THIRD DIVISION
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UNION BANK
OF THE Petitioner, - versus - ASB
DEVELOPMENT CORPORATION, Respondent. |
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G.R. No. 172895 Present: YNARES-SANTIAGO, J., Chairperson, AUSTRIA-MARTINEZ,
CHICO-NAZARIO, NACHURA, and REYES, JJ. Promulgated: July
30, 2008 |
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CHICO-NAZARIO,
J.:
This is a
Petition for Review seeking to set aside the Decision[1]
dated 31 May 2005 and Resolution dated 31 May 2006 of the Court of Appeals in
CA-G.R. SP No. 85780 which sustained the Resolution dated 6 July 2004 of the
Securities and Exchange Commission (SEC) En
Banc in SEC-EB Case No. 12-03-08 which, in turn, affirmed the Resolution
dated 11 December 2003 of the SEC Hearing Panel in SEC Case No. 05-00-6609.
FACTS
The factual
and procedural antecedents of this case are as follows:
On 29 May
1989, respondent ASB Development Corporation (ASBDC), a domestic corporation
organized and existing under Philippine laws, executed a Mortgage Trust
Indenture (MTI) and, thereafter, supplemental indentures, in favor of Rizal
Commercial Banking Corporation (RCBC), as trustee for the following creditor
banks: RCBC itself, petitioner Union Bank of the Philippines (UBP) and United
Coconut Planters Bank (UCPB). Under said
MTI and supplemental indentures, the creditor banks granted respondent ASBDC a
loan in the total amount of P1.198 billion, P122 million of which
was extended by petitioner UBP. As
security for the loan, respondent ASBDC mortgaged to RCBC real properties
covered by Transfer Certificates of Title (TCTs) No. 9836, No. 9837, and No.
9838. Petitioner UBP has an aliquot
share of 10.32% in said mortgages as security for its loan to respondent ASBDC.
On 2 May
2000, respondent ASBDC, together with ASB Holdings Inc., ASB Realty
Corporation, ASB Land Inc., ASB Finance Inc., Makati Hope Christian School
Inc., Bel-Air Holdings Corporation, Winchester Trading Inc., VYL Development
Corporation, and Neighborhood Holdings Inc. (collectively referred to as the ASB Group of Companies), as affiliated
companies commonly owned by Mr. Luke C. Roxas, filed with the SEC Securities
and Investigations Clearing Department (SICD) a Petition for Rehabilitation
with Prayer for Suspension of Actions and Proceedings. To take cognizance of
the said Petition, the SEC Hearing Panel was formed composed of three hearing
officers from SICD.
Petitioner
UBP, Metropolitan Bank and Trust Company (Metrobank), RCBC, Philippine National
Bank (PNB), Prudential Bank, UCPB and Equitable-PCI Bank opposed the petition
for rehabilitation of the ASB Group of Companies.
On
The SEC
Hearing Panel then appointed Atty. Monico V. Jacob as Interim Receiver and
ordered the latter to post a bond in the amount of P200,000.00 within
ten days from notice. Atty. Jacob
refused the appointment, leading to the appointment instead of Fortunato B.
Cruz. The SEC Hearing Panel enjoined the
ASB Group of Companies from disposing of their properties in any manner
whatsoever except in the ordinary course of business and from making payments
of its liabilities outstanding as of the date of the filing of its petition for
rehabilitation.
The SEC
Hearing Panel subsequently issued various Orders extending the suspension order
it initially issued on
On
The SEC
Hearing Panel approved on
In the course of the foregoing proceedings before the SEC Hearing Panel, the following cases arose:
Petitioner
UBP and PNB assailed the 4 May 2000 Suspension Order of the SEC Hearing Panel
before the Court of Appeals in a Petition for Certiorari Ad Cautelam, docketed as CA-G.R. SP No. 66649,
wherein they prayed inter alia that
the said Order be set aside. The Court
of Appeals later dismissed CA-G.R. SP No. 66649 in its
Petitioner
UBP would also join a consortium of creditor banks which filed a Petition for
Review on Certiorari with Application
for the Issuance of a Temporary Restraining Order and/or Writ of Preliminary
Injunction before the SEC En Banc
seeking to annul the 10 October 2000 Order of the SEC Hearing Panel giving due
course to the Petition for Rehabilitation of the ASB Group of Companies. Said consortium subsequently filed a
Supplemental Petition with the SEC En Banc praying for the enjoinment of
the implementation of the 27 October 2000 Order of the SEC Hearing Panel which
granted yet again the motion of the ASB Group of Companies for extension of the
4 May 2000 Suspension Order. The SEC En Banc dismissed this Petition in its
The Extrajudicial Foreclosure and
In the
meantime, two months after the SEC Hearing Panel approved the Rehabilitation
Plan for the ASB Group of Companies and during the pendency of CA-G.R. SP No.
66649 before the Court of Appeals, petitioner UBP, citing the failure of
respondent ASBDC to pay its indebtedness, filed on 27 July 2001 with the Office
of the Clerk of Court of the Regional Trial Court (RTC) of Mandaluyong City, a
Notice of Extrajudicial Sale of Properties under Act No. 3135, as amended, over
its 10.32% participation in the mortgage of real properties covered by TCTs No.
9836, No. 9837, and No. 9838 securing the loans of respondent ASBDC under the
MTI and supplemental indentures.
On P178,635,330.48. Atty. Lacebal issued a Certificate of Sale
over the said properties in favor of petitioner UBP. Vice Executive Judge Japar D. Dimaampao of
the Mandaluyong City RTC approved the Certificate of Sale.
Petitioner
UBP then filed a request with the Register of Deeds of Mandaluyong City for
registration of the Certificate of Sale on TCTs No. 9836, No. 9837 and No.
9838. On
In a letter
dated
The Register of Deeds, in a reply-letter dated 8 December 2002, denied the
request of petitioner UBP to merely annotate the Certificate of Sale on the
original copies of TCTs No. 9836, No. 9837 and No. 9838 since such annotation
partakes of the nature of a voluntary dealing on registered land wherein the
production of the owner’s duplicate copies of the certificates of title is
necessary.
On
Petitioner
UBP thus filed on
On
WHEREFORE, premises considered,
petitioners’ Motion dated
Petitioner
UBP filed with the SEC En Banc a
Petition for Review on Certiorari
assailing the afore-quoted Resolution of the SEC Hearing Panel, which was
docketed as SEC-EB Case No.
1. Article 1308 of the Civil Code of the
In signing the MTI and its Supplemental,
ASBDC had agreed and bound itself to comply with all the provisions of the
contract.
2. ASBDC violated the proscription against
unilateral cancellation of contracts under Article 1159 of the Civil Code;
3. Respondent SEC Hearing Panel amended or
expanded the rule making powers in suspending all actions and claims against
ASBDC immediately after the petition for rehabilitation is filed;
4. Contravened the constitutional
proscription against impairment of contracts;
5. Deprived Union Bank of its substantial
right over its property without due process of law;
6. Unilaterally revoked and/or nullified
the right of a secured creditor like Union Bank with existing contractual
rights;
7. Amended and/or modified existing and
valid contracts between the parties, without their consent.
On
WHEREFORE, the Petition for Review on Certiorari assailing the Resolution
dated
In so
doing, the SEC En Banc held that the
SEC Hearing Panel acted in accordance with Section 6(c) of Presidential Decree
No. 902-A[4]
as amended, which granted to the SEC the following power:
c) To
appoint one or more receivers of the property, real and personal, which is the
subject of the action pending before the Commission in accordance with the
pertinent provisions of the Rules of Court in such other cases whenever
necessary in order to preserve the rights of the parties-litigants and/or
protect the interest of the investing public and creditors: x x x Provided, finally, That upon appointment of a management committee,
rehabilitation receiver, board or body, pursuant to the Decree, all actions for
claims against corporations, partnerships or associations under management or
receivership pending before any court, tribunal, board or body shall be
suspended accordingly. (Emphasis
supplied.)
Petitioner
UBP then sought recourse with the Court of Appeals via a Petition for Review, docketed as CA-G.R. SP No. 85780,
seeking the reversal of the
On
WHEREFORE, premises considered, the
PETITION FOR REVIEW is hereby DISMISSED.
Accordingly, the Securities and Exchange Commission En Banc’s Resolution
dated
The Court
of Appeals cited the Rules of Procedure on Corporate Recovery which provides
for two distinct remedies for a financially distressed corporation, namely: (1)
suspension of payments under Section
3-1, Rule III; and (2) rehabilitation
proceedings under Section 4-1, Rule IV.
These provisions read:
SECTION 3-1. Suspension of Payments. – Any
debtor which possesses sufficient property to cover all its debts but foresees
the impossibility of meeting them when they respectively fall due may petition
the Commission that it be declared in the state of suspension of payments.
x x x x
SECTION 4-1. Who may petition. – A debtor which is
insolvent because its assets are not sufficient to cover its liabilities, or
which is technically insolvent under Section 3-12 of these Rules, but which may
still be rescued or revived through the institution of some changes in its
management, organization, policies, strategies operations or finances, may
petition the Commission to be placed under rehabilitation.
Any of the creditors or stockholders of
the debtor may file the petition on its behalf.
The Court
of Appeals explained that a debtor or petitioning corporation may have
sufficient assets to pay for all of its obligations but foresees the
impossibility of paying them when they respectively fall due, necessitating a
suspension of payments for at least one year.
Despite such declaration of solvency, the petitioning corporation may
still be found to be subsequently unable to pay its obligations for a period
longer than one year and be considered by the SEC as technically insolvent
under Sections 3-12[6]
and 3-13[7]
of Rule III of the Rules of Procedure on Corporate Recovery. Section 3-13 provides, inter alia, that if during the pendency of the proceedings, the
petitioner has become or is shown to be insolvent, whether actually or
technically, the SEC may, instead of terminating the proceedings for suspension
of payments, treat the petition as one for rehabilitation of the debtor.
Hence, the
Rules of Procedure on Corporate Recovery does not preclude a solvent
corporation or debtor from filing a petition for rehabilitation instead of just
a petition for suspension of payments because such temporary inability to pay
its obligations out of its assets may extend beyond the period of one year, or
a solvent corporation may become actually insolvent in the interim. The requirements and procedures in a petition
for suspension of payments and petition for rehabilitation are indeed entirely
different and distinct from one another; nonetheless, the petitioning
corporation which seeks temporary relief and assistance in the payment of its
obligations falling due, but may still have sufficient assets to cover the
same, may already file at the first instance a petition for rehabilitation
under Rule IV. Given the foregoing, the
Court of Appeals found that the Petition for Rehabilitation of the ASB Group of
Companies, which includes respondent ASBDC, is warranted under the
circumstances.
The Court
of Appeals further clarified that under either of the two remedies available, suspension of payments or rehabilitation, a suspension
order against all claims, proceedings or actions against the petitioning
corporation is available as immediate relief to the distressed corporation
pursuant to Sections 3-4[8]
and 3-8[9]
of Rule III and Section 4-4[10]
of Rule IV. During the pendency of
either proceeding, a management committee may be created upon agreement of the
parties or upon showing that there is imminent danger of dissipation, loss,
wastage or destruction of the debtor’s assets or those in its legal possession,
or paralysis of its business operations, in accordance with Section 5-1.[11]
In its
Decision of
The Court
of Appeals added that petitioner UBP, together with PNB, also assailed the 4
May 2000 Suspension Order of the SEC Hearing Panel before the Court of Appeals
in CA-G.R. SP No. 66649. When the Court
of Appeals dismissed CA-G.R. SP No. 66649 in its Resolutions dated
Finally,
the Court of Appeals noted that when petitioner UBP filed its petition for
extrajudicial foreclosure on 27 July 2001 and caused the holding of the public
auction of the mortgaged properties of respondent ASBDC on 21 August 2001, the
SEC Hearing Panel had already issued its Order dated 4 May 2000 suspending all
actions for claims against respondent ASBDC, whether pending or still to be
filed. In fact, on such dates, the SEC
Hearing Panel had already approved the Rehabilitation Plan of the ASB Group of
Companies in an Order dated
On
Petitioner
UBP filed the instant Petition for Review on Certiorari, setting forth the following assignment of errors for
the Court’s consideration:
1. With all due respect, the Court of
Appeals erred in law when it applied the Rules of Procedure on Corporate
Recovery and allowed respondent’s application for rehabilitation despite the
existence of fatal jurisdictional defects.
The Court of Appeals decided a matter not in accord with law and existing
jurisprudence.
2. The Court of Appeals erred in ruling
that the May 4, 2000 Suspension Order is valid and could no longer be
questioned it being a mere interlocutory order which cannot become final and
executory.
3. The Court of
Appeals erred in ruling that petitioner bank has no power on its own to
foreclose the mortgaged property.[15]
RULING
SEC Jurisdiction Over the Petition for
Rehabilitation
Petitioner
UBP alleges that the Petition for Rehabilitation
with Prayer for Suspension of Actions and Proceedings of respondent
ASBDC before the SEC suffers from fatal and jurisdictional defects. Respondent ASBDC cannot file a Petition for
Rehabilitation when respondent ASBDC itself alleged in its Petition for
Rehabilitation that it possessed sufficient property to cover its
obligations. By admitting that it is a
solvent corporation, respondent ASBDC cannot file a Petition for
Rehabilitation.
Petitioner UBP
also argues that respondent ASBDC cannot invoke Sections 3-12[16]
and 3-13,[17]
Rule III of the Rules of Procedure on Corporate Recovery since the situation
contemplated therein is the pendency of a petition for suspension of payments
and the supervention of technical insolvency,[18]
in which event, the petition for suspension of payments may be dismissed or the
petitioning corporation may opt for rehabilitation under Rule IV of the same
Rules. They do not apply to the
circumstance in which the petitioning corporation erroneously files a petition
for rehabilitation even when it has enough assets to cover its liabilities, but
would eventually suffer from technical insolvency in the course of the
proceedings, finally justifying its rehabilitation. The defect of the petition in the latter case
is jurisdictional and precludes the SEC from hearing the petition, and cannot
be cured by the subsequent technical insolvency of the petitioning
corporation. Petitioner UBP, thus,
claims that respondent ASBDC should have filed the “proper petition” with the
SEC at the first instance.
Anyhow,
petitioner UBP asserts that respondent ASBDC was not able to prove that it was
technically insolvent at the time it filed its Petition for Rehabilitation, or that
it became so in the course of the hearing by the SEC Hearing Panel of its
Petition.
Rule III of the Rules of Procedure on Corporate Recovery deals
specifically with Petitions for Suspension of Payments, while Rule IV
covers Petitions for Rehabilitation.
The title
and the contents of the initiatory pleading of respondent ASBDC before the Court
of Appeals clearly establish that it is a Petition for Rehabilitation, with a
prayer for the suspension of actions and proceedings to supplement the
same. The suspension of actions and
proceedings for any claims against respondent ASBDC is merely meant to afford
respondent ASBDC the opportunity to preserve its assets for later distribution
pursuant to its approved rehabilitation plan.
Being a
Petition for Rehabilitation, the Petition of respondent ASBDC must comply with
the jurisdictional requirements under Rule
IV of the Rules of Procedure on Corporate Recovery. Section 4-1[19]
of the said Rules provides that any of the following: (1) an actually insolvent
debtor; (b) a technically insolvent debtor; or (3) a creditor or stockholder of
the debtor, can file a petition for rehabilitation.
Although
respondent ASBDC admitted in its Petition that it had sufficient assets to
cover its liabilities, it also alleged that it had foreseen its inability to
pay its obligations within a period of one year. This is the very definition of technical
insolvency: the inability of the
petitioning corporation to pay, although temporarily, for a period longer than
one year from the filing of the petition.[20]
As a
technically insolvent corporation, respondent ASBDC can seek recourse from the
SEC through a Petition for Rehabilitation.
The reference to Section 3-12 of
the Rules of Procedure on Corporate
Recovery should be limited only to the definition of technical
insolvency provided therein. Section 3-13
and the rest of Rule III of the Rules
of Procedure on Corporate Recovery governing Petitions for Suspension of
Payments actually have no relevance in the instant Petition.
Neither can
the Court sustain the allegation of petitioner UBP that respondent ASBDC failed
to prove that it was technically insolvent. Whether respondent ASBDC is indeed
technically insolvent is a question of fact.
This Court has held that for a question to be one of law, it must
involve no examination of the probative value of the evidence presented by the
litigants or any of them. There is a
question of law in a given case when the doubt or difference arises as to what
the law is pertaining to a certain state of facts, and there is a question of
fact when the doubt arises as to the truth or the falsity of alleged facts.[21] The
determination of technical insolvency of respondent ASBDC is a question of fact
since it will require a review of sufficiency and weight of evidence presented
by the parties.
The
resolution of a question of fact is normally beyond the authority of this
Court, as this Court is not a trier of facts.
Moreover, the SEC Hearing Panel found that respondent ASBDC was
technically insolvent; the SEC En Banc and the Court of Appeals
sustained such factual finding; and we likewise find no reason to disturb the
same. The factual findings of
quasi-judicial agencies, which have acquired expertise due to their
jurisdiction being confined to special matters, are generally accorded great
respect and even finality, absent any showing that they disregarded evidence or
misapprehended evidence to such an extent as to compel a contrary conclusion if
such evidence had been properly appreciated.[22]
More
importantly, on 27 February 2007, this Court promulgated its Decision in Metropolitan Bank & Trust Company v. ASB
Holdings, Inc.[23]
Metropolitan Bank & Trust Company (MBTC) was one of the creditor-mortgagee
banks of the ASBDC. MBTC challenged the
validity of the Petition for Rehabilitation of the ASB Group of Companies
approved by the SEC Hearing Panel on
Validity of the Suspension Order
Petitioner
UBP argues that the 4 May 2000 Suspension Order of the SEC Hearing Panel is
void; consequently, the 6 July 2004 Order of the SEC Hearing Panel nullifying
the extrajudicial sale of the mortgaged properties of respondent ASBDC held on
24 August 2001 for being in violation of its 4 May 2000 Suspension Order, is
likewise void.
As pointed
out by the Court of Appeals, the issue of the validity of the 4 May 2000
Suspension Order was already resolved with finality by no less than this Court
in its Resolution dated 16 September 2002 in G.R. No. 153830. As previously stated, petitioner UBP, together with PNB, had
already assailed the
However,
petitioner UBP refuses to be bound by this Court’s ruling in G.R. No. 153830,
contending that the 4 May 2000 Suspension Order of the SEC Hearing Panel was
merely interlocutory and did not become final.
Since the said Order never became final, the principle of res judicata is, therefore, not
applicable.
Res judicata is a rule that precludes parties
from relitigating issues actually litigated and determined by a prior and final judgment.[24] Petitioner cites the Decision of this Court
in Montilla v. Court of Appeals,[25] wherein we
held that:
Quite elementary is that an order such as that
rendered on December 5, 1972, being interlocutory, cannot become final and
executory in the sense just described, and cannot bring the doctrine of res adjudicata into play at all. Indeed,
the correctness of such an interlocutory order may subsequently be impugned on
appeal by any party adversely affected thereby, regardless of whether or not he
had presented a motion for the reconsideration thereof, if he has otherwise
made of record his position thereon.
While
conceding that petitioner UBP is not precluded from questioning the validity of
the 4 May 2000 Suspension Order on the basis of res judicata, it is,
however, barred from doing so by the principle of law of the case. When the validity of such interlocutory order
has already been passed upon on appeal, the Decision of the Court on appeal
becomes the law of the case
between the same parties. Law of the case has been defined as
“the opinion delivered on a former appeal.
More specifically, it means that whatever is once irrevocably established
as the controlling legal rule of decision between the same parties in the same
case continues to be the law of the case, whether correct on general principles
or not, so long as the facts on which such decision was predicated continue to
be the facts of the case before the court.”[26] Hence, that the 4 May 2000 Suspension Order
is valid, as we already upheld in G.R. No. 153830, is the controlling legal
rule of decision between petitioner UBP and respondent ASBDC in the Petition at
bar. The same is true, whether the
decision of this Court in G.R. No. 153830 was correct on general principles or
not, and without a showing by petitioner UBP that the facts on which G.R. No.
153830 was predicated are no longer the same facts of the case presently before
us.
Power of petitioner UBP to foreclose the mortgaged
property
Finally,
petitioner UBP claims that the Court of Appeals erred in ruling that petitioner
UBP had no power to institute extrajudicial foreclosure of the mortgage on the
properties of respondent ASBDC securing the MTI and supplemental
indentures. Petitioner UBP claims that
under Section 7.16 of Article VII of the MTI, it had the right to initiate
foreclosure proceedings.
While it is
true that said provision of the MTI confers on any Holder of Participation
Certificates, i.e., any of the creditor-mortgagor banks, the right to
initiate foreclosure proceedings, such right is the exception rather than the
rule and is subject to specific conditions.
As provided under Sections 7.04, 7.05, 7.06 and 7.12 of Article VII of
the MTI, it is RCBC, as the designated Trustee of the creditor-mortgagor banks
under the MTI, which is vested with the primary authority to extrajudicially
foreclose the mortgaged properties. The
Holders of Participation Certificates are given the right to foreclose the
mortgaged property as against the primary authority of RCBC only if the
conditions under Section 7.16 of Article VII of the MTI are met. Section 7.16 of the MTI provides:
Section 7.16. Any HOLDER OF PARTICIPATION
CERTIFICATES shall have the right to institute any action or proceeding for the
foreclosure of this INDENTURE, or for the appointment of a receiver, or for the
exercise of any trust or power conferred upon the TRUSTEE or the prosecution of
any remedy available to the TRUSTEE, under this INDENTURE, PROVIDED, however,
that such HOLDER shall have previously given to the TRUSTEE written notice of
the Event of Default on which the HOLDERS of not less than 51% of the total
outstanding FACE AMOUNT of the PARTICIPATION CERTIFICATES shall have made
WRITTEN REQUEST to the TRUSTEE and shall have given it a reasonable period of
time either to proceed to exercise the powers conferred by this INDENTURE or to
institute such action, suit or proceeding in its own name, it being understood
and intended that no one or more
HOLDERS of the PARTICIPATION CERTIFICATES shall have any right in any manner
whatsoever to affect, disturb, or prejudice the lien of this INDENTURE by its
or their action or to enforce any right
hereunder except in the manner herein
provided or to the extent allowed by law and that all proceedings may only
be instituted and maintained and all trusts, powers or remedies of the TRUSTEE
exercised by any HOLDER of PARTICIPATION CERTIFICATES availing to the provisions
of this Section in the manner herein
provided and for the pari-passu benefit of all the holders of the
PARTICIPATION CERTIFICATES then outstanding.
(Emphases supplied.)
Thus, as a
general rule, the following circumstances must be present in order that the Holders
of Participation Certificates may directly exercise the authority to foreclose
mortgaged properties: (1) an event of default by respondent ASBDC occurs; (2)
Holders of not less than 51% of the total outstanding face amount of the
Participation Certificates have made a written request to RCBC as the trustee that
would exercise the powers conferred upon them by the MTI or institute
proceedings under their own names; and (3) RCBC as the trustee is given a
reasonable time to act on the Holders’ written request but fails to do so. It is noted that Section 7.16 of the MTI even
emphasized that the Holders of Participation Certificates may exercise their
right to institute any action or proceeding for the foreclosure of mortgage
only in the manner provided therein.
The Court
of Appeals explicitly found that petitioner UBP did not meet the first two of
the conditions set forth in Section 7.16 of the MTI. According to the Court of Appeals, the
failure of respondent ASBDC to pay its obligation under the MTI and
supplemental indentures is legally justified by the issuance of the Order dated
Petitioner
UBP does not dispute the factual finding by the Court of Appeals that there was
non-compliance with the requirement that the Holders of at least 51% of the
total outstanding face amount of the Participation Certificates should have given
their written request to RCBC as trustee to exercise their powers conferred by
the MTI or institute proceedings under their own name. Petitioner UBP, however, maintains that there
was an Event of Default, particularly described under Section 7.01(e) as
follows:
Section 7.01. The COMPANY and TIFFANY
shall, without the necessity of demand, be in default under this INDENTURE upon
the occurrence of any one or more of the following events:
x x x x
e. The COMPANY and/or TIFFANY shall file a
petition for voluntary bankruptcy, or shall consent to the filing of any such
petition, or shall consent to the appointment of a trustee or receiver for the
COMPANY and/or TIFFANY for all or any part of its properties, or shall file a
petition or answer seeking reorganization or arrangement under any law or
statute of the Republic of the Philippines for the relief or aid of the debtor
or shall consent to the filing of any such petition, or shall file a petition
to take advantage of the debtor’s act.[27]
Petitioner UBP
then reasons that Section 7.04 of the MTI authorizes the foreclosure of the
mortgaged properties of respondent ASBDC even without the written request of
the Holders of 51% of the total outstanding face amount of the Participation
Certificates, provided that the Event of Default is under Section 7.01(c) or
(e) of the MTI. Section 7.04 reads:
Section 7.04. Except in clauses (c) and (e) of Section 7.01, no
foreclosure of the MORTGAGED PROPERTY or any part thereof may be made unless
(i) an Event of Default has occurred as provided for in Section 7.01 and (ii)
the HOLDERS of at least 51% of the total outstanding FACE AMOUNT of the
PARTICIPATION CERTIFICATES shall have given written instructions to the TRUSTEE
to foreclose. The TRUSTEE, within five
(5) working days after its receipt of written instructions to foreclose as
provided above, shall give written notice to the COMPANY [respondent
corporation] that it is foreclosing on the MORTGAGED PROPERTY or any part
thereof and shall furnish the other HOLDERS of PARTICIPATION CERTIFICATES who
did not give instructions to foreclose, and the
TRUSTEE shall have the right and power to foreclose immediately on all
the MORTGAGED PROPERTY or any part thereof for all the credits secured by this
INDENTURE, judicially or extrajudicially, in accordance with Philippine laws
and this INDENTURE.[28]
Petitioner
UBP is partially correct on this point.
There was indeed an Event of Default under Section 7.01(e) of the MTI
when respondent ASBDC filed a Petition for Rehabilitation with the SEC and
consented to the appointment of a Receiver; and pursuant to the plain wording
of Section 7.04 of the MTI, a foreclosure of the mortgaged properties or a part
thereof may be had under the circumstances even without the written request of
the Holders of at least 51% of the outstanding face amount of Participation
Certificates.
Despite
having the authority to foreclose the mortgaged properties under the MTI, the
extrajudicial foreclosure initiated by petitioner UBP, nevertheless, remains
invalid for being a blatant violation of the
WHEREFORE, the Petition is DENIED.
The Decision dated
SO ORDERED.
|
|
MINITA V. CHICO-NAZARIOAssociate Justice |
WE
CONCUR:
CONSUELO
YNARES-SANTIAGO
Associate Justice
Chairperson
Associate
Justice Associate
Justice
RUBEN T. REYES
Associate Justice
ATTESTATION
I attest 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’s Division.
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson,
Third Division
CERTIFICATION
Pursuant
to Section 13, Article VIII of the Constitution, and the Division Chairperson’s
Attestation, 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’s Division.
REYNATO S. PUNO
Chief
Justice
[1] Penned by Associate Justice Bienvenido L. Reyes with Associate Justices Godardo A. Jacinto and Rosalinda Asuncion-Vicente, concurring; rollo, pp. 72-91.
[2] Rollo, p. 90.
[3]
[4] REORGANIZATION OF THE SECURITIES AND EXCHANGE COMMISSION WITH ADDITIONAL POWERS AND PLACING THE SAID AGENCY UNDER THE ADMINISTRATIVE SUPERVISION OF THE OFFICE OF THE PRESIDENT.
[5] Rollo, p. 227.
[6] SECTION 3-12. Technical Insolvency of Petitioner. If it is established that the inability of the petitioner to pay, although temporary, will last for a period longer than one (1) year from the filing of the petition, the petitioner shall be considered technically insolvent and the petition shall be dismissed accordingly.
[7] SECTION 3-13. Supervening Insolvency or Violation of Suspension Order. – If at any time during the pendency of the proceedings, the petitioner has become or is shown to be insolvent, whether actual or technical, or that it has violated any of the conditions of the suspension order, or has failed to make payments on its obligations in accordance with the approved Repayment Schedule, the Commission shall terminate the proceedings and dismiss the petition. Instead of terminating the proceedings, however, the Commission may, upon motion, treat the petition as one for rehabilitation of the debtor. Thereupon, the pertinent provisions of the succeeding Rule shall govern the proceedings.
[8] SECTION 3-4. Effect of Filing of Petition. Upon the filing of the petition, an order shall be issued by the Commission suspending all actions and proceedings to enforce payment of all claims against the petitioner for a period of thirty (30) days from the issuance thereof but enjoining the petitioner during such period from selling, encumbering or transferring any of its properties in any manner or for whatever purpose, or from making any payment or any application thereof without the approval of the Commission. The order shall be automatically vacated upon the lapse of the said period unless extended or the period is granted. Its life may be extended only upon proof that petitioner will suffer irreparable injury unless so extended. In any event, the total period of the extension allowed may not exceed six (6) months.
[9] SECTION 3-8. – Suspension Order. If, after hearing, the solvency of the petitioner and the temporary inability to pay are established, the Commission shall issue an order suspending payment of all claims against the petitioner, and all actions and proceedings to enforce the same, during the period of temporary inability which in no case shall exceed one (1) year from the filing of the petition. The order shall also direct the petitioner to resume payment of its obligations upon the lapse of said period in accordance with the Repayment Schedule approved by the Commission. The order may impose on the petitioner such terms and conditions as are necessary for the protection of the creditors and shall cover all actions for the recovery of the property being used by the petitioner in the normal course of its business operations even though such property belongs to a creditor.
In any event, the petition shall be deemed ipso facto denied and dismissed if no decision was taken thereon by the Commission after the lapse of two hundred and forty (240) days from the filing thereof. In such case, all orders issued in the proceedings are deemed automatically vacated.
[10] SECTION 4-4. Effect of Filing of the Petition. – Immediately upon the filing of a petition, the Commission shall issue an Order (a) appointing an Interim Receiver and fixing his bond; (b) suspending all actions and proceedings for claims against the debtor; (c) prohibiting the debtor from selling, encumbering, transferring or disposing in any manner any of its properties except in the normal course of business in which the debtor is engaged; (d) prohibiting the debtor from making any payment of its liabilities outstanding as of the date of the filing of the petition; x x x.
[11] SECTION 5-1. – Creation of a Management Committee. Upon agreement of the parties, or upon showing that there is imminent danger of dissipation, loss, wastage or destruction of the debtor’s assets or those in its legal possession, or paralyzation of its business operations, the Commission may create a management committee for the debtor at any time during, the pendency of the petition for suspension of payments or for rehabilitation.
[12] CA rollo, pp. 109-119.
[13]
[14] SEC Rules of Procedure on Corporate Recovery, Rule IV, Section 4-21.
[15] Rollo, p. 398.
[16] Section 3-12. Technical Insolvency of Petitioner. – If it is established that the inability of the petitioner to pay, although temporary, will last for a period longer than one (1) year from the filing of the petition, the petitioner shall be considered technically insolvent and the petition shall be dismissed accordingly.
[17] Section 3-13. Supervening Insolvency or Violation of Suspension Order. – If at any time during the pendency of the proceedings, the petitioner has become or is shown to be insolvent, whether actual or technical, or that it has violated any of the conditions of the suspension order, or has failed to make payments on its obligations in accordance with the approved Repayment Schedule, the Commission shall terminate the proceedings and dismiss the petition. Instead of terminating the proceedings, however, the Commission may, upon motion, treat the petition as one for rehabilitation of the debtor. Thereupon the pertinent provisions of the succeeding Rule shall govern the proceedings.
[18] When the petitioning corporation is unable to pay its debts for a period longer than one year.
[19] SECTION
4-1. Who May Petition. – A debtor which
is insolvent because its assets are not sufficient to cover its liabilities, or
which is technically insolvent under Section 3-12 of these Rules, but which may
still be rescued or revived through the institution of some changes in its
management, organization, policies, strategies, operations, or finances, may
petition the Commission to be placed under rehabilitation.
Any
of the creditors or stockholders of the debtor may file the petition on its
behalf.
[20] SEC Rules of Procedure on Corporate Recovery, Rule III, Section 3-12.
[21] Reyes v. Court of Appeals, 328 Phil. 171, 179 (1996); Manila Bay Club Corporation v. Court of Appeals, 315 Phil. 805, 820 (1995).
[22]
[23] G.R. No. 166197,
[24] De
Knecht v. Court of Appeals, 352 Phil. 833, 847 (1998).
[25] G.R. No. L-47968,
[26] People v. Pinuila, 103 Phil. 992, 999 (1958).
[27] Rollo,
pp. 116-117.
[28]
[29] CA rollo, p. 108.