The Court of Appeals ordered MICO to pay GOYU submitted its claim for indemnity on account of the loss

its claims in the total amount of P74,040,518.58, plus insured against. MICO denied the claim on the ground
37% interest per annum commencing July 27, that the insurance policies were either attached
[G.R. Nos. 128833. April 20, 1998] 1992. RCBC was ordered to pay actual and pursuant to writs of attachments/garnishments issued
compensatory damages in the amount of by various courts or that the insurance proceeds were
P5,000,000.00. MICO and RCBC were held solidarily also claimed by other creditors of GOYU alleging better
liable to pay GOYU P1,500,000.00 as exemplary rights to the proceeds than the insured. GOYU filed a
damages and P1,500,000.00 for attorneys complaint for specific performance and damages which
RIZAL COMMERCIAL BANKING CORPORATION, fees. GOYUs obligation to RCBC was fixed at was docketed at the Regional Trial Court of the National
UY CHUN BING AND ELI D. P68,785,069.04 as of April 1992, without any interest, Capital Judicial Region (Manila, Branch 3) as Civil Case
LAO, petitioners, vs. COURT OF APPEALS surcharges, and penalties. RCBC and MICO appealed No. 93-65442, now subject of the present G.R. No.
and GOYU & SONS, INC., respondents. separately but, in view of the common facts and issues 128833 and 128866.
involved, their individual petitions were consolidated.
RCBC, one of GOYUs creditors, also filed with
The undisputed facts may be summarized as MICO its formal claim over the proceeds of the
[G.R. No. 128834. April 20, 1998] follows: insurance policies, but said claims were also denied for
the same reasons that MICO denied GOYUs claims.
GOYU applied for credit facilities and
accommodations with RCBC at its Binondo In an interlocutory order dated October 12, 1993
Branch. After due evaluation, RCBC Binondo Branch, (Record, pp. 311-312), the Regional Trial Court of
RIZAL COMMERCIAL BANKING through its key officers, petitioners Uy Chun Bing and Eli Manila (Branch 3), confirmed that GOYUs other
CORPORATION, petitioners, vs. COURT OF D. Lao, recommended GOYUs application for approval creditors, namely, Urban Bank, Alfredo Sebastian, and
APPEALS, ALFREDO C. SEBASTIAN, GOYU by RCBCs executive committee. A credit facility in the Philippine Trust Company obtained their respective
& SONS, INC., GO SONG HIAP, SPOUSES amount of P30 million was initially granted. Upon writs of attachments from various courts, covering an
GO TENG KOK and BETTY CHIU SUK YING GOYUs application and Uys and Laos recommendation, aggregate amount of P14,938,080.23, and ordered that
alias BETTY GO, respondents. RCBCs executive committee increased GOYUs credit the proceeds of the ten insurance policies be deposited
facility to P50 million, then to P90 million, and finally to with the said court minus the aforementioned
P117 million. P14,938,080.23. Accordingly, on January 7, 1994,
MICO deposited the amount of P50,505,594.60 with
As security for its credit facilities with RCBC, Branch 3 of the Manila RTC.
[G.R. No. 128866. April 20, 1998]
GOYU executed two real estate mortgages and two
chattel mortgages in favor of RCBC, which were In the meantime, another notice of garnishment
registered with the Registry of Deeds at Valenzuela, was handed down by another Manila RTC sala (Branch
Metro Manila. Under each of these four mortgage 28) for the amount of P8,696,838.75 (Exhibit 22-
MALAYAN INSURANCE INC., petitioner, vs. GOYU contracts, GOYU committed itself to insure the Malayan).
& SONS, INC. respondent. mortgaged property with an insurance company
approved by RCBC, and subsequently, to endorse and After trial, Branch 3 of the Manila RTC rendered
deliver the insurance policies to RCBC. judgment in favor of GOYU, disposing:
D EC I S I O N
MELO, J.: GOYU obtained in its name a total of ten insurance WHEREFORE, judgment is hereby rendered in favor of
policies from MICO. In February 1992, Alchester the plaintiff and against the defendant, Malayan
Insurance Agency, Inc., the insurance agent where Insurance Company, Inc. and Rizal Commercial
The issues relevant to the herein three
GOYU obtained the Malayan insurance policies, issued Banking Corporation, ordering the latter as follows:
consolidated petitions revolve around the fire loss
nine endorsements in favor of RCBC seemingly upon
claims of respondent Goyu & Sons, Inc. (GOYU) with
instructions of GOYU (Exhibits 1-Malayan to 9-
petitioner Malayan Insurance Company, Inc. (MICO) in 1. For defendant Malayan Insurance Co., Inc.:
Malayan).
connection with the mortgage contracts entered into by
and between Rizal Commercial Banking Corporation On April 27, 1992, one of GOYUs factory buildings a. To pay the plaintiff its fire loss claims in the
(RCBC) and GOYU. in Valenzuela was gutted by fire. Consequently, GOYU total amount of P74,040,518.58 less
 the amount of P50,000,000.00 which 1992, with interest thereon at the rate 3. FOR DEFENDANTS MALAYAN INSURANCE CO.,
is deposited with this Court; stipulated in the respective promissory notes INC., RIZAL COMMERCIAL BANKING
(without surcharges and penalties) per CORPORATION, UY CHUN BING AND ELI D. LAO:
b. To pay the plaintiff damages by way of computation, pp. 14-A, 14-B & 14-C.
interest for the duration of the delay a) To pay the plaintiff jointly and severally the following
since July 27, 1992 (ninety days after FURTHER, the Clerk of Court of the Regional Trial amounts:
defendant insurers receipt of the Court of Manila is hereby ordered to release
required proof of loss and notice of immediately to the plaintiff the amount of 1. P1,500,000.00 as exemplary damages;
loss) at the rate of twice the ceiling P50,000,000.00 deposited with the Court by defendant
prescribed by the Monetary Board, on Malayan, together with all the interests earned thereon.
2. P1,500,000.00 as and for attorneys fees.
the following amounts:
(
Record, pp. 478-479.) 4. And on RCBCs Counterclaim, ordering the plaintiff
1) P50,000,000.00 from July 27, 1992
Goyu & Sons, Inc. to pay its loan obligation with RCBC
up to the time said amount
in the amount of P68,785,069.04 as of April 27, 1992
was deposited with this Court From this judgment, all parties interposed their without any interest, surcharges and penalties.
on January 7, 1994; respective appeals. GOYU was unsatisfied with the
amounts awarded in its favor. MICO and RCBC
2) P24,040,518.58 from July 27, 1992 disputed the trial courts findings of liability on their The Clerk of the Court of the Regional Trial Court of
Manila is hereby ordered to immediately release to
up to the time when the writs part. The Court of Appeals partly granted GOYUs
Goyu & Sons, Inc. the amount of P50,505,594.60 (per
of attachments were received appeal, but sustained the findings of the trial court with
by defendant Malayan; O.R. No. 3649285) deposited with it by Malayan
respect to MICO and RCBCs liabilities, thusly:
Insurance Co., Inc., together with all the interests
thereon.
2. For defendant Rizal Commercial Banking WHEREFORE, the decision of the lower court dated
Corporation: June 29, 1994 is hereby modified as follows:
Rollo, p. 200.)
a. To pay the plaintiff actual and 1. FOR DEFENDANT MALAYAN INSURANCE
compensatory damages in the amount CO., INC: RCBC and MICO are now before us in G.R. No.
of P2,000,000.00; 128833 and 128866, respectively, seeking review and
a) To pay the plaintiff its fire loss claim in the total consequent reversal of the above dispositions of the
3. For both defendants Malayan and RCBC: amount of P74,040,518.58 less the amount of Court of Appeals.
P50,505,594.60 (per O.R. No. 3649285) plus deposited In G.R. No. 128834, RCBC likewise appeals from
a. To pay the plaintiff, jointly and severally, the following in court and damages by way of interest commencing the decision in C.A. G.R. No. CV-48376, which case, by
amounts: July 27, 1992 until the time Goyu receives the said virtue of the Court of Appeals resolution dated August 7,
amount at the rate of thirty-seven (37%) percent per 1996, was consolidated with C.A. G.R. No. CV-46162
annum which is twice the ceiling prescribed by the (subject of herein G.R. No. 128833). At issue in said
1) P1,000,000.00 as exemplary damages;
Monetary Board. petition is RCBCs right to intervene in the action
between Alfredo C. Sebastian (the creditor) and GOYU
2) P1,000,000.00 as, and for, attorneys fees;
2. FOR DEFENDANT RIZAL COMMERCIAL BANKING (the debtor), where the subject insurance policies were
CORPORATION: attached in favor of Sebastian.
3) Costs of suit.
After a careful review of the material facts as found
a) To pay the plaintiff actual and compensatory by the two courts below in relation to the pertinent and
and on the Counterclaim of defendant RCBC, damages in the amount of P5,000,000.00.
ordering the plaintiff to pay its loan applicable laws, we find merit in the submissions of
obligations with defendant RCBC in the RCBC and MICO.
amount of P68,785,069.04, as of April 27,
 The several causes of action pursued below by had not such named payee or beneficiary been RCBC, in good faith, relied upon the endorsement
GOYU gave rise to several related issues which are now specifically disclosed by the insured itself. It is also documents sent to it as this was only pursuant to the
submitted in the petitions before us. This Court, significant that GOYU voluntarily and purposely took the stipulation in the mortgage contracts. We find such
however, discerns one primary and central issue, and insurance policies from MICO, a sister company of reliance to be justified under the circumstances of the
this is, whether or not RCBC, as mortgagee, has any RCBC, and not just from any other insurance case. GOYU failed to seasonably repudiate the
right over the insurance policies taken by GOYU, the company. Alchester would not have found out that the authority of the person or persons who prepared such
mortgagor, in case of the occurrence of loss. subject pieces of property were mortgaged to RCBC endorsements. Over and above this, GOYU continued,
had not such information been voluntarily disclosed by in the meantime, to enjoy the benefits of the credit
As earlier mentioned, accordant with the credit GOYU itself. Had it not been for GOYU, Alchester would facilities extended to it by RCBC. After the occurrence
facilities extended by RCBC to GOYU, the latter not have known of GOYUs intention of obtaining of the loss insured against, it was too late for GOYU to
executed several mortgage contracts in favor of insurance coverage in compliance with its undertaking disown the endorsements for any imagined or contrived
RCBC. It was expressly stipulated in these mortgage in the mortgage contracts with RCBC, and verily, lack of authority of Alchester to prepare and issue said
contracts that GOYU shall insure the mortgaged Alchester would not have endorsed the policies to endorsements. If there had not been actually an implied
property with any of the insurance companies RCBC had it not been so directed by GOYU. ratification of said endorsements by virtue of GOYUs
acceptable to RCBC. GOYU indeed insured the inaction in this case, GOYU is at the very least estopped
mortgaged property with MICO, an insurance company On equitable principles, particularly on the ground from assailing their operative effects. To permit GOYU
acceptable to RCBC. Based on their stipulations in the of estoppel, the Court is constrained to rule in favor of to capitalize on its non-confirmation of these
mortgage contracts, GOYU was supposed to endorse mortgagor RCBC. The basis and purpose of the endorsements while it continued to enjoy the benefits of
these insurance policies in favor of, and deliver them, to doctrine was explained in Philippine National Bank vs. the credit facilities of RCBC which believed in good faith
RCBC. Alchester Insurance Agency, Inc., MICOs Court of Appeals (94 SCRA 357 [1979]), to wit: that there was due endorsement pursuant to their
underwriter from whom GOYU obtained the subject mortgage contracts, is to countenance grave
insurance policies, prepared the nine endorsements The doctrine of estoppel is based upon the grounds of contravention of public policy, fair dealing, good faith,
(see Exh. 1-Malayan to 9-Malayan; also Exh. 51-RCBC public policy, fair dealing, good faith and justice, and its and justice. Such an unjust situation, the Court cannot
to 59-RCBC), copies of which were delivered to GOYU, purpose is to forbid one to speak against his own act, sanction. Under the peculiar circumstances obtaining in
RCBC, and MICO. However, because these representations, or commitments to the injury of one to this case, the Court is bound to recognize RCBCs right
endorsements do not bear the signature of any officer of whom they were directed and who reasonably relied to the proceeds of the insurance policies if not for the
GOYU, the trial court, as well as the Court of Appeals, thereon. The doctrine of estoppel springs from equitable actual endorsement of the policies, at least on the basis
concluded that the endorsements are defective. principles and the equities in the case. It is designed to of the equitable principle of estoppel.
We do not quite agree. aid the law in the administration of justice where without
its aid injustice might result. It has been applied by this GOYU cannot seek relief under Section 53 of the
It is settled that a mortgagor and a mortgagee have Court wherever and whenever special circumstances of Insurance Code which provides that the proceeds of
separate and distinct insurable interests in the same a case so demand. insurance shall exclusively apply to the interest of the
mortgaged property, such that each one of them may person in whose name or for whose benefit it is
insure the same property for his own sole benefit.There made. The peculiarity of the circumstances obtaining in
(
is no question that GOYU could insure the mortgaged the instant case presents a justification to take exception
p. 368.)
property for its own exclusive benefit. In the present to the strict application of said provision, it having been
case, although it appears that GOYU obtained the sufficiently established that it was the intention of the
Evelyn Lozada of Alchester testified that upon parties to designate RCBC as the party for whose
subject insurance policies naming itself as the sole
instructions of Mr. Go, through a certain Mr. Yam, she benefit the insurance policies were taken out. Consider
payee, the intentions of the parties as shown by their
prepared in quadruplicate on February 11, 1992 the nine thus the following:
contemporaneous acts, must be given due
endorsement documents for GOYUs nine insurance
consideration in order to better serve the interest of
policies in favor of RCBC. The original copies of each of 1. It is undisputed that the insured pieces of property
justice and equity.
these nine endorsement documents were sent to
were the subject of mortgage contracts entered into
It is to be noted that nine endorsement documents GOYU, and the others were sent to RCBC and MICO,
between RCBC and GOYU in consideration of and for
were prepared by Alchester in favor of RCBC. The Court while the fourth copies were retained for Alchesters file
securing GOYUs credit facilities from RCBC. The
is in a quandary how Alchester could arrive at the idea (tsn, February 23, pp. 7-8). GOYU has not denied
mortgage contracts contained common provisions
of endorsing any specific insurance policy in favor of any having received from Alchester the originals of these
whereby GOYU, as mortgagor, undertook to have the
particular beneficiary or payee other than the insured endorsements.
mortgaged property properly covered against any loss granted or owing to the proprietor from the insurers of Expiry Date : February 15, 1993
by an insurance company acceptable to RCBC. the property mortgaged, or in virtue of expropriation for
public use, with the declarations, amplifications and Amount : P6,603,586.43
2. GOYU voluntarily procured insurance policies to limitations established by law, whether the estate
cover the mortgaged property from MICO, no less than remains in the possession of the mortgagor, or it passes
a sister company of RCBC and definitely an acceptable into the hands of a third person.
insurance company to RCBC.
d. Policy Number : ACIA/F-114-07662 Exhibit 3-
Significantly, the Court notes that out of the 10
Malayan
3. Endorsement documents were prepared by MICOs insurance policies subject of this case, only 8 of them
underwriter, Alchester Insurance Agency, Inc., and appear to have been subject of the endorsements
prepared and delivered by Alchester for and upon Issue Date : January 18, 1992
copies thereof were sent to GOYU, MICO, and RCBC.
GOYU did not assail, until of late, the validity of said instructions of GOYU as shown below:
endorsements. Expiry Date : (not legible)
INSURANCE POLICY
4. GOYU continued until the occurrence of the fire, to PARTICULARS ENDORSEMENT Amount : P6,603,586.43
enjoy the benefits of the credit facilities extended by
RCBC which was conditioned upon the endorsement of a. Policy Number : F-114-07795 None e. Policy Number : ACIA/F-114-07663 Exhibit 4-
the insurance policies to be taken by GOYU to cover the Malayan
mortgaged properties. Issue Date : March 18, 1992
Issue Date : January 18, 1992
This Court can not over stress the fact that upon Expiry Date : April 5, 1993
receiving its copies of the endorsement documents Expiry Date : February 9, 1993
prepared by Alchester, GOYU, despite the absence of
Amount : P9,646,224.92
its written conformity thereto, obviously considered said
endorsement to be sufficient compliance with its Amount : P9,457,972.76
obligation under the mortgage contracts since RCBC
accordingly continued to extend the benefits of its credit
facilities and GOYU continued to benefit therefrom. Just b. Policy Number : ACIA/F-174-07660 Exhibit 1-
as plain too is the intention of the parties to constitute Malayan f. Policy Number : ACIA/F-114-07623 Exhibit 7-
RCBC as the beneficiary of the various insurance Malayan
policies obtained by GOYU. The intention of the parties Issue Date : January 18, 1992
will have to be given full force and effect in this particular
Issue Date : January 13, 1992
case. The insurance proceeds may, therefore, be
exclusively applied to RCBC, which under the factual Expiry Date : February 9, 1993
circumstances of the case, is truly the person or entity Expiry Date : January 13, 1993
for whose benefit the policies were clearly intended. Amount : P4,307,217.54
Amount : P24,750,000.00
Moreover, the laws evident intention to protect the
interests of the mortgagee upon the mortgaged property
is expressed in Article 2127 of the Civil Code which
states:
g. Policy Number : ACIA/F-174-07223 Exhibit 6-
ART. 2127. The mortgage extends to the natural c. Policy Number : ACIA/F-114-07661 Exhibit 2- Malayan
accessions, to the improvements, growing fruits, and the Malayan
rents or income not yet received when the obligation Issue Date : May 29, 1991
becomes due, and to the amount of the indemnity Issue Date : January 18, 1992
Expiry Date : June 27, 1992 for The Court of Appeals simply echoed the
MICO.) declaration of the trial court finding that GOYUS total
Amount : P6,000,000.00 obligation to RCBC was only P68,785,060.04 as of April
Policy Number F-114-07795 [(a) above] has not 27, 1992, thus sanctioning the trial courts exclusion of
been endorsed. This fact was admitted by MICOs Promissory Note No. 421-92 (renewal of Promissory
witness, Atty. Farolan (tsn, February 16, 1994, p. Note No. 908-91) and Promissory Note No. 420-92
25). Likewise, the record shows no endorsement for (renewal of Promissory Note No. 952-91) on the ground
h. Policy Number : CI/F-128-03341 None that their execution is highly questionable for not only
Policy Number CI/F-128-03341 [(h) above]. Also, one of
the endorsement documents, Exhibit 5-Malayan, refers are these dated after the fire, but also because the
Issue Date : May 3, 1991 to a certain insurance policy number ACIA-F-07066, signatures of either GOYU or any its representative are
which is not among the insurance policies involved in conspicuously absent. Accordingly, the Court of
Expiry Date : May 3, 1992 the complaint. Appeals speculated thusly:

The proceeds of the 8 insurance policies endorsed Hence, this Court is inclined to conclude that said
Amount : P10,000,000.00 to RCBC aggregate to P89,974,488.36. Being promissory notes were pre-signed by plaintiff in blank
exclusively payable to RCBC by reason of the terms, as averred by plaintiff, in contemplation of the
endorsement by Alchester to RCBC, which we already speedy grant of future loans, for the same practice of
ruled to have the force and effect of an endorsement by procedure has always been adopted in its previous
i. Policy Number : F-114-07402 Exhibit 8-Malayan GOYU itself, these 8 policies can not be attached by dealings with the bank.
GOYUs other creditors up to the extent of the GOYUs
outstanding obligation in RCBCs favor. Section 53 of the
Issue Date : September 16, 1991 Insurance Code ordains that the insurance proceeds of
the endorsed policies shall be applied exclusively to the Rollo, pp. 181-182.)
Expiry Date : October 19, 1992 proper interest of the person for whose benefit it was
made. In this case, to the extent of GOYUs obligation The fact that the promissory notes bear dates
Amount : P32,252,125.20 with RCBC, the interest of GOYU in the subject policies posterior to the fire does not necessarily mean that the
had been transferred to RCBC effective as of the time documents are spurious, for it is presumed that the
of the endorsement. These policies may no longer be ordinary course of business had been followed
attached by the other creditors of GOYU, like Alfredo (Metropolitan Bank and Trust Company vs. Quilts and
Sebastian in the present G.R. No. 128834, which may All, Inc., 222 SCRA 486 [1993]). The obligor and not the
j. Policy Number : F-114-07525 Exhibit 9-Malayan nonetheless forthwith be dismissed for being moot and holder of the negotiable instrument has the burden of
academic in view of the results reached herein. Only the proof of showing that he no longer owes the obligee any
Issue Date : November 20, 1991 two other policies amounting to P19,646,224.92 may be amount (Travel-On, Inc. vs. Court of Appeals, 210
validly attached, garnished, and levied upon by GOYUs SCRA 351 [1992]).
Expiry Date : December 5, 1992 other creditors. To the extent of GOYUs outstanding
Even casting aside the presumption of regularity of
obligation with RCBC, all the rest of the other insurance
private transactions, receipt of the loan amounting to
policies above-listed which were endorsed to RCBC,
Amount : P6,603,586.43 P121,966,058.67 (Exhibits 1-29, RCBC) was admitted
are, therefore, to be released from attachment,
by GOYU as indicated in the testimony of Go Song Hiap
garnishment, and levy by the other creditors of GOYU.
when he answered the queries of the trial court:
This brings us to the next relevant issue to be
ATTY. NATIVIDAD
resolved, which is, the extent of GOYUs outstanding
(pp. 456-
obligation with RCBC which the proceeds of the 8 Q: But insofar as the amount stated in Exhibits 1 to
457,
insurance policies will discharge and liquidate, or put 29-RCBC, you received all the amounts stated
Record;
differently, the actual amount of GOYUs liability to therein?
Folder of
RCBC.
Exhibits A: Yes, sir, I received the amount.
 COURT The Court of Appeals erred in placing much ____________ _____________
significance on the fact that the excluded promissory
He is asking if he received all the amounts stated in notes are dated after the fire. It failed to consider that
Exhibits 1 to 29-RCBC? Total: 108,083,971.49 8,218,021.11[2]
said notes had for their origin transactions
WITNESS: consummated prior to the fire. Thus, careful attention
LESS:
must be paid to the fact that Promissory Notes No. 420-
Yes, Your Honor, I received all the amounts. 92 and 421-92 are mere renewals of Promissory Notes
No. 908-91 and 952-91, loans already availed of by 1) Proceeds from
COURT GOYU.
Indicated in the Promissory Notes? Seaboard Eastern
The two courts below erred in failing to see that the
WITNESS promissory notes which they ruled should be excluded
for bearing dates which are after that of the fire, are Insurance Company: 6,095,145.81
A. The promissory Notes they did not give to me but mere renewals of previous ones. The proceeds of the
the amount I asked which is correct, Your loan represented by these promissory notes were 2) Proceeds from
Honor. admittedly received by GOYU. There is ample factual
and legal basis for giving GOYUs judicial admission of Equitable Insurance
COURT liability in the amount of P116,301,992.60 full force and
Q: You mean to say the amounts indicated in effect
Company: 2,756,373.00
Exhibits 1 to 29-RCBC is correct? It should, however, be quickly added that whatever
A: Yes, Your Honor. amount RCBC may have recovered from the other 3) Payment from
insurers of the mortgaged property will, nonetheless,
(tsn, Jan. 14, 1994, p. 26.) have to be applied as payment against GOYUs
foreign department
obligation. But, contrary to the lower courts findings,
Furthermore, aside from its judicial admission of payments effected by GOYU prior to January 21, 1993
having received all the proceeds of the 29 promissory should no longer be deducted. Such payments had negotiation: 203,584.89
notes as hereinabove quoted, GOYU also offered and obviously been duly considered by GOYU, in its
admitted to RCBC that its obligation be fixed at aforequoted letter dated March 9, 1993, wherein it 9,055,104.70[3]
P116,301,992.60 as shown in its letter dated March 9, admitted that its past due account totaled
1993, which pertinently reads: P116,301,992.60 as of January 21, 1993. NET AMOUNT as of January 21, 1993: P
The net obligation of GOYU, after deductions, is 107,246,887.90
We wish to inform you, therefore that we are ready and
willing to pay the current past due account of this thus reduced to P107,246,887.90 as of January 21,
company in the amount of P116,301,992.60 as of 21 1993, to wit: The need for the payment of interest due upon the
January 1993, specified in pars. 15, p. 10, and 18, p. 13 principal amount of the obligation, which is the cost of
of your affidavits of Third Party Claims in the Urban case Total Obligation as admitted by GOYU as of January 21, money to RCBC, the primary end and the ultimate
at Makati, Metro Manila and in the Zamboanga case at 1993: P116,301,992.60 reason for RCBCs existence and being, was duly
Zamboanga city, respectively, less the total of recognized by the trial court when it ruled favorably on
P8,851,519.71 paid from the Seaboard and Equitable RCBCs counterclaim, ordering GOYU to pay its loan
Broken down as follows obligation with RCBC in the amount of P68,785,069.04,
insurance companies and other legitimate
deductions. We accept and confirm this amount of as of April 27,1992, with interest thereon at the rate
P116,301,992.60 as stated as true and correct. Principal[1] Interest stipulated in the respective promissory notes (without
surcharges and penalties) per computation, pp. 14-A,
Regular 80,535,946.32 14-B, 14-C (Record, p. 479). Inexplicably, the Court of
(
Appeals, without even laying down the factual or legal
Exhibit BB.)
justification for its ruling, modified the trial courts ruling
FDU 7,548,025.17
and ordered GOYU to pay the principal amount of
P68,785,069.04 without any interest, surcharges and a bank to grant loans for which it will not charge any the court is made (at which time the quantification of
penalties (Rollo, p. 200). interest at all. We fail to find justification for the Court of damages may be deemed to have been reasonably
Appeals outright deletion of the payment of interest as ascertained). The actual base for the computation of
It is to be noted in this regard that even the trial agreed upon in the respective promissory notes. This legal interest shall, in any case, be on the amount finally
court hedgingly and with much uncertainty deleted the constitutes gross error. adjudged.
payment of additional interest, penalties, and charges,
in this manner: For the computation of the interest due to be paid
to RCBC, the following rules of thumb laid down by this 3. When the judgment of the court awarding a sum of
Court in Eastern Shipping Lines, Inc. vs. Court of money becomes final and executory, the rate of legal
Regarding defendant RCBCs commitment not to charge interest, whether the case falls under paragraph 1 or
additional interest, penalties and surcharges, the same Appeals (234 SCRA 78 [1994]), shall apply, to wit:
paragraph 2, above, shall be 12% per annum from such
does not require that it be embodied in a document or finality until its satisfaction, this interim period being
some form of writing to be binding and enforceable. The I. When an obligation, regardless of its source, i.e., law, deemed to be by then an equivalent to a forbearance of
principle is well known that generally a verbal contracts, quasi-contracts, delicts or quasi-delicts is credit.
agreement or contract is no less binding and effective breached, the contravenor can be held liable for
than a written one. And the existence of such a verbal damages. The provisions under Title XVIII on Damages
agreement has been amply established by the evidence of the Civil Code govern in determining the measure of
in this case. In any event, regardless of the existence of recoverable damages. pp. 95-97.)
such verbal agreement, it would still be unjust and
inequitable for defendant RCBC to charge the plaintiff II. With regard particularly to an award of interest in the There being written stipulations as to the rate of
with surcharges and penalties considering the latters concept of actual and compensatory damages, the rate interest owing on each specific promissory note as
pitiful situation. (Emphasis supplied.) of interest, as well as the accrual thereof, is imposed, as summarized and tabulated by the trial court in its
follows: decision (pp.470 and 471, Record) such agreed interest
( rates must be followed. This is very clear from
R paragraph II, sub-paragraph 1 quoted above.
1. When the obligation is breached, and it consists in the
payment of a sum e of money, i.e., a loan or forbearance On the issue of payment of surcharges and
c
of money, the interest due should be that which may penalties, we partly agree that GOYUs pitiful situation
o
have been stipulated in writing. Furthermore, the must be taken into account. We do not agree, however,
interest due shallr itself earn legal interest from the time that payment of any amount as surcharges and
d
it is judicially demanded. In the absence of stipulation, penalties should altogether be deleted. Even assuming
,
the rate of interest shall be 12% per annum to be that RCBC, through its responsible officers, herein
p
computed from default, i.e., from judicial or extrajudicial petitioners Eli Lao and Uy Chun Bing, may have relayed
demand under and . subject to the provisions of Article its assurance for assistance to GOYU immediately after
1169 of the Civil 4Code. the occurrence of the fire, we cannot accept the lower
7 courts finding that RCBC had thereby ipso
6 facto effectively waived collection of any additional
2. When an obligation,
) not constituting a loan or
forbearance of money, is breached, an interest on the interests, surcharges, and penalties from
amount of damages awarded may be imposed at the GOYU. Assurances of assistance are one thing, but
The essence or rationale for the payment of discretion of the court at the rate of 6% per annum. No waiver of additional interests, surcharges, and penalties
interest or cost of money is separate and distinct from interest, however, shall be adjudged on unliquidated is another.
that of surcharges and penalties. What may justify a claims or damages except when or until the demand can
court in not allowing the creditor to charge surcharges Surcharges and penalties agreed to be paid by the
be established with reasonable certainty. Accordingly, debtor in case of default partake of the nature of
and penalties despite express stipulation therefor in a where the demand is established with reasonable
valid agreement, may not equally justify non-payment of liquidated damages, covered by Section 4, Chapter 3,
certainty, the interest shall begin to run from the time the Title XVIII of the Civil Code. Article 2227 thereof
interest. The charging of interest for loans forms a very claim is made judicially or extrajudicially (Art. 1169, Civil
essential and fundamental element of the banking provides:
Code) but when such certainty cannot be so reasonably
business, which may truly be considered to be at the established at the time the demand is made, the interest
very core of its existence or being. It is inconceivable for shall begin to run only from the date of the judgment of
ART. 2227. Liquidated damages, whether intended as a be inflicted unless the evidence and circumstances injunction that was yet to be heard on the merits by the
indemnity or penalty, shall be equitably reduced if they show that such refusal was willful and without lower court. Elevated to the appellate court, it might be
are iniquitous and unconscionable. reasonable cause as the facts appear to a reasonable stressed, were mere incidents of the principal case still
and prudent man (Buffalo Ins. Co. vs. Bommarito [CCA pending with the trial court. In Municipality of Bian,
In exercising this vested power to determine what 8th] 42 F [2d] 53, 70 ALR 1211; Phoenix Ins. Co. vs. Laguna vs. Court of Appeals, 219 SCRA 69, we ruled
is iniquitous and unconscionable, the Court must Clay, 101 Ga. 331, 28 SE 853, 65 Am St Rep that the Court of Appeals would have no jurisdiction in
consider the circumstances of each case. It should be 307; Kusnetsky vs. Security Ins. Co., 313 Mo. 143, 281 a certiorari proceeding involving an incident in a case to
stressed that the Court will not make any sweeping SW 47, 45 ALR 189). The case at bar does not show rule on the merits of the main case itself which was not
ruling that surcharges and penalties imposed by banks that MICO wantonly and in bad faith delayed the release on appeal before it.
for non-payment of the loans extended by them are of the proceeds. The problem in the determination of
generally iniquitous and unconscionable. What may be who is the actual beneficiary of the insurance policies,
iniquitous and unconscionable in one case, may be aggravated by the claim of various creditors who wanted pp. 701-702.)
totally just and equitable in another. This provision of to partake of the insurance proceeds, not to mention the
law will have to be applied to the established facts of any importance of the endorsement to RCBC, to our mind, Anent the right of RCBC to intervene in Civil Case
given case. Given the circumstances under which and as now borne out by the outcome herein, justified No. 1073, before the Zamboanga Regional Trial Court,
GOYU found itself after the occurrence of the fire, the MICO in withholding payment to GOYU. since it has been determined that RCBC has the right to
Court rules the surcharges rates ranging anywhere from the insurance proceeds, the subject matter of
In adjudging RCBC liable in damages to GOYU, intervention is rendered moot and
9% to 27%, plus the penalty charges of 36%, to be the Court of Appeals said that RCBC cannot avail itself
definitely iniquitous and unconscionable. The Court academic. Respondent Sebastian must, however, yield
of two simultaneous remedies in enforcing the claim of to the preferential right of RCBC over the MICO
tempers these rates to 2% and 3%, an unpaid creditor, one for specific performance and the
respectively. Furthermore, in the light of GOYUs offer to insurance policies. It is basic and fundamental that the
other for foreclosure. In doing so, said the appellate first mortgagee has superior rights over junior
pay the amount of P116,301,992.60 to RCBC as March court, the second action is deemed barred, RCBC
1993 (See: Exhibit BB), which RCBC refused, we find it mortgagees or attaching creditors (Alpha Insurance &
having split a single cause of action (Rollo, pp. 195- Surety Co. vs. Reyes, 106 SCRA 274 [1981]; Sun Life
more in keeping with justice and equity for RCBC not to 199). The Court of Appeals was too accommodating in
charge additional interest, surcharges, and penalties Assurance Co. of Canada vs. Gonzales Diaz, 52 Phil.
giving due consideration to this argument of GOYU, for 271 [1928]).
from that time onward. the foreclosure suit is still pending appeal before the
Given the factual milieu spread hereover, we rule same Court of Appeals in CA G.R CV No. 46247, the WHEREFORE, the petitions are hereby
that it was error to hold MICO liable in damages for case having been elevated by RCBC. GRANTED and the decision and resolution of
denying or withholding the proceeds of the insurance December 16, 1996 and April 3, 1997 in CA-G.R. CV
In finding that the foreclosure suit cannot prosper, No. 46162 are hereby REVERSED and SET ASIDE,
claim to GOYU. the Fifteenth Division of the Court of Appeals pre- and a new one entered:
Firstly, by virtue of the mortgage contracts as well empted the resolution of said foreclosure case which is
as the endorsements of the insurance policies, RCBC not before it. This is plain reversible error if not grave
1. Dismissing the Complaint of private respondent
has the right to claim the insurance proceeds, in abuse of discretion.
GOYU in Civil Case No. 93-65442 before Branch 3 of
substitution of the property lost in the fire. Having As held in Pea vs. Court of Appeals (245 SCRA the Manila Regional Trial Court for lack of merit;
assigned its rights, GOYU lost its standing as the 691[1995]):
beneficiary of the said insurance policies.
2. Ordering Malayan Insurance Company, Inc. to deliver
Secondly, for an insurance company to be held It should have been enough, nonetheless, for the to Rizal Commercial Banking Corporation the proceeds
liable for unreasonably delaying and withholding appellate court to merely set aside the questioned of the insurance policies in the amount of
payment of insurance proceeds, the delay must be orders of the trial court for having been issued by the P51,862,390.94 (per report of adjuster Toplis & Harding
wanton, oppressive, or malevolent (Zenith Insurance latter with grave abuse of discretion. In likewise (Far East), Inc., Exhibits 2 and 2-1), less the amount of
Corporation vs. CA, 185 SCRA 403 [1990]). It is enjoining permanently herein petitioner from entering in P50,505,594.60 (per O.R. No. 3649285);
generally agreed, however, that an insurer may in good and interfering with the use or occupation and
faith and honesty entertain a difference of opinion as to enjoyment of petitioners (now private respondent) 3. Ordering the Clerk of Court to release the amount of
its liability. Accordingly, the statutory penalty for residential house and compound, the appellate court in P50,505,594.60 including the interests earned to Rizal
vexatious refusal of an insurer to pay a claim should not effect, precipitately resolved with finality the case for Commercial Banking Corporation;
4. Ordering Goyu & Sons, Inc. to pay its loan obligation contending that the insurance policies were either attached mortgagor and a mortgagee have separate and distinct
with Rizal Commercial Banking Corporation in the pursuant to writs of attachments/garnishments or that insurable interests in the same mortgaged property, such
principal amount of P107,246,887.90, with interest at creditors are claiming to have a better right that each one of them may insure the same property for his
the respective rates stipulated in each promissory note own sole benefit
from January 21, 1993 until finality of this judgment, and GOYU filed a complaint for specific performance and
surcharges at 2% and penalties at 3% from January 21, damages at the RTC although it appears that GOYU obtained the subject
1993 to March 9, 1993, minus payments made by insurance policies naming itself as the sole payee, the
Malayan Insurance Company, Inc. and the proceeds of RCBC, one of GOYU’s creditors, also filed with MICO its intentions of the parties as shown by their
the amount deposited with the trial court and its earned formal claim over the proceeds of the insurance policies, contemporaneous acts, must be given due consideration in
interest. The total amount due RCBC at the time of the but said claims were also denied for the same reasons that
finality of this judgment shall earn interest at the legal order to better serve the interest of justice and equity
MICO denied GOYU’s claims
rate of 12% in lieu of all other stipulated interests and
charges until fully paid. 8 endorsement documents were prepared by Alchester in
RTC: Confirmed GOYU’s other creditors (Urban Bank, favor of RCBC
Alfredo Sebastian, and Philippine Trust Company)
The petition of Rizal Commercial Banking obtained their writs of attachment covering an aggregate MICO, a sister company of RCBC
Corporation against the respondent Court in CA-GR CV
amount of P14,938,080.23 and ordered that 10 insurance
48376 is DISMISSED for being moot and academic in GOYU continued to enjoy the benefits of the credit facilities
policies be deposited with the court minus the said amount
view of the results herein arrived at. Respondent
so MICO deposited P50,505,594.60. extended to it by RCBC.
Sebastians right as attaching creditor must yield to the
preferential rights of Rizal Commercial Banking
Another Garnishment of P8,696,838.75 was handed down GOYU is at the very least estopped from assailing their
Corporation over the Malayan insurance policies as first
mortgagee. operative effects.
RTC: favored GOYU against MICO for the claim, RCBC for
SO ORDERED. damages and to pay RCBC its loan The two courts below erred in failing to see that the
promissory notes which they ruled should be excluded for
Lessons Applicable: Assignee (Insurance)
CA: Modified by increasing the damages in favor of GOYU bearing dates which are after that of the fire, are mere
renewals of previous ones
In G.R. No. 128834, RCBC seeks right to intervene in the
action between Alfredo C. Sebastian (the creditor) and RCBC has the right to claim the insurance proceeds, in
FACTS:
GOYU (the debtor), where the subject insurance policies substitution of the property lost in the fire. Having assigned
RCBC Binondo Branch initially granted a credit facility of were attached in favor of Sebastian its rights, GOYU lost its standing as the beneficiary of the
P30M to Goyu & Sons, Inc. GOYU’s applied again and said insurance policies
RTC and CA: endorsements do not bear the signature of
through Binondo Branch key officer's Uy’s and Lao’s
any officer of GOYU concluded that the endorsements insurance company to be held liable for unreasonably
recommendation, RCBC’s executive committee increased
favoring RCBC as defective. delaying and withholding payment of insurance proceeds,
its credit facility to P50M to P90M and finally to P117M.
the delay must be wanton, oppressive, or malevolent - not
As security, GOYU executed 2 real estate mortgages and shown
2 chattel mortgages in favor of RCBC.
ISSUE: W/N RCBC as mortgagee, has any right over the Sebastian’s right as attaching creditor must yield to the
insurance policies taken by GOYU, the mortgagor, in case preferential rights of RCBC over the Malayan insurance
GOYU obtained in its name 10 insurance policy on the
of the occurrence of loss policies as first mortgagee.
mortgaged properties from Malayan Insurance Company,
Inc. (MICO). In February 1992, he was issued 8 insurance
policies in favor of RCBC.
HELD: YES.
April 27, 1992: One of GOYU’s factory buildings was
burned so he claimed against MICO for the loss who denied