BANK OF THE PHILIPPINE
G.R. No. 164641
ISLANDS, as successor of Far
East Bank and Trust Company,
Petitioner, Present:
PUNO, C.J.,
QUISUMBING,
YNARES-SANTIAGO,
SANDOVAL-GUTIERREZ,
-
versus - CARPIO,
AUSTRIA-MARTINEZ,
CARPIO-MORALES,
AZCUNA,
SECURITIES AND EXCHANGE
TINGA,
COMMISSION,
REHABILITATION CHICO-NAZARIO, RECEIVER, ASB HOLDINGS, INC., VELASCO, JR.,
ASB DEVELOPMENT
CORPORATION, NACHURA,
ASB
LAND, INC., ASB FINANCE, REYES,
and
INC.,
SCHOOL, INC., BEL-AIR
HOLDINGS
CORP.,
INC., VYL DEVELOPMENT CORP.,
GERRICK HOLDINGS CORP.,
NEIGHBORHOOD HOLDINGS, INC.,
and THE COURT OF APPEALS,
Respondents.
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D E C I S I O N
Tinga, J.:
For resolution is a petition seeking
to nullify the 30 January 2004 Decision[1]
of the Court of Appeals in CA-G.R. SP No. 77309[2] upholding
the Securities and Exchange Commission’s (SEC) approval of the rehabilitation of
the ASB Group of Companies (ASB Group) in SEC En Banc Case No. EB-726.[3]
The
antecedent facts are as follows:
The
Bank of the Philippine
Islands (BPI), through its predecessor-in- interest, Far East
Bank and Trust Company (FEBTC), extended
credit accommodations to the ASB Group[4]
with an outstanding aggregate principal amount of
P86,800,000.00, secured by a real estate mortgage over two (2)
properties located in Greenhills, San Juan.[5] On
P84,000,000.00
against the total amount of the ASB Group’s exposure to the bank. In turn, ASB Group would require the release
of the other property mortgaged to BPI, to be thereafter placed in the asset pool. Specifically, the pertinent portion of the
plan reads:
“x x x ASB plans to invoke a dacion en pago for its #35 Eisenhower
property at ASB’s selling value of P84 million against the total amount
of the ASB’s exposure to the bank. In
return, ASB requests the release of the #27
The dacion would constitute full payment of the entire obligation due
to BPI because the balance was then to be considered waived, as per the Rehabilitation
Plan.[9]
BPI opposed the Rehabilitation Plan and moved for the dismissal of the ASB
Group’s petition for rehabilitation.[10] However, on
BPI
filed a petition for review[12]
of the
BPI
then filed a petition for review[15]
before the Court of Appeals (CA), claiming that the SEC en banc erred in affirming the approval of the Rehabilitation Plan despite
being violative of BPI’s contractual rights.
BPI contended that the terms of the Rehabilitation Plan would impair its freedom to contract,
and alleged that the dacion en pago was a mode of payment beneficial to the
ASB Group only.[16]
The
CA dismissed the petition for lack of merit.
It held that considering that the dacion en pago transaction could
proceed only proceed upon the mutual agreement of the parties, BPI’s assertion
that it is being coerced could not be sustained. At no point would the Rehabilitation Plan compel secured creditors such as BPI to
agree to a settlement agreement against their will, the CA added. Moreover, BPI
could refuse to accept any arrangement contemplated by the receiver and just
assert its preferred right in the liquidation and distribution of the assets of
the ASB Group.[17] BPI filed a motion for reconsideration, but
the same was denied for lack of merit.[18]
Before
this Court, BPI asserts that the CA erred in ruling that the approval by the SEC
of the ASB Group’s Rehabilitation Plan did
not violate BPI’s rights as a creditor.[19]
It maintains its position that the dacion en pago is a form of coercion
or compulsion, and violative of the rights of secured creditors.[20] It asserts that in order for the Rehabilitation
Plan to be feasible and legally tenable, it must reflect the express and free
consent of the parties; i.e, that the
conditions should not be imposed but agreed upon by the parties. By approving the Rehabilitation Plan, the SEC
hearing panel totally disregarded the efficacy of the mortgage agreements
between the parties, and sanctioned a mode of payment which is solely for the
unilateral benefit of the ASB Group.[21] This
is so because in the event that the secured creditors such as itself would not
agree to dacion en pago, the ASB Group’s obligations would be settled at
the selling prices of the mortgaged
properties to be dictated by the ASB Group,[22]
rendering BPI’s status as a preferred
creditor illusory.[23]
BPI
further claims that despite its rejection of the Rehabilitation Plan, no effort
was made to resolve the impasse on the valuation of the mortgaged properties. With no repayment scheme for secured creditors not accepting the
Rehabilitation Plan, the same has become discriminatory.[24]
Moreover, any interference on the rights of the secured creditors must not be so
indefinite and open-ended as to
effectively deprive secured
creditors of their right to their
security,[25] BPI
adds.
In
its Comment,[26] the SEC, through the Office of the Solicitor
General, claims that the terms and conditions of the Rehabilitation Plan do not violate BPI’s right as a
creditor because the dacion en pago transaction contemplated in the plan
can only proceed upon mutual agreement of the parties. Moreover, being a secured creditor, BPI
enjoys preference over unsecured creditors, thus there is no reason for BPI to
fear the non-payment of the loan, or the inability to assert its preferred
right over the mortgaged property.[27]
On
the other hand, private respondents maintain that the non-impairment clause of
the Constitution relied on by BPI is a limit on the exercise of legislative
power and not of judicial or quasi-judicial power. The SEC’s approval of the Rehabilitation
Plan was an exercise of adjudicatory power by an administrative agency and thus
the non-impairment clause does not apply.[28] In addition, they stress that there is no
coercion or compulsion that would be employed under the Rehabilitation Plan. If dacion en pago fails to
materialize, the Rehabilitation Plan contemplates to settle the obligations to
secured creditors with mortgaged properties at selling prices.[29] Finally, they claim that BPI failed to submit
any valuation of the mortgage properties to substantiate its objection to the
Rehabilitation Plan, making its objection thereto totally unreasonable.[30]
The petition must be denied.
The very same issues confronted the
Court in the case of Metropolitan Bank & Trust Company v. ASB
Holdings, et al.[31] In this case,
Metropolitan Bank & Trust Company (MBTC) refused to enter into a dacion en pago arrangement contained in
ASB’s proposed Rehabilitation Plan.[32] MBTC argued, among others, that the forced transfer of properties and the diminution
of its right to enforce its lien on the mortgaged properties violate its
constitutional right against impairment of contracts and right to due
process. The Court ruled that there is
no impairment of contracts because the approval of the Rehabilitation Plan and
the appointment of a rehabilitation receiver merely suspends the action for
claims against the ASB Group, and MBTC may still enforce its preference when
the assets of the ASB Group will be liquidated. But if the rehabilitation is
found to be no longer feasible, then the claims against the distressed
corporation would have to be settled eventually and the secured creditors shall
enjoy preference over the unsecured ones.
Moreover, the Court stated that there is no compulsion to enter into a dacion en pago agreement, nor to waive
the interests, penalties and related charges, since these are merely proposals
to creditors such as MBTC, such that in the event the secured creditors refuse
the dacion, the Rehabilitation Plan proposes to settle the obligations to
secured creditors with mortgaged properties at selling prices.
Rehabilitation
proceedings in our jurisdiction, much like the bankruptcy laws of the
The Court reiterates that the SEC’s
approval of the Rehabilitation Plan did not impair BPI’s right to
contract. As correctly contended by private respondents, the non-impairment
clause is a limit on the exercise of legislative power and not of judicial or
quasi-judicial power.[36] The SEC, through the hearing panel that heard
the petition for approval of the Rehabilitation Plan, was acting as a
quasi-judicial body and thus, its order approving the plan cannot constitute an impairment of the right and the
freedom to contract.
Besides, the mere fact that the Rehabilitation
Plan proposes a dacion en pago approach
does not render it defective on the ground of
impairment of the right to contract.
Dacion en pago is a special mode of payment where the debtor
offers another thing to the creditor who accepts it as equivalent of payment of
an outstanding debt.[37] The undertaking really partakes in a sense of the nature of sale, that is, the creditor
is really buying the thing or property of the debtor, the payment for which is to be charged against
the debtor’s debt. As such, the
essential elements of a contract of sale, namely; consent, object certain, and
cause or consideration must be present.[38] Being a form of contract, the dacion en
pago agreement cannot be perfected without the consent of the parties
involved.
We find no element of compulsion in the dacion en
pago provision of
the Rehabilitation Plan. It was not the only solution presented by the ASB to pay its creditors. In fact, it was stated in the Rehabilitation
Plan that:
x x x. If the dacion en pago herein contemplated does not materialize for failure
of the secured creditors to agree thereto, the rehabilitation plan contemplates
to settle the obligations (without interest, penalties and other related
charges accruing after the date of the initial suspension order) to secured
creditors with mortgaged properties at ASB selling prices for the general
interest of the employees, creditors, unit buyers, government, general public
and the economy.[39]
Thus,
if BPI does not find the dacion en pago modality acceptable, the ASB Group can propose to settle its
debts at such amount as is equivalent to the selling price of the mortgaged
properties. If BPI still refuses this
option, it can assert its rights in the liquidation and distribution of the ASB
Group’s assets. It will not lose its status as a secured creditor, retaining
its preference over unsecured creditors when the assets of the corporation are finally
liquidated.[40]
WHEREFORE,
in view of the foregoing, the petition is DENIED and the
Decision dated
SO ORDERED.
Associate Justice
WE CONCUR:
REYNATO S. PUNO
Chief Justice
|
LEONARDO A. QUISUMBING Associate
Justice |
CONSUELO YNARES-SANTIAGO Associate Justice |
|
ANGELINA SANDOVAL-GUTIERREZ Associate
Justice |
ANTONIO T. CARPIO Associate Justice |
|
MA. ALICIA AUSTRIA-MARTINEZ Associate
Justice |
RENATO C. CORONA Associate
Justice |
|
CONCHITA CARPIO MORALES Associate
Justice |
ADOLFO J. AZCUNA Associate Justice |
|
MINITA V. CHICO-NAZARIO Associate
Justice |
PRESBITERO J. VELASCO, JR. Associate Justice |
|
ANTONIO EDUARDO B. NACHURA Associate
Justice |
RUBEN T. REYES Associate
Justice |
TERESITA J. LEONARDO-DE CASTRO
Associate Justice
C
E R T I F I C A T I O N
Pursuant to Article VIII, Section 13
of the Constitution, it is hereby certified that the conclusions in the above
Decision were reached in consultation before the case was assigned to the
writer of the opinion of the Court.
REYNATO S. PUNO
Chief Justice
[2]Bank of the Philippine Islands, as successor-in-interest
of Far East Bank and Trust Company v. Securities and Exchange Commission, et al.
[3]Bank of the Philippine
[4]ASB
Realty Corporation, ASB Development Corporation, ASB Land, Inc. and ASB
Holdings, Inc. have been renamed St. Francis Square Realty Corporation, St.
Francis Square Development Corporation, St. Francis Square Land, Inc., and St.
Francis Square Holdings, Inc., respectively.
Amended Articles of Incorporation for the said companies were approved
by the SEC on
[20]
[21]Petitioner’s Memorandum; pp. 268-276; 271.
[22]Rollo, pp. 9, 272.
[23]
[25]
[27]Citing
Rizal Commercial Banking Corporation v. IAC,
378 Phil. 10 (1999).
[28]Rollo, p. 200, citing Lim v. Secretary of Agriculture, No.
L-26990,
[29]
[30]
[31]G.R. No. 166197,
[32]The
very same Rehabilitation Plan that is the subject of the instant petition. MBTC is also a creditor of ASB Group. In the Rehabilitation Plan, ASB
Group proposed payment by dacion on some
of the properties mortgaged to MBTC.
[33]Westmoreland Human Opportunities, Inc, v. Walsh, 246 F. 3d 233, C.A.3 (Pa)., 2001. see also In re: Epstein (39 B.R. 938, Bkrtcy. D.N.M. 1984).
[36]Bernas, The 1987 Const. of the Republic of the
Philippines: A Commentary, 1996 Edition, p. 397 citing Lim v. Secreatry of Agriculture, 34 SCRA 751, 764 (1970).
[38]Philippine Lawin Bus, et al. v. Court of Appeals, 425 Phil. 146, 155
(2002).