FIRST INTEGRATED BONDING & INSURANCE CO., INC. AND MARIAN REALTY & DEV. CORP., PETITIONERS, VS. HON. ASAALI S. ISNANI, IN HIS CAPACITY AS PRESIDING JUDGE, BRANCH CLIII, REGIONAL…

By this petition for certiorari and mandamus with
preliminary injunction, the petitioners seek to stem the implementation of a
writ of execution issued by the lower court to satisfy a final judgment in
favor of the respondent Rizal Commercial Banking
Corporation (hereafter “RCBC” or “the Bank”) in a collection
suit filed by the latter against the petitioner Marian Realty & Development
Corporation (hereafter MRDC).

On February
2, 1977, MRDC
obtained a P500,000 export financing loan from RCBC
evidenced by a promissory note (Exh. A) payable within 148 days from date of execution (which would fall on June 30, 1977) with compound interest at 14% per annum.  In case of default, the debtor agreed to pay
6% of the amount due as liquidated damages, and 10% as attorney’s fees.  Under
the “SCHEDULE OF PAYMENTS”
on the face of the promissory note was
written the following:

“50% partial payment on the principal.

“April 30, 1977 ……  P250,000.”

(p.
49, Rollo.)

As security for the
repayment of the loan, Luis F. Garcia and
Soledad F. Garcia, represented by their attorney-in-fact, Ramiro F. Garcia, executed on January 31, 1977 a real estate mortgage on several parcels of land in favor of the Bank.  In addition, the First Integrated Bonding & Insurance Co., Inc. (or FIBIC) executed
a surety bond (Exh. C).  Furthermore, Marcelino
Agana, Jr., Antonio V. Agcaoili
and Ramiro F. Garcia executed a comprehensive surety
agreement obligating themselves solidarily with MRDC, to pay the loan upon its maturity
June 30, 1977 (Exh. D).

On April 30, 1977,
MRDC signed a second promissory
note for P250,000
payable within 61 days (or on June 30, 1977) with 14% interest per annum (Annex N).

Upon MRDC’s default, the Bank filed a complaint for sum of money against it
and the sureties, in the Court of First Instance of Rizal
(Civil Case No. 30878), alleging that MRDC and its sureties (petitioner herein) failed to pay the promissory notes on their due date despite
the Bank’s demands; that as of January 30, 1978, their outstanding obligation
to the Bank amounted to P559,438.68; that in April 1978, the Bank extrajudicially foreclosed the real estate mortgage; that
P223,798 was realized from the foreclosure sale; and that the deficiency in the
defendants’ obligation amounted to P390,069.18
as of April 11, 1978 (Annex G, Petition).

In their answer (Annex H
of Petition), MRDC and FIBIC alleged that the loan was usurious hence null and
void; that MRDC had paid 50% of
the principal on April 30, 1977 as provided on the face of the promissory note
(Annex M); that the real estate mortgage, the surety bond, and the comprehensive
surety agreement were all null
and void; and that the
extrajudicial foreclosure sale was also
null and void.  They asked for moral and exemplary
damages and attorney’s fees.

For failure of the
defendants to appear at the pre-trial despite due notice, it was, on
plaintiff’s motion, declared as in default and the Bank was allowed to present its evidence ex parte (p. 44, Rollo).

On August
20, 1979, the Court
rendered judgment whose dispositive portion reads
as follows:

“WHEREFORE, judgment
is hereby rendered ordering
defendants to jointly and severally pay plaintiff:

“1) The sum of
P477,305.34, with interest thereon at 14% from August 9, 1979, which
interest if not paid when due shall be added to and become part of
the principal, the sum total to earn interest at 14% per annum until
fully paid;

“2) A sum equal to 6% of
the
amount due as penalty or liquidated damages;

“3) A sum equal to 10% of the amount
due as attorney’s fees.

“Costs against defendants.”
(p. 47, Rollo.)

The petitioners filed a motion to set aside the order of default and to reconsider the decision, but their motions were
denied.  They appealed to the Intermediate Appellate Court (CA-G.R. No.
67158-R).  On December 29, 1982, the Appellate Court affirmed
the decision of the trial court.

The petitioners filed a petition for review in this Court (G.R.
No. 62946, “Marian Realty Development Corporation vs. IAC, et
al.”).  On February 23, 1983, this Court denied the petition
for lack of merit.  Entry of judgment was
made on April 22, 1983 and
the records were remanded to the trial court for execution of the judgment.

Upon the Bank’s
motion in the lower court, a writ of execution was issued on January 22, 1985 (Annex A).

The petitioners filed separate motions to quash the writ,
alleging that MRDC had paid 50% of the first promissory note; that the second
promissory note does not represent an additional loan for P250,000, but it is a renewal note for the balance of
the first note half of which had already been paid, so that thereby the first
note was cancelled; that P140,069.18 is the balance of the second promissory
note; and that, as the proceeds of the foreclosure sale amounted to P223,798,
there was no deficiency, but an excess payment, of P83,728.82 which should be
returned to MRDC (Annexes D & E of Petition).

Respondent Judge, now CA Associate Justice Asaali
S. Isnani, denied the motions to quash because
“the payment sought to be credited has been duly presented, hence, could
have been considered and appreciated by the Court at the time of the decision,
x x x was rendered”
(Annex F, p. 29, Rollo).

In this petition for certiorari and mandamus with
preliminary injunction, the petitioners allege that the lower court gravely
abused its discretion in disallowing their motion to quash the writ of execution and to be
permitted to submit proof of payment of the judgment debt.  They rely on the decision of this Court in Naga Development Corporation vs. Court of Appeals (41 SCRA
105) where this Court ruled:

“Bearing in mind the nature of the instant suit and considering that the Court of
Appeals’ concurrence in the
trial court’s assessment of the amount of P143,282.76
is in the nature of a factual finding, this Court cannot now
pass upon its correctness.  The two courts below had before them
the sales agreement between the parties, and to what extent the parties
complied with their respective prestations thereunder was purely a matter of evidence.

“However, although we cannot pass upon the correctness of
the said assessment, it is quite obvious that in the execution of its judgment
as affirmed by the Court of Appeals, the trial court cannot compel the Naga to pay more than what it actually owes the Pacific
under the terms of their covenant. 
Deeply imbedded in our legal system are the principles that no man may unjustly enrich
himself at the expense of another, and that every person must, in the exercise
of his rights, act with justice, give everyone his due, and observe honesty and
good faith.  Upon these sacred legal
postulates, the Naga should, therefore, be allowed, during the execution phase
of the judgment, to present proof of payments made by it to the Pacific which
constitute proper deductions from the principal amount it owes.” (Underscoring ours; 41 SCRA 105, 115-116.)

In its comment on the petition, the Bank pointed out that as
the judgment in this case had become final and executory,
it may no longer be
altered.  It adverted to a material
factual difference between this case (where the decision of the trial court is already final as it has been affirmed by the Court of Appeals and
the Supreme Court) and the Naga case where the
decision of the Court of Appeals was still under review by the Supreme Court when
the latter ruled that “the Naga Development Corporation should be allowed, during the
execution phase of the judgment, to present proof of payments made by it to the
Pacific which constitute proper deductions from the principal amount it
owes” (p. 11, Rollo).

Significantly, the
decision of September 30, 1971 in Naga Development
Corporation vs. Court of Appeals, on which total reliance has been placed by
the petitioners, does not appear to have been reaffirmed by this Court in
subsequent cases.  It is Justice Antonio Barredo’s
dissent (quoted below), that appears to have been firmed up in later
decisions of this Court:

“x x x
I believe that since Naga has been declared in
default, and no grave abuse of discretion having been found by the Court in that respect, the judgment by default must stand and be executed, as is.  Whether or not Naga has partially paid was part of the
issue before the court before judgement we rendered;
Naga through its own fault was not allowed to prove
any such partial payment by the trial court; surely, that issue cannot be reopened during the execution because that would tend
to vary the terms of judgment.  The
matters of equity which can be raised in an execution proceeding,
cannot to my mind, refer to those which the court could have passed upon before
judgment.  Otherwise, there will be no
end to litigation, since
conceivably the proof of partial payments could be so seriously controversial
as to need another full blown trial, decision and appeal.  It is my view that under the circumstances, Naga can do no more than address itself to the benignity or
conscience of the private respondent.” (Emphasis supplied; 41 SCRA 105,
119.)

It is significant that
although the petitioners claim that they had paid 50% of the debt, they failed
to present any proof of such payment other than the two promissory notes
themselves (Annexes M and N, pp. 50-51, Rollo),
which, in the hands of their creditor, are proofs of indebtedness rather than
proofs of payment (Sec. 5-K, Rule 13, Rules of Court).  They did not present any receipts proving
that they had paid the total sum of P359,930.82 on
their P500,000 loan leaving an unpaid balance of only P140,069.18.  Although their second promissory note
contained a footnote that it was a “Partial-Renewal of
PN #0295/77 BDS-ST” (Annex N, p. 51, Rollo),
the trial court in its decision found, on the basis of evidence adduced by the
Bank:

“x x x
that the 50% partial payment under the promissory note was not paid on
April 30, 1977 as agreed upon and neither was the balance of P250,000 on the date agreed upon; that on April 30, 1977
defendant MRDC obtained another loan from plaintiff for which the former
executed in favor of the latter a promissory note of P250,000 to mature on June
30, 1977 (Exh. E); signed by Marcelino
Agana, Jr.
(Exh. E-1); that defendant MRDC failed
likewise to pay this loan upon maturity; that plaintiff sent demand letters to
defendant MRDC which failed to pay notwithstanding said demands, x x x.” (Underscoring
ours; p. 46, Rollo.)

Respondent Judge, therefore, did not abuse his discretion in
denying the petitioners’ motions to quash the writ of execution for their only
evidence in support of those
motions had been “duly presented (by RCBC), hence, could have been
considered and appreciated by the Court” (Annex F) that rendered the
decision which both the Court of Appeals and this Court affirmed.

Petitioners’ argument that the “partial renewal” promissory note dated April 30, 1977 (Annex N) for P250,000 proves that they had paid 50% of the original obligation
on April 30, 1977 and that
the new promissory note represents only the unpaid balance of the loan, is not
well taken.  Because the petitioners
failed to pay 50% (or P250,000) of the P500,000 loan on April 30, 1977, it
became necessary for them to renew that portion of the loan for
otherwise, the Bank could foreclose its collaterals.  But the P250,000
balance of the original promissory note did not have to be renewed on April 30, 1977 because that balance
was not due until June 30, 1977.

WHEREFORE, the petition for certiorari is denied
for lack of merit.  The temporary
restraining order which this Court issued
on March 26, 1985, is
hereby set aside.  Costs
against the petitioners.

SO ORDERED.

Narvasa, (Chairman), Cruz, Gancayco, and Medialdea, JJ., concur.