Rose Packing Co., Inc. v. Philippine Commercial International Bank

FIRST DIVISION

[G.R. No. 207212. December 2, 2021.]

ROSE PACKING CO., INC., petitioner,vs. PHILIPPINE COMMERCIAL INTERNATIONAL BANK [NOW BANCO DE ORO UNIBANK, INC.], respondent.

NOTICE

Sirs/Mesdames :

Please take notice that the Court, First Division, issued a Resolution datedDecember 2, 2021which reads as follows:

"G.R. No. 207212 (Rose Packing Co., Inc. v. Philippine Commercial International Bank [now Banco De Oro Unibank, Inc.]). — On December 12, 1962, Philippine Commercial International Bank (PCI Bank) approved the letter-request of Rose Packing Co., Inc. (Rose Packing) for the reactivation of its credit lines amounting to P700,000.00 and granted its application for a P300,000.00 loan fully secured by real estate and chattel mortgages on condition that PCI Bank would appoint its Executive Vice President Roberto S. Benedicto as its representative in Rose Packing's Board of Directors. On August 3, 1966 and October 5, 1966, PCI Bank granted Rose Packing additional loans: P710,000.00 for payment of five parcels of land in Pasig, Rizal, P500,000.00 for operating capital, and P200,000.00 to be paid directly to Rose Packing's creditors. Only P300,000.00 each was released by PCI Bank from the first two loans. Rose Packing's obligations were consolidated by PCI Bank at P1,597,000.00. 1

On June 29, 1967, the Development Bank of the Philippines (DBP) approved Rose Packing's loan application for P1,840,000.00 and a guarantee for $652,682.00 for the purchase of can making equipment. Upon receipt of the notice of approval, Rose Packing advised PCI Bank that it would partially pay its account by P800,000.00, and requested the release of the titles of the Pasig lots for delivery to DBP. PCI Bank verbally denied Rose Packing's request saying that all of its obligations must be liquidated before the titles could be released. With DBP's consent, Rose Packing acquired a parcel of land in Valenzuela, Bulacan with the loan proceeds. 2

On January 5, 1968, PCI Bank filed a complaint for collection against Rose Packing and its President, Rene Knecht (Knecht) before the Court of First Instance (CFI) of Manila docketed as Civil Case No. 71697. On January 22, 1968, PCI Bank gave notice that it would foreclose the real estate mortgage of Rose Packing. The sheriff served the notice of sheriffs sale over the three parcels of land located in Pasig and Cainta, Rizal (TCT Nos. 73620, 175595 and 177019); the public auction was set on July 18, 1968 at 10:00 a.m. 3

On July 15, 1968, Rose Packing filed a complaint before the CFI of Rizal docketed as Civil Case No. 11015 seeking the following reliefs: (1) to enjoin PCI Bank and the sheriff from proceeding with the foreclosure sale; (2) to fix a new period for the payment of Rose Packing's obligations to PCI Bank; and (3) to order PCI Bank to give up management of Rose Packing and pay damages and attorney's fees. Rose Packing also prayed for the ex-parte issuance of a writ of preliminary injunction enjoining PCI Bank and the sheriff from proceeding with the July 18, 1968 auction sale. On July 17, 1968, the CFI issued a restraining order. On January 31, 1969, however, the CFI denied Rose Packing's application for a writ of preliminary injunction. 4

Unsuccessful at a reconsideration, Rose Packing filed a petition for certiorari with the Court of Appeals (CA) praying for the issuance of a restraining order and preliminary injunction against the foreclosure. On May 13, 1969, the CA resolved to issue a preliminary injunction upon posting by Rose Packing of a bond. Since the foreclosure sale was already held on May 9, 1969, Rose Packing moved that the injunction be modified in that the provincial sheriff should be enjoined from giving effect to the foreclosure sale. The CA denied the motion and gave Rose Packing 60 days within which to redeem its properties. The CA denied the succeeding motions of Rose Packing. PCI Bank then consolidated the title over the three foreclosed properties. 5

Rose Packing elevated the CA decision to the Supreme Court. On November 14, 1988, the Court, in its Decision, 6 reversed the assailed decision and ruled that PCI Bank had no right to the extrajudicial foreclosure of the mortgaged properties before trial on the merits, to wit: CAIHTE

PREMISES CONSIDERED, (1) the decision of the Court of Appeals is REVERSED insofar as it sustained: (a) the lower court's denial of petitioner's application for preliminary injunction and (b) the validity of the foreclosure sale; (2) the lower court is ordered to proceed with the trial on the merits of the main case together with a determination of exactly how much are petitioner's liabilities in favor of respondent bank PCIB so that proper measures may be taken for their eventual liquidation; (3) the preliminary injunction issued by this Court on April 28, 1971 remains in force until the merits of the main case are resolved; and (4) the motion of respondent bank dated April 1, 1981 for leave to lease the real properties in custodia legis is DENIED.

SO ORDERED. 7

On January 19, 1993, the Court granted Rose Packing's motion for the reconveyance of the properties. PCI Bank thus revived Rose Packing's outstanding account. 8 On July 8, 2009, the trial court ruled on the two remaining issues for resolution as agreed upon during the pre-trial: (1) whether PCI Bank was liable to Rose Packing for damages; and (2) whether Rose Packing was liable to PCI Bank for the payment of its outstanding loan obligations under the promissory notes, and for attorney's fees and litigation expenses. The trial court held that PCI Bank was not liable to Rose Packing for damages. Rose Packing failed to prove its claim that PCI Bank's representatives mismanaged its operations, and the damages in the form of business losses and unrealized rental income it was claiming. The Court also noted that the properties were returned to Rose Packing in 1993 in compliance with the Supreme Court's order to vacate and surrender the titles of the properties to the Register of Deeds for cancellation and for issuance of new titles to Rose Packing. 9

The trial court further ruled that PCI Bank is entitled to collect on Rose Packing's outstanding obligations. Rose Packing admitted in its complaint that it owed PCI Bank P1,060,266.00 plus interest and penalties. When the Court invalidated the foreclosure, PCI Bank was constrained to reinstate Rose Packing's loan account and the balance ballooned to P45,249,519.00 by January 2007. Knecht's bare claim that the loans had already been paid cannot overcome the admission made by Rose Packing in its complaint that obligations under the promissory notes remain unpaid. However, the trial court equitably reduced the interest on the principal, 10 thus:

WHEREFORE, foregoing premises considered, judgment is hereby rendered in favor of the defendant and against the plaintiff, as follows:

A. The present complaint is hereby dismissed for insufficiency of evidence.

B. Ordering the plaintiff through its trustee, Knecht, Inc. to pay its outstanding loan obligations to the defendant Bank under the subject Promissory Notes (Exhibits "3" to "3-M") in the amount of [P]1,060,266.25 (principal obligation) plus interest of twelve percent (12%) per annum from the date of filing of its Answer on 16 August 1968 which is considered defendants' judicial demand until satisfaction of the judgment.

C. Order the plaintiff through its trustee, Knecht, Inc., to pay defendant Bank reasonable attorney's fees and litigation expenses in the amount of [P]300,000.00.

SO ORDERED. 11

Rose Packing moved for reconsideration on the ground that the trial court's conclusions were contrary to the Supreme Court's finding on the illegality of the foreclosure. The trial court denied the motion. 12 Undaunted, Rose Packing appealed the decision to the CA docketed as CA-G.R. CV No. 95174. On June 6, 2012, 13 the CA denied Rose Packing's appeal and explained that the Supreme Court did not make a final determination on the right of PCI Bank to foreclose the mortgaged properties. The only issue resolved by the CA was whether PCI Bank had the right to foreclose before trial on the merits. The CA ruled that the foreclosure was premature because the trial court needed to determine the following: (1) whether Rose Packing was already in default, and/or whether PCI Bank made a demand for the payment of Rose Packing's obligations; and (2) whether there was cause or consideration for the loan. 14

The CA found that Rose Packing was in default. The loans subject of the foreclosure were 14 promissory notes executed by Knecht from August 9, 1966 to October 20, 1967 in the total amount of P1,060,266.25. Thirteen of the notes matured prior to the notice of sale on January 22, 1968. While no demand or notice of dishonor in the subject notes was made by PCI Bank, Rose Packing expressly waived its right to demand. Thus, demand was unnecessary for Rose Packing to be considered in default. Further, there was cause or consideration for the loan and mortgage. Whether PCI Bank mismanaged or misappropriated the loans can be determined by reviewing if the loans were used for the purposes they were intended, or if they benefitted Rose Packing. Knecht admitted that the loan proceeds were used to buy land and as working capital of Rose Packing. Hence, the loan proceeds were not mismanaged to the extent that would result in failure of consideration. Consequently, PCI Bank had the right to foreclose the mortgage of Rose Packing. 15

After examining the promissory notes, the CA determined that of the P1,060,266.25 outstanding loan of Rose Packing, P519,566.25 was secured while P540,710.00 was unsecured. Hence, Rose Packing should pay interest at 14% per annum, as stipulated, on the unsecured loans from the respective maturity dates of the loans until satisfaction of the judgment. For the secured loans, Rose Packing should pay interest at 12% per annum from the maturity dates of the loans up to the foreclosure of the mortgages on May 9, 1969. Accrual of interest shall be suspended from the period PCI Bank had possession of the properties and shall be reinstated from January 19, 1993, the date the Court ordered PCI Bank to vacate the premises and to surrender the titles to the Register of Deeds for cancellation, until satisfaction of the judgment. 16 DETACa

The CA found that PCI Bank had not been faithful in its dealings with Rose Packing. However, Rose Packing failed to substantiate the damage it suffered. Rose Packing's claim that it would have been able to expand its business or pay off its short-term obligations to PCI Bank, and prevent the foreclosure had it been able to secure additional funding was speculative. Rose Packing's estimate of damages based on the growth supposedly experienced by Pure Foods over 34 years at 25.17% per annum was similarly speculative. Rose Packing's audited financial statements from 1965-1967 show that its liabilities exceeded its assets. Moreover, it was unlikely to attain the estimated growth even if the foreclosure did not happen, 17 to wit:

WHEREFORE, foregoing premises considered, judgment is hereby rendered modifying the court a quo'sdecision, thus:

The plaintiff-appellant through its trustee Knecht, Inc. shall pay its outstanding loan obligations to the defendant-appellee under the subject promissory notes (Exhibits "3" to "3-M") in the amount of [P]1,060,266.25 (principal obligation) plus interest computed as follows:

(1) Interest at 14% per annum on the unsecured loan computed from their respective maturity dates until satisfaction of the judgment.

(2) Interest at 12% per annum on the secured loans computed from their respective maturity dates until 9 May 1969; and recomputed from 19 January 1993 until satisfaction of judgment.

The award of attorney's fees and litigation expenses is deleted.

SO ORDERED.18

Dissatisfied, Rose Packing moved for reconsideration. On April 26, 2013, the CA denied Rose Packing's motion for lack of merit. 19

Aggrieved, Rose Packing filed this Petition for Review on Certiorari20 rehashing the arguments it raised in its motion for reconsideration of the CA Decision. Rose Packing reiterates that PCI Bank took control and supervision of its operations and "killed the company from the inside." PCI Bank sold Rose Packing's properties and foreclosed its mortgage/s. While the Court ordered reconveyance of the properties in 1993, PCI Bank merely surrendered the titles but did not turn over actual possession over the parcels of land to Rose Packing. The properties have become overrun with informal settlers and this has prevented Rose Packing from making use of the properties. Rose Packing insists that the Court's ruling of foreclosure was illegal. Accordingly, it is entitled to damages equivalent to unrealized rentals and business opportunities it lost as a result of the inequitable acts of PCI Bank. Finally, Rose Packing contends that the properties of Knecht taken by PCI Bank, particularly realty in Bel Air and in Zamboanga, are already enough to pay for its outstanding debt to PCI Bank.

The petition is unmeritorious.

Rose Packing raises a question regarding the CA and the RTC's appreciation of the evidence which is one of fact and is beyond the ambit the Court's jurisdiction in a petition for review on certiorari. The resolution of the issues of whether PCI Bank mismanaged the operations of Rose Packing, the extent of the damage caused by the mismanagement and the foreclosure, if any, and whether the loans of Rose Packing remain unpaid, require an evaluation of the evidence. Yet, it is not the Court's task to go over the proofs presented below to ascertain if they were appreciated and weighed correctly, most especially when the CA and the RTC speak as one in their findings and conclusions. 21 To be sure, the CA and the RTC considered and passed upon the very issues raised by Rose Packing in the present petition. Foremost, the RTC ruled that Rose Packing failed to discharge its burden to prove that PCI Bank is guilty of mismanagement that would make it liable for damages. 22 The CA similarly ruled that PCT Bank did not mismanage Rose Packing's funds, particularly the bank loans. Rose Packing's president disclosed that the loan proceeds were used to purchase land and as working capital. 23 Moreover, the RTC found that Rose Packing expressly admitted in its complaint that it owed PCI Bank P1,060,266.00 plus interest and penalties. PCI Bank was constrained to reinstate the loan account of Rose Packing after the foreclosure was invalidated by the Court. Thus, PCI Bank is entitled to collect from Rose Packing. The CA similarly ruled that the loan of Rose Packing remained unpaid and identified the secured and clean portions of the outstanding obligation. The RTC and the CA equitably reduced the interest on the loan. The CA even suspended the accrual of the interest from the period PCI Bank had possession of the properties until the Court ordered PCI Bank to vacate the premises and surrender the titles for cancellation. Lastly, the CA and the RTC denied Rose Packing's claim for damages for lack of evidence. aDSIHc

While it is widely held that this rule of limited jurisdiction admits of exceptions, none exists in the instant case. 24 At any rate, Rose Packing failed to sufficiently show any reversible error. The records reveal that Rose Packing was in default for 13 promissory notes that it executed in favor of PCI Bank. The CA correctly determined that these promissory notes had maturities prior to the date of the notice of sale on January 22, 1968. Similarly, the CA aptly ruled that Rose Packing waived its right to a demand under these promissory notes. Therefore, the lack of demand could not have prevented PCI Bank from exercising its right to foreclose the mortgage with respect to the loans in default. More importantly, there is no preponderant evidence that PCI Bank mismanaged or misappropriated the loan proceeds. As equitable measures, the CA and the RTC properly reduced the interest owed by Rose Packing to PCI Bank, suspended the running of the interest during the period that PCI Bank was in possession of the parcels of land, and did not award PCI Bank attorney's fees after finding that Rose Packing was merely trying to enforce its perceived rights when it filed the complaint. 25 Finally, given the duration of the case, it cannot be denied that Rose Packing was afforded numerous opportunities and remedies to prove its claims against PCI Bank. It is time for this long dispute that has vexed both parties to be finally laid to rest.

FOR THESE REASONS, the petition is DENIED. The Court of Appeals' Decision dated June 6, 2012 in CA-G.R. CV No. 95174 is AFFIRMED.

SO ORDERED."

By authority of the Court:

(SGD.) LIBRADA C. BUENADivision Clerk of Court

By:

MARIA TERESA B. SIBULODeputy Division Clerk of Court

Footnotes

1. Rollo, pp. 88-89.

2. Id. at 89-90.

3. Id. at 90.

4. Id. at 90-91.

5. Id. at 91-93.

6. Id. at 87-103.

7. Id. at 102-103.

8. Id. at 82-83.

9. Id. at 71-84. Decision in Civil Case No. 11015.

10. Id. at 82-83.

11. Id. at 84.

12. Id. at 85-86.

13. Id. at 23-52. Penned by Associate Justice Leoncia Real-Dimagiba with the concurrence of Associate Justices Hakim S. Abdulwahid and Marlene Gonzales-Sison.

14. Id. at 30-34.

15. Id. at 34-44.

16. Id. at 44-46.

17. Id. at 46-50.

18. Id. at 50-51.

19. Id. at 64-65.

20. Id. at 8-22.

21. See Gatan v. Vinarao, 820 Phil. 257, 273-274, citing Bank of the Philippine Islandsv. Leobrera, 461 Phil. 461, 469 (2003).

22. Rollo, p. 80.

23. Id. at 39-43.

24. Navaja v. Hon. De Castro, 761 Phil. 142 (2015). There are recognized exceptions to the rule that the Court is not a trier of facts:

(a) When the findings are grounded entirely on speculation, surmises or conjectures; (b) When the inference made is manifestly mistaken, absurd, or impossible; (c) When there is a grave abuse of discretion; (d) When the judgment is based on a misapprehension of facts; (e) When the findings of fact are conflicting; (f) When in making its findings the CA went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (g) When the CA's findings are contrary to those by the trial court; (h) When the findings are conclusions without citation of specific evidence on which they are based; (i) When the facts set forth in the petition, as well as in the petitioner's main and reply briefs, are not disputed by the respondent; (j) When the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record; or (k) When the CA manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, would justify a different conclusion. (Id. at 155, citation omitted.)

25. Rollo, pp. 46, 50, and 83.