FIRST
DIVISION
SPOUSES VIRGILIO AND DIGNA G.R.
No. 159748
ANASTACIO-CALINA,
Petitioners,
Present:
PUNO, C.J., Chairperson,
SANDOVAL-GUTIERREZ,
- versus
-
AZCUNA, and
GARCIA,
JJ.
DEVELOPMENT BANK Promulgated:
OF THE
Respondent. July 31, 2007
x -
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D E C I S I O N
PUNO, C.J.:
Before
the Court is a petition for review on certiorari filed under Rule 45 of the
Revised Rules of Court. Petitioner
spouses VIRGILIO AND DIGNA ANASTACIO-CALINA (Spouses Calina) seek to reverse the
decision[1] of
the Court of Appeals in CA-G.R. CV No. 570655, which set aside the decision of
the trial court dated
On P1,356,000.00.
On
- At the end of the third month after date of full
release or completion of boat (if full release is not availed of), only
interest and advances due shall be paid;
- Thereafter, the loan shall be repayable within five
(5) years, the first payment to be made on ____________ and the subsequent
payments on the _____day of every three (3) months thereafter, and each of all
such payments shall be NINETY ONE THOUSAND ONE HUNDRED FORTY FOUR AND 50/100
PESOS (P91,144.50), which shall cover amortizations on the principal and
interest at the above mentioned rate.[3]
On the same date, petitioners also executed
a Deed of Undertaking,[4]
which provided the following pertinent conditions for the loan:
1. That the
loan shall be utilized specifically to finance 80% of the total fixed cost
portion of the loan as follows:
P1,345,258.00
- Acquisition
of one (1) unit “Purse Seine” Type fishing vessel complete with engine and
accessories; and
350,000.00 - Purchase
of “Purse Seine” nets and accessories
P1,695,258.00 - Total
Fixed Cost
P 339,258.00 - Borrower’s Equity
P1,356,000.00 - DBP/IBRD
Fund
2.
Borrower shall put up out of his own funds the amount of P614,658.00 (P339,258.00
for fixed cost and P275,400.00 for operating cost) representing his
counterpart of total project costs to be financed. Borrower shall show proof of the availability
of the amount of P275,400.00 required for operating cost before initial
release of the loan.
3. Borrower shall avail of the proceeds of the
loan within a period of six (6) months from date of perfection of documents for
the loan.
x x x
5. This loan shall be secured by chattel
mortgage on one (1) unit “Purse Seine” type fishing boat, complete with engine
and accessories, including purse seine nets.
x x x
10. That should the borrower fail to avail of the
loan or any balance thereof within the said period and should he request for
the extension thereof, he shall thereby be obligated to pay thereafter a
commitment fee of Ľ of 1% per month on the unreleased proceeds of the loan
until the same are fully released or cancelled upon written request of the
borrower. This provision is, however,
without prejudice to the right of the Bank to cancel the loan, recover such
amounts as may have been already released therefrom and/or avail of the
remedies provided for in the promissory note and mortgage contract or
alternatively, the ordinary remedies in law should the delays in the borrower’s
availing of the proceeds of the loan constitute a violation of the promissory
note and mortgage contract in accordance with the provisions thereof, and/or
impair the security position of the Bank.
11. That the Bank reserves the right to reduce or
stop releases/advances if after inspection and verification the accomplishment
in the financed project does not justify giving full amount, or if the
conditions of the project do not show improvements commensurate with the
amounts already advanced/released. In
such an event or in the event of abandonment of the project, all
advances/releases made shall automatically become due and demandable and the
Bank shall take such legal steps as are necessary to protect its interest.
x x x
17. That the
fishing vessel to be mortgaged in favor of DBP shall be covered by an “all
risk” insurance policy. In the event
that any of the fishing vessel(s) become uninsurable the borrower shall reduce
the outstanding balance of the loan to the loan value of the remaining
acceptable securities.
x x x
21. That the
borrower shall secure and submit the following:
x x x
c. A
performance bond equivalent to 80% of hull cost to guarantee that the fishing
vessel shall be constructed in accordance with the plan approved by the said
Commission, within one (1) year from date of first release of loan, said
performance bond to be cancelled only upon completion of the vessel and
presentation to the DBP of a Certificate of Admeasurement and Safety issued by
said Commission for the vessel.
x x x.
Pursuant
to the conditions set by the Deed of Undertaking, on P319,085.60.
In
August 1975, using the first release of the loan from DBP and their own funds
to pay for materials and labor costs, the Spouses Calina commenced the
construction of a fishing boat on a beach in Panakan, Palawan.[5] In September 1975, the second release of the
loan was given to petitioners by DBP.
Petitioners used 95% of this amount to purchase one unit of a Cummins Marine
Diesel Engine. Prior to installation in the fishing boat, the engine was placed
in storage. On P451,589.80 to petitioners.
In
December 1975, petitioners requested DBP to conduct its inspection of the
partially completed keel of the fishing boat.
However, the inspectors of DBP were unavailable and failed to visit the
construction site.
In the last week
of January 1976, typhoon Asyang hit
On
On P666,195.55,
representing the amount of their obligation plus interest from
On
In a bid to
settle their financial obligations to DBP, petitioners sought buyers for the
Cummins Marine Diesel Engine by advertising in several newspapers. On P600,000.00.[10] On P600,000.00, and the
payment of the proceeds thereof as settlement for their agricultural (deep-sea
fishing) loan. DBP also agreed to
condone any penalty charges and interest on past due interest computed up to
the date of payment of the said amount.
Unfortunately,
the petitioners’ buyer had already lost interest.[13] They tried to find other buyers but to no
avail. Thus, the Cummins Marine Diesel
Engine remained unsold.
In the course
of the trial, the parties finally came to an agreement for the disposition of
the engine. On August 28, 1989, they
filed a Joint Motion to Lift the Writ of Attachment so that they could sell the
engine pending litigation and apply the proceeds of the sale to the payment of
the Spouses Calina’s outstanding account with DBP, “without prejudice to whatever negotiation and agreements that the
parties may enter into to settle the case amicably in the event the sales
proceeds of the Cummins Marine Diesel Engine is not sufficient to pay off the
total obligation.”[14] The
trial court granted the motion.
On P550,000.00, and the amount was applied to
the loan. The parties, however, could not agree whether the total amount of
the loan had been fully settled, hence the trial continued.
Finally, the
trial court rendered its decision, the dispositive portion of which stated:
FINDINGS AND CONCLUSIONS:
The Court finds that the CALINA (sic) received from DBP only the amount of P451,589.80 of the
agreed P1,356,000.00 loan, and this amount was used to purchase the
subject Cummins Engine. The non-completion
of the vessel was caused by fortuitous event which affected both parties that
the DBP novated the contract when it agreed to condone the interest and
penalties but was revoked by the failure of CALINA to pay the amount of P600,000.00.
However, the Court finds that the subsequent agreement of both parties to sell
the subject Engine for P550,000.00 is considered by the Court as
substantial compliance of the novated contract for the DBP to condone the
interests and penalties, and is in fact more than sufficient to offset the loan
of P451,589.80 after condonation of the interest and penalties.
On
the above findings, the Court concludes that, based on the subsequent novation
of the contract after the project was discontinued due to fortuitous event, and
with the proceeds of the mutually agreed sale of the subject Cummins Engine
absorbed by the DBP, the loan obligation is considered as settled and/or fully
paid.
WHEREFORE,
premises above considered, this case is hereby DISMISSED.[15]
On
1. The court a quo gravely erred in concluding that “DBP
novated the contract when it agreed to condone the interest and penalties but
was revoked by the failure of Calina to pay the amount of P600,000.00”;
2. The court a quo gravely erred in concluding “that
the subsequent agreement of both parties to sell the subject engine for P550,000.00
is considered by the [c]ourt as substantial compliance of the novated contract
for the DBP to condone the interests and penalties”;
3. The court a quo gravely erred in concluding that
the receipt of DBP of the amount of P550,000.00 realized from the sale
of the marine diesel engine “is more than sufficient to offset the loan of P451,589.80
after condonation of interest and penalties.”
Hence, “the loan obligation x x
x is considered as settled and/or fully paid”; and
4. The court a quo
gravely erred is (sic) not
ordering the defendants-appellees Spouses Virgilio G. Calina and Digna
Anastacio to pay DBP the remaining balance of their loan obligation, plus
interest until fully paid, and the pre-agreed attorney’s fees.
It
was also averred that even if “the DBP through its Board of Governors expressly
approved and agreed not only to condone the penalty charges and interest, but
also the dismissal of the complaint upon payment of P600,000.00,”[17]
this issue of novation is already moot as it had been revoked by the
petitioners’ failure to pay the said amount.
On
WHEREFORE, in view of the foregoing, the October 14, 1996
Decision of Branch 61, Regional Trial Court, Makati City in Civil Case No. 1622
is REVERSED and SET ASIDE and a new
one entered ordering defendants-appellees, Spouses Virgilio Calina and Digna
Anastacio, to pay plaintiff-appellant, Development Bank of the Philippines, the
amount of P666,195.55 plus 12% interest from August 18, 1878 (sic) until fully paid to be computed
based on diminishing balance method less the P550,000.00 proceeds from
the sale of the aforesaid Cummins Engine and 10% attorney’s fees.[19]
In their Petition for Review on
Certiorari,[20]
petitioners assigned the following errors to the appellate court’s decision:
1. The Court of Appeals gravely erred when it required
petitioners to pay interest on the advance of P451,589.80 made by DBP,
in violation of the Agreement between the parties and without any valid
document in support thereof.
2. The Court of Appeals gravely erred when it ruled that
there was partial condonation of the interest due, but the said condonation was
revoked when petitioners still did not pay the loan despite the reduction in
interest.
3. The Court of Appeals seriously erred when it failed to
consider and appreciate that what transpired between the parties, after the
filing of the complaint in the trial court, was a compromise settlement and not
a condonation of interest.
4. The Court of Appeals erred in not holding that the P550,000.00
proceeds in the sale of the Cummins Diesel engine was more than sufficient to
off-set the principal loan of P451,589.80.
5. The Court of Appeals gravely erred in awarding 10%
attorney’s fees despite the absence of bad faith on the part of petitioners,
and neither does this case fall under any of the circumstances provided for in
Art. 2208 of our Civil Code.
6. In the remote possibility, this Honorable Court is not
persuaded by petitioners’ argument, it is respectfully submitted that the
interest to be awarded should be reckoned from the date of the compromise
settlement between the parties, and only on the remaining balance of P50,000.00.
In its Comment, [21]
respondent DBP contended:
1. The petition raises only questions of fact, and should
not be given due course.
2. The Court of Appeals did not err when it ordered
petitioners to pay interest on the amount actually received as proceeds of their
loan, as the promissory note they executed provides for this. Moreover, as petitioners were in default in
the payment of their debt, they are liable to pay additional interest equal to
12% of the entire unpaid obligation as indemnity for damages sustained by the
respondent.
3. The petitioners did not challenge the finding of the
court a quo that although the DBP novated the contract by agreeing to condone
interest and penalties, this condonation was revoked by the petitioners’
failure to pay the agreed amount. Therefore,
the petitioners could not state as erroneous the decision of the Court of
Appeals when it affirmed the aforestated finding of the trial court and not as
a compromise settlement. The July 14, 1989 Motion (Exhibit 16) was not
connected to DBP’s letter dated
Since the petitioners raised the defense of novation
before the trial court and the Court of Appeals, it is now barred from
abandoning this theory and adopting a new one.
They can no longer claim that there had been no novation, but that the
parties had entered into a compromise agreement.
Respondent never entered into any compromise agreement
with petitioners. What it only sought
was the trial court’s approval to sell the Cummins engine and to partially
apply the proceeds thereof to the outstanding obligations of petitioners.
4. The CA did not err in finding that the proceeds from
the sale of the Cummins engine was not sufficient to fully offset the
petitioners’ outstanding obligation to respondent. As of P666,195.55.
Petitioners are liable to pay 12% regular interest per annum to the principal
obligation (P451,589.80), plus attorney’s fees of 10%.
5. In the promissory note and the deed of undertaking,
petitioners agreed to pay attorney’s fees in case the respondent is forced to
engage a lawyer to enforce its right against the petitioners.
6. Because the compromise agreement based on DBP’s letter
(exhibit 13) did not come to fruition, the amount of petitioners’ debt to the
respondent cannot be pegged at P600,000.00 only.
We affirm the ruling of the appellate
court with modifications.
First, it is a fact that petitioners owe
respondent a debt of money. Both parties agree that of the amount stipulated in
the promissory note, P451,589.80 had already been given to petitioners
by the respondent. When petitioners informed respondent of their intention to
desist from continuing the project due to the impossibility of complying with
the conditions in the promissory note and deed of undertaking, that immediately
rendered due and demandable any amount advanced to them by the respondent. From
this time onward, petitioners had the obligation to pay respondent the amount
of P451,589.80. On P666,195.55,
representing the amount of petitioners’ obligation plus interest from
Second, it is improper for this Court to determine
whether there was a compromise agreement entered into by the parties. This Court is not a trier of facts, nor will
it disturb the trial court’s findings of fact, such findings being, as a rule,
binding and conclusive.[22] This doctrine admits of only a few
exceptions, such as when the findings are grounded entirely on speculation,
surmises or conjectures; when an interference made by the appellate court from
its factual findings is manifestly mistaken, absurd or impossible; when there
is grave abuse of discretion in the appreciation of facts; when the findings of
the appellate court go beyond the issues of the case, run contrary to the
admissions of the parties to the case or fail to notice certain relevant facts
which, if properly considered, will justify a different conclusion; when there
is a misappreciation of facts; when the findings of fact are conclusions
without mention of the specific evidence on which they are based, are premised
on the absence of evidence or are contradicted by evidence on record.[23] None of these exceptions are present in the case
at bar.
From the
onset of the trial, the Spouses Calina had advocated the theory that there had
been a novation of the contract they had entered into with DBP. Based on this stance and the evidence presented by both parties, the trial
court declared that it is an admitted fact that the “DBP considered to condone interest and penalties, but this was
subsequently revoked when CALINA failed to comply with the condition to pay the
amount of P600,000.00” and that “the DBP novated the contract when it agreed to condone the interest and
penalties but was revoked by the failure of CALINA to pay the amount of P600,000.00.” Petitioners did not challenge this ruling of
the trial court in the appellate court.
They cannot now raise this issue in their petition before this
Court. To countenance such action would be
unfair to the respondent and offensive to the basic rules of fair play, justice
and due process.[24]
There is no
question that petitioners failed to comply with the original terms of the
agreement. It is erroneous for the
petitioners to blame the respondent for their failure to comply with their
contract. The respondent was well within
right when it sought to sell the engine at public auction. Indeed, if the auction succeeded, it would
have benefited all the parties concerned, as the engine could have been sold at
a much higher price.
We note
that throughout the proceedings before the trial court, the appellate court and
before this Court, petitioners have not assailed the computation of their debt.
Thus, it is settled that as of P666,195.55 to the respondent. As of P550,000.00 to the respondent.
Plainly, the
petitioners have not fully paid their obligation to the respondent. Persons who receive loans of money are bound
by law to pay to the creditor an equal amount of the same quality.[25]
In addition, respondent
had the right to demand interest on its loan based on their contract. In their promissory note,[26]
petitioners agreed to pay 12% interest per annum on their loan. Article 1253 of the New Civil Code provides
that, if the debt produces
interest, payment of the principal shall not be deemed to have been made until
the interests have been covered.
The respondent is a bank. To hold that bank debtors should not pay
interest on their loans would be anathema to the nature of any bank’s
business. The charging of interest for
loans forms a very essential and fundamental element of the banking
business. In fact, it may be considered
to be the very core of the banking’s existence or being.[27]
We now
determine the obligation owed by petitioners to respondent. It is clear that petitioners have to pay P666,195.55,
plus 12% interest based on the principal amount of the debt, computed from P550,000.00 paid by
petitioners must be deducted. The remaining
balance, plus 12% interest thereto until the date of full payment, constitute
the liability of the petitioners to the respondent.
Finally, we
disallow the payment of attorney’s fees awarded by the appellate court. Attorney’s fees partake of the nature of
liquidated damages. It is true that the promissory
note and the deed of undertaking executed by the petitioners provided for the
payment of attorney’s fees should respondent be forced to litigate. However, a
fortuitous event, typhoon Asyang,
caused the destruction of the fishing boat subject of the project. This supervening event, independent of the
will of the obligor, cannot render the latter liable[28]
beyond the restitution of what they may have received in advance from the
creditor. Consequently, petitioners cannot be made to
pay attorney’s fees on damages.[29]
IN VIEW WHEREOF,
the decision of the Court of Appeals is affirmed, with the modification that
the petitioners are ordered to pay to respondent the amount of P666,195.55,
plus 12% interest computed from P550,000.00,
representing the previous payment of the petitioners, must be deducted. On the remaining balance shall be added the
payment of 12% interest, to be computed from
The award of
attorney’s fees is deleted.
No
pronouncement as to costs.
SO ORDERED.
REYNATO S. PUNO
Chief Justice
WE CONCUR:
CANCIO C. GARCIA
Associate Justice
Pursuant to Section 13, Article VIII of the Constitution, I
certify 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
[1] Dated
[2] Original Records, p. 6.
[3]
[4]
[5]
[6] Exhibit “E,” id., p. 144.
[7] Exhibit “I,” id., p. 148.
[8]
[9]
[10] Exhibit “7,” Original Records, Vol.
II, pp. 535-536.
[11] Exhibit “10,” id., p. 541.
[12] Exhibit “13,” id., p. 543.
[13]
[14]
[15] The trial court’s decision was
penned by Judge Fernando V. Gorospe, Jr., rollo,
p. 59.
[16] CA rollo, pp. 30-36.
[17]
[18] Rollo,
pp. 25-32.
[19] The decision was written by
Associate Justice Sergio L. Pestańo of the 15th Division., id., p. 31.
[20]
[21]
[22] Singson v. Court of Appeals and Cathay Pacific Airways, Inc., 346 Phil. 831 (1997); Alitalia Airways v. Court of Appeals, G.R. No. 77011, July 24, 1990, 187 SCRA 763, 769-770.
[23] Halili v. Court of Appeals, et al., 350 Phil. 906 (1998).
[24] Drilon
v. Court of Appeals, et al., 336 Phil. 949 (1994), citing Cruz v. Court of Appeals, G.R. No. 107019, March 20, 1997,
233 SCRA 301; BA Finance Corporation v.
Court of Appeals, G.R. No. 82040, August 27, 1991, 201 SCRA 157; Galicia v. Palo, G.R. No. 99668,
November 14, 1989, 179 SCRA 375; Ramos v.
Intermediate Appellate Court, G.R. No. 782821, July 5, 1989, 175 SCRA 70; Ganzon v. Court of Appeals, No. L-48757,
[25] New Civil Code, Article 1953.
[26] Exhibit “A,” rollo, p. 34.
[27] Rizal Commercial Banking
Corporation, et al. v. Court of Appeals and
Goyu & Sons, Inc., G.R. Nos. 128833-34, April 20, 1998, 289
SCRA 292.
[28] New
Civil Code, Article 1266; House v. De la
Costa, 68 Phil. 742 (1939).
[29]
8
Manresa 355-356; Labayen v. Talisay Silay,
52 Phil. 449 (1928); Castro v. Longa,
89 Phil. 581 (1951); Asia Bed Factory v.
National Bed Worker's Union, et al., 100 Phil. 837 (1957); Philippine National Construction Co. v. NLRC,
G.R. No. 78603, January 23, 1991, 193
SCRA 401.