G.R. No. 177382 February 17, 2016
VIVA SHIPPING LINES, INC., Petitioner, vs. KEPPEL PHILIPPINES MINING, INC., ET AL., Respondents.

FACTS

Petitioner Viva Shipping Lines, Inc. filed a Petition for Corporate Rehabilitation, later amended, before the Regional Trial Court (RTC) of Lucena City. The company claimed it owned 19 vessels and a shopping mall, with total property assessed at about ₱45 million, and sought rehabilitation due to financial distress from currency devaluation, competition, and mismanagement. However, its submitted Property Inventory List contradicted these claims, showing ownership of only two vessels and listing total asset fair market value at ₱447.86 million, with a significant portion already encumbered. The RTC initially issued a Stay Order and appointed a rehabilitation receiver.
Several creditors, including Metropolitan Bank & Trust Company and Keppel Philippines Marine, Inc., filed oppositions. The appointed rehabilitation receiver later withdrew. Metrobank also filed a Motion for Production of documents, which the RTC granted, but Viva Shipping Lines failed to comply. The company further failed to submit a required memorandum. Subsequently, the RTC lifted the stay order and dismissed the rehabilitation petition.

ISSUE

Whether the Court of Appeals correctly affirmed the RTC’s dismissal of the petition for corporate rehabilitation.

RULING

Yes, the Supreme Court affirmed the dismissal. The ruling emphasized that a petition for corporate rehabilitation must strictly comply with procedural and substantive requirements to establish a credible basis for rehabilitation. The Court found that Viva Shipping Lines failed to demonstrate the feasibility of its rehabilitation plan. Critical inconsistencies existed between its allegations and supporting documents regarding asset ownership and value, undermining the petition’s credibility. Furthermore, the company’s non-compliance with court orders, including the failure to produce vital business documents and to file a memorandum, indicated a lack of good faith and a failure to substantiate its claim for rehabilitation. The Interim Rules on Corporate Rehabilitation require the petition to show that the debtor is illiquid but has a viable business that can be rehabilitated. The burden of proof lies with the petitioner. Here, the petitioner not only failed to meet this burden through its contradictory submissions but also through its disregard for procedural directives, which justified the dismissal of its petition for failure to establish a convincing case for rehabilitation.