Rizal Commercial Banking Corporation v. Alfa RTW Manufacturing Corporation
REITERATIONFacts
The Antecedents: Rizal Commercial Banking Corporation (RCBC) filed a collection case against Alfa RTW Manufacturing Corporation and several individuals for unpaid obligations arising from four Letters of Credit (LCs) facilitated by RCBC. Alfa RTW executed four Trust Receipts (TRs) as security for the loans obtained through the LCs. Individual defendants allegedly executed Comprehensive Surety Agreements (CSAs) guaranteeing the obligations of Alfa RTW. Intervenors BA Finance Corporation and North American Garments Corporation claimed superior rights over attached properties. Procedural History: The Regional Trial Court (RTC) of Makati rendered judgment in favor of RCBC, ordering defendants to pay jointly and severally the amount of P18,961,372.43, with a deduction for proceeds from the sale of apparel, and declaring the intervenors' liens inferior to RCBC's. On appeal, the Court of Appeals (CA) affirmed the RTC decision with modification, reducing the award to P3,060,406.25. The Petition: RCBC filed a petition for review on certiorari, questioning the CA's modification of the award by reducing it from P18,961,372.43 to P3,060,406.25, arguing that the CA erred in deviating from the contractual stipulations between the parties.
Issue(s)
Whether the Court of Appeals erred in modifying the award by decreasing the amount granted by the trial court. Whether the Court of Appeals can deviate from the provisions of the contract between the parties, which contract is the law between them.
Ruling
The petition is GRANTED. The assailed decision of the Court of Appeals is MODIFIED in the sense that the award to petitioner RCBC of P3,060,406.25 is SET ASIDE and substituted with an amount to be computed by the trial court, upon finality of this Decision, in accordance with the formula indicated in the decision.
Ratio Decidendi
On the issue of the Court of Appeals' modification of the award: The Supreme Court held that the Court of Appeals erred in modifying the award by reducing it from P18,961,372.43 to P3,060,406.25. The Court emphasized that the jurisdiction of the Supreme Court in cases brought from the Court of Appeals is limited to reviewing errors of law, and findings of fact of the latter court are generally conclusive. However, an exception exists when the Court of Appeals makes findings contrary to the admissions of the parties or goes beyond the issues of the case. In this instance, the Court found that the CA disregarded the parties' stipulations in their Trust Receipts and Comprehensive Surety Agreements, which are the law between them. The CA failed to apply the time-honored doctrine that obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. The Court cannot vary the terms and conditions therein stipulated unless such stipulation is contrary to law, morals, good customs, public order, or public policy. The CA's reduction of the award without considering the agreed interest rates, service charges, and penalties constituted a reversible error. On whether the Court of Appeals can deviate from the provisions of the contract: The Supreme Court unequivocally stated that the Court of Appeals cannot deviate from the provisions of the contract between the parties, as the contract constitutes the law between them. The Court reiterated the principle that "That which is agreed to in a contract is the law between the parties." Obligations arising from contracts are binding and must be complied with in good faith. The Court's power to modify contractual terms is limited to situations where the stipulations are contrary to law, morals, good customs, public order, or public policy. In this case, the contractual stipulations regarding interest rates, service charges, and penalties were not challenged as illegal or contrary to public policy. Therefore, the Court of Appeals erred in disregarding these stipulations and in failing to apply the established rules for the computation of interest and other charges as laid down in Eastern Shipping Lines, Inc. vs. Court of Appeals.
Main Doctrine
The terms and conditions agreed upon in contracts, such as Trust Receipts and Comprehensive Surety Agreements, become the law between the parties and cannot be disregarded by the courts unless contrary to law, morals, good customs, public order, or public policy. The Court of Appeals erred in modifying the award by disregarding the stipulated interest rates, service charges, and penalties.