MANILA, Philippines - The Court of Appeals (CA) has prevented the seizure of properties of beleaguered Export and Industry Bank, Inc. (EIB) as the appellate court stood by a writ of preliminary injunction it handed down against two orders of a trial court holding the bank liable for the unauthorized sale of over 32 million shares of DMCI amounting to over P1 billion by the bank's subsidiary, brokerage firm EIB Securities.
In a decision penned by Associate Justice Mario Lopez dated April 26 -- the same day the bank was ordered closed by the Bangko Sentral ng Pilipinas (BSP) due to insufficient liquidity --the appellate court's Special Division of Five under the Fourteenth Division nullified two orders of the Makati Regional Trial Court Branch 66 dated July 29, 2011 and August 26, 2011 that directed the garnishment of holding money, properties, real and personal belongings of EIB Securities worth P1.46 billion -- the total amount of the sold 32,180,000 DMCI shares.
The case stemmed from allegations of Pacific Rehouse Corporation, Pacific Concorde Corporation, Mizpah Holdings, Inc., Forum Holdings Corporation, and East Asia Oil Company, Inc. regarding the unauthorized sale of said DMCI shares made by their broker, EIB Securities, Inc.
The trial court ruled that EIB, as 99% owner of EIB Securities, has absolute control over the affairs of the latter. The trial court noted that EIB represented the brokerage firm in the trial.
The trial court thumbed down EIB's claim of denial of due process.
The assailed orders prompted EIB to seek redress from the appellate court which in turn issued a writ of preliminary injunction on September 2, 2011.
On November 29, 2011, Judge Joselito Villarosa of the Makati RTC directed its sheriff to implement its August 26, 2011 order and continue with the garnishment.
In its decision, the appellate court ruled that the trial court could not invalidate orders and resolutions of a higher court.
"The disquisition of the RTC, which is a declaration against the validity of a high court's order, is a blatant disregard of the principle of hierarchy of courts," the decision read.
The appellate court held that EIB's right to due process must be protected, thus, the writ of preliminary injunction must stay.
"Private respondents' frustration at not being able to have the judgment in their favor satisfied is understandable. But given the circumstances of this case, the seizure of petitioner's properties cannot be done without violating its constitutionally enshrined right to due process. Neither can equity heal the unintended injustice to petitioner resulting from an erroneous piercing of corporate fiction, merely to compensate losses arising from the contractual obligation of a subsidiary corporation whose limited liability is recognized by law and by the parties. This is not a fitting denouncement for the business community," the decision read.
The appellate court stressed that only itself or the Supreme Court may revoke or invalidate the writ of preliminary injunction.
Associate Justices Amy Lazaro-Javier and Vicente Veloso concurred with the ruling while Associate Justices Magdangal de Leon and Socorro Inting dissented.
EIB was placed under receivership by the Bangko Sentral ng Pilipinas due to its inability to service maturing time deposits because of insufficient liquidity.
EIB had P15.98 billion in deposits covering 50,052 deposit accounts when it was ordered closed.