SECOND DIVISION
G.R. No. 190800, November 07, 2018
METROPOLITAN BANK & TRUST COMPANY, Petitioner, v. FORTUNA PAPER MILL & PACKAGING CORPORATION, Respondent.
D E C I S I O N
REYES, A., JR., J.:
Challenged before this Court via this Petition for Review1 under Rule 45 of the Rules of Court is the Decision2 dated July 7, 2009 of the Court of Appeals (CA) in CA-G.R. SP No. 102148, which dismissed the petition for review filed by petitioner Metropolitan Bank and Trust Company (MBTC). Likewise challenged is the Resolution3 dated January 4, 2010 of the CA denying the Motion for Reconsideration likewise filed by MBTC.
In the said decision, the CA found no error in the assailed Order4 dated December 20, 2007 of the Regional Trial Court (RTC) of Malabon City, Branch 74, in SEC Case No. S7-002-MN granting the Petition for Corporate Rehabilitation of respondent Fortuna Paper Mill and Packaging Corporation (Fortuna) considering the latter complied with the qualifications and minimum requirements provided for under Rule 4, Sections 1 and 5 of the Interim Rules of Procedure on Corporate Rehabilitation (Interim Rules).
30.a) PROGRAM I – Restart and Continuance of Business of Fortuna with Implementation of Specific Plans of Action – The general plan is to continue the operation of Fortuna. These will be implemented with the following features:
(1) Entry of Investor for Fortuna. The of (sic) Policity (sic) Enterprises Ltd. of Hongkong has been identified in buying into Fortuna.
(2) Debt moratorium on principal and interest for two years and debt restructuring for a longer term or tenure and reduced interest rates. It is proposed that interest rates for a certain period within the rehabilitation period be reduced.
It is proposed that interest rates for a certain period within the rehabilitation period be reduced.
Thus, the Program I of the Rehabilitation Plan calls for the forbearance of the creditors/bank to the longer payment period of eight (8) years with the provision for acceleration of payment as cash becomes available from operation or from investors. Reduction of interest rates to 2% on the first two years; then 4% thereafter until the eight year is also an essential component of the Rehabilitation Plan because:
1. Higher interest rates do not encourage the major stockholders to put in more capital and take additional risks;
2. Reduction is customary in rehabilitation or liquidation proceedings when the issue is self-preservation and survival of the debtor;
3. The reduced interest rates are reflective of a very reasonable remedial interest rate;
With the relief from debt burdens and threats of paralyzing foreclosures by the foregoing modifications of its debt-structure, and also as part of its rehabilitation plan, FORTUNA shall implement the following key plans of action to bolster its businesses; detailed as follows:a. The entry of new investor shall pump in at least Php 70,000.000 into the Company; a communication identifying this new investor is hereto attached as Appendix "B";
b. The cash infusion shall be used principally to: (i) convert the bunker-fired boiler to cheaper coal; (ii) purchase of raw materials; (iii) operation of machines at or near maximum capacities; and (iv) settlement of liabilities to Meralco to assure power supply.
30.b) PROGRAM II – Expansion to Other Businesses to Take Advantage of Best-Use of Realty Assets – The Business Plan for the Rehabilitation of FORTUNA has the general premise that the present business of the Petitioner will remain, and in fact, will be expanded, considering that it is still viable.
The plans for additional or supplementary new businesses are hereby adopted only to augment the old business and serve as a cushion in the event that there are adverse environmental and business conditions that are not foreseen. This is also being done to ensure that the settlement of all obligations will occur at the programmed period of eight years or even shorter.
This supplementary business consists of developing some of the realty assets of the Petitioner and/or its sister companies into love-rise (sic) or medium-rise residential condominium under the Pag-IBIG City Program of the Home Mutual Development Fund (Pag-IBIG). Under this Program, the Pag-IBIG shall purchase the completed residential units at 70% of its appraised value and constitute the developer as the marketing agent. This way, the payment to the contractor, who shall complete the building on a turn-key basis, is assured.9
With respect to the rehabilitation plan, the Court finds the same feasible and viable. A moratorium period of two (2) years on the payment of its loans/obligations will enable [Fortuna] to generate additional capital/funds to continue its business operations. This is in line with [Fortuna's] intention to source fund from its internal operations, the growth of which is expected to favorably expand. To achieve this goal, an extension period for the payment of [Fortuna] is just and proper. This is precisely the main reason why [Fortuna] filed the instant petition as corporate rehabilitation can, in one way, be effected by suspension of payments of obligation for a certain period. Thereafter, payment of their loan/obligations could be ably resumed.
Further, the Court notes that [Fortuna] is in the process of establishing a new business of realty development in Malabon City using the 13,000 square meters property of its sister company, Classic Frames Corporation. Although the proposed project site is, as correctly pointed out by [Fortuna], not feasible at this time as it is inundated by flood during heavy rains, the on-going flood control project being undertaken by the government (CAMANAVA Flood Control Project) will solve this problem. As further pointed out by [Fortuna], residential development in Malabon is a feasible and marketable project. The Comprehensive Land Use Plan for the City of Malabon indicates that the community requires a substantial housing for its residents of all income groups. There is a housing deficiency of about 7,000 units for the lower-to-middle income class economic segment. The development of a modern residential condominium for the City's middle class priced at the level presented by the debtor is a welcome addition to the community's housing inventory. The HMDF has projected that such an inventory can be marketed easily. The realty company Oroquieta Properties, Inc. is willing to consider and to participate as the developer-contractor for the project. From this project, [Fortuna] expects to earn additional income which is a good source of cashflow for its operations.17
WHEREFORE, the Rehabilitation Plan filed with this Court and made as an Annex and integral part of this Order is hereby APPROVED. Petitioners are strictly enjoined to abide by its terms and conditions and they shall, unless directed otherwise, submit a quarterly report on the progress of the implementation of the Rehabilitation Plan. Further, and as prayed for, let the construction of the Valenzuela property be initiated within the twelve (12) months from this date and completed as set forth in the plan.18
WHEREFORE, premises considered, the petition for review is DISMISSED. The Order dated 20 December 2007 of the [RTC], Branch 74, City of Malabon in SEC Case No. S7-002-MN is AFFIRMED.
SO ORDERED.21
Sec. 23. Approval of the Rehabilitation Plan. - 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.
In determining whether or not the opposition of the creditors is manifestly unreasonable, the court shall consider the following:a. That the plan would likely provide the objecting class of creditors with compensation greater than that which they would have received if the assets of the debtor were sold by a liquidator within a three-month period; x x x.
WHEREFORE, finding the proposed amended rehabilitation plan inadequate to convince the Court that petitioner can be rehabilitated and restored to its former position of successful operation, the motion to admit amended rehabilitation plan is DENIED.
For failure to implement the approved eight[-]year rehabilitation plan for four years, the motion to terminate rehabilitation proceedings is GRANTED.
The rehabilitation receiver's report for November 2011 is NOTED and he is directed to render his final accounting within a period of thirty days from notice.
This rehabilitation proceeding is forthwith deemed TERMINATED. Accordingly, the Stay Order issued in this case is LIFTED, and is now functus oficio.
SO ORDERED.33
Sec. 1. Who May Petition. - Any debtor who foresees the impossibility of meeting its debts when they respectively fall due, or any creditor or creditors holding at least twenty-five percent (25%) of the debtor's total liabilities, may petition the proper Regional Trial Court to have the debtor placed under rehabilitation. (Emphasis Ours)
As stated by the CA in Philippine Bank of Communications, rehabilitation is in line with the State's objective to promote a wider and more meaningful equitable distribution of wealth.
In line with this objective, the Interim Rules provide for a liberal construction of its provisions:RULE 2
Definition of Terms and Construction
x x x x
SECTION 2. Construction. - These Rules shall be liberally construed to carry out the objectives of Sections 5(d), 6(c) and 6(d) of Presidential Decree No. 902-A, as amended, and to assist the parties in obtaining a just, expeditious, and inexpensive determination of cases. Where applicable, the Rules of Court shall apply suppletorily to proceedings under these Rules.
x x x x
There is no reason why corporations with debts that may have already matured should not be given the opportunity to recover and pay their debtors in an orderly fashion. The opportunity to rehabilitate the affairs of an economic entity, regardless of the status of its debts, redounds to the benefit of its creditors, owners, and to the economy in general. Rehabilitation, rather than collection of debts from a company already near bankruptcy, is a better use of judicial rewards.
x x x x
Thus, the condition that triggers rehabilitation proceedings is not the maturation of a corporation's debts but the inability of the debtor to pay these.
Where the law does not distinguish, neither should this Court. Because the definition under the Interim Rules is encompassing, there should be no distinction whether a claim has matured or otherwise.
Petitioner's proposed interpretation contradicts provisions of the Interim Rules, which contemplate situations where a debtor corporation may already be in default. As correctly pointed out by respondent, a creditor may possibly petition for the debtor's rehabilitation for default on debts already owed.48 (Citations omitted and emphasis and underscoring Ours)
Stare decisis simply means that for the sake of certainty, a conclusion reached in one case should be applied to those that follow if the facts are substantially the same, even though the parties may be different. It proceeds from the first principle of justice that, absent any powerful countervailing considerations, like cases ought to be decided alike. Thus, where the same questions relating to the same event have been put forward by the parties similarly situated as in a previous case litigated and decided by a competent court, the rule of stare decisis is a bar to any attempt to relitigate the same."50
a. The conclusion of the [CA] is grounded entirely on speculations, surmises and conjectures;
b. The inference made is manifestly mistaken, absurd or impossible;
c. There is a grave abuse of discretion;
d. The judgment is based on misapprehension of facts;
e. The findings of facts are conflicting;
f. The [CA], in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both appellant and appellee.
g. The findings of fact of the [CA] are contrary to those of the trial court;
h. The findings of fact are conclusions without citation of specific evidence on which they are based;
i. The facts set forth in the petition, as well as in the petitioner's main and reply briefs, are not disputed by respondents; or
j. The findings of fact of the [CA] are premised on the supposed absence of evidence and contradicted by the evidence on record.51
In order to determine the feasibility of a proposed rehabilitation plan, it is imperative that a thorough examination and analysis of the distressed corporation's financial data must be conducted. If the results of such examination and analysis show that there is a real opportunity to rehabilitate the corporation in view of the assumptions made and financial goals stated in the proposed rehabilitation plan, then it may be said that a rehabilitation is feasible. In this accord, the rehabilitation court should not hesitate to allow the corporation to operate as an on-going concern, albeit under the terms and conditions stated in the approved rehabilitation plan. On the other hand, if the results of the financial examination and analysis clearly indicate that there lies no reasonable probability that the distressed corporation could be revived and that liquidation would, in fact, better subserve the interests of its stakeholders, then it may be said that a rehabilitation would not be feasible. In such case, the rehabilitation court may convert the proceedings into one for liquidation.54 (Emphasis Ours)
Professor Stephanie V. Gomez of the University of the Philippines College of Law suggests specific characteristics of an economically feasible rehabilitation plan:
a. The debtor has assets that can generate more cash if used in its daily operations than if sold.
b. Liquidity issues can be addressed by a practicable business plan that will generate enough cash to sustain daily operations.
c. The debtor has a definite source of financing for the proper and full implementation of a Rehabilitation Plan that is anchored on realistic assumptions and goals.
These requirements put emphasis on liquidity: the cash flow that the distressed corporation will obtain from rehabilitating its assets and operations. A corporation's assets may be more than its current liabilities, but some assets may be in the form of land or capital equipment, such as machinery or vessels. Rehabilitation sees to it that these assets generate more value if used efficiently rather than if liquidated.
On the other hand, this court enumerated the characteristics of a rehabilitation plan that is infeasible:
a. the absence of a sound and workable business plan;
b. baseless and unexplained assumptions, targets and goals;
c. speculative capital infusion or complete lack thereof for the execution of the business plan;
d. cash flow cannot sustain daily operations; and
(e) negative net worth and the assets are near full depreciation or fully depreciated.56 (Citation omitted)
A material financial commitment becomes significant in gauging the resolve, determination, earnestness, and good faith of the distressed corporation in financing the proposed rehabilitation plan. This commitment may include the voluntary undertakings of the stockholders or the would-be investors of the debtor-corporation indicating their readiness, willingness, and ability to contribute funds or property to guarantee the continued successful operation of the debtor-corporation during the period of rehabilitation. x x x Case law holds that nothing short of legally binding investment commitment/s from third parties is required to qualify as a material financial commitment. x x x Here, no such binding investment was presented.57
30.a) PROGRAM I – Restart and Continuance of Business of Fortuna with Implementation of Specific Plans of Action – The general plan is to continue the operation of Fortuna. These will be implemented with the following features:(1) Entry of Investor for Fortuna. The of (sic) Policity (sic) Enterprises Ltd. of Hongkong has been identified in buying into Fortuna.
(2) Debt moratorium on principal and interest for two years and debt restructuring for a longer term or tenure and reduced interest rates. It is proposed that interest rates for a certain period within the rehabilitation period be reduced.
x x x x
With the relief from debt burdens and threats of paralyzing foreclosures by the foregoing modifications of its debt-structure, and also as part of its rehabilitation plan, FORTUNA shall implement the following key plans of action to bolster its businesses; detailed as follows:
c. The entry of new investor shall pump in at least Php 70,000.000 into the Company; a communication identifying this new investor is hereto attached as Appendix "B";
d. The cash infusion shall be used principally to: (i) convert the bunker-fired boiler to cheaper coal; (ii) purchase of raw materials; (hi) operation of machines at or near maximum capacities; and (iv) settlement of liabilities to Meralco to assure power supply.
30.b) PROGRAM II – Expansion to Other Businesses to Take Advantage of Best-Use of Realty Assets – The Business Plan for the Rehabilitation of FORTUNA has the general premise that the present business of the Petitioner will remain, and in fact, will be expanded, considering that it is still viable.
The plans for additional or supplementary new businesses are hereby adopted only to augment the old business and serve as a cushion in the event that there are adverse environmental and business conditions that are not foreseen. This is also being done to ensure that the settlement of all obligations will occur at the programmed period of eight years or even shorter.
This supplementary business consists of developing some of the realty assets of the Petitioner and/or its sister companies into love-rise (sic) or medium-rise residential condominium under the Pag-IBIG City Program of the Home Mutual Development Fund (Pag-IBIG). Under this Program, the Pag-IBIG shall purchase the completed residential units at 70% of its appraised value and constitute the developer as the marketing agent. This way, the payment to the contractor, who shall complete the building on a turn-key basis, is assured.59
Gentlemen:
We write to express our intention to acquire 50% or more of the issued capital stock of Fortuna Paper Mills & Packaging Corporation (Fortuna), which we understand is being sold. This letter serves notice to you being the sole financial creditor of Fortuna.
Our offer to purchase shall be subject to the following conditions: (i) grant of an exclusivity period of ninety (90) days during which period Fortuna shall not entertain any other offers from possible purchasors, but shall allow us to conduct due diligence and undertake other activities related to the possible acquisition of Fortuna's sticks; (ii) the conduct of financial, operational, legal and technical due diligence which yield satisfactory results to be completed within sixty (60) days of Fortuna's acceptance of this letter (iii) acceptable documentation of the acquisition; and (iv) Fortuna's compliance with any conditions precedent to such acquisition.
The Letter of Intent submitted to Fortuna does not constitute a binding a commitment on either party with respect to any transaction and is not intended to be and does not constitute a legal binding obligation. No legal binding obligations will be created, implied or inferred until and unless a definitive agreement is executed and delivered by the parties.
We will be sending over to Manila our representatives over in the immediate coming weeks to negotiate with the owners of Fortuna and to meet with the authorized representatives of Metropolitan Bank. We hope to introduce ourselves in person and to discuss other matters involving Fortuna.
Yours,
Anthony Sher60
That unfortunately, it is unable to come up with the payments in the first year of Rehabilitation, due to the following reasons:
a. The Rehabilitation Plan requires the infusion of Php70 Million from investor POL[Y]CITY. The current financial crisis, however, has compelled the investor to review its investment programs in this part of the world.
b. That it is now necessary to raise on its own the funds required to initiate the operations of the plant.
x x x x
The approved Plan calls for the entry of the Petitioner in real estate business. The first phase of thus business is the construction of a six-storey condominium at the 1.3 Hectare property of its sister company Classic Frames Inc. at Malabon, Metro Manila. This project is expected to result in a net profit of Php 277 Million.62
Corporate rehabilitation is a type of proceeding available to a business that is insolvent. In general, insolvency proceedings provide for predictability that commercial obligations will be met despite business downturns. Stability in the economy results when there is assurance to the investing public that obligations will be reasonably paid. It is considered state policy to encourage debtors, both juridical and natural persons, and their creditors to collectively and realistically resolve and adjust competing claims and property rights[.] x x x [Rehabilitation or liquidation shall be made with a view to ensure or maintain certainty and predictability in commercial affairs, preserve and maximize the value of the assets of these debtors, recognize creditor rights and respect priority of claims, and ensure equitable treatment of creditors who are similarly situated. x x x The rationale in corporate rehabilitation is to resuscitate businesses in financial distress because "assets x x x are often more valuable when so maintained than they would be when liquidated." Rehabilitation assumes that assets are still serviceable to meet the purposes of the business. The corporation receives assistance from the court and a disinterested rehabilitation receiver to balance the interest to recover and continue ordinary business, all the while attending to the interest of its creditors to be paid equitably. x x x.
x x x x
Philippine Bank of Communications v. Basic Polyprinters and Packaging Corporation reiterates that courts "must endeavor to balance the interests of all the parties that had a stake in the success of rehabilitating the debtors." These parties include the corporation seeking rehabilitation, its creditors, and the public in general. x x x Clearly then, there are instances when corporate rehabilitation can no longer be achieved. When rehabilitation will not result in a better present value recovery for the creditors, the more appropriate remedy is liquidation.
It does not make sense to hold, suspend, or continue to devalue outstanding credits of a business that has no chance of recovery. In such cases, the optimum economic welfare will be achieved if the corporation is allowed to wind up its affairs in an orderly manner. Liquidation allows the corporation to wind up its affairs and equitably distribute its assets among its creditors.66
Endnotes:
* On wellness leave. Designated as Acting Member per Special Order No. 2587 dated August 28, 2018.
1Rollo, pp. 3-8.
2 Penned by Associate Justice Arturo G. Tayag, with Associate Justices Noel G. Tijam (now a Member of this Court) and Normandie B. Pizarro concurring, id. at 39-66.
3 Id. at 84.
4 Rendered by Assisting Judge Leonardo L. Leonia; id. at 226-228.
5 Id. at 13.
6 Id.
7 Id.
8 Id. at 14.
9 Id. at 14-15.
10 Id. at 16.
11 Id. at 45.
12 Id. at 170-179.
13 Id. at 45.
14 Id. at 17.
15 Id. at 215-216.
16 Id. at 226-228.
17 Id. at 227-228.
18 Id. at 228.
19 Id. at 56.
20 Id. at 39-66.
21 Id. at 66.
22 Id. at 84.
23 Id. at 22.
24 Id. at 29-31.
25 Id. at 245.
26 Id. at 267.
27 Id. at 267-268.
28 Id. at 284-290.
29 Rendered by Judge Celso R.L. Magsino, Jr.; id. at 291-296.
30 Penned by Associate Justice Vicente S.E. Veloso, with Associate Justices Stephen C. Cruz and Myra V. Garcia-Fernandez concurring; id. at 299-321.
31 Id. at 322-325.
32 Id. at 327.
33 id. at 13.
34Mendoza, et al. v. Mayor Villas, et al., 659 Phil. 409, 417 (2011).
35Lanuza, Jr. v. Yuchengco, 494 Phil. 125, 133 (2005).
36 723 Phil. 776 (2013.
37Rollo, p. 129.
38Republic Act No. 10142 or the Financial Rehabilitation and Insolvency Act of 2010, Section 4(gg).
39Amores v. House of Representatives Electoral Tribunal, et al., 636 Phil. 600, 610 (2010)
40 745 Phil. 651 (2014).
41 Id. at 657.
42Rollo, p. 209.
43Republic Act No. 10142 or the Financial Rehabilitation and Insolvency Act of 2010, Section 4(gg).
44 804 Phil. 195 (2017).
45 Id. at 201.
46 Id. at 203.
47 Id. at 207-208.
48 Id. at 470-472.
49 G.R. No. 219683, January 23, 2018.
50 Id., citing Ty v. Banco Filipino Savings and Mortgage Bank, 689 Phil. 603, 614 (2012).
51Golden (Iloilo) Delta Sales Corp. v. Pre-Stress Int'l. Corp., et al., 596 Phil. 26, 39 (2009); Jarantilla v. Jarantilla, et al., 651 Phil. 13, 27 (2010).
52Phil. Asset Growth Two, Inc., et al. v. Fastech Synergy Phils., Inc., et al., 788 Phil. 355, 378 (2016).
53 715 Phil. 420 (2013).
54 Id. at 378-379.
55 788 Phil. 355 (2016).
56 Id. at 379-380.
57 Id. at 375-377.
58Rollo, p. 92.
59 Id. at 14-15.
60 Id. at 104.
61 Id. at 229-235.
62 Id. at 230-233.
63 Id. at 251.
64 Id.
65 781 Phil. 95 (2016).
66 Id. at 112-115.
PERLAS-BERNABE, J.:
I concur. This petition assailing the Decision1 dated July 7, 2009 of the Court of Appeals (CA) which upheld the Rehabilitation Plan of respondent Fortuna Paper Mill & Packaging Corporation (Fortuna) should be dismissed on the ground of mootness in view of the termination of the rehabilitation proceedings before the Court could resolve the instant petition. A case or issue is considered moot and academic when it ceases to present a justiciable controversy because of supervening events, rendering the adjudication of the case or the resolution of the issue without any practical use or value.2
This notwithstanding, the Court, in a number of instances,3 discussed the substantive merits of the case otherwise moot and academic whenever it found the need to formulate controlling principles to guide the bench, the bar, and the public in view of the public interest involved.4 In my view, and as the ponencia deemed fit, this case falls under the foregoing exception, considering the substantive issues raised concerning the technical subject of corporate rehabilitation and some of its working parameters.
As background, the basic facts of this case are as follows: on June 21, 2007, Fortuna filed a Petition5 for corporate rehabilitation (rehabilitation petition) before the Regional Trial Court of Malabon, Branch 74 (RTC), with prayer for the issuance of a Stay Order, docketed as SEC. Case No. S7-002-MN. It alleged, among others, that eighty-eight percent (88%) of its total obligations is owing to petitioner Metropolitan Bank & Trust Company (MBTC)6 which is secured by real estate and chattel mortgages over properties owned by it and its affiliates, and are now overdue.7 It claimed that rehabilitation is the best option for the company, as well as its creditors because any forced liquidation would give the unsecured creditors a mere P0.518 for every peso of exposure.9
Under the proposed Rehabilitation Plan,10 Fortuna intends to resume its operations which had ceased since the second quarter of 2006 due to the labor problems it encountered,11 that was followed by the disconnection of its supply of electricity.12 Essentially, the elements of the business plan are: (a) debt moratorium for two (2) years, restructuring of interest rates and waiver of penalty charges;13(b) the infusion of investment by Polycity Enterprises Ltd. (HK; Polycity) which had indicated its interest to acquire fifty percent (50%) or more of the company's stocks that is valued at least P70 Million;14 and (c) entry into the business of condominium development on a 13,503 square meter-property owned by its sister company, Classic Frames Corp., located in Malabon, Metro Manila (Malabon property), which project shall be enrolled with the Pag-IBIG City Program backed with a Payment Guarantee Bond.15
Despite opposition, the rehabilitation petition was given due course, and the Rehabilitation Plan, which was found to be feasible and viable, was eventually approved by the RTC in an Order16 dated December 20, 2007. The said Order was subsequently affirmed by the CA in the assailed July 7, 2009 Decision.
Hence, the instant petition filed by MBTC, contending that: (a) Fortuna is not qualified to file a rehabilitation petition17 under the 2000 Interim Rules of Procedure on Corporate Rehabilitation18 (Interim Rules); and (b) there are no material financial commitments to support the Rehabilitation Plan.19 Subsequently, however, MBTC informed the Court that the RTC had already terminated the rehabilitation proceedings in SEC. Case No. S7-002-MN,20 which was affirmed by the CA.21 Thus, based on this supervening event, MBTC prayed that the instant petition be dismissed on the ground of mootness.
As earlier mentioned, although this case had indeed become moot and academic due to the termination of the rehabilitation proceedings, it would be highly instructive to delve into the aforementioned substantive issues to guide the bench, the bar, and the public in understanding some of the working parameters attending corporate rehabilitation.
Endnotes:
1Rollo, pp. 39-66. Penned by Associate Justice Arturo G. Tayag with Associate Justices Noel G. Tijam (now a Member of this Court) and Normandie B. Pizarro, concurring.
2 See Ayala Land, Inc. v. Heirs of Lactao, G.R. No. 208213, August 8, 2018.
3 See Mahinay v. Gako, Jr., 677 Phil. 292 (2011); Republic v. Manila Electric Company, 723 Phil. 776 (2013).
4 See Genuino v. De Lima, G.R. Nos. 197930, 199034 & 199046, April 17, 2018.
5Rollo, pp. 85-97.
6 See id. at 92.
7 See id. at 90-91.
8 Should be P0.54. See Liquidation Analysis; CA rollo, p. 212.
9Rollo, p. 95.
10CA rollo, pp. 109-141.
11 See id. at 123.
12 See rollo, p. 13.
13 See CA rollo, p. 131-132.
14 See id. at 134. See also Polycity's letter of intent dated March 14, 2007; rollo, p. 104.
15 See CA rollo, pp. 135-136.
16 See rollo, pp. 226-228. Penned by Assisting Judge Leonardo L. Leonida.
17 See rollo, pp. 21-23.
18 A.M. No. 00-8-10-SC, November 21, 2000 (Re: Interim Rules of Procedure on Corporate Rehabilitation).
19 See rollo, pp. 29-31.
20 In its Decision dated November 21, 2011.
21 The CA denied Fortuna's Rule 43 petition in its Decision dated August 30, 2013 in CA-G.R. SP No. 124062. Penned by Associate Justice Vicente S.E. Veloso with Associate Justices Stephen C. Cruz and Myra V. Garcia-Fernandez, concurring.
Fortuna moved for reconsideration, but subsequently withdrew the motion on the ground that the petition has been overtaken by unspecified events which rendered the petition moot and academic, and admitting the correctness and validity of the November 21, 2011 RTC Order terminating the rehabilitation proceedings.
In a Resolution dated April 30, 2014, the CA granted Fortuna's motion to withdraw.
22 See Section 4 (gg) of Republic Act No. 10142, entitled "AN ACT PROVIDING FOR THE REHABILITATION OR LIQUIDATION OF FINANCIALLY DISTRESSED ENTERPRISES AND INDIVIDUALS," OTHERWISE KNOWN AS THE "FINANCIAL REHABILITATION AND INSOLVENCY ACT (FRIA) of 2010" (July 18, 2010).
23 Section 1. Who May Petition. – Any debtor who foresees the impossibility of meeting its debts when they respectively fall due, or any creditor or creditors holding at least twenty-five percent (25%) of the debtor's total liabilities, may petition the proper Regional Trial Court to have the debtor placed under rehabilitation.
24 See rollo, p. 21.
25 See id. at 22-23.
26 G.R. No. 184317, January 25, 2017, 815 SCRA 458.
27 See id. at 472.
28 See id. at 479.
29 See id. at 471-472.
30 Section 5. Rehabilitation Plan. – The rehabilitation plan shall include (a) the desired business targets or goals and the duration and coverage of the rehabilitation; (b) the terms and conditions of such rehabilitation which shall include the manner of its implementation, giving due regard to the interests of secured creditors; (c) the material financial commitments to support the rehabilitation plan; (d) the means for the execution of the rehabilitation plan, which may include conversion of the debts or any portion thereof to equity, restructuring of the debts, dacion enpago, or sale of assets or of the controlling interest; (e) a liquidation analysis that estimates the proportion of the claims that the creditors and shareholders would receive if the debtor's properties were liquidated; and (f) such other relevant information to enable a reasonable investor to make an informed decision on the feasibility of the rehabilitation plan. (Emphases supplied)
31 See rollo, pp. 26-27.
32 757 Phil. 251, 266 (2015).
33 Id. at 268.
34Rollo, p. 104; underscoring supplied.
35 Id.
36 See id.
37 See id.
38 During an interview with the rehabilitation receiver; see id. at 212.
39 See id. at 215.
40 Id. at 229-236.
41 See id. at 230.
42 See Wonder Book Corp. v. Phil. Bank of Communications, 691 Phil, 83, 100 (2012).
43 See rollo, pp. 219-220.
44 See MBTC's Reply (Re: Comment dated 28 May 2010) dated September 20, 2010; id. at 266.
45 See BPI Family Savings Bank, Inc. v. St. Michael Medical Center, Inc., supra note 32, at 269.
46 See Section 5, Rule 4 of the Interim Rules.
47 CA rollo, p. 212.
48 Among the assumptions made was the inclusion of the account "Estimated receivable" from Liberty on the realizable value of its land pledged in the amount of P84,414,200.00 (see CA rollo, p. 212) in the computation of free/available assets. However, the records are bereft of showing that Liberty, which is also undergoing rehabilitation, had already sold or assigned the said land to Fortuna.
49I.e., (a) Fortuna's assets, which are well in excess of its liabilities, would be even more valuable if Fortuna is preserved as a going concern rather than if it were liquidated outright (see rollo, p. 57); (b) Polycity's investment is a viable and realistic option (see id. at 58), and the approval of Fortuna's rehabilitation plan, as well as the lower court's close oversight of its implementation through the receiver "could well expedite the entry of Polycity" (see id. at 61); and (c) the proposed business of condominium development is a viable venture for the debtor and a good source of cash flow for its operations (see id. at 63).
50Philippine Asset Growth Two, Inc. v. Fastech Synergy Philippines, Inc., 788 Phil. 355, 378 (2016).
51 See rollo, p. 125.
52 Comprising the following:
Buildings P 131,521,000.00 Machineries/Chattel 144,643,000.00 Land 36,772.000.00 Total assets mortgaged P 312,936,000.00 (see id. at 90-91) Total Porperty & Equipment (PPE) ÷ 409,349,354.62 (see id. at 125) Percentage of mortgaged properties in the PPE 76.45% =====
53 "A company's cash position refers specifically to its level of cash compared to its pending expenses and liabilities, x x x. In general, a stable cash position means the company can easily meet its current liabilities with the cash or liquid assets it has on hand. Current liabilities are debts with payments due within the next 12 months." (See footnote 54 in BPI Family Savings Bank, Inc. v. St. Michael Medical Center, Inc., supra note 32, at 269, citing Kokemuller, "Neil, "Cash Flow vs. Cash Position," Chron. < http://smallbusiness.chron.com/cash-flow-vs-cash-position-51149.html> [visited November 5, 2018])
54 Fortuna's current assets and current liabilities as of May 31, 2007 are as follows:
Total Current Assets P 3,605,395.50 Total Current Liabilities 14,896,762.24 (see rollo, p. 125)
55 The audited financial statements atfached to the rollo and the CA rollo were not accompanied by any explanatory notes.
56 The account "Finished Goods Inventory" which was valued at P50,316,867.49 in the audited Balance Sheet as of December 31, 2006 (see rollo, p. 121) does not appear in the Interim Statement of Cost of Goods Manufactured and Sold (see id. at 127) and the Current Assets section of the Interim Balance Sheet (see id. at 125) without a showing that the same was sold and converted to cash or receivables, or otherwise disposed through a dacion en pago. Neither was it shown why the beginning balance of the "Raw Materials Inventory" in the Interim Statement of Cost of Goods Manufactured and Sold was reduced to P6,500,700.50 (see id. at 127) when the same was valued at P50,780,900.50 (see id. at 121) in the audited Balance Sheet as of December 31, 2006.
57 The account "Utilities Payable" in the amount of P30,354,849.60 corresponding to the liability to MERALCO was suddenly reported in the Interim Balance Sheet (see id. at 125) when the same was never reflected in Fortuna's audited balance sheets for the years 2005 (see id. at 115) and 2006 (see id. at 122), despite the compromise agreement entered with MERALCO on July 2005 (see id. at 88).
58 Year 2 Sales P 379,848,960.00 Year 1 Sales 323,872,960.00 (see CA rollo, p. 135) Increase in Sales P 55,976,000.00 ÷ 379,848,960.00 0.1474 x 100% Sales growth percentage 14.74% =======
59 See id.
60 Considering the growth of 3.35% in sales from 2004 to 2005 computed as follows:
2005 Sales P 92,842,658.02 (see rollo, p. 113)2004 Sales - 89,730,395.13 (see id. at 107)Increase in Sales P 3,112,262.89 ÷ 92,842.658.02 0.0335 x 100%Sales growth percentage 3.35% ======
61 See CA rollo, p. 134.
62 See id. at 120.
63 See id. at 134.
64 Amounting to P30,354,849.60; see id. at 101.
65 See id. at 134.
66 See Philippine Asset Growth Two, Inc. v. Fastech Synergy Philippines, Inc., supra note 50, at 383-384.