GR 190800; (November, 2018) (Digest)
G.R. No. 190800, November 7, 2018
Metropolitan Bank & Trust Company, Petitioner, vs. Fortuna Paper Mill & Packaging Corporation, Respondent.
FACTS
Petitioner Metropolitan Bank & Trust Company (MBTC) extended credit accommodations to respondent Fortuna Paper Mill & Packaging Corporation (Fortuna), secured by mortgages on Fortuna’s properties. Fortuna defaulted on its obligations. Instead of paying, Fortuna filed a Petition for Corporate Rehabilitation with the Regional Trial Court (RTC), attaching a proposed Rehabilitation Plan. The plan proposed a debt moratorium, interest rate reductions, an entry of a new investor, and a venture into condominium development to settle debts over eight years. The RTC initially found the petition sufficient and issued a Stay Order.
MBTC opposed the petition, arguing the Rehabilitation Plan was infeasible as it was not based on concrete financial data, the identified investor was not committed, and the condominium venture involved properties owned by separate corporate entities and already mortgaged to MBTC. The RTC eventually terminated the rehabilitation proceedings, finding the plan unworkable. However, the Court of Appeals (CA) dismissed MBTC’s petition challenging the initial order granting the rehabilitation petition, leading MBTC to elevate the case to the Supreme Court.
ISSUE
Whether the Court of Appeals erred in not finding grave abuse of discretion in the RTC’s initial order granting Fortuna’s Petition for Corporate Rehabilitation.
RULING
The Supreme Court dismissed the petition for being moot and academic. The core legal principle applied is that courts will not determine cases where no actual controversy exists or where the issues have been rendered academic by subsequent events. The RTC, in an order dated December 20, 2007, had already terminated the corporate rehabilitation proceedings upon finding Fortuna’s Rehabilitation Plan to be infeasible. This termination order was a supervening event that resolved the very subject of the controversy—the propriety of placing Fortuna under rehabilitation.
The Court emphasized that the termination of the proceedings meant there was no longer any live issue regarding the grant or implementation of the Rehabilitation Plan. An appeal becomes moot when the act sought to be enjoined or reversed has already been rendered ineffectual. Since the RTC itself declared the plan unworkable and ended the rehabilitation case, the question of whether the initial grant of the petition constituted grave abuse of discretion was rendered academic. The Court’s decision rests on the judicial policy of avoiding rulings on moot questions, as any declaration thereon would be without practical legal effect. The dismissal is without prejudice to the parties pursuing other legal remedies concerning the underlying financial obligations.