Allied Bank vs Equitable PCIB
G.R. No. 191939. March 14, 2018
Facts:
The case involves Allied Banking Corporation (ABC) as the petitioner and Equitable PCI Bank, Inc.
(EPCIB) as the respondent, concerning the corporate rehabilitation of Steel Corporation of the Philippines
(SCP). On September 11, 2006, EPCIB filed a petition for the corporate rehabilitation of SCP with the
Regional Trial Court (RTC) in Batangas City, citing SCP's financial distress due to the 1997 Asian
Financial Crisis. SCP had defaulted on its loan obligations, prompting EPCIB to seek rehabilitation under
the Interim Rules of Corporate Rehabilitation. The RTC issued an order on September 12, 2006,
appointing Santiago T. Gabionza Jr. as the rehabilitation receiver and staying all claims against SCP.
On September 15, 2006, ABC applied the remaining balance of SCP's current account, amounting to
P6,750,000.00, to settle SCP's obligations under a trust receipt agreement. SCP subsequently filed a
motion claiming that ABC violated the stay order by applying the funds, which led to the RTC ordering
ABC to restore the account and credit back the amount. ABC opposed this, arguing that it had no notice
of the stay order at the time of the setoff and that its actions were justified under legal compensation due
to SCP's default. The RTC ruled in favor of SCP, leading ABC to appeal to the Court of Appeals (CA),
which affirmed the RTC's decision. ABC then filed a petition for review on certiorari with the Supreme
Court.
Issue:
Whether the Court of Appeals err in affirming the RTC's decision that ABC was bound by the September
12, 2006 stay order, thereby allegedly depriving ABC of its right to due process?
Ruling:
The Supreme Court denied ABC's petition, affirming the decisions of the Court of Appeals and the RTC.
The Court held that the stay order was effective from the date of its issuance, and ABC was bound by it.
The Court also ruled that the actions taken by ABC after the issuance of the stay order were invalid.
The Supreme Court reasoned that the RTC's order on September 12, 2006, which initiated the
rehabilitation proceedings, was akin to a commencement order under the Rehabilitation Rules, which
retroactively affects actions taken after the filing of the rehabilitation petition. The Court emphasized that
the stay order was immediately executory, meaning that ABC was required to comply with it from the date
of issuance, regardless of the publication date. The Court clarified that the purpose of rehabilitation
proceedings is to provide a distressed debtor with an opportunity to reorganize and protect its assets,
which necessitates the suspension of creditor claims to prevent irreparable harm to the debtor's financial
recovery.
The Court further explained that the principle of due process was satisfied as ABC was given notice of the
proceedings and had the opportunity to be heard, having filed a verified comment on the petition. The
Court concluded that the enforcement of the stay order did not impair ABC's contractual rights, as it
merely suspended the enforcement of claims while allowing for the equitable distribution of SCP's
remaining assets among creditors. Thus, the Court upheld the RTC's authority to invalidate ABC's actions
that were inconsistent with the stay order, reinforcing the equitable objectives of the rehabilitation process.
