[ Manila Bulletin Online ] February 3, 2009
By REY G. PANALIGAN
The Supreme Court (SC) has set aside the protest of two creditor banks as it affirmed a Court of Appeals (CA) decision that ordered the rehabilitation of ASB Group, a property developer based in Makati City.
In a decision written by Justice Presbitero J. Velasco Jr., the SC ruled that the Securities and Exchange Commission (SEC) did not commit any abuse of discretion in entertaining the company’s petition for rehabilitation even without a finding of technical insolvency.
With the ruling, the SC dismissed the petition filed by the Philippine National Bank (PNB) and Equitable PCI Bank, now Banco de Oro, challenging the CA’s ruling that upheld the order issued by the SEC. "Contrary to petitioners’ (PNB and Equitable) arguments, the mere fact that the ASB Group averred that it has sufficient assets to cover its obligation does not make it ‘solvent’ enough to prevent it from filing a petition for rehabilitation. A corporation may have considerable assets but if it foresees the impossibility of meeting its obligations for more than one year, it is considered as technically insolvent. Thus at the first instance, a corporation may file a petition for rehabilitation — a remedy provided under Sec. 4.1 [of Rule IV of the Rules of Procedure of Corporate Recovery]," the SC said.
At the same time, the SC upheld the appellate court’s order for the appointment of the interim receiver for the ASB Group to protect the interests of both its creditors and stockholders, particularly the assets and business operations during the pendency of the proceedings and to ensure the viability and the success of the rehabilitation proceedings.
The SC pointed out that PNB and Equitable are not forced to accept the terms of the rehabilitation plan since they are merely proposals for the creditors to accept, citing its previous ruling involving ASB Holdings, Inc.
According to the SC, the CA was correct when the appellate court "took into consideration the fact that compared to the creditor banks who have existing mortgages with private respondents, the 725 individually affected unsecured creditors with a much higher stake in their combined claims of R4 billion, the SEC found it prejudicial to disapprove the Rehabilitation Plan and thereby allow the creditor banks to foreclose the mortgages and sell the fixed assets at prices lower than the market value, a prospect that will deprive the unsecured creditors of any hope of being paid while the corporations will eventually become insolvent unable to pay its obligations to the greater number of unsecured creditors."
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