Title
Bank of the Philippine Islands vs. Securities and Exchange Commission
Case
G.R. No. 164641
Decision Date
Dec 20, 2007
BPI opposed ASB Group's rehabilitation plan involving dacion en pago, claiming violation of its secured creditor rights. The Supreme Court upheld the plan, ruling it equitable and non-compulsory, preserving BPI's rights while supporting ASB's rehabilitation.
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Case Digest (G.R. No. 164641)

Facts:

Background of the Case:

  • Bank of the Philippine Islands (BPI), through its predecessor-in-interest, Far East Bank and Trust Company (FEBTC), extended credit accommodations to the ASB Group of Companies (ASB Group) amounting to P86,800,000.00. This loan was secured by a real estate mortgage over two properties in Greenhills, San Juan.

Filing of Rehabilitation Petition:

  • On May 2, 2000, the ASB Group filed a petition for rehabilitation and suspension of payments before the Securities and Exchange Commission (SEC), docketed as SEC Case No. 05-00-6609.

Proposed Rehabilitation Plan:

  • On August 18, 2000, the interim receiver submitted a Proposed Rehabilitation Plan. The plan included a dacion en pago arrangement, where the ASB Group would transfer one mortgaged property (valued at P84,000,000.00) to BPI in full settlement of its debt. In return, BPI would release the other mortgaged property, which would then be placed in the asset pool for other creditors.

BPI’s Opposition:

  • BPI opposed the Rehabilitation Plan, arguing that it violated its contractual rights and freedom to contract. BPI moved for the dismissal of the rehabilitation petition.

SEC’s Approval of the Plan:

  • On April 26, 2001, the SEC hearing panel approved the Rehabilitation Plan and appointed a rehabilitation receiver. BPI filed a petition for review before the SEC en banc, which was denied.

Appeal to the Court of Appeals:

  • BPI elevated the case to the Court of Appeals (CA), claiming that the SEC’s approval of the Rehabilitation Plan violated its rights as a secured creditor. The CA dismissed BPI’s petition, ruling that the dacion en pago arrangement required mutual consent and did not compel BPI to agree against its will.

BPI’s Motion for Reconsideration:

  • BPI filed a motion for reconsideration, which the CA denied. BPI then filed a petition before the Supreme Court.

Issue:

  1. Whether the SEC’s approval of the Rehabilitation Plan violated BPI’s right to contract and freedom to contract.
  2. Whether the dacion en pago arrangement in the Rehabilitation Plan constituted coercion or compulsion against BPI.
  3. Whether the Rehabilitation Plan was discriminatory against secured creditors like BPI.
  4. Whether the SEC’s approval of the Rehabilitation Plan impaired BPI’s rights as a secured creditor.

Ruling:

  • (Subscriber-Only)

Ratio:

  • (Subscriber-Only)

Conclusion:

The Supreme Court upheld the SEC’s approval of the ASB Group’s Rehabilitation Plan, emphasizing the equitable and rehabilitative purposes of such proceedings. The Court ruled that the plan did not violate BPI’s contractual rights, as the dacion en pago arrangement was not compulsory and BPI retained its status as a secured creditor. The petition was denied, and the Court of Appeals’ decision was affirmed.


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