Gentlemen:

Quoted hereunder, for your information, is a resolution of this Court dated DEC 14 2004.

GR No. 138598 (ASSET PRIVATIZATION TRUST vs. HON. SANDIGANBAYAN et al.)

Before the Court are COA's 30 May 2004 Compliance, private respondent's 7 June 2004 Motion to Fix PJI's Obligation to PMO x x x, petitioner's 16 June 2004 Comment, COA's 26 June 2004 Compliance, private respondent's 5 July 2004 Comment, OSG's 8 July 2004 Motion for Leave to File Comment and OSG's 28 June 2004 Comment.

Per the Court's 24 February 2004 Resolution, COA recomputed PJI's obligations to be P60,428,390.42. Private respondent, on the other hand, argued that the unpaid balance should only be P74,894.73 for Industrial Loan C-IX plus P1,195,440.58 for the "Additional Obligations" for a total of P1,270,335.31.

The variance in computation stems from 1) a difference in the manner of applying the "resulting overpayment" -- of the Advances on Guaranteed Loans (Schedule A) and the Industrial Loan Foreign Currency (Schedule B) -- totaling P56,500,105.04 and 2) computation of penalties and interests on the additional obligations. COA did not apply the P56,500,105.04 simultaneously to Industrial Loan C-IX (Schedule C) on the dates the payments were remitted. Reasoning that the overpayment on the two loans merely resulted from using -- in the recomputation -- the reduced rates required by the Court, COA concluded that "there was no actual overpayment" on the Advances on Guaranteed Loans and the Industrial Loan Foreign Currency. Hence, it continued computing interests on the principal -- unreduced by the payments which are free for application to this principal loan -- of Industrial Loan C-IX.

The Commission claims that instead of merely computing mechanically, it acted "to determine a fair settlement of PJI's obligations to APT/PMO." Thus, it came up with the unpaid balance of P60,428,390.42 as a result of the following computation:

	Net Outstanding Obligations /
Particulars	(Overpayment)
	US$	PhP
Advances on Guaranteed Loans	974,686.11	53,458,609.08
$1,121,210.59
Industrial Loan Foreign Currency CB#1	55,454.19	3,041,495.96
$ 121,456.08
Industrial Loan FC Consortium	1,524,942.13	83,638,501.00[1]
IX $1,385,064.96
Advances on Loans		35,251,910.06[2]
Unpaid Guarantee Fees		387,324.34
Uncollected Fees		384.04
Total		62,778,014.40
Less: Unapplied Payments		2,349,623.98
Net Outstanding Obligations [of PJI]		60,428,390.42

COA's concern for a legally fair settlement is not lost on the Court. But the Commission's mandate in this case is to make impartial computations based on the Court's Resolution of 24 February 2004. By injecting its own opinion on what is a legal and fair settlement under the circumstances instead of just computing as directed, the COA has ventured beyond its mandate and submitted a partly opinionated rather than totally impartial computation.

Private respondent correctly pointed out the following as regards the computation on the balance of Industrial Loan C-IX (Schedule C):

"x x x [T]he above-stated overpayments of P56,500,105.04 should have been applied simultaneously to the said third loan, which is shown by COA to have an unpaid balance in the amount of $1,031,063.77, or P56,550,754.59. In applying these overpayments to the third loan, there remains a minimal unpaid balance of only P74,894.73, including interests of 10.5%, as shown below:

Industrial Loan FC Consortium IX	56,550,754.59
Less: Overpayments on -
Advances on Guaranteed Loans	53,458,609.08)
Industrial Loan FC CB#1	(3,041,495.96)
Balance	50,649.55
Add: Interest at 10.5% p.a. x 4yrs and
204 days (Aug. 22, 1998, the date of last
Payment by PJI, March 13, 2003)	24,245.18
	P 74,894.73"

vvvvvvvvvvvvv

Having said the foregoing, we nonetheless sustain a part of COA's recomputation. In addition to the balance of the third loan as set forth above, COA has shown that PJI still has the following outstanding obligations:

Advances on Loans	P35,251,910.06
Unpaid Guarantee Fees	387,324.34
Uncollected Fees	384.04
Subtotal	P35,639,618.44
Less: Unapplied Payments	2,349,623.98
Total	P33,289,994.46

Private respondent's computation of the said additional obligations is not acceptable. As correctly pointed out by CO A, "[private respondent] simply deducted the accumulated payments on the three (3) obligations from the principal amounts. This is erroneous because the payments were not made on the same dates but were made between August 1, 1986 up to August 1, 1998 x x x . Thus, in between payments, the principal obligations incurred additional interest and penalty charges x x x."

Summing up the Industrial Loan FC Consortium IX balance of P74,894.73 plus the additional obligations balance of P33,289,994.46, PJI's total net outstanding obligation amounts to P33,364,889.19. As pointed out in our 25 November 2003 Resolution, this amount is in accordance with Article 1229 of the Civil Code, which mandates courts to reduce penalties that are "iniquitous and unconscionable.” It is worth reiterating that of the original aggregate loan of US$2,627,731.63 -- or P144,123,196.71, if converted using the rate of 54.847[3] -- PJI has already paid P376,125,916.64, which is more than double the principal loans. The government has already recovered in full the principal amount of the loans and more. What the OSG and the COA now claim is nothing more than unconscionable gains at the expense of the borrower.

More significantly, PJI -- while under petitioner's management -- has continuously been sustaining gargantuan losses[4] from 1997 to 2001. As a result, the company has been operating with a capital deficiency and by all indications is becoming another burden to the government. Thus, the payment by private respondent of this recomputed amount of P33,364,889.19 will not only finally settle this contentious litigation but will also free the State of a looming financial loss and cash burden.

WHEREFORE, private respondent and/or her representatives are DIRECTED to PAY P33,364,889.19 to APT/PMO. Upon full delivery of this amount: 1) the Deed of Chattel Mortgage executed by PJI in favor of DBP, the Deed of Assignment of Voting Shares dated June 17, 1977, and the Supplement to the Deed of Assignment, dated January 16, 1979 are automatically cancelled, and 2) APT/PMO is DIRECTED to immediately turn over management and control of PJI to private respondent and/or her representatives and/or the other stockholders of record of PJI.

The OSG’s repetitive arguments (contained in its 28 June 2004 Comment) impugning this Court's 24 February 2004 Resolution and praying for the affirmation of COA's 13 March 2003 computations are treated as a second motion for reconsideration, and thereafter DENIED for being prohibited by the Rules.

This Resolution is immediately executory.

Very truly yours,

(Sgd.) LUZVIMINDA D. PUNO

Clerk of Court

[1] Particulars Amount

US$ Php

Principal 1,031,063.77 56,550,754.59

Regular Interest 0.00 0.00

Service Fees 0.00 0.00

Additional Interest 493,878.36 27,087,746.41

Penalty Charges 0.00 0.00

Outstanding Obligations 1,524,942.13 83,638,501.00

[2] Particulars Amount (PhP)

Principal 10,526,857.61

Additional Interest 20,717,617.20

Penalty Charges 4,007,435.25

Outstanding Obligations 35,251,910.06

[3] The rate used by PMO in its Statement of Account on March 13, 2003. If the exchange rate is to be based on the sum paid by DBP when the dollar loans matured, the peso value would be much less. Thus, the government is actually recovering much more than double the principal loans.

[4] P58,870,266 in 1997; P50,563,841 in 1998; P170,433,876 in 1999; P149,537,988 in 2000; and P152,549,043 in 2001. There are no financial reports in the records for the years after 2001.