G.R. No. 183587 April 20, 2015
LEXBER, INC., Petitioner, vs. CAESAR M. and CONCHITA B. DALMAN, Respondents.

FACTS

Petitioner Lexber, Inc. is a domestic corporation engaged in housing, construction, and real estate development. Respondent-spouses Caesar and Conchita Dalman bought a house and lot from one of Lexber’s projects. Due to the 1997 Asian financial crisis, Lexber’s financial condition deteriorated, forcing it to discontinue projects, including the one involving the Spouses Dalman. Unable to pay its creditors, Lexber filed a petition for rehabilitation with prayer for suspension of payments. The Spouses Dalman are among its creditors, claiming either the house and lot or a refund of their ₱900,000.00 payment. The Regional Trial Court (RTC) gave due course to the rehabilitation petition and appointed a rehabilitation receiver. The Spouses Dalman filed a motion for reconsideration, arguing that the petition should have been dismissed outright because: (1) the rehabilitation plan was not approved within 180 days from the initial hearing as required by the Interim Rules, and (2) for a real estate company like Lexber, no rehabilitation petition should be given due course without a prior request from the Housing and Land Use Regulatory Board (HLURB) for the appointment of a receiver. The RTC denied their motion. The Court of Appeals (CA) granted the Spouses Dalman’s petition for certiorari, annulling the RTC orders. The CA ruled that the HLURB’s prior request was mandatory under PD 902-A and that the petition should be dismissed for non-compliance with the 180-day period. Lexber filed this petition, disclosing that the RTC had subsequently dismissed the rehabilitation petition due to disapproval of the plan, a matter pending in a separate CA case (CA G.R. No. 103917).

ISSUE

Whether the CA erred in finding grave abuse of discretion on the part of the trial court when it gave due course to the rehabilitation petition, despite: (a) the absence of the HLURB’s prior request for the appointment of a rehabilitation receiver; and (b) the lapse of the 180-day period for the approval of a rehabilitation plan.

RULING

The Supreme Court resolved to DENY the petition due to the pendency of CA G.R. No. 103917, which is reviewing the RTC’s subsequent order dismissing Lexber’s rehabilitation petition based on the disapproval of the rehabilitation plan. This denial is to avoid any conflicting ruling with the CA’s decision in that separate proceeding. The Court noted that under the subsequently enacted 2008 Rules of Procedure on Corporate Rehabilitation and the 2013 Financial Rehabilitation Rules of Procedure, review by the Court of Appeals is only available after the rehabilitation court issues an order approving or disapproving the rehabilitation plan, precisely to avoid multiple petitions and conflicting decisions.
Nevertheless, the Court addressed the substantive issues to correct erroneous legal reasoning. On the first issue, the Court held that the HLURB’s prior request for the appointment of a rehabilitation receiver is NOT a condition precedent before the trial court can give due course to a rehabilitation petition of a real estate company. The CA’s interpretation of Section 6(c) of PD 902-A was incorrect; the provision does not make such a request mandatory for the court to acquire jurisdiction or give due course to the petition. On the second issue, the Court held that the outright dismissal of a rehabilitation petition for non-compliance with the 180-day period for approval of the rehabilitation plan under the Interim Rules is not automatic. The Interim Rules should be liberally construed to facilitate the rehabilitation of distressed corporations, and the 180-day period is directory, not mandatory. Thus, the CA erred in ruling that the RTC committed grave abuse of discretion on these grounds.