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RIZAL COMMERCIAL BANKING CORPORATION v. MARCOPPER MINING CORPORATION

FACTS:

Marcopper Mining Corporation (Marcopper) obtained a loan from Rizal Commercial Banking Corporation (RCBC) and executed a Deed of Chattel Mortgage and a Deed of Pledge as security. They later agreed to restructure the loan, with Marcopper proposing foreclosure of the mortgaged assets or assignment of a Forbes Park property as partial payment. They reached an agreement on the repayment plan, which included the assignment of the property and payment over a certain period without interest, guaranteed by the company's major shareholders.

On July 31, 1997, Marcopper forwarded a Deed of Release from Mortgage for six Rig Haul Trucks and one Demag Hydraulic Excavator Shovel to RCBC, but RCBC did not sign it. On August 22, 1997, Marcopper sent additional documents related to the transfer of the Forbes Park property, including promissory notes and a Deed of Pledge over club shares. On September 12, 1997, RCBC informed Marcopper that approval was still needed for the release of the requested properties. On November 24, 1997, Marcopper reiterated the need for RCBC to release the mortgaged properties as MR Holdings, Ltd. had agreed to release its lien on the Forbes Park property upon RCBC's release of the trucks and shovel, and also requested the release of the club shares.

MR Holdings, Ltd. (MR Holdings), the successor-in-interest of the Asian Development Bank, entered into an agreement with RCBC to release an asset from their mortgage on the condition that RCBC would release their mortgage on certain assets. They specifically requested the release of six Rig Trucks and one Demag Shovel, and committed to mortgage club shares to RCBC. This release was necessary for the restructuring of their loan obligations with RCBC, and the restructured balance was covered by a surety issued by Mr. Teodoro G. Bernardino, in addition to the retained collateral. However, as of the time of writing, the requested equipment has not been released and the pledged club shares have not been given to MR Holdings, due to a pending issue between RCBC and its assigned Central Bank examiner concerning the restructuring agreement.

ISSUES:

  1. Whether RCBC had an obligation to release the properties from mortgage and pledge.

  2. Whether the promissory notes were due and enforceable against Marcopper.

  3. Did the parties agree that RCBC will execute a Deed of Release from Mortgage and Pledge in exchange for the assignment of the Forbes Park property by Marcopper?

  4. Did Marcopper present sufficient evidence to prove the existence of an agreement for RCBC to release the mortgage and pledge?

  5. Whether there was a previous agreement between the parties for RCBC to effect a partial release of mortgage and pledge upon assignment of the Forbes Park property.

  6. Whether Marcopper has established a cause of action.

RULING:

  1. The trial court ordered RCBC to execute a Deed of Partial Release from Mortgage and to release the properties from pledge in favor of Marcopper. The Court of Appeals affirmed this ruling.

  2. The trial court ordered RCBC to cease and desist from enforcing and collecting on the promissory notes, as they were not due and enforceable against Marcopper. The Court of Appeals suspended the enforcement of the promissory notes until the release of the properties.

  3. The Court found that there was no written agreement executed by RCBC and Marcopper for the partial release of the mortgage and pledge. The written communications between the parties did not mention any agreement for RCBC to release the mortgage and pledge upon the assignment of the Forbes Park property. The only reference to the release was made in a letter dated November 24, 1997, which did not mention a written contract. Therefore, the existence of the alleged condition of RCBC's release of the mortgage and pledge had to be gleaned primarily from the testimonies of Marcopper's witnesses.

  4. The Court held that the testimonies of Marcopper's witnesses were not sufficient to prove the existence of an agreement for RCBC to release the mortgage and pledge. The lower courts gave credence to the testimonies of Marcopper's witnesses, but the Court found that there was inadequate evidence to support Marcopper's assertions. The written exchanges between the parties did not indicate any agreement for the release, and the testimonies of Marcopper's witnesses were contradicted by significant facts overlooked by the lower courts. Therefore, the Court found that Marcopper failed to establish that RCBC agreed and legally bound itself to effect the release of the mortgage and pledge.

  5. The court ruled that Marcopper failed to establish that there was a previous agreement for RCBC to effect a partial release of mortgage and pledge upon assignment of the Forbes Park property. The court found that there was no mention of such condition in Marcopper's letter confirming the agreements between the parties, and that Marcopper delivered an additional pledge after the assignment of the Forbes Park property. Therefore, the court concluded that the assignment was not made on the condition Marcopper claimed.

  6. The court ruled that Marcopper failed to establish a cause of action because it did not provide sufficient evidence to support its claim. The court found that the testimonies of witnesses who were officers of Marcopper were insufficient to establish its cause of action, especially considering the existence of facts that militated against Marcopper's claim and the absence of any written agreement between the parties. As a result, the court held that Marcopper's complaint should have been dismissed by the trial court.

PRINCIPLES:

  • Parties to a contract are bound by its stipulations, and the court must recognize and enforce their rights and obligations as defined by the contract (Marcopper Mining Corp. v. Rizal Commercial Banking Corp., G.R. No. 155143, October 19, 2011).

  • Promissory notes are enforceable when they become due and demandable (Marcopper Mining Corp. v. Rizal Commercial Banking Corp., G.R. No. 155143, October 19, 2011).

  • In a civil case, final and conclusive are the factual findings of the trial court, but only if supported by clear and convincing evidence on record.

  • Findings by the trial court as to the credibility of witnesses are accorded the greatest respect and even finality by the appellate courts, since the former is in a better position to observe their demeanor and deportment during the trial.

  • Written agreements or contracts are given more weight than oral or testimonial evidence.

  • Hearsay evidence or evidence that is not relevant to the issue at hand is inadmissible in court.

  • The burden of proof lies with the party asserting the existence of a contract or agreement.

  • Contracts are perfected by mere consent, and the parties are bound by the fulfillment of what has been expressly stipulated and all the consequences in keeping with good faith, usage, and law.

  • Obligations arising from contracts should be complied with in good faith and have the force of law between the contracting parties.

  • Contracts undergo three distinct stages: negotiation, perfection or birth, and consummation.

  • The burden of proof in civil cases rests on the plaintiff, who must establish his case through a preponderance of evidence. The plaintiff must rely on the strength of his own evidence and not the weakness of the defendant's evidence.