SEC Adm. Case No. 12-09-183 Uniwide Sales, Inc., et al.vs. The Hearing Panel in SEC Case No. 06-99-6340 and In the matter of the Petition for Declaration of Suspencion of Payment, Formation and Appointment of a Rehabilitation Receiver/Committee and Approval of Rehabilitation Plan, Uniwide Sales, Inc., et al.

SEC Building, EDSA, Greenhills, Mandaluyong City Securities and Exchange Commission Republic of the Philippines Department of Finance

Uniwide Sales, Inc., Uniwide Holdings, Inc., NAIC Resources and Development Corp., Uniwide Sales Realty and Resources Corp. First Paragon Corporation, and Uniwide Warehouse Club, Inc. Petitioners, SEC En Banc Case No. 12-09-183 (SEC Case No. 06-99-6340)

versus The Hearing Panel in SEC Case No. 06-99-6340 Respondent.

K

In the Matter of the Petition for Declaration of Suspension Of Payment, Formation and Appointment of a Rehabilitation Receiver/ Committee and Approval of a Rehabilitation Plan.

Uniwide Sales, Inc., Uniwide Holdings, Inc. NAIC Resources and Development Corp. Uniwide Sales Realty and Resources Corp.. First Paragon Corporation, and Uniwide Warehouse Club, Inc. Petitioners-Appellants. SEC En Banc Case No. 01-10-193 (SEC Case No. 06-99-6340)

Philippine National Bank,

Oppositor-Appellee.

DECISION

the Commission in an Order dated 30 September 2010, namely: For resolution of the Commission En Banc are the two (2) cases consolidated by

SEC En Banc Case No. 01-10-193 SEC En Banc Case No. 12-9-183 Page 2 of 28 ad

1) SEC EN BANC CASE NO. 12-09-183 entitled: Uniwide Sales, Inc., Corporation, and Uniwide Warehouse Club, Inc,. Petitioners, versus The Hearing Panel, Respondent in SEC Case No. 06-99-6340 ("Petition for Certiorari"), filed with the Commission on 04 December 2009; and 2) SEC EN BANC CASE NO. 01-10-193 entitled: In the Matter of the Petition for the Declaration of Suspension. of Payments, Formation and Appointment of A Rehabilitation Receiver/Committee and Approval of Rehabilitation Plan, Uniwide Sales Inc., Uniwide Holdings, Inc., NAIC Resources and Development Corporation, Uniwide Sales Realty and Resources Corporation, First Paragon Corporation, and Uniwide Oppositor-Appellee ("Memorandum of Appeal") filed on 22 January Uniwide Holdings, Inc., NAIC Resources and Development Corporation, Warehouse Club, Inc. Petitioners- Appellants, Philippine. National Bank. 2010 Uniwide Sales Realty and Resources Corporation, First Paragon

cause why the rehabilitation proceedings should not be terminated, and 3) SHP Order declare petitioners' rehabilitation plan "not feasible" and to terminate the rehabilitation Exchange Commission (2006 Rules). They assail: 1) the Hearing Panel (HP) Order dated July 30, 2009 directing the reappraisal of the Metro Mall property, 2) Special Hearing Panel (SHP) Order dated September 17, 2009, directing petitioners to show dated November 6, 2009 denying their Motion for Reconsideration dated 19 August 2009 October 2009 of the Order dated 17 September 2009 13 January 2010, which denied petitioners' Motion to Approve the Revised Third case. 2009.2 of HP Order dated July 30, 2009, and their Motion for Partial Reconsideration dated 28 Amendment to the Group Rehabilitation Plan (Revised TARP),and granted the motions to The Uniwide Group filed the instant Petition for Certiorari' on 04 December pursuant to Rule XII of the 2006 Rules of Procedure of the Securities and The Memorandum of Appeal is an appeal from the Resolution of the SHP dated

Group," or "Petitioners-Appellants." The six companies shall be referred to herein collectively as the "Uniwide

Uniwide Group filed the following: Pending resolution of the. consolidated cases, the following companies of the

1) Urgent Manifestation and Motion filed on 06 December 2012 by Uniwide Sales pending petitions before the SEC En Banc, alleging that it has started negotiations for Realty and Resources Corporation praying that it be considered withdrawn from the

2 Records Vol. I p. 15. ' Dated 23 November 2009.

SEC En Banc Case No. 01-10-193 SEC En Banc Case No. 12-9-183 Page 3 of 28 and

settlement with Grandholdings Investments (successor in interest of Allied Banking Corporation) and PNB, allegedly its only remaining creditors. 2)' Urgent Manifestation and Motion filed on 04 January 2013 by Uniwide Sales, Inc. praying that it be.considered withdrawn from the pending petitions before the SEC En Banc, alleging that it has substantially paid all of its obligations with various creditors.3 3) Urgent Manifestation and Motion filed on 04 January 2013 by Uniwide Holdings. SEC En Banc, alleging that it has substantially paid all of its obligations with various Inc. praying that it be' considered withdrawn from the pending petitions before the creditors.

FACTS OF THE CASE

investments, as follows: 1) Uniwide Sales, Inc. - Retail; 2) Uniwide Holdings, Inc.- Franchising and Real Estate; 3) Naic Resources & Development Corporation - Real Philippine laws, with office address at Central Business Park II, Roxas Boulevard. Coastal Road Junction. They are engaged in various areas of business activities and Estate; 4) Uniwide Sales Realty and Resources Corp.:- Real Estate; 5) First Paragon Corporation -- Retail; and 6) Uniwide Sales Warehouse Club, Inc. -- Retail. The Uniwide Group is composed of stock corporations duly organized under

docketed as SEC Case No. 06-99-6340 praying for 1) the appointment of a receiver; 2) a No. 902-A; and 3) the approval of a Rehabilitation Plan.4 This was prompted by the adverse impact -on petitioners' finances allegedly due to slowdown in sales, slow because of aggressive expansion.s collection of receivables, high _interest payments and mounting debts accumulated suspension order pursuant to Sections 3 and 4 of the Insolvency Law in relation to P. D On 25 June 1999, the Uniwide Group filed a petition with the Commission

actions and proceedings against the Uniwide Group before any court, tribunal, office, board, body and/or commission. On 29 June 1999, the Commission granted the petition, suspending all claims,

on the following principles: return to core business of retailing; debt reduction via cash settlement and dacion en pago; loan restructuring; waiver of penalties & charges; ("IRC"), that submitted the rehabilitation plan on 18 October 1999, which was anchored On 26 July 1999, the Commission constituted an Interim.Receivership Committee

3 On 16 January 2013, Uniwide Sales, Inc. filed an Amended Urgent Manifestation and Motion amending Uniwide Sales, Inc. 4 Petition filed 4 December 2009 par. 3.4, Records Vol. I, p. 113. paragraph 4 of the 04 January 2013 Urgent Manifestation and Motion from "Uniwide Sales Realty" to 5 Special Hearing Panel (SHP) Resolution dated 13 January2010, Records, Vol. II p. 86

freezing of interest payments; restructuring of credit of suppliers, contractors and private lenders. SEC En Banc Case No. 01-10-193 SEC En Banc Case No. 12-9-183 Page 4 of 28 2

investor, Casino Guichard Perrachon (Casino), envisioned to infuse Php 3.7 billion fresh capital into the group. The Group Amended Rehabilitation Plan (GARP) which projected the entry of Casino (the third largest retailing outlet in France), was submitted on 14 February 2000 and was approved by the Commission on April 11, 2000.7 abandoned its plans of investment because of the petitioners' alleged inability to convince all creditors.to agree to the.Group Amended Rehabilitation Plan (GARP).8 THE SAGARP On 04 January 2001, the IRC filed a disclosure report, revealing that Casino The approval of this plan was deferred because of the negotiations with strategic

Rehabilitation Plan ("SAGARP") on October 11 2001, which was approved by the which was expected from Casino, the only alternative brought forth was to generate fresh cash from petitioners' retail operations. Hearing Panel (HP) in an Order dated December 23, 2002. In the absence of fresh cash Thus, the IRC submitted the Second Amendment to the Group Amended

business. In a nutshell, the key features of petitioners' rehabilitation plan are as follows: In short, the success of SAGARP is primarily anchored on the profitability of retail operate on their own and implement measures to achieve targets. Petitioners betieve that their retail business is still viable. Petitioners will consolidate retail operations to seven (7) stores. Petitioners are confident that they will be able to increase sales through aggressive marketing programs and efficient operations Operating expenses will be closely managed to keep these below 10% of the net Sales "1. Retail Business. Even without an investor, petitioners will be able to

debts with secured creditors through dacion en pago. arrangements. The residual net of priority payments. P6.61 billion with secured creditors. The SAGARP intends to pay off petitioners debt with Land Bank amounting to P44.14 miilion shall be restructured into a five-year term loan and payment shall depend on cash flow from retail operations 2.Debt Settlement with Secured Creditors. Petitioners have debt of

billion debt with unsecured creditors which include trade suppliers, contractors, private lenders and non-trade creditors. The SAGARP intends to' pay off (a) 50% of the unsecured debt by 15-year convertible notes which are redeemable petitioners' debts with unsecured creditors amounting to P2.33 billion as follows: 3.Debt. Settlement with Unsecured Creditors. Petitioners have P2.54

Order dated 23 December 2002 Records, Vol. I, pp. 45-46. SHP Resolution dated 13 January 2010, Records, Vol. II p. 86. 7 Petition par. 3.7 Records Vol. I, p. 112; also Comprehensive Report of the Receiver dated 04 June 2010 states 11 April 2000 -- see Records Vol. III p. 1. Id., par. 3.8 Records, Vol. I, p. 112.

any time at the option of Uniwide; (b) the other half (50%) of the unsecured debt contractors with liens and claims on Coastal Mall via dacion of Coastal Mall proportionately with other claimants." shall be restructured.into 10-year term loan inclusive of a 3-year grace period, and payment will start in year 4. The SAGARP intends to settle portion of the debt to SEC En Banc Case No. 01-10-193 SEC En Banc Case No. 12-9-183 Page 5 of 28 and

of supplier support for supermarket operations; and 4) unprogrammed operating expenses and uncertain political climate.t 2) the closure of stores, namely Uniwide EDSA, its second most profitable outlet, due to the renovation of EDSA Central Mall, the Cabuyao Store and the Baclaran Store; 3) lack 1) the unexpected refusal of some creditors to comply with all the terms of the SAGARP; Several issues prevented the realization of the desired goals of SAGARP, such as:

the unsecured creditors, through a dacion of part of the Metro Mall property in Las Pinas Group Rehabilitation Plan (TARP) for approval. filed on 29 September 2008 a Revised Third Amendment to the Group Rehabilitation Plan (Revised TARP) for approval.12 According to the petitioners-appellants, the Revised TARP is primarily aimed at the immediate settlement of all the obligations accruing to City On 11 July 2007, the petitioners-appellants submitted a Third Amendment to the However, before the Commission can act on the TARP, the petitioners-appellants

Metromall property owned by Uniwide. Petitioners claim that the Metromall that amount, P3.155 billion is owed to secured creditors Land Bank, EBC, RCBC. P2:377 billion is owed to unsecured creditors consisting of trade suppliers, contractors, private lenders and non-trade suppliers. property has an appraised value of P3.067 billion. The following are the salient features of the Revised TARP: Global Bank; Allied Bank, PNB, ING Bank and syndicate banks. The amount of 2. Settlement of outstanding debt shall be through dacion en pago of "1. Petitioners has still outstanding debt amounting to P5.533 billion. Of

Metromail property: Transfer of ownership shall be through the formation of a creditors as payment for the outstanding debt. special purpose company (SPC). The shares of SPC shall then be distributed to the 3. The unsecured creditors "shall be paid via dacion en pago of a portion of

while the value of the portion Metromall property to be transferred to unsecured unsecured debt at 65% discount. creditors is P800 million. Hence, the dacion amount shall fully settie the total The total amount to be settled with unsecured creditors is P2.327 billion,

1s Petition filed 4 December 2009 par. 318, Records, Vol. I p.106. :1 Petition filed 4 December 2009 pars. 3.13-3.15 Records, Vol. I pp. 107-111 and Receiver's Comprehensive Report dated 04 June 2010, Records Vol. III pp. 10-11 1 SHP Resolution dated 13 January 2010, Records, Vol. II p. 79. 12 Special Hearing Panel (SHP) Resolution dated 13 January 2010, p. 3, Vol. II Records p. 85.

dacion en pago of Metromall property. The total debt of petitioners to said creditor banks amounts to.P1.737 billion or P1.630 billion if the premium of 20% given to through convertible notes and cash payments from retail operations.]. EBC is excluded. 4. The secured creditors (PNB, Allied Bank, EBC) shall also be paid via [Under the SAGARP, unsecured creditors are supposed to be paid SEC En Banc Case No. 01-10-193 SEC En Banc Case No. 12-9-183 Page 6 of 28 ad

AND SHP ORDER DATED NOVEMBER 6, 2009. HP ORDER DATED JULY 30, 2009; SHP ORDER DATED SEPTEMBER 17, 2009; maintain minimum operating expenses.ni4 increase non-supermarket items which yields higher gross profit margin. It will sales. Thus, Uniwide will solicit support of trade suppliers for additional or longer to "C" and "D" income bracket market. Uniwide will increase its daily-per-store direct jobs and 10,000 to 15,000 indirect jobs. Retail business will continue to cater credit terms. It will improve efficiency on inventory management to enhance turnover. It will improve gross profit margin by enhancing inventory mix to 5. Petitioners will rehabilitate the retail operations in order to save 1,500

Petition for Certiorari

Corporation (LNC), successor-in-interest of Equitable PCI Bank, moved` for the re- creditors present unanimously seconded the motion. This was due to the difference between the fair market value of the subject property stated in the 30 September 1999 Appraisal Report covers only such land. appraisal of the Metromall property in Las Pinas, subject of the Revised TARP. All the Eighty-Eight Thousand Pesos (Php 1,307,488,000.00) and the 11 April 2008 Appraisal Report, wherein the value dropped to Six Hundred Fifty-Nine Million Nine Hundred Sixty-Six Thousand Pesos (Php 659,966,000.00). For clarity, the scope of the 1999 Appraisal Report covers the whole Metromall property consisting of "land, buildings, other land improvements and machinery and equipment" while that of the 2008 Appraisal Report which was One Billion Three Hundred Seven Million Four Hundred During the hearing on the Revised TARP on 22 June 2009, LNC (SPV-AMC)

directing the reappraisal and updating of the 30 September 1999 appraisal of the Metromall property. The HP ruled that it is the lone property in the asset pool of the proposed SPC whose shares shall be distributed to the unsecured creditors as payment for their claims, thus, it must be reasonably valued especially since it is now being disputed by creditors. Accordingly, the HP granted the motion and issued its Order dated July 30, 2009,

of 2009 creating a Special Hearing Panel ("SHP") for Corporate Rehabilitation and On 14 September 2009, the Commission issued SEC Office Order No. 287 Series

1s Order dated 30 July 2009, Records Vol: I, p.86. 1 SHP Resolution dated 13 January 2010, Records, Vol.II pp. 84-85. 16 I

Liquidation Cases, naming new' members to the panel, and listing the cases under liquidation, which includes the Uniwide Group. SEC En Banc Case No. 01-10-193 SEC En Banc Case No. 12-9-183 Page 7 of 28 and

to show cause within thirty (30) days from receipt thereof, why the Rehabilitation proceeding should not be terminated considering that more than ten (10) years have Plan and that the Rehabilitation Plan had undergone several revisions. The creditors and passed since they filed the Petition for Declaration of Suspension of Payments, Formation and Appointment of a Rehabilitation Receiver/Committee and Approval of Rehabilitation other claimants were likewise enjoined to manifest, within thirty days from receipt of Order, whether or not they still want the Rehabilitation proceedings to continue citing reasons therefor. On 17 September 2009, the SHP issued its Order 18. directing the Uniwide Group

dated 06 November 2009 20 on the ground that a Motion for Reconsideration is a every Order issued under said Rules is immediately executory. Rules), and the SEC Rules of Procedure on Corporate Recovery (RPCR) 21 provides that XII of the 2006 Rules. They alleged that the Orders could potentially jeopardize their ongoing rehabilitation, raising the following.issues: dated 30 July 2009 and 17 September 2009, which were denied by the SHP in its Order prohibited pleading under Section 3-5 of the Commission's 2000 Revised Rules of Procedure and Section 3-5 of the 2006 Rules of Procedure of the Commission (2006 1) Whether the Hearing Panel committed grave abuse of discretion in ordering the The Uniwide Group filed Motions for Partial Reconsideration1' of both Orders reappraisal of one of the properties in petitioner's asset pool; and Thus, the Uniwide Group filed the instant Petition for Certiorari pursuant to Rule

2) Whether the Special Hearing Panel committed grave abuse of discretion in motu proprio issuing a show cause order, directing petitioners to show cause why the rehabilitation should not be terminated.

(the "SHP Resolution") dated 13 January 2010 in SEC Case No. 06-99-6340, to wit: RESOLUTION OF THE SPECIAL HEARING PANEL DATED 13 JANUARY 2010 Pending resolution of the Petition for Certiorari, the SHP issued the Resolution GroupRehabilitation Plan (Revised TARP) is DENIED. "1. Petitioners' Motion to Approve Revised Third Amendment to the

2o Records Vot. I pp. 93-94. 21 Issued by the Commission on December 21, 1999, effective 15 January 2000. I8 Records, Vol. I, p. 91. 17 Records Vol. I p. 89. pars. 3.19-3.20 Vol. I p. 106.

merely Php 74.927 million. The SHP found that the Uniwide Group had failed to metamorphosed from being: "solvent but distressed23 to "technically insolvent"24 and then to unmistakably "insolvent,25 conglomerate. is not feasible. Majority of the secured creditors rejected it and moved for the termination Revised TARP is justified. exceeded their sales target in CY 2002, the sales target for 2009, which is Php 11.574 billion, was not met because the actual sales realized by the end of September 2009 is achieve the goals of the SAGARP. The SHP also observed that petitioners have proposal to settle petitioner's outstanding debt with secured and unsecured creditors via dacion en pago of Metromall property) for which petitioners-appellants sought approval of the rehabilitation proceedings. The SHP also concluded that the opposition to the SHP found that they were already insolvent since 2003, or just one year of implementation of the SAGARP.22 The SHP noted that the SAG4RP is primarily anchored on the profitability of retail business. However, while petitioners-appellants Rehabilitation Receiver, Atty. Julio C. Elamparo, is directed to submit his final report within thirty (30) days from receipt hereof." After a careful analysis of the financial condition of the petitioners-appellants, the and the stay order is lifted and dissolved. This case is deemed finally disposed of pursuant to Section 5.2 of Republic Act No. 8799. The The SHP found that the proposed Revised TARP of the Uniwide Group (i.e., the GRANTED. Consequently, the instant rehabilitation case is TERMINATED 2. The motions to declare petitioners' rehabilitation plan "not feasible" are SEC En Banc Case No. 01-10-193 SEC En Banc Case No. 12-9-183 Page 8 of 28 and

Memorandum of Appeal dated 21 January 2010, with the Commission En Banc. They the Revised TARP. This petition was docketed as SEC En Banc Case No. 01-10-193. 2) an Order for the continuation of the rehabilitation proceedings, and 3) the approval of STATUS QUO ORDER prayed for: 1) the reversal of the Special Hearing Panel's . 13 January 2010 Resolution. Consequently, on January 22, 2010, the Uniwide Group filed the instant

18 March 2010 was issued by the Commission En Banc, as follows: "WHEREFORE, in order to preserve the parties' rights during the pendency of Because of petitioners' timely appeal to the Commission En Banc, an Order dated the appeal, the Commission En Banc hereby directs the parties to observe the

25 Actual insoivency - the corporation's assets are not enough to cover its liabilities. (Section 5[d], PD 902- A ; Section 4-1, SEC RPCR) Id. 22 A debtor is insolvent if its assets are not sufficient to cover its liabilities.( Sec. 4-1 SEC Rules of 23 Soivent but distressed company has sufficient "assets to'cover all its debts but foresees difficulty of inability to pay its obligations for more than one year. (Section 3-12, SEC RPCR), Id. Procedure on Corporate Recovery) SHP Resolution, Records, Vol.II p. 70. meeting them when they fall due. (Section 5[d], PD No. 902-A ; Section 3-1, SEC Rules of Procedure on Corporate Recovery),Records, Vol. II p. 86. Technical insolvency -- the corporation has sufficient assets to cover all its debts but it foresees its

.comprehensive report on the progress of the implementation of the SAGARP; and 2) petitioners' audited financial statements for the fiscal year 2009.27 rehabilitation receiver, Atty. Julio C. Alamparo, to submit the following in consideration of the petitioners' appeal from the SHP's 13 January 2010 Resolution: 1) a CONSOLIDATION OF CASES January 2010 Resolution." (Emphasis supplied)26 status quo prevailing before the issuance of the 'Special Hearing Panel's 13 The Commission En Banc also issued an Order dated 27 April 2010, ordering the SEC En Banc Case No. 01-10-193 SEC En Banc Case No. 12-9-183 Page 9 of 28 and

and.SEC En Banc Case No. 01-10-193 in an Order dated 30 September 2010, as follows: The Commission consolidated the two cases SEC En Banc Case No. 12-09-183

following: (1) a comprehensive report on the progress of the implementation of statements for the fiscal year 2009 (Emphasis ours). updated audit and report on the financial condition of the distressed directing the rehabilitation receiver, Atty. Julio C. Elamparo, to submit the the Second Amended Rehabilitation Plan; and (2) petitioners' audited financial corporations. Thus, on 27 April 2010, the Commission En Banc issued an Order "Before the appeals can be resolved, the Commission needs an

(Emphasis ours). Order despite due notice of the same received by him on 18 May 2010 However, the rehabilitation receiver has yet to comply with the said

a ground for termination of the rehabilitation proceedings, and lifting of the Stay the audit and submit its'report within 90 days from receipt of this Order. submit any and all documents, papers, files and records as well as books of Case No. 01-10-193 and SEC En Banc Case No. 12-09-183 are hereby CONSOLIDATED, and the petitioners are hereby DIRECTED to submit to an audit to be conducted by the Commission's Office of the General Accountant. accounts, which will be required by the Office of the General Accountant. Order." WHEREFORE, premises considered, cases docketed as SEC En Banc Petitioners are hereby WARNED that non-compliance with this Order is The petitioners are hereby ORDERED to cooperate with the audit, and The Office of the General Accountant is hereby DIRECTED to conduct

SO ORDERED.

28 Records, Vol. IIIp.19. 27 Records, Vol. II p. 393. Comprehensive Report 28 (the Comprehensive Report) dated 04 June 2010 from the 2 Records, Vol. II pp. 213-214. On 12 October 2010, the Commission En Banc received the Manifestation and

Receiver, Atty. Julio C. Elamparo. He manifested that he has been following up from Uniwide and Sycip Gorres Velayo & Co. (SGV) the audited financial statements for the year 2009. As of their last meeting on 27 May 2009, SGV and Uniwide promised to rush the completion of the audited financial statements (AFS), but as of that date (07 October 2010), the AFS were not available. SEC En Banc Case No. 01-10-193 SEC En Banc Case No. 12-9-183 Page 10 of 28 ad

of the Uniwide Sales Warehouse Club Inc. (USWCI). 3 Report) submitted on 04 June 2010 by Atty. Elamparo. OGA narrated that the subject Receiver's Report has an attached Annex "A" which presents a summary of financial information of the Uniwide Group for periods 1999-2008. OGA noted that the financial financial information contained in said Annex "A." More particularly, the amounts of the petitioners' debts and assets indicated in pages 1 and 2 of subject Receiver's Report do not tally with the figures presented in the summary of financial information, Annex "A". they compared the 2008 and 2007 figures in said summary with the Group's audited financial statements ("AFS") as of 31 December 2008 and 31 December 2007. The discrepancy was due to the question of whether or not to include the financial statements findings to the Commission En Banc,29 citing the Comprehensive Report (Receiver's data indicated in subject Receiver's Report itself are not based on the summary of and are not supported by any documents. OGA also found material discrepancies when On 10 November 2010, the Office of the General Accountant (OGA) reported its

lapsed on 04 January 2011. OGA narrated that on 29 December 2010, OGA had a conference with SGV and two finance officers of the Group wherein they discussed the acknowledged that the ninety (90) day period set to complete the mandated examination dacion en pago transactions and the impairment of Investment Properties of the Group. By then, SGV had completed the audit of Group's 2009 FS, but the Group's legal counsel raised certain issues on the accrual of liabilities. In a Memorandum to the Commission En Banc dated 19 January 2011, the OGA

Statement (AFS) as audited by the SGV in close coordination with OGA, in February the draft FS and to discuss the pending issues raised on the accrual of liabilities. They informed OGA that a meeting with the unsecured creditors will be held on 14 January 2011. A commitment was made to submit the Uniwide Group's 2009 Audited Financial 2011. Due to the deadline set by the Commission, the OGA was constrained to conduct an evaluation and report. On 04 January 2011, the Legal Counsel and finance officers appeared to submit

letter dated 29 April 2011, the counsel of petitioner - appellants apologized for the delay The petitioner-appellants failed to deliver the 2009 AFS in February 2011. In a

30 This discrepancy was settled by the SHP Memorandum dated 23 August 20 1 1wherein the SHP clarified reference to the retail operations of the warehouse clubs of USWCI (Records Volume III, p. 197). 2 Memorandum dated 10 November 2010, Records Vol. II, p.8. that they used the Uniwide Group Consolidated Balance Sheets and Income Statements submitted by statements do not enumerate the specific companies under the Uniwide Group, the resolution made petitioner-appellants on 13 October 2009 in the 13 January 2010 Resolution. Although the financial

apologized for not submitting the 2009 AFS, and did not commit to a date of submission. to the Commission. and wrote that "the Corporation commits and undertakes to ensure submission of the 2009 AFS on 30 May 2011." On 10 June 2011, counsel of petitioners - appellants Up to even date, the 2009 AFS of the petitioners-appellants have not been submitted S SEC En Banc Case No. 01-10-193 SEC En Banc Case No. 12-9-183 Page 11 of 28 and

THE ISSUES 1. Whether or not the Urgent Manifestation and Motion to withdraw from the 2. Whether or not the HP committed grave abuse of discretion in ordering the reappraisal of the Metromall property in Las Pinas, one of the properties in proprio issuing a show cause order, directing petitioners to show cause why pending cases SEC En Banc case No. 12-09-183 and SEC En Banc case No. Sales, Inc. and Uniwide Holdings, Inc. should be granted. petitioners-appellants' asset pool (HP Order dated 30 July 2009); and in motu the rehabilitation should not be terminated (SHP Order dated 17 September 2009); and 12-09-183 filed by Uniwide Sales Realty and Resources Corporation, Uniwide

3. Whether or not the SHP erred and gravely abused its discretion in disapproving the proposed Revised TARP and in terminating the rehabilitation proceedings.

OUR RULING AS TO THE FIRST ISSUE

SEC En Banc Case No. 12-09-183 and SEC En Banc Case No. 12-09-183 filed by Holdings, Inc. cannot be given due course. Uniwide Sales Realty and Resources Corporation, Uniwide Sales, Inc. and Uniwide The Urgent Manifestations and Motions to withdraw from the pending cases

have relied on the rehabilitation plan wherein the group of companies have combined companies filed their petition as a group, pooling together all their assets for the purpose of satisfying their combined liabilities to their various creditors. To consider them as individual, separate companies at this stage would be prejudicial to their creditors who their assets for the benefit of their creditors. When the Uniwide Group filed its petition for rehabilitation on 25 June 1999, the

31 Records, Vol. III pp. 160-161; 184-185

petitioners --appellants on 13 October 2009, which was used by the SHP in its 13 January in the group. Consequently, the withdrawal of the three companies from the two cases herein would necessarily result in the diminution of the assets pooled together for the benefit of the creditors. Moreover, the consolidated cases are now ripe for decision, as in fact, they are now being resolved. 2010 Resolution, have included all the assets of the six companies in the Uniwide Group of the creditors. The rehabilitation plan was drawn and approved based on it. All the assets of the group were precisely pooled together and consolidated for the benefit The OGA has likewise consolidated the financial statements of the six companies The Consolidated Balance Sheets and Income Statements submitted by. the SEC En Banc Case No. 01-10-193 SEC En Banc Case No. 12-9-183 Page 12 of 28 d

AS TO THE SECOND ISSUE

Reappraisal of the Metromall Properties

foundation and mechanics of Petitioners-appellants' rehabilitation.32 the asset pool, because it effectively invalidated the property's previous appraisal. Petitioners-appellants assert that the 1999 Appraisal Report is incorporated in the SAGARP therefore anyone who questions its terms must file a case disputing the subject appraisal report. They insist that the subject appraisal report is binding upon the debtor and creditors, and that altering the values in any of the appraisal reports would upset the ordering the reappraisal of the Metromall property in Las Pinas, one of the properties in The Uniwide Group alleged that the HP committed grave abuse of discretion in

are inherent and/or incidental (i.e. the reappraisal of the Metromall property) to the or motu propio terminate, modify, or set conditions for the .continuance of the suspension order xxx upon showing that xxx (b) a creditor does not have adequate protection over the property securing its claim." The creditor lacks adequate protection if it can be shown that "depreciation of the property is increasing to the extent that the creditor is undersecured." Moreover, the Commission has plenary powers to consider matters which determination of the pending motion/request (i.e. Motion to Approve Revised TARP). property from Php 1.308 billion, as stated in the 1999 Appraisal Report, to Php 660 million, as mentioned in the 11 April 2008 Appraisal Report of Royal Asia Appraisal, which was engaged by LNC (SPV-AMC), successor in interest of Equitable PCI Bank. Section 4-10 of the SEC RPCR provides that "the Commission may, upon motion The HP issued the order for re-appraisal due to the drop in value of the subject

32 Petition filed 04 December 2009, Records. Vol. I pp.104-105.

need for any of the creditors to file a case disputing the Appraisal Report as alleged by the Petitioners-appellants, inasmuch as the Commission has, as above-stated, the power to motu propio order it. Moreover, there was a unanimous motion for reappraisal by the creditors present during. the 22 June 2009 hearing. Lastly, petitioner-appellants' accounts the values of the appraisal reports would upset the foundation of the rehabilitation for the HP under the circumstances, to order the reappraisal of subject property, especially considering the huge discrepancy between the two appraisal reports, and the with creditors are still subject to reconciliation as of the Third Quarter Report of the Rehabilitation Receiver dated 13 October 200933 contradicting their claim that altering proceedings. of the Group have changed since the SAGARP. This is why they submitted the Revised TARP, which now primarily hinges on the Metromall property. Thus, it was appropriate fact that the property owes Las Pinas City substantial amount of back taxes. There is no The 1999 Appraisal Report can no longer be binding because the circumstances SEC En Banc Case No. O1-10-193 SEC En Banc Case No. 12-9-183 Page 13 of 28 an

Show Cause Order

petitioners- appellants' full recovery is very much imminent. 34 be terminated considering that more than ten (10) years have passed since they filed the instant Petition and that the Rehabilitation Plan had undergone several revisions. them to justify the continuation of the rehabilitation proceedings, since there was no motion or any other event which could have prompted the issuance of the order. They reveal a different financial status of the Uniwide Group. The Consolidated Balance Sheets filed by petitioners-applellants on 14 October 2009, December. 2002. By the time the show cause order was issued by the SHP, the ten years. Hence, on 17 September 2009, the SHP directed petitioners to show cause discretion in motu propio issuing the show cause order, because there is no basis to ask alleged that the rehabilitation plan has been successfully, partially implemented and that Report approved on 29 June 1999. Due to the non-entry of Casino, which was expected to provide for fresh capital, the SAGARP was submitted, and was approved on 23 rehabilitation proceeding of the petitioners-appellants has been going on for more than within thirty (30) days from receipt thereof, why the Rehabilitation proceeding should not Despite the upbeat outlook of the petitioner-appellants, however, the figures The petitioners-appellants alleged that the SHP committed grave abuse of To.recall, the Petition for Rehabilitation sought by the petitioners-appellants was and the Third Quarter

33 SHP Resolution dated 13 January 2010 Records Vol. II p. 80. 34 Petition filed 04 December 2009, Records Vol. I pp. 100-104.

SEC En Banc Case No. 12-9-183

Group in 2002 was Php 6.5 billion, but as of 30 September 2009 this dropped to Php 74.9 million. The net profit (LOSS) in 2002 was Php 401.486 million while in 2009 LOSS was Php 133.599 million.35 of Rehabilitation Receiver dated 13 October 2009 show that the net sales of the Uniwide SEC En Banc Case No. 01-10-193 Page 14 of 28 and

the petitioners-appellants were operating under the SAGARP. In the petition itself, they of SAGARP. The glaring fact is that their claim that full recovery is imminent is doubtful, due to their overall poor performance under the SAGARP. admitted that several issues aforementioned, prevented the realization of the desired goals When the SHP issued the show cause order subject of this petition for certiorari.

prescribes that "xxx the Commission shall upon motion, motu propio or upon the xxx" Hence, a motion is only one of three instances when the Commission may terminate the proceedings. The Commission may motu propio order it, too. SHP to issue them the subject show cause order. Section 4-26 of the SEC RPCR recommendation of the Interim or Rehabilitation Receiver terminate the proceedings. The petitioners-appellants are mistaken in thinking that a motion is needed for the

termination of the rehabilitation proceeding under Section 4-26 of the SEC RPCR. In SEC Office Order No. 287 Series of 2009. Thus, a motion is not necessary, as alleged by doing so, it merely complied with the processes necessary to achieve its purpose under the petitioners-appellees. However, in this case, the SHP issued a show cause order, and did not order the

cause order, the petitioners-appellees believe that the Commission acted with grave abuse of discretion. The term grave abuse of discretion is defined as a capricious and whimsical arbitrary and despotic manner because of passion or hostility.36 exercise of judgment so patent and gross as to amount to an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law, as where the power is exercised in an For having ordered the reappraisal of the Metromall property and issuing a show

discretion is misplaced, for the Commission merely fulfilled its mandate under the law. AS TO THE THIRD ISSUE The foregoing circumstances discussed illustrate that the claim of grave abuse of

without merit. The appeal from the Resolution of the SHP dated 13 January 2010 is also

3s Table of the petitioners-appellants' retail business performance, SHP Resolution Records, p. 75. 36 Tan vs. Spouses Antazo G.R. No. 187208 February 23, 2011.

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The Revised TARP Rejected By Creditors

SHP applied the following provisions of the SEC RPCR: In determining whether to approve or reject the proposed Revised TARP, the

achieve the desired targets or goals set forth therein. No alteration or modification of an approved Rehabilitation Plan shall be allowed if opposed by creditors shall be classified into secured or unsecured. Plan shall be approved by the Commission if opposed by a majority of any class approved Rehabilitation Plan may, on motion, be altered or modified if, in the a majority_of any_class of creditors unless such opposition is manifestly unreasonable." required in these Rules for a decision to be taken, for an act to be done, or for their claims counted separately by each class of creditors. of creditors. The Commission may, upon motion, however, override said disapproval if such is manifestly unreasonable. The Rehabilitation Plan shall be fails to grant the motion to override within thirty (30) days from the time it is submitted for resolution. judgment of the Commission, such alteration or modification is necessary to the rejection of a proposal, the said number shall refer to the total amount of deemed ipso facto disapproved and the petition dismissed if the Commission Section 2-10 Classification of creditors -- For purposes of these Rules, Section 4-23 Alteration or modification of the Rehabilitation Plan - An Section 4-20 Approval of the Rehabilitation Plan -- No Rehabilitation "Section 2-8 Decision by creditors -- Whenever a number of creditors is XXXXXX xXXXXX XXXXXX

The SHP decided as follows:

billion. The outstanding obligation of petitioners to secured creditors and the claims of secured creditors opposing the Revised TARP are shown below: "Petitioners still owe their secured creditors approximately PhP 3.155

RCBC Philippine National Bank Land Bank Allied Bank Secured Creditors Corp. (successor of EBC) LNC SPV-AMC (PhP Million) Amount* 493.42 471.42 832.96 360.65 36.91 The Revised TARP Claims Opposing 360.65 36.91 493.42 832.96

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2009. ING Bank Secured Creditors *Third Quarter Report of Rehabilitation Receiver dated 13 October Global Bank (dacion amounts) Syndicate Banks (niet of BPD [P 100 M] TOTAL Percentage +Land Bank Bank including TOTAL East West (PhP Million) Amount* 50.S1 738.55 3,155.71 686.00 3,841.71 171.29 100 % 100 % The Revised TARP Claims Opposing 57.80 % 2,546.00 66.27 % 686.00 100.00 1,823.94

their obligation with Land Bank and that they owe Land Bank only PhP 36.91 petitioners have repudiated the dacion and restructuring agreements they Paraniaque City a case to nullify said contracts.37 The subject agreements are supposed to settle PhP 686 million debt of petitioners with Land Bank. It is fifty seven percent (57%) of the outstanding secured debt. Those against the these two banks preferred outright termination of the rehabilitation proceedings. executed with the bank from 2002 to 2004. In 2007, petitioners filed with RTC therefore misleading for petitioners to claim that they have substantially paid million. As it stands, petitioners' unsettled debt with Land Bank is approximately PhP 723 million. PhP 1.823 billion of the PhP 3.155 billion secured debt are against the revision of the rehabilitation plan, The claims opposing the Revised TARP represent at least modification of the rehabilitation plan include secured creditors Allied Bank, Land Bank, LNC SPV-AMC Corp. as well as PNB and East West Bank since But we must go further. Land Bank brought to our attention that Based on the above data, it is clear that secured creditors holding about

is PhP 3.842 billion. On the other hand, the total claims opposing the Revised total debt with secured creditors, the total outstanding secured debt of petitioners TARP will amount to PhP 2.546 billion. This means that creditors holding Now, if we use the amount of PhP 723 million in computing petitioners'

37 Complaint of Uniwide dated 30 August 2007 and Order of RTC Parafiaque City dated 20 February 2009.

approximately sixty six percent (66.27%) of the secured claims are against the revision of the rehabilitation plan. SEC En Banc Case No.. 01-10-193 SEC En Banc Case No. 12-9-183 Page 17 of 28 ad

Revised TARP. This alone is sufficient cause to reject petitioners' instant otion.38 Clearly, more than the majority of secured creditors are opposing the

no showing by the Uniwide Group that such a finding that votes were met is invalid. Thus there was no grave abuse of discretion when the panel decided to reject the proposed Revised TARP. The SHP merely applied the pertinent provisions of the SEC RPCR, and there is

have substantial basis, as they are based on the Third Quarter Report of the Rehabilitation Receiver dated 13 October 2009, which was not refuted by the Uniwide Group. Thus, the SHP was justified in relying on the data as basis for determining compliance with the majority requirement in Section 4-23 of the RCPR. The contents of the table on the outstanding secured debts reproduced above

value of the Metromall property supposedly dropped to only Php 660 million. the Commission that it cannot dispose of the properties dacioned in its favor because of petitioners-appellants debt is in the total amount of Php 165.34 Million which includes rental arrearages, interests, and charges.40 This is a lot more than the Php 36.91 Million by the majority of the remaining secured creditors, because the Revised TARP affects only two (2) of these secured creditors, PNB and Allied, mortgagees of the Metromall property. The petitioner-appellants asserted that Land Bank "has practically been -fully Uniwide Group also declared that the objection of LNC is a self-serving claim that the the pending civil case filed by the petitioners-appellants against the bank, which the Uniwide Group admitted, as mentioned in the preceding paragraph. In addition, the Uniwide Group has not paid Land Bank a single centavo on their restructured loan, which is part of the SAGARP. Land Bank stated that as of 30 November 2008, the listed in the table of the SHP. paid with the transfer of several of their prime properties in its favor, notwithstanding the pending civil case." Petitioner-appellants claim that Land Bank and East West "have no business interfering in the Revised TARP as they are not affected parties."" The " is not correct. In its Reply Memorandum filed on 05 April 2010, Land Bank informed The Uniwide Group's allegation that Land Bank "has practically been fully paid The Uniwide Group argues that the Revised TARP cannot be deemed opposed

33 Memorandum on Appeal pars. 6.80-6.81, Records Vol. II pp. 99-100. 38 SHP Resolution, Records Vol.I pp. 81-83. 46 Land Bank Reply Memorandum filed 05 April 2010Records, Vol.II pp. 346, 355. 4: Hearing Panel'Order dated 30 July 2009, Records Vol. I p.86. Royal Asia Appraisal Corporation is Php 659,966,000.00.41 likewise incorrect. The value of said property per the 11 April 2008 Appraisal Report of The Uniwide Group's assertion that the objection of LNC is self-serving is

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amendment, thus: "xxx No alteration or modification of an approved Rehabilitation Plan shall be allowed if opposed by a majority of any class of creditors unless such opposition is manifestly unreasonable." At any rate, Sec. 4-23 is clear that all creditors are entitled to vote on any

to the act of petitioners-appellants. These are more than adequate reasons why the the 1999 Appraisal Report, to Php 660 million, as mentioned in the 11 April 2008 the subject property being claimed by Las Pinas City amounts to Php 362,332,754.39.42 in favor of Land Bank is a clear manifestation of bad faith on the part of the Uniwide opposition of the secured creditors to the approval of the Revised TARP is not manifestly unreasonable. There was a drop in value of the Metromall property from Php 1.308 billion, as stated in] Appraisal Report of Royal Asia Appraisal. In addition, the unpaid real property taxes on More importantly, the act of the petitioner-appellants in filing the civil case against Land Group. The element of trust essential in a creditor-debtor relationship has been lost, due Bank that frustrated the implementation of the dacion executed by petitioners-appellants The opposition of the majority of the creditors is not "manifestly unreasonable."

secured and unsecured creditors via dacion en pago of Metromall property is not secured and unsecured creditors via dacion en pago of Metromall property. They offered to transfer ownership of the Metromall property to Allied Bank, PNB, LNC SPV-AMC is mortgaged to Allied Bank and PNB and these banks strongly oppose any arrangement that will result in the surrender of their mortgage rights over Metromall property. property rights. Being a form of contract, the dacion en pago agrecment carinot be feasible. Under the Revised TARP, petitioners-appellants intend to settle their debt with Corp. and the group of unsecured creditors. The problem is that the Metromall property Correctly pointed out by the SHP, these banks have property rights under their existing Security arrangements with petitioners that cannot be put asunder without their consent or unless in exchange for valuable consideration that preserves at least the value of their perfected without the consent of the parties involved.4 Moreover, the proposal to settle petitioners-appellants outstanding debt with

Termination of the Rehabilitation Proceedings Section 4-26 of the SEC RPCR provides:

its obligations under the said Plan, or a determination that the Rehabilitation 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 "Section 4-26: Termination of Proceedings. - xxx in case of the

44 Bank of the Philippine Islands vs. ASB Hoidings Inc., GR-164641, December 20, 2007. 42 Computed as of May 2010, Urgent Motion and Manifestation par. 3, filed 06 August 2010 by the Counsel and Co-Counsel of City of Las Pinas. Records, Vol. II p. 239. + SHP Resolution, Records, Vol. II p. 81.

SEC En Banc Case No. 12-9-183

the parties may apply for relief with the Commission by filing in the same proceedings the appropriate pleading therefore. Upon the termination thereof for liquidated in accordance with the succeeding Rule." (Emphasis ours) Plan may no longer be implemented in accordance with its terms, conditions. restrictions, or assumptions, the Commission shall upon motion, motu propio or upon the recommendation of the Interim or Rehabilitation Receiver teriminate the proceedings. The proceedings shall. also terminate upon: the successful implementation of the Rehabilitation Plan. Until the proceedings are terminated. reason other than the success of the rehabilitation, the debtor shall be dissolved and SEC En Banc Case No. 01-10-193 Page 19 of 28

Section 3-13 of SEC RPCR provides:

obligations in accordance with the approved Repayment Schedule, the Commission for rehabilitation of the debtor. Thereupon, the pertinent provisions of the time during the pendency of the proceedings, the petitioner has become or is the conditions of the suspension order, or has failed to make payments on its shall terminate the proceedings and dismiss the petition. Instead of terminating the proceedings, however, the Commission may, upon motion, treat the petition as one Succeeding Rule shall govern the proceedings." shown to be insolvent, whether actual or technical, or that it has violated any of "Section 3-13. Supervening insolvency or violation of Suspension Order.- If at any

million in 2008.45 It is undeniable that the projected sales target for 2009 in the amount of achieved. Data show that petitioners-appellants' retail business is a dismal failure. To reiterate, the viability of the rehabilitation plan was based on the success of their core business, their retail operations. The SHP illustrated the financial hemorrhage experienced by petitioners-appellants by presenting the data they have gathered and analyzed and comparing their goals under the rehabilitation plan and the actual results. their sales target. Nevertheless, from 2003 onwards, their sales data have been in steep decline and never recovered: net sales of Php 6.565 Billion in 2002 to only Php 344 PhP 11.574 billion could not be met because the actual sales realized by the end of September 2009 is only PhP 74.927 million .46 The SHP found that the goals and plans under the SAGARP have not been When the SAGARP was approved in 2002, the petitioners-appellants exceeded

number of operating stores only contribute to severe losses.4? 45 From the Consolidated Balance Sheets filed by petitioners on October 14, 2009, and the Third Quarter Records, incorporated in the SHP Resolution Vol. II pp.74.. a7SHP Resolution Records Vol. II p. 74 and p.1. they are the main source of their revenues. However, as of date of the SHP Resolution. Report of Rehabilitation Receiver dated 13 October 2009. Records, Vol. II p.75 46 Projected Net Sales from the Projected Income Statements of SAGARP dated October 12, 2001 , petitioners-appellants operate only five warehouse clubs (drop from eight warehouse clubs) and one department store (drop from two department stores). This reduction in Under the SAGARP, petitioners-appellants planned to operate seven stores, for

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million (CY 2008), then the operating expenses must not exceed PhP 34.412 million. However, the table of operating expenses and net sales from 2002 to 2009 shows that from 2002 to 2005, petitioners' operating expenses ranged from 22% to 27% of net sales. In 2006, operating expenses jumped to 94% of net sales, and as of 30 September 2009 operating expenses net of sales was 407%. Very clearly, petitioners-appellants never achieved the goal of taming their operating expenses.4 operating expenses must be kept below PhP 656 million. And, if net sales is PhP 344.118 10% of the net sales. This means that if net sales is PhP 6.565 billion (CY 2002), then the Under the SAGARP, petitioners intended to keep their operating expenses below

billion, net of those settled earlier. Based on SHP's computation, the amount of secured % of the'secured debt. Under the SAGARP, petitioners intend to pay off debts with secured creditors through dacion en pago arrangements. As of date of the SHP Resolution, the dacion en pago with Allied Bank, PNB, LNC SPV-AMC Corp. and other secured creditors have not taken place. This has been a plan since 2001. The Group's unsettled since it sought nullification of the dacion and restructuring agreements. SAGARP shows that as of 30 June 1999 petitioners have Php 2.54 billion debt with unsecured creditors, but as of 13 October 2009, petitioners still owe unsecured creditors approximately PhP 2.377 billion.50 This means that they have settled a measly 6.3% of their unsecured debt over a period of ten years. submission of the SAGARP in 2001, petitioners had a secured debt of about PhP 5.82 debt settled by petitioners under the SAGARP is Php 2.027 billion which is a mere 34.84 debt with Land Bank in the amount of Php 723.10 million was treated by the SHP as Petitioners-appellants' settlement of unsecured debt is way off the target. The Debt settlement with secured creditors is incredibly slow. At the time of

million convertible notes or 6.6% of the target Php 1.077 billion.convertible notes time at the option of petitioners. were issued. To date, issuance of convertible notes has been deferred.52 way of 15-year convertibie notes, in the total amount of Php 1.077 billion redeemable any Under the SAGARP, petitioners intended to settle 50% of the unsecured debt by 1 As of 30 September 2009, only a total of Php 71.05

restructured into 10-year term loan inclusive of a 3-year grace period. Cash payment for the principal should start in year 4 following the approval of the plan.53 Nonetheless, not Under the SAGARP, the other half (50%) of the unsecured debt shall be

%9 SHP Resolution, relying on the* Revised TARP, pp. 7-8; and the Third Quarter Report dated 13 October 52 Uniwide SEC Form 17-Q dated 30 September 2009, p. 31. 53 SHP Resolution citing SAGARP, p. 9. Records, Voi. II p. 71. 2009, pp. 2-4., Records,Vol. HI pp. 72-73. Records,Vol. II. pp.71-72. 51 SHP Resolution citing SAGARP, p. 9. Records, Vol. II p. 71. 4s8 SHP Resolution Records Vol. II p. 73. SHP' Resolution, citing Third Quarter Report of Rehabilitation Receiver dated 13 October 2009,

SEC En Banc Case No.12-9-183

the consistent negative results of retail operations .So a single cash payment for the restructured debt was made as projected because of SEC En Banc Case No. 01-10-193 Page 21 of 28 ad

members of Coastal Mall syndicate refused to implement the dacion of Coastal Mall.59 reasons: 1) He claimed that Allied/PNB refused to implement the dacion of Metromall; on the other hand, PNB manifested that the Uniwide Group wants the same property the steady and continuing decline in net sales revenue. 61 payments for the restructured unsecured debts and bank loan55 which were to come from concluded that the disastrous results of retail operations indicate that petitioner- and Rehabilitation Receiver's report that petitioners retail business is still viable. evidence. In fact, even Atty. Elamparo admitted in the Comprehensive Report to that the targets of the Rehabilitation Plan have not been completely met, citing the following dacioned to PNB to be shared with unsecured creditors, which was not the original agreement; 2) the Coastal Mall creditors also refuse to implement the dacion of the Coastal Mall; 3) Eventual closure of stores; 4) lack. of supplier support for supermarket operations; and 5) unprogrammed operating expenses and uncertain political climate. The Receiver also admitted that the quarterly reports he submitted readily show that the payment to unsecured creditors from retail operations is no longer achievable because of retail operations never took place. Those annual cash payments were supposed to begin in 2006, and their non-fulfillment resulted in negative reactions from the creditors. The SHP appellants' rehabilitation does not stand a chance of success. The SHP noted that these findings debunk petitioners' ridiculous assertion that their retail business is fairly stablese contractors with liens and claims on Coastal Mall via dacion of Coastal Mall proportionately with other claimants.38 However, petitioners-appellants disclosed that all effectively refuted by the Uniwide Group through presentation of convincing.contrary The foregoing findings are based on substantial evidence, and have not been Under the SAGARP, petitioners intended to settle a portion of the debt to Inasmuch as the retail operations continuously suffered losses, the annual cash

57 Third Quarter Report of Rehabilitation Receiver dated 13 October 2009, p.6. 62 Memorandum of Appeal dated 21 January 2010 par. 1.1, Records, Vol. II pp. 136-137. 55 Like the PhP 1.15 billion restructured debt with unsecured creditors and PhP 44 million residual debt 5 SAGARP, p. 9. Cited in SHP Resolution, Records, Vol.II. p.71. 5% SHP Resolution, Records,Vol. II. p.71. 60 Records, Vol. III pp. 10-11. 6. Records, Vol. III. p. 10. unexplained animosity against them, and that the conclusions were based on "erroneous figures, wrong premises and faulty reasoning.62 Petitioners-appellants argue that the rehabilitation plan has been "generally successful and substantially implemented," and that failure to achieve some objectives of the Rehabilitation Plan is not attributable to the SM Third Quarter Report of Rechabilitation Receiver dated 13 October 2009, p. 5. with Land Bank. 5 Petitioners' Motion for Partial Reconsideration dated 28 October 2009, p.13 The Uniwide Group declares that the SHP Resolution reeks of bias and

Uniwide Group.63 The group points out the five reasons it enumerated in its petition for Php 1.2Billion) to .cooperate in the implementation of the SAGARP. 64 Philippine certiorari and the alleged refusal of PNB and Allied Bank (to whom they owe a total of National Bank (PNB- oppositor- appellee), responded, that petitioners-appellants' present ruinous state vis-a-vis their past efforts to remedy it do not support their claim. SEC En Banc Case No. 01-10-193 SEC En Banc Case No. 12-9-183 Page 22 of 28 d

to around Php 5 Billion. They alleged that only less than Php 100 Million of the believe that AFTER full settlement of these loans, only debts to PNB, Allied Bank, Land creditors, amounting to Php 1.4 Billion, will remain of the SAGARP, they have substantially paid off their debts from around Php 11 Billion unsecured credits are still pursuing their credits, and that they EXPECT to receive quitclaims from ING Bank (around Php 171.00 million), EBC, now LNC (around Php 493.42 million), Global Bank now LNC (around Php 50.51 million) Syndicated Banks LNC (around Php 150.00 million), RCBC now Star 2 (around 471.00 million), and Syndicated Banks- Star/LNC around Php 604.27). This totals around 1.94 Billion. They Bank (which they claim to be a "small portion"), syndicated banks and unsecured The petitioners-appellants claim that in less than five years of the implementation

to Land Bank, EBC, and RCBC.6? the payment of the secured loans have been substantially achieved in five to seven years and that the remaining obligations to PNB (Php 832.96 million, which is the same figure as in the SHP Resolution) and Allied Bank (Php 360.65 million, which is the same figure as in the SHP Resolution) can be settled by "simply implementing" the SAGARP's provisions, thus there is no reason to terminate the proceedings insofar as the secured creditors are concerned. They allege that they have "substantially paid" their obligations The Uniwide Group believes that the targets and goals of the SAGARP relating to

less than Php 100 million." They reiterated that the SAGARP has been 'substantially implemented, successfully at that, and considering that less than 20% of the original debt the SHP Resolution. The petitioners-appellants claim that most of the unsecured creditors their very long and profitable business relationships with the Group." They believe that a "reasonable estimate of the remaining obligations to the unsecured creditors would be unsecured creditors amounts to Php 2.3 Billion which is the same amount indicated in are "relatively very small they may have written off the Uniwide Group's debts due to remains to be addressed, there is absolutely no valid ground to terminate the proceedings. The Uniwide Group admits that the remaining balance of its debt to the

65 Reply dated 04 February 2010 Vol. II p. 163. 66 Memorandum on Appeal pars. 4.13-4.16, Records Vol. II pp. 128-130. 6 Id., pars. 6.7-6.11 Records, Vol. II p.122-123. 53 Id. par. 6.4 Records, Vol. II p. 124. 64 Id., Vol.II p. 116-125. 68 Id., pars. 6.12-6.15 Records, Vot.II p. 120-122.

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cannot stand. The findings of the SHp,69 that the petitioners-appellants' have .paid only has been a plan since 2001.7 the payment of the secured loans have been substantially achieved in five to seven years, Php 2.07 Billion or 34.84% of the secured debt under the SAGARP, is credible for it is based on no less than the Third Quarter Report of the Receiver dated 13 October 2009 and the Revised TARP. On the other hand, petitioners-appellants' claim that they have settled almost 60% of the secured debts under the SAGARP is 1) unsubstantiated, and 2) misleading, considering that in arriving at such settlement rate, they still included those secured debts already settled before the SAGARP.70 Further, their alleged payment to Land Bank is questionable because the SHP found that petitioners-appellants sought nullification of the dacion and restructuring agreements with Land Bank aimed at settling Php 723.10 million debt. As a result, Land Bank could not dispose of the dacioned properties. As of date of the SHP Resolution, the dacion en pago with Allied Bank, PNB. LNC SPV-AMC Corp. and other secured creditors have not taken place even though this The Uniwide Group's belief that the targets and goals of the SAGARP relating to SEC En Banc Case No. 01-10-193 Page 23 of 28 and

"may have written off their debts, thus decreasing their obligation to the unsecured creditors from Php 2.3 Billion to Php 100 million, is unacceptable. The Commission Convincing evidence, which the Uniwide Group failed to do. The findings of the SHp12 cannot resolve cases based on speculation. Whoever makes any allegations must submit that over a period of ten years, a mere 6.3% debt settlement of the unsecured debt has been achieved by the Uniwide Group is convincing, as it is based on the same Report and Revised TARP. The speculation of petitioners-appellants that most of the unsecured creditors

support the same. In fact, the claim that their total remaining debts have decreased to presented the debt profile of the Uniwide Group of companies in this manner: around Php 1.4 Billion74 is contrary to the Comprehensive Report on the implementation of the SAGARP, dated 04 June 2010 submitted to the SHP by the Rehabilitation Receiver, Atty. Julio C. Elamparo. 1.4 Billion, Thus, the petitioners-appellants' claim that their total liabilities are down to Php must necessarily fail, especially since there is no financial statement to In the said. Comprehensive Report, Elamparo

"Total Debt: Secured Debt: Unsecured Debt: Php 10,450.14 B Php 2,925.02 B"75 Php 7, 525.12 B

73 Memorandum of Appeal (MOA) dated 21 January 2010 Records, Vol. I pp. 115-1 17. 5 Based on the Revised TARP, pages 7-8, and the Third Quarter Report of the Receiver dated 13 October T1 SHP Resolution Records Vol. II p. 72. 72 Id."Records Vot. II p.71. 74 Id., MOA, Conclusion par. 7.2,Records Vol. II p. 97. 75 Comprehensive Report dated 04 June 20 10, Records, Vol.IIIp. 19. 2009, pp. 2-4, SHP Resolution Records, Vol. II p. 72. 7o In arriving at the 34.84% settlement rate, the SHP correctly excluded those secured debts settled prior to submission of the SAGARP.

translate into trillions, which is inaccurate, because the debt amounts to billions and not trillions. Therefore, the appropriate letter indicator should have been "M" to mean that the total debt is Php 10,450.14 million, which is equal to ten billion four hundred fifty million one hundred forty thousand pesos, or more than Php 10.4 B. Since petitioners. discrepancy between their claim and the report of their Receiver in the amount of Php appellants claim that their debt has decreased to around Php 1.4 Billion, there is a 9.05 Billion. The foregoing figures appearing in the Comprehensive Report dated 04 June 2010 SEC En Banc Case No. 01-10-193 SEC En Banc Case No. 12-9-183 Page 24 of 28 and

period of ten years. 7 Thus, the 'SHP found that the Uniwide Group owes unsecured approximately Php 2.377 Billion, which translates into 6.3% debt settlement over a creditors a total amount of Php 6.17 Billion. Billion (34.84% of the secured debt) of its more or less Php 5.82 Billion debt to its secured creditors, thus having a balance of about Php 3.80 Billion debt to its secured creditors.76 To reiterate, the SHP found that the Uniwide Group has paid off Php 2.027 As to the. unsecured creditors, petitioners-appellants still owe them

they have admitted, the report of the Receiver, and the findings of the SHP. The findings October 2009, Uniwide Consolidated Interim Balance Sheets, ending September 30, Consolidated Balance Sheets filed by the Uniwide Group on 14 October 2009. In the Receiver's Comprehensive Report dated 04 June 2010, Atty. Elamparo noted that he has been following up from Uniwide and SGV the audited financial statements (AFS), but as of date of the report, the AFS are not available and promised that he will submit them to the En Banc as soon as available.78 The latest communication about the AFS from the petitioners- appellants was on 10 June 2011, when counsel of petitioners -- appellants apologized for not submitting the 2009 AFS, and did not commit to a date of submission. As mentioned above, up to even date, the 2009 AFS of the petitioners-appellants have not been submitted to the Commission. of the SHP are based on the Third Quarter Report of the Rehabilitation receiver dated 13 2009, Quarterly Report (SEC Form 17-Q) dated 30 September 2009, and the Hence, there is a discrepancy as to the debt profile of the petitioner-appellants that Te

remaining debt is Php 1.4 Billion, for the Group failed to substantiate its claims and debunk the findings of the SHP. The Commission therefore adopts the findings of the SAGARP has been substantially and successfully implemented and that its only SHP. Accordingly, we cannot accept the allegation of the Uniwide Group that the

T8 Records, Vol. III p. 9. 7% Citing Third Quarter Report dated 13 October 2009 pp. 2-4, Resolution Records Vol.II pp. 7 1&73. 77 Citing Third Quarter Report dated 13 October 2009 p..4, Records, Vol.II p.71. 79 Records, Vol. II pp. 160-161; 184-185

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Petitioners-Appellants Insolvent

June 1999, petitioners-appellants were solvent as their assets (PhP 19.864 billion) exceeded liabilities (PhP i1.101 billion), but they had difficulty meeting their obligations. By the time SAGARP was approved in December 2002, petitioners-appellants' assets plummeted to PhP 11.833 billion, while their liabilities stood at PhP 11.260 billion. From 2003 to 2009, petitioners' total liabilities consistently surpassed total assets. As of date of the SHP Resolution , petitioners assets are almost depleted and amount only to PhP 2.726 billion. In contrast, their total liabilities increased to PhP 12.292 billion. In other words. petitioners were already insolvent80 since 2003 or just one year after the implementation of SAGARP. The SHP observed that at the time of filing of the petition for rehabilitation on 25

in 2007. By 2009, petitioners-appellants' debt-asset ratio swelled to 4.51. This further validates petitioners' insolvency. than 1.0 means the company has negative net worth and is technically bankrupt. Petitioners-appellants' debt-asset ratios have always been greater than 1.0 since 2003. The debt-asset ratio started at 1.24 in 2003, climbed to 2.42 in 2005, and the grew to 3.95 Petitioners-appellants' have very high debt-to-asset-ratio81 A debt ratio greater

meet current obligations as they fall due and contributes to petitioners' insolvency. prescribes a current ratio of 2.0, meaning, for every peso of short-term debt, there should be two pesos of cash or near cash available. Typically, there should be two pesos in cash. where one peso is for payment and another peso is for operation. The SHP found that petitioners- appellants' "current ratio has always been less than 1. This means that they have more short term debts than current assets. This confirms petitioners' inability to debt-equity ratio of 2 to 1, it means that the company has two pesos of debt to cvery one peso shareholders invest in the company. In other words, the company is taking on debt at twice the rate that its owners are investing in the company. The general norm is that a company is considered sound if it has a low debt to equity ratio, that is, a higher Petitioners-appellants have negative debt-to-equity ratios.83 If a company has a Based on current ratio, petitioners-appellants are not liquid.82 The rule of thumb

Statements, 1998, p. 159. immediately pay its current debts. SHP Resolution, p. 19, Records Vol. II p. 69 citing Wild, John. so A debtor is insolvent if its asets are not sufficient to cover its liabities. (Section 4-1, SEC Rules of Fundamental Accounting Principles, 2008, p. 685. company's total liabilities by its shareholders' equity. SHP Resolution, p. 20, Records Vol. II p. 68, citing Warren, Earl. Managerial Accounting, 2002, p. 510: White, Gerald. The Analysis and Use of Financial Procedure on Corporate Recovery), cited in SHP Resolution Records Vol. II p. 70. 81 The debt-asset ratio shows the proportion of a company's assets which are financed by borrowing. SHP Resolution, p. 19, Records Vol. II p. 69. citing Weygandt, Jerry. Managerial Accounting. 2008, p. 637; Levy, Haim. Introduction To Investments, 1999, p.785. 83 Debt to equity ratio compares a company's total debt to shareholders' equity. It is derived by dividing the Current ratio is the firm's current assets to its current liabilities. It measures the firm's ability to

SEC En Banc Case No. 12-9-183 SEC En Banc Case No. 01-10-193 Page 26 of 28 proportion of shareholder-supplied capital. A negative debt-to-equity ratio means the company's net worth is negative which, in turn, indicates that it has more debt than assets. A negative net worth means that the company has been losing and is in trouble. In this case, petitioners-appellants have negative net worth of -1.28, thus they have negative debt-to-equity ratios.

Php 6.978 billion in losses in 2002, petitioners' losses as of time of the SHP Resolution amount to Php 15.467 billion. The SHP surmised that this process seems irreversible considering the continuous negative results in retail business, which is the core of the rehabilitation plan. Petitioners-appellants were also found to suffer chronic losses annually.84 From

the time the SAGARP was approved in December 2002, petitioners had already a capital deficiency of Php 1.362 billion. As of September 2009, petitioners' capital deficit stood at Php 9.567 billion which is a stark contrast to the Php 11.147 billion capital at the start doubt about their ability to.continue as going concern.85 deficiency indicates the existence of material uncertainty which casts significant of the rehabilitation proceedings. Petitioners-appellants admitted that the huge capital The SHP also saw the enormous capital deficit of the petitioners-appellants. By

to rescue the Uniwide Group of companies. These considerations convinced the SHP conditions, restrictions and assumptions prescribed therein. that petitioners-appellants can no ionger be rescued. Thus, the SHP concluded that petitioners-appellants' rehabilitation plan can no longer be implemented under the terms, Added to the foregoing, there are no indications that fresh capital are forthcoming

Memorandum on Appeal. Considering that the SHP Resolution is based on solid data, unlike the speculations, beliefs and unsubstantiated allegations of the petitioners. appellees, the Commission adopts its findings and conclusions. These findings on insolvency were never questioned by the Uniwide Group in its

Plan. OGA's findings 87are summarized as follows: Group to achieve the desired targets or goals as set forth in their approved Rehabilitation is consistent with the findings of the SHP which ascertained the failure of the Uniwide The evaluation of OGA, per the Commission's records in the SEC iView system,

Comparative from 2005 to 2009

85 SHP Resolution citing Quarterly Report (SEC Form 17-Q) dated 30 September 2009. Records Vol.I 86 The foregoing discussion is culled from the SHP Resolution pages 12-21, Records, Vol. II pp. 67-76. 87 OGA's Memorandum to the Commission En Banc dated 19 January 2011, Records Vol.Il pp. 78-80. 88 Used as collateral on debt. 84 SHP Resolution Records Vol. II p.68. p.67 Non-current assets which compose mainly of investment propertiest8 continues to decline by 51.58% (2009), 8.70% (2008), 8.41% (2007),

Mounting debt ratio means that the Group continues to rely on debt to 2.28% (2006) and 3.28% (2005) due to annual recognition of accrued Downfall of current ratio shows that the ability of the Group to settle its short Decreasing negative debt-to-equity ratio appears that the amount provided by 5.96% (2006) and 20.75% (2005) due to dacion settlements, depreciation Current liabilities continues to pile up by 2.51% (2008), 2.51% (2007), Revenues from operation decreased by 70.97% (2009), 4.95% (2008), 6.09% (2007), 8.65% (2006), 2.69% (2005), while other income and Major accounts in the Balance Sheet consist of non-current assets and current liabilities which averages at 95% and 147% of total assets, respectively, however, current liabilities are much higher than the Group's total assets year-to-year basis. term obligation continues to deteriorate. and impairments. expenses fluctuates due to the recognition of gains from dacion, and recognition of impairment of assets, respectively. which reveals that there no sufficient assets to cover the Group's liabilities. Revenues from operations are also not sufficient to cover the expenses on a creditors continues to rise up, while the amount provided by owners deflate due to the negative results of operations. penalties and surcharges. finance its assets. SEC En Banc Case No. 01-10-193 SEC En Banc Case No. 12-9-183 Page 27 of 28 d

Raycor Aircontrol Systems Inc., Galactica Food Corporation, and Diamond Laboratories, Inc. moved for, and are in favor of the termination of the rehabilitation proceedings. requirement as to how many creditors should file the motion, hence, the SHP did not err in granting the petition of PNB to terminate the rehabilitation proceedings. abuse of discretion in terminating the rehabilitation proceedings of the Uniwide Group. Case No. 12-09-183) is hereby DENIED. The Order of the Hearing Panel dated 30 July 2009 and the Order of the Special Hearing Panel dated 17 September 2009 are hereby AFFIRMED. termination of the rehabilitation proceedings and only five of the hundreds of creditors favored the motion. They insist that the rehabilitation proceedings should continue as they are on their path to recovery. PNB, Land Bank, East West Banking Corporation, WHEREFORE, premises considered, the Petition for Certiorari (SEC En Banc The foregoing discussion disprove the allegation that the SHP acted with grave The Uniwide Group asserted that only one creditor, PNB moved for the As can be gleaned from the afore-quoted Section 4-26 of the RPCR, there is no

hereby AFFIRMED 193) is hereby DENIED, and Special Hearing Panel Resolution dated 13 January 2010 is The Appeal by the Uniwide Group of Companies (SEC En Banc Case No. 01-10-

SEC En Banc Case No. 01-10-193 SEC En Banc Case No. 12-9-183 Page 28 of 28 d

SEC En Banc case No. 12-09-183 and SEC En Banc case No. 12-09-183 filed by Holdings, Inc. are hereby DENIED. Uniwide Sales Realty and Resources Corporation, Uniwide Sales, Inc. and Uniwide The Urgent Manifestations and Motions to Withdraw from the pending cases

Rules of Procedure on Corporate Recovery, after which, LIQUIDATION SHALL Sales, Inc. 2) Uniwide Holdings, Inc. 3) Naic Resources & Development Corporation 4) Uniwide Sales Realty and Resources Corp. 5) First Paragon Corporation and 6) Uniwide Sales Warehouse Club, Inc. is hereby ORDERED pursuant to Section 6-1 of the SEC FOLLOW. The DISSOLUTION of all the companies in the group, namely: 1) Uniwide

SO ORDERED.

Mandaluyong City, 30 May 2013.

TERESITA J. HERBOSA Chairperson

MA.JUANITAE.CUITO Commissioner JvW MANUEL HU Commissioner O B.GAITE

ELADIOM. JALA oim WW toner ANTONIETA F. IBE G Mou

Commissioner