Metropolitan Bank and Trust Company vs. Liberty Corrugated Boxes Manufacturing Corporation

A corporation whose debts have already matured and fallen into default remains qualified to file a petition for corporate rehabilitation under Rule 4, Section 1 of the Interim Rules of Procedure on Corporate Rehabilitation, because the triggering condition is the debtor's inability to pay its debts, not the maturity status of those debts; the Interim Rules are to be liberally construed to carry out the objectives of Presidential Decree No. 902-A.

Liberty Corrugated Boxes Manufacturing Corporation is a domestic corporation engaged in the production of corrugated packaging boxes. It obtained various credit accommodations and loan facilities from Metropolitan Bank and Trust Company amounting to ₱19,940,000.00, secured by mortgages over 12 lots in Valenzuela City. The Asian Financial Crisis caused a drastic decline in demand for Liberty's goods, compounded by the serious illness of its Founder and President, Ki Kiao Koc, ultimately leading to default on the loans. The dispute arose in the context of the Interim Rules of Procedure on Corporate Rehabilitation and Presidential Decree No. 902-A, which govern corporate rehabilitation proceedings and provide the framework under which a distressed corporation may seek judicial assistance to restore itself to solvency.

Liberty Corrugated Boxes Manufacturing Corporation is a domestic corporation engaged in the production of corrugated packaging boxes. It obtained various credit accommodations and loan facilities from Metropolitan Bank and Trust Company amounting to ₱19,940,000.00, secured by mortgages over 12 lots in Valenzuela City. Liberty defaulted on the loans.

On June 21, 2007, Liberty filed a Petition for corporate rehabilitation before Branch 74 of the Regional Trial Court of Malabon City, docketed as SEC Case No. S8-001-MN. Liberty attributed its inability to meet its obligations to Metrobank to the Asian Financial Crisis, which caused a drastic decline in demand for its goods, and to the serious illness of its Founder and President, Ki Kiao Koc. The rehabilitation plan consisted of four components: a debt moratorium, renewal of marketing efforts, resumption of operations, and entry into condominium development as a new business venture.

On June 27, 2007, the RTC found the Petition sufficient in form and substance and issued a Stay Order, staying enforcement of all claims against Liberty and setting an initial hearing. Metrobank filed its Comment/Opposition on August 6, 2007, contending that Liberty was not qualified for corporate rehabilitation, that the Petition and rehabilitation plan were defective, and that rehabilitation was not feasible; it also alleged that Liberty filed the Petition solely to avoid its obligations. On September 20, 2007, the RTC gave due course to the Petition and referred the rehabilitation plan to Rehabilitation Receiver Rafael Chris F. Teston.

The Rehabilitation Receiver recommended approval of the plan, subject to the condition that Liberty initiate construction on the Valenzuela property within 12 months from approval. On December 21, 2007, the RTC approved the rehabilitation plan, finding Liberty capable of being rehabilitated and the plan feasible and viable. Metrobank appealed to the Court of Appeals, which on June 13, 2008 affirmed the RTC's Order, holding that debtor corporations could still avail of rehabilitation even if already in default and that the trial court correctly approved the plan upon the Rehabilitation Receiver's recommendation, which had carefully addressed Metrobank's criticisms. Metrobank's motion for reconsideration was denied on August 20, 2008, prompting the present Petition before the Supreme Court.

• Qualification for Rehabilitation: Petitioner argued that Rule 4, Section 1 of the Interim Rules restricts the kind of debtor who can file for rehabilitation, requiring an element of foresight; because foresight is required, the corporation's debts should not yet have matured, and respondent, already in default, is disqualified.
• Approval Over Opposition: Petitioner maintained that the RTC's approval of the rehabilitation plan was contrary to Rule 4, Section 23 of the Interim Rules, which requires both a finding of feasibility and a determination that creditor opposition is "manifestly unreasonable"; petitioner claimed the RTC failed to declare the manifest unreasonableness of its opposition.
• Defective Petition: Petitioner argued that respondent's Petition and attached inventory of accounts receivable failed to disclose the maturity dates of the accounts, rendering the Petition defective under Rule 4, Section 2(d) of the Interim Rules.
• Insufficient Financial Commitments: Petitioner contended that the rehabilitation plan lacked the material financial commitments required under Rule 4, Section 5, as it did not claim that new money would be invested in the corporation.

• Qualification for Rehabilitation: Respondent countered that petitioner's reading of Rule 4, Section 1 is unduly restrictive, merely indicating the minimum conditions for filing; respondent cited Rule 4, Sections 4 and 6 of the Interim Rules, noting that a stay order — which may assume cases have been filed to collect on matured debts — may be granted, supporting the view that defaulting debtors are covered.
• Feasibility of the Plan: Respondent argued that the Court of Appeals' finding of feasibility was well-grounded and consistent with Rule 4, Section 23, as the Rehabilitation Receiver had deemed the plan viable and no serious objection or counter-proposal was presented by petitioner.
• Sufficiency of the Petition: Respondent maintained that the Petition listed the receivables, clearly due for collection, in its annexes, and that the Court of Appeals did not disregard the maturity dates.
• Material Financial Commitments: Respondent contended that the rehabilitation plan contains material financial commitments, arguing that the Interim Rules do not require commitments to come from outside sources; the corporation's showing that the plan can find sufficient funding, including from internal operations, should be sufficient.

• Qualification of Defaulting Debtor: Whether a debtor corporation already in default on matured debts is qualified to file a petition for corporate rehabilitation under Presidential Decree No. 902-A and Rule 4, Section 1 of the Interim Rules.
• Sufficiency and Feasibility: Whether respondent's Petition for rehabilitation is sufficient in form and substance and respondent's rehabilitation plan is feasible, and whether the Supreme Court may review these findings in a Rule 45 petition.

• Qualification of Defaulting Debtor: Yes. A corporation whose debts have already matured and fallen into default remains qualified to file for rehabilitation, because the triggering condition under Rule 4, Section 1 is the debtor's inability to pay, not the maturity status of its debts; the Interim Rules are to be liberally construed to carry out the objectives of P.D. No. 902-A.
• Sufficiency and Feasibility: Yes. The Petition was sufficient in form and substance and the rehabilitation plan was feasible, as found by both the RTC and the Court of Appeals; these are questions of fact that the Supreme Court will not review in a Rule 45 petition absent any recognized exception.

• Qualification of Defaulting Debtor: The purpose of rehabilitation, as articulated in Philippine Bank of Communications vs. Basic Polyprinters and Packaging Corporation, is to restore the debtor to successful operation and solvency, allowing creditors to recover more if the corporation continues as a going concern than if it were immediately liquidated. The Interim Rules mandate liberal construction under Rule 2, Section 2 to carry out the objectives of P.D. No. 902-A. Adopting petitioner's restrictive interpretation — limiting rehabilitation to corporations whose debts have not yet matured — would undermine this purpose by denying already-defaulting corporations the opportunity to recover and pay creditors in an orderly fashion. The phrase "any debtor who foresees the impossibility of meeting its debts when they respectively fall due" need not refer to a specific period or point in time when debts mature; it may refer to the debtor's general realization that it cannot fulfill its obligations. The definition of "claim" under Rule 2, Section 1 encompasses "all claims or demands of whatever nature or character," not limited to unmatured claims. Rule 4, Section 6 provides for stay orders staying enforcement of "all claims, whether for money or otherwise," which contemplates situations where debts have already matured and enforcement actions may be pending. The principle ubi lex non distinguit, nec nos distinguere debemos applies: where the Interim Rules make no distinction between matured and unmatured debts, courts should not distinguish. Precedents including Negros Navigation Co., Inc. vs. Court of Appeals, Abrera vs. Hon. Barza, and Express Investments III Private Ltd. and Export Development Canada vs. Bayan Telecommunications, Inc. all confirm that corporations already in default were allowed to undergo rehabilitation. The plain meaning doctrine cannot apply because the phrase is not absolutely clear and a literal reading would lead to absurdity and defeat the legislative purpose.

• Sufficiency and Feasibility: The Supreme Court is not a trier of facts; factual findings of the Court of Appeals, when supported by substantial evidence, are final, binding, and conclusive. Petitioner's contentions — that the Petition failed to include maturity dates, that the RTC failed to declare its opposition manifestly unreasonable, and that the plan lacked material financial commitments — are all questions of fact requiring review of the sufficiency and weight of evidence. None of the ten recognized exceptions to the finality of factual findings enumerated in Pascual vs. Burgos (originating from Medina vs. Mayor Asistio, Jr.) were established. On the merits, the Interim Rules do not require a written declaration that a creditor's opposition is manifestly unreasonable; the RTC's December 21, 2007 Order effectively found the opposition unreasonable by approving the plan. The Petition annexed a table of accounts receivable showing obligations that had already matured, and respondent admitted its inability to comply with its obligations. Regarding material financial commitments, internally generated funds from operations constitute a material, voluntary, and significant financial commitment; the Interim Rules do not require commitments to come from outside sources. The Rehabilitation Receiver assessed the expected cashflow as realistic and noted that the funds required to finance the first year would be less than the amount stated in the Petition. Philippine Bank of Communications distinguished insufficient commitments (e.g., written-off insurance claims, reclassification of payables, third-party property for dacion en pago) from respondent's genuine, internally sourced funding plan.

• Liberal Construction of the Interim Rules — Rule 2, Section 2 of the Interim Rules of Procedure on Corporate Rehabilitation mandates that the Rules "shall be liberally construed to carry out the objectives of Sections 5(d), 6(c) and 6(d) of Presidential Decree No. 902-A." The Court applied this principle to hold that the qualification threshold for filing a rehabilitation petition should not be read restrictively to exclude corporations already in default.
• Purpose of Corporate Rehabilitation — Rehabilitation is the process of restoring the debtor to a position of successful operation and solvency, where continuance of operation is economically feasible and creditors can recover more through the present value of projected payments than through immediate liquidation. The Court relied on this doctrine to reject an interpretation that would deny defaulting corporations the opportunity to recover.
• Ubi Lex Non Distinguit — Where the law does not distinguish, courts should not distinguish. Because Rule 4, Section 1 does not specify what kind of debtor may seek rehabilitation, and the definition of "claim" is not limited to unmatured claims, no distinction should be drawn between corporations with matured and unmatured debts.
• Finality of Factual Findings in Rule 45 Petitions — Only questions of law may be raised in a Rule 45 petition; factual findings of the Court of Appeals supported by substantial evidence are final, binding, and conclusive on the parties and the Supreme Court, subject only to ten recognized exceptions first enumerated in Medina vs. Mayor Asistio, Jr. None of the exceptions were found applicable.
• Material Financial Commitments Need Not Be Externally Sourced — A rehabilitation plan's material financial commitments under Rule 4, Section 5(c) need not come from outside sources; a corporation's showing that it can source sufficient funding from internal operations constitutes a material, voluntary, and significant financial commitment.

• "A corporation with debts that have already matured may still file a petition for rehabilitation under the Interim Rules of Procedure on Corporation Rehabilitation." — This is the opening statement of the decision and encapsulates the core ruling: the maturity status of debts does not disqualify a corporation from seeking rehabilitation.

• "The condition that triggers rehabilitation proceedings is not the maturation of a corporation's debts but the inability of the debtor to pay these." — This passage articulates the ratio decidendi on the first issue, clarifying that the operative triggering event for rehabilitation is inability to pay, not debt maturity.

• "There is no reason why corporations with debts that may have already matured should not be given the opportunity to recover and pay their debtors in an orderly fashion. The opportunity to rehabilitate the affairs of an economic entity, regardless of the status of its debts, redounds to the benefit of its creditors, owners, and to the economy in general." — This passage explains the policy rationale behind the liberal construction of the Interim Rules and the rejection of petitioner's restrictive interpretation.

• "That the funds are internally generated does not render the funds insufficient. This arrangement is still a material, voluntary, and significant financial commitment, in line with respondent's rehabilitation plan." — This defines the scope of "material financial commitments" under Rule 4, Section 5(c), distinguishing internally sourced funding from the insufficient commitments identified in Philippine Bank of Communications.

• Philippine Bank of Communications vs. Basic Polyprinters and Packaging Corporation, 745 Phil. 651 (2014) — Followed for the definition and purpose of corporate rehabilitation, and for illustrating what constitutes insufficient material financial commitments (e.g., written-off insurance claims, reclassification of payables, third-party property for dacion en pago).
• Spouses Sobrejuanite vs. ASB Development Corporation, 508 Phil. 715 (2005) — Followed for the principle that the purpose of a stay order is to prevent creditor preference and preserve rights, and that the Interim Rules' definition is encompassing.
• Negros Navigation Co., Inc. vs. Court of Appeals, 594 Phil. 97 (2008) — Followed for the guidelines on treatment of claims against corporations undergoing rehabilitation, including that all claims — secured and unsecured — are suspended during rehabilitation, and that secured creditors retain preference but enforcement is equally suspended.
• Abrera vs. Hon. Barza, 615 Phil. 595 (2009) — Followed for the holding that a pre-need corporation already in default could file for rehabilitation, applying the principle that courts should not distinguish where the Interim Rules make no distinction.
• Express Investments III Private Ltd. and Export Development Canada vs. Bayan Telecommunications, Inc., 700 Phil. 225 (2012) — Followed as precedent allowing a corporation already in default to undergo rehabilitation proceedings.
• Pascual vs. Burgos, G.R. No. 171722, January 11, 2016 — Followed for the rule that only questions of law may be raised in Rule 45 petitions and for the enumeration of ten exceptions to the finality of factual findings.
• Social Weather Stations, Inc. and Pulse Asia vs. Commission on Elections, G.R. No. 208062, April 27, 2015 — Cited for the principle that the plain meaning doctrine applies only when the law is completely clear, and that statutory construction cannot lend itself to pedantic rigor that foments absurdity.
• Chavez vs. Judicial and Bar Council, 691 Phil. 173 (2012) — Cited for the maxim noscitur a sociis, that ambiguous words should be construed in association with other words in the statute.

• Rule 4, Section 1, Interim Rules of Procedure on Corporate Rehabilitation — Defines who may petition for rehabilitation: "Any debtor who foresees the impossibility of meeting its debts when they respectively fall due, or any creditor or creditors holding at least twenty-five percent (25%) of the debtor's total liabilities." The Court held that this provision does not restrict rehabilitation to debtors whose debts have not yet matured; the phrase refers to the debtor's general realization of inability to pay.
• Rule 2, Section 2, Interim Rules of Procedure on Corporate Rehabilitation — Mandates liberal construction of the Rules to carry out the objectives of P.D. No. 902-A. The Court relied on this provision to reject a restrictive reading of Rule 4, Section 1.
• Rule 2, Section 1, Interim Rules of Procedure on Corporate Rehabilitation — Defines "claim" to include "all claims or demands of whatever nature or character against a debtor or its property, whether for money or otherwise," and "debtor" to mean any corporation on whose behalf a petition for rehabilitation has been filed. The Court used these definitions to show that the Interim Rules contemplate matured claims.
• Rule 4, Section 6, Interim Rules of Procedure on Corporate Rehabilitation — Provides for the stay order, staying "enforcement of all claims, whether for money or otherwise and whether such enforcement is by court action or otherwise." The Court cited this provision to show that the Interim Rules contemplate situations where debts have already matured and enforcement actions may be pending.
• Rule 4, Section 23, Interim Rules of Procedure on Corporate Rehabilitation — Governs approval of the rehabilitation plan over creditor opposition, requiring that rehabilitation is feasible and the opposition is manifestly unreasonable. The Court held that the Interim Rules do not require a written declaration of manifest unreasonableness, and that the RTC's approval order effectively found the opposition unreasonable.
• Rule 4, Section 5, Interim Rules of Procedure on Corporate Rehabilitation — Outlines the requisites of a rehabilitation plan, including "material financial commitments to support the rehabilitation plan." The Court held that internally generated funds from operations satisfy this requirement.
• Rule 4, Section 2, Interim Rules of Procedure on Corporate Rehabilitation — Specifies the contents of the petition, including an inventory of assets with a schedule of accounts receivable indicating maturity dates. The Court found that the Petition annexed a table of accounts receivable showing obligations that had already matured, satisfying this requirement.
• Presidential Decree No. 902-A, Sections 5(d), 6(c), and 6(d) — The statutory provisions underlying the Interim Rules, referenced in Rule 2, Section 2 as the objectives the Rules are designed to carry out, including the rehabilitation of distressed corporations.

Antonio T. Carpio (Chairperson), Diosdado M. Peralta, Jose Catral Mendoza, and Francis H. Jardeleza concurred in the decision. No separate concurring opinions were noted.