G.R. No. 177729 - Philippine Export and Foreign Loan Guarantee Corp. vs. Amalgated Management and Development Corp.

The petitioner, originally known as the Philippine Export and Foreign Loan Guarantee Corporation and now as the Trade and Investment Development Corporation of the Philippines, is a government-owned and controlled corporation created by Presidential Decree No. 1080 (amended by Republic Act No. 8497).
Its primary mandate is to guarantee foreign loans (in whole or part) for domestic entities or corporations where a majority of the capital is owned by Filipino citizens.
Respondent Amalgamated Management and Development Corporation (AMDC) is a domestic corporation engaged in hauling commodities within Middle Eastern countries.
Co-respondents Felimon R. Cuevas and Jose A. Saddul, serving as President and Vice-President of AMDC respectively, played significant roles in the operation of the company.

In early 1982, AMDC secured a loan amounting to SR3.3 million (equivalent to ₱9,000,000.00) from the National Commercial Bank of Saudi Arabia (NCBSA) to finance its hauling project.
On April 23, 1982, the petitioner issued a letter of guaranty in favor of NCBSA at AMDC’s request.
To secure the guaranty, Amalgamated Motors Philippines Incorporated (AMPI), a sister company of AMDC, executed a real estate mortgage over two parcels of land in Dasmariñas, Cavite (identified by TCT Nos. 119031 and 119032).

AMDC executed a deed of undertaking dated April 21, 1982, wherein AMDC, along with Cuevas and Saddul, jointly and severally bound themselves to pay for any damages or liabilities the petitioner might incur due to the guaranty.
AMDC defaulted in its obligation, forcing the petitioner to pay the loan amount to NCBSA.
Pursuant to the principle of subrogation under the deed of undertaking, the petitioner demanded AMDC, Cuevas, and Saddul to reimburse the amount but received no compliance.

Due to non-payment, the petitioner extra-judicially foreclosed the real estate mortgage.
The Provincial Sheriff of Cavite conducted a public auction where the petitioner emerged as the highest bidder, acquiring the properties for ₱4,688,482.00 (TCT No. 119031) and ₱69,518.00 (TCT No. 119032).
The foreclosed property sale proceeds were insufficient to cover the guaranty, leaving a deficiency amounting to ₱45,839,219.95 (plus interest and other charges).

The petitioner filed a suit against AMDC, Cuevas, and Saddul in the Regional Trial Court (RTC) to collect the deficiency.
In their consolidated answer, AMDC and Cuevas admitted the existence of both the real estate mortgage and deed of undertaking but raised several defenses:

They did not receive any demand for the loan’s payment from the petitioner.
The additional interests, penalties, fees, and attorney’s fees were argued to be usurious, exorbitant, unconscionable, and unlawful.
They contended that the mortgage sale proceeds were sufficient to settle the loan.
The computation of the deficiency was deemed unilaterally and unconscionably calculated by the petitioner.
They asserted that several payments (in the form of rentals or otherwise) had been made to the petitioner.

Saddul, in a separate answer, denied any personal liability due to lack of benefit from the guaranty, claimed the deed of undertaking was unenforceable for lack of consideration, and insisted that he was not notified regarding delays in payment by AMDC.
The RTC eventually ruled on December 27, 2002, ordering AMDC to pay the full deficiency claim, including interest (at 6% per annum), penalty charges (at 6% per annum), attorney’s fees, and costs of suit, while absolving Cuevas and Saddul of personal liability.

The petitioner appealed the RTC decision before the CA, raising multiple issues:

Challenging the absolution of Cuevas and Saddul from liability on the deficiency claim.
Arguing that these co-obligors should have been held jointly and severally liable on the basis of their involvement in the extension of the guaranty period.
Maintaining that the demand made on them rendered them delay in payment.
Arguing for a higher interest and penalty rate (16% per annum) contrary to the RTC and CA’s decision which imposed a rate of 6% per annum.

On April 30, 2007, the CA affirmed the RTC’s ruling with some modifications, notably declaring that Cuevas and Saddul were jointly and solidarily liable with AMDC for the deficiency claim, while supporting the reduced interest and penalty rates.

Whether the CA erred in affirming the RTC’s ruling that absolved Cuevas and Saddul of personal liability on the petitioner’s deficiency claim.
Whether the petitioner’s position that the pre-trial order limited the issues and implied an admission of liability by Cuevas and Saddul was properly considered.

Whether the CA erred in ruling that the lack of notification to Cuevas and Saddul regarding the extension of the guaranty period exonerated them from liability.
The impact of the written requests by Cuevas and Saddul for extension and the petitioner’s subsequent actions in this context.

Whether the petitioner’s judicial demand for the payment of the deficiency claim was sufficient to render the co-obligors in delay under the provisions of the Civil Code.
The adequacy of the evidence showing that Cuevas and Saddul were aware of the extension and the demand, thereby affirming their liability.

The precise commencement date of the 10-year prescriptive period for the deficiency claim: whether it started from the date of foreclosure or from another event.
The implications of treating the pre-foreclosure and post-foreclosure timelines in determining the validity of the recovery action.

Whether the CA erred in setting the interest rate and penalty charge at 6% per annum instead of the 16% per annum argued by the petitioner.
Consideration of the financial disparity between the market value of the foreclosed properties and the actual sale price in justifying the reduction of rates.