Академический Документы
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* SECOND DIVISION.
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notifying the same employees that an appeal had been filed, petitioner
consistently denied the due process rights of these employees.—We do not
see how it will be in the interest of justice to allow a petition that fails to
inform some of its creditors that the final order of the corporate
rehabilitation proceeding was appealed. By not declaring its former
employees as creditors in the Amended Petition for Corporate Rehabilitation
and by not notifying the same employees that an appeal had been filed,
petitioner consistently denied the due process rights of these employees.
This court cannot be a party to the inequitable way that petitioner’s
employees were treated.
Same; Same; Same; The Interim Rules of Procedure on Corporate
Rehabilitation allows the trial court to disapprove a rehabilitation plan and
terminate proceedings or, should the instances warrant, to allow
modifications to a rehabilitation plan.—Petitioner argues that after Judge
Mendoza’s withdrawal as rehabilitation receiver, the Regional Trial Court
should have appointed a new rehabilitation receiver to evaluate the
rehabilitation plan. We rule otherwise. It is not solely the responsibility of
the rehabilitation receiver to determine the validity of the rehabilitation plan.
The Interim Rules of Procedure on Corporate Rehabilitation allows the trial
court to disapprove a rehabilitation plan and terminate proceedings or,
should the instances warrant, to allow modifications to a rehabilitation plan.
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LEONEN, J.:
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the general body of creditors, employees, and stockholders. The petition shall be
accompanied by the following documents:
a. An audited financial statement of the debtor at the end of its last fiscal
year;
b. Interim financial statements as of the end of the month prior to the filing
of the petition;
c. Schedule of Debts and Liabilities which lists all the creditors of the
debtor indicating the name and address of each creditor, the amount of each
claim as to principal, interest, or penalties due as of the date of filing, the
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nature of the claim, and any pledge, lien, mortgage judgment, or other
security given for the payment thereof;
d. An Inventory of Assets which must list with reasonable specificity all
the assets of the debtor, stating the nature of each asset, the location and
condition thereof, the book value or market value of the asset, and attaching
the corresponding certificate of title therefor in case of real property, or the
evidence of title or ownership in case of movable property, the encumbrances,
liens or claims thereon, if any, and the identities and addresses of the
lienholders and claimants. The Inventory shall include a Schedule of
Accounts Receivable which must indicate the amount of each, the persons
from whom due, the date of maturity, and the degree of collectibility
categorizing them as highly collectible to remotely collectible;
e. A rehabilitation plan which conforms to the minimal requirements set
out in Section 5, Rule 4 of these Rules;
f. A Schedule of Payments and disposition of assets which the debtor may
have effected within three (3) months immediately preceding the filing of the
petition;
g. A Schedule of the Cash Flow of the debtor for three (3) months
immediately preceding the filing of the petition, and a detailed schedule of the
projected cash flow for the succeeding three (3) months;
h. A Statement of Possible Claims by or against the debtor which must
contain a brief statement of the facts which might give rise to the claim and an
estimate of the probable amount thereof;
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Five (5) copies of its petition shall be filed with the court.
Rule 4, Sec. 3 provides:
SECTION 3. Verification by Debtor.—The petition filed by the debtor must be
verified by an affidavit of a responsible officer of the debtor and shall be in a form
substantially as follows:
“I, _____________, (position) of (name of petitioner), do solemnly swear
that the petitioner has been duly authorized to file the petition and that the
stockholders and board of directors (or governing body) have approved and/or
consented to, in accordance with law, all actions or matters necessary or
desirable to rehabilitate the debtor. There is no petition for insolvency filed
with any other body, court, or tribunal affecting the petitioner. The Inventory
of Assets and the Schedule of Debts and Liabilities contains a full, correct,
and true description of all debts and liabilities and of all goods, effects, estate,
and property of whatever kind or class belonging to petitioner. The Inventory
also contains a full, correct, and true statement of all debts owing or due to
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M/V Sta. Ana, M/V Viva Lady of Lourdes, and M/V Our Lady of Mercy (id., at
pp. 48-49).
6 Id., at p. 48, Amended Petition dated October 14, 2005.
7 Id., at p. 52.
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8 Id., at p. 70, Property Inventory List attached to the Amended Petition dated
October 14, 2005.
9 Id.
10 Id.
11 Id.
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12 This sum was arrived at by adding the debts declared by Viva Shipping Lines,
Inc. in its Amended Petition (Rollo, pp. 51-52), and its Schedule of Debts &
Liabilities as of September 30, 2005 (id., at p. 68). However, in the same Petition,
Viva Shipping Lines, Inc. stated that its total liabilities amount to P220,873,700.00
(id., at p. 52).
13 Id., at pp. 50-51.
14 Id.
15 Id., at p. 53.
16 Id., at p. 72.
17 Id.
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Trial Court that Viva Shipping Lines violated certain laws and
rules of the Commission.26
On March 24, 2006, Judge Mendoza withdrew his acceptance of
appointment as rehabilitation receiver.27 As replacement, Viva
Shipping Lines nominated Atty. Antonio Acyatan, while Metrobank
nominated Atty. Rosario S. Bernaldo.28 Keppel Philippines Marine,
Inc. adopted Metrobank’s nomination.29
On April 4, 2006, Metrobank filed a Motion for Production or
Inspection of relevant documents relating to Viva Shipping Lines’
business operations such as board resolutions, tax returns,
accounting ledgers, bank accounts, and contracts.30 Viva Shipping
Lines filed its opposition. However, the Regional Trial Court granted
Metrobank’s Motion.31 Viva Shipping Lines failed to comply with
the Order to produce the documents,32 as well as with the Regional
Trial Court Order to submit a memorandum.33
On September 27, 2006, Viva Shipping Lines’ former employees
Alejandro Olit, Nida Montilla, Pio Hernandez, Eugenio Baculo, and
Harlan Bacaltos34 (Alejandro Olit, et al.) filed their comment on the
Amended Petition, informing the Regional Trial Court of their
pending complaint against Viva Shipping Lines before the National
Labor Relations Commission.35
In the Order dated October 30, 2006,36 the Regional Trial Court
lifted the stay order and dismissed Viva Shipping Lines’
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26 Id., at p. 85.
27 Id., at p. 86.
28 Id., at pp. 86-87.
29 Id., at p. 87.
30 Id.
31 Id., at p. 88.
32 Id.
33 Id.
34 Id., at p. 13, Petition.
35 Id., at p. 17.
36 Id., at pp. 83-95.
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37 Id., at p. 89.
38 Id., at p. 68.
39 Id., at pp. 93-94.
40 According to Metropolitan Bank and Trust Company, this vessel is owned and
registered in the name of Besta Shipping Lines as shown in the Certificate of
Ownership No. 043172. The Certificate, however, was not included in Metropolitan
Bank and Trust Company’s submission.
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The Regional Trial Court found that Viva Shipping Lines’ assets
all appeared to be nonperforming. Further, it noted that Viva
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41 Rollo, p. 94, Regional Trial Court Order dated October 30, 2006.
42 CA Rollo, pp. 14-44, Petition for Review filed before the Court of Appeals.
43 Id., Affidavit of Service dated December 7, 2006.
44 Rollo, pp. 39-41, Court of Appeals Resolution dated January 5, 2007. The
Resolution was penned by Associate Justice Marina L. Buzon and concurred in by
Associate Justices Edgardo F. Sundiam and Monina Arevalo-Zenarosa of the Fifth
Division.
45 Id., at p. 40.
46 Id.
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63 Id., at p. 553.
64 Id., at p. 566.
65 Id., at p. 589.
66 Id., at p. 617.
67 Id., at p. 622.
68 Id., at p. 720.
69 Id., at p. 630.
70 Id., at p. 677.
71 Id., at p. 746.
72 Id., at p. 798.
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Petitioner argues that the Court of Appeals should have given due
course to its Petition and excused its noncompliance with procedural
rules.73 For petitioner, the Interim Rules of Procedure on Corporate
Rehabilitation mandates a liberal construction of procedural rules,
which must prevail over the strict application of Rule 43 of the
Rules of Court.74
According to petitioner, this court disfavors dismissals based on
pure technicalities and adopts a policy stating that rules on appeal
are “not iron-clad and must yield to loftier demands of substantial
[j]ustice and equity.”75 For petitioner, the immediate dismissal of its
Petition for Review is contrary to the purpose of corporate
rehabilitation to rescue and rehabilitate financially distressed
companies.76
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73 Id., at p. 724.
74 Id., at pp. 724-727.
75 Id., at pp. 724-725, petitioner’s Memorandum, citing Remulla v. Manlongat,
484 Phil. 832; 442 SCRA 226 (2004) [Per J. Panganiban, Third Division].
76 Id., at p. 726.
77 Id., at pp. 686, 760 and 643.
78 Id., at p. 648.
79 Id., at pp. 479-480, 687-688 and 750.
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96 Rep. Act No. 10142 (2010), Sec. 4(p) defines solvency as: “the financial
condition of a debtor that is generally unable to pay its or his liabilities as they fall
due in the ordinary course of business or has liabilities that are greater than its or his
assets.” This definition is derived from the definition of insolvency under the
Financial Rehabilitation and Insolvency Act.
97 Id., Sec. 2.
98 Bank of the Philippine Islands v. Securities and Exchange Commission, 565
Phil. 588, 595-596; 541 SCRA 294, 301 (2007) [Per J. Tinga, En Banc].
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102 G.R. No. 187581, October 20, 2014, 738 SCRA 561 [Per J. Bersamin, First
Division].
103 Id., at p. 575.
104 Bank of the Philippine Islands v. Sarabia Manor Hotel Corporation, G.R. No.
175844, July 29, 2013, 702 SCRA 432 [Per J. Perlas-Bernabe, Second Division].
105 Umale v. ASB Realty Corporation, 667 Phil. 351; 652 SCRA 215 (2011) [Per
J. Del Castillo, First Division].
106 Gomez-Somera, Stephanie V., Credit Transactions: Notes and Cases, 2nd
edition, Vol. II, p. 862 (2015).
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wind up its affairs and equitably distribute its assets among its
creditors.107
Liquidation is diametrically opposed to rehabilitation. Both
cannot be undertaken at the same time.108 In rehabilitation,
corporations have to maintain their assets to continue business
operations. In liquidation, on the other hand, corporations preserve
their assets in order to sell them. Without these assets, business
operations are effectively discontinued. The proceeds of the sale are
distributed equitably among creditors, and surplus is divided or
losses are reallocated.109
Proceedings in case of insolvency are not limited to
rehabilitation. Our laws have evolved to provide for different
procedures where a debtor can undergo judicially supervised
reorganization or liquidation of its assets.110
Corporate rehabilitation traces its roots to Act No. 1956,
otherwise known as the Insolvency Law of 1909. Under the
Insolvency Law, a debtor in possession of sufficient properties to
cover all its debts but foresees the impossibility of meeting them
when they fall due may file a petition before the court to be declared
in a state of suspension of payments.111 This allows time for the
debtor to organize its affairs in order to achieve a state where it can
comply with its obligations.
The relief was also provided in the amendatory provisions of
Presidential Decree No. 902-A. Section 5 of Presidential Decree No.
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107 Philippine Veterans Bank Employees Union-N.U.B.E. v. Vega, 412 Phil. 449;
360 SCRA 33 (2001) [Per J. Kapunan, First Division].
108 Id.
109 Gomez-Somera, supra note 106 at p. 926.
110 Id., at p. 737.
111 Act No. 1956 (1909), Sec. 2.
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112 Pres. Decree No. 902-A (1976), Sec. 5(d), as amended by Pres. Decree No.
1758.
113 Since 2000, this court has designated different branches of several multi-sala
Regional Trial Courts as “Special Commercial Courts” to resolve cases that were
originally under the jurisdiction of the Securities and Exchange Commission. In
Gonzales v. GJH Land, Inc., G.R. No. 202664, November 10, 2015, 774 SCRA 242
[Per J. Perlas-Bernabe, En Banc], we clarified that it is the Regional Trial Court that
has subject matter jurisdiction over these commercial cases, and it is an exercise of
jurisdiction to refer these cases to the branches designated as Special Commercial
Courts for their speedy and efficient disposition.
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II
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115 New Frontier Sugar Corp. v. Regional Trial Court, Branch 39, Iloilo City,
542 Phil. 587, 595; 513 SCRA 601, 608 (2007) [Per J. Austria-Martinez, Third
Division].
116 Rep. Act No. 10142 (2010).
117 A.M. No. 12-12-11-SC, Resolution dated April 27, 2013.
118 Rep. Act No. 10142 (2010), Sec. 146 provides:
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123 Id.
124 Supra note 115.
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III
Our courts are not only courts of law, but are also courts of
equity.129 Equity is justice outside legal provisions, and must be
exercised in the absence of law, not against it.130 In Reyes v. Lim:131
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128 See Insurance of the Philippine Islands Corp. v. Gregorio, 658 Phil. 36; 642
SCRA 685 (2011) [Per J. Peralta, Second Division].
129 Rustia v. Franco, 41 Phil. 280, 284 (1920) [Per J. Street, En Banc].
130 GF Equity, Inc. v. Valenzona, 501 Phil. 153, 166; 462 SCRA 466, 480 (2005)
[Per J. Carpio-Morales, Third Division].
131 Reyes v. Lim, 456 Phil. 1; 408 SCRA 560 (2003) [Per J. Carpio, First
Division].
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IV
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136 Id., at p. 34, citing Lagunilla v. Velasco, 607 Phil. 194, 205; 589 SCRA 224,
232 (2009) [Per J. Nachura, Third Division], in turn citing Regner v. Logarta, 562
Phil. 862; 537 SCRA 277 (2007) [Per J. Chico-Nazario, Third Division] and Arcelona
v. Court of Appeals, 345 Phil. 250; 280 SCRA 20 (1997) [Per J. Panganiban, Third
Division].
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138 Bello v. Fernando, 114 Phil. 101, 103; 4 SCRA 135, 138 (1962) [Per J.
Reyes, J.B.L., En Banc], citing Aguilar v. Navarro, 55 Phil. 898 (1931) [Per J.
Villamor, Second Division] and Santiago v. Valenzuela, 78 Phil. 397 (1947) [Per J.
Feria, En Banc].
139 Interim Corp. Rehab. Rule, Rule 2, Sec. 2.
140 360 Phil. 95; 299 SCRA 708 (1998) [Per J. Quisumbing, First Division].
141 Id., at p. 101; p. 713.
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a. The debtor has assets that can generate more cash if used
in its daily operations than if sold.
b. Liquidity issues can be addressed by a practicable
business plan that will generate enough cash to sustain daily
operations.
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rehabilitation that provides for better present value recovery for its
creditors.149
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economically feasible and its creditors can recover by way of the present value of
payments projected in the plan, more if the debtor continues as a going concern than
if it is immediately liquidated.” This is because if rehabilitation is still viable,
creditors may still be able to recover the full value of the credit. If the assets are
immediately liquidated even when rehabilitation is viable, creditors run the risk of
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sharing in the losses of the corporation, especially if the book value of its assets is less
than its outstanding credits.
150 J. Leonen, Dissenting Opinion in Secretary of the Department of Public
Works and Highways v. Tecson, G.R. No. 179334, April 21, 2015, 756 SCRA 389
(Resolution) [Per J. Peralta, En Banc].
151 See Heirs of Spouses Domingo Tria and Consorcia Camano Tria v. Land
Bank of the Philippines, G.R. No. 170245, July 1, 2013, 700 SCRA 188 [Per J.
Peralta, Third Division].
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152 Rollo, p. 94, Regional Trial Court Order dated October 30, 2006.
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