MARILYN VICTORIO-AQUINO, Petitioner,
PACIFIC PLANS, INC. and MAMERTO A. MARCELO, JR. (Court-Appointed Rehabilitation Receiver of Pacific Plans, Inc.), Respondents.
G.R. No. 193108 December 10, 2014
TOPIC: FRIA, cram-down power of rehabilitation court
Respondent Pacific Plans, Inc. (now “APEC”) is engaged in the business of selling pre-need plans and educational plans, including traditional open-ended educational plans (PEPTrads). PEPTrads are educational plans where respondent guarantees to pay the planholder, without regard to the actual cost at the time of enrolment, the full amount of tuition and other school fees of a designated beneficiary.
Petitioner is a holder of two (2) units of respondent’s PEPTrads.
On April 7, 2005, foreseeing the impossibility of meeting its obligations to the availing planholders as they fall due, respondent filed a Petition for Corporate Rehabilitation with the Regional Trial Court, praying that it be placed under rehabilitation and suspension of payments. At the time of filing of the Petition for Corporate Rehabilitation, respondent had more or less 34,000 outstanding PEPTrads.
On April 12, 2005, the Rehabilitation Court issued a Stay Order, directing the suspension of payments of the obligations of respondent and ordering all creditors and interested parties to file their comments/oppositions, respectively, to the Petition for Corporate Rehabilitation. The same Order also appointed respondent Marcelo as the rehabilitation receiver.
Pursuant to the prevailing rules on corporate rehabilitation, respondent submitted to the Rehabilitation Court its proposed rehabilitation plan. Under the terms thereof, respondent proposed the implementation of a “Swap,” which will essentially give the planholder a means to exit from the PEPTrads at terms and conditions relative to a termination value that is more advantageous than those provided under the educational plan in case of voluntary termination.
The rehabilitation receiver submitted an Alternative Rehabilitation Plan and was approved by the Court. However due to the fact that the value of the Philippine Peso strengthened and appreciated, the rehabilitation receiver submitted a Modified Rehabilitation Plan.
Whether or not the Rehabilitation Court has the authority to sanction a rehabilitation plan, or the modification thereof, even when the essential feature of the plan involves forcing creditors to reduce their claims against respondent.
YES. The Court upheld the “cram-down” power of the Rehabilitation Court pursuant to Sec. 23 of FRIA which states that the court may approve a rehabilitation plan over the opposition of creditors, holding a majority of the total liabilities of the debtor if, in its judgment, the rehabilitation of the debtor is feasible and the opposition of the creditors is manifestly unreasonable.
Moreover, notwithstanding the rejection of the Rehabilitation Plan by the creditors, the court may confirm the Rehabilitation Plan if all of the following circumstances are present:
- The Rehabilitation Plan complies with the requirements specified in this Act;
- The rehabilitation receiver recommends the confirmation of the Rehabilitation Plan;
- The shareholders, owners or partners of the juridical debtor lose at least their controlling interest as a result of the Rehabilitation Plan; and
- The Rehabilitation Plan would likely provide the objecting class of creditors with compensation which has a net present value greater than that which they would have received if the debtor were under liquidation.