The Supreme Court has allowed beleaguered College Assurance Plan (CAP) Philippines, Inc. to rehabilitate itself, ordering the suspension of payment on the claims of individual plan holders against the pre-need firm.

In a decision written by Justice Diosdado M. Peralta, the SC ruled that the Makati City Regional Trial Court (RTC) did not abuse its discretion in staying all claims against CAP and giving due course to its petition for corporate rehabilitation in orders issued in 2005.

But the SC said that while there was no abuse of discretion on the part of then RTC Judge and now Court of Appeals Associate Justice Romeo F. Barza, the plan holders “are not precluded from seeking other remedies available to them with the lower court.”

With the ruling, the SC dismissed the petition filed by more than 700 planholders who questioned the 2005 orders issued by the trial court.

CAP was incorporated in 1980 to engage in the sale of pre-need educational plans. After suffering financial difficulties, several planholders filed in 2005 an action against the corporation “for Specific Performance and/or Annulment of Contract due to Fraud, Return and Disgorgement of Illegal Profits, Damages with Application for Receiver and/or Management Committee against CAP, its Directors and Officers, and the Fil-Estate Group of Companies.”

In less than two weeks, CAP filed a petition for corporate rehabilitation that was given due course by the trial court which also ordered a stay on the payment of claims filed by individual planholders.

The planholders elevated the issue before the SC, alleging that the trial court judge committed grave abuse of discretion issuing the two orders on corporate rehabilitation and stay of payment on claims.

Finding no grave abuse of discretion on the part of the trial court judge, the SC said that “all the assets of the corporation” are to be “held in trust for the equal benefit of all creditors to preclude one from obtaining an advantage or preference over another.”

The SC said that “all the creditors ought to stand on equal footing” in situations such as this as it pointed out that the Interim Rules of Procedure on Corporate Rehabilitation of 2000 (Interim Rules) applies to CAP’s petition for corporate rehabilitation.

Under the rules, a “claim” shall include ‘all claims or demands of whatever nature or character against a debtor or its property…’” and “’creditor’ shall mean ‘any holder of a claim.’”

“The claim of petitioners for payment of tuition fees from CAP is included in the definition of ‘claims’ under the Interim Rules,” and thus must be frozen with all other claims to assure that CAP’s assets will be distributed accordingly to all its claimants.”