Case Summary (G.R. No. 200934-35)
Key Dates
• May 7, 1992 – Joint Venture Agreement (JVA) executed, with May 5, 1995 as completion deadline and PhP 10,000/day penalty for delay
• May 26, 1994 – Land sold to Josephine Conde (later assigned to respondent)
• May 5, 1997 – Project completion extended by JVA addendum
• Feb 28, 1998 – Respondent files suit (QC RTC Civil Case No. Q-98-33682) for contract termination and damages
• Apr 25, 2003 – Petitioner files rehabilitation petition (Makati RTC)
• June 4, 2003 – Makati RTC issues stay of all claims and appoints rehabilitation receiver
• June 12, 2003 – QC RTC renders decision terminating the JVA, ordering possession, daily penalties and fees
• July 31, 2007 – QC RTC decision becomes final and executory (later held void)
• Nov 21, 2007 – QC RTC issues writ of execution
• Dec 28, 2007 – Rehabilitation Court enjoins enforcement of writ and restores ejected residents
• June 30, 2008 – Rehabilitation Court approves Amended Revised Rehabilitation Plan (ARRP), reducing penalty to PhP 5,000/day (March 3, 1998–June 4, 2003)
• Nov 4, 2011 & Feb 24, 2012 – Court of Appeals (CA) decisions annulling both the injunction and the penalty reduction
• Sept 28, 2020 – Supreme Court decision
Applicable Law
• 1987 Constitution (Article III Sec. 10 – non-impairment of contracts; police power)
• Presidential Decree No. 902-A, as amended (mandatory stay of actions upon rehabilitation petition)
• 2000 Interim Rules on Corporate Rehabilitation (Procedure, Rule 4 Sec. 11 – stays and extensions)
• Republic Act No. 10142 (FRIA) – definition of rehabilitation (not directly applied here)
Procedural Background
Respondent sued petitioner for failure to complete the subdivision project, invoked the JVA penalty clause, and secured an ex parte default decision from the QC RTC awarding possession, daily penalties, and attorney’s fees. Petitioner simultaneously filed for rehabilitation before the Makati RTC, which issued a Stay Order suspending all claims.
Rehabilitation Proceedings and Orders
Following appellate reversal of the Makati RTC’s dismissal, a new rehabilitation receiver was appointed. Petitioner’s ARRP proposed condonation of surcharges and reduction of respondent’s penalty claim. The Rehabilitation Court approved the ARRP with modifications, halving the penalty to PhP 5,000/day for the period from judicial demand (March 3, 1998) until the stay (June 4, 2003).
Court of Appeals Rulings
The CA consolidated two certiorari petitions and:
- Annulled the Rehabilitation Court’s December 28, 2007 injunction, holding it had no power to enjoin a co-equal court’s writ of execution;
- Annulled the ARRP’s penalty reduction, citing impairment of contractual stipulations and lack of authority to modify a final QC RTC judgment.
Finality of the QC RTC Decision
The Supreme Court held that the QC RTC decision was rendered in violation of the mandatory Stay Order under PD 902-A and the Interim Rules. Pursuant to Lingkod Manggagawa sa Rubberworld Adidas-Anglo v. Rubberworld, proceedings in breach of a mandatory stay are null and void ab initio and cannot attain finality or executory status. Consequently, the Rehabilitation Court was entitled to address and reduce respondent’s claim.
Cram-down Power in Rehabilitation
Rehabilitative debt restructuring necessarily permits modification of contractual liabilities. Citing Pacific Wide Realty v. Puerto Azul, the Court reaffirmed that court-approved rehabilitation plans may lawfully reduce the debtor’s obligations. The non-impairment clause
Case Syllabus (G.R. No. 200934-35)
Procedural History
- On May 7, 1992, Spouses San Juan and Buencamino, represented by Delfin Cruz, Jr., entered into a Joint Venture Agreement (JVA) with petitioner to develop three parcels of land in San Rafael, Bulacan, with a P10,000/day penalty for delay beyond May 5, 1995.
- On May 26, 1994, the landowners sold the properties to Josephine Conde, who assigned her rights to respondent Buenavista Properties, Inc.
- Petitioner failed to complete the project; on February 28, 1998, respondent filed Civil Case No. Q-98-33682 before the Quezon City RTC for termination of contract, recovery of property, damages, and penalties.
- Petitioner was declared in default; QC RTC rendered judgment on June 12, 2003 terminating the JVA, ordering delivery of possession, P10,000/day penalty from March 3, 1998, and P100,000 attorney’s fees. Judgment became final and executory on July 31, 2007.
- Anticipating insolvency, petitioner filed a rehabilitation petition on April 25, 2003, before Makati RTC; on June 4, 2003, the court issued a Stay Order staying enforcement of all claims and appointed a rehabilitation receiver.
- Makati RTC lifted the Stay and dismissed the rehabilitation petition on October 1, 2003; on appeal, the Court of Appeals (CA) reversed on June 21, 2005, and remanded for further proceedings. A new receiver was appointed on September 21, 2006.
- Respondent secured a writ of execution from the QC RTC on November 21, 2007; petitioner moved before the Rehabilitation Court to enjoin enforcement.
- Rehabilitation Court issued an order on December 28, 2007 directing the deputy sheriff to halt execution, restore occupants, and lift levies.
- Respondent filed petitions for certiorari in the CA (CA-G.R. SP Nos. 102114 and 104413), which were consolidated on August 12, 2008.
- CA annulled the December 28, 2007 order (lack of power to enjoin a co