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Equitable Distribution

The document discusses equitable distribution of assets during insolvency. It provides that the objective should be fair distribution among creditors. To do so, there must be a proceeding to notify all creditors and adjudicate preferred creditors' claims. It also discusses the principle of pari passu, by which secured and unsecured creditors are treated equally when receiving payment from the same fund. The Court then lays out guidelines for treating claims against corporations undergoing rehabilitation, including suspending all claims and retaining secured creditors' preference but equal treatment during rehabilitation.

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108 views1 page

Equitable Distribution

The document discusses equitable distribution of assets during insolvency. It provides that the objective should be fair distribution among creditors. To do so, there must be a proceeding to notify all creditors and adjudicate preferred creditors' claims. It also discusses the principle of pari passu, by which secured and unsecured creditors are treated equally when receiving payment from the same fund. The Court then lays out guidelines for treating claims against corporations undergoing rehabilitation, including suspending all claims and retaining secured creditors' preference but equal treatment during rehabilitation.

Uploaded by

ikrenfly
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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EQUITABLE DISTRIBUTION OF ASSETS:

In the event of insolvency, a principal objective should be


to effect an equitable distribution of the insolvent's property
among his creditors. To accomplish this there must first be some
proceeding where notice to all of the insolvent's creditors may be
given and where the claims of preferred creditors may be bindingly
adjudicated. (De Barretto vs. Villanueva, No. L-14938, 29 December
1962, 6 SCRA 928).

PRINCIPLE OF PARI PASSU - The principle of equality in


equity has been cited as the basis for placing secured and
unsecured creditors in equal footing or in pari passu with each
other during rehabilitation. In legal parlance, pari passu is
used especially of creditors who, in marshaling assets, are
entitled to receive out of the same fund without any precedence
over each other.

[The Court laid the guidelines for the treatment of claims


against corporations undergoing rehabilitation:

1. All claims against corporations, partnerships, or associations


that are pending before any court, tribunal, or board, without
distinction as to whether or not a creditor is secured or
unsecured, shall be suspended effective upon the
appointment of a management committee, rehabilitation
receiver, board, or body in accordance with the provisions of
Presidential Decree No. 902-A.

2. Secured creditors retain their preference over


unsecured creditors, but enforcement of such
preference is equally suspended upon the appointment
of a management committee, rehabilitation receiver,
board, or body. In the event that the assets of the
corporation, partnership, or association are finally liquidated,
however, secured and preferred credits under the applicable
provisions of the Civil Code will definitely have preference
over unsecured ones.]

(Express Investments III Private Ltd. and Export Development Canada


Vs. Bayan Telecommunications, Inc., The Bank of New York G.R. Nos.
174457-59/G.R. Nos. 175418-20/G.R. No. 177270. 5 December 2012)

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