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"Cram-Down" Power of The Rehabilitation Court
"Cram-Down" Power of The Rehabilitation Court
all planholders or creditors receive adequate returns regardless of the tides of the Philippine
market by making payment in U.S. Dollars. This plan would prevent the trust fund of respondent
from being diluted due to the appreciation of the Philippine Peso and assure that all planholders
and creditors shall receive payment upon maturity of the NAPOCOR bonds in the most equitable
manner. (Victorio-Aquino vs Pacific Plans, Inc., per Peralta, J.)
Likewise, the rehabilitation receiver that will replace the interim receiver is tasked only to monitor
the successful implementation of the rehabilitation plan. There is nothing in the concept of
corporate rehabilitation that would ipso facto deprive the Board of Directors and corporate officers
of a debtor corporation, such as ASB Realty, of control such that it can no longer enforce its right
to recover its property from an errant lessee.
To be sure, corporate rehabilitation imposes several restrictions on the debtor corporation. The
rules enumerate the prohibited corporate actions and transactions (most of which involve some
kind of disposition or encumbrance of the corporation’s assets) during the pendency of the
rehabilitation proceedings but none of which touch on the debtor corporation’s right to sue. The
implication therefore is that our concept of rehabilitation does not restrict this particular power,
save for the caveat that all its actions are monitored closely by the receiver, who can seek an
annulment of any prohibited or anomalous transaction or agreement entered into by the officers
of the debtor corporation. (Umale vs ASB Realty Corp., per Del Castillo, J.)
well as the interest of the investing public or creditors. Such suspension is intended to give enough
breathing space for the management committee or rehabilitation receiver to make the business
viable again, without having to divert attention and resources to litigations in various fora. The
suspension would enable the management committee or rehabilitation receiver to effectively
exercise its/his powers free from any judicial or extra-judicial interference that might unduly
hinder or prevent the "rescue" of the debtor company. To allow such other action to continue
would only add to the burden of the management committee or rehabilitation receiver, whose
time, effort and resources would be wasted in defending claims against the corporation instead of
being directed toward its restructuring and rehabilitation.
AS BETWEEN CREDITORS, EQUALITY IS EQUITY
As between creditors, the key phrase is "equality is equity." When a corporation threatened by
bankruptcy is taken over by a receiver, all the creditors should stand on equal footing. Not anyone
of them should be given any preference by paying one or some of them ahead of the others. This
is precisely the reason for the suspension of all pending claims against the corporation under
receivership. Instead of creditors vexing the courts with suits against the distressed firm, they are
directed to file their claims with the receiver who is a duly appointed officer of the SEC.
MEANING OF “CLAIM”; RESCISSION OF CONTRACT WITH DAMAGES INCLUDED
The interim rules define a claim as referring to all claims or demands, of whatever nature or
character against a debtor or its property, whether for money or otherwise. The definition is all-
encompassing as it refers to all actions whether for money or otherwise. There are no distinctions
or exemptions.
Clearly then, the complaint filed by Sobrejuanite is a claim as defined under the Interim Rules of
Procedure on Corporate Rehabilitation. The complaint for rescission with damages would fall under
the category of claim considering that it is for pecuniary considerations. In their complaint,
Sobrejuanite pray for the rescission of the contract and the refund of P2,674,637.10 representing
their total payments to ASBDC; P200,000.00 as moral damages; P100,000.00 as exemplary
damages; P100,000.00 as attorney’s fees; P50,000.00 as litigation expenses; P1,500.00 per
hearing as appearance fees; and costs of the suit.
In the decision of the HLURB arbiter, ASBDC was ordered to pay P2,674,637.10 plus 12% interest
from the date of actual payment of each amortization, representing the refund of all the
amortization payments made by Sobrejuanite; P200,000.00 as moral damages; P100,000.00 as
exemplary damages; P100,000.00 as attorney’s fees; and P50,000.00 as litigation expenses. As
such, the HLURB arbiter should have suspended the proceedings upon the approval by the SEC of
the ASB Group of Companies’ rehabilitation plan and the appointment of its rehabilitation receiver.
By the suspension of the proceedings, the receiver is allowed to fully devote his time and efforts
to the rehabilitation and restructuring of the distressed corporation. (Sps. Sobrejuanite vs ASB
Development Corp., per Ynares-Santiago, J.)
The Labor Arbiter, the NLRC, as well as the Court of Appeals should have abstained from resolving
petitioners’ case for illegal dismissal and should instead have directed them to lodge their claim
before PAL’s receiver.
However, to still require petitioners at this time to re-file their labor claim against PAL under the
peculiar circumstances of the case – that their dismissal was eventually held valid with only the
matter of reinstatement pending appeal being the issue – this Court deems it legally expedient to
suspend the proceedings in this case. (Garcia vs PAL, per Quisumbing, J.)
Petitioner’s rehabilitation plan should have shown that petitioner has enough serviceable assets
to be able to continue its business. Yet, the plan showed that the source of funding would be to
sell petitioner’s old vessels. Disposing of the assets constituting petitioner’s main business cannot
result in rehabilitation. A business primarily engaged as a shipping line cannot operate without its
ships. On the other hand, the plan to purchase new vessels sacrifices the corporation’s cash flow.
This is contrary to the goal of corporate rehabilitation, which is to allow present value recovery
for creditors. The plan to buy new vessels after selling the two vessels it currently owns is neither
sound nor workable as a business plan. (Viva Shipping Lines, Inc. vs Keppel Philippines
Mining, Inc., per Leonen, J.)