THIRD DIVISION
G.R. No. 183947, September 21, 2016
RIZAL COMMERCIAL BANKING CORPORATION, Petitioner, v. TEODORO G. BERNARDINO, Respondent.
D E C I S I O N
JARDELEZA, J.:
This is a Petition for Review on Certiorari1 assailing the Decision dated June 10, 20082 and the Resolution dated July 22, 20083 of the Court of Appeals (CA) in CA-G.R. CV No. 88745. The assailed Decision and Resolution affirmed the Decision dated June 30, 20064 of the Regional Trial Court, Branch 59, Makati City in Civil Case No. 98-1851, which declared the comprehensive surety agreements between Rizal Commercial Banking Corporation (RCBC) and Teodoro G. Bernardino (Bernardino) unenforceable and having no effect for the reason that the subrogation agreement, a condition precedent, was not executed.
In the same letter, MMC encouraged RCBC to choose the second option, thus:ChanRoblesVirtualawlibrary
1) Initiate a foreclosure on the mortgaged assets, thereby realizing a maximum cash proceeds of about $11.6 Million. The balance will have to be relegated to the rank of unsecured obligations whose repayment will solely depend on the timing and extent of cash proceeds to be generated from the disposal of the company's assets, or 2) Accept our proposal which calls for the involvement of [MMC's] major shareholders. The company may request the involvement of our major shareholders who could ensure a definite repayment plan for the principal exposure of $13.7 Million. Said repayment plan will consist of the following components: a) Implementation of the assignment of the Forbes Park property for the previously agreed amount of P235 Million; b) Payment of the amount of P71 Million, being the peso equivalent of the difference between $11.6 Million and $8.9 Million (dollar equivalent of P235 Million) over a period of one (1) year on a quarterly basis, plus interest; and c) Payment of the balance of P55.4 Million (being the peso equivalent of the difference between the entire principal obligation of $13.7 Million and $11.6 Million which is the sum of Items a) and b) above), over a period of two (2) years payable quarterly.11
We believe that Option 2 above guarantees your full recovery of our principal obligation to you. Since our major shareholders have already indicated their willingness to support this repayment scheme, may we request you to accept this option for immediate implementation.12chanroblesvirtuallawlibraryOn July 3, 1997, representatives of MMC and RCBC met: to discuss the details of MMC's proposals. RCBC was represented by its former vice-presidents Filadelfo Rojas (Rojas), Felisa Banzon (Banzon), Susan Santos (Santos), and Arty. Merlyn Dueñas (Arty. Dueñas). RCBC representatives signified their intention to choose Option 2, but raised a concern on the issue of accrued interest.13 MMC also informed them that Placer Dome, a major stockholder of MMC which, as a guarantor, subsequently acquired the mortgage on the Forbes Park property, would only agree to let go of the Forbes Park property if RCBC would release in its favor the mining equipment mortgaged to RCBC.14 It was also discussed that another condition for the second option was for a stocldiolder of MMC to act as a surety for two (2) promissory notes intended to be executed between the parties.15chanrobleslaw
RCBC, through Rojas and Santos, signed its conformity to the July 8, 1997 letter.17chanrobleslaw
1) The principal amount was to be revised, from the original principal of $13.7 million to $14,327 million, which includes interest that has been capitalized; 2) Implementation of the assignment of the Forbes Park property for the agreed amount of P235 million, equivalent to about $8,901,515; 3) Payment of the amount of $2,698,485 over a period of one (1) year payable quarterly plus interest; and 4) Payment of the balance of $2,727,000 over a period of two (2) years, payable quarterly, without interest.
In connection with the transfer of our Forbes Park Property in your favor, we are transmitting to you herewith the following documents:RCBC only signed the Deed of Assignment of the Forbes Park property and returned the Deed of Release from Mortgage of the six (6) Rig Haul Trucks and one (1) Demag Hydraulic Excavator Shovel unsigned.20chanrobleslawKindly note that the release of the above-mentioned property by MR Holdings Limited from their mortgage was made on the condition that a substitution thereof with other unencumbered and free assets and properties of the mortgagor under a second Addendum Mortgage be effected. Inasmuch as our only free and unencumbered assets will be those that will be released by you under the Deed of Release from Mortgage mentioned under Item No. 4 above, may we therefore request that your authorized signatories sign as soon as possible the said Deed of Release from Mortgage.19chanroblesvirtuallawlibrary
- Deed of Assignment dated August 1, 1997, for BIR purposes;
- Deed of Partial Release from Mortgage signed by the Attorney-in-Fact of MR Holdings Limited releasing from their mortgage the above-mentioned property; and cralawlawlibrary
- Copy of Secretary's Certificate of a resolution passed by the Board of Directors of MR Holdings Limited appointing as Attorney-in-Fact, Arty. Alma D. Fernandez-Mallonga. The original of said Secretary's Certificate is with Arty. Mallonga and will be presented to the Register of Deeds when required[;]
- Deed of Release from Mortgage to be signed by RCBC involving the release from your mortgage six (6) units Rig Tracks and one (1) unit Demag Shovel.
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered in favor of the plaintiff, declaring that for RCBC's unjust refusal to execute the necessary subrogation agreement which is a condition precedent before plaintiff may be held liable under the comprehensive surety agreements, the same are declared unenforceable and of no effect.
Defendant is also ordered to pay plaintiff the following sums:
chanRoblesvirtualLawlibrary1) P100,000.00 as moral damages;
2) P100,000.00 as nominal and exemplary damages;
3) P957,540.94 as attorney's fees;
4) P44,519.03 as litigation expenses; and
5) Costs of suit against herein defendant.
SO ORDERED.37chanroblesvirtuallawlibrary
1) Article 1403 of the Civil Code on what constitutes unenforceable contracts. Nowhere in the complaint nor in the evidence on record can one find any claim that the essential elements needed for a contract to be considered unenforceable are missing; 2) The principle that in civil cases, the party having the burden of proof must produce a preponderance of evidence thereon, with plaintiff having to rely on the strength of his own evidence and not upon the weakness of the defendant's; 3) The principle that inconsistencies as to minor details and peripheral matters do not affect the credibility of witnesses nor the probative weight of their testimonies. While RCBC's witnesses may not have recalled certain details that took place long before they were called to testify, they were clear on the threshold legal and factual issues in this case; 4) The hornbook rule on mutuality and interpretation of contracts that when the terms of the agreement, as expressed in such, language, are clear, they are to be understood literally, just as they appear on the face thereof. Bernardino failed to prove exceptional circumstances when parol evidence can be received. He did not adduce any documentary evidence to establish his self-serving contention that RCBC agreed to the release of a certain mortgage and to the execution of any subrogation agreement. On the contrary, there is clear evidence on record negating this alleged agreement; 5) Section 28, Rule 130 of the Rules of Court, or the res inter alios acta rule, which states that the rights of a party cannot be prejudiced by an act, declaration, or omission of another. The CA unduly relied on, and unfairly imputed acts of third parties against RCBC to establish the supposed intention, state of mind and undertaking of RCBC; and 6) The settled rule that any person who seeks to be awarded damages due to acts of another has the burden of proving that the latter acted in bad faith or with ill motive. The CA made no finding of any specific act committed by RCBC that may constitute bad faith, much less one that could overcome the presumption of good faith.39
The RTC and the CA are also one in saying that the testimony of Rojas was evasive and vacillating, and thus, unworthy of credence. We disagree. Although Rojas could not recall some details of the meetings, We find these details innocuous and merely incidental. Rojas cannot be expected to remember every single detail of the meeting with perfect recall.52 Far from adversely affecting his credibility, his failure to recall every minute detail of what transpired even fortifies it. We have held that the failure of a witness to recall each and every detail of an occurrence may even serve to strengthen rather than weaken his credibility because it erases any suspicion of a coached or rehearsed testimony.53 What is clear from the testimony of Rojas is that the surety agreement was discussed and he was of the opinion, from the bank's perspective, that such security was not enough. Nowhere did he state or admit that the parties agreed to, much less discussed, a subrogation agreement as a condition precedent to the surety agreement.
A: Subrogation of what rights? ATTY. PEÑA: Q: Of bank's rights in case of this surety over all. A: They could not have agreed upon that. No, Sir. There was. On the subrogation itself, there is an agreement. Q: So, there was no agreement on that[?] A: No, Sir.51
The rule is that where the language of a contract is plain and unambiguous, its meaning should be determined without reference to extrinsic facts or aids. The intention of the parties must be gathered from that language, and from that language alone. Stated differently, where the language of a written contract is clear and unambiguous, the contract must be taken to mean that which, on its face, it purports to mean, unless some good reason can be assigned to show that the words used should be understood in a different sense. Courts cannot make for the parties better or more equitable agreements than they themselves have been satisfied to make, or rewrite contracts because they operate harshly or inequitably as to one of the parties, or alter them for the benefit of one party and to the detriment of the other, or by construction, relieve one of the parties from terms which he voluntarily consented to, or impose on him those which he did not.60 (Citation omitted; emphasis ours.)The surety agreements do not include or refer to the execution of a subrogation agreement as a condition precedent before Bernardino could be held liable. Bernardino cannot now come to court asking for the enforcement of an agreement which clearly does not appear in the written contract between him and RCBC.
Sec. 9. Evidence of written agreements. — When the terms of an agreement have been reduced to writing, it is considered as containing all the terms agreed upon and there can be, between the parties and their successors-in-interest, no evidence of such terms other than the contents of the written agreement.Under this rule, when the parties have reduced their agreement into writing, they are deemed to have intended the written agreement to be the sole repository and memorial of everything that they have agreed upon. All their prior and contemporaneous agreements are deemed to be merged in the written document so that, as between them and their successors-in-interest, such writing becomes exclusive evidence of its terms and any verbal agreement which tends to vary, alter or modify it is not admissible.61 Whatever is not found in the writing is understood to have been waived and abandoned.62 This must be so because an oral testimony on an alleged prior or contemporaneous agreement, such as the subrogation agreement subject of Bernardino's testimony in this case, comes from a party who has an interest in the outcome of the case and depends exclusively on human memory. Thus, it is not as reliable as written documentary evidence. Spoken words could be notoriously undesirable unlike a written contract which speaks of a uniform language.63chanrobleslawx x x
In his Complaint, however, Bernardino did not plead any exception to the application of the parol evidence rule. All that he pleaded was the alleged collateral agreement with which RCBC must first comply.65 We have uniformly held that it is only where a party puts in issue in his pleadings the failure of the written agreement to express the true intent of the parties that the party may present evidence to modify, explain or add to the terms of the written agreement.66 The failure of Bernardino, therefore, should have rendered the parol evidence inadmissible. However, no timely objection or protest was made against its admission and RCBC, against whom it was presented, cross-examined the witnesses who testified. Failure to object to the parol evidence constitutes a waiver to its ladmissibility.67chanrobleslaw
(a) An intrinsic ambiguity, mistake or imperfection in the written agreement; (b) The failure of the written agreement to express the true intent and agreement of the parties thereto; (c) The validity of the written agreement; or (d) The existence of other terms agreed to by the parties or their successors-in-interest after the execution of the written agreement.64
WHEREFORE, the petition is GRANTED. The assailed Decision dated June 6, 2005 and the Resolution dated December 8, 2005 of the Court of Appeals in CA-G.R. CV No. 77594 are REVERSED and SET ASIDE. Marcopper is directed to pay RCBC the following amounts expressly stipulated in the Non-Negotiable Promissory NoteNos. 21-3697 and 21-3797:The obligation of MMC having been settled in the above decision, which has already attained finality when We denied MMC's Motion for Reconsideration in our Resolution dated October 30, 2009,76 Bernardino, as surety, has also become liable for MMC's obligation to RCBC or to its successors-in-interest77 under the promissory notes.SO ORDERED.75chanroblesvirtuallawlibrary
- US$5,425,485.00 as the total principal amount due under Non-Negotiable Promissory Note Nos. 21-3697 and 21-3797, including the interest due on US$2,698,845.00 under Non-Negotiable Promissory Note No. 21-3697 at the rate of 9% per annum until fully paid.
- Penalty equivalent to 36% per annum of the amount due and unpaid under Non-Negotiable Promissory Note Nos. 21-3697 and 21-3797 until fully paid; and cralawlawlibrary
- Attorney's fees equivalent to 20% of the total amount due.
RCBC's claims for moral and exemplary damages are denied. It may, however, exercise its rights, in accordance with law, to foreclose on the properties covered. No pronouncement as to costs.
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 failto do so.Suretyship is a contractual relation resulting from an agreement whereby one person, the surety, engages to be answerable for the debt, default or miscarriage of another, known as the principal.78 The surety's obligation is not an original and direct one for the performance of his own act, but merely accessory or collateral to the obligation contracted by the principal. Nevertheless, although the contract of a surety is in essence secondary only to a valid principal obligation, his liability to the creditor or promisee of the principal is said to be direct, primary and absolute;79 in other words, he is directly and equally bound with the principal. The surety therefore becomes liable for the debt or duty of another although he possesses no direct or personal interest over the obligations nor does he receive any benefit therefrom.80chanrobleslaw
If a person binds himself solidarity with the principal debtor, the provisions of Section 4, Chapter 3, Title I of this Book shall be observed. In such case, the contract; is called a suretyship.
Article 2071. The guarantor, even before having paid, may proceed against the principal debtor:It is clear, therefore, that whatever right to a security Bernardino may have can only be demanded from MMC and not from RCBC.
chanRoblesvirtualLawlibrary
(1) When he is sued for the payment; (2) In case of insolvency of the principal debtor; (3) When the debtor has bound himself to relieve him from the guaranty within a specified period, and this period has expired; (4) When the debt has become demandable, by reason of the expiration of the period for payment; (5) After the lapse of ten years, when the principal obligation has no fixed period for its maturity, unless it be of such nature that it cannot be extinguished except within a period longer than ten years; (6) If there are reasonable grounds to fear that the principal debtor intends to abscond; (7) If the principal debtor is in imminent danger of becoming insolvent.
x x x
Endnotes:
* Designated as additional Member in lieu of Associate Justice Presbitero J. Velasco, Jr. per Raffle dated September 19, 2016.
** Designated as additional Member in lieu of Associate Justice Jose Portugal Perez per Raffle dated September 19, 2016.
1Rollo, pp. 13-76.
2Id. at 78-118. Panned by Associate Justice Andres B. Reyes, Jr., with Associate Justices Jose C. Mendoza (now a Member of the Court) and Arturo G. Tayag concurring.
3Id. at 120.
4Id. at 459-486.
5Id. at 79.
6Id. at 252-255.
7Id. at 879-880.
8Id. at 877-878.
9Id. at 79-80.
10Id. at 140-143.
11Id. at 141-142.
12Id. at 142.
13Id. at 81.
14Id. at 82-83.
15Id. at 83.
16Id. at 144-145.
17Id. at 145.
18Id. at 83.
19Id. at 266.
20Id. at 85.
21Id. at 164.
22Id. at 165-166.
23Id. at 167-168.
24Id. at 25.
25cralawred Id. at 165 and 167.
26Id. at 169.
27Id. at 170-171.
28Id. at 173.
29Id. at 172-173.
30Id. at 175.
31Id. at 174-176.
32Id. at 177-183.
33Id. at 182.
34 Records, pp. 44-68.
35Id. at 67-68.
36Rollo, pp. 468-470.
37Id. at 486.
38Id. at 120.
39Id. at 17-19.
40 G.R. No. 170738, September 12, 2008, 565 SCRA 125. Penned by Associate Justice Leonardo A. Quisumbing.
41Land Bank of the Philippines v. Yatco Agricultural Enterprises, G.R. No. 172551, January 15, 2014, 713 SCRA 370, 378-379.
42Suliman v. People, G.R. No. 190970, November 24, 2014, 741 SCRA 477, 487.
43Cirtek Employees Labor Union-Federation of Free Workers v. Cirtek Electronics, Inc., G.R. No. 190515, June 6, 2011, 650 SCRA 656, 660.
44MOF Company, Inc. v. Shin Yang Brokerage Corporation, G.R. No. 172822, December 18, 2009, 608 SCRA 521, 533, citing Acabal v. Acabal, G.R. No. 148376, March 31, 2005, 454 SCRA 555, 569.
45Bank of the Philippine Islands v. Royeca, G.R. No. 176664, July 21, 2008, 559 SCRA 207, 215.
46 RULES OF COURT, Rule 133, Sec. 1.
47Magdiwang Realty Corporation v. The Manila Banking Corporation, G.R. No. 195592, September 5, 2012, 680 SCRA 251, 265.
48Chua v. Westmont Bank, G.R. No. 182650, February 27, 2012, 667 SCRA 56, 68.
49Eulogio v. Apeles, G.R. No. 167884, January 20, 2009, 576 SCRA 561, 571-572.
50Domingo v. Domingo, G.R. No. 150897, April 11, 2005, 455 SCRA 230, 238.
51Rollo, p. 1624.
52Rivera v. People, G.R. No. 138553, June 30, 2005, 462 SCRA 350, 359-360.
53Id.
54Rollo, p. 1636.
55Id. at 1635.
56Manila Metal Container Corporation v. Philippine National Bank, G.R. No. 166862, December 20, 2006, 511 SCRA 444, 465.
57Rizal Commercial Banking Corporation v. Marcopper Mining Corporation, G.R. No. 170738, October 30, 2009, 604 SCRA 719, 735.
58Insular Life Assurance Company, Ltd., v. Asset Builders Corporation, G.R. No. 147410, February 5, 2004, 422 SCRA 148, 165, citing Leaño v. Court of Appeals, G.R. No. 129018, November 15, 2001, 369 SCRA 36.
59 G.R. No. 123655, January 19, 2000, 322 SCRA 365.
60Bautista v. Court of Appeals, supra at 376.
61Allied Banking Corporation v. Cheng Yong, G.R. Nos. 151040 & 154109, October 5, 2005, 472 SCRA 101, 111.
62Edrada v. Ramos, G.R. No. 154413, August 31, 2005, 468 SCRA 597, 604.
63Ortañez v. Court of Appeals, G.R. No. 107372, January 23, 1997, 266 SCRA 561, 565.
64 RULES OF COURT, Rule 130, Sec. 9.
65 See Ortañez v. Court of Appeals, supra note 63.
66Sabio v. International Corporate Bank, Inc., G.R. No. 132709, September 4, 2001, 364 SCRA 385, 405.
67Reyes v. Court of Appeals, G.R. No. 147758, June 26, 2002, 383 SCRA 471, 479-480.
68Peñalber v. Ramos, G.R. No. 178645, January 30, 2009, 577 SCRA 509, 529-530.
69Rollo, pp. 164-166.
70Id. at 170-171.
71Ortañez v. Court of Appeals, supra note 63 at 566.
72Supra note 40.
73Id. at 141.
74Id. at 137.
75Id. at 144-145.
76Rizal Commercial Banking porporation v. Marcopper Mining Corporation, G.R. No. 170738, October 30, 2009, 604 SCRA 719.
77 In its Compliance dated February 24, 2016, RCBC, through its counsel, manifested that MMC's outstanding obligation was sold as a non-performing loan to a special purpose vehicle, Philippine Investment One (SPV-AMC), Inc. (Rollo, pp. 1779-1789). In a letter dated August 10, 2006 and which was attached to Bernardino's Compliance dated February 10, 2016, MMC did not object to the sale of its loan to SPV-AMC, Inc. SPV-AMC, Inc., however, opted not to substitute RCBC in this case. Hence, RCBC continued to litigate the case on its behalf in accordance with Section 19, Rule 3 of the Rules of Court. (Id. at 1785-1791)
78Garcia, Jr. v. Court of Appeals, G.R. No. 80201, November 20, 1990, 191 SCRA 493, 495.
79Id. at 495-496.
80Id. at 496 citing Miner's Merchants Bank v. Gidley, 144 SE 2d 711 (1965).
81Escaño v. Ortigas, Jr., G.R. No. 151953, June 29, 2007, 526 SCRA 26, 46.
82Autocorp Group v. Intra Strata Assurance Corporation, G.R. No. 166662, June 27, 2008, 556 SCRA 250, 257.