Case Summary (G.R. No. 177729)
Loan Agreement and Default
AMDC secured a loan of SR3.3 million from the National Commercial Bank of Saudi Arabia (NCBSA) in 1982 for its operations. In conjunction, the petitioner issued a letter of guaranty for this loan, with AMDC and its officers Cuevas and Saddul signing a deed of undertaking where they agreed to be jointly and severally liable for any obligations arising from the guaranty. Following AMDC's default on the loan, the petitioner settled the debt with NCBSA and subsequently sought reimbursement from AMDC, Cuevas, and Saddul for the deficiency that remained after a foreclosure of the mortgage undertaken by AMDC's sister company.
Legal Proceedings and Findings
In the Regional Trial Court (RTC), the defendants admitted the existence of the loan and mortgage but contested the liability of Cuevas and Saddul on multiple grounds, including claims of lack of notice and allegations of unconscionable fees related to the loan. The RTC ultimately ruled in favor of the petitioner regarding AMDC but absolved Cuevas and Saddul from liability, thereby dismissing the claims against them.
Court of Appeals Decision
Dissatisfied with the RTC’s ruling, the petitioner appealed to the Court of Appeals (CA), which affirmed the lower court’s decision. The CA stressed the respect afforded to the factual findings of the RTC and concluded that there was insufficient justification to disturb the RTC's conclusions, particularly regarding the lack of notice provided to Cuevas and Saddul about the guaranty extension which contributed to their absolution from liability.
Points of Contention on Appeal
In the appeal, the petitioner raised several issues questioning the CA's affirmation of the RTC ruling, including the liabilities of Cuevas and Saddul, whether they were properly notified of the extension of the loan's guaranty period, the alleged failure of the petitioner to provide demand for payment, and claims regarding the rate of interest and penalty charges related to the deficiency amount.
Ruling on Liability
The Supreme Court's review concluded that the CA erred in absolving Cuevas and Saddul from liability, as they had explicitly engaged in actions (requesting extensions) that indicated awareness of their obligations. Therefore, the Court modified the ruling, declaring Cuevas and Saddul jointly and severally liable for the deficiency along with AMDC.
Demand for Payment and Delay
The Supreme Court also upheld the petitioner’s assertion that it had made a valid demand for payment, which rendered Cuevas and Saddul liable under the obligations defined in the deed of undertaking. According to the Civil Code, they were in delay following the demand made by the petitioner to settle the deficiency.
Prescriptive Period for the Deficiency Claim
The Supreme Court addressed the prescriptive period for the petitioner’s deficiency claim, affirming that it commenced from the date of foreclosure of the mortgaged properties. As such, the petitioner’s claim filed in 1994 remained timely and actionable within the prescribed ten-year period defined
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Case Citation
- G.R. No. 177729
- Date: September 28, 2011
- Division: First Division
- Reported in: 674 Phil. 60
Parties Involved
- Petitioner: Philippine Export and Foreign Loan Guarantee Corporation (now Trade and Investment Development Corporation of the Philippines)
- Respondents:
- Amalgamated Management and Development Corporation (AMDC)
- Felimon R. Cuevas (President of AMDC)
- Jose A. Saddul, Jr. (Vice-President of AMDC)
Background and Antecedents
- The petitioner, a government-owned corporation established under Presidential Decree No. 1080, guarantees foreign loans for domestic entities with majority Filipino ownership.
- AMDC, a domestic corporation engaged in hauling commodities in the Middle East, obtained a loan of SR3.3 million (approximately P9,000,000.00) from the National Commercial Bank of Saudi Arabia (NCBSA) in 1982.
- The petitioner issued a letter of guaranty to NCBSA at AMDC's request, secured by a real estate mortgage from Amalgamated Motors Philippines Incorporated (AMPI) and a deed of undertaking with Cuevas and Saddul as co-obligors.
- AMDC defaulted on its obligation, prompting the petitioner to pay NCBSA and later foreclose on the mortgaged properties, recovering only P4,758,000.00 from the auction.
- A deficiency of P45,839,219.95 remained unpaid, leading the petitioner to sue AMDC, Cuevas, and Saddul for the deficiency.
Rulings of the Regional Trial Court (RTC)
- The RTC ruled on December 27, 2002, in favor of the petitioner against AMDC, orde