FACTS:

Petitioners P.C. Javier & Sons, Inc. and spouses Pablo C. Javier, Sr. and Rosalina F. Javier filed a complaint for Annulment of Mortgage and Foreclosure with Preliminary Injunction, Prohibition and Damages against PAIC Savings & Mortgage Bank, Inc., Grace S. Belvis (Acting Ex Officio Regional Sheriff of Pasig, Metro Manila), and Sofronio M. Villarin (Deputy Sheriff-in-Charge) before the RTC of Makati City. The case was docketed as Civil Case No. 7184.

The complaint alleged that in February 1981, petitioner corporation applied for a loan accommodation with First Summa Savings and Mortgage Bank (later renamed PAIC Savings and Mortgage Bank) for P1.5 Million. The loan was released in two tranches of P750,000 each, with the second tranche having P250,000 deducted and placed under a time deposit. Petitioners claimed that they were not allowed to withdraw the proceeds of the time deposit, as the bank intended it as automatic payment for the loan. The bank, on the other hand, claimed that the delay in releasing the second tranche was due to a collateral deficiency and that the time deposit was opened as additional security. Petitioner corporation defaulted on the loan, prompting the bank to send demand letters and initiate extrajudicial foreclosure proceedings. The complaint sought to forestall the foreclosure sale of a piece of land and nullify the real estate mortgages entered into with the bank.

Several extrajudicial foreclosures were scheduled but were temporarily restrained by the RTC. The RTC declared that First Summa Savings and Mortgage Bank and PAIC Savings and Mortgage Bank, Inc. were the same entity, and held petitioner corporation liable for the loan.

The case involves a dispute between petitioners, JTL Realty and Development Corporation, and respondent bank, Philippine American Industrial Corporation (PAIC) Savings and Mortgage Bank, Inc. The Regional Trial Court (RTC) ruled that JTL Realty and Development Corporation and PAIC Savings and Mortgage Bank, Inc. are the same entity and that the corporation is liable to the bank for the unpaid balance of its Industrial Guarantee Loan Fund (IGLF) loans. The RTC also held that the bank was justified in foreclosing the real estate mortgages executed by the corporation in its favor. In its decision, the RTC ordered the corporation to pay the bank the principal amounts, interests, damages, and attorney's fees. The corporation filed a Motion for Reconsideration but was denied. It appealed the decision to the Court of Appeals, which affirmed the RTC's decision and denied the corporation's motion for reconsideration. The corporation then filed an appeal by certiorari to the Supreme Court. The corporation assigned errors regarding the dismissal of its complaint, its withholding of payment, and the damages awarded to the bank. The Supreme Court found that the corporation's argument that it should have been formally notified of the change in the bank's corporate name is not supported by any law or regulation. The Court also noted that there were documents showing that the corporation had notice or knowledge of the change in corporate name.

ISSUES:

1. Whether there is a requirement for a bank that changes its corporate name to formally notify its debtors.

2. Whether the petitioner corporation had notice or knowledge of the bank's change of corporate name.

3. • Whether the collateral put up by the petitioners is sufficient to cover their loan obligations.
4. • Whether collecting the P250,000.00 from the petitioners would be a case of unjust enrichment.
5. • Whether the requirement to put up additional collateral was warranted.
6. • Whether the plaintiff corporation defaulted on its loan obligations.
7. • Whether damages should be awarded to the respondent bank.

8. Whether or not the petitioner corporation was in good faith in reneging on its obligation to pay its loans to the respondent bank.

RULING:

1. There is no requirement for a bank that changes its corporate name to formally notify its debtors. The formal notification is discretionary on the bank, unless there is a law, regulation, or circular requiring it.

2. The petitioner corporation had notice or knowledge of the bank's change of corporate name based on the evidence presented.

3. • The issue of the sufficiency of the collateral put up by the petitioners is not proper for the Supreme Court's consideration since it is a factual question. The finding of the respondent court that there was a collateral deficiency was not disputed in the appeal before them.
4. • There is no unjust enrichment on the part of the respondent bank. The amount of P225,905.79 was applied as payment for the petitioner corporation's loan, which was taken from the P250,000.00 time deposit placed as additional collateral. The use of said amount as payment was approved by petitioner Pablo C. Javier, Sr.
5. • The questioning of the propriety of placing the P250,000.00 in time deposits as additional collateral was belatedly made by the petitioner corporation. It should have been raised immediately after making the time deposit. It is too late to question it after the loans became due and demandable, and a demand for full payment has been made.
6. • The petitioner corporation defaulted on its loan obligations as it stopped payments on one promissory note on March 17, 1983, and on another promissory note on August 31, 1982.
7. • Damages should be awarded to the respondent bank as there is evidence of malice or bad faith on the part of the petitioners.

8. The Supreme Court ruled that the petitioner corporation was not in good faith in refusing to pay its loans. The court stated that the petitioner was well aware that First Summa Savings and Mortgage Bank changed its name to PAIC Savings and Mortgage Bank, Inc., and yet it pretended otherwise. The petitioner used this supposed ignorance as an excuse to avoid its obligation to pay the loans. The court further emphasized that if the petitioner were truly acting in good faith, it should have made a valid consignation of the payment in court. Moreover, the fact that it was respondent bank and not First Summa Savings and Mortgage Bank that was demanding payment should have alerted the petitioner to investigate the matter. Therefore, the court held that the petitioner failed to comply with its obligation to pay the loans, and the respondent bank is entitled to foreclose the real estate mortgages.

PRINCIPLES:

• A change in the corporate name does not make a new corporation, but rather, it is the same corporation with a different name. The change has no effect on the identity of the corporation, its property, rights, or liabilities.

• Collateral is required to cover a loan, and if the collateral is insufficient, the borrower may be required to provide additional collateral.

• The Supreme Court does not consider factual questions in a petition for review.

• The doctrine of unjust enrichment requires enrichment on the part of the defendant, impoverishment on the part of the plaintiff, and lack of cause.

• The requirement for additional collateral is warranted when the collateral put up by the debtor is insufficient to cover the loan obligations.

• Defaulting on loan payments gives the bank the right to declare all obligations immediately due and payable.

• Damages may be awarded if there is evidence of malice or bad faith on the part of the party being sued.

• Parties to a contract are bound by their obligations, and they cannot refuse to perform their obligations based on pretended ignorance.

• Good faith requires parties to act honestly, fairly, and without deceit or fraud.

• If a party is unsure to whom payment should be made, it should take steps to inquire and clarify the matter.

• Consignation of payment should be made in court if there is uncertainty as to who should receive the payment.

• Actual and compensatory damages may be awarded to the party who incurred expenses due to the other party's failure to fulfill its contractual obligations.

• Attorney's fees may be granted if the other party is compelled to defend itself against an unfounded and baseless legal action.

• Exemplary damages may be awarded as a deterrent against baseless legal actions and for the public good.