Tuesday, May 11, 2010

Rizal Commercial Banking Corp. vs Alfa RTW Manufacturing Corp. et. al.

Rizal Commercial Banking Corp. vs Alfa RTW Manufacturing Corp. et. al.
G.R. No. 133877
November 14, 2001


It appears that defendant Alfa RTW Manufacturing Corporation (Alfa RTW), on separate instances, had applied for and was granted by the plaintiff Rizal Commercial Banking Corporation (RCBC) four Letters of Credit to facilitate its purchase of raw materials for its garments business. Upon such letters of credit, corresponding bills of exchange of various amounts were drawn, and charged to the account of said defendants.

The defendant Alfa RTW, in turn, had executed four Trust Receipts, stipulating that it had received in trust for the plaintiff bank the goods and merchandise described therein, and which were purchased with the drawings upon the letters of credit.
When the obligations upon the said commercial documents became due, the plaintiff demanded payment of the defendants’ undertakings, citing two documents allegedly executed by the individual defendants Johnny Teng, Ramon Lee, Antonio D. Lacdao and Ramon Uy and Alfa Integrated Textile Mills Inc. (Alfa ITM), labeled Comprehensive Surety Agreements dated September 8, 1978 and October 10, 1979.

Under such Comprehensive Surety Agreements, it was essentially agreed that for and in consideration of any existing indebtedness to plaintiff bank of defendant Alfa RTW and/or in order to induce the plaintiff bank at any time thereafter to make loans or advances or increases thereof or to extend credit in any other manner to or for the account of defendant, Alfa ITM and the signatory officers agreed to guarantee in joint and several capacity the punctual payment at maturity to plaintiff bank of any and all such indebtedness and/or other obligations and also any and all indebtedness of every kind which was then or may thereafter become due or owing to plaintiff bank by the defendant Alfa RTW, together with any and all expenses of collection, etc., provided, however, that the liability of individual defendants and defendant Alfa Integrated Textile Mills, Inc. thereunder shall not exceed the sum of P4,000,000.00 and P7,500,000.00 and such interest as may accrue thereon and expenses as may be incurred by plaintiff bank.


Petitioner for review on certiorari assailing the decision of the Court of Appeals.
The award of interest, in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.."

RTC Decision

On March 12, 1982, Rizal Banking Corporation (RCBC) filed with the Regional Trial Court of Makati, for a sum of money against Alfa RTW Manufacturing Corporation, Johnny Teng, Ramon Lee, Antonio Lacdao, Ramon Luy and Alfa Integrated Textile Mills. Asserting a superior right over the property involved in the suit, North Atlantic Garments Corporation filed a complaint in intervention. BA Finance Corporation, claiming as mortgagee of the same property, filed an answer in intervention. After hearing, the trial court rendered judgment on August 19, 1991.

It was held at RTC that the judgment is rendered in favor of plaintiff on the following grounds: (1) Ordering all defendants to pay, jointly and severally, to plaintiff the amount of P18,961,372.43 (inclusive of interest, service charges, litigation expenses and attorney’s fees), with interest thereon at the legal rate from February 15, 1988 until fully paid. The proceeds from the sale of defendant Alfa’s ready to wear apparel, in the sum of P73,133.70, should be deducted from the principal obligation of P18,961,372.43. And (2) Declaring that the respective liens of intervenors BA Finance Corporation and North American Garments Corporation over the properties attached by the sheriff are inferior to that of plaintiff.

CA Decision

However, when the case was brought to the CA, On appeal, the Court of Appeals affirmed with modification the RTC decision, in which the decision appealed from was AFFIRMED, with the modification that instead of P18,961,372.43, all the defendants are hereby ordered to pay, jointly and severally to plaintiff the amount of P3,060,406.25.

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