G.R. No. 121171 - Asset Privatization Trust vs. Court of Appeals

The case involves a petition for review on certiorari by the Asset Privatization Trust (APT) against the Court of Appeals and several minority stockholders of Marinduque Mining and Industrial Corporation (MMIC).
The petition seeks to reverse the Court of Appeals' decision that denied APT's petition for certiorari, which challenged the Regional Trial Court (RTC) of Makati's order confirming an arbitration award in favor of MMIC.
The RTC had upheld an arbitration committee's decision that awarded MMIC damages amounting to approximately P2.5 billion, which could rise to P4.5 billion with interest.
The damages were imposed on the government for exercising its right to foreclose on MMIC's assets due to MMIC's failure to pay its debts.

The Philippine government authorized the development of mineral deposits in the Surigao Mineral Reservation through various Republic Acts, granting MMIC exclusive rights to explore and exploit minerals.
The government supported MMIC financially by purchasing debenture bonds and extending guarantees for loans from the Development Bank of the Philippines (DBP) and the Philippine National Bank (PNB).
A Mortgage Trust Agreement was executed, allowing DBP and PNB to foreclose on MMIC's assets in case of default, which was defined in the agreement.

By 1984, MMIC faced severe financial difficulties, with outstanding loans totaling over P22 billion to DBP and PNB.
A Financial Restructuring Plan (FRP) was proposed to convert MMIC's debt into equity, but it was never formally approved by the banks.
As loans became overdue, DBP and PNB decided to extrajudicially foreclose on MMIC's assets, which were subsequently sold to PNB.

In 1985, minority stockholders of MMIC, led by Jesus S. Cabarrus, filed a derivative suit against DBP and PNB, seeking to annul the foreclosures and restore the assets to MMIC.
The case was submitted to arbitration under a Compromise and Arbitration Agreement, which limited the issues to the capacity of the plaintiffs to file the suit and the validity of the foreclosure actions.

The Arbitration Committee ruled in favor of MMIC, declaring the foreclosure invalid and awarding damages to MMIC and moral damages to Cabarrus.
The decision was contested by APT, which argued that the arbitration exceeded its authority and that the RTC lacked jurisdiction to confirm the award due to the prior dismissal of the case.

The Court of Appeals dismissed APT's petition for certiorari, affirming the RTC's confirmation of the arbitration award.
APT subsequently filed a petition for review, raising several errors attributed to the Court of Appeals.

The Supreme Court found that the RTC had lost jurisdiction over the case after it was dismissed, and thus could not confirm the arbitration award.
The dismissal of the case was deemed final, and the only way to revive it would have been through a new action, not a motion.

The Court ruled that APT was not estopped from questioning the RTC's jurisdiction, as it consistently maintained that the RTC lacked authority to confirm the arbitration award.
The Court emphasized that jurisdiction cannot be conferred by consent or waiver, and APT's actions did not preclude it from raising jurisdictional issues.

The Supreme Court reiterated that arbitration awards cannot be set aside for mere errors of judgment, but must be vacated if the arbitrators exceed their powers or act beyond the scope of their authority.
The Court found that the arbitration committee had exceeded its authority by awarding damages to MMIC, which was not a party to the derivative suit.

The Supreme Court reversed the Court of Appeals' decision and the RTC's orders, vacating the arbitration commi...continue reading