Kathryn P.

Akmad
Bulacan State University
College of Law
TITLE: Asser Privatization Trust v. CA
FACTS: In 1968, the government undertook to support the financing of arindu!ue ining and
Industria" Corporation #IC$. The government then issued de%enture %onds in favor of IC
&hich ena%"e the "atter to take out "oans from the 'eve"opment (ank of the Phi"ippines #'(P$ and
the Phi"ippine )ationa" (ank #P)($. The "oans &ere mortgaged %* IC+s assets. In 198,
ho&ever, IC+s inde%tedness reached P1-.. %i""ion and P8.. %i""ion to 'P( and P)(
respective"*. IC had trou%"e pa*ing and this e/posed the government, %ecause of the
de%enture %onds, to a P00 %i""ion o%"igation.
In order to mitigate IC+s "oan "ia%i"it*, a financia" restructuring p"an #12P$ &as drafted in the
presence of IC+s representatives as &e"" as representatives from '(P and P)(. The t&o
%anks ho&ever never forma""* approved the said 12P. 3ventua""*, the staggering "oans %ecame
overdue and P)( and '(P chose to forec"ose IC+s assets, 12P no "onger feasi%"e at that
point. 4o the assets &ere forec"osed and &ere eventua""* assigned to the Asset Privatization Trust
#APT$.
5ater, 6esus Ca%arrus, 4r., a stockho"der of IC initiated a derivative suit against P)( and '(P
&ith APT %eing imp"eaded as the successor in interest of the t&o %anks. The suit %asica""*
!uestioned the forec"osure as Ca%arrus asserted that the forec"osure &as inva"id %ecause he
insisted that the 12P &as adopted %* P)( and '(P as a conse!uence of the presence of the
%anks+ representatives &hen the said 12P &as drafted. Ca%arrus asserts that APT shou"d restore
the assets to IC and that P)( and '(P shou"d honor the 12P. The suit &as fi"ed in the 2TC of
akati %ut &hi"e the case &as pending, the parties agreed to su%mit the case for ar%itration.
7ence, akati 2TC dismissed the case upon motion of the parties.
The Ar%itration Committee #AC$ &hich heard the case ru"ed in favor of Ca%arrus. The AC granted
Ca%arrus pra*er and at the same time a&arded him P18 mi""ion in mora" damages. )ot on"* that,
the AC a"so a&arded P0.9 %i""ion in mora" damages in favor of IC to %e paid %* the
government. APT+s 12 &as denied. Ca%arrus then fi"ed %efore the akati 2TC a motion to
confirm the ar%itration a&ard. APT opposed the same as it a""eged that the motion is improper.
akati 2TC denied APT+s opposition and confirmed the ar%itration a&ard. The Court of Appea"s
affirmed the ru"ing of the 2TC.
ISSUE: :hether or not the ru"ing of the Ar%itration Committee as affirmed %* the 2egiona" Tria"
Court of akati #(ranch 60$ and the Court of Appea"s is correct.
HELD: )o.
1. The a&ard of damages in favor of IC is improper. 1irst, it &as not made a part* to the case.
The derivative suit fi"ed %* Ca%arrus fai"ed to imp"ead IC. 4o ho& can an a&ard for damages %e
a&arded to a non;part*< 4econd, even if IC, &hich is actua""* a rea" part* in interest, &as
imp"eaded, it is not entit"ed to mora" damages. It is not *et a &e"" sett"ed =urisprudence that corporations
are entit"ed to mora" damages. :hi"e the 4upreme Court in some cases did a&ard certain corporations
mora" damages for %esmirched reputations, such is not app"ica%"e in this case %ecause &hen the
a""eged &rongfu" forec"osure &as done, IC &as a"read* in %ad standing hence it has no good
&ho"esome reputation to protect. 4o it cou"d not %e said that there &as a >reputation? %esmirched %*
the act of forec"osure. 5ike&ise, the a&ard of mora" damages in favor of Ca%arrus is inva"id. 7e cannot
have possi%"* suffered an* mora" damages %ecause the a""eged &rongfu" act &as committed against
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Kathryn P. Akmad
Bulacan State University
College of Law
IC. It is a %asic postu"ate that a corporation has a persona"it* separate and distinct from its
stockho"ders. The properties forec"osed %e"onged to IC, not to its stockho"ders. 7ence, if &rong &as
committed in the forec"osure, it &as done against the corporation.
0. The 12P is not va"id hence the forec"osure is va"id. The mere presence of '(P+s and P)(+s
representatives during the drafting of 12P is not constitutive of the %anks+ forma" approva" of the 12P.
The representatives are persona"ities distinct from P)( and '(P. P)( and '(P have their o&n %oards
and officers &ho ma* have different decisions. The representatives &ere not sho&n to have %een
authorized %* the respective %oards of the t&o %anks to enter into an* agreement &ith IC.
-. 1urther, the proceeding is procedura""* infirm. 2TC akati had a"read* dismissed the civi" case
&hen the parties opted for ar%itration. 7ence, it shou"d have never took cognizance of the Ca%arrus+
motion to confirm the AC+ a&ard. The same shou"d have %een %rought through a separate action not
through a motion %ecause 2TC akati a"read* "ost =urisdiction over the case &hen it dismissed it to
give &a* for the ar%itration. The ar%itration &as a not a continuation of the civi" case fi"ed in akati
2TC.
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