G. R. No. 159352 - April 14 ,2004
PREMIERE DEVELOPMENT BANK, Petitioner, vs. COURT OF APPEALS, PANACOR MARKETING CORPORATION and ARIZONA TRANSPORT CORPORATION, Respondents.
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
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
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
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 Arizonas mortgage. 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.
On March 13, 1996, Panacor and Arizona filed a complaint for specific performance and damages against Premiere Bank before the Regional Trial Court of Pasig City, docketed as Civil Case No. 65577.
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:
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 reads:
Hence the present petition for review, which raises the following issues:11
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 line. 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 agreement.
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 Iba-Finance. 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 agreement. Both Iba-Finance and Panacor, which are two separate and distinct juridical entities, suffered damages due to the fault of Premiere Bank. Hence, it 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 mortgage cancellation.
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:
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 not viable.
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 such declaration.
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 Martillano.
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
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 declarations.
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 of Panacor. 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
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 loss.
The Code Commission, in explaining the concept of temperate damages under Article 2224, makes the following comment:21
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:
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., Panganiban, Carpio, and Azcuna, JJ., concur.
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