7.

Remedies after a Judgment has become Final and Executory

7.1. Definition

Execution is the remedy provided by law for the enforcement of a judgment. A judgment which has
no entry yet cannot be executed.

General rule: Only the trial court can execute judgment.

Exception: In the case of discretionary, it can be issued by the appellate court.

When a judgment is issued by the court and the judgment debtor does not file a timely appeal or
does not have any more options, the judgment is deemed final and executory.

Since the judgment creditor can now request that the court issue a writ of execution to carry out
the judgment's enforcement, the judgment is executory.

Two (2) ways exist under Rule 39 of the New Rules of Court, Section 6, for the execution of a
judgment.

(1) Upon motion filed within five (5) years of the date of entry or the day it becomes final and
executory,

(2) Following the expiration of five (5) years and prior to the statute of limitations barring it, actions
can be taken to enforce a ruling.

Q: How is execution generally done?

A: It is generally done by filing a motion for execution by the prevailing party and the court will then
issue an order of execution, which will be followed with a writ of execution, and the sheriff will
enforce the judgment.

7.1.1 Properties exempt from execution (Section 13)

Section 13. Property exempt from execution. — Except as otherwise expressly provided by law, the
following property, and no other, shall be exempt from execution:

a. The judgment obligor's family home as provided by law, or the homestead in which he resides,
and land necessarily used in connection therewith;

b. Ordinary tools and implements personally used by him in his trade, employment, or livelihood;

c. Three horses, or three cows, or three carabaos, or other beasts of burden, such as the judgment
obligor may select necessarily used by him in his ordinary occupation;

d. His necessary clothing and articles for ordinary personal use, excluding jewelry;

e. Household furniture and utensils necessary for housekeeping, and used for that purpose by the
judgment obligor and his family, such as the judgment obligor may select, of a value not exceeding
one hundred thousand pesos;
f. Provisions for individual or family use sufficient for four months; g. The professional libraries and
equipment of judges, lawyers, physicians, pharmacists, dentists, engineers, surveyors, clergymen,
teachers, and other professionals, not exceeding three hundred thousand pesos in value;

h. One fishing boat and accessories not exceeding the total value of one hundred thousand pesos
owned by a fisherman and by the lawful use of which he earns his livelihood;

i. So much of the salaries, wages, or earnings of the judgment obligor for his personal services
within the four months preceding the levy as are necessary for the support of his family;

j. Lettered gravestones;

k. Monies, benefits, privileges, or annuities accruing or in any manner growing out of any life
insurance;

l. The right to receive legal support, or money or property obtained as such support, or any pension
or gratuity from the Government; m. Properties specially exempted by law.

But no article or species of property mentioned in this section shall be exempt from execution
issue upon a judgment recovered for its price or upon a judgment of foreclosure of a mortgage
thereon.

7.1.2 Execution in case of death of a party

In case of the death of a party, execution may issue or be enforced in the following manner:

(a) In case of the death of the judgment obligee, upon the application of his executor or
administrator, or successor in interest;

(b) In case of the death of the judgment obligor, against his executor or administrator or successor
in interest, if the judgment be for the recovery of real or personal property, or the enforcement of a
lien thereon;

(c) In case of the death of the judgment obligor, after execution is actually levied upon any of his
property, the same may be sold for the satisfaction of the judgment obligation, and the officer
making the sale shall account to the corresponding executor or administrator for any surplus in his
hands.

1. If it is the obligee (the creditor) will die after he wins the case, his executor or administrator, his
legal representative or his heirs and successors in interest can enforce the judgment. They will be
the one to collect. (paragraph [a])

2. If it is the defendant (obligor) who dies and there is final judgment which is recovery of real or
personal property, the judgment is executed against the administrator or executor because this is
an action which survives. (paragraph [b])

3. Under paragraph [3], it is the death of the obligor in a money claim. This is related to Rule 3,
Section 20. However, the timing of the death is different. Let us connect these with Rule 3, Sec. 20:

Sec. 20. Action on contractual money claims. When the action is for recovery of money arising from
contract, express or implied, and the defendant dies before entry of final judgment in the court in
which the action was pending at the time of such death, it shall not be dismissed but shall instead
be allowed to continue until entry of final judgment. A favorable judgment obtained by the plaintiff
therein shall be enforced in the manner especially provided in these Rules for prosecuting claims
against the estate of a deceased person. (21a)

So, for example, A filed a case against B to collect an unpaid loan. What is the effect on the case if
B dies? It will depend on what stage of the case he dies. If he died before final judgment could be
rendered by the court (before entry of final judgment), there will be a substitution of party and the
case will continue until entry of final judgment.

Suppose, there is already an entry of final judgment and he dies, it will depend whether there was
already a levy on execution. Meaning, there was already an entry of final judgment but before the
property was levied. This should not apply in Rule 39 because Section 7 [c] states that "after
execution is levied."

But my question is no levy. The procedure there is found in the Special Proceedings. The judgment
shall be enforced in the manner provided for by the Rules on claims against the estate of the
deceased under

Rule 86. And that is also mentioned in Rule 3, Section 20. It shall be enforced in the manner
provided for against the estate.

Q: Suppose the defendant dies when there is already a levy. What will happen?

A: The auction sale will proceed as scheduled in connection with Section 7 [c] because the law
says "the same may be sold for the satisfaction of the judgment obligation." Meaning, the auction
sale or the execution sale shall proceed as scheduled. No more substitution here.

7.1.3 Execution of Judgment Other Than Money

Section 10. Execution of judgments for specific act. —

(a) Conveyance, delivery of deeds, or other specific acts; vesting title. — If a judgment directs a
party to execute a conveyance of land or personal property, or to deliver deeds or other
documents, or to perform, any other specific act in connection therewith, and the party fails to
comply within the time specified, the court may direct the act to be done at the cost of the
disobedient party by some other person appointed by the court and the act when so done shall
have like effect as if done by the party. If real or personal property is situated within the Philippines,
the court in lieu of directing a conveyance thereof may by an order divest the title of any party and
vest it in others, which shall have the force and effect of a conveyance executed in due form of law.
(10a)

(b) Sale of real or personal property. — If the judgment be for the sale of real or personal property,
to sell such property, describing it, and apply the proceeds in conformity with the judgment. (8[c]a)

(c) Delivery or restitution of real property. — The officer shall demand of the person against whom
the judgment for the delivery or restitution of real property is rendered and all persons claiming
rights under him to peaceably vacate the property within three (3) working days, and restore
possession thereof to the judgment obligee, otherwise, the officer shall oust all such persons
therefrom with the assistance, if necessary, of appropriate peace officers, and employing such
means as may be reasonably necessary to retake possession, and place the judgment obligee in
possession of such property. Any costs, damages, rents or profits awarded by the judgment shall
be satisfied in the same manner as a judgment for money. (13a)

(d) Removal of improvements on property subject of execution. — When the property subject of the
execution contains improvements constructed or planted by the judgment obligor or his agent, the
officer shall not destroy, demolish or remove said improvements except upon special order of the
court, issued upon motion of the judgment obligee after the hearing and after the former has failed
to remove the same within a reasonable time fixed by the court. (14a)

(e) Delivery of personal property. — In judgment for the delivery of personal property, the officer
shall take possession of the same and forthwith deliver it to the party entitled thereto and satisfy
any judgment for money as therein provided. (8a)

Section 10 is the procedure for executing a judgment other than to collect money. Sometimes,
money is only incidental. There are court decisions that could be something else like specific
performance, or accion publiciana You are more interested in recovering your property. Another is
Unlawful Detainer where unpaid rentals may be paid but the plaintiff is more interested in the
ejectment.

EXAMPLES of the first sentence [a] :

1. An action for reconveyance of property where you are asking the defendant, a title owner, to
convey to you his property. The property will be held in trust or that the title be in your name instead
of his; 2. Pacto de retro. I sold to you my land and I am repurchasing it, but you refuse. You refuse to
execute a deed of sale returning the property to me;

3. Public Land Law. I am the owner of a property under homestead or free patent and sold it after
the prohibition period. Under the public land law, I have the right to repurchase it within 5 years.
You don't want to return it, so I'm suing you. Of course, if I win, you will be directed to return to me
the property and execute a deed of sale.

4. An action for specific performance to compel you to return to me said property. And the court
will order. "Alright, execute a deed of sale." You refuse. The court may order the clerk of court to
sign the deed of sale or the Register of Deeds will be ordered to register the same as if done by the
obligor. The obligor's signature is not needed.

The best example for [b] is an action for termination of co-ownership where there are 50 co-owners
of one (1) hectare - the property will be ordered sold and the proceeds will be distributed among
the co-owners.

Now, with respect to Section 10, particularly paragraph [c] - delivery or restitution of real property. -
this is applicable to actions for forcible

entry, unlawful detainer, accion publiciana. So, what is the procedure? The sheriff will give the
defendant the chance to vacate the property, "I am giving you the chance to vacate within three (3)
working days and restore possession thereof." And if you still don't want it, I will use force to oust
you with the assistance of the appropriate peace officers and place the judgment obligee in
possession of such property. And if there are damages or unpaid rentals, I will also levy the
property under Section 9. Because sometimes, aside from ousting the defendant, meron pang
money judgment like unpaid rentals. So, the property of the defendant may be levied. That is the
procedure.

Under paragraph [d], When you oust the defendant in regard to a possession case, writ of
execution is not sufficient basis for the removal of improvements of the property. The plaintiff or
judgment obligee still have to get a special order from the court by filing a petition to authorize the
destruction or removal of the improvements of the property after the defendant is given a
reasonable time to remove his shanty or house voluntarily. In other words, there must be a special
order. The writ of execution only authorizes you to oust the defendant physically, but not to destroy
any property. Just like in squatters, you need a special order for demolition.

Paragraph [e] is related to REPLEVIN - action to recover personal property - where the plaintiff is
trying to repossess a personal property from the defendant. For example, you bought a car but you
can’t pay for it. The finance company or the car dealer will resort to replevin to recover the unit by
filing an action for replevin against the buyer. Take note that the procedure for enforcing a money
judgment is different from enforcing a judgment for ejectment, or recovery of possession.
Enforcement of money judgment is in Section 9 - you get the money. If you don’t have money, you
levy on the property of the defendant. If it is ejectment or recovery of possession of property, you
follow Section 10, paragraph [c].

Remedies after judgment becomes final and executory

a. Petition for relief from judgment;

b. Action to annul a judgment;

c. Certiorari; and

d. Collateral attack of a judgment.

7.2 Petition for relief from judgment (Rule 38)

(1) An equitable remedy known as a petition for relief from judgment is only permitted in extreme
circumstances where no other appropriate or viable remedy is available. A party may not utilize this
petition if he has another remedy available to him, such as a motion for new trial or an appeal from
an unfavorable trial court decision, and he was not prevented from filing such a motion or taking
such an appeal by fraud, accident, mistake, or excusable negligence.

(2) Upon the filing of a bond in favor of the adverse party, the court where the petition is filed may,
pursuant to Sec. 5, Rule 38, grant such preliminary injunction to safeguard the parties' interests.
According to Section 5, the bond is contingent upon the adverse party receiving payment of any
damages and costs that may be awarded to them as a result of the issuing of the injunction.

(3) Prolonged New Trial. This does not make up for diminished attraction. (4) The petitioner may
only employ equitable remedies if he has been denied the opportunity to pursue other remedies
and it is not his fault. (5) Within sixty days of learning of the judgment, final order, or process, and
within six (6) months of the judgment or final order's entry, the petitioner must file a request for
relief from the judgment. It is jurisdictional to strictly adhere to the double period mandated by
Section 3, Rule 38. When a petition for judicial relief is submitted after the reglementary time, it is
immediately rejected. Fraud, accident, error, or excused carelessness are the grounds upon which
a petition for relief from judgment may be brought under Section 1, Rule 38. Before a petition for
certiorari is filed, a move for reconsideration must be made in order to give the court that issued
the contested judgment or order a chance to address any real or apparent errors by reexamining
the case's facts and legal context.

(6) The time limits for filing a petition for relief from judgment are as follows: first, the petition must
be filed within sixty (60) days of learning of the judgment, order, or other proceeding that is to be set
aside; second, the petition must be filed within a set period of six (6) months after the judgment,
order, or other proceeding is entered. It is necessary to strictly adhere to these time frames
because a petition for relief from judgment represents the State's last act of liberality. This remedy
cannot be used to further undermine the essential idea that a judgment, order, or proceeding must
reach finality at a specific point in order to end litigation.

7.2.1. Grounds for availing of the remedy (petition for relief) (1) If a party is the victim of fraud, an
accident, a mistake, or excusable negligence and a judgment, final order, or other proceeding is
entered against them in any court, they may petition the court in question,

pleading for the judgment, order, or proceeding to be set aside (Sec. 1, Rule 38).

(2) When fraud, error, or excused carelessness has prohibited the petitioner from filing an appeal
(Sec. 2).

7.2.2. Time to file petition

(1) Within sixty days of learning of the judgment, final order, or other proceeding to be set aside,
and no later than six (6) months after the judgment or final order was entered, or the proceeding
taken, a verified petition for relief from judgment, order, or other proceedings must be filed. It must
also be accompanied by affidavits that demonstrate the fraud, accident, mistake, or excusable
negligence that is being relied upon, as well as the facts that constitute the petitioner's good and
substantial cause of action or defense, as applicable (Sec. 3, Rule 38).

7.2.3. Contents of petition

(1) Affidavits of Merits, which demonstrate fraud, accident, error, or excused carelessness that is
relied upon, as well as the facts forming the petitioner's good and substantial cause of action or
defense, as applicable, must be verified and included with the petition (Sec. 3).

7.3. Action to annul a judgment (Rule 47)

(1) It is established that the client has responsibility for the attorney's carelessness and errors.
Relief is only granted to a client who has suffered because of this in situations where there has
been egregious or obvious carelessness on the part of the attorneys, or when the interests of
justice so dictate. In addition, in order for a claim of a lawyer's gross negligence to be successful,
the client's own carelessness or malice cannot be present; only the attorney's blatant
abandonment of the client's cause can be demonstrated. It is incumbent for clients to
communicate with their attorneys periodically to be updated on the progress of their cases,
particularly when their freedom is in jeopardy. Thus, it is necessary for both attorneys and their
clients to exercise diligence. Therefore, the attorney's lack of communication with his clients over a
period of over three years, as well as his refusal to update them on the status of their case, does
not constitute abandonment that meets the criteria for gross negligence. Should it occur, the
omission just represents a case of ordinary carelessness rather than egregious carelessness that
would require the below-mentioned procedures to be thrown out.

(2) Generally speaking, an executory and final judgment is definitive and cannot be changed,
overturned, or amended in any way; the only action left is to carry it out. However, a final and
executory decision may be overturned by filing a petition under Rules 38 or 47 of the Rules of Court,
respectively,

asking for relief or an annulment of the decision. Only in extreme cases, where a party has
neglected to use the standard remedies of a new trial, appeal, petition for relief, or other suitable
remedies without fault on his side, may Rule 47 of the Rules of Court be granted. A remedy that was
forfeited because the party failed to immediately pursue it cannot be replaced by the same
petition. The petitioner's exclusive recourse is the annulment of the verdict; no substitute has been
offered in this case. The case contains all of the necessary components for filing a petition to annul
a judgment on the grounds of lack of jurisdiction, extrinsic fraud, and want of due process.

7.3.1. Grounds for annulment

(1) The grounds for annulment are limited to lack of jurisdiction and extrinsic fraud. When used, or
potentially used, in a move for a new trial or petition for relief, extrinsic fraud is not admissible as a
defense (Sec. 2, Rule 47).

(2) Quasi-judicial agencies' rulings cannot be overturned. Only the Court of Appeals may hear
cases involving Rule 47.

7.3.2. Period to file action

(1) The action must be filed, if it is based on extrinsic fraud, within four (4) years after its discovery;
if it is based on lack of jurisdiction, before laches or estoppels bar it (Sec. 3).

7.3.3. Effects of judgment of annulment

(1) Without affecting the first action's ability to be refiled in the appropriate court, an annulment
judgment will set aside the contested judgment, final order, or resolution and declare it void.
Nonetheless, the court may, upon request, direct the trial court to retry the case in the same
manner as if a timely move for new trial had been granted therein, in cases where the judgment,
final order, or resolution is set aside due to extrinsic fraud (Sec. 7, Rule 47).

7.4. Certiorari (Rule 65)

A special civil action for Certiorari, or simply a Petition for Certiorari, under Rule 65 of the Revised
Rules of Court is intended for the correction of errors of jurisdiction only or grave abuse of
discretion amounting to lack or excess of jurisdiction. Its principal office is only to keep the inferior
court within the parameters of its jurisdiction or to prevent it from committing such a grave abuse
of discretion amounting to lack or excess of jurisdiction.
A writ of certiorari may be issued only for the correction of errors of jurisdiction or grave abuse of
discretion amounting to lack or excess of

jurisdiction. Such cannot be used for any other purpose, as its function is limited to keeping the
inferior court within the bounds of its jurisdiction.

For a petition for certiorari to prosper, the essential requisites that have to concur are: (1) the writ is
directed against a tribunal, a board or any officer exercising judicial or quasi-judicial functions; (2)
such tribunal, board or officer has acted without or in excess of jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction; and (3) there is no appeal or any plain,
speedy and adequate remedy in the ordinary course of law.

7.4.1. Difference between certiorari under Rules 45 and 65 While an assailed judgment elevated
by way of ordinary appeal or a Rule 45 petition is considered an intrinsically valid, albeit erroneous,
judgment, a judgment assailed under Rule 65 is characterized as an invalid judgment because of
defect in the trial courts authority to rule. Also, an ordinary appeal and a Rule 45 petition tackle
errors committed by the trial court in the appreciation of the evidence and/or the application of
law. In contrast, a Rule 65 petition resolves jurisdictional errors committed in the proceedings in
the principal case. In other words, errors of judgment are the proper subjects of an ordinary appeal
and in a Rule 45 petition; errors of jurisdiction are addressed in a Rule 65 petition.

It can also be observed that the rule that a petition should have been brought under Rule 65 instead
of under Rule 45 of the Rules of Court (or vice versa) is not inflexible or rigid. The inflexibility or
rigidity of application of the rules of procedure is eschewed in order to serve the higher ends of
justice. Thus, substance is given primacy over form, for it is paramount that the rules of procedure
are not applied in a very rigid technical sense, but used only to help secure, not override,
substantial justice.

7.5. Collateral attack of a judgment.

(1) When an assault on the judgment is made as an incident in another action to achieve a different
relief, it is called a collateral attack. This is appropriate only in cases where the judgment is
manifestly defective on its face, such as in cases where the court that issued the judgment lacks
jurisdiction (Co vs. CA, 196 SCRA 705). Examples: A direct attack would be a certiorari petition filed
under Rule 65. The main purpose of the filing is to have an order revoked. A direct challenge to a
judgment also occurs in an action to nullify a judgment. It is a collateral attack on the company to
move

to dismiss a complaint for collection of money brought by the corporation against the defendant on
the grounds that the plaintiff lacks the legal ability to sue. The primary activity for the money is
incidental to a move to dismiss. According to Co v. CA, 196 SCRA 705, it is not brought as an action
meant to challenge the plaintiff's legal existence.

(2) In Islamic v. CA, 178 SCRA 178, a non-party may bring the petition if he can demonstrate that
the ruling will negatively impact him.

8. Remedies for Insolvency in the Philippines

Due to the outbreak of COVID-19 worldwide, and the imposition of the Enhanced Community
Quarantine and Stringent Social Distancing Measures over the entire island of Luzon, there has
been a severe disruption of economic activities. Many establishments have been prevented from
physically operating and had to resort to finding means to handle their business activities remotely.
Entrepreneurs and businessmen across different industries have reported significant losses and
cutbacks, which have resulted in a widespread and looming fear of bankruptcy.

In the event that this economic disruption will put juridical entities in a state of insolvency, below is
a summary of the remedies available under Philippine laws to address the same.

Under the Philippine laws, an entity is considered insolvent if it is generally unable to pay its
liabilities as they fall due in the ordinary course of business or has liabilities that are greater than its
assets.

For insolvent entities, the law offers two main reliefs: (1) Rehabilitation and (2) Liquidation. Both
remedies are made available to ensure or maintain certainty and predictability in commercial
affairs, preserve and maximize the value of the assets of debtors, recognize creditor rights and
respect priority of claims and ensure equitable treatment of creditors who are similarly situated.

8.1 Rehabilitation

Rehabilitation aims to restore the debtor to a state of solvency or to its former healthy financial
condition through the adaptation of a Rehabilitation Plan showing that the continued operations is
economically feasible and its creditors can recover more if the debtor continues as a going concern
instead of it being immediately liquidated.

There are three main kinds of Rehabilitation Proceedings: (1) Court-Supervised, (2) Pre-Negotiated,
and (3) Out-of-Court or Informal Rehabilitation Proceedings. The main difference between these
different

types is the level of involvement of the courts over the rehabilitation proceedings.

8.1.1 Court-Supervised Rehabilitation

These proceedings are coursed through the regular courts, i.e., the Regional Trial Courts,
(“Court/s”) and is initiated by filing of a Petition for Rehabilitation (“Petition”). The Petition must be
accompanied by a Rehabilitation Plan that lays down a plan in order to bring back the entity to a
state of solvency or to its former healthy financial condition. If the Court finds the Petition to be
meritorious, it shall issue a Commencement Order, which includes the appointment of a
Rehabilitation Receiver, among others.

The Petition can be initiated or filed by either the debtor or its creditor/s:

● If filed by Debtor (Voluntary Proceedings)

- Debtors must acquire a majority vote of the board of directors and further authorized by the vote
of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock.

- Creditors can file their verified notices of claims with the Courts at least five (5) days before the
initial hearing date, without which they will be barred from participating in the rehabilitation
proceedings. - Creditors can also file and serve on the debtor a verified comment or opposition to
the Petition no later than fifteen (15) days before the initial hearing.

● If filed by Creditor or a Group of Creditors (Involuntary Proceedings)

- The aggregate amount of their claim must be, whichever is higher: (1) at least One Million Pesos
(Php 1,000,000); or (2) at least 25% of the subscribed capital stock or partners’ contributions.

Benefits for the Debtor:

1. Actions to enforce claims against the debtor may be suspended or prohibited.

2. Waiver of taxes and fees, including penalties, interest and charges, to the government.

3. Measures that allow the debtor to maintain its assets instead of being liquidated.

4. All proceedings against the debtor may be consolidated with the Court making it easier for the
debtor to answer all claims.

5. Any compromises of amounts or rescheduling of payments by the debtor shall be binding on

creditors regardless of whether the Rehabilitation Plan is implemented.

6. It gives the debtor a chance to re-engage the market, hopefully with more vigor and enlightened
services, having learned from a painful experience.

Benefits for the Creditor/s:

1. Measures that preserve the assets of the debtor and direct the same towards efforts to
rehabilitate the debtor.

2. Consolidation of all proceedings against the debtor prevents a scenario of several courts issuing
various writs over the same assets. 3. Creditors are to be paid equitably.

4. The Court shall not impair the security or lien of secured creditors.

5. Secured creditors are given more defined leverage. 6. Assured creditors’ participation.

7. More protection to the creditors to equitably and fairly address their concerns.

8. Allows for present value recovery for creditors.

8.1.2 Pre-Negotiated Rehabilitation

The proceeding involves the confirmation of the Court of a Rehabilitation Plan that was already pre-
negotiated by the debtor and its creditors. A Petition may be filed by the debtor or jointly with its
creditors.

The Petition must be supported by an affidavit showing the written approval or endorsement of 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.
Benefits for the Debtor:

1. Measures that allow the debtor to maintain its assets instead of being liquidated.

2. All proceedings against the debtor may be consolidated with the Court.

3. A shorter timeline.

4. No need to call creditors for the approval of the Rehabilitation Plan as such is already pre-
approved.

Benefits for the Creditor/s:

1. Consolidation of all proceedings against the debtor prevents a scenario of several courts issuing
various writs over the same assets. 2. Commencement Order is lifted earlier.

3. Objecting creditors’ rights are protected.

4. The proceeding is significantly shorter compared to a Court-Supervised Rehabilitation.

8.1.3 Out-of-Court or Informal Rehabilitation Agreements (“OCRA”)

This remedy does not involve the use of court processes. The requirements for OCRAs are as
follows:

1. The debtor must agree to the OCRA;

2. Approval by creditors representing at least sixty-seven (67%) of the secured obligations of the
debtor;

3. Approval by the creditors representing at least seventy-five (75%) of the unsecured obligations of
the debtor; and

4. Approval by creditors holding at least eighty-five (85%) of the total liabilities, secured and
unsecured, of the debtor.

Benefits for the Debtor:

1. The Rehabilitation Plan does not need the appointment of a Rehabilitation Receiver –
negotiations will be conducted by the parties independently.

2. A standstill period may be agreed upon, which protects debtors from actions of its creditors.

Benefits for the Creditor/s:

1. Confirmation from the Court is not needed, only requires the publication of the notice.

2. The requirements of creditor approval for the Rehabilitation Plan can be made more stringent.

All Rehabilitation Plans approved under the three kinds of Rehabilitation Proceedings shall legally
bind the debtor and all persons

who may be affected thereby, including the creditors, whether or not such persons have
participated in the proceedings.
Since the first two kinds of Rehabilitation Proceedings generally involve the Courts, it may normally
take longer, maybe several months or even years, most especially if contested, to complete
compared to the third kind. These timelines should be taken into consideration given the
immediate or otherwise need for relief.

Under certain scenarios provided under the law, Rehabilitation Proceedings may be converted into
Liquidation Proceedings.

8.2 Liquidation

The goal of a Liquidation Proceeding is to wind up the affairs of the entity and distribute its assets
among its creditors. It involves either the filing of a Petition for Liquidation or the failure or
conversion of a Rehabilitation Proceeding into a Liquidation Proceeding.

● If filed by the Debtor (Voluntary Liquidation)

- Debtors must show certificates attesting that resolutions for the filing of the Petition for
Liquidation were approved by at least a majority of the members of the board of directors present
and stockholders holding at least two-thirds (2/3) of the outstanding capital stock of the stock
corporation.

● If filed by the creditors (Involuntary Liquidation) - Applicants must be made up of three (3) or
more creditors whose aggregate claims are: (1) at least One Million Pesos (Php 1,000,000.00); or (2)
At least twenty-five percent (25%) of the subscribed capital stock.

In both cases, if the Court finds the Petition for Liquidation meritorious, the Court will issue a
Liquidation Order which determines the point when the debtor is deemed dissolved and its
corporate or juridical existence is terminated.

Since Liquidation Proceedings also involve the regular courts, it may take a months or years to
obtain a Liquidation Order from the Court, most especially if contested.

Benefits for the Debtor:

1. May allow termination of debtor’s contracts.

2. Prohibits separate actions for the collection of unsecured claims. 3. Disallows foreclosure
proceedings to protect the debtor’s assets prior to distribution.

Benefits for the Creditor/s:

1. May attribute direct liability to directors or officers of the debtor. 2. The right of secured creditors
to enforce its liens are not affected by the Liquidation Order.

3. More protection to the creditors as the State steps in to equitably distribute the debtor’s limited
resources while its losses are reallocated. 4. It prevents further devaluation of the business
assets.

9. Supply of Goods in the Philippines: Enforcement and Remedies

9.1. Main Remedies and Rules for Losses and Damages for Breach of a Supply of Goods
Contract

A supply of goods contract breach gives rise to the primary remedies listed below:

● Measures for the cost.

● Restitution or sufficient payment for real losses. To minimize damages resulting from a breach,
the aggrieved party is required by the Civil Code to act with the diligence of a good father toward his
family.

● Rescission

● Certain Presentation

● A lower price

9.2. Seller's Remedies for Breach of a Supply of Goods Contract

The unpaid seller has the following remedies available to them under the Civil Code:

● If it is in possession of the items, a lien over them or the right to keep them.

● Rights to stop the goods in transit after relinquishing custody of them in a case that the buyer
becomes insolvent.

● A right to resell.

● The option to back out of the deal.

● An action for the fee.

● Termination of the agreement.

● Losses.

Additional remedies, such as interest on the outstanding price, may be included in the contract.

When it comes to the price, the seller may file a lawsuit where:

● When the customer willfully disregards or declines to pay for the products in accordance with
the terms of the contract, ownership of the goods has already moved to them.

● The buyer wrongly fails to make a timely payment or refuses to accept delivery; the price is due
on a specific day regardless of delivery or title transfer. But the buyer has the right to assert the
defense that the seller has indicated it is unable or unwilling to fulfill the contract at any point prior
to a judgment in the action.

The seller may file a claim for damages for non-acceptance if the customer willfully fails to accept
the goods and make the necessary payment. The projected loss that results directly and naturally
from the contract breach in the normal course of events is the measure of damages. If there is a
market for the goods, the difference between the contract price and the market or current price at
the time the goods should have been accepted, or, if no time was set for acceptance, at the time of
refusal to accept, is the measure of damages, absent special circumstances demonstrating
damages of a different amount.

The buyer shall be responsible for any labor completed and expenses incurred prior to notice of the
buyer's repudiation or revocation if the seller used labor or incurred expenses to fulfill its
commitments and the buyer repudiates the contract or tells the seller not to proceed with the
contract. The seller's profit margin would have been considered by the courts when determining
the seller's damages.

If the buyer has done any of the following, the seller may terminate the agreement even though the
items have not yet been delivered to the buyer.

● Rejected the agreement.

● It demonstrated that it couldn't fulfill its end of the bargain. ● Committed a contract violation.

10. Remedy of the Person Who Paid or Satisfied the Execution (Rule 39, Sec. 35)

When property liable to an execution against several persons is sold thereon, and more than a due
proportion of the judgment is satisfied out of the proceeds of the sale of the property of one of
them, or one of them pays, without a sale, more than this proportion, he may, subject to the
following rules:

1. Compel a contribution from the others; and

2. When a judgment is upon an obligation of one of them, as security for another, and the surety
pays the amount, or any part thereof, either by sale of his property or before sale, he may compel
repayment from the principal.

10.1 Remedies in Aid of Execution

Note:

What are the remedies available to the judgment oblige in aid of execution?

1. Examination of judgment obligor when judgment returned unsatisfied (Sec. 36);

2. Examination of obligor of judgment obligor (Sec. 37);

3. Order for application of property and income to satisfaction of judgment (Sec. 40);

4. Appointment of receiver (Sec. 41)

Another important portion of the rule to remember are the so-called provisions of the rules in aid of
execution - remedies "in aid of execution" - because execution is a difficult process. The purpose of
the remedies in aid of execution is to help the obligee realize the fruits of the judgment. It is
sometimes very hard to grasp out properties of the obligor especially if he knows how to hide them
by conveying remedies to assist him in locating the properties of the defendant and these remedies
in aid of execution are found in Section 36 to Section 43. And the most famous are those found in
Sections 36 and 37.
So under Section 36, you can ask the court to render judgment to allow you to subpoena the obligor
and take the witness stand subject to questioning so that you can discover where his properties
are. So in effect, Section 36 is related to modes of discovery. This is actually a mode of discovery.
This is a type of deposition taking. It is related to the subject of deposition taking where the
discovery of the witness stand to effect execution.

EXAMPLE: The sheriff did not find any property of the obligor. So the obligee can file a motion under
Section 36 for examination of the obligor under oath hoping that in the course of asking questions,
he might make some

admissions. And the procedure is the same as in deposition but this is only done right inside the
courtroom.

On the other hand under Section 37, you can also examine people whom you believe owe the
obligor such as his debtors, or those holding his property, so that you can discover all his
collectibles and ask that the same be garnished. So this time, it is the "obligor" of the judgment
obligor who will be examined.

EXAMPLE: Kenneth, Thadd, and Francis owe the judgment obligor a sum of money. The obligee can
file a motion under Section 37 to subpoena Kenneth, Thadd and Francis to find out if it is true that
they are indebted to the judgment obligor. In this case, the obligee can ask the court to garnish the
money.

In section 40, if upon investigation of his current income and expenses, it appears that the earnings
of the judgment obligor for his personal services are more than necessary for the support of his
family, the court may order that he pay the judgment obligee in fixed monthly installments, and
upon his failure to pay any such installment when due without good excuse, may punish him for
indirect contempt.

Q: Can the salary of an employee be garnished?

A: Yes, IF there is excess for support of his family.

Normally, you cannot levy on the earnings of a person which he needs for support of his family. But
actually, it is not the entire earnings because if you're earning a lot, it is more than sufficient for
your family. So the excess of your income can be garnished under Section 40.

Section 41 talks about that the court may appoint a receiver who is an officer of the court who will
manage the property of the litigants pending litigation. This remedy is found under Rule 59 on
Receivership. The purpose of receivership is to preserve the property by placing it in the hands of
the court to remove it from the control of a party because a party may dispose of the property.

11. Remedy of the Judgment is Unsatisfied (Rule 39, Sec. 36)

When the return of a writ of execution issued against property of a judgment obligor, or any one of
several obligors in the same judgment, shows that the judgment remains unsatisfied, in whole or in
part, the judgment oblige, at any time after such return is made, may avail a remedy subject to the
following conditions:
1. He is entitled to an order from the court which rendered the said judgment, requiring such
judgment obligor to appear and be examined concerning his property and income before such
court or before a commissioner appointed by it at a specified time and place; and

2. Proceedings may thereupon be had for the application of the property and income of the
judgment obligor towards the satisfaction of the judgment.