Republic
of the
Supreme
Court
SECOND DIVISION
|
ASIATRUST
DEVELOPMENT BANK, Petitioner, - versus - FIRST AIKKA DEVELOPMENT,
INC. and UNIVAC DEVELOPMENT, INC., Respondents. |
G.R.
No. 179558
Present: CARPIO,
J., Chairperson, NACHURA,
PERALTA,
ABAD,
and MENDOZA,
JJ. Promulgated: June 11,
2011 |
x------------------------------------------------------------------------------------x
DECISION
NACHURA, J.:
This is a
petition for review on certiorari
under Rule 45 of the Rules of Court, assailing the Court of Appeals (CA)
Decision[1]
dated June 28, 2007 and Resolution[2]
dated August 29, 2007 in CA-G.R. SP No. 97408.
The Facts
Respondents
First Aikka Development, Inc. (FADI) and Univac Development, Inc. (UDI) are
domestic corporations engaged in the construction and/or development of roads,
bridges, infrastructure projects, subdivisions, housing, land, memorial parks,
and other industrial and commercial projects for the government or any private
entity or individual.[3]
In the course of their business, FADI
and UDI availed of separate loan accommodations or credit lines with petitioner
Asiatrust Development Bank.[4]
The aggregate amount of the loan obtained by respondents was P114,000,000.00. Respondents
religiously and faithfully complied with their loan obligations, but during the
Asian Financial Crisis, which directly and adversely affected mainly the
construction and real estate industry, respondents could not pay their
obligations in cash.[5]
This prompted respondents to negotiate with petitioner for different modes of
payment that the former might avail of. Petitioner thus agreed that respondents
assign the receivables of their various contracts to sell involving the lots in
the residential subdivision projects they were developing, instead of paying in
cash.[6]
Notwithstanding the above agreement, petitioner
insisted on collecting the loan per the loan documents. Petitioner claimed that
respondents were already in default and demanded the payment of P145,830,220.95. Respondents
denied that they were in default because of the assignment of their receivables
to petitioner. Respondents contested petitioners claim and demanded for an
accounting to determine the correct and true amount of their obligations.[7]
On May 10,
2006, respondents filed a consolidated Petition for Corporate Rehabilitation
with Prayer for Suspension of Payments[8]
with the Regional Trial Court (RTC) of
On May 16, 2006, the RTC issued an
Order,[12]
the pertinent portions of which read:
After
an examination of the contents of the petition setting forth with sufficient
particularity and material facts pursuant to Section 2 of Rule 4 of the Interim
Rules of Procedures (sic) of Corporate Rehabilitation and the supporting
documents attached thereto and finding the same to be sufficient in form and
substance, the Court hereby:
1.
ORDERS STAYING enforcement of all claims whether for
money or otherwise and whether such enforcement is by court action or
otherwise, against the debtors (herein petitioners)[, their] guarantors and [sureties]
not solidarily liable with the debtors. In particular[,] ASIATRUST BANK BE
STAYED from proceeding with the foreclosure and auction sale of the mortgaged
properties;
2. APPOINTS PATRICK V. CAOILE as interim rehabilitation receiver with
a bond of two million (P2,000,000.00) pesos;
x
x x x
7. FIXES
the initial hearing on the petition on June 29, 2006 at 11:00 oclock (sic) in
the morning.[13]
On
June 2, 2006, Robert Cuchado, an officer of petitioner, went to Baguio City to
secure a copy of the petition for rehabilitation but failed to do so because,
at that time, the personnel of the rehabilitation court were attending the
Judicial Service Training. Petitioner then tried to secure a copy of the
petition through the sheriff of the RTC of La Trinidad, Benguet. The
rehabilitation court, however, required petitioner to file a motion to that
effect, together with a written document authorizing the sheriff to secure a
copy thereof. On June 9, 2006, the rehabilitation court issued an Order
granting the motion filed by petitioner and gave it a certified true copy of
the petition.[14]
On
the day of the initial hearing, petitioner, through its counsel Atty. Mario C.
Lorenzo (Atty. Lorenzo), went to court with a Motion for Leave of Court to
Admit Opposition to Rehabilitation Petition[15]
with the attached Opposition to Petition for Rehabilitation.[16]
In an Order[17] dated
July 17, 2006, the RTC denied the motion and explained:
Under
par. 9 of the Stay Order[,] all creditors, etc., were given ten (10) days
before the initial hearing to file their comment or opposition to the petition
and putting them on notice that failure to do so will bar them from
participating in the proceedings.
It
is only on June 29, 2006, the date of the initial hearing that Asiatrust filed
its Motion with Leave to Admit Opposition. The motion partakes of the nature of
a motion for extension of time to file pleading which is a prohibited pleading
under Rule 3(e) of the Interim Rules of Procedure on Corporate Rehabilitation.[18]
On
July 31, 2006, when the case was called for hearing, Enrico J. Ong (Ong)
appeared as representative of petitioner because the latters counsel could not
go to court due to the cancellation of his flight as a result of bad weather.
The rehabilitation court recognized the appearance of Ong only to inform the
court that the counsel for petitioner could not attend the hearing. There being
no other oppositors or creditors in court despite due notices, the
rehabilitation court terminated the initial hearing and directed the
rehabilitation receiver to evaluate respondents rehabilitation plan and then
report the results thereof to the court.[19]
On
October 13, 2006, the rehabilitation receiver called for a conference and
presented the draft of the rehabilitation report to petitioner, represented by
Atty. Lorenzo and Ong, and to respondents. Petitioner filed a manifestation and
motion in court calling its attention to the alleged refusal of the receiver to
hear its side. Petitioner thus asked for judicial assistance to enable it to
actively participate in the rehabilitation proceedings and protect its
interest. The receiver finalized and later on filed his evaluation report in
court. He recommended the approval of the rehabilitation plan.[20]
On
December 5, 2006, the RTC issued an Order,[21]
the pertinent portions of which read:
On the same ground under Rule 3 of the
Interim Rules, the Motion of Oppositor Asiatrust to participate in the
Rehabilitation Proceedings is DENIED.
This pleading partakes of a [P]etition for Relief which is also a prohibited
pleading under par. d of Rule 3 of the same rule. Moreover, the motion has also
the purpose to reconsider the courts ruling in denying the admission of their
opposition to the [P]etition for Rehabilitation.
It
must be stressed that under par. 9 of the Stay Order, All creditors, etc.,
were given ten (10) days before the initial hearing to file their comment or
opposition to the petition and putting
them on notice that failure to do so will bar them from participating in the
proceedings.
As
to the Rehabilitation Report and the Integrated Revised Rehabilitation Plan and
Schedule of the petitioners, the court, after a careful and thorough
examination and review of the report, it is its considered judgment that the
rehabilitation of the debtor is feasible and hereby APPROVES the Rehabilitation
Report and the REVISED REHABILITATION PLAN.
x x x x
WHEREFORE, premises all duly considered, the
Motion of Asiatrust to participate in the Rehabilitation Proceedings is hereby
DENIED, the Rehabilitation Report and the Integrated Revised Rehabilitation
Plan of Receiver Patrick Caoile is APPROVED and the Notice of the Appearance of
the Cabato Law Office as collaborating counsel for Oppositor Asiatrust is
NOTED.
The court appointed Receiver shall submit his
report every three (3) months and a yearly report on the status of the progress
of the rehabilitation and the implementation and monitoring of the same.
SO ORDERED.[22]
Aggrieved,
petitioner elevated the case to the CA via a Petition for Review[23]
under Rule 43 of the Rules of Court.
On
June 28, 2007, the appellate court affirmed the above RTC Orders. The appellate
court emphasized that petitioners failure to participate in the rehabilitation
proceedings was due to its own fault. First, petitioner failed to file on time
its opposition to the petition for rehabilitation
and still failed to present good reason
for it to be belatedly admitted. Second, on the date of the second hearing, its
counsel failed to go to court allegedly due to the cancellation of his flight,
which, to the mind of the court, was inexcusable. Lastly, instead of filing a
comment to the rehabilitation proceedings, petitioner filed a motion to
participate in the rehabilitation proceedings, which is a prohibited pleading.
The CA thus concluded that petitioner was given every opportunity to be heard
in the rehabilitation proceedings, but it failed to avail of these remedies. On
the propriety of the joint petition for rehabilitation, the CA opined that the
Interim Rules of Procedure on Corporate Rehabilitation (the Rules) contains no
prohibition. Finally, the CA stressed that rehabilitation proceedings are
non-adversarial and summary in nature which, therefore, necessitate the proper
observance of the period and procedures provided for by law and the Rules.[24]
The Issues
Undaunted,
petitioner comes before this Court, raising the following errors:
A.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
COMMITTED GRAVE ERRORS OF LAW WHEN IT FAILED TO RULE THAT PETITIONER WAS
UNJUSTLY DEPRIVED OF ITS PROPERTY WITHOUT DUE PROCESS OF LAW WHEN IT WAS NOT
ALLOWED TO PROVE THE TRUE AND CORRECT AMOUNT OF THE LOAN OBLIGATIONS OWING TO
IT BY THE RESPONDENTS BASED ON A MERE TECHNICALITY, IN BLATANT DISREGARD OF THE
APPLICABLE LAWS AND DECISIONS OF THIS HONORABLE COURT.
B.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
COMMITTED GRAVE ERRORS OF LAW WHEN IT AFFIRMED THE APPROVAL OF THE
REHABILITATION PLAN DESPITE THE REHABILITATION COURTS FAILURE TO CONDUCT A
CLARIFICATORY HEARING TO RESOLVE THE UNSETTLED ISSUE ON THE AMOUNT OF
INDEBTEDNESS OF PRIVATE RESPONDENTS AND THE REHABILITATION RECEIVERS FAILURE
TO MAKE A CREDIBLE AND INDEPENDENT INVESTIGATION ON THE AMOUNT OF INDEBTEDNESS
OF RESPONDENT CORPORATIONS, THEREBY DEVIATING FROM THE USUAL AND ACCEPTED
COURSE OF JUDICIAL PROCEEDINGS.
C.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
COMMITTED GRAVE ERRORS OF LAW WHEN IT INEXPLICABLY AFFIRMED THE
D.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
COMMITTED A SERIOUS ERROR OF LAW WHEN IT REFUSED TO
E.
WHETHER OR NOT THE HONORABLE COURTS EXERCISE
OF ITS DISCRETIONARY REVIEW POWERS IS WARRANTED UNDER THE CIRCUMSTANCES.[25]
Petitioners Arguments
Petitioner avers that it was denied due process when the
rehabilitation court refused to admit its opposition to the petition for
rehabilitation and to comment on the
rehabilitation plan.[26]
It explains that the late submission of the opposition was brought about by the
baseless and unfounded requirements imposed by the court.[27]
Considering that there are valid and substantial grounds for the dismissal of
the petition for rehabilitation, petitioner insists that its comment and
opposition should have been admitted by the rehabilitation court. Petitioner
points out that while the court denied its motion for leave to admit its
opposition, it (the court) allowed the Securities and Exchange Commission to
submit its comment long after the prescribed period.[28]
Petitioner adds that the
rehabilitation courts unwarranted refusal to recognize the appearance of its
duly authorized representative constitutes a denial of its right to due
process.[29] Petitioner
also insists that mere delay in the submission of the comment on the petition
for rehabilitation does not warrant the denial of petitioners right to
participate in the rehabilitation proceedings. It likewise assails the
rehabilitation courts jurisdiction over UDI, whose principal place of business
is in
Respondents Arguments
Respondents, on the other hand, aver that the petition is
legally infirm as there are no special important reasons for the Court to exercise
its sound judicial discretion to review the assailed CA Decision.[33]
They also argue that petitioners
failure to participate in the rehabilitation proceedings could be attributed to
its counsels own slackness and disregard for the rules.[34]
On the issue of the rehabilitation courts jurisdiction, respondents counter
that petitioner could no longer assail it as petitioner actively participated
and continues to participate in the rehabilitation proceedings, including the receipt
of payments in accordance with the approved rehabilitation plan.[35]
They explain that in the Orders dated May 16, 2006, the rehabilitation court
held that the petition is sufficient in form and substance; July 17, 2006, the
rehabilitation court denied petitioners motion for leave to admit its comment
on the petition for rehabilitation; and July 31, 2006, the court declared that
there is merit in the petition which was given due course. Petitioners failure
to assail the above orders rendered them final and immutable. Respondents thus
opine that petitioner could no longer assail them in this petition for review.[36]
Respondents likewise
insist that petitioner could no longer participate in the rehabilitation
proceedings because of its failure to file its comment on the petition. In other
words, respondents said, the filing of the comment on the petition is a
condition precedent to the filing of the comment on the rehabilitation plan.[37]
On the amount of the loan obligation, respondents claim that there was a valid
basis and there was a determination of the true and correct amount thereof.[38]
The Courts Ruling
Though the rehabilitation proceedings had gone as far as
the approval and the subsequent implementation of the rehabilitation plan, we must
confront the issue of the rehabilitation courts jurisdiction to hear and
decide the case insofar as respondent UDI is concerned. A perusal of
petitioners pleadings clearly shows that it had repeatedly raised the
jurisdictional question. The courts below, however, ignored this issue as they
did not recognize petitioners right to participate in the rehabilitation
proceedings.
While it is true that petitioner had been asking the
rehabilitation and appellate courts that it be allowed to participate, contrary
to respondents contention, the same did not amount to estoppel that would bar it
from questioning the rehabilitation courts jurisdiction. It is well-settled
that the courts jurisdiction may be assailed at any stage of the proceedings,
even for the first time on appeal. The reason is that jurisdiction is conferred
by law, and lack of it affects the very authority of the court to take
cognizance of and to render judgment on the action.[39]
In its Opposition to the petition for rehabilitation, petitioner already
questioned the courts jurisdiction over UDI. On appeal to the CA, it again
raised the same issue, but it failed to obtain a favorable decision. We cannot,
therefore, say that petitioner slept on its rights. It is not estopped from
raising the jurisdictional issue even at this stage. In any event, even if petitioner
had not raised the issue of jurisdiction, the reviewing court would still not
be precluded from ruling on the matter of jurisdiction.
Neither can estoppel be
imputed to petitioner for its receipt of payments made by respondents in
accordance with the rehabilitation plan. It has been established that in its
letters to respondents, petitioner explained that it received payments subject
to the results of its appeal. Besides, it
is a basic rule that estoppel does not confer jurisdiction on a tribunal that
has none over the cause of action or subject matter of the case.[40]
Records
show that the Petition for Corporate Rehabilitation with Prayer for Suspension
of Payments[41]
was filed by two corporations, namely, FADI and UDI. Respondent FADI is a real
estate corporation duly organized and existing under and by virtue of
Philippine laws, with principal place of business in
We find that the consolidation of the petitions involving
these two separate entities is not proper.
Although FADI and UDI have interlocking directors, owners,
and officers and intertwined loans, the two corporations are separate, each
with a personality distinct from the other. To be sure, in determining the
feasibility of rehabilitation, the court evaluates the assets and liabilities
of each of these corporations separately and not jointly with other corporations.
Moreover, Section 2, Rule
3 of the Rules, the rule applicable at the time of the filing of the petition,
provides:
Sec. 2. Venue. Petitions for rehabilitation pursuant to these Rules shall
be filed in the Regional Trial Court having jurisdiction over the territory
where the debtors principal office is located.
Considering that UDIs
principal office is located in
This error, however, will not result in the dismissal of
the entire petition since the RTC of Baguio City had jurisdiction over the
petition of FADI in accordance with the above-quoted provision of the Rules.
On the issue of whether
the rehabilitation court, as affirmed by the CA, correctly denied petitioners
prayer to participate in the rehabilitation proceedings because of the belated
filing of its Comment/Opposition to respondents petition for
rehabilitation, we answer in the
negative.
The Court promulgated the
Rules in order to provide a remedy for summary and non-adversarial
rehabilitation proceedings of distressed but viable corporations.[45]
These Rules are to be construed liberally to obtain for the parties a just,
expeditious, and inexpensive disposition of the case.[46]
To be sure, strict compliance with the rules of procedure is essential to the
administration of justice. Nonetheless, technical rules of procedure are mere
tools designed to facilitate the attainment of justice. Their strict and rigid
application should be relaxed when they hinder rather than promote substantial
justice.[47]
Otherwise stated, strict application of technical rules of procedure should be
shunned when they hinder rather than promote substantial justice.[48]
In this case, instead of filing its opposition to the
petition for rehabilitation at least ten days before the date of the initial
hearing as required by the Rules, petitioner filed a Motion for Leave of Court to Admit
Opposition to Rehabilitation Petition[49]
with the attached Opposition to Petition for Rehabilitation[50]
on the date of the initial hearing. Because the pleading was not filed on time,
the RTC denied the motion. While the court has the discretion whether or not to
admit the opposition belatedly filed by petitioner, it is our considered
opinion that the RTC gravely abused its discretion when it refused to grant the
motion, even as the factual circumstances of the case require that the Rules be
liberally construed in the interest of justice.
Admittedly,
petitioner is respondents major creditor. The parties even explained that the
new payment scheme adopted in the approved rehabilitation plan maintained the
same scheme as that stipulated in the contracts between respondents and their
creditors except that of petitioner. In other words, respondents could pay the
other creditors in the same manner as that stipulated in their contracts but
could not abide by the terms of their contracts with petitioner.
Moreover, petitioner and respondents
differ in their assessment and computation of the latters obligations to the
former. Petitioner claims that respondents owe it P145,830,220.95, while
the latter only admit a total obligation of P24,202,015. This disparity
in the parties claims makes it more important for the rehabilitation court to have
given petitioner the opportunity to be heard. Besides, in their petition before
the RTC, respondents sought the determination of the true and correct amount of
their loan with petitioner.[51] We consider this as a compelling reason for
the liberal interpretation of the Rules, and the rehabilitation court should
have admitted petitioners comment on the petition for rehabilitation and allowed
petitioner to participate in the proceedings.
Time and again, we have held that cases should, as much as
possible, be resolved on the merits, not on mere technicalities. In cases where
we dispense with the technicalities, we do not mean to undermine the force and
effectivity of the periods set by law. In those rare cases where we did not
stringently apply the procedural rules, there always existed a clear need to
prevent the commission of a grave injustice, as in the present case.[52]
Our judicial system and the courts have always tried to maintain a healthy
balance between the strict enforcement of procedural laws and the guarantee
that every litigant be given the full opportunity for the just and proper
disposition of his cause.[53]
Corporate rehabilitation connotes the restoration of the
debtor to a position of successful operation and solvency, if it is shown that its
continued operation is economically feasible and its creditors can recover by
way of the present value of payments projected in the rehabilitation plan, more
if the corporation continues as a going concern than if it is immediately
liquidated.[54]
Rehabilitation proceedings in our jurisdiction have
equitable and rehabilitative purposes. On the one hand, they attempt to provide
for the efficient and equitable distribution of an insolvent debtors remaining
assets to its creditors; and on the other, to provide debtors with a fresh
start by relieving them of the weight of their outstanding debts and
permitting them to reorganize their affairs.[55]
The purpose of rehabilitation proceedings is to enable the company to gain a new
Lease on life and thereby allow creditors to be paid their claims from its
earnings.[56]
The determination of the true and correct amount due
petitioner is important in assessing whether FADI may be successfully
rehabilitated. It is thus necessary that petitioner be given the opportunity to
be heard by the rehabilitation court. The court should admit petitioners
comment on or opposition to FADIs petition for rehabilitation and allow
petitioner to participate in the rehabilitation proceedings to determine if indeed
FADI could maintain its corporate existence. A remand of the case to the
rehabilitation court is, therefore, imperative. To be sure, the successful
rehabilitation of a distressed corporation will benefit its debtors, creditors,
employees, and the economy in general.[57]
As much as we would like
to honor the rehabilitation plan approved by the rehabilitation court, particularly
because it has already been partially implemented, we cannot sustain the
decision of the court, as affirmed by the CA, if we are to ensure that
rehabilitation is indeed feasible. It is especially important in this case to
hear petitioner, as the major creditor of the distressed corporation, since it
is a banking institution.
Banks are entities
engaged in the lending of funds obtained through deposits from the public. They
borrow the publics excess money and lend out the same. Banks, therefore,
redistribute wealth in the economy by channeling idle savings to profitable
investments.[58]
Banks operate (and earn income) by extending credit facilities financed primarily
by deposits from the public. They plough back the bulk of said deposits into
the economy in the form of loans. Since banks deal with the publics money,
their viability depends largely on their ability to return those deposits on
demand. For this reason, banking is undeniably imbued with public interest.
Consequently, much importance is given to sound lending practices and good
corporate governance.[59]
WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The Court of Appeals Decision dated
June 28, 2007 and Resolution dated August 29, 2007 in CA-G.R. SP No. 97408 are SET ASIDE. Consequently, the Order of
the RTC dated July 17, 2006 and those issued subsequent thereto are hereby NULLIFIED.
We REMAND the records of the case
pertaining to the petition for rehabilitation of First Aikka Development, Inc.
to the
The
SO
ORDERED.
ANTONIO
EDUARDO B. NACHURA
Associate
Justice
Chairperson
WE CONCUR:
ANTONIO T. CARPIO
Associate Justice
Chairperson
|
DIOSDADO
M. PERALTA Associate Justice |
ROBERTO
A. ABAD Associate Justice |
JOSE CATRAL
Associate Justice
ATTESTATION
I attest that the
conclusions in the above Decision had been reached in consultation before the
case was assigned to the writer of the opinion of the Courts Division.
ANTONIO T.
CARPIO
Associate Justice
Chairperson, Second Division
CERTIFICATION
Pursuant to Section
13, Article VIII of the Constitution and the Division Chairpersons Attestation,
I certify that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Courts Division.
RENATO
C. CORONA
Chief Justice
[1] Penned
by Associate Justice Marlene Gonzales-Sison, with Associate Justices Juan Q.
Enriquez, Jr. and Vicente S.E. Veloso, concurring; rollo, pp. 105-118.
[2]
[3] Supra
note 1, at 105.
[4] Rollo, p. 125.
[5]
[6]
[7]
[8]
[9]
[10]
[11]
[12]
[13]
[14]
[15]
[16]
[17]
[18]
[19]
[20]
[21]
[22]
[23] CA
rollo, pp. 7-38.
[24] Supra
note 1, at 110-117.
[25] Rollo, pp. 544-546.
[26]
[27]
[28]
[29]
[30]
[31]
[32]
[33]
[34]
[35]
[36]
[37]
[38]
[39] Sales v. Barro, G.R. No. 171678,
December 10, 2008, 573 SCRA 456, 464.
[40] Atwel v. Concepcion Progressive Association,
Inc., G.R. No. 169370, April 14, 2008, 551 SCRA 272, 283.
[41] Supra
note 1.
[42]
[43]
[44]
[45] North Bulacan Corporation v. Philippine Bank
of Communications, G.R. No. 183140,
August 2, 2010, 626 SCRA 260, 262-263.
[46]
[47] Tan v. Planters Products, Inc., G.R. No. 172239, March 28, 2008, 550
SCRA 287, 300.
[48]
[49] Supra
note 15.
[50] Supra
note 16.
[51] Rollo, pp. 127-128.
[52] Tanenglian v. Lorenzo, G.R. No. 173415,
March 28, 2008, 550 SCRA 348, 364.
[53]
[54] Castillo v. Uniwide Warehouse Club, Inc.,
G.R. No. 169725, April 30, 2010, 619 SCRA 641, 646.
[55] China Banking Corporation v. ASB Holdings,
Inc., G.R. No. 172192, December 23, 2008, 575 SCRA 247, 259, citing Bank of the Philippine Islands v. Securities
and Exchange Commission, G.R. No. 164641, December 20, 2007, 541 SCRA 294,
301.
[56] Philippine National Bank v. Court of Appeals,
G.R. No. 165571, January 20, 2009, 576 SCRA 537, 559; Metropolitan Bank and Trust Company v. ASB Holdings, Inc., G.R. No.
166197, February 27, 2007, 517 SCRA 1, 15.
[57] Pacific Wide Realty and Development
Corporation v. Puerto Azul Land, Inc., G.R. Nos. 178768 & 180893,
November 25, 2009, 605 SCRA 503, 517.
[58] Banco de Oro-EPCI, Inc. v. JAPRL Development
Corporation, G.R. No. 179901, April 14, 2008, 551 SCRA 342, 355.
[59]