

(e) Any compromises on amounts or rescheduling of timing of payments by the debtor shall be binding on creditors regardless of whether or not the plan is successfully implemented.

Section 21. Revocation of Rehabilitation Plan on Grounds of Fraud. - Upon motion, within ninety (90) days from the approval of the rehabilitation plan, and after notice and hearing, the court may revoke the approval thereof on the ground that the same was secured through fraud.

Section 22. Alteration or Modification of Rehabilitation Plan. - An approved rehabilitation plan may, upon motion, be altered or modified if, in the judgement of the court, such alteration or modification is necessary to achieve the desired targets or goals set forth therein.

Section 23. Termination of Proceedings. - The court shall, upon motion or upon recommendation of the rehabilitation receiver, terminate the proceeding in any of the following cases:

(a) Dismissal of the petition;

(b) Failure of the debtor to submit the rehabilitation plan;

(c) Disapproval of the rehabilitation plan by the court;

(d) Failure to achieve the desired targets or goals as set forth in the rehabilitation plan;

(e) Failure of the debtor to perform its obligations under the plan;

(f) Determination that the rehabilitation plan may no longer be implemented in accordance with its terms, conditions, restrictions or assumptions; or

(g) Successful implementation of the rehabilitation plan.

Section 24. Discharge of Rehabilitation Receiver. - Upon termination of the rehabilitation proceedings, the rehabilitation receiver shall submit his final report and accounting with such period of time as the court will allow him. Upon approval of his report and accounting, the court shall order his discharge.

RULE 4. DEBTOR-INITIATED REHABILITATION


Section 1. Who May Petition. - Any debtor who foresees the impossibility of meeting its debts when they respectively fall due, may petition the proper regional trial court for rehabilitation.

A group of companies may jointly file a petition for rehabilitation under these Rules when one or more of its constituent corporations foresee the impossibility of meeting debts when they respectively fall due, and the financial distress would likely adversely affect the financial condition and/or operations of the other member companies of the group is essential under the terms and conditions of the proposed rehabilitation plan.

Section 2. Contents of Petition. -

(a) The petition filed by the debtor must be verified and must set forth with sufficient particularity all the following material facts: (1) the name and business of the debtor; (2) the nature of the business of the debtor; (3) the history of the debtor; (4) the cause of its inability to pay its debts; (5) all the pending actions or proceedings known to the debtor and the courts or tribunals where they are pending; (6) threats or demands to enforce claims or liens against the debtor; and (7) the manner by which the debtor may be rehabilitated and how such rehabilitation may benefit the general body of creditors, employees and stockholders.

(b) The petition shall be accompanied by the following documents:

(1) An audited financial statement of the debtor at the end of its last fiscal year;

(2) Interim financial statements as of the end of the month prior to the filing of the petition;

(3) A Schedule of Debts and Liabilities which lists all the creditors of the debtor, indicating the name and last address of record of each creditor; the amount of each claim as to principal, interest, or penalties due as of the date of filing; the nature of the claim; and any pledge, lien, mortgage judgement or other security given for the payment thereof;

(4) An Inventory of Assets which must list with reasonable specificity all the assets of the debtor, stating the nature of each asset, the location and condition thereof, the book value or market value of the asset, and attaching the corresponding certificate of title thereof in case of real property, or the evidence of title or ownership in case of movable property, the encumbrances, liens or claims thereon, if any, and the identities and addresses of the lienholders

and claimants. The Inventory shall include a Schedule of Accounts Receivable which must indicate the amount of each, the persons from who due, the date of maturity and the degree of collectibility categorizing them as highly collectible to remotely collectible;

(5) A rehabilitation plan which conforms with the minimal requirements set out in Section 18 of Rule 3;

(6) A Schedule of Payments and Disposition of Assets which the debtor may have effected within three (3) months immediately preceding the filing of the petition;

(7) A Schedule of Cash Flow of the debtor for three (3) months immediately preceding the filing of the petition, and a detailed schedule of the projected cash flow for the succeeding three (3) months;

(8) A Statement of Possible Claims by or against the debtor which must contain a brief statement of the facts which might give rise to the claim and an estimate of the probable amount thereof;

(9) An Affidavit of General Financial Condition which shall contain answers to the questions or matters prescribed in Annex "A" hereof;

(10) At least three (3) nominees for the position of rehabilitation receiver as well as their qualifications and addresses, including but not limited to their telephone numbers, fax numbers and e-mail address; and

(11) A certificate attesting under oath that (i) the filing of the petition has been duly authorized; and (ii) the directors and stockholders of the debtor have irrevocably approved and/or consented to, in accordance with existing laws, all actions or matters necessary and desirable to rehabilitate the debtor including, but not limited to, amendments to the articles of incorporation and by-laws or articles of partnership; increase or decrease in the authorized capital stock; issuance of bonded indebtedness; alienation, transfer, or encumbrance of assets of the debtor; and modification of shareholders' rights.

(c) Five (5) copies of the petition shall be filed with the court.


Section 3. Verification by Debtor. - The petition filed by the debtor must be verified by an affidavit of a responsible officer of the debtor and shall be in a form substantially as follows:

"I, ___________________, (position) of (name of petitioner), do solemnly swear that the petitioner has been duly authorized to file the petition and that the stockholders and board of directors (or governing body) have approved and/or consented to, accordance with law, all actions or matters necessary or desirable to rehabilitate the debtor. The petition is being filed to protect the interests of the debtor, the stockholders, the inventors and the creditors of the debtor, which warrant the appointment of a rehabilitation receiver. There is no petition for insolvency filed with any other body, court of tribunal affecting the petitioner. The Inventory of Assets and the Schedule of Debts and Liabilities contains a full, correct and true description of all debts and liabilities and of all goods, effects, estate and property of whatever kind of class belonging to petitioner. The Inventory also contains a full, correct and true statement of all debts owing or due to petitioner, or to any person or persons in trust for petitioner and of all securities and contracts whereby any money may hereafter become due or payable to petitioner or by or through which any benefit or advantage may accrue to petitioner. The petition contains a concise statement of the facts giving rise, or which might give rise, to any cause of action in favor of petitioner. Petitioner has no land, money, stock, expectancy, or property of any kind, except those set forth in the Inventory of Assets. Petitioner has, in no instance, created or acknowledged a debt for a greater sum than the true and correct amount. Petitioner, its officers, directors and stockholders have not, directly or indirectly, concealed, fraudulently sold or otherwise fraudulently disposed of, any part of petitioner's real or personal property, estate, effects or rights of action, and petitioner, its officers, directors and stockholders have not in any way compounded with any of its creditors in order to give preference to such creditors, or to receive or to accept any profit or advantage therefrom, or to defraud or deceive in any manner any creditor to whom petitioner is indebted. Petitioner, its officers, directors, and stockholders have been acting in good faith and with due diligence.

Section 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 than fifteen (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.

If the Schedule of Debts and Liabilities omits a claim or liability, the creditor concerned shall attach to its comment or opposition a verified statement of the obligations allegedly due it.

Section 5. Initial Hearing. -

(a) On or before the initial hearing set in the order mentioned in Section 7 of Rule 3, the petitioner shall file a publisher's affidavit showing that the publication requirements and a petitioner's affidavit showing that the notification requirement for foreign creditors had been complied with, as required in the stay order.

(b) Before proceeding with the initial hearing, the court shall determine whether the jurisdictional requirements set forth above had been complied with. After finding that such requirements are met, the court shall ensure that the parties consider in detail all of the following:

(1) Amendments to the rehabilitation plan proposed by the debtor;

(2) Simplification of the issues;

(3) The possibility of obtaining stipulations and admission of facts and documents, including resort to request for admission under Rule 26 of the Rule of Court;

(4) The possibility of amicably agreeing on any issue brought up in the comments on, or opposition to, the petition;

(5) Referral of any accounting, financial and other technical issues to an expert;

(6) The possibility of submitting the petition for decision on the basis of the comments, opposition, affidavit and other documents on record;

(7) The possibility of a new rehabilitation plan voluntarily agreed upon by the debtor and its creditors; and

(8) Such other matters as may aid in the speedy and summary disposition of the case.

Section 6. Additional Hearings. - The court may hold additional hearings as part of the initial hearing contemplated in these Rules but the initial hearing must be concluded not later than ninety (90) days from the initial date of the initial hearing fixed in the stay order.

Section 7. Order After Initial Hearing. -

(a) Within twenty (20) days after the last hearing, the court shall issue an order which shall:

(1) Give due course to the petition and immediately refer the petition and its


annexes to the rehabilitation receiver who shall evaluate the rehabilitation plan and submit his recommendations to the court not later than ninety (90) days from the date of the last initial hearing, if the court is satisfied that there is merit to the petition, otherwise the court shall immediately dismiss the petition; and

(2) Recite in detail the matters taken up in the initial hearing and the action taken thereon, including a substitute rehabilitation plan contemplated in Sections 5 (b)(7) and (8) of this Rule;

(b) If the debtor and creditors agree on a new rehabilitation plan pursuant to Section 5 (b)(7) of this Rule, the order shall so state the fact and require the rehabilitation receiver to supply the details of the plan and submit it for the approval of the court not later than sixty (6) days from the date of the last initial hearing. The court shall approve the new rehabilitation plan not later than ninety (90) days from the date of the last initial hearing upon concurrence of the following:

(1) Approval or endorsement of creditors holding at least two-thirds (2/3) of the total liabilities of the debtor including secured creditors holding more than fifty percent (50%) of the total secured claims of the debtor and unsecured creditors holding more than fifty percent (50%) of the total unsecured claims of the debtor;

(2) The rehabilitation plan complies with the requirements specified in Section 18 of Rule 3;

(3) The rehabilitation plan would provide the objecting class of creditors with payments whose present value projected in the plan would be greater than that which they would have received if the assets of the debtor were sold by a liquidator within a six (6) month period from the date of filing of the petition; and

(4) The rehabilitation receiver has recommended approval of the plan.

The approval by the court of the new rehabilitation plan shall have the same effect as approval of a rehabilitation plan under Section 20 of Rule 3.

Section 8. Creditors' Meetings. - If no new rehabilitation plan is agreed upon by the debtor and the creditors, the rehabilitation receiver, at any time before he submits his evaluation on the debtor-proposed rehabilitation plan to the court as prescribed in Section 7(a)(1) of this Rule, shall, either alone or with the debtor, meet with the creditors or

any interested party t discuss the plan with a view to clarifying or resolving any matter connected therewith.

Section 9. Comments on or Opposition to Rehabilitation Plan. - Any creditor or interested party of record may file comments on or opposition to the proposed rehabilitation plan, with a copy given to the rehabilitation receiver, not later than sixty (60) days from the date of the last initial hearing. The court shall conduct summary and non-adversarial proceedings to receive evidence, if necessary, in hearing the comments on and opposition to the plan.

Section 10. modification of Proposed Rehabilitation Plan. - The debtor may modify its rehabilitation plan in the light of the comments of the rehabilitation receiver and creditors or any interested party and submit a revised or substitute rehabilitation plan for the final approval of the court. Such rehabilitation plan must be submitted to the court not later than ten (10) moths from the date of filing of the petition.

Section 11. Approval of Rehabilitation Plan. - The court may approve a rehabilitation plan even over the opposition of creditors of the debtor if, in its judgement, the rehabilitation of the debtor is feasible and the opposition of the creditors is manifestly unreasonable if the following are present:

(a) The rehabilitation plan complies with the requirements specified in Section 18 of Rule 3;

(b) The rehabilitation plan would provide the objecting class of creditors with payments whose present value projected in the plan would be greater than that which they would have received if the assets of the debtor were sold by a liquidator within a six (6)-month period from the date of filing of the petition; and

(c) The rehabilitation receiver has recommended approval of the plan.

In approving the rehabilitation plan, the court shall ensure that the rights of the secured creditors are not impaired. The court shall also 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 reasonably require, or for the protection and preservation of the interests of the creditors should the plan fall.

Section 12. Period to Decide Petition. - The court shall decide the petition within one (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.

RULE 5. CREDITOR-INITIATED REHABILITATION

Section 1. Who May Petition. - Any creditor or creditors holding at least twenty percent (20%) of the debtor's total liabilities may file a petition with the proper regional trial


court for rehabilitation of a debtor that cannot meet its debts as they respectively fall due.

Section 2. Requirements for Creditor-Initiated Petitions. - Where the petition is filed by a creditor or creditors under this Rule, it is sufficient that the petition is accompanied by a rehabilitation plan and a list of at least three (3) nominees to the position of rehabilitation receiver and verified by a sworn statement that the affiant has read the petition and that its contents are true and correct of his personal knowledge or based on authentic records and that the petition is being filed to protect the interests of the debtor, the stockholders, the investors and the creditors of the debtor.

Section 3. Applicability of Provisions Relating to Debtor-Initiated Rehabilitation. - The provisions of Sections 5 to 12 of Rule 4 shall apply to rehabilitation under this Rule.

RULE 6. PRE-NEGOTIATED REHABILITATION

Section 1. Pre-negotiated Rehabilitation Plan. - A debtor that foresees the impossibility of meeting its debts as they fall due may, by itself or jointly with any of its creditors, file a verified petition for the approval of a pre-negotiated rehabilitation plan. The petition shall comply with Section 2 of Rule 4 and be supported by an affidavit showing the written approval or endorsement of creditors holding at least two-thirds (2/3) of the total liabilities of the debtor, including secured creditors holding more than fifty percent (50%) of the total secured claims of the debtor and unsecured creditors holding more than fifty percent (50%) of the total unsecured claims of the debtor.

Section 2. Issuance of Order. - If the court finds the petition sufficient in form and substance, it shall, not later than five (5) working days from the filing of the petition, issue an order which shall:

(a) Identify the debtor, its principal business or activity/ies and its principal place of business;

(b) Direct the publication of the order in a newspaper of general circulation once a week for at least two (2) consecutive weeks, with the first publication to be made within seven (7) days from the time of its issuance;

(c) Direct the service by personal delivery of a copy of the petition on each creditor who is not a petitioner holding at least five percent (5%) of the total liabilities of the debtor, as determined in the schedule attached to the petition, within three (3) days;

(d) Direct the petitioner to furnish a copy of the petition and its annexes, as well as the stay order, to the relevant regulatory agency;

(e) State that copies of the petition and the rehabilitation plan are available for examination and copying by any interested party;

(f) Direct creditors and other parties interested (including the Securities and Exchange Commission and the relevant regulatory agencies such as, but not limited to, the Bangko Sentral ng Pilipinas, the Insurance Commission, the National Telecommunications Commission, the Housing and Land Use Regulatory Board and the Energy Regulatory Commission) in opposing the petition or rehabilitation plan to file their verified objections thereto or comments thereon within a period of not later than twenty (20) days from the second publication of the order, with a warning that failure to do so will bar them from participating in the proceedings;

(g) Appoint the rehabilitation receiver named in the plan, unless the court finds that he is not qualified under these Rules in which case it may appoint a qualified rehabilitation receiver of its choice;

(h) Stay enforcement of all claims, whether for money or 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 not solidarily liable, said owner shall be entitled to be benefit of excussion as such guarantor;

(i) Prohibit the debtor from selling, encumbering, transferring, or disposing in any manner any of its properties except in the ordinary course of business;

(j) Prohibit the debtor from making any payment of its liabilities outstanding as of the date of filing of the petition;

(k) Prohibit the debtor's suppliers of goods or services from withholding supply of goods and services in the ordinary course of business for as long as the debtor makes payments for the services and goods supplied after the issuance of the stay order;

(l) Direct the payment in full of all administrative expenses incurred after the issuance of the stay order; and


(m) Direct the payment of new loans or other forms of credit accommodations obtained for the rehabilitation of the debtor with prior court approval.

Section 3. Approval of Plan. - Within ten (10) days from the date of the second publication of the order referred to in Section 2 of this Rule, the court shall approve the rehabilitation plan unless a creditor or other interested party submits a verified objection to it in accordance with the next succeeding section.

Section 4. Objection to Petition or Rehabilitation Plan. - Any creditor or other interested party may submit to the court a verified objection to the petition or the rehabilitation plan. The objection shall be limited to the following:

(a) The petition or the rehabilitation plan or their attachments contain material omissions or are materially false or misleading;

(b) The terms of rehabilitation are unattainable; or

(c) The approval or endorsement of creditors required under Section 1 of this Rule has not been obtained

Copies of any objection to the petition or the rehabilitation plan shall be served on the petitioning debtor and/or creditors.

Section 5. Hearing on Objections. - The court shall set the case for hearing not earlier than ten (10) days and no longer than twenty (20) days from the date of the second publication of the order mentioned in Section 2 of this Rule on the objections is in accordance with the immediately preceding section, it shall direct the petitioner to cure the defect within a period fifteen (15) days from receipt of the order.

Section 6. Period for Approval of Rehabilitation Plan. - The court shall decide the petition not later than one hundred twenty (120) days from the date of the filing of the petition. If the court fails to do so within said period, the rehabilitation plan shall be deemed approved.

Section 7. Effects of Approval of Rehabilitation Plan. - Approval of the rehabilitation plan under this Rule shall have the same legal effect as approval of a rehabilitation plan under Section 20 of Rule 3.

Section 8. Revocation of Approved Rehabilitation Plan. - Not later than thirty (30) days from the approval of a rehabilitation plan under this Rule, the plan may, upon motion and after notice and hearing, be revoked on the ground that the approval was secured by fraud or that the petitioner has failed to cure the defect ordered by the court pursuant to Section 5 of this Rule.

Section 9. Effect of Rule on Pending Petitions. - Any pending petition for rehabilitation that has not undergone the initial hearing prescribed under the Interim Rules of Procedure for Corporate Rehabilitation at the time of the effectivity of these Rules may be converted into a rehabilitation proceeding under this Rule.

RULE 7. RECOGNITION OF FOREIGN PROCEEDINGS

Section 1. Scope of Application. - This Rule applies where (a) assistance is sought in a Philippine court by a foreign court or a foreign representative in connection with a foreign proceeding; (b) assistance is sought in a foreign State in connection with a domestic proceeding governed by these Rules; or (c) a foreign proceeding and a domestic proceeding are concurrently taking place.

The sole fact that a petition is filed pursuant to this Rule does not subject the foreign representative or the foreign assets and affairs of the debtor to the jurisdiction of the local courts for any purpose other than the petition.

Section 2. Non-Recognition of Foreign Proceeding. - Nothing in this Rule prevents the court from refusing to take an action governed by this Rule if (a) the action would be manifestly contrary to the public policy of the Philippines; and (b) if the court finds 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.

Section 3. Petition for Recognition of Foreign Proceeding. - A foreign representative may apply with the Regional Trial Court where the debtor resides for recognition of the foreign proceeding in which the foreign representative has been appointed.

A petition for recognition shall be accompanied by:

(a) A certified copy of the decision commencing the foreign proceeding and appointing the foreign representative; or

(b) A certificate from the foreign court affirming the existence of the foreign proceeding and of the appointment of the foreign representative; or

(c) In the absence of evidence referred to in subparagraph (a) and (b), any other evidence acceptable to the court of the existence of the foreign proceeding and of the appointment of the foreign representative.

Section 4. Recognition of Foreign Proceeding. - A foreign proceeding shall be recognized if:

(a) The proceeding is a foreign proceeding as defined herein;


(b) The person or body applying for recognition is a foreign representative as defined herein; and

(c) The petition meets the requirements of Section 3 of this Rule;

Section 5. Period to Recognize Foreign Proceeding. - A petition for recognition of a foreign proceeding shall be decided within thirty (30) days from the filing thereof.

Section 6. Notification to Court. - From the time of filing the petition for recognition f the foreign proceeding, the foreign representative shall inform the court promptly of:

(a) Any substantial change in the status of the foreign proceeding or the status of the foreign representative's appointment; and

(b) Any other foreign proceeding regarding the same debtor that becomes known to the foreign representative.

Section 7. Provisional Relief that May be Granted upon Application for Recognition of Foreign Proceeding. - From the time of filing a 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 or the interests of the creditors, grant relief of a provisional nature, including:

(a) Staying execution against the debtor's assets;

(b) Entrusting the administration or realization of all or 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;

(c) Any relief mentioned in Section 9(a)(1), (2) and (7) of this Rule.

Section 8. Effects of Recognition of Foreign Proceeding. - Upon recognition of a foreign proceeding:

(a) 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

(c) The right to transfer, encumber or otherwise dispose of any assets of the debtor is suspended.

Section 9. Relief That May be Granted After Recognition of Foreign Proceeding. -

(a) Upon recognition of a foreign proceeding, where necessary to protect the assets of the debtor or the interests of the creditors, the court may, upon motion of the foreign representative, grant any appropriate relief including:

(1) Staying the commencement or continuation of individual actions or individual proceedings concerning the debtor's assets, rights, obligations or liabilities to the extent they have not been stayed under Section 8(a) of this Rule;

(2) Staying execution against the debtor's assets to the extent it has not been stayed under Section 8(b) of this Rule;

(3) Suspending the right to transfer, encumber or otherwise dispose of any assets of the debtor to the extent this right has not been suspended under Section 8(c) of this Rule;

(4) Providing for the examination of witnesses, the taking of evidence or the delivery of information concerning the debtor's assets, affairs, rights, obligations or liabilities;

(5) Entrusting the administration or realization of all or part of the debtor's assets located in the Philippines to the foreign representative or another person designated by the court;

(6) Extending the relief granted under Section 7 of this Rule;

(7) Granting any additional relief that may be available to the rehabilitation receiver under these laws.

(b) 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 is satisfied that the interests of local creditors are adequately protected.

Section 10. Protection of Creditors and Other Interested Persons. -


(a) In granting or denying relief under this Rule or in modifying or terminating the relief under paragraph (c) of this Section, the court must be satisfied that the interests of the creditors and other interested persons, including the debtor, are adequately protected.

(b) The court may subject the relief granted under Section 7 or Section 9. Of this Rule to conditions it considers appropriate.

(c) The court may, upon motion of the foreign representative or a person affected by the relief granted under Section 7 or Section 9 of this Rule, or on its own motion, modify or terminate such relief.

Section 11. Actions to Avoid Acts Detrimental to Creditors. - Upon recognition of a foreign proceeding, the foreign representative acquires the standing to initiate actions to avoid or otherwise render ineffective acts detrimental to creditors that are available under these Rules.

Section 12. Intervention by Foreign Representative in Philippine Proceedings. - Upon recognition of a foreign proceeding, the foreign representative may intervene in any action or proceeding in the Philippines in which the debtor is a party.

Section 13. Cooperation and Direct Communication with Foreign Courts and Foreign Representatives. - In matters covered by this Rule, the court shall cooperate to the maximum extent possible with foreign courts or foreign representatives.

The court is entitled to communicate directly with, or request information or assistance directly from, foreign courts or foreign representatives.

Section 14. Forms of Cooperation. - Cooperation may be implemented by any appropriate means, including but not limited to the following:

(a) Appointment of a person or body to act at the discretion of the court;

(b) Communication of information by any means considered appropriate by the court;

(c) Coordination of the administration and supervision of the debtor's assets and affairs;

(d) Approval or implementation by courts of agreements concerning the coordination of proceedings;

(e) Coordination of concurrent proceedings regarding the same debtor;

(f) Suspension of proceedings against the debtor;

(g) Limiting the relief of assets that should be administered in a foreign proceeding pending in a jurisdiction other than the place where the debtor has its principal place of business (foreign non-main proceeding) or information required in that proceeding; and

(h) Implementation of rehabilitation or re-organization plan for the debtor.

Nothing in this Rule limits the power of the court to provide additional assistance to the foreign representative under other applicable laws.

Section 15. Commencement of Local Proceeding after Recognition of Foreign Proceeding. - After the recognition of a foreign proceeding, a local proceeding under these Rules may be commenced only if the debtor is doing business in the Philippines, the effects of the proceedings shall be restricted to the assets of the debtor located in the country and, to the extent necessary to implement cooperation and coordination under Sections 13 and 14 of this Rule, to the other assets of the debtor that, under local laws, must be administered in that proceeding.

Section 16. Local and Foreign Proceedings. - Where a foreign proceeding and a local proceeding are taking place concurrently regarding the same debtor, the court shall seek cooperation and coordination under Section 13 and 14 of this Rule. Any relief granted to the foreign proceeding must be made consistent with the relief granted in the local proceeding.

RULE 8. PROCEDURAL REMEDIES

Section 1. Motion for Reconsideration. - A party may file a motion for reconsideration of any order issued by the court prior to the approval of the rehabilitation plan. No relief can be extended to the party aggrieved by the court's order on the motion through a special civil action for certiorari under Rule 65 of the rules of Court. Such order can only be elevated to the Court of Appeals as an assigned error in the petition for review of the decision or order approving or disapproving the rehabilitation plan.

An order issued after the approval of the rehabilitation plan can de reviewed only through a special civil action for certiorari under Rule 65 of the Rules of Court.

Section 2. Review of Decision or Order on Rehabilitation Plan. - an order approving or disapproving a rehabilitation plan can only be reviewed through a petition for review to the Court of Appeals under Rule 43 of the Rules of Court within fifteen (15) days from notice of the decision or order.

RULE 9. FINAL PROVISIONS

Section 1. Severability. - If any provision or section of these Rules is held invalid, the other provisions or sections shall not be affected thereby.


Section 2. Transitory Provision. - Unless the court orders otherwise to prevent manifest injustice, any pending petition for rehabilitation that has not undergone the initial hearing prescribed under the Interim Rules of Procedure for Corporate Rehabilitation at the time of the effectivity of these Rules shall be governed by these rules.

Section 3. Effectivity. - These Rules shall take affect on 16 January 2009 following its publication in two (2) newspapers of general circulation in the Philippines.

ANNEX "A" AFFIDAVIT OF GENERAL FINANCIAL CONDITION

(1) Are you an officer of the debtor referred to in these proceedings?

(2) What is your full name and what position do you hold in the debtor?

(3) What is the full name of the debtor and what is the address of its head office?

(4) When was it formed or incorporated?

(5) When did the debtor commence business?

(6) What is the nature of its business? What is the market share of the debtor in the industry in which it is engaged?

(7) Who are the parties, members, or stockholders? How many employees?

(8) What is the capital of the debtor?

(9) What is the capital contribution and what is the amount of the capital, paid and unpaid, of each of the partners or shareholders?

(10) Do any of these people hold the shares in trust for others?

(11) Who are the directors and officers of the debtors?

(12) Has the debtor any subsidiary corporation? If so, give particulars?

(13) Has the debtor properly maintained its books and are they updated?

(14) Were the books audited annually?

(15) If so, what is the name of the auditor and when was the last audited statement drawn up?

(16) Have all proper returns been made to the various government agencies requiring same?

(17) When did the debtor first become aware of its problems?

(18) Has the debtor within the twelve months preceding the filing of the petition:

(a) made any payments, returned any goods or delivered any property to any of its creditors, except in the normal course of business?

(b) executed any mortgage, pledge, or security over any of its properties in favor of any creditor?

(c) transferred or disposed of any of its properties in payment of any debt?

(d) sold, disposed of, or removed any of its property except in the ordinary course of business?

(e) sold any merchandise at less than fair market value or purchased merchandise or services at more than fair market value?

(f) made or been a party to any settlement of property in favor of any person?

If, so, give particulars.

(19) Has the debtor recorded all sales or dispositions of assets?

(20) What were the sales for the last three years and what percentage of the sales represented the profit or markup?

(21) What were the profits or losses for the debtor for the last three years?

(22) What are the causes of the problems of the debtor? Please provide particulars?

(23) When did you first notice these problems and what actions did the debtor take to rectify them?

(24) How much do you estimate is needed to rehabilitate the debtor?

(25) Has any person expressed interest in investing new money into the debtor?


(26) Are there any pending and threatened legal actions against the debtor? If so, please provide particulars.

(27) Has the debtor discussed any restructuring or repayment plan with any of the creditors? Please provide status and details.

(28) Has any creditor expressed interest in restructuring the debts of the debtor? If so, please give particulars.

(29) Have employees' wages and salaries been kept current? If not, how much are in arrears and what time period do the arrears represent?

(30) Have obligation to the government and its agencies been kept current? If not, how much are in arrears and what time period do the arrears represent?

A.M. No. 04-9-07-SC

Re: Mode of Appeal in Cases Formerly Cognizable by the Securities and Exchange Commission

RESOLUTION

WHEREAS, to implement the provisions of Section 5.2 of Republic Act No. 8799 (The Securities Regulation Code), and in the interest of a speedy and efficient administration of justice, the Supreme Court En Banc promulgated (1) A.M. No. 00-8-10-SC, on Transfer of Cases from the Securities and Exchange Commission to the Regional Trial Courts which took effect on October 1, 2001; and (2) SC Adm. Memo. No. 01-2-04, or the Interim Rules of Procedure Governing Intra-Corporate Controversies under Republic Act No. 8799 which took effect on April 1, 2001;

WHEREAS, the Supreme Court En Banc designated certain regional trial courts as commercial courts to decide cases falling under both Interim Rules;

WHEREAS, under both Interim Rules, all decisions and orders issued shall immediately be executory and no appeal or petition taken therefrom shall stay the enforcement or implementation of the decision or order, unless restrained by an appellate court;

WHEREAS, lawyers and litigants are in a quandary on how to prevent under appropriate circumstances the execution of decisions and orders in cases involving corporate rehabilitation and intra-corporate controversies;

WHEREAS, in A.M. No. 00-8-10-SC, dated 4 September 2001, the Supreme Court En Banc clarified the

period of appeal for cases involving corporate rehabilitation and intra-corporate controversies;

WHEREAS, there is a need to clarify the proper mode of appeal in these cases in order to prevent cluttering the dockets of the courts with appeals and/or petitions for certiorari;

WHEREFORE, the Court Resolves:

1. All decisions and final orders in cases falling under the Interim Rules of Corporate Rehabilitation and the Interim Rules of Procedure Governing Intra-Corporate Controversies under Republic Act No. 8799 shall be appealable to the Court of Appeals through a petition for review under Rule 43 of the Rules of Court.

2. The petition for review shall be taken within fifteen (15) days from notice of the decision or final order of the Regional Trial Court. Upon proper motion and the payment of the full amount of the legalfee prescribed in Rule 141 as amended before the expiration of the reglementary period, the Court of Appeals may grant an additional period of fifteen (15) days within which to file the petition forreview. No further extension shall be granted except for the most compelling reasons and in no case to exceed fifteen (15) days.

3. This Resolution shall apply to all pending appeals filed within the reglementary period from decisions and final orders in cases falling under the Interim Rules of Corporate Rehabilitation and the Interim Rules of Procedure Governing Intra-Corporate Controversies under Republic Act No. 8799, regardless of the mode of appeal or petition resorted to by the appellant or petitioner.

4. These pending appeals or petitions shall be treated in the following manner:

a. In case a notice of appeal and/or record on appeal was filed with the Regional Trial Court within the period provided in A.M. No. 00-8-10-SC, and the original record or the approved record on appeal has not been transmitted to the Court of Appeals, the appealing party shall have fifteen (15) days from the effectivity of this Resolution to file a petition for review under Rule 43 with the Court of Appeals, without prejudice to filing a motion for extension in accordance with 1 hereof.

The notice of appeal and/or record on appeal shall remain in the original record but the Regional


Trial Court and/or its clerk shall not transmit the original record or the approved record on appeal to the Court of Appeals anymore.

An appealing party who fails to file a petition for review with the Court of Appeals within the prescribed period shall not be deemed to have abandoned his appeal, in which case the appeal shall run its due course.

b. In case a notice of appeal and/or record on appeal was filed with the Regional Trial Court within the period provided in A.M. No. 00-8-10-SC, and the original record or the approved record on appeal has been transmitted to the Court of Appeals, the case shall continue as an appeal.

c. In case a petition appealing or assailing the decision and/or final order is filed directly with the Court of Appeals within the reglementary period, such petition shall be considered a petition for review under Rule 43.

d. In case a notice of appeal and/or record on appeal is filed with the Regional Trial Court and a petition appealing or assailing the decision and/or final order is likewise filed with the Court of Appeals, the cases shall be consolidated and treated as a petition for review under Rule 43.

e. No docket fees shall be required for the filing of a petition for review filed in substitution of a pending appeal and/or petition as the appellate fees have already been collected by the Regional Trial Court and/or Court of Appeals. However, should a prayer for temporary restraining order and/or writ of preliminary injunction, not included in the original petition, be included in the substitute petition for review, the Court of Appeals may assess additional docket fees for such prayer.

This Resolution shall take effect on the 15th day of October 2004 and shall be published on a newspaper of general circulation not later than 30 September 2004.

Promulgated this 14th day of September 2004.

Davide, Jr., C.J., Puno, Panganiban, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio, Austria-Martinez, Corona, Callejo, Sr., Azcuna, and Tinga, JJ., concur.

Carpio-Morales, J., on official leave. Chico-Nazario, J., on leave.

PART ELEVEN. RECOGNITION OF MINOR NATURAL CHILDREN

Republic Act No. 9255 February 24 2004 AN ACT ALLOWING ILLEGITIMATE CHILDREN TO USE THE SURNAME OF THEIR FATHER, AMENDING FOR THE PURPOSE ARTICLE 176 OF EXECUTIVE ORDER NO. 209, OTHERWISE KNOWN AS THE "FAMILY CODE OF THE PHILIPPINES" Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled: SECTION 1. Article 176 of Executive Order No. 209, otherwise known as the Family Code of the Philippines, is hereby amended to read as follows:

"Article 176. Illegitimate children shall use the surname and shall be under the parental authority of their mother, and shall be entitled to support in conformity with this Code. However, illegitimate children may use the surname of their father if their filiation has been expressly recognized by the father through the record of birth appearing in the civil register, or when an admission in a public document or private handwritten instrument is made by the father. Provided, the father has the right to institute an action before the regular courts to prove non-filiation during his lifetime. The legitime of each illegitimate child shall consist of one-half of the legitime of a legitimate child." SECTION 2. Repealing Clause. – All laws, presidential decrees, executive orders, proclamations, rules and regulations, which are inconsistent with the provisions of this Act are hereby repealed or modified accordingly. SECTION 3. Effectivity Clause. – This Act shall take effect fifteen (15) days from its publication in the Official Gazette or in two (2) newspapers of general circulation.

CASE NOTES Uyguangco v. Court of Appeals (1989) Since Graciano Uyguangco seeks to prove his filiation under the second paragraph of Article 172 of the Family Code, his action is now barred because of his alleged father's death in 1975. The second paragraph of this Article 175 reads as follows: “The action must be brought within the same period specified in Article 173, except when the action is based on the second paragraph of Article 172, in which case the action may be brought during the lifetime of the alleged parent. (Italics supplied.)”

It is clear that the private respondent can no longer be allowed at this time to introduce evidence of his open and continuous possession of the status of an illegitimate child or prove his alleged filiation through any of the means allowed by the Rules of Court or special laws. The simple reason is that Apolinario Uyguangco is already dead and can


no longer be heard on the claim of his alleged son's illegitimate filiation. PART TWELVE. CONSTITUTION OF FAMILY HOME

CIVIL CODE

Article 223. The family home is the dwelling house where a person and his family reside, and the land on which it is situated. If constituted as herein provided, the family home shall be exempt from execution, forced sale or attachment, except as provided in articles 232 and 243. Article 224. The family home may be established judicially or extrajudicially.

FAMILY CODE Art. 152. The family home, constituted jointly by the husband and the wife or by an unmarried head of a family, is the dwelling house where they and their family reside, and the land on which it is situated. (223a) Art. 153. The family home is deemed constituted on a house and lot from the time it is occupied as a family residence. From the time of its constitution and so long as any of its beneficiaries actually resides therein, the family home continues to be such and is exempt from execution, forced sale or attachment except as hereinafter provided and to the extent of the value allowed by law. (223a) Art. 154. The beneficiaries of a family home are:

(1) The husband and wife, or an unmarried person who is the head of a family; and

(2) Their parents, ascendants, descendants, brothers and sisters, whether the relationship be legitimate or illegitimate, who are living in the family home and who depend upon the head of the family for legal support. (226a) Art. 155. The family home shall be exempt from execution, forced sale or attachment except:

(1) For nonpayment of taxes; (2) For debts incurred prior to the constitution of the

family home; (3) For debts secured by mortgages on the premises

before or after such constitution; and (4) For debts due to laborers, mechanics, architects,

builders, materialmen and others who have rendered service or furnished material for the construction of the building. (243a) Art. 156. The family home must be part of the properties of the absolute community or the conjugal partnership, or of the exclusive properties of either spouse with the latter's consent. It may also be constituted by an unmarried head of a family on his or her own property.

Nevertheless, property that is the subject of a conditional sale on installments where ownership is reserved by

the vendor only to guarantee payment of the purchase price may be constituted as a family home. (227a, 228a) Art. 157. The actual value of the family home shall not exceed, at the time of its constitution, the amount of the three hundred thousand pesos in urban areas, and two hundred thousand pesos in rural areas, or such amounts as may hereafter be fixed by law.

In any event, if the value of the currency changes after the adoption of this Code, the value most favorable for the constitution of a family home shall be the basis of evaluation.

For purposes of this Article, urban areas are deemed to include chartered cities and municipalities whose annual income at least equals that legally required for chartered cities. All others are deemed to be rural areas. (231a) Art. 158. The family home may be sold, alienated, donated, assigned or encumbered by the owner or owners thereof with the written consent of the person constituting the same, the latter's spouse, and a majority of the beneficiaries of legal age. In case of conflict, the court shall decide. (235a) Art. 159. The family home shall continue despite the death of one or both spouses or of the unmarried head of the family for a period of ten years or for as long as there is a minor beneficiary, and the heirs cannot partition the same unless the court finds compelling reasons therefor. This rule shall apply regardless of whoever owns the property or constituted the family home. (238a) Art. 160. When a creditor whose claims is not among those mentioned in Article 155 obtains a judgment in his favor, and he has reasonable grounds to believe that the family home is actually worth more than the maximum amount fixed in Article 157, he may apply to the court which rendered the judgment for an order directing the sale of the property under execution. The court shall so order if it finds that the actual value of the family home exceeds the maximum amount allowed by law as of the time of its constitution. If the increased actual value exceeds the maximum allowed in Article 157 and results from subsequent voluntary improvements introduced by the person or persons constituting the family home, by the owner or owners of the property, or by any of the beneficiaries, the same rule and procedure shall apply.

At the execution sale, no bid below the value allowed for a family home shall be considered. The proceeds shall be applied first to the amount mentioned in Article 157, and then to the liabilities under the judgment and the costs. The excess, if any, shall be delivered to the judgment debtor. (247a, 248a) Art. 161. For purposes of availing of the benefits of a family home as provided for in this Chapter, a person may constitute, or be the beneficiary of, only one family home. (n) Art. 162. The provisions in this Chapter shall also govern existing family residences insofar as said provisions are applicable. (n)


PART THIRTEEN. ABSENTEES

RULE 107. PROCEEDINGS FOR HOSPITALIZATION OF INSANE PERSONS

Section 1. Appointment of representative. — When a person disappears from his domicile, his whereabouts being unknown, and without having left an agent to administer his property, or the power conferred upon the agent has expired, any interested party, relative or friend may petition the Court of First Instance of the place where the absentee resided before his dis-appearance, for the appointment of a person to represent him provisionally in all that may be necessary. In the City of Manila, the petition shall be filed in the Juvenile and Domestic Relations Court. Section 2. Declaration of absence; who may petition. — After the lapse of two (2) years from his disapperance and without any news about the absentee or since the receipt of the last news, or of five (5) years in case the absentee has left a person in charge of the administration of his property, the declaration of his absence and appointment of a trustee or administrative may be applied for by any of the following:

(a) The spouse present; (b) The heirs instituted in a will, who may present an

authentic copy of the same. (c) The relatives who would succeed by the law of

intestacy; and (d) Those who have over the property of the absentee

some right subordinated to the condition of his death. Section 3. Contents of petition. — The petition for the appointment of a representative, or for the declaration of absence and the appointment of a trustee or an administrator, must show the following:

(a) The jurisdictional facts; (b) The names, ages, and residences of the heirs

instituted in the will, copy of which shall be presented, and of the relatives who would succeed by the law of intestacy;

(c) The names and residences of creditors and others who may have any adverse interest over the property of the absentee;

(d) The probable value, location and character of the property belonging to the absentee. Section 4. Time of hearing; notice and publication thereof. — When a petition for the appointment of a representative, or for the declaration of absence and the appointment of a trustee or administrator, is filed, the court shall fix a date and place for the hearing thereof where all concerned may appear to contest the petition.

Copies of the notice of the time and place fixed for the hearing shall be served upon the known heirs, legatees, devisees, creditors and other interested persons, at least ten (10) days before the day of the hearing, and shall be published once a week for three (3) consecutive weeks prior to the time designated for the hearing, in a newspaper of general circulation in the province or city where the absentee resides, as the court shall deem best. Section 5. Opposition. — Anyone appearing to contest the petition shall state in writing his grounds therefor, and serve a copy thereof on the petitioner and other interested parties on or before the date designated for the hearing.

Section 6. Proof at hearing; order. — At the hearing, compliance with the provisions of section 4 of this rule must first be shown. Upon satisfactory proof of the allegations in the petition, the court shall issue an order granting the same and appointing the representative, trustee or administrator for the absentee. The judge shall take the necessary measures to safeguard the rights and interests of the absentee and shall specify the powers, obligations and remuneration of his representative, trustee or administrator, regulating them by the rules concerning guardians. In case of declaration of absence, the same shall not take effect until six (6) months after its publication in a newspaper of general circulation designated by the court and in the Official Gazette. Section 7. Who may be appointed. — In the appointment of a representative, the spouse present shall be preferred when there is no legal separation. If the absentee left no spouse, or if the spouse present is a minor or otherwise incompetent, any competent person may be appointed by the court. In case of declaration of absence, the trustee or administrator of the absentee's property shall be appointed in accordance with the preceding paragraph. Section 8. Termination of administration. — The trusteeship or administration of the property of the absentee shall cease upon order of the court in any of the following cases:

(a) When the absentee appears personally or by means of an agent;

(b) When the death of the absentee is proved and his testate or intestate heirs appear;

(c) When a third person appears, showing by a proper document that he has acquired the absentee's property by purchase or other title.

In these cases the trustee or administrator shall cease in the performance of his office, and the property shall be placed at the disposal of whose may have a right thereto.

CIVIL CODE TITLE XIV. ABSENCE

CHAPTER 1. Provisional Measures in Case of Absence Article 381. When a person disappears from his domicile, his whereabouts being unknown, and without leaving an agent to administer his property, the judge, at the instance of an interested party, a relative, or a friend, may appoint a person to represent him in all that may be necessary.

This same rule shall be observed when under similar circumstances the power conferred by the absentee has expired. (181a) Article 382. The appointment referred to in the preceding article having been made, the judge shall take the necessary measures to safeguard the rights and interests of the absentee and shall specify the powers, obligations and remuneration of his representative, regulating them, according to the circumstances, by the rules concerning guardians. (182) Article 383. In the appointment of a representative, the spouse present shall be preferred when there is no legal separation. If the absentee left no spouse, or if the spouse present is a minor, any competent person may be appointed by the court. (183a)

CHAPTER 2. Declaration of Absence


Article 384. Two years having elapsed without any news about the absentee or since the receipt of the last news, and five years in case the absentee has left a person in charge of the administration of his property, his absence may be declared. (184) Article 385. The following may ask for the declaration of absence:

(1) The spouse present; (2) The heirs instituted in a will, who may present an

authentic copy of the same; (3) The relatives who may succeed by the law of

intestacy; (4) Those who may have over the property of the

absentee some right subordinated to the condition of his death. (185) Article 386. The judicial declaration of absence shall not take effect until six months after its publication in a newspaper of general circulation. (186a)

FAMILY CODE

Art. 41. A marriage contracted by any person during subsistence of a previous marriage shall be null and void, unless before the celebration of the subsequent marriage, the prior spouse had been absent for four consecutive years and the spouse present has a well-founded belief that the absent spouse was already dead. In case of disappearance where there is danger of death under the circumstances set forth in the provisions of Article 391 of the Civil Code, an absence of only two years shall be sufficient. For the purpose of contracting the subsequent marriage under the preceding paragraph the spouse present must institute a summary proceeding as provided in this Code for the declaration of presumptive death of the absentee, without prejudice to the effect of reappearance of the absent spouse. (83a) Art. 42. The subsequent marriage referred to in the preceding Article shall be automatically terminated by the recording of the affidavit of reappearance of the absent spouse, unless there is a judgment annulling the previous marriage or declaring it void ab initio.

A sworn statement of the fact and circumstances of reappearance shall be recorded in the civil registry of the residence of the parties to the subsequent marriage at the instance of any interested person, with due notice to the spouses of the subsequent marriage and without prejudice to the fact of reappearance being judicially determined in case such fact is disputed. (n) Art. 43. The termination of the subsequent marriage referred to in the preceding Article shall produce the following effects:

(1) The children of the subsequent marriage conceived prior to its termination shall be considered legitimate;

(2) The absolute community of property or the conjugal partnership, as the case may be, shall be dissolved and liquidated, but if either spouse contracted said marriage in bad faith, his or her share of the net profits of the community property or conjugal partnership property shall be forfeited in favor of the common children or, if there are none, the children of the guilty spouse by a previous marriage or in default of children, the innocent spouse;

(3) Donations by reason of marriage shall remain valid, except that if the donee contracted the marriage in bad faith,

such donations made to said donee are revoked by operation of law;

(4) The innocent spouse may revoke the designation of the other spouse who acted in bad faith as beneficiary in any insurance policy, even if such designation be stipulated as irrevocable; and

(5) The spouse who contracted the subsequent marriage in bad faith shall be disqualified to inherit from the innocent spouse by testate and intestate succession. (n)

CASE NOTES Jones v. Hortiguela (1937) For the purposes of the civil marriage law, it is not necessary to have the former spouse judicially declared an absentee. The declaration of absence under Civil Code is only to enable the taking of the necessary precautions for the administration of the estate of the absentee.

For the celebration of civil marriage, the law only requires that the former spouse has been absent for seven consecutive years at the time of the second marriage (section III, paragraph 2, General orders, No. 68). Hence the absence of Marciana Escaño's former husband should be counted from January 10, 1918, the date on which the last news concerning Arthur W. Jones was received, and from said date to May 6, 1927. Therefore, more than nine years elapsed when Marciana remarried, hence her marriage with Hortiguela is valid.

That the marriage contracted does not appear recorded in the marriage register of the municipality of Malitbog does not affect the fact that the marriage was valid:

Madridejo vs. De Leon: "The mere fact that the parish priest who married the plaintiff's natural father and mother, while the latter was in articulo mortis failed to send a copy of the marriage certificate to the municipal secretary, does not invalidate said marriage… the forwarding of a copy of the marriage certificate not one of the requisites [of a valid marriage]."

U. S. vs. De Vera: "Certificate issued… by municipal secretaries, marriages recorded in their respective registers, are not the only ones that can attest and prove such facts [of marriage]… Other proofs established by law may be presented or admitted at trial.."

Furthermore, Marciana Escaño believed Arthur W. Jones to be dead when she contracted her second marriage. Her daughter Angelita Jones herself was of the same belief, since she lived with her mother after the latter had married Hortiguela, treated Hortiguela as her true stepfather, and lived and traveled with him together with her mother. Still furthermore, according to section 334, No. 24, of the Code of Civil Procedure, a person not heard from in seven years is presumed to be dead.

Therefore, there is no reason to annul the order of May 9, 1932, declaring that the heirs of the deceased were her widower and her daughter Angelita Jones. Neither is there any reason to annul the order of June 26, 1933, approving the partition of the properties of the intestate estate.


Tol-Noquera v. Villamor (1992) The lower court was rather hasty in dismissing the petition. The petition was not a collateral attack on a Torrens title. The petitioner did say there was a need to appoint an administrator to prevent the property from being usurped, but this did not amount to a collateral attack on the title. The alleged fraudulent issuance of title was mentioned as a justification for her appointment as administrator. But there was nothing in the petition to indicate that the petitioner would attack the title issued to Diosdado in the same proceeding. In fact, the petitioner declared that whatever remedy she might choose would be pursued in another venue, in a proceeding entirely distinct and separate from her petition for appointment as administratrix.

The private respondent's arguments that the petitioner cannot inherit ab intestato from the legitimate parents of the absentee is immaterial to this case. Her disqualification as an heir to her supposed grandparents does not inhibit her from petitioning for a declaration of absence or to be appointed as an administratrix of the absentee's estate.

It is not necessary that a declaration of absence be made in a proceeding separate from and prior to a petition for administration. This was the ruling in Reyes v. Alejandro, reiterating Pejer v. Martinez. In the latter case, the court declared that the petition to declare the husband an absentee and the petition to place the management of the conjugal properties in the hands of the wife could be combined and adjudicated in the same proceeding.

The purpose of the law is the protection of the interests and property of the absentee, not of the administrator. Thus, the question of whether the administrator may inherit the property to be administered is not controlling. What is material is whether she is one of those allowed by law to seek the declaration of absence of Remigio Tol and whether she is competent to be appointed as administratrix of his estate. As to the issue of whether or not the property titled to Diosdado Tol is really owned by him should be resolved in another proceeding. The right of Daya Maria Tol to be appointed administratrix cannot be denied outright by reason alone of such issue. Even if it be assumed that the title obtained by Diosdado Tol is already indefeasible because of the lapse of the one-year period for attacking it on the ground of fraud, there are still other remedies available to one who is unjustly deprived of his property. One of these is a claim for reconveyance, another a complaint for damages. The petitioner can avail herself of such remedies if she is appointed administratrix of the estate of the absentee. REMANDED to the court of origin for determination of the legal personality of Daya Maria Tol to petition the declaration of Remigio Tol's absence and of her competence to be appointed as administratrix of his estate. PART FOURTEEN. OTHER WRITS13

13 See attachments

PART FIFTEEN. ALTERNATIVE DISPUTE RESOLUTION

A.M. No. 07-11-08-SC September 1, 2009

SPECIAL RULES OF COURT ON ALTERNATIVE DISPUTE RESOLUTION

Acting on the recommendation of the Chairperson of the Sub-Committee on the Rules on Alternative Dispute Resolution submitting for this Court’s consideration and approval the proposed Special Rules of Court on Alternative Dispute Resolution, the Court Resolved to APPROVE the same.

This Rule shall take effect on October 30, 2009 following its publication in three (3) newspapers of general circulation.

September 1, 2009.

SPECIAL RULES OF COURT ON ALTERNATIVE DISPUTE RESOLUTION

PART I. GENERAL PROVISIONS AND POLICIES

RULE 1: GENERAL PROVISIONS

Rule 1.1. Subject matter and governing rules.-The Special Rules of Court on Alternative Dispute Resolution (the "Special ADR Rules") shall apply to and govern the following cases:

a. Relief on the issue of Existence, Validity, or Enforceability of the Arbitration Agreement;

b. Referral to Alternative Dispute Resolution ("ADR");

c. Interim Measures of Protection;

d. Appointment of Arbitrator;

e. Challenge to Appointment of Arbitrator;

f. Termination of Mandate of Arbitrator;

g. Assistance in Taking Evidence;

h. Confirmation, Correction or Vacation of Award in Domestic Arbitration;

i. Recognition and Enforcement or Setting Aside of an Award in International Commercial Arbitration;

j. Recognition and Enforcement of a Foreign Arbitral Award;

k. Confidentiality/Protective Orders; and


l. Deposit and Enforcement of Mediated Settlement Agreements.

Rule 1.2. Nature of the proceedings.-All proceedings under the Special ADR Rules are special proceedings.

Rule 1.3. Summary proceedings in certain cases.-The proceedings in the following instances are summary in nature and shall be governed by this provision:

a. Judicial Relief Involving the Issue of Existence, Validity or Enforceability of the Arbitration Agreement;

b. Referral to ADR;

c. Interim Measures of Protection;

d. Appointment of Arbitrator;

e. Challenge to Appointment of Arbitrator;

f. Termination of Mandate of Arbitrator;

g. Assistance in Taking Evidence;

h. Confidentiality/Protective Orders; and

i. Deposit and Enforcement of Mediated Settlement Agreements.

(A) Service and filing of petition in summary proceedings.-The petitioner shall serve, either by personal service or courier, a copy of the petition upon the respondent before the filing thereof. Proof of service shall be attached to the petition filed in court.

For personal service, proof of service of the petition consists of the affidavit of the person who effected service, stating the time, place and manner of the service on the respondent. For service by courier, proof of service consists of the signed courier proof of delivery. If service is refused or has failed, the affidavit or delivery receipt must state the circumstances of the attempted service and refusal or failure thereof.

(B) Notice.-Except for cases involving Referral to ADR and Confidentiality/Protective Orders made through motions, the court shall, if it finds the petition sufficient in form and substance, send notice to the parties directing them to appear at a particular time and date for the hearing thereof which shall be set no later than five (5) days from the lapse of the period for filing the opposition or comment. The notice to the respondent shall contain a statement allowing him to file a comment or opposition to the petition within fifteen (15) days from receipt of the notice.

The motion filed pursuant to the rules on Referral to ADR or Confidentiality/Protective Orders shall be set for hearing by the movant and contain a notice of hearing that complies with the requirements under Rule 15 of the Rules of Court on motions.

(C) Summary hearing. - In all cases, as far as practicable, the summary hearing shall be conducted in one (1) day and only for purposes of clarifying facts.

Except in cases involving Referral to ADR or Confidentiality/Protective Orders made through motions, it shall be the court that sets the petition for hearing within five (5) days from the lapse of the period for filing the opposition or comment.

(D) Resolution. - The court shall resolve the matter within a period of thirty (30) days from the day of the hearing.

Rule 1.4. Verification and submissions. -Any pleading, motion, opposition, comment, defense or claim filed under the Special ADR Rules by the proper party shall be supported by verified statements that the affiant has read the same and that the factual allegations therein are true and correct of his own personal knowledge or based on authentic records and shall contain as annexes the supporting documents.

The annexes to the pleading, motion, opposition, comment, defense or claim filed by the proper party may include a legal brief, duly verified by the lawyer submitting it, stating the pertinent facts, the applicable law and jurisprudence to justify the necessity for the court to rule upon the issue raised.

Rule 1.5. Certification Against Forum Shopping. - A Certification Against Forum Shopping is one made under oath made by the petitioner or movant: (a) that he has not theretofore commenced any action or filed any claim involving the same issues in any court, tribunal or quasi-judicial agency and, to the best of his knowledge, no such other action or claim is pending therein; (b) if there is such other pending action or claim, a complete statement of the present status thereof; and (c) if he should thereafter learn that the same or similar action or claim has been filed or is pending, he shall report that fact within five (5) days therefrom to the court wherein his aforementioned petition or motion has been filed.

A Certification Against Forum Shopping shall be appended to all initiatory pleadings except a Motion to Refer the Dispute to Alternative Dispute Resolution.

Rule 1.6. Prohibited submissions. - The following pleadings, motions, or petitions shall not be allowed in the cases governed by the Special ADR Rules and shall not be accepted for filing by the Clerk of Court:

a. Motion to dismiss;

b. Motion for bill of particulars;

c. Motion for new trial or for reopening of trial;

d. Petition for relief from judgment;


e. Motion for extension, except in cases where an ex-parte temporary order of protection has been issued;

f. Rejoinder to reply;

g. Motion to declare a party in default; and

h. Any other pleading specifically disallowed under any provision of the Special ADR Rules.

The court shall motu proprio order a pleading/motion that it has determined to be dilatory in nature be expunged from the records.

Rule 1.7. Computation of time. - In computing any period of time prescribed or allowed by the Special ADR Rules, or by order of the court, or by any applicable statute, the day of the act or event from which the designated period of time begins to run is to be excluded and the date of performance included. If the last day of the period, as thus computed, falls on a Saturday, a Sunday, or a legal holiday in the place where the court sits, the time shall not run until the next working day.

Should an act be done which effectively interrupts the running of the period, the allowable period after such interruption shall start to run on the day after notice of the cessation of the cause thereof.

The day of the act that caused the interruption shall be excluded from the computation of the period.

Rule 1.8. Service and filing of pleadings, motions and other papers in non-summary proceedings. - The initiatory pleadings shall be filed directly with the court. The court will then cause the initiatory pleading to be served upon the respondent by personal service or courier. Where an action is already pending, pleadings, motions and other papers shall be filed and/or served by the concerned party by personal service or courier. Where courier services are not available, resort to registered mail is allowed.

(A) Proof of filing. - The filing of a pleading shall be proved by its existence in the record of the case. If it is not in the record, but is claimed to have been filed personally, the filing shall be proved by the written or stamped acknowledgment of its filing by the clerk of court on a copy of the same; if filed by courier, by the proof of delivery from the courier company.

(B) Proof of service. - Proof of personal service shall consist of a written admission by the party served, or the official return of the server, or the affidavit of the party serving, containing a full statement of the date, place and manner of service. If the service is by courier, proof thereof shall consist of an affidavit of the proper person, stating facts showing that the document was deposited with the courier company in a sealed envelope, plainly addressed to the party at his office, if known, otherwise at his residence, with postage fully pre-paid, and with instructions to the courier to immediately provide proof of delivery.

(C) Filing and service by electronic means and proof thereof. - Filing and service of pleadings by electronic transmission may be allowed by agreement of the parties approved by the court. If the

filing or service of a pleading or motion was done by electronic transmission, proof of filing and service shall be made in accordance with the Rules on Electronic Evidence.

Rule 1.9. No summons. - In cases covered by the Special ADR Rules, a court acquires authority to act on the petition or motion upon proof of jurisdictional facts, i.e., that the respondent was furnished a copy of the petition and the notice of hearing.

(A) Proof of service. - A proof of service of the petition and notice of hearing upon respondent shall be made in writing by the server and shall set forth the manner, place and date of service.

(B) Burden of proof. - The burden of showing that a copy of the petition and the notice of hearing were served on the respondent rests on the petitioner.

The technical rules on service of summons do not apply to the proceedings under the Special ADR Rules. In instances where the respondent, whether a natural or a juridical person, was not personally served with a copy of the petition and notice of hearing in the proceedings contemplated in the first paragraph of Rule 1.3 (B), or the motion in proceedings contemplated in the second paragraph of Rule 1.3 (B), the method of service resorted to must be such as to reasonably ensure receipt thereof by the respondent to satisfy the requirement of due process.

Rule 1.10. Contents of petition/motion. - The initiatory pleading in the form of a verified petition or motion, in the appropriate case where court proceedings have already commenced, shall include the names of the parties, their addresses, the necessary allegations supporting the petition and the relief(s) sought.

Rule 1.11. Definition. - The following terms shall have the following meanings:

a. "ADR Laws" refers to the whole body of ADR laws in the Philippines.

b. "Appointing Authority" shall mean the person or institution named in the arbitration agreement as the appointing authority; or the regular arbitration institution under whose rule the arbitration is agreed to be conducted. Where the parties have agreed to submit their dispute to institutional arbitration rules, and unless they have agreed to a different procedure, they shall be deemed to have agreed to procedure under such arbitration rules for the selection and appointment of arbitrators. In ad hoc arbitration, the default appointment of arbitrators shall be made by the National President of the Integrated Bar of the Philippines or his duly authorized representative.

c. "Authenticate" means to sign, execute or use a symbol, or encrypt a record in whole or in part, intended to identify the authenticating party and to adopt, accept or establish the authenticity of a record or term.

d. "Foreign Arbitral Award" is one made in a country other than the Philippines.


e. "Legal Brief" is a written legal argument submitted to a court, outlining the facts derived from the factual statements in the witness’s statements of fact and citing the legal authorities relied upon by a party in a case submitted in connection with petitions, counter-petitions (i.e., petitions to vacate or to set aside and/or to correct/modify in opposition to petitions to confirm or to recognize and enforce, or petitions to confirm or to recognize and enforce in opposition to petitions to vacate or set aside and/or correct/modify), motions, evidentiary issues and other matters that arise during the course of a case. The legal brief shall state the applicable law and the relevant jurisprudence and the legal arguments in support of a party’s position in the case.

f. "Verification" shall mean a certification under oath by a party or a person who has authority to act for a party that he has read the pleading/motion, and that he certifies to the truth of the facts stated therein on the basis of his own personal knowledge or authentic documents in his possession. When made by a lawyer, verification shall mean a statement under oath by a lawyer signing a pleading/motion for delivery to the Court or to the parties that he personally prepared the pleading/motion, that there is sufficient factual basis for the statements of fact stated therein, that there is sufficient basis in the facts and the law to support the prayer for relief therein, and that the pleading/motion is filed in good faith and is not interposed for delay.

Rule 1.12. Applicability of Part II on Specific Court Relief. - Part II of the Special ADR Rules on Specific Court Relief, insofar as it refers to arbitration, shall also be applicable to other forms of ADR.

Rule 1.13. Spirit and intent of the Special ADR Rules. – In situations where no specific rule is provided under the Special ADR Rules, the court shall resolve such matter summarily and be guided by the spirit and intent of the Special ADR Rules and the ADR Laws.

RULE 2: STATEMENT OF POLICIES

Rule 2.1. General policies. - It is the policy of the State to actively promote the use of various modes of ADR and to respect party autonomy or the freedom of the parties to make their own arrangements in the resolution of disputes with the greatest cooperation of and the least intervention from the courts. To this end, the objectives of the Special ADR Rules are to encourage and promote the use of ADR, particularly arbitration and mediation, as an important means to achieve speedy and efficient resolution of disputes, impartial justice, curb a litigious culture and to de-clog court dockets.

The court shall exercise the power of judicial review as provided by these Special ADR Rules. Courts shall intervene only in the cases allowed by law or these Special ADR Rules.

Rule 2.2. Policy on arbitration.- (A) Where the parties have agreed to submit their dispute to arbitration, courts shall refer the parties to arbitration pursuant to Republic Act No. 9285 bearing in mind that such arbitration agreement is the law between the parties and that they are expected to abide by it in good faith.

Further, the courts shall not refuse to refer parties to arbitration for reasons including, but not limited to, the following:

a. The referral tends to oust a court of its jurisdiction;

b. The court is in a better position to resolve the dispute subject of arbitration;

c. The referral would result in multiplicity of suits;

d. The arbitration proceeding has not commenced;

e. The place of arbitration is in a foreign country;

f. One or more of the issues are legal and one or more of the arbitrators are not lawyers;

g. One or more of the arbitrators are not Philippine nationals; or

h. One or more of the arbitrators are alleged not to possess the required qualification under the arbitration agreement or law.

(B) Where court intervention is allowed under ADR Laws or the Special ADR Rules, courts shall not refuse to grant relief, as provided herein, for any of the following reasons:

a. Prior to the constitution of the arbitral tribunal, the court finds that the principal action is the subject of an arbitration agreement; or

b. The principal action is already pending before an arbitral tribunal.

The Special ADR Rules recognize the principle of competence-competence, which means that the arbitral tribunal may initially rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement or any condition precedent to the filing of a request for arbitration.

The Special ADR Rules recognize the principle of separability of the arbitration clause, which means that said clause shall be treated as an agreement independent of the other terms of the contract of which it forms part. A decision that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.

Rule 2.3. Rules governing arbitral proceedings. - The parties are free to agree on the procedure to be followed in the conduct of arbitral proceedings. Failing such agreement, the arbitral tribunal may conduct arbitration in the manner it considers appropriate.

Rule 2.4. Policy implementing competence-competence principle. - The arbitral tribunal shall be accorded the first opportunity or competence to rule on the issue of whether or not it has the competence or jurisdiction to decide a dispute submitted to it for decision, including any objection with respect to the existence or validity of the arbitration agreement. When a court is asked to rule upon issue/s affecting the competence or


jurisdiction of an arbitral tribunal in a dispute brought before it, either before or after the arbitral tribunal is constituted, the court must exercise judicial restraint and defer to the competence or jurisdiction of the arbitral tribunal by allowing the arbitral tribunal the first opportunity to rule upon such issues.

Where the court is asked to make a determination of whether the arbitration agreement is null and void, inoperative or incapable of being performed, under this policy of judicial restraint, the court must make no more than a prima facie determination of that issue.

Unless the court, pursuant to such prima facie determination, concludes that the arbitration agreement is null and void, inoperative or incapable of being performed, the court must suspend the action before it and refer the parties to arbitration pursuant to the arbitration agreement.

Rule 2.5. Policy on mediation. - The Special ADR Rules do not apply to Court-Annexed Mediation, which shall be governed by issuances of the Supreme Court.

Where the parties have agreed to submit their dispute to mediation, a court before which that dispute was brought shall suspend the proceedings and direct the parties to submit their dispute to private mediation. If the parties subsequently agree, however, they may opt to have their dispute settled through Court-Annexed Mediation.

Rule 2.6. Policy on Arbitration-Mediation or Mediation-Arbitration. - No arbitrator shall act as a mediator in any proceeding in which he is acting as arbitrator; and all negotiations towards settlement of the dispute must take place without the presence of that arbitrator. Conversely, no mediator shall act as arbitrator in any proceeding in which he acted as mediator.

Rule 2.7. Conversion of a settlement agreement to an arbitral award. - Where the parties to mediation have agreed in the written settlement agreement that the mediator shall become the sole arbitrator for the dispute or that the settlement agreement shall become an arbitral award, the sole arbitrator shall issue the settlement agreement as an arbitral award, which shall be subject to enforcement under the law.

PART II. SPECIFIC COURT RELIEF

RULE 3: JUDICIAL RELIEF INVOLVING THE ISSUE OF EXISTENCE, VALIDITY AND ENFORCEABILITY OF THE ARBITRATION AGREEMENT

Rule 3.1. When judicial relief is available. - The judicial relief provided in Rule 3, whether resorted to before or after commencement of arbitration, shall apply only when the place of arbitration is in the Philippines.

A. Judicial Relief before Commencement of Arbitration

Rule 3.2. Who may file petition. - Any party to an arbitration agreement may petition the appropriate court to determine any question concerning the existence, validity and enforceability of

such arbitration agreement serving a copy thereof on the respondent in accordance with Rule 1.4 (A).

Rule 3.3. When the petition may be filed. - The petition for judicial determination of the existence, validity and/or enforceability of an arbitration agreement may be filed at any time prior to the commencement of arbitration.

Despite the pendency of the petition provided herein, arbitral proceedings may nevertheless be commenced and continue to the rendition of an award, while the issue is pending before the court.

Rule 3.4. Venue. - A petition questioning the existence, validity and enforceability of an arbitration agreement may be filed before the Regional Trial Court of the place where any of the petitioners or respondents has his principal place of business or residence.

Rule 3.5. Grounds. - A petition may be granted only if it is shown that the arbitration agreement is, under the applicable law, invalid, void, unenforceable or inexistent.

Rule 3.6. Contents of petition. - The verified petition shall state the following:

a. The facts showing that the persons named as petitioner or respondent have legal capacity to sue or be sued;

b. The nature and substance of the dispute between the parties;

c. The grounds and the circumstances relied upon by the petitioner to establish his position; and

d. The relief/s sought.

Apart from other submissions, the petitioner must attach to the petition an authentic copy of the arbitration agreement.

Rule 3.7. Comment/Opposition.-The comment/opposition of the respondent must be filed within fifteen (15) days from service of the petition.

Rule 3.8. Court action. - In resolving the petition, the court must exercise judicial restraint in accordance with the policy set forth in Rule 2.4, deferring to the competence or jurisdiction of the arbitral tribunal to rule on its competence or jurisdiction.

Rule 3.9. No forum shopping. - A petition for judicial relief under this Rule may not be commenced when the existence, validity or enforceability of an arbitration agreement has been raised as one of the issues in a prior action before the same or another court.

Rule 3.10. Application for interim relief. - If the petitioner also applies for an interim measure of protection, he must also comply with the requirements of the Special ADR Rules for the application for an interim measure of protection.


Rule 3.11. Relief against court action. - Where there is a prima facie determination upholding the arbitration agreement.-A prima facie determination by the court upholding the existence, validity or enforceability of an arbitration agreement shall not be subject to a motion for reconsideration, appeal or certiorari.

Such prima facie determination will not, however, prejudice the right of any party to raise the issue of the existence, validity and enforceability of the arbitration agreement before the arbitral tribunal or the court in an action to vacate or set aside the arbitral award. In the latter case, the court’s review of the arbitral tribunal’s ruling upholding the existence, validity or enforceability of the arbitration agreement shall no longer be limited to a mere prima facie determination of such issue or issues as prescribed in this Rule, but shall be a full review of such issue or issues with due regard, however, to the standard for review for arbitral awards prescribed in these Special ADR Rules.

B. Judicial Relief after Arbitration Commences

Rule 3.12. Who may file petition. - Any party to arbitration may petition the appropriate court for judicial relief from the ruling of the arbitral tribunal on a preliminary question upholding or declining its jurisdiction. Should the ruling of the arbitral tribunal declining its jurisdiction be reversed by the court, the parties shall be free to replace the arbitrators or any one of them in accordance with the rules that were applicable for the appointment of arbitrator sought to be replaced.

Rule 3.13. When petition may be filed. - The petition may be filed within thirty (30) days after having received notice of that ruling by the arbitral tribunal.

Rule 3.14. Venue. - The petition may be filed before the Regional Trial Court of the place where arbitration is taking place, or where any of the petitioners or respondents has his principal place of business or residence.

Rule 3.15. Grounds. - The petition may be granted when the court finds that the arbitration agreement is invalid, inexistent or unenforceable as a result of which the arbitral tribunal has no jurisdiction to resolve the dispute.

Rule 3.16. Contents of petition. - The petition shall state the following:

a. The facts showing that the person named as petitioner or respondent has legal capacity to sue or be sued;

b. The nature and substance of the dispute between the parties;

c. The grounds and the circumstances relied upon by the petitioner; and

d. The relief/s sought.

In addition to the submissions, the petitioner shall attach to the petition a copy of the request for arbitration and the ruling of the arbitral tribunal.

The arbitrators shall be impleaded as nominal parties to the case and shall be notified of the progress of the case.

Rule 3.17. Comment/Opposition. - The comment/opposition must be filed within fifteen (15) days from service of the petition.

Rule 3.18. Court action. - (A) Period for resolving the petition.- The court shall render judgment on the basis of the pleadings filed and the evidence, if any, submitted by the parties, within thirty (30) days from the time the petition is submitted for resolution.

(B) No injunction of arbitration proceedings. - The court shall not enjoin the arbitration proceedings during the pendency of the petition.

Judicial recourse to the court shall not prevent the arbitral tribunal from continuing the proceedings and rendering its award.

(C) When dismissal of petition is appropriate. - The court shall dismiss the petition if it fails to comply with Rule 3.16 above; or if upon consideration of the grounds alleged and the legal briefs submitted by the parties, the petition does not appear to be prima facie meritorious.

Rule 3.19. Relief against court action. - The aggrieved party may file a motion for reconsideration of the order of the court. The decision of the court shall, however, not be subject to appeal. The ruling of the court affirming the arbitral tribunal’s jurisdiction shall not be subject to a petition for certiorari. The ruling of the court that the arbitral tribunal has no jurisdiction may be the subject of a petition for certiorari.

Rule 3.20. Where no petition is allowed. - Where the arbitral tribunal defers its ruling on preliminary question regarding its jurisdiction until its final award, the aggrieved party cannot seek judicial relief to question the deferral and must await the final arbitral award before seeking appropriate judicial recourse.

A ruling by the arbitral tribunal deferring resolution on the issue of its jurisdiction until final award, shall not be subject to a motion for reconsideration, appeal or a petition for certiorari.

Rule 3.21. Rendition of arbitral award before court decision on petition from arbitral tribunal’s preliminary ruling on jurisdiction. - If the arbitral tribunal renders a final arbitral award and the Court has not rendered a decision on the petition from the arbitral tribunal’s preliminary ruling affirming its jurisdiction, that petition shall become ipso facto moot and academic and shall be dismissed by the Regional Trial Court. The dismissal shall be without prejudice to the right of the aggrieved party to raise the same issue in a timely petition to vacate or set aside the award.

Rule 3.22. Arbitral tribunal a nominal party. - The arbitral tribunal is only a nominal party. The court shall not require the arbitral tribunal to submit any pleadings or written submissions but may consider the same should the latter participate in the proceedings, but only as nominal parties thereto.

RULE 4: REFERRAL TO ADR


Rule 4.1. Who makes the request. - A party to a pending action filed in violation of the arbitration agreement, whether contained in an arbitration clause or in a submission agreement, may request the court to refer the parties to arbitration in accordance with such agreement.

Rule 4.2. When to make request. - (A) Where the arbitration agreement exists before the action is filed. - The request for referral shall be made not later than the pre-trial conference. After the pre-trial conference, the court will only act upon the request for referral if it is made with the agreement of all parties to the case.

(B) Submission agreement. - If there is no existing arbitration agreement at the time the case is filed but the parties subsequently enter into an arbitration agreement, they may request the court to refer their dispute to arbitration at any time during the proceedings.

Rule 4.3. Contents of request. - The request for referral shall be in the form of a motion, which shall state that the dispute is covered by an arbitration agreement.

Apart from other submissions, the movant shall attach to his motion an authentic copy of the arbitration agreement.

The request shall contain a notice of hearing addressed to all parties specifying the date and time when it would be heard. The party making the request shall serve it upon the respondent to give him the opportunity to file a comment or opposition as provided in the immediately succeeding Rule before the hearing.

Rule 4.4. Comment/Opposition. - The comment/opposition must be filed within fifteen (15) days from service of the petition. The comment/opposition should show that: (a) there is no agreement to refer the dispute to arbitration; and/or (b) the agreement is null and void; and/or (c) the subject-matter of the dispute is not capable of settlement or resolution by arbitration in accordance with Section 6 of the ADR Act.

Rule 4.5. Court action. - After hearing, the court shall stay the action and, considering the statement of policy embodied in Rule 2.4, above, refer the parties to arbitration if it finds prima facie, based on the pleadings and supporting documents submitted by the parties, that there is an arbitration agreement and that the subject-matter of the dispute is capable of settlement or resolution by arbitration in accordance with Section 6 of the ADR Act. Otherwise, the court shall continue with the judicial proceedings.

Rule 4.6. No reconsideration, appeal or certiorari. - An order referring the dispute to arbitration shall be immediately executory and shall not be subject to a motion for reconsideration, appeal or petition for certiorari.

An order denying the request to refer the dispute to arbitration shall not be subject to an appeal, but may be the subject of a motion for reconsideration and/or a petition for certiorari.

Rule 4.7. Multiple actions and parties. - The court shall not decline to refer some or all of the parties to arbitration for any of the following reasons:

a. Not all of the disputes subject of the civil action may be referred to arbitration;

b. Not all of the parties to the civil action are bound by the arbitration agreement and referral to arbitration would result in multiplicity of suits;

c. The issues raised in the civil action could be speedily and efficiently resolved in its entirety by the court rather than in arbitration;

d. Referral to arbitration does not appear to be the most prudent action; or

e. The stay of the action would prejudice the rights of the parties to the civil action who are not bound by the arbitration agreement.

The court may, however, issue an order directing the inclusion in arbitration of those parties who are not bound by the arbitration agreement but who agree to such inclusion provided those originally bound by it do not object to their inclusion.

Rule 4.8. Arbitration to proceed.- Despite the pendency of the action referred to in Rule 4.1, above, arbitral proceedings may nevertheless be commenced or continued, and an award may be made, while the action is pending before the court.

RULE 5: INTERIM MEASURES OF PROTECTION

Rule 5.1. Who may ask for interim measures of protection. - A party to an arbitration agreement may petition the court for interim measures of protection.

Rule 5.2. When to petition. - A petition for an interim measure of protection may be made (a) before arbitration is commenced, (b) after arbitration is commenced, but before the constitution of the arbitral tribunal, or (c) after the constitution of the arbitral tribunal and at any time during arbitral proceedings but, at this stage, only to the extent that the arbitral tribunal has no power to act or is unable to act effectively.

Rule 5.3. Venue. - A petition for an interim measure of protection may be filed with the Regional Trial Court, which has jurisdiction over any of the following places:

a. Where the principal place of business of any of the parties to arbitration is located;

b. Where any of the parties who are individuals resides;

c. Where any of the acts sought to be enjoined are being performed, threatened to be performed or not being performed; or


d. Where the real property subject of arbitration, or a portion thereof is situated.

Rule 5.4. Grounds. - The following grounds, while not limiting the reasons for the court to grant an interim measure of protection, indicate the nature of the reasons that the court shall consider in granting the relief:

a. The need to prevent irreparable loss or injury;

b. The need to provide security for the performance of any obligation;

c. The need to produce or preserve evidence; or

d. The need to compel any other appropriate act or omission.

Rule 5.5. Contents of the petition. - The verified petition must state the following:

a. The fact that there is an arbitration agreement;

b. The fact that the arbitral tribunal has not been constituted, or if constituted, is unable to act or would be unable to act effectively;

c. A detailed description of the appropriate relief sought;

d. The grounds relied on for the allowance of the petition

Apart from other submissions, the petitioner must attach to his petition an authentic copy of the arbitration agreement.

Rule 5.6. Type of interim measure of protection that a court may grant.- The following, among others, are the interim measures of protection that a court may grant:

a. Preliminary injunction directed against a party to arbitration;

b. Preliminary attachment against property or garnishment of funds in the custody of a bank or a third person;

c. Appointment of a receiver;

d. Detention, preservation, delivery or inspection of property; or,

e. Assistance in the enforcement of an interim measure of protection granted by the arbitral tribunal, which the latter cannot enforce effectively.

Rule 5.7. Dispensing with prior notice in certain cases. - Prior notice to the other party may be dispensed with when the petitioner alleges in the petition that there is an urgent need to either (a) preserve property, (b) prevent the respondent from

disposing of, or concealing, the property, or (c) prevent the relief prayed for from becoming illusory because of prior notice, and the court finds that the reason/s given by the petitioner are meritorious.

Rule 5.8. Comment/Opposition. - The comment/opposition must be filed within fifteen (15) days from service of the petition. The opposition or comment should state the reasons why the interim measure of protection should not be granted.

Rule 5.9. Court action. - After hearing the petition, the court shall balance the relative interests of the parties and inconveniences that may be caused, and on that basis resolve the matter within thirty (30) days from (a) submission of the opposition, or (b) upon lapse of the period to file the same, or (c) from termination of the hearing that the court may set only if there is a need for clarification or further argument.

If the other parties fail to file their opposition on or before the day of the hearing, the court shall motu proprio render judgment only on the basis of the allegations in the petition that are substantiated by supporting documents and limited to what is prayed for therein.

In cases where, based solely on the petition, the court finds that there is an urgent need to either (a) preserve property, (b) prevent the respondent from disposing of, or concealing, the property, or (c) prevent the relief prayed for from becoming illusory because of prior notice, it shall issue an immediately executory temporary order of protection and require the petitioner, within five (5) days from receipt of that order, to post a bond to answer for any damage that respondent may suffer as a result of its order. The ex-parte temporary order of protection shall be valid only for a period of twenty (20) days from the service on the party required to comply with the order. Within that period, the court shall:

a. Furnish the respondent a copy of the petition and a notice requiring him to comment thereon on or before the day the petition will be heard; and

b. Notify the parties that the petition shall be heard on a day specified in the notice, which must not be beyond the twenty (20) day period of the effectivity of the ex-parte order.

The respondent has the option of having the temporary order of protection lifted by posting an appropriate counter-bond as determined by the court.

If the respondent requests the court for an extension of the period to file his opposition or comment or to reset the hearing to a later date, and such request is granted, the court shall extend the period of validity of the ex-parte temporary order of protection for no more than twenty days from expiration of the original period.

After notice and hearing, the court may either grant or deny the petition for an interim measure of protection. The order granting or denying any application for interim measure of protection in aid of arbitration must indicate that it is issued without prejudice to subsequent grant, modification, amendment, revision or revocation by an arbitral tribunal.


Rule 5.10. Relief against court action. - If respondent was given an opportunity to be heard on a petition for an interim measure of protection, any order by the court shall be immediately executory, but may be the subject of a motion for reconsideration and/or appeal or, if warranted, a petition for certiorari.

Rule 5.11. Duty of the court to refer back. - The court shall not deny an application for assistance in implementing or enforcing an interim measure of protection ordered by an arbitral tribunal on any or all of the following grounds:

a. The arbitral tribunal granted the interim relief ex parte; or

b. The party opposing the application found new material evidence, which the arbitral tribunal had not considered in granting in the application, and which, if considered, may produce a different result; or

c. The measure of protection ordered by the arbitral tribunal amends, revokes, modifies or is inconsistent with an earlier measure of protection issued by the court.

If it finds that there is sufficient merit in the opposition to the application based on letter (b) above, the court shall refer the matter back to the arbitral tribunal for appropriate determination.

Rule 5.12. Security. - The order granting an interim measure of protection may be conditioned upon the provision of security, performance of an act, or omission thereof, specified in the order.

The Court may not change or increase or decrease the security ordered by the arbitral tribunal.

Rule 5.13. Modification, amendment, revision or revocation of court’s previously issued interim measure of protection. - Any court order granting or denying interim measure/s of protection is issued without prejudice to subsequent grant, modification, amendment, revision or revocation by the arbitral tribunal as may be warranted.

An interim measure of protection issued by the arbitral tribunal shall, upon its issuance be deemed to have ipso jure modified, amended, revised or revoked an interim measure of protection previously issued by the court to the extent that it is inconsistent with the subsequent interim measure of protection issued by the arbitral tribunal.

Rule 5.14. Conflict or inconsistency between interim measure of protection issued by the court and by the arbitral tribunal. - Any question involving a conflict or inconsistency between an interim measure of protection issued by the court and by the arbitral tribunal shall be immediately referred by the court to the arbitral tribunal which shall have the authority to decide such question.

Rule 5.15. Court to defer action on petition for an interim measure of protection when informed of constitution of the arbitral tribunal. - The court shall defer action on any pending petition for an interim measure of protection filed by a party to an arbitration agreement arising from or in connection with a

dispute thereunder upon being informed that an arbitral tribunal has been constituted pursuant to such agreement. The court may act upon such petition only if it is established by the petitioner that the arbitral tribunal has no power to act on any such interim measure of protection or is unable to act thereon effectively.

Rule 5.16. Court assistance should arbitral tribunal be unable to effectively enforce interim measure of protection. - The court shall assist in the enforcement of an interim measure of protection issued by the arbitral tribunal which it is unable to effectively enforce.

RULE 6: APPOINTMENT OF ARBITRATORS

Rule 6.1. When the court may act as Appointing Authority. - The court shall act as Appointing Authority only in the following instances:

a. Where any of the parties in an institutional arbitration failed or refused to appoint an arbitrator or when the parties have failed to reach an agreement on the sole arbitrator (in an arbitration before a sole arbitrator) or when the two designated arbitrators have failed to reach an agreement on the third or presiding arbitrator (in an arbitration before a panel of three arbitrators), and the institution under whose rules arbitration is to be conducted fails or is unable to perform its duty as appointing authority within a reasonable time from receipt of the request for appointment;

b. In all instances where arbitration is ad hoc and the parties failed to provide a method for appointing or replacing an arbitrator, or substitute arbitrator, or the method agreed upon is ineffective, and the National President of the Integrated Bar of the Philippines (IBP) or his duly authorized representative fails or refuses to act within such period as may be allowed under the pertinent rules of the IBP or within such period as may be agreed upon by the parties, or in the absence thereof, within thirty (30) days from receipt of such request for appointment;

c. Where the parties agreed that their dispute shall be resolved by three arbitrators but no method of appointing those arbitrators has been agreed upon, each party shall appoint one arbitrator and the two arbitrators thus appointed shall appoint a third arbitrator. If a party fails to appoint his arbitrator within thirty (30) days of receipt of a request to do so from the other party, or if the two arbitrators fail to agree on the third arbitrator within a reasonable time from their appointment, the appointment shall be made by the Appointing Authority. If the latter fails or refuses to act or appoint an arbitrator within a reasonable time from receipt of the request to do so, any party or the appointed arbitrator/s may request the court to appoint an arbitrator or the third arbitrator as the case may be.

Rule 6.2. Who may request for appointment. - Any party to an arbitration may request the court to act as an Appointing Authority in the instances specified in Rule 6.1 above.

Rule 6.3. Venue. - The petition for appointment of arbitrator may be filed, at the option of the petitioner, in the Regional Trial Court (a) where the principal place of business of any of the parties is located, (b) if any of the parties are individuals, where those individuals reside, or (c) in the National Capital Region.


Rule 6.4. Contents of the petition. -The petition shall state the following:

a. The general nature of the dispute;

b. If the parties agreed on an appointment procedure, a description of that procedure with reference to the agreement where such may be found;

c. The number of arbitrators agreed upon or the absence of any agreement as to the number of arbitrators;

d. The special qualifications that the arbitrator/s must possess, if any, that were agreed upon by the parties;

e. The fact that the Appointing Authority, without justifiable cause, has failed or refused to act as such within the time prescribed or in the absence thereof, within a reasonable time, from the date a request is made; and

f. The petitioner is not the cause of the delay in, or failure of, the appointment of the arbitrator.

Apart from other submissions, the petitioner must attach to the petition (a) an authentic copy of the arbitration agreement, and (b) proof that the Appointing Authority has been notified of the filing of the petition for appointment with the court.


Rule 6.6. Submission of list of arbitrators. - The court may, at its option, also require each party to submit a list of not less than three (3) proposed arbitrators together with their curriculum vitae.

Rule 6.7. Court action. - After hearing, if the court finds merit in the petition, it shall appoint an arbitrator; otherwise, it shall dismiss the petition.

In making the appointment, the court shall have regard to such considerations as are likely to secure the appointment of an independent and impartial arbitrator.

At any time after the petition is filed and before the court makes an appointment, it shall also dismiss the petition upon being informed that the Appointing Authority has already made the appointment.

Rule 6.8. Forum shopping prohibited. - When there is a pending petition in another court to declare the arbitration agreement inexistent, invalid, unenforceable, on account of which the respondent failed or refused to participate in the selection and appointment of a sole arbitrator or to appoint a party-nominated arbitrator, the petition filed under this rule shall be dismissed.

Rule 6.9. Relief against court action. - If the court appoints an arbitrator, the order appointing an arbitrator shall be immediately executory and shall not be the subject of a motion for reconsideration, appeal or certiorari. An order of the court denying the petition for appointment of an arbitrator may,

however, be the subject of a motion for reconsideration, appeal or certiorari.

RULE 7: CHALLENGE TO APPOINTMENT OF ARBITRATOR

Rule 7.1. Who may challenge. - Any of the parties to an arbitration may challenge an arbitrator.

Rule 7.2. When challenge may be raised in court. - When an arbitrator is challenged before the arbitral tribunal under the procedure agreed upon by the parties or under the procedure provided for in Article 13 (2) of the Model Law and the challenge is not successful, the aggrieved party may request the Appointing Authority to rule on the challenge, and it is only when such Appointing Authority fails or refuses to act on the challenge within such period as may be allowed under the applicable rule or in the absence thereof, within thirty (30) days from receipt of the request, that the aggrieved party may renew the challenge in court.

Rule 7.3. Venue. - The challenge shall be filed with the Regional Trial Court (a) where the principal place of business of any of the parties is located, (b) if any of the parties are individuals, where those individuals reside, or (c) in the National Capital Region.

Rule 7.4. Grounds. - An arbitrator may be challenged on any of the grounds for challenge provided for in Republic Act No. 9285 and its implementing rules, Republic Act No. 876 or the Model Law. The nationality or professional qualification of an arbitrator is not a ground to challenge an arbitrator unless the parties have specified in their arbitration agreement a nationality and/or professional qualification for appointment as arbitrator.

Rule 7.5. Contents of the petition. - The petition shall state the following:

a. The name/s of the arbitrator/s challenged and his/their address;

b. The grounds for the challenge;

c. The facts showing that the ground for the challenge has been expressly or impliedly rejected by the challenged arbitrator/s; and

d. The facts showing that the Appointing Authority failed or refused to act on the challenge.

The court shall dismiss the petition motu proprio unless it is clearly alleged therein that the Appointing Authority charged with deciding the challenge, after the resolution of the arbitral tribunal rejecting the challenge is raised or contested before such Appointing Authority, failed or refused to act on the challenge within thirty (30) days from receipt of the request or within such longer period as may apply or as may have been agreed upon by the parties.

Rule 7.6. Comment/Opposition. - The challenged arbitrator or other parties may file a comment or opposition within fifteen (15) days from service of the petition.


Rule 7.7. Court action. - After hearing, the court shall remove the challenged arbitrator if it finds merit in the petition; otherwise, it shall dismiss the petition.

The court shall allow the challenged arbitrator who subsequently agrees to accept the challenge to withdraw as arbitrator.

The court shall accept the challenge and remove the arbitrator in the following cases:

a. The party or parties who named and appointed the challenged arbitrator agree to the challenge and withdraw the appointment.

b. The other arbitrators in the arbitral tribunal agree to the removal of the challenged arbitrator; and

c. The challenged arbitrator fails or refuses to submit his comment on the petition or the brief of legal arguments as directed by the court, or in such comment or legal brief, he fails to object to his removal following the challenge.

The court shall decide the challenge on the basis of evidence submitted by the parties.

The court will decide the challenge on the basis of the evidence submitted by the parties in the following instances:

a. The other arbitrators in the arbitral tribunal agree to the removal of the challenged arbitrator; and

b. If the challenged arbitrator fails or refuses to submit his comment on the petition or the brief of legal arguments as directed by the court, or in such comment or brief of legal arguments, he fails to object to his removal following the challenge.

Rule 7.8. No motion for reconsideration, appeal or certiorari. - Any order of the court resolving the petition shall be immediately executory and shall not be the subject of a motion for reconsideration, appeal, or certiorari.

Rule 7.9. Reimbursement of expenses and reasonable compensation to challenged arbitrator. - Unless the bad faith of the challenged arbitrator is established with reasonable certainty by concealing or failing to disclose a ground for his disqualification, the challenged arbitrator shall be entitled to reimbursement of all reasonable expenses he may have incurred in attending to the arbitration and to a reasonable compensation for his work on the arbitration. Such expenses include, but shall not be limited to, transportation and hotel expenses, if any. A reasonable compensation shall be paid to the challenged arbitrator on the basis of the length of time he has devoted to the arbitration and taking into consideration his stature and reputation as an arbitrator. The request for reimbursement of expenses and for payment of a reasonable compensation shall be filed in the same case and in the court where the petition to replace the challenged arbitrator was filed. The court, in determining the amount of the award to the challenged arbitrator, shall receive evidence of expenses to be reimbursed, which may consist of air tickets, hotel bills and expenses, and

inland transportation. The court shall direct the challenging party to pay the amount of the award to the court for the account of the challenged arbitrator, in default of which the court may issue a writ of execution to enforce the award.

RULE 8: TERMINATION OF THE MANDATE OF ARBITRATOR

Rule 8.1. Who may request termination and on what grounds.- Any of the parties to an arbitration may request for the termination of the mandate of an arbitrator where an arbitrator becomes de jure or de facto unable to perform his function or for other reasons fails to act without undue delay and that arbitrator, upon request of any party, fails or refuses to withdraw from his office.

Rule 8.2. When to request. - If an arbitrator refuses to withdraw from his office, and subsequently, the Appointing Authority fails or refuses to decide on the termination of the mandate of that arbitrator within such period as may be allowed under the applicable rule or, in the absence thereof, within thirty (30) days from the time the request is brought before him, any party may file with the court a petition to terminate the mandate of that arbitrator.

Rule 8.3. Venue. - A petition to terminate the mandate of an arbitrator may, at that petitioner’s option, be filed with the Regional Trial Court (a) where the principal place of business of any of the parties is located, (b) where any of the parties who are individuals resides, or (c) in the National Capital Region.

Rule 8.4. Contents of the petition. - The petition shall state the following:

a. The name of the arbitrator whose mandate is sought to be terminated;

b. The ground/s for termination;

c. The fact that one or all of the parties had requested the arbitrator to withdraw but he failed or refused to do so;

d. The fact that one or all of the parties requested the Appointing Authority to act on the request for the termination of the mandate of the arbitrator and failure or inability of the Appointing Authority to act within thirty (30) days from the request of a party or parties or within such period as may have been agreed upon by the parties or allowed under the applicable rule.

The petitioner shall further allege that one or all of the parties had requested the arbitrator to withdraw but he failed or refused to do so.


Rule 8.6. Court action. - After hearing, if the court finds merit in the petition, it shall terminate the mandate of the arbitrator who refuses to withdraw from his office; otherwise, it shall dismiss the petition.


Rule 8.7. No motion for reconsideration or appeal. - Any order of the court resolving the petition shall be immediately executory and shall not be subject of a motion for reconsideration, appeal or petition for certiorari.

Rule 8.8. Appointment of substitute arbitrator. - Where the mandate of an arbitrator is terminated, or he withdraws from office for any other reason, or because of his mandate is revoked by agreement of the parties or is terminated for any other reason, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced.

RULE 9: ASSISTANCE IN TAKING EVIDENCE

Rule 9.1. Who may request assistance. - Any party to an arbitration, whether domestic or foreign, may request the court to provide assistance in taking evidence.

Rule 9.2. When assistance may be sought. - Assistance may be sought at any time during the course of the arbitral proceedings when the need arises.

Rule 9.3. Venue. - A petition for assistance in taking evidence may, at the option of the petitioner, be filed with Regional Trial Court where (a) arbitration proceedings are taking place, (b) the witnesses reside or may be found, or (c) where the evidence may be found.

Rule 9.4. Ground. - The court may grant or execute the request for assistance in taking evidence within its competence and according to the rules of evidence.

Rule 9.5. Type of assistance. - A party requiring assistance in the taking of evidence may petition the court to direct any person, including a representative of a corporation, association, partnership or other entity (other than a party to the ADR proceedings or its officers) found in the Philippines, for any of the following:

a. To comply with a subpoena ad testificandum and/or subpoena duces tecum;

b. To appear as a witness before an officer for the taking of his deposition upon oral examination or by written interrogatories;

c. To allow the physical examination of the condition of persons, or the inspection of things or premises and, when appropriate, to allow the recording and/or documentation of condition of persons, things or premises (i.e., photographs, video and other means of recording/documentation);

d. To allow the examination and copying of documents; and

e. To perform any similar acts.

Rule 9.6. Contents of the petition. - The petition must state the following:

a. The fact that there is an ongoing arbitration proceeding even if such proceeding could not continue due to some legal impediments;

b. The arbitral tribunal ordered the taking of evidence or the party desires to present evidence to the arbitral tribunal;

c. Materiality or relevance of the evidence to be taken; and

d. The names and addresses of the intended witness/es, place where the evidence may be found, the place where the premises to be inspected are located or the place where the acts required are to be done.


Rule 9.8. Court action. - If the evidence sought is not privileged, and is material and relevant, the court shall grant the assistance in taking evidence requested and shall order petitioner to pay costs attendant to such assistance.

Rule 9.9. Relief against court action. - The order granting assistance in taking evidence shall be immediately executory and not subject to reconsideration or appeal. If the court declines to grant assistance in taking evidence, the petitioner may file a motion for reconsideration or appeal.

Rule 9.10. Perpetuation of testimony before the arbitral tribunal is constituted. - At anytime before arbitration is commenced or before the arbitral tribunal is constituted, any person who desires to perpetuate his testimony or that of another person may do so in accordance with Rule 24 of the Rules of Court.

Rule 9.11. Consequence of disobedience. - The court may impose the appropriate sanction on any person who disobeys its order to testify when required or perform any act required of him.

RULE 10: CONFIDENTIALITY/PROTECTIVE ORDERS

Rule 10.1. Who may request confidentiality. - A party, counsel or witness who disclosed or who was compelled to disclose information relative to the subject of ADR under circumstances that would create a reasonable expectation, on behalf of the source, that the information shall be kept confidential has the right to prevent such information from being further disclosed without the express written consent of the source or the party who made the disclosure.

Rule 10.2. When request made. - A party may request a protective order at anytime there is a need to enforce the confidentiality of the information obtained, or to be obtained, in ADR proceedings.

Rule 10.3. Venue. - A petition for a protective order may be filed with the Regional Trial Court where that order would be implemented.


If there is a pending court proceeding in which the information obtained in an ADR proceeding is required to be divulged or is being divulged, the party seeking to enforce the confidentiality of the information may file a motion with the court where the proceedings are pending to enjoin the confidential information from being divulged or to suppress confidential information.

Rule 10.4. Grounds. - A protective order may be granted only if it is shown that the applicant would be materially prejudiced by an unauthorized disclosure of the information obtained, or to be obtained, during an ADR proceeding.

Rule 10.5. Contents of the motion or petition. - The petition or motion must state the following:

a. That the information sought to be protected was obtained, or would be obtained, during an ADR proceeding;

b. The applicant would be materially prejudiced by the disclosure of that information;

c. The person or persons who are being asked to divulge the confidential information participated in an ADR proceedings; and

d. The time, date and place when the ADR proceedings took place.

Apart from the other submissions, the movant must set the motion for hearing and contain a notice of hearing in accordance with Rule 15 of the Rules of Court.

Rule 10.6. Notice. - Notice of a request for a protective order made through a motion shall be made to the opposing parties in accordance with Rule 15 of the Rules of Court.

Rule 10.7. Comment/Opposition. - The comment/opposition must be filed within fifteen (15) days from service of the petition. The opposition or comment may be accompanied by written proof that (a) the information is not confidential, (b) the information was not obtained during an ADR proceeding, (c) there was a waiver of confidentiality, or (d) the petitioner/movant is precluded from asserting confidentiality.

Rule 10.8. Court action. - If the court finds the petition or motion meritorious, it shall issue an order enjoining a person or persons from divulging confidential information.

In resolving the petition or motion, the courts shall be guided by the following principles applicable to all ADR proceedings: Confidential information shall not be subject to discovery and shall be inadmissible in any adversarial proceeding, whether judicial or quasi judicial. However, evidence or information that is otherwise admissible or subject to discovery does not become inadmissible or protected from discovery solely by reason of its use therein.

For mediation proceedings, the court shall be further guided by the following principles:

a. Information obtained through mediation shall be privileged and confidential.

b. A party, a mediator, or a nonparty participant may refuse to disclose and may prevent any other person from disclosing a mediation communication.

c. In such an adversarial proceeding, the following persons involved or previously involved in a mediation may not be compelled to disclose confidential information obtained during the mediation: (1) the parties to the dispute; (2) the mediator or mediators; (3) the counsel for the parties: (4) the nonparty participants; (5) any persons hired or engaged in connection with the mediation as secretary, stenographer; clerk or assistant; and (6) any other person who obtains or possesses confidential information by reason of his/ her profession.

d. The protection of the ADR Laws shall continue to apply even if a mediator is found to have failed to act impartially.

e. A mediator may not be called to testify to provide information gathered in mediation. A mediator who is wrongfully subpoenaed shall be reimbursed the full cost of his attorney fees and related expenses.

Rule 10.9. Relief against court action. - The order enjoining a person or persons from divulging confidential information shall be immediately executory and may not be enjoined while the order is being questioned with the appellate courts.

If the court declines to enjoin a person or persons from divulging confidential information, the petitioner may file a motion for reconsideration or appeal.

Rule 10.10. Consequence of disobedience. - Any person who disobeys the order of the court to cease from divulging confidential information shall be imposed the proper sanction by the court.

RULE 11: CONFIRMATION, CORRECTION OR VACATION OF AWARD IN DOMESTIC ARBITRATION

Rule 11.1. Who may request confirmation, correction or vacation. - Any party to a domestic arbitration may petition the court to confirm, correct or vacate a domestic arbitral award.

Rule 11.2. When to request confirmation, correction/modification or vacation. -

(A) Confirmation. - At any time after the lapse of thirty (30) days from receipt by the petitioner of the arbitral award, he may petition the court to confirm that award.

(B) Correction/Modification. - Not later than thirty (30) days from receipt of the arbitral award, a party may petition the court to correct/modify that award.

(C) Vacation. - Not later than thirty (30) days from receipt of the arbitral award, a party may petition the court to vacate that award.


(D) A petition to vacate the arbitral award may be filed, in opposition to a petition to confirm the arbitral award, not later than thirty (30) days from receipt of the award by the petitioner. A petition to vacate the arbitral award filed beyond the reglementary period shall be dismissed.

(E) A petition to confirm the arbitral award may be filed, in opposition to a petition to vacate the arbitral award, at any time after the petition to vacate such arbitral award is filed. The dismissal of the petition to vacate the arbitral award for having been filed beyond the reglementary period shall not result in the dismissal of the petition for the confirmation of such arbitral award.

(F) The filing of a petition to confirm an arbitral award shall not authorize the filing of a belated petition to vacate or set aside such award in opposition thereto.

(G) A petition to correct an arbitral award may be included as part of a petition to confirm the arbitral award or as a petition to confirm that award.

Rule 11.3. Venue. - The petition for confirmation, correction/modification or vacation of a domestic arbitral award may be filed with Regional Trial Court having jurisdiction over the place in which one of the parties is doing business, where any of the parties reside or where arbitration proceedings were conducted.

Rule 11.4. Grounds. - (A) To vacate an arbitral award. - The arbitral award may be vacated on the following grounds:

a. The arbitral award was procured through corruption, fraud or other undue means;

b. There was evident partiality or corruption in the arbitral tribunal or any of its members;

c. The arbitral tribunal was guilty of misconduct or any form of misbehavior that has materially prejudiced the rights of any party such as refusing to postpone a hearing upon sufficient cause shown or to hear evidence pertinent and material to the controversy;

d. One or more of the arbitrators was disqualified to act as such under the law and willfully refrained from disclosing such disqualification; or

e. The arbitral tribunal exceeded its powers, or so imperfectly executed them, such that a complete, final and definite award upon the subject matter submitted to them was not made.

The award may also be vacated on any or all of the following grounds:

a. The arbitration agreement did not exist, or is invalid for any ground for the revocation of a contract or is otherwise unenforceable; or

b. A party to arbitration is a minor or a person judicially declared to be incompetent.

The petition to vacate an arbitral award on the ground that the party to arbitration is a minor or a person judicially declared to be incompetent shall be filed only on behalf of the minor or incompetent and shall allege that (a) the other party to arbitration had knowingly entered into a submission or agreement with such minor or incompetent, or (b) the submission to arbitration was made by a guardian or guardian ad litem who was not authorized to do so by a competent court.

In deciding the petition to vacate the arbitral award, the court shall disregard any other ground than those enumerated above.

(B) To correct/modify an arbitral award. - The Court may correct/modify or order the arbitral tribunal to correct/modify the arbitral award in the following cases:

a. Where there was an evident miscalculation of figures or an evident mistake in the description of any person, thing or property referred to in the award;

b. Where the arbitrators have awarded upon a matter not submitted to them, not affecting the merits of the decision upon the matter submitted;

c. Where the arbitrators have omitted to resolve an issue submitted to them for resolution; or

d. Where the award is imperfect in a matter of form not affecting the merits of the controversy, and if it had been a commissioner’s report, the defect could have been amended or disregarded by the Court.

Rule 11.5. Form of petition. - An application to vacate an arbitral award shall be in the form of a petition to vacate or as a petition to vacate in opposition to a petition to confirm the same award.

An application to correct/modify an arbitral award may be included in a petition to confirm an arbitral award or in a petition to vacate in opposition to confirm the same award.

When a petition to confirm an arbitral award is pending before a court, the party seeking to vacate or correct/modify said award may only apply for those reliefs through a petition to vacate or correct/modify the award in opposition to the petition to confirm the award provided that such petition to vacate or correct/modify is filed within thirty (30) days from his receipt of the award. A petition to vacate or correct/modify an arbitral award filed in another court or in a separate case before the same court shall be dismissed, upon appropriate motion, as a violation of the rule against forum-shopping.

When a petition to vacate or correct/modify an arbitral award is pending before a court, the party seeking to confirm said award may only apply for that relief through a petition to confirm the same award in opposition to the petition to vacate or correct/modify the award. A petition to confirm or correct/modify an arbitral award filed as separate proceeding in another court or in a different case before the same court shall be


dismissed, upon appropriate motion, as a violation of the rule against forum shopping.

As an alternative to the dismissal of a second petition for confirmation, vacation or correction/modification of an arbitral award filed in violation of the non-forum shopping rule, the court or courts concerned may allow the consolidation of the two proceedings in one court and in one case.

Where the petition to confirm the award and petition to vacate or correct/modify were simultaneously filed by the parties in the same court or in different courts in the Philippines, upon motion of either party, the court may order the consolidation of the two cases before either court.

In all instances, the petition must be verified by a person who has knowledge of the jurisdictional facts.

Rule 11.6. Contents of petition. - The petition must state the following:

a. The addresses of the parties and any change thereof;

b. The jurisdictional issues raised by a party during arbitration proceedings;

c. The grounds relied upon by the parties in seeking the vacation of the arbitral award whether the petition is a petition for the vacation or setting aside of the arbitral award or a petition in opposition to a petition to confirm the award; and

d. A statement of the date of receipt of the arbitral award and the circumstances under which it was received by the petitioner.

Apart from other submissions, the petitioner must attach to the petition the following:

a. An authentic copy of the arbitration agreement;

b. An authentic copy of the arbitral award;

c. A certification against forum shopping executed by the applicant in accordance with Section 5 of Rule 7 of the Rules of Court; and

d. An authentic copy or authentic copies of the appointment of an arbitral tribunal.

Rule 11.7. Notice. - Upon finding that the petition filed under this Rule is sufficient both in form and in substance, the Court shall cause notice and a copy of the petition to be delivered to the respondent allowing him to file a comment or opposition thereto within fifteen (15) days from receipt of the petition. In lieu of an opposition, the respondent may file a petition in opposition to the petition.

The petitioner may within fifteen (15) days from receipt of the petition in opposition thereto file a reply.

Rule 11.8. Hearing. - If the Court finds from the petition or petition in opposition thereto that there are issues of fact, it shall require the parties, within a period of not more than fifteen (15) days from receipt of the order, to simultaneously submit the affidavits of all of their witnesses and reply affidavits within ten (10) days from receipt of the affidavits to be replied to. There shall be attached to the affidavits or reply affidavits documents relied upon in support of the statements of fact in such affidavits or reply affidavits.

If the petition or the petition in opposition thereto is one for vacation of an arbitral award, the interested party in arbitration may oppose the petition or the petition in opposition thereto for the reason that the grounds cited in the petition or the petition in opposition thereto, assuming them to be true, do not affect the merits of the case and may be cured or remedied. Moreover, the interested party may request the court to suspend the proceedings for vacation for a period of time and to direct the arbitral tribunal to reopen and conduct a new hearing and take such other action as will eliminate the grounds for vacation of the award. The opposition shall be supported by a brief of legal arguments to show the existence of a sufficient legal basis for the opposition.

If the ground of the petition to vacate an arbitral award is that the arbitration agreement did not exist, is invalid or otherwise unenforceable, and an earlier petition for judicial relief under Rule 3 had been filed, a copy of such petition and of the decision or final order of the court shall be attached thereto. But if the ground was raised before the arbitral tribunal in a motion to dismiss filed not later than the submission of its answer, and the arbitral tribunal ruled in favor of its own jurisdiction as a preliminary question which was appealed by a party to the Regional Trial Court, a copy of the order, ruling or preliminary award or decision of the arbitral tribunal, the appeal therefrom to the Court and the order or decision of the Court shall all be attached to the petition.

If the ground of the petition is that the petitioner is an infant or a person judicially declared to be incompetent, there shall be attached to the petition certified copies of documents showing such fact. In addition, the petitioner shall show that even if the submission or arbitration agreement was entered into by a guardian or guardian ad litem, the latter was not authorized by a competent court to sign such the submission or arbitration agreement.

If on the basis of the petition, the opposition, the affidavits and reply affidavits of the parties, the court finds that there is a need to conduct an oral hearing, the court shall set the case for hearing. This case shall have preference over other cases before the court, except criminal cases. During the hearing, the affidavits of witnesses shall take the place of their direct testimonies and they shall immediately be subject to cross-examination thereon. The Court shall have full control over the proceedings in order to ensure that the case is heard without undue delay.

Rule 11.9. Court action. - Unless a ground to vacate an arbitral award under Rule 11.5 above is fully established, the court shall confirm the award.


An arbitral award shall enjoy the presumption that it was made and released in due course of arbitration and is subject to confirmation by the court

In resolving the petition or petition in opposition thereto in accordance with these Special ADR Rules, the court shall either confirm or vacate the arbitral award. The court shall not disturb the arbitral tribunal’s determination of facts and/or interpretation of law.

In a petition to vacate an award or in petition to vacate an award in opposition to a petition to confirm the award, the petitioner may simultaneously apply with the Court to refer the case back to the same arbitral tribunal for the purpose of making a new or revised award or to direct a new hearing, or in the appropriate case, order the new hearing before a new arbitral tribunal, the members of which shall be chosen in the manner provided in the arbitration agreement or submission, or the law. In the latter case, any provision limiting the time in which the arbitral tribunal may make a decision shall be deemed applicable to the new arbitral tribunal.

In referring the case back to the arbitral tribunal or to a new arbitral tribunal pursuant to Rule 24 of Republic Act No. 876, the court may not direct it to revise its award in a particular way, or to revise its findings of fact or conclusions of law or otherwise encroach upon the independence of an arbitral tribunal in the making of a final award.

RULE 12: RECOGNITION AND ENFORCEMENT OR SETTING ASIDE OF AN INTERNATIONAL COMMERCIAL ARBITRATION AWARD

Rule 12.1. Who may request recognition and enforcement or setting aside. - Any party to an international commercial arbitration in the Philippines may petition the proper court to recognize and enforce or set aside an arbitral award.

Rule 12.2. When to file petition. - (A) Petition to recognize and enforce. - The petition for enforcement and recognition of an arbitral award may be filed anytime from receipt of the award. If, however, a timely petition to set aside an arbitral award is filed, the opposing party must file therein and in opposition thereto the petition for recognition and enforcement of the same award within the period for filing an opposition.

(B) Petition to set aside. - The petition to set aside an arbitral award may only be filed within three (3) months from the time the petitioner receives a copy thereof. If a timely request is made with the arbitral tribunal for correction, interpretation or additional award, the three (3) month period shall be counted from the time the petitioner receives the resolution by the arbitral tribunal of that request.

A petition to set aside can no longer be filed after the lapse of the three (3) month period. The dismissal of a petition to set aside an arbitral award for being time-barred shall not automatically result in the approval of the petition filed therein and in opposition thereto for recognition and enforcement of the same award. Failure to file a petition to set aside shall preclude a party from raising grounds to resist enforcement of the award.

Rule 12.3. Venue. - A petition to recognize and enforce or set aside an arbitral award may, at the option of the petitioner, be filed with the Regional Trial Court: (a) where arbitration proceedings were conducted; (b) where any of the assets to be attached or levied upon is located; (c) where the act to be enjoined will be or is being performed; (d) where any of the parties to arbitration resides or has its place of business; or (e) in the National Capital Judicial Region.

Rule 12.4. Grounds to set aside or resist enforcement. - The court may set aside or refuse the enforcement of the arbitral award only if:

a. The party making the application furnishes proof that:

(i). A party to the arbitration agreement was under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereof, under Philippine law; or

(ii). The party making the application to set aside or resist enforcement was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

(iii). The award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration; provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside or only that part of the award which contains decisions on matters submitted to arbitration may be enforced; or

(iv). The composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of Philippine law from which the parties cannot derogate, or, failing such agreement, was not in accordance with Philippine law;

b. The court finds that:

(i). The subject-matter of the dispute is not capable of settlement by arbitration under the law of the Philippines; or

(ii). The recognition or enforcement of the award would be contrary to public policy.

In deciding the petition, the Court shall disregard any other ground to set aside or enforce the arbitral award other than those enumerated above.

The petition to set-aside or a pleading resisting the enforcement of an arbitral award on the ground that a party was a minor or an incompetent shall be filed only on behalf of the minor or incompetent and shall allege that (a) the other party to arbitration had knowingly entered into a submission or agreement with such minor or incompetent, or (b) the submission to arbitration was made by a guardian or guardian ad litem who was not authorized to do so by a competent court.


Rule 12.5. Exclusive recourse against arbitral award. - Recourse to a court against an arbitral award shall be made only through a petition to set aside the arbitral award and on grounds prescribed by the law that governs international commercial arbitration. Any other recourse from the arbitral award, such as by appeal or petition for review or petition for certiorari or otherwise, shall be dismissed by the court.

Rule 12.6. Form. - The application to recognize and enforce or set aside an arbitral award, whether made through a petition to recognize and enforce or to set aside or as a petition to set aside the award in opposition thereto, or through a petition to set aside or petition to recognize and enforce in opposition thereto, shall be verified by a person who has personal knowledge of the facts stated therein.

When a petition to recognize and enforce an arbitral award is pending, the application to set it aside, if not yet time-barred, shall be made through a petition to set aside the same award in the same proceedings.

When a timely petition to set aside an arbitral award is filed, the opposing party may file a petition for recognition and enforcement of the same award in opposition thereto.

Rule 12.7. Contents of petition. - (A) Petition to recognize and enforce. - The petition to recognize and enforce or petition to set aside in opposition thereto, or petition to set aside or petition to recognize and enforce in opposition thereto, shall state the following:

a. The addresses of record, or any change thereof, of the parties to arbitration;

b. A statement that the arbitration agreement or submission exists;

c. The names of the arbitrators and proof of their appointment;

d. A statement that an arbitral award was issued and when the petitioner received it; and

e. The relief sought.

Apart from other submissions, the petitioner shall attach to the petition the following:

a. An authentic copy of the arbitration agreement;

b. An authentic copy of the arbitral award;

c. A verification and certification against forum shopping executed by the applicant in accordance with Sections 4 and 5 of Rule 7 of the Rules of Court; and

d. An authentic copy or authentic copies of the appointment of an arbitral tribunal.

(B) Petition to set aside. - The petition to set aside or petition to set aside in opposition to a petition to recognize and enforce an arbitral award in international commercial arbitration shall have the same contents as a petition to recognize and enforce or petition to recognize and enforce in opposition to a petition to set aside an arbitral award. In addition, the said petitions should state the grounds relied upon to set it aside.

Further, if the ground of the petition to set aside is that the petitioner is a minor or found incompetent by a court, there shall be attached to the petition certified copies of documents showing such fact. In addition, the petitioner shall show that even if the submission or arbitration agreement was entered into by a guardian or guardian ad litem, the latter was not authorized by a competent court to sign such the submission or arbitration agreement.

In either case, if another court was previously requested to resolve and/or has resolved, on appeal, the arbitral tribunal’s preliminary determination in favor of its own jurisdiction, the petitioner shall apprise the court before which the petition to recognize and enforce or set aside is pending of the status of the appeal or its resolution.

Rule 12.8. Notice. - Upon finding that the petition filed under this Rule is sufficient both in form and in substance, the court shall cause notice and a copy of the petition to be delivered to the respondent directing him to file an opposition thereto within fifteen (15) days from receipt of the petition. In lieu of an opposition, the respondent may file a petition to set aside in opposition to a petition to recognize and enforce, or a petition to recognize and enforce in opposition to a petition to set aside.

The petitioner may within fifteen (15) days from receipt of the petition to set aside in opposition to a petition to recognize and enforce, or from receipt of the petition to recognize and enforce in opposition to a petition to set aside, file a reply.

Rule 12.9. Submission of documents. - If the court finds that the issue between the parties is mainly one of law, the parties may be required to submit briefs of legal arguments, not more than fifteen (15) days from receipt of the order, sufficiently discussing the legal issues and the legal basis for the relief prayed for by each of them.

If the court finds from the petition or petition in opposition thereto that there are issues of fact relating to the ground(s) relied upon for the court to set aside, it shall require the parties within a period of not more than fifteen (15) days from receipt of the order simultaneously to submit the affidavits of all of their witnesses and reply affidavits within ten (10) days from receipt of the affidavits to be replied to. There shall be attached to the affidavits or reply affidavits, all documents relied upon in support of the statements of fact in such affidavits or reply affidavits.

Rule 12.10. Hearing. - If on the basis of the petition, the opposition, the affidavits and reply affidavits of the parties, the court finds that there is a need to conduct an oral hearing, the court shall set the case for hearing. This case shall have preference over other cases before the court, except criminal cases. During the hearing, the affidavits of witnesses shall take the place of their direct testimonies and they shall immediately


be subject to cross-examination thereon. The court shall have full control over the proceedings in order to ensure that the case is heard without undue delay.

Rule 12.11. Suspension of proceedings to set aside. - The court when asked to set aside an arbitral award may, where appropriate and upon request by a party, suspend the proceedings for a period of time determined by it to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the arbitral tribunal’s opinion will eliminate the grounds for setting aside. The court, in referring the case back to the arbitral tribunal may not direct it to revise its award in a particular way, or to revise its findings of fact or conclusions of law or otherwise encroach upon the independence of an arbitral tribunal in the making of a final award.

The court when asked to set aside an arbitral award may also, when the preliminary ruling of an arbitral tribunal affirming its jurisdiction to act on the matter before it had been appealed by the party aggrieved by such preliminary ruling to the court, suspend the proceedings to set aside to await the ruling of the court on such pending appeal or, in the alternative, consolidate the proceedings to set aside with the earlier appeal.

Rule 12.12. Presumption in favor of confirmation. - It is presumed that an arbitral award was made and released in due course and is subject to enforcement by the court, unless the adverse party is able to establish a ground for setting aside or not enforcing an arbitral award.

Rule 12.13. Judgment of the court. - Unless a ground to set aside an arbitral award under Rule 12.4 above is fully established, the court shall dismiss the petition. If, in the same proceedings, there is a petition to recognize and enforce the arbitral award filed in opposition to the petition to set aside, the court shall recognize and enforce the award.

In resolving the petition or petition in opposition thereto in accordance with the Special ADR Rules, the court shall either set aside or enforce the arbitral award. The court shall not disturb the arbitral tribunal’s determination of facts and/or interpretation of law.

Rule 12.14. Costs. - Unless otherwise agreed upon by the parties in writing, at the time the case is submitted to the court for decision, the party praying for recognition and enforcement or setting aside of an arbitral award shall submit a statement under oath confirming the costs he has incurred only in the proceedings for such recognition and enforcement or setting aside. The costs shall include the attorney’s fees the party has paid or is committed to pay to his counsel of record.

The prevailing party shall be entitled to an award of costs, which shall include reasonable attorney’s fees of the prevailing party against the unsuccessful party. The court shall determine the reasonableness of the claim for attorney’s fees.

RULE 13: RECOGNITION AND ENFORCEMENT OF A FOREIGN ARBITRAL AWARD

Rule 13.1. Who may request recognition and enforcement. - Any party to a foreign arbitration may petition the court to recognize and enforce a foreign arbitral award.

Rule 13.2. When to petition. - At any time after receipt of a foreign arbitral award, any party to arbitration may petition the proper Regional Trial Court to recognize and enforce such award.

Rule 13.3. Venue. - The petition to recognize and enforce a foreign arbitral award shall be filed, at the option of the petitioner, with the Regional Trial Court (a) where the assets to be attached or levied upon is located, (b) where the act to be enjoined is being performed, (c) in the principal place of business in the Philippines of any of the parties, (d) if any of the parties is an individual, where any of those individuals resides, or (e) in the National Capital Judicial Region.

Rule 13.4. Governing law and grounds to refuse recognition and enforcement. - The recognition and enforcement of a foreign arbitral award shall be governed by the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "New York Convention") and this Rule. The court may, upon grounds of comity and reciprocity, recognize and enforce a foreign arbitral award made in a country that is not a signatory to the New York Convention as if it were a Convention Award.

A Philippine court shall not set aside a foreign arbitral award but may refuse it recognition and enforcement on any or all of the following grounds:

a. The party making the application to refuse recognition and enforcement of the award furnishes proof that:

(i). A party to the arbitration agreement was under some incapacity; or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereof, under the law of the country where the award was made; or

(ii). The party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

(iii). The award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration; provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside; or

(iv). The composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or, failing such agreement, was not in accordance with the law of the country where arbitration took place; or

(v). The award has not yet become binding on the parties or has been set aside or suspended by a court of the country in which that award was made; or


b. The court finds that:

(i). The subject-matter of the dispute is not capable of settlement or resolution by arbitration under Philippine law; or

(ii). The recognition or enforcement of the award would be contrary to public policy.

The court shall disregard any ground for opposing the recognition and enforcement of a foreign arbitral award other than those enumerated above.

Rule 13.5. Contents of petition. - The petition shall state the following:

a. The addresses of the parties to arbitration;

b. In the absence of any indication in the award, the country where the arbitral award was made and whether such country is a signatory to the New York Convention; and

c. The relief sought.

Apart from other submissions, the petition shall have attached to it the following:

a. An authentic copy of the arbitration agreement; and

b. An authentic copy of the arbitral award.

If the foreign arbitral award or agreement to arbitrate or submission is not made in English, the petitioner shall also attach to the petition a translation of these documents into English. The translation shall be certified by an official or sworn translator or by a diplomatic or consular agent.

Rule 13.6. Notice and opposition. - Upon finding that the petition filed under this Rule is sufficient both in form and in substance, the court shall cause notice and a copy of the petition to be delivered to the respondent allowing him to file an opposition thereto within thirty (30) days from receipt of the notice and petition.

Rule 13.7. Opposition. - The opposition shall be verified by a person who has personal knowledge of the facts stated therein.

Rule 13.8. Submissions. - If the court finds that the issue between the parties is mainly one of law, the parties may be required to submit briefs of legal arguments, not more than thirty (30) days from receipt of the order, sufficiently discussing the legal issues and the legal bases for the relief prayed for by each other.

If, from a review of the petition or opposition, there are issues of fact relating to the ground/s relied upon for the court to refuse enforcement, the court shall, motu proprio or upon request of any party, require the parties to simultaneously submit the affidavits of all of their witnesses within a period of not less than fifteen (15) days nor more than thirty (30) days from receipt of the order. The court may, upon the request of any party, allow

the submission of reply affidavits within a period of not less than fifteen (15) days nor more than thirty (30) days from receipt of the order granting said request. There shall be attached to the affidavits or reply affidavits all documents relied upon in support of the statements of fact in such affidavits or reply affidavits.

Rule 13.9. Hearing. - The court shall set the case for hearing if on the basis of the foregoing submissions there is a need to do so. The court shall give due priority to hearings on petitions under this Rule. During the hearing, the affidavits of witnesses shall take the place of their direct testimonies and they shall immediately be subject to cross-examination. The court shall have full control over the proceedings in order to ensure that the case is heard without undue delay.

Rule 13.10. Adjournment/deferment of decision on enforcement of award. - The court before which a petition to recognize and enforce a foreign arbitral award is pending, may adjourn or defer rendering a decision thereon if, in the meantime, an application for the setting aside or suspension of the award has been made with a competent authority in the country where the award was made. Upon application of the petitioner, the court may also require the other party to give suitable security.

Rule 13.11. Court action. - It is presumed that a foreign arbitral award was made and released in due course of arbitration and is subject to enforcement by the court.

The court shall recognize and enforce a foreign arbitral award unless a ground to refuse recognition or enforcement of the foreign arbitral award under this rule is fully established.

The decision of the court recognizing and enforcing a foreign arbitral award is immediately executory.

In resolving the petition for recognition and enforcement of a foreign arbitral award in accordance with these Special ADR Rules, the court shall either [a] recognize and/or enforce or [b] refuse to recognize and enforce the arbitral award. The court shall not disturb the arbitral tribunal’s determination of facts and/or interpretation of law.

Rule 13.12. Recognition and enforcement of non-convention award. - The court shall, only upon grounds provided by these Special ADR Rules, recognize and enforce a foreign arbitral award made in a country not a signatory to the New York Convention when such country extends comity and reciprocity to awards made in the Philippines. If that country does not extend comity and reciprocity to awards made in the Philippines, the court may nevertheless treat such award as a foreign judgment enforceable as such under Rule 39, Section 48, of the Rules of Court.

PART III. SPECIFIC TO MEDIATION


Rule 14.1. Application of the rules on arbitration. - Whenever applicable and appropriate, the pertinent rules on arbitration shall be applied in proceedings before the court relative to a dispute subject to mediation.


RULE 15: DEPOSIT AND ENFORCEMENT OF MEDIATED SETTLEMENT AGREEMENTS

Rule 15.1. Who makes a deposit. - Any party to a mediation that is not court-annexed may deposit with the court the written settlement agreement, which resulted from that mediation.

Rule 15.2. When deposit is made. - At any time after an agreement is reached, the written settlement agreement may be deposited.

Rule 15.3. Venue. - The written settlement agreement may be jointly deposited by the parties or deposited by one party with prior notice to the other party/ies with the Clerk of Court of the Regional Trial Court (a) where the principal place of business in the Philippines of any of the parties is located; (b) if any of the parties is an individual, where any of those individuals resides; or (c) in the National Capital Judicial Region.

Rule 15.4. Registry Book. - The Clerk of Court of each Regional Trial Court shall keep a Registry Book that shall chronologically list or enroll all the mediated settlement agreements/settlement awards that are deposited with the court as well as the names and address of the parties thereto and the date of enrollment and shall issue a Certificate of Deposit to the party that made the deposit.

Rule 15.5. Enforcement of mediated settlement agreement. - Any of the parties to a mediated settlement agreement, which was deposited with the Clerk of Court of the Regional Trial Court, may, upon breach thereof, file a verified petition with the same court to enforce said agreement.

Rule 15.6. Contents of petition. - The verified petition shall:

a. Name and designate, as petitioner or respondent, all parties to the mediated settlement agreement and those who may be affected by it;

b. State the following:

(i). The addresses of the petitioner and respondents; and

(ii). The ultimate facts that would show that the adverse party has defaulted to perform its obligation under said agreement; and

c. Have attached to it the following:

(i). An authentic copy of the mediated settlement agreement; and

(ii). Certificate of Deposit showing that the mediated settlement agreement was deposited with the Clerk of Court.

Rule 15.7. Opposition. - The adverse party may file an opposition, within fifteen (15) days from receipt of notice or service of the petition, by submitting written proof of compliance with the mediated settlement agreement or such other affirmative or negative defenses it may have.

Rule 15.8. Court action. - After a summary hearing, if the court finds that the agreement is a valid mediated settlement agreement, that there is no merit in any of the affirmative or negative defenses raised, and the respondent has breached that agreement, in whole or in part, the court shall order the enforcement thereof; otherwise, it shall dismiss the petition.

PART IV. SPECIFIC TO CONSTRUCTION ARBITRATION


Rule 16.1. Application of the rules on arbitration. - Whenever applicable and appropriate, the rules on arbitration shall be applied in proceedings before the court relative to a dispute subject to construction arbitration.

RULE 17: REFERRAL TO CIAC

Rule 17.1. Dismissal of action. - A Regional Trial Court before which a construction dispute is filed shall, upon becoming aware that the parties have entered into an arbitration agreement, motu proprio or upon motion made not later than the pre-trial, dismiss the case and refer the parties to arbitration to be conducted by the Construction Industry Arbitration Commission (CIAC), unless all parties to arbitration, assisted by their respective counsel, submit to the court a written agreement making the court, rather than the CIAC, the body that would exclusively resolve the dispute.

Rule 17.2. Form and contents of motion. - The request for dismissal of the civil action and referral to arbitration shall be through a verified motion that shall (a) contain a statement showing that the dispute is a construction dispute; and (b) be accompanied by proof of the existence of the arbitration agreement.

If the arbitration agreement or other document evidencing the existence of that agreement is already part of the record, those documents need not be submitted to the court provided that the movant has cited in the motion particular references to the records where those documents may be found.

The motion shall also contain a notice of hearing addressed to all parties and shall specify the date and time when the motion will be heard, which must not be later than fifteen (15) days after the filing of the motion. The movant shall ensure receipt by all parties of the motion at least three days before the date of the hearing.

Rule 17.3. Opposition. - Upon receipt of the motion to refer the dispute to arbitration by CIAC, the other party may file an opposition to the motion on or before the day such motion is to be heard. The opposition shall clearly set forth the reasons why the court should not dismiss the case.

Rule 17.4. Hearing. - The court shall hear the motion only once and for the purpose of clarifying relevant factual and legal issues.

Rule 17.5. Court action. - If the other parties fail to file their opposition on or before the day of the hearing, the court shall motu proprio resolve the motion only on the basis of the facts alleged in the motion.


After hearing, the court shall dismiss the civil action and refer the parties to arbitration if it finds, based on the pleadings and supporting documents submitted by the parties, that there is a valid and enforceable arbitration agreement involving a construction dispute. Otherwise, the court shall proceed to hear the case.

All doubts shall be resolved in favor of the existence of a construction dispute and the arbitration agreement.

Rule 17.6. Referral immediately executory. - An order dismissing the case and referring the dispute to arbitration by CIAC shall be immediately executory.

Rule 17.7. Multiple actions and parties. - The court shall not decline to dismiss the civil action and make a referral to arbitration by CIAC for any of the following reasons:

a. Not all of the disputes subject of the civil action may be referred to arbitration;

b. Not all of the parties to the civil action are bound by the arbitration agreement and referral to arbitration would result in multiplicity of suits;

c. The issues raised in the civil action could be speedily and efficiently resolved in its entirety by the Court rather than in arbitration;

d. Referral to arbitration does not appear to be the most prudent action; or

e. Dismissal of the civil action would prejudice the rights of the parties to the civil action who are not bound by the arbitration agreement.

The court may, however, issue an order directing the inclusion in arbitration of those parties who are bound by the arbitration agreement directly or by reference thereto pursuant to Section 34 of Republic Act No. 9285.

Furthermore, the court shall issue an order directing the case to proceed with respect to the parties not bound by the arbitration agreement.

Rule 17.8. Referral - If the parties manifest that they have agreed to submit all or part of their dispute pending with the court to arbitration by CIAC, the court shall refer them to CIAC for arbitration.

PART V. SPECIFIC TO OTHER FORMS OF ADR


Rule 18.1. Applicability of rules to other forms of ADR. - This rule governs the procedure for matters brought before the court involving the following forms of ADR:

a. Early neutral evaluation;

b. Neutral evaluation;

c. Mini-trial;

d. Mediation-arbitration;

e. A combination thereof; or

f. Any other ADR form.

Rule 18.2. Applicability of the rules on mediation. - If the other ADR form/process is more akin to mediation (i.e., the neutral third party merely assists the parties in reaching a voluntary agreement), the herein rules on mediation shall apply.

Rule 18.3. Applicability of rules on arbitration.-If the other ADR form/process is more akin to arbitration (i.e., the neutral third party has the power to make a binding resolution of the dispute), the herein rules on arbitration shall apply.

Rule 18.4. Referral. - If a dispute is already before a court, either party may before and during pre-trial, file a motion for the court to refer the parties to other ADR forms/processes. At any time during court proceedings, even after pre-trial, the parties may jointly move for suspension of the action pursuant to Article 2030 of the Civil Code of the Philippines where the possibility of compromise is shown.

Rule 18.5. Submission of settlement agreement. - Either party may submit to the court, before which the case is pending, any settlement agreement following a neutral or an early neutral evaluation, mini-trial or mediation-arbitration.

PART VI. FOR RECONSIDERATION, APPEAL AND CERTIORARI

RULE 19: MOTION FOR RECONSIDERATION, APPEAL AND CERTIORARI

A. MOTION FOR RECONSIDERATION

Rule 19.1. Motion for reconsideration, when allowed. - A party may ask the Regional Trial to reconsider its ruling on the following:

a. That the arbitration agreement is inexistent, invalid or unenforceable pursuant to Rule 3.10 (B);

b. Upholding or reversing the arbitral tribunal’s jurisdiction pursuant to Rule 3.19;

c. Denying a request to refer the parties to arbitration;

d. Granting or denying a party an interim measure of protection;

e. Denying a petition for the appointment of an arbitrator;

f. Refusing to grant assistance in taking evidence;


g. Enjoining or refusing to enjoin a person from divulging confidential information;

h. Confirming, vacating or correcting a domestic arbitral award;

i. Suspending the proceedings to set aside an international commercial arbitral award and referring the case back to the arbitral tribunal;

j. Setting aside an international commercial arbitral award;

k. Dismissing the petition to set aside an international commercial arbitral award, even if the court does not recognize and/or enforce the same;

l. Recognizing and/or enforcing, or dismissing a petition to recognize and/or enforce an international commercial arbitral award;

m. Declining a request for assistance in taking evidence;

n. Adjourning or deferring a ruling on a petition to set aside, recognize and/or enforce an international commercial arbitral award;

o. Recognizing and/or enforcing a foreign arbitral award, or refusing recognition and/or enforcement of the same; and

p. Granting or dismissing a petition to enforce a deposited mediated settlement agreement.

No motion for reconsideration shall be allowed from the following rulings of the Regional Trial Court:

a. A prima facie determination upholding the existence, validity or enforceability of an arbitration agreement pursuant to Rule 3.1 (A);

b. An order referring the dispute to arbitration;

c. An order appointing an arbitrator;

d. Any ruling on the challenge to the appointment of an arbitrator;

e. Any order resolving the issue of the termination of the mandate of an arbitrator; and

f. An order granting assistance in taking evidence.

Rule 19.2. When to move for reconsideration. - A motion for reconsideration may be filed with the Regional Trial Court within a non-extendible period of fifteen (15) days from receipt of the questioned ruling or order.

Rule 19.3. Contents and notice. - The motion shall be made in writing stating the ground or grounds therefor and shall be filed with the court and served upon the other party or parties.

Rule 19.4. Opposition or comment. - Upon receipt of the motion for reconsideration, the other party or parties shall have a non-extendible period of fifteen (15) days to file his opposition or comment.

Rule 19.5. Resolution of motion. - A motion for reconsideration shall be resolved within thirty (30) days from receipt of the opposition or comment or upon the expiration of the period to file such opposition or comment.

Rule 19.6. No second motion for reconsideration. - No party shall be allowed a second motion for reconsideration.

B. GENERAL PROVISIONS ON APPEAL AND CERTIORARI

Rule 19.7. No appeal or certiorari on the merits of an arbitral award. - An agreement to refer a dispute to arbitration shall mean that the arbitral award shall be final and binding. Consequently, a party to an arbitration is precluded from filing an appeal or a petition for certiorari questioning the merits of an arbitral award.

Rule 19.8. Subject matter and governing rules. - The remedy of an appeal through a petition for review or the remedy of a special civil action of certiorari from a decision of the Regional Trial Court made under the Special ADR Rules shall be allowed in the instances, and instituted only in the manner, provided under this Rule.

Rule 19.9. Prohibited alternative remedies. - Where the remedies of appeal and certiorari are specifically made available to a party under the Special ADR Rules, recourse to one remedy shall preclude recourse to the other.

Rule 19.10. Rule on judicial review on arbitration in the Philippines. - As a general rule, the court can only vacate or set aside the decision of an arbitral tribunal upon a clear showing that the award suffers from any of the infirmities or grounds for vacating an arbitral award under Section 24 of Republic Act No. 876 or under Rule 34 of the Model Law in a domestic arbitration, or for setting aside an award in an international arbitration under Article 34 of the Model Law, or for such other grounds provided under these Special Rules.

If the Regional Trial Court is asked to set aside an arbitral award in a domestic or international arbitration on any ground other than those provided in the Special ADR Rules, the court shall entertain such ground for the setting aside or non-recognition of the arbitral award only if the same amounts to a violation of public policy.

The court shall not set aside or vacate the award of the arbitral tribunal merely on the ground that the arbitral tribunal committed errors of fact, or of law, or of fact and law, as the court cannot substitute its judgment for that of the arbitral tribunal.


Rule 19.11. Rule on judicial review of foreign arbitral award. - The court can deny recognition and enforcement of a foreign arbitral award only upon the grounds provided in Article V of the New York Convention, but shall have no power to vacate or set aside a foreign arbitral award.

C. APPEALS TO THE COURT OF APPEALS

Rule 19.12. Appeal to the Court of Appeals. - An appeal to the Court of Appeals through a petition for review under this Special Rule shall only be allowed from the following final orders of the Regional Trial Court:

a. Granting or denying an interim measure of protection;

b. Denying a petition for appointment of an arbitrator;

c. Denying a petition for assistance in taking evidence;

d. Enjoining or refusing to enjoin a person from divulging confidential information;

e. Confirming, vacating or correcting/modifying a domestic arbitral award;

f. Setting aside an international commercial arbitration award;

g. Dismissing the petition to set aside an international commercial arbitration award even if the court does not decide to recognize or enforce such award;

h. Recognizing and/or enforcing an international commercial arbitration award;

i. Dismissing a petition to enforce an international commercial arbitration award;

j. Recognizing and/or enforcing a foreign arbitral award;

k. Refusing recognition and/or enforcement of a foreign arbitral award;

l. Granting or dismissing a petition to enforce a deposited mediated settlement agreement; and

m. Reversing the ruling of the arbitral tribunal upholding its jurisdiction.

Rule 19.13. Where to appeal. - An appeal under this Rule shall be taken to the Court of Appeals within the period and in the manner herein provided.

Rule 19.14. When to appeal. - The petition for review shall be filed within fifteen (15) days from notice of the decision of the Regional Trial Court or the denial of the petitioner’s motion for reconsideration.

Rule 19.15. How appeal taken. - Appeal shall be taken by filing a verified petition for review in seven (7) legible copies with the Court of Appeals, with proof of service of a copy thereof on the adverse party and on the Regional Trial Court. The original copy of the petition intended for the Court of Appeals shall be marked original by the petitioner.

Upon the filing of the petition and unless otherwise prescribed by the Court of Appeals, the petitioner shall pay to the clerk of court of the Court of Appeals docketing fees and other lawful fees of P3,500.00 and deposit the sum of P500.00 for costs.

Exemption from payment of docket and other lawful fees and the deposit for costs may be granted by the Court of Appeals upon a verified motion setting forth valid grounds therefor. If the Court of Appeals denies the motion, the petitioner shall pay the docketing and other lawful fees and deposit for costs within fifteen days from the notice of the denial.

Rule 19.16. Contents of the Petition. - The petition for review shall (a) state the full names of the parties to the case, without impleading the court or agencies either as petitioners or respondent, (b) contain a concise statement of the facts and issues involved and the grounds relied upon for the review, (c) be accompanied by a clearly legible duplicate original or a certified true copy of the decision or resolution of the Regional Trial Court appealed from, together with certified true copies of such material portions of the record referred to therein and other supporting papers, and (d) contain a sworn certification against forum shopping as provided in the Rules of Court. The petition shall state the specific material dates showing that it was filed within the period fixed herein.

Rule 19.17. Effect of failure to comply with requirements. - The court shall dismiss the petition if it fails to comply with the foregoing requirements regarding the payment of the docket and other lawful fees, the deposit for costs, proof of service of the petition, the contents and the documents, which should accompany the petition.

Rule 19.18. Action on the petition. - The Court of Appeals may require the respondent to file a comment on the petition, not a motion to dismiss, within ten (10) days from notice, or dismiss the petition if it finds, upon consideration of the grounds alleged and the legal briefs submitted by the parties, that the petition does not appear to be prima facie meritorious.

Rule 19.19. Contents of Comment. - The comment shall be filed within ten (10) days from notice in seven (7) legible copies and accompanied by clearly legible certified true copies of such material portions of the record referred to therein together with other supporting papers. The comment shall (a) point out insufficiencies or inaccuracies in petitioner’s statement of facts and issues, and (b) state the reasons why the petition should be denied or dismissed. A copy thereof shall be served on the petitioner, and proof of such service shall be filed with the Court of Appeals.

Rule 19.20. Due course. - If upon the filing of a comment or such other pleading or documents as may be required or allowed by the Court of Appeals or upon the expiration of the period for the filing thereof, and on the basis of the petition or the records, the


Court of Appeals finds prima facie that the Regional Trial Court has committed an error that would warrant reversal or modification of the judgment, final order, or resolution sought to be reviewed, it may give due course to the petition; otherwise, it shall dismiss the same.

Rule 19.21. Transmittal of records. - Within fifteen (15) days from notice that the petition has been given due course, the Court of Appeals may require the court or agency concerned to transmit the original or a legible certified true copy of the entire record of the proceeding under review. The record to be transmitted may be abridged by agreement of all parties to the proceeding. The Court of Appeals may require or permit subsequent correction of or addition to the record.

Rule 19.22. Effect of appeal. - The appeal shall not stay the award, judgment, final order or resolution sought to be reviewed unless the Court of Appeals directs otherwise upon such terms as it may deem just.

Rule 19.23. Submission for decision. - If the petition is given due course, the Court of Appeals may set the case for oral argument or require the parties to submit memoranda within a period of fifteen (15) days from notice. The case shall be deemed submitted for decision upon the filing of the last pleading or memorandum required by the Court of Appeals.

The Court of Appeals shall render judgment within sixty (60) days from the time the case is submitted for decision.

Rule 19.24. Subject of appeal restricted in certain instance. - If the decision of the Regional Trial Court refusing to recognize and/or enforce, vacating and/or setting aside an arbitral award is premised on a finding of fact, the Court of Appeals may inquire only into such fact to determine the existence or non-existence of the specific ground under the arbitration laws of the Philippines relied upon by the Regional Trial Court to refuse to recognize and/or enforce, vacate and/or set aside an award. Any such inquiry into a question of fact shall not be resorted to for the purpose of substituting the court’s judgment for that of the arbitral tribunal as regards the latter’s ruling on the merits of the controversy.

Rule 19.25. Party appealing decision of court confirming arbitral award required to post bond. - The Court of Appeals shall within fifteen (15) days from receipt of the petition require the party appealing from the decision or a final order of the Regional Trial Court, either confirming or enforcing an arbitral award, or denying a petition to set aside or vacate the arbitral award to post a bond executed in favor of the prevailing party equal to the amount of the award.

Failure of the petitioner to post such bond shall be a ground for the Court of Appeals to dismiss the petition.

D. SPECIAL CIVIL ACTION FOR CERTIORARI

Rule 19.26. Certiorari to the Court of Appeals. - When the Regional Trial Court, in making a ruling under the Special ADR Rules, has acted without or in excess of its jurisdiction, or with grave abuse of discretion amounting to lack or excess of

jurisdiction, and there is no appeal or any plain, speedy, and adequate remedy in the ordinary course of law, a party may file a special civil action for certiorari to annul or set aside a ruling of the Regional Trial Court.

A special civil action for certiorari may be filed against the following orders of the court.

a. Holding that the arbitration agreement is inexistent, invalid or unenforceable;

b. Reversing the arbitral tribunal’s preliminary determination upholding its jurisdiction;

c. Denying the request to refer the dispute to arbitration;

d. Granting or refusing an interim relief;

e. Denying a petition for the appointment of an arbitrator;

f. Confirming, vacating or correcting a domestic arbitral award;

g. Suspending the proceedings to set aside an international commercial arbitral award and referring the case back to the arbitral tribunal;

h. Allowing a party to enforce an international commercial arbitral award pending appeal;

i. Adjourning or deferring a ruling on whether to set aside, recognize and or enforce an international commercial arbitral award;

j. Allowing a party to enforce a foreign arbitral award pending appeal; and

k. Denying a petition for assistance in taking evidence.

Rule 19.27. Form. - The petition shall be accompanied by a certified true copy of the questioned judgment, order or resolution of the Regional Trial Court, copies of all pleadings and documents relevant and pertinent thereto, and a sworn certification of non-forum shopping as provided in the Rules of Court.

Upon the filing of the petition and unless otherwise prescribed by the Court of Appeals, the petitioner shall pay to the clerk of court of the Court of Appeals docketing fees and other lawful fees of P3,500.00 and deposit the sum of P500.00 for costs. Exemption from payment of docket and other lawful fees and the deposit for costs may be granted by the Court of Appeals upon a verified motion setting forth valid grounds therefor. If the Court of Appeals denies the motion, the petitioner shall pay the docketing and other lawful fees and deposit for costs within fifteen days from the notice of the denial.


Rule 19.28. When to file petition. - The petition must be filed with the Court of Appeals within fifteen (15) days from notice of the judgment, order or resolution sought to be annulled or set aside. No extension of time to file the petition shall be allowed.

Rule 19.29. Arbitral tribunal a nominal party in the petition. - The arbitral tribunal shall only be a nominal party in the petition for certiorari. As nominal party, the arbitral tribunal shall not be required to submit any pleadings or written submissions to the court. The arbitral tribunal or an arbitrator may, however, submit such pleadings or written submissions if the same serves the interest of justice.

In petitions relating to the recognition and enforcement of a foreign arbitral award, the arbitral tribunal shall not be included even as a nominal party. However, the tribunal may be notified of the proceedings and furnished with court processes.

Rule 19.30. Court to dismiss petition. - The court shall dismiss the petition if it fails to comply with Rules 19.27 and 19.28 above, or upon consideration of the ground alleged and the legal briefs submitted by the parties, the petition does not appear to be prima facie meritorious.

Rule 19.31. Order to comment. - If the petition is sufficient in form and substance to justify such process, the Court of Appeals shall immediately issue an order requiring the respondent or respondents to comment on the petition within a non-extendible period of fifteen (15) days from receipt of a copy thereof. Such order shall be served on the respondents in such manner as the court may direct, together with a copy of the petition and any annexes thereto.

Rule 19.32. Arbitration may continue despite petition for certiorari. - A petition for certiorari to the court from the action of the appointing authority or the arbitral tribunal allowed under this Rule shall not prevent the arbitral tribunal from continuing the proceedings and rendering its award. Should the arbitral tribunal continue with the proceedings, the arbitral proceedings and any award rendered therein will be subject to the final outcome of the pending petition for certiorari.

Rule 19.33. Prohibition against injunctions. - The Court of Appeals shall not, during the pendency of the proceedings before it, prohibit or enjoin the commencement of arbitration, the constitution of the arbitral tribunal, or the continuation of arbitration.

Rule 19.34. Proceedings after comment is filed. - After the comment is filed, or the time for the filing thereof has expired, the court shall render judgment granting the relief prayed for or to which the petitioner is entitled, or denying the same, within a non-extendible period of fifteen (15) days.

Rule 19.35. Service and enforcement of order or judgment. - A certified copy of the judgment rendered in accordance with the last preceding section shall be served upon the Regional Trial Court concerned in such manner as the Court of Appeals may direct, and disobedience thereto shall be punished as contempt.

E. APPEAL BY CERTIORARI TO THE SUPREME COURT

Rule 19.36. Review discretionary. - A review by the Supreme Court is not a matter of right, but of sound judicial discretion, which will be granted only for serious and compelling reasons resulting in grave prejudice to the aggrieved party. The following, while neither controlling nor fully measuring the court's discretion, indicate the serious and compelling, and necessarily, restrictive nature of the grounds that will warrant the exercise of the Supreme Court’s discretionary powers, when the Court of Appeals:

a. Failed to apply the applicable standard or test for judicial review prescribed in these Special ADR Rules in arriving at its decision resulting in substantial prejudice to the aggrieved party;

b. Erred in upholding a final order or decision despite the lack of jurisdiction of the court that rendered such final order or decision;

c. Failed to apply any provision, principle, policy or rule contained in these Special ADR Rules resulting in substantial prejudice to the aggrieved party; and

d. Committed an error so egregious and harmful to a party as to amount to an undeniable excess of jurisdiction.

The mere fact that the petitioner disagrees with the Court of Appeals’ determination of questions of fact, of law or both questions of fact and law, shall not warrant the exercise of the Supreme Court’s discretionary power. The error imputed to the Court of Appeals must be grounded upon any of the above prescribed grounds for review or be closely analogous thereto.

A mere general allegation that the Court of Appeals has committed serious and substantial error or that it has acted with grave abuse of discretion resulting in substantial prejudice to the petitioner without indicating with specificity the nature of such error or abuse of discretion and the serious prejudice suffered by the petitioner on account thereof, shall constitute sufficient ground for the Supreme Court to dismiss outright the petition.

Rule 19.37. Filing of petition with Supreme Court. - A party desiring to appeal by certiorari from a judgment or final order or resolution of the Court of Appeals issued pursuant to these Special ADR Rules may file with the Supreme Court a verified petition for review on certiorari. The petition shall raise only questions of law, which must be distinctly set forth.

Rule 19.38. Time for filing; extension. - The petition shall be filed within fifteen (15) days from notice of the judgment or final order or resolution appealed from, or of the denial of the petitioner's motion for new trial or reconsideration filed in due time after notice of the judgment.

On motion duly filed and served, with full payment of the docket and other lawful fees and the deposit for costs before the expiration of the reglementary period, the Supreme Court may for justifiable reasons grant an extension of thirty (30) days only within which to file the petition.


Rule 19.39. Docket and other lawful fees; proof of service of petition. - Unless he has theretofore done so or unless the Supreme Court orders otherwise, the petitioner shall pay docket and other lawful fees to the clerk of court of the Supreme Court of P3,500.00 and deposit the amount of P500.00 for costs at the time of the filing of the petition. Proof of service of a copy thereof on the lower court concerned and on the adverse party shall be submitted together with the petition.

Rule 19.40. Contents of petition. - The petition shall be filed in eighteen (18) copies, with the original copy intended for the court being indicated as such by the petitioner, and shall (a) state the full name of the appealing party as the petitioner and the adverse party as respondent, without impleading the lower courts or judges thereof either as petitioners or respondents; (b) indicate the material dates showing when notice of the judgment or final order or resolution subject thereof was received, when a motion for new trial or reconsideration, if any, was filed and when notice of the denial thereof was received; (c) set forth concisely a statement of the matters involved, and the reasons or arguments relied on for the allowance of the petition; (d) be accompanied by a clearly legible duplicate original, or a certified true copy of the judgment or final order or resolution certified by the clerk of court of the court a quo and the requisite number of plain copies thereof, and such material portions of the record as would support the petition; and (e) contain a sworn certification against forum shopping.

Rule 19.41. Dismissal or denial of petition. - The failure of the petitioner to comply with any of the foregoing requirements regarding the payment of the docket and other lawful fees, deposit for costs, proof of service of the petition, and the contents of and the documents which should accompany the petition shall be sufficient ground for the dismissal thereof.

The Supreme Court may on its own initiative deny the petition on the ground that the appeal is without merit, or is prosecuted manifestly for delay, or that the questions raised therein are too insubstantial to require consideration.

Rule 19.42. Due course; elevation of records. - If the petition is given due course, the Supreme Court may require the elevation of the complete record of the case or specified parts thereof within fifteen (15) days from notice.

PART VII. FINAL PROVISIONS

RULE 20: FILING AND DEPOSIT FEES

Rule 20.1. Filing fee in petitions or counter-petitions to confirm or enforce, vacate or set aside arbitral award or for the enforcement of a mediated settlement agreement. - The filing fee for filing a petition to confirm or enforce, vacate or set aside an arbitral award in a domestic arbitration or in an international commercial arbitration, or enforce a mediated settlement agreement shall be as follows:

PhP 10,000.00 - if the award does not exceed PhP 1,000,000.00




PhP 50,000.00 - if the award exceeds PhP 100,000,000.00

The minimal filing fee payable in "all other actions not involving property" shall be paid by the petitioner seeking to enforce foreign arbitral awards under the New York Convention in the Philippines.

Rule 20.2. Filing fee for action to enforce as a counter-petition. - A petition to enforce an arbitral award in a domestic arbitration or in an international commercial arbitration submitted as a petition to enforce and/or recognize an award in opposition to a timely petition to vacate or set aside the arbitral award shall require the payment of the filing fees prescribed in Rule 20.1 above.

Rule 20.3. Deposit fee for mediated settlement agreements. - Any party to a mediated settlement agreement who deposits it with the clerk of court shall pay a deposit fee of P500.00.

Rule 20.4. Filing fee for other proceedings. - The filing fee for the filing of any other proceedings, including applications for interim relief, as authorized under these Special Rules not covered under any of the foregoing provisions, shall be P10,000.00.

RULE 21: COSTS

Rule 21.1. Costs. - The costs of the ADR proceedings shall be borne by the parties equally unless otherwise agreed upon or directed by the arbitrator or arbitral tribunal.

Rule 21.2. On the dismissal of a petition against a ruling of the arbitral tribunal on a preliminary question upholding its jurisdiction. - If the Regional Trial Court dismisses the petition against the ruling of the arbitral tribunal on a preliminary question upholding its jurisdiction, it shall also order the petitioner to pay the respondent all reasonable costs and expenses incurred in opposing the petition. "Costs" shall include reasonable attorney’s fees. The court shall award costs upon application of the respondent after the petition is denied and the court finds, based on proof submitted by respondent, that the amount of costs incurred is reasonable.

Rule 21.3. On recognition and enforcement of a foreign arbitral award. - At the time the case is submitted to the court for decision, the party praying for recognition and enforcement of a foreign arbitral award shall submit a statement under oath confirming the costs he has incurred only in the proceedings in the Philippines for such recognition and enforcement or setting-aside. The costs shall include attorney’s fees the party has paid or is committed to pay to his counsel of record.


The prevailing party shall be entitled to an award of costs which shall include the reasonable attorney’s fees of the prevailing party against the unsuccessful party. The court shall determine the reasonableness of the claim for attorney’s fees.

Rule 21.4. Costs. - At the time the case is submitted to the court for decision, the party praying for confirmation or vacation of an arbitral award shall submit a statement under oath confirming the costs he has incurred only in the proceedings for confirmation or vacation of an arbitral award. The costs shall include the attorney’s fees the party has paid or is committed to pay to his counsel of record.

The prevailing party shall be entitled to an award of costs with respect to the proceedings before the court, which shall include the reasonable attorney’s fees of the prevailing party against the unsuccessful party. The court shall determine the reasonableness of the claim for attorney’s fees.

Rule 21.5. Bill of Costs. - Unless otherwise agreed upon by the parties in writing, at the time the case is submitted to the court for decision, the party praying for recognition and enforcement or for setting aside an arbitral award shall submit a statement under oath confirming the costs he has incurred only in the proceedings for such recognition and enforcement or setting-aside. The costs shall include attorney’s fees the party has paid or is committed to pay to his counsel of record.

The prevailing party shall be entitled to an award of costs, which shall include reasonable attorney’s fees of the prevailing party against the unsuccessful party. The court shall determine the reasonableness of the claim for attorney’s fees.

Rule 21.6. Government’s exemption from payment of fees. - The Republic of the Philippines, its agencies and instrumentalities are exempt from paying legal fees provided in these Special ADR Rules. Local governments and government controlled corporation with or with or without independent charters are not exempt from paying such fees.

RULE 22: APPLICABILITY OF THE RULES OF COURT

Rule 22.1. Applicability of Rules of Court. - The provisions of the Rules of Court that are applicable to the proceedings enumerated in Rule 1.1 of these Special ADR Rules have either been included and incorporated in these Special ADR Rules or specifically referred to herein.

In connection with the above proceedings, the Rules of Evidence shall be liberally construed to achieve the objectives of the Special ADR Rules.

RULE 23: SEPARABILITY

Rule 23.1. Separability Clause. - If, for any reason, any part of the Special ADR Rules shall be held unconstitutional or invalid, other Rules or provisions hereof which are not affected thereby, shall continue to be in full force and effect.

RULE 24: TRANSITORY PROVISIONS

Rule 24.1. Transitory Provision. - Considering its procedural character, the Special ADR Rules shall be applicable to all pending arbitration, mediation or other ADR forms covered by the ADR Act, unless the parties agree otherwise. The Special ADR Rules, however, may not prejudice or impair vested rights in accordance with law.

RULE 25: ONLINE DISPUTE RESOLUTION

Rule 25.1. Applicability of the Special ADR Rules to Online Dispute Resolution. - Whenever applicable and appropriate, the Special ADR Rules shall govern the procedure for matters brought before the court involving Online Dispute Resolution.

Rule 25.2. Scope of Online Dispute Resolution. - Online Dispute Resolution shall refer to all electronic forms of ADR including the use of the internet and other web or computed based technologies for facilitating ADR.

RULE 26: EFFECTIVITY

Rule 26.1. Effectivity. - The Special ADR Rules shall take effect fifteen (15) days after its complete publication in two (2) newspapers of general circulation.

RULE A: GUIDELINES FOR THE RESOLUTION OF ISSUES RELATED TO ARBITRATION OF LOANS SECURED BY COLLATERAL

Rule A.1. Applicability of an arbitration agreement in a contract of loan applies to the accessory contract securing the loan. - An arbitration agreement in a contract of loan extends to and covers the accessory contract securing the loan such as a pledge or a mortgage executed by the borrower in favor of the lender under that contract of loan.

Rule A.2. Foreclosure of pledge or extra-judicial foreclosure of mortgage not precluded by arbitration. - The commencement of the arbitral proceeding under the contract of loan containing an arbitration agreement shall not preclude the lender from availing himself of the right to obtain satisfaction of the loan under the accessory contract by foreclosure of the thing pledged or by extra-judicial foreclosure of the collateral under the real estate mortgage in accordance with Act No. 3135.

The lender may likewise institute foreclosure proceedings against the collateral securing the loan prior to the commencement of the arbitral proceeding.

By agreeing to refer any dispute under the contract of loan to arbitration, the lender who is secured by an accessory contract of real estate mortgage shall be deemed to have waived his right to obtain satisfaction of the loan by judicial foreclosure.

Rule A.3. Remedy of the borrower against an action taken by the lender against the collateral before the constitution of the arbitral tribunal. - The borrower providing security for the payment of his loan who is aggrieved by the action taken by the lender against the collateral securing the loan may, if such action against the collateral is taken before the arbitral tribunal is constituted, apply with the appropriate court for interim relief


against any such action of the lender. Such interim relief may be obtained only in a special proceeding for that purpose, against the action taken by the lender against the collateral, pending the constitution of the arbitral tribunal. Any determination made by the court in that special proceeding pertaining to the merits of the controversy, including the right of the lender to proceed against the collateral, shall be only provisional in nature.

After the arbitral tribunal is constituted, the court shall stay its proceedings and defer to the jurisdiction of the arbitral tribunal over the entire controversy including any question regarding the right of the lender to proceed against the collateral.

Rule A.4. Remedy of borrower against action taken by the lender against the collateral after the arbitral tribunal has been constituted. - After the arbitral tribunal is constituted, the borrower providing security for the payment of his loan who is aggrieved by the action taken by the lender against the collateral securing the loan may apply to the arbitral tribunal for relief, including a claim for damages, against such action of the lender. An application to the court may also be made by the borrower against any action taken by the lender against the collateral securing the loan but only if the arbitral tribunal cannot act effectively to prevent an irreparable injury to the rights of such borrower during the pendency of the arbitral proceeding.

An arbitration agreement in a contract of loan precludes the borrower therein providing security for the loan from filing and/or proceeding with any action in court to prevent the lender from foreclosing the pledge or extra-judicially foreclosing the mortgage. If any such action is filed in court, the lender shall have the right provided in the Special ADR Rules to have such action stayed on account of the arbitration agreement.

Rule A.5. Relief that may be granted by the arbitral tribunal. - The arbitral tribunal, in aid of the arbitral proceeding before it, may upon submission of adequate security, suspend or enjoin the lender from proceeding against the collateral securing the loan pending final determination by the arbitral tribunal of the dispute brought to it for decision under such contract of loan.

The arbitral tribunal shall have the authority to resolve the issue of the validity of the foreclosure of the thing pledged or of the extrajudicial foreclosure of the collateral under the real estate mortgage if the same has not yet been foreclosed or confirm the validity of such foreclosure if made before the rendition of the arbitral award and had not been enjoined.

Rule A.6. Arbitration involving a third-party provider of security. - An arbitration agreement contained in a contract of loan between the lender and the borrower extends to and covers an accessory contract securing the loan, such as a pledge, mortgage, guaranty or suretyship, executed by a person other than the borrower only if such third-party securing the loan has agreed in the accessory contract, either directly or by reference, to be bound by such arbitration agreement.

Unless otherwise expressly agreed upon by the third-party securing the loan, his agreement to be bound by the arbitration agreement in the contract of loan shall pertain to disputes arising from or in connection with the relationship between the lender

and the borrower as well as the relationship between the lender and such third-party including the right of the lender to proceed against the collateral securing the loan, but shall exclude disputes pertaining to the relationship exclusively between the borrower and the provider of security such as that involving a claim by the provider of security for indemnification against the borrower.

In this multi-party arbitration among the lender, the borrower and the third party securing the loan, the parties may agree to submit to arbitration before a sole arbitrator or a panel of three arbitrators to be appointed either by an Appointing Authority designated by the parties in the arbitration agreement or by a default Appointing Authority under the law.

In default of an agreement on the manner of appointing arbitrators or of constituting the arbitral tribunal in such multi-party arbitration, the dispute shall be resolved by a panel of three arbitrators to be designated by the Appointing Authority under the law. But even in default of an agreement on the manner of appointing an arbitrator or constituting an arbitral tribunal in a multi-party arbitration, if the borrower and the third party securing the loan agree to designate a common arbitrator, arbitration shall be decided by a panel of three arbitrators: one to be designated by the lender; the other to be designated jointly by the borrower and the provider of security who have agreed to designate the same arbitrator; and a third arbitrator who shall serve as the chairperson of the arbitral panel to be designated by the two party-designated arbitrators.

PART SIXTEEN. APPEALS

RULE 109. APPEALS IN SPECIAL PROCEEDINGS SECTION 1. Orders or judgments from which appeals may be taken.—An interested person may appeal in special proceedings from an order or judgment rendered by a Regional Trial Court [or a Juvenile, and Domestic Relations Court], where such order or judgment:

(a) Allows or disallows a will; (b) Determines who are the lawful heirs of

a deceased person, or the distributive share of the estate to which such person is entitled;

(c) Allows or disallows, in whole or in part, any claim against the estate of a deceased person, or any claim presented on behalf of the estate in offset to a claim against it;

(d) Settles the account of an executor, administrator, trustee or guardian;

(e) Constitutes, in proceedings relating to the settlement of the estate of a deceased person, or the administration of a trustee or guardian, a final determination in the lower court of the rights of the party appealing, except that no appeal shall be allowed from the appointment of a special administrator; and

(f) Is the final order or judgment rendered in the case, and affects the substantial rights of the person appealing, unless it be an order granting or denying a motion for a new trial or for reconsideration. SEC. 2. Advance distribution in special proceedings.—Notwithstanding a pending controversy or appeal in proceedings


to settle the estate of a decedent, the court may, in its discretion and upon such terms as it may deem proper and just, permit that such part of the estate as may not be affected by the controversy or appeal be distributed among the heirs or legatees, upon compliance with the conditions set forth in Rule 90 of these rules.

CASE NOTES Testate Estate of vda. de Biascan v. Biascan (2000) Section 1, Rule 109 of the Rules of Court enumerates the orders and judgments in special proceedings which may be the subject of an appeal. Thus:

Section 1. Orders or judgments from which appeals may be taken. – An interested person may appeal in a special proceeding from an order or judgment rendered by a Regional Trial Court or a Juvenile and domestic Relations Court, where such order or judgment:

(a) Allows or disallows a will; (b) Determines who are the lawful heirs of a

deceased person, or the distributive shares of the estate to which such person is entitled;

(c) Allows, or disallows, in whole or in part, any claim against the estate of a deceased person, or any claim presented on behalf of the estate in offset to a claim against it;

(d) Settles the account of an executor, administrator, trustee or guardian;

(e) Constitutes, in proceedings relating to the settlement of the estate of a deceased person, or the administration of a trustee or guardian, a final determination in the lower court of the rights of the party appealing, except that no appeal shall be allowed from the appointment of a special administrator; and

(f) Is the final order or judgment rendered in the case, and affects the substantial rights of the person appealing, unless it be an order granting or denying a motion for new trial or for reconsideration.”

The ruling of the trial court that Maria, private respondent Rosalina Biascan and German Biascan were entitled to participate in the settlement proceedings falls squarely under paragraph (b), Section 1, Rule 109 of the Rules of Court as a proper subject of appeal. By so ruling, the trial court has effectively determined that the three persons are the lawful heirs of the deceased. As such, the same may be the proper subject of an appeal.

Similarly, the ruling of the trial court denying petitioner’s motion to set aside the order appointing private respondent as the regular administratrix of the estate of Florencio Bisacan is likewise a proper subject of an appeal. We have previously held that an order of the trial court appointing a regular administrator of a deceased person’s estate is a final determination of the rights of the parties thereunder, and is thus, appealable. This is in contrast with an order appointing a special administrator who is appointed only for a limited time and for a specific purpose. Because of the temporary character and special character of this appointment, the Rules deem it not advisable for any party to appeal from said temporary appointment. Considering however that private respondent has aleready been appointed as regular administratrix of the

estate of Florencio Biascan, her appointment as such may be questioned before the appellate court by way of appeal.

It is thus clear that the Order dated April 2, 1981 may be the proper subject of an appeal in a special proceeding. In special proceedings, such as the instant proceeding for settlement of estate, the period of appeal from any decision or final order rendered therein is thirty (30) days, a notice of appeal and a record on appeal being required. The appeal period may only be interrupted by the filing of a motion for new trial or reconsideration. Once the appeal period expires without an appeal or a motion for reconsideration or new trial being perfected, the decision or order becomes final.

It is well-settled that judgment or orders become final and executory by operation of law and not by judicial declaration. Thus, finality of a judgment becomes a fact upon the lapse of the reglementary period of appeal if no appeal is perfected or motion for reconsideration or new trial is filed. The trial court need not even pronounce the finality of the order as the same becomes final by operation of law. In fact, the trial court could not even validly entertain a motion for reconsideration filed after the lapse of the period for taking an appeal. As such, it is of no moment that the opposing party failed to object to the timeliness of the motion for reconsideration or that the court denied the same on grounds other than timeliness considering that at the time the motion was filed, the Order dated April 2, 1981 had already become final and executory. Being final and executory, the trial court can no longer alter, modify, or reverse the questioned order. The subsequent filing of the motion for reconsideration cannot disturb the finality of the judgment or order.

Republic v. Nishina (2010) Rule 109 of the Rules of Court contemplates multiple appeals during the pendency of special proceedings. A record on appeal – in addition to the notice of appeal – is thus required to be filed as the original records of the case should remain with the trial courtto enable the rest of the case to proceed in the event that a separate and distinct issue is resolved by said court and held to be final.

In the present case, the filing of a record on appeal was not necessary since no other matter remained to be heard and determined by the trial court after it issued the appealed order granting respondent’s petition for cancellation of birth record and change of surname in the civil registry.

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