G.R. No. 165571; January 20, 2009
PHILIPPINE NATIONAL BANK and EQUITABLE PCI BANK, Petitioners, vs. HONORABLE COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION EN BANC, ASB HOLDINGS, INC., ASB REALTY CORPORATION, ASB DEVELOPMENT CORPORATION (formerly TIFFANY TOWER REALTY CORPORATION), ASB LAND INC., ASB FINANCE, INC., MAKATI HOPE CHRISTIAN SCHOOL, INC., BEL-AIR HOLDINGS CORPORATION, WINCHESTER TRADING, INC., VYL DEVELOPMENT CORPORATION, GERICK HOLDINGS CORPORATION, and NEIGHBORHOOD HOLDINGS, INC., Respondents.

FACTS

Petitioners Philippine National Bank (PNB) and Equitable PCI Bank are members of a consortium of creditor banks that granted a loan of PhP 1,081,000,000 to respondent ASB Development Corporation (ASBDC), secured by a mortgage on five parcels of land. The ASB Group of corporations, owned by Luke C. Roxas and engaged in real estate development, filed a verified petition for rehabilitation with the Securities and Exchange Commission (SEC) on May 2, 2000 (SEC Case No. 05-00-6609). They cited financial distress due to the non-renewal/withdrawal of loans, a real estate market glut, peso devaluation, and decreased investor confidence, leading to an inability to pay obligations as they fell due. The ASB Group reported assets of PhP 19,410,000,000 and liabilities of PhP 12,700,000,000. The SEC Hearing Panel issued an order suspending all actions for claims for 60 days, enjoining the disposition of properties, and appointing an interim receiver. The consortium of creditor banks opposed the petition on multiple grounds, including failure to state a cause of action, non-compliance with rules, and the plan’s lack of viability. The ASB Group submitted a Rehabilitation Plan on August 18, 2000. The Hearing Panel, on October 10, 2000, denied the banks’ opposition and later approved the Rehabilitation Plan on April 26, 2001. The SEC en banc and the Court of Appeals upheld the Hearing Panel’s orders and the approval of the Rehabilitation Plan.

ISSUE

Whether the SEC and the Court of Appeals correctly upheld the approval of the Rehabilitation Plan and the appointment of a rehabilitation receiver for the ASB Group.

RULING

The Supreme Court DENIED the petition and AFFIRMED the Decision and Resolution of the Court of Appeals. The Court held that the SEC did not act arbitrarily or whimsically in approving the Rehabilitation Plan and appointing a receiver. The ASB Group, foreseeing its inability to pay its obligations within a year, was technically insolvent and qualified for rehabilitation under the rules. The joint filing of the petition by the ASB corporations was permissible as their businesses and finances were intertwined. The suspension of payments and the injunction against enforcing claims were necessary to prevent a disorderly scramble for the debtor’s assets and to provide an opportunity for rehabilitation. The Court cited precedent establishing that upon the appointment of a management committee or rehabilitation receiver, all claims by creditors, both secured and unsecured, are suspended, and secured creditors may not assert their preference during the pendency of the rehabilitation proceedings. The approval of the Rehabilitation Plan was a proper exercise of the SEC’s administrative discretion to prevent the dissolution of the corporations and to maximize asset recovery for the benefit of all creditors and stakeholders.