San Miguel Corp.-backed Bank of Commerce will appeal a Supreme Court decision over disputed funds released by fallen preneed giant, College Assurance Plan (CAP), to its planholders in 2013.
The high court reversed a Court of Appeals ruling that required the retrieval of about P91 million previously released by CAP to its planholders.
“The bank will file a motion for reconsideration of the Supreme Court’s decision,” Bank of Commerce, a former trustee of CAP, said in a stock exchange filing on Friday.
The lender did not say when it received the Supreme Court decision, which was promulgated on Sept. 15, 2021.
Held in escrow
Meanwhile, Bank of Commerce said there would be no impact on its operations and finances “since the funds subject of the case were in escrow and previously released” by then trustee, Philippine Veterans Bank.
The case goes back to the receivership of Sobrepeña-led CAP, which was established in the 1980s to become one of the country’s top education preneed providers.
Rising tuition and the 1997 Asian Financial Crisis contributed to its eventual collapse in the mid-2000s, hurting millions of families who relied on the company to fund their children’s college plans.
CAP had subscribed to preferred shares of Bank of Commerce in 1991. After CAP filed for corporate rehabilitation in 2005, a trial court acting as a rehabilitation court ordered Bank of Commerce to make back interest payments on the preferred shares.
In 2010, Bank of Commerce agreed to deliver P113 million to Philippine Veterans Bank under a settlement and escrow agreement. Three years later, the amount of P90.7 million was released to CAP’s planholders on orders from the rehabilitation court.
Negative retained earnings
Bank of Commerce, meanwhile, challenged the release of the funds, arguing that it was barred from making interest or “dividend” payments due to its negative retained earnings at the time.
The Bangko Sentral ng Pilipinas, in 2011, also cited negative retained earnings in denying the application for the payment of dividends.
In its decision, however, the high court said both Philippine Veterans Bank and CAP “acted in obedience to the valid orders of the Rehabilitation Court, which were valid and effective at the time petitioners carried out the ruling.”
“The subsequent denial by the BSP to BOC’s (Bank of Commerce) request to declare dividends does not constitute a supervening event that would warrant a departure from the doctrine of immutability of final judgments,” it added. The doctrine bars courts from amending a final decision.