G.R. No. 111634 - Komatsu Industries , Inc. vs. Court of Appeals

On October 16, 1978, petitioner Komatsu Industries (Phil.), Inc. obtained credit facilities amounting to P3,000,000.00 from private respondent Pilipinas Bank.
The credit facility was secured by a Chattel Mortgage executed by the petitioner’s Executive Vice-President and General Manager, Edmundo S. Silverio, and its Treasurer, E. N. Capulong, covering various pieces of heavy equipment (including bulldozers, payloader, air compressor, generating units).
On February 29, 1980, the loan was restructured and converted into a two-year term for P7,633,245.52, maturing on February 12, 1982, as documented by Promissory Note No. TL-109/80.
As part of the restructuring, both parties agreed that the Chattel Mortgage executed on October 16, 1978 would remain effective, and a new Chattel Mortgage was executed on April 9, 1980, covering additional equipment (specifically certain bulldozers and graders).

In further consideration of petitioner’s payment of ten percent of its principal obligation and outstanding interest, the loan was restructured again:

The Promissory Note of December 24, 1981 carried a face value of P6,869,266.08 with an interest rate of 23% per annum, payable in four equal semi-annual installments starting on June 24, 1983, followed by subsequent installments on or before the 24th of each ensuing semester.
Petitioner failed to pay any installment and did not deliver the properties subject to the Chattel Mortgages to the bank, despite repeated demands.

On September 28, 1984, private respondent initiated legal proceedings by filing a complaint for replevin and damages, with an alternative prayer for a money judgment if replevin of the mortgaged properties failed.
The complaint was later amended, and a bond was posted.
On November 5, 1984, the trial court issued a seizure order directing the Deputy Sheriff to take custody of the properties covered by the two Chattel Mortgages.
A partial return by the Deputy Sheriff on November 22, 1984, indicated that further efforts would be required to implement the writ.
Private respondent later moved to recall the writ and cancel the bond, asserting that the recovery of the properties was futile; this motion was granted on August 1, 1986.

On January 20, 1989, the trial court rendered judgment ordering petitioner to pay:

P6,869,266.08 (the principal on the Promissory Note dated December 24, 1981) plus interest at 23% per annum from December 24, 1983, until fully paid.
Penalty and collection charges at 3% per annum of the principal, from December 24, 1983, until fully paid.
Attorney’s fees amounting to 15% of the total due (P1,030,389.91).
Additional fees including filing, research, premium, documentary stamps, notarial fees, and other charges.

On June 18, 1993, the decision was affirmed with modification by the Court of Appeals regarding the proper reckoning date for accruing interest and charges.

The appellate court ruled that legal interest should commence from the filing date (September 28, 1984) rather than from December 24, 1983.

Alleged error in not applying the doctrine of no default for unliquidated and unascertained sums due.
Failure to consider the assignment of receivables from accounts of Quezon Transport, Inc./Jose Zubiri, Davao Stevedores Terminal, Inc., Emil Gaston, and a special time deposit.
Misapplication concerning the crediting of P250,000.00 to the deed of assignment rather than against the Promissory Note.
Absence of promissory estoppel as a recognized defense.
The Court of Appeals’ ruling that both Chattel Mortgages (from October 16, 1978 and April 9, 1980) were valid and subsisting.

There were negotiations for a complete settlement of the obligation through a dacion en pago.
Petitioner’s offer of real and personal properties was met by private respondent sending investigators and appraisers, implying a study of the proposal but not a commitment.
The Chattel Mortgage from October 16, 1978 had been novated by the February 29, 1980 Promissory Note, leaving only the April 9, 1980 Chattel Mortgage as valid.

The appellate court found no reversible error in the trial court’s findings and judgment, noting that the factual issues were sufficiently supported by testimony, particularly by petitioner’s Finance Manager, Mr. Ernesto S. Angeles.

Whether the appellate court erred in not applying the doctrine of no default for unliquidated and unascertained sum due.

Petitioner asserted that reconciliation of accounts was still ongoing at the time of filing and that an assignment of receivables was meant to settle part of the obligation.

The disagreement focused on whether interest and associated charges should commence on December 24, 1983 (as per the Promissory Note) or on September 28, 1984 (the filing of the action).

The validity and subsistence of the Chattel Mortgages executed on October 16, 1978 and April 9, 1980.

Petitioner questioned the continued validity of both mortgages, particularly in light of the novation of the October 16, 1978 mortgage.

The application of promissory estoppel in the context of the petitioner’s offer of dacion en pago.

Petitioner argued that the conduct of private respondent, including the appraisal of properties, amounted to an implied assurance to accept payment via dacion en pago.

Whether the assignment of receivables and the mistaken crediting of P250,000.00 should have been given proper weight in reducing petitioner’s indebtedness.