GR 154973; (June, 2005) (Digest)
G.R. No. 154973; June 21, 2005
THE PRESIDENT OF PHILIPPINE DEPOSIT INSURANCE CORPORATION AS LIQUIDATOR OF PACIFIC BANKING CORPORATION, petitioner, vs. HON. WILFREDO D. REYES, Pairing Judge, RTC Manila, Branch 31; ANG ENG JOO; ANG KEONG LAN; and E.J. ANG INTERNATIONAL, LTD., respondents.
FACTS
Pacific Banking Corporation (PaBC) was placed under receivership and later liquidation in 1985 due to insolvency. Private respondents, foreign investors (Singaporeans), filed a claim before the liquidating court for the return of their equity investment of US$2,531,632.18, asserting preferred creditor status under the Investment Incentives Act. On September 11, 1992, the liquidation court ordered the Liquidator to pay the investment amount as a preferred claim but deferred the issue of dividends or interest. The Liquidator’s appeal was dismissed for failure to perfect it on time, rendering the 1992 Order final and executory. In 1998, the pairing judge, respondent Judge Reyes, issued orders directing payment and, crucially, awarding legal interest on the investment from 1981 until full payment. The Liquidator challenged these orders via certiorari.
ISSUE
Whether an equity investment in a corporation under liquidation is entitled to an award of legal interest as actual or compensatory damages from the time of investment until the closure of the corporation.
RULING
No. The Supreme Court granted the petition and set aside the award of legal interest. The legal logic is anchored on the nature of an equity investment and the finality of the 1992 Order. An equity investment represents ownership interest, not a loan or credit transaction. As shareholders, the Singaporeans’ capital contribution is placed at the risk of the business; it does not earn interest. The claim for interest, being in the nature of damages, constitutes a separate cause of action that was not part of the original, final 1992 Order, which only adjudicated the return of the investment principal. The subsequent 1998 orders, by awarding interest, effectively modified a final judgment, which is impermissible. The Court emphasized that while the principal claim was already final, the liquidating court exceeded its jurisdiction by awarding interest, as this expanded the liabilities of the insolvent estate beyond what was conclusively settled. The matter was remanded solely for a proper accounting of payments made against the final judgment debt of US$2,531,632.18.