THIRD DIVISION
|
HENRY DELA RAMA CO, Petitioner, - versus - ADMIRAL UNITED SAVINGS
BANK, Respondent. |
G.R.
No. 154740
Present: YNARES-SANTIAGO, J.,
Chairperson, AUSTRIA-MARTINEZ, CHICO-NAZARIO, NACHURA, and REYES, JJ. Promulgated: April 16,
2008 |
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DECISION
NACHURA, J.:
On
appeal is the February 19, 2002 Decision[1] of
the Court of Appeals (CA) in CA-G.R. CV No. 42167, setting aside the May 18,
1991 Decision[2] of the
Regional Trial Court (RTC) of Quezon City, Branch 100, as well as its
subsequent Resolution,[3]
denying petitioner’s motion for reconsideration.
On
P500,000.00)
to petitioner Henry Dela Rama Co (Co), with Leocadio
O. Isip (Isip) as co-maker. The loan was evidenced by Promissory Note No. A1-041[4]
dated February 28, 1983 and payable on or before
February 23, 1984, with interest at the rate of 18% per annum and service
charge of 10% per annum. The note also
provided for liquidated damages at the rate of 3% per month plus incidental
cost of collection and/or legal fees/cost, in the event of non-payment on due
date.
Co and Isip failed to pay the loan
when it became due and demandable.
Demands for payment were made by ADMIRAL, but these were not
heeded. Consequently, ADMIRAL filed a
collection case against Co and Isip with the RTC of Quezon City, docketed as
Civil Case No. Q-48543.
Co
answered the complaint alleging that the promissory note was sham and
frivolous; hence, void ab initio. He denied receiving any benefits from the
loan transaction, claiming that ADMIRAL merely induced him into executing a
promissory note. He also claimed that
the obligations, if any, had been paid, waived or otherwise extinguished. Co
allegedly ceded several vehicles to ADMIRAL, the value of which was more than
enough to cover the alleged obligation. He added that there was condonation of
debt and novation of the obligation.
ADMIRAL was also guilty of laches in prosecuting the case. Finally, he
argued that the case was prematurely filed and was not prosecuted against the
real parties-in-interest.[5]
Pending
resolution of the case, Isip died. Accordingly, he was dropped from the
complaint.
Co
then filed a third party complaint against Metropolitan Rentals & Sales,
Inc. (METRO RENT). He averred that the incorporators and officers of METRO RENT
were the ones who prodded him in obtaining a loan of P500,000.00 from
ADMIRAL. The proceeds of the loan were
given to the directors and officers of METRO RENT, who assured him of prompt
payment of the loan obligation. METRO
RENT also assured him that he would be discharged from all liabilities under the
promissory note, but it did not make good its promise. Co, thus, prayed that METRO RENT be adjudged
liable to ADMIRAL for the payment of the obligation under the promissory note.[6]
Traversing
the third party complaint, METRO RENT denied receiving the loan proceeds from
In
due course and after hearing, the RTC rendered a Decision[8]
on
ADMIRAL appealed the dismissal of the
complaint to the CA.[9]
On
The CA disposed, thus:
UPON THE VIEW WE TAKE OF THIS CASE, THUS, the judgment appealed from must
be as it hereby is, REVERSED and SET ASIDE, and a new one entered CONDEMNING [petitioner] Henry Dela Rama
Co to pay [respondent] Admiral United Savings Bank: (1) the sum of FIVE HUNDRED THOUSAND (P500,000.00) PESOS, Philippine Currency,
with interest at eighteen percent (18%) per annum, and charges of ten percent
(10%) per annum, reckoned from 28 February 1984, until fully paid; (2) the sum
equivalent to three percent (3%) per
month from said due date until fully paid, by way of liquidated damages; and,
(3) the sum equivalent to twenty-five percent (25%) of the total amount due in
the concept of attorney’s fees.
For
insufficiency of evidence, the third party complaint against third party
defendant Metropolitan Rental and Sales, Incorporated, is DISMISSED. Without costs.
SO ORDERED.[11]
Co filed a motion for reconsideration,
but the CA denied the same on
Hence,
this appeal by Co faulting the CA for reversing the RTC.
The
appeal lacks merit.
Co
has not denied the authenticity and due execution of the promissory note. He, however, asserts that he is not legally
bound by said document because he merely acted as an accommodation party for
METRO RENT. He claimed the he signed the
note only for the purpose of lending his name to METRO RENT, without receiving
value therefor.
The argument fails to persuade.
The document, bearing Co’s signature,
speaks for itself. To repeat, Co has not questioned the genuineness and due
execution of the note. By signing the promissory note, Co acknowledged receipt
of the loan amounting to P500,000.00, and undertook to pay the same,
plus interest, to ADMIRAL on or before
At
any rate, Co’s assertion that he merely acted as an accommodation party for
METRO RENT cannot release him from liability under the note. An accommodation party who lends his name to
enable the accommodated party to obtain credit or raise money is liable on the
instrument to a holder for value even if he receives no part of the
consideration.[13] He assumes the obligation to the other party
and binds himself to pay the note on its due date. By signing the note, Co thus became liable
for the debt even if he had no direct personal interest in the obligation or
did not receive any benefit therefrom.
In Sierra v. Court of Appeals,[14]
we held that:
A promissory note is a solemn acknowledgment
of a debt and a formal commitment to repay it on the date and under the
conditions agreed upon by the borrower and the lender. A person who signs such
an instrument is bound to honor it as a legitimate obligation duly assumed by
him through the signature he affixes thereto as a token of his good faith. If
he reneges on his promise without cause, he forfeits the sympathy and
assistance of this Court and deserves instead its sharp repudiation.
Co is not
unfamiliar with commercial transactions. He is a certified public accountant,
who obtained his bachelor’s degree in accountancy from De La Salle
University. Certainly, he fully
understood the import and consequences of what he was doing when he signed the
promissory note. He even mortgaged his own properties to secure payment of the
loan. His disclaimer, therefore, does not inspire belief.
Co also
offered the alternative defense that the loan had already been extinguished by
payment. He testified that METRO RENT
paid the loan a week before
In
Alonzo v. San Juan,[16]
we held that the receipts of payment, although not exclusive, were deemed to be
the best evidence of the fact of payment.
In
this case, no receipt was presented to substantiate the claim of payment. Instead, Co presented a Release of Real
Estate Mortgage[17]
dated
Unfortunately
for Co, no such inference can be made from the deed he presented. The Release of Real Estate Mortgage reads:
The
ADMIRAL UNITED SAVINGS BANK, a banking institution duly organized and existing
under and by virtue of the laws of the Philippines, with offices at S. Medalla
Building, EDSA corner Gen. MacArthur, Cubao, Quezon City, Metro-Manila,
represented in this act by its First Vice-President, MR. EMMANUEL ALMANZOR, and
its Asst. Vice President, MR. ROSSINI PETER G. GAMALINDA, the mortgagee of the
properties described in Transfer Certificates of Title Nos. 3478 and 95759 of
the Registry of Deeds of Laguna in the MORTGAGE executed on February 24, 1983
and acknowledged on the same date before Atty. Benjamin Baens del Rosario,
Notary Public for and in Quezon City, Metro Manila who entered in his notarial
protocol as Doc. No. 70, Page No. 15, Book No. IV, Series of 1983, in favor of
the said Bank, by HENRY DE[LA] RAMA CO, hereby RELEASES and DISCHARGES the
mortgage on the aforesaid Transfer Certificates of Title Nos. 3478 and 95759 of
the Registry of Deeds of Laguna.[18]
The record is
bereft of any showing that the promissory note was secured by a mortgage over
properties covered by TCT Nos. 3478 and 95759.
Thus, it cannot be assumed that the mortgage executed on
In
addition, TCT Nos. 3478 and 95759, the supposed collaterals for the loan, are
still with the bank.[19] If indeed there was payment of the principal obligation
and cancellation of the mortgage in 1983, Co should have immediately demanded
for the return of the TCTs. This he
failed to do.[20]
It was only on
Jurisprudence
is replete with rulings that in civil cases, the party who alleges a fact has
the burden of proving it. Burden of
proof is the duty of a party to present evidence on the facts in issue
necessary to prove the truth of his claim or defense by the amount of evidence
required by law.[22] Thus, a party who pleads payment as a defense
has the burden of proving that such payment had, in fact, been made. When the
plaintiff alleges nonpayment, still, the general rule is that the burden rests
on the defendant to prove payment, rather than on the plaintiff to prove
nonpayment.[23]
Verily,
Co failed to discharge this burden. His
bare testimonial assertion that METRO RENT paid the loan a week before
Similarly,
Co’s protestation that the cancellation of the real estate mortgage
extinguished his obligation to pay the loan cannot be sustained. We perceive it as a strained attempt to rationalize his
untenable position.
A
real estate mortgage is but an accessory contract to secure the loan in the
promissory note. Its cancellation does
not automatically result in the extinguishment of the loan. Being the principal
contract, the loan is unaffected by the release or cancellation of the mortgage.
Certainly, a debt may subsist even
without a mortgage. Thus, in the case at
bench, ADMIRAL can still run after Co for the payment of the loan under the
promissory note, even after the release of the mortgage on the properties,
especially because there was no showing that the mortgage was constituted as a
security for the loan covered by the promissory note.
In sum, the CA committed no reversible error in holding Co liable
for the payment of the loan.
However,
we find a need to modify the damages awarded in favor of ADMIRAL.
The
CA, in conformity with the terms of the promissory note, awarded to ADMIRAL the
amount of P500,000.00 with interest at 18% per annum, and service charge
at the rate of 10% per annum, computed from
We sustain
the interest rate of 18% per annum for being fair and reasonable. However, equity dictates that we reduce the
service charge, liquidated damages and attorney’s fees awarded in favor of
ADMIRAL.
In L.M. Handicraft
Manufacturing Corporation v. Court of Appeals,[25]
we held that a bank is only entitled to a maximum of 2% per annum service
charge for amounts not over P500,000.00.
We, therefore, modify the amount of service charge from 10% to 2%, or P10,000.00
per annum beginning
As to the awards of liquidated
damages and attorney’s fees, we acknowledge that the law allows a party to
recover liquidated damages and attorney's fees under a written agreement, thus:
[T]he attorney's fees here are in the nature
of liquidated damages and the stipulation therefor is aptly called a penal
clause. It has been said that so long as such stipulation does not contravene
law, morals, or public order, it is strictly binding upon defendant. The
attorney's fees so provided are awarded in favor of the litigant, not his
counsel.
On the other hand, the law also allows
parties to a contract to stipulate on liquidated damages to be paid in case of
breach. A stipulation on liquidated damages is a penalty clause where the
obligor assumes a greater liability in case of breach of an obligation. The
obligor is bound to pay the stipulated amount without need for proof on the
existence and on the measure of damages caused by the breach.[26]
Nonetheless, courts are empowered to
reduce such penalty if the same is iniquitous or unconscionable. Article 1229
of the Civil Code states:
ART. 1229. The
judge shall equitably reduce the penalty when the principal obligation has been
partly or irregularly complied with by the debtor. Even if there has been no
performance, the penalty may also be reduced by the courts if it is iniquitous
or unconscionable.
This sentiment is echoed in Article
2227 of the same Code:
ART. 2227. Liquidated
damages, whether intended as an indemnity or a penalty, shall be equitably
reduced if they are iniquitous or unconscionable.
ADMIRAL
is more than adequately protected from a possible breach of contract because of
the stipulations on the payment of interest, service fee, liquidated damages
and attorney’s fees. Thus, this Court
finds the award of liquidated damages and attorney’s fees by the CA
exorbitant. After all, liquidated
damages and attorney’s fees serve the same purpose, that is, as penalty for
breach of contract.[27]
Accordingly, we reduce
the liquidated damages to P150,000.00, and attorney’s fees to 10% of the
principal loan or P50,000.00.
WHEREFORE, the
petition is DENIED. The assailed Decision of the Court of Appeals
in CA-G.R. CV No. 42167 is AFFIRMED
with MODIFICATIONS. Petitioner Henry Dela Rama Co is ordered to
pay Admiral United Savings Bank P500,000.00, with interest at 18% per
annum from P10,000.00
per year also from February 28, 1984 until the full payment of the loan; P150,000.00,
as liquidated damages; and P50,000.00,
as attorney’s fees.
SO ORDERED.
ANTONIO
EDUARDO B. NACHURA
Associate
Justice
WE CONCUR:
CONSUELO YNARES-SANTIAGO
Associate
Justice
Chairperson
|
MA. ALICIA
AUSTRIA-MARTINEZ Associate Justice |
MINITA V. CHICO-NAZARIO Associate Justice |
RUBEN T. REYES
Associate
Justice
A T T E S T A T I O N
I attest that the conclusions in the above Decision were
reached in consultation before the case was assigned to the writer of the
opinion of the Court’s Division.
CONSUELO
YNARES-SANTIAGO
Associate
Justice
Chairperson,
Third Division
C E R T I F I C A T I O
N
Pursuant to Section 13, Article
VIII of the Constitution and the Division Chairperson's Attestation, 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
Chief
Justice
[1] Penned by Associate Justice Renato C. Dacudao (retired), with Associate Justices Perlita J. Tria Tirona (retired) and Mariano C. Del Castillo, concurring; rollo, pp. 66-74.
[2] Rollo, pp. 34-40.
[3]
[4] Records, p. 180.
[5]
[6]
[7]
[8] Supra
note 2.
[9] Rollo, pp. 41-64.
[10] Supra
note 1.
[11]
[12]
[13] Ang v. Associated Bank, G. R. No. 146511, September 5, 2007, 532 SCRA 244, 273.
[14] G. R. No. 90270,
[15] TSN,
[16] G.R. No. 137549,
[17] Exhibit “3”; records, pp. 224-225.
[18]
[19] TSN,
[20]
[21] Records, pp. 43-44.
[22] RULES OF COURT, Rule 131, Sec. 1.
[23] See Bulos, Jr. v. Yasuma, G.R. No. 164159, July 17, 2007, 527 SCRA 727, 739; Alonzo v. San Juan, supra note 16, at 56.
[24] Rollo, p. 73.
[25] G.R. No. 90047,
[26] Titan
Construction Corporation v. Uni-Field
[27]