PNB v. RBL Enterprises Inc : 149569 : May 28, 2004 : J. Panganiban :
First Division : Decision
[G.R. NO. 149569 : May 28, 2004]
PHILIPPINE NATIONAL BANK, Petitioner, v. RBL ENTERPRISES, INC.; RAMON B. LACSON SR.; and
Spouses EDWARDO and HERMINIA LEDESMA, Respondents.
D E C I S I O N
Having released fifty percent of the loan proceeds on the basis
of the signed loan and mortgage contracts, petitioner can no longer require the
borrowers to secure the lessors conformity to the Mortgage Contract as a
condition precedent to the release of the loan balance.The conformity of the lessor was not
necessary to protect the banks interest, because respondents were
unquestionably the absolute owners of the mortgaged property.Furthermore, the registration of the mortgage
created a real right to the properties which, in subsequent transfers by the
mortgagor, the transferees are legally bound to respect.
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to set aside the August 22, 2001
Decision2 of the Court of Appeals (CA) in CA-GR CV No. 49749.The dispositive portion of the Decision reads
WHEREFORE, premises considered[,] the judgment appealed
from is hereby AFFIRMED, with x x x MODIFICATION as follows:chanroblesvirtua1awlibrary
1.The amount of actual damages and losses is
P985,722.15 to merely P380,713.55 with legal
interest from the date of the filing of the complaint.The interest payable on the loan is ordered
reduced by using the agreed interest rate of 18% per annum in the
2.The amount of moral damages is reduced from
P100,000.00 to P50,000.00;chanroblesvirtuallawlibrary
3.The amount of exemplary damages is reduced
P50,000.00 to P30,000.00; andcralawlibrary
4.The award of attorneys fees is reduced
P200,000.00 to P50,000.00.3
The facts of the case are narrated in the assailed Decision of
the CA, as follows:chanroblesvirtua1awlibrary
1.On April 28, 1993, [respondents]
instituted an action against [Petitioner] PNB and the Provincial Sheriff of
Negros Occidental alleging among others, the following:
(a) Sometime in 1987, [respondents] opened a
prawn hatchery in San Enrique, Negros Occidental, and for this purpose, leased
from Nelly Bedrejo a parcel of land where the operations were conducted;
(b) In order to increase productions and
improve the hatchery facilities, [respondents] applied for and was approved a
P2,000,000.00, by [Petitioner] PNB.To secure its payment, [respondents] executed
in favor of PNB, a real estate mortgage over two (2) parcels of land, located
at Bago City,
Negros Occidental, covered by Transfer Certificate of Title Nos. T-13005 and
T-12642 in the names of [respondents], and another real [estate] and chattel
mortgage over the buildings, culture tanks and other hatchery facilities
located in the leased property of Nelly Bedrejo;
(c) PNB partially released to [respondents] on
several dates, the total sum of
P1,000,000.00 less the advance
interests, which amount [respondents] used for introducing improvements on the
leased property where the hatchery business was located.
(d) During the mid-part of the construction of
the improvements, PNB refused to release the balance of
allegedly because [respondents] failed to comply with the banks requirement
that Nelly Bedrejo should execute an undertaking or a lessors conformity
provided in Real Estate and Chattel Mortgage contract dated August 3,
1989, which states, par. 9.07. It is a condition of this mortgage that
while the obligations remained unpaid, the acquisition by the lessor of the
permanent improvements covered by this Real Estate Mortgage as provided for in
the covering Lease Contract, shall be subject to this mortgage.For this purpose, the mortgagor hereby
undertakes to secure the lessors conformity hereto.
(e) For said alleged failure of [respondents]
to comply with the additional requirement and the demand of PNB to pay the
released amount of
P1,000,000.00, PNB foreclosed the mortgaged
properties, to the detriment of [respondents].
(f) Due to the non-release of the remaining
balance of the loan applied for and approved, the productions-operations of the
business were disrupted causing losses to [respondents], and thereafter, to the
closure of the business.
2.On June 29, 1990,
[Petitioner] PNB filed its Answer with Counterclaim alleging that the lessors
conformity was not an additional requirement but was already part of the terms
and conditions contained in the Real Estate and Chattel Mortgage dated
August 3, 1989, executed between [respondents] and [petitioner]; and that the
release of the balance of the loan was conditioned on the compliance and
submission by the [respondents] of the required lessors conformity.
3.On November 8, 1993, a
writ of preliminary injunction was issued by the court a quo prohibiting
PNB and the Provincial Sheriff of Negros Occidental from implementing the
foreclosure proceedings including the auction sale of the properties of the
[respondents] subject matter of the real [estate] and chattel mortgages.4 cralawred
The Regional Trial Court (RTC) ruled that Philippine National
Bank (PNB) had breached its obligation under the Contract of Loan and should
therefore be held liable for the consequential damages suffered by
respondents.The trial court held that
PNBs refusal to release the balance of the loan was unjustified for the
following reasons: 1) the banks partial release of the loan of respondents had
estopped it from requiring them to secure the lessors signature on the Real
Estate and Chattel Mortgage Contract; 2) Nelly Bedrejo, the lessor, had no
interest in the property and was not in any manner connected with respondents
business; thus, the fulfillment of the condition was legally impossible; and 3)
the interests of PNB were amply protected, as the loan had overly been secured
by collateralswith a total appraised
The RTC further observed that while the loan would mature in
three years, the lease contract between Bedrejo and respondents would expire in
ten years.According to a provision in
the Contract, upon its expiration, all improvements found on the leased
premises would belong to the lessor.Thus, in the event of nonpayment of the loan at its maturity, PNB could
still foreclose on those improvements, the subject of the chattel mortgage.
Ruling of the Court of Appeals
Affirming the lower court, the CA held that Nelly Bedrejo, who
was not a party to the Mortgage Contract, could not be compelled to affix her
signature thereto.The appellate court
further ruled that the registration of the mortgage not only revealed PNBs
intention to give full force and effect to the instrument but, more important,
gave the mortgagee ample security against subsequent owners of the chattels.
The CA, however, reduced the amount of actual damages for lack of
competent proof of the lost income and the unrealized profits of RBL, as well
as for the additional expenses and liabilities incurred by respondents as a
result of petitioners refusal to release the balance of the loan.Moral and exemplary damages as well as
attorneys fees were likewise lessened.
Hence, this Petition.5
Petitioner raises the following alleged errors for our
Whether or not the
Court of Appeals committed serious error when it held that Petitioner PNB has
no legal basis to require respondents to secure the conformity of the lessor
and owner of the property where their hatchery business is being conducted
notwithstanding that respondents obligated themselves in no uncertain terms to
secure such conformity pursuant to par. 9.07 of the Real Estate and Chattel
Mortgage and considering further that respondents authority to mortgage the
lessors property and leasehold rights are annotated [on] the titles of the
Whether or not the
Court of Appeals erred in holding Petitioner PNB liable for actual, moral and
exemplary damages as well as attorneys fees for the non-release of the balance
of the loan applied by respondents even though there is no evidence that such
non-release was attended by malice or bad faith.6 cralawred
Simply put, the issues are as follows: 1) whether the non-release
of the balance of the loan by PNB is justified; and 2) whether it is liable for
actual, moral and exemplary damages as well as attorneys fees.
The Courts Ruling
The Petition is partly meritorious.
Was PNBs Non-Release of the
Petitioner maintains that the lessors signature in the conforme
portion of the Real Estate and Chattel Mortgage Contract was a condition
precedent to the release of the balance of the loan to respondents. Petitioner invokes paragraph 9.07 of the
Contract as legal basis for insisting upon respondents fulfillment of the
We are not persuaded.If
the parties truly intended to suspend the release of the
balance of the loan until the lessors conformity to the Mortgage Contract
would have been obtained, such condition should have been plainly stipulated
either in that Contract or in the Credit Agreement.The tenor of the language used in paragraph.
9.07, as well as its position relative to the whole Contract, negated the
supposed intention to make the release of the loan subject to the fulfillment
of the clause. From a mere reading thereof, respondents could not reasonably be
expected to know that it was petitioners unilateral intention to suspend the
release of the P1,000,000 balance until the lessors conformity to the
Mortgage Contract would have been obtained.
Respondents had complied with all the requirements set forth in
the recommendation and approval sheet forwarded by petitioners main office to
the Bacolod branch for
implementation; and the Credit Agreement had been executed thereafter.Naturally, respondents were led to believe
and to expect the full release of their approved loan accommodation.This belief was bolstered by the initial
release of the first
P1,000,000 portion of the loan.
We agree with the RTC in its ruling on this point:chanroblesvirtua1awlibrary
x x x .In the instant case,
there is a clear and categorical showing that when the parties have finally
executed the contract of loan and the Real Estate and Chattel Mortgage
Contract, the applicantcomplied with
the terms and conditions imposed by defendant bank on the recommendation and
approval sheet, hence, defendant bank waived its right to further require the
plaintiffs other conditions not specified in the previous agreement.Should there [appear] any obscurity after
such execution, the same should not favor the party who caused such obscurity.
Therefore, such obscurity must be construed against the party who drew up the
contract.Art. 1377 of the Civil Code
applies x x x [even] with greater force [to] this type of contract where the
contract is already prepared by a big concern and [the] other party merely
adheres to it.7 (Citations omitted) chanroblesvirtuallawlibrary
Conditions precedent are not favored.Unless impelled by plain and unambiguous
language or by necessary implication, courts will not construe a stipulation as
laden with such burden, particularly when that stipulation would result in a
forfeiture or in inequitable consequences.8 cralawred
Nowhere did PNB explicitly state that the release of the second
half of the loan accommodation was subject to the mortgagors procurement of
the lessors conformity to the Mortgage Contract.Absent such a condition, the efficacy of the
Credit Agreement stood, and petitioner was obligated to release the balance of
the loan.Its refusal to do so
constituted a breach of its reciprocal obligation under the Loan Agreement.
Flimsy was the insistence of petitioner that the lessor should be
compelled to sign the Mortgage Contract, since she was allegedly a beneficiary
thereof.The chattel mortgage was a mere
accessory to the contract of loan executed between PNB and RBL.The latter was undisputably the absolute
owner of the properties covered by the chattel mortgage.Clearly, the lessor was never a party to
either the loan or the Mortgage Contract.
The Real Nature of a Mortgage
The records show that all the real estate and chattel mortgages were
registered with the Register of Deeds of Bago City, Negros Occidental, and
annotated at the back of the mortgaged titles.Thus, petitioner had ample security to protect its interest.As correctly held by the appellate court, the
lessors nonconformity to the Mortgage Contract would not cause petitioner any
undue prejudice or disadvantage, because the registration and the annotation
were considered sufficient notice to third parties that the property was
subject to an encumbrance.9 cralawred
Article 2126 of the Civil Code describes the real nature of a
mortgage: itis a real right
following the property, such that in subsequent transfers by the mortgagor, the
transferee must respect the mortgage.A
registered mortgage lien is considered inseparable from the property inasmuch
as it is a right in rem.10 The mortgage creates a real right or a lien which, after being recorded,
follows the chattel wherever it goes.Under Article 2129 of the same Code, the mortgage on the property may
still be foreclosed despite the transfer.
Indeed, even if the mortgaged property is in the possession of
the debtor, the creditor is still protected.To protect the latter from the formers possible disposal of the
property, the chattel mortgage is made effective against third persons by the
process of registration.
PNB violated the Loan Agreement when it refused to release the
balance.As regards the partial release
of that amount, over which respondents executed three Promissory Notes, the
bank is deemed to have complied with its reciprocal obligation. The Promissory
Notes compelled them to pay that initial amount when it fell due.Their failure to pay any overdue
amortizations under those Promissory Notes rendered them liable thereunder.
Effect of Failure of Consideration
Since PNB failed to release the
P1,000,000 balance of the
loan, the Real Estate and Chattel Mortgage Contract became unenforceable to
that extent.Relevantly, we quote this
Courts ruling in Central Bank of the Philippines v. Court of Appeals:11 cralawred
The consideration of the accessory contract of real estate
mortgage is the same as that of the principal contract.For the debtor, the consideration of his
obligation to pay is the existence of a debt.Thus, in the accessory contract of real estate mortgage, the consideration
of the debtor in furnishing the mortgage is the existence of a valid, voidable,
or unenforceable debt.
x x x
[W]hen there is partial failure of consideration, the mortgage
becomes unenforceable to the extent of such failure.Where the indebtedness actually owing to the
holder of the mortgage is less than the sum named in the mortgage, the mortgage
cannot be enforced for more than the actual sum due.12
of Award for Damages
and Attorneys Fees
In reducing the award for actual damages from
to P380,713.55, the CA explained:chanroblesvirtua1awlibrary
The alleged projected cash flow and net income for the 5-year
period of operations were not substantiated by any other evidence to
sufficiently establish the attainability of the projection.No evidence was also introduced to show the
accounts payable of and other expenses incurred by [respondents].The court
a quo therefore, erred when it ruled that [respondents] incurred actual
damages and losses amounting to
P985,722.15 from 1990 to 1992, when no
evidence was presented to establish the same.
Compensatory or actual damages cannot be presumed.They cannot be allowed if there are no
specific facts, which should be a basis for measuring the amount.The trial court cannot rely on speculation as
to the fact and amount of damages, but must depend on actual proof that damage
had been suffered.The amount of loss
must not only be capable of proof but must actually be proven with reasonable
degree of certainty, premised upon competent proof or best evidence to support
his claim for actual damages.
At most, the court a quo
may declare as lost income and unrealized profits, the amount of
for the 3-year period of business operations from 1990 when PNB refused to
release the loans until closure of business in 1992, based on the highest
quarterly taxable income earned in 1989 in the amount of P28,754.80,
with a conservative and reasonable increase of 10% per year on the net
income.The amount of actual damages is
therefore, reduced from P985,722.15 to P380,713.55 x x x.13 cralawred
We see no reason to overturn these findings.True, indemnification for damages comprises
not only the loss that was actually suffered, but also the profits -- referred
to as compensatory damages -- that the obligee failed to obtain.To justify a grant of actual or compensatory
damages, however, it would be necessary to prove the amount of loss with a
reasonable degree of certainty, based upon competent proof and the best
evidence obtainable by the injured party.14 The quarterly income tax report of Respondent
RBL Enterprises, Inc., which was presented by petitioner and used by the
appellate court as basis for computing the average profits earned by
respondents in their business, provided a reasonable means for ascertaining
their claims for lost profits.Thus, we
believe that the assessment by the Court of Appeals was fair and just.
On the other hand, the award for moral and exemplary damages
should be deleted, because respondents failed to prove malice or bad faith on
the part of petitioner.
Moral damages are explicitly authorized in breaches of contract
when the defendant has acted fraudulently or in bad faith.15 Concededly, the bank was remiss in its obligation to release the balance of the
loan extended to respondents.Nothing in
the findings of the trial and the appellate courts, however, sufficiently
indicate a deliberate intent on the part of PNB to cause harm to respondents.
Exemplary damages, in turn, are intended to serve as an example
or a correction for the public good.Courts may award them if the defendant is found to have acted in a
wanton, fraudulent, reckless, oppressive, or malevolent manner.16 Given the above premises and the circumstances here obtaining, the exemplary
damages granted by the courts a quo cannot
Finally, the award of attorneys fees as part of the damages is
just and equitable under the circumstances.17 Such fees may be awarded when parties are compelled to litigate or to incur
expenses to protect their interest by reason of an unjustified act of the
opposing party.18 In the present case, petitioners refusal to release the balance of the loan
has compelled respondents to institute an action for injunction and damages in
order to protect their clear rights and interests.
Petition is PARTLY GRANTED.
The assailed Decision is hereby AFFIRMED,with the MODIFICATION
that the award of actual and exemplary damages is deleted.No costs.
Ynares-Santiago, and Carpio, JJ., concur.
Davide, Jr., C.J., (Chairman), on
Azcuna, J., took no part,
former PNB Chairman.
2 Id., pp.
24-34. Eleventh Division.Penned by
Justice Juan Q. Enriquez Jr. and concurred in by Justices Ruben T. Reyes
(Division chairman) and Presbitero J. Velasco Jr. (member).
3 CA Decision, pp. 9-10; rollo, pp.
4 Id., pp. 2-3
& 25-26.Italics in the original.
5 This case was deemed submitted for decision on July 9, 2002, upon this Courts actual receipt of
respondents Memorandum, which was signed by Atty. William N. Mirano.Petitioners Memorandum, signed by Attys.
Eligio P. Petilla and Jose Troy A. Almario, was received by the Court on June 28, 2002.
6 Petitioners Memorandum, p. 7; rollo,
p. 112.Original in upper case.
7 RTC Decision, pp. 1112; records, pp. 372373.
8 17A Am. Jur.2d, S 471, p. 491.
9 Isaguirre v. De
Lara, 332 SCRA 803, May
31, 2000; Asuncion v. Evangelista,
316 SCRA 848, October 13, 1999; Northern Motors, Inc. v. Coquia, 68 SCRA 374,
December 15, 1975; Ong Liong Tiak v. Luneta Motor Company, 66 Phil.
459, November 7, 1938.
10 Ganzon v. Inserto, 208 Phil. 630, July 25, 1983.
11 139 SCRA 46, October 3, 1985.
12 Id., p. 56,
per Makasiar, CJ.
13 CA Decision, p. 8; rollo, p. 31.Citations omitted.
16 Article 2232 of the Civil Code; Far East Bank and Trust Company v. Court
of Appeals, supra.
17 Article 2208 of the Civil Code.
18 Producers Bank of the Philippines
v. Court of Appeals, supra.
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