Case Digest (G.R. No. 117964)
Facts:
Land Bank of the Philippines filed a Petition for Review on Certiorari under Rule 45 assailing the Court of Appeals’ September 28, 2012 Decision and March 5, 2013 Resolution that reinstated the Fastech Corporations’ corporate rehabilitation petition and approved their Rehabilitation Plan under Republic Act No. 10142 (FRIA). The Rehabilitation Court had earlier dismissed the petition on December 9, 2011 for alleged unreliability of financial statements and lack of feasibility.During the pendency of the petition, this Court already resolved whether rehabilitation was feasible in Philippine Asset Growth Two, Inc. (Successor-In-Interest of Planters Development Bank) and Planters Development Bank v. Fastech Synergy Philippines, Inc., docketed as G.R. No. 206528, and reversed and set aside the Court of Appeals, ultimately dismissing the rehabilitation petition on June 28, 2016, which became final and executory on March 17, 2017.
Issues:
- Whether the Petition for Review was properly
Case Digest (G.R. No. 117964)
Facts:
- Background of the dispute
- Land Bank of the Philippines (petitioner) filed a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure to modify the Court of Appeals September 28, 2012 Decision and March 5, 2013 Resolution.
- The petition raised concerns involving the rehabilitation of respondents Fastech Synergy Philippines, Inc. (Fastech Synergy), Fastech Microassembly & Test, Inc. (Fastech Microassembly), Fastech Electronique, Inc. (Fastech Electronique), and Fastech Properties, Inc. (Fastech Properties) (collectively, Fastech Corporations).
- The rehabilitation was pursued through a Joint Petition for corporate rehabilitation filed with the Regional Trial Court, Makati City, Branch 149 (Rehabilitation Court).
- The Fastech Corporations justified a joint petition by alleging that they had common managers, assets, and creditors.
- They claimed that due to financial losses, their assets would not be enough to pay their peso and dollar debts of multiple creditors, including Planters Development Bank (Planters Bank), Penta Capita, Investment Corporation (Penta Capital), Union Bank of the Philippines (UnionBank), Bank of the Philippine Islands (BPI), and Land Bank of the Philippines (Landbank).
- The creditors’ debt table in the petition showed total peso debts of PHP 73,968,606.00 and total dollar debts of US$2,348,669.00, including Landbank’s US$340,000.00 dollar debt.
- Rehabilitation Petition and the Rehabilitation Plan
- The Fastech Corporations filed their Rehabilitation Petition under Republic Act No. 10142 (Financial Rehabilitation and Insolvency Act of 2010, FRIA) on April 8, 2011.
- The Rehabilitation Plan attached to the petition provided:
- A two (2)-year grace period for payment of outstanding loans.
- A waiver of accumulated interests and penalties.
- A 12-year period from the end of the grace period for payment of interests accrued during the grace period.
- An interest rate of four percent (4%) per annum for real estate-secured creditors and two percent (2%) per annum for chattel mortgage-secured creditors.
- On April 19, 2011, the Rehabilitation Court issued a Commencement Order with Stay Order, appointing Atty. Rosario Bernaldo (Atty. Bernaldo) as Rehabilitation Receiver.
- On May 18, 2011, the Rehabilitation Petition was heard, and the Rehabilitation Court gave it due course.
- The creditors Planters Bank, UnionBank, BPI, and Landbank later filed Notices of Claims and Comments.
- After the Fastech Corporations presented the Rehabilitation Plan to the receiver and creditors, the Rehabilitation Court issued a June 22, 2011 Order requiring submission of a revised rehabilitation plan.
- The Fastech Corporations complied by submitting their Revised Rehabilitation Plan, and creditors filed comments and oppositions.
- Proceedings before the Rehabilitation Court, including auditor reports and the receiver’s stance
- Atty. Bernaldo submitted her Preliminary Report and opined that the Fastech Corporations’ original Rehabilitation Plan was viable.
- Atty. Bernaldo stated that the Fastech Corporations “may be successfully rehabilitated” and that their assets were sufficient to cover liabilities considering underlying assumptions, financial projections, and procedures in the Rehabilitation Plan.
- External auditors provided comments on the Fastech Corporations’ financial statements:
- The auditors gave qualified audit opinions on the 2008 financial statements of Fastech Microassembly and Fastech Electronique because those companies failed to prove financial support from their major stockholders.
- The auditors could not provide opinions on Fastech Synergy’s and Fastech Properties’ 2008 financial statements due to insufficient audit evidence.
- The auditors could not provide opinions on the 2009 financial statements of the Fastech Corporations for lack of appropriate audit evidence.
- The Rehabilitation Court directed the Fastech Corporations to submit their Reply to creditors’ comments and oppositions, which they submitted on September 30, 2011.
- Rehabilitation Court dismissal of the Rehabilitation Petition
- On December 9, 2011, the Rehabilitation Court issued a Resolution dismissing the Rehabilitation Petition.
- The dismissal grounds included the Rehabilitation Court’s findings that:
- The Singapore Stock Exchange had deleted one of the petitioners, yet the petitioners did not explain the status or steps taken regarding the deletion.
- The petitioners failed to overcome unqualified adverse opinions of external auditors.
- The petitioners did not explain the adverse observations and submitted unreliable financial statements with materially false and misleading facts and figures.
- The petitioners did not provide basic assumptions of rehabilitation plan feasibility because they withheld them on the basis of confidentiality.
- The plan’s assumptions were speculative, including a new niche manufacturing business being experimental and dependent on customer numbers amid competition, without historical reliable facts and figures.
- The dispositive portion dismissed the petition for unreliable facts and figures and stated that the petitioners did not comply with requirements under Section 25(b)(3) of R.A. No. 10142.
- The Rehabilitation Court also stated that, given unreliability, it could not declare placement under liquidation.
- Court of Appeals reversal and approval of the Rehabilitation Plan
- The Fastech Corporations filed a Petition for Review before the Court of Appeals under Rule 43 (CA-G.R. SP No. 122836), praying for temporary relief (writ of preliminary injunction and/or TRO).
- They argued that rehabilitation was feasible and that the Rehabilitation Court erred in stating they would not have a better future due to failures to meet restructuring plans.
- The Court of Appeals issued:
- A Temporary Restraining Order on January 24, 2012 to prevent the case from becoming moot and academic, considering an Ex Parte Petition for Issuance of a Writ of Possession filed by Planters Bank over the Fastech Corporations’ properties.
- A Writ of Preliminary Injunction on March 22, 2012.
- On April 30, 2012, Atty. Bernaldo filed a Manifestation maintaining that financial projections and procedures in the Rehabilitation Plan were attainable.
- On September 28, 2012, the Court of Appeals granted the Fastech Corporations’ petition:
- It reinstated the Rehabilitation Petition.
- It approved the Rehabilitation Plan attached to the petition.
- It permanently enjoined Planters Bank from foreclosing the Fastech Corporations’ property during implementation.
- It remanded the case to the Rehabilitation Court for supervision in plan implementation.
- The Court of Appeals held that the Rehabilitation Petition served the purpose of corporate rehabilitation:
- Rehabilitation would allow continued employment of more than 100 employees.
- Rehabilitation would assure payment to creditors who would participate in the rehabilitation.
- Stockholders would benefit in the long run if the plan succeeded.
- The general public would benefit because the Fastech Corporations would open the Philippine market to new opportunities.
- The Court of Appeals ruled that the Rehabilitation Court erred by disregarding Atty. Bernaldo’s opinion that the corporations may be successfully rehabilitated.
- The Court of Appeals also ruled that the Rehabilitation Court failed to distinguish adverse or negative audit opinion from a situation where an auditor could not formulate an opinion due to insufficient data.
- Motions for reconsideration and subsequent Supreme Court proceedings
- Landbank and Plan...(Subscriber-Only)