SC orders export firms to pay BDO P1 billion

Universal lender Banco De Oro successfully prosecutes copra exporting companies and force them to honor an obligation incurred decades ago in a Supreme Court decision affirming the validity of their claims.

The Supreme Court (SC) affirms the Court of Appeals (CA) in compelling a copra exporter to pay Banco de Oro Unibank Inc. at least P1 billion as unpaid loan obligations obtained more than five decades ago.

The SC Third Division in a resolution dated 11 November this year affirmed with modification the CA decision issued on 22 November 2018 upholding the ruling issued by the Regional Trial Court (RTC)of Makati City on 25 January 2017 directing International Copra Export Corporation (ICEC), Interco Manufacturing Corporation (Interco) and their affiliated security companies owned by the Luy family to pay Banco de Oro a total P833,589,999.41.

But a six percent annual interest from the finality of the decision until fully paid instead of the 10 percent previously imposed by the Makati RTC was also imposed by the High Court.

Lawyer fees awarded to BDO was also increased from P25 million to P41.67 million.

“Acting on the petition for review on certiorari assailing the decision and resolution, dated 22 November 2018 and 3 July 2019, respectively, of the Court of Appeals, the Court resolves to deny the petition for failure to show any reversible error in the challenged decision and resolution as to warrant the exercise by this Court of its discretionary appellate jurisdiction,” read the SC resolution.

Record showed BDO’s predecessor-in-interest, the Philippine Commercial International Bank (PCI Bank), later known as Equitable PCI Bank (EPCI), extended loan and credit accommodations to ICEC and Interco.

These were consistently renewed without any collateral on account of the good standing of the two copra companies.

Between 1995 to 2007, surety agreement and deed of suretyship were executed between the bank and the Luys.

In June 2006 the parties, negotiated the collaterization of ICEC and Interco loans due to the drastic drop in their export volumes.

EPCI proposed that a portion of the total obligation be secured by a real estate mortgage over the LKG Tower, a building in Makati City owned by ICEC Land, which was rejected by the copra companies.

On account of defendants-appellants’ refusal to collateralize their loan, EPCI offered them two options: (a) renew the P900 million loan on a clean basis but subject to a P25 million quarterly amortization beginning November 2006; and (b) the outstanding obligation of P255 million shall be amortized for five years beginning January 2007 through five annual payments of P51 million.

The two options were subject to the condition that all the creditors of defendant-appellants shall remain on “pari passu.”

Under the arrangement, the creditors would be treated on equal footing with respect to the uniform absence of collateral. And, should they provide collateral to any of their creditors, excluding the real estate mortgage with the Bank of the Philippine Islands (BPI), or if any of their creditors enjoy preferential terms over that of EPCI, these circumstances shall be considered as events of default.

By reason of the pari passu agreement, BDO extended the maturity date of defendants-appellants’ loans and even extended credit facilities in various dates in November and December 2008 and January and February 2009, as evidenced by promissory notes.

However, BDO discovered that contrary to their representations, ICEC and Interco were mortgaging and disposing their properties to secure their indebtedness with other creditors.

BDO claimed that ICEC mortgaged units of the LKG Tower to Allied Banking Corporation (Allied Bank) as a security for its loan.

Additionally, the bank discovered that the maturity dates of the promissory notes have lapsed without the obligation being settled by the copra companies.

This prompted BDO to seek redress from the court through a complaint for sum of money with application for preliminary attachment.