352 Phil. 101
MELO, J.:
The issues
relevant to the herein three consolidated petitions revolve around the fire
loss claims of respondent Goyu & Sons, Inc. (GOYU) with petitioner Malayan
Insurance Company, Inc. (MICO) in connection with the mortgage contracts
entered into by and between Rizal Commercial Banking Corporation (RCBC) and
GOYU.
The Court of
Appeals ordered MICO to pay GOYU its claims in the total amount of
P74,040,518.58, plus 37% interest per annum commencing July 27, 1992. RCBC was ordered to pay actual and
compensatory damages in the amount of P5,000,000.00. MICO and RCBC were held solidarily liable to pay GOYU P1,500,000.00
as exemplary damages and P1,500,000.00 for attorney’s fees. GOYU’s obligation to RCBC was fixed at
P68,785,069.04 as of April 1992, without any interest, surcharges, and
penalties. RCBC and MICO appealed
separately but, in view of the common facts and issues involved, their individual
petitions were consolidated.
The undisputed
facts may be summarized as follows:
GOYU applied for
credit facilities and accommodations with RCBC at its Binondo Branch. After due evaluation, RCBC Binondo Branch,
through its key officers, petitioners Uy Chun Bing and Eli D. Lao, recommended
GOYU’s application for approval by RCBC’s executive committee. A credit facility in the amount of P30
million was initially granted. Upon
GOYU’s application and Uy’s and Lao’s recommendation, RCBC’s executive
committee increased GOYU’s credit facility to P50 million, then to P90 million,
and finally to P117 million.
As security for
its credit facilities with RCBC, GOYU executed two real estate mortgages and
two chattel mortgages in favor of RCBC, which were registered with the Registry
of Deeds at Valenzuela, Metro Manila. Under each of these four mortgage contracts, GOYU committed itself to
insure the mortgaged property with an insurance company approved by RCBC, and
subsequently, to endorse and deliver the insurance policies to RCBC.
GOYU obtained in
its name a total of ten insurance policies from MICO. In February 1992,
Alchester Insurance Agency, Inc., the insurance agent where GOYU obtained the
Malayan insurance policies, issued nine endorsements in favor of RCBC seemingly
upon instructions of GOYU (Exhibits “1-Malayan” to “9-Malayan”).
On April 27,
1992, one of GOYU’s factory buildings in Valenzuela was gutted by fire. Consequently, GOYU submitted its claim for
indemnity on account of the loss insured against. MICO denied the claim on the ground that the insurance policies
were either attached pursuant to writs of attachments/garnishments issued by
various courts or that the insurance proceeds were also claimed by other
creditors of GOYU alleging better rights to the proceeds than the insured. GOYU filed a complaint for specific
performance and damages which was docketed at the Regional Trial Court of the
National Capital Judicial Region (Manila, Branch 3) as Civil Case No. 93-65442,
now subject of the present G.R. No. 128833 and 128866.
RCBC, one of
GOYU’s creditors, also filed with MICO its formal claim over the proceeds of
the insurance policies, but said claims were also denied for the same reasons
that MICO denied GOYU’s claims.
In an
interlocutory order dated October 12, 1993 (Record, pp. 311-312), the Regional
Trial Court of Manila (Branch 3), confirmed that GOYU’s other creditors,
namely, Urban Bank, Alfredo Sebastian, and Philippine Trust Company obtained
their respective writs of attachments from various courts, covering an
aggregate amount of P14,938,080.23, and ordered that the proceeds of the ten
insurance policies be deposited with the said court minus the aforementioned
P14,938,080.23. Accordingly, on January
7, 1994, MICO deposited the amount of P50,505,594.60 with Branch 3 of the Manila
RTC.
In the meantime,
another notice of garnishment was handed down by another Manila RTC sala
(Branch 28) for the amount of P8,696,838.75 (Exhibit “22-Malayan”).
After trial,
Branch 3 of the Manila RTC rendered judgment in favor of GOYU, disposing:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant, Malayan Insurance Company, Inc. and Rizal Commercial Banking Corporation, ordering the latter as follows:
1. For defendant Malayan Insurance Co., Inc.:
a. To pay the plaintiff its
fire loss claims in the total amount of P74,040,518.58 less the amount of
P50,000,000.00 which is deposited with this Court;
b. To pay the plaintiff
damages by way of interest for the duration of the delay since July 27, 1992
(ninety days after defendant insurer’s receipt of the required proof of loss
and notice of loss) at the rate of twice the ceiling prescribed by the Monetary
Board, on the following amounts:
1) P50,000,000.00 —
from July 27, 1992 up to the time said amount was deposited with this Court on
January 7, 1994;
2) P24,040,518.58 —
from July 27, 1992 up to the time when the writs of attachments were received
by defendant Malayan;
2. For defendant Rizal Commercial Banking Corporation:
a. To pay the plaintiff actual
and compensatory damages in the amount of P2,000,000.00;
3. For both defendants Malayan and RCBC:
a. To
pay the plaintiff, jointly and severally, the following amounts:
1) P1,000,000.00
as exemplary damages;
2) P1,000,000.00
as, and for, attorney’s fees;
3) Costs
of suit.
and on the Counterclaim of defendant RCBC, ordering
the plaintiff to pay its loan obligations with defendant RCBC in the amount of
P68,785,069.04, as of April 27, 1992, with interest thereon at the rate
stipulated in the respective promissory notes (without surcharges and
penalties) per computation, pp. 14-A, 14-B & 14-C.
FURTHER, the Clerk of Court of the Regional Trial Court of Manila is hereby ordered to release immediately to the plaintiff the amount of P50,000,000.00 deposited with the Court by defendant Malayan, together with all the interests earned thereon.
(Record, pp. 478-479.)
From this
judgment, all parties interposed their respective appeals. GOYU was unsatisfied with the amounts
awarded in its favor. MICO and RCBC
disputed the trial court’s findings of liability on their part. The Court of Appeals partly granted GOYU’s
appeal, but sustained the findings of the trial court with respect to MICO and
RCBC’s liabilities, thusly:
WHEREFORE, the decision of the lower court dated June 29, 1994 is hereby modified as follows:
1. FOR DEFENDANT MALAYAN INSURANCE CO., INC:
a) To
pay the plaintiff its fire loss claim in the total amount of P74,040,518.58
less the amount of P50,505,594.60 (per O.R. No. 3649285) plus deposited in court
and damages by way of interest commencing July 27, 1992 until the time Goyu
receives the said amount at the rate of thirty-seven (37%) percent per annum
which is twice the ceiling prescribed by the Monetary Board.
2. FOR DEFENDANT RIZAL COMMERCIAL BANKING CORPORATION:
a) To
pay the plaintiff actual and compensatory damages in the amount of
P5,000,000.00.
3. FOR DEFENDANTS MALAYAN INSURANCE CO., INC., RIZAL COMMERCIAL BANKING CORPORATION, UY CHUN BING AND ELI D. LAO:
a) To
pay the plaintiff jointly and severally the following amounts:
1. P1,500,000.00
as exemplary damages;
2. P1,500,000.00
as and for attorney’s fees.
4. And on RCBC’s Counterclaim, ordering the plaintiff Goyu & Sons, Inc. to pay its loan obligation with RCBC in the amount of P68,785,069.04 as of April 27, 1992 without any interest, surcharges and penalties.
The Clerk of the Court of the Regional Trial Court of Manila is hereby ordered to immediately release to Goyu & Sons, Inc. the amount of P50,505,594.60 (per O.R. No. 3649285) deposited with it by Malayan Insurance Co., Inc., together with all the interests thereon.
(Rollo,
p. 200.)
RCBC and MICO
are now before us in G.R. No. 128833 and 128866, respectively, seeking review
and consequent reversal of the above dispositions of the Court of Appeals.
In G.R. No.
128834, RCBC likewise appeals from the decision in C.A. G.R. No. CV-48376,
which case, by virtue of the Court of Appeals’ resolution dated August 7, 1996,
was consolidated with C.A. G.R. No. CV-46162 (subject of herein G.R. No.
128833). At issue in said petition is
RCBC’s right to intervene in the action between Alfredo C. Sebastian (the
creditor) and GOYU (the debtor), where the subject insurance policies were
attached in favor of Sebastian.
After a careful
review of the material facts as found by the two courts below in relation to
the pertinent and applicable laws, we find merit in the submissions of RCBC and
MICO.
The several
causes of action pursued below by GOYU gave rise to several related issues
which are now submitted in the petitions before us. This Court, however, discerns one primary and central issue, and
this is, whether or not RCBC, as mortgagee, has any right over the insurance
policies taken by GOYU, the mortgagor, in case of the occurrence of loss.
As earlier
mentioned, accordant with the credit facilities extended by RCBC to GOYU, the
latter executed several mortgage contracts in favor of RCBC. It was expressly stipulated in these
mortgage contracts that GOYU shall insure the mortgaged property with any of
the insurance companies acceptable to RCBC. GOYU indeed insured the mortgaged property with MICO, an insurance
company acceptable to RCBC. Based on their stipulations in the mortgage
contracts, GOYU was supposed to endorse these insurance policies in favor of,
and deliver them, to RCBC. Alchester
Insurance Agency, Inc., MICO’s underwriter from whom GOYU obtained the subject
insurance policies, prepared the nine endorsements (see Exh. “1-Malayan” to
“9-Malayan”; also Exh. “51-RCBC” to “59-RCBC”), copies of which were delivered
to GOYU, RCBC, and MICO. However,
because these endorsements do not bear the signature of any officer of GOYU,
the trial court, as well as the Court of Appeals, concluded that the
endorsements are defective.
We do not quite
agree.
It is settled
that a mortgagor and a mortgagee have separate and distinct insurable interests
in the same mortgaged property, such that each one of them may insure the same
property for his own sole benefit. There is no question that GOYU could insure the mortgaged property for
its own exclusive benefit. In the
present case, although it appears that GOYU obtained the subject insurance
policies naming itself as the sole payee, the intentions of the parties as
shown by their contemporaneous acts, must be given due consideration in order
to better serve the interest of justice and equity.
It is to be
noted that nine endorsement documents were prepared by Alchester in favor of
RCBC. The Court is in a quandary how
Alchester could arrive at the idea of endorsing any specific insurance policy
in favor of any particular beneficiary or payee other than the insured had not
such named payee or beneficiary been specifically disclosed by the insured
itself. It is also significant that GOYU
voluntarily and purposely took the insurance policies from MICO, a sister
company of RCBC, and not just from any other insurance company. Alchester would not have found out that the
subject pieces of property were mortgaged to RCBC had not such information been
voluntarily disclosed by GOYU itself. Had it not been for GOYU, Alchester would not have known of GOYU’s
intention of obtaining insurance coverage in compliance with its undertaking in
the mortgage contracts with RCBC, and verily, Alchester would not have endorsed
the policies to RCBC had it not been so directed by GOYU.
On equitable
principles, particularly on the ground of estoppel, the Court is constrained to
rule in favor of mortgagor RCBC. The
basis and purpose of the doctrine was explained in Philippine National Bank
vs. Court of Appeals (94 SCRA 357 [1979]), to wit:
The doctrine of estoppel is based upon the grounds of public policy, fair dealing, good faith and justice, and its purpose is to forbid one to speak against his own act, representations, or commitments to the injury of one to whom they were directed and who reasonably relied thereon. The doctrine of estoppel springs from equitable principles and the equities in the case. It is designed to aid the law in the administration of justice where without its aid injustice might result. It has been applied by this Court wherever and whenever special circumstances of a case so demand.
(p. 368.)
Evelyn Lozada of
Alchester testified that upon instructions of Mr. Go, through a certain Mr.
Yam, she prepared in quadruplicate on February 11, 1992 the nine endorsement
documents for GOYU’s nine insurance policies in favor of RCBC. The original copies of each of these nine
endorsement documents were sent to GOYU, and the others were sent to RCBC and
MICO, while the fourth copies were retained for Alchester’s file (tsn, February
23, pp. 7-8). GOYU has not denied
having received from Alchester the originals of these endorsements.
RCBC, in good
faith, relied upon the endorsement documents sent to it as this was only
pursuant to the stipulation in the mortgage contracts. We find such reliance to be justified under
the circumstances of the case. GOYU
failed to seasonably repudiate the authority of the person or persons who
prepared such endorsements. Over and above this, GOYU continued, in the
meantime, to enjoy the benefits of the credit facilities extended to it by
RCBC. After the occurrence of the loss
insured against, it was too late for GOYU to disown the endorsements for any
imagined or contrived lack of authority of Alchester to prepare and issue said
endorsements. If there had not been
actually an implied ratification of said endorsements by virtue of GOYU’s
inaction in this case, GOYU is at the very least estopped from assailing their
operative effects. To permit GOYU to
capitalize on its non-confirmation of these endorsements while it continued to
enjoy the benefits of the credit facilities of RCBC which believed in good
faith that there was due endorsement pursuant to their mortgage contracts, is
to countenance grave contravention of public policy, fair dealing, good faith,
and justice. Such an unjust situation,
the Court cannot sanction. Under the
peculiar circumstances obtaining in this case, the Court is bound to recognize
RCBC’s right to the proceeds of the insurance policies if not for the actual
endorsement of the policies, at least on the basis of the equitable principle
of estoppel.
GOYU cannot seek
relief under Section 53 of the Insurance Code which provides that the proceeds
of insurance shall exclusively apply to the interest of the person in whose
name or for whose benefit it is made. The peculiarity of the circumstances obtaining in the instant case
presents a justification to take exception to the strict application of said provision,
it having been sufficiently established that it was the intention of the
parties to designate RCBC as the party for whose benefit the insurance policies
were taken out. Consider thus the
following:
1. It is undisputed that the insured pieces of property were the subject of mortgage contracts entered into between RCBC and GOYU in consideration of and for securing GOYU’s credit facilities from RCBC. The mortgage contracts contained common provisions whereby GOYU, as mortgagor, undertook to have the mortgaged property properly covered against any loss by an insurance company acceptable to RCBC.
2. GOYU voluntarily procured insurance policies to cover the mortgaged property from MICO, no less than a sister company of RCBC and definitely an acceptable insurance company to RCBC.
3. Endorsement documents were prepared by MICO’s underwriter, Alchester Insurance Agency, Inc., and copies thereof were sent to GOYU, MICO, and RCBC. GOYU did not assail, until of late, the validity of said endorsements.
4. GOYU continued until the occurrence of the fire, to enjoy the benefits of the credit facilities extended by RCBC which was conditioned upon the endorsement of the insurance policies to be taken by GOYU to cover the mortgaged properties.
This Court can
not over stress the fact that upon receiving its copies of the endorsement
documents prepared by Alchester, GOYU, despite the absence of its written conformity thereto, obviously
considered said endorsement to be sufficient compliance with its obligation
under the mortgage contracts since RCBC accordingly continued to extend the
benefits of its credit facilities and GOYU continued to benefit therefrom. Just as plain too is the intention of the
parties to constitute RCBC as the beneficiary of the various insurance policies
obtained by GOYU. The intention of the
parties will have to be given full force and effect in this particular
case. The insurance proceeds may,
therefore, be exclusively applied to RCBC, which under the factual
circumstances of the case, is truly the person or entity for whose benefit the
policies were clearly intended.
Moreover, the
law’s evident intention to protect the interests of the mortgagee upon the
mortgaged property is expressed in Article 2127 of the Civil Code which states:
ART. 2127. The mortgage extends to the natural accessions, to the improvements, growing fruits, and the rents or income not yet received when the obligation becomes due, and to the amount of the indemnity granted or owing to the proprietor from the insurers of the property mortgaged, or in virtue of expropriation for public use, with the declarations, amplifications and limitations established by law, whether the estate remains in the possession of the mortgagor, or it passes into the hands of a third person.
Significantly,
the Court notes that out of the 10 insurance policies subject of this case,
only 8 of them appear to have been subject of the endorsements prepared and
delivered by Alchester for and upon instructions of GOYU as shown below:
INSURANCE POLICY PARTICULARS ENDORSEMENT
a. Policy Number : F-114-07795 None
Issue Date : March 18, 1992
Expiry Date : April 5, 1993
Amount : P9,646,224.92
b. Policy Number : ACIA/F-174-07660 Exhibit “1-Malayan”
Issue Date : January 18, 1992
Expiry Date : February 9, 1993
Amount : P4,307,217.54
c. Policy Number : ACIA/F-114-07661 Exhibit “2-Malayan”
Issue Date : January 18, 1992
Expiry Date : February 15, 1993
Amount : P6,603,586.43
d. Policy Number : ACIA/F-114-07662 Exhibit “3-Malayan”
Issue Date : January 18, 1992
Expiry Date : (not legible)
Amount : P6,603,586.43
e. Policy Number : ACIA/F-114-07663 Exhibit “4-Malayan”
Issue Date : January 18, 1992
Expiry Date : February 9, 1993
Amount : P9,457,972.76
f. Policy Number : ACIA/F-114-07623 Exhibit “7-Malayan”
Issue Date : January 13, 1992
Expiry Date : January 13, 1993
Amount : P24,750,000.00
g. Policy Number : ACIA/F-174-07223 Exhibit “6-Malayan”
Issue Date : May 29, 1991
Expiry Date : June 27, 1992
Amount : P6,000,000.00
h. Policy Number : CI/F-128-03341 None
Issue Date : May 3, 1991
Expiry Date : May 3, 1992
Amount : P10,000,000.00
i. Policy Number : F-114-07402 Exhibit “8-Malayan”
Issue Date : September 16, 1991
Expiry Date : October 19, 1992
Amount : P32,252,125.20
j. Policy Number : F-114-07525 Exhibit “9-Malayan”
Issue Date : November 20, 1991
Expiry Date : December 5, 1992
Amount : P6,603,586.43
(pp. 456-457, Record; Folder of Exhibits for MICO.)
Policy Number
F-114-07795 [(a) above] has not been endorsed. This fact was admitted by MICO’s witness, Atty. Farolan (tsn, February
16, 1994, p. 25). Likewise, the record
shows no endorsement for Policy Number CI/F-128-03341 [(h) above]. Also, one of the endorsement documents,
Exhibit “5-Malayan”, refers to a
certain insurance policy number ACIA-F-07066, which is not among the insurance
policies involved in the complaint.
The proceeds of
the 8 insurance policies endorsed to RCBC aggregate to P89,974,488.36. Being exclusively payable to RCBC by reason
of the endorsement by Alchester to RCBC, which we already ruled to have the
force and effect of an endorsement by GOYU itself, these 8 policies can not be
attached by GOYU’s other creditors up to the extent of the GOYU’s outstanding
obligation in RCBC’s favor. Section 53
of the Insurance Code ordains that the insurance proceeds of the endorsed
policies shall be applied exclusively to the proper interest of the person for
whose benefit it was made. In this
case, to the extent of GOYU’s obligation with RCBC, the interest of GOYU in the
subject policies had been transferred to RCBC effective as of the time of the
endorsement. These policies may no
longer be attached by the other creditors of GOYU, like Alfredo Sebastian in
the present G.R. No. 128834, which may nonetheless forthwith be dismissed for
being moot and academic in view of the results reached herein. Only the two other policies amounting to
P19,646,224.92 may be validly attached, garnished, and levied upon by GOYU’s
other creditors. To the extent of
GOYU’s outstanding obligation with RCBC, all the rest of the other insurance
policies above-listed which were endorsed to RCBC, are, therefore, to be
released from attachment, garnishment, and levy by the other creditors of GOYU.
This brings us
to the next relevant issue to be resolved, which is, the extent of GOYU’s
outstanding obligation with RCBC which the proceeds of the 8 insurance policies
will discharge and liquidate, or put differently, the actual amount of GOYU’s
liability to RCBC.
The Court of
Appeals simply echoed the declaration of the trial court finding that GOYU’S
total obligation to RCBC was only P68,785,060.04 as of April 27, 1992, thus
sanctioning the trial court’s exclusion of Promissory Note No. 421-92 (renewal
of Promissory Note No. 908-91) and Promissory Note No. 420-92 (renewal of
Promissory Note No. 952-91) on the ground that their execution is highly
questionable for not only are these dated after the fire, but also because the
signatures of either GOYU or any its representative are conspicuously absent. Accordingly, the Court of Appeals speculated
thusly:
…Hence, this Court is inclined to conclude that said promissory notes were pre-signed by plaintiff in blank terms, as averred by plaintiff, in contemplation of the speedy grant of future loans, for the same practice of procedure has always been adopted in its previous dealings with the bank.
(Rollo, pp. 181-182.)
The fact that
the promissory notes bear dates posterior to the fire does not necessarily mean
that the documents are spurious, for it is presumed that the ordinary course of
business had been followed (Metropolitan Bank and Trust Company vs. Quilts
and All, Inc., 222 SCRA 486 [1993]). The obligor and not the holder of the negotiable instrument has the
burden of proof of showing that he no longer owes the obligee any amount (Travel-On,
Inc. vs. Court of Appeals, 210 SCRA 351 [1992]).
Even casting
aside the presumption of regularity of private transactions, receipt of the
loan amounting to P121,966,058.67 (Exhibits 1-29, RCBC) was admitted by GOYU as
indicated in the testimony of Go Song Hiap when he answered the queries of the
trial court:
ATTY. NATIVIDAD
Q: But insofar as the amount stated in Exhibits 1 to 29-RCBC, you received all the amounts stated therein?
A: Yes, sir, I received the amount.
COURT
He is asking if he received all the amounts stated in Exhibits 1 to 29-RCBC?
WITNESS:
Yes, Your Honor, I received all the amounts.
COURT
Indicated in the Promissory Notes?
WITNESS
A. The promissory Notes they did not give to me but the amount I asked which is correct, Your Honor.
COURT
Q: You mean to say the amounts indicated in Exhibits 1 to 29-RCBC is correct?
A: Yes, Your Honor.
(tsn, Jan. 14, 1994, p. 26.)
Furthermore,
aside from its judicial admission of having received all the proceeds of the 29
promissory notes as hereinabove quoted, GOYU also offered and admitted to RCBC
that its obligation be fixed at P116,301,992.60 as shown in its letter dated
March 9, 1993, which pertinently reads:
We wish to inform you, therefore that we are ready and willing to pay the current past due account of this company in the amount of P116,301,992.60 as of 21 January 1993, specified in pars. 15, p. 10, and 18, p. 13 of your affidavits of Third Party Claims in the Urban case at Makati, Metro Manila and in the Zamboanga case at Zamboanga city, respectively, less the total of P8,851,519.71 paid from the Seaboard and Equitable insurance companies and other legitimate deductions. We accept and confirm this amount of P116,301,992.60 as stated as true and correct.
(Exhibit BB.)
The Court of
Appeals erred in placing much significance on the fact that the excluded
promissory notes are dated after the fire. It failed to consider that said notes had for their origin transactions
consummated prior to the fire. Thus, careful attention must be paid to the fact that Promissory Notes
No. 420-92 and 421-92 are mere renewals of Promissory Notes No. 908-91
and 952-91, loans already availed of by GOYU.
The two courts
below erred in failing to see that the promissory notes which they ruled should
be excluded for bearing dates which are after that of the fire, are mere renewals of previous ones. The proceeds of the loan represented by
these promissory notes were admittedly received by GOYU. There is ample factual and legal basis for
giving GOYU’s judicial admission of liability in the amount of P116,301,992.60
full force and effect
It should,
however, be quickly added that whatever amount RCBC may have recovered from the
other insurers of the mortgaged property will, nonetheless, have to be applied
as payment against GOYU’s obligation. But, contrary to the lower courts’ findings, payments effected by GOYU
prior to January 21, 1993 should no longer be deducted. Such payments had obviously been duly
considered by GOYU, in its aforequoted letter dated March 9, 1993, wherein it
admitted that its past due account totaled P116,301,992.60 as of January 21,
1993.
The net
obligation of GOYU, after deductions, is thus reduced to P107,246,887.90 as of
January 21, 1993, to wit:
Total Obligation as admitted by GOYU as of January 21, 1993: P116,301,992.60
Broken down as follows
Principal[1] Interest
Regular 80,535,946.32
FDU 7,548,025.17
____________ _____________
Total: 108,083,971.49 8,218,021.11[2]
LESS:
1) Proceeds from
Seaboard Eastern
Insurance Company: 6,095,145.81
2) Proceeds from
Equitable Insurance
Company: 2,756,373.00
3) Payment from
foreign department
negotiation: 203,584.89
9,055,104.70[3]
NET AMOUNT as of January 21, 1993: P 107,246,887.90
The need for the
payment of interest due upon the principal amount of the obligation, which is
the cost of money to RCBC, the primary end and the ultimate reason for RCBC’s
existence and being, was duly recognized by the trial court when it ruled
favorably on RCBC’s counterclaim, ordering GOYU “to pay its loan obligation
with RCBC in the amount of P68,785,069.04, as of April 27,1992, with
interest thereon at the rate stipulated in the respective promissory notes
(without surcharges and penalties) per computation, pp. 14-A, 14-B, 14-C”
(Record, p. 479). Inexplicably, the
Court of Appeals, without even laying down the factual or legal justification
for its ruling, modified the trial court’s ruling and ordered GOYU “to pay the
principal amount of P68,785,069.04 without any interest, surcharges and
penalties” (Rollo, p. 200).
It is to be
noted in this regard that even the trial court hedgingly and with much
uncertainty deleted the payment of additional interest, penalties, and
charges, in this manner:
Regarding defendant RCBC’s commitment not to charge additional interest, penalties and surcharges, the same does not require that it be embodied in a document or some form of writing to be binding and enforceable. The principle is well known that generally a verbal agreement or contract is no less binding and effective than a written one. And the existence of such a verbal agreement has been amply established by the evidence in this case. In any event, regardless of the existence of such verbal agreement, it would still be unjust and inequitable for defendant RCBC to charge the plaintiff with surcharges and penalties considering the latter’s pitiful situation. (Emphasis supplied.)
(Record, p. 476)
The essence or
rationale for the payment of interest or cost of money is separate and distinct
from that of surcharges and penalties. What may justify a court in not allowing the creditor to charge
surcharges and penalties despite express stipulation therefor in a valid
agreement, may not equally justify non-payment of interest. The charging of interest for loans forms a
very essential and fundamental element of the banking business, which may truly
be considered to be at the very core of its existence or being. It is inconceivable for a bank to grant
loans for which it will not charge any interest at all. We fail to find justification for the Court
of Appeals’ outright deletion of the payment of interest as agreed upon in the
respective promissory notes. This
constitutes gross error.
For the
computation of the interest due to be paid to RCBC, the following rules of
thumb laid down by this Court in Eastern Shipping Lines, Inc. vs. Court of
Appeals (234 SCRA 78 [1994]), shall apply, to wit:
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on “Damages” of the Civil Code govern in determining the measure of recoverable damages.
II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date of the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.
(pp. 95-97.)
There being
written stipulations as to the rate of interest owing on each specific
promissory note as summarized and tabulated by the trial court in its decision
(pp.470 and 471, Record) such agreed interest rates must be followed. This is very clear from paragraph II,
sub-paragraph 1 quoted above.
On the issue of
payment of surcharges and penalties, we partly agree that GOYU’s pitiful
situation must be taken into account. We do not agree, however, that payment of any amount as surcharges and
penalties should altogether be deleted. Even assuming that RCBC, through its
responsible officers, herein petitioners Eli Lao and Uy Chun Bing, may have
relayed its assurance for assistance to GOYU immediately after the occurrence
of the fire, we cannot accept the lower courts’ finding that RCBC had thereby ipso
facto effectively waived collection of any additional interests, surcharges,
and penalties from GOYU. Assurances of
assistance are one thing, but waiver of additional interests, surcharges, and
penalties is another.
Surcharges and
penalties agreed to be paid by the debtor in case of default partake of the nature
of liquidated damages, covered by Section 4, Chapter 3, Title XVIII of the
Civil Code. Article 2227 thereof
provides:
ART. 2227. Liquidated damages, whether intended as a indemnity or penalty, shall be equitably reduced if they are iniquitous and unconscionable.
In exercising
this vested power to determine what is iniquitous and unconscionable, the Court
must consider the circumstances of each case. It should be stressed that the Court will not make any sweeping ruling
that surcharges and penalties imposed by banks for non-payment of the loans
extended by them are generally iniquitous and unconscionable. What may be iniquitous and unconscionable in
one case, may be totally just and equitable in another. This provision of law will have to be applied
to the established facts of any given case. Given the circumstances under which
GOYU found itself after the occurrence of the fire, the Court rules the
surcharges rates ranging anywhere from 9% to 27%, plus the penalty charges of
36%, to be definitely iniquitous and unconscionable. The Court tempers these rates to 2% and 3%, respectively. Furthermore, in the light of GOYU’s offer to
pay the amount of P116,301,992.60 to RCBC as March 1993 (See: Exhibit “BB”),
which RCBC refused, we find it more in keeping with justice and equity for RCBC
not to charge additional interest, surcharges, and penalties from that time
onward.
Given the
factual milieu spread hereover, we rule that it was error to hold MICO liable
in damages for denying or withholding the proceeds of the insurance claim to
GOYU.
Firstly, by
virtue of the mortgage contracts as well as the endorsements of the insurance
policies, RCBC has the right to claim the insurance proceeds, in substitution
of the property lost in the fire. Having assigned its rights, GOYU lost its standing as the beneficiary of
the said insurance policies.
Secondly, for an
insurance company to be held liable for unreasonably delaying and withholding
payment of insurance proceeds, the delay must be wanton, oppressive, or malevolent
(Zenith Insurance Corporation vs. CA, 185 SCRA 403 [1990]). It is generally agreed, however, that an
insurer may in good faith and honesty entertain a difference of opinion as to
its liability. Accordingly, the
statutory penalty for vexatious refusal of an insurer to pay a claim should not
be inflicted unless the evidence and circumstances show that such refusal was
willful and without reasonable cause as the facts appear to a reasonable and
prudent man (Buffalo Ins. Co. vs. Bommarito [CCA 8th] 42 F [2d] 53, 70 ALR 1211; Phoenix
Ins. Co. vs. Clay, 101 Ga. 331, 28 SE 853, 65 Am St Rep 307; Kusnetsky
vs. Security Ins. Co., 313 Mo. 143, 281 SW 47, 45 ALR 189). The case at bar does not show that MICO
wantonly and in bad faith delayed the release of the proceeds. The problem in the determination of who is
the actual beneficiary of the insurance policies, aggravated by the claim of
various creditors who wanted to partake of the insurance proceeds, not to
mention the importance of the endorsement to RCBC, to our mind, and as now
borne out by the outcome herein, justified MICO in withholding payment to GOYU.
In adjudging
RCBC liable in damages to GOYU, the Court of Appeals said that RCBC cannot avail
itself of two simultaneous remedies in enforcing the claim of an unpaid
creditor, one for specific performance and the other for foreclosure. In doing so, said the appellate court, the
second action is deemed barred, RCBC having split a single cause of action
(Rollo, pp. 195-199). The Court of
Appeals was too accommodating in giving due consideration to this argument of
GOYU, for the foreclosure suit is still pending appeal before the same Court of
Appeals in CA G.R CV No. 46247, the case having been elevated by RCBC.
In finding that
the foreclosure suit cannot prosper, the Fifteenth Division of the Court of
Appeals pre-empted the resolution of said foreclosure case which is not before
it. This is plain reversible error if
not grave abuse of discretion.
As held in Peña
vs. Court of Appeals (245 SCRA 691[1995]):
It should have been enough, nonetheless, for the appellate court to merely set aside the questioned orders of the trial court for having been issued by the latter with grave abuse of discretion. In likewise enjoining permanently herein petitioner “from entering in and interfering with the use or occupation and enjoyment of petitioner’s (now private respondent) residential house and compound,” the appellate court in effect, precipitately resolved with finality the case for injunction that was yet to be heard on the merits by the lower court. Elevated to the appellate court, it might be stressed, were mere incidents of the principal case still pending with the trial court. In Municipality of Biñan, Laguna vs. Court of Appeals, 219 SCRA 69, we ruled that the Court of Appeals would have “no jurisdiction in a certiorari proceeding involving an incident in a case to rule on the merits of the main case itself which was not on appeal before it.”
(pp.
701-702.)
Anent the right
of RCBC to intervene in Civil Case No. 1073, before the Zamboanga Regional
Trial Court, since it has been determined that RCBC has the right to the
insurance proceeds, the subject matter of intervention is rendered moot and
academic. Respondent Sebastian must,
however, yield to the preferential right of RCBC over the MICO insurance
policies. It is basic and fundamental
that the first mortgagee has superior rights over junior mortgagees or
attaching creditors (Alpha Insurance & Surety Co. vs. Reyes, 106
SCRA 274 [1981]; Sun Life Assurance Co. of Canada vs. Gonzales Diaz, 52
Phil. 271 [1928]).
WHEREFORE, the
petitions are hereby GRANTED and the decision and resolution of December 16,
1996 and April 3, 1997 in CA-G.R. CV No. 46162 are hereby REVERSED and SET
ASIDE, and a new one entered:
1. Dismissing the Complaint of private respondent GOYU in Civil Case No. 93-65442 before Branch 3 of the Manila Regional Trial Court for lack of merit;
2. Ordering Malayan Insurance Company, Inc. to deliver to Rizal Commercial Banking Corporation the proceeds of the insurance policies in the amount of P51,862,390.94 (per report of adjuster Toplis & Harding (Far East), Inc., Exhibits “2” and “2-1”), less the amount of P50,505,594.60 (per O.R. No. 3649285);
3. Ordering the Clerk of Court to release the amount of P50,505,594.60 including the interests earned to Rizal Commercial Banking Corporation;
4. Ordering Goyu & Sons, Inc. to pay its loan obligation with Rizal Commercial Banking Corporation in the principal amount of P107,246,887.90, with interest at the respective rates stipulated in each promissory note from January 21, 1993 until finality of this judgment, and surcharges at 2% and penalties at 3% from January 21, 1993 to March 9, 1993, minus payments made by Malayan Insurance Company, Inc. and the proceeds of the amount deposited with the trial court and its earned interest. The total amount due RCBC at the time of the finality of this judgment shall earn interest at the legal rate of 12% in lieu of all other stipulated interests and charges until fully paid.
The petition of
Rizal Commercial Banking Corporation against the respondent Court in CA-GR CV
48376 is DISMISSED for being moot and academic in view of the results herein
arrived at. Respondent Sebastian’s
right as attaching creditor must yield to the preferential rights of Rizal
Commercial Banking Corporation over the Malayan insurance policies as first
mortgagee.
SO ORDERED.
[1] 1See: Exhibit “70-RCBC”
[2] Computed by deducting P108,083,971.49 from the
admitted amount of P116,301,992.60.
[3] To be deducted from interest payments due in
accordance with Article 1253 of the Civil Code which provides:
ART.
1253. If debt produces interest,
payment of the principal shall not be deemed to have been made until the
interests have been covered.