SC sets aside court order seeking levy on Traders Royal’s escrow

THE SUPREME COURT (SC) has set aside a 2005 trial court order that sought to seize an escrow fund of shuttered Traders Royal Bank in connection to damages due to unpaid tax liabilities of local broadcasting firms.

Traders Royal Bank entered into a purchase and sale agreement with the Bank of Commerce (BankCom) in 2001, which the Bangko Sentral ng Pilipinas approved on the condition that the parties set up a P50-million escrow fund to be kept for 15 years.

The amount had been deposited with the Metropolitan Bank and Trust & Co. (Metrobank).

“It is only when Traders Royal cannot pay all or part of the obligation may the court sheriff resort to the levy of properties including the escrow fund with Metrobank,” SC Associate Justice Mario V. Lopez said in a nine-page ruling dated July 27 last year and made public on May 11.

“Yet, the regional trial court assumed that it has jurisdiction over Metrobank as Traders Royal’s escrow agent.”

The Court of Appeals affirmed a trial court’s ruling, which granted the petitions of Radio Philippines Network (RPN), Intercontinental Broadcasting Corp. (IBC) and Banahaw Broadcasting Corp. (BBC) that sought a writ of execution ordered the seizure of Traders Royal’s assets. The court also ordered Metrobank to submit a detailed report of the escrow fund.

The tribunal also issued a subpoena ordering BankCom to present a list of Traders Royal’s assets and liabilities it had assumed after the purchase and sale agreement.

Metrobank argued it was not a party to the case and that any action related to the escrow fund should have been sought in a separate legal action.

The High Court said the appellate and trial courts should have issued a writ of garnishment for it to have jurisdiction to compel Metrobank to abide by the seizure of the escrow fund.

A writ of garnishment orders a seizure of a property of a defendant that is controlled by a third party.

In 1986, the Bureau of Internal Revenue (BIR) granted the request of the broadcasting firms’ comptroller to settle their tax liabilities from 1978 to 1983 through manager’s checks.

The tax bureau discovered the checks purchased by the networks from Traders Royal worth P9.8 had not been presented to the BIR and were presented by unknown individuals to the Security Bank’s branch in Taytay, Rizal.

The BIR issued warrants of levy, distrain, and garnishment against the networks after RPN, IBC, and BBC failed to settle their tax liabilities.

The broadcasting firms filed complaints for damages with the trial court and eventually, the Court of Appeals against Traders Royal and Security Bank and Trust Co. after they were forced to settle with the BIR in the amount of P19 million.

The plaintiffs sought damages worth P9.8 million, the amount of the unpaid manager’s checks.

The appellate court absolved Security Bank from any liability and held Traders Royal liable for the damages.

The CA had modified its decision and deleted the P300,000 exemplary damages previously imposed on each of the plaintiffs, while awarding the broadcasting firms P100,000 each in lawyer fees.

“The court reminds that while the expeditious and efficient execution of court orders and writs is commendable, it should not, under any circumstance, be done by departing from the rules governing the same,” the High Court said. — John Victor D. Ordoñez