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586 Phil. 686

SECOND DIVISION

[ G.R. No. 170738, September 12, 2008 ]

RIZAL COMMERCIAL BANKING CORPORATION, PETITIONER, VS. MARCOPPER MINING CORPORATION, RESPONDENT.

D E C I S I O N

QUISUMBING, J.:

This petition for review on certiorari under Rule 45 of the Rules of Court assails the Decision [1] dated June 6, 2005 and the Resolution [2] dated December 8, 2005, of the Court of Appeals in CA-G.R. CV No. 77594. The appellate court had affirmed with modification the Decision [3] dated July 2, 2002 of the Regional Trial Court (RTC) of Makati City, Branch 57, in Civil Case No. 98-1661. The RTC ordered the petitioner Rizal Commercial Banking Corporation (RCBC) to execute a Deed of Partial Release from Mortgage of six Rig Haul Trucks, one Demag Hydraulic Excavator Shovel, and shares of stock of the Baguio Country Club, Canlubang Golf and Country Club, Philippine Columbian Association, and Puerto Azul Beach and Country Club in favor of respondent Marcopper Mining Corporation (Marcopper).

The facts, culled from the records, are as follows:

To finance its acquisition of 12 Rig Haul Trucks and one Demag Hydraulic Excavator Shovel, Marcopper obtained a loan from RCBC in the amount of US$13.7 Million. As security for the loan, Marcopper executed in favor of RCBC a Deed of Chattel Mortgage [4] dated April 23, 1996 of the 12 Rig Haul Trucks and one Demag Hydraulic Excavator Shovel and a Deed of Pledge [5] dated August 29, 1996 covering shares of stock of the Baguio Country Club, Canlubang Golf and Country Club, Philippine Columbian Association, and Puerto Azul Beach and Country Club. Later, Marcopper likewise delivered to RCBC an additional Deed of Pledge [6] dated September 9, 1997, covering one share of stock in the Philippine Columbian Association.

Sometime in 1996, a restructuring of the loan was agreed upon by RCBC and Marcopper. In view of its inability to pay the loan, Marcopper, in a letter [7] dated July 1, 1997, proposed two options to RCBC: (1) to initiate foreclosure of the mortgaged assets and treat the deficiency as an unsecured creditor's claim against Marcopper's remaining assets; or (2) to accept the assignment of a Forbes Park property owned by Marcopper comprising 2,437 square meters and covered by TCT No. 321269 [8] (Forbes Park property) as partial payment of the loan and restructure the payment of the balance over a period of two years. The letter stated:
x x x x

Based on the foregoing, we foresee two (2) possible options for you, namely:
1)

Initiate a foreclosure on the mortgaged assets, thereby realizing maximum cash proceeds of about $11.6 Million. The balance will have to be relegated to the rank of unsecured obligations whose repayment will solely depend on the timing and extent of cash proceeds to be generated from the disposal of the company's assets, or



2)
Accept our proposal which calls for the involvement of our major shareholders.
The Company may request the involvement of our major shareholders who could ensure a definite repayment plan for the principal exposure of $13.7 Million. Said repayment plan will consist of the following components:
a)

Implementation of the assignment of the Forbes Park property for the previously agreed amount of P235 Million;



b)
Payment of the amount of P71 Million, being the peso equivalent of the difference between $11.6 Million and $8.9 Million (dollar equivalent of P235 Million) over a period of one (1) year on a quarterly basis, plus interest; and


c)
Payment of the balance of P55.4 Million (being the peso equivalent of the difference between the entire principal obligation of $13.7 Million and $11.6 Million which is the sum of Items a) and b) above, over a period of two (2) years payable quarterly.
x x x x

We believe that Option 2 above guarantees your full recovery of our principal obligation to you. Since our major shareholders have already indicated their willingness to support this repayment scheme, may we request you to accept this option for immediate implementation. [9]

x x x x
Representatives from both parties met on July 3, 1997, [10] to discuss Marcopper's proposal.

On July 8, 1997, Marcopper sent a letter to RCBC to confirm the agreements reached and to increase the principal amount under the repayment scheme of Option 2 as RCBC had raised concern about the accrued interest. The letter reads:
July 8, 1997

RIZAL COMMERCIAL BANKING CORP.
Sen. Gil Puyat Avenue
Makati City

Attention: MR. FILADELFO ROJAS, Jr.
Senior Vice-President


Gentlemen:

Subject: Marcopper FCDU Loan

This is to summarize our discussion and the points agreed upon during our meeting last July 3, regarding our payment proposal made in our letter to you of July 1.

In the meeting, Mr. Joost Pekelharing and I have reiterated Marcopper's proposal that with the involvement of the company's major shareholders, a definite repayment plan on the principal amount of your exposure to us be ensured.

While you raised your concern about the accrued interest, we had to explain that it may be unfair to overburden the company's major shareholders who are already overexposing themselves, if only to ensure that you will be repaid to the extent of your principal exposure to us. For this reason, we requested that said accrued interest be waived.

We then agreed on the repayment of your principal exposure to us as follows:

1)
The principal amount was to be revised, from the original principal of $13.7 million to $14.327 million, which includes interest that has been capitalized;


2)
Implementation of the assignment of the Forbes Park property for the agreed amount of P235 million, equivalent to about $8,901,515;


3)
Payment of the amount of $2,698,485 over a period of one (1) year payable quarterly plus interest; and


4)
Payment of the balance of $2,727,000 over a period of two (2) years, payable quarterly, without interest.

It was emphasized that the restructured loans will be guaranteed by the company's major shareholders.

We believe the foregoing captures the essence of what transpired in our meeting. May we therefore, request you to indicate your conforme in the space provided for below.

Thank you.

Very truly yours,

(Sgd.)
NICANOR L. ESCALANTE
Treasurer

Conforme:

Director/SVP SUSANNE Y. SANTOS
SVP FILADELFO S. ROJAS, JR.
(Sgd.)
____________________________
(Sgd.)
___________________
Rizal Banking Corporation
(Authorized Signatories) [11]

RCBC Director/Senior Vice-President Susanne Y. Santos and Senior Vice-President Filadelfo S. Rojas, Jr. signed their conformity to the above letter.

In a letter dated July 31, 1997, Marcopper forwarded four documents to RCBC thus:
31 July 1997

Rizal Commercial Banking Corporation
Sen. Gil J. Puyat Avenue, Makati City

Attention : Ms. Ma. Felisa Banzon
Vice-President

Gentlemen:

Re: Deed of Release from Mortgage

In connection with the transfer of our Forbes Park Property in your favor, we are transmitting to you herewith the following documents:
  1. Deed of Assignment [of the Forbes Park property] dated August 1, 1997, for BIR purposes;

  2. Deed of Partial Release from Mortgage signed by the Attorney-in-Fact of MR Holdings Limited releasing from their mortgage the above-mentioned property; and

  3. Copy of Secretary's Certificate of a resolution passed by the Board of Directors of MR Holdings Limited appointing as Attorney-in-Fact, Atty. Alma D. Fernandez-Mallonga. The original of said Secretary's Certificate is with Atty. Mallonga and will be presented to the Register of Deeds when required.

  4. Deed of Release from Mortgage to be signed by RCBC involving the release from your mortgage six (6) Units Rig Trucks and one (1) unit Demag Shovel.
Kindly note that the release of the above-mentioned property by MR Holdings Limited from their mortgage was made on the condition that a substitution thereof with other unencumbered and free assets and properties of the mortgagor under a second Addendum to Mortgage be effected. Inasmuch as our only free and unencumbered assets will be those that will be released by you under the Deed of Release from Mortgage mentioned under Item No. 4 above, may we therefore request that your authorized signatories sign as soon as possible the said Deed of Release from Mortgage.

Thank you for your kind assistance and cooperation

Very truly yours,

(Sgd.)
NICANOR L. ESCALANTE
Treasurer [12]
RCBC did not sign the Deed of Release from Mortgage of the six Rig Haul Trucks and one Demag Hydraulic Excavator Shovel. Instead, it returned the unsigned deed to Marcopper. However, it signed the Deed of Assignment of the Forbes Park property.

On August 22, 1997, Marcopper sent RCBC another letter transmitting additional documents.

August 22, 1997

MS. MARISSA BANZON
Vice-President
RIZAL COMMERCIAL BANKING CORPORATION
Sen. Gil J. Puyat Avenue
Makati City

Dear Marissa,

In connection with the completion of documentation of the transfer of our Forbes Park property in your favor, we are transmitting to you herewith our Promissory Notes for US$2,698,485.00 and US$2,727,000.00. These amounts correspond to the restructured balance of our outstanding loan with you after effecting our partial payment to you through the abovementioned assignment of our Forbes Park property.

In addition, we are sending you herewith the Surety Agreements duly executed by Mr. Teodoro G. Bernardino as surety corresponding to the restructured obligation to you. As earlier discussed with you, kindly release your letter addressed to Mr. Teodoro G. Bernardino, clarifying certain aspects of the Surety Agreement he signed in your favor.

Thank you for your kind cooperation.

Best regards.

Very truly yours,

(Sgd.)
NICK L. ESCALANTE
Treasurer [13]

On August 26, 1997, said promissory notes, which represent the restructured balance of Marcopper's loan, were signed by both parties. As stated above, Marcopper also delivered to RCBC an additional Deed of Pledge dated September 9, 1997 over one share of the Philippine Columbian Association.

On September 12, 1997, RCBC Vice-President Ma. Felisa R. Banzon wrote Marcopper the following letter:

September 12, 1997

MARCOPPER MINING CORP.
6th Floor, V. Madrigal Bldg.
6793 Ayala Avenue,
Makati City

Attention: MR. NICANOR L. ESCALANTE
Treasurer


Gentlemen:

As you are aware, we have effected the transfer of ownership of the Forbes property which you used to partially settle your past due obligations with the bank. You have previously requested the release of six (6) Unit Rig trucks and one (1) Demag Shovel. However, as I have previously informed you, we first need to work on some details in relation to the dacion. We still need to get approval for your request thus no commitment can be made at this time.

Very truly yours,

(Sgd.)
MA. FELISA R. BANZON
Vice-President [14]
On November 24, 1997, Marcopper stressed to RCBC the need for RCBC to release the mortgaged properties. Marcopper stated that RCBC was well aware that MR Holdings, Ltd. agreed to release its lien on the Forbes Park property upon Marcopper's assurance that RCBC will release from mortgage the six Rig Haul Trucks and one Demag Hydraulic Excavator Shovel. In said letter, Marcopper for the first time also stated that pledges over the club shares were to be released as well. The properties to be released from mortgage and pledge were to be used as substitute security in favor of MR Holdings, Ltd. The letter reads:

November 24, 1997

MR. CESAR VIRATA
Chairman of the Board
RIZAL COMMERCIAL BANKING CORPORATION
Sen. Gil J. Puyat Avenue
Makati City

Dear Mr. Virata,

We are writing you in connection with the recently completed documentation on the assignment of our Forbes Park property in your favor, representing partial settlement of our loan obligations to you.

As you may be aware, the Forbes Park property had, up to the time of assignment to you, been part of a pool of assets mortgaged with MR HOLDINGS, LTD. (MR Holdings), successor-in-interest of the Asian Development Bank. MR Holdings agreed to release this asset from their mortgage only upon our assurance that RCBC will release as well from their mortgage, and we would, without delay, turn over to MR Holdings, six (6) units Rig Trucks and one (1) unit Demag Shovel.

We, likewise, committed to MR Holdings that we will additionally mortgage to them some club shares, which we earlier pledged to you, and which we expected to be released by you, after the restructuring of our loan obligations with you. As you very well know, the restructured balance of our obligations with you are covered by a surety issued by Mr. Teodoro G. Bernardino, in addition to the equipment to be retained by you as collateral.

Up to now, however, the abovementioned equipment have not yet been released from your mortgage, nor have the pledged club shares been turned over to us. We have been advised by RCBC that the non-release of the abovementioned assets is caused by a pending issue between RCBC and its assigned Central Bank examiner, involving the restructuring agreement entered into between RCBC and Marcopper.

Considering the pressure being exerted on us by MR Holdings on the immediate compliance of our commitment to deliver the abovementioned assets to them, may we, therefore, seek your kind assistance in the release of said assets from RCBC.

Thank you.

Very truly yours,

MARCOPPER MINING CORP.

(Sgd.)
JOOST PEKELHARING
Chairman of the Board [15]
In a letter [16] dated December 15, 1997, RCBC informed Marcopper that its Executive Committee had approved the release of five Rig Haul Trucks subject to the condition that Marcopper pays the first amortization which fell due on November 24, 1997. On December 17, 1997, RCBC sent a second letter [17] to Marcopper informing the latter that it has approved the release from mortgage of the six Rig Haul Trucks and one Demag Hydraulic Excavator Shovel as well as the release from pledge of the club shares, also subject to the same condition. Marcopper failed to settle the obligations which fell due on November 24, 1997, February 23, 1998 and May 25, 1998. RCBC sent to Marcopper and its surety Mr. Teodoro G. Bernardino a letter dated July 1, 1998, declaring the whole obligation under the non-negotiable promissory notes due and payable and demanding that they pay the same. Marcopper and its surety refused to pay.

Instead, on July 16, 1998, Marcopper filed a complaint [18] for Specific Performance with Damages and with Prayer for the Issuance of a Writ of Preliminary Injunction against RCBC before the RTC of Makati. Marcopper alleged that it agreed to assign the Forbes Park property to RCBC to be credited to Marcopper's account in the amount of US$8,901,515 on the condition that RCBC will execute a Deed of Release from Mortgage of the six Rig Haul Trucks, one Demag Hydraulic Excavator Shovel and the club shares of the Baguio Country Club, Canlubang Golf and Country Club, Puerto Azul Beach and Country Club, and Philippine Columbian Association which it failed to do. Marcopper prayed that RCBC be ordered to execute a deed of partial release of mortgage and pledge, desist from declaring Marcopper's promissory notes as due and demandable, and pay damages.

In its Answer with Compulsory Counterclaim, RCBC asserted that it did not have an obligation to release any mortgage or pledge because the parties did not have any agreement for RCBC to do so. As its counterclaims, RCBC prayed that Marcopper be ordered to pay the principal amount of its promissory notes, the interest, penalties, and attorney's fees stipulated therein, and to compensate RCBC for the damages it suffered as a result of the filing of the case.

In a Decision dated July 2, 2002, the RTC ruled in favor of Marcopper:

WHEREFORE, premises considered, judgment is hereby [rendered], as follows:
  1. Ordering defendant Rizal Commercial Banking Corporation to execute a Deed of Partial Release from Mortgage, in favor of the plaintiff, the following properties:
    a)
    six (6) units Rig [Haul] trucks


    b)
    one (1) Demag Excavator shovel and for said defendant to release from pledge, in favor of the plaintiff, the following:



    a)
    one (1) share of Baguio Country Club under Certificate No. 3753;





    b)
    one (1) share of Canlubang Golf and Country Club under Certificate No. 1759;





    c)
    one (1) share of Philippine Columbian Club Association under Certificate No. 1461;





    d)
    one (1) share of Philippine Columbian Club Association under Certificate No. 1486; and





    e)
    one (1) share of Puerto Azul Beach and Country Club under Certificate No. 534.
  2. Ordering defendant to cease and desist from enforcing and collecting on the non-negotiable Promissory Note Nos. 21-3699 and 21-37997 including the comprehensive surety agreements of Mr. Teodoro Bernardino, the same not being due and enforceable against the plaintiff and Teodoro Bernardino.

  3. Ordering defendant to pay Marcopper the amount equivalent to 30% of the value as of 1997 of the six (6) units Rig trucks, Demag Excavator shovel and the club shares mentioned in [the] preceding par. 1 hereof, as compensatory damages; and [P500,000.00] as exemplary damages.
The compulsory counterclaims of defendant are dismissed for lack of merit.

No costs.

SO ORDERED. [19]
The Court of Appeals affirmed with modification the trial court's ruling. Thus:
WHEREFORE, premises considered, the decision of Branch 57, Regional Trial Court of Makati in Civil Case No. 98-1661 is hereby AFFIRMED with Modifications in items 2 and 3 of the same:
2. Enforcement of Promissory Notes 21-3697 and 21-3797 is hereby SUSPENDED until the RELEASE of properties specified in the trial court's decision dated July 2, 2002.

3. RCBC is held liable for actual and compensatory damages equivalent to thirty percent (30%) of the value of the equipment not released to answer for the depreciation these equipment underwent due to the passage of time and the profit [Marcopper] could have realized if aforementioned release was effected on time. RCBC is likewise held liable for exemplary damages in the reduced amount of One Hundred Thousand (P100,000.00) Pesos.
The dismissal of defendant's compulsory counterclaims is AFFIRMED.

SO ORDERED. [20]
RCBC's motion for reconsideration was denied. Hence, the instant appeal by RCBC. RCBC alleges that:

I.

THE COURT OF APPEALS ERRED IN FINDING THAT RCBC WAS LEGALLY OBLIGATED TO RELEASE THE SUBJECT MORTGAGE AND PLEDGE BASED ON HEARSAY, IRRELEVANT, AND THUS INADMISSIBLE EVIDENCE, AND IN DISREGARDING THE UNDISPUTED AND MATERIAL FACTS, WHICH IF PROPERLY CONSIDERED, WOULD JUSTIFY A CONTRARY CONCLUSION.

x x x x

II.

THE COURT OF APPEALS DEPARTED FROM THE USUAL COURSE OF JUDICIAL PROCEEDINGS IN GIVING MORE WEIGHT AND CREDENCE TO THE HEARSAY, DOUBTFUL, TENUOUS, AND IRRELEVANT, TESTIMONIES OF MARCOPPER'S WITNESSES, AND IN DISREGARDING THE CATEGORICAL TESTIMONIES OF MARIA FELI[S]A R. BANZON AND MERLYN E. DUEƑAS, BOTH OF WHOM WERE PRESENT AT THE PARTIES' MEETING ON 3 JULY 1997, PROVING THAT THERE WAS NO COMMITMENT, MUCH LESS AGREEMENT, TO RELEASE THE SUBJECT MORTGAGE AND THE PLEDGE.

III.

THE COURT OF APPEALS ERRED IN AWARDING DAMAGES TO MARCOPPER BASED ON MANIFESTLY MISTAKEN, ABSURD, OR IMPOSSIBLE INFERENCES AND MERE SPECULATION.

IV.

THE COURT OF APPEALS ERRED IN DISMISSING RCBC'S COUNTERCLAIMS. [21]

x x x x
Simply, the issue is: Did the parties agree that RCBC will execute a Deed of Release from Mortgage and Pledge of the six Rig Haul Trucks, one Demag Hydraulic Excavator Shovel and shares of stock in exchange for the assignment by Marcopper to RCBC of the Forbes Park property?

RCBC contends that a mortgage obligation is one and indivisible and thus, Marcopper cannot demand the release of any portion of its mortgaged and pledged properties unless and until it has fully paid its loan with RCBC, notwithstanding its partial payment of the loan through a dacion en pago of its Forbes Park property to RCBC. The only way RCBC would be bound to release the mortgage and pledge is if it had contracted to do so. However, Marcopper failed to establish that RCBC agreed and legally bound itself to effect release of the subject mortgage and pledge. RCBC stressed that Marcopper merely presented hearsay and/or irrelevant evidence. [22]

On the other hand, Marcopper counters that there was an agreement between the parties for RCBC to release the mortgage as proven by the testimonies of its witnesses which were found to be credible. Marcopper argues that such evidence constitutes findings of fact of the trial court and Court of Appeals and that when supported by substantial evidence, findings of fact of the trial court as affirmed by the Court of Appeals are conclusive and binding on the Supreme Court. [23]

The petition is impressed with merit.

As a rule, only questions of law are entertained by this Court in petitions for review on certiorari under Rule 45. It is not our function to analyze or weigh all over again the evidence presented. It is a settled doctrine that in a civil case, final and conclusive are the factual findings of the trial court, but only if supported by clear and convincing evidence on record. [24]

Both the RTC and the Court of Appeals gave credence to the testimonies of Marcopper President Atty. Teodulo C. Gabor, Jr. and Mr. Teodoro G. Bernardino, a member of the Board of Directors of Marcopper. True, findings by the trial court as to the credibility of witnesses are accorded the greatest respect, and even finality by the appellate courts, since the former is in a better position to observe their demeanor as well as their deportment and manner of testifying during the trial. [25] However, in this case, not only was there inadequate evidence to prove Marcopper's assertions, the lower courts also overlooked certain significant facts which contradict the assertions of Marcopper's witnesses.

A review of the written exchanges between the parties shows no written agreement was ever executed by RCBC and Marcopper for RCBC to execute a partial release of mortgage and pledge upon assignment to it of the Forbes Park property. The July 1, 1997 letter from Marcopper Treasurer Nicanor L. Escalante to RCBC merely listed two options of payment of Marcopper's loan to RCBC while the July 8, 1997 letter from Marcopper to RCBC modified the terms of payment as to the second option listed in the July 1, 1997 letter. The next written communication between the parties was the July 31, 1997 where Marcopper forwarded the Deed of Release of Mortgage which it requested RCBC to sign.

Even the letter [26] dated November 24, 1997 from Marcopper Chairperson of the Board Joost Pekelharing to RCBC makes no allusion to a written contract. The letter merely stated MR Holdings agreed to release the Forbes Park property upon Marcopper's assurance that RCBC will release from mortgage six units Rig Haul Trucks and one unit Demag Hydraulic Excavator Shovel.

The existence of the alleged condition asserted by Marcopper was therefore to be gleaned primarily from the testimonies of its witnesses who asserted that Marcopper and RCBC had agreed on July 3, 1997 to the release of the mortgage and pledge as a condition to the assignment of the Forbes Park property and ultimately the payment of the promissory notes. However, we note that the first time that Marcopper ever mentioned the release of the pledges of club shares was in its letter dated November 24, 1997. Before that, Marcopper requested the release of the mortgage on the Rig Haul Trucks and one unit Demag Hydraulic Excavator Shovel only. Marcopper's letter to RCBC dated July 8, 1997, which confirmed the agreements between the parties during their July 3, 1997 meeting, did not state that RCBC committed to release the mortgage and pledge, a condition which Marcopper alleged to be a material condition and which would ordinarily be included in the written confirmation had it been agreed upon. Also, on September 9, 1997, Marcopper executed a deed of pledge of one additional share of stock of the Philippine Columbian Association. If it were true, as asserted by Marcopper's witnesses, that RCBC had committed to release the mortgage and pledge during the July 3, 1997 meeting, Marcopper would not have delivered the additional pledge after the Forbes Park property had been assigned to RCBC. That it did so proves that the assignment of the Forbes Park property was not made on the condition Marcopper claims.

Contracts are perfected by mere consent, and from that moment the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage, and law. [27] Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. [28]

In general, contracts undergo three distinct stages, to wit: negotiation; perfection or birth; and consummation. Negotiation begins from the time the prospective contracting parties manifest their interest in the contract and ends at the moment of agreement of the parties. Perfection or birth of the contract takes place when the parties agree upon the essential elements of the contract. Consummation occurs when the parties fulfill or perform the terms agreed upon in the contract, culminating in the extinguishment thereof. [29]

Based on the records, RCBC agreed to a partial release of the mortgaged properties only in its letters dated December 15, 1997 [30] and December 17, 1997 [31] but it was clearly on the condition that Marcopper first pay the first amortization which fell due on November 24, 1997.

Marcopper cannot renege on its obligation to pay the promissory notes under the pretext that there was a previous agreement between the parties for RCBC to effect a partial release of mortgage and pledge upon assignment to it of the Forbes Park property.

Marcopper has failed to establish a cause of action, defined as an act or omission by which a party violates a right of another. [32]

In Jison v. Court of Appeals, [33] this Court outlined the quantum of evidence required in order to sufficiently assert one's claim in civil cases, thus:
The foregoing discussion, however, must be situated within the general rules on evidence, in light of the burden of proof in civil cases, i.e., preponderance of evidence, and the shifting of the burden of evidence in such cases. Simply put, he who alleges the affirmative of the issue has the burden of proof, and upon the plaintiff in a civil case, the burden of proof never parts. However, in the course of trial in a civil case, once plaintiff makes out a prima facie case in his favor, the duty or the burden of evidence shifts to defendant to controvert plaintiff's prima facie case, otherwise, a verdict must be returned in favor of plaintiff. Moreover, in civil cases, the party having the burden of proof must produce a preponderance of evidence thereon, with plaintiff having to rely on the strength of his own evidence and not upon the weakness of the defendant's. The concept of "preponderance of evidence" refers to evidence which is of greater weight, or more convincing, that which is offered in opposition to it; at bottom, it means probability of truth.
In a civil case, the burden of proof is on the plaintiff to establish his case through a preponderance of evidence. If he claims a right granted or created by law, he must prove his claim by competent evidence. [34]

Given the existence of facts clearly militating against Marcopper's claim and the absence of any written agreement between the parties, the testimonies of witnesses who happen to be officers of Marcopper and whose testimonies should naturally favor Marcopper are insufficient to establish its cause of action. Marcopper's complaint should have been dismissed by the trial court.

WHEREFORE, the petition is GRANTED. The assailed Decision dated June 6, 2005 and the Resolution dated December 8, 2005 of the Court of Appeals in CA-G.R. CV No. 77594 are REVERSED and SET ASIDE. Marcopper is directed to pay RCBC the following amounts expressly stipulated in the Non-Negotiable Promissory Note Nos. 21-3697 and 21-3797:
  1. US$5,425,485.00 as the total principal amount due under Non-Negotiable Promissory Note Nos. 21-3697 and 21-3797, including the interest due on US$2,698,845.00 under Non-Negotiable Promissory Note No. 21-3697 at the rate of 9% per annum until fully paid.

  2. Penalty equivalent to 36% per annum of the amount due and unpaid under Non-Negotiable Promissory Note Nos. 21-3697 and 21-3797 until fully paid; and

  3. Attorney's fees equivalent to 20% of the total amount due.
RCBC's claims for moral and exemplary damages are denied. It may, however, exercise its rights, in accordance with law, to foreclose on the properties covered. No pronouncement as to costs.

SO ORDERED.

Carpio Morales, Tinga, Velasco, Jr., and Brion, JJ., concur.



[1] Rollo, pp. 53-71. Penned by Associate Justice Arcangelita M. Romilla-Lontok, with Associate Justices Rodrigo V. Cosico and Danilo B. Pine concurring.

[2] Id. at 73-74.

[3] Id. at 75-98. Penned by Judge Reinato G. Quilala.

[4] Records, pp. 178-181.

[5] Id. at 184-185.

[6] Id. at 182-183.

[7] Id. at 72-75.

[8] Rollo, p. 75.

[9] Records, pp. 73-74.

[10] Id. at 76.

[11] Id. at 76-77.

[12] Id. at 14.

[13] Id. at 79.

[14] Id. at 83.

[15] Id. at 197-198.

[16] Id. at 199.

[17] Id. at 200.

[18] Id. at 1-9.

[19] Rollo, pp. 97-98.

[20] Id. at 69-70.

[21] Id. at 22-24.

[22] Id. at 25.

[23] Id. at 178-179.

[24] Vibram Manufacturing Corporation v. Manila Electric Company, G.R. No. 149052, August 9, 2005, 466 SCRA 178, 183.

[25] Domingo v. Domingo, G.R. No. 150897, April 11, 2005, 455 SCRA 230, 238.

[26] Records, pp.197-198.

[27] Civil Code of the Philippines, Article 1315.

[28] Id., Article 1159.

[29] Swedish Match, AB v. CA, G.R. No. 128120, October 20, 2004, 441 SCRA 1, 18.

[30] Records, p. 86.

[31] Id. at 87.

[32] 1997 Rules of Court, Rule 2, Section 2.

[33] G.R. No. 124853, February 24, 1998, 286 SCRA 495, 532.

[34] Social Security System v. Chaves, G.R. No. 151259, October 13, 2004, 440 SCRA 269, 277.

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