CA affirms Makati court's ruling versus Standard Chartered Bank

Posted at 06/06/2014 8:06 AM | Updated as of 06/06/2014 8:06 AM

MANILA -- The Court of Appeals (CA) has upheld a resolution issued by the Makati City Regional Trial Court (RTC) that ordered Standard Chartered Bank (SCB) to return some P233.62 million it earlier received from a local investment firm as loan repayments.

In a 35-page decision penned by Associate Justice Rebecca de Guia-Salvador, the CA’s Former Special Third Division held that the findings of the Makati rehabilitation court should be given more weight considering “its expertise on such cases.”

“Therefore, we find that, contrary to the allegations of petitioner SCB, the RTC’s assailed resolution stated enough legal and factual bases to satisfy the constitutional and procedueal requirements,” the CA ruled.

Last August 30 the Makati RTC Branch 149, acting as the rehabilitation court, granted the motion filed by Philippine Investment Two (PI Two) seeking the release of an escrow account in the amount of P34.51 million in its favor.

The Makati RTC also declared that the SCB’s claim against PI Two in the rehabilitation proceedings is already deemed excluded and ordered the bank to return the amount it already received under the rehabilitation plan amounting to P233.62 million.

The case arose from a petition for rehabilitation of PI Two filed by its creditors, which sought to stay all claims, actions and proceedings against the said investment firm.

SCB, a banking institution incorporated under the laws of England and licensed to conduct business in the country, claimed that it had provided loans to its branches and affiliates, a so-called group financial package to Lehman Brothers Holdings Inc. (LBHI) and some of the latter’s foreign affiliations, including PI Two.

Between 2003 and 2007, SCB, through its New York, USA branch, and LBHI entered into a loan agreement which obliged SCB New York to extend to LBHI and some of its foreign affiliates various loans to be obtained from SCB’s branches and affiliates.

The agreement paved the way for PI Two to avail itself of loans from SCB’s branch in the Philippines in the total principal amount of P819 million.

However, on September 15, 2008, LBHI filed a bankruptcy petition with the US Bankruptcy Court for the Southern District of New York.

In ruling in favor of PI Two, the Makati RTC held that SCB’s parent in New York and LBHI had already agreed on a global settlement that included the bank’s exposure in PI Two.

The amicable settlement between both parties, according to the court, had extinguished PI Two’s loan obligations to SCB.

In affirming the rehabilitation court's ruling, the CA did not give credence to SCB’s claim that its resolution lacks factual and legal bases and violated its right to due process.

The CA explained that while the rehabilitation court could have been more elaborate in its statement of the legal and factual justifications of its ruling, it substantially complied with the constitutional requirements.

“Thus, we hold that the rehabilitation court’s findings are supported by the facts on record. In particular, the rehabilitation receiver mentions of a catch-up amount as proof of SCB’s intention to be paid before the US Bankruptcy Court...,” it added.

The PI Two earlier claimed that SCB deliberately withheld information about the New York settlement from the rehabilitation court, prompting it to file cases for perjury and other deceits against SCB officials with the Makati prosecutor’s office.

PI Two said in its complaints that SCB also concealed that it had received some $90 million worth of collateral for the P819 million it loaned PI Two.

Meanwhile, the CA also dismissed the petition for indirect contempt filed by PI Two against SCB, represented by Duncan van de Feltz and lawyer Patricia Ann Prodigalidad, accusing them of “abusing court proceedings and degrading the administration of justice by misleading and deceiving” the CA into issuing a temporary restraining order (TRO).

“In the case at bar, we do not see any malice nor deliberate intent on the part of respondents to withhold from this court information on the alleged judicially mediated settlement talks and the lower court’s disinclination to immediately enforce its resolution, facts which would have supposedly erased the imminence and necessity of the TRO that this court eventually had issued,” the CA noted.

Concurring with the ruling were Associate Justices Samuel Gaerlan and Victoria Isabel Paredes.