SECOND DIVISION
TRANSPACIFIC
CORPORATION
and MICHAEL G. SAY,
Petitioners,
Present:
CARPIO
MORALES, J.*
Chairperson,
-
versus - TINGA,
VELASCO,
JR.,
LEONARDO DE CASTRO,** and
BRION,
JJ.
SECURITY
BANK & TRUST CO., Promulgated:
Respondent.
May
8, 2009
x---------------------------------------------------------------------------------x
MICHAEL
G. SAY and JOSEPHINE G.R.
No. 173607
G.
SAY,
Petitioners,
-
versus -
SECURITY
BANK & TRUST
COMPANY,
Respondent.
x---------------------------------------------------------------------------------x
D E C I S I O N
Tinga, J.:
Before this Court are two petitions
for review on certiorari[1]
under Rule 45 of the Rules of Court seeking
the reversal of the decision[2] of
the Court of Appeals in CA-G.R. CV No. 74644 which affirmed with modification
the decision[3] of
Branch 64 of the Regional Trial Court of Makati City, ordering petitioners Transpacific
Battery Company (Transpacific), Michael Go Say (Michael), Melchor G. Say
(Melchor) and Josephine G. Say (Josephine) jointly and severally liable to
Security Bank and Trust Company (The Bank).
The facts, as culled from the records,
follow.
Transpacific, represented by its
officers, Michael G. Say, Josephine G. Say and Myrna Magpantay, entered into a
Credit Line Agreement[4]
with the Bank. Consequently, the officers in behalf of Transpacific applied for
nine (9) letters of credit (LC) with the Bank to facilitate the importation
and/or purchases of certain merchandise, goods and supplies for its business. The
Bank issued the corresponding LCs to Transpacific. Transpacific then executed and delivered to the Bank,
as entrustor, nine (9) trust receipt agreements
with
for the release of the imported merchandise and supplies in its favor,
with the aforementioned officers, individual petitioners herein, binding
themselves to be solidarily liable with Transpacific to the Bank for the value
of the merchandise and supplies covered by the trust receipts. The letters of credit and their corresponding
trust receipts are listed below:
|
Letter
of Credit No. |
Trust
Receipt Agreement Ref. No. |
Date
Issued |
Expiry
Date of Trust Receipt |
Amount
of Trust Receipt |
Entrustees |
|
73
DC-82/492 |
731B-83/8927 |
|
|
|
Michael
G.Say, Josephine G. Say, Myrna E. Magpantay[5] |
|
73
DC-83/504 |
731B-83/9126 |
|
|
|
Michael
G. Say, Melchor G. Say, Myrna E. Magpantay[6] |
|
73
DC-83/517 |
731B-83/9259 |
|
|
|
Michael
G. Say, Melchor G. Say, Myrna E. Magpantay[7] |
|
73
DC-83/6278 |
731B-83/9187 |
|
|
|
Michael
G. Say, Melchor G. Say, Myrna E. Magpantay[8] |
|
73
DC-6994 |
731B-83/9461 |
|
|
|
Michael
G. Say, Melchor G. Say, Myrna E. Magpantay[9] |
|
73
DC-6990 |
731B-83/9617 |
|
|
|
Michael
G. Say, Melchor G. Say, Myrna E. Magpantay[10] |
|
73
DC-83/5580 |
731B-83/587 |
|
|
|
Michael
G. Say, Melchor G. Say, Myrna E. Magpantay[11] |
|
73
DC-83/5581 |
731B-83/588 |
|
|
|
Michael
G. Say, Melchor G. Say, Myrna E. Magpantay[12] |
|
73
DC-83/432 |
731B-83/8110 |
|
|
|
Michael
G. Say, Melchor G. Say, Myrna E. Magpantay[13] |
Under the terms of the trust receipts,
the entrustees agreed to hold the goods, merchandise and supplies, as well as
the proceeds of the sale and collection thereof, in trust for the Bank for the
payment of petitioners’ acceptance, bank
commissions and charges,
and/or any
other indebtedness of petitioners to the
Bank, and deliver the same to the Bank upon maturity date of said trust
receipts.[14]
On the maturity dates of the trust
receipts, petitioners failed to account for and to deliver to the Bank the
proceeds of the sale and collection of the goods, merchandise and supplies
subject of the trust receipts. Despite
repeated demands, petitioners reneged on their obligation.
On P3,082,029.00, subject to the following terms and conditions:
1.
Payment
of all interest and other charges prior to restructuring;
2.
TR
term is for one year with equal monthly principal payments;
3.
Interest
at 5% p.a. over prime rate or 30% p.a., whichever is higher, amortized monthly;
4.
Interest
rate subject to review every amortization due; and
5.
Against
the joint and solidary liability of Sps. Miguel and Mary Say and Michael Go
Say.[15]
Failure to meet one monthly
installment when due shall cause the unmatured balance to become due and
demandable. The account shall be
referred automatically to our Special Accounts Department for collection.[16]
Alleging that out of the total
obligation of P3,082,029.00, the amount of P2,290,865.41 remained
unpaid, the Bank demanded in writing the payment of the unpaid balance.[17]
Despite repeated demands, petitioners
failed to comply with the restructuring agreement, prompting the Bank to file a
criminal complaint for violation of Presidential Decree No. 115 or the Trust
Receipts Law. However, said complaint
was dismissed.
On
In his answer,[19]
Michael countered that the obligation had already been paid or if not totally
paid, the same is very minimal. He
further contended that said obligation had already been extinguished by
novation when the Bank restructured the obligation of Transpacific. He also
claimed that the Bank is guilty of laches for its inaction for an unreasonable
length of time.[20]
Melchor and Josephine, for their
part, argued that the trust receipts have not been executed in strict
compliance with the requirements of the Trust Receipts Law; that their
participation in the questioned transactions was in their capacity as officers
of Transpacific and consequently, cannot be held liable in their individual
capacities; that their signatures in some of the documents were forged; and
that the obligation had been extinguished by novation.[21]
Ma. Fe Rosadio (Rosadio), who was
employed at the Foreign Department of the Bank and tasked with documentation,
processing and releasing of import bills and trust receipts, testified for the
Bank. She identified the trust receipts
and attested to the genuineness of the signatures of petitioners.
Instead of presenting their
witnesses, petitioners filed a demurrer to evidence[22]
which the trial court denied on
In a decision dated
WHEREFORE, IN VIEW OF THE FOREGOING, judgment is rendered in favor of plaintiff Security Bank and Trust Company and against defendants Transpacific Battery Company, Michael Go Say, Melchor G. Say and Josephine G. Say ordering the defendants to pay jointly and severally to the plaintiff the following amounts:
1.
The sum of P2,290,865.41 representing the
balance of defendants’ outstanding and unpaid obligation as of the filing of
the complaint on February 4, 1992 plus interest at the rate of 12% per annum
from February 4, 1992 until full payment of the defendants’ obligation under
the aforecited Trust Receipts and/or Letter Agreement is made;
2. Attorney’s fees in the amount equivalent to 25% on the amount due;
3. Cost of suit.
SO ORDERED.[23]
The
trial court lent credence to the testimony of Rosadio and upheld the
authenticity and genuineness of the signatures of the individual petitioners on
the trust receipts. It also ruled that
the restructuring of the obligation did not relieve individual petitioners of
their liability as solidary debtors to the Bank as there was an express
agreement on their part to be bound jointly and severally with Transpacific
under the trust receipts.[24]
On
appeal, the Court of Appeals affirmed the ruling of the trial court with
modification in that it deleted the award of attorney’s fees.
The
Court of Appeals’ decision centered on the finding that there was no novation
in the restructuring of the obligation, therefore, the individual petitioners as solidary
debtors cannot be exonerated from the obligation of Transpacific. The appellate court also dismissed the
allegation of forgery for failure of petitioners to present evidence to support
their allegation that the purported signatures in the trust receipts were
forged. With respect to the amount of
the unpaid obligation, the appellate court concluded that since the issue is
factual in nature, the finding of the trial court should not be disturbed on
appeal.
In the
petition filed by Michael, he insists that novation had taken place and
effectively extinguished his obligation to the Bank. Moreover, he argues that he did not sign the
restructuring agreement; hence, he should not be made liable to pay any
obligation due to the Bank under said agreement.[25]
Melchor
and Josephine question the credibility of witness Rosadio to testify on the
authenticity of their signatures on the trust receipts. They likewise point out the deficiencies in
the trust receipts. Finally, they assert
that whatever obligation they may have assumed under the agreements in the
trust receipts they signed was fully novated by the restructuring agreement
entered into between the Bank and Transpacific without their knowledge and
consent.
The Bank
posits that the arguments presented by petitioners involve factual questions
and the findings thereof by the courts below are conclusive upon this
Court. It also contends that there is no
novation and the restructuring agreement was executed only to make it less
onerous for the debtors to perform their obligation. It avers that although
petitioners were no longer signatories in the restructuring agreement, they are
still bound as they were not expressly released from their obligation. On the contrary, it points out that the
restructuring agreement was even made subject to their joint and solidary
liability.
Novation is a mode of extinguishing
an obligation by changing its objects or principal obligations, by substituting
a new debtor in place of the old one, or by subrogating a third person to the
rights of the creditor.[26] Article 1292 of the Civil Code expressly
provides:
Art. 1292. In order that an obligation may be extinguished by another which substitute the same, it is imperative that it be so declared in unequivocal terms, or that the old and new obligations be in every point incompatible with each other.
In order for novation to take place,
the concurrence of the following requisites are indispensable:
1. There must be a previous valid obligation;
2. There must be an agreement of the parties concerned to a new
contract;
3. There must be the extinguishment of the old contract; and
4. There must be the validity of the new contract.[27]
Novation
is never presumed, and the animus novandi, whether totally or partially,
must appear by express agreement of the parties, or by their acts that are too
clear and unmistakable. The extinguishment of the old obligation by the new one
is a necessary element of novation, which may be effected either expressly or
impliedly. The contracting parties must incontrovertibly disclose that their
object in executing the new contract is to extinguish the old one. Upon the
other hand, no specific form is required for an implied novation, and all that
is prescribed by law would be an incompatibility between the two contracts.[28]
The test
of incompatibility is whether the two obligations can stand together, each one
having its independent existence. If they
cannot, they are incompatible and the latter obligation novates the first. Corollarily, changes that breed
incompatibility must be essential in nature and not merely accidental. The
incompatibility must take place in any of the essential elements of the
obligation, such as its object, cause or principal conditions thereof;
otherwise, the change would be merely modificatory in nature and insufficient
to extinguish the original obligation.[29]
Petitioners
proffer that the terms of the restructuring agreement are absolutely
incompatible with the terms of the trust receipts. First, the maturity date under the trust
receipts is reckoned at ninety (90) days from their respective issuance dates
whereas it is one (1) year under the restructuring agreement. Second, payment is in full under the trust
receipts while under the restructured obligation, it is to be made in equal
monthly installments. Third, the rate of
interest under the trust receipts is 16% or 18% per annum whereas it is 5% per
annum over prime rate or 30% per annum, whichever is higher, under the
restructured obligation. Fourth, the
restructuring agreement has a provision on the time of interest payments, as
well as a review of the interest rate, whereas there are no such provisions
under the trust receipts. Fifth, the
obligation under the trust receipts is secured by the joint and solidary
liability of the alleged signatories, whereas the restructured obligation is
secured by the joint and solidary liability of Spouses Miguel and Mary Say and
Michael G. Say. Sixth, there is no
acceleration clause under the trust receipts whereas the restructured
obligation is subject to an acceleration clause.
On the
other hand, the Bank dismisses any incompatibility between the restructuring
agreement and the trust receipt transactions.
It alleges that the restructuring agreement even made an express
recognition of the trust receipts when it obliged the debtors pay all interests
and other charges prior to restructuring.
Moreover, only the interest rates and the term of the trust receipts
were modified, according to the Bank. In
fact, it claims that the restructuring agreement was executed to make it less
onerous for the debtors to perform their obligation.
The primary issue for resolution is
whether the obligation under the trust receipts was novated by the
restructuring agreement. We rule in the
negative.
The
material portions of the restructuring agreement is hereby reproduced for
brevity:
Gentlemen:
We
are pleased to inform you that our Executive Committee has approved the restructuring of your
outstanding past due trust receipts amounting to P3,082,029.00, subject
to:
1. Payment of all interest and other charges prior to restructuring;
2. TR term is for one year with equal monthly principal payments
3. Interest at 5% p.a. over prime rate or 30% p.a., whichever is higher, amortized monthly;
4. Interest rate subject to review every amortiaton due;
5. Against the joint and solidary liability of Sps. Miguel and Mary Say and Michael Go Say;
Failure to meet one monthly installment when due shall cause the unmatured balance to become due and demandable. The account shall be referred automatically to our Special Accounts Department for collection.[30]
Undoubtedly, there is no express
novation since the restructuring agreement does not state in clear
terms that the obligation under the trust receipts is extinguished and in lieu
thereof the restructuring agreement will be substituted. Neither is there
an implied novation since the restructuring agreement is not incompatible with
the trust receipt transactions.
Indeed, the restructuring agreement
recognizes the obligation due under the trust receipts when it required
“payment of all interest and other charges prior to restructuring.” With respect to Michael, there was even a
proviso under the agreement that the amount due is subject to “the joint and
solidary liability of Spouses Miguel and Mary Say and Michael Go Say.” While the names of Melchor and Josephine do
not appear on the restructuring agreement, it cannot be presumed that they have
been relieved from the obligation. The
old obligation continues to subsist subject to the modifications agreed upon by
the parties.
The
circumstance that motivated the parties to enter into a restructuring agreement
was the failure of petitioners to account for the goods received in trust
and/or deliver the proceeds thereof. To
remedy the situation, the parties executed an agreement to restructure
Transpacific’s obligations.
The Bank
only extended the repayment term of the trust receipts from 90 days to one year
with monthly installment at 5% per annum over prime rate or 30% per annum
whichever is higher. Furthermore, the
interest rates were flexible in that they are subject to review every
amortization due. Whether the terms appeared
to be more onerous or not is immaterial.
Courts are not authorized to extricate parties from the necessary consequences
of their acts. The parties will not be
relieved from their obligations as there was absolutely no intention by the
parties to supersede or abrogate the trust receipt transactions. The intention of the new agreement was
precisely to revive the old obligation after the original period expired and
the loan remained unpaid. Well-settled is the rule that, with respect to
obligations to pay a sum of money, the obligation is not novated by an
instrument that expressly recognizes the old, changes only the terms of
payment, adds other obligations not incompatible with the old ones, or the new
contract merely supplements the old one.[31]
Equally unmeritorious is petitioners’
claim that they cannot be held liable to pay any obligation due to the Bank
under the restructuring agreement because they did not participate or sign the
same. To reiterate, there is no
novation. The trust receipts transactions
and the restructuring agreement can both stand together. Petitioners have not shown that they were
expressly released from the obligation. From the
beginning, they were joint and solidary debtors under the trust receipts, the
obligation of which subsist vis-à-vis
the restructuring agreement. Being joint
and solidary debtors, they are liable for the entirety of the obligation.
While petitioners Melchor and
Josephine insist that they never claimed forgery, the crux of the matter still
pertains to the credibility of the witness, which the courts below chose to
uphold. Suffice it to say that in the
absence of any of the recognized exceptions,[32]
the factual findings of the trial court, especially when affirmed by the Court
of Appeals are conclusive on this Court.
WHEREFORE, the
twin petitions are DENIED. The Decision of the Court of Appeals in
CA-G.R. CV No. 74644 is AFFIRMED. Costs against petitioners.
SO
ORDERED.
DANTE
O. TINGA
Associate Justice
WE CONCUR:
CONCHITA CARPIO
MORALES
Associate
Justice
Acting Chairperson
PRESBITERO J. VELASCO, JR. TERESITA LEONARDO DE CASTRO
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.
CONCHITA CARPIO MORALES
Associate Justice
Acting 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
*Acting Chairperson as replacement of Justice Leonardo A. Quisumbing who is on official leave per Special Order No. 618.
**Additional member of the Second Division per Special Order No. 619.
[2]Rollo (G.R. No. 173607), pp. 38-48; Penned by Associate Justice Juan Q. Enriquez, Jr. concurred in by Associate Justices Romeo A. Brawner and Aurora Santiago-Lagman.
[8]
[11]
[12]
[13]
[26]Garcia
v. Llamas, 462 Phil. 779, 788 (2003), citing Idolor v. CA, 351 SCRA
399, 407, February 7, 2001; Agro Conglomerates, Inc. v. CA, 348 SCRA
450, 458, December 12, 2000; De Cortes v. Venturanza, 79 SCRA 709,
722–723, October 28, 1977; PNB v. Mallari and The First Nat'l. Surety &
Assurance Co., Inc., 104 Phil. 437, 441,
[27]Sueño
v. Land Bank of the
[29]California Bus Lines v. State Investment House, 463 Phil. 689, 703 (2003), citing Molino v. Security Diners International Corporation, G.R. No. 136780, 16 August 2001, 363 SCRA 358, 366.
[32](1)
the conclusion is grounded on speculations, surmises or conjectures; (2) the
inference is manifestly mistaken, absurd or impossible; (3) there is grave
abuse of discretion; (4) the judgment is based on a misapprehension of facts;
(5) the findings of fact are conflicting; (6) there is no citation of specific
evidence on which the factual findings are based; (7) the finding of absence of
facts is contradicted by the presence of evidence on record; (8) the findings
of the CA are contrary to the findings of the trial court; (9) the CA
manifestly overlooked certain relevant and undisputed facts that, if properly
considered, would justify a different conclusion; (10) the findings of the CA
are beyond the issues of the case; and, (11) such findings are contrary to the
admissions of both parties. See Pelonia v. People of the