MBTC v ASB HOLDINGS suspends, there is no impairment of contracts,

specifically its lien on the mortgaged properties.

FACTS:
Metropolitan Bank and Trust company is a creditor
bank of respondents corporation collectively known as
the ASB Group of Companies. ASB group of
companies is owner and developer of condominium
and real estate projects which contracted loans to the
petitioner which were secured by real estate
mortgages.
Later, ASB group of companies filed with the Securities
and Exchange Commission a petition for rehabilitation
with prayer for suspension of actions and proceedings
against petitioners. However, despite the objection of
Metropolitan bank and trust company for the
rehabilitation plan, SEC granted the same.
The court also emphasized that the purpose of
rehabilitating proceedings is to enable the company to
gain new lease on life thereby allows creditors to be
paid their claims from its earnings. rehabilitation
contemplates a continuance of corporate life and
activities in an effort to restore ad reinstate the
financially distressed corporation to its former position
of successful operation and solvency. this is in
consonance with the state's equitable distribution of
wealth to protect investments and the public. The
approval of the rehabilitation plan by the SEC hearing
panel, affirmed by both the SEC en banc and the court
of appeals, is precisely in furtherance if the rationale
behind P.D. No. 902-A, as amended which is "to effect
a feasible and viable rehabilitation" of ailing
corporations which affect the public welfare.

Meanwhile, the contention of the petitioner in their

objection was that, the approval on the rehabilitation
plan will impair the contract entered into by the ASB
group of companies with the petitioner.

ISSUE:

Whether or not the approval of rehabilitation plan

impairs contract entered into and prejudiced creditors.

HELD:

The Supreme Court were not convinced that the

approval of the rehabilitation plan impair petitioner
bank's lien over the mortgaged properties. Section 6
(c) of P.D. no. 902-A provides that "upon appointment
of a management committee, rehabilitation receiver,
board or body, pursuant to this Decree, all actions for
claims against corporations, partnership or
associations under management or receivership
pending before any curt, tribunal, board or body shall
be suspended." By that statutory provision, it is clear
that the approval of the rehabilitation plan and the
appointment of a rehabilitation reciever merely
suspend the action for claims against respondent
corporations. Petitioners banks preferred status over
the unsecured creditors relative to the mortgage liens
is retained, but the enforcement of such preference is
suspended. the loan agreement between the parties
have not been set aside and petitioner bank may still
enforce its preference when the assets of ASB Group
of companies will be liquidated. considering that the
provisions of the loan agreements and merely