Case Digest (G.R. No. 176535) Core Legal Reasoning Model
Core Legal Reasoning Model
Facts:
In Richardson Steel Corporation et al. v. Union Bank of the Philippines, petitioners Richardson Steel Corporation (RSC), Ayala Integrated Steel Manufacturing Co., Inc. (AISMC), Asian Footwear and Rubber Corp. (AFRC), and spouses Ricardo O. Cheng and Eleanor S. Cheng sued Union Bank of the Philippines (UBP) for specific performance, damages, and injunctions. In January 1996 UBP agreed to extend a ₱240 million credit facility for RSC’s Continuous Galvanizing Line (CGL) plant and a promised ₱600 million working-capital line. The plant was completed but operating capital was never released. On December 3, 1999 petitioners restructured their existing loans under separate Restructuring Agreements (RAs) and executed Credit Line Agreements (CLAs)—₱150 million for RSC and ₱30 million for AISMC—while AFRC was left without a working-capital line. From December 1999 to November 2000 petitioners repeatedly requested drawdowns, only to have UBP apply the credit-line proceeds to interest on th Case Digest (G.R. No. 176535) Expanded Legal Reasoning Model
Expanded Legal Reasoning Model
Facts:
- Parties and Procedural History
- Petitioners: Richardson Steel Corporation (RSC), Ayala Integrated Steel Manufacturing, Co., Inc. (AISMC), Asian Footwear and Rubber Corp. (AFRC), and Spouses Ricardo O. Cheng and Eleanor S. Cheng.
- Respondent: Union Bank of the Philippines (UBP).
- April 2001: Petitioners filed Complaint for Specific Performance and Damages with Prayer for Injunctions before the RTC of Makati City, Branch 62 (Civil Case No. 01-575).
- Loan Transactions and Agreements
- January 1996: UBP agreed to finance RSC’s Continuous Galvanizing Line (CGL) project under DBP JEXIM 2 Program—P240 million for plant and equipment released; promised P600 million working capital not released; CGL Plant completed but under-operational.
- December 3, 1999: Petitioners restructured existing loans (Restructuring Agreements, “RAs”) and executed Memoranda of Agreement (MOAs) and Credit Line Agreements (CLAs) granting working‐capital lines—P150 million for RSC, P30 million for AISMC; AFRC received no line.
- 1999–2000: Despite execution of promissory notes and supporting documents, petitioners’ requests to draw on CLAs were denied; UBP unilaterally applied CLA proceeds to interest payments on the restructured loans.
- Foreclosure Proceedings
- October 17, 2003: UBP filed petition for extrajudicial foreclosure of real‐estate mortgages (REMs) on petitioners’ properties during RTC proceedings.
- November 24, 2003: Sheriff’s sale held; UBP highest bidder. Petitioners moved to annul foreclosure as premature.
- RTC Decision (June 4, 2012)
- Held CLAs independent of RAs; CLAs serve working-capital needs, not debt servicing.
- Ordered UBP to release P150 million to RSC and P30 million to AISMC under CLAs; declared foreclosure null and void.
- Declared interest on petitioners’ obligations null until working-capital release; awarded compensatory damages (P5 million each to RSC and AISMC), moral damages (P2 million to spouses Cheng), exemplary damages (P5 million), attorney’s fees (P500,000), and costs.
- CA Decision (June 29, 2015)
- Reversed RTC: treated CLAs and RAs as complementary (executed contemporaneously); allowed UBP to apply CLA proceeds to interest under a Set-Off Clause.
- Upheld foreclosure for petitioners’ default on restructured loans; denied damages.
- Reconsideration denied April 20, 2016. Petitioners filed Rule 45 petition to the SC.
Issues:
- Contractual Scope and Independence
- Are the CLAs independent agreements for working-capital finance, or accessory to RAs for servicing interest?
- May UBP apply CLA proceeds to interest under the Set-Off Clause without petitioners’ default?
- Validity of Foreclosure
- Was extrajudicial foreclosure valid when petitioners’ obligations were not yet due and UBP had not released working-capital advances?
- Damages and Attorney’s Fees
- Are awards of compensatory, moral, exemplary damages and attorney’s fees supportable?
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)