500 Phil. 475
SANDOVAL-GUTIERREZ, J.:
“Sometime in 1989, Rosario Textile Mills Corporation (RTMC) applied from Home Bankers Savings & Trust Co. for an Omnibus Credit Line for P10 million. The bank approved RTMC’s credit line but for only P8 million. The bank notified RTMC of the grant of the said loan thru a letter dated March 2, 1989 which contains terms and conditions conformed by RTMC thru Edilberto V. Yujuico. On March 3, 1989, Yujuico signed a Surety Agreement in favor of the bank, in which he bound himself jointly and severally with RTMC for the payment of all RTMC’s indebtedness to the bank from 1989 to 1990. RTMC availed of the credit line by making numerous drawdowns, each drawdown being covered by a separate promissory note and trust receipt. RTMC, represented by Yujuico, executed in favor of the bank a total of eleven (11) promissory notes.Dissatisfied, RTMC and Yujuico, herein petitioners, appealed to the Court of Appeals, contending that under the trust receipt contracts between the parties, they merely held the goods described therein in trust for respondent Home Bankers Savings and Trust Company (the bank) which owns the same. Since the ownership of the goods remains with the bank, then it should bear the loss. With the destruction of the goods by fire, petitioners should have been relieved of any obligation to pay.
Despite the lapse of the respective due dates under the promissory notes and notwithstanding the bank’s demand letters, RTMC failed to pay its loans. Hence, on January 22, 1993, the bank filed a complaint for sum of money against RTMC and Yujuico before the Regional Trial Court, Br. 16, Manila.
In their answer (OR, pp. 44-47), RTMC and Yujuico contend that they should be absolved from liability. They claimed that although the grant of the credit line and the execution of the suretyship agreement are admitted, the bank gave assurance that the suretyship agreement was merely a formality under which Yujuico will not be personally liable. They argue that the importation of raw materials under the credit line was with a grant of option to them to turn-over to the bank the imported raw materials should these fail to meet their manufacturing requirements. RTMC offered to make such turn-over since the imported materials did not conform to the required specifications. However, the bank refused to accept the same, until the materials were destroyed by a fire which gutted down RTMC’s premises.
For failure of the parties to amicably settle the case, trial on the merits proceeded. After the trial, the Court a quo rendered a decision in favor of the bank, the decretal part of which reads:
‘WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered in favor of plaintiff and against defendants who are ordered to pay jointly and severally in favor of plaintiff, inclusive of stipulated 30% per annum interest and penalty of 3% per month until fully paid, under the following promissory notes:The counterclaims of defendants are hereby DISMISSED.
90-1116 6-20-90 P737,088.25 9-18-90 (maturity) 90-1320 7-13-90 P650,000.00 10-11-90 90-1334 7-17-90 P422,500.00 10-15-90 90-1335 7-17-90 P422,500.00 10-15-90 90-1347 7-18-90 P795,000.00 10-16-90 90-1373 7-20-90 P715,900.00 10-18-90 90-1397 7-27-90 P773,500.00 10-20-90 90-1429 7-26-90 P425,750.00 10-24-90 90-1540 8-7-90 P720,984.00 11-5-90 90-1569 8-9-90 P209,433.75 11-8-90 90-0922 5-28-90 P747,780.00 8-26-90
SO ORDERED.” (OR, p. 323; Rollo, p. 73).”[2]
The above assigned errors boil down to the following issues: (1) whether the Court of Appeals erred in holding that petitioners are not relieved of their obligation to pay their loan after they tried to tender the goods to the bank which refused to accept the same, and which goods were subsequently lost in a fire; (2) whether the Court of Appeals erred when it ruled that petitioners are solidarily liable for the payment of their obligations to the bank; and (3) whether the Court of Appeals violated the Trust Receipts Law.“I
THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE ACTS OF THE PETITIONERS-DEFENDANTS WERE TANTAMOUNT TO A VALID AND EFFECTIVE TENDER OF THE GOODS TO THE RESPONDENT-PLAINTIFF.II
THE HONORABLE COURT OF APPEALS ERRED IN NOT APPLYING THE DOCTRINE OF ‘RES PERIT DOMINO’ IN THE CASE AT BAR CONSIDERING THE VALID AND EFFECTIVE TENDER OF THE DEFECTIVE RAW MATERIALS BY THE PETITIONERS-DEFENDANTS TO THE RESPONDENT-PLAINTIFF AND THE EXPRESS STIPULATION IN THEIR CONTRACT THAT OWNERSHIP OF THE GOODS REMAINS WITH THE RESPONDENT-PLAINTIFF.III
THE HONORABLE COURT OF APPEALS VIOLATED ARTICLE 1370 OF THE CIVIL CODE AND THE LONG-STANDING JURISPRUDENCE THAT ‘INTENTION OF THE PARTIES IS PRIMORDIAL’ IN ITS FAILURE TO UPHOLD THE INTENTION OF THE PARTIES THAT THE SURETY AGREEMENT WAS A MERE FORMALITY AND DID NOT INTEND TO HOLD PETITIONER YUJUICO LIABLE UNDER THE SAME SURETY AGREEMENT.IV
ASSUMING ARGUENDO THAT THE SURETYSHIP AGREEMENT WAS VALID AND EFFECTIVE, THE HONORABLE COURT OF APPEALS VIOLATED THE BASIC LEGAL PRECEPT THAT A SURETY IS NOT LIABLE UNLESS THE DEBTOR IS HIMSELF LIABLE.V
THE HONORABLE COURT OF APPEALS VIOLATED THE PURPOSE OF TRUST RECEIPT LAW IN HOLDING THE PETITIONERS LIABLE TO THE RESPONDENT.”
“(h) Security Interest means a property interest in goods, documents, or instruments to secure performance of some obligation of the entrustee or of some third persons to the entruster and includes title, whether or not expressed to be absolute, whenever such title is in substance taken or retained for security only.”Petitioners’ insistence that the ownership of the raw materials remained with the bank is untenable. In Sia vs. People,[9] Abad vs. Court of Appeals,[10] and PNB vs. Pineda,[11] we held that:
“If under the trust receipt, the bank is made to appear as the owner, it was but an artificial expedient, more of legal fiction than fact, for if it were really so, it could dispose of the goods in any manner it wants, which it cannot do, just to give consistency with purpose of the trust receipt of giving a stronger security for the loan obtained by the importer. To consider the bank as the true owner from the inception of the transaction would be to disregard the loan feature thereof...”[12]Thus, petitioners cannot be relieved of their obligation to pay their loan in favor of the bank.
“SEC. 9. Evidence of written agreements. – When the terms of an agreement have been reduced in writing, it is considered as containing all the terms agreed upon and there can be, between the parties and their successors in interest, no evidence of such terms other than the contents of the written agreement.Under this Rule, the terms of a contract are rendered conclusive upon the parties and evidence aliunde is not admissible to vary or contradict a complete and enforceable agreement embodied in a document.[13] We have carefully examined the Suretyship Agreement signed by Yujuico and found no ambiguity therein. Documents must be taken as explaining all the terms of the agreement between the parties when there appears to be no ambiguity in the language of said documents nor any failure to express the true intent and agreement of the parties.[14]
However, a party may present evidence to modify, explain, or add to the terms of the written agreement if he puts in issue in his pleading:
(a) An intrinsic ambiguity, mistake, or imperfection in the written agreement;
(b) The failure of the written agreement to express the true intent and agreement of the parties thereto;
(c) The validity of the written agreement; or
(d) The existence of other terms agreed to by the parties or their successors in interest after the execution of the written agreement.
x x x.”