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Asset Privatization Trsut vs CA Not only that, the AC also awarded P2.

5 billion in moral
damages in favor of MMIC to be paid by the government.
In 1968, the government undertook to support the financing APTs MFR was denied. Cabarrus then filed before the Makati
of Marinduque Mining and Industrial Corporation (MMIC). RTC a motion to confirm the arbitration award. APT opposed
The government then issued debenture bonds in favor of the same as it alleged that the motion is improper. Makati
MMIC which enable the latter to take out loans from the RTC denied APTs opposition and confirmed the arbitration
Development Bank of the Philippines (DBP) and the award. The Court of Appeals affirmed the ruling of the RTC.
Philippine National Bank (PNB). The loans were mortgaged
by MMICs assets. In 1984 however, MMICs indebtedness ISSUE: Whether or not the ruling of the Arbitration
reached P13.7 billion and P8.7 billion to DPB and PNB Committee as affirmed by the Regional Trial Court of Makati
respectively. MMIC had trouble paying and this exposed the (Branch 62) and the Court of Appeals is correct.
government, because of the debenture bonds, to a P22
billion obligation. HELD: No.

In order to mitigate MMICs loan liability, a financial 1. The award of damages in favor of MMIC is improper.
restructuring plan (FRP) was drafted in the presence of First, it was not made a party to the case. The derivative suit
MMICs representatives as well as representatives from DBP filed by Cabarrus failed to implead MMIC. So how can an
and PNB. The two banks however never formally approved award for damages be awarded to a non-party? Second,
the said FRP. Eventually, the staggering loans became even if MMIC, which is actually a real party in interest, was
overdue and PNB and DBP chose to foreclose MMICs assets, impleaded, it is not entitled to moral damages. It is not yet a
FRP no longer feasible at that point. So the assets were well settled jurisprudence that corporations are entitled to
foreclosed and were eventually assigned to the Asset moral damages. While the Supreme Court in some cases did
Privatization Trust (APT). award certain corporations moral damages for besmirched
Later, Jesus Cabarrus, Sr., a stockholder of MMIC initiated a reputations, such is not applicable in this case because
derivative suit against PNB and DBP with APT being when the alleged wrongful foreclosure was done, MMIC was
impleaded as the successor in interest of the two banks. The already in bad standing hence it has no good wholesome
suit basically questioned the foreclosure as Cabarrus reputation to protect. So it could not be said that there was
asserted that the foreclosure was invalid because he a reputation besmirched by the act of foreclosure.
insisted that the FRP was adopted by PNB and DBP as a Likewise, the award of moral damages in favor of Cabarrus
consequence of the presence of the banks representatives is invalid. He cannot have possibly suffered any moral
when the said FRP was drafted. Cabarrus asserts that APT damages because the alleged wrongful act was committed
should restore the assets to MMIC and that PNB and DBP against MMIC. It is a basic postulate that a corporation has a
should honor the FRP. The suit was filed in the RTC of Makati personality separate and distinct from its stockholders. The
but while the case was pending, the parties agreed to properties foreclosed belonged to MMIC, not to its
submit the case for arbitration. Hence, Makati RTC dismissed stockholders. Hence, if wrong was committed in the
the case upon motion of the parties. foreclosure, it was done against the corporation.

The Arbitration Committee (AC) which heard the case ruled 2. The FRP is not valid hence the foreclosure is valid.
in favor of Cabarrus. The AC granted Cabarrus prayer and at The mere presence of DBPs and PNBs representatives
the same time awarded him P10 million in moral damages. during the drafting of FRP is not constitutive of the banks
formal approval of the FRP. The representatives are 3. Further, the proceeding is procedurally infirm. RTC
personalities distinct from PNB and DBP. PNB and DBP have Makati had already dismissed the civil case when the parties
their own boards and officers who may have different opted for arbitration. Hence, it should have never took
decisions. The representatives were not shown to have been cognizance of the Cabarrus motion to confirm the AC
authorized by the respective boards of the two banks to award. The same should have been brought through a
enter into any agreement with MMIC. separate action not through a motion because RTC Makati
already lost jurisdiction over the case when it dismissed it to
give way for the arbitration. The arbitration was a not a
continuation of the civil case filed in Makati RTC.

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