Title
Bank of the Philippine Islands vs. Court of Appeals
Case
G.R. No. 170625
Decision Date
Oct 17, 2008
BPI challenged TF KO Development's rehabilitation plan, citing procedural defects. SC remanded the case, emphasizing substantial justice over procedural lapses.
rehabilitation plan
procedural errors
petition for review

Case Summary (G.R. No. 170625)

Factual Background

TF KO Development Corporation was a domestic corporation engaged in agricultural commerce that later developed into a subdivision developer after securing HLURB licenses. To finance its rice milling, trading and real estate projects, TF KO obtained loans from several banks, including BPI, Land Bank of the Philippines (LBP), and Metropolitan Bank & Trust Co. (Metrobank). At the time of the petition for rehabilitation, the outstanding obligations were alleged to be approximately P32,000,000 with LBP, P34,680,298.40 with BPI, and P3,500,000 with Metrobank. Foreclosure proceedings by LBP and BPI on mortgaged properties were pending before the RTC of Koronadal when TF KO filed its petition.

RTC Proceedings and Early Relief

On 10 November 2003 TF KO filed a petition for declaration in the state of suspension of payments with approval of a proposed rehabilitation plan, docketed as Corporate Case No. 26 before the RTC of General Santos City. Finding the petition sufficient in form and substance, the RTC issued a Stay Order on 14 November 2003 enjoining enforcement of all claims, scheduled an initial hearing, and appointed Pedro N. Suson as rehabilitation receiver. The receiver accepted, posted bond and was sworn. By Order dated 7 January 2004 the RTC enjoined LBP and the Koronadal sheriff from foreclosing mortgaged properties and required the creditor banks to file oppositions. BPI filed a verified comment on 7 January 2004 opposing the petition mainly on grounds of formality, lack of a certification against forum shopping, the alleged nonviability of the rehabilitation plan, and lack of factual and legal basis. LBP and Metrobank likewise filed oppositions. A creditors’ meeting took place and the receiver submitted a proposed Final Mode of Payment on 22 March 2004.

RTC Decision Approving Rehabilitation

After hearings and filings the RTC on 24 January 2005 rendered a decision approving TF KO’s rehabilitation plan. The court approved a specific semiannual payment schedule for creditors including BPI and LBP with an interest rate of 12% per annum compounded annually, discharged Metrobank from the rehabilitation plan and directed that Metrobank’s obligation be settled personally by TF KO’s president, Mrs. Flora G. Ko. The RTC also ordered no dividends until bank loans were fully paid, directed the commencement of the rehabilitation program in 2005, discharged Receiver Suson, and terminated the Stay Order. BPI received a copy of the RTC decision on 26 January 2005.

Court of Appeals Proceedings and Dismissal

BPI sought and obtained from the Court of Appeals an extension to file a petition for review under Section 6, Rule 43, and was allowed to file until 25 February 2005. BPI filed the petition on 28 February 2005. On 29 July 2005 the Court of Appeals dismissed the petition for review on procedural grounds, citing a host of defects: the verification and certification were allegedly unsigned by an authorized person; late filing beyond the extended period; failure to attach pertinent documents and pleadings in violation of Section 6(c), Rule 43; omission of the date of issue of counsel’s IBP O.R. No.; and nonpayment of docket fees for the prayer for temporary restraining order and/or writ of preliminary injunction. BPI filed a motion for reconsideration which the Court of Appeals denied on 22 November 2005.

Issues Presented to the Supreme Court

In its Rule 45 petition BPI challenged the Court of Appeals’ dismissal on procedural grounds and assailed the RTC decision on the merits. BPI urged that the rehabilitation was infeasible because its obligations had matured prior to the petition; that the RTC decision lacked factual and legal basis; that the petition for rehabilitation lacked a certification against non-forum shopping; and that the filing of a separate civil action for injunction by TF KO while the rehabilitation petition was pending constituted forum shopping.

Supreme Court’s Assessment of Procedural Grounds

The Supreme Court found that the Court of Appeals erred in dismissing the petition for review on the enumerated procedural grounds. The Court held that the supposed late filing was excused because the final day of the permissible period, 25 February 2005, fell on a special national holiday declared under Proclamation No. 785; under Rule 22, Sec. 1 of the Rules of Court, the time to file extended to the next working day, thus making 28 February 2005 timely. The Court further held that the motion for reconsideration was timely filed by registered mail under Rule 13, Sec. 3 because the post office stamp on the envelope indicated deposit on 30 August 2005, the last day for filing the motion for reconsideration. The Court therefore deemed the motion filed on time.

Supreme Court’s Analysis of Other Alleged Procedural Defects

The Court addressed the other procedural defects identified by the Court of Appeals. The omission in the petition of the date of issue of counsel’s IBP receipt was not a ground for outright dismissal; the Court noted that petitioner’s counsel had provided his IBP number in the petition and later appended the IBP receipt to the motion for reconsideration, which sufficed as substantial compliance. The Court held that the requirement of verification is formal and not jurisdictional; courts may permit correction or act despite imperfect verification when justice so requires. As to the certification against forum shopping, the Court acknowledged the general rule under Section 5, Rule 45 that failure to file the required certification is sufficient ground for dismissal, and that certifications signed on behalf of a corporation must be accompanied by proof of authority. Nevertheless, the Court recognized a line of precedent including Shipside Incorporated v. Court of Appeals, Ateneo de Naga University v. Manalo, Pascual & Santos, Inc. v. The Members of the Tramo Wakas Neighborhood Association, Inc., and China Banking Corporation v. Mondragon International Philippines, Inc., where the belated submission of proof of authority was allowed in exceptional circumstances. In this case BPI had submitted a certification against forum shopping and later furnished a board resolution and special power of attorney; the Court found that the lapse was curable.

Supreme Court on Docket Fees and Missing Annexes

The Supreme Court found that the record showed BPI tendered P6,000.00 with the motion for extension, an amount sufficient to cover docket fees and to cover fees for a temporary restraining order; the Court observed that the Court of Appeals could have applied any overpayment toward the TRO docket fees rather than dismissing the petition. Regarding the absence of annexed pleadings and documents, the Court reiterated that Section 6, Rule 43 requires clearly legible duplicate originals or certified true copies of the judgment or final order and material portions of the record, but does not mandate that every supporting paper be a certified true copy. The Court further observed that the entire records of the case would, under Rule 43, Section

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