Case Digest (G.R. No. 152154)
Facts:
In Development Bank of the Philippines v. Sta. Ines Melale Forest Products Corporation (G.R. Nos. 193068 & 193099, February 1, 2017), the Court resolved consolidated petitions by the Development Bank of the Philippines (DBP) and the National Development Corporation (NDC) assailing a 2010 Court of Appeals decision affirming with modifications a 2003 Makati Regional Trial Court judgment. In 1979, Galleon Shipping Corporation’s major stockholders, including respondents Sta. Ines Melale Forest Products Corporation, Cuenca Investment Corporation, Universal Holdings Corporation, Rodolfo M. Cuenca and Manuel I. Tinio, executed a Deed of Undertaking to guarantee DBP’s advancement of foreign loans to Galleon. When Galleon remained distressed, President Ferdinand Marcos issued Letter of Instructions (LOI) No. 1155 (July 21, 1981) directing NDC to acquire 100% of Galleon’s shares in five years and DBP to advance principal and interest, to be converted into preferred shares, while both GoveCase Digest (G.R. No. 152154)
Facts:
- Parties and Background
- Petitioners: Development Bank of the Philippines (DBP) and National Development Corporation (NDC)
- Respondents: Sta. Ines Melale Forest Products Corporation, Rodolfo M. Cuenca, Manuel I. Tinio, Cuenca Investment Corporation, Universal Holdings Corporation, National Galleon Shipping Corporation (Galleon), Philippine National Construction Corporation (PNCC)
- Galleon organized in 1977, encountered financial distress, obtained foreign loans guaranteed by DBP; its shareholders and officers counter-guaranteed those obligations under a Deed of Undertaking (Oct 10, 1979)
- Letter of Instructions No. 1155 and Memorandum of Agreement
- LOI 1155 (July 21, 1981) directed NDC to acquire 100% of Galleon’s shares for ₱46.7 M (payable in five years, no interest), infuse capital, have DBP advance principal and interest on Galleon’s obligations, convert advances into preferred shares, and restructure foreign loans
- MOA (Aug 10, 1981) between NDC (Buyer) and Galleon’s stockholders (Sellers) pursuant to LOI 1155:
- Sellers to allow NDC to assume management and prepare a share purchase agreement (SPA) within 60 days for 100% of shares; NDC to appoint directors, verify paid-up capital of ₱46,740,755, issue promissory notes maturing on fifth anniversary of SPA, and include conditions (warranties, release of counter-guarantees, arbitration)
- SPA never formally executed; NDC delayed review of Galleon’s accounts, Gereral Manager Carpio only reported on April 26, 1982
- LOI 1195, Privatization and Trial Proceedings
- LOI 1195 (Feb 10, 1982) rescinded inconsistent provisions of LOI 1155, directed DBP and NDC to foreclose to limit government exposure
- Complaint (Apr 22, 1985) by stockholders against NDC, NGSC, DBP, APT: enforcement of MOA, payment of advances (₱15.15 M and US$2.3 M), share price (₱46.74 M), attorney’s fees, moral and exemplary damages; sought declaration of novation extinguishing Deed of Undertaking
- RTC Decision (Sept 16, 2003, modified Feb 23, 2004) upheld LOI 1155 and MOA, ruled LOI 1195 did not repeal LOI 1155, estopped NDC from denying SPA, held novation occurred (NDC subrogated to guarantees), awarded sums with 6% interest, attorney’s fees, damages, declared respondents and PNCC free from liability under undertaking and barred DBP/APT deficiency claims
- CA Decision (Mar 24, 2010) affirmed RTC with modifications: upheld MOA as binding, held NDC prevented SPA so condition deemed fulfilled (Art. 1186), affirmed novation, applied 12% interest from filing until finality and beyond, maintained awards
- Petitions for Review filed by NDC and DBP to the Supreme Court raising questions on MOA’s binding effect, novation, interest rate
Issues:
- Does the MOA obligate NDC to purchase Galleon’s shares and pay respondents’ advances?
- Did the MOA novate the Deed of Undertaking, substituting NDC for respondents as co-guarantors?
- What is the correct legal interest rate on the awards?
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)