ALLIED BANKING CORP vs STEEL CORPORATION of the PHILIPPINES

GR NO. 191939 MARCH 14, 2018

FACTS Equitable PCI Bank filed a petition for corporate rehabilitation of its debtor Steel Corp of the
Philippines (SCP). They alleged that because of the financial crisis in 1997 which SCP experienced,
various banks and financial institutions granted SCP several loans to which the latter failed to pay. The
basis of Equitable’s petition is Sec 1, Rule 4 of the Interim Rules of Corp Rehabilitation “any debtor who
foresees the impossibility of meeting its debts when they become due or creditors holding at least 25%
of debtor’s liabilities may petition the Court to have the debtor placed under rehabilitation. SCP
however, had another agreement with Allied Banking Corp (ABC) with a revolving credit facility in an
amount of 100M and executed a trust receipt which authorizes ABC to charge SCP’s account in its
possession. LOWER COURT RULINGS RTC Sep 12, 2006 – granted Equitable’s petition and stayed all
claims against SCP by all other corporations as may be affected by the present proceedings until further
notice. CA Affirmed RTC’s decision and that the order was effective on Sep 12 2006, rendering ABC’s
unilateral application of the proceeds improper. CONTENTIONS: ABC’S Contention They are asserting
that it was not yet bound by the September 12, 2006 order when they made a set off on Sep 15, 2006
because jurisdiction over it had not yet been acquired since the stay order was only published on
September 16, 2006. - Sep 12 – RTC issued stay order

- Sep 15 – ABC made a set off (tntry nila iset-off yung unpaid debts) - Sep 16 – publication pa lang ng stay
order They were contending that since rehabilitation is a proceeding in rem, jurisdiction may only be
acquired upon publication of notice. ISSUES 1.) WON the setoff made by ABC was proper despite
issuance of stay order 2.) WON Rehabilitation Rules be applied to resolve the present petition when the
subject of the petition for rehabilitation was filed under Interim Rules 3.) WON the immediate effectivity
of the stay order is inconsistent with the publication requirement considering rehabilitation proceedings
are in rem HELD 1.) NO. The rehabilitation proceedings shall deem to have commenced from the date of
filing the petition and it renders void any attempt to collect or enforce a claim against the debtor or to
set off any debt by the creditors after the commencement date. The Interim Rules provide that the
issuance of an order is immediately executory thus ABC is bound by the sep 12 stay order as the date of
its issuance and being immediately executory and effective without any further act, event or condition
being necessary to compel compliance. 2.) YES. The petition was filed on Nov 21, 2000 under Interim
rules. On Aug 27, 2013, the court enacted FRIA (Rehabilitation Rules) which amended the said interim
rules. Thus, it governs all proceedings already pending EXCEPT if its application would not be feasible or
would work injustice in which event the procedures originally applicable shall continue to govern. (dito
naman kasi, applicable kasi consistent naman kahit iapply ung FRIA, walang injustice na ganap) Thus, the
court finds the application of the Rehabilitation Rules to the case as proper as it clarifies the effect of an
order staying claims against a debtor sought to be rehabilitated. 3.) NO. The immediate effectivity of the
stay order only means that the RTC is acknowledging that the debtor requires rehabilitation immediately
and that it cannot only prohibit but must also nullify acts made after its effectivity. Further, the
publication notifies all affected persons to satisfy due process and to notify the debtor that they require
rehabilitation and that they should be exempted from paying its obligations. Once notice is made, the
court may now nullify actions inconsistent with the stay order but which may have been taken prior to
publication since they don’t know yet that they should desist from pursuing any claims against the
insolvent debtor. Thus, RTC properly invalidated the petitioner's action made on Sep 15 2006 after the
order was issued. (In short, ung notice for purpose lang na masatisfy yung due process, basta magissue
court ng stay order, effective na agad un, and desist na dapat claimants from pursuing any action)