[G.R. No. 159352. April 14, 2004]
PREMIERE DEVELOPMENT BANK, petitioner, vs. COURT OF APPEALS, PANACOR MARKETING CORPORATION and ARIZONA TRANSPORT CORPORATION, respondents.
D E C I S I O N
This is a petition for review under Rule 45 of the 1997 Rules on Civil Procedure seeking the annulment of the Decision dated June 18, 2003 of the Court of Appeals which affirmed the Decision of the Regional Trial Court in Civil Case No. 65577.
The undisputed facts show that on or about October 1994, Panacor Marketing Corporation (Panacor for brevity), a newly formed corporation, acquired an exclusive distributorship of products manufactured by Colgate Palmolive Philippines, Inc. (Colgate for short). To meet the capital requirements of the exclusive distributorship, which required an initial inventory level of P7.5 million, Panacor applied for a loan of P4.1 million with Premiere Development Bank. After an extensive study of Panacor’s creditworthiness, Premiere Bank rejected the loan application and suggested that its affiliate company, Arizona Transport Corporation (Arizona for short), should instead apply for the loan on condition that the proceeds thereof shall be made available to Panacor. Eventually, Panacor was granted a P4.1 million credit line as evidenced by a Credit Line Agreement. As suggested, Arizona, which was an existing loan client, applied for and was granted a loan of P6.1 million, P3.4 million of which would be used to pay-off its existing loan accounts and the remaining P2.7 million as credit line of Panacor. As security for the P6.1 million loan, Arizona, represented by its Chief Executive Officer Pedro Panaligan and spouses Pedro and Marietta Panaligan in their personal capacities, executed a Real Estate Mortgage against a parcel of land covered by TCT No. T-3475 as per Entry No. 49507 dated October 2, 1995.
Since the P2.7 million released by Premiere Bank fell short of the P4.1 million credit line which was previously approved, Panacor negotiated for a take-out loan with Iba Finance Corporation (hereinafter referred to as Iba-Finance) in the sum of P10 million, P7.5 million of which will be released outright in order to take-out the loan from Premiere Bank and the balance of P2.5 million (to complete the needed capital of P4.1 million with Colgate) to be released after the cancellation by Premiere of the collateral mortgage on the property covered by TCT No. T-3475. Pursuant to the said take-out agreement, Iba-Finance was authorized to pay Premiere Bank the prior existing loan obligations of Arizona in an amount not to exceed P6 million.
On October 5, 1995, Iba-Finance sent a letter to Ms. Arlene R. Martillano, officer-in-charge of Premiere Bank’s San Juan Branch, informing her of the approved loan in favor of Panacor and Arizona, and requesting for the release of TCT No. T-3475. Martillano, after reading the letter, affixed her signature of conformity thereto and sent the original copy to Premiere Bank’s legal office. The full text of the letter reads:
Please be informed that we have approved the loan application of ARIZONA TRANSPORT CORP. and PANACOR MARKETING CORPORATION. Both represented by MR. PEDRO P. PANALIGAN (hereinafter the BORROWERS) in the principal amount of PESOS: SEVEN MILLION FIVE HUNDRED THOUSAND ONLY (P7,500,000.00) Philippine Currency. The loan shall be secured by a Real Estate Mortgage over a parcel of land located at #777 Nueve de Pebrero St. Bo. Mauway, Mandaluyong City, Metro Manila covered by TCT No. 3475 and registered under the name of Arizona Haulers, Inc. which is presently mortgaged with your bank.
The borrowers have authorized IBA FINANCE CORP. to pay Premiere Bank from the proceeds of their loan. The disbursement of the loan, however is subject to the annotation of our mortgage lien on the said property and final verification that said title is free from any other lien or encumbrance other than that of your company and IBA Finance Corporation.
In order to register the mortgage, please entrust to us the owner’s duplicate copy of TCT No. 3475, current tax declaration, realty tax receipts for the current year and other documents necessary to affect annotation thereof.
Upon registration of our mortgage, we undertake to remit directly to you or your authorized representative the amount equivalent to the Borrower’s outstanding indebtedness to Premiere Bank as duly certified by your goodselves provided such an amount shall not exceed PESOS: SIX MILLION ONLY (P6,000,000.00) and any amount in excess of the aforestated shall be for the account of the borrowers. It is understood that upon receipt of payment, you will release to us the corresponding cancellation of your mortgage within five (5) banking days therefrom.
If the foregoing terms and conditions are acceptable to you, please affix your signature provided below and furnish us a copy of the Statement of Account of said borrowers.
On October 12, 1995, Premiere Bank sent a letter-reply to Iba-Finance, informing the latter of its refusal to turn over the requested documents on the ground that Arizona had existing unpaid loan obligations and that it was the bank’s policy to require full payment of all outstanding loan obligations prior to the release of mortgage documents. Thereafter, Premiere Bank issued to Iba-Finance a Final Statement of Account showing Arizona’s total loan indebtedness. On October 19, 1995, Panacor and Arizona executed in favor of Iba-Finance a promissory note in the amount of 7.5 million. Thereafter, Iba-Finance paid to Premiere Bank the amount of P6,235,754.79 representing the full outstanding loan account of Arizona. Despite such payment, Premiere Bank still refused to release the requested mortgage documents specifically, the owner’s duplicate copy of TCT No. T-3475.
On November 2, 1995, Panacor requested Iba-Finance for the immediate approval and release of the remaining P2.5 million loan to meet the required monthly purchases from Colgate. Iba-Finance explained however, that the processing of the P2.5 million loan application was conditioned, among others, on the submission of the owner’s duplicate copy of TCT No. 3475 and the cancellation by Premiere Bank of Arizona’s mortgage. Occasioned by Premiere Bank’s adamant refusal to release the mortgage cancellation document, Panacor failed to generate the required capital to meet its distribution and sales targets. On December 7, 1995, Colgate informed Panacor of its decision to terminate their distribution agreement.
On March 13, 1996, Panacor and Arizona filed a complaint for specific performance and damages against Premiere Bank before the Regional Trial Court of Pasig City, docketed as Civil Case No. 65577.
On June 11, 1996, Iba-Finance filed a complaint-in-intervention praying that judgment be rendered ordering Premiere Bank to pay damages in its favor.
On May 26, 1998, the trial court rendered a decision in favor of Panacor and Iba-Finance, the decretal portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff Panacor Marketing Corporation and against the defendant Premiere Bank, ordering the latter to pay the former the following sums, namely:
1) P4,520,000.00 in addition to legal interest from the time of filing of the complaint until full payment;
2) P1,000,000.00 as and for exemplary damages;
3) P100,000.00 as and for reasonable attorney’s fees; and
4) Costs of suit.
Similarly, judgment is hereby rendered in favor of plaintiff-in-intervention IBA-Finance Corporation as against defendant Premiere bank, as follows, namely:
1) Ordering defendant Premiere Bank to release to plaintiff-intervenor IBA-Finance Corporation the owner’s duplicate copy of Transfer Certificate of Title No. 3475 registered in the name of Arizona Haulers, Inc. including the deed of cancellation of the mortgage constituted thereon;
2) Ordering the defendant Premiere Bank to pay to Intervenor IBA-Finance, the following sums, to wit:
3) P1,000,000.00 as and by way of exemplary damages; and
4) P100,000.00 as and for reasonable attorney’s fees; and
5) Costs of suit.
For lack of sufficient legal and factual basis, the counterclaim of defendant Premiere Bank is DISMISSED.
Premiere Bank appealed to the Court of Appeals contending that the trial court erred in finding, inter alia, that it had maliciously downgraded the credit-line of Panacor from P4.1 million to P2.7 million.
In the meantime, a compromise agreement was entered into between Iba-Finance and Premiere Bank whereby the latter agreed to return without interest the amount of P6,235,754.79 which Iba-Finance earlier remitted to Premiere Bank to pay off the unpaid loans of Arizona. On March 11, 1999, the compromise agreement was approved.
On June 18, 2003, a decision was rendered by the Court of Appeals which affirmed with modification the decision of the trial court, the dispositive portion of which reads:
WHEREFORE, premises considered, the present appeal is hereby DISMISSED, and the decision appealed from in Civil Case No. 65577 is hereby AFFIRMED with MODIFICATION in that the award of exemplary damages in favor of the appellees is hereby reduced to P500,000.00. Needless to add, in view of the Compromise Agreement plaintiff-intervenor IBA-Finance and defendant-appellant PREMIERE between plaintiff-intervenor IBA-Finance and defendant-appellant PREMIERE as approved by this Court per Resolution dated March 11, 1999, Our dispositive of the present appeal is only with respect to the liability of appellant PREMIERE to the plaintiff-appellees.
With costs against the defendant-appellant.
Hence the present petition for review, which raises the following issues:
WHETHER OR NOT THE DECISION OF HONORABLE COURT OF APPEALS EXCEEDED AND WENT BEYOND THE FACTS, THE ISSUES AND EVIDENCE PRESENTED IN THE APPEAL TAKING INTO CONSIDERATION THE ARGUMENT OF PETITIONER BANK AND ADVENT OF THE DULY APPROVED COMPROMISE AGREEMENT BETWEEN THE PETITIONER BANK AND IBA FINANCE CORPORATION.
WHETHER OR NOT THE ISSUES THAT SHOULD HAVE BEEN RESOLVED BY THE HONORABLE COURT OF APPEALS, BY REASON OF THE EXISTENCE OF THE COMPROMISE AGREEMENT, IS LIMITED TO THE ISSUE OF ALLEGED BAD FAITH OF PETITIONER BANK IN THE DOWNGRADING OF THE LOAN AND SHOULD NOT INCLUDE THE RENDITION OF AN ADVERSE PRONOUNCEMENT TO AN ALREADY FAIT ACCOMPLI- ISSUE ON THE REFUSAL OF THE BANK TO RECOGNIZE THE TAKE-OUT OF THE LOAN AND THE RELEASE OF TCT NO. 3475.
WHETHER OR NOT PETITIONER ACTED IN BAD FAITH IN THE DOWNGRADING OF THE LOAN OF RESPONDENTS TO SUPPORT AN AWARD OF ACTUAL AND EXEMPLARY DAMAGES NOW REDUCED TO P500,000.00.
WHETHER OR NOT THERE IS BASIS OR COMPETENT PIECE OF EVIDENCE PRESENTED DURING THE TRIAL TO SUPPORT AN AWARD OF ACTUAL DAMAGES OF P4,520,000.00.
Firstly, Premiere Bank argues that considering the compromise agreement it entered with Iba-Finance, the Court of Appeals should have ruled only on the issue of its alleged bad faith in downgrading Panacor’s credit line. It further contends that the Court of Appeals should have refrained from making any adverse pronouncement on the refusal of Premiere Bank to recognize the take-out and its subsequent failure to release the cancellation of the mortgage because they were rendered fait accompli by the compromise agreement.
We are not persuaded.
In a letter-agreement dated October 5, 1995, Iba-Finance informed Premiere Bank of its approval of Panacor’s loan application in the amount of P10 million to be secured by a real estate mortgage over a parcel of land covered by TCT No. T-3475. It was agreed that Premiere Bank shall entrust to Iba-Finance the owner’s duplicate copy of TCT No. T-3475 in order to register its mortgage, after which Iba-Finance shall pay off Arizona’s outstanding indebtedness. Accordingly, Iba-Finance remitted P6,235,754.79 to Premiere Bank on the understanding that said amount represented the full payment of Arizona’s loan obligations. Despite performance by Iba-Finance of its end of the bargain, Premiere Bank refused to deliver the mortgage document. As a consequence, Iba-Finance failed to release the remaining P2.5 million loan it earlier pledged to Panacor, which finally led to the revocation of its distributorship agreement with Colgate.
Undeniably, the not-so-forthright conduct of Premiere Bank in its dealings with respondent corporations caused damage to Panacor and Iba-Finance. It is error for Premiere Bank to assume that the compromise agreement it entered with Iba-Finance extinguished all direct and collateral incidents to the aborted take-out such that it also cancelled its obligations to Panacor. The unjustified refusal by Premiere Bank to release the mortgage document prompted Iba-Finance to withhold the release of the P2.5 million earmarked for Panacor which eventually terminated the distributorship agreement. Both Iba-Finance and Panacor, which are two separate and distinct juridical entities, suffered damages due to the fault of Premiere Bank. Hence, it should be held liable to each of them.
While the compromise agreement may have resulted in the satisfaction of Iba-Finance’s legal claims, Premiere Bank’s liability to Panacor remains. We agree with the Court of Appeals that the “present appeal is only with respect to the liability of appellant Premiere Bank to the plaintiffs-appellees (Panacor and Arizona)” taking into account the compromise agreement.
For the foregoing reasons, we find that the Court of Appeals did not err in discussing in the assailed decision the abortive take-out and the refusal by Premiere Bank to release the cancellation of the mortgage document.
Secondly, Premiere Bank asserts that it acted in good faith when it downgraded the credit line of Panacor from P4.1 million to P2.7 million. It cites the decision of the trial court which, albeit inconsistent with its final disposition, expressly recognized that the downgrading of the loan was not the proximate cause of the damages suffered by respondents.
Under the Credit Line Agreement dated September 1995, Premiere Bank agreed to extend a loan of P4.1 million to Arizona to be used by its affiliate, Panacor, in its operations. Eventually, Premiere approved in favor of Arizona a loan equivalent to P6.1 million, P3.4 million of which was allotted for the payment of Arizona’s existing loan obligations and P2.7 million as credit line of Panacor. Since only P2.7 million was made available to Panacor, instead of P4.1 million as previously approved, Panacor applied for a P2.5 loan from Iba-Finance, which, as earlier mentioned, was not released because of Premiere Bank’s refusal to issue the mortgage cancellation.
It is clear that Premiere Bank deviated from the terms of the credit line agreement when it unilaterally and arbitrarily downgraded the credit line of Panacor from P4.1 million to P2.7 million. Having entered into a well-defined contractual relationship, it is imperative that the parties should honor and adhere to their respective rights and obligations thereunder. Law and jurisprudence dictate that obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. The appellate court correctly observed, and we agree, that:
Appellant’s actuations, considering the actual knowledge of its officers of the tight financial situation of appellee PANACOR brought about primarily by the appellant bank’s considerable reduction of the credit line portion of the loan, in relation to the “bail-out” efforts of IBA Finance, whose payment of the outstanding loan account of appellee ARIZONA with appellant was readily accepted by the appellant, were truly marked by bad faith and lack of due regard to the urgency of its compliance by immediately releasing the mortgage cancellation document and delivery of the title to IBA Finance. That time is of the essence in the requested release of the mortgage cancellation and delivery of the subject title was only too well-known to appellant, having only belatedly invoked the cross-default provision in the Real Estate Mortgage executed in its favor by appellee ARIZONA to resist the plain valid and just demand of IBA Finance for such compliance by appellant bank.
Premiere Bank cannot justify its arbitrary act of downgrading the credit line on the alleged finding by its project analyst that the distributorship was not financially feasible. Notwithstanding the alleged forewarning, Premiere Bank still extended Arizona the loan of P6.1 million, albeit in contravention of the credit line agreement. This indubitably indicates that Premiere Bank had deliberately and voluntarily granted the said loan despite its claim that the distributorship contract was not viable.
Neither can Premiere Bank rely on the puerile excuse that it was the bank’s policy not to release the mortgage cancellation prior to the settlement of outstanding loan obligations. Needless to say, the Final Statement of Account dated October 17, 1995 showing in no uncertain terms Arizona’s outstanding indebtedness, which was subsequently paid by Iba-Finance, was the full payment of Arizona’s loan obligations. Equity demands that a party cannot disown it previous declaration to the prejudice of the other party who relied reasonably and justifiably on such declaration.
Thirdly, Premiere Bank avers that the appellate court’s reliance on the credit line agreement as the basis of bad faith on its part was inadmissible or self-serving for not being duly notarized, being unsigned in all of its left margins, and undated. According to Premiere Bank, the irregularities in the execution of the credit line agreement bolsters the theory that the same was the product of manipulation orchestrated by respondent corporations through undue influence and pressure exerted by its officers on Martillano.
Premiere Bank’s posture deserves scant consideration. As found by the lower court, there are sufficient indicia that demonstrate that the alleged unjust pressure exerted on Martillano was more imagined than real. In her testimony, Martillano claims that she was persuaded and coaxed by Caday of Iba-Finance and Panaligan of Panacor to sign the letter. It was she who provided Iba-Finance with the Final Statement of Account and accepted its payment without objection or qualification. These acts show that she was vested by Premiere Bank with sufficient authority to enter into the said transactions.
If a private corporation intentionally or negligently clothes its officers or agents with apparent power to perform acts for it, the corporation will be estopped to deny that the apparent authority is real as to innocent third persons dealing in good faith with such officers or agents. As testified to by Martillano, after she received a copy of the credit line agreement and affixed her signature in conformity thereto, she forwarded the same to the legal department of the Bank at its Head Office. Despite its knowledge, Premiere Bank failed to disaffirm the contract. When the officers or agents of a corporation exceed their powers in entering into contracts or doing other acts, the corporation, when it has knowledge thereof, must promptly disaffirm the contract or act and allow the other party or third persons to act in the belief that it was authorized or has been ratified. If it acquiesces, with knowledge of the facts, or fails to disaffirm, ratification will be implied or else it will be estopped to deny ratification.
Finally, Premiere Bank argues that the finding by the appellate court that it was liable for actual damages in the amount of P4,520,000.00 is without basis. It contends that the evidence presented by Panacor in support of its claim for actual damages are not official receipts but self-serving declarations.
To justify an award for actual damages, there must be competent proof of the actual amount of loss. Credence can be given only to claims, which are duly supported by receipts. The burden of proof is on the party who will be defeated if no evidence is presented on either side. He must establish his case by a preponderance of evidence which means that the evidence, as a whole, adduced by one side is superior to that of the other. In other words, damages cannot be presumed and courts, in making an award, must point out specific facts that can afford a basis for measuring whatever compensatory or actual damages are borne.
Under Article 2199 of the Civil Code, actual or compensatory damages are those awarded in satisfaction of, or in recompense for, loss or injury sustained. They proceed from a sense of natural justice and are designed to repair the wrong that has been done, to compensate for the injury inflicted and not to impose a penalty.
In the instant case, the actual damages were proven through the sole testimony of Themistocles Ruguero, the vice president for administration of Panacor. In his testimony, the witness affirmed that Panacor incurred losses, specifically, in terms of training and seminars, leasehold acquisition, procurement of vehicles and office equipment without, however, adducing receipts to substantiate the same. The documentary evidence marked as exhibit “W”, which was an ordinary private writing allegedly itemizing the capital expenditures and losses from the failed operation of Panacor, was not testified to by any witness to ascertain the veracity of its contents. Although the lower court fixed the sum of P4,520,000.00 as the total expenditures incurred by Panacor, it failed to show how and in what manner the same were substantiated by the claimant with reasonable certainty. Hence, the claim for actual damages should be admitted with extreme caution since it is only based on bare assertion without support from independent evidence. Premiere’s failure to prove actual expenditure consequently conduces to a failure of its claim. In determining actual damages, the court cannot rely on mere assertions, speculations, conjectures or guesswork but must depend on competent proof and on the best evidence obtainable regarding the actual amount of loss.
Even if not recoverable as compensatory damages, Panacor may still be awarded damages in the concept of temperate or moderate damages. When the court finds that some pecuniary loss has been suffered but the amount cannot, from the nature of the case, be proved with certainty, temperate damages may be recovered. Temperate damages may be allowed in cases where from the nature of the case, definite proof of pecuniary loss cannot be adduced, although the court is convinced that the aggrieved party suffered some pecuniary loss.
The Code Commission, in explaining the concept of temperate damages under Article 2224, makes the following comment:
In some States of the American Union, temperate damages are allowed. There are cases where from the nature of the case, definite proof of pecuniary loss cannot be offered, although the court is convinced that there has been such loss. For instance, injury to ones commercial credit or to the goodwill of a business firm is often hard to show with certainty in terms of money. Should damages be denied for that reason? The judge should be empowered to calculate moderate damages in such cases, rather than that the plaintiff should suffer, without redress from the defendant's wrongful act.
It is obvious that the wrongful acts of Premiere Bank adversely affected, in one way or another, the commercial credit of Panacor, greatly contributed to, if not, decisively caused the premature stoppage of its business operations and the consequent loss of business opportunity. Since these losses are not susceptible to pecuniary estimation, temperate damages may be awarded. Article 2216 of the Civil Code:
No proof of pecuniary loss is necessary in order that moral, nominal, temperate, liquidated or exemplary damages may be adjudicated. The assessment of such damages, except liquidated ones, is left to the discretion of the Court, according to the circumstances of each case.
Under the circumstances, the sum of P200,000.00 as temperate damages is reasonable.
WHEREFORE, the petition is DENIED. The Decision dated June 18, 2003 of the Court of Appeals in CA-G.R. CV No. 60750, ordering Premiere Bank to pay Panacor Marketing Corporation P500,000.00 as exemplary damages, P100,000.00 as attorney’s fees, and costs, is AFFIRMED, with the MODIFICATION that the award of P4,520,000.00 as actual damages is DELETED for lack of factual basis. In lieu thereof, Premiere Bank is ordered to pay Panacor P200,000.00 as temperate damages.
Davide, Jr., C.J., (Chairman), Panganiban, Carpio, and Azcuna, JJ., concur.
 Decision penned by Justice Martin S. Villarama, Jr., concurred in by Justices Eubulo G. Verzola and Mario L. Guariña, Third Division, Court of Appeals.
 Decision of Judge Alfredo C. Flores, RTC-Br. 167, City of Pasig.
 Arizona and Panacor are owned and managed by Pedro P. Panaligan who is president of both companies.
 Original Records, p. 340.
 Id., p. 70.
 Id., p. 248.
 Id., p. 249.
 Id., p. 80.
 Id., p. 344.
 Rollo, p. 60.
 Id., pp. 16-17.
 Id., p. 66.
 CA Records, p. 141.
 Original Records, p. 17.
 Intestate estate of the late Ricardo P. Presbiterio, Sr. v. Court of Appeals, G.R. No. 102432, 21 January 1993, 217 SCRA 372.
 Rollo, p. 52.
 Yao Ka Sin Trading v. Court of Appeals, G.R. No. 53820, 15 June 1992, 209 SCRA 763, 783.
 Commentaries and Jurisprudence on the Commercial Laws of the Philippines, 1996 Edition, Volume 3, p. 233, citing Fletcher, 814-815, by Aguedo F. Agbayani.
 People v. Marollano, G.R. No. 105004, 24 July 1997, 276 SCRA 84.
 Barzaga v. Alviar, G.R. No. 115129, 12 February 1997, 268 SCRA 105.
 Araneta v. Bank of America, G.R. No. L-25414, 30 July 1971, 40 SCRA 144, 145.
 Radio Communications of the Philippines, Inc. (RCPI) v. Yabut Freight Express Inc., et al., G.R. No. L-55194, 26 February 1981, 103 SCRA 359.