Ben Madilynn
AFTER returning from a two-week international trip, Cebu Gov. Gwendolyn Garcia addressed the ongoing controversy regarding her debt with Hong Kong Shanghai Banking Corp. (HSBC), as she reiterated that the issue pertains to her as a private individual and an entrepreneur and not her role as governor.
In a press conference at the Cebu Provincial Capitol on Friday afternoon, Sept. 20, Garcia explained to reporters that it should not have been made public as this does not involve the Cebu Provincial Government.
However, she was forced to speak and clarify in defense of the Provincial Government after her position and her name were dragged into the issue.
“It is what it is…Since a huge uproar has been created over this Supreme Court decision, then the entire public will know what I went through [with] HSBC,” Garcia said.
The issue stemmed from a lawsuit that HSBC filed against Garcia, citing her failure to repay the US$900,000 loan from the bank.
The loan from HSBC was to purchase a barge as part of a business expansion to improve their private port at Ormoc City back in 1996.
Garcia said that she was still a private individual and an Ormoc City-based entrepreneur at that time, where she owned the GGC Enterprising/Shipping.
The loan credit was secured through collateral items as Garcia executed, with the consent of her then husband, a real estate mortgage covering two parcels of land, a trust receipt dated Oct. 15, 1997, over the barge, and a general surety agreement relating to goods in favor of HSBC.
The land parcels cover 15 to 20 hectares and have an appraised value of P30 million at that time. This was in addition to the existing $200,000 deposit under their name to the HSBC, Garcia said.
Garcia added that the loan was also contracted with 14 percent interest.
She also said that the average exchange rate of US dollars to the Philippine pesos in 1996 was around P26 to $1, making the $900,000 loan to around P18 million in local currency.
However, Garcia said that with the arrival of the 1997 Asian financial crisis, affecting the majority of businesses in Asia and Southeast Asia, including her enterprises, there was an abrupt rise of the foreign exchange rate of one US dollar to P39 at the end of the year.
With the high exchange rate and interest rate, GGC was not able to catch up on its loan obligation to HSBC. The GGC tried to settle its loan with HSBC, including offering the foreclosure of the two parcels of land as collateral that are worth more than the loan amount, she said.
The GGC’s $200,000 deposit at HSBC was recouped to the bank, reducing their loan credit.
After two years, HSBC declared GGC in default, and in July 2000, filed before the Regional Trial Court of Makati Branch 57, demanding Garcia to pay off around $2,100,000, including legal and accumulated interest and the costs of the suit.
On Dec. 21, 2001, RTC Makati favored HSBC and awarded the amount of $890,347.92 as actual damages plus an accumulation of P2 million for moral and exemplary damages against Garcia.
It was then later reduced by the Court of Appeals on Oct. 17, 2006, to $700,000 in actual damages plus P605,503.90 as the cost of the suit in favor of HSBC.
In 2006, Garcia sought the Supreme Court’s intervention, and on Aug. 22, 2012, the SC still favored HSBC but retained $700,000 in actual damages but reduced the cost of the suit to P405,560.50 and later became final and executory in 2013.
Garcia said that she sought SC and reiterated the loan credit has an adequate collateral item that can cover the loan amount for the bank to recoup the loan capital.
However, HSBC refused to foreclose the two parcels of land as collateral.
“If I were to pay, at that time, the US $700,000 as judged by CA, that would mean a sacrifice for the working capital of our business, as well as (our other loan),” Garcia said.
She explained that at that time, the HSBC loan was contracted, and GGC had an existing P28 million loan obligation to the Bank of the Philippine Islands (BPI).
The difference between her two loan obligations from two banks was that the BPI offered her a loan reconstruction, particularly after the 1997 Asian financial crisis.
As of the moment, Garcia said that under the reconstructed loan obligation, she was able to pay off her loan with BPI, while the HSBC has not offered a loan restructure program for her to pay off her obligation.
Garcia’s legal counsel, Alex Avisado Jr., said via Zoom videoconference that HSBC failed to meet the deadline to petition for the revival of judgment at the Taguig City Regional Trial Court Branch 153. Consequently, the court dismissed the petition as it was no longer enforceable, more than 10 years had passed since the decision became final.
The HSBC had five years to enforce the ruling but failed to do so. It also had 10 years to file the petition to revive the judgment but didn’t make it on time.
This prompted HSBC to elevate the dismissal to the Court of Appeals, where it is now pending.
Avisado reiterated that there is no “imminent threat of enforcement” of any civil liability against Garcia.
Garcia said that she no longer allowed HSBC to foreclose the real estate mortgage as HSBC’s right has already expired. /EHP
