THIRD DIVISION
G.R. No. 193890, March 11, 2015
ESTANISLAO AND AFRICA SINAMBAN, Petitioners, v. CHINA BANKING CORPORATION, Respondent.
D E C I S I O N
REYES, J.:
Before this Court is a Petition for Review on Certiorari1 of the Decision2 dated May 19, 2010 of the Court of Appeals (CA) in CA-G.R. CV. No. 66274 modifying the Decision3 dated July 30, 1999 of the Regional Trial Court (RTC) of San Fernando City, Pampanga, Branch 45 for Sum of Money in Civil Case No. 11708.chanRoblesvirtualLawlibrary
All of the three promissory notes carried an acceleration clause stating that if the borrowers failed to pay any stipulated interest, installment or loan amortization as they accrued, the notes shall, at the option of Chinabank and without need of notice, immediately become due and demandable. A penalty clause also provides that an additional amount shall be paid equivalent to 1/10 of 1% per day of the total amount due from date of default until fully paid, and the further sum of 10% of the total amount due, inclusive of interests, charges and penalties, as and for attorney's fees and costs.10
- PN No. OACL 634-95, dated April 24, 1995, for a loan principal of P1,800,000.00, with interest at 23% per annum; the spouses Manalastas signed alone as makers.7
- PN No. OACL 636-95, dated May 23, 1995, for a loan principal of P325,000.00, with interest at 21% per annum; the spouses Sinamban signed as solidary co-makers;8
- PN No. CLF 5-93, dated February 26, 1991, for a loan principal of P1,300,000.00, with interest at 22.5% per annum; only Estanislao Sinamban signed as solidary co-maker.9
(a) PN No. OACL 636-95 has an outstanding principal of P325,000.00, cumulative interest of P184,679.00, and cumulative penalties of P258,050.00, or a total amount due of P767,729.00;
(b) PN No. OACL 634-95 has an outstanding principal of P1,800,000.00, cumulative interest of P1,035,787.50, and cumulative penalties of P1,429,200.00, or a total amount due of P4,264,987.50; and
(c) PN No. CLF 5-93 has an outstanding principal of P148,255.08, cumulative interest of P64,461.84, and cumulative penalties of P156,541.58, or a total amount due of P369,258.50. Note that from the original amount of P1,300,000.00, the loan principal had been reduced to only P148,255.08 as of May 18, 1998.12cralawlawlibrary
On the basis of the above statement of account, and pursuant to the promissory notes, Chinabank instituted extrajudicial foreclosure proceedings against the mortgage security. The foreclosure sale was held on May 18, 1998, with Chinabank offering the highest bid of P4,600,000.00, but by then the defendants' total obligations on the three promissory notes had risen to P5,401,975.00, before attorney's fees of 10% and auction expenses, leaving a loan deficiency of P1,758,427.87.14 Thus, in the complaint before the RTC, Chinabank prayed to direct the defendants to jointly and severally settle the said deficiency, plus 12% interest per annum after May 18, 1998,15 the date of the auction sale.16
PN NUMBER PRINCIPAL INTEREST 36%
PENALTY FEE TOTALOACL 636-95 325,000.00 184,679.00 258,050.00 767,729.00OACL 634-95 1,800,000.00 1,035,787.50 1,429,200.00 4,264,987.50CLF 005-93 148,255.08 64,461.84 156,541.58 369,258.50 ----------------- ----------------- ----------------- -----------------TOTAL P 2.273.255.08 1.284.928.34 1.843.791.58 5,401,975.00 -----------------TOTAL AMOUNT DUE----------------------------------------- 5,401,975.00PLUS 10% ATTORNEY'S FEE-------------------------------- 540,197.50 ----------------- 5,942,172.50ADD: OTHER EXPENSES INSURANCE PREMIUM 22,618.37POSTING OF NOTICE OF SALE 700.00PUBLICATION FEE 17,500.00REGISTRATION OF CERTIFICATE OF SALE (MISC.) 1,000.00REGISTRATION OF CERTIFICATE OF SALE (REGISTER OF DEEDS) Registration fee 10,923.00Entry fee 30.00Legal fund 20.00BIR certification 60.00Doc. stamps tax 69,000.00Capital Gains tax 276,000.00 356,033.00 -------------EXPENSES INCURRED ON OCULAR INSPECTION MADE ON 404.00TCT#173532-R & TCT#173533-R ATTORNEY'S FEE 18,000.00 416,255.37LESS: BID PRICE 4,600,000.00 ------------------- GRAND TOTAL ------------------------------------------------ 1,758,427.8713
WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff China Banking Corporation and against defendant Sps. Danilo and Magdalena Manalastas and defendant Sps. Estanislao and Africa Sinamban to jointly and severally pay [Chinabank] the amount of P1,758,427.87, representing the deficiency between the acquisition cost of the foreclosed real estate properties and the outstanding obligation of defendants at the time of the foreclosure sale; interest at the legal rate of 12% per annum from and after May 18, 1998; attorney's fees equivalent to 10% of the aforesaid deficiency amount and the litigation and costs of suit.On Motion for Reconsideration25 of the spouses Sinamban dated August 27, 1999, to which Chinabank filed an Opposition26 dated September 14, 1999, the RTC in its Order27 dated October 22, 1999 set aside the Decision dated July 30, 1999 with respect to the spouses Sinamban, in this wise:chanroblesvirtuallawlibrary
SO ORDERED.24cralawlawlibrary
As it is undisputed that Exhibit "B" (Promissory Note dated April 24, 1995 in the amount of P1,800,000.00), was not signed by the Spouses Sinamban it would not be equitable that the said defendants be made solidarity liable for the payment of the said note as co-makers of their co-defendants Spouses Manalastas who are the one[s] principally liable thereto. Prescinding from this premise, the movant spouses could only be held liable for the two (2) promissory notes they have signed, Promissory Notes dated May 23, 1995 in the amount of P325,000.00 and February 26, 1991 in the amount of P1,300,000.00, Exhibits "A" and "C", respectively. As the total amount of the said notes is only P1,625,000.00, so even if we would add the interests due thereon, there is no way that the said outstanding loan exceed[s] the acquisition cost of the foreclosed real estate properties subject hereof in the amount of P4,600,000.00. It would appear then that the Spouses Sinamban could not be held liable for the deficiency in the amount of P1,758,427.87 which should justly be borne alone by the defendant Spouses Manalastas. Guided by law and equity on the matter, the court will not hesitate to amend a portion of its assailed decision to serve the interest of justice.cralawredThe RTC ruled that the proceeds of the auction were sufficient to answer for the two PNs co-signed by the spouses Sinamban, including interest and penalties thereon, and therefore the spouses Manalastas should solely assume the deficiency of P1,758,427.87. Chinabank moved for reconsideration on November 11, 1999,29 to which the spouses Sinamban filed their comment/opposition on November 23, 1999.30
WHEREFORE, premises considered, the decision dated July 30, 1999 is hereby Reconsidered and Set Aside with respect to the Spouses Estanislao and Africa Sinamban hereby Relieving them from any liability arising from the said Decision which is affirmed in toto with respect to Spouses Manalastas.
SO ORDERED.28 (Emphases ours)
WHEREFORE, premises considered, the instant Motion for Reconsideration of plaintiff is Granted.This time the RTC held that the spouses Sinamban must, solidarity with the spouses Manalastas, proportionately answer for the loan deficiency pertaining to the two PNs they co-signed, since the mortgage security provided by the spouses Manalastas secured all three PNs and thus also benefited them as co-makers. But since they did not co-sign PN No. OACL 634-95, the deficiency judgment pertaining thereto will be the sole liability of the spouses Manalastas.chanRoblesvirtualLawlibrary
Order dated October 22, 1999 is hereby Set Aside.
Accordingly, the dispositive portion of the Decision dated July 30, 1999 is hereby Modified to read as follows:chanroblesvirtuallawlibraryWHEREFORE, premises considered, judgment [is] hereby rendered in favor of plaintiff China Banking Corporation and against the defendant Sps. Danilo and Magdalena Manalastas and defendant Sps. Estanislao and Africa Sinamban, ordering them to pay as follows:SO ORDERED.32cralawlawlibrary
1. For defendant Sps. Danilo and Magdalena Manalastas, the amount of P1,758,427.87, the deficiency between the acquisition cost of the foreclosed real properties and their outstanding obligation;
2. For defendant Sps. Sinamban a percentage of P1,758,427.87, jointly and severally with the defendant Sps. [Manalastas] only on two (2) promissory notes;
3. The corresponding interests thereon at legal rate:
4. Attorney's fees; and
5. Costs of suit.
On May 19, 2010, the CA rendered judgment denying the appeal, the fallo of which reads:chanroblesvirtuallawlibraryI
THE LOWER COURT ERRED WHEN IT HELD DEFENDANTS-APPELLANTS SPS. SINAMBAN LIABLE TO PAY A PERCENTAGE OF P1,758,427.87, JOINTLY AND SEVERALLY WITH THE DEFENDANTS SPS. MANALASTAS ON THE TWO PROMISSORY NOTES (EXHIBITS 'C' AND 'A').II
THE LOWER COURT ERRED WHEN IT RECONSIDERED AND SET ASIDE ITS PREVIOUS ORDER DATED 22 OCTOBER 1999 RELIEVING DEFENDANTS-APPELLANTS SPS. SINAMBAN FROM ANY LIABILITY ARISING FROM THE DECISION DATED 30 JULY 1999.III
THE LOWER COURT ERRED WHEN IT RENDERED THE VAGUE ORDER OF 8 DECEMBER 1999 (ANNEX 'B' HEREOF).33cralawlawlibrary
WHEREFORE, considering the foregoing disquisition, the appeal is DENIED. The Decision dated 30 July 1999 and the Order dated 08 December 1999 of the Regional Trial Court of San Fernando, Pampanga, Branch 45 in Civil Case No. 11708 are hereby AFFIRMED with MODIFICATION in that:Petition for Review to the Supreme CourtSO ORDERED.34 (Some emphasis ours)
- Sps. Danilo and Magdalena Manalastas are solidarily liable for the deficiency amount of Php507,741.62 (inclusive of 10% attorney's fees) on Promissory Note No. OACL 634-95 dated 24 April 1995;
- Sps. Estanislao and Africa Sinamban are solidarily liable with Sps. Danilo and Magdalena Manalastas for the amount of Php844,501.90 (inclusive of 10% attorney's fees) on Promissory Note No. OACL00636-95 dated 23 May 1995;
- Estanislao Sinamban and Sps. Danilo and Magdalena Manalastas are solidarity liable for the amount of Php406,184.35 (inclusive of 10% attorney's fees) on Promissory Note No. CLF 5-93 dated 26 February 1991; and
- The foregoing amounts shall bear interest at the rate of 12% per annum from 18 November 1998 until fully paid.
5.1 Whether or not the Honorable Court of Appeals erred in not considering that the Sps. Sinamban's obligations under PN# OACL 636-95 dated May 23, 1995 in the principal sum of Php325,000.00 and PN# CLF 5-93 dated February 26, 1991 in the principal sum of Php 1,300,000.00 are more onerous and burdensome on their part as mere sureties (co-makers) of their co-defendants-spouses Danilo and Magdalena Manalastas' (hereinafter referred to as the "Sps. Manalastas") obligations over the same, compared to the Sps. Manalastas' sole obligation under PN# OACL 634-95 dated 24 April 1995 in the principal amount of Php1,800,000.00, such that the proceeds of the auction sale of the properties securing all the three (3) promissory notes should first be applied to satisfy the promissory notes signed by the Sps. Sinamban; and
5.2 Whether or not the Honorable Court of Appeals erred in not considering the facts indubitably showing that it is the Sps. Sinamban, as the debtors, and not the respondent bank, who are given the choice under Article 1252 of the Civil Code to have the proceeds of the auction sale applied as payments to their obligations under PN# OACL 636-95 dated 23 May 1995 and PN# CLF 5-93 dated 26 February 1991.35cralawlawlibrary
"FOR VALUE RECEIVED, I/We jointly and severally promise to pay to the CHINA BANKING CORPORATION or its order the sum of PESOS x x x[.]"37 (Emphasis ours)According to Article 2047 of the Civil Code,38 if a person binds himself solidarily with the principal debtor, the provisions of Articles 1207 to 1222 of the Civil Code (Section 4, Chapter 3, Title I, Book IV) on joint and solidary obligations shall be observed. Thus, where there is a concurrence of two or more creditors or of two or more debtors in one and the same obligation, Article 1207 provides that among them, "[t]here is a solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity." It is settled that when the obligor or obligors undertake to be "jointly and severally" liable, it means that the obligation is solidary.39 In this case, the spouses Sinamban expressly bound themselves to be jointly and severally, or solidarily, liable with the principal makers of the PNs, the spouses Manalastas.
[T]o apply to the payment of this note and/or any other particular obligation or obligations of all or any one of us to the CHINA BANKING CORPORATION as the said Corporation may select, irrespective of the dates of maturity, whether or not said obligations are then due, any or all moneys, securities and things of value which are now or which may hereafter be in its hands on deposit or otherwise to the credit of, or belonging to, all or any one of us, and the CHINA BANKING CORPORATION is hereby authorized to sell at public or private sale such securities or things of value for the purpose of applying their proceeds to such payments.40cralawlawlibraryPursuant to Article 1216 of the Civil Code, as well as Paragraph 5 of the PNs, Chinabank opted to proceed against the co-debtors simultaneously, as implied in its May 18, 1998 statement of account when it applied the entire amount of its auction bid to the aggregate amount of the loan obligations.
a) PN No. OACL 634-95, with a balance as of May 18, 1998 of P4,264,987.50: its share in the total deficiency is computed as the ratio of P4,264,987.50 to P5,401,975.00, multiplied by P1,758,427.87, or P1,388,320.55, (not P507,741.62 as found by the CA);
b) PN No. OACL 636-95, with a balance of P767.729.00 as of May 18, 1998: its share in the deficiency is computed as the ratio of P767,729.00 to P5,401,975.00, multiplied by P1,758,427.87, or P249,907.87, (not P844,501.90 as computed by the CA);
c) PN No. CLF 5-93, with an outstanding balance of P369,258.50 as of May 18, 1998: its share in the deficiency is computed as the ratio of P369,258.50 to P5,401,975.00, multiplied by P1,758,427.87, or P120,199.45, (not P406,184.35 as found by the CA).
In short, in the CA decision, the spouses Manalastas would be solely liable on PN No. OACL 634-95 for only P507,741.62 (instead of the much bigger amount of P1,388,320.55 which this Court found), whereas the spouses Sinamban would be solidarily liable with the spouses Manalastas for a total deficiency of P1,250,686.25 on PN No. OACL 636-95 and PN No. CLF 5-93. But under the Court's interpretation, the spouses Sinamban are solidarily liable with the spouses Manalastas for only P370,107.32 on the said two PNs, for a significant difference of P880,578.93.
Pursuant to Monetary Board Circular No. 799, effective July 1, 2013, the rate of interest for the loan or forbearance of any money, goods or credits and the rate allowed in judgments, in the absence of an express contract as to such rate of interest, has been reduced to six percent (6%) per annum.
The subject three PNs bear interests ranging from 21% to 23% per annum, exclusive of penalty of 1% on the overdue amount per month of delay, whereas in its complaint, Chinabank prayed to recover only the legal rate of 12% on whatever judgment it could obtain. Meanwhile, the Monetary Board of the Bangko Sentral ng Pilipinas in its Resolution No. 796 dated May 16, 2013, and now embodied in Monetary Board Circular No. 799, has effective July 1, 2013 reduced to 6%, from 12%, the legal rate of interest for the loan or forbearance of any money, goods or credits and the rate allowed in judgments, in the absence of stipulation.45 Since Chinabank demanded only the legal, not the stipulated, interest rate on the deficiency and attorney's fees due, the defendants will solidarily pay interest on their shares in the deficiency at the rate of 12% from November 18, 1998 to June 30, 2013, and 6% from July 1, 2013 until fully paid.cralawred
WHEREFORE, the Decision of the Court of Appeals dated May 19, 2010 in CA-G.R. CV No. 66274 is MODIFIED. The Decision dated July 30, 1999 and the Order dated December 8, 1999 of the Regional Trial Court of San Fernando City, Pampanga, Branch 45 in Civil Case No. 11708 are hereby AFFIRMED with MODIFICATIONS as follows:
1. Spouses Danilo and Magdalena Manalastas are solidarily liable for the deficiency amount of P1,388,320.55 (inclusive of 10% attorney's fees) on Promissory Note No. OACL 634-95 dated April 24, 1995;
2. Spouses Estanislao and Africa Sinamban are solidarily liable with spouses Danilo and Magdalena Manalastas for the deficiency amount of P249,907.87 (inclusive of 10% attorney's fees) on Promissory Note No. OACL 636-95 dated May 23, 1995;
3. Estanislao Sinamban and spouses Danilo and Magdalena Manalastas are solidarily liable for the deficiency amount of P120,199.45 (inclusive of 10% attorney's fees) on Promissory Note No. CLF 5-93 dated February 26, 1991; and
4. The foregoing amounts shall bear interest at the rate of twelve percent (12%) per annum from November 18, 1998 to June 30, 2013, and six percent (6%) per annum from July 1, 2013 until fully paid.
SO ORDERED.chanroblesvirtuallawlibrary
Velasco, Jr., (Chairperson), Peralta, Villarama, Jr., and Jardeleza, JJ., concur.
Endnotes:
1Rollo, pp. 9-26.
2 Penned by Associate Justice Celia C. Librea-Leagogo, with Associate Justices Remedios A. Salazar-Fernando and Michael P. Elbinias, concurring; id. at 28-53.
3 Issued by Judge Adelaida Ala-Medina; id. at 101-104.
4 Id. at 64-66.
5 Id. at 67-72.
6 Id. at 56-60.
7 Id. at 61.
8 Id. at 62.
9 Id. at 63.
10 Id. at 57.
11 Id. at 75.
12 Id.
13 Id.
14 Id. at 58-59.
15 But note that the PNs stipulated interest rates from 21% to 23% per annum, plus a penalty of 1% per month of delay.
16Rollo, p. 59.
17 Id. at 79-82.
18 Id. at 73-74.
19 Id. at 89.
20 Id. at 97.
21 Id.
22 Id. at 98.
23 Id. at 101-104.
24 Id. at 104.
25 Id. at 105-110.
26 Id. at 115-119.
27 Id. at 120-122.
28 Id. at 121-122.
29 Id. at 123-126.
30 Id. at 127-128.
31 Id. at 131-133.
32 Id. at 132-133.
33 Id. at 39-40.
34Id. at 49-50.
35 Id. at 18-19.
36Sierra v. Court of Appeals, G.R. No. 90270, July 24, 1992, 211 SCRA 785, 795.
37 Rollo, pp. 61-63.
38 Art. 2047. By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so.
If a person binds himself solidarily with the principal debtor, the provisions of Section 4, Chapter 3, Title I of this Book shall be observed, tn such case the contract is called a suretyship.
39Crystal v. Bank of the Philippine Islands, G.R. No. 172428, November 28, 2008, 572 SCRA 697, 703. See also Escaño v. Ortigas, Jr., 553 Phil. 24, 39 (2007).
40] Rollo, pp. 61-63.
41 Id. at 132.
42 ART. 1252. He who has various debts of the same kind in favor of one and the same creditor, may declare at the time of making the payment, to which of them the same must be applied. Unless the parties so stipulate, or when the application of payment is made by the party for whose benefit the term has been constituted, application shall not be made as to debts which are not yet due.
If the debtor accepts from the creditor a receipt in which an application of the payment is made, the former cannot complain of the same, unless there is a cause for invalidating the contract.
43Rollo, p. 47.
44 Art. 1252. He who has various debts of the same kind in favor of one and the same creditor, may declare at the time of making the payment, to which of them the same must be applied. Unless the parties so stipulate, or when the application of payment is made by the party for whose benefit the term has been constituted, application shall not be made as to debts which are not yet due.
If the debtor accepts from the creditor a receipt in which an application of the payment is made, the former cannot complain of the same, unless there is a cause for invalidating the contract.
Art. 1253. If the debt produces interest, payment of the principal shall not be deemed to have been made until the interests have been covered.
Art. 1254. When the payment cannot be applied in accordance with the preceding rules, or if application can not be inferred from other circumstances, the debt which is most onerous to the debtor, among those due, shall be deemed to have been satisfied.
If the debts due are of the same nature and burden, the payment shall be applied to all of them proportionately.
45S.C. Megaworld Construction and Development Corporation v. Parada, G.R. No. 183804, September 11, 2013, 705 SCRA 584, 608; Nacar v. Gallery Frames, G.R. No. 189871 August 13, 2013, 703 SCRA 439, 455-456.