SECOND DIVISION
|
DEVELOPMENT BANK
OF THE PHILIPPINES[1]
and PRIVATIZATION AND MANAGEMENT OFFICE (formerly ASSET PRIVATIZATION TRUST),
|
G.R. No. 138703 |
|
Petitioners, |
Present: |
|
- versus - |
PUNO, J., Chairperson,* SANDOVAL-GUTIERREZ,** AZCUNA, and GARCIA, JJ. |
|
HON. COURT OF APPEALS, PHILIPPINE UNITED FOUNDRY AND MACHINERY CORP.
and PHILIPPINE IRON MANUFACTURING CO., INC., Respondents. |
Promulgated: June 30, 2006 |
x-----------------------------------------------------------------------------------------x
DECISION
AZCUNA,
J.:
This is a petition for review on certiorari under Rule 45
of the Rules of Court of the decision of the Court of Appeals (CA) dated May 7,
1999 in CA-G.R. CV No. 49239 entitled “Philippine United Foundry and Machinery
Corp. and Philippine Iron Manufacturing Co., Inc. v. Development Bank of the
Philippines and Asset Privatization Trust” which upheld the decision of the
Regional Trial Court (RTC), Branch 98 of Quezon City in Civil Case No. Q-49650.
Sometime in March 1968, the Development Bank of the
Philippines (DBP) granted to respondents Philippine United Foundry and
Machineries Corporation and Philippine Iron Manufacturing Company, Inc. an
industrial loan in the amount of P2,500,000 consisting of P500,000 in cash and P2,000,000
in DBP Progress Bonds. The loan was evidenced by a promissory note[2]
dated
Subsequently, DBP granted to respondents another loan in
the form of a five-year revolving guarantee amounting to P1,700,000
which was reflected in the amended mortgage contract[4]
dated
On P4,655,992.35 were
consolidated into a single account. The restructured loan was evidenced by a
new promissory note[6]
dated
This promissory note
represents the consolidation into one account of the outstanding principal
balance of PHILIMCO and PHUMACO’s account, and is
prepared pursuant to Res. No. 228, dated
On the other hand, all accrued interest and charges due
amounting to P3,074,672.21 were denominated as “Notes Taken for
Interests” and evidenced by a separate promissory note[8]
dated
This promissory note represents all accrued interests and
charges which are taken up as “NOTES TAKEN FOR INTEREST” due on the accounts of
PHILIMCO and PHUMACO approved under Bd. Res. No. 3577, s. of 1975. This note is
secured by (a) mortgage on the existing assets of the firm.[9]
Both notes provided for the following additional charges
and penalties:
(1) 12% interest per annum on unpaid
amortizations[10];
(2) 10% penalty charge per annum on the
total amortizations past due effective 30 days from the date respondents failed
to comply with any of the terms stipulated in the notes[11];
and,
(3) Bank advances for insurance premiums,
taxes, rentals, litigation and acquired assets expenses, collection and other
out-of-pocket expenses not covered by inspection and processing fees subject to
the following charges[12]:
(a) One time service charge of ½% on the
amount advanced to be included in the receivable account;
(b) Penalty charge of 8% per annum on past
due advances; and
(c) Interest at 12% per annum.
Notwithstanding the restructuring, respondents were still
unable to comply with the terms and conditions of the new promissory notes. As
a result, respondents requested DBP to refinance the matured obligation. The
request was granted by DBP, pursuant to which three foreign currency denominated
loans sourced from DBP’s own foreign borrowings were
extended to respondents on various dates between 1980 and 1981.[13]
These loans were secured by mortgages[14]
on the properties of respondents and were evidenced by the following promissory
notes:
|
|
Face
Value |
Maturity Date |
Interest Rate Per Annum |
|
(1) Promissory Note[15]
dated |
$661,330 |
|
3% over DBP’s
borrowing rate[16] |
|
(2) Promissory Note[17]
dated |
$666,666 |
|
3%
over DBP’s borrowing rate[18] |
|
(3) Promissory Note[19]
dated |
$486,472.37 |
|
4%
over DBP’s borrowing cost |
Apart from the interest, the promissory notes imposed
additional charges and penalties if respondents defaulted on their payments.
The notes dated
(a)
If in arrears for thirty (30) days or less:
i.
Additional interest at the basic loan interest rate per
annum computed on total amortizations past due, irrespective of age.
ii. No penalty charge
(b) If in arrears for more than thirty (30)
days:
i. Additional interest at the basic loan
interest rate per annum computed on total amortizations past due, irrespective
of age, plus,
ii. Penalty charge of 16% per annum computed on
amortizations or portions thereof in arrears for more than thirty (30) days
counted from the date the amount in arrears becomes liable to this charge.[20]
Under these two notes, respondents also bound themselves to
pay bank advances for insurance premiums, taxes, litigation and acquired assets
expenses and other out-of-pocket expenses not covered by inspection and
processing fees as follows:
(a)
One-time service charge of 2% of the amount advanced, same
to be included in the receivable account.
(b)
Interest at 16% per annum.
(c) Penalty charge from date of advance at
16% per annum.
The note dated
(a)
Additional interest at the basic loan interest per annum
computed on total amortizations past due irrespective of age; plus
(b)
Penalty charges of 8%
per annum computed on total amortizations in arrears, irrespective of age.[21]
Respondents were likewise bound to pay bank advances for
insurance premiums, taxes, litigation and acquired assets expenses and other
out-of-pocket expenses not covered by inspection and processing fees as
follows:
(a)
One-time service charge of 2% of (the) amount advanced,
same to be included and debited to the advances account;
(b)
Interest at the basic loan interest rate; and
(c)
Penalty charge from date of advance at 8% per annum.[22]
Sometime in October 1985, DBP initiated foreclosure
proceedings upon its computation that respondents’ loans were in arrears by P62,954,473.68.[23]
According to DBP, this figure already took into account the intermittent
payments made by respondents between 1968 and 1981 in the aggregate amount of P5,150,827.71.[24]
However, the foreclosure proceedings were suspended on
twelve separate occasions from October 1985 to December 1986 upon the
representations of respondents that a financial rehabilitation fund arising
from a contract with the military was forthcoming. On December 23, 1986, before
DBP could proceed with the foreclosure proceedings, respondents instituted the
present suit for injunction.
On January 6, 1987, the complaint was amended to include
the annulment of mortgage. On
Respondents’ cause of action arose from their claim that
DBP was collecting from them an unconscionable if not unlawful or usurious
obligation of P62,954,473.68 as of September 30, 1985, out of a mere P6,200,000
loan. Primarily, respondents contended that the amount claimed by DBP is
erroneous since they have remitted to DBP approximately P5,300,000 to
repay their original debt. Additionally, respondents assert that since the
loans were procured for the Self-Reliant Defense Posture Program of the Armed
Forces of the Philippines (AFP), the latter’s breach of its commitment to
purchase military armaments and equipment from respondents amounts to a failure
of consideration that would justify the annulment of the mortgage on
respondents’ properties.[26]
On December 24, 1986, the RTC issued a temporary
restraining order. A Writ of Preliminary Injunction was subsequently issued on
May 4, 1987. After trial on the merits, the court rendered a decision in favor
of respondents,[27]
the dispositive portion of which reads:
WHEREFORE, in view of
the foregoing consideration, judgment is hereby rendered in favor of the
[respondents] and against the defendants [DBP and APT], ordering that:
(1) The Writ of
Preliminary Injunction already issued be made permanent;
(2) The [respondents]
be made to pay the original loans in the aggregate amount of Six Million Two
Hundred Thousand (P6,200,000) Pesos;
(3) The [respondents’]
payment in the amount of Five Million Three Hundred Thirty-Five Thousand, Eight
Hundred Twenty-seven Pesos and Seventy-one Centavos (P5,335,827.71) be
applied to payment for interest and penalties; and
(4) No further
interest and/or penalties on the aforementioned principal obligation of P6.2
million shall be imposed/charged upon the [respondents] for failure of the
military establishment to honor their commitment to a valid and consummated
contract with the former. Costs against the defendants.
SO ORDERED.
Both DBP and PMO appealed the decision to the CA. The CA,
however, affirmed the decision of the RTC. Aggrieved, DBP filed with the CA a
motion for a reconsideration[28]
dated
I.
THE CA DISREGARDED THE BINDING AND OBLIGATORY FORCE OF
CONTRACTS WHICH IS THE LAW BETWEEN THE PARTIES.
x
x x
II. THE CA VIOLATED THE PRINCIPLE OF LAW
THAT CONTRACTS TAKE EFFECT ONLY BETWEEN THE PARTIES AS IT LINKED RESPONDENTS’
CONTRACTS WITH THE AFP WITH RESPONDENTS’ LOANS WITH DBP.
x
x x
III. THE CA ERRED IN PERMANENTLY ENJOINING THE
DBP AND APT FROM FORECLOSING THE MORTGAGES ON RESPONDENTS’ PROPERTIES THEREBY
VIOLATING THE PROVISIONS OF P[RESIDENTIAL] D[ECREE NO.] 385 AND PROCLAMATION
NO. 50.[29]
On the first issue, PMO asserts that the CA erred in
declaring that the interest rate on the loans had been unilaterally increased
by DBP despite the evidence on record (consisting of promissory notes and testimonies
of witnesses for DBP) showing otherwise. PMO also claims that the CA failed to
take into account the effect of the restructuring and refinancing of the loans
granted by DBP upon the request of respondents.
Anent the second issue, PMO argues that
the failure of the AFP to honor its commitment to respondents should have had
no bearing on respondents’ loan obligations to DBP as DBP was not a party to
their contract. Hence, PMO contends that the CA ran afoul of the principle of
relativity of contracts when it ruled that no further interest could be imposed
on the loans.
Finally, PMO claims that DBP, being a
government financial institution, could not be enjoined by any restraining
order or injunction, whether permanent or temporary, from proceeding with the
foreclosure proceedings mandated under Section 1 of Presidential Decree No.
385.
For their part, respondents moved for the
denial of the petition in their comment dated October 27, 1999,[30]
stating that (1) the petition merely raises questions of fact and not of law;
(2) PMO is engaged in forum shopping considering that the motion for
reconsideration filed by its co-defendant, DBP, against the CA decision was
still pending before the appellate court; and, (3) the petition is fatally
defective because the attached certification against non-forum shopping does
not conform to the requirements set by law. After PMO filed its reply denying
the foregoing allegations, the parties submitted their respective memoranda.
The petition is partly meritorious.
Prefatorily, it bears stressing that only
questions of law may be raised in a petition for review on certiorari under
Rule 45 of the Rules of Court. This Court is not a trier of facts, its
jurisdiction in such a proceeding being limited to reviewing only errors of law
that may have been committed by the lower courts. Consequently, findings of
fact of the trial court and the CA are final and conclusive, and cannot be
reviewed on appeal.[31]
It is not the function of the Court to reexamine or reevaluate evidence,
whether testimonial or documentary, adduced by the parties in the proceedings
below.[32]
Nevertheless, the rule admits of certain exceptions and has, in the past, been
relaxed when the lower courts’ findings were not supported by the evidence on
record or were based on a misapprehension of facts,[33]
or when certain relevant and undisputed facts were manifestly overlooked that,
if properly considered, would justify a different conclusion.[34]
The resolution of the present controversy
turns on the issue regarding the precise amount of respondents’ principal
obligation under the series of mortgages which DBP, as mortgagee-creditor,
attempted to foreclose. In this case, the total amount of respondents’
indebtedness is not simply a question of fact but is a question of law, one
requiring the application of legal principles for the computation of the amount
owed, and is thus a matter that can be properly brought up for the Court’s
determination.[35]
PMO claims that the total outstanding obligation of
respondents reached P62.9 Million on P6.2 Million
which they actually received from DBP.
As mentioned, the RTC ultimately sustained respondents and
made permanent the writ of preliminary injunction it issued to enjoin the
foreclosure proceedings. Respondents were directed to pay only the amount of
the original loans, that is, P6.2 Million, with the P5.3 Million
which they previously paid to be applied as interest and penalties. The RTC did
not find respondents culpable for defaulting on their loan obligations and
passed the blame to the AFP for not fulfilling its contractual obligations to
respondents.
The CA affirmed the RTC decision and
agreed that DBP cannot be allowed to foreclose on the mortgage securing
respondents’ loan. The CA surmised that since DBP failed to adequately explain
how it arrived at P62.9 Million, the original loan amount of P6.2
Million could only have been “blatantly enlarged or erroneously computed” by
DBP through the imposition of an “unconscionable rate of interest and charges.”
The CA also agreed with the trial court that there was no consideration for the
mortgage contracts executed by respondents considering the proceeds from the
alleged foreign currency loans were never actually received by the latter. This
view is untenable and lacks foundation.
As correctly pointed out by PMO, the
original loans alluded to by respondents had been refinanced and restructured
in order to extend their maturity dates. Refinancing is an exchange of an old
debt for a new debt, as by negotiating a different interest rate or term or by
repaying the existing loan with money acquired from a new loan.[36]
On the other hand, restructuring, as
applied to a debt, implies not only a postponement of the maturity[37]
but also a modification of the essential terms of the debt (e.g.,
conversion of debt into bonds or into equity,[38]
or a change in or amendment of collateral security) in order to make the
account of the debtor current.[39]
In this instance, it is important to note
that DBP accommodated respondents’ request to restructure and refinance their
account twice in view of the financial difficulties the latter were
experiencing. The first restructuring/refinancing
was granted in 1975 while the second one was undertaken sometime in the early 1980s.
Pursuant to the restructuring schemes, respondents executed promissory notes
and mortgage contracts in favor of DBP,[40]
the second restructuring being evidenced by three promissory notes dated
December 11, 1980, June 5, 1981 and December 16, 1981 in the total amount of $1.8
Million. The reason respondents seek to be excused from fulfilling their
obligation under the second batch of promissory notes is that first, they
allegedly had “no choice” but to sign the documents in order to have the loan
restructured[41]
and thus avert the foreclosure of their properties, and second, they never
received any proceeds from the same. This reasoning cannot be
sustained.
Respondents’ allegation that they had no
“choice” but to sign is tantamount to saying that DBP exerted undue influence
upon them. The Court is mindful that the law grants an aggrieved party the
right to obtain the annulment of a contract on account of factors such as
mistake, violence, intimidation, undue influence and fraud which vitiate
consent.[42] However, the fact that the representatives were “forced”
to sign the promissory notes and mortgage contracts in order to have
respondents’ original loans restructured and to prevent the foreclosure of
their properties does not amount to vitiated consent.
The financial condition of respondents
may have motivated them to contract with DBP, but undue influence cannot be
attributed to DBP simply because the latter had lent money. The concept
of undue influence is defined as follows:
There is undue influence when a person
takes improper advantage of his power over the will of another, depriving the
latter of a reasonable freedom of choice. The following circumstances
shall be considered: the confidential, family, spiritual and other relations
between the parties or the fact that the person alleged to have been unduly
influenced was suffering from mental weakness, or was ignorant or in financial
distress.[43]
While
respondents were purportedly financially distressed, there is no clear showing
that those acting on their behalf had been deprived of their free agency when
they executed the promissory notes representing respondents’ refinanced
obligations to DBP. For undue influence to be present, the influence
exerted must have so overpowered or subjugated the mind of a contracting party
as to destroy the latter’s free agency, making such party express the will of
another rather than its own. The alleged lingering financial woes of a debtor per
se cannot be equated with the presence of undue influence.[44]
Corollarily, the threat to foreclose the mortgage would not
in itself vitiate consent as it is a threat to enforce a just or legal claim
through competent authority.[45]
It bears emphasis that the foreclosure of mortgaged properties in case of
default in payment of a debtor is a legal remedy given by law to a creditor.[46] In the event of default by
the mortgage debtor in the performance of the principal obligation, the
mortgagee undeniably has the right to cause the sale at public auction of the
mortgaged property for payment of the proceeds to the mortgagee.[47]
It is likewise of no moment that respondents never
physically received the proceeds of the foreign currency loans. When the loan
was refinanced and restructured, the proceeds were understandably not actually
given by DBP to respondents since the transaction was but a renewal of the
first or original loan and the supposed proceeds were applied as payment for the
latter.
It also bears emphasis that the second set of promissory
notes executed by respondents must govern the contractual relation of the
parties for they unequivocally express the terms and conditions of the parties’
loan agreement, which are binding and conclusive between them. Parties are free
to enter into stipulations, clauses, terms and conditions they may deem
convenient; that is, as long as these are not contrary to law, morals, good
customs, public order or public policy.[48]
With the signatures of their duly authorized representatives on the subject
notes and mortgage contracts, the genuineness and due execution of which having
been admitted,[49]
respondents in effect freely and voluntarily affirmed all the concurrent rights
and obligations flowing therefrom. Accordingly, respondents are barred from
claiming the contrary without transgressing the principle of estoppel and
mutuality of contracts. Contracts must bind both contracting parties; their
validity or compliance cannot be left to the will of one of them.[50]
The significance of the promissory notes should
not have been overlooked by the trial court and the CA. By completely disregarding
the promissory notes, the lower courts unilaterally modified the contractual
obligations of respondents after the latter already benefited from the
extension of the maturity date on their original loans, to the damage and
prejudice of PMO which steps into the shoes of DBP as mortgagee-creditor.
At this juncture, it must be emphasized
that a party to a contract cannot deny its validity after enjoying its benefits
without outrage to one’s sense of justice and fairness. Where parties have
entered into a well-defined contractual relationship, it is imperative that
they should honor and adhere to their rights and obligations as stated in their
contracts because obligations arising from it have the force of law between the
contracting parties and should be complied with in good faith.[51]
As a rule, a court in such a case has no
alternative but to enforce the contractual stipulations in the manner they have
been agreed upon and written. Courts, whether trial or appellate, generally
have no power to relieve parties from obligations voluntarily assumed simply
because their contract turned out to be disastrous or unwise investments.[52]
Thus, respondents cannot be absolved from
their loan obligations on the basis of the failure of the AFP to fulfill its
commitment under the manufacturing agreement[53]
entered by them allegedly upon the prompting of certain AFP and DBP officials.
While it is true that the DBP representatives appear to have been aware that the
proceeds from the sale to the AFP were supposed to be applied to the loan, the
records are bereft of any proof that would show that DBP was a party to the
contract itself or that DBP would condone respondents’ credit if the contract
did not materialize. Even assuming that the AFP defaulted in its obligations
under the manufacturing agreement, respondents’ cause of action lies with the
AFP, and not with DBP or PMO. The loan contract of respondents is separate and
distinct from their manufacturing agreement with the AFP.
Incidentally, the CA sustained the validity of
a loan obligation but annulled the mortgage securing it on the ground of
failure of consideration. This is erroneous. A
mortgage is a mere accessory contract and its validity would depend on the
validity of the loan secured by it.[54]
Hence, the consideration of the mortgage contract is the same as that
of the principal contract from which it receives life, and without which it
cannot exist as an independent contract. [55]
The debtor cannot escape the consequences of the mortgage contract once the
validity of the loan is upheld.
Again, as a rule, courts cannot intervene to save parties
from disadvantageous provisions of their contracts if they consented to the
same freely and voluntarily.[56]
Thus, respondents cannot now protest against the fact that the loans were
denominated in foreign currency and were to be paid in its peso equivalent after
they had already given their consent to such terms.[57] There is no legal impediment to having
obligations or transactions paid in a foreign currency as long as the parties
agree to such an arrangement. In fact, obligations in foreign currency may be
discharged in Philippine currency based on the prevailing rate at the time of
payment.[58] For
this reason, it was improper for the CA to reject outright DBP’s
claim that the conversion of the remaining balance of the foreign currency
loans into peso accounted for the considerable differential in the total
indebtedness of respondents mainly because the exchange rates at the time of
demand had been volatile and led to the depreciation of the peso.[59]
PMO also denies that a unilateral increase in the interest
rates on the loans caused the substantial increase in the indebtedness of
respondents and points out that the promissory notes themselves specifically
provided for the rates of interest as well as penalty and other charges which
were merely applied on respondents’ outstanding obligations. It should be
noted, however, that at the time of the transaction, Act No. 2655, as amended
by Presidential Decree No. 116 (Usury Law), was still in full force and effect.
Basic is the rule that the laws in force at the time the contract is made
governs the effectivity of its provisions.[60]
Section 2 of the Usury Law specifically provides as follows:
Sec. 2. No person or corporation shall directly or
indirectly take or receive in money or other property, real or personal, or choses in action, a higher rate of interest or a greater
sum or value, including commissions, premiums, fines and penalties, for the
loan or renewal thereof or forbearance of money, goods, or credits, where such
loan or renewal or forbearance is secured in whole or in part by a mortgage
upon real estate the title to which is duly registered, or by any document
conveying such real estate or interest therein, than twelve per centum per
annum or the maximum rate prescribed by the Monetary Board and in force at the
time the loan or renewal thereof or forbearance is granted: Provided, that the
rate of interest under this section or the maximum rate of interest that may be
prescribed by the monetary board under this section may likewise apply to loans
secured by other types of security as may be specified by the Monetary Board.
A perusal of the promissory notes reveals
that the interest charged upon the notes is dependent upon the borrowing cost
of DBP which, however, would be pegged at a fixed rate assuming certain factors.
The notes dated December 11, 1980 and June 5, 1981, for example, had a per
annum interest rate of 3% over DBP’s borrowing rate that will become 1 ½% per annum in the
event the loan is drawn under the Central Bank’s Jumbo Loan. These were further
subject to the condition that should the loan from where they were drawn be
fully repaid, the interest to be charged on respondents’ remaining dollar
obligation would be pegged at 16% per annum.[61]
The promissory note dated
Due to the variable factors mentioned
above, it cannot be determined whether DBP did in fact apply an interest rate
higher than what is prescribed under the law. It appears on the records,
however, that DBP attempted to explain how it arrived at the amount stated in
the Statement of Account[63]
it submitted in support of its claim but was not allowed by the trial court to
do so citing the rule that the best evidence of the same is the document
itself. [64] DBP
should have been given the opportunity to explain its entries in the Statement
of Account in order to place the figures that were cited in the proper context.
Assuming
the interest applied to the principal obligation did, in fact, exceed 12%, in
addition to the other penalties stipulated in the note, this should be stricken out for being usurious.
In usurious loans, the
entire obligation does not become void because of an agreement for usurious
interest; the unpaid principal debt still stands and remains valid but the
stipulation as to the interest is void. The debt is then considered to
be without stipulation as to the interest. In the
absence of an express stipulation as to the rate of interest, the legal
rate of 12% per annum shall be imposed.[65]
As to the issue raised by PMO that the
injunction issued by the lower courts violated Presidential Decree No. 385, the
Court agrees with the ruling of the CA. Presidential
Decree No. 385 was issued primarily to see to it that government financial
institutions are not denied substantial cash inflows which are necessary to
finance development projects all over the country, by large borrowers who, when
they become delinquent, resort to court actions in order to prevent or delay
the government’s collection of their debts and loans.[66]
The government, however, is bound by
basic principles of fairness and decency under the due process clause of the
Bill of Rights. Presidential Decree No.
385 does not provide the government blanket authority to unqualifiedly impose
the mandatory provisions of the decree without due regard to the constitutional
rights of the borrowers. In fact, it is required that a hearing first be
conducted to determine whether or not 20% of the outstanding arrearages has been
paid, as a prerequisite for the issuance of a temporary restraining order or a
writ of preliminary injunction. Hence, the trial court can, on the basis of the
evidence then in its possession, make a provisional determination on the matter
of the actual existence of the arrearages and the amount on which the 20%
requirement is to be computed. Consequently, Presidential Decree No. 385 cannot
be invoked where the
extent of the loan actually received by the borrower is still to be determined.[67]
Finally, respondents’ allegation that PMO
is engaged in forum shopping is untenable. Forum shopping is the act of a party,
against whom an adverse judgment has been rendered in one forum, of seeking
another and possibly favorable opinion in another forum by appeal or a special
civil action of certiorari.[68]
As correctly pointed out by PMO, the present petition is merely an appeal from
the adverse decision rendered in the same action where it was impleaded as co-defendant
with DBP. That DBP opted to file a motion for reconsideration with the CA
rather than a direct appeal to this Court does not bar PMO from seeking relief from
the judgment by taking the latter course of action.
It must be remembered that PMO was
impleaded as party defendant through the amended complaint[69]
dated
In any event, the Court deems it fit to
put an end to this controversy and to finally adjudicate the rights and
obligations of the parties in the interest of a speedy dispensation of justice,
taking into account the length of time this action has been pending with the
courts as well as in light of the fact that PMO is the real party-in-interest
in this case, being the successor-in-interest of DBP.
WHEREFORE, the petition is PARTLY GRANTED and the assailed Decision dated
No costs.
SO ORDERED.
ADOLFO S. AZCUNA
Associate Justice
WE CONCUR:
REYNATO S. PUNO
Acting Chief Justice
Chairperson
(On Official Business)
ANGELINA
SANDOVAL-GUTIERREZ RENATO C.
CORONA
Associate Justice Associate Justice
CANCIO C. GARCIA
Associate Justice
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, it
is hereby certified that the conclusions in the above Decision had been reached
in consultation before the case was assigned to the writer of the opinion of
the Court’s Division.
REYNATO S. PUNO
Acting Chief Justice
1 Based
on the records, only the Privatization and Management Office (PMO) filed the
present petition for review on certiorari. DBP, for its part, moved for
reconsideration of the CA decision instead.
* Acting Chief Justice.
** On Official Business.
[2] Exhibit
“F,” p. 42.
[3] Exhibit
“1,” pp. 115-132.
[4] Exhibit
“2,” pp. 133-146.
[5] TSN,
[6] Exhibit
“8,” pp. 202-203.
[7] Exhibit
“8,” p. 203.
[8] Exhibit
“9,” pp. 204-205.
[9]
[10] Exhibit
“8,” pp. 202, 204.
[11]
[12]
[13] TSN,
[14] Exhibits
“4” and “5,” pp. 152-200.
[15] Exhibit
“10,” pp. 206-207.
[16] It
was agreed that this rate will become 1 ½% per annum in the event the loan is
drawn under the Central Bank’s Jumbo Loan. However, should the loan from where
respondents’ foreign currency loan was drawn be fully repaid, the interest to
be charged on their remaining dollar obligation would be pegged at 16% per
annum. See Exhibit “10,” p. 206.
[17] Exhibit
“11,” pp. 208-209.
[18] It
was agreed that this rate will become 1 ½% per annum in the event the loan is
drawn under the Central Bank’s Jumbo Loan. However, should the loan from where
respondents’ foreign currency loan was drawn be fully repaid, the interest to
be charged on their remaining dollar obligation would be pegged at 18% per
annum. See Exhibit “11,” p. 208.
[19] Exhibit
“12,” pp. 210-211.
[20] Exhibit
“10,” pp. 206-207, Exhibit “11,” pp.
208-209.
[21] Exhibit
“12,” p. 210.
[22]
[23] Exhibit
“15,” pp. 215-216.
[24] TSN,
[25] Former
President Corazon C. Aquino issued Proclamation No.
50 which created the Asset Privatization Trust (APT). APT was mandated to take
title to and possess, manage and dispose of the non-performing assets of the
national government. Pursuant to the proclamation, DBP transferred and assigned
its rights and interests in the mortgage to APT by virtue of a Deed of Transfer
dated
[26] CA
Rollo, p. 202.
[27] Records,
pp. 512-527.
[28] CA
Rollo, pp. 241-250.
[29] Rollo, pp. 37-38.
[30]
[31] Donato C. Cruz Trading Corp. v. CA, G.R. No.
129189, December 5, 2000, 347 SCRA 13; Baylon v. CA, G.R. No. 109941, August 17,
1999, 312 SCRA 502.
[32] Kwok
v. Philippine Carpet Manufacturing Corp., G.R. No. 149252,
[33] Swagman
Hotels and Travel, Inc. v. CA, G.R. No. 161135,
[34] New
Sampaguita Builders Construction, Inc. v. Philippine
National Bank, G.R. No. 148753, July
30, 2004, 435 SCRA 565.
[35] Landl & Company (Phil.), Inc. v. Metropolitan
Bank & Trust Co., G.R. No. 159622, July 30, 2004, 435 SCRA 639.
[36] Black’s
Law Dictionary, 8th edition.
[37] Development
Bank of the
[38] Garcia
v. CA, G.R. No. 80201,
[39]
[40] TSN,
[41] TSN,
[42] CIVIL
CODE, Article 1391, in relation to Article 1390.
[43] CIVIL
CODE, Article 1337.
[44] Carpo v. Chua, G.R. Nos.
150773 and 153599,
[45] CIVIL
CODE, Article 1335.
[46] BPI
Family Savings Bank, Inc. v. Veloso, G.R. No.
141974,
[47] CIVIL
CODE, Art. 2087; RULES OF COURT, Rule 68, Sec. 5; Act 3135, Sec. 4.
[48] CIVIL
CODE, Article 1306.
[49] TSN,
[50] Asian
Construction & Dev’t. Corp. v. Tulabut, G.R. No. 161904,
[51] CIVIL
CODE, Article
1159; Premiere Development
Bank v. CA, G.R. No. 159352,
[52] Lim
v. Queensland Tokyo Commodities, Inc., G.R. No. 136031,
[53] Exhibit
“Q,” pp. 50-64.
[54] Naguiat v. CA, G.R. No. 118375,
[55] Carpo v. Chua, G.R. Nos.
150773 and 153599,
[56] Pryce
Corporation v. PAGCOR, G.R. No. 157480,
[57] The
following paragraphs appear in the promissory notes:
(a) Promissory note dated
“x x x Borrower’s obligation shall remain denominated in US
Dollars or in any foreign currency available for relending
by DBP. In case of default in the payment of any installment above, we bind
ourselves to pay DBP for advances made on the installment in equivalent pesos
computed at commercial bank’s selling rate as of [the] date DBP paid for [the]
installment or as of [the] date of [the] borrower’s payment to DBP, whichever
is higher. x x x” (Exhibit
“10,” p. 206)
(b) Promissory notes dated
“x x x In case of default in the payment of any installment above, we bind ourselves to pay DBP for advances made on the installment in equivalent pesos computed at commercial bank’s selling rate as of [the] date DBP paid for [the] installment or as of [the] date of [the] borrower’s payment to DBP, whichever is higher. x x x” (Exhibits “11” and “12” pp. 208, 210)
[58] CF
Sharp & Co., Inc. v. Northwest Airlines, Inc., G.R. No. 133498,
314.
[59] TSN,
[60] Puerto
v. CA, G.R. No. 138210,
[61] Supra,
note 16.
[62] Supra,
note 18.
[63] Exhibit
“15,” pp. 215-216.
[64] TSN,
[65] Development
Bank of the
[66] Republic
v. CA, G.R. No. 107943,
[67] Polysterene Manufacturing Co., Inc. v. CA, G.R.
No. 77631, May 9, 1990, 185 SCRA 207.
[68] Heirs
of
[69] Records,
pp. 244-257.
[70] Tan
v. Mandap, G.R. No. 150925,
[71] Republic
v. Express Telecommunications Co., Inc., G.R. No. 147096, January 15, 2002,
373 SCRA 316.