FIRST DIVISION

[G.R. Nos. 174457-59. December 5, 2012.]

EXPRESS INVESTMENTS III PRIVATE LTD. AND EXPORT

DEVELOPMENT CANADA, petitioners, vs. BAYAN
TELECOMMUNICATIONS, INC., THE BANK OF NEW YORK (AS
TRUSTEE FOR THE HOLDERS OF THE US$200,000,000 13.5% SENIOR
NOTES OF BAYAN TELECOMMUNICATIONS, INC.) AND ATTY.
REMIGIO A. NOVAL (AS THE COURT-APPOINTED REHABILITATION
RECEIVER OF BAYANTEL), respondents.

[G.R. Nos. 175418-20. December 5, 2012.]

IN THE MATTER OF:

THE CORPORATE REHABILITATION OF BAYAN

TELECOMMUNICATIONS, INC. PURSUANT TO THE INTERIM RULES
OF PROCEDURE ON CORPORATE REHABILITATION (A.M. NO. 00-8-
10-SC)

THE BANK OF NEW YORK AS TRUSTEE FOR THE HOLDERS OF THE

US$200,000,000 13.5% SENIOR NOTES OF BAYAN
TELECOMMUNICATIONS, INC.

DUE 2006 ACTING ON THE INSTRUCTIONS OF THE INFORMAL

STEERING COMMITTEE: AVENUE ASIA INVESTMENTS, L.P., AVENUE
ASIA INTERNATIONAL, LTD., AVENUE ASIA SPECIAL SITUATIONS
FUND II, L.P. AND AVENUE ASIA CAPITAL PARTNERS, L.P. , petitioners,
vs. BAYAN TELECOMMUNICATIONS, INC., respondent.

IN THE MATTER OF:

THE CORPORATE REHABILITATION OF BAYAN

TELECOMMUNICATIONS, INC. PURSUANT TO THE INTERIM RULES
OF PROCEDURE ON CORPORATE REHABILITATION (A.M. NO. 00-8-
10-SC)

AVENUE ASIA INVESTMENTS, L.P., AVENUE ASIA INTERNATIONAL,

LTD., AVENUE ASIA SPECIAL SITUATIONS FUND II, L.P., AVENUE
ASIA CAPITAL PARTNERS, L.P. AND AVENUE ASIA SPECIAL
SITUATIONS FUND III, L.P. , petitioners, v s . BAYAN
TELECOMMUNICATIONS, INC., respondent.

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 [G.R. No. 177270. December 5, 2012.]

THE BANK OF NEW YORK AS TRUSTEE FOR THE HOLDERS OF THE

US$200,000,000 13.5% SENIOR NOTES OF BAYAN
TELECOMMUNICATIONS, INC., petitioner, v s . BAYAN
TELECOMMUNICATIONS, INC., respondent.

DECISION

VILLARAMA, JR., J:

Before us are seven consolidated petitions for review on certiorari filed in

connection with the corporate rehabilitation of Bayan Telecommunications, Inc.
(Bayantel).
The Petition for Partial Review on Certiorari 1 in G.R. Nos. 174457-59 was filed
by Express Investments III Private Ltd. and Export Development Canada to assail the
August 18, 2006 Decision 2 of the Court of Appeals in CA-G.R. SP No. 87203.
On the other hand, the Petition for Review on Certiorari 3 in G.R. Nos. 175418-20
was filed by The Bank of New York; Avenue Asia Investments, L.P.; Avenue Asia
International, Ltd.; Avenue Asia Special Situations Fund II, L.P.; Avenue Asia Capital
Partners, L.P. and Avenue Asia Special Situations Fund III, L.P. Said petition questions
as well the said August 18, 2006 Court of Appeals Decision, and also the November 8,
2006 Resolution 4 of the Court of Appeals in CA-G.R. SP Nos. 87100 and 87111
affirming the June 28, 2004 Decision 5 of the Regional Trial Court (RTC) of Pasig City,
Branch 158, in SEC Case No. 03-25. CHDTEA

Meanwhile, the Petition for Review on Certiorari 6 in G.R. No. 177270 was filed
by The Bank of New York, in its capacity as trustee for the holders of the US$200
million 13.5% Senior Notes of Bayantel and upon the instructions of the Informal
Steering Committee, to contest the Decision 7 and Resolution 8 of the Court of Appeals
in CA-G.R. SP No. 89894 which nullified the November 9, 2004 and March 15, 2005
Orders of the Pasig RTC, Branch 158, in SEC Case No. 03-25 insofar as it defined the
powers and functions of the Monitoring Committee.
The facts, as culled from the records of these cases, follow:
Respondent Bayantel is a duly organized domestic corporation engaged in the
business of providing telecommunication services. It is 98.6% owned by Bayan
Telecommunications Holdings Corporation (BTHC), which in turn is 85.4% owned by
the Lopez Group of Companies and Benpres Holdings Corporation.
On various dates between the years 1995 and 2001, Bayantel entered into
several credit agreements with Express Investments III Private Ltd. and Export
Development Canada (petitioners in G.R. Nos. 174457-59), Asian Finance and
Investment Corporation, Bayerische Landesbank (Singapore Branch) and Clearwater
Capital Partners Singapore Pte. Ltd., as agent for Credit Industriel et Commercial
(Singapore), Deutsche Bank AG, Equitable PCI Bank, JP Morgan Chase Bank,
Metropolitan Bank and Trust Co., P.T. Bank Negara Indonesia (Persero), TBK, Hong
Kong Branch, Rizal Commercial Banking Corporation and Standard Chartered Bank. To
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 secure said loans, Bayantel executed an Omnibus Agreement dated September 19,
1995 and an EVTELCO Mortgage Trust Indenture 9 dated December 12, 1997. 10
Pursuant to the Omnibus Agreement, Bayantel executed an Assignment
Agreement in favor of the lenders under the Omnibus Agreement (hereinafter, Omnibus
Creditors, Bank Creditors, or secured creditors). In the Assignment Agreement,
Bayantel bound itself to assign, convey and transfer to the Collateral Agent, the
following properties as collateral security for the prompt and complete payment of its
obligations to the Omnibus Creditors:
(i) all monies payable to Bayantel under the Project Documents (as the term
is defined by the Omnibus Agreement);
(ii) all Project Documents and all Contract Rights arising thereunder;

(iii) all receivables;

(iv) all general intangibles; cDTHIE

(v) each of the Accounts (as the term is defined by the Omnibus Agreement);

(vi) all amounts maintained in the Accounts and all monies, securities and
instruments deposited or required to be deposited in the Accounts;

(vii) all other chattel paper and documents;

(viii) all other property, assets and revenues of Bayantel, whether tangible or
intangible; and

(ix) all proceeds and products of any and all of the foregoing.11

In July 1999, Bayantel issued US$200 million worth of 13.5% Senior Notes
pursuant to an Indenture 12 dated July 22, 1999 that it entered into with The Bank of
New York (petitioner in G.R. Nos. 175418-20) as trustee for the holders of said notes.
Pursuant to the said Indenture, the notes are due in 2006 and Bayantel shall pay
interest on them semi-annually. Bayantel managed to make two interest payments, on
January 15, 2000 and July 15, 2000, before it defaulted on its obligation.
Foreseeing the impossibility of further meeting its obligations, Bayantel sent, in
October 2001, a proposal for the restructuring of its debts to the Bank Creditors and the
Holders of Notes. To facilitate the negotiations between Bayantel and its creditors, an
Informal Steering Committee was formed composed of Avenue Asia Investments, L.P.,
Avenue Asia International, Ltd., Avenue Asia Special Situations Fund II, L.P., Avenue
Asia Capital Partners, L.P. (petitioners in G.R. Nos. 175418-20) and Van Eck Global
Opportunity Masterfund, Ltd. The members of the Informal Steering Committee are the
assignees of the unsecured credits extended to Bayantel by J.P. Morgan Europe, Ltd.,
Bayerische Landesbank Singapore Branch and Deutsche Bank AG, London in the total
principal amount of US$13,637,485.20. They are holders, as well, of the Notes issued
by Bayantel pursuant to the Indenture dated July 22, 1999.
In its initial proposal called the "First Term Sheet," Bayantel suggested a 25%
write-off of the principal owing to the Holders of Notes. The Informal Steering
Committee rejected the idea, but accepted Bayantel's proposal to pay the restructured
debt, pari passu, 13 out of its cash flow. This pari passu or equal treatment of debts,
however, was opposed by the Bank Creditors who invoked their security interest under
the Assignment Agreement.
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 Bayantel continued to pay reduced interest on its debt to the Bank Creditors but
stopped paying the Holders of Notes starting July 17, 2000. By May 31, 2003,
Bayantel's total indebtedness had reached US$674 million or P35.928 billion in unpaid
principal and interest, based on the prevailing conversion rate of US$1 = P53.282. Out
of its total liabilities, Bayantel allegedly owes 43.2% or US$291 million (P15.539 billion)
to the Holders of the Notes.
On July 25, 2003, The Bank of New York, as trustee for the Holders of the Notes,
wrote Bayantel an Acceleration Letter declaring immediately due and payable the
principal, premium interest, and other monetary obligations on all outstanding Notes.
Then, on July 30, 2003, The Bank of New York filed a petition 14 for the corporate
rehabilitation of Bayantel upon the instructions of the Informal Steering Committee. IAEcCT

On August 8, 2003, the Pasig RTC, Branch 158, issued a Stay Order 15 which
directed, among others, the suspension of all claims against Bayantel and required the
latter's creditors and other interested parties to file a comment or opposition to the
petition. The court appointed Dr. Conchita L. Manabat to act as rehabilitation receiver
but the latter declined. 16 In her stead, the court appointed Atty. Remigio A. Noval (Atty.
Noval) who took his oath and posted a bond on September 26, 2003. 17
On November 28, 2003, the Rehabilitation Court gave due course to the petition
and directed the Rehabilitation Receiver to submit his recommendations to the court
within 120 days from the initial hearing. 18 After several extensions, Atty. Noval filed on
March 22, 2004 a Compliance and Submission of the Report as Compelling Evidence
that Bayantel may be Successfully Rehabilitated. 19
In his report, Atty. Noval classified Bayantel's debts into three: (1) those owed to
secured Bank Creditors pursuant to the Omnibus Agreements (Omnibus Creditors) in
the total amount of US$334 million or P17.781 billion; (2) those owed to Holders of the
Senior Notes and Bank Creditors combined (Chattel Creditors), comprising US$625
million, of which US$473 million (P25.214 billion) is principal and US$152 million
(P8.106 billion) is accrued unpaid interest; and (3) those that Bayantel owed to persons
other than Financial Creditors/unsecured creditors in the amount of US$49 million or
P2.608 billion.
According to The Bank of New York, out of the US$674 million that respondent
owes its creditors under groups 2 and 3 above, the amount outstanding under the
Senior Notes represent 43.2% of its liabilities as of May 31, 2003. Subsequently,
negotiations for the restructuring of Bayantel's debt reached an impasse when the
Informal Steering Committee insisted on a pari passu treatment of the claims of both
secured and unsecured creditors.
Meanwhile, on January 20, 2004, Bayantel filed a "Motion to Include Radio
Communications Philippines, Inc. [RCPI] and Naga Telephone Company [Nagatel] as
Debtor-Corporations for Rehabilitation . . . ." 20
The Rehabilitation Court denied said motion in an Order 21 dated April 19, 2004.
The fallo of said order reads:
WHEREFORE, the Court resolves the pending incidents as follows:
1. The Urgent Motion to Resolve of petitioner is hereby granted. The
creditors of Bayantel, whether secured or unsecured, should be treated equally
and on the same footing or pari passu until the rehabilitation proceedings is
terminated in accordance with the Interim Rules;
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 2. The Motion of Bayantel to Include RCPI and Nagatel in the present
rehabilitation proceedings as debtor-corporations is denied;
3. The Motion of Bayantel to Exempt from the Stay Order the payment
of the compensation package of its former employees per Annex "A" attached to
said motion is granted, subject to the verification and confirmation of the items
therein by the Rehabilitation Receiver;
4. The Motion of Petitioner to Strike Out the proposed rehabilitation
plan of Bayantel is denied. SaIEcA

SO ORDERED. 22

On June 28, 2004, the Pasig RTC, Branch 158, acting as a Rehabilitation Court,
approved the Report and Recommendations 23 attached by the Receiver to his
"Submission with Prayer for Further Guidance from the Honorable Court," 24 subject to
the following clarifications and/or amendments:

1. The ruling on the pari passu treatment of all creditors whose claims
are subject to restructuring shall be maintained and shall extend to all payment
terms and treatment of past due interest.

2. Due regard shall be given to the rights of the secured creditors and
no changes in the security positions of the creditors shall be granted as a result
of the rehabilitation plan as amended and approved herein.
3. The level of sustainable debt of the rehabilitation plan, as amended,
shall be reduced to the amount of [US]$325,000,000 for a period of 19 years.
4. Unsustainable debt shall be converted into an appropriate
instrument that shall not be a financial burden for Bayantel.
5. All provisions relating to equity in the rehabilitation plan, as
approved and amended, must strictly conform to the requirements of the
Constitution limiting foreign ownership to 40%.
6. A Monitoring Committee shall be formed composed of
representatives from all classes of the restructured debt. The Rehabilitation
Receiver's role shall be limited to the powers of monitoring and oversight as
provided in the Interim Rules.
All powers provided for in the Report and Recommendations, which
exceed the monitoring and oversight functions mandated by the Interim Rules
shall be amended accordingly.
SO ORDERED. 25

Dissatisfied, The Bank of New York filed a Notice of Appeal 26 on August 6, 2004.
So did Avenue Asia Investments, L.P., Avenue Asia International, Ltd., Avenue Asia
Special Situations Fund II, L.P., Avenue Asia Capital Partners, L.P., and Avenue Asia
Special Situations Fund III, L.P. which filed a Joint Record on Appeal 27 on August 9,
2004.
On September 28, 2004, Bayantel submitted an Implementing Term Sheet to the
Rehabilitation Court and the Receiver. Claiming that said Term Sheet was inadequate
to protect the interest of the creditors, The Bank of New York (petitioner in G.R. No.
177270) filed a Manifestation 28 dated October 15, 2004 praying for the constitution of a
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 Monitoring Committee and the creation of a convertible debt instrument to cover the
unsustainable portion of the restructured debt.
On November 9, 2004, the Rehabilitation Court issued an Order 29 directing the
creation of a Monitoring Committee to be composed of one member each from the
group of Omnibus Creditors and unsecured creditors, and a third member to be chosen
by the unanimous vote of the first two members. In the same Order, the court defined
the scope of the Monitoring Committee's authority, as follows:
. . . The Monitoring Committee shall participate with the Receiver in
monitoring and overseeing the actions of the Board of Directors of Bayantel and
may, by majority vote, adopt, modify, revise or substitute, any of the following
items:
(1) any proposed Annual OPEX Budgets;
(2) any proposed Annual CAPEX Budgets;
(3) any proposed Reschedule;

(4) any proposed actions by the Receiver on a payment default;

(5) terms of Management Incentivisation Scheme and Management
Targets;
(6) the EBITDA/Revenue ratios set by the Bayantel Board of
Directors; and

(7) any other proposed actions by the Bayantel Board of Directors

including, without limitation, issuance of new shares, sale of core and non-core
assets, change of business, etc. that will materially affect the terms and
conditions of the rehabilitation plan and its implementation.
In case of disagreement between the Monitoring Committee and the Board
of Directors of Bayantel on any of the foregoing matters, the same shall be
submitted to the Court for resolution. 30

On November 16, 2004, The Bank of New York filed a Petition for Review 31
before the Court of Appeals. The petition was docketed as CA-G.R. SP No. 87100 in
the Fifteenth Division of the Court of Appeals. On even date, Avenue Asia Investments,
L.P., Avenue Asia International, Ltd., Avenue Asia Special Situations Fund II, L.P.,
Avenue Asia Capital Partners, L.P., and Avenue Asia Special Situations Fund III, L.P.
(Avenue Asia Capital Group) filed a similar petition 32 which was docketed as CA-G.R.
SP No. 87111 in the Second Division of the Court of Appeals. Both petitions contest the
Rehabilitation Court's June 28, 2004 Decision for, among others, fixing the level of
Bayantel's sustainable debt at US$325 million to be paid in 19 years.
Thereafter, on November 30, 2004, petitioners Express Investments III Private
Ltd. and Export Development Canada along with Bayerische Landesbank (Singapore
Branch), Credit Industriel et Commercial, Deutsche Bank AG, P.T. Bank Negara
Indonesia (Persero), TBK, Hong Kong Branch and Rizal Commercial Banking
Corporation filed a Petition for Review 33 which was docketed as CA-G.R. No. 87203 in
the Tenth Division of the Court of Appeals. The secured creditors likewise assailed the
Rehabilitation Court's June 28, 2004 Decision insofar as it ordered the pari passu
treatment of all claims against Bayantel. Said petitioners invoke a lien over the cash
flow and receivables of Bayantel by virtue of the Assignment Agreement. EHTIcD

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 On December 23, 2004, Bayantel filed an Omnibus Motion 34 for the
consolidation of CA-G.R. SP Nos. 87111 and CA-G.R. SP No. 87203 with CA-G.R. SP
No. 87100, the lowest-numbered case.
In a Resolution dated January 20, 2005, the Court of Appeals, Fifteenth Division,
ordered the consolidation of CA-G.R. SP No. 87203 with CA-G.R. SP No. 87100. This
was accepted by the Court of Appeals, Seventh Division, in a Resolution 35 dated
March 29, 2005. Then, in the Resolution 36 dated June 10, 2005, the Court of Appeals,
First Division, ordered the consolidation of CA-G.R. SP No. 87111 with 87100 and the
transmittal of the records of the three cases to the Seventh Division.
Meanwhile, on January 10, 2005, Atty. Noval submitted to the Rehabilitation
Court an Implementing Term Sheet 37 to serve as a guide for Bayantel's Rehabilitation.
The same was approved in an Order 38 dated March 15, 2005. In the same Order, the
Rehabilitation Court appointed Avenue Asia Investments L.P. and Export Development
Canada to represent the unsecured and secured creditors, respectively, in the
Monitoring Committee.
On May 26, 2005, Bayantel filed a petition for certiorari and prohibition 39
docketed as CA-G.R. SP No. 89894 in the Court of Appeals. Said petition assailed the
Rehabilitation Court's Orders dated November 9, 2004 and March 15, 2005, for
purportedly conferring upon the Monitoring Committee, powers of management and
control over its operations.
The Court of Appeals Decision in CA-G.R. Nos. 87100, 87111 and 87203
In the assailed August 18, 2006 Decision, the Court of Appeals dismissed the
petitions in CA-G.R. SP Nos. 87100, 87111 and 87203 for lack of merit. The appellate
court upheld the Rehabilitation Court's determination of Bayantel's sustainable debt at
US$325 million payable in 19 years. It rejected the Receiver's proposal to set the
sustainable debt at US$370 million payable in 15 years, and the proposal of the Avenue
Asia Capital Group to set it at US$471 million payable in 12 years.
The Court of Appeals agreed with the Rehabilitation Court that it is reasonable to
adopt a level of sustainable debt that approximates respondent Bayantel's proposal
because the latter is in the best position to determine the level of sustainable debt that it
can manage. It found Bayantel's proposal more credible considering that it was
prepared using "updated financial information with realistic cash flow figures." 40 The
appellate court noted that Bayantel's proposal was drafted without regard for its status
as a "niche player" in the telecommunications market and after factoring the cost of
reorganization. In contrast, it expressed concern that the proposals submitted by
Avenue Asia Capital Group and the Receiver might eventually leave Bayantel with an
unworkable financial debt-to-revenue ratio.
The Court of Appeals also confirmed the Rehabilitation Court's authority to
approve, reject, substitute, or even change the rehabilitation plans submitted by the
Receiver and the parties. It upheld the trial court in adopting the Receiver's
recommendation to limit the equity conversion of Bayantel's unsustainable debt to 40%
of its paid-up capital. This percentage, the appellate court explains, is consistent with
the constitutional limitation on the allowable foreign equity in Filipino corporations. It
also maintained the write-off of penalties and default interest and recomputation of
Bayantel's past due interest, as a valid exercise of discretion by the Rehabilitation Court
under the Interim Rules of Procedure on Corporate Rehabilitation (Interim Rules). The
appellate court negated any violation of the pari passu principle with the use of these
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 measures since they shall apply to all classes of creditors.
As to the claim of the secured creditors in CA-G.R. SP No. 87203, the Court of
Appeals ruled that while rehabilitation is ongoing, the sole control over the security on
the receivables and cash flow of Bayantel is vested in the Rehabilitation Court. To allow
otherwise would not only violate the Stay Order but interfere as well with the duty of the
Receiver to "take possession, control and custody of the debtor's assets." 41 Ultimately,
the Court of Appeals ruled that preference in payment cannot be accorded the secured
creditors since preference applies only in liquidation proceedings.
Discontented, The Bank of New York and the Avenue Asia Capital Group
(petitioners in CA-G.R. SP Nos. 87100 and 87111) filed a Motion for Partial
Reconsideration. 42 Said motion was, however, denied in the Resolution dated
November 8, 2006.
In the meantime, Express Investments III Private Ltd. and Export Development
Canada had filed before this Court a Petition for Partial Review on Certiorari of the
Court of Appeals Decision docketed as G.R. Nos. 174457-59. According to petitioners,
the other secured creditors who were also petitioners in CA-G.R. SP No. 87203 had not
remained in contact with them and had not authorized them to file further petitions on
their behalf. CIaASH

On December 28, 2006, The Bank of New York and the Avenue Asia Capital
Group also filed their own Petition for Review on Certiorari which was docketed as G.R.
Nos. 175418-20.
The Court of Appeals Decision in CA-G.R. SP No. 89894
In CA-G.R. SP No. 89894, the Court of Appeals rendered the assailed Decision
dated October 27, 2006 declaring null and void the November 9, 2004 and March 15,
2005 Orders of the Rehabilitation Court insofar as they defined the powers and
functions of the Monitoring Committee.
The appellate court found grave abuse of discretion on the part of the
Rehabilitation Court for conferring upon the Monitoring Committee the power to modify,
reverse or overrule the proposals of Bayantel's Board of Directors relative to operations.
It stressed that the Committee's functions are confined to monitoring and overseeing
the operations of Bayantel to ensure its compliance with the terms and conditions of the
Rehabilitation Plan. To conform therewith, the appellate court restated the Committee's
powers as follows:
The Monitoring Committee shall participate with the Receiver in monitoring
and overseeing the operations of Bayantel to ensure compliance by Bayantel
with the terms and conditions of the Rehabilitation Plan. In the event Bayantel
fails to meet any of the milestones under the Rehabilitation Plan or fails to comply
with any material provision thereunder, the Monitoring Committee may, by
majority vote, recommend modifications, revisions and substitutions of the
following items:

xxx xxx xxx 43 (Emphasis supplied)

The Court of Appeals likewise approved of the Implementing Term Sheet,
clarifying that the same is not intended to address every contingency that may arise in
the implementation of the Plan. It assured that any doubt in the interpretation of the
Term Sheet shall be resolved by the Rehabilitation Court.
Lastly, the appellate court affirmed the creation of a convertible debt instrument
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 to cover the unsustainable portion of respondent's debt. It perceives such instrument as
a tool to generate surplus cash to satisfy Bayantel's debt under Tranche B. As well, it
serves as a buy-back scheme for the assignment and transfer of credits by the
Financial Creditors in a manner that will not unduly burden Bayantel.
Issues
On October 19, 2006, Express Investments III Private Ltd. and Export
Development Canada 44 filed a Petition for Partial Review on Certiorari which was
docketed as G.R. Nos. 174457-59. Said petition, which seeks the reversal of the
August 18, 2006 Decision of the Court of Appeals insofar as it dismissed the petition of
the secured creditors in CA-G.R. SP No. 87203, essentially proffers the following issues
for resolution: (1) whether the claims of secured and unsecured creditors should be
treated pari passu during rehabilitation; (2) whether the pari passu treatment of
creditors during rehabilitation impairs the Assignment Agreement between respondent
and petitioners; (3) whether an impairment in the security position of petitioners can be
justified as a valid exercise of police power.
On the other hand, The Bank of New York and the Avenue Asia Capital Group
filed a Petition for Review on Certiorari docketed as G.R. Nos. 175418-20, to question
the appellate court's August 18, 2006 Decision as well as its November 8, 2006
Resolution in CA-G.R. SP Nos. 87100 and 87111. This second consolidated petition
raises the following issues: (1) whether the Court of Appeals erred in setting Bayantel's
sustainable debt at US$325 million, payable in 19 years; (2) whether a debtor may
submit a rehabilitation plan in a creditor-initiated rehabilitation; (3) whether the
conversion of debt to equity in excess of 40% of the outstanding capital stock in favor of
petitioners violates the constitutional limit on foreign ownership of a public utility; (4)
whether the write-off of respondent's penalties and default interest and recomputation of
its past due interest violate the pari passu principle; and (5) whether petitioners are
entitled to costs.
On February 22, 2007, respondent Bayantel moved for the consolidation of G.R.
Nos. 174457-59 with G.R. Nos. 175418-20. In a Resolution 45 dated April 23, 2007, we
directed the Division Clerk of Court to study the feasibility of consolidating said cases. In
a Memorandum Report 46 dated May 17, 2007, the First Division Clerk of Court
recommended the consolidation of G.R. Nos. 174457-59 with G.R. Nos. 175418-20.
On May 21, 2007, The Bank of New York, as trustee for the Holders of the Senior
Notes, filed a Petition for Review on Certiorari, docketed as G.R. No. 177270, to assail
the October 27, 2006 Decision and March 23, 2007 Resolution of the Court of Appeals
in CA-G.R. SP No. 89894. Amplified, the petition presents the lone issue of whether the
Monitoring Committee in this case may exercise control over Bayantel's operations.
In a Resolution 47 dated June 6, 2007, we directed the Division Clerk of Court to
study the feasibility of consolidating G.R. No. 177270 with G.R. Nos. 174457-59 and
G.R. Nos. 175418-20. To avoid conflicting decisions on related cases, the Assistant
Clerk of Court recommended the consolidation of the three cases. By Resolution 48
dated July 11, 2007, the Court ordered the consolidation of G.R. No. 177270 with G.R.
Nos. 174457-59 and G.R. Nos. 175418-20.
The Parties' Arguments
In G.R. Nos. 174457-59
The petitioners/secured creditors argue primarily that the pari passu treatment of
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 creditors during rehabilitation has no basis in law. According to petitioners, all that
Presidential Decree No. 902-A 49 (PD 902-A) provides is the suspension of all claims
against the debtor corporation during rehabilitation so that the Receiver can exercise
his powers free from judicial or extrajudicial interference. If the equity policy is to be
considered at all, they believe that the equity policy should be construed to accord
creditors with similar rights or uniform treatment. In line with this, petitioners assert
priority under the Assignment Agreement to receive from Bayantel's surplus cash flow
and to be paid in full, ahead of all other creditors. DSETcC

The petitioners/secured creditors contend that the pari passu treatment of claims
impairs the Omnibus Agreement and the Assignment Agreement. Such impairment,
they posit, cannot be justified as a proper exercise of police power for three reasons:
first, there is no law which authorizes the equal treatment of claims; second, there is no
enabling law; and third, it is not reasonably necessary for the success of the
rehabilitation.
Petitioners point out that the Interim Rules mandates instead that the
rehabilitation plan shall give due regard to the interest of the secured creditors. For
petitioners, the preservation of Bayantel's chattels alone is inadequate to meet said
requirement since the value thereof depreciates over time. They go on to invoke
international practices on bankruptcy and rehabilitation which purportedly recognize the
distinction between the rights of secured and unsecured creditors. Petitioners warn of
dire consequences to the international credit standing of the Philippines, the financial
market, and the influx of foreign investments if the pari passu principle would be upheld.
Finally, petitioners maintain that a "Trigger Event" 50 had occurred which rendered
respondent's obligations due and demandable. Thus, despite their failure to notify
respondent of the alleged Events of Default, petitioners believe that they can rightfully
proceed against the securities.
For its part, respondent Bayantel reasons that enforcing preference in payment
at this stage of the rehabilitation would only disrupt the progress it has made so far. It
assures petitioners that their security rights are adequately protected in case the
collateral assets are disposed. Respondent adds that no single payment scheme is
applicable in all rehabilitation proceedings and the peculiar circumstances of its case
warrant the pari passu treatment of its creditors.
In G.R. Nos. 175418-20
Mainly, petitioners Bank of New York and Avenue Asia Capital Group impute
error on the Court of Appeals for affirming the Rehabilitation Court's decision which
adopted the sustainable debt level Bayantel proposed. The court a quo fixed
respondent's sustainable debt at US$325 million payable within 19 years against the
Receiver's proposal of US$370 million payable in 15 years. Petitioners dispute
Bayantel's financial projections as unreliable and contrived, designed to bear out a
reduced level of sustainable debt and justify a substantial write-off of its debts. In order
to arrive at a reasonable level of sustainable debt, they believe that the prospective
cash flow of Bayantel must be reckoned against industry standards. Petitioners point
out that the Interim Rules only allows the debtor, in a creditor-initiated petition for
corporate rehabilitation, to file a comment or opposition but not to submit its own
rehabilitation plan. They warn that if the fulfillment of the obligation would be made to
depend on the sole will of Bayantel, the entire obligation would be void.
Petitioners fault the trial court for basing the sustainable debt on the state of the
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 telecommunications industry in the country rather than consulting the financial
projections and business models submitted by petitioners and the Receiver. They stress
that the state of the telecommunications industry is not among those which the court
may take judicial notice of by discretion.
Petitioners maintain that converting the unsustainable debt to 77.7% equity in
Bayantel will not violate the nationality requirement of the 1987 Constitution. They aver
that the debts to domestic bank creditors 51 account is US$473 million or 70.18% of
Bayantel's total liabilities. Considering the substantial write-off of penalties and default
interest in the amount of US$34,044,553.00 and past due interest of
US$25,243,381.07, petitioners believe that it is only fair to accord the Financial
Creditors greater equity in Bayantel to compensate for said losses.
Moreover, it is the petitioners' view that the write-off contravenes the pari passu
principle because they would suffer greater losses than the Omnibus Creditors.
According to petitioners, approximately 82% of the penalties and interests shall be
borne by the unsecured creditors and the Holders of Notes. In the same vein,
petitioners protest the recomputation of past due interest in accordance with the rate
proposed by the Receiver. They claim that recomputation would result in the
condonation of 89% of the accrued interest owing them. The Receiver's report shows
that as of the filing of the present petition, the total accrued interest amounts to
US$106,054,197.66, of which, US$91,100,000 are due the Holders of Notes.
Finally, petitioners reiterate their claim for costs. In its Order dated March 15,
2005, the Rehabilitation Court awarded costs of suit to petitioner Bank of New York. In
particular, it granted the latter's prayer for the payment of filing fees, costs of publication
and professional fees. Even then, petitioner bank claims that a huge amount of its
expenses for the professional fees of counsels and advisers remain unpaid. More
importantly, it asserts precedence in payment over the preferred creditors. In the
alternative, the Bank of New York prays that the costs of suit be incorporated in the
award to the nonfinancial or trade creditors. Similarly, the Avenue Asia Capital Group
seeks reimbursement for the docket fees, publication expenses and the professional
fees it has paid its counsels and financial adviser. It invokes Article 2208 of the Civil
Code and the provisions of the Indenture as legal bases therefor. cDAITS

Meanwhile, the secured creditors in G.R. Nos. 174457-59 filed a Memorandum 52

dated April 30, 2009 with a prayer for the dismissal of the bondholders' petition in G.R.
Nos. 175418-20. For the secured creditors, the sustainable debt set by the Court of
Appeals is a more manageable and realistic undertaking compared to herein petitioners'
proposal. They add that the fact that Bayantel's actual revenues are lower than its cash
flow projections belies any scheme to avoid paying its debts in full. The secured
creditors agree with the appellate court in limiting the conversion of the unsustainable
debt to a maximum of 40% shares in Bayantel as more in keeping with the Constitution.
Further, the secured creditors point out that there is nothing in the Interim Rules
which prohibits a debtor company from submitting an alternative rehabilitation plan in
creditor-initiated proceedings. In support of this, they cite Section 22, 53 Rule 4 of said
rules which permits the debtor to modify its proposed plan or submit a revised or
substitute plan. According to them, Bayantel's suggestion as to the terms of payment
does not constitute a potestative condition that would render the obligation void.
The secured creditors, however, join petitioners in protesting the condonation of
penalties and default interest. Rather than observing absolute equality, they insist that
the pari passu principle should be applied such that creditors within the same class are
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 treated alike.
In response, respondent Bayantel submitted on May 21, 2009, a Consolidated
Memorandum 54 in G.R. Nos. 175418-20 and G.R. No. 177270. It practically echoed the
ratio decidendi of the Court of Appeals in dismissing both petitions.
In G.R. Nos. 175418-20, Bayantel defends the Rehabilitation Court for adopting
the sustainable debt level it proposed. Such approval by the court alone, Bayantel
reasons, did not make the payment of its debt a condition whose fulfillment rests on its
sole will, as to render the obligation void under Article 1182 55 of the Civil Code.
Respondent maintains that among the stakeholders, it is in the best position to
determine the level of debt that it can pay. Moreover, it believes that a majority of the
secured creditors are comfortable with the approved sustainable debt since only two of
them appealed. Respondent insists that altering the sustainable debt at this point would
be counterproductive.
Respondent equally opposes the Bondholders' proposal to reduce the company's
capital expenditures to between 9% and 11% to make more funds available for debt
servicing. This approach, according to Bayantel, ignores its need to make significant
investments in new infrastructure in order to cope with competitors. Respondent
disputes the value of petitioners' projections which were derived by benchmarking
Bayantel's income, as a company under rehabilitation, against those of the major
players, PLDT and Digitel.
Furthermore, respondent maintains that its rehabilitation plan was based on
accurate financial data and operation reports. It insists that the Interim Rules allows a
debtor, in creditor-initiated rehabilitation proceedings, to submit an alternative plan. It
agrees with the Rehabilitation Court's decision to restrict conversion of the
unsustainable debt to 40% of fully paid-up capital in Bayantel. Respondent believes that
the waiver of penalties and default interest and the recomputation of past due interest
will not violate the pari passu principle because said measures shall apply equally to all
creditors. Lastly, respondent admits limited liability for costs pursuant to the Assignment
Agreement but not for those incurred by petitioners under "non-consensual scenarios."
In G.R. No. 177270
In this petition for review, the Bank of New York, as trustee for the holders of the
13.5% Senior Notes of respondent Bayantel, challenges the Court of Appeals decision
nullifying the Monitoring Committee's power to modify, reverse or overrule the decision
of Bayantel's Board of Directors on certain matters. It invokes Section 23, 56 Rule 4 of
the Interim Rules as legal basis to justify the Rehabilitation Court's grant of extensive
powers to the Monitoring Committee. The pertinent portion of said Rule states:
In approving the rehabilitation plan, the court shall issue the necessary
orders or processes for its immediate and successful implementation. It may
impose such terms, conditions, or restrictions as the effective implementation
and monitoring thereof may reasonably require, or for the protection and
preservation of the interests of the creditors should the plan fail.

Petitioner contends that the magnitude and complexity of respondent's business

necessitate close monitoring of its operations to ensure successful rehabilitation.
Specifically, the Bank of New York expresses concern over Bayantel's taciturn
disposition as regards its budget and expansion costs. Petitioner believes that such lack
of transparency can be addressed by empowering the Monitoring Committee to
approve measures that will ultimately affect respondent's ability to settle its debts.
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 Moreover, petitioner assures that the Implementing Term Sheet provides
safeguards against the improvident disapproval by the Monitoring Committee of
proposed measures. Petitioner is of the view that the functions of the Monitoring
Committee would be rendered illusory if all disagreements on key areas would have to
be heard by the Rehabilitation Court. Petitioner explains that the Monitoring
Committee's powers do not in any way supplant those of the Board of Directors. The
Bank of New York claims that it is customary to allow creditors to monitor and supervise
the debtor's operations as demonstrated by the restructuring experiences of certain
Asian countries.
Petitioner submits that the Rehabilitation Court did not intend to give the
Monitoring Committee powers that are concurrent with those of the Receiver on account
of the differing interests that they represent in rehabilitation. It argues that if at all, the
court a quo committed a mere error of judgment not correctible by certiorari. Petitioner
adds that even if a petition for certiorari was proper, the 60-day reglementary period
provided by the Rules of Court had already lapsed when Bayantel filed its petition on
May 27, 2005. It contends that Bayantel's Manifestation and Motion for Clarification
dated December 15, 2004 was in truth a motion for reconsideration which is a
prohibited pleading under Section 1, 57 Rule 3 of the Interim Rules. Petitioner concludes
that such pleadings did not toll the period for filing a petition and, therefore, the
Rehabilitation Court's decision had become final. CITcSH

In its Consolidated Memorandum dated May 21, 2009, Bayantel counters that
Section 23, Rule 4 of the Interim Rules should be understood as delineating the
purpose of the court's orders and processes to mere implementation and monitoring of
the plan. Respondent opposes any interpretation of said provision which authorizes the
Committee to substitute its judgment for those of the Board or vest it with powers
greater than those of the Receiver. It argues that vesting the Committee with veto
power over certain decisions of the Board would effectively give it control and
management over Bayantel's operations. The necessary effect, according to Bayantel,
is that every disagreement between the Committee and the Board would have to be
settled in court. Respondent points out that petitioner failed to cite proof of its claim that
it is customary among Asian countries to allow the Monitoring Committee active
participation during rehabilitation.
Bayantel perceive the instant petition as an underhanded attempt by petitioner to
create a Management Committee without satisfying the requisites therefor. It reiterates
that the functions of the Monitoring Committee are confined to ensuring that Bayantel
meets the debt reduction milestones under the plan. Respondent avers that even
without a Monitoring Committee, it is obliged under the Plan to comply with certain
information covenants and reportorial requirements. It adds that the Plan provides a
mechanism for dispute resolution through which creditors can enforce compliance.
Penultimately, respondent assails the validity of the Order dated November 9,
2004 for lack of notice. Allegedly, Bayantel learned of said Order only after petitioner
furnished it a copy of its Compliance to which the same was made an attachment. Thus,
respondent insists that the reglementary period to file an appeal or a petition for
certiorari did not run against it.
The Court's Ruling
In G.R. Nos. 174457-59
Rehabilitation is an attempt to conserve and administer the assets of an insolvent
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 corporation in the hope of its eventual return from financial stress to solvency. 58 It
contemplates the continuance of corporate life and activities in an effort to restore and
reinstate the corporation to its former position of successful operation and liquidity. The
purpose of rehabilitation proceedings is precisely to enable the company to gain a new
lease on life and thereby allow creditors to be paid their claims from its earnings. 59
Rehabilitation shall be undertaken when it is shown that the continued operation of the
corporation is economically feasible and its creditors can recover, by way of the present
value of payments projected in the plan, more, if the corporation continues as a going
concern than if it is immediately liquidated. 60
The law governing rehabilitation and suspension of actions for claims against
corporations is PD 902-A, as amended. On December 15, 2000, the Court promulgated
A.M. No. 00-8-10-SC or the Interim Rules of Procedure on Corporate Rehabilitation,
which applies to petitions for rehabilitation filed by corporations, partnerships and
associations pursuant to PD 902-A.
In January 2004, Republic Act No. 8799 (RA 8799), otherwise known as the
Securities Regulation Code, amended Section 5 of PD 902-A, and transferred to the
Regional Trial Courts the jurisdiction of the Securities and Exchange Commission
(SEC) over petitions of corporations, partnerships or associations to be declared in the
state of suspension of payments in cases where the corporation, partnership or
association possesses property to cover all its debts but foresees the impossibility of
meeting them when they respectively fall due or in cases where the corporation,
partnership or association has no sufficient assets to cover its liabilities, but is under the
management of a rehabilitation receiver or a management committee.
In order to effectively exercise such jurisdiction, Section 6 (c), PD 902-A
empowers the Regional Trial Court to appoint one or more receivers of the property,
real and personal, which is the subject of the pending action before the Commission
whenever necessary in order to preserve the rights of the parties-litigants and/or protect
the interest of the investing public and creditors.
Under Section 6, Rule 4 of the Interim Rules, if the court finds the petition to be
sufficient in form and substance, it shall issue, not later than five (5) days from the filing
of the petition, an Order with the following pertinent effects:
(a) appointing a Rehabilitation Receiver and fixing his bond;
(b) staying enforcement of all claims, whether for money or
otherwise and whether such enforcement is by court action or otherwise,
against the debtor, its guarantors and sureties not solidarily liable with the
debtor;
(c) prohibiting the debtor from selling, encumbering, transferring, or
disposing in any manner any of its properties except in the ordinary course of
business;

(d) prohibiting the debtor from making any payment of its liabilities
outstanding as at the date of filing of the petition; . . . (Emphasis supplied)

The stay order shall be effective from the date of its issuance until the dismissal
of the petition or the termination of the rehabilitation proceedings. 61 Under the Interim
Rules, the petition shall be dismissed if no rehabilitation plan is approved by the court
upon the lapse of 180 days from the date of the initial hearing. The court may grant an
extension beyond this period only if it appears by convincing and compelling evidence
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 that the debtor may successfully be rehabilitated. In no instance, however, shall the
period for approving or disapproving a rehabilitation plan exceed 18 months from the
date of filing of the petition. 62
On the other hand, Section 27, Rule 4 of the Interim Rules provides when the
rehabilitation proceedings is deemed terminated:

SEC. 27. Termination of Proceedings. — In case of the failure of the

debtor to submit the rehabilitation plan, or the disapproval thereof by the court, or
the failure of the rehabilitation of the debtor because of failure to achieve the
desired targets or goals as set forth therein, or the failure of the said debtor to
perform its obligations under the said plan, or a determination that the
rehabilitation plan may no longer be implemented in accordance with its terms,
conditions, restrictions, or assumptions, the court shall upon motion, motu
proprio, or upon the recommendation of the Rehabilitation Receiver, terminate
the proceedings. The proceedings shall also terminate upon the successful
implementation of the rehabilitation plan. (Emphasis supplied)

Hence, unless the petition is dismissed for any reason, the stay order shall be
effective until the rehabilitation plan has been successfully implemented. In the
meantime, the debtor is prohibited from paying any of its outstanding liabilities as of the
date of the filing of the petition except those authorized in the plan under Section 24 (c),
Rule 4 of the Interim Rules. DAEcIS

In this case, in an Order dated April 19, 2004, the Rehabilitation Court held that "
[t]he creditors of Bayantel, whether secured or unsecured, should be treated equally
and on the same footing or pari passu until the rehabilitation proceedings is terminated
in accordance with the Interim Rules." 63 The court reiterated this pronouncement in its
Decision dated June 28, 2004.
Before us, petitioners contend that such pari passu treatment of claims violates
not only the "due regard" provision in the Interim Rules but also the Contract Clause in
the 1987 Constitution. Petitioners assert precedence in the payment of claims during
rehabilitation by virtue of the Assignment Agreement dated September 19, 1995. Under
said Agreement, Bayantel assigned, charged, conveyed and transferred to a Collateral
Agent, the following properties as collateral for the prompt and complete payment of its
obligations to secured creditors:
(i) All land, buildings, machinery and equipment currently owned, and to be
acquired in the future by Bayantel;

(ii) All monies payable to Bayantel under the Project Documents (as the term
is defined by the Omnibus Agreement);
(iii) All Project Documents and all Contract Rights arising thereunder;

(iv) All receivables;

(v) Each of the Accounts (as the term is defined by the Omnibus Agreement);

(vi) All amounts maintained in the Accounts and all monies, securities and
instruments deposited or required to be deposited in the Accounts;
(vii) All other Chattel Paper and Documents;

(viii) All other property, assets and revenues of Bayantel, whether tangible or
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 intangible;

(ix) All General Intangibles; and

(x) All proceeds and products of any and all of the foregoing.64

In particular, petitioners refer to Section 4.02 of the Assignment Agreement as

basis for demanding full payment, ahead of other creditors, out of respondent's revenue
from operations during rehabilitation. The relevant provision reads:
Section 4.02. Payments Under Contracts and Receivables. —

I f during the continuance of a Trigger Event the Company shall receive

directly from any party to any Assigned Agreement or from any account debtor or
other obligor under any Receivable, any payments under such agreements or the
Receivables, the Company shall receive such payments in a constructive
trust for the benefit of the Secured Parties, shall segregate such payments
from its other funds, and shall forthwith transmit and deliver such payments to the
Collateral Agent in the same form as so received (with any necessary
endorsement) along with a description of the sources of such payments. All
amounts received by the Collateral Agent pursuant to this Section 4.02 shall be
applied as set forth in Part L and in the [Inter-creditor] Agreement. 65
(Underscoring in the original; emphasis supplied)
The resolution of the issue at hand rests on a determination of whether secured
creditors may enforce preference in payment during rehabilitation by virtue of a
contractual agreement.
Section 6 (c), PD 902-A provides that upon the appointment of a management
committee, rehabilitation receiver, board or body, all actions for claims against
corporations, partnerships or associations under management or receivership pending
before any court, tribunal, board or body shall be suspended accordingly. 66 The
suspension of action for claims against the corporation under a rehabilitation receiver or
management committee embraces all phases of the suit, be it before the trial court or
any tribunal or before this Court. 67
The justification for suspension of actions for claims is to enable the
management committee or rehabilitation receiver to effectively exercise its/his powers
free from any judicial or extrajudicial interference that might unduly hinder or prevent the
"rescue" of the debtor company. 68 It is intended to give enough breathing space for the
management committee or rehabilitation receiver to make the business viable again
without having to divert attention and resources to litigation in various fora. 69
In the 1990 case of Alemar's Sibal & Sons, Inc. v. Judge Elbinias , 70 the Court
first enunciated the prevailing principle which governs the relationship among creditors
during rehabilitation. In said case, G.A. Yupangco sought the issuance of a writ of
execution to implement a final and executory default judgment in its favor and after
Alemar's Sibal & Sons, Inc. was placed under rehabilitation. In ordering the stay of
execution, the Court held:
During rehabilitation receivership, the assets are held in trust for the
equal benefit of all creditors to preclude one from obtaining an advantage
or preference over another by the expediency of an attachment, execution
or otherwise. For what would prevent an alert creditor, upon learning of the
receivership, from rushing posthaste to the courts to secure judgments for the
satisfaction of its claims to the prejudice of the less alert creditors.
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 As between the creditors, the key phrase is "equality is equity."
When a corporation threatened by bankruptcy is taken over by a receiver,
all the creditors should stand on equal footing. Not anyone of them should
be given any preference by paying one or some of them ahead of the
others. This is precisely the reason for the suspension of all pending claims
against the corporation under receivership. Instead of creditors vexing the courts
with suits against the distressed firm, they are directed to file their claims with the
receiver who is a duly appointed officer of the SEC. 71 (Emphasis supplied) DAcaIE

Since then, the principle of equality in equity has been cited as the basis for
placing secured and unsecured creditors in equal footing or in pari passu with each
other during rehabilitation. In legal parlance, pari passu is used especially of creditors
who, in marshaling assets, are entitled to receive out of the same fund without any
precedence over each other. 72
In Rizal Commercial Banking Corporation v. Intermediate Appellate Court, 73 the
Court disallowed the foreclosure of the debtor company's property after the latter had
filed a Petition for Rehabilitation and Declaration of Suspension of Payments with the
SEC. We ruled that whenever a distressed corporation asks the SEC for rehabilitation
and suspension of payments, preferred creditors may no longer assert preference but
shall stand on equal footing with other creditors. Foreclosure shall be disallowed so as
not to prejudice other creditors, or cause discrimination among them. In 1999, the Court
qualified this ruling by stating that preferred creditors of distressed corporations shall
stand on equal footing with all other creditors only after a rehabilitation receiver or
management committee has been appointed. 74 More importantly, the Court laid the
guidelines for the treatment of claims against corporations undergoing rehabilitation:
1. All claims against corporations, partnerships, or associations that
are pending before any court, tribunal, or board, without distinction as to whether
or not a creditor is secured or unsecured, shall be suspended effective upon the
appointment of a management committee, rehabilitation receiver, board, or body
in accordance with the provisions of Presidential Decree No. 902-A.
2. Secured creditors retain their preference over unsecured
creditors, but enforcement of such preference is equally suspended upon
the appointment of a management committee, rehabilitation receiver,
board, or body. In the event that the assets of the corporation, partnership, or
association are finally liquidated, however, secured and preferred credits under
the applicable provisions of the Civil Code will definitely have preference over
unsecured ones. 75 (Emphasis supplied)

Basically, once a management committee or rehabilitation receiver has been

appointed in accordance with PD 902-A, no action for claims may be initiated against a
distressed corporation and those already pending in court shall be suspended in
whatever stage they may be. Notwithstanding, secured creditors shall continue to have
preferred status but the enforcement thereof is likewise held in abeyance. However, if
the court later determines that the rehabilitation of the distressed corporation is no
longer feasible and its assets are liquidated, secured claims shall enjoy priority in
payment.
We perceive no good reason to depart from established jurisprudence. While
Section 24 (d), Rule 4 of the Interim Rules states that contracts and other arrangements
between the debtor and its creditors shall be interpreted as continuing to apply, this
holds true only to the extent that they do not conflict with the provisions of the plan.
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 Here, the stipulation in the Assignment Agreement to the effect that respondent
Bayantel shall pay petitioners in full and ahead of other creditors out of its cash flow
during rehabilitation directly impinges on the provision of the approved Rehabilitation
Plan that "[t]he creditors of Bayantel, whether secured or unsecured, should be treated
equally and on the same footing or pari passu until the rehabilitation proceedings is
terminated in accordance with the Interim Rules."
During rehabilitation, the only payments sanctioned by the Interim Rules are
those made to creditors in accordance with the provisions of the plan. Pertinent to this
is Section 5 (b), Rule 4 of the Interim Rules which states that the terms and conditions
of the rehabilitation plan shall include the manner of its implementation, giving due
regard to the interests of secured creditors. This very phrase is what petitioners invoke
as basis for demanding priority in payment out of respondent's cash flow.
But petitioners' reliance thereon is misplaced.
By definition, due regard means consideration in a degree appropriate to the
demands of a particular case. 76 On the other hand, security interest is a form of interest
in property which provides that the property may be sold on default in order to satisfy
the obligation for which the security interest is given. Often, the term "lien" is used as a
synonym, although lien most commonly refers only to interests providing security that
are created by operation of law, not through agreement of the debtor and creditor. In
contrast, the term "security interest" means any interest in property acquired by contract
for the purpose of securing payment or performance of an obligation or indemnifying
against loss or liability. 77
Under the Interim Rules, the only pertinent reference to creditor security is found
in Section 12, Rule 4 on relief from, modification or termination of stay order. Said
provision states that the creditor is regarded as lacking adequate protection if it can be
shown that: (a) the debtor fails or refuses to honor a pre-existing agreement with the
creditor to keep the property insured; (b) the debtor fails or refuses to take commercially
reasonable steps to maintain the property; or (c) the property has depreciated to an
extent that the creditor is undersecured.
Upon a showing that the creditor is lacking in protection, the court shall order the
rehabilitation receiver to take steps to ensure that the property is insured or maintained
or to make payment or provide replacement security such that the obligation is fully
secured. If such arrangements are not feasible, the court may allow the secured creditor
to enforce its claim against the debtor. Nonetheless, the court may deny the creditor the
foregoing remedies if allowing so would prevent the continuation of the debtor as a
going concern or otherwise prevent the approval and implementation of a rehabilitation
plan. 78
In the context of the foregoing provisions, "giving due regard to the interests of
secured creditors" primarily entails ensuring that the property comprising the collateral
is insured, maintained or replacement security is provided such that the obligation is
fully secured. The reason for this rule is simple, in the event that the court terminates
the proceedings for reasons other than the successful implementation of the plan, the
secured creditors may foreclose the securities and the proceeds thereof applied to the
satisfaction of their preferred claims. TDEASC

When the Rules of Procedure on Corporate Rehabilitation took effect on January

16, 2009, the "due regard" provision was amended to read:

SEC. 18. Rehabilitation Plan. — The rehabilitation plan shall include

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 (a) the desired business targets or goals and the duration and coverage of the
rehabilitation; (b) the terms and conditions of such rehabilitation which shall
include the manner of its implementation, giving due regard to the interests of
secured creditors such as, but not limited, to the non-impairment of their
security liens or interests; . . . . (Emphasis supplied)

Despite the additional phrase, however, it is our view that the amendment simply
amplifies the meaning of the "due regard provision" in the Interim Rules. First, the
amendment exemplifies what giving "due regard to the interests of secured creditors"
contemplates, mainly, the non-impairment of securities. At the same time, the specific
reference to "security liens" and "interests," separated by the disjunctive "or," describes
what "the interests of secured creditors" consist of. Again, lien pertains only to interests
providing security that are created by operation of law while security interests include
those acquired by contract for the purpose of securing payment or performance of an
obligation or indemnifying against loss or liability. Lastly, the addition of the phrase "but
not limited" in the amendment shuns a rigid application of the provision by recognizing
that "giving due regard to the interest of secured creditors" may be rendered in other
ways than taking care that the security liens and interests of secured creditors are
adequately protected.
In this case, petitioners Express Investments III Private Ltd. and Export
Development Canada are concerned, not so much with the adequacy of the securities
offered by respondent, but with the devaluation of such securities over time. Petitioners
fear that the proceeds of respondent's collateral would be insufficient to cover their
claims in the event of liquidation.
On this point, suffice it to state that petitioners are not without any remedy to
address a deficiency in securities, if and when it comes about. Under Section 12, Rule 4
of the Interim Rules, a secured creditor may file a motion with the Rehabilitation Court
for the modification or termination of the stay order. If petitioners can show that
arrangements to insure or maintain the property or to make payment or provide
additional security therefor is not feasible, the court shall modify the stay order to allow
petitioners to enforce their claim — that is, to foreclose the mortgage and apply the
proceeds thereof to their claims. Be that as it may, the court may deny the creditor this
remedy if allowing so would prevent the continuation of the debtor as a going concern
or otherwise prevent the approval and implementation of a rehabilitation plan.
Indeed, neither the "due regard provision" nor contractual arrangements can
shackle the Rehabilitation Court in determining the best means of rehabilitating a
distressed corporation. Truth be told, the Rehabilitation Court may approve a
rehabilitation plan even 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. In determining whether or not
the opposition of the creditors is manifestly unreasonable, the court shall consider the
following: (a) That the plan would likely provide the objecting class of creditors with
compensation greater than that which they would have received if the assets of the
debtor were sold by a liquidator within a three-month period; (b) That the shareholders
or owners of the debtor lose at least their controlling interest as a result of the plan; and
(c) The Rehabilitation Receiver has recommended approval of the plan. 79
According to the Liquidation Analysis 80 prepared by KPMG at the request of the
Receiver, the Fair Market Value of respondent's fixed assets is P18.7 billion while its
Forced Liquidation Value is P9.3 billion. Together with cash and receivables in the
amount of P911 million, respondent's total liquidation assets are valued at P10.2 billion.
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 From this amount, the estimated liquidation return to the Omnibus Creditors is
P6,102,150,000 or approximately 52.9% of their claims in the amount of
P11,539,776,000. Meanwhile, Chattel Creditors can recoup 61% of its claims. As
regards the Unsecured Creditors, they will share in the pool of assets that respondents
have acquired since 1998, which were not specifically registered under the Omnibus
Agreement Mortgage Supplements. Said assets are estimated to have a value of P3.5
Billion. This accounts for 10.7% of the Unsecured Creditors' claims.
Reckoned from these figures, the Receiver concluded that the shareholders shall
receive nothing on respondent's liquidation while the latter's creditors can expect
significantly less than full repayment. Moreover, regardless of whether the shareholders
will lose at least their controlling interest as a result of the plan, petitioners, in their
Memorandum dated April 30, 2009, have signified their conformity with the Court of
Appeals decision to limit the conversion of the unsustainable debt to a maximum of 40%
of the fully-paid up capital of respondent corporation. Lastly, the Receiver not only
recommended the approval of the Plan by the Rehabilitation Court, he, himself,
prepared it. The concurrence of these conditions renders the opposition of petitioners
manifestly unreasonable.
As regards the second issue, petitioners submit that the pari passu treatment of
claims offends the Contract Clause under the 1987 Constitution. Article III, Section 10
of the Constitution mandates that no law impairing the obligation of contracts shall be
passed. Any law which enlarges, abridges, or in any manner changes the intention of
the parties, necessarily impairs the contract itself. And even when the change in the
contract is done by indirection, there is impairment nonetheless. 81
At this point, it bears stressing that the non-impairment clause is a limitation on
the exercise of legislative power and not of judicial or quasi-judicial power. In Lim, Sr. v.
Secretary of Agriculture & Natural Resources, et al., 82 we held:
. . . . For it is well-settled that a law within the meaning of this constitutional
provision has reference primarily to statutes and ordinances of municipal
corporations. Executive orders issued by the President whether derived from his
constitutional powers or valid statutes may likewise be considered as such. It
does not cover, therefore, the exercise of the quasi-judicial power of a
department head even if affirmed by the President. The administrative process in
such a case partakes more of an adjudicatory character. It is bereft of any
legislative significance. It falls outside the scope of the non-impairment clause. . .
. . 83

The prohibition embraces enactments of a governmental law-making body

pertaining to its legislative functions. Strictly speaking, it does not cover the exercise by
such law-making body of quasi-judicial power. TEIHDa

Verily, the Decision dated June 28, 2004 of the Rehabilitation Court is not a
proper subject of the Non-impairment Clause.
In view of the foregoing, we find no need to discuss the third issue posed in this
petition.
In G.R. Nos. 175418-20
Prefatorily, we restate the time honored principle that in a petition for review on
certiorari under Rule 45 of the Rules of Court, only questions of law may be raised.
Thus, in a petition for review on certiorari, the scope of the Supreme Court's judicial
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 review is limited to reviewing only errors of law, not of fact. 84 It is not our function to
weigh all over again evidence already considered in the proceedings below, our
jurisdiction is limited to reviewing only errors of law that may have been committed by
the lower court. 85
Before us, petitioners Bank of New York and Avenue Asia Capital Group raise a
question of fact which is not proper in a petition for review on certiorari. A question of
law arises when there is doubt as to what the law is on a certain state of facts, while
there is a question of fact when the doubt arises as to the truth or falsity of the alleged
facts. For a question to be one of law, the same must not involve an examination of the
probative value of the evidence presented by the litigants or any of them. The resolution
of the issue must rest solely on what the law provides on the given set of
circumstances. Once it is clear that the issue invites a review of the evidence
presented, the question posed is one of fact. 86
Whether the Court of Appeals erred in affirming the sustainable debt fixed by the
Rehabilitation Court is a question of fact that calls for a recalibration of the evidence
presented by the parties before the trial court. In order to resolve said issue, petitioners
would have this Court reassess the state of respondent Bayantel's finances at the onset
of rehabilitation and gauge the practical value of the plans submitted by the parties vis-
à -vis the financial models prepared by the experts engaged by them. These tasks are
certainly not for this Court to accomplish. The resolution of factual issues is the function
of lower courts, whose findings on these matters are received with respect. 87 This is
especially true in rehabilitation proceedings where certain courts are designated to hear
the case on account of their expertise and specialized knowledge on the subject matter.
Though this doctrine admits of several exceptions, 88 none is applicable in the case at
bar.
Notably, the Interim Rules is silent on the manner by which the sustainable debt
of the debtor shall be determined. Yet, Section 2 of the Interim Rules prescribe that the
Rules shall be liberally construed to carry out the objectives of Sections 5 (d), 89 6 (c) 90
and 6 (d) 91 of PD 902-A.
Section 5 (d), PD 902-A vested jurisdiction upon the SEC over petitions for
rehabilitation. Later, RA 8799 or the Securities Regulation Code, amended Section 5 (d)
of PD 902-A by transferring SEC's jurisdiction over said petitions to the RTC.
Meanwhile, Section 6 (c) of PD 902-A provides for the appointment of a receiver of the
subject property whenever necessary in order to preserve the rights of the parties and
to protect the interest of the investing public and the creditors. Upon the appointment of
such receiver, all actions for claims against the corporation pending before any court,
tribunal, board or body shall be suspended accordingly. On the other hand, Section 5
(d), PD 902-A expands the power of the Commission to allow the creation and
appointment of a management committee to undertake the management of the
corporation when there is imminent danger of dissipation, loss, wastage or destruction
of assets or other properties or paralyzation of the business of the corporation which
may be prejudicial to the interest of minority stockholders, parties-litigants or the general
public.
The underlying objective behind these provisions is to foster the rehabilitation of
the debtor by insulating it against claims, preserving its assets and taking steps to
ensure that the rights of all parties concerned are adequately protected.
This Court is convinced that the Court of Appeals ruled in accord with this policy
when it upheld the Rehabilitation Court's determination of respondent's sustainable
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 debt. We find the sustainable debt of US$325 million, spread over 19 years, to be a
more realistically achievable amount considering respondent's modest revenue
projections. Bayantel projected a constant rise in its revenues at the range of 1.16%-
4.91% with periodic reverses every two years. 92 On the other hand, petitioner's
proposal of a sustainable debt of US$471 million to be paid in 12 years and the
Receiver's proposal of US$370 million to be paid in 15 years betray an over optimism
that could leave Bayantel with nothing to spend for its operations.
Next, petitioners contest the admission of respondent's rehabilitation plan for
being filed in violation of the Interim Rules. It is petitioner's view that in a creditor-
initiated petition for rehabilitation, the debtor may only submit either a comment or
opposition but not its own rehabilitation plan.
We cannot agree.
Rule 4 of the Interim Rules treats of rehabilitation in general, without distinction
as to who between the debtor and the creditor initiated the petition. Nowhere in said
Rule is there any provision that prohibits the debtor in a creditor-initiated petition to file
its own rehabilitation plan for consideration by the court. Quite the reverse, one of the
functions and powers of the rehabilitation receiver under Section 14 (m) of said Rule is
to study the rehabilitation plan proposed by the debtor or any rehabilitation plan
submitted during the proceedings, together with any comments made thereon. This
provision makes particular reference to a debtor-initiated proceeding in which the debtor
principally files a rehabilitation plan. In such case, the receiver is tasked, among other
things, to study the rehabilitation plan presented by the debtor along with any
rehabilitation plan submitted during the proceedings. This implies that the creditors of
the distressed corporation, and even the receiver, may file their respective rehabilitation
plans. We perceive no good reason why the same option should not be available, by
analogy, to a debtor in creditor-initiated proceedings, which is also found in Rule 4 of
the Interim Rules.
Third, petitioners fault the Court of Appeals for ruling that the debt-to-equity
conversion rate of 77.7%, as proposed by The Bank of New York, violates the
Filipinization provision of the Constitution. Petitioners explain that the acquisition of
shares by foreign Omnibus and Financial Creditors shall be done, both directly and
indirectly in order to meet the control test principle under RA 7042 93 or the Foreign
Investments Act of 1991. Under the proposed structure, said creditors shall own 40% of
the outstanding capital stock of the telecommunications company on a direct basis,
while the remaining 40% of shares shall be registered to a holding company that shall
retain, on a direct basis, the other 60% equity reserved for Filipino citizens.cIECaS

Moreover, petitioners maintain that it is only fair to impose upon the Omnibus and
Financial Creditors a bigger equity conversion in Bayantel considering that petitioners
will bear the bulk of the accrued interests and penalties to be written off. Initially, the
Rehabilitation Court approved the Receiver's recommendation to write-off interests and
penalties in the amount of US$34,044,553.00. The Rehabilitation Court likewise ordered
a re-computation of past due interest in accordance with the rate proposed by the
Receiver. Following this, petitioners estimate the total unpaid accrued interest of
Bayantel as of July 30, 2003 to be at US$140,098,750.66 while the Rehabilitation Court
arrived at the total amount of past due interest and penalties of US$114,855,369.59
upon recomputation. This makes for a difference of US$25,243,381.07 which,
petitioners claim, represents an additional write-off to be borne by them for a total write-
off of US$59,287,934.07.
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 The provision adverted to is Article XII, Section 11 of the 1987 Constitution which
states:
SEC. 11. No franchise, certificate, or any other form of authorization
for the operation of a public utility shall be granted except to citizens of the
Philippines or to corporations or associations organized under the laws of the
Philippines at least sixty per centum of whose capital is owned by such citizens,
nor shall such franchise, certificate or authorization be exclusive in character or
for a longer period than fifty years. Neither shall any such franchise or right be
granted except under the condition that it shall be subject to amendment,
alteration, or repeal by the Congress when the common good so requires. The
State shall encourage equity participation in public utilities by the general public.
The participation of foreign investors in the governing body of any public utility
enterprise shall be limited to their proportionate share in its capital, and all the
executive and managing officers of such corporation or association must be
citizens of the Philippines.

This provision explicitly reserves to Filipino citizens control over public utilities,
pursuant to an overriding economic goal of the 1987 Constitution: to "conserve and
develop our patrimony" and ensure "a self-reliant and independent national economy
effectively controlled by Filipinos." 94
In the recent case of Gamboa v. Teves , 95 the Court settled once and for all the
meaning of "capital" in the above-quoted Constitutional provision limiting foreign
ownership in public utilities. In said case, we held that considering that common shares
have voting rights which translate to control as opposed to preferred shares which
usually have no voting rights, the term "capital" in Section 11, Article XII of the
Constitution refers only to common shares. However, if the preferred shares also have
the right to vote in the election of directors, then the term "capital" shall include such
preferred shares because the right to participate in the control or management of the
corporation is exercised through the right to vote in the election of directors. In short, the
term "capital" in Section 11, Article XII of the Constitution refers only to shares of stock
that can vote in the election of directors.
Applying this, two steps must be followed in order to determine whether the
conversion of debt to equity in excess of 40% of the outstanding capital stock violates
the constitutional limit on foreign ownership of a public utility: First, identify into which
class of shares the debt shall be converted, whether common shares, preferred shares
that have the right to vote in the election of directors or non-voting preferred shares;
Second, determine the number of shares with voting right held by foreign entities prior
to conversion. If upon conversion, the total number of shares held by foreign entities
exceeds 40% of the capital stock with voting rights, the constitutional limit on foreign
ownership is violated. Otherwise, the conversion shall be respected.
In its Rehabilitation Plan, 96 among the material financial commitments made by
respondent Bayantel is that its shareholders shall "relinquish the agreed-upon amount
of common stock[s] as payment to Unsecured Creditors as per the Term Sheet." 97
Evidently, the parties intend to convert the unsustainable portion of respondent's debt
into common stocks, which have voting rights. If we indulge petitioners on their
proposal, the Omnibus Creditors which are foreign corporations, shall have control over
77.7% of Bayantel, a public utility company. This is precisely the scenario proscribed by
the Filipinization provision of the Constitution. Therefore, the Court of Appeals acted
correctly in sustaining the 40% debt-to-equity ceiling on conversion.
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 As to the fourth issue, petitioners insist that the write-off of the default interest and
penalties along with the re-computation of past due interest violate the pari passu
treatment of creditors.
Petitioner's argument lacks merit.
Section 5 (d), Rule 4 of the Interim Rules provides that the rehabilitation plan
shall include the means for the execution of the rehabilitation plan, which may include
conversion of the debts or any portion thereof to equity, restructuring of the debts,
dacion en pago, or sale of assets or of the controlling interest.
Debt restructuring may involve conversion of the debt or any portion thereof to
equity, sale of the assets of the distressed company and application of the proceeds to
the obligation, dacion en pago, debt relief or reduction, modification of the terms of the
loan or a combination of these schemes.
In this case, the approved Rehabilitation Plan provided for a longer period of
payment, the conversion of debt to 40% equity in respondent company, modification of
interest rates on the restructured debt and accrued interest and a write-off or relief from
penalties and default interest. These recommendations by the Receiver are perfectly
within the powers of the Rehabilitation Court to adopt and approve, as it did adopt and
approve. In so doing, no reversible error can be attributed to the Rehabilitation Court.
The pertinent portion of the fallo of said court's Decision dated June 28, 2004
states: EScIAa

1. The ruling on the pari passu treatment of all creditors whose

claims are subject to restructuring shall be maintained and shall extend to all
payment terms and treatment of past due interest. 98 (Emphasis supplied)

Thus, the court a quo provided for a uniform application of the pari passu
principle among creditor claims and the terms by which they shall be paid, including
past due interest. This is consistent with the interpretation accorded by jurisprudence to
the pari passu principle that during rehabilitation, the assets of the distressed
corporation are held in trust for the equal benefit of all creditors to preclude one from
obtaining an advantage or preference over another. All creditors should stand on equal
footing. Not any one of them should be given preference by paying one or some of
them ahead of the others. 99
As applied to this case, the pari passu treatment of claims during rehabilitation
entitles all creditors, whether secured or unsecured, to receive payment out of
Bayantel's cash flow. Despite their preferred position, therefore, the secured creditors
shall not be paid ahead of the unsecured creditors but shall receive payment only in the
proportion owing to them.
In any event, the debt restructuring schemes complained of shall be implemented
among all creditors regardless of class. Both secured and unsecured creditors shall
suffer a write-off of penalties and default interest and the escalating interest rates shall
be equally imposed on them. We repeat, the commitment embodied in the pari passu
principle only goes so far as to ensure that the assets of the distressed corporation are
held in trust for the equal benefit of all creditors. It does not espouse absolute equality
in all aspects of debt restructuring.
As regards petitioners' claims for costs, petitioner Bank of New York filed before
the Rehabilitation Court a Notice of Claim 100 dated February 19, 2004 for the payment
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 of US$1,255,851.30, representing filing fee, deposit for expenses and the professional
fees of its counsels and financial advisers. Earlier, said bank had filed a claim for the
payment of US$863,829.98 for professional fees of its counsels and professional
advisers and P2,850,305.00 for docket fees and publication expenses. On its end, the
Avenue Asia Capital Group claims a total of US$535,075.64 to defray the professional
fees of its financial adviser, Price Waterhouse & Cooper and the Bondholder
Communications Group.
In an Order 101 dated March 15, 2005, the Rehabilitation Court approved the
claims for costs of petitioner Bank of New York as follows:
i. filing fees of P2,701,750.00 as evidenced by O.R. Nos.
18463998, 18466286 and 0480246 all dated August 13, 2003 of the
Regional Trial Court (of Pasig City);
ii. costs of publication of the Stay Order in the amount of
P47,550.00 as evidenced by O.R. No. 86384 dated August 13, 2003 of the
Peoples Independent Media, Inc.,
the same being judicial costs authorized under Sec. 1, Rule 142 of the
Rules of Court;

iii. payments of professional fees to its Philippine Counsel, Belo

Gozon Elma Parel Asuncion & Lucila, in the total amount of
US$152,784.32 as evidenced by the Affidavit of Atty. Roberto Rafael V.
Lucila and the Statements of Account attached thereto;

which the Court considers to be reasonable and finds authorized under

Sec. 6.11 and 6.12 of the Indenture attached as Annex "E" to the Petition;
The Receiver is hereby directed to cause the settlement of payment of the
accounts within a period of sixteen (16) months from receipt of this Order. 102

The trial court made no pronouncement on the claims for cost of petitioner
Avenue Asia Capital Group, either in the same Order or in a subsequent order.
Before us, petitioners reiterate their claims for costs based on Sections 6.11 103
and 6.12 104 of the Indenture 105 dated July 22, 1999, which was executed by
respondent in their favor.
It bears stressing at this point that the subject of petitioners' appeal before the
Court of Appeals was the Rehabilitation Court's Decision dated June 28, 2004. Said
Decision, however, bore no discussion on either petitioners' claim for costs from which
they may appeal. Notably, the assailed Order of the Rehabilitation Court was
promulgated on March 15, 2005 or four (4) months after petitioners had appealed the
Decision dated June 28, 2004 to the Court of Appeals on November 16, 2004.
Evidently, the appellate court could not have acquired jurisdiction to review said Order.
Nonetheless, we doubt the propriety of the Rehabilitation Court's award for costs.
A perusal of the Order dated March 15, 2005 reveals that the award to petitioner Bank
of New York was made pursuant to Section 1, Rule 142 of the Rules of Court, which
states:

SECTION 1. Costs ordinarily follow results of suit. — Unless

otherwise provided in these Rules, costs shall be allowed to the prevailing
party as a matter of course, but the court shall have power, for special reasons,
to adjudge that either party shall pay the costs of an action, or that the same be
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 divided, as may be equitable. No costs shall be allowed against the Republic of
the Philippines unless otherwise provided by law. (Emphasis supplied)

However, there is no prevailing party in rehabilitation proceedings which is non-

adversarial in nature. 106 Unlike in adversarial proceedings, the court in rehabilitation
proceedings appoints a receiver to study the best means to revive the debtor and to
ensure that the value of the debtor's property is reasonably maintained pending the
determination of whether or not the debtor should be rehabilitated, as well as implement
the rehabilitation plan after its approval. 107 The main thrust of rehabilitation is not to
adjudicate opposing claims but to restore the debtor to a position of successful
operation and solvency. Under the Interim Rules, reasonable fees and expenses are
allowed the Receiver and the persons hired by him, 108 for those expenses incurred in
the ordinary course of business of the debtor after the issuance of the stay order but
excluding interest to creditors. 109
Moreover, while it is true that the Indenture between petitioners and respondent
corporation authorizes the Trustee to file proofs of claim for the payment of reasonable
expenses and disbursements of the Trustee, its agents and counsel, accountants and
experts, such remedy is available only in cases where the Trustee files a collection suit
against respondent company. Indubitably, the rehabilitation proceedings in the case at
bar is not a collection suit, which is adversarial in nature. AECacT

In G.R. No. 177270

At issue in this petition for review on certiorari is the extent of power that the
Monitoring Committee can exercise.
The pertinent portion of the fallo of the Decision dated June 28, 2004 provides:
6. A Monitoring Committee shall be formed composed of
representatives from all classes of the restructured debt. The Rehabilitation
Receiver's role shall be limited to the powers of monitoring and oversight as
provided in the Interim Rules. All powers provided for in the Report and
Recommendations, which exceed the monitoring and oversight functions
mandated by the Interim Rules shall be amended accordingly. 110

On October 15, 2004, petitioner Bank of New York filed a Manifestation with the
Rehabilitation Court for the creation of a monitoring committee in accordance with the
aforequoted pronouncement. Petitioner espouses the view that it is essential to "provide
for a strong and effective Monitoring Committee . . . which gives the Financial Creditors
meaningful and substantial participation in Bayantel." 111 It went on to propose the
powers that the Monitoring Committee should possess, specifically:
The role of the Monitoring Committee shall be to work with the Receiver
(on precise terms to be agreed as discussed below) to Oversee the actions of the
BTI New Board of Directors, making key Decisions and approving, amongst
other things,
(i) Any proposed Events of Rescheduling;
(ii) Any other proposed actions by the receiver on a payment default;

(iii) Operating Expenses Budgets;

(iv) Capital Expenditure Budgets;
(v) Asset Sales Programs; and
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 (vi) Terms of Incentive Scheme for New Management and
Management Targets. 112

Subsequently, in an Order 113 dated November 9, 2004, the Rehabilitation Court

adopted petitioner's proposal by constituting a Monitoring Committee that
shall participate with the Receiver in monitoring and overseeing the actions of
the Board of Directors of Bayantel and may, by majority vote, adopt, modify,
revise or substitute any of the following items:

(1) any proposed Annual OPEX Budgets;

(2) any proposed Annual CAPEX Budgets;
(3) any proposed Reschedule;

(4) any proposed actions by the Receiver on a payment default;

(5) terms of Management Incentivisation Scheme and Management
Targets;
(6) the EBITDA/Revenue ratios set by the Bayantel Board of
Directors; and,
(7) any other proposed actions by the Bayantel Board of
Directors including, without limitation, issuance of new
shares, sale of core and non-core assets, change of
business, etc. that will materially affect the terms and
conditions of the rehabilitation plan and its implementation.
114 (Emphasis supplied)
From said Order, respondent Bayantel filed a Manifestation and Motion for
Clarification while the secured creditors moved for an increase in the membership of the
monitoring committee from three to five members. For his part, the Receiver submitted
a Compliance and Manifestation dated January 10, 2005.
In an Order 115 dated March 15, 2005, the Rehabilitation Court affirmed the
creation of a monitoring committee but denied the motion for the appointment of
additional members therein. It also made the following dispositions relative to the
functions of the Monitoring Committee:
(d) to approve the Implementing Term Sheet submitted by the
Receiver subject to the following conditions:
xxx xxx xxx
ii. the Receiver shall design and formulate with the
participation of the Monitoring Committee and Bayantel the
convertible debt instrument, as directed of him in the earlier Order of
November 9, 2004, for the unsustainable portion of the restructured debt
of Bayantel and submit the same to the Court within thirty (30) days from
receipt of this Order. Costs, expenses and taxes that may be due on the
execution of the convertible debt instrument shall be charged to Bayantel
as costs of the rehabilitation proceedings;
xxx xxx xxx
iv. the Receiver shall devise a mode or procedure wherebythe
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 Monitoring Committee can have immediate and direct access to any
information that the Receiver has obtained or received from Bayantel or
the Monitoring Accountant in regard to the management and business
operations of Bayantel; EDSHcT

v. the trading of debt mentioned in the Implementing Term

Sheet shall be governed by the pre-petition documents which do not
conflict with the Decision of this Court and provided that no transfer shall
be made to the Bayantel Group Companies, or any controlling
shareholders thereof including Bayan Telecommunications Holdings
Corporation ("BTHC"); however, any "buy back" scheme as may be
approved by the Monitoring Committee and Bayantel shall be open to
all creditors whether secured or unsecured; 116 (Emphasis supplied)

On appeal, the Court of Appeals nullified the Orders dated November 9, 2004
and March 15, 2005 insofar as they defined the powers and functions of the Monitoring
Committee. The appellate court ruled that the Rehabilitation Court committed grave
abuse of discretion in vesting the Monitoring Committee with powers beyond monitoring
and overseeing Bayantel's operations.
Before us, petitioner contends that the Rehabilitation Court intended for the
Monitoring Committee to exercise powers greater than those of the Receiver.
We find no merit in petitioner's argument.
In the Decision dated June 28, 2004, the Rehabilitation Court discussed the
circumstances surrounding the creation of the monitoring committee, thus:
Both Bayantel and the Opposing Creditors contend that the Rehabilitation
Receiver, under his Report and Recommendations, appear to be vested with too
much discretion in the implementation of his proposed rehabilitation plan.
Bayantel and the Opposing Creditors for one, argue against the power of the
Rehabilitation Receiver to be able to further restructure Restructured Debt as
well as the Rehabilitation Receiver's power relating to matters of Bayantel's
budget.
The [c]ourt wishes to stress that the Interim Rules prohibit the
Rehabilitation Receiver from taking over the management and control of the
company under rehabilitation, and limit his role to merely overseeing and
monitoring the operations of the company (Section 14, Rule 4, Interim Rules).
However, the [c]ourt also appreciates that the Rehabilitation Receiver must
oversee the implementation of the rehabilitation plan as approved by the [c]ourt.
In line with petitioner's proposal, the creation of a Monitoring Committee
composed of representatives from all classes of the restructured debt
addresses the concerns raised by the creditors. 117 (Emphasis supplied)

It can be gleaned from the foregoing that the Rehabilitation Court's decision to
form a monitoring committee was borne out of creditors' concerns over the possession
of vast powers by the Receiver. While the Rehabilitation Court was quick to delineate
the Receiver's authority, it nevertheless, underscored the value of his role in overseeing
the implementation of the Plan. It was on this premise that the Rehabilitation Court
appointed the Monitoring Committee — to "[address] the concerns raised by the
creditors." Yet, in its Orders dated November 9, 2004 and March 15, 2005, the
Rehabilitation Court equipped the Monitoring Committee with powers well beyond those
of the Receiver's. Apart from control over respondent's budget, the Monitoring
Committee may also adopt, modify, revise or even substitute any other proposed
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 actions by respondent's Board of Directors, including, without limitation issuance of new
shares, sale of core and non-core assets, change of business and others that will
materially affect the terms and conditions of the rehabilitation plan and its
implementation. Ironically, the court a quo diluted the seeming concentration of power in
the hands of the Receiver but appointed a Committee possessed of even wider
discretion over respondent's operations.
From all indications, however, the tenor of the Rehabilitation Court's Decision
dated June 28, 2004 does not contemplate the creation of a Monitoring Committee with
broader powers than the Receiver. As the name of the Monitoring Committee itself
suggests, its job is "to watch, observe or check especially for a special purpose." 118 In
the context of the Decision dated June 28, 2004, the fundamental task of the Monitoring
Committee herein is to oversee the implementation of the rehabilitation plan as
approved by the court. This should not be confused with the functions of the Receiver
under the Interim Rules or a management committee under PD 902-A.
Under Section 14, Rule 4 of the Interim Rules, the Receiver shall not take over
the management and control of the debtor but shall closely oversee and monitor its
operations during the pendency of the rehabilitation proceeding. The Rehabilitation
Receiver shall be considered an officer of the court and his core duty is to assess how
best to rehabilitate the debtor and to preserve its assets pending the determination of
whether or not it should be rehabilitated and to implement the approved plan.
It is a basic precept in Corporation Law that the corporate powers of all
corporations formed under Batas Pambansa Blg. 68 or the Corporation Code shall be
exercised, all business conducted and all property of such corporations controlled and
held by the board of directors or trustees. Nonetheless, PD 902-A presents an
exception to this rule.
Section 6 (d) 119 of PD 902-A empowers the Rehabilitation Court to create and
appoint a management committee to undertake the management of corporations when
there is imminent danger of dissipation, loss, wastage or destruction of assets or other
properties or paralyzation of business operations of such corporations which may be
prejudicial to the interest of minority stockholders, parties-litigants or the general public.
In the case of corporations supervised or regulated by government agencies, such as
banks and insurance companies, the appointment shall be made upon the request of
the government agency concerned. Otherwise, the Rehabilitation Court may, upon
petition or motu proprio, appoint such management committee.
The management committee or rehabilitation receiver, board or body shall have
the following powers: (1) to take custody of, and control over, all the existing assets and
property of the distressed corporation; (2) to evaluate the existing assets and liabilities,
earnings and operations of the corporation; (3) to determine the best way to salvage
and protect the interest of the investors and creditors; (4) to study, review and evaluate
the feasibility of continuing operations and restructure and rehabilitate such entities if
determined to be feasible by the Rehabilitation Court; and (5) it may overrule or revoke
the actions of the previous management and board of directors of the entity or entities
under management notwithstanding any provision of law, articles of incorporation or by-
laws to the contrary. EcDSTI

In this case, petitioner neither filed a petition for the appointment of a

management committee nor presented evidence to show that there is imminent danger
of dissipation, loss, wastage or destruction of assets or other properties or paralyzation
of business operations of respondent corporation which may be prejudicial to the
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 interest of the minority stockholders, the creditors or the public. Unless petitioner
satisfies these requisites, we cannot sanction the exercise by the Monitoring Committee
of powers that will amount to management of respondent's operations.
WHEREFORE, the Court hereby RESOLVES to dispose of these consolidated
petitions, as follows:
(1) The petition for review on certiorari in G.R. Nos. 174457-59 is DENIED.
The Decision dated August 18, 2006 of the Court of Appeals in CA-G.R. SP No. 87203
is AFFIRMED;
(2) The petition for review on certiorari in G.R. Nos. 175418-20 is DENIED.
The Decision dated August 18, 2006 and Resolution dated November 8, 2006 of the
Court of Appeals in CA-G.R. SP Nos. 87100 and 87111 are AFFIRMED; and
(3) The petition for review on certiorari in G.R. No. 177270 is DENIED. The
Decision dated October 27, 2006 and Resolution dated March 23, 2007 of the Court of
Appeals in CA-G.R. SP No. 89894 are AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
Leonardo-de Castro, Bersamin, Perez * and Reyes, JJ., concur.

Footnotes
*Designated additional member per Special Order No. 1385 dated December 4, 2012.

1.Rollo (G.R. Nos. 174457-59), Vol. I, pp. 16-141.

2.Id. at 188-219. Penned by Associate Justice Vicente Q. Roxas with Presiding Justice Ruben
T. Reyes (now a retired member of this Court) and Associate Justice Rebecca de Guia-
Salvador concurring.

3.Rollo (G.R. Nos. 175418-20), Vol. I, pp. 49-123.

4.Id. at 45-46.

5.Id. at 1014-1029. Penned by Judge Rodolfo R. Bonifacio.

6.Rollo (G.R. No. 177270), Vol. I, pp. 47-140.

7.Id. at 12-37. The decision is dated October 27, 2006. Penned by Associate Justice Rebecca
de Guia-Salvador with Associate Justices Magdangal M. de Leon and Ramon R. Garcia
concurring.

8.Id. at 39-42. The resolution is dated March 23, 2007.

9.A written agreement under which bonds and debentures are issued, setting forth maturity
date, interest rate, and other terms. BLACK'S LAW DICTIONARY 693 (5th ed., 1979).

10.CA rollo, Vol. II, pp. 38-39.

11.Id. at 39-40.

12.Rollo (G.R. Nos. 174457-59), Vol. I, pp. 402-570.

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 13.By an equal progress; equably, ratably; without preference. Used especially of creditors
who in marshalling assets, are entitled to receive out of the same fund without any
precedence over each other. BLACK'S LAW DICTIONARY 1004 (5th ed., 1979).

14.Rollo (G.R. Nos. 175418-20), Vol. I, pp. 203-218.

15.Id. at 246-249.

16.CA rollo, Vol. II, pp. 302-303.

17.Id. at 313, 316.

18.Rollo (G.R. Nos. 175418-20), Vol. I, pp. 307-318.

19.Rollo (G.R. No. 177270), Vol. I, pp. 245-250.

20.Rollo (G.R. Nos. 175418-20), Vol. I, pp. 319-330.

21.Id. at 650-654.

22.Id. at 653-654.

23.Id. at 670-843.

24.Id. at 655-669.

25.Id. at 1028-1029.

26.CA rollo, Vol. I, pp. 30-35.

27.Id. at 37-56.

28.Rollo (G.R. Nos. 175418-20), Vol. I, pp. 1067-1092.

29.Rollo (G.R. No. 177270), Vol. I, pp. 509-511.

30.Id. at 510.

31.CA rollo, Vol. I, pp. 78-161. The petition was filed under Rule 43 of the 1997 Rules of Civil
Procedure, as amended.

32.Id. at 219-302.

33.Rollo (G.R. Nos. 174457-59), Vol. I, pp. 1470-1535.

34.Rollo (G.R. Nos. 175418-20), Vol. I, pp. 1099-1109.

35.Id. at 1115-1119.

36.Id. at 1111-1112.

37.Rollo (G.R. No. 177270), Vol. I, pp. 729-803.

38.Id. at 609-614.

39.Id. at 619-664.

40.Rollo (G.R. Nos. 175418-20), Vol. I, p. 29.

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 41.Id. at 38.

42.CA rollo, Vol. I, pp. 877-911.

43.Rollo (G.R. No. 177270), Vol. I, pp. 28-29.

44.Apparently, the other secured creditors who were also petitioners in CA-G.R. SP No. 87203
had not remained in contact with the Ad Hoc Committee of the secured creditors and
did not furnish it with the requisite secretary's certificate authorizing the filing of a
petition on their behalf. [Rollo (G.R. Nos. 174457-59), Vol. I, p. 16.]

45.Rollo (G.R. Nos. 175418-20), Vol. I, p. 1669.

46.Id. at 1670-1673.

47.Rollo (G.R. No. 177270), Vol. I, p. 1085.

48.Id. at 1089-1090.

49.REORGANIZATION OF THE SECURITIES AND EXCHANGE COMMISSION WITH

ADDITIONAL POWERS AND PLACING THE SAID AGENCY UNDER THE
ADMINISTRATIVE SUPERVISION OF THE OFFICE OF THE PRESIDENT.
50.Part M of the Omnibus Agreement states that a "Trigger Event" shall mean 75% of the
outstanding principal amount constituting Secured Obligations shall have been declared
to be, or shall automatically have become, due and payable (and shall not have been
rescinded) by reason of one or more Events of Default, as evidenced by the notices
provided to the Collateral Agent by the Credit Agents pursuant to Section 4(a) of the
[Inter-creditor] Agreement, except that the foregoing percentage shall be 66 2/3% in the
event that (i) one or more Events of Default arise by reason of the non-payment when
due of any scheduled payment of principal or interest by the Company under any Credit
Agreement, and (ii) such an Event of Default or Events of Default give rise to one or
more Events of Default under a cross-acceleration provision in any other Financing
Document (including Section 9.01 (b) of each Existing Credit Agreement).
(Underscoring and italics in the original) [Rollo (G.R. Nos. 174457-59), Vol. I, p. 130.]
51.Bank of the Philippine Islands, Banco de Oro Universal Bank, China Bank Corporation,
Development Bank of the Philippines, Equitable Philippine Commercial International
Bank, Land Bank of the Philippines, Metrobank, PCCI, Philippine Commercial
International Bank, Rizal Commercial Banking Corporation, United Coconut Planter's
Bank and Union Bank. [Rollo (G.R. Nos. 175418-20), Vol. I, pp. 102-103.]

52.Rollo (G.R. Nos. 175418-20), Vol. III, pp. 2720-2771.

53.SEC. 22. Modification of the Proposed Rehabilitation Plan. — The debtor may modify its
rehabilitation plan in the light of the comments of the Rehabilitation Receiver and
creditors or any interested party and submit a revised or substitute rehabilitation plan for
the final approval of the court. Such rehabilitation plan must be submitted to the court
not later than one (1) year from the date of the initial hearing.

54.Rollo (G.R. Nos. 175418-20), Vol. III, pp. 2994-3153.

55.Art. 1182. When the fulfillment of the condition depends upon the sole will of the debtor, the
conditional obligation shall be void. If it depends upon chance or upon the will of a third
person, the obligation shall take effect in conformity with the provisions of this Code.
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 56.SEC. 23. Approval of the Rehabilitation Plan. — The court may approve a rehabilitation
plan even 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.

In determining whether or not the opposition of the creditors is manifestly unreasonable,

the court shall consider the following:
a. That the plan would likely provide the objecting class of creditors with compensation
greater than that which they would have received if the assets of the debtor were sold
by a liquidator within a three-month period;
b. That the shareholders or owners of the debtor lose at least their controlling interest as
a result of the plan; and
c. The Rehabilitation Receiver has recommended approval of the plan.

In approving the rehabilitation plan, the court shall issue the necessary orders or
processes for its immediate and successful implementation. It may impose such terms,
conditions, or restrictions as the effective implementation and monitoring thereof may
reasonably require, or for the protection and preservation of the interests of the
creditors should the plan fail.

57.Section 1. Nature of Proceedings. — Any proceeding initiated under these Rules shall be
considered in rem. Jurisdiction over all those affected by the proceedings shall be
considered as acquired upon publication of the notice of the commencement of the
proceedings in any newspaper of general circulation in the Philippines in the manner
prescribed by these Rules.
The proceedings shall also be summary and non-adversarial in nature. The following
pleadings are prohibited:
a. Motion to dismiss;

b. Motion for a bill of particulars;

c. Motion for new trial or for reconsideration;
d. Petition for relief;

e. Motion for extension;

f. Memorandum;
g. Motion for postponement;

h. Reply or Rejoinder;
i. Third party complaint; and
j. Intervention.
Any pleading, motion, opposition, defense, or claim filed by any interested party shall be
supported by verified statements that the affiant has read the same and that the factual
allegations therein are true and correct of his personal knowledge or based on authentic
records and shall contain as annexes such documents as may be deemed by the party
submitting the same as supportive of the allegations in the affidavits. The court may
decide matters on the basis of affidavits and other documentary evidence. Where
necessary, the court shall conduct clarificatory hearings before resolving any matter
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 submitted to it for resolution.
58.BLACK'S LAW DICTIONARY 1157 (5th ed., 1979).

59.Negros Navigation Co., Inc. v. Court of Appeals, Special Twelfth Division, G.R. Nos.
163156 & 166845, December 10, 2008, 573 SCRA 434, 450.

60.See Pacific Wide Realty and Development Corporation v. Puerto Azul Land, Inc., G.R. Nos.
178768 & 180893, November 25, 2009, 605 SCRA 503, 515.

61.INTERIM RULES OF PROCEDURE ON CORPORATE REHABILITATION, Rule 4, Section

11.

62.Id.

63.Rollo (G.R. Nos. 174457-59), Vol. I, p. 1240.

64.Id. at 39-40.

65.Id. at 133.

66.Philippine Airlines, Inc. v. Zamora, G.R. No. 166996, February 6, 2007, 514 SCRA 584,
601.

67.Id. at 605.

68.Rubberworld (Phils.), Inc. v. NLRC, 365 Phil. 273, 280-281 (1999).

69.Id. at 276-277.
70.264 Phil. 456 (1990).

71.Id. at 462.
72.BLACK'S LAW DICTIONARY 1004 (5th ed., 1979).
73.G.R. No. 74851, September 14, 1992, 213 SCRA 830, 838.

74.Rizal Commercial Banking Corporation v. Intermediate Appellate Court, 378 Phil. 10, 27
(1999).

75.Id. at 26-27.

76.BLACK'S LAW DICTIONARY 450 (5th ed., 1979).

77.Id. at 1217.
78.INTERIM RULES OF PROCEDURE ON CORPORATE REHABILITATION, Rule 4, Section
12.

79.Id., Rule 4, Section 23.

80.Rollo (G.R. Nos. 175418-20), Vol. I, pp. 760-779.

81.J.G. Bernas, THE 1987 CONSTITUTION OF THE PHILIPPINES: A COMMENTARY, 2003
ed., p. 431.

82.145 Phil. 561 (1970).

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 83.Id. at 577.

84.Dela Rosa v. Michealmar Philippines, Inc., G.R. No. 182262, April 13, 2011, 648 SCRA
721, 729.

85.Vallacar Transit, Inc. v. Catubig, G.R. No. 175512, May 30, 2011, 649 SCRA 281, 293-294.

86.Tirazona v. Court of Appeals, G.R. No. 169712, March 14, 2008, 548 SCRA 560, 581.

87.Vallacar Transit, Inc. v. Catubig, supra note 85 at 294.

88.I d . The findings of fact of the Court of Appeals are generally conclusive but may be
reviewed when: (1) the factual findings of the Court of Appeals and the trial court are
contradictory; (2) the findings are grounded entirely on speculation, surmises or
conjectures; (3) the inference made by the Court of Appeals from its findings of fact is
manifestly mistaken, absurd or impossible; (4) there is grave abuse of discretion in the
appreciation of facts; (5) the appellate court, in making its findings, goes beyond the
issues of the case and such findings are contrary to the admissions of both appellant
and appellee; (6) the judgment of the Court of Appeals is premised on a
misapprehension of facts; (7) the Court of Appeals fails to notice certain relevant facts
which, if properly considered, will justify a different conclusion; and (8) the findings of
fact of the Court of Appeals are contrary to those of the trial court or are mere
conclusions without citation of specific evidence, or where the facts set forth by the
petitioner are not disputed by respondent, or where the findings of fact of the Court of
Appeals are premised on the absence of evidence but are contradicted by the evidence
on record.

89.SEC. 5. In addition to the regulatory and adjudicative functions of the Securities and
Exchange Commission over corporations, partnerships and other forms of associations
registered with it as expressly granted under existing laws and decrees, it shall have
original and exclusive jurisdiction to hear and decide cases involving:

xxx xxx xxx;

d) Petitions of corporations, partnerships or associations to be declared in the state of
suspension of payments in cases where the corporation, partnership or association
possesses sufficient property to cover all its debts but foresees the impossibility of
meeting them when they respectively fall due or in cases where the corporation,
partnership or association has no sufficient assets to cover its liabilities, but is under the
management of a Rehabilitation Receiver or Management Committee created pursuant
to this Decree.
90.SEC. 6. In order to effectively exercise such jurisdiction, the Commission shall possess the
following powers:
xxx xxx xxx;
c) To appoint one or more receivers of the property, real and personal, which is the
subject of the action pending before the Commission in accordance with the pertinent
provisions of the Rules of Court in such other cases whenever necessary in order to
preserve the rights of the parties-litigants and/or protect the interest of the investing
public and creditors: Provided, however, That the Commission may, in appropriate
cases, appoint a rehabilitation receiver of corporations, partnerships or other
associations not supervised or regulated by other government agencies who shall have,
in addition to the powers of a regular receiver under the provisions of the Rules of Court,
such functions and powers as are provided for in the succeeding paragraph d) hereof:
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 Provided, further, That the Commission may appoint a rehabilitation receiver of
corporations, partnerships or other associations supervised or regulated by other
government agencies, such as banks and insurance companies, upon request of the
government agency concerned: Provided, finally, That upon appointment of a
management committee, rehabilitation receiver, board or body, pursuant to this Decree,
all actions for claims against corporations, partnerships or associations under
management or receivership pending before any court, tribunal, board or body shall be
suspended accordingly.
91.SEC. 6. In order to effectively exercise such jurisdiction, the Commission shall possess the
following powers:

xxx xxx xxx;

d) To create and appoint a management committee, board, or body upon petition or
motu proprio to undertake the management of corporations, partnerships or other
associations not supervised or regulated by other government agencies in appropriate
cases when there is imminent danger of dissipation, loss, wastage or destruction of
assets or other properties or paral[y]zation of business operations of such corporations
or entities which may be prejudicial to the interest of minority stockholders, parties-
litigants or the general public: Provided, further, That the Commission may create or
appoint a management committee, board or body to undertake the management of
corporations, partnerships or other associations supervised or regulated by other
government agencies, such as banks and insurance companies, upon request of the
government agency concerned.
The management committee or rehabilitation receiver, board or body shall have the
power to take custody of, and control over, all the existing assets and property of such
entities under management; to evaluate the existing assets and liabilities, earnings and
operations of such corporations, partnerships or other associations; to determine the
best way to salvage and protect the interest of the investors and creditors; to study,
review and evaluate the feasibility of continuing operations and restructure and
rehabilitate such entities if determined to be feasible by the Commission. It shall report
and be responsible to the Commission until dissolved by order of the Commission:
Provided, however, That the Commission may, on the basis of the findings and
recommendation of the management committee, or rehabilitation receiver, board or
body, or on its own findings, determine that the continuance in business of such
corporation or entity would not be feasible or profitable nor work to the best interest of
the stockholders, parties-litigants, creditors, or the general public, order the dissolution
of such corporation entity and its remaining assets liquidated accordingly. The
management committee or rehabilitation receiver, board or body may overrule or revoke
the actions of the previous management and board of directors of the entity or entities
under management notwithstanding any provision of law, articles of incorporation or by-
laws to the contrary.
The management committee, or rehabilitation receiver, board or body shall not be
subject to any action, claim or demand for, or in connection with, any act done or
omitted to be done by it in good faith in the exercise of its functions, or in connection
with the exercise of its power herein conferred.

92.Rollo (G.R. Nos. 175418-20), Vol. I, pp. 408-409.

93.AN ACT TO PROMOTE FOREIGN INVESTMENTS, PRESCRIBE THE PROCEDURES
FOR REGISTERING ENTERPRISES DOING BUSINESS IN THE PHILIPPINES, AND
FOR OTHER PURPOSES.
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 94.Gamboa v. Teves, G.R. No. 176579, June 28, 2011, 652 SCRA 690, 716. Emphasis and
italics in the original.

95.Id. at 726.

96.Rollo (G.R. Nos. 175418-20), Vol. I, pp. 373-431.

97.Id. at 429.

98.Id. at 1028.

99.Alemar's Sibal & Sons, Inc. v. Judge Elbinias, supra note 71.

100.Rollo (G.R. Nos. 175418-20), Vol. I, pp. 542-548.

101.Id. at 1624-1629.

102.Id. at 1626.
103.SECTION 6.11. Collection Suit by Trustee. — If an Event of Default in payment of
principal, premium, if any, interest, Additional Amounts, if any, or Liquidated Damages, if
any, specified in Section 6.1 (a) or (b) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company or any other obligor on the Notes for the whole amount of principal and
accrued interest remaining unpaid, together with interest on overdue principal
and, to the extent that payment of such interest is lawful, interest on overdue
installments of interest, in each case at the rate per annum borne by the Notes and
such further amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agent and counsel, and any other amounts due the Trustee under Section
7.7. (Emphasis supplied) [Rollo (G.R. Nos. 174457-59), Vol. I, p. 472.]

104.SECTION 6.12. Trustee May File Proofs of Claim. — The Trustee may file such proofs of
claim and other papers or documents as may be necessary or advisable in order to
have the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, accountants and experts) and the Holders allowed in any judicial
proceedings relating to the Company, its creditors or its property or other obligor on the
Notes, its creditors and its property and shall be entitled and empowered to collect and
receive any monies or other property payable or deliverable on any such claims and to
distribute the same, and any Custodian in any such judicial proceedings is hereby
authorized by each Holder to make such payments to the Trustee and, in the event that
the Trustee shall consent to the making of such payments directly to the Holders, to pay
to the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agent and counsel, and any other
amounts due the Trustee under Section 7.7. To the extent that the payment of any such
compensation, expenses, disbursements and advances of the Trustee, its agents and
counsel, and any other amounts due the Trustee under Section 7.7 hereof out of the
estate in any such proceeding, shall be denied for any reason, payment of the same
shall be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties which the Holders of the Notes may
be entitled to receive in such proceeding whether in liquidation or under any plan of
reorganization or arrangement or otherwise. (Emphasis supplied) (Id. at 73.)

105.Rollo (G.R. Nos. 174457-59), Vol. I, pp. 402-570.

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 106.INTERIM RULES OF PROCEDURE ON CORPORATE REHABILITATION, Rule 3,
Section 1.

107.Id., Rule 4, Section 14.

108.Id., Rule 4, Section 16.

109.Id., Rule 2, Section 1.

110.Rollo (G.R. No. 177270), Vol. I, pp. 507-508.

111.Rollo (G.R. Nos. 175418-20), Vol. I, p. 1075.

112.Id. at 1071.

113.Id. at 1096-1098.

114.Id. at 1097.

115.Rollo (G.R. No. 177270), Vol. I, pp. 609-614.

116.Id. at 611-613.

117.Id. at 505-506.
118.WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY 1460 (Unabridged ed.).

119.Supra note 91.

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