Mervic Realty v. China Banking Corp.
REITERATIONFacts
The Antecedents: Mervic Realty, Inc. and Viccy Realty, Inc. (petitioners) filed a joint petition for suspension of payments and rehabilitation with the Regional Trial Court (RTC) of Malabon City, citing financial difficulties stemming from the 1997 Asian financial crisis. They alleged combined total obligations of P193,156,559.00 as of September 30, 2006. The RTC issued a stay order and appointed a rehabilitation receiver. China Banking Corporation (China Bank), a creditor, opposed the petition, arguing that the corporations were separate entities with different financial conditions and creditors, and that the petition was filed in the wrong venue, as their Articles of Incorporation indicated Quezon City as their principal place of business. Procedural History: The RTC approved the rehabilitation plan and denied China Bank's opposition, finding no misjoinder of causes of action and deeming separate filings to be a multiplicity of suits, though it did not rule on the venue issue. China Bank appealed to the Court of Appeals (CA), which granted the appeal and dismissed the rehabilitation petition solely on the ground of improper venue, holding that a corporation's residence is determined by its principal office as stated in its Articles of Incorporation, and that China Bank had timely raised the venue issue. The petitioners moved for reconsideration, which was denied, leading to the present petition for certiorari before the Supreme Court. The Petition: The petitioners seek reversal of the CA's decision, arguing that the CA erred in dismissing their rehabilitation petition on the ground of improper venue. They claim Mervic Realty, Inc. amended its Articles of Incorporation in 1985 to establish Malabon City as its principal place of business, and Viccy Realty, Inc. adopted this principal place of business. They also contend that as close family corporations, a joint petition is practical and permissible, and that the rehabilitation court acquired jurisdiction. Furthermore, they invoke the 2008 Rules of Procedure on Corporate Rehabilitation, which allow joint filings, and argue for its retroactive application. China Bank, in response, maintains that the petitioners' General Information Sheet and other documents indicate Quezon City as their principal place of business, and that the 2008 Rules cannot be retroactively applied as the initial hearing had already been conducted.
Issue(s)
Whether the petitioners, as close family corporations, could jointly file a petition for rehabilitation under the 2000 Interim Rules of Procedure on Corporate Rehabilitation. Whether the rehabilitation petition was filed in the proper venue.
Ruling
The Supreme Court denied the petition for lack of merit, affirming the Court of Appeals' decision dismissing the rehabilitation petition.
Ratio Decidendi
On the issue of joint filing: The Court held that the 2000 Interim Rules of Procedure on Corporate Rehabilitation, which were in effect at the time the petition was filed, did not allow the joint or consolidated filing of rehabilitation petitions. This principle was reiterated in Asiatrust Development Bank v. First Aikka Development, Inc., where the Court disallowed the consolidation of petitions involving two separate entities, even with interlocking stockholders and officers, emphasizing that each corporation has its own distinct personality and its financial condition must be evaluated separately. Therefore, Mervic Realty, Inc. and Viccy Realty, Inc., being separate entities, could not jointly file a single rehabilitation petition. On the issue of venue: Even if the 2008 Rules of Procedure on Corporate Rehabilitation, which allow joint filings, were to be applied retroactively, the issue of venue would still remain. The Court noted that the RTC did not rule on the venue issue, while the CA found Quezon City to be the principal place of business. The Supreme Court stated that it could not resolve the factual question of whether the petitioners had validly amended their AOIs to establish Malabon City as their principal place of business, as this would require a fact-finding task not suitable for a Rule 45 petition, which is limited to questions of law. Consequently, the Court affirmed the CA's finding of improper venue without delving into the factual claims of amendment.
Main Doctrine
Under the 2000 Interim Rules of Procedure on Corporate Rehabilitation, separate corporations, even if having interlocking stockholders and officers, cannot jointly file a petition for corporate rehabilitation. Each corporation must file its own petition, and the venue must be determined based on the principal office of each individual corporation.