High Court rejects lender's request to sell borrower's assets after client fails to pay its debts

(UPDATED 7:33 PM) MANILA, Philippines - The Philippines’ High Court rejected a request by China Banking Corp. to take custody and sell properties of a construction company which failed to settle debts worth P90 million. In a decision promulgated in Baguio City, the Supreme Court’s Third Division upheld an earlier ruling by the appellate court denying the lender’s petition to dispose assets owned by Asian Construction and Development Corp. (ACDC). The High Court’s ruling, penned by Associate Justice Ma. Alicia Austria-Martinez, said that since ACDC is engaged in a construction business, it is of “paramount importance" that its properties be preserved. Since the said properties are not perishable in nature, selling these assets prior to final judgment of the appealed case is premature and contrary to the intent and purpose of preliminary attachment, the Court added. “While the sale of the attached properties may serve the interest of China Bank, it will not be so for ACDC," said the Supreme Court. Based on case records, Chinabank granted a P90-million Omnibus Credit Line to the construction company in July 1996. In April 1999, China Bank claimed that ACDC failed to comply with its obligations and asked a Makati Court to compel the borrower to pay the lender. In its complaint, the bank alleged that the construction company misappropriated, converted, and used the funds from its contracts instead of remitting these to the lender for loan payments. During the same period, the lender secured court approval for a writ of preliminary attachment. The order allowed China Bank to get an assurance that it can claim its borrower’s properties. Consequently, the writ of preliminary attachment was implemented levying personal properties of ACDC, such as vans, dump trucks, cement mixers, cargo trucks, utility vehicles, machinery, equipment and office machines and fixtures. On June 15, 2000, China Bank filed another case, asking court approval to take custody of ACDC’s properties for the purpose of selling them in an auction. China Bank alleged since the assets’ attachment in 1999, the equipment have deteriorated, among others, since these were located in areas where these are exposed to the elements. This was later opposed by ACDC, arguing that the sale cannot proceed without a final and executory judgment against the company. In April 2002, China Bank sought court authority to sell attached properties which the CA denied in October of the same year. - GMANews.TV