ASB Holdings, et al. vs. Vernette Umali-Paco, et al.

December 1, 2010 SEC EN BANC CASE NO. 10-07-117 (SEC Case No. 05-00-6609) ASB HOLDINGS, ET AL. , petitioners , vs . THE HONORABLE HEARING PANEL VERNETTE UMALI-PACO, MELVELYN S. BARROZO, and ELLEN LAMANILAO-DE DIOS , respondents . DECISION For consideration of the Commission En Banc is the Petition for Review on Certiorari dated 04 October 2007, filed by petitioners assailing the 17 September 2007 Decision of the Hearing Panel, which provides: "In view of the foregoing, petitioner's motion is DENIED and the Memorandum of Agreement entered into by ASB and Cityland on 03 March 2006 is hereby DISAPPROVED." The petitioners are domestic corporations duly organized and existing under Philippine laws with their principal office located at 4th floor, St. Francis Square, Doa Julia Vargas Avenue corner Bank Drive, Ortigas Center, Mandaluyong City. The respondents Vernette Umali-Paco, Melvelyn S. Barrozo and Ellen Lamanilao-de Dios are impleaded herein in their capacities as members of the Hearing Panel that issued the assailed Decision. The petitioners, on 02 May 2000, filed a Petition for Rehabilitation with Prayer for Suspension of Actions and Payments before the Commission praying, among others, for the appointment of a receiver to rehabilitate the ASB Group of Companies and for the suspension of all actions and claims against it. On 26 April 2001, the Commission approved the Rehabilitation Plan for the ASB Group of Companies and appointed a Rehabilitation Receiver, Atty. Julio C. Elamparo. IHTASa On 02 February 2005, petitioners filed a Motion for Approval of a Joint Venture Agreement, dated 08 January 2005 ("JVA"), between ASB Realty Corporation ("ASBRC'), Sto. Tomas Agri-Farms, Inc., Novoland Development Corporation and Sta. Lucia Realty Development, Inc. for the development of more or less fifty-five (55) hectares of land located at Barangays San Rafael and Santiago in the Municipality of Sto. Tomas, Batangas into an exclusive residential/commercial subdivision. In an Order dated 06 July 2005, the respondent Hearing Panel approved the JVA, thus: "Considering the foregoing, petitioners' motion is GRANTED and the JVA is APPROVED subject to the conditions that petitioner shall (1) include the proceeds from the sale of its 43% share under the JVA in the Asset Pool to be used exclusively for the settlement of the claims of all classes of unsecured creditors of ASB Group of Companies as provided in the Rehabilitation Plan for the ASB Group of Companies, and (2) inform the Commission on regular basis of the progress and developments of the JVA." Thereafter, on 03 March 2006, ASBRC and Cityland Incorporated (Cityland) entered into a Memorandum of Agreement ("MOA"). It included, among others, the following: "WHEREAS, the parties herein desire and have agreed to convert into equity in the JVA project the Account Receivables of CITYLAND amounting to Php50,000,000.00 and as return of contribution, CITYLAND will be entitled to certain number of the abovementioned saleable lots with an aggregate area of 16,670 square meters, more or less, to which the CITYLAND has agreed; xxx xxx xxx 1. ASB shall reserve and allocate in favor of CITYLAND certain number of saleable lots with an aggregate area of 16,670 square meters, more or less, . . . 2. Upon signing of this Agreement, a portion of the Accounts Receivable of CITYLAND in the sum of Php1,000,000 shall be converted into equity while the full conversion thereof into equity shall be implemented when completion of the JVA project has reached ninety percent (90%) already . . . " ECaSIT On 30 May 2006, petitioners filed a Motion to Approve Memorandum of Agreement, alleging, among others, that the approval and implementation of the MOA shall result in the full settlement of the obligation of ASBRC with Cityland in the amount of FIFTY MILLION PESOS (PHP50,000,000.00). In his Comment, dated 05 June 2006, the Rehabilitation Receiver, Atty. Julio C. Elamparo, recommended the approval of the Motion to Approve Memorandum of Agreement. In its Order dated 17 September 2007, the Hearing Panel denied the Motion to Approve Memorandum of Agreement on the ground that "the approval of the MOA will result in Cityland being a creditor preferred over other unsecured creditors and will contravene the Order of the Hearing Panel allocating the proceeds of the JVA exclusively for the settlement of the claims of all classes of unsecured creditors of ASB". On 04 October 2007, petitioners filed a Petition for Review on Certiorari to annul and set aside the Order dated 17 September 2007, issued by the respondent Hearing Panel for having been issued with grave abuse of discretion amounting to lack or excess of jurisdiction. On 13 December 2007, the Commission Secretary C.A. Gerard M. Lukban issued an Order, directing all of petitioners' unsecured creditors and the Rehabilitation Receiver to file their comments/oppositions to the Petition. On 12 February 2008, unsecured creditors Michael Tong, Ceylilona Tong, Patrick Tong, and Erwin Sy filed their Comment/Opposition and prayed for the denial of the petition for lack of merit and affirm the Order of the Hearing Panel dated 17 September 2007, upon the following grounds: a) The granting of the MOA will have a prejudicial effect on the Asset Pool to the damage and prejudice of the other creditors in that the subject properties under the JVA to be subsequently conveyed to Cityland as return of contribution and a portion of the accounts receivable in the sum of ONE MILLION PESOS (PHP1,000,000.00) shall be converted into equity thereby reducing the anticipated proceeds of the sale of ASB's 43% share under the JVA; b) The MOA will create a priority of credit to Cityland in that: (i) it will result in the full settlement of petitioner's obligation to the former in the amount of FIFTY MILLION PESOS (PHP50,000,000.00) to the prejudice of the other unsecured creditors; and (ii) it will convert ASB's obligations to Cityland into equity in the joint venture project, a privilege not accorded to the other unsecured creditors; c) The MOA, if approved, will defraud other unsecured creditors because Mr. Luke C. Roxas, who owns 98% of the shares of petitioner and the owners of Cityland are brothers and sisters. Hence, the instant appeal. Before the appeal, however, could be resolved, the petitioners, on September 14, 2010, filed an Omnibus Motion to Withdraw: Motion to Approve MOA between ASB Holdings, Inc. vs. Cityland, Inc. ; and Petition for Certiorari . Petitioners assert that with the resolution by the Supreme Court of all cases questioning the validity of the ASB rehabilitation 1 plan there is no more need to seek approval of the questioned MOA from the hearing panel because "there is no longer any impediment to the implementation of the approved Rehabilitation Plan in accordance with the decisions of the Supreme Court". In light of the Omnibus Motion to Withdraw filed by the petitioners on September 14, 2010, we are inclined to grant the same subject to the condition that petitioners shall faithfully comply with the provisions of the ASB Rehabilitation Plan and the conditions set forth in the approved Joint Venture Agreement dated 08 January 2005. WHEREFORE, premises considered, the Omnibus Motion to Withdraw is hereby GRANTED, subject to petitioners' faithful compliance with the ASB Rehabilitation Plan and the conditions set forth in the Joint Venture Agreement dated 08 January 2005. The instant Petition for Review is consequently rendered moot. SO ORDERED. Mandaluyong City, December 1, 2010. CDaTAI (SGD.) FE B. BARIN Chairperson (SGD.) MA. JUANITA E. CUETO Commissioner (SGD.) RAUL J. PALABRICA Commissioner (SGD.) MANUEL HUBERTO B. GAITE Commissioner (SGD.) ELADIO M. JALA Commissioner Footnotes 1. Metrobank vs. ASB Holdings, et al. (G.R. No. 166197) promulgated February 27, 2007, BPI vs. SEC, et al. (G.R. No. 164641) promulgated December 20, 2007, PNB and Equitable PCIB vs. Hon. CA, et al. (G.R. No. 165571) promulgated January 20, 2009 and Chinabank vs. ASB Holdings, et al. (G.R. No. 172192).