Premiere Dev't Bank v. CA: 159352 : April 14, 2004 : J. Ynares-Santiago
: First Division : Decision
[G.R. NO. 159352 : April
PREMIERE DEVELOPMENT BANK,
APPEALS, PANACOR MARKETING CORPORATION and ARIZONA TRANSPORT CORPORATION, Respondents.
D E C I S I O N
This is a Petition for Review under Rule 45 of the 1997 Rules on
Civil Procedure seeking the annulment of the Decision dated June
18, 2003 of the Court of Appeals1 which
affirmed the Decision of the Regional Trial Court2 in
Civil Case No. 65577.
The undisputed facts show that on or about October 1994, Panacor
Marketing Corporation (Panacor for brevity),
a newly formed corporation,
acquired an exclusive distributorship of products manufactured by Colgate
Palmolive Philippines, Inc. (Colgate for short). To meet the capital
requirements of the exclusive distributorship, which required an initial
inventory level of P7.5 million, Panacor applied for a loan of P4.1 million
with Premiere Development Bank. After an extensive study of Panacors
creditworthiness, Premiere Bank rejected the loan application and suggested
that its affiliate company, Arizona Transport Corporation (Arizona
for short),3 should instead apply for the loan on condition that the proceeds thereof shall
be made available to Panacor. Eventually, Panacor was granted a P4.1 million
credit line as evidenced by a Credit Line Agreement.4 As
suggested, Arizona, which was an
existing loan client, applied for and was granted a loan of P6.1 million, P3.4
million of which would be used to pay-off its existing loan accounts and the
remaining P2.7 million as credit line of Panacor. As security for the P6.1
million loan, Arizona,
represented by its Chief Executive Officer Pedro Panaligan and spouses Pedro
and Marietta Panaligan in their personal capacities, executed a Real Estate
Mortgage against a parcel of land covered by TCT No. T-3475 as per Entry No.
49507 dated October 2, 1995.5 cralawred
Since the P2.7 million released by Premiere Bank fell short of
the P4.1 million credit line which was previously approved, Panacor negotiated
for a take-out loan with Iba Finance Corporation (hereinafter referred to as
Iba-Finance) in the sum of P10 million, P7.5 million of which will be released
outright in order to take-out the loan from Premiere Bank and the balance of P2.5
million (to complete the needed capital of P4.1 million with Colgate) to be
released after the cancellation by Premiere of the collateral mortgage on the
property covered by TCT No. T-3475.
Pursuant to the said take-out agreement, Iba-Finance was authorized to
pay Premiere Bank the prior existing loan obligations of Arizona
in an amount not to exceed P6 million.
On October 5, 1995,
Iba-Finance sent a letter to Ms. Arlene R. Martillano, officer-in-charge of
Premiere Banks San Juan Branch, informing her of the approved loan in favor of
Panacor and Arizona, and
requesting for the release of TCT No. T-3475.
Martillano, after reading the letter, affixed her signature of
conformity thereto and sent the original copy to Premiere Banks legal office.
The full text of the letter reads:6 cralawred
Please be informed that we have approved the loan application of
ARIZONA TRANSPORT CORP. and PANACOR MARKETING CORPORATION. Both represented by
MR. PEDRO P. PANALIGAN (hereinafter the BORROWERS) in the principal amount of
PESOS: SEVEN MILLION FIVE HUNDRED THOUSAND ONLY (P7,500,000.00) Philippine
Currency. The loan shall be secured by a Real Estate Mortgage over a parcel of
land located at #777 Nueve de Pebrero St.
Bo. Mauway, Mandaluyong City, Metro Manila covered by TCT No. 3475 and
registered under the name of Arizona Haulers, Inc. which is presently mortgaged
with your bank.
The borrowers have authorized IBA FINANCE CORP. to pay Premiere
Bank from the proceeds of their loan. The disbursement of the loan, however is
subject to the annotation of our mortgage lien on the said property and final
verification that said title is free from any other lien or encumbrance other
than that of your company and IBA Finance Corporation.
In order to register the mortgage, please entrust to us the owners
duplicate copy of TCT No. 3475, current tax declaration, realty tax receipts
for the current year and other documents necessary to affect annotation
Upon registration of our mortgage, we undertake to remit directly
to you or your authorized representative the amount equivalent to the
Borrowers outstanding indebtedness to Premiere Bank as duly certified by your
goodselves provided such an amount shall not exceed PESOS: SIX MILLION ONLY
(P6,000,000.00) and any amount in excess of the aforestated shall be for the
account of the borrowers. It is understood that upon receipt of payment, you
will release to us the corresponding cancellation of your mortgage within five
(5) banking days therefrom.
If the foregoing terms and conditions are acceptable to you, please
affix your signature provided below and furnish us a copy of the Statement of
Account of said borrowers.
On October 12, 1995,
Premiere Bank sent a letter-reply7 to
Iba-Finance, informing the latter of its refusal to turn over the requested
documents on the ground that Arizona
had existing unpaid loan obligations and that it was the banks policy to
require full payment of all outstanding loan obligations prior to the release
of mortgage documents. Thereafter, Premiere Bank issued to Iba-Finance a Final
Statement of Account8 showing Arizonas total loan
indebtedness. On October 19, 1995,
Panacor and Arizona executed in
favor of Iba-Finance a promissory note in the amount of 7.5 million.
Thereafter, Iba-Finance paid to Premiere Bank the amount of P6,235,754.79
representing the full outstanding loan account of Arizona.
Despite such payment, Premiere Bank still refused to release the requested
mortgage documents specifically, the owners duplicate copy of TCT No. T-3475.9 cralawred
On November 2, 1995,
Panacor requested Iba-Finance for the immediate approval and release of the
remaining P2.5 million loan to meet the required monthly purchases from
Colgate. Iba-Finance explained however, that the processing of the P2.5 million
loan application was conditioned, among others, on the submission of the
owners duplicate copy of TCT No. 3475 and the cancellation by Premiere Bank of
Occasioned by Premiere Banks
adamant refusal to release the mortgage cancellation document, Panacor failed
to generate the required capital to meet its distribution and sales targets. On
December 7, 1995, Colgate
informed Panacor of its decision to terminate their distribution agreement. cra
On March 13, 1996,
Panacor and Arizona filed a
complaint for specific performance and damages against Premiere Bank before the
Court of Pasig
City, docketed as Civil Case No.
On June 11, 1996,
Iba-Finance filed a complaint-in-intervention praying that judgment be rendered
ordering Premiere Bank to pay damages in its favor.
On May 26, 1998,
the trial court rendered a decision in favor of Panacor and Iba-Finance, the
decretal portion of which reads:chanroblesvirtua1awlibrary
WHEREFORE, judgment is hereby rendered in favor of the plaintiff
Panacor Marketing Corporation and against the defendant Premiere Bank, ordering
the latter to pay the former the following sums, namely:
1) P4,520,000.00 in addition to legal
interest from the time of filing of the complaint until full payment;
2) P1,000,000.00 as and for exemplary
3) P100,000.00 as and for reasonable
attorneys fees; andcralawlibrary
4) Costs of suit.
Similarly, judgment is hereby rendered in favor of
plaintiff-in-intervention IBA-Finance Corporation as against defendant Premiere
bank, as follows, namely:chanroblesvirtua1awlibrary
1) Ordering defendant Premiere Bank to
release to plaintiff-intervenor IBA-Finance Corporation the owners duplicate
copy of Transfer Certificate of Title No. 3475 registered in the name of
Arizona Haulers, Inc. including the deed of cancellation of the mortgage
2) Ordering the defendant Premiere Bank to
pay to Intervenor IBA-Finance, the following sums, to wit:chanroblesvirtua1awlibrary
3) P1,000,000.00 as and by way of exemplary
4) P100,000.00 as and for reasonable
attorneys fees; andcralawlibrary
5) Costs of suit.cralawlibrary
For lack of sufficient legal and factual basis, the counterclaim of
defendant Premiere Bank is DISMISSED.
Premiere Bank appealed to the Court of Appeals contending that
the trial court erred in finding, inter
alia, that it had maliciously downgraded the credit-line of Panacor from
P4.1 million to P2.7 million.
In the meantime, a compromise agreement was entered into between
Iba-Finance and Premiere Bank whereby the latter agreed to return without
interest the amount of P6,235,754.79 which Iba-Finance earlier remitted to
Premiere Bank to pay off the unpaid loans of Arizona. On March
11, 1999, the compromise agreement was approved.
On June 18, 2003,
a decision was rendered by the Court of Appeals which affirmed with
modification the decision of the trial court, the dispositive portion of which
WHEREFORE, premises considered, the present appeal is hereby
DISMISSED, and the decision appealed from in Civil Case No. 65577 is hereby
AFFIRMED with MODIFICATION in that the award of exemplary damages in favor of
the appellees is hereby reduced to P500,000.00. Needless to add, in view of the
Compromise Agreement plaintiff-intervenor IBA-Finance and defendant-appellant
PREMIERE between plaintiff-intervenor IBA-Finance and defendant-appellant PREMIERE
as approved by this Court per Resolution dated March 11, 1999, Our dispositive
of the present appeal is only with respect to the liability of appellant
PREMIERE to the plaintiff-appellees.
With costs against the defendant-appellant.
SO ORDERED.10 cralawred
Hence the present Petition for Review , which raises the following
WHETHER OR NOT THE DECISION OF HONORABLE COURT OF APPEALS EXCEEDED
AND WENT BEYOND THE FACTS, THE ISSUES AND EVIDENCE PRESENTED IN THE APPEAL
TAKING INTO CONSIDERATION THE ARGUMENT OF PETITIONER BANK AND ADVENT OF THE
DULY APPROVED COMPROMISE AGREEMENT BETWEEN THE PETITIONER BANK AND IBA FINANCE
WHETHER OR NOT THE ISSUES THAT SHOULD HAVE BEEN RESOLVED BY THE
HONORABLE COURT OF APPEALS, BY REASON OF THE EXISTENCE OF THE COMPROMISE
AGREEMENT, IS LIMITED TO THE ISSUE OF ALLEGED BAD FAITH OF PETITIONER BANK IN
THE DOWNGRADING OF THE LOAN AND SHOULD NOT INCLUDE THE RENDITION OF AN ADVERSE
PRONOUNCEMENT TO AN ALREADY FAIT ACCOMPLI- ISSUE ON THE REFUSAL OF THE BANK TO
RECOGNIZE THE TAKE-OUT OF THE LOAN AND THE RELEASE OF TCT NO. 3475.
WHETHER OR NOT PETITIONER ACTED IN BAD FAITH IN THE DOWNGRADING OF
THE LOAN OF RESPONDENTS TO SUPPORT AN AWARD OF ACTUAL AND EXEMPLARY DAMAGES NOW
REDUCED TO P500,000.00.
WHETHER OR NOT THERE IS BASIS OR COMPETENT PIECE OF EVIDENCE
PRESENTED DURING THE TRIAL TO SUPPORT AN AWARD OF ACTUAL DAMAGES OF
Firstly, Premiere Bank argues that considering the compromise
agreement it entered with Iba-Finance, the Court of Appeals should have ruled
only on the issue of its alleged bad faith in downgrading Panacors credit
It further contends that the
Court of Appeals should have refrained from making any adverse pronouncement on
the refusal of Premiere Bank to recognize the take-out and its subsequent
failure to release the cancellation of the mortgage because they were rendered fait accompli by the compromise
We are not persuaded.
In a letter-agreement12 dated
October 5, 1995, Iba-Finance informed Premiere Bank of its approval of
Panacors loan application in the amount of P10 million to be secured by a real
estate mortgage over a parcel of land covered by TCT No. T-3475. It was agreed
that Premiere Bank shall entrust to Iba-Finance the owners duplicate copy of
TCT No. T-3475 in order to register its mortgage, after which Iba-Finance shall
pay off Arizonas outstanding
indebtedness. Accordingly, Iba-Finance remitted P6,235,754.79 to Premiere Bank
on the understanding that said amount represented the full payment of Arizonas
loan obligations. Despite performance by Iba-Finance of its end of the bargain,
Premiere Bank refused to deliver the mortgage document. As a consequence,
Iba-Finance failed to release the remaining P2.5 million loan it earlier
pledged to Panacor, which finally led to the revocation of its distributorship
agreement with Colgate.
Undeniably, the not-so-forthright conduct of Premiere Bank in its
dealings with respondent corporations caused damage to Panacor and
It is error for Premiere
Bank to assume that the compromise agreement it entered with Iba-Finance
extinguished all direct and collateral incidents to the aborted take-out such
that it also cancelled its obligations to Panacor.The unjustified refusal by Premiere Bank to release the mortgage
document prompted Iba-Finance to withhold the release of the P2.5 million
earmarked for Panacor which eventually terminated the distributorship
Both Iba-Finance and Panacor,
which are two separate and distinct juridical entities, suffered damages due to
the fault of Premiere Bank.
should be held liable to each of them.
While the compromise agreement may have resulted in the
satisfaction of Iba-Finances legal claims, Premiere Banks liability to
Panacor remains. We agree with the Court of Appeals that the present appeal is
only with respect to the liability of appellant Premiere Bank to the
plaintiffs-appellees (Panacor and Arizona)13 taking into account the compromise agreement.
For the foregoing reasons, we find that the Court of Appeals did
not err in discussing in the assailed decision the abortive take-out and the
refusal by Premiere Bank to release the cancellation of the mortgage document.
Secondly, Premiere Bank asserts that it acted in good faith when
it downgraded the credit line of Panacor from P4.1 million to P2.7 million. It
cites the decision of the trial court which, albeit inconsistent with its final
disposition, expressly recognized that the downgrading of the loan was not the
proximate cause of the damages suffered by Respondents.
Under the Credit Line Agreement14 dated September 1995, Premiere Bank agreed to extend a loan of P4.1 million to Arizona
to be used by its affiliate, Panacor, in its operations. Eventually, Premiere
approved in favor of Arizona a
loan equivalent to P6.1 million, P3.4 million of which was allotted for the
payment of Arizonas existing
loan obligations and P2.7 million as credit line of Panacor. Since only P2.7
million was made available to Panacor, instead of P4.1 million as previously
approved, Panacor applied for a P2.5 loan from Iba-Finance, which, as earlier
mentioned, was not released because of Premiere Banks refusal to issue the
It is clear that Premiere Bank deviated from the terms of the
credit line agreement when it unilaterally and arbitrarily downgraded the
credit line of Panacor from P4.1 million to P2.7 million. Having entered into a
well-defined contractual relationship, it is imperative that the parties should
honor and adhere to their respective rights and obligations thereunder. Law and
jurisprudence dictate that obligations arising from contracts have the force of
law between the contracting parties and should be complied with in good faith.15 The appellate court correctly observed, and we agree, that:chanroblesvirtua1awlibrary
Appellants actuations, considering the actual knowledge of its
officers of the tight financial situation of appellee PANACOR brought about
primarily by the appellant banks considerable reduction of the credit line
portion of the loan, in relation to the bail-out efforts of IBA Finance,
whose payment of the outstanding loan account of appellee ARIZONA with
appellant was readily accepted by the appellant, were truly marked by bad faith
and lack of due regard to the urgency of its compliance by immediately
releasing the mortgage cancellation document and delivery of the title to IBA
Finance. That time is of the essence in the requested release of the mortgage
cancellation and delivery of the subject title was only too well-known to
appellant, having only belatedly invoked the cross-default provision in the
Real Estate Mortgage executed in its favor by appellee ARIZONA to resist the
plain valid and just demand of IBA Finance for such compliance by appellant
Premiere Bank cannot justify its arbitrary act of downgrading the
credit line on the alleged finding by its project analyst that the
distributorship was not financially feasible. Notwithstanding the alleged
forewarning, Premiere Bank still extended Arizona
the loan of P6.1 million, albeit in contravention of the credit line agreement.
This indubitably indicates that Premiere Bank had deliberately and voluntarily
granted the said loan despite its claim that the distributorship contract was
Neither can Premiere Bank rely on the puerile excuse that it was
the banks policy not to release the mortgage cancellation prior to the
settlement of outstanding loan obligations. Needless to say, the Final
Statement of Account dated October
17, 1995 showing in no uncertain terms Arizonas
outstanding indebtedness, which was subsequently paid by Iba-Finance, was the
full payment of Arizonas loan
obligations. Equity demands that a party cannot disown it previous declaration
to the prejudice of the other party who relied reasonably and justifiably on
Thirdly, Premiere Bank avers that the appellate courts reliance
on the credit line agreement as the basis of bad faith on its part was
inadmissible or self-serving for not being duly notarized, being unsigned in
all of its left margins, and undated. According to Premiere Bank, the
irregularities in the execution of the credit line agreement bolsters the
theory that the same was the product of manipulation orchestrated by respondent
corporations through undue influence and pressure exerted by its officers on
Premiere Banks posture deserves scant consideration. As found by
the lower court, there are sufficient indicia that demonstrate that the alleged
unjust pressure exerted on Martillano was more imagined than real. In her
testimony, Martillano claims that she was persuaded and coaxed by Caday of
Iba-Finance and Panaligan of Panacor to sign the letter. It was she who
provided Iba-Finance with the Final Statement of Account and accepted its
payment without objection or qualification. These acts show that she was vested
by Premiere Bank with sufficient authority to enter into the said transactions.
If a private corporation intentionally or negligently clothes its
officers or agents with apparent power to perform acts for it, the corporation
will be estopped to deny that the apparent authority is real as to innocent
third persons dealing in good faith with such officers or agents.17 As testified to by Martillano, after she received a copy of the credit line
agreement and affixed her signature in conformity thereto, she forwarded the
same to the legal department of the Bank at its Head Office.
Despite its knowledge, Premiere Bank failed
to disaffirm the contract. When the officers or agents of a corporation exceed
their powers in entering into contracts or doing other acts, the corporation,
when it has knowledge thereof, must promptly disaffirm the contract or act and
allow the other party or third persons to act in the belief that it was
authorized or has been ratified. If it acquiesces, with knowledge of the facts,
or fails to disaffirm, ratification will be implied or else it will be estopped
to deny ratification.18 cralawred
Finally, Premiere Bank argues that the finding by the appellate
court that it was liable for actual damages in the amount of P4,520,000.00 is
without basis. It contends that the evidence presented by Panacor in support of
its claim for actual damages are not official receipts but self-serving
To justify an award for actual damages, there must be competent
proof of the actual amount of loss. Credence can be given only to claims, which
are duly supported by receipts.19 The
burden of proof is on the party who will be defeated if no evidence is
presented on either side. He must establish his case by a preponderance of
evidence which means that the evidence, as a whole, adduced by one side is
superior to that of the other. In other words, damages cannot be presumed and
courts, in making an award, must point out specific facts that can afford a
basis for measuring whatever compensatory or actual damages are borne.
Under Article 2199 of the Civil Code, actual or compensatory
damages are those awarded in satisfaction of, or in recompense for, loss or
injury sustained. They proceed from a sense of natural justice and are designed
to repair the wrong that has been done, to compensate for the injury inflicted
and not to impose a penalty.
In the instant case, the actual damages were proven through the
sole testimony of Themistocles Ruguero, the vice president for administration
In his testimony, the
witness affirmed that Panacor incurred losses, specifically, in terms of
training and seminars, leasehold acquisition, procurement of vehicles and
office equipment without, however, adducing receipts to substantiate the same.
The documentary evidence marked as exhibit W, which was an ordinary private
writing allegedly itemizing the capital expenditures and losses from the failed
operation of Panacor, was not testified to by any witness to ascertain the
veracity of its contents. Although the lower court fixed the sum of
P4,520,000.00 as the total expenditures incurred by Panacor, it failed to show
how and in what manner the same were substantiated by the claimant with
reasonable certainty. Hence, the claim for actual damages should be admitted
with extreme caution since it is only based on bare assertion without support
from independent evidence. Premieres failure to prove actual expenditure
consequently conduces to a failure of its claim. In determining actual damages,
the court cannot rely on mere assertions, speculations, conjectures or
guesswork but must depend on competent proof and on the best evidence
obtainable regarding the actual amount of loss.20 cralawred
Even if not recoverable as compensatory damages, Panacor may
still be awarded damages in the concept of temperate or moderate damages. When
the court finds that some pecuniary loss has been suffered but the amount
cannot, from the nature of the case, be proved with certainty, temperate
damages may be recovered. Temperate damages may be allowed in cases where from
the nature of the case, definite proof of pecuniary loss cannot be adduced,
although the court is convinced that the aggrieved party suffered some pecuniary
The Code Commission, in explaining the concept of temperate
damages under Article 2224, makes the following comment:21 cralawred
In some States of the American Union, temperate damages are
allowed. There are cases where from the nature of the case, definite proof of
pecuniary loss cannot be offered, although the court is convinced that there
has been such loss. For instance, injury to ones commercial credit or to the
goodwill of a business firm is often hard to show with certainty in terms of
money. Should damages be denied for that reason? The judge should be empowered
to calculate moderate damages in such cases, rather than that the plaintiff
should suffer, without redress from the defendant's wrongful act.
It is obvious that the wrongful acts of Premiere Bank adversely
affected, in one way or another, the commercial credit22 of Panacor, greatly contributed to, if not, decisively caused the premature
stoppage of its business operations and the consequent loss of business
opportunity. Since these losses are not susceptible to pecuniary estimation,
temperate damages may be awarded.
Article 2216 of the Civil Code:chanroblesvirtua1awlibrary
No proof of pecuniary loss is necessary in order that moral,
nominal, temperate, liquidated or exemplary damages may be adjudicated. The
assessment of such damages, except liquidated ones, is left to the discretion
of the Court, according to the circumstances of each case.
Under the circumstances, the sum of P200,000.00 as temperate
damages is reasonable.
WHEREFORE, the petition is DENIED. The Decision dated June
18, 2003 of the Court of Appeals in CA-G.R. CV No. 60750, ordering Premiere
Bank to pay Panacor Marketing Corporation P500,000.00 as exemplary damages,
P100,000.00 as attorneys fees, and costs, is AFFIRMED, with the MODIFICATION
that the award of P4,520,000.00 as actual damages is DELETED for lack of
factual basis. In lieu thereof, Premiere Bank is ordered to pay Panacor
P200,000.00 as temperate damages.
Davide, Jr., C.J.,
(Chairman), Panganiban, Carpio, and Azcuna, JJ., concur.
Decision penned by Justice Martin S. Villarama, Jr., concurred in by Justices
Eubulo G. Verzola and Mario L. Guaria, Third Division, Court of Appeals.
Decision of Judge Alfredo C. Flores, RTC-Br. 167, City of Pasig.
Arizona and Panacor are owned and managed by Pedro P. Panaligan who is
president of both companies.
Original Records, p. 340.
Original Records, p. 17.
Intestate estate of the late Ricardo P. Presbiterio, Sr. v
. Court of
Appeals, G.R. No. 102432, 21 January 1993, 217 SCRA 372.
Yao Ka Sin Trading v
. Court of Appeals,
G.R. No. 53820, 15 June 1992, 209 SCRA 763, 783.
Commentaries and Jurisprudence on the Commercial Laws of the Philippines, 1996
Edition, Volume 3, p. 233, citing Fletcher, 814-815, by Aguedo F. Agbayani.
. Bank of America, G.R. No. L-25414, 30 July 1971, 40 SCRA 144,
Radio Communications of the Philippines, Inc. (RCPI) v. Yabut Freight Express
Inc., et al., G.R. No. L-55194, 26 February 1981, 103 SCRA 359.
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