Court: SEC can’t force Victorias Milling to pay trading arm’s loans

The Court of Appeals struck down Land Bank of the Philippines’ and Dao Heng Bank’s moves to compel sugar firm Victorias Milling Corp. (VMC) to follow the Securities and Exchange Commission’s (SEC) directive to honor loans given to sugar trading arm North Negros Marketing Co.

In a decision dated Oct. 13, the 14th Division of the appellate court said the SEC had no jurisdiction over the claims filed by the lenders, noting the responsibility was with regular courts.

In 1998, Landbank sought to directly enforce against VMC a claim over a credit line it had extended to North Negros. Wholly owned by VMC, North Negros is known to lenders as the former’s in-house sugar trading arm.

To secure the obligation, North Negros mortgaged its real properties and executed deeds of assignment over certain refined sugar delivery orders
(RSDOs) in favor of Landbank.

“The RSDOs were allegedly originally issued by VMC,” VMC said in a disclosure on Wednesday.

Despite the foreclosure of North Negros’ real properties, Landbank said that there remained an obligation in the amount of around P187.18 million.

But since the alleged loans were incurred by North Negros, VMC said it “neither received anything nor benefited from the alleged loans.”

In 2016, VMC received an order from an SEC panel directing the sugar firm to deliver to Landbank refined sugar, or its monetary equivalent, to cover the claim.

The VMC questioned the order before the SEC’s en banc, but was denied.

For its part, Dao Heng Bank, which has since then been taken over by BDO Unibank, also filed in 1998 a complaint with the SEC for a similar claim of 105,000 bags of refined sugar from VMC.

Consolidating the cases, the appellate court thereafter granted VMC’s petitions for review on both the Dao Heng Bank and Landbank cases.

The appellate court said the proceedings under the SEC were limited by the doctrine that the tribunal, being an administrative agency, had limited jurisdiction.