Source: http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=52959:gr-157901-2009&catid=1522&Itemid=566
Timestamp: 2019-04-24 16:02:43+00:00

Document:
ORIX METRO LEASING AND FINANCE CORPORATION, Petitioner, v. M/V "PILAR-I" and SPOUSES ERNESTO DY and LOURDES DY, Respondents.
Before this Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court seeking the reversal of the Decision1 dated 22 November 2002 and Resolution2 dated 2 April 2003 of the Court of Appeals in CA-G.R. CV No. 57321. The appellate court, in its assailed Decision and Resolution, affirmed with modifications the Decision3 dated 31 July 1997 of the Regional Trial Court (RTC), Makati City, Branch 64, in Civil Case No. 92-2311.
Petitioner Orix Metro Leasing and Finance Corporation (Orix Metro) is a domestic corporation engaged in the leasing and financing business. Respondents Ernesto and Lourdes Dy (spouses Dy) are the proprietors of Limchia Enterprises, engaged in the shipping business.
Needing to raise funds for the acquisition of a cargo vessel, Limchia Enterprises, with Lourdes Dy as co-maker, obtained a loan from Orix Metro in the amount of P4,764,024.004 evidenced by a Promissory Note executed on 3 August 1990.5 According to the Promissory Note, Lourdes Dy would pay for the loan, without need of notice or demand, in 36 monthly installments due and payable on the 6th day of each month starting 6 September 1990. Ernesto Dy likewise executed a Continuing Suretyship Agreement,6 wherein he made himself a solidary obligor in the event his wife Lourdes Dy would default under the terms of the Promissory Note.
With the proceeds of the loan, Limchia Enterprises was able to acquire and register in its name the vessel M/V Pilar-I. On 16 July 1990, the Philippine Coast Guard in Zamboanga City issued in favor of Limchia Enterprises the Certificate of Ownership and Certificate of Philippine Registry of M/V Pilar-I.
As additional security for the loan from Orix Metro, Limchia Enterprises, with Lourdes Dy as signatory, executed on 3 August 1990 a Deed of Chattel Mortgage7 over M/V Pilar-I in favor of Orix Metro. The mortgage was registered with the Office of the Philippine Coast Guard in Zamboanga City, and annotated on the Certificate of Ownership of Limchia Enterprises, pursuant to the Ship Mortgage Act of 1978. Furthermore, the spouses Dy also constituted a Real Estate Mortgage on their Quezon City home in favor of Orix Metro.
On 27 December 1990, M/V Pilar-I was attacked by pirates, and the vessel was brought to Palau Sapi, Kota Kinabalu, Malaysia. The spouses Dy suffered financial losses from the incident and, thus, failed to pay according to the schedule of payments set forth in the Promissory Note dated 3 August 1990. As of August 1992, the spouses Dy should have already paid amortizations amounting to P3,140,364.00; however, they were only able to pay P2,775,339.00.8 Consequently, Orix Metro sent them several demand letters.
The spouses Dy appealed for the restructuring of their loan with Orix Metro. Lourdes Dy also requested the release of the mortgage on their Quezon City home, so they could mortgage the same real property to secure a bank loan, the proceeds of which they would use, in turn, to pay the arrears, penalty charges, as well as advance payments, on their loan from Orix Metro.
We are pleased to inform you that your request for the release of Real Estate Property located at San Francisco del Monte, Quezon City which is presently mortgaged with us, has been approved subject to the final payment amounting to EIGHT HUNDRED THOUSAND PESOS only (P800,000.00) to cover all your arrearages, penalty charges and advance payment.
This has reference to I.S. No. 922871, Makati and our plea that you allow us to update our account. We will be paying interest and charges until we are able to reinstate our monthly payments of P132,334.00.
This is in reply to your letter of June 9, 1992 addressed to our client, Mrs. Lourdes Dy and to inform you that we will be amenable to incorporate the amount of P55,128.00 in order that their arrearages will be obliterated on November 30, 1992.
Upon the filing of an affidavit of merit and the posting of a bond in the amount of P2,386,825.00 by Orix Metro as required by the Revised Rules of Court, the RTC issued an Order of Arrest (of Vessel) dated 1 September 1992, directing the Sheriff to arrest, seize, and take immediate possession of M/V Pilar-I and to keep it under the custody of the court. Pursuant to the said arrest order, the Sheriff seized the vessel on 30 September 1992 at Pier 18 in North Harbor, Manila.
Also on 13 October 1992, the spouses Dy filed a Motion to Lift and/or Set Aside Order of Arrest/Seizure of Defendants' vessel M/V Pilar-I, manifesting that the obligation sought to be enforced by Orix Metro was not yet due. The spouses Dy claimed that it acted favorably on their request for restructuring of the loan in its letter dated 10 August 1992,20 thus, resulting in the reduction of the monthly amortizations and the extension of the terms of payment. The initial payment of the loan under the extended period was to begin on 6 September 1992, or after the Complaint was filed on 18 August 1992.21 Expectedly, Orix Metro opposed the Motion of the spouses Dy.
Subsequently, the spouses Dy filed their Answer,22 again averring that there was yet no default on their part at the time the Complaint was filed on 18 August 1992, considering that Orix Metro acquiesced to the restructuring of their loan and to the extension of time to pay.
On 1 February 1993, the RTC issued an Order granting the motion to lift/set aside the order of arrest/seizure of M/V Pilar-I and ordering the Sheriff to return the vessel to the spouses Dy, but requiring them to pay Orix Metro according to the terms embodied in the 10 August 1992 letter of Orix Metro to spouses Dy.23 However, acting on the Motion for Reconsideration filed by Orix Metro, the RTC set aside its 1 February 1993 Order and directed that M/V Pilar-I be returned to Orix Metro.
The spouses Dy assailed the RTC Order of 23 June 1993 before the Court of Appeals via a Petition for Certiorari, docketed as CA-G.R. SP No. 32000. In a Resolution dated 21 March 1994, the Court of Appeals dismissed CA-G.R. SP No. 32000 after finding no grave abuse of discretion on the part of the RTC judge when he reinstated the Order of Arrest of the vessel. The Court of Appeals held that the Attachment of the vessel was an ancillary remedy, with both parties being protected by the bond put up by Orix Metro.24 The spouses Dy intended to elevate their case to this Court, but failed to file the proper pleadings within the extended period granted to them; thus, their case was deemed closed and terminated. Thereafter, the proceedings before the RTC resumed.
On 28 September 1994, Orix Metro transferred all of its rights, title to and interests in M/V Pilar-I, as mortgagee, to Colorado Shipyard Corporation (Colorado).25 Despite the objection of the spouses Dy, the RTC approved the assignment on the condition that the term "foreclosed vessel," used in the Deed of Assignment to refer to M/V Pilar-I, be changed to "mortgaged vessel." An Amended Transfer of Rights by Orix Metro and Colorado, executed and submitted to the RTC on 4 December 1994, was approved on 5 December 1994. Possession of M/V Pilar-I was then transferred to Colorado.
Evidently, the parties agreed to restructure the loan and [herein petitioner Orix Metro] acceded to the [herein respondents'] proposed schedule of payments. Records show that in accordance with [Lourdes Dy]'s letter dated May 30, 1992, [respondents] have partially complied with the payment of their obligation for the months of June and July 1992. This is so because [respondents] failed to pay the additional amounts of P55,128.00 which they agreed to incorporate in their monthly payments in addition to what was proposed in the May 30, 1992 letter.
The question we will now resolve is whether or not [respondents] are in default, in order to determine whether or not [Orix Metro] has a cause of action to institute the instant case.
In the instant case, [Orix Metro] gave [respondents] until November 28, 1992 to pay the amortizations which were not paid on time. However, instead of paying the agreed amount for July 1992, of P330,000.00, [respondents] paid only P130,000.00, claiming that they still have an advance payment of P289,480.00 with [Orix Metro].
When [respondents] defaulted in the payment of the monthly amortizations, [Orix Metro] demanded from [respondents] the full payment of the total obligation due in accordance with the terms in the contract of mortgage. However, after representations were made by [respondents], [Orix Metro] accepted the late and partial payments of [respondents], making their default immaterial. When they again defaulted in paying the next amortization due, [Orix Metro] this time made no demand for the full payment of the total obligation. Consequently, [respondents] made payments even after the due date, as in fact they paid several installments to [Orix Metro] which the latter accepted. Thus, upon expiration of the period to pay the monthly amortization, [Orix Metro] continued accepting late payments, an act which cannot but be construed as a waiver of the right to demand full payment of the obligation due and to foreclose the preferred mortgage. When the mortgagee, instead of availing of their right as embodied in the contract of mortgage, accepted and received delayed payments of installments beyond the period stipulated, and the mortgagors were in arrears, the mortgagee in effect waived and are now estopped from exercising such right. (Heirs of Escanlar v. Court of Appeals, 281 SCRA 176).
4. [Herein respondents] are ordered to reimburse [herein petitioner Orix Metro] for the expenses it incurred for the repair and drydocking of the subject vessel at the time it was under [Orix Metro]'s possession.
The Motion for Reconsideration and Supplement to the Motion for Reconsideration filed by Orix Metro were both denied by the Court of Appeals in its Resolution dated 2 April 2003.
I. THE APPELLATE COURT ERRED IN RULING THAT THE PARTIES AGREED TO RESTRUCTURE THE LOAN AND THAT ORIX METRO ACCEEDED TO THE SPOUSES DY'S PROPOSED SCHEDULE OF PAYMENTS.
II. THE APPELLATE COURT ERRED IN RULING THAT ORIX METRO'S ACCEPTANCE OF THE LATE AND PARTIAL PAYMENTS FROM THE SPOUSES DY CONSTITUTED A WAIVER OF ORIX METRO'S RIGHT TO FORECLOSE THE SHIP MORTGAGE.
III. THE APPELLATE COURT ERRED IN RULING THAT ORIX METRO SHOULD NOT HAVE APPLIED THE ADVANCE PAYMENT OF P289,439.00 TO INTEREST DUE ON THE LOAN WITHOUT INFORMING THE SPOUSES DY.
IV. THE APPELLATE COURT ERRED IN RULING THAT THE SPOUSES DY ARE THE LEGAL POSSESSORS OF RESPONDENT VESSEL.
V. THE APPELLATE COURT ERRED IN RULING THAT ORIX METRO'S ASSIGNEE, COLORADO, COULD NOT BE REIMBURSED BY THE SPOUSES DY FOR EXPENSES INCURRED IN DRYDOCKING AND REPAIRING RESPONDENT VESSEL.
VI. THE APPELLATE COURT ERRED IN RULING THAT THE SPOUSES DY ARE ENTITLED TO MORAL DAMAGES AND ATTORNEY'S FEES.
VII. THE APPELLATE COURT ERRED IN FAILING TO MAKE A SPECIFIC RULING WITH REGARD TO THE BALANCE OF THE SPOUSES DY'S OBLIGATION TO ORIX METRO.
The issue arises as to the existence of the second condition for foreclosure, i.e., whether the spouses Dy were already in default at the time Orix Metro filed, on 18 August 1992, its Complaint for foreclosure of the mortgage constituted on M/V Pilar-I.
Orix Metro maintains that the spouses Dy defaulted in the payment of their obligation and denies that it acceded to the proposed restructure of payments of the spouses Dy. Orix Metro argues that it rejected the proposal for restructuring of the loan of the spouses Dy when it made a counter-offer with certain conditions, which spouses Dy failed to accept and comply with.
In the instant case, both the RTC and the Court of Appeals uniformly found, based on the evidence adduced by the parties, that the filing of the foreclosure proceedings was premature, since the spouses Dy were not yet in default of their obligation at the time thereof. The RTC and the Court of Appeals both observed that while the spouses Dy may not have been up to date on the payment of their monthly amortizations, Orix Metro did not pursue its right to foreclose and opted to accept the spouses Dy's offer to restructure their loan obligation. The Court of Appeals, in particular, held that the previous defaults became immaterial when Orix Metro continued to accept the spouses Dy's partial payments.
Strictly, the Court, not being a trier of facts, is under no obligation to examine and weigh anew evidence adduced below. It should already be bound by the aforementioned findings of fact of the RTC, as affirmed by the Court of Appeals. True, there are recognized exceptions to this general rule and the Court may be prevailed upon to review the findings of fact of the Court of Appeals when the same are manifestly mistaken, or when the appealed judgment was based on a misapprehension of facts, or when the appellate court overlooked certain undisputed facts which, if properly considered, would justify a different conclusion.33 No such circumstances, however, exist in this case.
Nonetheless, in this case, the Court delves into the evidence on record in order to dispel any doubt as to the correctness of the assailed Decision of the Court of Appeals.
In addition to the aforementioned payments, the spouses Dy had previously advanced the amount of P289,480.00. Resultantly, they have already paid Orix Metro the sum of P739,480.00.
Simple computation would reveal that the amount paid (P739,480.00) by the spouses Dy even exceeded the amount they were due to pay (P610,000.00) by August 1992. Thus, at the time the foreclosure proceedings were instituted by Orix Metro on 18 August 1992, there was no installment payment due and demandable, and remaining unpaid, which would have rendered the spouses Dy in default and justified the foreclosure of the mortgage on M/V Pilar-I.
When [the spouses Dy] defaulted in the payment of the monthly amortizations, [Orix Metro] demanded from [spouses Dy] the full payment of the total obligation due in accordance with the terms in the contract of mortgage. However, after representations were made by [spouses Dy], [Orix Metro] accepted the late and partial payments of [spouses Dy], making their default immaterial. When they again defaulted in paying the next amortization due, [Orix Metro] this time made no demand for the full payment of the total obligation. Consequently, [spouses Dy] made payments even after the due date, as in fact they paid several installments to [Orix Metro] which the latter accepted. Thus, upon the expiration of the period to pay the monthly amortization, [Orix Metro] continued accepting late payments, an act which cannot but be construed as a waiver of the right to demand full payment of the obligation due and to foreclose the preferred mortgage. When the mortgagee, instead of availing of their right as embodied in the contract of mortgage, accepted and received delayed payments of installments, beyond the period stipulated, and the mortgagors were in arrears, the mortgagee in effect waived and are now estopped from exercising such right. x x x.
Suffice it to say that as of the time Orix Metro instituted the foreclosure proceedings against the spouses Dy, the legal basis for foreclosure of mortgage did not exist. Thus, Orix Metro had no cause of action against them and cannot demand foreclosure of the mortgage on M/V Pilar-I.
On the application of the advance payment of P289,480.00 to the obligation, the Court affirms the ruling of the Court of Appeals that Article 125237 of the Civil Code controls. Therefore, the spouses Dy may properly apply said advance payment against their outstanding obligation following the new schedule of payments. Additionally, in contracts involving installment payments with interest chargeable against the remaining balance of the obligation, the creditor is duty-bound to inform the debtor of the amount of interest that falls due, and that he is applying the installment payments to cover said interest. Without notifying the debtor, the creditor cannot apply the payments to the interest and then later on hold the debtor in default for nonpayment of installments on the principal.38 In this case, as found by the appellate court, Orix Metro clearly failed to provide the spouses Dy a detailed accounting of the remaining principal obligation, interest, and payments already made.39 The spouses Dy had all the right to apply the advance payment to the amount due in the new schedule of payments.
WHEREFORE, premises considered, the Petition for Review on Certiorari is DENIED. The Decision dated 22 November 2002 and Resolution dated 2 April 2003 of the Court of Appeals in CA-G.R. CV No. 57321 are AFFIRMED with the MODIFICATION that the order requiring respondents spouses Dy to reimburse petitioner Orix Metro/Colorado's expenses incurred for the repair and drydocking of the vessel MV Pilar-I is DELETED.
1 Penned by Associate Justice Juan Q. Enriquez, Jr. with Associate Justices Bernardo P. Abesamis and Edgardo F. Sundiam, concurring; rollo, pp. 60-71.
3 CA rollo, pp. 144-153.
4 Breakdown: P3 million loan, the rest withheld by Orix as interest payments etc.
9 Records, Vol. II, p. 9.
11 Criminal Cases No. 92-3964-68 for Violation of Batas Pambansa Blg. 22 were eventually filed against Lourdes Dy before the Makati RTC, Branch 134. In a Decision dated 7 February 1996, the RTC found her guilty beyond reasonable doubt. She has since then jumped bail.
12 Proposed Restructured Schedule of Payment; rollo, p. 217.
18 Orix Metro filed criminal complaints against Lourdes Dy for violation of Batas Pambansa Bilang 22, otherwise known as "The Bouncing Checks Law," as a result of the latter's issuance of five worthless checks totaling P661,670.00 in payment of her loan obligation to Orix Metro. The criminal informations were docketed as Criminal Cases No. 92-3964 to 68, entitled "People of the Philippines v. Lourdes P. Dy," before the Regional Trial Court, Makati City, Branch 134. In a Decision dated 7 February 1996, Branch 134 found Lourdes Dy guilty beyond reasonable doubt. She has since jumped bail.
19 9 October 1992; records, pp. 128-130.
21 13 October 1992; records, pp. 131-139.
22 6 November 1992; id. at 249-283.
23 1 February 1993; id. at 365-368.
26 CA rollo, pp. 144-153.
30 Servicewide Specialists, Inc. v. Court of Appeals, 376 Phil. 602, 612 (1999).
31 Barbacina v. Court of Appeals, G.R. No. 135365, 31 August 2004, 437 SCRA 300, 305.
32 Cargolift Shipping, Inc. v. L. Acuario Marketing Corporation, G.R. No. 146426, 27 June 2006, 493 SCRA 157, 163.
34 CA rollo, pp. 149-150.
38 Rapanut v. Court of Appeals, 316 Phil. 391, 398 (1995).
39 CA rollo, p. 234.
40 MCC Industrial Sales Corporation v. Ssangyong Corporation, G.R. No. 170633, 17 October 2007, 536 SCRA 408, 466.
42 CA rollo, p. 236.
44 See MCC Industrial Sales Corporation v. Ssangyong Corporation, supra note 40 at 467.

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