PHILIPPINE BANK OF COMMUNICATIONS v.

BASIC POLYPRINTERS AND PACKAGING CORPORATION

FACTS:

 Basic Polyprinters, along with the eight other companies filed a joint petition for suspension of payments with
approval of the proposed rehabilitation in the RTC which issued a stay order, and eventually approved the
rehabilitation plan.
 CA reversed the RTC and directed petitioners to file their individual petitions.
 RTC: approved the petitions; CA: affirmed.
 It was opposed by one of its creditors, PBCOM, contending that the sole issue in corporate rehabilitation is one of
liquidity and that rehabilitation became inappropriate because Basic Polyprinters was insolvent due to its assets being
inadequate to cover the outstanding obligations.
 It further contends that Basic Polyprinters did not present any material financial commitment in the rehabilitation
plan, thereby violating Section 5, Rule 4 of the Interim Rules.

ISSUES: 1. Whether liquidity is an issue in a petition for rehabilitation

2. Whether material financial commitment is required in a rehabilitation plan

RULING: 1. Under the Interim Rules, rehabilitation is the process of restoring “the debtor to a position of successful operation
and solvency, if it is shown that its continuance of operation is economically feasible and its creditors can recover by way of the
present value of payments projected in the plan more if the corporation continues as a going concern that if it is immediately
liquidated.”21 It contemplates a continuance of corporate life and activities in an effort to restore and reinstate the corporation
to its former position of successful operation and solvency.22The Court said that rehabilitation proceedings have a two-pronged
purpose, namely: (a) to efficiently and equitably distribute the assets of the insolvent debtor to its creditors; and (b) to provide
the debtor with a fresh start.

Consequently, the basic issues in rehabilitation proceedings concern the viability and desirability of continuing the business
operations of the petitioning corporation.

Moreover, the term insolvent under FRIA of 2010 was defined as “the financial condition of a debtor that is generally unable to
pay its or his liabilities as they fall due in the ordinary course of business or has liabilities that are greater than its or his
assets.”28 As such, the contention that rehabilitation becomes inappropriate because of the perceived insolvency of Basic
Polyprinters was incorrect.

2. A material financial commitment becomes significant in gauging the resolve, determination, earnestness and good faith of
the distressed corporation in financing the proposed rehabilitation plan. 30 This commitment may include the voluntary
undertakings of the stockholders or the would-be investors of the debtor-corporation indicating their readiness, willingness and
ability to contribute funds or property to guarantee the continued successful operation of the debtor corporation during the
period of rehabilitation. We cannot now find the rehabilitation plan for Basic Polyprinters to be genuine and in good faith, for it
was, in fact, unilateral and detrimental to its creditors and the public.

The commitment to add 10M to be sourced out from the insurance was already written-off by respondent’s affiliate. Hence,
considered as bad debt. Also, the “conversion” of cash advances to trade payables was, in fact, a mere re-classification of the
liability entry and had no effect on the shareholders’ deficit. Basic Polyprinters’s rehabilitation plan likewise failed to offer any
proposal on how it intended to address the low demands for their products and the effect of direct competition. We observe,
too, that Basic Polyprinters’s proposal to enter into the dacion en pago to create a source of “fresh capital” was not feasible
because the object thereof would not be its own property but one belonging to its affiliate.

We cannot now find the rehabilitation plan for Basic Polyprinters to be genuine and in good faith, for it was, in fact, unilateral
and detrimental to its creditors and the public.
 METROBANK v. S.F. NAGUIAT

FACTS:

 In 1997, Spouses Naguit and S.F. Naguit Enterprises executed a real estate mortgage in favor of Metrobank to secure
certain credit accommodations.
 S.F. Naguiat obtained a loan from Metrobank which was likewise secured by the 1997 real estate mortgage.
 Subsequently, S.F. Naguiat filed a Petition for Voluntary Insolvency with Application for the Appointment of a Receiver
and among the properties declared was one of the properties covered by the 1997 mortgage.
 An order was issued declaring S.F. Naguiat insolvent, forbidding payment of any debts due, delivery of properties, and
transfer of any of its properties.
 Metrobank filed a manifestation and Motion informing the insolvency court of its decision to withdraw from the
insolvency proceedings because it intended to extrajudicially foreclose the mortgaged property to satisfy its claim
against S.F. Naguiat.
 S.F. Naguiat defaulted in paying its loan. Hence, Metrobank foreclosed the property and was sold.
 Subsequently, the Executive Judge denied the approval of the Certificate of Sale in view of the order issued by the
insolvency court.

ISSUE: Whether the approval and consent of the insolvency court is required under the Insolvency Law before a secured
creditor can proceed with the extrajudicial foreclosure of the mortgaged property.

RULING: Yes. it is the policy of Act No. 1956 to place all the assets and liabilities of the insolvent debtor completely within the
jurisdiction and control of the insolvency court without the intervention of any other court in the insolvent debtor's concerns or
in the administration of the estate.72 It was considered to be of prime importance that the insolvency proceedings follow their
course as speedily as possible in order that a discharge, if the insolvent debtor is entitled to it, should be decreed without
unreasonable delay. "Proceedings of [this] nature cannot proceed properly or with due dispatch unless they are controlled
absolutely by the court having charge thereof.

With the declaration of insolvency of the debtor, insolvency courts "obtain full and complete jurisdiction over all property of
the insolvent and of all claims by and against [it.]"94 It follows that the insolvency court has exclusive jurisdiction to deal with
the property of the insolvent.95 Consequently, after the mortgagor-debtor has been declared insolvent and the insolvency court
has acquired control of his estate, a mortgagee may not, without the permission of the insolvency court, institute proceedings
to enforce its lien. In so doing, it would interfere with the insolvency court's possession and orderly administration of the
insolvent's properties.

Under Sec. 59 of the Insolvency Law, the mortgaged property must first be formally delivered by the court or the assignee (if
one has already been elected) before a mortgagee-creditor can initiate proceedings for foreclosure. 97

Here, the foreclosure and sale of the mortgaged property of the debtor, without leave of court, contravene the provisions of
Act No. 1956 and violate the Order of the insolvency court which declared S.F. Naguiat insolvent and forbidden from making
any transfer of any of its properties to any person.
 BIR v. LEPANTO CERAMICS

FACTS:

 Lepanto Ceramics, Inc. (LCI) filed a filed a petition 4 for corporate rehabilitation.

 Consequently, the Rehabilitation Court issued a Commencement Order, suspending all actions for the enforcement of
claims against LCI, prohibited Lepanto from paying any debts, and directed BIR to file and serve on LCI its comment or
opposition to the petition, or its claims against LCI.
 Despite the order, BIR sent a notice of informal conference to LCI. The latter reminded the former of the pendency of
its rehabilitation proceedings and the issuance of Commencement Order.
 Undaunted, BIR sent a formal letter of demand.
 LCI filed a petition for indirect contempt against BIR.

ISSUE: Whether may be cited for indirect contempt.

RULING: Yes. Verily, the inherent purpose of rehabilitation is to find ways and means to minimize the expenses of the
distressed corporation during the rehabilitation period by providing the best possible framework for the corporation to
gradually regain or achieve a sustainable operating form.

In order to achieve such objectives, Section 16 of RA 10142 provides,  that upon the issuance of a Commencement Order -
which includes a Stay or Suspension Order - all actions or proceedings, in court or otherwise, for the enforcement of "claims"
against the distressed company shall be suspended.26 Under the same law, claim "shall refer to all claims or demands of
whatever nature or character against the debtor or its property, whether for money or otherwise, liquidated or unliquidated,
fixed or contingent, matured or unmatured, disputed or undisputed, including, but not limited to; (1) all claims of the
government, whether national or local, including taxes, tariffs and customs duties.

Creditors must ventilate their claims before the rehabilitation court, and any "[a]ttempts to seek legal or other resource against
the distressed corporation shall be sufficient to support a finding of indirect contempt of court."
 STEELCORP v. BOC & BIR

FACTS:

 The court issued a Stay or Suspension Order in view of STEELCORP’s petition for rehabilitation filed by its creditor.
 While the rehabilitation proceedings were pending, FRIA of 2010 was enacted.7 Section 19 of which mandates that
upon issuance of the Commencement Order by the court, and until the approval of the Rehabilitation Plan or
dismissal of the petition, whichever is earlier, the imposition of all taxes and fees, including penalties, interests and
charges thereof, due to the national government or to LGUs shall be considered waived, in furtherance of the
objectives of rehabilitation.
 Department of Finance disapproved the recommendation of the BOC Commissioner Alvarez to approve the waiver
with regard the taxes and customs duties due on importations or shipments Steelcorp.
 Steelcorp appealed to the Office of the President and filed a complaint against BIR, BOC and DOF for injunction with
application for immediate issuance of TRO and writ of PI which was granted by the court.
 However, the orders were subsequently lifted by the RTC and dismiss the case for lack of jurisdiction. Upon appeal to
the CA, the same was also dismissed.

ISSUE: Whether the denial of the respondents to waive the taxes and customs duties of STEELCORP is appealable to the CTA
and not by CA or SC.

RULING: Yes. Republic Act No. 1125 transferred to the Court of Tax Appeals jurisdiction over all matters involving assessments
that were previously cognizable by the Regional Trial Courts.

The Court of Tax Appeals has undoubted jurisdiction to pass upon the constitutionality or validity of a tax law or regulation
when raised by the taxpayer as a defense in disputing or contesting an assessment or claiming a refund. It is only in the lawful
exercise of its power to pass upon all matters brought before it, as sanctioned by Section 7 of Republic Act No. 1125, as
amended. Within the judicial system, the law intends the Court of Tax Appeals to have exclusive jurisdiction to resolve all tax
problems.

From the clear purpose of R.A. No. 1125 and its amendatory laws, the CTA, therefore, is the proper forum to file the appeal.
Matters calling for technical knowledge should be handled by such court as it has the specialty to adjudicate tax, customs, and
assessment cases
 ALLIED BANKING CORP v. EQUITABLE PCI BANK, INC.

FACTS:

 The court issued a Stay or Suspension Order in view of STEELCORP’s petition for rehabilitation filed by its creditor,
herein respondent Equitable PCI Bank.
 Despite the order, Petitioner Allied Banking Corporation still applied the remaining proceeds of Steel Corp’s Current
Account.
 Consequently, SteelCorp filed an urgent omnibus motion alleging that petitioner violated the rehabilitation court's
stay order.
 Petitioner: It did not violate the stay order as it had no knowledge of its issuance at the time of the legal
compensation. Hence, it was not yet bound by the stay order because jurisdiction over it had not yet been acquired
by the rehabilitation court.

ISSUE: Whether petitioner was bound by the Stay Order.

RULING: Yes. Under the Rehabilitation Rules, the issuance of a commencement order shall retroact to the date that the petition
was filed. Thus, it renders void any attempt to collect on or enforce a claim against the debtor or to set off any debt by the
debtor's creditors after the commencement date. Hence, Allied Banking Corp is bound by the stay order and that the
rehabilitation court correctly ordered the restoration of the credited amount back to Steelcorp’s account.
 LANDBANK OF THE PHILIPPINES v. FASTECH SYNERGY PHILIPPINES, INC.

FACTS:

 Fastech Corporations submitted their Rehabilitation Petition which was dismissed.

 It was later on approved by the appellate court on the ground that rehabilitation was feasible.
 Consequently, Petitioner Landbank filed a petition for review before the SC
 Meanwhile, Planters Bank and PAGTI, another creditor of respondent, filed a separate petition for review where the
SC held that rehabilitation was not feasible.
 Subsequently, Planters Bank and PAGTI filed a manifestation in the instant case stating that SC has already resolved
the issue.

ISSUE: Whether the rehabilitation plan was feasible.

RULING: No. The ruling of the Supreme Court regarding the non-feasibility of the rehabilitation plan already became final and
executory. In such decision, the Court held that the Rehabilitation Plan of Fastech Corporations failed to comply with the
minimum requirements, i.e.: (a) material financial commitments to support the rehabilitation plan; and (b) a proper liquidation
analysis, under Section 18, Rule 3 of the 2008 Rules of Procedure on Corporate Rehabilitation. The Court said that a distressed
corporation should not be rehabilitated when the results of the financial examination and analysis clearly indicate that there
lies no reasonable probability that it may be revived, to the detriment of its numerous stakeholders which include not only the
corporation's creditors but also the public at large.
 STEEL CORPORATION OF THE PHILIPPINES v. MAPFRE INSURANCE CORPORATION

FACTS:

 Steel Corporation of the Philippines obtained loans from several creditors and mortgaged its assets as security.
 Thereafter, its creditors appointed BPI as their trustee.
 Petitioner and BPI entered into an agreement requiring petitioner to insure all of its assets.
 Subsequently, petitioner suffered financial losses which prompted one ot is creditors to file a petition for
rehabilitation.
 As a consequence, Petitioner sought the collection of the insurance proceeds which shall be sued to rehabilitate the
corporation. It also argued that the assignment of the RTC as rehabilitation court did not divest it from being a court
of general jurisdiction.
 Insurance companies refused to pay petitioner on the ground that petitioner’s negligence caused the damage to its
machineries and that the rehabilitation court has no jurisdiction over the propriety of the payment or non-payment of
the insurance proceeds.
 RTC acting as the rehabilitation court: Ordered the insurance companies to pay; CA: Reversed.

ISSUE: Whether a rehabilitation court can rule on the issue of propriety of payment of insurance proceeds to a corporation
under rehabilitation.

RULING: No. Under Sec. 3 of R.A. No. 10142, rehabilitation proceedings are summary and non-adversarial in nature. Hence,
they do not include adjudication of claims that require full trial on the merits, like petitioner’s insurance claim against
respondent insurers. Therefore, it is necessary to file a separate action for collection where respondent insurers can properly
thresh out their defenses.
 FAR EAST BANK AND TRUST COMPANY v. UNION BANK OF THE PHILIPPINES

FACTS:

 FEBTC bought properties from Nikon’s proeperties (owned by spouses Yutingco)

 Thereafter, Union Bank (creditor of spouses Yutingco) filed a case against the spouses claiming that the sale between
FEBTC and Nikon’s was fraudulent and was done in bad faith to prevent Union bank from levying the properties. The
sale was even made a day prior to the filing of Nikon of a petition for suspension of payments with the SEC.
 FEBTC filed a motion to dismiss on the ground of pendency of the proceedings in the SEC which had acquired prior
jurisdiction over the subject matter of the case.
 Union Bank: Litis pendentia does not apply in this case as it is not a party to the SEC proceedings for suspension of
payments.
 Trial court: Granted the motion to dismiss; CA: Reversed.

ISSUE: Wether litis pendentia applies in this case.

RULING: No. The elements of litis pendentia are absent in the instant case due to the following:

(1) No identity of parties: Spouses were ordered dropped from the SEC on the ground that the latter cannot acquire jurisdiction
over an individual filing a petition for suspension of payments together with a corporate entity.

(2) No identity of rights asserted nor relief prayed for: Ultimate objective of the rehabilitation proceeding in SEC is the equitable
distribution of earnings from the business under rehabilitation while the validity of the sale to petitioner is the principal issue in
Civil case.

Further, the decision in either, regardless of which party is successful, would not amount to res judicata as the properties
involved in both actions were not the same. Considering that there is no identity of parties, issues and reliefs prayed, litis
pendentia does not apply. Hence, the case should not be dismissed.