Today is Monday, July 22, 2019

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

DECISION

munications, v. Basic Polyprinters and Packaging Corporation, whereby the Court of Appeals (CA) affirmed the order issued on January 11, 2008 by the Regional Trial Court (R
1

oflmus, Cavite, Branch 21, is hereby AFFIRMED.

Antecedents

rinting greeting cards, gift wrappers, gift bags, calendars, posters, labels and other novelty items. 3

Cuisine Connection, Inc., Fine Arts International, Gibson HP Corporation, Gibson Mega Corporation, Harry U. Limtong Corporation, Main Pacific Features, Inc., T.O.L. Realty
lan, but the CA reversed the RTC on October 25, 2005, and directed the petitioning corporations tofile their individual petitions for suspension of payments and rehabilitation i
5

ble and financially profitable; (b) it had obtained loans from various banks, and had owed accounts payable to various creditors; (c) the Asian currency crisis, devaluation of the
from stores like SM, Gaisano, Robinson and other malls; and (iv) the fire of July 19, 2002 that had destroyed its warehouse containing inventories worth ₱264,000,000.00, res
as the full payment of its outstanding loans in favor of petitioner Philippine Bank of Communications (PBCOM), RCBC, Land Bank, EPCI Bank and AUB via repayment over 15

III as the rehabilitation receiver, and required all creditors and interested parties, including the Securities and Exchange Commission (SEC), to file their comments.

e petition and referred it to the rehabilitation receiver for evaluation and recommendation. 9

19, 2007, the rehabilitation receiver submitted his clarifications and corrections to his report and recommendations. 10

Ruling of the RTC

d.

operations will be insufficient to pay off its maturing obligations. Thus, the success of the rehabilitation planlargely depends on its ability to reduce its debt obligation to a mana
lity.

nt of debts.

the stockholders, investors and creditors.

ommendations and its clarifications and corrections and enjoins the petitioner to comply strictly with the provisions of the plan, perform its obligations thereunder and take all ac
litation.

reon.

Ruling of the CA

of the rehabilitation receiver that there were sufficient evidence, factors and actual opportunities in the rehabilitation plan indicating that Basic Polyprinters could be successfu

amended, sought to "effect a feasible and viable rehabilitation by preserving a foundering business as going concern" because it would be more valuable to preserve the ass

to be paid their claims from its earnings. Rehabilitation contemplates a continuance of corporate life and activities in an effort to restore and reinstate the financially distressed
y the trial court is precisely in furtherance of the rationale behind the Interim Rules of Corporate Rehabilitation is to effect a feasible and viable rehabilitation ofailing corporatio

Issues

ER DATED JANUARY 11, 2008, CONSIDERING THAT:

HAT THE PETITIONING CORPORATION HAS SUFFICIENT PROPERTY TO COVER ALL ITS INDEBTEDNESS. RESPONDENT IS INSOLVENT AS ITS ASSETS ARE LES

ELF OR WOULD-BE INVESTORS

ILITATION TERM OF FIFTEEN (15) YEARS AS WELL AS THE "WAIVER" OF ALL INTEREST AND PENALTIES BEGINNING FEBRUARY 2004 UPTO THE TIME OF ITS A

aterial in proceedings for corporate rehabilitation; that a petition for rehabilitation presupposed that the petitioning corporation had sufficient property to cover all its indebtedne
ot just ₱71,315,086.00 as it claimed; that the independent appraisal by the Professional Asset Valuers, Inc. (PAVI) on Basic Polyprinters’ machineries and printing equipment m
ommitments required by Section 5, Rule 4 of the Interim Rules of Procedure for Corporate Rehabilitation (Interim Rules); that, accordingly, the proposed repayment scheme d
hat would increase sales and improve quality and capacity. 18

and principal payments counted from the issuance of the stay order in 2004 that effectively prejudiced its creditors. 19

as long as the rehabilitation court found that the petitioning corporation could still be rehabilitated, its findings of fact should be binding when they were supported by substant

ters; and (b) absence of a material financial commitment pursuant to Section 5, Rule 4 of the Interim Rules.

Ruling

ficient assets to cover all its indebtedness because it only foresees the impossibility of paying the indebtedness falling due. It claims that rehabilitation became inappropriate b

wn that its continuance of operation is economically feasible and its creditors can recover by way of the present value of payments projected in the plan more if the corporation

mely: (a) to efficiently and equitably distribute the assets of the insolvent debtor to its creditors; and (b) to provide the debtor with a fresh start, viz: Rehabilitation proceedings
em of the weight of their outstanding debts and permitting them to reorganize their affairs. The purpose of rehabilitation proceedings is to enable the company to gain a new le

he petitioning corporation. The determination of such issues was to be carried out by the court-appointed rehabilitation receiver, who was Cacho in this case.
25

ned a corporate debtor as a corporation duly organized and existing under Philippine laws that has become insolvent. The term insolventis defined in Republic Act No. 10142
27

II

ating Section 5, Rule 4 of the Interim Rules, the rule applicable at the time of the filing of the petition for rehabilitation. In that regard, Basic Polyprinters made no commitment

orporation in financing the proposed rehabilitation plan. This commitment may include the voluntary undertakings ofthe stockholders or the would-be investors of the debtor-c
30

e treated as trade payables. 33

orking capital would be sourced had already been written-off by Basic Polyprinters’s affiliate, Wonder Book Corporation. A claim that has been written-off is considered a bad
34

3,316,044.00 as of June 30, 2006.

for future subscriptions to common stock and the treatment of all payables to officers and stockholders as trade payables was hardly constituting material financial commitmen
s for future subscription to common stock and substituted liabilities on the shareholders’ deficit because their amounts were not reflected in the financial statements contained

cts and the effect of direct competition from stores like SM, Gaisano, Robinsons, and other malls. Even the ₱245 million insurance claim that was supposed to cover the destro

because the object thereof would not be its own property but one belonging to its affiliate, TOL Realty and Development Corporation, a corporation also undergoing rehabilitatio

filed the joint petition for suspension of payments and rehabilitation in SEC Case No. 031-04 adverted to earlier. Both of them submitted identical commitments in their respect
y.

ed to exert a conscious effort in formulating the same, for such plan would spell the future not only for itself but also for its creditors and the public in general. The contents and
we must endeavor to balance the interests of all the parties that had a stake in the success of rehabilitating the debtors. In doing so here, we cannot now find the rehabilitation

cember 16, 2008 and the resolution promulgated on April 22, 2009, both by the Court of Appeals, as well as the order issued on January 11, 2008 by the Regional Trial Court a
on to pay the costs of suit.

MARIA LOURDES P. A. SERENO

Chief Justice

TERESITA J. LEONARDO-DE CASTRO JOSE PORTUGAL PEREZ

Associate Justice Associate Justice

ESTELA M. PERLAS-BERNABE
Associate Justice

CERTIFICATION

on before the case was assigned to the writer of the opinion of the Court's Division.

E. Maarnbong (retired/deceased) and Associate Justice Arturo G. Tayag (retired), concurring.

Interim Rules of Procedure on Corporate Rehabilitation (A.M. No. 00-8-10-SC, as amended).

Ruby Industrial Corporation v. Court of Appeals, G.R. Nos. 124185-87, January 20, 1998, 284 SCRA 445, 460.

gistered with the Department of Trade and Industry (DTI), a partnership duly registered with the Securities and Exchange Commission (SEC), a corporation duly organized an

505.
817, 831.

Constitution
Statutes
Executive Issuances
Judicial Issuances
Other Issuances
Jurisprudence
International Legal Resources
AUSL Exclusive