RCBC vs CA Credit Digest

RCBC vs CA

GR Nos. 128833, 128834, 128866, 20 April 1998

289 SCRA 292

FACTS

            GOYU was granted credit facilities and accommodations by the RCBC initially in the amount of P 30 million. Upon GOYU’s application, the credit was increased to P50 Million, then P90 Million, then P117 Million. As security, GOYU executed 2 REM and 2 CM in favor of RCBC, which were registered with the RD. Under the 4 contracts, GOYU committed itself to insure the mortgaged properties with an insurance company approved by RCBC, and subsequently endorse and deliver the insurance policies to RCBC. GOYU then obtained 10 policies from MICO. GOYU’s buildings were gutted by fire and it claimed indemnity from MICO but the latter 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 proceeds were also claimed by other creditors of GOYU. GOYU, alleging better rights to the proceeds, filed for specific performance and damges before the RTC of Manila Br 3. The trial court ruled in favor of GOYU for the fire loss claims but ordered it to pay RCBC its loan obligations. On appeal to the CA, it affirmed the ruling with regard to the liabilities of MICO and RCBC. The trial court and appellate courts both held that, since the endorsements do not bear the signature of any officer of GOYU, they concluded that the endorsements are defective. The CA then ordered GOYU to pay its obligation to RCBC without any interest, surcharges and penalties.

ISSUE

            Whether or not the ruling of the appellate court is correct.

HELD

The Court held in the negative. The essence or rationale for the payment of interest or cost of money is separate and distinct  from that of surcharges and penalties. The charging of interest for loans forms a very essential and fundamental element of the banking business.

Petitions granted.