Residual jurisdiction of rehabilitation courts

The Securities Regulation Code transferred the jurisdiction over rehabilitation cases from the Securities and Exchange Commission (SEC) to Regional Trial Courts specially designated by the Supreme Court (now commonly known as special commercial courts). The Interim Rules of Procedure on Rehabilitation (Interim Rules) provide that any order, including an order approving a rehabilitation plan, issued by a special commercial court is immediately executory. An appeal from such order shall not stay the execution of the order, unless restrained by an appellate court (Sec. 5, Rule 3).

A question that is always asked is whether or not a special commercial court retains jurisdiction over the rehabilitation case after the approval of the rehabilitation plan. The question, although theoretical on its face, has practical impact. For example, assuming that the order approving the rehabilitation plan is appealed by a creditor to the Court of Appeals, can the rehabilitation court amend the rehabilitation plan pending the appeal? Or should the motion to amend be filed with the Court of Appeals?

The question is unresolved. Nevertheless, there are legal provisions in the Interim Rules which tend to suggest that the motion to amend must be lodged with the rehabilitation court.

The Interim Rules provide that "[a]n approved rehabilitation plan may, on motion, be altered or modified if, in the judgment of the court, such alteration or modification is necessary to achieve the desired targets or goals set forth therein."(Sec. 26, Rule 4). Coupled with the executory nature of the order approving a rehabilitation plan, one can argue that the rehabilitation court retains jurisdiction to amend the plan despite the appeal, unless the appellant is able to get a temporary restraining order from the Court of Appeals.

The Interim Rules also provide that the rehabilitation receiver may: (1) "recommend any modification of an approved rehabilitation plan as he may deem appropriate;" (Sec. 14(v), Rule 4); (2) "bring to the attention of the court any material change affecting the debtor’s ability to meet the obligations under the rehabilitation plan;" (Sec. 14(w), id.); and (3) to "apply to the court for any order or directive that he may deem necessary or desirable to aid him in the exercise of his powers and performance of his duties and functions." (Sec. 14(z), id.). Had the intention been to deprive the rehabilitation court of its jurisdiction over the rehabilitation case upon the finality of the order approving the plan and conversely upon appeal therefrom, the Interim Rules would not have contained these said provisions.

More importantly, an appeal from an order approving a rehabilitation plan is not one of the instances for the termination of the rehabilitation proceedings provided for in the Interim Rules. The Interim Rules limit the termination of the rehabilitation proceedings to the following: (1) in case of the failure of the debtor to submit the rehabilitation plan; (2) the disapproval of the plan by the court; (3) the failure of the rehabilitation of the debtor because of failure to achieve the desired targets or goals as set forth therein; (4) the failure of the debtor to perform its obligations under the said plan; or (5) a determination that the rehabilitation plan may no longer be implemented. The proceedings shall also terminate upon the successful implementation of the rehabilitation plan (Sec. 27, Rule 4).

Since an appeal from an order approving a rehabilitation plan does not terminate the rehabilitation proceedings, one may argue that the rehabilitation court retains jurisdiction to approve an amendment to the rehabilitation plan despite an appeal taken from the order approving it.

The foregoing legal points are arguments in support of the legal proposition that the rehabilitation court retains jurisdiction to amend the plan after the order approving it is appealed to the Court of Appeals. But lawyers are creative in coming up with arguments for or against a legal proposition. Who would have thought, for example, that the right to privacy would be invoked in the Jose Pidal investigation? Like what Father Bernas has said on the privacy issue, only the Supreme Court will decide – once and for all – the matter under discussion.

(The author is a Senior Partner and the Co-Managing Partner of the Angara Abello Concepcion Regala & Cruz Law Offices or ACCRALAW. He may be contacted at tel: 830-8000.)