Bank of the Philippine Islands v. Shemberg Biotech Corporation
REITERATIONFacts
The Antecedents: Respondent Shemberg Biotech Corporation (SBC), a manufacturer of carrageenan, filed a petition for the approval of its rehabilitation plan and the appointment of a rehabilitation receiver before the Regional Trial Court (RTC). The RTC issued a stay order, and petitioner Bank of the Philippine Islands (BPI) filed an opposition to SBC's petition. Procedural History: The RTC issued an order giving due course to SBC's petition, referring the rehabilitation plan for evaluation, recalling the initial receiver, and appointing a new one. BPI's motion for reconsideration was denied. BPI then filed a petition for certiorari, prohibition, and mandamus before the Court of Appeals (CA), which dismissed the petition, deeming it moot due to a subsequent RTC decision approving SBC's rehabilitation plan and finding no grave abuse of discretion by the RTC. The CA denied BPI's motion for reconsideration. The Petition: Petitioner BPI seeks review on certiorari under Rule 45 of the Rules of Civil Procedure, arguing that the CA focused on procedural matters instead of substantial issues. BPI contends that the rehabilitation plan is unconstitutional as it allegedly forces creditors to convert debt to equity without just compensation or due process, and that the RTC exercised its power arbitrarily. BPI also challenges the constitutionality of the Interim Rules of Procedure on Corporate Rehabilitation. BPI prays for the declaration of unconstitutionality of the Interim Rules, the order approving the rehabilitation plan, and the dismissal of the rehabilitation petition.
Issue(s)
Whether the Court of Appeals erred in dismissing BPI's petition for certiorari on the ground that the issues raised were rendered moot by subsequent developments. Whether the RTC committed grave abuse of discretion in issuing its October 12, 2001 and December 26, 2001 Orders. Whether the rehabilitation plan's provisions on debt-to-equity conversion and elimination of penalties and reduction of interests are unconstitutional for allegedly amounting to taking of private property without just compensation and due process. Whether the Interim Rules of Procedure on Corporate Rehabilitation are unconstitutional. Whether the petition for rehabilitation should be dismissed and terminated.
Ruling
The petition is denied for lack of merit. The assailed Decision and Resolution of the Court of Appeals are affirmed.
Ratio Decidendi
On the mootness of the petition: The Court affirmed the CA's ruling that BPI's petition for certiorari was rendered moot. The issues raised against the interim orders of the RTC had been overtaken by the subsequent approval of SBC's rehabilitation plan by the RTC and its affirmation on appeal. A ruling on the propriety of the RTC's directives in the assailed orders would no longer have practical use or value, as the rehabilitation plan had already been considered and approved. The Court emphasized that an issue becomes moot when it ceases to present a justiciable controversy, rendering any declaration on the issue of no practical use or value. On grave abuse of discretion: The Court found no grave abuse of discretion on the part of the RTC in issuing the assailed orders. BPI's imputation of grave abuse of discretion was deemed baseless, as the RTC had not yet fully considered the rehabilitation plan at the time of the assailed orders. The RTC explicitly stated that it would reflect on the viability of the plan upon submission of the Rehabilitation Receiver's recommendation. The issues BPI raised regarding the plan's viability, new capital infusion, and debt-to-equity conversion were matters concerning the merits of the plan itself, which were to be addressed after the Receiver's evaluation. On the constitutionality of debt-to-equity conversion and other plan provisions: The Court held that BPI's contention regarding the unconstitutionality of debt-to-equity conversion was out of order because the RTC did not approve such conversion in the assailed orders, nor did the CA. In fact, the RTC did not even order debt-to-equity conversion in its decision approving the rehabilitation plan. Therefore, the issue was premature and not a proper subject of the certiorari petition assailing the interim orders. On the constitutionality of the Interim Rules of Procedure on Corporate Rehabilitation: The Court found that BPI failed to discharge its burden of clearly and unequivocally proving the unconstitutionality of the Interim Rules. Furthermore, the challenge to the constitutionality of the Interim Rules was considered a new and belated theory, as it was not raised before the CA. The Court reiterated the rule that issues not previously ventilated cannot be raised for the first time on appeal, and for constitutional questions, they must be pleaded at the earliest opportunity and be the lis mota of the case. On the dismissal and termination of rehabilitation proceedings: The Court denied BPI's prayer to dismiss and terminate the rehabilitation proceedings. Such dismissal would improperly reverse the final course of the petition, which had been granted by the RTC, affirmed on appeal, and was already being implemented. Moreover, the resolution of termination involves factual matters that cannot be considered for the first time before the Supreme Court, which is not a trier of facts. BPI had also impliedly invoked the Interim Rules by seeking a modified plan under its framework.
Main Doctrine
A petition for certiorari assailing interim orders in corporate rehabilitation proceedings may be rendered moot by subsequent developments, such as the approval of the rehabilitation plan, and issues not raised at the earliest opportunity, including constitutional challenges, may not be entertained on appeal. Furthermore, challenges to the RTC's exercise of its rehabilitation powers, including the alleged unconstitutionality of the Interim Rules, must be clearly and unequivocally proven.