Rizal Commercial Banking v. Marcopper Mining
REITERATIONFacts
The Antecedents: Marcopper Mining Corporation (Marcopper) obtained a US$13.7 Million loan from Rizal Commercial Banking Corporation (RCBC) to finance the acquisition of mining equipment. The loan was secured by a Deed of Chattel Mortgage over 12 Rig Haul Trucks and one Demag Hydraulic Excavator Shovel, and several Deeds of Pledge over club shares. Due to financial distress, Marcopper proposed a restructuring plan where it would assign its Forbes Park property to RCBC via dacion en pago as partial payment, with the balance restructured into promissory notes. Marcopper alleged that during a meeting on July 3, 1997, RCBC agreed to release the mortgage on six trucks and the excavator, as well as the pledges on club shares, so Marcopper could use them as substitute security for another creditor, MR Holdings, Ltd. Procedural History: RCBC accepted the Forbes Park property but refused to sign the Deed of Partial Release from Mortgage for the equipment and shares. Marcopper subsequently defaulted on the restructured loan payments. RCBC declared the entire obligation due and demandable. Marcopper filed a complaint for Specific Performance with Damages against RCBC in the Regional Trial Court (RTC) of Makati. The RTC ruled in favor of Marcopper, ordering RCBC to release the properties and suspending the enforcement of the promissory notes. The Court of Appeals (CA) affirmed the RTC's decision with modifications regarding the amount of damages. The Petition: RCBC filed a Petition for Review on Certiorari under Rule 45 before the Supreme Court. RCBC argued that the CA erred in finding a legal obligation to release the securities based on hearsay and irrelevant evidence. RCBC maintained that the principle of indivisibility of mortgage applied and that Marcopper failed to prove by a preponderance of evidence that RCBC ever committed to a partial release of the mortgage and pledge as a condition for the dacion en pago.
Issue(s)
Whether the parties entered into a binding agreement for RCBC to execute a Deed of Release from Mortgage and Pledge of the subject properties in exchange for the assignment of the Forbes Park property.
Ruling
The Supreme Court GRANTED the petition. The Decision and Resolution of the Court of Appeals were REVERSED and SET ASIDE. Marcopper was directed to pay the principal amount, interest, penalties, and attorney's fees stipulated in the promissory notes.
Ratio Decidendi
On the Issue of the Existence of an Agreement to Release Security: The Supreme Court held that Marcopper failed to establish by a preponderance of evidence that RCBC agreed to a partial release of the mortgage and pledge. The Court emphasized that while factual findings of lower courts are generally respected, they are not binding if they are not supported by clear and convincing evidence. A review of the written exchanges between the parties, specifically the letters dated July 1 and July 8, 1997, showed no mention of a commitment by RCBC to release the securities as a condition for the dacion en pago. Furthermore, the Court found Marcopper's actions inconsistent with its claims; Marcopper delivered an additional deed of pledge on September 9, 1997, which it would not have done if RCBC had already agreed to release existing pledges in July. The Court also noted that the demand for the release of club shares was only raised for the first time in a letter dated November 24, 1997, months after the alleged agreement. Applying the principle of indivisibility of mortgage, the Court ruled that RCBC was not obligated to release any portion of the security until the loan was fully paid, absent a proven agreement to the contrary. Consequently, Marcopper's failure to prove the alleged condition meant it had no cause of action for specific performance.
Main Doctrine
The principle of indivisibility of mortgage dictates that the security remains intact over all mortgaged properties until the entire obligation is extinguished. A debtor cannot demand the partial release of collateral upon partial payment unless a clear and specific agreement to that effect exists between the parties. The party alleging such an agreement bears the burden of proving its existence by a preponderance of evidence, and such proof must be consistent with the parties' written correspondence and subsequent conduct.