Summaries: Rizal Commercial Banking Corporation (RCBC) vs. Court of Appeals (GR 128833, 20 April 1998)

Rizal Commercial Banking Corporation (RCBC) vs. Court of Appeals
[GR 128833, 20 April 1998]; also RCBC vs. Court of Appeals [GR 128834]
Second Division, Melo (J): 4 concur

Facts: Goyu & Sons, Inc. (Goyu) applied for credit facilities and accommodations with Rizal Commercial Banking Corporation (RCBC) at its Binondo Branch. After due evaluation, RCBC Binondo Branch, through its key officers, petitioners Uy Chun Bing and Eli D. Lao, recommended Goyu's application for approval by RCBC's executive committee. A credit facility in the amount of P30 million was initially granted. Upon Goyu's application and Uy's and Lao's recommendation, RCBC's executive committee increased Goyu's credit facility to P50 million, then to P90 million, and finally to P117 million. As security for its credit facilities with RCBC, Goyu executed two real estate mortgages and two chattel mortgages in favor of RCBC, which were registered with the Registry of Deeds at Valenzuela, Metro Manila. Under each of these four mortgage contracts, Goyu committed itself to insure the mortgaged property with an insurance company approved by RCBC, and subsequently, to endorse and deliver the insurance policies to RCBC. Goyu obtained in its name a total of 10 insurance policies from MICO. In February 1992, Alchester Insurance Agency, Inc., the insurance agent where Goyu obtained the Malayan insurance policies, issued 9 endorsements in favor of RCBC seemingly upon instructions of Goyu. On 27 April 1992, one of Goyu's factory buildings in Valenzuela was gutted by fire. Consequently, Goyu submitted its claim for indemnity on account of the loss insured against. MICO denied the claim on the ground that the insurance policies were either attached pursuant to writs of attachments/garnishments issued by various courts or that the insurance proceeds were also claimed by other creditors of Goyu alleging better rights to the proceeds than the insured. Goyu filed a complaint for specific performance and damages which was docketed at the Regional Trial Court of the National Capital Judicial Region (Manila, Branch 3) as Civil Case 93-65442. RCBC, one of Goyu's creditors, also filed with MICO its formal claim over the proceeds of the insurance policies, but said claims were also denied for the same reasons that AGCO denied Goyu's claims. In an interlocutory order dated 12 October 1993, the Regional Trial Court of Manila (Branch 3), confirmed that Goyu's other creditors, namely, Urban Bank, Alfredo Sebastian, and Philippine Trust Company obtained their respective writs of attachments from various courts, covering an aggregate amount of P14,938,080.23, and ordered that the proceeds of the 10 insurance policies be deposited with the said court minus the aforementioned P14,938,080.23. Accordingly, on 7 January 1994, MICO deposited the amount of P50,505,594.60 with Branch 3 of the Manila RTC. In the meantime, another notice of garnishment was handed down by another Manila RTC sala (Branch 28) for the amount of P8,696,838.75. After trial, Branch 3 of the Manila RTC rendered judgment in a favor of Goyu, ordering Malayan to pay Goyu its fire loss claims in the total amount of P74,040,518.58 less the amount of P50,000,000.00 which is deposited with the Court; damages by way of interest for the duration of the delay since 27 July 1992 (90 days after Malayan's receipt of the required proof of loss and notice of loss) at the rate of twice the ceiling prescribed by the Monetary Board, on the amounts of (1) P50,000,000.00 from 27 July 1992 up to the time said amount was deposited with the Court on 7 January 1994; and (2) P24,040,518.58 — from 17 July 1992 up to the time when the writs of attachments were received by Malayan. The court also ordered RCBC to pay Goyu actual and compensatory damages in the amount of P2,000,000.00, and both Malayan and RCBC to solidarily pay Goyu (1) P1,000,000.00 as exemplary damages; (2) P1,000,000.00 as, and for, attorneys fees; and (3) Costs of suit. The Court, on the Counterclaim of RCBC, ordered Goyu to pay its loan obligations with RCBC in the amount of P68,785,069.04, as of 27 April 1992, with interest thereon at the rate stipulated in the respective promissory notes (without surcharges and penalties). From this judgment, all parties interposed their respective appeals. Goyu was unsatisfied with the amounts awarded in its favor. MICO and RCBC disputed the trial court's findings of liability on their part. The Court of Appeals partly granted Goyu's appeal, but sustained the findings of the trial court with respect to MICO and RCBC's liabilities. The appellate court modified the decision by ordering Malayan to pay Goyu its fire loss claim in the total amount of P74,040,518.58 less than the amount of P50,505,549.60 (per O.R. No. 3649285) plus deposited in court and damages by way of interest commencing 27 July 1992 until the time Goyu receives the said amount at the rate of 37% per annum which is twice the ceiling prescribed by the Monetary Board; ordering RCBC to pay Goyu actual and compensatory damages in the amount of P5,000,000.00; and Malayan and RCBC, Uy Chun Bing and Eli Lao to pay Goyu solidarily in the amounts of (1) P1,500,000.00 as exemplary damages; and (2) P1,500,000.00 as and for attorney's fees. The Court, on RCBC's Counterclaim, ordered Goyuto pay its loan obligation with RCBC in the amount of P68,785.069.04 as of 27 April 1992 without any interest, surcharges and penalties. RCBC and Malayan appealed separately but, in view of the common facts and issues involved, their individual petitions were consolidated.

Issue [1]: Whether RCBC, as mortgagee, has any right over the insurance policies taken by Goyu, the mortgagor, in case of the occurrence of loss.

Held [1]: YES. It is settled that a mortgagor and a mortgagee have separate and distinct insurable interests in the same mortgaged property, such that each one of them may insure the same property for his own sole benefit. There is no question that Goyu could insure the mortgaged property for its own exclusive benefit. Herein, although it appears that Goyu obtained the subject insurance policies naming itself as the sole payee, the intentions of the parties as shown by their contemporaneous acts, must be given due consideration in order to better serve the interest of justice and equity. It is to be noted that nine endorsement documents were prepared by Alchester in favor of RCBC. The Court is in a quandary how Alchester could arrive at the idea of endorsing any specific insurance policy in favor of any particular beneficiary or payee other than the insured had not such named payee or beneficiary been specifically disclosed by the insured itself. It is also significant that Goyu voluntarily and purposely took the insurance policies from MICO, a sister company of RCBC, and not just from any other insurance company. Alchester would not have found out that the subject pieces of property were mortgaged to RCBC had not such information been voluntarily disclosed by Goyu itself. Had it not been for Goyu, Alchester would not have known of Goyu's intention of obtaining insurance coverage in compliance with its undertaking in the mortgage contracts with RCBC, and verify, Alchester would not have endorsed the policies to RCBC had it not been so directed by Goyu. On equitable principles, particularly on the ground of estoppel, the Court is constrained to rule in favor of mortgagor RCBC. RCBC, in good faith, relied upon the endorsement documents sent to it as this was only pursuant to the stipulation in the mortgage contracts. Such reliance is justified under the circumstances of the case. Goyu failed to seasonably repudiate the authority of the person or persons who prepared such endorsements. Over and above this, Goyu continued, in the meantime, to enjoy the benefits of the credit facilities extended to it by RCBC. After the occurrence of the loss insured against, it was too late for Goyu to disown the endorsements for any imagined or contrived lack of authority of Alchester to prepare and issue said endorsements. If there had not been actually an implied ratification of said endorsements by virtue of Goyu's inaction in this case, Goyu is at the very least estopped from assailing their operative effects. To permit Goyu to capitalize on its non-confirmation of these endorsements while it continued to enjoy the benefits of the credit facilities of RCBC which believed in good faith that there was due endorsement pursuant to their mortgage contracts, is to countenance grave contravention of public policy, fair dealing, good faith, and justice. Such an unjust situation, the Court cannot sanction. Under the peculiar circumstances, the Court is bound to recognize RCBC's right to the proceeds of the insurance policies if not for the actual endorsement of the policies, at least on the basis of the equitable principle of estoppel.

Issue [2]: Whether Goyu can insist that the proceeds of insurance shall exclusively apply to the interest of the person in whose name or for whose benefit it is made.

Held [2]: NO. Goyu cannot seek relief under Section 53 of the Insurance Code which provides that the proceeds of insurance shall exclusively apply to the interest of the person in whose name or for whose benefit it is made. The peculiarity of the circumstances obtaining in the instant case presents a justification to take exception to the strict application of said provision, it having been sufficiently established that it was the intention of the parties to designate RCBC as the party for whose benefit the insurance policies were taken out. Consider thus the following: (1) It is undisputed that the insured pieces of property were the subject of mortgage contracts entered into between RCBC and Goyu in consideration of and for securing Goyu's credit facilities from RCBC. The mortgage contracts contained common provisions whereby Goyu, as mortgagor, undertook to have the mortgaged property properly covered against any loss by an insurance company acceptable to RCBC. (2) Goyu voluntarily procured insurance policies to cover the mortgaged property from MICO, no less than a sister company of RCBC and definitely an acceptable insurance company to RCBC. (3) Endorsement documents were prepared by MICO's underwriter, Alchester Insurance Agency, Inc., and copies thereof were sent to Goyu, MICO and RCBC. Goyu did not assail, until of late, the validity of said endorsements. (4) Goyu continued until the occurrence of the fire, to enjoy the benefits of the credit facilities extended by RCBC which was conditioned upon the endorsement of the insurance policies to be taken by Goyu to cover the mortgaged properties. The fact that upon receiving its copies of the endorsement documents prepared by Alchester, Goyu, despite the absence written conformity thereto, obviously considered said endorsement to be sufficient compliance with its obligation under the mortgage contracts since RCBC accordingly continued to extend the benefits of its credit facilities and Goyu continued to benefit therefrom. Just as plain too is the intention of the parties to constitute RCBC as the beneficiary of the various insurance policies obtained by Goyu. The intention of the parties will have to be given full force and effect in this particular case. The insurance proceeds may, therefore, be exclusively applied to RCBC, which under the factual circumstances of the case, is truly the person or entity for whose benefit the policies were clearly intended. Moreover, the law's evident intention to protect the interests of the mortgagee upon the mortgaged property is expressed in Article 2127 of the Civil Code. The proceeds of the 8 insurance policies endorsed to RCBC aggregate to P89,974,488.36. Being exclusively payable to RCBC by reason of the endorsement by Alchester to RCBC, which we already ruled to have the force and effect of an endorsement by Goyu itself, these 8 policies can not be attached by Goyu's other creditors up to the extent of the Goyu's outstanding obligation in RCBC's favor. Section 53 of the Insurance Code ordains that the insurance proceeds of the endorsed policies shall be applied exclusively to the proper interest of the person for whose benefit it was made. In this case, to the extent of Goyu's obligation with RCBC, the interest of Goyu in the subject policies had been transferred to RCBC effective as of the time of the endorsement. These policies may no longer be attached by the other creditors of Goyu, like Alfredo Sebastian in GR 128834, which may nonetheless forthwith be dismissed for being moot and academic in view of the results reached herein. Only the two other policies amounting to P19,646,224.92 may be validly attached, garnished, and levied upon by Goyu's other creditors. To the extent of Goyu's outstanding obligation with RCBC, all the rest of the other insurance policies which were endorsed to RCBC, are, therefore, to be released from attachment, garnishment, and levy by the other creditors of Goyu.

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