.

167, B 24, 1988 815

Garcia s. Co rt of Appeals
*
No . L-82282-83. No embe 24, 1988.

ANTONIO M. GARCIA, DYNETICS, INC, and MATRIX

MANAGEMENT CORPORATION, pe i ione , . COURT OF
APPEALS and SECURITY BANK AND TRUST COMPANY,
e ponden .

Ci i P ced e; S a J dg e ; C a e de a
j dg e he he e i ge i e i e a a a e ia fac a d ha he
i g a i e i ed a j dg e a a a e f a . A S mma
J dgmen ma be ende ed b a co pon mo ion of a pa befo e ial
and af e bmi ion of pleading , admi ion , doc men and/o af da i
and co n e af da i hen i i clea ha "e cep a o he amo n of
damage , he e i no gen ine i e a o an ma e ial fac and ha he
mo ing pa i en i led o a j dgmen a a ma e of la ." (R le 34, R le
of Co ). B gen ine i e i mean an i e of fac hich call fo he
p e en a ion of e idence (Cadi ao . E en o, 132 SCRA 93) a
di ing i hed f om an i e hich i ham, c i io , con i ed, e p in
bad fai h, o pa en l n b an ial a no o con i e a gen ine i e fo
ial. (Ve ga a, S . . S el o, e al., G.R. No. 74766 Decembe 21, 1987;
Cadi a o . E en o p a; Me cado, e al. . Co of Appeal , G.R. No. L-
44001 J ne 10,1988) Thi can be de e mined b he co on he ba i of he
pleading , admi ion , doc men , af da i and/o co n e -af da i
bmi ed b he pa ie o he co .
Sa e; Sa e; Sa e; Ob iga i f eii e e de ae
c ea de ed i he eadi g , ad i i a d he eb ed af da i f
M . Ma e . Undo b edl , he obliga ion of he pe i ione o he
e ponden a e clea l de ned in he pleading , admi ion and he
n eb ed af da i of M . Ma e ho handle he Chema k acco n .
Sa e; Sa e; Sa e; Sa e; N a e ia e i f fac e de ed b
he defe e a he ai i e. We nd no ma e ial e ion of fac
ende ed b he e defen e a o he main i e on he he o no he
pe i ione can be held liable o he e ponden bank nde hei indemni
ag eemen .
Sa e; Sa e; Sa e; Sa e; Sa e; I e e de ed i he a d ec d
defe e i ha a d c i i . The i e ende ed in he

* HIRD DI I ION.
 16

816 C A A

Garcia s. Co rt of Appeals

defen e i " ham and c i io " in he ligh of he e m of he indemni

ag eemen . Th , nde he indemni ag eemen , he pe i ione bo nd
hem el e join l and e e all i h Chema k in fa o of he e ponden
bank fo he pa men , de a d a d i h be e f e c i , f
ha e e a a Che a k a be i deb ed he e de
ba k de a d b i e f he c edi acc da i . (I alic pplied)
The economic condi ion of he co n a e imma e ial o he i e on he
liabili of he pe i ione nde hei indemni ag eemen . The i e
ai ed in he econd defen e, on he he o no he indemni ag eemen
e e in ended a colla e al fo f e Chema k loan i like i e ham and
c i io . Unde he indemni ag eemen , he pe i ione bo nd
hem el e o pa ha e e amo n Chema k ma be indeb ed o he bank
" de a d b i e f af e aid c edi acc da i ( ) i c di g he
b i i , e e a , e e i , i c ea e , a e d e , c e i a d
e i a f he af e aid c edi acc da i ( ) .
Sa e; Sa e; Sa e; Sa e; A g e ha D e ic ' e ec i f he
i de i ag ee e i c a i e a d he ef e a ie
a d e f ceab e d e e de a ge i e i e. The a g men a o
he he o no D ne ic ' e ec ion of he indemni ag eemen i con a
o i p po e and he efo e l a i e and nenfo ceable again i doe
no ende a gen ine i e. The eco d ho ha D ne ic a a ho i ed
o e ec e he indemni ag eemen e idenced b he Co po a e Sec e a '
ce i ca e (p. 38, 264 O iginal Reco d ). Thi a no eb ed.
Sa e; I e e ; N e e ib e e I he a a d f i e e . The
inc ea ed in e e a e a e e p e l p o ided fo in he amended c edi line
ag eemen and in he o p omi o no e e ec ed b Chema k in fa o of
Sec i Bank & T Co. We nd no e e ible e o in he a a d of
in e e .
Sa e; Sa e; Pe a cha ge a e e ce i e a d c ci ab e.
Penal in e e a e in he na e of li ida ed damage (C mag n .
Philippine Ame ican In ance Co., Inc., e al. G.R. No. 81453 A g 15,
1988, Lambe . Fo , 26 Phil. 588) and ma be e i abl ed ced b he
co if he a e ini i o o ncon cionable. (See A icle 1229, 2227,
Ne Ci il Code). We ag ee i h he pe i ione ha he penal cha ge a e
e ce i e and ncon cionable. The in e e cha ge a e eno gh p ni hmen
fo he pe i ione ' fail e o compl i h hei obliga ion .

17

. 167, B 24, 1988 817

Garcia s. Co rt of Appeals
PETITION o e ie he deci ion and e ol ion of he Co of
Appeal .
The fac a e a ed in he opinion of he Co .
S c , Sa a a , H a & Ga a a fo pe i ione .
B , Za a a, Na c , C a a, P c &B fo
p i a e e ponden .

GUTIERREZ, JR., J.:

In a mma j dgmen ende ed b he Regional T ial Co of

Maka i in Ci il Ca e No. 10398, he complain a di mi ed fo
lack of me i and he pe i ione e e o de ed o pa he p i a e
e ponden he follo ing: (a) he npaid p incipal m of P15
million emaining npaid o of Chema k' a ailmen of he P20
million c edi line, pl 18% in e e pe ann m and 36% a penal
pe ann m fo P omi o No e No. DLS/74/540/83 f om Ma ch 23,
1984 n il f ll paid; and pl 24% in e e pe ann m and 36% a
penal pe ann m fo P omi o No e No. DLS/74/1358/83 f om
A g 9,1983 n il f ll paid; (b) a o ne ' fee e i alen o 10%
of he o al amo n of plain iff ' obliga ion and (c) co of i .
The mma j dgmen a af med b he Co of Appeal .
The appella e co ' deci ion and he e ol ion den ing a mo ion
fo econ ide a ion a e no challenged b he pe i ione in he
in an pe i ion.
The an eceden fac ele an o he in an pe i ion a e a
follo :
On Ap il 23,1985 pe i ione D ne ic , Inc., Ma i Managemen
and T ading Co po a ion and An onio M. Ga cia led a complain
fo decla a o elief and/o inj nc ion i h damage again
e ponden Sec i Bank and T Compan (SBTC). The
plain iff o gh a j dicial decla a ion ha he e e no liable o he
defendan bank nde ce ain Indemni Ag eemen he e ec ed
in fa o of Chema k Elec ic Mo o , Inc. hich had been e ended
a c edi accommoda ion of abo P20,000,000.00 b he defendan
bank. The al o p a ed fo pa men of a o ne ' fee and co of
i . Th , he alleged in hei complain :

818 C A A
Garcia s. Co rt of Appeals

"a) The e i no alid con ide a ion fo he e ec ion of he aid

in men ;
b) The aid in men had become in alid and ineffec i e a he ime
he defendan nall e ended he loan accommoda ion o Chema k
and ha he pa ie o he aid in men did no in end he aid
in men o co e Chema k' obliga ion o he defendan hich
ee b e en l g an ed nde epa a e and independen
an ac ion ;
c) A ming, i ho conceding, ha he e i a alid con ide a ion fo
he e ec ion of he afo e aid in men and ha he aid
in men con in ed o be alid and effec i e hen he defendan
e ended a c edi accommoda ion o Chema k, aid in men a e
n ll and oid in ofa a D ne ic i conce ned a i i l a i e ,
being con a o he p po e of D ne ic , i po e , licen e and
f anchi e;
d) A ming, i ho conceding, ha he Indemni Ag eemen
in men a e alid and enfo ceable, he obliga ion of he
plain iff he e nde ha e been e ing i hed, ei he b no a ion o
b he ac and cond c of he defendan , ho, nde he
ci c m ance , in ef ing he alid and legi ima e plea of Chema k
fo a ea onable e c ing plan of i obliga ion ha p ac icall
ende ed i impo ible fo Chema k o pa i obliga ion o i
c edi o and o he plain iff in he e en plain iff a e legall
obliga ed o pa Chema k' obliga ion o he defendan ;
e) In he ligh of p e en economic condi ion , in gene al, and he
condi ion of Chema k in pa ic la , a ell a he nancial
condi ion of he plain iff , he demand of he defendan fo he
plain iff o pa he Chema k obliga ion o ld con i e an ab e
of igh a de ned in he Ne Ci il Code;
f) Con ide ing he p e en ad e e economic condi ion plag ing he
en i e co n , he e m and condi ion of he c edi
accommoda ion and he Indemni Ag eemen in men ,
a ming ha he la e a e alid and enfo ceable, ha e become o
manife l dif c l a o be be ond he con empla ion of he
pa ie . Unde he p o i ion of H man Rela ion of he Ne Ci il
Code, a ell a he gene al p inciple of e i , e peciall he
doc ine of he ' eb ic an ib ' and ' he f a ion of he
comme cial objec o f a ion of en e p i e' and nde A icle
1267 of he Ne Ci il Code, hen he e ice ha become o
dif c l a o be manife l be ond he con empla ion of he
pa ie , he obligo ma be elea ed he ef om;
g) In addi ion o he ea on a ed in pa ag aph e and f he eof,
Chema k, he p incipal obligo , i no liable fo i obliga ion
nde he c edi accommoda ion e ended o i b he defendan

. 167, B 24, 1988 819

Garcia s. Co rt of Appeals

beca e i ha been p ohibi ed f om compl ing he e i h b a

la f l a ho i . Unde he la on g a an and e , he
g a an o o he e , no being a p incipal deb o , i no liable fo
he obliga ion nle he p incipal obligo i like i e liable.
(A icle 2054 of he Ne Ci il Code; Ho picio de San Jo e .
Fideli and S e Co., 52 Phil. 926; U I abelo . Yandoc, CA-
G.R. No. 8801-R, J ne 20, 1956). The deb o in obliga ion o do
hall al o be elea ed hen he p e a ion become legall
 impo ible i ho he fa l of he obligo .(A icle 1266 of he Ne
Ci il Code);
h) A ming, i ho conceding, ha he plain iff a e liable nde
he Indemni Ag eemen in men , he a e no liable fo he
amo n being claimed b he defendan , con ide ing ha he aid
amo n incl de he pa men of e o bi an in e e , e ce i e
penal ie and amo n imp ed o be d e hich a e no , in fac ,
d e." (Rollo, pp. 106-107)

On J ne 11, 1985 he e ponden bank led i An e and

Co n e claim i h p a e fo p elimina a achmen . The defendan
alleged in i co n e claim:

ALLEGATIONS COMMON TO ALL DEFENDANTS

"21. Some ime in A g , 1981, Chema k a g an ed b plain iff a

c edi line of P4.0 million con i ing of an impo LC-TR line of
P2.0 million and an e po loan line of P2.0 million.
22. Said c edi line a inc ea ed in Feb a , 1982 f om P4.0 million
o P20.0 million, o i :

E po loan line f om P2.0 million o P15.0 million

Impo LC-TR f om P2.0 million o P5.0 million
The e m and condi ion of hi P20.0 million c edi a e e ec ed in he
Amended C edi Line Ag eemen da ed Feb a 8, 1982 a ached a Anne
"1" he eof;

23. Chema k a ailed of aid c edi line and a e idence of aid

a ailmen , Chema k e ec ed e e al p omi o no e co e ing
he follo ing amo n d a n again hi c edi line, i ;

a) The m of P6,350,750.00 d a n on Ma ch 23, 1983 i h in e e

and penal a he a e indica ed in P omi o No e No.
DLS/74/540/83 o ma e on J ne 21,1983, a cop i a ached a
Anne "3";
b) The m of P8,649,250.00 d a n on A g 9, 1983 i h in e e
and penal a he a e indica ed in P omi o No e No.
DLS/74/1358/83 o ma e on Sep embe 8, 1983, a cop of hich
i he e o a ached a Anne "4".

20

820 C A A
Garcia s. Co rt of Appeals

24. Chema k defa l ed in pa ing i obliga ion nde he afo e aid

p omi o no e hen he e became d e. De pi e epea ed
demand , Chema k failed and ef ed o pa i alid and j
obliga ion o he defendan hich, a of Decembe 11,1984,
amo n ed o P13, 30,596.93 nde P omi o No e No,
 DLS/74/540/83 and P17,357,117.51 nde PN No.
DLS/74/1358/83.

CAUSE OF ACTION AGAINST ANTONIO M. GARCIA

25. Plain iff Ga cia pe onall bo nd him elf join l and e e all i h
Chema k, o pa defendan pon demand and i ho bene of
e c ion, of ha e e amo n o amo n Chema k ma be
indeb ed o defendan nde and b i e of he afo e aid c edi
line accommoda ion, incl ding he b i ion , ene al ,
e en ion , inc ea e and o he amendmen of he afo e aid c edi
accommoda ion , a ell a all o he obliga ion ha Chema k ma
o e he defendan .
26. Acco dingl , plain iff Ga cia e ec ed o (2) lndemni
Ag eemen , one da ed Jan a 20,1982, a cop of hich i
a ached he e o and made in eg al pa he eof a Anne "E" and he
o he , an Indemni Ag eemen da ed Feb a 8, 1982, a Anne
"B" of he Complain ;
27. Unde he e m of he fo egoing Indemni Ag eemen e ec ed
b plain iff Ga cia, he f he bo nd him elf olida il ih
Chema k in fa o of defendan fo he fai hf l compliance of all he
e m and condi ion con ained in he Amended C edi Line
Ag eemen (Anne "1").
28. Defendan demanded f om plain iff Ga cia he pa men of he
o anding obliga ion of Chema k in a le e da ed Oc obe 26,
1984, a cop of hich i made Anne "5" o fo m pa he eof.
Defendan ei e a ed aid demand on Ap il 15, 1985.
29. No i h anding aid demand , plain iff Ga cia failed and ef ed,
a he ill fail and ef e o pa hi obliga ion p an o he
indemni ag eemen he e ec ed.

CAUSES OF ACTION AGAINST MATRIX MANAGEMENT

& TRADING CORPORATION

30. Plain iff Ma i bo nd i elf join l and e e all i h Chema k in

fa o of he defendan fo he pa men , pon demand and i ho
bene of e c ion, of ha e e amo n o amo n Chema k ma
be indeb ed o defendan nde and b i e of he afo e aid c edi
line accommoda ion incl ding he b i ion , ene al ,
e en ion , inc ea e and o he amendmen of he afo e aid c edi
accommoda ion , a ell a of he amo n of ch o he obliga ion
ha Chema k ma o e he defendan .

21

. 167, B 24, 1988 821

Garcia s. Co rt of Appeals

31. Acco dingl , Ma i h o gh i d l a ho i ed of ce , e ec ed

an Indemni Ag eemen da ed Feb a 8,1982, a cop of hich i
a ached he e o a Anne "A" and inco po a ed he ein b efe ence.
 32. Unde he e m of he fo egoing indemni ag eemen e ec ed b
Ma i , i f he bo nd i elf olida il i h Chema k in fa o of
defendan fo he fai hf l compliance of all he e m and
condi ion con ained in he C edi Line Ag eemen (Anne "B").
33. Defendan demanded f om Ma i he pa men of he o anding
obliga ion of Chema k in a le e da ed Oc obe 26,1984, a cop of
hich i made Anne "5" o fo m pa he eof. Defendan ei e a ed
aid demand on Ap il 25,1985.
34. No i h anding aid demand , Ma i failed and ef ed, a i ill
fail and ef e , o pa i obliga ion p an o he indemni
ag eemen i e ec ed in plain iff' fa o .

CAUSE OF ACTION AGAINST DYNETICS, INC.

35. Plain iff D ne ic bo nd i elf join l and e e all i h Chema k

in fa o of he defendan fo he pa men , pon demand and
i ho bene of e c ion, of ha e e amo n o amo n
Chema k ma be indeb ed o defendan nde and b i e of he
afo e aid c edi line accommoda ion incl ding he b i ion ,
ene al , e en ion , inc ea e and o he amendmen of he
afo e aid c edi accommoda ion , a ell a of he amo n of ch
obliga ion ha Chema k ma o e he defendan .
36. D ne ic e ec ed an indemni ag eemen da ed Feb a 8,1982,
cop of hich i a ached a anne "A" of he Complain . 37.
Unde he e m of he fo egoing Indemni Ag eemen e ec ed b
D ne ic , i f he bo nd i elf olida il i h Chema k in fa o of
defendan fo he fai hf l compliance of all he e m and
condi ion con ained in he Amended C edi Line Ag eemen
(Anne "1").
38. Defendan demanded f om D ne ic he pa men of he o anding
obliga ion of Chema k in a le e da ed Oc obe 26,1984, a cop of
hich i made Anne "5", o fo m pa he eof. Defendan ei e a ed
aid demand on Ap il 25,1985.
39. No i h anding aid demand , D ne ic failed and ef ed, a i
ill fail and ef e o pa i obliga ion p an o he indemni
ag eemen i e ec ed in defendan ' fa o ." (Rollo, pp. 108-111)

On A g 21,1985, he pe i ione manife ed ha " he a e

adop ing all allega ion in hei Complain a hei

22

822 C A A
Garcia s. Co rt of Appeals

an e o he e pec i e co n e claim again each of hem."

(O iginal Reco d , p. 229)
On Sep embe 18,1985, he e ponden bank led a mo ion fo
mma j dgmen on he g o nd ha he an e o he
co n e claim " ende no gen ine i e a o an ma e ial fac , and
con i of me e c c a a ac , a aa a 4
 , a ac b a
a a a da ed Feb a 8, 1982 hen
he admi ed " nde aid in men , i a ba icall p o ided ha
fo and in con ide a ion of he c edi accommoda ion in he o al
amo n of T en Million (20,000,000.00) Pe o , g an ed b
defendan in fa o of Chema k Elec ic Mo o , Inc., a co po a ion
d l o gani ed and e i ing nde he la of he Philippine ,
a a o indemnif defendan in he e en Chema k
ho ld fail o compl i h i obliga ion .'" (O iginal Reco d , p.
248) In ppo of he mo ion, he e ponden bank a ached he
af da i da ed Sep embe 17,1985 of M . Cha i Ma e , Senio
A i an Manage , co po a e banking g o p, SBTC incl ding i
anne e .
The pe i ione led an oppo i ion o he mo ion fo mma
j dgmen b o no a ail. The lo e co ende ed a deci ion
g an ing he mo ion fo mma j dgmen . The pe i ione '
complain a di mi ed and he e e o de ed o pa he
e ponden bank nde he indemni ag eemen .
The pe i ione hen led i h he Co of Appeal : 1) an appeal
f om he mma j dgmen and 2) a pecial ci il ac ion fo
ce io a i and p ohibi ion i h a p a e fo p elimina inj nc ion o
ann l he o de of he Io e co g an ing mo ion fo mma
j dgmen and g an ing mo ion fo e ec ion pending appeal. The
o ca e e e con olida ed.
The appella e co ained he mma j dgmen . Bo h
pe i ion e e di mi ed i h co again he pe i ione . A mo ion
fo econ ide a ion he e o a denied.
Hence, hi pe i ion.
On Ma ch 30,1988, e i ed a empo a e aining o de o
enjoin he enfo cemen of he e ioned deci ion of he appella e
co . In a Re ol ion da ed J ne 6, 1988, e ga e d e co e o he
pe i ion.
The i e ai ed in he pe i ion i he he o no he appel-

23

. 167, B 24, 1988 823

Garcia s. Co rt of Appeals

la e co commi ed e e ible e o hen i ained he ial

co ' mma j dgmen .
The pe i ione bmi ha he appella e co commi ed ch an
e o, o i:

"a. The endi ion of J dge Mendo a' S mma J dgmen a

imp ope beca e pe i ione ' Complain and SBTC'
An e i h Co n e claim ai e iable i e of fac . The
Co of Appeal , he efo e, e ed hen i ained J dge
Mendo a' S mma J dgmen .
b. A ming ( he n e) ha he e e e no 'gen ine i e a
o an ma e ial fac ,' he a a d e o in J dge Mendo a'
 S mma J dgmen e e ende ed in iola ion of le of
e idence and la and j i p dence on in e e , penal ie
and a o ne ' fee . The appella e co , he efo e,
commi ed he ame iola ion hen i pheld J dge
Mendo a' S mma J dgmen ." (Rollo, p. 325).

A S mma J dgmen ma be ende ed b a co pon mo ion of a

pa befo e ial and af e bmi ion of pleading , admi ion ,
doc men and/o af da i and co n e af da i hen i i clea
ha "e cep a o he amo n of damage , he e i no gen ine i e
a o an ma e ial fac and ha he mo ing pa i en i led o a
j dgmen a a ma e of la ." (R le 34, R le of Co ). B gen ine
i e i mean an i e of fac hich call fo he p e en a ion of
e idence (Cadi ao . E en o, 132 SCRA 93) a di ing i hed f om
an i e hich i ham, c i io , con i ed, e p in bad fai h, o
pa en l n b an ial a no o con i e a gen ine i e fo ial.
(Ve ga a, S . . S el o, e al., G.R. No. 74766 Decembe 21,1987,
Cadi ao . E en o a; Me cado, e al. . Co of Appeal , G.R.
No. L-44001 J ne 10,1988) Thi can be de e mined b he co on
he ba i of he pleading , admi ion , doc men , af da i and/o
co n e -af da i bmi ed b he pa ie o he co . (Sec ion 3,
R le 34, Re i ed R le of Co ; Ve ga a . S el o a; Cadi ao .
E en o a).
The pleading , admi ion and af da i bmi ed in co in
hi ca e e eal he follo ing fac :
In A g 1981, Chema k a g an ed b e ponden bank a
c edi line of P4.0 million hich a inc ea ed in Feb a 1982 o
P20.0 million, o i ; E po loan line f om P2.0 million o P15.00
million; Impo LC/TR f om P2.0 million o

24

824 C A A
Garcia s. Co rt of Appeals

P5.0 million. The e m and condi ion of hi P20 million c edi a e

a ed in he C edi Line Ag eemen da ed Feb a 8,1982 (p. 254,
Reco d ). On hi ame da , Feb a 8,1982 he pe i ione
e ec ed epa a e, b i h imila e m , indemni ag eemen
he eb he bo nd hem el e join l and e e all i h Chema k
o pa e ponden bank pon demand and i ho e c ion of
ha e e amo n Chema k ma be indeb ed o aid bank b i e
of aid c edi line accommoda ion incl ding he b i ion,
ene al , e en ion , inc ea e and o he amendmen he eof; and
ha pon defa l of Chema k, p ope demand o pa e e made on
he pe i ione o compl i h hei obliga ion . The h ee indemni
ag eemen binding each of he pe i ione con ain he follo ing
p o i ion :

INDEMNITY AGREEMENT

KNOW ALL MEN BY THESE PRESENTS: Tha

"DYNETICS, INC., a co po a ion d l o gani ed and e i ing nde and b
i e of he la of he Philippine , i h of ce a he FTI Comple ,
Tag ig, Me o Manila fo and in con ide a ion of he c edi
accommoda ion in he o al amo n of TWENTY MILLION
(P20,000,000.00) PESOS g an ed b he SECURITY BANK & TRUST
COMPANY, a comme cial banking co po a ion d l o gani ed and e i ing
nde and b i e of he la of he Philippine , i h of ce a 6778 A ala
A en e, Maka i, Me o Manila, he einaf e efe ed o a he BANK, in
fa o of CHEMARK ELECTRIC MOTORS, INC., a co po a ion d l
o gani ed and e i ing nde and b i e of he la of he Philippine ,
i h of ce a he 2nd Floo , P ince B ilding, E eban S ee , Lega pi
Village, Maka i, Me o Manila, he einaf e efe ed o a he CLIENT, i h
he ip la ed in e e and cha ge he eon, e idenced b ha / ho e ce ain
AMENDED CREDIT LINE AGREEMENT made 'and e ec ed b and
be een he CLIENT and he BANK on e en da e he eb bind( )
him elf/ hem el e join l and e e all i h he CLIENT in fa o of he
BANK fo he pa men , pon demand and i ho bene of e c ion, of
ha e e amo n o amo n he CLIENT ma be indeb ed o he BANK
nde and b i e of afo e aid c edi accommoda ion( ) incl ding he
b i ion , ene al , e en ion , inc ea e , amendmen , con e ion and
e i al of he afo e aid c edi accommoda ion( ), a ell a of he amo n
o amo n of ch o he obliga ion ha he CLIENT ma o e he BANK,
he he

25

. 167, B 24, 1988 825

Garcia s. Co rt of Appeals

book and eco d of he BANK, pl in e e and e pen e a i ing f om an

ag eemen o ag eemen ha ma ha e he e ofo e been made, o ma
he eaf e be e ec ed b and be een he pa ie he e o, incl ding he
b i ion , ene al , e en ion , inc ea e , amendmen , con e ion and
e i al of he afo e aid c edi accommoda ion( ), and f he bind( )
him elf/ hem el e i h he CLIENT in fa o of he BANK fo he fai hf l
compliance of all he afo e aid c edi accommoda ion( ), all of hich a e
inco po a ed he ein and made pa he eof b efe ence.
IN WITNESS WHEREOF, he e p e en a e igned a Maka i, Me o
Manila on hi 8 h da of Feb a , 1982. and/o i acco n
f nding hi loan

DYNETICS, INC.
(SGD.) ANTONIO M. GARCIA
(SGD.) DOMINADOR GAMEZ

Signed in he P e ence of:

(SGD.) JONA C. CAJUYONG

(SGD.) TERESITA A. DE GUZMAN"
(O iginal Reco d , pp. 306-307)

Bo h D ne ic and Ma i e e a ho i ed b hei e pec i e boa d

of di ec o o e ec e he indemni ag eemen . In he ca e of
D ne ic , Co po a e Sec e a An onio Pa ele o ce i ed ha d ing
a mee ing of he Boa d of Di ec o held on Decembe 29,1981 a i
of ce add e , i a nanimo l adop ed ha he co po a ion "
nde ake o join l and e e all g a an ee he c edi line of
CHEMARK ELECTRIC MOTORS, INC. in fa o of he
SECURITY BANK & TRUST COMPANY, in an amo n no o
e ceed TWENTY MILLION (20,000,000.00) PESOS" (p. 264,
O iginal Reco d ). In he ca e of MATRIX, Co po a e Sec e a
Rene J. Ka igbak ce i ed ha a he mee ing of he Boa d of
Di ec o held on Decembe 28, 1981, a e ol ion a nanimo l
adop ed o ha e he co po a ion " join l and e e all
g a an ee he c edi line of CHEMARK ELECTRIC MOTORS,
INC. in fa o of he SECURITY BANK & TRUST COMPANY, in
an amo n no o e ceed TWENTY MILLION (P20,000,000.00)
PESOS." (O iginal Reco d , p. 262) 825

26

826 C A A
Garcia s. Co rt of Appeals

Chema k hen a ailed of he P20.0 million c edi line and e ec ed

o (2) p omi o no e co e ing he follo ing amo n d a n
again he E po Loan Line, o i :

"a) The m of P6,350,750.00 d a n on Ma ch 23, 1983 i h

in e e and penal a he a e indica ed in P omi o No e
No. DLS/74/540/83 o ma e on J ne 21, 1983" (p. 255,
O iginal Reco d )
"b) The m of P8,649,250.00 d a n on A g 9, 1983 i h
in e e and penal a he a e indica ed in P omi o No e
No. DLS/74/1358/83 o ma e on Sep embe 8, 1983" (p.
256, O iginal Reco d )

The e obliga ion e e no paid b Chema k hen he became d e.

Hence, he e ponden bank demanded f om he pe i ione nde he
indemni ag eemen he pa men of he o anding obliga ion of
Chema k.
Undo b edl , he obliga ion of he pe i ione o he e ponden
a e clea l de ned in he pleading , admi ion and he n eb ed
af da i of M . Ma e ho handle he Chema k acco n .
Ne e hele , he pe i ione in i ha hei complain fo
decla a o elief ende gen ine i e hich ho ld be h e hed
o in a f ll-blo n ial, o i :

"11.1 Fi Defe e: ha he i ci a b iga i ha e a ed

beca e SBTC, ag eed a Che a k a g ace e i d i hi
hich ec e i i idi a d a he deb .
11.1A Thi defen e i pleaded in he follo ing allega ion of he
 Complain :

"'6. In he af e ma h of he a a ina ion of Sena o Benigno S. A ino,

J ., on A g 21, 1983, he Philippine econom a pl nged in o a
deep c i i . The e a a ma i e igh of capi al; he co n '
balance of pa men de e io a ed; b ine and ind p ac icall
ood ill; and he fo eign deb of he co n co ld no be
e iced; bank collap ed, he e change a e be een he Philippine
Pe o and US Dolla ipled and he e a p ac icall no fo eign
e change a ailable in he co n . The e l an e emel ad e e
economic condi ion e e no fo e een o con empla ed b pe on
o en i ie ho became pa ie o a con ac . N e f he a ie

27

. 167, B 24, 1988 827

Garcia s. Co rt of Appeals

a c ac e ec ed did he i e d ha he e a d
c di i he ag eed d e a e de e e e ad e e
ec ic c di i .
'7. Beca e of he ecen economic de elopmen he e and ab oad, he
fail e of one of he ockholde of Chema k o compl ih i
commi men and Chema k' inabili o collec b an ial
ecei able f om i ma ke ing ep e en a i e in he Uni ed S a e ,
Chema k a ed o ffe li idi p oblem . A a con e ence, i
a nable o pa i c edi o , among hom i he defendan .
Ho e e , Chema k had mo e han f cien a e o pa all i
obliga ion incl ding i obliga ion o he defendan , e cep ha i
li idi p oblem p e en ed i f om pa ing i c edi o .
'8. Chema k a ed nego ia ing i h he defendan fo he
e c ing of i obliga ion o he la e . Fo hi p po e, i
bmi ed e e al p opo ed co e of ac ion o he defendan
he eb in ime all of i obliga ion o he defendan o ld be
paid.
'9. In he mean ime, he defendan demanded pa men f om he
plain iff of he obliga ion of Chema k. Al ho gh plain iff a e no
legall liable fo he pa men of ch obliga ion , he none hele ,
p opo ed o he defendan ha he la e allo Chema k o eco e
i li idi n il ch ime ha i hall ha e eco e ed i abili o
pa i obliga ion . A ag ee e i i ci e a eached hi
a a d he defe da c i ed i e f a Che a k
ec e f i i idi be a d ef ai f de a di g
a e f he a f Che a k f he ai iff . (I alic
pplied)." (Rollo, pp. 328-329).

"11.2 Sec d Defe e: ha SBTC a d he e i i e did i e d

e e i i e ' I de i Ag ee e a c ae a ec i f
 Che a k' a a d ha SBTC e e ded he a e
Che a k' iabi i a a b i e e e i e.
"11.2A The Complain plead hi defen e in he follo ing pa ag aph :

'5. hen he defendan nall e ended he loan o Chema k, i

did o no beca e of he afo e aid in men ( efe ing o he
Indemni Ag eemen ) p e io l e ec ed b he (pe i ione )
hich, in he mean ime, e e no longe alid and effec i e and
i e ded b he a ie a c a e a ec i f f e Che a k
a , b beca e of defendan ' a e men of he iabili of
Chema k' b ine ope a ion

828 C A A
Garcia s. Co rt of Appeals

and in e e income e pec ed o be gene a ed f om he loan o

Chema k.' (I alic pplied) (Rollo, pp. 329-330)

"11.3 Thi d Defe e: ha D e ic' e ec i f he I de i Ag ee e

i c a i e a d i he ef e a ie a d
e f ceab e agai i .
11.3A Thi defen e i pleaded in he Complain a follo :

'13. Plain iff a e no liable o he defendan nde he Indemni

Ag eemen in men fo he follo ing ea on :

(c) A ming, i ho , conceding, ha he e i a alid con ide a ion

fo he e ec ion of he afo e aid in men and ha aid
in men con in ed o be alid and effec i e hen he defendan
e ended a c edi accommoda ion o Chema k, aid i e ae
a d id i fa a D e ic i c ce ed a i i a ie,
bei g c a he e f D e ic , i e , ice e a d
f a chi e: (I alic pplied)'" (Rollo, pp. 332-333)

We nd no ma e ial e ion of fac ende ed b he e defen e a

o he main i e on he he o no he pe i ione can be held liable
o he e ponden bank nde hei indemni ag eemen .
The i e ende ed in he defen e i " ham and c i io " in
he ligh of he e m of he indemni ag eemen . Th , nde he
indemni ag eemen , he pe i ione bo nd hem el e join l and
e e all i h Chema k in fa o of he e ponden bank fo he
pa men , a a b c ,
a a a C a a b b
ba a b c acc a .
(I alic pplied) The economic condi ion of he co n ae
imma e ial o he i e on he liabili of he pe i ione nde hei
indemni ag eemen .
 The i e ai ed in he econd defen e, on he he o no he
indemni ag eemen e e in ended a colla e al fo f e
Chema k loan i like i e ham and c i io . Unde he indemni
ag eemen , he pe i ione bo nd hem el e o pa ha e e
amo n Chema k ma be indeb ed o he bank " a b
a a c acc a ()

. 167, B 24, 1988 829

Garcia s. Co rt of Appeals

c b , a , , c a ,
a , c a a a a c
acc a () ." (I alic pplied)
The a g men a o he he o no D ne ic ' e ec ion of he
indemni ag eemen i con a o i p po e and he efo e l a
i e and nenfo ceable again i doe no ende a gen ine i e.
The eco d ho ha D ne ic a a ho i ed o e ec e he
indemni ag eemen e idenced b he Co po a e Sec e a '
ce i ca e (p. 38, 264 O iginal Reco d ).
Thi a no eb ed.
Indeed, e nd no gen ine i e ai ed in he complain hich
can no be e ol ed b he pleading , admi ion and he af da i of
Cha i Ma e bmi ed o he co . A he appella e co aid:

"D ne ic , Ga cia and Ma i a emp ed o a oid liabili b ing ha d o

c ea e fac al i e fo ial. The a emp i b a hodgepodge of legal
a g men and concl ion hich can be e ol ed i ho he i al of
ial. Th , D ne ic ge ha he e i need fo ial o de e mine he he i
can be compelled o pa con ide ing ha SEC b i O de of Sep embe
27,1984 ha p ohibi ed Chema k f om pa ing i c edi o . The i e i
ic l legal and can be decided b de e mining he cha ac e of liabili of
D ne ic a join and olida deb o . D ne ic al o a g e ha i ai ed he
i e of lack of con ide a ion hich m be ied on he me i . The i e
de e e can con ide a ion fo he pa ie ' Indemni Ag eemen peci e
he con ide a ion o be he g an of c edi accommoda ion o Chema k in he
m of P20 M. Al o ha i po ed i a legal i e e ol able in ligh of he
cha ac e of D ne ic a a join and olida deb o . D ne ic al o
a e e a e ha i did no in end i Indemni Ag eemen a colla e al fo
f e Chema k loan . Thi i a clea p e en e con ide ing ha again nde
i Indemni Ag eemen , D ne ic clea l bo nd i elf o pa ha e e
amo n Chema k ma be indeb ed o Sec i Bank ' nde and b i e of
he afo e aid c edi accommoda ion( ) incl ding he b i ion , ene al ,
e en ion , inc ea e , amendmen , con e ion and e i al of afo e aid
c edi accommoda ion( .)' The e i no hing on eco d o b an ia e he
p e en e of mi ake of D ne ic ." (Rollo, p. 121)

'Then D ne ic a g e ha i ha ai ed he i e of no a ion in ligh of

he ne loan con ac be een Sec i Bank and Chema k. Again, he
alleged ne con ac a e e abli hed fac and need no
 30

830 C A A
Garcia s. Co rt of Appeals

be he bjec of ial. Upon hei ba i , he co can concl de he he

he e i no a ion of con ac ." (Rollo, p. 125)

The pe i ione al o a ail he a a d of penal cha ge a 36% pe

ann m and in e e a 18% and 24% pe ann m e pec i el on he
loan . The con end ha he in e e a e e ce i e and a e no
ained b he e idence beca e he a e of in e e ip la ed in
he p omi o no e i onl 11% pe ann m.
The lo e co ba ed he comp a ion of in e e and penal
cha ge on he af da i of Cha i Ma e , A i an Manage of he
Co po a e Banking G o p of Sec i Bank & T Co. Ma e
a he acco n of ce ho handled he acco n of Chema k. The
pe inen po ion of he af da i ead a follo :

"22. A pe a emen of Acco n da ed J ne 15, 1985, nde

he aid p omi o no e (Anne e '2' and '3' he eof)
co e ed b he bjec Indemni Ag eemen (Anne e '4'
'7' and '8' he eof), he o al o anding obliga ion of
D ne ic , Inc., Ma i Managemen & T ading Co po a ion
and An onio M. Ga cia o Sec i Bank & T Co. a
P38,1 89,038.27, incl ding in e e and cha ge . A ached
he e o a Anne e '9' and 10' a e copie of aid S a emen
of Acco n da ed J ne 15, 1985;
23. In he aid S a emen of Acco n da ed J ne 15,1985, e
cha ged 18% and 25% pe ann m, e pec i el , beca e he
bjec loan (Anne e '2' and '3' he eof) e e in ended o
be edi co n ed a he Cen al Bank a 11% pe ann m.
Ho e e , hen Chema k Elec ic Mo o , Inc. failed o
gi e he e i ed le e of c edi hich a a e i emen
of he Cen al Bank, e cha ged hem 18% and 24% in ead
of 11% in e e pe ann m. The e highe in e e cha ge
e e ba ed on and a ho i ed nde o C edi P opo al,
copie of hich a e he e o a ached a Anne e 11' o '11-
B'." (O iginal Reco d , p. 252)

The inc ea ed in e e a e a e e p e l p o ided fo in he

amended c edi line ag eemen and in he o p omi o no e
e ec ed b Chema k in fa o of Sec i Bank & T Co. We nd
no e e ible e o in he a a d of in e e .
The penal of 36% pe ann m i p o ided in he p omi o
no e (Anne e "3", "4" Af da i ), a follo :
31

. 167, B 24, 1988 831

Garcia s. Co rt of Appeals
"If hi no e i no f ll paid hen d e, he nde igned hall pa , in
addi ion o he ip la ed in e e , a penal of 3% pe mon h on he o al
o anding p incipal and in e e d e and npaid. " (O iginal Reco d ,
p. 256)

The af da i and ppo ing doc men e e a ached o he

e ponden bank' mo ion fo mma j dgmen . The pe i ione
failed o oppo e Ma e ' af da i in hei "Oppo i ion " o he
mo ion fo mma j dgmen . Nei he did he bmi co n e -
af da i , a a hei igh , o oppo e he e amo n d e f om hem
incl ding he inc ea ed in e e and penal cha ge . Unde he e
ci c m ance , he e ponden bank a en i led o mma
j dgmen (Philippine Na ional Bank . Phil. Lea he Co., Inc., e al.
105 Phil. 400; See al o Me cado, e al. . Co of Appeal a).
A ea lie a ed, he lo e co commi ed no e e ible e o in
a a ding he e ioned in e e . We canno , ho e e , ag ee i h
he appella e co a ega d he a a d of penal cha ge a 36%
pe ann m.
Penal in e e a e in he na e of li ida ed damage
(C mag n . Philippine Ame ican In ance Co., Inc., e al. G.R.
No. 81453 A g 15, 1988; Lambe . Fo , 26 Phil. 588) and ma
be e i abl ed ced b he co if he a e ini i o o
ncon cionable. (See A icle 1229, 2227, Ne Ci il Code).
The eco d ho ha on he loan, he p incipal of hich i
P6,350,750.00, he penal cha ge a of J ne 15, 1985 a e al ead
e i alen o P6,774.378.06 (p. 265, O iginal Reco d ) and ha on
he econd loan, he p incipal of hich i P8,649,250.00 he penal
cha ge a of J ne 15, 1985 a e e i alen o P8,662,008.53. (p.
266, O iginal Reco d ) The P6,774,378.06 penal cha ge in he
loan o ld ha e been ea ned b he p i a e e ponden af e
onl 725 da (1 ea and 360 da ) of dela in he pa men of he
loan hile he P8,662,008.53 penal cha ge o ld ha e been
ea ned b he p i a e e ponden af e onl 646 da (1 ea and 281
da ) of dela in he pa men of he loan. The g e f om 1985 o
1988 o ld amo n o e e al ime he p incipal loan .
We ag ee i h he pe i ione ha he penal cha ge a e
e ce i e and ncon cionable. The in e e cha ge a e eno gh

32

832 C A A
Garcia s. Co rt of Appeals

p ni hmen fo he pe i ione ' fail e o compl i h hei

obliga ion .
Finall , he pe i ione e ion he amo n fo a o ne ' fee
e i alen o 10% of hei obliga ion.
Again, Chema k' p omi o no e p o ide fo he a a d of
a o ne ' fee in ca e of defa l o pa he loan , o i :
 "If hi no e i no f ll paid hen d e, he nde igned hall pa , in
addi ion o he ip la ed in e e , a penal of 3% pe mon h on he o al
o anding p incipal and in e e d e and npaid. The nde igned hall
al o pa , a and fo a o ne ' fee, a m e i alen o 20% of he o al
amo n d e nde hi no e pl e pen e and co of collec ion, in ca e
hi no e i placed in he hand of an a o ne fo collec ion." (See Anne e
'2', '3', Af da i of Cha i Ma e ) (O iginal Reco d , p. 255)

The a a d fo a o ne ' fee i j i ed and, in fac , i e en lo e

han ha ag eed pon b he pa ie .
WHEREFORE, he in an pe i ion i DISMISSED. The
e ioned deci ion and e ol ion of he Co of Appeal a e
AFFIRMED e cep fo he a a d of penal cha ge hich i
icken f om he j dgmen . The Tempo a Re aining O de
i ed on Ma ch 30, 1988 i LIFTED. Co again he pe i ione .
SO ORDERED.

F a , (C.J.), B and C , JJ., conc .

F c a , J., No pa . Pe i ione a e ep e en ed b m
fo me m.

P .D c a a .

No e . Relief of mma j dgmen i in ended o e pedi e o

p omp l di po e of ca e he e he fac appea ndi p ed and
ce ain f om he pleading , di po i ion , admi ion and af da i .
(V a a . E , 89 SCRA 684).
The e i no ba i fo i ance of S mma J dgmen fo fail e
o ob e e g ideline , (V a a . E , 89 SCRA 684).

o0o

33

C g 2023 Ce a B S , I c. A g e e ed.