G.R. No. 193872. October 19, 2011.

*    The facts are stated in the opinion of the Court.

SIOCHI FISHERY ENTERPRISES, INC., JUN-JUN FISHING CORPORATION, DEDE FISHING   Karlo L. Calingasan for petitioners.
CORPORATION, BLUE CREST AQUA-FARMS, INC., and ILOILO PROPERTY VENTURES, INC.,   Benedicto, Verzosa, Gealogo & Burkley for respondent Bank of the Philippine Islands.
petitioners, vs. BANK OF THE PHILIPPINE ISLANDS, respondent.
CARPIO, J.:
Corporate Rehabilitation; Interim Rules of Procedure; These rules are to be construed
liberally to obtain for the parties a just, expeditious, and inexpensive disposition of the case; The Case
Parties may not, however, invoke such liberality if it will result in the utter disregard of the
rules.—Petitioners claim that the Interim Rules of Procedure are construed liberally; thus, the This is a petition1 for review on certiorari under Rule 45 of the Rules of Court. The
RTC may disregard the Rules. The Court disagrees. Indeed, the Rules are construed liberally. petition challenges the 20 October 2009 Decision 2 and 22 September 2010 Resolution 3 of the
However, this does not mean that courts may disregard the Rules. In North Bulacan Court of Appeals in CA-G.R. SP No. 93278. The Court of Appeals set aside the 9 January 2006
Corporation v. Philippine Bank of Communications, 626 SCRA 260 (2010), the Court held that, Order4 of the Regional Trial Court (RTC), National Capital Judicial Region, Malabon City,
“These rules are to be construed liberally to obtain for the parties a just, expeditious, and Branch 74, in Sec. Corp. Case No. S4-03-MN.
inexpensive disposition of the case. The parties may not, however, invoke such liberality if it _______________
will result in the utter disregard of the rules.” 1 Rollo, pp. 10-42.
Same; Rehabilitation Receiver; As an officer of the court and an expert, the 2 Id., at pp. 51-75. Penned by Associate Justice Ramon M. Bato, Jr., with Associate
rehabilitation receiver plays an important role in corporate rehabilitation proceedings; The Justices Noel G. Tijam and Priscilla J. Baltazar-Padilla concurring.
purpose of the law in directing the appointment of receivers is to protect the interests of the 3 Id., at pp. 93-94.
corporate investors and creditors.—As an officer of the court and an expert, the rehabilitation 4 Id., at pp. 146-149. Penned by Judge Leonardo L. Leonida.
receiver plays an important role in corporate rehabilitation proceedings. In Pryce Corporation
v. Court of Appeals, 543 SCRA 657 (2008), the Court held that, “the purpose of the law in 819
directing the appointment of receivers is to protect the interests of the corporate investors VOL. 659, OCTOBER 19, 2011 819
and creditors.” Section 14 of the Interim Rules of Procedure on Corporate Rehabilitation
enumerates the powers and functions of the rehabilitation receiver. Siochi Fishery Enterprises, Inc. vs. Bank of the Philippine Islands
Same; The rehabilitation plan is an indispensable requirement in corporate The Facts
rehabilitation proceedings; Essential Requisites of a Rehabilitation Plan.—The rehabilitation Petitioners Siochi Fishery Enterprises, Inc., Jun-Jun Fishing Corporation, Dede Fishing
plan is an indispensable requirement in corporate rehabilitation proceedings. Section 5 of the Corporation, Blue Crest Aqua-Farms, Inc. and Iloilo Property Ventures, Inc. (petitioners) are
Rules enumerates the essential requisites of a rehabilitation plan: The rehabilitation plan domestic corporations of the Siochi family. Petitioners are engaged in various businesses and
shall include (a) the desired business targets or goals and the duration and coverage of the have interlocking stockholders and directors. Their principal office is located at 31 Don B.
_______________ Bautista Boulevard, Dampalit, Malabon City.
* SECOND DIVISION. In the course of their business, petitioners borrowed from respondent Bank of the
Philippine Islands (BPI) and from Ayala Life Assurance, Inc. As of 30 June 2004, petitioners’
818 total obligation amounted to P85,362,262.05.
On 15 July 2004, petitioners filed with the RTC a petition 5 for corporate rehabilitation.
8 SUPREME COURT REPORTS ANNOTATED Petitioners prayed that the RTC (1) issue a stay order; (2) declare petitioners in a state of
suspension of payments; (3) approve petitioners’ proposed rehabilitation plan; and (4)
18 appoint a rehabilitation receiver.
Siochi Fishery Enterprises, Inc. vs. Bank of the Philippine Islands
rehabilitation; (b) the terms and conditions of such rehabilitation which shall include RTC’s Ruling
the manner of its implementation, giving due regard to the interests of secured creditors; (c)
the material financial commitments to support the rehabilitation plan; (d) the means for the In its 26 July 2004 Order, 6 the RTC (1) stayed enforcement of all claims against
execution of the rehabilitation plan, which may include conversion of the debts or any petitioners; (2) prohibited petitioners from disposing their properties, except in the ordinary
portion thereof to equity, restructuring of the debts, dacion en pago, or sale of assets or of course of business; (3) prohibited petitioners from paying their obligations; (4) prohibited
the controlling interest; (e) a liquidation analysis that estimates the proportion of the claims petitioners’ suppliers from withholding supply of goods and services; and (5) appointed Atty.
that the creditors and shareholders would receive if the debtor’s properties were Cesar C. Cruz (Atty. Cruz) as rehabilitation receiver.
liquidated; and (f) such other relevant information to enable a reasonable investor to make BPI filed with the RTC a comment to the 26 July 2004 Order. BPI alleged, among others,
an informed decision on the feasibility of the rehabilitation plan. that (1) the RTC had no jurisdicttion over Blue Crest Aqua-Farms, Inc. and Iloilo Property
Ventures, Inc.; (2) petitioners submitted only one affidavit of general financial condition for
PETITION for review on certiorari of the decision and resolution of the Court of Appeals.
all five corporations; (3) the market values of petitioners’ real properties were loans/obligations will enable said petitioners to generate additional capital/funds to continue
unsubstantiated and inconsistent; (4) the photocopies of the its [sic] business operations. This is in line with the petitioners’ intention to source fund from
_______________ its [sic] internal operations, the growth of which is expected to favorably expand. To achieve
5 Id., at pp. 101-108. this goal, an extension period for the payment of petitioners’ obligations is just and proper.
6 Id., at pp. 121-124. This is precisely the main reason why petitioners filed the instant petition as corporate
rehabilitation can, in one way, be effected by suspension of payments of obligation for a
820 certain period. Thereafter, payment of their loan/obligations could be ably resumed.
820 SUPREME COURT REPORTS ANNOTATED Further, petitioners, thru its [sic] President, is [sic] in the process of negotiating with
prospective investors to put up additional capital and diversifying its [sic] operation and, if
Siochi Fishery Enterprises, Inc. vs. Bank of the Philippine Islands still necessary, funds can still be generated from the real estate properties of the petitioners
Transfer Certificates of Title were incomplete; (5) the interest rate had already been reduced mentioned in Exhibit “I” whose value has not been exposed to the limit of their loan value.
to 12%; (6) typhoons were not an excuse to default on payments; (7) the Asian financial crisis Aside from the repayment plan in an amount of Php3,241,514.83 per quarter beginning the
and the peso devaluation did not affect petitioners; (8) petitioners’ total liability should have 1st quarter of the 6th year up to ten years thereafter, petitioners are open to negotiations
been lowered from P79,848,920.23 to P70,135,649.50; (9) petitioners had no sufficient cash with their creditors, to enter into dacion en pago and/or sales of assets as means of payment.
flow to pay their debts; (10) the rehabilitation plan was unfeasible and prejudicial to BPI; and The sale of petitioners’ assets, as claimed by BPI, in order to pay off their matured
(11) petitioners did not present a liquidation analysis. obligation/s with it and not the suspension of payments is, as the Court sees, not a solution
In his 14 December 2004 motion, 7 Atty. Cruz prayed that the RTC issue an order directing because this would mean a forced sale of their assets at a much lower price thereby adding
petitioners and their creditors to attend a meeting. In its 18 January 2005 Order, 8 the RTC significant loss in the value of the petitioner’s [sic] assets, making said petitioners insolvent
denied the motion.In its 9 January 2006 Order, 9 the RTC approved petitioners’ rehabilitation rather than giving it [sic] a chance to rehabilitate their business operations.
plan. The RTC held: The success therefore of the rehabilitation plan largely depends on its ability to reduce
“Jurisdiction over the instant petition has been acquired upon the publication of the stay its debt obligations to a manageable level by the suspension of payments of obligations. This
order which serves as the notice of the commencement of the proceedings x x x. In the scheme enables the petitioners to restore their profitability and solvency and maintain it [sic]
instant petition, all the petitioning corporations have, as admitted also by BPI, interlocking as an on-going business, to the benefit not only of the stockholders and investors but to BPI
directors which means that the said directors are all members of the “Siochi” family. In and ALAI as petitioners’ creditors.”10
addition thereto, three (3) of the petitioning corporations x x x hold their respective principal
offices in Malabon City. In line therefore with the settled policy of avoiding multiplicity of BPI appealed the RTC’s 9 January 2006 Order to the Court of Appeals.
suits, the Court finds it proper to include Blue Crest Aqua-Farms, Inc. and Iloilo Property _______________
Ventures in the instant petition. x x x 10 Id., at pp. 147-148.
x x x x
Based on the Consolidated Schedule of Debts and Liabilities x x x the total principal 822
liability of the petitioners is Seventy Nine Million, Eight Hundred Forty Eight [sic] Nine
822 SUPREME COURT REPORTS ANNOTATED
Hundred Twenty and 23/100 (P79,848,920.23) Pesos. On the other hand, the petitioning
corporations own properties among which are titled lands located in Malabon City, Navotas, Siochi Fishery Enterprises, Inc. vs. Bank of the Philippine Islands
Obando, Bulacan and Iloilo Province with an estimated value of Three Hundred Ninety Three The Court of Appeals’ Ruling
Million Nine Hundred Twenty Two Thousand and 00/100 (P393,922,000.00) Pesos, as In its 20 October 2009 Decision, the Court of Appeals set aside the RTC’s 9 January 2006
appraised by the Philippine Appraisal Co., Inc. x x x. Accordingly, the petitioning corporations Order. The Court of Appeals held:
could still be considered net worthy, capable of being rehabilitated. “In the case at bar, the proceeding before the court a quo was rife with procedural
_______________ infirmities. Under the Interim Rules, the court is directed to summarily hear the parties on
7 Id., at pp. 141-143. any matter relating to the petition as well as any comment and/or opposition filed in
8 Id., at p. 144. connection therewith. Accordingly, the creditor or any interested party is required to file a
9 Id., at pp. 146-149. verified opposition to or comment on the petition for rehabilitation so as to aid the court in
making an informed and rational decision as to whether or not the petition for rehabilitation
821 should be given due course. Pursuant thereto, petitioner filed its Oppositions and Comments
wherein it raised the following significant issues, among others, viz.: that the court a quo has
VOL. 659, OCTOBER 19, 2011 821 no jurisdiction over Blue Crest Aqua-Farms, Inc. and Iloilo Property Ventures, Inc.; that the
Consolidated Schedule of Debts and Liabilities is misleading; that respondent corporations
Siochi Fishery Enterprises, Inc. vs. Bank of the Philippine Islands have no sufficient cash flow to repay their debts; that the proposal in the Rehabilitation Plan
As regards the rehabilitation plan, the Court, contrary to BPI and ALAI’s stand, finds the does not ensure actual loan repayment nor respondent corporations’ recovery; that the
same feasible, and viable. A moratorium period of five (5) years on the payment of its proposed repayment period thereunder is grossly disadvantageous; and that respondent
corporations are undercapitalized. Instead of discussing these issues, the court a quo merely their loan value. However, the court a quo’s conclusion that respondent corporations’
confined the hearing on the issue of jurisdiction. It should be pointed out that while the rehabilitation is feasible and viable is not supported by their financial condition,
Interim Rules direct the court to summarily hear the parties, it [sic] do not authorize the commitments and proposed measures for rehabilitation/recovery.
court to disregard the comment and/or opposition filed by the parties, especially when there With respect to the Appraisal Report, it bears to stress that the same was commissioned
are material issues raised therein, as in the present case. The rules itself [sic] mandate a just, by respondent corporations and petitioner was not afforded the opportunity to contest the
expeditious and inexpensive determination of cases. Certainly, disregarding the arguments same. Also, it is extant from the records that some of the properties included therein do not
raised by petitioner would not result in a just determination of the case. belong to respondent
The most glaring procedural infirmity committed by the court a quo, however, is its 824
failure to refer respondent corporations’ petition for rehabilitation and Rehabilitation Plan to
the rehabilitation receiver despite the explicit and clear mandate of the Interim Rules that if 824 SUPREME COURT REPORTS ANNOTATED
the court is satisfied that there is merit in the petition, it shall give due course to the petition
Siochi Fishery Enterprises, Inc. vs. Bank of the Philippine Islands
and “immediately” refer the same and its annexes to the rehabilitation receiver x x x.
x x x x corporations but to their officers, namely, Ferdinand Siochi, Mario Siochi, Jr., Gerald Siochi
We have likewise observed that the court a quo made an unwarranted procedural and Jose Patrick Siochi. Thus, these properties should not be considered as part of
shortcut as its finding that there was merit in respondent corporations’ petition for respondent corporations’ assets as their officers have a separate personality from the
rehabilitation was made in the same Order approving corporation itself. x x x
823 As to respondent corporations’ financial condition, the same is reflected in their
respective Affidavits of General Financial Condition and Consolidated Cash Flow Statement.
In their respective Affidavits of General Financial Condition x x x, the average annual income
VOL. 659, OCTOBER 19, 2011 823
and average annual net loss for the past three (3) years prior to the filing of the petition for
Siochi Fishery Enterprises, Inc. vs. Bank of the Philippine Islands rehabilitation are: (1) income of P4,781,833.21 and loss of P2,079,499.80—Siochi Fishery
their Rehabilitation Plan. The court a quo’s propensity in ignoring the procedure laid down in Enterprises, Inc., (2) income of P65,254.48 and loss of P1,081,921.15—Jun-Jun Fishing
the Interim Rules can also be seen in its failure to issue an Order directing respondent Corporation, (3) income of P34,633.36 and loss of P1,051,300.03
corporations and their creditors to attend a meeting notwithstanding the Manifestation and —Dede Fishing Corporation. A scrutiny of their Consolidated Cash Flow Statement for the
Motion filed by the rehabilitation receiver for this purpose. Further, the court a quo ignored past three (3) months prior to the filing of the petition shows that respondent corporations’
the patent defect in the allegations in the petition for rehabilitation. A perusal of the records cash balance is P2,839,921.70 while an examination of respondent corporations’ cash flow
reveals that out of the five (5) respondent corporations, it is only Iloilo Property Ventures, for three (3) months after the filing of the petition shows that their cash inflow amounts to
Inc. which has a threat or demand from Ayala Life Assurance, Inc. x x x. However, in their P4,788,230.59 and their cash outflow is pegged at P1,574,976.76, thereby leaving a cash
respective Affidavits of General Financial Condition, respondent corporations uniformly balance of P3,213,253.83.
alleged that petitioner and Ayala Life Assurance, Inc. “will initiate legal actions including On the other hand, an examination of the Consolidated Schedule of Debts and Liabilities
foreclosure proceedings to enforce collection of the obligations.” Interestingly, Blue Crest shows that the total claim of petitioner is P30,445,608.73 while that of Ayala Life Assurance,
Aqua-Farms, Inc. alleged the same in its Affidavit of General Financial Condition even as Inc. is P44,038,428.54 or an aggregate amount of P74,484,037.27. x x x
petitioner and Ayala Life Assurance, Inc. were not listed among its creditors in its Schedule of Given these facts, it can readily be seen that respondent corporations are in dire financial
Debts and Liabilities. In actuality, Blue Crest Aqua-Farms, Inc. does not even qualify as a condition. Their Affidavits of General Financial Condition show that Jun-Jun Fishing
financially distressed corporation as it has no threats/demands for the enforcement of claims Corporation and Dede Fishing Corporation had bigger average annual net loss than average
and its cash on hand and in bank is sufficient to pay its financial obligations. x x x annual income for the past three (3) years prior to the filing of the petition for rehabilitation.
x x x x x x x It must be noted that their Consolidated Cash Flow Statement and the cash balance
In cases where the creditors oppose the approval of the rehabilitation plan, the court reflected reflected therein incorporates the amount belonging to Blue Crest Aqua-Farms, Inc.
may only approve the same upon the concurrence of two conditions—one, that the which should have been excluded from the petition. Even with the inclusion of Blue Crest’s
rehabilitation of the debtor is feasible and two, that the opposition of the creditors is money, respondent corporations’ cash balance is still insufficient to service their debts.
manifestly unreasonable. x x x Therefore, the feasibility and viability of their rehabilitation would have to depend on their
In the present case, the court a quo found the rehabilitation of respondent corporations financial commitments to support the Rehabilitation Plan, as well as the proposed measures
feasible and viable on the basis of the following circumstances: (1) that the real properties for rehabilitation/recovery, which are reflected in their Rehabilitation Plan.
they own have an estimated value of P393,922,000.00 x x x as opposed to their consolidated x x x x825
debts and liabilities in the amount of P79,848,920.23; and (2) that the moratorium period of
five (5) years on the payment of its [sic] loans/obligations will enable respondent VOL. 659, OCTOBER 19, 2011 825
corporations to generate additional capital/funds to continue its [sic] business operations
Siochi Fishery Enterprises, Inc. vs. Bank of the Philippine Islands
from the expected growth of its [sic] internal operations, from negotiations with prospective
investors, and from their real properties whose value has not been exposed to the limit of
 At this juncture, it must be emphasized that the debtor’s material financial commitments aforementioned properties. In the same vein, respondent corporations may not compel
are of critical value in gauging the sincerity of its intention in the projected rehabilitation as petitioner and Ayala Life Assurance, Inc. to grant them a new loan with the same properties
these signify the debtor’s resolve to financially support the rehabilitation plan. Corollarily, as collaterals so as to enable them to obtain their full loanable value. x x x
respondent corporations’ material financial commitments were stated in this manner: x x x x
“1. The petitioners intend to source fund from its internal operations, the growth In this case, there was nothing in the records that would show that the rehabilitation
of which is expected to favorably expand. receiver recommended the approval of the Rehabilitation Plan or that the shareholders or
2. The president is currently negotiating with prospective investors to put up owners of the debtor will lose their controlling interest as a result thereof. Also, there was no
additional fresh capital and diversifying its operation. showing that the plan would likely provide petitioner with compensation greater than that
3. The real estate properties of petitioner [sic] have not been exposed to the limit which it would have received if the assets of respondent corporations were sold by a
of their loan value and if necessary funds can still be sourced from them to ensure liquidator within a three-month period. Ergo, petitioner’s opposition to the Rehabilitation
working fund/capital for petitioners’ operations.” Plan is not manifestly unreasonable.
Notably, in concluding that the moratorium period of five (5) years on the payment of its x x x x
[sic] loans/obligations will enable respondent corporations to generate additional In the case at bar, the interest of herein petitioner should be protected and preserved as
capital/funds from their internal operations, prospective investors, and their properties it is engaged in the banking business which is imbued with public interest. x x x
which had not been exposed to the limit of their loan value, the court a quo heavily relied on x x x x
the above-quoted commitments. However, these hardly qualify as a concrete undertaking on Similarly, the reduction of interest on these loans from 12% to 8% is unwarranted as it is
the part of respondent corporations to financially support their Rehabilitation Plan. not the province of the court a quo to relieve respondent corporations from the obligations
Firstly, the sourcing of funds from their internal operations is based on a mere they had voluntarily assumed. x x x The rule is that the parties to a loan agreement have been
expectancy. Respondent corporations did not even allege in their Rehabilitation Plan their given wide latitude to agree on any interest rate and an interest of 12% per annum is deemed
operational plan or definite management which would bring about growth and expansion in fair and reasonable.”11
their internal operations. x x x In fact, petitioner correctly contends that inspite of the
supposed modernization program on the 5th year of the rehabilitation period, the sales _______________
projection of respondent corporations was constantly pegged at 5%. 11 Id., at pp. 60-74.
Secondly, respondent corporations failed to give the specific details regarding their
prospective investors who will supposedly put up additional fresh capital. This should have 827
been considered by the court a quo considering that in their respective Affidavits of General VOL. 659, OCTOBER 19, 2011 827
Financial Condition, respondent corporations uniformly answered that none, so far, has
Siochi Fishery Enterprises, Inc. vs. Bank of the Philippine Islands
expressed interest in investing new money into respondent corporations’ business.
Petitioners filed a motion for reconsideration. In its 22 September 2010 Resolution, the
x x x x
Court of Appeals denied the motion. Hence, the present petition.
Noticeably, some of respondent corporations’ subscribed capital stock remained unpaid
and their respective boards of directors failed to take concrete steps to compel the
shareholders to pay their subscribed capital stock in full or to order the conversion of their Issue
debts to equity or to offer the remai-
826 Petitioners raise as issue that the Court of Appeals erred in setting aside the RTC’s 9
January 2006 Order because “it is within [the RTC’s] discretion to disregard the procedural
formalities,” and “the lower court has x x x factual basis in [sic] its finding that [petitioners]
826 SUPREME COURT REPORTS ANNOTATED
are capable of rehabilitated [sic].”
Siochi Fishery Enterprises, Inc. vs. Bank of the Philippine Islands
ning shares of stock from their authorized capital stock for subscription. x x x [P]etitioner The Court’s Ruling
correctly pointed out that the proposed rehabilitation is deemed to succeed in only one
thing: to extend the loan repayment term and does not ensure actual loan repayment nor The petition is unmeritorious.
business recovery of the petitioners. Petitioners claim that the Interim Rules of Procedure are construed liberally; thus, the
Thirdly, by stating that their real estate properties have not been exposed to the limit of RTC may disregard the Rules. The Court disagrees. Indeed, the Rules are construed liberally.
their loan values, respondent corporations are implying that they will use the mortgaged However, this does not mean that courts may disregard the Rules. In North Bulacan
properties as collaterals to secure another loan. This hardly constitutes a material financial Corporation v. Philippine Bank of Communications,12 the Court held that, “These rules are to
commitment as the real properties x x x referred to by respondent corporations were already be construed liberally to obtain for the parties a just, expeditious, and inexpensive
mortgaged to petitioner and Ayala Life Assurance, Inc. Respondent corporations had no right disposition of the case. The parties may not, however, invoke such liberality if it will result in
to assume that petitioner and Ayala Life Assurance, Inc., who have a superior lien over these the utter disregard of the rules.”13
properties, would allow them to obtain another loan from a new creditor secured by the
 In New Frontier Sugar Corporation v. Regional Trial Court, Branch 39, Iloilo City,14 the VOL. 659, OCTOBER 19, 2011 829
Court enumerated the basic procedure in corporate rehabilitation cases. The Court held:
“As provided in the Interim Rules, the basic procedure is as follows: Siochi Fishery Enterprises, Inc. vs. Bank of the Philippine Islands
(1) The petition is filed with the appropriate Regional Trial Court; tion and Rehabilitation Plan to the rehabilitation receiver despite the explicit and clear
(2) If the petition is found to be sufficient in form and substance, the trial court shall mandate of the Interim Rules that if the court is satisfied that there is merit in the petition, it
issue a Stay Order, which shall provide, among others, for the appointment of a shall give due course to the petition and “immediately” refer the same and its annexes to the
Rehabilitation Receiver; the fixing of the initial hearing rehabilitation receiver x x x.
_______________ It is discernible from the foregoing that there are serious matters which should be
12 G.R. No. 183140, 2 August 2010, 626 SCRA 260. determined before rehabilitation may be had. For this reason, the Interim Rules required the
13 Id., at p. 263. appointment of a rehabilitation receiver simultaneously with the issuance of the Stay Order
14 G.R. No. 165001, 31 January 2007, 513 SCRA 601. and prescribed the following qualifications—expertise and acumen to manage and operate a
business similar in size and complexity to that of the debtor, knowledge in management,
828 finance, and rehabilitation of distressed companies, and general familiarity with the rights of
creditors in rehabilitation, etc. to further emphasize the significance of the role of the
828 SUPREME COURT REPORTS ANNOTATED rehabilitation receiver in rehabilitation proceedings, the Interim Rules directed the
rehabilitation receiver to evaluate the rehabilitation plan and submit his recommendations to
Siochi Fishery Enterprises, Inc. vs. Bank of the Philippine Islands the court. In fact, his recommendation bears much weight as it is one of the factors which
on the petition; a directive to the petitioner to publish the Order in a newspaper of general must be considered by the court if it were to approve the rehabilitation plan. More
circulation in the Philippines once a week for two (2) consecutive weeks; and a directive to all importantly, it must be emphasized that the purpose of the law in directing the appointment
creditors and all interested parties (including the Securities and Exchange Commission) to file of receivers is to protect the interests of the corporate investors and creditors. Thus, the
and serve on the debtor a verified comment on or opposition to the petition, with supporting court a quo committed serious error when it failed to refer the petition for rehabilitation and
affidavits and documents[;] its annexes to the appointed receiver.
(3) Publication of the Stay Order; We have likewise observed that the court a quo made an unwarranted procedural
(4) Initial hearing on any matter relating to the petition or on any comment and/or shortcut as its finding that there was merit in respondent corporations’ petition for
opposition filed in connection therewith. If the trial court is satisfied that there is merit in rehabilitation was made in the same Order approving their Rehabilitation Plan.” 16
the petition, it shall give due course to the petition;
5. Referral for evaluation of the rehabilitation plan to the rehabilitation receiver who As an officer of the court and an expert, the rehabilitation receiver plays an important
shall submit his recommendations to the court; role in corporate rehabilitation proceedings. In Pryce Corporation v. Court of Appeals,17 the
6. Modifications or revisions of the rehabilitation plan as necessary; Court held that, “the purpose of the law in directing the appointment of receivers is to
7. Submission of final rehabilitation plan to the trial court for approval; protect the interests of the corporate investors and creditors.” 18 Section 14 of the Interim
8. Approval/disapproval of rehabilitation plan by the trial court[.]” 15 (Emphasis Rules of Procedure on Corporate Rehabilitation enumerates the powers and functions of the
supplied) rehabilitation receiver:
_______________
In the present case, the RTC hastily approved the rehabilitation plan in the same order 16  Rollo, pp. 60-62.
giving due course to the petition. The RTC confined the initial hearing to the issue of 17  G.R. No. 172302, 4 February 2008, 543 SCRA 657.
jurisdiction and failed to address other more important matters relating to the petition and 18  Id., at p. 664.
comment. The RTC also failed to refer for evaluation the rehabilitation plan to the
rehabilitation receiver. Thus, the rehabilitation receiver was unable to submit his 830
recommendations and make modifications or revisions to the rehabilitation plan as 830 SUPREME COURT REPORTS ANNOTATED
necessary. Moreover, the RTC denied the rehabilitation receiver’s motion to issue an order
directing petitioners and their creditors to attend a meeting. In its 20 October 2009 Decision, Siochi Fishery Enterprises, Inc. vs. Bank of the Philippine Islands
the Court of Appeals found: (1) verify the accuracy of the petition, including its annexes such as the schedule of debts
“The most glaring procedural infirmity committed by the court a quo, however, is its and liabilities and the inventory of assets submitted in support of the petition; (2) accept and
failure to refer respondent corporations’ petition for rehabilita- incorporate, when justified, amendments to the schedule of debts and liabilities; (3)
_______________ recommend to the court the disallowance of claims and rejection of amendments to the
15  Id., at pp. 608-609. schedule of debts and liabilities that lack sufficient proof and justification; (4) submit to the
court and make available for review by the creditors a revised schedule of debts and
829 liabilities; (5) investigate the acts, conduct, properties, liabilities, and financial condition of
the debtor, the operation of its business and the desirability of the continuance thereof, and
any other matter relevant to the proceedings or to the formulation of a rehabilitation plan; debts, dacion en pago, or sale of assets or of the controlling interest; (e) a liquidation
(6) examine under oath the directors and officers of the debtor and any other witnesses that analysis that estimates the proportion of the claims that the creditors and shareholders
he may deem appropriate; (7) make available to the creditors documents and notices would receive if the debtor’s properties were liquidated; and (f) such other relevant
necessary for them to follow and participate in the proceedings; (8) report to the court any information to enable a rea-
fact ascertained by him pertaining to the causes of the debtor’s problems, fraud, _______________
preferences, dispositions, encumbrances, misconduct, mismanagement, and irregularities 19  Pacific Wide Realty and Development Corporation v. Puerto Azul Land, Inc., G.R. Nos.
committed by the stockholders, directors, management, or any other person; (9) employ 178768 and 180893, 25 November 2009, 605 SCRA 503, 515.
such person or persons such as lawyers, accountants, appraisers, and staff as are necessary in
performing his functions and duties as rehabilitation receiver; (10) monitor the operations of 832
the debtor and to immediately report to the court any material adverse change in the
debtor’s business; (11) evaluate the existing assets and liabilities, earnings and operations of 832 SUPREME COURT REPORTS ANNOTATED
the debtor; (12) determine and recommend to the court the best way to salvage and protect
Siochi Fishery Enterprises, Inc. vs. Bank of the Philippine Islands
the interests of the creditors, stockholders, and the general public; (13) study the
sonable investor to make an informed decision on the feasibility of the rehabilitation plan.”
rehabilitation plan proposed by the debtor or any rehabilitation plan submitted during the
(Emphasis supplied)
proceedings, together with any comments made thereon; (14) prohibit and report to the
court any encumbrance, transfer, or disposition of the debtor’s property outside of the
The Court notes that petitioners failed to include a liquidation analysis in their
ordinary course of business or what is allowed by the court; (15) prohibit and report to the
rehabilitation plan.
court any payments outside of the ordinary course of business; (16) have unlimited access to
Petitioners claim that the RTC had factual basis in giving due course to the petition for
the debtor’s employees, premises, books, records, and financial documents during business
corporate rehabilitation, and in approving the rehabilitation plan. The Court disagrees. In its 9
hours; (17) inspect, copy, photocopy, or photograph any document, paper, book, account, or
January 2006 Order, the RTC stated:
letter, whether in the
“Based on the Consolidated Schedule of Debts and Liabilities x x x the total principal
831
liability of the petitioners is Seventy Nine Million, Eight Hundred Forty Eight [sic] Nine
VOL. 659, OCTOBER 19, 2011 831 Hundred Twenty and 23/100 (P79,848,920.23) Pesos. On the other hand, the petitioning
Siochi Fishery Enterprises, Inc. vs. Bank of the Philippine Islands corporations own properties among which are titled lands located in Malabon City, Navotas,
possession of the debtor or other persons; (18) gain entry into any property for the purpose Obando, Bulacan and Iloilo Province with an estimated value of Three Hundred Ninety Three
of inspecting, measuring, surveying, or photographing it or any designated relevant object or Million Nine Hundred Twenty Two Thousand and 00/100 (P393,922,000.00) Pesos, as
operation thereon; (19) take possession, control, and custody of the debtor’s assets; (20) appraised by the Philippine Appraisal Co., Inc. x x x. Accordingly, the petitioning corporations
notify the parties and the court as to contracts that the debtor has decided to continue to could still be considered net worthy, capable of being rehabilitated.
perform or breach; (21) be notified of, and to attend all meetings of the board of directors As regards the rehabilitation plan, the Court, contrary to BPI and ALAI’s stand, finds the
and stockholders of the debtor; (22) recommend any modification of an approved same feasible, and viable. A moratorium period of five (5) years on the payment of its
rehabilitation plan as he may deem appropriate; (23) bring to the attention of the court any loans/obligations will enable said petitioners to generate additional capital/funds to continue
material change affecting the debtor’s ability to meet the obligations under the rehabilitation its [sic] business operations. This is in line with the petitioners’ intention to source fund from
plan; (24) recommend the appointment of a management committee in the cases provided its [sic] internal operations, the growth of which is expected to favorably expand. x x x
for under Presidential Decree No. 902-A, as amended; (25) recommend the termination of Further, petitioners, thru its [sic] President, is [sic] in the process of negotiating with
the proceedings and the dissolution of the debtor if he determines that the continuance in prospective investors to put up additional capital and diversifying its [sic] operation and, if
business of such entity is no longer feasible or profitable or no longer works to the best still necessary, funds can still be generated from the real estate properties of the petitioners
interest of the stockholders, parties-litigants, creditors, or the general public; and (26) apply mentioned in Exhibit “I” whose value has not been exposed to the limit of their loan value.” 20
to the court for any order or directive that he may deem necessary or desirable to aid him in
the exercise of his powers. The Court notes that, contrary to the factual finding of the RTC, petitioners do not own
The rehabilitation plan is an indispensable requirement in corporate rehabilitation all of the properties with a total estimated value of P393,922,000. Some of the properties are
proceedings.19 Section 5 of the Rules enumerates the essential requisites of a rehabilitation owned by Ferdinand, Gerald and Jose Patrick Siochi, and Mario Siochi, Jr., not by
plan: _______________
“The rehabilitation plan shall include (a) the desired business targets or goals and the 20  Rollo, pp. 147-148.
duration and coverage of the rehabilitation; (b) the terms and conditions of such
833
rehabilitation which shall include the manner of its implementation, giving due regard to the
interests of secured creditors; (c) the material financial commitments to support the VOL. 659, OCTOBER 19, 2011 833
rehabilitation plan; (d) the means for the execution of the rehabilitation plan, which may Siochi Fishery Enterprises, Inc. vs. Bank of the Philippine Islands
include conversion of the debts or any portion thereof to equity, restructuring of the
petitioners. A corporation has a legal personality distinct from its stockholders and directors. Brion, Sereno, Reyes and Perlas-Bernabe,**  JJ., concur. 
In Santos v. National Labor Relations Commission,21 the Court held that, “A corporation is a
juridical entity with legal personality separate and distinct from those acting for and in its Petition denied, judgment and resolution affirmed.
behalf and, in general, from the people comprising it.” 22 In its 20 October 2009 Decision, the
Court of Appeals found: Note.—The very definition of technical insolvency is the inability of the petitioning
“With respect to the Appraisal Report, it bears to stress that the same was commissioned corporation to pay, although temporarily, for a period longer than one year from the filing of
by respondent corporations and petitioner was not afforded the opportunity to contest the the petition; A technically insolvent corporation can seek recourse from the Securities and
same. Also, it is extant from the records that some of the properties included therein do Exchange Commission for Rehabilitation. (Union Bank of the Philippines vs. ASB Development
not belong to respondent corporations but to their officers, namely, Ferdinand Siochi, Corporation, 560 SCRA 578 [2008])
Mario Siochi, Jr., Gerald Siochi and Jose Patrick Siochi. Thus, these properties should not be ——o0o—— 
considered as part of respondent corporations’ assets as their officers have a separate
personality from the corporation itself. In turn, this renders doubtful their declaration in
their Rehabilitation Plan that they have “sufficient collaterals to back-up their bank
loans.”23 (Emphasis supplied)

The Court of Appeals also found:

“Firstly, the sourcing of funds from their internal operations is based on a mere
expectancy. Respondent corporations did not even allege in their Rehabilitation Plan their
operational plan or definite management which would bring about growth and expansion in
their internal operations. In their Consolidated Cash Flow Statement for the 15-year
rehabilitation period, respondent corporations allocated a fund of P30 million for a
modernization program. But they did not sufficiently describe and adequately explain as to
how the alleged modernization program would translate to a growth in or expansion of their
internal operations. In fact, petitioner correctly contends that inspite of the supposed
modernization program on the 5th year of the rehabilitation period, the sales projection of
respondent corporations was constantly pegged at 5%.
Secondly, respondent corporations failed to give the specific details regarding their
prospective investors who will supposedly put up additional fresh capital. This should have
been considered by the court a quo consider-
_______________
21  325 Phil. 145; 254 SCRA 673 (1996).
22  Id., at p. 156; p. 681.
23  Rollo, p. 64.

834

834 SUPREME COURT REPORTS ANNOTATED

Siochi Fishery Enterprises, Inc. vs. Bank of the Philippine Islands
ing that in their respective Affidavits of General Financial Condition, respondent corporations
uniformly answered that none, so far, has expressed interest in investing new money into
respondent corporations’ business.” 24

Incidentally, since the time of filing on 15 July 2004 of the petition for corporate
rehabilitation, there has been no showing that petitioners’ situation has improved or that
they have complied faithfully with the terms of the rehabilitation plan.
WHEREFORE, the Court DENIES the petition and AFFIRMS the 20 October 2009 Decision
and 22 September 2010 Resolution of the Court of Appeals in CA-G.R. SP No. 93278.
SO ORDERED.