APR

METROPOLITAN BANK & TRUST COMPANY vs ASB HOLDINGS,

INC. CASE DIGEST
G.R. NO. 166197, February 27, 2007

Metropolitan Bank & Trust Company, petitioner

vs

ASB Holdings, Inc., respondents

FACTS:

Metropolitan Bank and Trust company is a creditor bank of respondents corporation collectively
known as the ASB Group of Companies. ASB group of companies is owner and developer of
condominium and real estate projects which contracted loans to the petitioner which were secured
by real estate mortgages.

Later, ASB group of companies filed with the Securities and Exchange Commission a petition for
rehabilitation with prayer for suspension of actions and proceedings against petitioners. However,
despite the objection of Metropolitan bank and trust company for the rehabilitation plan, SEC granted
the same.

Meanwhile, the contention of the petitioner in their objection was that, the approval on the
rehabilitation plan will impair the contract entered into by the ASB group of companies with the
petitioner.

ISSUE:

Whether or not the approval of rehabilitation plan impairs contract entered into and prejudiced
creditors.
HELD:

The Supreme Court were not convinced that the approval of the rehabilitation plan impair
petitioner bank's lien over the mortgaged properties. Section 6 (c) of P.D. no. 902-A provides that
"upon appointment of a management committee, rehabilitation receiver, board or body, pursuant to
this Decree, all actions for claims against corporations, partnership or associations under
management or receivership pending before any curt, tribunal, board or body shall be suspended."
By that statutory provision, it is clear that the approval of the rehabilitation plan and the appointment
of a rehabilitation reciever merely suspend the action for claims against respondent corporations.
Petitioners banks preferred status over the unsecured creditors relative to the mortgage liens is
retained, but the enforcement of such preference is suspended. the loan agreement between the
parties have not been set aside and petitioner bank may still enforce its preference when the assets
of ASB Group of companies will be liquidated. considering that the provisions of the loan
agreements and merely suspends, there is no impairment of contracts, specifically its lien on the
mortgaged properties.

The court also emphasized that the purpose of rehabilitating proceedings is to enable the company
to gain new lease on life thereby allows creditors to be paid their claims from its earnings.
rehabilitation contemplates a continuance of corporate life and activities in an effort to restore ad
reinstate the financially distressed corporation to its former position of successful operation and
solvency. this is in consonance with the state's equitable distribution of wealth to protect investments
and the public. The approval of the rehabilitation plan by the SEC hearing panel, affirmed by both
the SEC en banc and the court of appeals, is precisely in furtherance if the rationale behind P.D. No.
902-A, as amended which is "to effect a feasible and viable rehabilitation" of ailing corporations
which affect the public welfare.