REPUBLIC PLANTERS BANK, PETITIONER, VS. COURT OF APPEALS, HON. WILLIAM M. BAYHON, AS JUDGE RTC OF MANILA, BRANCH XXIII, RAMON MONFORT AND OTHERS WHOSE NAMES ARE LISTED IN ANNEX …

Petitioner Republic Planters Bank (RPB) runs to Us complaining
that the Court of Appeals denied due course to its petition for certiorari
filed therein^[1]
questioning the actuations of public respondent Judge William M. Bayhon, Manila
Regional Trial Court, Branch XXIII, ordering the issuance of the questioned
writs of injunction in favor of private respondents, Monfort, et al., which
orders were given June 16, 1989,^[2] and
February 8, 1990^[3]
and also asks Us now to give due course to its petition and to annul the
assailed orders of public respondent Judge solely on the basis that it is a
government financial institution which cannot be enjoined from foreclosing on
its delinquent accounts as mandated by P.D. No. 385.

The antecedent facts of the case as summarized by the trial court
are as follows:

“Filed with this Court is a complaint with prayer for the issuance
of a writ of preliminary injunction.

Plaintiffs, in their complaint seek to enjoin one of the
defendants, Republic Planters Bank from foreclosing the real estate and Chattel
Mortgages and otherwise from enforcing any Deed of Collateral or undertaking
executed by plaintiffs as securities for the loans secured by them from
defendant Republic Planters Bank.

As basis for the issuance of a writ of preliminary Injunction,
plaintiff’s complaint alleged among others, relevant to the prayer for the
issuance of injunction, that as matter of common knowledge, Ferdinand Marcos as
then President after the imposition of Martial Rule through and in conspiracy with a few and selected
individuals (commonly known as cronies) initiated the wanton plunder of the
Philippine economy for his and their personal and mutual benefit by assuming
and consolidating absolute and exclusive control of the country’s basic and
primary industry among them the sugar industry through the use and abuse of the
absolute dictatorial powers of the Office of the President.

In implementation of the aforesaid criminal and (im) moral plan and
design and with the objective of obtaining the absolute monopoly of the
Philippine sugar trade, Ferdinand E. Marcos, through various dictatorial
issuances and decrees created a network of government agencies,
government-owned, government-controlled or crony?controlled corporations
(one of those defendant the Republic Planters Bank) appointing as heads and
managing directors therein his cronies x x x x who are the defendants herein.

Sometime in early 1978, thru the use and investment of the fees and
charges collected from the plaintiffs and other sugar producers pursuant to
Presidential Decree No. 388, the Philippine Sugar Commission, also a defendant
herein (thereafter referred to as Philsucom for short), vested with powers to
levy and collect charges fees, x x x x to act as the single buying and selling
agency of sugar x x x x to determine the floor ceiling price of sugar acquired
control of defendant Republic Planters Bank (hereafter referred to as RPB for
short), converting the latter into a commodity bank for sugar.

During the crop year
material to this case, the directors of the RPB nominated by and elected
through the vote of PHILSUCOM, thereafter, became the effective and absolute
controlling majority in the Board of Directors of the RPB and the RPB
therefrom, acted as and became the principal conduit and depository of the
funds generated and received by PHILSUCOM and defendant National Sugar Trading
Corporation (hereafter referred to as NASUTRA) from the marketing of the sugar
of plaintiffs’ and other sugar producers as well as the said defendants
instrumentality, conduit and agent in the payment and liquidation thereof.

During the crop years material to the present complaint, the said
corporate defendants were under the effective, absolute, interlocking and
common control of the directors and management of the individual defendants
(natural persons).

With the foregoing network, defendants in conspiracy with Ferdinand
Marcos obtained absolute and complete control of the sugar industry by
compulsory appropriating all the sugar produced in the Philippines during the
crop year 1979-1980 to 1984-1985 selling or trading the same without the
knowledge or consent of plaintiffs and other sugar producers, paying the latter
only such prices as defendants unilaterally and arbitrarily determined.

After the February revolution, on the basis of documents collated
and information gathered, it was discovered that defendants with malice and bad
faith defrauded plaintiffs and other sugar producers by resorting to various
schemes and devices.

As alleged in paragraph 13 of the complaint, defendant Republic
Planters Bank was constituted as a commodity bank for the plaintiffs allegedly
for the benefits of the sugar planters. Defendant RPB campaigned for clients among sugar planters and the
plaintiffs, transferred their accounts to said defendant RPB and depended on
its crop loans and other type of loans to finance their sugar cane operation –
said loans were secured by real estate mortgages and Chattel Mortgages on their
standing crops. Plaintiffs further
assigned their sugar produced to defendant RPB and constituted the latter as
their attorney’s-in-fact for the purpose of selling the same, collecting the
proceeds therefrom and applying the same to their outstanding loans.

In the latter years, defendant
RPB imposed exorbitant, excessive and usurious and unconscionable interest
rates on the loan x x x x.

During said period, defendant PHILSUCOM/NASUTRA unduly delayed its
payment of plaintiffs sugar and defendant RPB preferring its own interest over
that of the plaintiffs, took no step to effect collection from the
co-defendants for application to plaintiff’s account at the same time
collecting its excessive and usurious interest and penalties which caused
plaintiffs’ account to balloon to proportions beyond their capacities to
liquidate.

As a result of the scheme and devices resorted by defendants in
which defendants participated and conspired in derogation of its role as
attorneys-in-fact of its clients, the plaintiffs have been unable to liquidate
their accounts with defendant RPB and are now in the danger of having their
properties foreclosed.

Thus, plaintiffs now come to Court praying for the issuance of a
writ of injunction to prohibit and enjoin defendant RPB from foreclosing the
Real and Chattel Mortgages executed by the plaintiffs.

Defendant RPB in a Manifestation
dated November 25, 1988, filed with this Court manifested that it is waiving
presentation of its evidence on the incident for the application for a writ of
preliminary injunction, submitting the incident for resolution on the basis of
the opposition it had submitted together with a decision of the Court of
Appeals holding that the RPB is within
the coverage of P.D. 385.

A hearing was conducted in connection with the prayer for the
issuance of the preliminary
injunction whereby plaintiffs submitted the affidavit of Guillermo Araneta
narrating how the corporate defendants whose officers are also the defendants
herein conspired and devised a scheme to manipulate and control the price of
sugar, together with defendant RPB whose officers are one and the same as that
of the corporate and natural persons, Exhibit “B” – a primer on NASUTRA export
sugar marketing and policies and programs of PHILSUCOM; Exhibit “B”,
the Affidavit of Enrique Olmedo to the fact that RPB sent letters to plaintiffs
threatening drastic measures which can only be interpreted as foreclosures;
Exhibit “B-2”, sample copies of the real estate mortgage contracts of the RPB;
Exhibit “B-3”, copy of the Chattel Mortgage Contract; letter of
defendant RPB to plaintiffs regarding settlement of their account with threats
of legal action, audit reports of the COA on the audit conducted against
defendants government corporation.

All documentary exhibits were admitted by defendant RPB. However, defendant RPB did not present any
evidence but opposed the issuance of the injunction 1. invoking the provisions
of P.D. 385 which prohibits courts from enjoining government financial
institutions from foreclosing the collaterals and/or securities of delinquent
loans and 2. Plaintiffs are clearly not entitled to the issuance of the writ as
they are not entitled to the main reliefs 3. RPB has not threatened to
foreclose the collaterals of the loans of the plaintiffs 4. The issuance of a
writ of preliminary injunction would cause great damages to defendant RPB and
defendant RPB is willing to post a counterbond
in accordance with Section 6, Rule 58 of the Revised Penal Code (sic).

As to whether plaintiffs are entitled to the writ or not,
defendants presented the above four issues for the Court to be resolved.”

The respondent judge then ordered the issuance of a writ of
preliminary injunction against RPB on June 16, 1989 and consequently, the writ was so issued on July 10,
1989. The Motion for Reconsideration of RPB was denied
in an Order dated May 21, 1990.

During the pendency of the application for a writ of preliminary
injunction, and later on, RPB’s Motion for Reconsideration, various parties who
moved for intervention in the case below were allowed by the court. And a writ of preliminary injunction was
issued in favor of said intervenors on January 30, 1990 and March 20, 1990.

Not satisfied with the decision of the trial court, RPB filed a
petition for certiorari before the Court of Appeals, docketed as CA-G.R.
SP No. 22269, assailing the Orders of the trial Judge granting the application
of private respondents for the issuance of a writ of preliminary injunction and
denying their Motion for Reconsideration. The petition was, however, denied due course and dismissed on September
11, 1990.

Hence, this petition for review on certiorari.

Petitioner submits for Our resolution the following question of
law — whether or not Petitioner may be considered as a government financial
institution within the contemplation and coverage of P.D. No. 385.

Private respondents submit that under the unique circumstances
prevailing in private respondents’ case, similar to that in Filipinas Marble Corporation v. Intermediate
Appellate Court,^[4] even if petitioner were to be
considered a government financial institution, “the provisions of P.D. No.
385 cannot and should not be slavishly applied and enforced by the courts where to do so would
contravene the basic constitutional precepts of equity, fairness and due
process.”^[5]

These circumstances are:

1.   That petitioner RPB constituted itself as
private respondent’s irrevocable Attorney-in-Fact for the purpose of selling
the latter’s sugar produce and collecting the proceeds thereof from PHILSUCOM
and NASUTRA. In turn PHILSUCOM held the absolute control of petitioner RPB as
the “single buying and selling agency of Philippine sugar” with
absolute authority “to determine the floor-ceiling price” thereof.^[6]

Given the common ownership and interlocking officership and directorate
of Petitioner RPB, PHILSUCOM and NASUTRA, the effective and total control of
the trading and marketing operations of Respondent’s businesses, had been taken
over by petitioner RPB in
combination with the two other corporate Defendants;

2.   What had been extended to private respondents
by way of loans, petitioner with its corporate-defendants in the trial court
below, had in effect wholly or partially taken back and recovered in advance
through the fraud it committed in the liquidation of the sale of private
respondent’s sugar;^[7]

3.   Private respondents have charged petitioner
and its corporate-defendants in the trial court with defrauding them in the
liquidation and payment of their sugar.^[8]

From the voluminous comment of private respondents (328 pages,
including annexes), there are indications that private respondents have built a
prima facie case against petitioner in its allegation of fraud. Since this Court is not a trier of
facts. We deny petitioner’s petition to
enable the trial court to fully examine the evidence to be presented by the
parties in what promises to be the trial of the 1990’s.

The historical circumstances surrounding private respondents’
plight were best summarized by the late Chief Justice Teehankee as follows:

“[I]n the recent past, we saw how the martial law rule imposed
by a president turned dictator so weakened and emasculated the judicial system
to the point of impotence that it failed to shield the people against the whims
of the authoritarian ruler who, without compunction, assaulted human rights and
the rule of law.

It reached a point where it was held that one single clause, the
Commander-in?Chief clause, allowed the president-dictator to take
absolute command of the nation and that the people could only trust and pray
that he would not fail them. This was a
return to the lese majeste when the voice of the King was the voice of
God so that those touched by his absolute powers could only pray that the King
acted prudently and wisely. This was a
rejection of the rule of law and constitutionalism which mean the existence and
efficacy of legal institutions, particularly the courts of justice, to protect
and defend the rights and liberties of the people who would not have to resign
themselves with prayers for the purpose. x x x”^[9]

For example, the Affidavit of Mr. Guillermo Araneta^[10]
is very revealing, to wit:

“I, GUILLERMO ARANETA, after being duly sworn in accordance
with law, hereby depose and state THAT:

1. I am one of the plaintiffs in the case
entitled ‘Ramon Monfort, et al. vs. Philippine Sugar Commission, et al.,’ Civil
Case No. 88-46368, Regional Trial Court of Manila;

x x x                                                       
x x x

3. Late in 1974 and early in 1975, by means of
PDs 579 and 659, ex-President Ferdinand E. Marcos imposed a monopoly on the
sugar export industry by constituting the Philippine Exchange Co., Inc.
(PHILEX), as the sole buying and selling agency for export sugar. PHILEX was the subsidiary of the Philippine
National Bank, which remained under the control of its immediate past President
Roberto S. Benedicto, who was an intimate friend and former classmate of Mr.
Marcos.

x x x                                                        x
x x

6. Though PHILSUCOM was created in 1974,
pursuant to PD 388 however it only became involved in sugar trading in
1977. President Marcos appointed his
close friend Roberto S. Benedicto as Chairman, and Jaime C. Dacanay, Jose A.
Unson, Fred Elizalde and Armando C. Gustillo as Commissioners thereof.

7. Immediately after their appointments as
such Chairman and Commissioners, the above named persons organized the NATIONAL
SUGAR TRADING CORPORATION (NASUTRA) under the Corporation Code, for the purpose
of acting as the sole marketing arm of PHILSUCOM. The Chairman and Directors of NASUTRA are the same as the
Chairman and Commissioners of PHILSUCOM.

8. Thereafter, PHILSUCOM acquired control of
the REPUBLIC PLANTERS BANK (RPB), and the said bank was used as the conduit of
their export sales and liquidation of planters proceeds.

9. NASUTRA never rendered an accounting of
their export sales and RPB allowed itself to be utilized as the instrument in
concealing the actual export price by agreeing to negotiate the sale of the
sugar not thru regular letters of credit but thru an arrangement of Cash
payment abroad against presentation of documents.

x x x                                                        x
x x

11. Moreover, in
translating its average selling price of export sugar, which is expressed in
U.S. cents per pound, to Philippine pesos per picul. NASUTRA defrauded the sugar planters further. Thus, in the 1979-80 crop year, when NASUTRA
reported an average selling price of 20 US cents per pound, it converted the same to only P200 a picul, and after deducting
alleged trading costs and loan obligations, paid and/or credited the planters
with a net export price or P135.00 per picul only.

This computation is misleading because one picul is equivalent to
139.44 pounds, and the average rate or exchange in the said crop year was
P7.461-$1.00. Hence, based on the
alleged selling price of $0.20 per pound, the computation should have been:

$0.20 x 139.44 x P7.461 = P207.76 per picul

Thus, on this score alone, the planters were shortchanged by at
least P7.76 per picul for crop year 1979-80, assuming but not admitting that
NASUTRA’s deductions for trading costs and loan obligations are correct.

x x x                                                              x x x

14.
PHILSUCOM/NASUTRA likewise failed to
account to the planters for the polarization premiums, insurance rebates and
bag rebates which they received in the course of the sale of Philippine export
sugar.

15. In 1980, when
the price of sugar in the World Market rose to as high as $0.41 a pound,
PHILSUCOM/NASUTRA entered into long­term contracts with favored foreign buyers
covering 572,381 metric tons of Philippine export sugar a year for four
consecutive years at prices ranging from $0.22 to $0.28 a pound only. PHILSUCOM justified these contracts by
saying that they assured Philippine sugar producers of stable prices in the
face of fluctuating World Market prices. However, when prices of World Market sugar started dropping below the
contracted prices, PHILSUCOM/NASUTRA unaccountably refrained from enforcing the
said contracts, thereby favoring the buyers at the expense of the sugar
planters who were deprived of at least $350 million in revenue.

x x x                                                        x
x x

17. In addition to
defrauding the sugar planters which already crippled them and disabled them
from paying their financial obligations, PHILSUCOM/NASUTRA inexplicably
incurred delays in the liquidation of their sugar proceeds thereby further
disabling them from meeting their loan
obligations with RPB on time, just when such payments were badly needed due to
the higher interests charged by RPB.”

A second example would be two (2) sets of NASUTRA invoices for
the same quantity of sugar, 7,540 metric tons, which sugar was declared as export sugar under Export
Declaration No. 133-50-0279/81.^[11] The
first invoice for 7,540 metric tons of sugar with a price of US$0.155/lb. has a
total amount of US$2,621,605.05.^[12] The
second invoice also for the same 7,540 metric tons of sugar with a price of US$0.27/lb. has a total amount of
US$4,566,666.86.^[13]
On the reverse side of the Export Declaration, one Luisito Andres certified
that US$2,621,605.05 had been received as payment for the first invoice,^[14]
while private respondents were able to secure a copy of petitioner’s bank draft
dated May 8, 1981 drawn by NASUTRA on Philipp Brothers Oceanic, Inc., the buyer
of the sugar, for $4.566,666.86.^[15]
which is the value of the second invoice. The difference between the two invoices is US$1,945,061.81. That
multiplied by only?God-knows-how-many invoices for the sugar crop years
1979-1980 to 1984-1985 will give an inkling into the sudden unexplained wealth
of petitioner’s Chairman, Roberto S. Benedicto, who happens to be also Chairman
of both PHILSUCOM and NASUTRA.^[16]

To get an indication of the amounts involved, the total amount of
sugar exported for the crop years 1979-80 up to 1984-85 which came ONLY FROM
private respondents and intervenors (in the lower court) was 2,352,648.20
metric tons.^[17]
Dividing said figure by 7,450 metric tons, assuming that this will be the amount sold per invoice, We
arrive at 315 invoices covering all the above sugar exported. Three hundred fifteen (315) invoices
multiplied by the UNREPORTED differential income of US$1,945.061.81 will give
Us SIX HUNDRED TWELVE MILLION, SIX HUNDRED NINETY FOUR THOUSAND, FOUR HUNDRED
SIXTY (US$612,694,460) UNITED STATES DOLLARS.

Private respondents have good reason indeed to complain that they
were not able to pay their loans with petitioner because of some financial
manipulations by highly placed persons during the Marcos martial law years who,
coincidentally(?) happened to be petitioner’s chairman of the board and members
of its board of Directors.^[18]

On the assumption that petitioner is one of the government financial institutions alluded to in P.D. 385, although We do not see
the need for Us right now to declare whether or not petitioner is indeed a government financial institution
included in the coverage of said P.D. Our ruling in the above-cited Filipinas
Marble case, that:

“Precisely, what the petitioner is trying to point out is that
the DBP and Bancom people who managed Filipinas Marble misspent the proceeds of
the loan by taking advantage of the positions that they were occupying in the
corporation which resulted in the latter’s devastation instead of its
rehabilitation. The petitioner does not
question the authority under which the loan was delivered but stresses that it
is precisely this authority which enabled the DBP and Bancom people to misspend
and misappropriate the proceeds of the loan thereby defeating its very purpose,
that is, to develop the projects of the corporation. Therefore, it is as if the loan was never delivered to it
and thus, there was failure on the part of the respondent DBP to deliver the
consideration for which the mortgage and the assignment of deed were executed.

We cannot, at this point, conclude that respondent DBP together
with the Bancom people actually misappropriated and misspent the $5 million
loan in whole or in part although the trial court found that there is
‘persuasive’ evidence that such acts were committed by the respondent. This matter should rightfully be litigated
below in the main action. Pending the
outcome of such litigation, P.D. 385 cannot automatically be applied for if it
is really proven that respondent DBP is responsible for the misappropriation of
the loan, even if only in part, then the foreclosure of the petitioner’s
properties under the provisions of P.D. 385 to satisfy the whole amount of the loan would be a gross mistake. It would unduly prejudice the petitioner,
its employees and their families.”

x x x                                                  x
x x                                                     x
x x

“Under the admitted circumstances of this petition, we,
therefore, hold that until the trial on the merits of the main case, P.D. 385
cannot be applied and thus, this Court can restrain the respondents from
foreclosing on petitioner’s properties pending such litigation.”

finds relevant, if not, more pressing,
application in private respondents’ case.

The enforcement of P.D.
385 will “sweep under the rug” this iceberg of a scandal in the sugar industry
during the Marcos martial law years. This We can not allow to happen. For the benefit of future generations, all the dirty linen in the PHILSUCOM/NASUTRA/RPB closets have to
be exposed in public so that the same may NEVER be repeated.

It is of paramount national interest, that We allow the trial
court to proceed with dispatch to allow the parties below to present their
evidence.

WHEREFORE, the petition for review and certiorari
is denied for lack of merit. The Court
of Appeals’ decision denying due course to petitioner’s petition therein is
hereby AFFIRMED. The records of this
case are hereby returned to the trial court with orders to try this case with
dispatch leaving no stone unturned in the
presentation of all the parties’ evidence. Let a copy of this Decision be given to the Ombudsman for its
information. Costs against petitioner.

SO ORDERED.

Narvasa, C.J., (Chairman), Padilla, Regalado, and Melo, JJ., concur.

^[1]
Ponente, Justice Jose C. Campos, Jr., concurred in by Justices Oscar M. Herrera
and Asaali S. Isnani; Rollo, pp. 24-31.

^[2]
Rollo, pp. 109-118.

^[3]
Court of Appeals Records, pp. 168-169.

^[4]
142 SCRA 180.

^[5]
Comment, p. 19; Rollo, p. 56.

^[6]
Sections 4(d) & (e) P.D. No. 388.

^[7]
See Par. 44, Respondent’s Complaint, p. 120, Rollo.

^[8]
           “(a) The fraudulent use, during
the crop years 1979-80 to 1984-85, of erroneous Peso-Dollar conversation rates
in the computation of the peso equivalent of the export sales prices of their sugar.

“(b) The collection and
imposition of improper trading cost charges.

“(c) Unlawful and improper
deductions from the liquidation of their sugar, for the reimbursement of the
corporate Defendants supposed advances in the handling and trading of their sugar,
some of which were officially verified to be inexistent;

“(d) The fraudulent waiver of
rights under long-term contracts for the sale of Philippine sugar, to the
prejudice and damage of the sugar planters and producers, including
Respondents, in the amount of approximately $350 Million; and,

“(e) The withholding of the
share of sugar planters and producers in other income realized from the sale of
their sugar, such as Polarization Premiums, etc.” (Rollo, pp.
62-63)

^[9]
Foreword by Chief Justice Teehankee to SCRA Second Series, 142 SCRA vii,
viii.

^[10]
Rollo, pp. 172-178.

^[11]
Rollo, p. 358.

^[12]
Rollo, p. 360.

^[13]
Rollo, p. 362.

^[14]
Rollo, p. 366.

^[15]
Rollo, p. 364.

^[16]
Rollo, pp. 204 and 327.

^[17]
Rollo, pp. 143-156.

^[18]
Rollo, pp. 327, 346.