Remedial Law

Asset Privatization Trust v. CA, G.R. No. 121171, December 29, 1998 Jurisdiction

FACTS:

MMIC, a domestic corporation engaged in mining, was granted the exclusive right to explore, develop and exploit nickel, cobalt and other minerals in the Surigao mineral reservation. 

Through the efforts of the government to support the financing of MMIC the DBP approved guarantees in favor of MMIC.

MMIC, PNB and DBP executed a Mortgage Trust Agreement  whereby MMIC, as mortgagor, mortgaged in favor of PNB and DBP as mortgagees, all of MMIC’s assets.

By 1984, MMIC had an outstanding loan of more than 22 Billion pesos.

As the various loans had become overdue, DBP and PNB decided to exercise their right to extrajudicially foreclose the mortgages in accordance with the Mortgage Trust Agreement.

The foreclosed assets were sold to PNB as the lone bidder and were later transferred to the Asset Privatization Trust (APT).

MMIC President and other stockholders, filed a derivative suit against DBP and PNB before the RTC of Makati, Branch 62, for Annulment of Foreclosures, Specific Performance and Damages, docketed as Civil Case No. 9900.

Private respondents and petitioner APT, as successor of the DBP and the PNB’s interest in MMIC, mutually agreed to submit the case to arbitration by entering into a “Compromise and Arbitration Agreement,” which the trial court approved.

The RTC dismissed the Complaint.

The Arbitration Committee found that the foreclosure not legally and validly done. 

Hence, while the loans of PNB and DBP to MMIC continue to remain outstanding and unpaid, such loans shall be reduced by the amount which APT may have realized from the sale of the seized assets of MMIC which by agreement should no longer be returned even if the foreclosures were found to be null and void.

The Committee rendered judgment in favor of MMIC and ordered APT to pay MMIC actual, moral and exemplary damages, to be offset by APT from the outstanding and unpaid loans of MMIC with DBP and PNB.

Private respondents filed in the same Civil Case No. 9900, an “Application/Motion for Confirmation of Arbitration Award.” 

Petitioner countered with an “Opposition and Motion to Vacate Judgment” on the ground that the Application/Motion is improperly filed with the same branch of the Court, considering that the said motion is neither a part nor the continuation of the proceedings in Civil Case No. 9900 which was dismissed upon motion of the parties.

The trial court, in an Order, confirmed the award of the Arbitration Committee.

It later denied APT’s motion for reconsideration.

Private respondents filed a Motion for Execution and Appointment of Custodian of Proceeds of Execution.

Petitioner thereafter filed with the CA, a special civil action for certiorari with temporary restraining order and/or preliminary injunction to annul and declare as void the Orders of the RTC for having been issued without or in excess of jurisdiction and/or with grave abuse of discretion. 

The CA dismissed the petition.

Hence, the instant petition.

ISSUE:

Whether or not jurisdiction was validly acquired giving the Court authority to confirm the arbitral award considering that the original case, Civil Case No. 9900, had previously been dismissed.

RULING:

The petition is impressed with merit.

The RTC of Makati, Branch 62, did not have jurisdiction to confirm the arbitral award.

The use of the term “dismissed” is not “a mere semantic imperfection.” 

The dispositive portion of the Order of the trial court dated October 14, 1992 stated in no uncertain terms:

 The Complaint is hereby DISMISSED. 

The term “dismiss” has a precise definition in law. “To dispose of an action, suit, or motion without trial on the issues involved. Conclude, discontinue, terminate, quash.” 

Admittedly, the correct procedure was for the parties to go back to the court where the case was pending to have the award confirmed by said court. 

However, Branch 62 made the fatal mistake of issuing a final order dismissing the case. 

While Branch 62 should have merely suspended the case and not dismissed it,  neither of the parties questioned said dismissal. 

Thus, both parties as well as said court are bound by such error.

By its own action, Branch 62 had lost jurisdiction over the case. 

It could not have validly reacquired jurisdiction over the said case on mere motion of one of the parties. 

The Rules of Court is specific on how a new case may be initiated and such is not done by mere motion in a particular branch of the RTC. 

Consequently, as there was no “pending action” to speak of, the petition to confirm the arbitral award should have been filed as a new case and raffled accordingly to one of the branches of the Regional Trial Court.

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