HERMAN
C. CRYSTAL, LAMBERTO G.R. No. 172428
C. CRYSTAL, ANN GEORGIA C.
SOLANTE, and DORIS C. Present:
MAGLASANG, as Heirs of
Deceased SPOUSES RAYMUNDO QUISUMBING, J.,
I.
CRYSTAL and DESAMPARADOS Chairperson,
C.
Petitioners, TINGA,
VELASCO, JR., and
BRION,
JJ.
- versus
-
Promulgated:
BANK OF THE PHILIPPINE
Respondent.
x----------------------------------------------------------------------------x
Tinga,
J.:
Before us is a Petition for Review[1] of
the Decision[2] and Resolution[3] of
the Court of Appeals dated 24 October 2005 and 31 March 2006, respectively, in
CA G.R. CV No. 72886, which affirmed the
The facts, as culled from the records,
follow.
On P300,000.00 loan in
behalf of the Cebu Contractors
Consortium Co. (CCCC) from the Bank of the Philippine Islands-Butuan branch (BPI-Butuan). The loan was secured by a
chattel mortgage on heavy equipment and machinery of CCCC. On the same date, the spouses executed in
favor of BPI-Butuan a Continuing Suretyship[5] where they bound themselves as surety of CCCC
in the aggregate principal sum of not exceeding P300,000.00. Thereafter, or on P300,000.00,
also in favor of BPI-Butuan.
Sometime in August 1979, CCCC renewed a previous
loan, this time from BPI,
However, CCCC
had no real property to offer as security for the loan; hence, the spouses
executed a real estate mortgage[8]
over their own real property on P20,000.00 of CCCC.[10]
CCCC failed to pay its loans to both
BPI-Butuan and P240,000.00
applied to the loan from BPI-Butuan which had then reached P707,393.90.[12] Meanwhile, on
estate
mortgages and to pay directly the spouses’ indebtedness in exchange for the
release of the mortgages. BPI rejected IBAA’s offer to pay.[13]
BPI filed a complaint for sum of money
against CCCC and the spouses before the
On P450,000.00 loan also extended by BPI-Makati. The P450,000.00
loan was allegedly paid, and thereafter the spouses demanded the return of the
FCSA passbook. BPI rejected the demand; thus, the spouses were unable to
withdraw from the said account to pay for their other obligations to BPI.
The trial court dismissed the spouses’
complaint and ordered them to pay moral and exemplary damages and attorney’s
fees to BPI.[17] It ruled that since the spouses agreed to
bind themselves jointly and severally, they are solidarily liable for the
loans; hence, BPI can validly foreclose the two real estate mortgages.
Moreover, being guarantors-mortgagors, the spouses are not entitled to the
benefit of exhaustion. Anent the FCSA, the trial court found that CCCC
originally had FCDU SA No. 197 with BPI, Dewey Boulevard branch, which was
transferred to BPI-Makati as FCDU SA 76/0035, at the request of Desamparados Crystal. FCDU SA 76/0035 was thus closed, but Desamparados Crystal failed to surrender the passbook
because it was lost. The transferred
FCSA in BPI-Makati was the one used as security for
CCCC’s P450,000.00 loan from BPI-Makati. CCCC was no longer allowed to
withdraw from FCDU SA No. 197 because it was already closed.
The
spouses appealed the decision of the trial court to the Court of Appeals, but
their appeal was dismissed.[18]
The spouses moved for the reconsideration of the decision, but the Court of
Appeals also denied their motion for reconsideration.[19] Hence, the present petition.
Before
the Court, petitioners who are the heirs of the spouses argue that the failure
of the spouses to pay the BPI-Cebu City loan of P120,000.00 was due to BPI’s illegal refusal to accept payment for the loan unless the P300,000.00
loan from BPI-Butuan would also be paid. Consequently, in view of BPI’s unjust refusal to accept payment of the BPI-Cebu City
loan, the loan obligation of the spouses was extinguished, petitioners contend.
The
contention has no merit. Petitioners rely on IBAA’s
offer to purchase the mortgaged lot from
them and to directly pay BPI out of the proceeds thereof to settle the loan.[20] BPI’s refusal to
agree to such payment scheme cannot extinguish the spouses’ loan
obligation. In the first place, IBAA is
not privy to the loan agreement or the promissory note between the spouses and
BPI. Contracts, after all, take
effect only between the parties,
their successors in interest, heirs
and assigns.[21] Besides, under Art. 1236 of the Civil Code,
the creditor is not bound to accept payment or performance by a third person
who has no interest in the fulfillment of the obligation, unless there is a
stipulation to the contrary. We see no stipulation in the promissory note which
states that a third person may fulfill the spouses’ obligation. Thus, it is
clear that the spouses alone bear responsibility for the same.
In
any event, the promissory note is the controlling repository of the obligation of the spouses. Under the
promissory note, the spouses defined the
parameters of their obligation as follows:
On
or before June 29, 1980 on demand, for value received, I/we promise to pay,
jointly and severally, to the BANK OF THE PHILIPPINE ISLANDS, at its office in the city of Cebu
Philippines, the sum of ONE HUNDRED TWENTY THOUSAND PESOS (P120,0000.00), Philippine Currency,
subject to periodic installments on the principal as follows: P30,000.00
quarterly amortization starting September 28, 1979. x x
x [22]
A
solidary obligation is one in which each of the debtors is liable for the entire
obligation, and each of the creditors is entitled to demand the satisfaction of
the whole obligation from any or all of the debtors. [23] A liability is solidary “only when the
obligation expressly so states, when
the law so
provides or when
the nature of the
obligation so requires.”[24]
Thus, when the obligor undertakes to be “jointly and severally” liable, it
means that the obligation is solidary,[25]
such as in this case. By stating “I/we
promise to pay, jointly and severally, to the BANK OF THE PHILIPPINE ISLANDS,”
the spouses agreed to be sought out and
be demanded payment from, by BPI. BPI did demand payment from them, but they
failed to comply with their obligation, prompting BPI’s
valid resort to the foreclosure of the chattel mortgage and the real estate mortgages.
More
importantly, the promissory note, wherein the spouses undertook to be solidarily liable for the
principal loan, partakes the nature of a
suretyship and therefore is an additional security
for the loan. Thus we held in one case that
if solidary liability was instituted to “guarantee” a principal
obligation, the law deems the contract to be one of suretyship.[26] And while a contract of a surety is in
essence secondary only to a valid principal obligation, the surety’s liability to the creditor or promisee of the
principal is said to be direct, primary, and absolute; in other words, the
surety is directly and equally bound
with the principal. The surety therefore
becomes liable for the debt or duty of another even if he possesses no direct or personal interest
over the obligations nor does he receive any benefit therefrom.[27]
Petitioners
contend that the Court of Appeals erred in not granting their counterclaims,
considering that they suffered moral damages in view of the unjust refusal of
BPI to accept the payment scheme proposed by IBAA and the allegedly unjust and
illegal foreclosure of the real estate mortgages on their property.[28] Conversely, they argue that the Court of
Appeals erred in awarding moral damages to BPI, which is a corporation, as well
as exemplary damages, attorney’s fees and expenses of litigation.[29]
We
do not agree. Moral
damages are meant to compensate the claimant for any physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation and similar injuries unjustly
caused.[30]
Such damages, to be recoverable, must be the proximate result of a wrongful act
or omission the factual basis for which is satisfactorily established by the
aggrieved party.[31] There being no wrongful or unjust act on the
part of BPI in demanding payment from them and in seeking the foreclosure of
the chattel and real estate mortgages, there is no lawful basis for award of
damages in favor of the spouses.
Neither
is BPI entitled to moral damages. A juridical person is generally not entitled to
moral damages because, unlike a natural person, it cannot experience physical
suffering or such sentiments as wounded feelings, serious anxiety, mental
anguish or moral shock.[32] The Court of
Appeals found BPI as “being
famous and having gained its familiarity and respect not only in the
Philippines but also in the whole world because of its good will and good
reputation must protect and defend the same against any unwarranted suit such
as the case at bench.”[33]
In holding that BPI is entitled to moral damages, the Court of Appeals relied on the case of People v. Manero,[34] wherein the Court ruled that “[i]t is only
when a juridical person has a good reputation that is debased, resulting in
social humiliation, that moral damages may be awarded.”[35]
We
do not agree with the Court of Appeals.
A statement similar to that made by the Court in Manero can be found in the case of
Mambulao Lumber Co. v. PNB, et al.,[36] thus:
x
x x Obviously, an artificial person like herein
appellant corporation cannot experience
physical sufferings, mental anguish, fright, serious anxiety, wounded
feelings, moral shock or social humiliation which are basis of moral
damages. A corporation may have good reputation
which, if besmirched may also be a ground for the award of moral damages. x x x (Emphasis
supplied)
Nevertheless, in the
more recent cases of ABS-CBN Corp. v. Court of Appeals, et al.,[37]
and Filipinas Broadcasting Network, Inc.
v. Ago Medical and Educational Center-Bicol Christian College of Medicine
(AMEC-BCCM),[38] the
Court held that the statements in Manero
and Mambulao were mere
obiter dicta, implying that the award of moral damages to
corporations is not a hard and fast rule.
Indeed, while the Court may allow the grant of moral damages to
corporations, it is not automatically granted; there must still be proof of the
existence of the factual basis of the damage and its causal relation to the
defendant’s acts. This is so because moral damages, though incapable of
pecuniary estimation, are in the category of an award designed to compensate
the claimant for actual injury
suffered and not to impose a penalty on the wrongdoer.[39]
The spouses’ complaint against BPI proved to be unfounded, but it does not
automatically entitle BPI to moral damages.
Although the institution of a clearly unfounded civil suit can at
times be a legal
justification for an award of
attorney's fees, such filing, however, has almost invariably been held not to
be a ground for an award of moral damages. The rationale for the rule is that
the law could not have meant to impose a penalty on the right to litigate.
Otherwise, moral damages must every time be awarded in favor of the prevailing
defendant against an unsuccessful plaintiff.[40] BPI may have been inconvenienced by the
suit, but we do not see how it could have possibly suffered besmirched
reputation on account of the single suit alone.
Hence, the award of moral damages should be deleted.
The
awards of exemplary damages and attorney’s fees, however, are proper. Exemplary damages, on the other hand, are
imposed by way of example or correction for the public good, when the party to
a contract acts in a wanton, fraudulent, oppressive or malevolent manner, while
attorney’s fees are allowed when exemplary damages are awarded and when the
party to a suit is compelled to incur expenses to protect his interest.[41] The spouses instituted their complaint
against BPI notwithstanding the fact that they were the ones who failed to pay
their obligations. Consequently, BPI was forced to litigate and defend its
interest. For these reasons, BPI is
entitled to the awards of exemplary damages and attorney’s fees.
WHEREFORE,
the petition is DENIED. The Decision and Resolution of the Court of Appeals
dated 24 October 2005 and 31 March 2006, respectively, are hereby AFFIRMED,
with the MODIFICATION that the award of moral damages to
Bank of the Philippine Islands is
DELETED.
Costs
against the petitioners.
SO
ORDERED.
DANTE O. TINGA Associate Justice
WE CONCUR:
LEONARDO A. QUISUMBING
Associate Justice
Chairperson
CONCHITA CARPIO MORALES PRESBITERO J.
VELASCO, JR.
Associate Justice
Associate Justice
ARTURO D. BRION
Associate Justice
ATTESTATION
I attest 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.
LEONARDO A. QUISUMBING
Associate Justice
Chairperson, Second Division
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution,
and the Division Chairperson’s Attestation, 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
Chief Justice
[2]Id. at 23-31. Penned by Associate Justice Vicente L. Yap. with Associate Justices Arsenio J. Magpale and Apolinario D. Bruselas, Jr. concurring.
[13]Plaintiff’s Folder of Exhibits. The offer was contained in a letter dated 7 July 1981. It reads:
Gentlemen:
We are buying that parcel of land covered by Transfer Certificate of Title No. T-16118 at present securing a loan of Cebu Contractors Consortium with you.
Please lend us the Certificate of Title so that the same can be transferred to us. Your lien will, of course, continue to be annotated upon said title even when it has already been transferred to us.
As soon as we procure the Certificate of Title in our name, we will pay directly to you the amount needed to wipe off the indebtedness of Cebu Contractors Consortium, in exchange for your release of the mortgage.
[25]International Finance Corporation v. Imperial Textile Mills, Inc., 15 November 2005, 475 SCRA 149.