Case Summary (G.R. No. 260650)
Factual Background and Foreclosure
Respondents, related corporations sharing common management, assets, creditors, and liabilities, faced financial distress. PDB initiated extrajudicial foreclosure over two parcels of land owned by Fastech Properties, Inc., listed among respondents’ common assets. A foreclosure sale on April 13, 2011 resulted in PDB as highest bidder. Respondents claimed loss of critical business premises and revenue source, prompting their joint petition for corporate rehabilitation on April 8, 2011, before the RTC of Makati City.
RTC Proceedings and Initial Ruling
The RTC issued a Commencement Order with Stay Order on April 19, 2011, appointed a Rehabilitation Receiver, and referred respondents’ petition for study. Despite the receiver’s preliminary and subsequent reports opining that rehabilitation was feasible, the RTC dismissed the petition on December 9, 2011. The court doubted the reliability of respondents’ financial statements in view of disclaimers of opinion by independent auditors, the unaudited and unsigned 2010 statements, unexplained changes in account listings, and withheld assumptions on confidentiality grounds.
CA Proceedings and Decision
Respondents appealed to the Court of Appeals, which issued a TRO on January 24, 2012, and a Writ of Preliminary Injunction on March 22, 2012, to preserve the status quo pending resolution. On September 28, 2012, the CA reversed the RTC, giving weight to the Rehabilitation Receiver’s qualification and recommendation, distinguishing an auditor’s disclaimer from an adverse opinion, and declaring the Rehabilitation Plan feasible. The CA approved the plan, permanently enjoined PDB from foreclosing the subject properties during implementation, and remanded supervision to the RTC. A motion for reconsideration was denied on March 5, 2013.
Issues Before the Supreme Court
- Whether the petition for review on certiorari was timely filed.
- Whether respondents’ Rehabilitation Plan is feasible under applicable law and jurisprudential standards.
Timeliness of the Petition
Under Rule 45 of the Rules of Court and settled doctrine, notice to any counsel of record begins the running of the fifteen-day period to file a petition for review on certiorari. Janda Asia & Associates, remaining counsel of PDB, received a copy of the CA’s March 5, 2013 Resolution on March 12, 2013, making the filing deadline March 27, 2013. The petition filed on April 18, 2013 was thus late. Recognizing the finality rule, the Supreme Court nonetheless relaxed procedural bars in the interest of substantial justice due to the severe prejudice to creditors if the unjustified rehabilitation were allowed to stand.
Legal Framework on Rehabilitation
Republic Act No. 10142 defines rehabilitation as restoring a debtor to solvency and successful operation if economically feasible, with creditors recovering greater present value through continuation rather than liquidation. The 2008 Rules of Procedure on Corporate Rehabilitation (in force when respondents filed their petition) mandate that a Rehabilitation Plan include:
a. Material financial commitments supporting the plan;
b. A liquidation analysis demonstrating that creditor recovery under the plan exceeds forced liquidation returns; and
c. Other relevant information enabling informed stakeholder decisions.
Non-Compliance with Rehabilitation Plan Requirements
Respondents’ plan lacked any binding commitment of new or infused capital, relying instead on waivers of penalties, reduced interest rates, and grace periods to achieve solvency. No legally enforceable third-party investments were presented. The plan also omitted a liquidation analysis, preventing assessment of comparative creditor recovery values. These failures undercut the CA’s findings of feasibility and deprived stakeholders of essential data.
Assessment of Economic Feasibility
Jurisprudence requires a realistic projection that cash flows and operating assets will suffice to meet obligations, justified by sound assumptions and binding financial commitments. Respondents’ audited 2009 statements showed current assets far below current liabilities;
Case Syllabus (G.R. No. 260650)
Facts
- On April 8, 2011, four related corporations—Fastech Synergy Philippines, Inc., Fastech Microassembly & Test, Inc., Fastech Electronique, Inc., and Fastech Properties, Inc.—filed a verified joint petition for corporate rehabilitation with prayer for a Stay or Suspension Order before RTC-Makati (SP Case No. M-7130).
- They alleged common management, shared majority assets, common creditors and liabilities, among which Planters Development Bank (PDB) was listed.
- PDB had earlier initiated an extrajudicial foreclosure of two parcels of land under TCT Nos. T-458102 and T-458103, registered in the name of Fastech Properties (subject properties).
- A foreclosure sale on April 13, 2011 resulted in PDB as highest bidder, threatening Fastech Microassembly’s and Fastech Electronique’s ongoing operations and revenue stream for Fastech Properties.
- The corporates proposed a Rehabilitation Plan seeking:
- Waiver of all accrued interests and penalties;
- A two-year grace period on principal with capitalization of accruing interests, payable over twelve years thereafter;
- Interest rates at 4% p.a. on real-estate-secured credits and 2% p.a. on chattel-secured credits.
- On April 19, 2011, RTC-Makati issued a Commencement Order with Stay Order, and appointed Atty. Rosario S. Bernaldo as Rehabilitation Receiver.
- After hearings, submissions, comments, and a favorable recommendation by the Rehabilitation Receiver (preliminary and revised reports), RTC-Makati dismissed the petition on December 9, 2011, citing unreliability of audited 2009 financial statements (disclaimer of opinion), unaudited 2010 statements, undocumented changes in accounts, and withheld bases for revised projections.
- Respondents appealed to the Court of Appeals (CA) in CA-G.R. SP No. 122836, obtaining on January 24, 2012 a TRO and on March 22, 2012 a WPI against PDB’s parallel writ of possession proceedings.
- On September 28, 2012, the CA reversed the RTC, giving weight to the Receiver’s opinion, distinguishing an auditor’s disclaimer from an adverse opinion, declaring the Plan feasible, approving it, enjoining PDB from foreclosure during implementation, and remanding supervision to RTC-Makati.
- PDB’s motion for reconsideration was denied by CA on March 5, 2013. Philippine Asset Growth Two, Inc. (PAGTI) later substituted PDB’s interests and, together with PDB, filed the present petition for review on certiorari on April 18, 2013.
- Respondents moved to dismiss the petition as filed out of time, asserting CA notice received by PDB’s collaborating counsel, Janda Asia & Associates, on March 12, 2013, started the 15-day period, making the April 18 filing belated. PAGTI countered