LEA MADELON G.

BECERRO
JD – IV

CASE DIGEST

G.R. No. 175844, July 29, 2013

BANK OF THE PHILIPPINE ISLANDS, Petitioner, v. SARABIA MANOR HOTEL

CORPORATION, Respondent.

FACTS:

This is a petition for review on certiorari on decisions of CA of Cebu City. Sarabia is a

corporation duly organized and existing under Philippine laws, with principal place
of business at 101 General Luna Street, Iloilo City. It was incorporated on February
22, 1982, with an authorized capital stock of P10,000,000.00, fully subscribed and
paid-up, for the primary purpose of owning, leasing, managing and/or operating
hotels, restaurants, barber shops, beauty parlors, sauna and steam baths, massage
parlors and such other businesses incident to or necessary in the management or
operation of hotels.

It obtained, in 1997, a p150,000,000.00 special loan from Far East Bank and Trust
Company (FEBTC) in order to finance the construction of a five-storey hotel building
(New Building). An additional P20,000,000.00 stand-by credit line was approved by
FEBTC in the same year.

By virtue of a merger, Bank of the Philippine Islands (BPI) assumed all of FEBTC’s
rights against Sarabia.

Due to the delayed completion of the New Building, Sarabia incurred various cash
flow problems. Thus, despite the fact that it had more assets than liabilities at that
time,11 it, nevertheless, filed, on July 26, 2002, a Petition12 for corporate
rehabilitation (rehabilitation petition) with prayer for the issuance of a stay order
before the RTC as it foresaw the impossibility to meet its maturing obligations to its
creditors when they fall due.

Its cash position suffered when it was forced to take over the construction of the
New Building due to default of its contractor and subsequently its abandonment of
the said project. The situation became even more difficult when the grace period for
the payment of the principal loan amounts ended in 2000 which resulted in higher
amortizations. Moreover, external events adversely affecting the hotel industry also
contributed to Sarabia’s financial difficulties.
RTC approved its rehabilitation plan. However BPI opposed claiming that such rehabilitation
plan did not substantiate the interest of BPI as a creditor. Hence, this petition.

Issue:

Whether or not the CA correctly affirmed Sarabia’s rehabilitation plan as approved

by the RTC.

Ruling:

Yes. Section 23, Rule 4 of the Interim Rules of Procedure on Corporate

Rehabilitation states that a rehabilitation plan may be approved even over the
opposition of the creditors holding a majority of the corporation’s total liabilities if
there is a showing that rehabilitation is feasible and the opposition of the creditors
is manifestly unreasonable.

Here, the delayed of the construction of its new building significantly skewed its
projected revenues and led to various cash flow difficulties, resulting in its
incapacity to meet its maturing obligations.

It is within the parameters of the aforesaid provision that the Court examines the
approval of Sarabia’s rehabilitation. Thus, the CA correctly affirmed Sarabia’s
corporate rehabilitation plan.

VIVA SHIPPING LINES v. KEPPEL PHILIPPINES MINING, GR No. 177382, 2016-02-17

Facts:

Viva Shipping Lines, Inc. (Viva Shipping Lines) filed a Petition for Corporate Rehabilitation
before the Regional Trial Court
Viva Shipping Lines owned only two (2) maritime vessels. According to Viva Shipping Lines,
the devaluation of the Philippine peso, increased competition, and mismanagement of its
businesses made it difficult to pay its debts as they became due. It also stated that "almost all
its vessels were rendered unserviceable either because of age and deterioration that it can
no longer compete with modern made vessels owned by other operators."

In its Company Rehabilitation Plan, Viva Shipping Lines enumerated possible sources of
funding such as the sale of old vessels and commercial lots of its sister company, Sto.
Domingo Shipping Lines. It also proposed the conversion of the Ocean Palace Mall into a
hotel, the acquisition of two (2) new vessels for shipping operations, and the "re-operation"
of an oil mill in Buenavista, Quezon. The Regional Trial Court found that Viva Shipping Lines'
Amended Petition to be "sufficient in form and substance," and issued a stay order.
Viva Shipping Lines' former employees Alejandro Olit, Nida Montilla, Pio Hernandez,
Eugenio Baculo, and Harlan Bacaltos (Alejandro Olit, et al.) filed their comment on the
Amended Petition, informing the Regional Trial Court of their pending complaint against
Viva Shipping Lines before the National Labor Relations Commission. The Regional Trial
Court lifted the stay order and dismissed Viva Shipping Lines' Amended Petition for failure
to show the company's viability and the feasibility of rehabilitation.

The Regional Trial Court found that Viva Shipping Lines' assets all appeared to be non-
performing. Further, it noted that Viva Shipping Lines failed to show any evidence of
consent to sell real properties belonging to its sister company.
The Court of Appeals dismissed Viva Shipping Lines' Petition for Review
It found that Viva Shipping Lines failed to comply with procedural requirements under Rule
43,[45] The Court of Appeals ruled that due to the failure of Viva Shipping Lines to implead
its creditors as respondents, "there are no respondents who may be required to file a
comment on the petition, pursuant to Section 8 of Rule 43,"
Viva Shipping Lines moved for reconsideration. It argued that its procedural misstep was
cured when it served copies of the Petition on the Regional Trial Court and on its former
employees.
Viva Shipping Lines filed before this court a Petition for Review on Certiorari assailing the
January 5, 2007 and March 30, 2007 Court of Appeals Resolutions

Issue:

Whether or not the Court of Appeals erred in dismissing petitioner Viva Shipping Lines'
Petition for Review on procedural grounds.

Ruling:

Yes. Any final order or decision of the Regional Trial Court may be subject of an appeal. In
Relation to Mode of Appeal in Cases Formerly Cognizable by the Securities and Exchange
Commission. This court clarified that all decisions and final orders falling under the Interim
Rules of Procedure on Corporate Rehabilitation shall be appealable to the Court of Appeals
through a petition for review under Rule 43 of the Rules of Court. An appeal from a final
order or decision in corporate rehabilitation proceedings may be dismissed for being filed
under the wrong mode of appeal.