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Pryce vs CA (2008) FACTS: Pryce corporation o Primary purpose develop real estate in Mindanao.

o. o Engaged in development of memorial parks, operated a major hotel in CDO, and produced industrial gases. 1997 Asian Financial crisis badly affected petitioners operations resulting in heavy losses. --- it could not meet its obligations as they became due. Pryce filed before RTC a petition for rehabilitation o Prayed for appointment of a rehabilitation receiver from among the nominees named therein and staying of the enforcement of all claims, monetary, or otherwise against it. Proposed rehabilitation plan: o Bank creditors will be paid through dacion en pago of assets already mortgaged to them.- to the extent to pay off the outstanding obligations. o If value is not sufficient, the deficiency shall be settled by way of memorial parks owned. o Pricing of assets of dacion based on 2 valuation appraisals of independent appraisals accredited by BSP. o All penalties shall be waived by the creditors. o Interest on the loans shall be accrued only up to June 30, 2003. o Titles of [properties and sales held by bank as additional security but without actual mortgaged o Memorial park mother titles mortgaged to creditor bank shall be priced based on the value of individual memorial lots. Mother titles shall be released to the petitioner. o Or purpose of dacion, foreign currency loan from CBC .(not impt) o Bank creditors will avail of the tax exemption and benefits offered to minimize the dacion-related costs for all parties. o Trade creditors will be paid through dacion of memorial park lots. o Any other debt not covered by mortgaged of assets shall be paid through dacion of memorial park lots. RTC issied STAY ORDER directing: o All claims against petitioner be deferred o The initial hearing of the petition for rehabilitation be set on (date) o .(not impt) BANK-CREDITOR opposition: o BPI- opposed the petition and rehabilitation plan because it is coercive and violative of the contract. o Land Bank unacceptable petition because of the unrealistic valuation of the properties subject to dacion en pago.

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CHINA BANKING CORPORATION (Respondent herein) petitioner is solvent and it filed the rehab petition to force its creditors to accept dacion payments. In effect, petitioner passed on to the creditors the burden of marketing and financing unwanted memorial lots, while exempting itself from paying interests and penalties. RTC petition allowed. RTC- issued an order approving the amended rehabilitation plan and finding petitioner eligible to be placed in a state of corporate rehabilitation; and directing that its assets shall be held and disposed of and its liabilities paid and liquidated. CA reversing RTC decision

ISSUE: WON Pryce Corporation is eligible to be placed in a state of corporate rehabilitation.

HELD: NO Because the petition for rehabilitation does not allege that there is a clear and imminent danger that petitioner will lose its corporate assets if a receiver is not appointed (Serious situation test). The stay order does not state serious situation affecting petitioners corporate assets. The RTC did not specify any reason or ground to sustain such thing. The only basis of RTC in finding its sufficient in form and substance is the appointment of rehabilitation receiver.

SEC6- INTERIM RULES OF PROCEDURE ON CORPORATE REHABILITATION STAY ORDER if the court finds the petition to be sufficient in form and substancemust issue an order (a)(g)fixing the initial hearing on the petition not earlier than 45 days but not later than 60 days from filing.(i) directing all creditors and all interested parties to file and serve on the debtor a verified comment on or opposition to the petition(j) directing the creditors and interested parties to secure from the court copies of the petition and its annexes within such time as to enable themselves to file their comment on or opposition to the petition and to prepare for the initial hearing of the petition.

PD 902-A RECEIVERS MAY BE APPOINTED WHENEVER: 1) Necessary in order to preserve the rights of the parties-litigants 2) Protect the interest of the investing public and creditors.

There must be clear and imminent danger of losing the corporate assets if receiver is not appointed. Absent such danger, (assets can sustain rehab plan) there is no need to appoint. To determine if there is clear and imminent danger (serious financial situation): commercial court shall conduct a hearing wherein both parties are can present their respective evidence. In this case, the court did not conduct hearing, it appointed rehab receiver the very next day after filing of petition for rehab, it did not gathered enough evidence before determination.

Additional info: order of procedure File a petition for rehab Rtc appointed a rehab receiver Rehab receiver for evaluation or recomm Rtc will approve rehab plan and order state of rehab