RCBC vs CA 289 SCRA 292 20 April 1998 Facts: -
Parties: Goyu and Sons, Inc. Malayan Insurance Company, Inc. o Rizal Commercial Banking Corporation o GOYU was granted credit facilities and accommodations by the RC BC initially in the amount of P 30 m illion. Upon GOYU’s application, the credit was increased to P50 Million then P90 Million o then P117 Million o As security, GOYU executed in favor of RCBC 2 REM o 2 CM o registered with the RD Under the 4 contracts, GOYU committed itself to insure the mortgage d 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 cla imed indemnity from MICO MICO denied the claim on the ground that o the insurance policies were either at tached 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 per formance and damges before the RTC, Manila RTC, Manila ruled in favor of GOYU (indemnity claimed) but ordered it to pay RCBC its loan obligations o On appeal to the CA it affirmed the ruling with regard t o the liabilities of MICO and RCBC o The trial court and appellate courts both held t hat, since the endorsements do not bear the signature of any officer of GOYU, they concluded that the endorsements are defective. o The CA then ordered GOYU to pay its obligation to RCBC without any interest, surcharges and pe nalties. o
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Issue: - WoN the RTC and CA are correct Ruling: - SC ruled 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 - 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 which states: ART. 2127. The mortgage extends to the natural accessions, accessions, to the improvements, growing fruits, and o the rents or income not yet received when the obligation becomes due, and to the amount of the indemnity granted or owing to the proprietor from the insurers of the property mortgaged, or in virtue of expropriation for public use, with the declarations, amplifications and limitations established by law, whether the estate remains in the t he possession of the mortgagor, or it passes into the hands of a third person. - To be deducted from interest payments due in accordance with Article 1253 o f the Civil Code which provides: ART. 1253. If debt produces interest, payment of the principal shall not be deemed to have been made o until the interests have been covered.
