Bank of the Philippine Islands vs. Leobrera

In petitions for review on certiorari, factual findings of the Court of Appeals are binding and conclusive on the Supreme Court absent specific exceptions; parties may not raise new theories or issues for the first time on appeal as this violates due process; foreign currency obligations may be discharged in Philippine currency based on the prevailing exchange rate at the time of payment; moral damages under Article 2220 of the Civil Code require proof of bad faith or fraud and must be proportional to the suffering inflicted without being palpably excessive; and the award of attorney's fees lies within the sound discretion of the court based on the circumstances of each case.

The consolidated cases stem from disputes between Bank of the Philippine Islands (BPI) and Carlos Leobrera involving real estate mortgage foreclosure and related banking transactions. The cases were previously decided by the Supreme Court on January 29, 2002 (G.R. No. 137147) and January 30, 2002 (G.R. No. 137148), modifying the decisions of the Court of Appeals and the trial court regarding awards of actual, moral, and exemplary damages, as well as attorney's fees.

• The consolidated cases involve two separate disputes between petitioner Bank of the Philippine Islands (BPI) and respondent Carlos Leobrera, both stemming from banking transactions and real estate mortgage foreclosure.
• In G.R. No. 137147, the Court of Appeals and trial court found that petitioner bank was guilty of gross negligence and bad faith in dealing with respondent, warranting the award of moral damages.
• The previous Supreme Court Decision dated January 29, 2002 affirmed the lower courts' decisions but modified the awards by reducing actual damages to P200,000.00 and attorney's fees to P50,000.00.
• In G.R. No. 137148, the previous Supreme Court Decision dated January 30, 2002 affirmed the lower courts but reduced actual damages to P98,975.00, attorney's fees to P30,000.00, and deleted all awards for moral and exemplary damages.
• Respondent Leobrera suffered losses including a letter of credit in the amount of $1,763.50 and a remittance of $8,350.94, totaling $10,114.44 in foreign currency.
• The trial court had originally awarded P1,000,000.00 in moral damages in G.R. No. 137147, while in G.R. No. 137148, it awarded P10,000,000.00 in moral damages and P1,300,000.00 in actual damages.
• The cases have been litigated for more than fifteen years at the time of the Resolution.
• Petitioner BPI failed to raise in its petition for review the issue regarding the clarification that reconveyed properties remain subject to the real estate mortgage.

• Petitioner Bank of the Philippine Islands argued that the P1,000,000.00 award of moral damages in G.R. No. 137147 should be deleted, citing the ruling in G.R. No. 137148 which involved the same parties.
• Petitioner contended that the lower courts' order to reconvey the foreclosed properties to respondent should be clarified to state that they remain subject to the real estate mortgage executed by respondent.
• Petitioner maintained that the factual bases for the awards in both cases are the same and should be treated similarly regarding the deletion of moral damages.

• Respondent Carlos Leobrera argued that the Supreme Court erred in reducing the award of actual damages from P1,000,000.00 to P200,000.00 in G.R. No. 137147, and from P1,300,000.00 to P98,975.00 in G.R. No. 137148.
• Respondent contended that the reduction of attorney's fees from P100,000.00 to P50,000.00 in G.R. No. 137147, and from P200,000.00 to P30,000.00 in G.R. No. 137148, was erroneous given the fifteen-year duration of the litigation.
• In G.R. No. 137148, respondent argued that the deletion of the award of interest on actual damages and the deletion of moral and exemplary damages constituted serious error, as the records substantiate these awards and prove petitioner's bad faith.

• Procedural Issues:
  • Whether petitioner Bank of the Philippine Islands can raise for the first time on appeal the issue that reconveyed properties remain subject to the real estate mortgage.
  • Whether the Supreme Court can review the factual findings of the Court of Appeals regarding petitioner's gross negligence and bad faith.
• Substantive Issues:
  • Whether the award of moral damages in G.R. No. 137147 should be deleted consistent with the ruling in G.R. No. 137148.
  • Whether the awards of actual damages were properly reduced by the Supreme Court in its previous decisions.
  • What is the proper rate of conversion for foreign currency obligations under Republic Act No. 8183.
  • Whether the awards of attorney's fees were properly reduced given the circumstances of the case.
  • Whether moral and exemplary damages should be awarded in G.R. No. 137148 based on Article 2220 and Article 2232 of the Civil Code.

• Procedural:
  • The Court held that petitioner cannot raise the issue regarding the clarification of reconveyance being subject to mortgage for the first time on appeal, as this issue was not pleaded as an error in the petition for review. A party who deliberately adopts a certain theory upon which the case is tried and decided by the lower court will not be permitted to change theory on appeal, as this would violate basic considerations of due process and fair play.
  • The Court reaffirmed that factual findings of the Court of Appeals are binding and conclusive on the parties and upon the Supreme Court in petitions for review on certiorari, which are limited to questions of law. The exceptions to this rule (variance with trial court findings, overlooked relevant facts, or misapprehension of facts) were not proven by petitioner.
• Substantive:
  • The Court denied petitioner's motion to delete the P1,000,000.00 moral damages in G.R. No. 137147, holding that the factual bases for the awards in this case and in G.R. No. 137148 are different, and the finding of gross negligence and bad faith by the lower courts was supported by evidence.
  • The Court modified the award of actual damages in G.R. No. 137147 to the peso equivalent of $10,114.44 (representing the letter of credit and remittance losses) computed at the prevailing exchange rate at the time of payment, citing C.F. Sharp & Co. v. Northwest Airlines regarding the application of R.A. 8183.
  • The Court increased the award of attorney's fees in G.R. No. 137147 to P100,000.00, finding that the fifteen-year duration of litigation justified the higher amount.
  • In G.R. No. 137148, the Court restored the award of actual damages to P1,300,000.00, finding that the records substantiate this amount as testified to by respondent and affirmed by both lower courts.
  • The Court awarded P500,000.00 in moral damages in G.R. No. 137148 (tempered from P10,000,000.00), finding that both lower courts found petitioner acted in bad faith under Article 2220 of the Civil Code, but the original amount was excessive.
  • The Court upheld the deletion of exemplary damages in G.R. No. 137148, as the records do not show that petitioner acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner as required by Article 2232 of the Civil Code.
  • The Court increased the award of attorney's fees in G.R. No. 137148 to P100,000.00.

• Binding Effect of Factual Findings — Factual findings of the Court of Appeals are binding and conclusive upon the Supreme Court in petitions for review on certiorari, which are limited to questions of law. Exceptions exist when findings are at variance with the trial court, when relevant facts are manifestly overlooked, or when the judgment is based on a misapprehension of facts.
• Theory on Appeal — A party who deliberately adopts a certain theory upon which the case is tried and decided by the lower court will not be permitted to change theory on appeal. Points of law, theories, issues, and arguments not brought to the attention of the lower court need not be considered by a reviewing court as they cannot be raised for the first time at such a late stage without violating due process.
• Foreign Currency Conversion Rate — Under Republic Act No. 8183 (which repealed R.A. 529), obligations in foreign currency may be discharged in Philippine currency based on the prevailing rate at the time of payment. This preserves the real value of the foreign exchange-incurred obligation to the date of its payment.
• Actual Damages — To be recoverable, the amount actually expended must be substantiated with a reasonable degree of certainty, premised upon competent proof and on the best evidence obtainable by the injured party.
• Moral Damages — Under Article 2220 of the Civil Code, moral damages may be awarded where the defendant acted fraudulently and in bad faith. The amount must be proportional to the suffering inflicted and should not be palpably and scandalously excessive, as moral damages are not punitive in nature and are not intended to enrich the claimant.
• Exemplary Damages — Under Article 2232 of the Civil Code, exemplary damages require that the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.

• "Indeed, it is axiomatic that in petitions for review on certiorari, only questions of law may be raised by the parties and passed upon by this Court."
• "As a rule, a party who deliberately adopts a certain theory upon which the case is tried and decided by the lower court will not be permitted to change theory on appeal."
• "Basic considerations of due process underlie this rule. It would be unfair to the adverse party who would have no opportunity to present further evidence material to the new theory, which it could have done had it been aware of it at the time of the hearing before the trial court."
• "In order that actual damages may be recovered, the amount actually expended must be substantiated with a reasonable degree of certainty, premised upon competent proof and on the best evidence obtainable by the injured party."
• "Verily, it is just and fair to preserve the real value of the foreign exchange-incurred obligation to the date of its payment."
• "Moral damages are meant to compensate the claimant for any physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation and similar injuries unjustly caused."
• "Moral damages are not punitive in nature and were never intended to enrich the claimant at the expense of the defendant."

• C.F. Sharp & Co. v. Northwest Airlines, Inc. (G.R. No. 133498, 381 SCRA 314) — Cited for the rule that under R.A. 8183, foreign currency obligations may be discharged in Philippine currency based on the prevailing rate at the time of payment.
• Asia World Recruitment, Inc. v. National Labor Relations Commission (313 SCRA 1) — Cited to support the rule that obligations in foreign currency may be discharged in Philippine currency based on the prevailing rate at the time of payment.
• Vicente v. Planters Development Bank (G.R. No. 136112, 28 January 2003) — Cited regarding the exceptions to the rule that factual findings of the Court of Appeals are binding on the Supreme Court.
• Balitaosan v. Secretary of Education, Culture and Sports (G.R. No. 138238, 2 September 2003) — Cited for the rule that parties cannot change their theory on appeal.
• Philippine Ports Authority v. City of Iloilo (G.R. No. 109791, 14 July 2003) — Cited for the rule that issues not raised in the lower court cannot be raised for the first time on appeal.
• People v. Astudillo (G.R. No. 141518, 29 April 2003) — Cited for the requirement that actual damages must be substantiated with competent proof.
• National Power Corporation v. Court of Appeals (339 Phil. 605) — Cited for the principle that the award of damages, including attorney's fees, lies within the discretion of the court.
• Bernaldez v. Francia (G.R. No. 143929, 28 February 2003) — Cited for the rule that findings of fact of the trial court, when affirmed by the Court of Appeals, are binding upon the Supreme Court.
• Mercado v. People (G.R. No. 149375, 26 November 2002) — Cited for the rule that findings of fact of the Court of Appeals are final and conclusive when affirmed by the trial court.
• Samson v. Bank of the Philippine Islands (G.R. No. 150487, 10 July 2003) — Cited for the principle that moral damages should not be palpably and scandalously excessive.

• Republic Act No. 529 — The former law prohibiting stipulation of currency other than Philippine currency, which was repealed by R.A. 8183.
• Republic Act No. 8183 — The law removing the prohibition on stipulation of currency other than Philippine currency, allowing obligations to be paid in the currency agreed upon by the parties.
• Civil Code, Article 2220 — Provides that moral damages may be awarded where the defendant acted fraudulently and in bad faith.
• Civil Code, Article 2232 — Governs the award of exemplary damages, requiring that the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.