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    Today Is Monday, July 22, 2019: Supreme Court

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    Vanessa Garingo
    The Supreme Court of the Philippines affirmed the decision of the Court of Appeals and Regional Trial Court regarding Basic Polyprinters' petition for corporate rehabilitation. Specifically: 1) Basic Polyprinters claimed it had sufficient assets to cover debts but was insolvent as its liabilities exceeded assets. However, an independent appraisal found assets were worth more. 2) The proposed 15-year rehabilitation plan that waived interest and penalties from 2004 was rejected as it prejudiced creditors. 3) For a rehabilitation plan to be approved, the petitioner must show continuing operations are economically feasible and creditors would receive more than through liquidation. The court did not find this was shown.

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    Today Is Monday, July 22, 2019: Supreme Court

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    Vanessa Garingo
    32 views6 pages
    The Supreme Court of the Philippines affirmed the decision of the Court of Appeals and Regional Trial Court regarding Basic Polyprinters' petition for corporate rehabilitation. Specifically: 1) Basic Polyprinters claimed it had sufficient assets to cover debts but was insolvent as its liabilities exceeded assets. However, an independent appraisal found assets were worth more. 2) The proposed 15-year rehabilitation plan that waived interest and penalties from 2004 was rejected as it prejudiced creditors. 3) For a rehabilitation plan to be approved, the petitioner must show continuing operations are economically feasible and creditors would receive more than through liquidation. The court did not find this was shown.

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    The Supreme Court of the Philippines affirmed the decision of the Court of Appeals and Regional Trial Court regarding Basic Polyprinters' petition for corporate rehabilitation. Specifically: 1) Basic Polyprinters claimed it had sufficient assets to cover debts but was insolvent as its liabilities exceeded assets. However, an independent appraisal found assets were worth more. 2) The proposed 15-year rehabilitation plan that waived interest and penalties from 2004 was rejected as it prejudiced creditors. 3) For a rehabilitation plan to be approved, the petitioner must show continuing operations are economically feasible and creditors would receive more than through liquidation. The court did not find this was shown.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    32 views6 pages

    Today Is Monday, July 22, 2019: Supreme Court

    Uploaded by

    Vanessa Garingo
    The Supreme Court of the Philippines affirmed the decision of the Court of Appeals and Regional Trial Court regarding Basic Polyprinters' petition for corporate rehabilitation. Specifically: 1) Basic Polyprinters claimed it had sufficient assets to cover debts but was insolvent as its liabilities exceeded assets. However, an independent appraisal found assets were worth more. 2) The proposed 15-year rehabilitation plan that waived interest and penalties from 2004 was rejected as it prejudiced creditors. 3) For a rehabilitation plan to be approved, the petitioner must show continuing operations are economically feasible and creditors would receive more than through liquidation. The court did not find this was shown.

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    of 6

    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.

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