Title
Bank of the Philippine Islands vs. Court of Appeals
Case
G.R. No. 97178
Decision Date
Jan 10, 1994
BPI sought foreclosure against RUBY, but SEC’s rehabilitation order suspended proceedings. Court ruled suspension applies to all creditors, prioritizing equitable treatment and rehabilitation over individual claims.
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Case Digest (G.R. No. 97178)

Facts:

  1. Filing of Complaint for Foreclosure: On 16 February 1984, petitioner Bank of the Philippine Islands (BPI) filed a complaint for foreclosure of real estate mortgage against respondent Ruby Industrial Corporation (RUBY) with the Regional Trial Court of Pasig.
  2. Rehabilitation Plan by SEC: On 10 August 1984, the Securities and Exchange Commission (SEC) issued an Order placing RUBY under a rehabilitation plan pursuant to Section 6(c) of P.D. 902-A. The Order suspended all actions or claims against RUBY pending before any court or tribunal.
  3. Suspension of Proceedings: On 19 December 1984, the trial court granted RUBY’s motion to suspend the proceedings based on the SEC Order.
  4. Motion to Reopen Proceedings: On 31 July 1990, BPI filed a motion to reopen the proceedings, citing the ruling in Philippine Commercial International Bank v. Court of Appeals, which held that suspension orders under P.D. 902-A apply only to unsecured creditors, not to secured creditors like BPI.
  5. Denial of Motion to Reopen: On 22 August 1990, the trial court denied BPI’s motion, relying on Alemar’s Sibal & Sons, Inc. v. Elbinias, which held that suspension of payments applies to all creditors, whether secured or unsecured. BPI’s motion for reconsideration was also denied on 19 October 1990.
  6. Petition to the Court of Appeals: BPI filed a petition for certiorari and mandamus with the Court of Appeals, which dismissed the petition on 31 January 1991, upholding the trial court’s decision.

Issue:

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Ruling:

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Ratio:

  1. Equal Treatment of Creditors: The purpose of P.D. 902-A is to ensure the equitable treatment of all creditors during the rehabilitation of a distressed corporation. Allowing secured creditors to enforce their claims would undermine this objective by giving them an undue advantage over unsecured creditors.
  2. Suspension of Claims: The suspension of all claims, including those of secured creditors, is necessary to allow the rehabilitation receiver or management committee to effectively manage the distressed corporation’s assets and operations without interference.
  3. Rehabilitation Over Foreclosure: The Court emphasized that the rehabilitation of a distressed corporation takes precedence over the enforcement of individual claims, as the goal is to restore the corporation’s viability for the benefit of all stakeholders.


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