G.R. No. 238258 , December 10, 2019
DUTY PAID IMPORT CO. INC., RAMON P. JACINTO, RAJAH BROADCASTING NETWORK, INC., AND RJ MUSIC CITY, PETITIONERS, VS. LANDBANK OF THE PHILIPPINES, RESPONDENT.

FACTS

On November 19, 1997, respondent Landbank of the Philippines (LBP) extended an Omnibus Credit Line Agreement of P250,000,000.00 to petitioner Duty Paid Import Co. Inc. (DPICI). Petitioners Ramon P. Jacinto, Rajah Broadcasting Network, Inc., and RJ Music City (collectively, Jacinto, et al.) executed a Comprehensive Surety Agreement, unconditionally, irrevocably, jointly, and severally binding themselves to pay LBP the principal sum in the event of DPICI’s default. From July 24, 1997, to August 4, 1998, DPICI, through its officers, executed several promissory notes in favor of LBP. As security for a P10,000,000.00 loan, a real estate mortgage over a condominium unit was executed. Upon DPICI’s failure to pay, LBP extrajudicially foreclosed the mortgage on December 17, 1998, and emerged as the highest bidder at the auction sale on February 5, 1999, for P2,970,000.00. After applying the foreclosure proceeds, a deficiency of P304,524,438.98 remained. LBP sent demand letters, and after no payment was made, filed a collection case. Petitioners contended the complaint was premature due to an alleged loan restructuring agreement, argued the actual obligation was less, and claimed force majeure due to the 1997 Asian economic crisis. The Regional Trial Court (RTC) ruled in favor of LBP, ordering petitioners to pay solidarily. The Court of Appeals (CA) affirmed the RTC decision, dismissing petitioners’ appeal.

ISSUE

Whether the Court of Appeals erred in affirming the RTC decision which held petitioners solidarily liable to pay respondent LBP for the loan obligations, despite petitioners’ defenses of premature filing due to alleged loan restructuring, miscalculation of the obligation, unconscionable interest, lack of solidary liability for the sureties, and force majeure due to the 1997 Asian financial crisis.

RULING

The Supreme Court DENIED the petition and AFFIRMED the CA Decision and Resolution. The Court held that the issues raised were questions of fact, which are not reviewable in a Rule 45 petition, as factual findings of the lower courts are final and binding when supported by substantial evidence. None of the recognized exceptions to this rule were present. On the merits, the Court found petitioners failed to substantiate their claim of a loan restructuring agreement with preponderant evidence; a letter from petitioners’ Vice President for Finance acknowledged LBP’s denial of the restructuring proposal. Petitioners, as sureties under the Comprehensive Surety Agreement, were solidarily liable with the principal debtor DPICI upon default, without need for LBP to first exhaust the collaterals. The 1997 Asian financial crisis did not constitute a fortuitous event under Article 1174 of the Civil Code justifying non-payment, as it was a business risk petitioners assumed when they contracted the loan. The defense under the Truth in Lending Act was correctly disregarded for being raised for the first time on appeal.