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G.R. No. 115412 November 19, 1999 HOME BANKERS SAVINGS AND TRUST COMPANY, petitioner, vs.

COURT OF APPEALS and FAR EAST BANK & TRUST CO., INC. respondents.

ISSUE: MAY THE PARTICIPANTS IN THE REGIONAL CLEARING OPERATIONS OF THE PCHC MAY BYPASS THE ARBITRATION PROCESS? RULING: No. Participants in the regional clearing operations of the Philippine Clearing House Corporation cannot bypass the arbitration process laid out by the body and seek relief directly from the courts. In the case at bar, undeniably, private respondent has initiated arbitration proceedings as required by the PCHC rules and regulations, and pending arbitration has sought relief from the trial court for measures to safeguard and/or conserve the subject of the dispute under arbitration, as sanctioned by section 14 of the Arbitration Law, and otherwise not shown to be contrary to the PCHC rules and regulations. (Home Bankers Saving and Trust Company vs. CA G.R. No. 115412. November 19, 1999)

PHILIPPINE ECONOMIC ZONE AUTHORITY, Petitioner, vs. EDISON (BATAAN) COGENERATION CORPORATION, Respondent.
In a recent case(1) the Philippine Economic Zone Authority and Edison Cogeneration Corporation entered into a power supply and purchase agreement whereby the latter undertook to construct, operate and maintain a power plant which would sell, supply and deliver electricity to the authority for resale in the Bataan Economic Processing Zone. In the course of discharging its obligation, Edison requested from the authority a tariff increase with a mechanism for adjustment of the cost of fuel and lubricating oil. The authority did not respond. Citing a tariff increase which the authority granted to the East Asia Utilities Corporation (another electricity supplier in the Mactan Economic Zone), Edison claimed that the authority had violated its obligation not to give preferential treatment to other power suppliers. After 90 days had elapsed, Edison terminated the agreement and demanded Ps708,691,543 as a termination fee. The authority disputed Edison's right to terminate the agreement and refused to pay the termination fee, prompting Edison to request the authority to submit the dispute to arbitration pursuant to the arbitration clause in the agreement. The authority refused to submit to arbitration, and thus Edison filed a complaint against it in court for specific performance. Edison alleged, among other things, that:

under the arbitration clause, the dispute should be resolved through arbitration before an arbitration committee, to be composed of a representative from each party and a third member, who should be mutually acceptable to the parties; it had requested the authority to submit the dispute to arbitration, but the authority had refused and would not even nominate a representative for the arbitration committee; and under arbitration law, if either party fails or refuses to name its arbitrator within 15 days of receipt of a request for arbitration, the court shall appoint the arbitrator(s). The authority admitted the existence of the arbitration clause, but claimed that the dispute was not arbitrable. It also claimed that the provision on the termination fee in the agreement was invalid and unenforceable. The court held that, despite the authority's claim regarding the validity of the provision on the termination fee, it could render judgment on the pleadings because the authority did not deny the existence of the arbitration clause.

Therefore, the court proceeded to appoint the arbitrators and referred the dispute to the arbitration committee to resolve the issue.

Asset Privatization Trust vs Court of Appeals


on November 20, 2012

300 SCRA 579 Business Organization Corporation Law Corporation Generally Not Entitled To Moral Damages Power To Enter Into Contracts
In 1968, the government undertook to support the financing of Marinduque Mining and Industrial Corporation (MMIC). The government then issued debenture bonds in favor of MMIC which enable the latter to take out loans from the Development Bank of the Philippines (DBP) and the Philippine National Bank (PNB). The loans were mortgaged by MMICs assets. In 1984 however, MMICs indebtedness reached P13.7 billion and P8.7 billion to DPB and PNB respectively. MMIC had trouble paying and this exposed the government, because of the debenture bonds, to a P22 billion obligation. In order to mitigate MMICs loan liability, a financial restructuring plan (FRP) was drafted in the presence of MMICs representatives as well as representatives from DBP and PNB. The two banks however never formally approved the said FRP. Eventually, the staggering loans became overdue and PNB and DBP chose to foreclose MMICs assets, FRP no longer feasible at that point. So the assets were foreclosed and were eventually assigned to the Asset Privatization Trust (APT). Later, Jesus Cabarrus, Sr., a stockholder of MMIC initiated a derivative suit against PNB and DBP with APT being impleaded as the successor in interest of the two banks. The suit basically questioned the foreclosure as Cabarrus asserted that the foreclosure was invalid because he insisted that the FRP was adopted by PNB and DBP as a consequence of the presence of the banks representatives when the said FRP was drafted. Cabarrus asserts that APT should restore the assets to MMIC and that PNB and DBP should honor the FRP. The suit was filed in the RTC of Makati but while the case was pending, the parties agreed to submit the case for arbitration. Hence, Makati RTC dismissed the case upon motion of the parties. The Arbitration Committee (AC) which heard the case ruled in favor of Cabarrus. The AC granted Cabarrus prayer and at the same time awarded him P10 million in moral damages. Not only that, the AC also awarded P2.5 billion in moral damages in favor of MMIC t o be paid by the government. APTs MFR was denied. Cabarrus then filed before the Makati RTC a motion to confirm the arbitration award. APT

opposed the same as it alleged that the motion is improper. Makati RTC denied APTs opposition and confirmed the arbitration award. The Court of Appeals affirmed the ruling of the RTC. ISSUE: Whether or not the ruling of the Arbitration Committee as affirmed by the Regional Trial Court of Makati (Branch 62) and the Court of Appeals is correct. HELD: No. 1. The award of damages in favor of MMIC is improper. First, it was not made a party to the case. The derivative suit filed by Cabarrus failed to implead MMIC. So how can an award for damages be awarded to a non-party? Second, even if MMIC, which is actually a real party in interest, was impleaded, it is not entitled to moral damages. It is not yet a well settled jurisprudence that corporations are entitled to moral damages. While the Supreme Court in some cases did award certain corporations moral damages for besmirched reputations, such is not applicable in this case because when the alleged wrongful foreclosure was done, MMIC was already in bad standing hence it has no good wholesome reputation to protect. So it could not be said that there was a reputation besmirched by the act of foreclosure. Likewise, the award of moral damages in favor of Cabarrus is invalid. He cannot have possibly suffered any moral damages because the alleged wrongful act was committed against MMIC. It is a basic postulate that a corporation has a personality separate and distinct from its stockholders. The properties foreclosed belonged to MMIC, not to its stockholders. Hence, if wrong was committed in the foreclosure, it was done against the corporation. 2. The FRP is not valid hence the foreclosure is valid. The mere presence of DBPs and PNBs representatives during the drafting of FRP is not constitutive of the banks formal approval of the FRP. The representatives are personalities distinct from PNB and DBP. PNB and DBP have their own boards and officers who may have different decisions. The representatives were not shown to have been authorized by the respective boards of the two banks to enter into any agreement with MMIC. 3. Further, the proceeding is procedurally infirm. RTC Makati had already dismissed the civil case when the parties opted for arbitration. Hence, it should have never took cognizance of the Cabarrus motion to confirm the AC award. The same should have been brought through a 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.

Transfiel vs Luzon Hydro IN CASE THE BUYER WAS NOT ABLE TO PAY ITS OBLIGATION UNDER THE LETTER OF CREDIT, CAN THE BANK TAKE POSSESSION OVER THE GOODS COVERED BY THE SAID LETTER OF CREDIT?

No. The opening of a Letter of Credit did not vest ownership of the goods in the bank in the absence of a trust receipt agreement. A letter of credit is a mere financial device developed by merchants as a convenient and relatively safe mode of dealing with the sales of goods to satisfy the seemingly irreconcilable interests of a seller, who refuses to part with his goods before he is paid, and a buyer, who wants to have control of the goods before paying. (Transfield Philippines, Inc. v. Luzon Hydro Corporation, G.R. No. 146717, Nov. 22, 2004)