G.R. No. 195289 September 24, 2014
Robinson’s Bank Corporation (formerly The Royal Bank of Scotland [Phils.], Inc.), Petitioner, vs. Hon. Samuel H. Gaerlan, Hon. Hakim S. Abdulwahid and Hon. Ricardo R. Rosario, in their capacity as Associate Justices respectively of the Tenth Division of the Court of Appeals, and Trade and Investment Development Corporation of the Philippines, Respondents.

FACTS

World Granary Corporation (WGC) filed a Petition for Rehabilitation before the Regional Trial Court (RTC) of Lucena City. WGC incurred loans from Robinson’s Bank Corporation (RBC) and Trade and Investment Development Corporation of the Philippines (TIDCORP), with RBC being both a secured and unsecured creditor and TIDCORP being a secured creditor. The RTC issued a Stay Order and later gave due course to the petition. The rehabilitation receiver submitted a Report recommending, among others, a pari passu (equal) sharing between secured and unsecured creditors of the proceeds from WGC’s cash flow for debt servicing. TIDCORP objected, insisting on preferential treatment for secured creditors. RBC opposed TIDCORP, arguing that during rehabilitation, secured and unsecured creditors stand on equal footing, and preference only applies upon liquidation. The RTC approved the rehabilitation plan, conditioning that all obligations, except TIDCORP’s guarantee fees, be settled on a pari passu basis. TIDCORP filed a Petition for Review before the Court of Appeals (CA) assailing this order. RBC filed an Urgent Motion for Intervention with attached Comment in Intervention, arguing against TIDCORP’s preferential treatment and that TIDCORP knew of WGC’s additional loans. TIDCORP opposed the intervention, citing Rule 3, Section 1 of the Interim Rules of Procedure on Corporate Rehabilitation, which lists “Intervention” as a prohibited pleading. The CA denied RBC’s motion for intervention, holding that intervention is prohibited under the Interim Rules. RBC filed a Motion for Reconsideration, arguing that the Interim Rules on prohibited pleadings apply only during rehabilitation proceedings before the rehabilitation court decides, and after a decision, the Rules of Court apply, citing Leca Realty Corporation v. Manuela Corporation. The CA denied the motion.

ISSUE

Whether the Court of Appeals committed grave abuse of discretion in denying Robinson’s Bank Corporation’s Motion for Intervention in the appeal (Petition for Review) of the rehabilitation case, based on the prohibition against intervention under the Interim Rules of Procedure on Corporate Rehabilitation.

RULING

Yes. The Supreme Court granted the Petition for Certiorari, annulled and set aside the assailed Resolutions of the Court of Appeals, and directed the CA to admit RBC’s Comment in Intervention. The Court ruled that the prohibition against intervention under Section 1, Rule 3 of the Interim Rules applies only to the proceedings before the rehabilitation court. Once the rehabilitation court issues an order or decision, and an aggrieved party appeals via a petition for review under Rule 43 of the Rules of Court, the procedure is governed by the Rules of Court, as expressly provided under Section 5, Rule 3 of the same Interim Rules. The Court cited Leca Realty Corporation v. Manuela Corporation, which held that the enumerated prohibited pleadings are those filed in the rehabilitation proceedings proper, and upon appeal, the Rules of Court apply. Since TIDCORP’s petition before the CA was a petition for review under Rule 43, the ordinary rules on intervention under the Rules of Court became applicable. RBC, as a creditor whose interests would be directly affected by the outcome of TIDCORP’s petition seeking to reverse the pari passu ruling, had a legal interest in the matter in litigation and should be allowed to intervene. The CA’s denial of the motion, based solely on the Interim Rules’ prohibition, was a patent disregard of the controlling doctrine and constituted grave abuse of discretion.