Sobrejuanite vs. ASB Development Corporation

A complaint for rescission of contract with damages seeking a refund of payments constitutes a "claim" under PD 902-A and the Interim Rules on Corporate Rehabilitation, which mandates the suspension of all pending actions against the corporation under receivership.

Buyers of a condominium unit filed a complaint for rescission and refund against their developer before the HLURB for the developer's failure to deliver the property. Meanwhile, the developer's parent company was placed under corporate rehabilitation by the SEC, triggering the question of whether the buyer's suit should yield to the suspension mandated by rehabilitation laws.

• Original Filing: HLURB Case No. REM-030701-11433 (Complaint for rescission of contract, refund of payments, and damages)
• Lower Court Decision: HLURB Arbiter ordered rescission, refund of payments (P2,674,637.10 plus 12% interest), and damages. Affirmed by the HLURB Board of Commissioners, with the clarification that monetary awards be filed as claims before the rehabilitation receiver.
• Appeal: O.P. Case No. 03-C-119 (Office of the President dismissed ASBDC's appeal for lack of merit).
• CA Appeal: CA-G.R. SP No. 79420 (CA reversed the OP, ruling SEC had jurisdiction and HLURB proceedings should be suspended).
• SC Action: Petition for Review on Certiorari under Rule 45 assailing the CA decision.

• The Contract to Sell: Spouses Sobrejuanite entered into a contract to sell with ASBDC for a condominium unit and parking space at BSA Twin Tower-B Condominium. ASBDC was obligated to deliver the property on or before December 1999. Sobrejuanite fully paid their obligations except for a P50,000.00 balance payable upon completion.
• Failure to Deliver: ASBDC failed to deliver the property by December 1999.
• HLURB Complaint: On March 7, 2001, Sobrejuanite filed a complaint for rescission, refund, and damages before the HLURB.
• SEC Rehabilitation: On April 26, 2001, the SEC approved the rehabilitation plan of the ASB Group of Companies (which includes ASBDC) and appointed a rehabilitation receiver. The petition for rehabilitation had been filed on May 2, 2000.
• Motion to Suspend: ASBDC filed a motion to dismiss or suspend the HLURB proceedings due to the SEC rehabilitation order. The HLURB denied the motion, proceeding to rule in favor of Sobrejuanite and stating the monetary award could simply be filed as a claim before the receiver.
• Procedural Ascension: The Office of the President affirmed the HLURB. The CA reversed the OP, holding that the SEC rehabilitation suspended the HLURB proceedings and that ASBDC's financial reverses extended the delivery date.

• The CA gravely abused its discretion in ruling that the SEC, not the HLURB, has jurisdiction over the complaint, arguing this contravenes the ruling in Arranza.
• The CA erred in ruling that the SEC rehabilitation suspended the HLURB proceedings, asserting that the HLURB monetary award could be filed as a claim before the SEC receiver.
• The CA erred in extending the agreed date of delivery based on ASBDC's financial constraints, claiming this was an unlawful novation of the contract.

• The complaint for rescission and damages is a pecuniary "claim" under PD 902-A and the Interim Rules on Corporate Rehabilitation, falling under the SEC's jurisdiction and warranting suspension.
• The appointment of a rehabilitation receiver mandates the suspension of all pending claims against the corporation.
• The financial reverses experienced by ASBDC constitute causes beyond its control, justifying an extension of the delivery period under Section 7 of the Contract to Sell.

• Procedural Issues: Whether the approval of the corporate rehabilitation plan and the appointment of a receiver by the SEC had the effect of suspending the proceedings before the HLURB.
• Substantive Issues:
  • Whether a complaint for rescission of contract with damages constitutes a "claim" within the contemplation of PD 902-A and the Interim Rules on Corporate Rehabilitation.
  • Whether ASBDC's financial reverses validly extended the agreed date of delivery under the contract.

• Procedural: The SC held that the HLURB proceedings should have been suspended upon the SEC's approval of the rehabilitation plan and appointment of a receiver. Section 6(c) of PD 902-A expressly mandates the suspension of all actions for claims against a corporation under receivership pending before any court, tribunal, board, or body. The purpose is to prevent a creditor from obtaining an advantage over others and to give the receiver breathing space to rehabilitate the company without diverting resources to litigation. By continuing the proceedings, the HLURB gave undue preference to Sobrejuanite over other creditors.
• Substantive:
  • The complaint for rescission with damages is a "claim" under PD 902-A and the Interim Rules. Under the Interim Rules, a "claim" refers to all claims or demands of whatever nature or character against a debtor, whether for money or otherwise. Even under prior jurisprudence (Finasia and Arranza), a claim refers to debts or demands of a pecuniary nature. Sobrejuanite's prayer for refund of payments and damages is pecuniary in nature. Petitioners' reliance on Arranza is misplaced because Arranza involved specific performance for right of way and repairs (not purely pecuniary), whereas this case seeks a refund of money.
  • ASBDC's financial reverses validly extended the delivery period. Section 7 of the Contract to Sell allows the developer to extend the period of delivery on account of causes beyond its control, such as financial reverses.

• Suspension of Actions under Corporate Rehabilitation — Upon the appointment of a rehabilitation receiver, all actions for claims against the corporation pending before any court, tribunal, board, or body shall be suspended. The purpose is to prevent preference among creditors ("equality is equity"), preserve the rights of party-litigants, and allow the receiver to focus entirely on the restructuring and rehabilitation of the debtor company without judicial or extra-judicial interference.
• Definition of "Claim" in Corporate Rehabilitation — Under the Interim Rules of Procedure on Corporate Rehabilitation, a "claim" refers to all claims or demands, of whatever nature or character against a debtor or its property, whether for money or otherwise. Under PD 902-A and prior jurisprudence, it refers to debts or demands of a pecuniary nature. A complaint for rescission of contract with damages seeking a refund of payments falls under this definition.

• Section 6(c), Presidential Decree No. 902-A (SEC Reorganization Act) — Empowers the SEC to appoint receivers and mandates that upon appointment of a management committee or rehabilitation receiver, all actions for claims against the corporation pending before any court, tribunal, board, or body shall be suspended accordingly. Applied to rule that the HLURB proceedings should be suspended.
• Section 1, Rule 1, Interim Rules of Procedure on Corporate Rehabilitation — Provides the scope of the Interim Rules, applying them to petitions for rehabilitation filed pursuant to PD 902-A. Applied to justify that the definition of "claim" in the Interim Rules (all-encompassing, whether for money or otherwise) governs the case, even if the rehabilitation petition was filed before the effectivity of the Interim Rules.
• Section 7, Contract to Sell — Allows the developer to extend the period of delivery on account of causes beyond its control, such as financial reverses. Applied to justify the extension of the delivery date for the condominium unit.