Pastor v. Philippine National Bank

TINGA, J.:

This is the third time that a controversy arising from Civil Case No. RQ-18176 has reached this Court. The first was C & C Commercial Corporation, et. al.

v. Philippine National Bank, et. al, docketed as G.R. No. 42449,1 while the second was Philippine National Bank and National Investment Development Corporation v. Court of Appeals, et.al., docketed as G.R. No. 108870.2 Both cases form part of the factual backdrop of the present petition which is summarized below. On various dates between the period February 27, 1957 and December 20, 1960, petitioner C&C Commercial Corporation3 (hereafter, C & C) opened seven (7) letters of credit with the respondent Philippine National Bank (hereafter, PNB) to import machines and equipment for its plants.

Since C & C's obligations under the letters of credit totaling P5,451,851.83 as of January 31, 1968 were not paid, PNB instituted on March 13, 1968 a case for collection with a prayer for preliminary attachment before the then Court of First Instance of Manila against C & C, impleading petitioner Clara Pastor, the controlling stockholder of C & C, as joint and solidary debtor.4 However, instead of proceeding with the collection case, the PNB and its subsidiary, the National Investment Development Corporation (hereafter, NIDC) as Trustees , and Clara Pastor as Trustor , entered into a Voting Trust Agreement5 (hereafter, VTA) dated March 5, 1969. The VTA gave PNB and NIDC full authority "to manage the affairs and the accounts and properties of the C & C Commercial Corporation, Inc.; to choose its directors and key officers; to safeguard its interest and those of its creditors; and, in general, to exercise all such powers and discharge such functions as inherently pertain to the ownership and/or management of the corporation"6 for a period of five (5) years, renewable for another five (5) years in case an unpaid balance remains at the end of the original period.7 Also included in the VTA was an immunity clause in favor of PNB and NIDC.8 The PNB and NIDC immediately took over the management of C & C pursuant to the agreement.

On September 6, 1971, C & C executed a chattel mortgage over its personal properties in favor of NIDC as a security for the loan of Seven Hundred Thousand Pesos (P700,000.00) intended to finance the production of asbestos cement products and their exportation to Brunei and to repair/rehabilitate its plant building which had been damaged by typhoon "Yoling."9 Meanwhile, the accounting firm of Sycip, Gorres and Velayo (hereafter, SGV) examined the management and operations of C & C for the first three (3) years under the Voting Trust Agreement. On August 27, 1973, SGV submitted a report10 finding that the C & C was in a serious financial position. The SGV made the following observations relative to the company's financial difficulty: Even in 1969, it would appear that the Company had required inflow of funds to support its operations since at that time it had already incurred a 3.4 million capital deficiency.

This figure eventually reached ₱11.5 million by 1972. Exhibit IX shows an analysis of capital deficiency from 1969 to 1972. Total assets decreased by 15% from ₱5.1 million in 1969 to ₱4.3 million in 1972 mainly due to decreases in current assets amounting to ₱6 million; although additional investments were made in fixed assets, depreciation more than offset this resulting in a ₱2 million decrease in the net book values of fixed assets.

Total current liabilities increased by ₱6.3 million in 1972 due mainly to the increase in accounts payable amounting to ₱1.1 million and new liabilities due to banks of ₱5.2 million which include interests accrued as follows: Additional Liabilities Due to Banks Incurred in 1970-1972 PNB NIDC DBP Total Principal ₱1.3M ₱1.0M ₱2.3M Interest and other charges 1.6 .1 ₱1.2M 2.9 Total