July 2010 - Philippine Supreme Court Decisions/Resolutions
[G.R. No. 159097 : July 05, 2010]
METROPOLITAN BANK AND TRUST COMPANY, PETITIONER, VS. RURAL BANK OF GERONA, INC., RESPONDENT.
D E C I S I O N
RBG is a rural banking corporation organized under Philippine laws and located in Gerona, Tarlac. In the 1970s, the Central Bank and the RBG entered into an agreement providing that RBG shall facilitate the loan applications of farmers-borrowers under the Central Bank-International Bank for Reconstruction and Development's (IBRD's) 4th Rural Credit Project. The agreement required RBG to open a separate bank account where the IBRD loan proceeds shall be deposited. The RBG accordingly opened a special savings account with Metrobank's Tarlac Branch. As the depository bank of RBG, Metrobank was designated to receive the credit advice released by the Central Bank representing the proceeds of the IBRD loan of the farmers-borrowers; Metrobank, in turn, credited the proceeds to RBG's special savings account for the latter's release to the farmers-borrowers.
On September 27, 1978, the Central Bank released a credit advice in Metrobank's favor and accordingly credited Metrobank's demand deposit account in the amount of P178,652.00, for the account of RBG. The amount, which was credited to RBG's special savings account represented the approved loan application of farmer-borrower Dominador de Jesus. RBG withdrew the P178,652.00 from its account.
On the same date, the Central Bank approved the loan application of another farmer-borrower, Basilio Panopio, for P189,052.00, and credited the amount to Metrobank's demand deposit account. Metrobank, in turn, credited RBG's special savings account. Metrobank claims that the RBG also withdrew the entire credited amount from its account.
On October 3, 1978, the Central Bank approved Ponciano Lagman's loan application for P220,000.00. As with the two other IBRD loans, the amount was credited to Metrobank's demand deposit account, which amount Metrobank later credited in favor of RBG's special savings account. Of the P220,000.00, RBG only withdrew P75,375.00.
On November 3, 1978, more than a month after RBG had made the above withdrawals from its account with Metrobank, the Central Bank issued debit advices, reversing all the approved IBRD loans. The Central Bank implemented the reversal by debiting from Metrobank's demand deposit account the amount corresponding to all three IBRD loans.
Upon receipt of the November 3, 1978 debit advices, Metrobank, in turn, debited the following amounts from RBG's special savings account: P189,052.00, P115,000.00, and P8,000.41. Metrobank, however, claimed that these amounts were insufficient to cover all the credit advices that were reversed by the Central Bank. It demanded payment from RBG which could make partial payments. As of October 17, 1979, Metrobank claimed that RBG had an outstanding balance of P334,220.00. To collect this amount, it filed a complaint for collection of sum of money against RBG before the RTC, docketed as Civil Case No. 6028.
In its July 7, 1994 decision, the RTC ruled for Metrobank, finding that legal subrogation had ensued:
[Metrobank] had allowed releases of the amounts in the credit advices it credited in favor of [RBG's special savings account] which credit advices and deposits were under its supervision. Being faulted in these acts or omissions, the Central Bank [sic] debited these amounts against [Metrobank's] demand [deposit] reserve; thus[, Metrobank's] demand deposit reserves diminished correspondingly, [Metrobank as of this time,] suffers prejudice in which case legal subrogation has ensued.
It thus ordered RBG to pay Metrobank the sum of P334,200.00, plus interest at 14% per annum until the amount is fully paid.
On appeal, the CA noted that this was not a case of legal subrogation under Article 1302 of the Civil Code. Nevertheless, the CA recognized that Metrobank had a right to be reimbursed of the amount it had paid and failed to recover, as it suffered loss in an agreement that involved only the Central Bank and the RBG. It clarified, however, that a determination still had to be made on who should reimburse Metrobank. Noting that no evidence exists why the Central Bank reversed the credit advices it had previously confirmed, the CA declared that the Central Bank should be impleaded as a necessary party so it could shed light on the IBRD loan reversals. Thus, the CA set aside the RTC decision, and remanded the case to the trial court for further proceedings after the Central Bank is impleaded as a necessary party. After the CA denied its motion for reconsideration, Metrobank filed the present petition for review on certiorari.
Metrobank disagrees with the CA's ruling to implead the Central Bank as a necessary party and to remand the case to the RTC for further proceedings. It argues that the inclusion of the Central Bank as party to the case is unnecessary since RBG has already admitted its liability for the amount Metrobank failed to recover. In two letters, RBG's President/Manager made proposals to Metrobank for the repayment of the amounts involved. Even assuming that no legal subrogation took place, Metrobank claims that RBG's letters more than sufficiently proved its liability.
Metrobank additionally contends that a remand of the case would unduly delay the proceedings. The transactions involved in this case took place in 1978, and the case was commenced before the RTC more than 20 years ago. The RTC resolved the complaint for collection in 1994, while the CA decided the appeal in 2002. To implead Central Bank, as a necessary party in the case, means a return to square one and the restart of the entire proceedings.
The petition is impressed with merit.
A basic first step in resolving this case is to determine who the liable parties are on the IBRD loans that the Central Bank extended. The Terms and Conditions of the IBRD 4th Rural Credit Project (Project Terms and Conditions) executed by the Central Bank and the RBG shows that the farmers-borrowers to whom credits have been extended, are primarily liable for the payment of the borrowed amounts. The loans were extended through the RBG which also took care of the collection and of the remittance of the collection to the Central Bank. RBG, however, was not a mere conduit and collector. While the farmers-borrowers were the principal debtors, RBG assumed liability under the Project Terms and Conditions by solidarily binding itself with the principal debtors to fulfill the obligation.
How RBG profited from the transaction is not clear from the records and is not part of the issues before us, but if it delays in remitting the amounts due, the Central Bank imposed a 14% per annum penalty rate on RBG until the amount is actually remitted. The Central Bank was further authorized to deduct the amount due from RBG's demand deposit reserve should the latter become delinquent in payment. On these points, paragraphs 5 and 6 of the Project Terms and Conditions read:
5. Collection received representing repayments of borrowers shall be immediately remitted to the Central Bank, otherwise[,] the Rural Bank/SLA shall be charged a penalty of fourteen [percent] (14%) p.a. until date of remittance.
6. In case the rural bank becomes delinquent in the payment of amortizations due[,] the Central Bank is authorized to deduct the corresponding amount from the rural bank's demand deposit reserve at any time to cover any delinquency. [Emphasis supplied.]
Based on these arrangements, the Central Bank's immediate recourse, therefore should have been against the farmers-borrowers and the RBG; thus, it erred when it deducted the amounts covered by the debit advices from Metrobank's demand deposit account. Under the Project Terms and Conditions, Metrobank had no responsibility over the proceeds of the IBRD loans other than serving as a conduit for their transfer from the Central Bank to the RBG once credit advice has been issued. Thus, we agree with the CA's conclusion that the agreement governed only the parties involved - the Central Bank and the RBG. Metrobank was simply an outsider to the agreement. Our disagreement with the appellate court is in its conclusion that no legal subrogation took place; the present case, in fact, exemplifies the circumstance contemplated under paragraph 2, of Article 1302 of the Civil Code which provides:
Art. 1302. It is presumed that there is legal subrogation:
(1) When a creditor pays another creditor who is preferred, even without the debtor's knowledge;
(2) When a third person, not interested in the obligation, pays with the express or tacit approval of the debtor;
(3) When, even without the knowledge of the debtor, a person interested in the fulfillment of the obligation pays, without prejudice to the effects of confusion as to the latter's share. [Emphasis supplied.]
As discussed, Metrobank was a third party to the Central Bank-RBG agreement, had no interest except as a conduit, and was not legally answerable for the IBRD loans. Despite this, it was Metrobank's demand deposit account, instead of RBG's, which the Central Bank proceeded against, on the assumption perhaps that this was the most convenient means of recovering the cancelled loans. That Metrobank's payment was involuntarily made does not change the reality that it was Metrobank which effectively answered for RBG's obligations.
Was there express or tacit approval by RBG of the payment enforced against Metrobank? After Metrobank received the Central Bank's debit advices in November 1978, it (Metrobank) accordingly debited the amounts it could from RBG's special savings account without any objection from RBG. RBG's President and Manager, Dr. Aquiles Abellar, even wrote Metrobank, on August 14, 1979, with proposals regarding possible means of settling the amounts debited by Central Bank from Metrobank's demand deposit account. These instances are all indicative of RBG's approval of Metrobank's payment of the IBRD loans. That RBG's tacit approval came after payment had been made does not completely negate the legal subrogation that had taken place.
Article 1303 of the Civil Code states that subrogation transfers to the person subrogated the credit with all the rights thereto appertaining, either against the debtor or against third persons. As the entity against which the collection was enforced, Metrobank was subrogated to the rights of Central Bank and has a cause of action to recover from RBG the amounts it paid to the Central Bank, plus 14% per annum interest.
Under this situation, impleading the Central Bank as a party is completely unnecessary. We note that the CA erroneously believed that the Central Bank's presence is necessary "in order x x x to shed light on the matter of reversals made by it concerning the loan applications of the end users and to have a complete determination or settlement of the claim." In so far as Metrobank is concerned, however, the Central Bank's presence and the reasons for its reversals of the IBRD loans are immaterial after subrogation has taken place; Metrobank's interest is simply to collect the amounts it paid the Central Bank. Whatever cause of action RBG may have against the Central Bank for the unexplained reversals and any undue deductions is for RBG to ventilate as a third-party claim; if it has not done so at this point, then the matter should be dealt with in a separate case that should not in any way further delay the disposition of the present case that had been pending before the courts since 1980.
While we would like to fully and finally resolve this case, certain factual matters prevent us from doing so. Metrobank contends in its petition that it credited RBG's special savings account with three amounts corresponding to the three credit advices issued by the Central Bank: the P178,652.00 for Dominador de Jesus; the P189,052.00 for Basilio Panopio; and the P220,000.00 for Ponciano Lagman. Metrobank claims that all of the three credit advices were subsequently reversed by the Central Bank, evidenced by three debit advices. The records, however, contained only the credit and debit advices for the amounts set aside for de Jesus and Lagman; nothing in the findings of fact by the RTC and the CA referred to the amount set aside for Panopio.
Thus, what were sufficiently proven as credited and later on debited from Metrobank's demand deposit account were only the amounts of P178,652.00 and P189,052.00. With these amounts combined, RBG's liability would amount to P398,652.00 - the same amount RBG acknowledged as due to Metrobank in its August 14, 1979 letter. Significantly, Metrobank likewise quoted this amount in its July 11, 1979 and July 26, 1979 demand letters to RBG and its Statement of Account dated December 23, 1982.
RBG asserts that it made partial payments amounting to P145,197.40, but neither the RTC nor the CA made a conclusive finding as to the accuracy of this claim. Although Metrobank admitted that RBG indeed made partial payments, it never mentioned the actual amount paid; neither did it state that the P145,197.40 was part of the P312,052.41 that, it admitted, it debited from RBG's special savings account.
Deducting P312,052.41 (representing the amounts debited from RBG's special savings account, as admitted by Metrobank) from P398,652.00 amount due to Metrobank from RBG, the difference would only be P86,599.59. We are, therefore, at a loss on how Metrobank computed the amount of P334,220.00 it claims as the balance of RBG's loan. As this Court is not a trier of facts, we deem it proper to remand this factual issue to the RTC for determination and computation of the actual amount RBG owes to Metrobank, plus the corresponding interest and penalties.
WHEREFORE, we GRANT the petition for review on certiorari, and REVERSE the decision and the resolution of the Court of Appeals, in CA-G.R. CV No. 46777, promulgated on December 17, 2002 and July 14, 2003, respectively. We AFFIRM the decision of the Regional Trial Court, Branch 65, Tarlac, promulgated on July 7, 1994, insofar as it found respondent liable to the petitioner Metropolitan Bank and Trust Company, but order the REMAND of the case to the trial court to determine the actual amounts due to the petitioner. Costs against respondent Rural Bank of Gerona, Inc.
Carpio Morales, (Chairperson), Bersamin, *Abad, and Villarama, Jr., JJ. concur.
* Designated additional Member of the Third Division, in view of the retirement of former Chief Justice Reynato S. Puno, per Special Order No. 843 dated May 17, 2010.
 Rollo, pp. 3-32.
 Id. at 37-45; penned by Associate Justice Eugenio S. Labitoria, with Associate Justice Renato C. Dacudao and Associate Justice Danilo B. Pine concurring.
 Id. at 35-36.
 Id. at 81-96; penned by Judge Miguel G. Sta. Romana.
 Now the Bangko Sentral ng Pilipinas.
 Rollo, pp. 61.
 Id. at 59-62.
 Supra note 4.
 Id. at 95.
 Id. at 44-45.
 Id. at 97-98. The August 14, 1979 letter read:
This is in connection with the P398,652.00 which was debited by the Central Bank of the Philippines from your bank.
We would like to make the following proposals as agreed upon during our conference with Central Bank and [Metrobank] Officials:
1. Pending the re-consideration of the Central bank regarding the loan of Dominador de Jesus in the amount of P178,652.00, we would like to ask for a Plan of Payment for a period of six (6) months starting August, 1979;
2. With [regard to] the P220,000.00 balance plus interest, we would like to reiterate our request for a personal loan from your bank, the proceeds of which will be used to pay our capital build-up, to enable the bank to settle the said amount.
Considering that you have been our depository bank for a long time, we hope you will not fail us on our proposals especially now that we are badly in need of your help.
Thanking you in advance.
The August 27, 1979 letter read:
This will acknowledge receipt of your letter on August 26, 1979, informing me about the decision of Metrobank's management rejecting my proposals on August 14, 1979.
Please be informed that I am going to Manila today to confer with Director Consolacion Odra regarding the matter.
I will also try to get an appointment with your Executive Vice-President and if necessary, I will refer the matter to our legal counsel, the [Siguion]-Reyna Law Office, Soriano Building, Ayala Avenue, Makati, Metro Manila for [advice].
I have great hopes that this problem will be settled within five (5) days.
 Id. at 74.
 Section 94 of the New Central Bank Act (Republic Act No. 7653) states:
In order to control the volume of money created by the credit operations of the banking system, all banks operating in the Philippines shall be required to maintain reserves against their deposit liabilities: Provided, That the Monetary Board may, at its discretion, also require all banks and/or quasi-banks to maintain reserves against funds held in trust and liabilities for deposit substitutes as defined in this Act. The required reserves of each bank shall be proportional to the volume of its deposit liabilities and shall ordinarily take the form of a deposit in the Bangko Sentral. Reserve requirements shall be applied to all banks of the same category uniformly and without discrimination.
 Rollo, p. 15.
 Id. at 97.
 Id. at 44.
 Id. at 63-64.
 Supra note 15.
 Exhibits for the Plaintiff, p. 8.
 Id. at 10.
 Id. at 23.
 Rollo, pp. 67-68.