Article 44p. 44

SPECIAL RULES OF PROCEDURE SUPPLEMENT TO THE RULES OF COURT

SECTION 21. All Property Taken to be Held for All

Creditors; Appeal Bonds; Exemptions to Sureties . — If

after the taking mentioned in the preceding section,

there still remains property of the debtor not exempt

from execution and not subject of a secured creditor's

lien, any other creditor or creditors, upon giving bond

approved by the court in double the amount of his/their

claim/s, singly or jointly, shall be entitled to similar

orders and to like action, by the sheriff, until all claims

are

provided

for,

and

as long as the debtor has

sufficient property. All such property taken into custody

by the sheriff shall be held by him for the benefit of all

creditors whose claims shall be duly established in the

proceedings.

SECTION 22. Bonds for Custody of Property and Appeal .

— The bonds provided for in Sections 19 and 21 of this

Rule to procure the order for custody of the property

and effects of the debtor shall be conditioned upon

payment

to

the

debtor,

his

heirs,

administrators,

executors or assigns of all damages he may sustain by

reason of the order for which the bonds were procured

if, after hearing of the petition, the court shall find in

favor of the debtor and the petition is dismissed. Such

damages, which shall not exceed the amount of the

bond, shall be determined and fixed by the court. If

either the petitioners or the debtor shall appeal from

the decision of the court, upon final hearing of the

petition, the appellant shall be required to give bond to

the successful party in a sum double the amount of the

value of the property in controversy, and for the costs of

the proceedings.

Any person interested in the estate may object to the

sufficiency of the surety or sureties on such bond or

bonds. The court shall direct the surety or sureties to

justify their sufficiency. If the court finds that the

sureties or any of them are insufficient, the court shall

issue an order dismissing the petition or vacating the

order to take into the custody of the sheriff the property

of the individual debtor, or denying the appeal, as the

case may be.

SECTION 23. Sale of Debtor's Property under Sheriff's

Custody . — If the property of the debtor taken into

custody by the sheriff under Sections 19, 20 and 21 of

this Rule is perishable, costly to maintain, subject to or

in

danger

of

rapid

obsolescence,

depreciation,

or

diminution in value, or when the interests of the debtor

and the creditors will be better served by the sale

thereof, the court, upon motion of any creditor, duly

supported by affidavit/s narrating facts supporting the

application and a bond equivalent to the estimated

value of the property approved by the court, shall issue

an order directing: (a) the sale of the property in the

same manner as property is sold under execution, the

proceeds to be deposited in the court to abide by the

result of the proceedings; and (b) the publication of the

order once a week for two consecutive weeks in a

newspaper of general circulation in the city or province

where the court exercises jurisdiction.

RULE 4 Provisions Common to Liquidation in

Insolvency of Individual and Juridical Debtors

SECTION 1. Use of Term Debtor . — The term debtor used

in this Rule shall refer to an individual debtor and/or a

juridical debtor whenever appropriate.

A. The Liquidation Order

SECTION 2. Liquidation Order . — The Liquidation Order

shall:

(a) declare the debtor insolvent;

(b) order the liquidation of the debtor and, in the case

of a juridical debtor, declare it as dissolved;

(c) order the sheriff to take possession and control of all

the property of the debtor, except those that may be

exempt from execution;

(d) order the publication of the Liquidation Order,

together with the petition, or motion to convert the

rehabilitation proceedings into liquidation proceedings,

if any, in a newspaper of general circulation in the

Philippines once a week for two (2) consecutive weeks;

(e) direct payments of any claims and conveyance of

any property due the debtor to the liquidator;

(f) prohibit payments and the transfer of any property

by the debtor;

(g) direct all creditors to file their claims with the

liquidator not later than five (5) days from the time the

liquidator takes his oath of office, furnishing a copy

thereof to the court;

(h) authorize the payment of administrative expenses

as they become due;

(i) state that the debtor and creditors who are not

petitioner/s may submit the names of other nominees

to the position of liquidator; and

(j)

set

the

case

for

hearing for the election and

appointment of the liquidator, which date shall not be

less than thirty (30) days nor more than forty-five (45)

days from the date of the last publication.

SECTION 3. Effects of the Liquidation Order . — Upon

the issuance of the Liquidation Order:

(a) the juridical debtor shall be deemed dissolved and

its corporate or juridical existence terminated;

(b) legal title to and control of all the assets of the

debtor,

except

those

that

may

be

exempt

from

execution, shall be deemed vested in the liquidator or,

pending his election or appointment, with the court;

(c)

all

contracts

of

the

debtor

shall

be

deemed

terminated

and/or

breached,

unless

the liquidator,

within ninety (90) days from the time he takes his oath

of

office,

declares

otherwise

and

the

contract

counter-party agrees;

(d) no separate action for the collection of an unsecured

claim shall be allowed. Actions already pending will be

transferred to the liquidator for him to accept and settle

or contest. If the liquidator contests or disputes the

claim, the court shall allow, hear, and resolve such

contest, except when the case is already on appeal. In

such a case, the suit may proceed to judgment, and any

final

and

executory judgment therein for a claim

against the debtor shall be filed and allowed in court;

and

(e) no foreclosure proceeding shall be allowed for a

period of one hundred eighty (180) days from the date

of the order.

B. Secured Creditors

SECTION

4.

Rights

of

Secured

Creditors .

—

The

Liquidation Order shall not affect the right of a secured

creditor to enforce his lien in accordance with the

applicable contract or law, unless he waives his right.

SECTION 5. Duty of Secured Creditors . — At any time

prior to the election of the liquidator, a secured creditor

shall manifest in writing to the court whether he is:

(a) waiving his right under the security or lien in

accordance with Section 6 of this Rule; or

(b) maintaining his right under the security or lien.

If a secured creditor fails to file such a manifestation, he

shall be deemed to have opted to maintain his right

under the security or lien.

SECTION 6. Waiver of Security or Lien . — A secured

creditor shall not be deemed to have waived his right

under the security or lien unless the waiver is made in a

public document, in unequivocal language, and with

full knowledge of the consequences of his action. If a

secured creditor waives his right, he shall be entitled to

participate

in

the

liquidation

proceedings

as

an

unsecured creditor.

© Compiled By RGL

44 of 98