DBP vs. Hydro Resources Contractors Corporation 2013

G.R. Nos. 167530, 167561, & 167603 Date

March 13, 2013

Petitioner 1

Philippine National Bank (PNB)

Petitioner 2

Asset Privatization Trust (APT), now PMO

Petitioner 3

Development Bank of the Philippines (DBP)

Respondent in the cases

Hydro Resources Contractors Corporation (HRCC)

Nonoc Mining and Industrial Corporation (NMIC)

The company formed by PNB and DBP to revive mining assets

Marinduque Mining and Industrial Corporation (MMIC)

The original company whose assets were foreclosed by the banks

Contract Amount

₱35,770,120 for mine stripping and road construction

Unpaid Balance Owed to HRCC

₱8,370,934.74 plus legal interest

Solidary Liability

When multiple parties are individually and collectively responsible for a debt

Proclamation No. 50

1986 decree creating the Asset Privatization Trust (APT)

Alter Ego Theory

Legal doctrine used to ignore corporate separation when one entity controls another

The Three-Pronged "Alter Ego" Test

Control, fraud or wrong, and harm to the plaintiff

Element 1: Control

Complete domination of finances, policy, and business practice regarding the transaction

Element 2: Fraud or Wrong

Control used to commit fraud, violate duty, or act unjustly

Element 3: Harm

The control and breach of duty caused the injury or loss

RTC and CA Ruling on "Control"

Ruled banks controlled NMIC because they owned all shares and officers

Supreme Court Ruling on "Control"

Ownership of most shares and overlapping officers is insufficient to prove control

SC Ruling on "Fraud or Wrong"

No evidence that banks used NMIC to commit fraud against HRCC

SC Ruling on Corporate Veil

The corporate veil remains intact unless fraud or injustice is proven

Juridical Personality

The legal status of a corporation as a separate entity from owners

Liability of APT as Trustee

Responsible only for ensuring NMIC complies with the judgment

Final Supreme Court Verdict

PNB, DBP, and APT are not liable; only NMIC must pay