ATTACHMENT D-3 epublic of the Philippines Supreme Court -Mlanila EN BANC PRYCE CORPORATION, Petitioner, ~versus- CHINA BANKING CORPORATION, Respondent. an eee RESOLUTION LEONEN, J: GR. No. 172302 Present: SERENO, C.J, CARPIO, VELASCO, JR. LBONARDO- “BRION, ~ PERALTA, BERSAMIN, DEL CASTILLO, ABAD, VILLARAMA, JR., PEREZ, MENDOZA, _REYES, PERLAS-BERNABE, and LEONEN, WU. Promulgated: FEBRUARY 18, 2014 This case resolves conflicting decisions between two divisions. Only one may serve as res judicata or a bar for the other to proceed. This case also settles the doctrine as to whether a hearing is needed prior to the issuance of a stay order in corporate rehabilitation proceedings. On Leave,Resolution , a GR. No. 172302 ‘The present case originated from a petition for corporate rehabilitation filed by petitioner Pryce Corporation on July 9, 2004 with the Regional Trial Court of Makati, Branch 138." ‘The rchabilitation court found the petition sufficient in form and substance and issued a stay order on July 13, 2004 appointing Gener T. Mendoza as rehabilitation receiver.” On September 13, 2004, the rehabilitation court gave due course to the petition and directed the rehabilitation receiver to evaluate and give recommendations on petitioner Pryce Corporation’s proposed rehabilitation plan attached to its petition.* The rehabilitation receiver did not approve this plan and submitted instead an amended rehabilitation plan, which the rehabilitation court approved by order dated January’ 17, 2005.’ In its disposition, the court found petitioner Pryce Corporation “eligible to be placed in a state of corporate rehabilitation.”* The disposition likewise identified the assets to be held and disposed of by petitioner Pryce Corporation and the manner by which its liabilities shall be paid and liquidated.’ On February 23, 2005, respondent China Banking Corporation elevated the case to the Court of Appeals. Its petition questioned the January 17, 2005 order that included the following terms: 1, The indebtedness. to China Banking Corporation and Bank of the Philippine Islands as well as the long term commercial papers will be paid through a dacion en pago of developed real estate assets of the’petitioner. XXXX 4, Allaccrued penalties are waived|.] 5. Interests shall accrue only up to July 13, 2004, the date of issuance of the stay order{.] 6. No interest will accrue during the pendency of petitioner's corporate reuabilitation[.] A.copy of this petition for corporate rehabilitation was attached as Annex * Rotto (vol. 1), pp. 120-1 “F" of the petition. 2 [d.at 135-136. A copy of this order dated July 13, 2004 was attached as Annex “G" of the petition, 3d, at 153155, A copy of this order dated September 13, 2004 was attuched as Annex “I" of the petition 1d, at 221-243, A copy ofthis order dated Junuury 17, 2005 was attached as Annex “KC” of the petition, 2 ta. nt 239, Id. at 239-243,GR_No. 172302 Resolution 7. Dollar-denominated loans will be converted to Philippine Pesos on the date of the issuance of this Order using the reference rate of the Philippine Dealing System as of this date. : Respondent China Banking Corporation contended that the rehabilitation plan’s approval impaired the obligations of contraets. It argued that neither the provisions of Presidential Decree No. 902-A nor the Interim Rules of Procedure on Corporate Rehabilitation (Interim Rules) empowered commercial courts “to render without force and effect valid contractual stipulations.”* Moreover, the plan’s approval authorizing dacion en pago of petitioner Pryce Corporation’s properties without respondent China Banking Corporation’s consent not only violated “mutuality of contract and due process, but [was] also antithctical to the avowed policies of the state to maintain a competitive financial system.”” The Bank of the Philippine Islands (BPI), another creditor of petitioner Pryce Corporation, filed a separate petition with the Court of Appeals assailing the same order by the rehabilitation court. BPT called the attention of the court “to the non-impairment clause and the mutuality of contracts purportedly ran roughshod by the [approved rehabilitation plan].”'° On July 28, 2005, the Court of Appeals Seventh (7") Division'! granted respondent China Banking Corporation's petition, and reversed and set aside the rehabilitation court’s: (1) July 13, 2004 stay order that also appointed Gener T, Mendoza as rehabilitation receiver; (2) September 13, 2004 order giving due course to the petition and directing the rehabilitation receiver to evaluate and give recommendations on petitioner Pryce Corporation’s proposed rehabilitation plan; and (3) January 17, 2005 order finding petitioner Pryce Corporation eligible to be placed in a state of corporate rehabilitation, identifying assets to be disposed of, and determining the manner of liquidation to pay the liabilities.” With respect to BPI’s separate appeal, the Court of Appeals First (1° _\ Division" granted its petition initially and set aside the January 17, 2005 lorder of the rehabilitation court in its decision dated May 3, 2006." On reconsideration, the court issued a resolution dated May 23, 2007 setting aside its original decision and dismissing the petition.'* BPI clevated the 7 4a, 3239, ida id, » Id. at622, ' Rollo (G.R. No. 180316), p. 28, " Penned by Associate Justice ‘Mormachuelos and Juan Q. Enriquez, Jr. "= Rollo (vol. 1), pp. $5-70. " Penned by Associate Justice Rebecea de Guia-Salvador and concurred in by Justices Kuben T. Reyes and Aurora Santiago-lagman, % Rollo (G.R. No. 180316), pp, 84-102, "Td, at 189-188, © Q. Roxas and concurred in by Justices Portia Alino-Resolution | 4 GR.No. 1723 case to this court, docketed as G.R, No. 180316. By resolution dated January 30, 2008, the First (1°) Division of this court denied the petition.'© By resolution dated April 28, 2008, this court denied reconsideration with finality."” Meanwhile, petitioner Pryce Corporation also appealed to this court assailing the July 28, 2005 decision of the Court of Appeals Seventh (7") Division granting respondent China Banking Corporation’s petition as well as the resolution denying its motion. for reconsideration. In the decision dated February 4, 2008," the First (1°) Division of this court denied its petition with the dispositive portion as follows: WHEREFORE, we DENY the petition, The assailed Decision of the Court of Appeals in CA-G.R. SP No. 88479 is AFFIRMED with the modification discussed above. Let the records of this case be REMANDED to the RTC, Branch 138, Makati City, sitting as Commercial Court, for further procecdings with dispatch, to determine the merits of the petition for rchabilitation. No costs.!? Petitioner Pryce Corporation filed an omnibus motion for (1) reconsideration or (2) partial reconsideration and (3) referral to the court En Bane dated February 29, 2008. Respondent China Banking Corporation also filed 2 motion for reconsideration on even date, praying that the February 4, 2008 decision be set aside and reconsidered only insofar as it ordered the remand of the case for further proceedings “to determine whether petitioner's financial condition is serious and whether there is clear and imminent danger that it will lose its corporate assets.’*° By resolution dated June 16, 2008, this court denied with finality the separate motions for reconsideration filed by the parties. On September 10, 2008, petitioner Pryce Corporation filed a second motion for reconsideration praying thatthe Court of Appeals” devsion dated \ February 4, 2008 be set aside. The First Division of this court referred this case to the En Banc en consulta by resolution dated June 22, 2009. The court En Bane, in its resolution dated April 13, 2010, resolved to accept this case. 6 td, 871. Ud at 878. © Rollo (vol. 2), pp. 1,627-1,634 [Per J. Sundoval-Gutierrez, First Division). "Id. at 1,634 [Per I. SandovalGuticrez, First Division} 2 1d, a 1,644, 2 Tel at 1,804. id, at 1,805.Resolution Banki 5 GR. No. 172302 On July 30, 2013, petitioner Pryce Corporation and respondent China Corporation, through their respective counsel, filed a joint manifestation and motion to suspend proceedings. The parties requested this court to defer its ruling on petitioner Pryce Corporation’s second motion for reconsideration “so as to enable, the parties to work out a mutually acceptable arrangement.” By resolution dated August 6, 2013, this court granted the motion but only for two (2) months. The registry receipts showed that counsel for respondent China Banking Corporation and counsel for petitioner Pryce Corporation received their copies of this resolution on September 5, 20 13,4 More than two months had lapsed since September 5, 2013, but no agreement was filed by the partics. Thus, we proceed to rule on petitioner Pryce Corporation’s second motion for reconsideration. This motion raises two grounds. First, petitioner Pryce Corporation argues that the issue on the validity of the rehabilitation court orders is now res judicata. Petitioner Pryce Corporation submits that the ruling in BPI v. Pryce Corporation docketed as G.R. No. 180316 contradicts the present case, and it has rendered the issue on the validity and regularity of the rehabilitation court orders as res judicata. Second, petitioner Pryce Corporation contends that Rule 4, Section 6 of the Interim Rules of Procedure on Corporate Rehabilitation” docs not require the rehabilitation court to hold a hearing before issuing a stay order. Considering that the Interim Rules was promulgated later than Rizal Commercial Banking Corp. v. AC” that enunciated the “serious situations” test," petitioner Pryce Corporation argues that the test has effectively been abandoned by the “sufficiency in form and substance test” under the Interim. Rules.” ‘The present second motion for reconsideration involves the following issues: 1d, at 1,849, Id. at 1,884. Id. at 1,791, AM, No, 00-8-10-SC, November 21, 2000, otherwise known us the Interim Rules of Procedure on Corporate Rehabilitation, Rizal Cammercial Banking Corp. v, IAC, 378 Phil. 10 (1999) [Per J. Melo, Ea Banc]. Id. 23, Rolla (vol.2),p. 1,794.Resolution 6 G.R. No, 172302 L WHETHER THE ISSUE ON THE VALIDITY OF THE REHABILITATION ORDER DATED JANUARY 17, 2005 IS NOW RES JUDICATA IN LIGHT OF BPI V. PRYCE CORPORATION DOCKETED AS G.R. NO. 180316; I. WHETHER THE REHABILITATION COURT IS REQUIRED TO HOLD A HEARING TO COMPLY WITEI THE “SERIOUS SITUATIONS” TEST LAID DOWN IN THE CASE OF RIZAL COMMERCIAL BANKING CORP. V. IAC BEFORE ISSUING A STAY ORDER. We proceed to discuss the first issue. BPI v. Pryce Corporation docketed as G.R. No. 180316 rendered the issue on the validity of the rehabilitation court’s January 17, 2005 order approving the amended rehabilitation plan as res judicata. in BPI y, Pryce Corporation, the Court of Appeals set aside initially the January 17, 2005 order of the rehabilitation court.” On reconsideration, the court set aside its original decision and dismissed the petition”! On appeal, this court denied the petition filed by BPI with finality. An entry of judgment was made for BPI v. Pryce Corporation on June 2, 2008. In effect, this court ipa the January 17, 2005 order of the rehabilitation court. According to the doctrine of res judicata, “a final judgment or decree on the merits by a court of competent jurisdiction is conclusive of the rights of the pariies or their privics in all later suits on all points and matters determined in the former suit." The clements for res judicata to apply are as follows: (a) the former judgment was final; (b) the court that rendered it had jurisdiction over the subject mattor and the parties; (c) the judgment was based on the merits; and ! (d) between the first and the second actions, there was an identity of parties, subject matters, and causes of action. __~ Res judicata embraces two concepts: (1) bar by prior judgment” and (2) conclusiveness of judgment.*® Rollo (G.R. No. 180316), 102, Court of Appeuls decision dated May 3, 2006 3 Id. at 182-188, Court of Appeals resolution dated May 23, 2007. id, a 884, © Antonio ¥. Sayman Ve, de Monje, G.R. No. 149624, September 29, 2010, 631 SCRA 471, 479-480 [Per J. Peralta, Second Division}, citing agustin v. Delos Santos, G.R. No, 168139, January 20, 2009, 576 SCRA'S76, 585. Social Security Commission w ial Pout ai Livestock Aasocltion, tne, G-R- NO, 167050, Jue I 2011, 650 SCRA 50, 57-58 [Per. » Ruudeor cnn Paar: Rule 39 se 47 0).Resolution . 7 GR. No, 172302 Bar by prior judgment exists “wheh, as between the first ‘case where the judgment was rendered and the second case that is sought to be barred, there is identity of parties, subject matter, and causes of action.” On the other hand, the concept of conclusiveness of judgment finds application “when a fact or question has been squarely put in issue, judicially passed upon, and adjudged ih a former suit by a court of competent jurisdiction.”** This principle only needs identity of parties and issues to apply.** The elements of res judicata through bar by prior judgment are present in this case. fi On the element of identity of parties, res judicata does not require absolute identity of parties as substantial identity is enough." Substantial identity of parties exists “when there is a community of interest between a party in the first case and a party in the second case, even if the latter was not impleaded in the first case." Parties that represent the same interests in two petitions are, thus, considered substantial identity of partics for purposes of res judicata.” Definitely, one test to’ determine substantial identity of interest would be to see whether the success or failure of one party materially affects the other. In the present case, respondent China Banking Corporation and BPI are creditors of petitioner Pryce Corporation and are both questioning the rehabilitation court’s approval of the amended rehabilitation plan. Thus, there is substantial identity of parties since they are litigating for the same matter and in the same capacity as creditors of petitioner Pryce Corporation. RULES OF CIVIL PROCEDURE, Rule 39, sec. 47 (0). See also Selga v. Brar, G.R. No. 175151, September 21, 2011, 658 SCRA 108, 119. Antonio ¥. Sayman Yda, de Monje, 631 SCRA 471, 480 [Per J. Peralta, Second Division), citing ™ Consti. (1935), art. Il, see | (10). % Consti. (1973), art. IV, see. 11. i Const, art Ill sec 10. 7 See Pacifie Wide Realty and Development Corporation v, Puerto Azul Land, Inc, GR. No. 178768 ‘and, 180893, November 25. 2009, 605 SCRA 503, 516-517 [Per J. Nachura, ‘Third Division! Phitiopine National Bank v. Remigio, G.R. No. 78508, March 21, 1994, 231 SCRA 362, 368 [Per J. Vitug, Third Division]; Kabiling v. National Housing Authority, 240 Phil. $85, $90 (1987) [Per J. Yap, En Banc]; Alalayan, etal, v, National Power Corporation, et ai, 133 Phil. 279, 293-294 (1968) [Per J. Fernando, En Bane). ™ See Abella v. National Labor Relations Commission, 236 Phil, 150, 157 (1987) ® G.R.No. 178768, November 25, 2009, 605 SCRA 503 [Per J. Nachura, ‘Third "Id. 5165517. «3, Pars En Bane) ion}.Resolution 7 G.R. No. 172302 Corporate rehabilitation is one of many statutorily provided remedies for businesses that experience a downturn. Rather than leave the various creditors unprotected, legislation now provides for an orderly procedure of equitably and fairly addressing their concems. Corporate rehabilitation allows a court-supervised process to rejuvenate a corporation. Its twin, insolvency, provides for a system of liquidation and a procedure of equitably settling various debts owed by an individual or a business. It provides a corporation’s owners a sound chance to re-engage the market, hopefully with more vigor and enlightened services, having leamed from a painful experionce. Necessarily, a business in the red and about to incur tremendous losses may not be able to pay all its.creditors. Rather than leave it to the strongest or most resourceful amongst all of them, the state steps in to equitably distribute the corporation’s limited resources. The cram-down principle adopted by the Interim Rules does, in effect, dilute contracts. When it permits the approval of a rehabilitation plan even over the opposition of creditors," or when it imposes a binding effect of the approved plan on all parties including those who did not participate in the proceedings," the burden of loss is shifted to the creditors to allow the corporation to rehabilitate itself from insolvency. Rather than Ict struggling ‘corporations slip and vanish, the better option. is to allow commercial courts to come in and apply the process for corporate rehabilitation. This option is preferred so as to avoid what Garrett Hardin called the ‘Tragedy of Commons. Here, Hardin submits that “coercive government regulation is necessary to prevent the degradation of common-pool resources [since] individual resource appropriators receive the full benefit of their use and bear only a share of their cost.” By analogy to the game theory, this is the prisoner’s dilemma: “Since no individual has the right to control or exclude others, each appropriator has a very high discount rate [with] little incentive to efficiently manage the resource in order to guarantee future use.” Thus, the cure is an exogenous policy to equitably distribute scarce resources. This will incentivize future creditors to continue lending, resulting ~ in something productive rather than resulting in nothing. In fact, these corporations exist within a market. The General Theory of Second Best holds that “correction for one market imperfection will not necessarily be efficiency-enhancing unléss [there is also] simultaneous 4 yTORIM RULES OF PROCEDURE ON CORPORATE: REHABILITATION (2000), Rule 4, see, 23, 1B INTERIM RULES OF PROCTDUREON Cok)OATE REHARILITATION (2000), Rule 4, see. 24 (). © See N. S. Gamett, Managing the Urban Commons, 160 U. Pa. L, Rev. 1995, 2,000-2,001 (2012), id. t2,001Resolution 18 G.R. No. 172302 [correction] for all other market imperfections.” The correction of one market imperfection may adversely affect market efficiency elsewhere, for instance, “a contract rule that corrects for an imperfection in the market for consensual agreements may [at ‘the same time] induce welfare losses elsewhere.” This theory is one justification for the passing of corporate rehabilitation Jaws allowing the suspension of payments so that corporations can get back on their fect. As in all markets, the environment is never guaranteed. There are always risks. Contracts are indeed sacred as the law between the parties. However, these contracts exist within a society where nothing is risk-free, and the government is constantly being called to attend to the realities of the times. Corporate rehabilitation is preferred for addressing social costs. Allowing the corporation room to get back on its fect will retain if not increase employment opportunities for the market as a whole. Indirectly, the services offered by the corporation will also benefit the market as “[t]he fundamental impulse that sets and keeps the capitalist engine in motion comes'from [the constant entry of] new consumers’ goods, the new methods of production or transportation, the new markets, [and] the new forms of industrial organization that capitalist enterprise creates.”*” As a final note, this is not the first time this court was made to review two separate petitions appealed from two conflicting decisions, rendered by two divisions of the Court of Appcals, and originating from the same case. In Serrano v. Ambassador Hotel, Inc.,* we ordered the Court of Appeals to adopt immediately a more efficient system in its Internal Rules to avoid situations as this. Tn this instance, it is fortunate that this court had the opportunity to correct the situation and prevent conflicting judgments from reaching impending finality with the referral to the En Banc. We reiterate the need for our courts to be “constantly vigilant in extending their judicial gaze to cases related to the matters submitted for their resolution™” as to “ensure against judicial confusion and [any] seeming conflict in the judiciary’s decisions.””” "© See T. S, Ulen, Courts, Legislatures, and the General Theory of Secand Lest in Law and Economics, 73 Chi-Kent L. Rev. 189, 220 (1998), a, " Sce'T. K. MeCraw, Classics: Jaseph Schumpeter on Competition, 8 Competition Pol'y tnt, 194, 201 a1: ™ GR.No, 197003, February 11, 2013, 690 SCRA 226 [Per J, Velasco, Third Division}.Resolution 19 G.R. No. 172302 WHEREFORE, petitioner Pryce Corporation’s motion is GRANTED. This court’s February 4, 2008 decision is RECONSIDERED and SET ASIDE. SO ORDERED. MARVIC MARIOVICTOR F. LE Associate Justice WE CONCUR: ee MARIA LOURDES P. A. SERENO Chief Justice ANTONIO T. CARPIO PRESBITERQ@ J. VELASCO, JR. Associate Justice ociate Justice (On Leave) TERESITA J. LEONARDO-DE CASTRO ARTURO D. BRION Associate Justice Associate Justice DIOSDADO\M. PERALTA Associate Justice ( Mine D MARIANO C. DEL CASTILLO ROBERTO A. ABAD Associate Justice Associate Justice Associate Justice ‘Associate JusticeResolution 20 * G.R. No, 172302 JOSE CAy INDOZA BIENVENIDO L. REYES Asst Associate Justice No Park Abe ESTELA M/ PIERLAS-BERNABE Associate Justice CERTIFICATION I certify that the conclusions in the above Resolution had been reached in consultation before the case was assigned to the writer of the opinion of the court. oe ere MARIA LOURDES P. A. SERENO Chief JusticeJuudganent Form No, 1 ATTACHMENT D-4 | "D4? Republic of the Philippines Supreme Court Manila EN BANC PRYCE CORPORATION, : Petitioner, versus G.R. No. 172302 THE COURT OF APPEALS AND CHINA BANKING CORPORATION, Respondents. NTRY OF JUDGMENT This is to certify that on February 4, 2006 a des above-entitled case was filed in this Office, the dispositive part of which reads as follows: “WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals in CA-G.R. SP No. 88479 is AFFIRMED with the modification discussed above. Let the records of this case be REMANDED to the RTC, Branch 138, Makati City, sitting as Commercial Court, for further proceedings with dispatch to determine the merits of the petition for rehabilitation. No costs. SO ORDERED.” This is to further certify that the Court on February 18, 2014 adopted a resolution, the dispositive part of which reads as follow: “WHEREFORE, petitioner Pryce Corporation’s motion is GRANTED. This court's February 4, 2008 decision is RECONSIDERED and SET ASIDE. SO ORDERED.” and that the same has, on March 27, 2014 become final and exccutory and is hereby recorded in the Book of Entries of Judgments. Manila, Philippines. Clerk of Court: By: ecepemtcns CORAZON D. DELO$ REYES Deputy Clerk of Court & Chief, Judicial Records O! mi May 26, 2014ATTACHMENT E-1 Republic of the Philippines COURT OF APPEALS Manila FIRST DIVISION BANK OF THE PHILIPPINE CA-G.R. SP NO. 88442 Petitioner, Membors: ‘eis P.J. REYES, RT, Chairman DE GUIA-SALVADOR, and PRYCE CORPORATION, SANTIAGO-LAGMAN, JJ. Respondent. a Promulgated: way a anmng 07? CL a ata tn meee DECISION DE GULA-SALVADOR, J: Filed pursuant to Rule 43 of the £997 Rules of Civil Procedure, the Petition for review at bench primarily raises the general principle of contractual liberty and mutuality in secking the setting aside of the January 17, 2005 Order issued by the Regional Trial Court of Makati City, Branch 138, in Special Proceedings No. M-5901, finding respondent Pryce Corporation eligible for corporate rehabilitation and approving. its rehabilitation plan as well as the amendment thereto submitted by Gener Mendoza, its duly appointed Rehabilitation Receiver.' * pp 23-44, Rol.CA-GR. SP NO, 88442 DECISION PAGE 2 The Facts Respondent is 2 property holding and development company primarily engaged in the real estate business and hotel operations in Mindanao. tn addition to its main business concems which include the development and marketing of memorial parks, residential subdivisions as well as business parks, it has a subsidiary. Pryce Gases, Ine. PGI), which produces and sefls industrial gases as well as imports and distributes liquefied petroleum gas. Among respondent's creditors is petitioner Bank of the Philippine Islands to which it owes the obligation covered by Promissory No. 58657-000-99. Secured by real estate mortgages constituted on respondent's properties and bearing a December 16, 2002 maturity date. said obligation, together with interest, penalties and other charges, amounted to P100,121,141.18 as of July 28, 20047 Citing the Asian financial crisis for its inability to pay its maturing obligations, respondent filed its petition for corporate rehabilitation, with prayer for suspension of payments on July 9, 2604. it alleged, among other matters, that despite negotiations with its hank creditors for the past three years, the proposed plan of payment for its debts through dacion om page had not come to fruition due to the parties’ inability to agree on the assets to be conveyed and their valuation, the waiver of penalties and the accrual period of interests on the subject loans; and, that the ballooning of interests and penalties resulting from said impasse as well as the threatened foreclosure of the mortgages constituted on its properties will, alongside theCA-GR. SP NO. 88442 DECISION PAGE 3 pending cases against it, adversely affect ite viability as 2 gomg concern? Respondent proffered a rehabilitation plan which essentially proposed the following measures: (a) dacion of mortgaged properties, the value of which shall be the average determined by two independent appraisal companies accredited by the Central Bank, to be chosen by the creditors and found acceptable by respondent: (b) the retum to respondent of any excess in the value of said properties; (c) in case of insufficiency, the setilement of the difference by dacion of memorial ots individually valued at P16,000.00: (2) accrual of interests up to June 30, 2003 only; and, (¢) the creditor bank's asstunption of the applicable taxes and transaction fees in the event of failure to avail of the benefits provided under the Special Purpose Vehicle (SPV)." In addition to its Audited and Interim Financial Statements,* an Affidavit of General Financial Condition.’ an Inventory of Assets.’ 2 Statement of Possible Claims’ and Schedules of its Debts and Lisbilities,” of Payments and Disposition of Assets." of its Cash Flow for the immediately preceding three months" and 9 Certification on the requisite authorization for the petition,’? respondent submitted its three nominees for appointment as Rehabilitation Reoviver in accordance with Section 2 Gj), Rule 4 of the Interim Rudes on Corporate Rehabilitation. 8 pp 324-925, id "pp 110-141, Bal sb 268-270,CA-GR, SP NO, 88442 DECISION PAGES Docketed as Special Proceedings No. M-5901, the foregoing pelition for corporate rehobilitation was given «tue course by the trial court which issued the July 13, 2004 order directing the deferment of all claims against respondent, setting the initial hearing thereon for September 1, 2004, ordering the respondent's creditors nd oiher interested parties to file their opposition thereto and appointing Gener Mendoza as Rehabilitation Receiver.* On Angust 20, 2004, petitioner consequently filed its opposition/comment to the petition, contending that the impairment of the freedom of contracis therein proposed is tantamount to an unjustified resort to the State’s exercise of its police power.’ In compliance with the trial court's order dated September 13, 2004, the aforesaid Rehabilitation Receiver likewise submitted an Amended Rehabilitation Plan which contained the following recommendations, viz: (a) payment of all bank loans and long term commercial papers (“LTCP”) through dacion en page. (b) payment of all non-bank, trade and other payables amounting to at least 500,000.00 each, throngh a dacion of memorial park lots. and (c) payment in cash over a three year period, without interest, of ail non-bank trade and. other paysiles amounting to less than P500,000.00 cach, numbering 290 for an aggregate of P7.64 Million."* In receipt of the parties’ comments/oppositions to the Amended Rehabilitation Pian,"” the trial court issued the herein assailed January 17, 2005 order, the decretal portion of which states:CA-GR. SP NO. 88442 DECISION PAGES “IN VIEW OF ALL THE FOREGOING, the Court findg petitioner to be eligible to be placed in a state of corporate rehabilitation. Aasets horsinbelow identified shell be held and dispored of by the petitioner and its liabilities shall be paid and liquidated in the manner as follows: 1. The indebtedness to China Ranking Corporation and Bank of the Philippine Islands as wall as the lona-term commercial papers will ba paid through a dacion en paao of developed real astate assets of the petitioner. at least 2. The trade credits amounting t P500,000.00 will be paid through a dacion en pago of memorial park lots. Memorial lots so caded will be allecated equally across ali locations esront the one in Navan City which is mortgaged to China Banking Corporation: 3. Trade credits amounting to less then £500,000 each will be paid in cash over theee (3) years, without intere: Payment vill be made quarterly commencing 80 days from issuance of this Order. 4. ALL accrued penalties are waived. 5S. Interests shall acccue only up to duly 13, 2004, the date of issuance of the stay order. 6. No interest will accrue during the pendency oF petitioner's corporate rehabilitation; 7. Dollar-denominated loans will be converted to Philippine Pesos on the date of the issuance of this Order using the reference rate of the Philippine Dealing System as of this date. a. In ths cossion of assets, by way of dacion an pagn, the following guidelines shall be observed ~ a) ALl developed real estate assets of the patLtionac, including those which areYU CAAG.R. SP NO, 88442 DECISION PAGE 6 unencumbered shall be made available to secured creditors for dacion en pago. to b) In the event there is deficiency due lower value of the assets chosen, the deficiency Bhall be paid by way of memorial lots according to the valuation outlined and according to a pro- agreed distribution method. c) Momorial lots will be valued at P13,125 per lot for secured creditors and P17,500 per lot for unsecured creditors. 4) Real estate assets other than memorial lots will be valued on the basis of the average of separate appraisals mado by three (3) companies duly accredited by the Bangko Sentral ng Pilipinas chosen by a majority of the creditors. e) All crediters whose leans to the petitionor are eligible for incentives under’ the Special Purpose Vehicle Act of 2002 shall apply for a Certificale of Eligibility with the proper authorities For transactions not eligible for such SPV incantives, the creditor shall advance the cost of taxes and other expenses of transfer. The cost of seid taxes and related expenses shall be accrued and settled by petitioner through a dlacien an page of additional raal estates. f) Titles to properties and sales documents held by China Banking Corporation as additional security but without actual mortgage on thea properties will be released to the petitioner as soon az it is determined from the appraisal reports that the values of the assets mortgaged to said bank are sufficient to settle the obligations. q) Memorial park mother titles mortgaged to China Ranking Corporation covering portions of Mt. Ape Gardens in Davac City and Cagayan de Oro Gardens in Cagayan de Oro City will be priced on the basis of the individual memorial lots comprising those titles. These lots, af whi there are 9,576 in Cagayan and 29,$71 in Dave:CA-GR SP NO. 88442 DECISION PAGET of 213,125 per will be valued at the same rate lot. The mother titles shall pe released to the petitioners simultaneously with the execution of any and 411 dacion document/s with China Bank. 3. The Rehabilitation Receiver shall oversee the implementation of the rehabilitation plan ancl to insure orderly implementation, the Rehabilitation Receiver shall ~ a) Call a meeting among bank and bong Term Commerchal Plan creditors’ representatives within five (5) days from receipt of this Order to select three (3) oppraisal companies from the list, Annex G, Amended Rehabilitation Plan te perform the appraisal of ail‘ assets for dacion except memorial lots, which companies shall be ranked by the creditors according to theis preference. Any creditor may aloo nominate for enaagement an appraisal company of its choice outside of the list appearing on Annex G, provided a letter or certification from the BSP redarding the company’s accreditation is Presented to the Rehabilitation Receiver and the other creditors. b) Within ten (10) days from the election of the thraa (3) appraisers, he shall negotiate their professional fees to a reasonable level and confirm their engagement, subject to the completion of their work and submission of final reports within three weeks. 3) Upon ceceipt of the reports, the Rehabilitation Receiver shall tabulate the results and distribute them immediately to all secured creditors. Por the election and fixing of assats to be ceded by way of dacion en pago, the following shall be observed - a) secured creditors shall be given three weeks from receipt of the summary appraisal