0% found this document useful (0 votes)
189 views6 pages

Cordova vs. Reyes Daway Lim Bernardo Lindo Rosales Law Offices

This document summarizes a court case regarding a corporation placed under receivership. The key points are: 1) The petitioner owned shares in a corporation that were held by custodian banks on his behalf. The liquidators of the corporation illegally withdrew the shares and sold them, adding the proceeds to the corporation's assets without the petitioner's consent. 2) This meant the petitioner became a creditor of the corporation for the value of his shares. Although the shares were originally specific property, the proceeds from their sale became commingled with the corporation's general funds. 3) As an ordinary creditor, the petitioner was entitled to only 15% of the value of his shares, in line

Uploaded by

JENNY BUTACAN
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as ODT, PDF, TXT or read online on Scribd
0% found this document useful (0 votes)
189 views6 pages

Cordova vs. Reyes Daway Lim Bernardo Lindo Rosales Law Offices

This document summarizes a court case regarding a corporation placed under receivership. The key points are: 1) The petitioner owned shares in a corporation that were held by custodian banks on his behalf. The liquidators of the corporation illegally withdrew the shares and sold them, adding the proceeds to the corporation's assets without the petitioner's consent. 2) This meant the petitioner became a creditor of the corporation for the value of his shares. Although the shares were originally specific property, the proceeds from their sale became commingled with the corporation's general funds. 3) As an ordinary creditor, the petitioner was entitled to only 15% of the value of his shares, in line

Uploaded by

JENNY BUTACAN
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as ODT, PDF, TXT or read online on Scribd
You are on page 1/ 6

G.R. No. 146555. July 3, 2007.

JOSE C. CORDOVA, petitioner, vs. REYES DAWAY LIM BERNARDO LINDO ROSALES
LAW OFFICES, ATTY. WENDELL CORONEL and the SECURITIES AND EXCHANGE
COMMISSION,** respondents.

Corporation Law; Receiverships; Where the liquidators of a corporation placed on receivership


illegally withdrew the certificates of stock from the custodian bank without the knowledge and
consent of the owner and authority of the Securities and Exchange Commission, adding the
proceeds of the sale to the assets of the corporation, the owner became a creditor of said
corporation.—There is no dispute that petitioner was the owner of the CSPI shares. However, private
respondents, as liquidators of Philfinance, illegally withdrew said certificates of stock without the
knowledge and consent of petitioner and authority of the SEC. After selling the CSPI shares, private
respondents added the proceeds of the sale to the assets of Philfinance. Under these circumstances, did
the petitioner become a creditor of Philfinance? We rule in the affirmative.

Same; Same; While shares of stock are specific or determinate movable properties, after they are
sold, the money raised from the sale became generic and commingled with the cash and other assets
of the corporation under receivership.—Petitioner’s CSPI shares were specific or determinate
movable properties. But after they were sold, the money raised from the sale became generic and were
commingled with the cash and other assets of Philfinance. Unlike shares of stock, money is a generic
thing. It is designated merely by its class or genus without any particular designation or physical
segregation from all others of the same class. This means that once a certain amount is added to the
cash balance, one can no longer pinpoint the specific amount included which then becomes part of a
whole mass of money. It thus became impossible to identify the exact proceeds of the sale of the CSPI
shares since they could no longer be particularly designated nor distinctly segregated from the assets of
Philfinance. Petitioner’s only remedy was to file a claim on the whole mass of these assets, to which
unfortunately all of the other creditors and investors of Philfinance also had a claim.

Same; Same; Words and Phrases; The word “claim” as used in Sec. 6(c) of P.D. 902-A, as amended,
refers to debts or demands of a pecuniary nature—it means the assertion of a right to have money
paid.—Petitioner’s right of action against Philfinance was a “claim” properly to be litigated in the
liquidation proceedings. In Finasia Investments and Finance Corporation v. CA, 237 SCRA 446 (1994),
we discussed the definition of “claims” in the context of liquidation proceedings: We agree with the
public respondent that the word ‘claim’ as used in Sec. 6(c) of P.D. 902-A, as amended, refers to debts
or demands of a pecuniary nature. It means “the assertion of a right to have money paid. It is used in
special proceedings like those before [the administrative court] on insolvency.” The word “claim” is
also defined as: Right to payment, whether or not such right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or
unsecured; or right to an equitable remedy for breach of performance if such breach gives rise to a right
to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent,
matured, unmatured, disputed, undisputed, secured, unsecured.

Liquidation; Concurrence and Preference of Credits; The Civil Code provisions on concurrence and
preference of credits are applicable to liquidation proceedings.—Petitioner had a right to the payment
of the value of his shares. His demand was of a pecuniary nature since he was claiming the monetary
value of his shares. It was in this sense (i.e. as a claimant) that he was a creditor of Philfinance. The
Civil Code provisions on concurrence and preference of credits are applicable to the liquidation
proceedings.
Same; Same; Article 2241 of the Civil Code refers only to specific movable property, not generic
property; Where a creditor does not fall under any of the provisions applicable to preferred
creditors, he is deemed an ordinary creditor under Article 2245.—Article 2241 refers only to specific
movable property. His claim was for the payment of money, which, as already discussed, is generic
property and not specific or determinate. Considering that petitioner did not fall under any of the
provisions applicable to preferred creditors, he was deemed an ordinary creditor under Article 2245:
Credits of any other kind or class, or by any other right or title not comprised in the four preceding
articles, shall enjoy no preference. This being so, Article 2251 (2) states that: Common credits referred
to in Article 2245 shall be paid pro rata regardless of dates. Like all the other ordinary creditors or
claimants against Philfinance, he was entitled to a rate of recovery of only 15% of his money claim.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

CORONA, J.:

This is a petition for review on certiorari1 of a decision2 and resolution3 of the Court of Appeals (CA)
dated July 31, 2000 and December 27, 2000, respectively, in CA-G.R. SP No. 55311.

Sometime in 1977 and 1978, petitioner Jose C. Cordova bought from Philippine Underwriters Finance
Corporation (Philfinance) certificates of stock of Celebrity Sports Plaza Incorporated (CSPI) and shares
of stock of various other corporations. He was issued a confirmation of sale.4 The CSPI shares were
physically delivered by Philfinance to the former Filmanbank5 and Philtrust Bank, as custodian banks,
to hold these shares in behalf of and for the benefit of petitioner.6

On June 18, 1981, Philfinance was placed under receivership by public respondent Securities and
Exchange Commission (SEC). Thereafter, private respondents Reyes Daway Lim Bernardo Lindo
Rosales Law Offices and Atty. Wendell Coronel (private respondents) were appointed as liquidators.7
Sometime in 1991, without the knowledge and consent of petitioner and without authority from the
SEC, private respondents withdrew the CSPI shares from the custodian banks.8 On May 27, 1996, they
sold the shares to Northeast Corporation and included the proceeds thereof in the funds of Philfinance.
Petitioner learned about the unauthorized sale of his shares only on September 10, 1996.9 He lodged a
complaint with private respondents but the latter ignored it10 prompting him to file, on May 6, 1997,11
a formal complaint against private respondents in the receivership proceedings with the SEC, for the
return of the shares.

Meanwhile, on April 18, 1997, the SEC approved a 15% rate of recovery for Philfinance’s creditors and
investors.12 On May 13, 1997, the liquidators began the process of settling the claims against
Philfinance, from its assets.13

On April 14, 1998, the SEC rendered judgment dismissing the petition. However, it reconsidered this
decision in a resolution dated September 24, 1999 and granted the claims of petitioner. It held that
petitioner was the owner of the CSPI shares by virtue of a confirmation of sale (which was considered
as a deed of assignment) issued to him by Philfinance. But since the shares had already been sold and
the proceeds commingled with the other assets of Philfinance, petitioner’s status was converted into
that of an ordinary creditor for the value of such shares. Thus, it ordered private respondents to pay
petitioner the amount of P5,062,500 representing 15% of the monetary value of his CSPI shares plus
interest at the legal rate from the time of their unauthorized sale.
On October 27, 1999, the SEC issued an order clarifying its September 24, 1999 resolution. While it
reiterated its earlier order to pay petitioner the amount of P5,062,500, it deleted the award of legal
interest. It clarified that it never meant to award interest since this would be unfair to the other
claimants.

On appeal, the CA affirmed the SEC. It agreed that petitioner was indeed the owner of the CSPI shares
but the recovery of such shares had become impossible. It also declared that the clarificatory order
merely harmonized the dispositive portion with the body of the resolution. Petitioner’s motion for
reconsideration was denied.

Hence this petition raising the following issues:

1)whether petitioner should be considered as a preferred (and secured) creditor of Philfinance;


2)whether petitioner can recover the full value of his CSPI shares or merely 15% thereof like all other
ordinary creditors of Philfinance and
3)whether petitioner is entitled to legal interest.14
To resolve these issues, we first have to determine if petitioner was indeed a creditor of Philfinance.

There is no dispute that petitioner was the owner of the CSPI shares. However, private respondents, as
liquidators of Philfinance, illegally withdrew said certificates of stock without the knowledge and
consent of petitioner and authority of the SEC.15 After selling the CSPI shares, private respondents
added the proceeds of the sale to the assets of Philfinance.16 Under these circumstances, did the
petitioner become a creditor of Philfinance? We rule in the affirmative.

The SEC, after holding that petitioner was the owner of the shares, stated:

“Petitioner is seeking the return of his CSPI shares which, for the present, is no longer possible,
considering that the same had already been sold by the respondents, the proceeds of which are
ADMITTEDLY commingled with the assets of PHILFINANCE.

This being the case, [petitioner] is now but a claimant for the value of those shares. As a claimant, he
shall be treated as an ordinary creditor in so far as the value of those certificates is concerned.”17

The CA agreed with this and elaborated:

“Much as we find both detestable and reprehensible the grossly abusive and illicit contrivance
employed by private respondents against petitioner, we, nevertheless, concur with public respondent
that the return of petitioner’s CSPI shares is well-nigh impossible, if not already an utter impossibility,
inasmuch as the certificates of stocks have already been alienated or transferred in favor of Northeast
Corporation, as early as May 27, 1996, in consequence whereof the proceeds of the sale have been
transmuted into corporate assets of Philfinance, under custodia legis, ready for distribution to its
creditors and/or investors. Case law holds that the assets of an institution under receivership or
liquidation shall be deemed in custodia legis in the hands of the receiver or liquidator, and shall from
the moment of such receivership or liquidation, be exempt from any order, garnishment, levy,
attachment, or execution.

Concomitantly, petitioner’s filing of his claim over the subject CSPI shares before the SEC in the
liquidation proceedings bound him to the terms and conditions thereof. He cannot demand any special
treatment [from] the liquidator, for this flies in the face of, and will contravene, the Supreme Court
dictum that when a corporation threatened by bankruptcy is taken over by a receiver, all the creditors
shall stand on equal footing. Not one of them should be given preference by paying one or some [of]
them ahead of the others. This is precisely the philosophy underlying the suspension of all pending
claims against the corporation under receivership. The rule of thumb is equality in equity.”18

We agree with both the SEC and the CA that petitioner had become an ordinary creditor of Philfinance.

Certainly, petitioner had the right to demand the return of his CSPI shares.19 He in fact filed a
complaint in the liquidation proceedings in the SEC to get them back but was confronted by an
impossible situation as they had already been sold. Consequently, he sought instead to recover their
monetary value.

Petitioner’s CSPI shares were specific or determinate movable properties.20 But after they were sold,
the money raised from the sale became generic21 and were commingled with the cash and other assets
of Philfinance. Unlike shares of stock, money is a generic thing. It is designated merely by its class or
genus without any particular designation or physical segregation from all others of the same class.22
This means that once a certain amount is added to the cash balance, one can no longer pinpoint the
specific amount included which then becomes part of a whole mass of money.

It thus became impossible to identify the exact proceeds of the sale of the CSPI shares since they could
no longer be particularly designated nor distinctly segregated from the assets of Philfinance.
Petitioner’s only remedy was to file a claim on the whole mass of these assets, to which unfortunately
all of the other creditors and investors of Philfinance also had a claim.

Petitioner’s right of action against Philfinance was a “claim” properly to be litigated in the liquidation
proceed-ings.23 In Finasia Investments and Finance Corporation v. CA, 24 we discussed the definition
of “claims” in the context of liquidation proceedings:

“We agree with the public respondent that the word ‘claim’ as used in Sec. 6(c) of P.D. 902-A,25 as
amended, refers to debts or demands of a pecuniary nature. It means “the assertion of a right to have
money paid. It is used in special proceedings like those before [the administrative court] on
insolvency.”

The word “claim” is also defined as:

Right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured; or right
to an equitable remedy for breach of performance if such breach gives rise to a right to payment,
whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured,
unmatured, disputed, undisputed, secured, unsecured.”26

Undoubtedly, petitioner had a right to the payment of the value of his shares. His demand was of a
pecuniary nature since he was claiming the monetary value of his shares. It was in this sense (i.e. as a
claimant) that he was a creditor of Philfinance.

The Civil Code provisions on concurrence and preference of credits are applicable to the liquidation
proceedings.27 The next question is, was petitioner a preferred or ordinary creditor under these
provisions?
Petitioner argues that he was a preferred creditor because private respondents illegally withdrew his
CSPI shares from the custodian banks and sold them without his knowledge and consent and without
authority from the SEC. He quotes Article 2241 (2) of the Civil Code:

“With reference to specific movable property of the debtor, the following claims or liens shall be
preferred:

(2) Claims arising from misappropriation, breach of trust, or malfeasance by public officials committed
in the performance of their duties, on the movables, money or securities obtained by them;

(Emphasis supplied)

He asserts that, as a preferred creditor, he was entitled to the entire monetary value of his shares.

Petitioner’s argument is incorrect. Article 2241 refers only to specific movable property. His claim was
for the payment of money, which, as already discussed, is generic property and not specific or
determinate.

Considering that petitioner did not fall under any of the provisions applicable to preferred creditors, he
was deemed an ordinary creditor under Article 2245:

Credits of any other kind or class, or by any other right or title not comprised in the four preceding
articles, shall enjoy no preference.

This being so, Article 2251 (2) states that:

Common credits referred to in Article 2245 shall be paid pro rata regardless of dates.

Like all the other ordinary creditors or claimants against Philfinance, he was entitled to a rate of
recovery of only 15% of his money claim.

One final issue: was petitioner entitled to interest?

The SEC argues that awarding interest to petitioner would have given petitioner an unfair advantage or
preference over the other creditors.28 Petitioner counters that he was entitled to 12% legal interest per
annum under Article 2209 of the Civil Code from the time he was deprived of the shares until fully
paid.

The guidelines for awarding interest were laid down in Eastern Shipping Lines, Inc. v. CA:29

“I.When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-
delicts is breached, the contravenor can be held liable for damages. The provisions under Title XVIII
on “Damages” of the Civil Code govern in determining the measure of recoverable damages.
II.With regard particularly to an award of interest in the concept of actual and compensatory damages,
the rate of interest, as well as the accrual thereof, is imposed, as follows:
1.When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e.,
from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil
Code.
2.When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum.
No interest, however, shall be adjudged on unliquidated claims or damages except when or until the
demand can be established with reasonable certainty. Accordingly, where the demand is established
with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or
extrajudicially (Art.1169, Civil Code) but when such certainty cannot be so reasonably established at
the time the demand is made, the interest shall begin to run only from the date of the judgment of the
court is made (at which time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount
of finally adjudged.
3.When the judgment of the court awarding a sum of money becomes final and executory, the rate of
legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum
from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to
a forbearance of credit.”30 (Emphasis supplied)
Under this ruling, petitioner was not entitled to legal interest of 12% per annum (from demand) because
the amount owing to him was not a loan31 or forbearance of money.

Neither was he entitled to legal interest of 6% per annum under Article 2209 of the Civil Code33 since
this provision applies only when there is a delay in the payment of a sum of money.34 This was not the
case here. In fact, petitioner himself manifested before the CA that the SEC (as liquidator) had already
paid him P5,062,500 representing 15% of P33,750,000.35

Accordingly, petitioner was not entitled to interest under the law and current jurisprudence.

Considering that petitioner had already received the amount of P5,062,500, the obligation of the SEC
as liquidator of Philfinance was totally extinguished.36

We note that there is an undisputed finding by the SEC and CA that private respondents sold the subject
shares without authority from the SEC. Petitioner evidently has a cause of action against private
respondents for their bad faith and unauthorized acts, and the resulting damage caused to him.37

WHEREFORE, the petition is hereby DENIED.


SO ORDERED.

Petition denied.

Notes.—The exclusive jurisdiction of the liquidation court pertains only to the adjudication of claims
against the bank—it does not cover the reverse situation where it is the bank which files a claim against
another person or legal entity. (Manalo vs. Court of Appeals, 366 SCRA 752 [2001])

With the appointment of a management receiver, all claims and proceedings against the corporation,
including labor claims, are deemed suspended during the existence of the receivership—the labor
arbiter, the NLRC, as well as the Court of Appeals should not proceed to resolve complaints for illegal
dismissal and should instead direct the employees to lodge their claims before the duly-appointed
receiver. (Clarion Printing House, Inc. vs. National Labor Relations Commission, 461 SCRA 272
[2005])

You might also like