The Supreme Court denied two petitions and partially granted another arising from the rehabilitation proceedings of Philippine Phosphate Fertilizer Corporation (PHILPHOS), the largest fertilizer manufacturer in the Philippines. The Court denied the petitions in G.R. Nos. 267577 and 267831, partially granted the petition in G.R. No. 267604, and reinstated the PHP 20,481,776.27 interest payment by PHILPHOS to the Development Bank of the Philippines (DBP).
The Case
The consolidated Petitions for Review on Certiorari assailed the dispositions of the Court of Appeals in CA-G.R. SP Nos. 11910, 11974, and 11982. The challenged rulings were the Decision dated July 29, 2021 and the Resolution dated March 30, 2023 of the Court of Appeals.
DBP, Philippine National Bank (PNB), and Philippine Ports Authority (PPA) were among the creditors of PHILPHOS. Under an Omnibus Credit Line Agreement (OCLA), DBP granted PHILPHOS a loan accommodation not exceeding PHP 1 billion, secured by Mortgage Participation Certificate (MPC) No. PP-10-001 issued by Security Bank Corporation as Mortgage Trustee under a Mortgage Trust Indenture (MTI) for PHP 1 billion.
PNB granted PHILPHOS a credit line of PHP 500 million through various credit facilities, later increased to PHP 545 million, secured by another MPC for PHP 500 million also issued by Security Bank. PPA operates the Port of Isabel, Leyte, where PHILPHOS receives imported goods for fertilizer production, and charges wharfage dues and other fees.
In 2013, Typhoon Yolanda/Haiyan struck Central Visayas, damaging the fertilizer manufacturing plant of PHILPHOS in Leyte and causing it to stop its operations. PHILPHOS requested a moratorium on its outstanding payments to DBP. It later filed a Petition for Voluntary Rehabilitation under Republic Act No. 10142, the Financial Rehabilitation and Insolvency Act of 2010 (FRIA), before Branch 12, Regional Trial Court, Ormoc City on September 17, 2015. The trial court granted the Petition and issued a Commencement Order dated September 22, 2015. Upon motion of another creditor, Mekatrade, Inc., the case was transferred to the Rehabilitation Court.
The Issue
Among the questions framed by the Court was whether PPA availed of the correct remedy in assailing the rehabilitation court's actions, and whether the claims of the creditors were correctly treated in the rehabilitation proceedings.
The Ruling
The Court ruled on the remedy available in rehabilitation cases, stating that when a party's motion for reconsideration of any order issued by a rehabilitation court prior to the approval of the rehabilitation plan is denied, the remedy is to await the approval or disapproval of the rehabilitation plan and raise the denial as an error in the petition for certiorari assailing the approval or disapproval of said rehabilitation plan.
The Court held that PPA's timely Petition for Certiorari in CA-G.R. SP No. 11983 is the correct remedy. Nonetheless, the Court could not grant PPA the relief it sought because, as observed by the Court of Appeals, PPA no longer raised as an issue the amount of its claim nor prayed for the correction thereof when it filed its Petition for Certiorari. The Court relied on the findings of the Court of Appeals that PPA only assailed the approval of the NRRP and no longer disputed the amount of its claim.
The Court's dispositive portion reads: "ACCORDINGLY, the Petitions in G.R. Nos. 267577 and 267831 are DENIED. The Petition in G.R. No. 267604 is PARTIALLY GRANTED. The Decision dated July 29, 2021 and the Resolution dated March 30, 2023 of the Court of Appeals in CA-G.R. SP Nos. 11910, 11974, and 11982 are AFFIRMED WITH MODIFICATION. The PHP 20,481,776.27 interest payment by respondent Philippine Phosphate Fertilizer Corporation to petitioner Development Bank of the Philippines is REINSTATED. The case is REMANDED to Branch 8, Regional Trial Court, Tacloban City for further proceedings. Branch 8, Regional Trial Court, Tacloban City is DIRECTED to resolve this case with utmost dispatch."
By the Numbers
- PHP 1 billion — loan accommodation ceiling under the OCLA with DBP
- PHP 500 million — PNB credit line, later increased to PHP 545 million
- PHP 998,514,974.49 — PHILPHOS's unpaid matured principal obligation to DBP
- PHP 537,735,849.06 — amount assigned to DBP from stock insurance proceeds; DBP received only PHP 499,909,185.79
- PHP 20,481,776.27 — interest payment to DBP reinstated by the Court
- September 17, 2015 — Petition for Voluntary Rehabilitation filed
- September 22, 2015 — Commencement Order issued
- July 29, 2021 — Court of Appeals Decision; March 30, 2023 — Resolution
The Court's Reasoning
The Court likened the situation to the denial of an interlocutory order, where the proper recourse is not to file a petition for certiorari but for the aggrieved party to proceed to trial, with the denial later raised as an error on appeal. The availability of another remedy bars refuge in certiorari unless the disposition is tainted with grave abuse of discretion. The Court found that PPA had not demonstrated that the Rehabilitation Court acted with grave abuse of discretion.
The Court noted that in CA-G.R. CEB-SP No. 11772, what attained finality was only the Court of Appeals' pronouncement that PPA availed of the wrong remedy, and no substantive findings were made on its claims. However, PPA did not maintain its argumentation on the amount of its claim in its Petition for Certiorari before the Court of Appeals, and did not adduce evidence showing the Court of Appeals erred. Issues not raised on appeal, including the amount of PPA's claims, were already final and could not be disturbed, so PPA's Petition for Review on Certiorari was dismissed.
This report summarizes the decision in G.R. Nos. 267577, 267604 & 267831, penned by Associate Justice Lazaro-Javier.
This report summarizes a public Supreme Court decision and is not legal advice.