THE Supreme Court has affirmed the ruling issued by the Court of Appeals (CA) compelling a copra exporting firm to pay Banco de Oro (BDO) Unibank Inc., the amount of at least P1 billion representing its unpaid loan obligations obtained more than five decades ago.
In a two-page resolution dated November 11, the SC’s Third Division affirmed with modification the CA’s decision issued on November 22, 2018. That CA decision upheld the ruling issued by the Regional Trial Court of Makati City on January 25, 2017. The Makati RTC ordered International Copra Export Corp. (ICEC), Interco Manufacturing Corp. (Interco) and affiliated security companies owned by the Luy family to pay BDO the total amount of P833,589,999.41.
However, the Court imposed a 6-percent interest per annum from the finality of the decision until fully paid instead of the 10 percent previously imposed by the Makati RTC.
The SC also increased the attorney’s fees awarded to BDO from P25 million to P41.67 million.
“Acting on the petition for review on certiorari assailing the decision and resolution, dated November 22, 2018, and July 3, 2019, respectively, of the Court of Appeals, the court resolves to deny the petition for failure to show any reversible error in the challenged decision and resolution as to warrant the exercise by this court of its discretionary appellate jurisdiction,” the SC resolution read.
Based on the record, BDO’s predecessor-in-interest, Philippine Commercial International Bank which later on became Equitable PCI Bank (EPCI), have been extending loan and credit facilities to ICEC and Interco.
On account of the good standing of the two companies, the loans were consistently renewed without any collateral.
Between 1995 to 2007, surety agreement and deed of suretyship were executed between the bank and the Luys.
In June 2006, the parties negotiated the collaterization of ICEC and Interco’s loans due to the drastic drop of their export volumes.
EPCI proposed that a portion of the total obligation be secured by a real-estate mortgage over the LKG Tower, a building in Makati City owned by ICEC Land. The companies rejected the proposal.
On account of defendants-appellants’ refusal to collateralize their loan, EPCI offered them two options. One option is torenew the P900-million loan on a clean slate but subject to a P25-million quarterly amortization beginning November 2006. The second option was to amortize the outstanding obligation of P255 million for five years beginning January 2007 through five annual payments of P51 million.
Both options are nevertheless subject to a condition that all the creditors of defendant-appellants shall remain on pari passu.
Under said arrangement, their creditors would be treated on equal footing with respect to the uniform absence of collaterals. And, should they provide collaterals to any of their creditors, excluding the real-estate mortgage with the Bank of the Philippine Islands, or if any of their creditors enjoy preferential terms over that of EPCI, these circumstances shall be considered as events of default.
By reason of the pari passu agreement, BDO extended the maturity date of defendants-appellants’ loans and even extended credit facilities in various dates in November and December 2008, and January and February 2009, as evidenced by promissory notes.
However, BDO discovered that contrary to their representations, ICEC and Interco had been mortgaging and disposing their properties to secure their indebtedness to other creditors.
It clamed that ICEC mortgaged units of the LKG Tower to Allied Banking Corp. as a security for its loan.
Additionally, the bank found out that the maturity dates of the promissory notes have lapsed without the obligation being settled by the copra exporters.
This prompted BDO to seek redress from the court through a complaint for sum of money with application for preliminary attachment.
In upholding the ruling of the trial court, the CA did not give weight to the claim of the companies that there was actually no pari passu agreement between them and BDO due to lack of written agreement between the parties.
“In this case, the absence of any written conformity of defendants-appellants to the pari passu agreement is not fatal to plaintiff-appellee’s case,” the CA ruled. “The latter only needed to show by a preponderance of evidence that there was indeed an oral representation on the part of the former, which the bank did.”
“Conspicuously, the evidence submitted by plaintiff-appellee weigh more than defendants-appellants’ bare denials. Other than denial, no other evidence was submitted by defendants-appellants to prove its defense. As aptly pronounced by the RTC, their plain denial that there was no pari passui representation deserves no weight and cannot overcome the straightforward, unequivocal and categorical declaration of plaintiff-appellee’s witnesses,” it added.