G.R. No. 172302, February 18, 2014
PRYCE CORPORATION, Petitioner, v. CHINA BANKING CORPORATION, Respondent.
R E S O L U T I O N
Respondent China Banking Corporation contended that the rehabilitation plan’s approval impaired the obligations of contracts. It argued that neither the provisions of Presidential Decree No. 902–A nor the Interim Rules of Procedure on Corporate Rehabilitation (Interim Rules) empowered commercial courts “to render without force and effect valid contractual stipulations.”8 Moreover, the plan’s approval authorizing dacion en pago of petitioner Pryce Corporation’s properties without respondent China Banking Corporation’s consent not only violated “mutuality of contract and due process, but [was] also antithetical to the avowed policies of the state to maintain a competitive financial system.”9
1. The indebtedness to China Banking Corporation and Bank of the Philippine Islands as well as the long term commercial papers will be paid through a dacion en pago of developed real estate assets of the petitioner. x x x 4. All accrued penalties are waived[.] 5. Interests shall accrue only up to July 13, 2004, the date of issuance of the stay order[.] 6. No interest will accrue during the pendency of petitioner’s corporate rehabilitation[.] 7. Dollar–denominated loans will be converted to Philippine Pesos on the date of the issuance of this Order using the reference rate of the Philippine Dealing System as of this date.7
WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals in CA–G.R. SP No. 88479 is AFFIRMED with the modification discussed above. Let the records of this case be REMANDED to the RTC, Branch 138, Makati City, sitting as Commercial Court, for further proceedings with dispatch to determine the merits of the petition for rehabilitation. No costs.19ChanRoblesVirtualawlibraryPetitioner Pryce Corporation filed an omnibus motion for (1) reconsideration or (2) partial reconsideration and (3) referral to the court En Banc dated February 29, 2008. Respondent China Banking Corporation also filed a motion for reconsideration on even date, praying that the February 4, 2008 decision be set aside and reconsidered only insofar as it ordered the remand of the case for further proceedings “to determine whether petitioner’s financial condition is serious and whether there is clear and imminent danger that it will lose its corporate assets.”20
The general rule precluding the relitigation of material facts or questions which were in issue and adjudicated in former action are commonly applied to all matters essentially connected with the subject matter of the litigation. Thus, it extends to questions necessarily implied in the final judgment, although no specific finding may have been made in reference thereto and although such matters were directly referred to in the pleadings and were not actually or formally presented. x x x.47ChanRoblesVirtualawlibraryThe dispositive portion of the Court of Appeals’ decision in BPI v. Pryce Corporation, reversed on reconsideration, only mentioned the January 17, 2005 order of the rehabilitation court approving the amended rehabilitation plan. Nevertheless, the affirmation of its validity necessarily included the September 13, 2004 order as this earlier order gave due course to the petition and directed the rehabilitation receiver to evaluate and give recommendations on the rehabilitation plan proposed by petitioner.48
x x x [W]ell–settled is the principle that a decision that has acquired finality becomes immutable and unalterable and may no longer be modified in any respect even if the modification is meant to correct erroneous conclusions of fact or law and whether it will be made by the court that rendered it or by the highest court of the land.Generally, the later case is the one abated applying the maxim qui prior est tempore, potior est jure (he who is before in time is the better in right; priority in time gives preference in law).50 However, there are limitations to this rule as discussed in Victronics Computers, Inc. v. Regional Trial Court, Branch 63, Makati:51
The reason for this is that litigation must end and terminate sometime and somewhere, and it is essential to an effective and efficient administration of justice that, once a judgment has become final, the winning party be not deprived of the fruits of the verdict. Courts must guard against any scheme calculated to bring about that result and must frown upon any attempt to prolong the controversies.
The only exceptions to the general rule are the correction of clerical errors, the so–called nunc pro tunc entries which cause no prejudice to any party, void judgments, and whenever circumstances transpire after the finality of the decision rendering its execution unjust and inequitable.49 (Emphasis provided)chanroblesvirtualawlibrary
In our jurisdiction, the law itself does not specifically require that the pending action which would hold in abatement the other must be a pending prior action. Thus, in Teodoro vs. Mirasol, this Court observed:chanRoblesvirtualLawlibraryNone of these situations are present in the facts of this instant suit. In any case, it is the better part of wisdom in protecting the creditors if the corporation is rehabilitated.It is to be noted that the Rules do not require as a ground for dismissal of a complaint that there is a prior pending action. They provide that there is a pending action, not a pending prior action. The fact that the unlawful detainer suit was of a later date is no bar to the dismissal of the present action. We find, therefore, no error in the ruling of the court a quo that plaintiff’s action should be dismissed on the ground of the pendency of another more appropriate action between the same parties and for the same cause.In Roa–Magsaysay vs. Magsaysay, wherein it was the first case which was abated, this Court ruled:chanRoblesvirtualLawlibraryIn any event, since We are not really dealing with jurisdiction but mainly with venue, considering both courts concerned do have jurisdiction over the causes of action of the parties herein against each other, the better rule in the event of conflict between two courts of concurrent jurisdiction as in the present case, is to allow the litigation to be tried and decided by the court which, under the circumstances obtaining in the controversy, would, in the mind of this Court, be in a better position to serve the interests of justice, considering the nature of the controversy, the comparative accessibility of the court to the parties, having in view their peculiar positions and capabilities, and other similar factors. Without in any manner casting doubt as to the capacity of the Court of First Instance of Zambales to adjudicate properly cases involving domestic relations, it is easy to see that the Juvenile and Domestic Relations Court of Quezon City which was created in order to give specialized attention to family problems, armed as it is with adequate and corresponding facilities not available to ordinary courts of first instance, would be able to attend to the matters here in dispute with a little more degree of expertise and experience, resulting in better service to the interests of justice. A reading of the causes of action alleged by the contending spouses and a consideration of their nature, cannot but convince Us that, since anyway, there is an available Domestic Court that can legally take cognizance of such family issues, it is better that said Domestic Court be the one chosen to settle the same as the facts and the law may warrant.We made the same pronouncement in Ramos vs. Peralta:chanRoblesvirtualLawlibraryFinally, the rule on litis pendentia does not require that the later case should yield to the earlier case. What is required merely is that there be another pending action, not a prior pending action. Considering the broader scope of inquiry involved in Civil Case No. 4102 and the location of the property involved, no error was committed by the lower court in deferring to the Bataan court’s jurisdiction.An analysis of these cases unravels the ratio for the rejection of the priority–in–time rule and establishes the criteria to determine which action should be upheld and which is to be abated. In Teodoro, this Court used the criterion of the more appropriate action. We ruled therein that the unlawful detainer case, which was filed later, was the more appropriate action because the earlier case — for specific performance or declaratory relief — filed by the lessee (Teodoro) in the Court of First Instance (CFI) to seek the extension of the lease for another two (2) years or the fixing of a longer term for it, was “prompted by a desire on plaintiff’s part to anticipate the action for unlawful detainer, the probability of which was apparent from the letter of the defendant to the plaintiff advising the latter that the contract of lease expired on October 1, 1954.” The real issue between the parties therein was whether or not the lessee should be allowed to continue occupying the leased premises under a contract the terms of which were also the subject matter of the unlawful detainer case. Consonant with the doctrine laid down in Pue vs. Gonzales and Lim Si vs. Lim, the right of the lessee to occupy the land leased against the lessor should be decided under Rule 70 of the Rules of Court; the fact that the unlawful detainer case was filed later then of no moment. Thus, the latter was the more appropriate action.
x x x
In Roa–Magsaysay[,] the criterion used was the consideration of the interest of justice. In applying this standard, what was asked was which court would be “in a better position to serve the interests of justice,” taking into account (a) the nature of the controversy, (b) the comparative accessibility of the court to the parties and (c) other similar factors. While such a test was enunciated therein, this Court relied on its constitutional authority to change venue to avoid a miscarriage of justice.
It is interesting to note that in common law, as earlier adverted to, and pursuant to the Teodoro vs. Mirasol case, the bona fides or good faith of the parties is a crucial element. In the former, the second case shall not be abated if not brought to harass or vex; in the latter, the first case shall be abated if it is merely an anticipatory action or, more appropriately, an anticipatory defense against an expected suit — a clever move to steal the march from the aggrieved party.52 (Emphasis provided and citations omitted)chanroblesvirtualawlibrary
Furthermore, as relevantly pointed out in the dissenting opinion, a petition for rehabilitation does not always result in the appointment of a receiver or the creation of a management committee. The SEC has to initially determine whether such appointment is appropriate and necessary under the circumstances. Under Paragraph (d), Section 6 of Presidential Decree No. 902–A, certain situations must be shown to exist before a management committee may be created or appointed, such as:However, this case had been promulgated prior to the effectivity of the Interim Rules that took effect on December 15, 2000.
1. when there is imminent danger of dissipation, loss, wastage or destruction of assets or other properties; or
2. when there is paralization of business operations of such corporations or entities which may be prejudicial to the interest of minority stockholders, parties–litigants or to the general public.
On the other hand, receivers may be appointed whenever:
1. necessary in order to preserve the rights of the parties–litigants; and/or
2. protect the interest of the investing public and creditors. (Section 6 [c], P.D. 902–A.)
These situations are rather serious in nature, requiring the appointment of a management committee or a receiver to preserve the existing assets and property of the corporation in order to protect the interests of its investors and creditors. Thus, in such situations, suspension of actions for claims against a corporation as provided in Paragraph (c) of Section 6, of Presidential Decree No. 902–A is necessary, and here we borrow the words of the late Justice Medialdea, “so as not to render the SEC management Committee irrelevant and inutile and to give it unhampered ‘rescue efforts’ over the distressed firm” (Rollo, p. 265).”
Otherwise, when such circumstances are not obtaining or when the SEC finds no such imminent danger of losing the corporate assets, a management committee or rehabilitation receiver need not be appointed and suspension of actions for claims may not be ordered by the SEC. When the SEC does not deem it necessary to appoint a receiver or to create a management committee, it may be assumed, that there are sufficient assets to sustain the rehabilitation plan, and that the creditors and investors are amply protected.56ChanRoblesVirtualawlibrary
The Proposed Rules remove the concept of the Interim Receiver and replace it with a rehabilitation receiver. This is to justify the immediate issuance of the stay order because under Presidential Decree No. 902–A, as amended, the suspension of actions takes effect only upon appointment of the rehabilitation receiver.67 (Emphasis provided)chanroblesvirtualawlibraryEven without this court going into the procedural issues, addressing the substantive merits of the case will yield the same result.
We also find no merit in PWRDC’s contention that there is a violation of the impairment clause. Section 10, Article III of the Constitution mandates that no law impairing the obligations of contract shall be passed. This case does not involve a law or an executive issuance declaring the modification of the contract among debtor PALI, its creditors and its accommodation mortgagors. Thus, the non–impairment clause may not be invoked. Furthermore, as held in Oposa v. Factoran, Jr. even assuming that the same may be invoked, the non–impairment clause must yield to the police power of the State. Property rights and contractual rights are not absolute. The constitutional guaranty of non–impairment of obligations is limited by the exercise of the police power of the State for the common good of the general public.Corporate rehabilitation is one of many statutorily provided remedies for businesses that experience a downturn. Rather than leave the various creditors unprotected, legislation now provides for an orderly procedure of equitably and fairly addressing their concerns. Corporate rehabilitation allows a court–supervised process to rejuvenate a corporation. Its twin, insolvency, provides for a system of liquidation and a procedure of equitably settling various debts owed by an individual or a business. It provides a corporation’s owners a sound chance to re–engage the market, hopefully with more vigor and enlightened services, having learned from a painful experience.
Successful rehabilitation of a distressed corporation will benefit its debtors, creditors, employees, and the economy in general. The court may approve a rehabilitation plan even over the opposition of creditors holding a majority of the total liabilities of the debtor if, in its judgment, the rehabilitation of the debtor is feasible and the opposition of the creditors is manifestly unreasonable. The rehabilitation plan, once approved, is binding upon the debtor and all persons who may be affected by it, including the creditors, whether or not such persons have participated in the proceedings or have opposed the plan or whether or not their claims have been scheduled.80ChanRoblesVirtualawlibrary
1Rollo (vol. 1), pp. 120–134. A copy of this petition for corporate rehabilitation was attached as Annex “F” of the petition.
2 Id. at 135–136. A copy of this order dated July 13, 2004 was attached as Annex “G” of the petition.
3 Id. at 153–155. A copy of this order dated September 13, 2004 was attached as Annex “I” of the petition.
4 Id. at 221–243. A copy of this order dated January 17, 2005 was attached as Annex “K” of the petition.
5 Id. at 239.
6 Id. at 239–243.
7 Id. at 239.
8 Id. at 614.
9 Id. at 622.
10Rollo (G.R. No. 180316), p. 28.
11 Penned by Associate Justice Vicente Q. Roxas and concurred in by Justices Portia Alino–Hormachuelos and Juan Q. Enriquez, Jr.
12Rollo (vol. 1), pp. 55–70.
13 Penned by Associate Justice Rebecca de Guia–Salvador and concurred in by Justices Ruben T. Reyes and Aurora Santiago–Lagman.
14Rollo (G.R. No. 180316), pp. 84–102.
15 Id. at 182–188.
16 Id. at 871.
17 Id. at 878.
18Rollo (vol. 2), pp. 1,627–1,634 [Per J. Sandoval–Gutierrez, First Division].
19 Id. at 1,634 [Per J. Sandoval–Gutierrez, First Division].
20 Id. at 1,644.
21 Id. at 1,804.
22 Id. at 1,805.
23 Id. at 1,849.
24 Id. at 1,854.
25 Id. at 1,791.
26 A.M. No. 00–8–10–SC, November 21, 2000, otherwise known as the Interim Rules of Procedure on Corporate Rehabilitation.
27Rizal Commercial Banking Corp. v. IAC, 378 Phil. 10 (1999) [Per J. Melo, En Banc].
28 Id. at 23.
29Rollo (vol. 2), p. 1,794.
30Rollo (G.R. No. 180316), pp. 84–102, Court of Appeals decision dated May 3, 2006.
31 Id. at 182–188, Court of Appeals resolution dated May 23, 2007.
32 Id. at 884.
33Antonio v. Sayman Vda. de Monje, G.R. No. 149624, September 29, 2010, 631 SCRA 471, 479–480 [Per J. Peralta, Second Division], citing Agustin v. Delos Santos, G.R. No. 168139, January 20, 2009, 576 SCRA 576, 585.
34Social Security Commission v. Rizal Poultry and Livestock Association, Inc., G.R. No. 167050, June 1, 2011, 650 SCRA 50, 57–58 [Per J. Perez, First Division].
35 RULES OF CIVIL PROCEDURE, Rule 39, sec. 47 (b).
36 RULES OF CIVIL PROCEDURE, Rule 39, sec. 47 (c). See also Selga v. Brar, G.R. No. 175151, September 21, 2011, 658 SCRA 108, 119.
37Antonio v. Sayman Vda. de Monje, 631 SCRA 471, 480 [Per J. Peralta, Second Division], citing Agustin v. Delos Santos, G.R. No. 168139, January 20, 2009, 576 SCRA 576, 585.
38Antonio v. Sayman Vda. de Monje, 631 SCRA 471, 480 [Per J. Peralta, Second Division], citing Hacienda Bigaa, Inc. v. Chavez, G.R. No. 174160, April 20, 2010, 618 SCRA 559; Chris Garments Corporation v. Sto. Tomas, G.R. No. 167426, January 12, 2009, 576 SCRA 13, 21–22; Heirs of Rolando N. Abadilla v. Galarosa, 527 Phil. 264, 277–278 (2006).
39Antonio v. Sayman Vda. de Monje, 631 SCRA 471, 481 [Per J. Peralta, Second Division].
40Coastal Pacific Trading, Inc. v. Southern Rolling Mills Co., Inc., 529 Phil. 10, 33 (2006) [Per J. Panganiban, First Division].
41Social Security Commission v. Rizal Poultry and Livestock Association, Inc., G.R. No. 167050, June 1, 2011, 650 SCRA 50, 58–59. See also Coastal Pacific Trading, Inc. v. Southern Rolling Mills, Co., Inc., 529 Phil. 10, 33 (2006) [Per J. Panganiban, First Division]; Cruz v. Court of Appeals (Second Division), G.R. No. 164797, 517 Phil. 572, 584 (2006) [Per J. Chico–Nazario, First Division].
42See University of the Philippines v. Court of Appeals, G.R. No. 97827, February 9, 1993, 218 SCRA 728, 737–738 [Per J. Romero, Third Division].
43 R. LUCILA, CORPORATE REHABILITATION IN THE PHILIPPINES 158–159 (2007), citing Atty. Balgos in the October 18, 2000 meeting of the SC Committee on SEC Cases.
44 Under Sec. 5.2 of the Securities Regulation Code, commercial courts have primary jurisdiction over petitions for corporate rehabilitation.
45 INTERIM RULES OF PROCEDURE ON CORPORATE REHABILITATION (2000), Rule 4, sec. 23.
46 INTERIM RULES OF PROCEDURE ON CORPORATE REHABILITATION (2000), Rule 4, sec. 24 (a).
47Alamayri v. Pabale, 576 Phil. 146, 159 (2008) [Per J. Chico–Nazario, Third Division], citing Calalang v. Register of Deeds, G.R. No. 76265, March 11, 1994, 231 SCRA 88, 99–100.
48Rollo (vol. 1), pp. 153–155. A copy of this order dated September 13, 2004 was attached as Annex “I” of the petition.
49Siy v. NLRC, 505 Phil. 265, 274 (2005) [Per J. Corona, Third Division], citing Sacdalan v. Court of Appeals, G.R. No. 128967, May 20, 2004, 428 SCRA 586, 599, further citing Philippine Veterans Bank v. Judge Estrella, 453 Phil. 45, 51 (2003) [Per J. Callejo, Sr., Second Division] and Salva v. Court of Appeals, 364 Phil. 281, 294–295 (1999) [Per J. Puno, Second Division].
50Victronics Computers, Inc. v. Regional Trial Court Branch 63, Makati, G.R. No. 104019, January 25, 1993, 217 SCRA 517, 531 [Per J. Davide, Third Division].
51 Id. at 517.
52 Id. at 531–534.
53Rollo (vol. 1), pp. 135–136. A copy of this order dated July 13, 2004 was attached as Annex “G” of the petition.
54Rizal Commercial Banking Corp. v. IAC, 378 Phil. 10 (1999) [Per J. Melo, En Banc].
55 Id. at 30.
56 Id. at 23–24.
57See M. BALGOS, INTERIM RULES OF PROCEDURE ON CORPORATE REHABILITATION 80 (2006). Atty. Balgos was part of the Supreme Court’s Committee tasked specifically to draft the rules of procedure on corporate rehabilitation and intra–corporate controversies.When the Committee met and discussed when stay should be issued so that the arrest of enforcement of claims against the distressed debtor may be immediate, it decided that, to satisfy the law and the abandonment of the former RCBC decision, once a petition for rehabilitation is filed, and not later than five (5) days therefrom, upon its finding that it is sufficient in form and substance, it shall “issue an order (a) appointing a Rehabilitation Receiver and fixing his bond, and (b) staying enforcement of all claims, whether for money or otherwise and whether enforcement is by court action or otherwise, against the debtor, its guarantors and sureties not solidarily liable with the debtor. (Emphasis provided)chanroblesvirtualawlibrary58 F. LIM, BENCHBOOK ON CORPORATE REHABILITATION 17 (2004).
60 INTERIM RULES OF PROCEDURE ON CORPORATE REHABILITATION (2000), Rule 4, sec. 11.
61Yu v. Reyes–Carpio, G.R. No. 189207, June 15, 2011, 652 SCRA 341, 349 [Per J. Velasco, First Division], citing Philippine Business Bank v. Chua, G.R. No. 178899, November 15, 2010, 634 SCRA 635, 648 [Per J. Brion, Third Division].
62 Consti., art. VIII, sec. 14. This provides that “No decision shall be rendered by any court without expressing therein clearly and distinctly the facts and the law on which it is based.”
63 INTERIM RULES OF PROCEDURE ON CORPORATE REHABILITATION (2000), Rule 4, sec. 9.
64 INTERIM RULES OF PROCEDURE ON CORPORATE REHABILITATION (2000), Rule 4, sec. 11.
65 P. V. Santo, An Assessment of the Application of the Interim Rules of Procedure on Corporate Rehabilitation, in F. LIM, BENCHBOOK ON CORPORATE REHABILITATION 137 (2004).
66 Id.; INTERIM RULES OF PROCEDURE ON CORPORATE REHABILITATION (2000), Rule 4, sec. 6.
67 R. LUCILA, CORPORATE REHABILITATION IN THE PHILIPPINES 246 (2007).
68 Consti., art. III, sec. 10. No law impairing the obligation of contracts shall be passed.
69Rollo ( vol. 2), p. 870.
70See J. G. Hervey, The Impairment of Obligation of Contracts, in ANNALS OF THE AMERICAN ACADEMY OF POLITICAL AND SOCIAL SCIENCE, vol. 195, 87 (1938).
71See Rediscovering the Contract Clause, in HARVARD LAW REVIEW, vol. 97, no. 6, 1,414 and 1,420 (1984).
72 Id. at 1,421.
73 Sec. 3 (c), August 29, 1916 < http://www.gov.ph/the–philippine–constitutions/the–jones–law–of–1916/>.
74 Consti. (1935), art. III, sec. 1 (10).
75 Consti. (1973), art. IV, sec. 11.
76 Consti., art. III, sec. 10.
77See Pacific Wide Realty and Development Corporation v. Puerto Azul Land, Inc., G.R. No. 178768 and 180893, November 25, 2009, 605 SCRA 503, 516–517 [Per J. Nachura, Third Division]; Philippine National Bank v. Remigio, G.R. No. 78508, March 21, 1994, 231 SCRA 362, 368 [Per J. Vitug, Third Division]; Kabiling v. National Housing Authority, 240 Phil. 585, 590 (1987) [Per J. Yap, En Banc]; Alalayan, et al. v. National Power Corporation, et al., 133 Phil. 279, 293–294 (1968) [Per J. Fernando, En Banc].
78See Abella v. National Labor Relations Commission, 236 Phil. 150, 157 (1987) [Per J. Paras, En Banc].
79 G.R. No. 178768, November 25, 2009, 605 SCRA 503 [Per J. Nachura, Third Division].
80 Id. at 516–517.
81 INTERIM RULES OF PROCEDURE ON CORPORATE REHABILITATION (2000), Rule 4, sec. 23.
82 INTERIM RULES OF PROCEDURE ON CORPORATE REHABILITATION (2000), Rule 4, sec. 24 (a).
83See N. S. Garnett, Managing the Urban Commons, 160 U. Pa. L. Rev. 1995, 2,000–2,001 (2012).
84 Id. at 2,001.
85See T. S. Ulen, Courts, Legislatures, and the General Theory of Second Best in Law and Economics, 73 Chi.–Kent L. Rev. 189, 220 (1998).
87See T. K. McCraw, Classics: Joseph Schumpeter on Competition, 8 Competition Pol’y Int’l. 194, 201 (2012).
88 G.R. No. 197003, February 11, 2013, 690 SCRA 226 [Per J. Velasco, Third Division].
89 Id. at 238.