G.R. No. 170625 October 17, 2008
BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. COURT OF APPEALS and TF KO DEVELOPMENT CORPORATION, respondents.

FACTS

TF KO Development Corporation (respondent), a domestic corporation engaged in agricultural commerce and subdivision development, filed a petition for declaration of suspension of payments with approval of a proposed rehabilitation plan before the Regional Trial Court (RTC) of General Santos City. Respondent had obtained loans from several banks, including the Bank of the Philippine Islands (BPI, petitioner), Land Bank of the Philippines (LBP), and Metropolitan Bank & Trust Co. (Metrobank). At the time of the petition, foreclosure proceedings by LBP and BPI on mortgaged properties were pending. The RTC issued a Stay Order, appointed a rehabilitation receiver, and after proceedings, approved the rehabilitation plan on January 24, 2005. The plan detailed a schedule of payments for BPI and LBP, discharged Metrobank (with its obligation to be settled personally by the corporation’s president), and terminated the stay order and the receiver’s duties. Petitioner BPI received the RTC decision on January 26, 2005, and after being granted an extension by the Court of Appeals, filed a petition for review on February 28, 2005. The Court of Appeals dismissed BPI’s petition on procedural grounds via a Resolution dated July 29, 2005, and denied its motion for reconsideration on November 22, 2005. BPI then filed the instant petition before the Supreme Court, assailing both the CA’s procedural dismissal and the RTC’s approval of the rehabilitation plan.

ISSUE

1. Whether the Court of Appeals correctly dismissed BPI’s petition for review on procedural grounds.
2. Whether the RTC correctly approved the rehabilitation plan of TF KO Development Corporation.

RULING

1. On the procedural dismissal: The Supreme Court found the petition meritorious and reversed the Court of Appeals’ dismissal. The Court held that several of the procedural errors cited by the CA were either unsupported by the records or not sufficient grounds for dismissal. Specifically: (a) The petition for review was filed on time because the last day of the extended period (February 25, 2005) was a special national holiday, making the filing on February 28, 2005 timely. (b) The motion for reconsideration was timely filed via registered mail, as shown by the post office stamp. (c) The alleged lack of authority of the signatory in the verification and certification was not a fatal defect. (d) The failure to indicate the date of issue of the IBP O.R. was a minor oversight. (e) The non-payment of docket fees for the prayer for a TRO/injunction was inconsequential since no injunctive relief was granted. The Court emphasized that rules of procedure should be liberally construed to secure a just determination of every action, and the dismissal of appeals on purely technical grounds is frowned upon.
2. On the merits of the rehabilitation: The Supreme Court reversed the RTC’s decision approving the rehabilitation plan. The Court ruled that the petition for rehabilitation was fatally defective for lack of a certification against forum shopping, which is a mandatory requirement. Furthermore, the rehabilitation was not feasible as a matter of law. Citing jurisprudence (e.g., Shipside Inc. v. Court of Appeals), the Court held that rehabilitation is not available when the debts have already become due and demandable prior to the filing of the petition. In this case, BPI’s credit had matured as early as February 2002, and foreclosure proceedings were already pending when the rehabilitation petition was filed in November 2003. The purpose of rehabilitation is to assist distressed corporations in regaining viability, not to indefinitely suspend the enforcement of legitimate claims by creditors. Therefore, the RTC should have dismissed the petition outright.