National Sugar Trading v PNB (2003) AS WELL as the 200M PHILEXCHANGE account still on
Petitioner/s: NATIONAL SUGAR TRADING and/or the SUGAR
REGULATORY ADMINISTRATION
Respondent: PHILIPPINE NATIONAL BANK,
Petition: Petition For Certiorari
Ponencia: Ynares-Santiago, J.
DOCTRINE: A corporation that is wholly owned and controlled by the
government does not have a separate juridical personality.
FACTS:
1. Marcos issued PD 388, creating the Philippine Sugar
Commission (PHILSUCOM) as the sole buying and selling agent
of sugar on the quedan permit level.
2. PD 579 was also issued, authorizing the Philippine Exchange
Company, Inc. (PHILEXCHANGE), a wholly owned subsidiary
of Philippine National Bank (PNB) to serve as the marketing
agent of PHILSUCOM. PHILEXCHANGE’s purchases of sugar
shall be financed by PNB and the proceeds of sugar trading
operations of PHILEXCHANGE shall be used to pay its liabilities
with PNB.
3. With the fall of world sugar prices, PHILEXCHANGE could
not pay and owed PNB P200M.
4. In 1977, the National Sugar Trading Corporation (NASUTRA)
replaced PHILEXCHANGE as the marketing agent of
PHILSUCOM. However, NASUTRA and PHILSUCOM still failed
to pay the sugar stocks covered by quedans to PHILEXCHANGE
eventually amounted to P498,828,845.03
5. To finance its sugar trading operations, NASUTRA applied for
and was granted a P408 Million Revolving Credit Line by PNB in
1981. Still, NASUTRA wound up with another 65M in interest
payments.
6. Thus, NASUTRA was dissolved and its assets were
transferred to the SRA. Still, NASUTRA (and consequently
the SRA) defaulted in its loans, ended up owing a total of
P380 Million.
7. PNB then received remittances from the foreign banks
amounting to P690 Million. PNB applied these remittances to the
380 Million NASUTRA account and 65M in interest payments,
PHILSUCOM’s books.
8. The petitioners then filed a petition for arbitration with the DOJ.
The SOJ ruled for them, saying that PNB should refund the
200M back to petitioners. Office of the President and CA
reversed, thus this petition.
ISSUES:
1. WON CA erred in upholding the legality of the compensation
by PNB of the accounts of NASUTRA
RULING + RATIO:
1. NO.
 The important part here is the validity of the compensation of
the P200 Million PHILEXCHANGE account. Petitioners say that
compensation is not possible, since the subject remittances
were received by PNB and not PHILEXCHANGE, a corporation
clothed with a separate and distinct corporate personality from
PNB.
 HOWEVER, it was clear that PHILEXCHANGE and PNB were
treated as one entity.
 Purchases of sugar of PHILEXCHANGE as the exclusive sugar
trading arm of PHILSUCOM were financed by PNB pursuant to
PD 579.
 PNB, a wholly owned bank of the government at that time,
in turn wholly owned and controlled PHILEXCHANGE.
 Also, Section 2 (a), PD 659 declared as illegal the sale, transfer
and assignment of sugar by any planter, producer, miller,
central, or refinery to any person or entity other than
Philippine Exchange, Inc. and/or the PNB.
 To reiterate, PHILEXCHANGE failed to pay its loans with PNB
because of the fall of the sugar prices in the world market.
When NASUTRA substituted PHILEXCHANGE as marketing
agent of PHILSUCOM, 1,485,532.47 metric tons of export sugar
were turned over by PHILEXCHANGE to NASUTRA. To
reiterate, the foreign remittances constituted proceeds of the
sale of the sugar covered by quedans transferred by
PHILEXCHANGE to NASUTRA.
DISPOSITION: DENIED