The PHILJA Judicial Journal The PHILJA Judicial Journal is published twice a year by the Research, Publications and Linkages Office of the Philippine Judicial Academy (PHILJA). The Journal features articles, lectures, research outputs and other materials of interest to members of the Judiciary, particularly judges, as well as law students and practitioners. The views expressed by the authors do not necessarily reflect the views of either the Academy or its editorial board. Editorial and general offices are located at PHILJA, 3rd Floor, Centennial Building, Supreme Court, Padre Faura Street, Manila. Tel. No.: +63 2 8552-9524 Telefax No.: +63 2 8552-9621 Email: [email protected]; [email protected] CONTRIBUTIONS. The PHILJA Judicial Journal invites contributions. Please include author’s name and biographical information. The editorial board reserves the right to edit the materials submitted for publication. Copyright © 2014 by The PHILJA Judicial Journal. All rights reserved. For more information, please visit the PHILJA website at http://philja.judiciary.gov.ph. ISSN 2244-5854 SUPREME COURT OF THE PHILIPPINES CHIEF JUSTICE Hon. MARIA LOURDES P. A. SERENO ASSOCIATE JUSTICES Hon. ANTONIO T. CARPIO Hon. PRESBITERO J. VELASCO, Jr. Hon. TERESITA J. LEONARDO-DE CASTRO Hon. ARTURO D. BRION Hon. DIOSDADO M. PERALTA Hon. LUCAS P. BERSAMIN Hon. MARIANO C. DEL CASTILLO Hon. ROBERTO A. ABAD Hon. MARTIN S. VILLARAMA, Jr. Hon. JOSE P. PEREZ Hon. JOSE C. MENDOZA Hon. BIENVENIDO L. REYES Hon. ESTELA M. PERLAS-BERNABE Hon. MARVIC MARIO VICTOR F. LEONEN COURT ADMINISTRATOR Hon. JOSE MIDAS P. MARQUEZ DEPUTY COURT ADMINISTRATORS Hon. RAUL B. VILLANUEVA Hon. JENNY LIND ALDECOA-DELORINO Hon. THELMA C. BAHIA CLERK OF COURT Hon. ENRIQUETA ESGUERRA VIDAL ASSISTANT COURT ADMINISTRATOR Hon. THEODORE O. TE ASSISTANT CLERK OF COURT Atty.FELIPA B. ANAMA DIVISION CLERKS OF COURT Atty.EDGAR O. ARICHETA Atty.MA. LOURDES C. PERFECTO Atty.LUCITA A. SORIANO PHILIPPINE JUDICIAL ACADEMY Board of Trustees Hon. MARIA LOURDES P. A. SERENO Chief Justice Chair Hon. ANTONIO T. CARPIO Senior Associate Justice, Supreme Court Vice Chair Members Hon. ADOLFO S. AZCUNA Hon. JOSE MIDAS P. MARQUEZ Chancellor Court Administrator Hon. ANDRES B. REYES, Jr. Hon. AMPARO CABOTAJE-TANG Presiding Justice, Court of Appeals Presiding Justice, Sandiganbayan Hon. ROMAN G. DEL ROSARIO Hon. RALPH S. LEE Presiding Justice, Court of Tax Appeals President, Philippine Judges Association Hon. MARINA G. MEJORADA Dean NILO T. DIVINA Representative, First Level Courts President, Philippine Association of Law Schools Hon. AMEURFINA A. MELENCIO HERRERA Founding Chancellor Emeritus Executive Officials Hon. ADOLFO S. AZCUNA Hon. JUSTO P. TORRES, Jr. Chancellor Vice Chancellor Hon. MARINA L. BUZON Executive Secretary Chiefs of Office Hon. JUSTO P. TORRES, Jr. Finance Office Hon. DELILAH VIDALLON-MAGTOLIS Hon. MARINA L. BUZON Academic Affairs Office Acting Chief, Philippine Mediation Center Office Dean SEDFREY M. CANDELARIA Hon. ELMER DG. ELERIA Head, Research, Publications and Linkages Office Officer in Charge, Administrative Office Chairpersons, Curricular Departments Dean PACIFICO A. AGABIN Prof. RUBEN F. BALANE Constitutional Law Civil Law Hon. MAGDANGAL M. DE LEON Hon. EDILBERTO G. SANDOVAL Remedial Law Criminal Law Hon. JOSE MIDAS P. MARQUEZ Hon. HILARION L. AQUINO Court Management Ethics and Judicial Conduct Hon. JOSE C. VITUG Dean MERLIN M. MAGALLONA Commercial Law International and Human Rights Law Fr. RANHILIO C. AQUINO Prof. MYRNA S. FELICIANO Jurisprudence and Legal Philosophy Legal Method and Research Dean SEDFREY M. CANDELARIA Atty.EMMANUEL L. CAPARAS Special Areas of Concern Court Technology Prof. ALFREDO F. TADIAR Hon. HAKIM S. ABDULWAHID Alternative Dispute Resolution Shari’a and Islamic Jurisprudence Justice Adolfo S. Azcuna Chancellor Dean Sedfrey M. Candelaria Editor in Chief Editorial and Research Staff Atty. Ma. Melissa R. Dimson-Bautista Atty. Ronald Paz Caraig Ms. Armida M. Salazar Ms. Regina Maria Sofia M. Babasa Atty. Rizsa Rose S. Baer Ms. Jocelyn D. Bondoc Atty. Gabriella Louise OJ. Candelaria Mr. Jonel M. Candelaria Mr. Joseph Arvin S. Cruz Ms. Judith B. del Rosario Ms. Christine A. Ferrer Mr. Michael Angelo P. Laude Ms. Joanne Narciso-Medina Ms. Charmaine S. Nicolas Ms. Sarah Jane S. Salazar Circulation and Support Staff Mr. Lope R. Palermo Ms. Carmela D. Panganiban Mr. Daniel S. Talusig Printing Services Mr. Ponciano M. Santiago and Staff Contents Officials of the Supreme Court of the Philippines iv Officials of the Philippine Judicial Academy v Program 1 Opening Remarks 3 Justice Arturo D. Brion Message 6 Mr. Aniceto M. Sobrepeña Lecture 8 Toward a More Forward-Looking Insolvency System Atty. Francis Ed. Lim Reactions Senator Edgrado J. Angara 36 Atty. Monico M. Jacob 43 Closing Remarks 48 Chief Justice Maria Lourdes P. A. Sereno References Law Republic Act No. 10142 52 An Act Providing for the Rehabilitation or Liquidation of Financially Distressed Enterprises and Individuals Approved on July 18, 2010 Rules A.M. No. 00-8-10-SC 105 Rule of Procedure on Corporate Rehabilitation Effective January 16, 2009 A.M. No. 12-12-11-SC 131 The Financial Rehabilitation Rules of Procedure (2013) Approved on August 27, 2013 1 Supreme Court of the Philippines Philippine Judicial Academy in cooperation with the Metrobank Foundation, Inc. present the Ninth Metrobank Foundation Professorial Chair Lecture January 25, 2013, Friday, 2:00 p.m. Court of Appeals Auditorium Centennial Building, Court of Appeals Maria Orosa Street, Manila Program Doxology Philippine National Anthem Supreme Court Hymn Supreme Court Choir Welcome Remarks Honorable Adolfo S. Azcuna Chancellor, Philippine Judicial Academy Opening Remarks Honorable Arturo D. Brion Associate Justice, Supreme Court Message Mr. Aniceto M. Sobrepeña President, Metrobank Foundation, Inc. Musical Number Supreme Court Choir Introduction of Lecturer Justice Jose C. Vitug Retired Associate Justice, Supreme Court Chairperson, PHILJA Department of Commercial Law LECTURE TOWARD A MORE FORWARD-LOOKING INSOLVENCY SYSTEM Atty. Francis Ed. Lim Holder, 2012 Metrobank Foundation Professorial Chair in Commercial Law Co-Managing Partner, Angara Abello Concepcion Regala & Cruz Law Offices Vice Chairperson, PHILJA Department of Commercial Law Reactors Honorable Edgardo J. Angara Senator, Senate of the Philippines Atty. Monico V. Jacob Former Commissioner, Securities and Exchange Commission President and CEO, STI Education Services Group The Professorial Chair in Commercial Law endowed by The Metrobank Foundation “The Metrobank Foundation Professorial Chair provides assistance to the Philippine Judicial Academy to develop and enhance its programs in Judicial Education in order to encourage its Corps of Professors to author and publish treatises that introduce innovative concepts and approaches in designated areas of law to promote competence, excellence, and efficiency in the Philippine Justice System.” Presentation of Paper To the Metrobank Foundation, Inc. by the Chairholder To the Supreme Court of the Philippines by the Metrobank Foundation, Inc. Presentation of Endowment to the Chairholder by the Metrobank Foundation, Inc. Presentation of Plaques of Appreciation to the Metrobank Foundation, Inc., to the Chairholder, and the Reactors from the Supreme Court of the Philippines and the Philippine Judicial Academy Closing Remarks Honorable Maria Lourdes P. A. Sereno Chief Justice, Republic of the Philippines Philippine Judiciary Hymn Master of Ceremonies Ma. Kristina Salonga Zamora Associate, Angara Abello Concepcion Regala and Cruz Law Offices 3 Opening Remarks* Honorable Arturo D. Brion Associate Justice, Supreme Court Chief Justice Maria Lourdes P. A. Sereno, Senator Edgardo J. Angara, Justice Jose C. Vitug, Chancellor Adolfo S. Azcuna, Mr. Aniceto M. Sobrepeña (President, Metrobank Foundation, Inc.), Former SEC Commissioner, Atty. Monico V. Jacob, Atty. Francis Ed. Lim, our Lecturer and the Ninth Metrobank Foundation Professorial Chair holder, Distinguished guests, Good afternoon to everyone. Today, under the initiative of the Metrobank Foundation, Inc. and the Philippine Judicial Academy, a very able lecturer—Atty. Francis Ed. Lim of the ACCRA law firm and holder of the 2012 Metrobank Foundation Professorial Chair in Commercial Law—will discuss with us the Financial Rehabilitation and Insolvency Act of 2012 or the FRIA. Let me open the discussion by sharing with you, as an advance glimpse into the law, the insight we gained as we—Atty. Lim among them—drafted the implementing rules of this law for the Court en banc’s consideration. I can best describe the mindset that unavoidably evolved by citing the best-selling book, The Black Swan: The Impact of the Highly Improbable, by Nassem Nicolas Taleb, which discussed the concept of a black swan event. A black swan event is an unexpected or hard to predict event that carries deep and far-reaching consequences. We can hardly see black swans coming; when they do, their consequences can unsettle the existing order, create chaos, cause confusion, and profoundly shape our world. Think in this regard of World War I, 9/11, and the financial crisis currently plaguing the global economy—events that were beyond the realm of normal expectations and which we only saw clearly on hindsight. Because we can hardly predict or prevent these rare occurrences, attempts at prediction or in suppressing randomness and volatility only leave us unsettled and more fragile. In lieu of these efforts, Taleb proposes in