G.R. No. 166197; February 27, 2007
METROPOLITAN BANK & TRUST COMPANY, Petitioner vs. ASB HOLDINGS, INC., ET AL., Respondents. CAMERON GRANVILLE 3 ASSET MANAGEMENT, INC., Intervenor.

FACTS

The ASB Group of Companies, owner and developer of condominium and real estate projects, filed a Petition for Rehabilitation with the Securities and Exchange Commission (SEC) pursuant to P.D. No. 902-A. The petition alleged that due to a glut in the real estate market, a severe drop in property sales, and the non-renewal of loans by creditors, the group was unable to service its obligations as they fell due, despite possessing sufficient assets to cover its liabilities. The SEC Hearing Panel found the petition sufficient and issued a Suspension Order, which, among other things, suspended all actions for claims against the ASB Group and appointed an interim receiver.
Metropolitan Bank and Trust Company (Metrobank), a major creditor with loans totaling over ₱1.5 billion secured by real estate mortgages, opposed the rehabilitation plan. Metrobank argued that the plan was not feasible, as it proposed to pay secured creditors like itself only after ten years, while unsecured creditors and condominium buyers would be paid earlier. The SEC approved the rehabilitation plan, a decision affirmed by the Court of Appeals. Metrobank elevated the case to the Supreme Court via a Petition for Review on Certiorari.

ISSUE

Whether the Court of Appeals erred in affirming the SEC’s approval of the rehabilitation plan for the ASB Group of Companies.

RULING

The Supreme Court denied Metrobank’s petition and affirmed the appellate court’s decision. The legal logic centers on the nature and purpose of corporate rehabilitation under P.D. No. 902-A. Rehabilitation is an equitable proceeding designed to conserve and administer the assets of a distressed corporation for the benefit of all its creditors and stockholders, with the paramount goal of restoring the corporation to a state of economic viability.
The Court emphasized that in rehabilitation proceedings, the SEC exercises its sound business judgment and discretion. Its findings, especially on the feasibility of a rehabilitation plan, are accorded great weight and respect, and will not be disturbed on appeal absent a showing of grave abuse of discretion. The Court found no such abuse. The approved plan, which prioritized payments to unsecured creditors and condominium buyers to enable the continuation of projects and generation of income, was crafted to serve the collective interest of all stakeholders. While Metrobank, as a secured creditor, preferred immediate foreclosure, such an action would have led to the piecemeal liquidation of assets, potentially harming other creditors and defeating the very purpose of rehabilitation. The temporary restraint on Metrobank’s foreclosure rights was a necessary consequence of the suspension order intended to give the corporation a chance to recover, which ultimately benefits all creditors.