Title
Asset Privatization Trust vs. Court of Appeals
Case
G.R. No. 121171
Decision Date
Dec 29, 1998
Foreclosure of MMIC assets contested by minority stockholders; arbitration award vacated due to jurisdictional issues, arbitrators' excess of authority, and improper confirmation by RTC.
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Case Digest (G.R. No. 121171)

Facts:

Background of the Case:
The case revolves around the foreclosure of assets belonging to Marinduque Mining and Industrial Corporation (MMIC) by the Philippine National Bank (PNB) and the Development Bank of the Philippines (DBP) due to MMIC's failure to pay its substantial debts, which amounted to approximately P22.66 billion. The foreclosure was contested by MMIC's minority stockholders, led by Jesus S. Cabarrus, Sr., who filed a derivative suit against PNB and DBP, seeking the annulment of the foreclosure, specific performance, and damages.

Development of MMIC and Government Support:
MMIC was granted the exclusive right to explore, develop, and exploit mineral deposits in the Surigao Mineral Reservation under Republic Act No. 1828, as amended. The Philippine government supported MMIC’s financing through the purchase of debentures and guarantees. PNB and DBP provided loans and guarantees to MMIC, which later became overdue and unpaid.

Foreclosure and Financial Restructuring Plan (FRP):
By 1984, MMIC’s financial situation was dire, leading to the drafting of a Financial Restructuring Plan (FRP) designed to convert debt into equity. However, the FRP was never formally adopted by PNB or DBP. In August and September 1984, due to the impossibility of restructuring the loans, PNB and DBP decided to foreclose on MMIC’s assets, which were later sold to PNB and transferred to the Asset Privatization Trust (APT) in 1986.

Arbitration Agreement and Proceedings:
In 1985, Cabarrus and other minority stockholders filed a derivative suit against PNB and DBP. In 1992, the parties agreed to submit the dispute to arbitration, limiting the issues to (a) the plaintiffs' capacity to file the derivative suit and (b) the validity of the foreclosure proceedings. The Arbitration Committee ruled in favor of MMIC, awarding it P2.53 billion in actual damages and additional moral and exemplary damages. APT challenged the award, leading to the instant petition.

Issue:

  1. Jurisdiction of the RTC to Confirm the Arbitral Award:
    Whether the RTC, Branch 62, which had previously dismissed the case, retained jurisdiction to confirm the arbitration award.

  2. Estoppel of APT to Question the Arbitration Award:
    Whether APT was estopped from questioning the arbitration award after seeking affirmative relief from the RTC.

  3. Appropriateness of Certiorari as a Remedy:
    Whether the Court of Appeals erred in not treating APT’s petition for certiorari as an appeal from the RTC’s order confirming the award.

  4. Excess of Arbitrators’ Powers:
    Whether the arbitrators exceeded their powers by ruling on matters not submitted to arbitration, such as the validity of the FRP and the award of moral damages to individuals.

Ruling:

The Supreme Court reversed the decision of the Court of Appeals and vacated the arbitration award. The Court held that:

  1. Lack of Jurisdiction of the RTC:
    The RTC, Branch 62, had no jurisdiction to confirm the arbitration award after dismissing the original case. The confirmation of the award should have been filed as a new case and raffled to a different branch of the RTC.

  2. No Estoppel Against APT:
    APT was not estopped from questioning the jurisdiction of the RTC, as it consistently maintained its position that the court lacked jurisdiction. Its motion to vacate the award was not inconsistent with its disavowal of the court’s jurisdiction.

  3. Certiorari as the Proper Remedy:
    APT’s petition for certiorari was proper, as the RTC acted without jurisdiction and with grave abuse of discretion in confirming the arbitration award, which was beyond the scope of the arbitration agreement.

  4. Excess of Arbitrators’ Powers:
    The arbitrators exceeded their authority by (a) ruling on the validity of the FRP, (b) awarding damages to MMIC, which was not a party to the suit, and (c) granting moral damages to Jesus S. Cabarrus, Sr., who was not entitled to such damages in a derivative suit.

Ratio:

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