G.R. No. 226771 - Norsk Hydro , Inc. vs. Premiere Development Bank

Case Summary (G.R. No. 226771)

Factual Background

Petitioners alleged that respondent Skyrider Brokerage International, Inc. failed to remit to the Bureau of Customs nineteen crossed manager's checks transmitted by petitioner Yara Fertilizers (formerly Norsk Hydro (Philippines), Inc.) for payment of customs duties and taxes on imported fertilizers. The checks were allegedly deposited and encashed without authority, resulting in conversion and loss to petitioners. One manager's check involved Citibank Manager's Check No. 338583 dated November 16, 2001; the remaining manager's checks were linked to issuances from Bank of the Philippine Islands. Petitioners charged respondents with negligence and conversion and sought recovery of the amounts and damages.

Trial Court Proceedings

The RTC, by Decision dated April 14, 2010, found respondents jointly and severally liable in several particulars. The court awarded P26,176,006.06 covering eighteen crossed manager's checks purchased from BPI, plus interest. It likewise held certain respondents jointly and severally liable for P1,907,784.00 covering the Citibank manager's check. The RTC recognized the right of BPI and Citibank to seek reimbursement from Premiere Development Bank. The court dismissed Premiere Development Bank's counterclaim. The RTC further awarded exemplary damages in the amount of P400,000.00, moral damages in the amount of P400,000.00, attorney's fees of P700,000.00, litigation expenses, and costs of suit against specified respondents.

Appellate Proceedings

The Court of Appeals, in its Decision dated November 20, 2014, denied respondents' appeal and affirmed the RTC's findings. The appellate court agreed that respondents acted with gross, wanton and inexcusable negligence in the unauthorized encashment and conversion of the subject checks. Respondents sought relief by filing a Petition for Review on Certiorari with this Court on January 27, 2015, which this Court denied in a Resolution dated March 16, 2015 for failure to show reversible error. The Resolution became final and executory, and an Entry of Judgment issued May 26, 2015.

Motion for Execution and Contentions

Following finality, petitioners filed a Motion for Execution on September 18, 2015 and sought enforcement of the RTC Decision in the amount of P109,460,770.61. Petitioners argued that, absent an express stipulation, legal interest on actual damages should be twelve percent per annum compounded annually from extrajudicial demand up to June 30, 2013, and six percent per annum compounded annually thereafter pursuant to Bangko Sentral ng Pilipinas Circular No. 799-13. Respondent Security Bank opposed the contention. It argued that the obligation did not arise from a loan or forbearance but from fraud and negligence, that legal interest should be six percent per annum from finality of judgment, and that there was no basis for compounding interest or for interest on moral and exemplary damages and attorney's fees.

RTC Order dated February 19, 2016

The RTC granted the Motion for Execution and computed the defendants' remaining unpaid obligation as of November 30, 2015 at P1,328,263.07. The court imposed legal interest at six percent per annum from November 30, 2015 until full payment. In its computations the RTC treated the legal interest on actual damages as running from judicial demand (the filing of the complaint on October 9, 2003) to finality of the decision on May 26, 2015. The RTC also held that moral and exemplary damages and attorney's fees carried legal interest read into the judgment from the date the award was rendered until finality, and thereafter at six percent per annum from finality until satisfaction. The RTC refused to impose compounded interest in the absence of contract stipulation or an express provision in the decision.

RTC Order dated August 5, 2016

On reconsideration, the RTC partially granted petitioners' motion and found that the last extrajudicial demand was sent on June 25, 2003 based on petitioners' witnesses. The court recomputed the legal interest on actual damages from June 25, 2003 to May 26, 2015 and increased the unpaid obligation as of November 30, 2015 to P1,831,535.79. The RTC then accounted for additional payments, the accrual of interest to March 30, 2016, and an admitted payment of P1,328,263.07 on March 22, 2016. The RTC's final computation reduced the remaining unpaid obligation to P539,903.44 as of March 30, 2016, imposed six percent legal interest per annum from April 1, 2016 until full payment, and assessed costs of suit of P61,772.58.

Issues Advanced by Petitioners to this Court

Petitioners asserted that the Court a quo erred in three principal respects. First, petitioners maintained that the actual damages of P28,083,790.02 constituted a forbearance of money for which twelve percent per annum applied from extrajudicial demand of June 25, 2003 to June 30, 2013 and six percent thereafter, relying on Nacar v. Gallery Frames, G.R. No. 189871. Second, petitioners argued that interest should be compounded annually under NFF Industrial Corporation v. G&L Associated Brokerage, G.R. No. 178169. Third, petitioners asserted that costs of suit should likewise earn interest.

The Supreme Court's Disposition

The petition was denied for lack of merit and the RTC Orders dated February 19, 2016 and August 5, 2016 were affirmed. The Court ordered respondents Security Bank Corporation (formerly Premiere Development Bank), Bank of the Philippine Islands, Citibank, N.A., Skyrider Brokerage International, Inc., and Marivic-Jong Briones to pay P277,762.65 in proportion to their respective obligations to petitioners Yara Fertilizers and Norteam Seatransport Services, with legal interest at six percent per annum from the date of finality of this judgment until full payment, plus costs of suit.

Legal Basis and Reasoning — Finality and Collaterally Adjudicated Issues

The Court emphasized that the RTC Decision of April 14, 2010 became final and executory after this Court's Entry of Judgment on May 26, 2015. The Court reiterated the doctrine that a final judgment is immutable and unalterable and that issues necessarily adjudicated by a competent court are conclusively settled and cannot be relitigated. The RTC's factual findings that respondents participated in or were culpable for fraud and negligence in the unauthorized encashment and conversion of the checks were treated as binding. Consequently, petitioners could not relabel the obligation as a loan or forbearance at this stage.

Legal Basis and Reasoning — Nature of the Obligation and Proper Rate of Interest

The Court reviewed the distinction between obligations that constitute a loan or forbearance and obligations arising from fault or negligence. It explained that forbearance involves an arrangement by which a creditor refrains from requiring repayment and that the instant case involved performance of a service and duties of banks and brokers rather than a loan. The Court restated the governing guidelines on legal interest: when the obligation is a loan or forbearance, interest may be stipulated and, absent stipulation, six percent per annum applies from default; when the obligation is not a loan or forbearance, the court may impose interest at six percent per annum and interest commences from judicial or extrajudicial demand if demand can be established with reasonable certainty, otherwise from final judgment; and when judgment is final legal interest is six percent per annum from finality until satisfaction. Applying those principles, the Court held that the proper legal interest rate here is six percent per annum rather than twelve percent.

Legal Basis and Reasoning — Compounding versus Simple Interest

The Court held that compounded interest could be imposed only when the parties stipulate to it in writing and when the agreement specifies the manner of earning interest. The records contained no stipulation for compound interest and the RTC's decision did not impose it. The Court therefore declared that interest awarded in the case is simple interest. The Court distinguished NFF Industrial Corporation v. G&L Associated Brokerage, observing that that case involved a loan or forbearance evidenced by a complaint for sum of money and thus presented factual grounds for compounding not present here.

Legal Basis and Reasoning — Inte

Case Syllabus (G.R. No. 226771)

Parties and Procedural Posture

Norsk Hydro (Philippines), Inc. and Norteam Seatransport Services filed the original Complaint for Sum of Money and Damages with an Application for the Issuance of a Writ of Preliminary Attachment on October 9, 2003.
Premiere Development Bank (later Security Bank Corporation), Bank of the Philippine Islands, Citibank, N.A., Skyrider Brokerage International, Inc., and Marivic-Jong Briones were the respondents in Civil Case No. 03-1203 before RTC Branch 148, Makati City.
The RTC rendered a Decision dated April 14, 2010, against the respondents, which the Court of Appeals affirmed by Decision dated November 20, 2014.
The petitioners filed a Petition for Review on Certiorari before the Supreme Court under Rule 45, which the Supreme Court denied in a Resolution dated March 16, 2015, resulting in an Entry of Judgment dated May 26, 2015.
Petitioners invoked execution of the final judgment and sought computation and enforcement of damages, interest, and costs through motions filed in the RTC resulting in Orders dated February 19, 2016, and August 5, 2016, the subject of the present Rule 45 petition.

Key Factual Allegations

Petitioners alleged that Skyrider Brokerage failed to remit nineteen crossed manager’s checks transmitted by petitioner Yara Fertilizers (formerly Norsk Hydro) to the Bureau of Customs for payment of import duties on fertilizers.
The RTC found that respondents encashed and converted the subject checks through unauthorized deposits and improper endorsements and that the acts involved gross, wanton, and inexcusable negligence.
The RTC awarded P26,176,006.06 covering eighteen crossed manager’s checks from BPI, P1,907,784.00 covering one Citibank manager’s check, P400,000.00 each as moral and exemplary damages, P700,000.00 as attorney’s fees, and costs of suit.
Respondents made partial payments acknowledged in the records totaling P49,834,118.90 as of November 30, 2015.
The parties filed a Joint Manifestation that petitioners received P1,328,263.07 as additional payment pursuant to the execution order.

Trial and Appellate Rulings

The RTC, in its April 14, 2010 Decision, held Security Bank (Premiere), Skyrider Brokerage, Jong-Briones, BPI, and Citibank jointly and severally liable in varying degrees for the conversion and wrongful encashment of the manager’s checks.
The Court of Appeals, by Decision dated November 20, 2014, affirmed the RTC’s findings of liability and negligence and denied respondents’ appeal.
The Supreme Court denied the petition for review on March 16, 2015 for failure to sufficiently show reversible error and thereby rendered the appellate decision final and executory by Entry of Judgment dated May 26, 2015.

Orders Under Review

The RTC Order dated February 19, 2016 granted petitioners’ Motion for Execution and computed the remaining unpaid obligation as P1,328,263.07 as of November 30, 2015 and directed issuance of a writ of execution with legal interest at 6% per annum from November 30, 2015 until full payment.
The RTC Order dated August 5, 2016 partially granted petitioners’ motion for reconsideration by fixing the date of the last extrajudicial demand as June 25, 2003, recomputing interest, and finding a remaining unpaid obligation of P539,903.44 as of March 30, 201