Case Summary (B.M. No. 3288)
Petitioner
Pryce Corporation, a distressed corporate debtor seeking statutory rehabilitation under Presidential Decree No. 902-A (as amended) and the 2000 Interim Rules of Procedure on Corporate Rehabilitation.
Respondent
China Banking Corporation, a secured creditor challenging the approved rehabilitation plan’s terms. The Bank of the Philippine Islands (BPI) likewise contested the plan in a separate appeal.
Key Dates
- July 9, 2004: Petition for rehabilitation filed.
- July 13, 2004: Stay order issued and rehabilitation receiver appointed.
- September 13, 2004: Petition given due course; receiver tasked to evaluate proposed plan.
- January 17, 2005: Approval of amended rehabilitation plan.
- February 23, 2005: China Bank appealed to the Court of Appeals (7th Division).
- May 3, 2006 & May 23, 2007: BPI appealed to the Court of Appeals (1st Division) with initial grant and subsequent dismissal.
- February 4, 2008: Supreme Court First Division decision denying Pryce’s petition and remanding.
- June 22, 2009: Supreme Court En Banc referral.
- April 13, 2010: En Banc accepted the case for resolution.
Applicable Law
- 1987 Philippine Constitution (Article III, Section 10 on non-impairment of contracts; Article VIII, Section 14 on judicial decisions).
- Presidential Decree No. 902-A, as amended.
- Interim Rules of Procedure on Corporate Rehabilitation (A.M. No. 00-8-10-SC, effective December 15, 2000).
- Rules of Civil Procedure provisions on res judicata (Rule 39, Section 47).
Procedural History at the Regional Trial Court
Upon finding Pryce’s petition sufficient in form and substance, the RTC issued an ex parte stay order within five days, appointed a rehabilitation receiver, gave due course to the petition, directed evaluation of the proposed plan, and ultimately approved an amended rehabilitation plan identifying asset disposition and liability payment methods.
Appeals to the Court of Appeals
China Bank challenged impairment of contract obligations, waiver of penalties, suspension of interest, dacion en pago without consent, and currency-conversion terms. The 7th Division granted its petition on July 28, 2005, voiding the stay order, due-course order, and plan approval. The 1st Division initially granted BPI’s petition on May 3, 2006, but on May 23, 2007, reversed itself and dismissed the petition.
Supreme Court First Division Proceedings
Pryce and BPI separately appealed to the Supreme Court. On February 4, 2008, the First Division denied Pryce’s petition, affirmed the 7th Division decision with modifications, and remanded for further proceedings. Reconsiderations were denied, and Pryce’s second motion prompted an En Banc referral in June 2009, with acceptance in April 2010.
Issues for Reconsideration
- Whether challenges to the January 17, 2005 rehabilitation court order (and by implication the stay order) are now barred by res judicata following the finality of BPI v. Pryce Corporation (G.R. No. 180316).
- Whether a hearing is required under the “serious situations” test of Rizal Commercial Banking Corp. v. IAC before issuing a stay order under the Interim Rules.
First Issue: Res Judicata
The Supreme Court held that the June 2, 2008 entry of judgment in G.R. No. 180316, affirming the January 17, 2005 approval order, satisfies all elements of res judicata: final judgment, jurisdiction, merits adjudication, and identity of parties, subject matter, and cause of action. Substantial identity existed among creditor-appellants, and the cram-down provisions (Interim Rules, Rules 4.23–4.24) bind all creditors to the approved plan. Challenges to the earlier September 13, 2004 order were also barred as necessarily implicated by the final judgment.
Second Issue: Hearing Requirement for Stay Order
Under Rule 4, Section 6 of the Interim Rules, once a petition is found sufficient in form and substance, the court must issue a stay order and appoint a rehabilitation receiver within five days. The “serious situations” test of PD 902-A (pre-2000) no longer applies. Although the court may call a hearing within the five-day period if it deems necessary, no mandatory pre-stay hearing is required. The ex parte stay order dated July 13, 2004 complied fully with these provisions.
Corporate Rehabilitation under the Interim Rules
The Interim Rules adopt the cram-down principle: the court may approve a rehabilitation plan over majority creditor opposition if feasibility is shown, and the approved plan is binding on all affected partie
...continue readingCase Syllabus (B.M. No. 3288)
Facts of the Case
- Pryce Corporation filed a petition for corporate rehabilitation on July 9, 2004 with RTC Makati, Branch 138.
- On July 13, 2004, the court found the petition sufficient in form and substance, issued a stay order, and appointed Gener T. Mendoza as rehabilitation receiver.
- On September 13, 2004, the court gave due course to the petition and directed the receiver to evaluate Pryce’s proposed rehabilitation plan.
- The receiver submitted an amended plan, which the court approved by order dated January 17, 2005, finding Pryce eligible for rehabilitation.
- The approved plan specified assets to be held and disposed of, the manner of paying and liquidating liabilities, a dacion en pago for certain debts, waiver of penalties, freezing of interest accrual, and currency conversion terms.
Procedural History
- February 23, 2005: China Banking Corporation appealed to the Court of Appeals (CA), contesting impairment of contract obligations and lack of creditor consent.
- BPI filed a separate CA petition challenging the same rehabilitation order on similar grounds.
- July 28, 2005: CA Seventh Division granted China Bank’s petition, set aside the July 13, 2004 stay, September 13, 2004 due-course order, and January 17, 2005 rehabilitation order.
- May 3, 2006: CA First Division initially granted BPI’s petition but on May 23, 2007 reversed itself, dismissing it.
- January 30, 2008 & April 28, 2008: Supreme Court First Division denied BPI’s petition and reconsideration (G.R. No. 180316), finalizing approval of the January 17, 2005 order.
- February 4, 2008: First Division denied Pryce’s petition against the July 28, 2005 CA decision, affirmed it with modification, and remanded proceedings to RTC Makati.
- Pryce and China Bank filed motions for reconsideration; all were denied by June 16, 2008.
- September 10, 2008: Pryce filed a second motion for reconsideration; case was referred En Banc on June 22, 2009 and accepted April 13, 2010.
- July 30, 2013: Parties jointly moved to suspend proceedings for two months to negotiate; no agreement was filed.
Issues Presented
- Whether the validity of the J