EFFECT OF CONFIRMATION OF THE REHABILITATION PLAN

1. Viva Shipping Lines v Keppel Philippines Mining

Facts:

Viva shipping lines filed for rehabilitation which was initially denied for failure to
comply with the requirements. Subsequently, it amended it petition and claimed
to own several vessels contrary to its attachment. Some of the properties listed
were also already encumbered.
In its plan, it alleged that it will recover financially by selling properties of its sister
company.
RTC denied the petition since the assets of Viva all appeared to be non
performing and there was no evidence of consent to sell real properties
belonging to its sister company.

Issue: Whether or not the denial of the rehabilitation plan was proper?

Held: Yes.

The Regional Trial Court correctly dismissed petitioner’s rehabilitation plan. It

found that petitioner’s assets are non-performing. Petitioner admitted this in its
Amended Petition when it stated that its vessels were no longer serviceable.
In Wonder Book Corporation v. Philippine Bank of Communications, a
rehabilitation plan is infeasible if the assets are nearly fully or fully depreciated.
This reduces the probability that rehabilitation may restore and reinstate
petitioner to its former position of successful operation and solvency.

Petitioner’s rehabilitation plan should have shown that petitioner has enough
serviceable assets to be able to continue its business. Yet, the plan showed that
the source of funding would be to sell petitioner’s old vessels. Disposing of the
assets constituting petitioner’s main business cannot result in rehabilitation. A
business primarily engaged as a shipping line cannot operate without its ships.
On the other hand, the plan to purchase new vessels sacrifices the corporation’s
cash flow. This is contrary to the goal of corporate rehabilitation, which is to allow
present value recovery for creditors. The plan to buy new vessels after selling the
two vessels it currently owns is neither sound nor workable as a business plan.