LANDBANK v. WESTBAY

LANDBANK of THE PHILIPPINES ( PETITIONER ) Vs. WESTBAY COLLEGES INC. PBR MANAGEMENT AND DEVELOPMENT CORPORATION BCP TRADING COP. INC. ( RESPONDENT)

G.R. No. 211287

April 17, 2017

FACTS

In June 1996, West Bay applied for an interim financing with Land Bank for the construction of a school building, which was approved in the amount of P125 Million. On December 22, 1997, PBR availed of a PlOO-Million Term Loan from Land Bank for the construction of condominium buildings. 5 On January 22, 1998, West Bay, as an accommodation mortgagor, executed a Real and Chattel Mortgage over its training vessel to secure the loan of PBR with Land Bank. The vessel was insured with First Lepanto Taisho Insurance Corporation in the amount of P26 Million, representing the mortgagee Land Bank's insurable interest in the vessel.6 On November 3, 2000, the mortgaged vessel sank during the typhoon Seniang.7 By agreement of the parties, insurance proceeds in the amount of P21,980,000.00 net of shared expenses were released to Land Bank on account of PBR's loan.

But on June 28, 2002, the respondents filed a petition for corporate rehabilitation with a prayer for suspension of payments before the Regional Trial Court (RTC) ofMuntinlupa City. 12 The RTC Branch 256 issued a Stay Order13 dated July 10, 2002 directing, among others, a stay in the enforcement of all claims against West Bay, its guarantors and sureties not solidarily liable with it, particularly, PBR and BCP.

In the subsequent years, the rehabilitation plan underwent several amendments which were approved by the RTC on the following dates: November 17, 2003, June 7, 2004, March 29, 2006 and September 1, 2008. 17 The updated Rehabilitation Plans consistently provided for the application of the P21,980,000.00 insurance proceeds to the loan accounts of PBR and BCP. 18 While the rehabilitation proceedings were pending, Land Bank filed a motion to be substituted by Philippine Distressed Asset Asia Pacific (PDAAP), a special purpose vehicle. The motion was granted by the RTC in its Order19 dated November 5, 2010.20 In November 2011, the respondents filed an Amended Rehabilitation Plan, indicating that PDAAP did not agree to the application of P21,980,000.00 insurance proceeds to the outstanding obligations of PBR.

In the assailed Order26 dated August 31, 2012, the RTC denied the Urgent Motion as it found no justifiable reason for the reimbursement of the insurance proceeds to West Bay. It also observed that West Bay did not comply with the terms and conditions of the restructuring agreement. Finally, PBR signed promissory notes which stated that, "[t]he Borrower hereby authorizes and empowers the Bank, without need of notice to the Borrower, and irrespective of the date of maturity, to deduct, set-off and apply any funds, securities or assets of the Borrower with the Bank or any of its branches, on deposit or otherwise, in reduction of amounts due under this Note." 27 On December 18, 2012, the respondents filed a petition for certiorari and mandamus with the CA, challenging the R TC Order dated August 31, 2012.

The RTC order. Per the CA's findings, Land Bank did not apply the insurance proceeds to the remaining obligations of West Bay, PBR or BCP as there was no statement of the settlement of the insurance proceeds in the context of the restructured loan. Granting that West Bay and PBR failed to comply with the requirements of the restructured loan, it was because they were prohibited from paying any of their outstanding liabilities when the Stay Order took effect.

WHEREFORE, the petition is GRANTED. The Order dated August 31, 2012 of the Rehabilitation Court is ANNULLED and SET ASIDE. The Rehabilitation Court is ORDERED to DIRECT the [Land Bank] to REIMBURSE the P21,980,000.00 insurance proceeds, plus interest, to [West Bay].

ISSUES

a. Whether west bay is entitled to the reimbursement of the p2 l ,980,000.00 insurance proceeds.

b. Whether the right of west bay to be reimbursed with the p21,980,000.00 insurance proceeds has been clearly and fully established in the modified rehabilitation plan so as to be compellable by mandamus.

RULING

It should be noted at the outset that under Rule 45 of the 1997 Rules of Civil Procedure, only questions of law may be raised by the parties and passed upon by the Court. The Court is not a trier of facts and is not duty bound to analyze and weigh again the evidence.

In the instant case, the R TC and the CA have conflicting pronouncements, which necessitates a review of their factual findings. After a judicious review of the records, the Court finds that there is no reversible error on the part of the CA in ordering the reimbursement of P21,980,000.00 which is the amount of the insurance proceeds previously received by Land Bank. As the CA pointed out, despite several amendments to the rehabilitation plan which repeatedly provided for the application of the insurance proceeds to the debts of West Bay, then to PBR and BCP, there is no showing that Land Bank applied the amount thereof to the aforementioned loans. 36 The Court is inclined to uphold this finding - for if Land Bank had in fact deducted the amount of the insurance proceeds from the loan obligations of either West Bay or PBR and BCP, this information would have reflected on the rehabilitation plans of the CGC. In other words, if the insurance proceeds were indeed applied to West Bay's and PBR' s account in January and June 2002 as Land Bank espoused, then P21,980,000.00 should have been subtracted from the obligations of the said companies. Verily, Land Bank negated its own claim when it failed to present evidence of reduction in the outstanding balances of the respondents, whether singly or collectively.

Also, a belated application of the insurance proceeds to the obligations of West Bay or PBR and BCP would violate the Stay Order dated July 10, 2002 issued by the RTC. Section 6 of Rule 4 of the 2000 Interim Rules of Procedure on Corporate Rehabilitation, which was in force at the time of the filing of the petition for corporate rehabilitation

Lastly, the Court deems it proper to impose interest on the amount of the insurance proceeds in the concept of actual and compensatory damages. Article 2209 of the Civil Code provides that if the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is six percent ( 6%) per annum. In the case of loans or forbearances of money, the rate of legal interest used to be twelve percent (12o/o) per annum pursuant to Central Bank Circular No. 905-82, which took effect on January 1, 1983.37 "The term 'forbearance', within the context of usury law, has been described as a contractual obligation of a lender or creditor to refrain, during a given period.of time, from requiring the borrower or debtor to repay the loan or debt then due and payable. " 38 But effective on July 1, 2013, under Bangko Sentral ng Pilipinas Monetary Board Circular No. 799, the rate of interest is now back at six percent (6o/o) per annum for the loan or forbearance of any money, goods or credits and in judgments, in the absence of an express contract as to such rate of interest.39 In view of this amendment, the Court, in Nacar v. Gallery Frames, et al., 40 modified the guidelines laid down in Eastern Shipping Lines, Inc. v. Court of Appeals.

Since the obligation of Land Bank to reimburse the amount of insurance proceeds does not constitute a forbearance of money, the interest rate of six percent ( 6%) is applicable. The pronouncement of the Court in Sunga-Chan, et al. v. CA, et al. 43 on this matter is enlightening: For transactions involving payment of indemnities in the concept of dama2es arisin2 from default in the performance of obli2ations in general and/or for money judgment not involving a loan or forbearance of money, goods, or credit, the governing provision is Article. 2209 of the Civil Code prescribing a yearly six percent (6o/o} interest.44 As to the reckoning period for the commencement of the running of the legal interest, it shall be subject to the condition "that the courts are vested with discretion, depending on the equities of each case, on the award of interest."45 Applying the guidelines in Nacar, another six percent (6o/o) interest shall be imposed from the finality of this Resolution until its satisfaction as the interim period, is considered to be, by then, equivalent to a forbearance of credit. WHEREFORE, the petition is DENIED. The Decision dated September 30, 2013 and Resolution dated February 10, 2014 of the Court of Appeals in CA-G.R. SP No. 127897 are AFFIRMED. The Land Bank of the Philippines is DIRECTED to reimburse West Bay Colleges, Inc~ the amount of P21,980,000.00 representing the insurance proceeds plus six percent (6%) interest thereon from the issuance ofthe Stay Order on July 10, 2002 up to the date of finality of this Resolution by way of actual or compensatory damages. From finality until full satisfaction, the total amount due now compounded with interest due from July 10, 2002 up to finality, shall likewise earn interest at six percent (6%) per annum until fully paid.