(a) In relation to each type of insolvency procedure available in the legal system of this economy, what types of claims of creditors are properly admissible for payment in the context of that procedure? (for example liquidated debts, future debts, contingent claims, secured claims, unliquidated claims for damages, interest claims, costs of administration or of legal proceedings, periodical payments, debts owed by guarantors of the business organization.)

 

Under the Insolvency Law, different classes of debts may be proved against the estate of the debtor in insolvency proceedings (Secs. 53 to 59 of the Insolvency Law).

PD 902-A does not have similar provisions and the determination of whether claims of creditors would be acceptable or not would depend on the receiver or the management committee and, eventually, the SEC. The list of creditors required to be attached to the petition filed with the SEC should however indicate if the claim is admitted, contingent, unliquidated or disputed.

(b) At what date are the amounts of admissible debts computed?

 

See answer in (a)

(c) By what method are claims of creditors proven by those creditors in the context of each type of insolvency procedure?

 

See answer in (a)

(d) How are disputed claims made by creditors adjudicated upon? (for example by the administrator, or by a Court.)

 

Under the Insolvency Law, the assignee decides whether or not a claim is admissible. Under PD 902-A, disputed claims are initially passed upon by the rehabilitation receiver or the management committee, and, eventually, the SEC.

(a) In relation to each type of insolvency procedure available in the legal system of this economy, what principles apply to the division of available assets of the corporate debtor among those of its creditors entitled to payment? Is there a basic principle of equality of payment, or are rights of priority of payment enjoyed by secured creditors, or by certain classes of creditors over others? (for example costs of the administration, claims for taxes owed by the debtor, amounts owed to employees of the organization.)

 

Only taxes enjoy absolute preference under the Civil Code. Under the Labor Code of the philippine (P.D. No. 422, as amended), unpaid wages and other monetary claims of workers enjoy preference over taxes due the Government:

"Art. 110. Worker preference in case of bankruptcy. - In the event of bankruptcy or liquidation of an employer's business, his workers shall enjoy first preference as regards their wages and other monetary claims, any provisions of law to the contrary notwithstanding. Such unpaid wages and monetary claims shall be paid in full before claims of the government and other creditors may be paid." All the remaining classes of preferred credits with respect to specific immovable property, or the remaining classes with respect to specific movable property, enjoy no priority among themselves but must be paid pro rata.

In order that this prorating may be fully effective, the preferred creditors or such of them as have credits outstanding must necessarily be convened and the import of their claims ascertained. It is thus apparent that the full application of the Civil Code provisions on concurrence and preference of credit demands that there must be first some proceeding where the claims of all the preferred creditors may be adjudicated with binding effect, such as insolvency or other liquidation proceedings of similar import.

(b) Give a brief account of the order of priorities, if any, of payment of creditors prescribed by the legal system of this economy.

 

The pertinent provisions of the Civil Code are as follows:

"ART. 2241. With reference to specific movable property of the debtor, the following claims or the liens shall be preferred.

(1) Duties, taxes and fees due thereon to the State or any subdivision thereof;

(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;

(3) Claims for the unpaid price of movables sold, on said movables, so long as they are in the possession of the debtor, up to the value of the same; and if the movable has been resold by the debtor and the price is still unpaid, the lien may be enforced on the price, this right is not lost by the immobilization of the thing by destination, provided it has not lost its form, substance and identity, neither is the right lost by the sale of the thing together with other property for a lump sum, when the price thereof can be determined proportionally;

(4) Credits guaranteed with a pledge so long as the things pledged are in the hands of the creditor, or those guaranteed by a chattel mortgage, upon the things pledged or mortgaged, up to the value thereof

(5) Credits for the making, repair, safekeeping or preservation of personal property, on the movable thus made, repaired, kept or possessed;

(6) Claims for laborers' wages, on the goods manufactured or the work done;

(7) For expenses of salvage, upon the goods manufactured or the work done;

(8) Credits between the landlord and the tenant, arising from the contract of tenancy on shares, on the share of each in the fruits or harvest;

(9) Credits for transportation, upon the goods carried, for the price of the contract and incidental expenses, until their delivery and for thirty days thereafter;

(10) Credits for loading and supplies usually furnished to travellers by hotel keepers, on the movables belonging to the guest as long as such movables are in the hotel, but not for money loaned to the guests;

(11) Credits for seeds and expenses for cultivation and harvest advanced to the debtor, upon the fruits harvested;

(12) Credits for rent for one year, upon the personal property of the lessee existing on the immovable leased and on the fruits of the same, but not on money or instruments of credit;

(13) Claims in favor of the depositor if the depositary has wrongfully sold the thing deposited, upon the price of the sale.

In the foregoing cases, if the movables to which the lien or preference attaches have been wrongfully taken the creditor may demand them from any possessor, within thirty days from the unlawful seizure."

"ART. 2242. With reference to specific immovable property and real rights of the debtor, the following claims, mortgages and liens shall be preferred, and shall constitute an encumbrance on the immovable or real right:

(1) Taxes due upon the land or building;

(2) For the unpaid price of real property sold, upon the immovable sold;

(3) Claims of laborers, masons, mechanics and other workmen, as well as of architects, engineers, and contractors, engaged in the construction, reconstruction or repair of buildings, canals or other works, upon said buildings, canals or other works;

(4) Claims of furnishers of materials used in the construction, reconstruction or repair of buildings, canals or other works, upon said buildings, canals or other works;

(5) Mortgage credits recorded in the Registry of Property, upon the real estate mortgaged;

(6) Expenses for the preservation or improvement of real property when the law authorizes reimbursement, upon the immovable preserved or improved;

(7) Credits annotated in the Registry of Property, in virtue of a judicial order, by attachments or executions, upon the property affected, and only as to later credits;

(8) Claims of co-heirs for warranty in the partition of an immovable among them, upon the real property thus divide;

(9) Claims of donors of real property for pecuniary charges or other conditions imposed upon the donee, upon the immovable donated;

(10) Credits of insurers, upon the property insured, for the insurance premium for two years."

"ART. 2243. The claims or credits enumerated in the two preceding articles shall be considered as mortgages or pledges of real or personal property, or liens within the purview of legal provisions governing insolvency. Taxes mentioned in No. 1, article 2241, and No. 1, article 2242, shall first be satisfied."

"ART. 2244. With reference to other property, real and personal, of the debtor, the following claims or credits shall be preferred in the order named:

(1) Proper funeral expenses for the debtor, or children under this or her parental authority who have no property of their own, when approved by the court;

(2) Credits for services rendered the insolvent by employees, laborers, or household helpers for one year preceding the commencement of the proceedings in insolvency;

(3) Expenses during the last illness of the debtor or of his or her spouse and children under his or her parental authority, if they have no property of their own;

(4) Compensation due the laborers or their dependents under laws providing for indemnity for damages in cases of labor accident, or illness resulting from the nature of the employment;

(5) Credits and advancements made to the debtor for support of himself or herself, and family, during the last year preceding the insolvency;

(6) Support during the insolvency proceedings, and for three months thereafter;

(7) Fines and civil indemnification arising from a criminal offense;

(8) Legal expenses, and expenses incurred in the administration of the insolvent's estate for the common interest of the creditors, when properly authorized and approved by the court;

(9) Taxes and assessments due the national government, other than those mentioned in articles 2241, No. 1, and 2242, No. 1;

(10) Taxes and assessments due any province, other than those referred to in articles 2241, No. 1, and 2242, No. 1;

(11) Taxes and assessments due any city or municipality, other than those indicated in articles 2241, No. 1, and 2242, No. 1;

(12) Damages for death or personal injuries caused by a quasi-delict;

(13) Gifts due to public and private institutions or charity or beneficence;

(14) Credits which, without special privilege, appear in (a) a public instrument; or (b) in a final judgment, if they have been the subject of litigation. These credits shall have preference among themselves in the order of priority of the dates of the instruments and of the judgments, respectively."