CA stops seizure of Export Bank's assets

MANILA, Philippines - The Court of Appeals (CA) has stopped the seizure of assets of the now closed Export and Industry Bank (EIB).

In a decision promulgated last April 26 but issued only last Monday, the five-man 14th Special Division of the appellate court stopped the implementation of an earlier ruling by the Makati City Regional Trial Court (RTC) ordering the commercial bank to return to several corporations over P32 million in DMCI stocks.

Voting 3-2, CA justices ruled that the lower court erred in issuing the order that in effect had nullified the writ of preliminary injunction it issued.

The appellate court lambasted the ruling issued by Makati Judge Joselito Villarosa, saying the RTC has no authority to declare the invalidity of the orders/ resolutions of the CA, which is a higher court.

“The disquisition of the RTC, which is a declaration against the validity of a high court’s order, is a blatant disregard of the principle of hierarchy of courts,” stated the ruling penned by Associate Justice Mario Lopez.

The appellate court said the complainants – Pacific Rehouse Corp., Pacific Concorde Corp., Mizpah Holdings, Inc., Forum Holdings Corp., and East Asia Oil Co. Inc. – could pursue their claims over the unauthorized sale of DMCI shares made by the bank’s subsidiary, EIB Securities Inc. (E-Securities).

“Private respondents’ frustration at not being able to have the judgment in their favor satisfied is understandable. But given the circumstances of this case, the seizure of petitioner’s properties cannot be done without violating its constitutionally enshrined right to due process,” the CA stressed.

“Neither can equity heal the unintended injustice to petitioner resulting from an erroneous piercing of corporate fiction, merely to compensate losses arising from the contractual obligation of a subsidiary corporation whose limited liability is recognized by law and by the parties. This is not a fitting denouncement for the business community,” it added.

Associate Justices Amy Lazaro-Javier and Vicente Veloso concurred with the ruling while Associate Justices Magdangal de Leon and Socorro Inting dissented.

After declaring insolvency, EIB was recently placed under receivership by the Bangko Sentral ng Pilipinas (BSP).

On July 29, 2011, the Makati RTC ruled that E-Securities was a mere business conduit or alter ego of EIB.

The trial court on Aug. 26, 2011 directed the garnishment of P1,465,799,000, the total amount of the P32,180,000 DMCI shares at P45.55 per share, against E-Securities.

It said that the bank, as 99 percent owner of E-Securities, has absolute control of the affairs of defendant corporation “so much so that the lawyers of EIB represented the defendant throughout the trial of the case.”

This prompted the bank to seek redress before the appeals court, which in turn issued a writ of preliminary injunction on Sept. 2, 2011.

On Nov. 29, 2011, the RTC directed the sheriff to implement its Aug. 26, 2011 order and continue with the garnishment of all properties belonging to E-Securities, forcing EIB to elevate the case to the CA.