Yam & Lent vs. Court of Appeals

An express condonation of a credit exceeding P5,000.00 must comply with the forms of donation and be in writing; otherwise it is void, and a notation on the debtor's own payment voucher does not bind the creditor. Moreover, the appointment of a receiver suspends the authority of the corporation and its directors and officers over its property and effects, so a corporate president cannot condone a debt during receivership.

Petitioners Victor Yam and Yek Sun Lent operated Philippine Printing Works, a printing establishment whose machinery and equipment were mortgaged to secure loans extended by private respondent Manphil Investment Corporation under the Industrial Guarantee and Loan Fund (IGLF) program. Manphil was subsequently placed under Central Bank receivership, with Ricardo Lirio and Cristina Destajo appointed receiver and in-house examiner, respectively. The dispute concerns the second IGLF loan and the alleged condonation of penalties and service charges.

On May 10, 1979, Victor Yam and Yek Sun Lent, doing business under the name and style of Philippine Printing Works, entered into a Loan Agreement with Assumption of Solidary Liability with Manphil Investment Corporation. Under the agreement, Manphil extended petitioners a loan of P500,000.00, with 12% annual interest, 2% monthly penalty, 1 1/2% monthly service charge, and 10% attorney's fees. Denominated the first Industrial Guarantee and Loan Fund (IGLF) loan, it was secured by a chattel mortgage on the printing machinery in petitioners' establishment.

Petitioners subsequently obtained a second IGLF loan of P300,000.00, evidenced by two promissory notes dated July 3, 1981 and September 30, 1981. For this loan, the parties executed a new loan agreement containing provisions identical to the first except that the annual interest was increased to 14% and the service charge was reduced to 1% per annum. The deed of chattel mortgage was amended correspondingly.

By April 2, 1985, petitioners had paid the first loan of P500,000.00. On November 4, 1985, Manphil was placed under receivership by the Central Bank, and Ricardo Lirio and Cristina Destajo were appointed receiver and in-house examiner, respectively. On May 17, 1986, petitioners made a partial payment of P50,000.00 on the second loan. They later wrote Manphil a letter dated June 18, 1986 proposing to settle their obligation. On July 2, 1986, Manphil, through counsel, replied with a counter-offer: it would reduce the penalty charges up to P140,000.00, provided petitioners could pay their obligation on or before July 30, 1986.

As of July 31, 1986, petitioners' total liability to Manphil was P727,001.35, broken down into principal of P295,469.47, interest of P165,385.00, penalties of P254,820.55, and service charges of P11,326.33. On that date, petitioners paid P410,854.47 by means of a Pilipinas Bank check, receipt of which was acknowledged by Destajo. The corresponding voucher for the check bore the notation "full payment of IGLF LOAN." The amount of P410,854.47 represented the sum of the principal (P295,469.47) and interest (P165,385.00), less the partial payment of P50,000.00. Manphil sent two demand letters to petitioners, dated September 4, 1986 and September 25, 1986, seeking payment of the balance of P266,146.88. When petitioners did not respond, Manphil filed this case in the Regional Trial Court of Metro Manila for collection of P266,146.88 plus interests, penalties, and service charges or, in the alternative, for foreclosure of the mortgaged machineries.

In their Answer, petitioners claimed that they had fully paid their obligation. They contended that sometime after receiving Manphil's letter of July 25, 1986 concerning the conditional offer to reduce their penalty charges, petitioner Victor Yam and his wife, Elena Yam, met with Carlos Sobrepeñas, president of respondent corporation, who allegedly agreed to waive the penalties and service charges, provided petitioners paid the principal and interest computed as of July 31, 1986, less the earlier payment of P50,000.00. According to petitioners, this was why they paid only P410,854.47, and the voucher notation "full payment of IGLF loan" reflected that full payment. Destajo claimed that when she signed the voucher, she failed to notice the statement that the amount was being given in "full payment of IGLF Loan"; she said she merely took note of the amount and the check number indicated therein. Mrs. Yam herself testified that when she and her husband sought the release of the chattel mortgage over their property, they were told that only the Central Bank would authorize the same because the Central Bank was the receiver. Both the trial court and the Court of Appeals found that petitioners received the two demand letters and rejected their claim of full payment.

• Full Payment and Oral Condonation: Petitioners maintained that they had fully paid their obligation to private respondent. They claimed that after receiving private respondent's letter of July 25, 1986 concerning the conditional offer to reduce penalty charges, Victor Yam and his wife, Elena Yam, met with Carlos Sobrepeñas, president of respondent corporation, who agreed to waive the penalties and service charges provided petitioners paid the principal and interest as of July 31, 1986, less the earlier P50,000.00 payment; this allegedly explained their payment of P410,854.47.
• Voucher Notation as Evidence: Petitioners argued that the voucher covering the Pilipinas Bank check for P410,854.47, containing the notation "full payment of IGLF loan," constituted documentary evidence of the oral agreement to condone the remaining penalties and service charges. They also pointed out that Cristina L. Destajo, the Central Bank examiner assigned to respondent corporation, signed the voucher.
• Credibility of Evidence: Petitioners assigned error to the lower court's failure to give credence to their documentary and testimonial evidence relative to payment of the additional loan under the Amendment of Deed of Chattel Mortgage (Exhibit K, respondent) and as against the testimony of respondent's witness Cristina L. Destajo.
• Non-Receipt of Demand Letters: Petitioners alleged that they did not receive the two demand letters sent by private respondent on September 4 and September 25, 1986, and assigned error to the lower court's failure to totally disregard Exhibits E and F of respondents.

• Liability for Penalties and Service Charges: Whether petitioners are liable for the payment of penalties and service charges on their loan which, as of July 31, 1986, amounted to P266,146.88.
• Validity of Oral Condonation: Whether the alleged oral agreement to waive the penalties and service charges on the second IGLF loan is valid and binding despite not being reduced to writing.
• Effect of Voucher Notation: Whether the notation "full payment of IGLF loan" on the voucher covering the Pilipinas Bank check for P410,854.47 constitutes documentary evidence of full payment or binds private respondent.
• Authority of Corporate President During Receivership: Whether Carlos Sobrepeñas, as president of respondent corporation, had authority to condone the debt after private respondent had been placed under Central Bank receivership.
• Receipt of Demand Letters: Whether petitioners failed to receive the demand letters dated September 4 and September 25, 1986, such that the lower court erred in not totally disregarding Exhibits E and F.

• Liability for Penalties and Service Charges: Yes. Petitioners are liable for P266,146.88 plus interest, service charge, penalty fees, attorney's fees, and costs; the alleged condonation did not extinguish the obligation because it was not in writing and the corporate president lacked authority.
• Validity of Oral Condonation: No. Express condonation must comply with the forms of donation; a donation and acceptance of a movable exceeding P5,000.00 must be in writing, otherwise void; the alleged agreement was not reduced to writing.
• Effect of Voucher Notation: No. The notation merely stated petitioners' intention in making the payment and did not bind private respondent; it would have been different if it appeared in a receipt issued by respondent corporation.
• Authority of Corporate President During Receivership: No. The appointment of a receiver suspends the authority of the corporation and its directors and officers over its property and effects; Sobrepeñas had no authority to condone the debt.
• Receipt of Demand Letters: No error. Both lower courts found that petitioners received the demand letters; findings of fact of trial courts, adopted and confirmed by the Court of Appeals, are final and conclusive and will not be reviewed on appeal.

• Liability for Penalties and Service Charges: The Court framed the question as whether petitioners are liable for penalties and service charges amounting to P266,146.88 as of July 31, 1986. It answered in the affirmative. The alleged full payment depended on an oral condonation and a voucher notation; because neither was legally effective, the unpaid balance remained due. The RTC and CA findings on the amount and the demand letters were sustained.
• Validity of Oral Condonation: Art. 1270, par. 2 of the Civil Code provides that express condonation must comply with the forms of donation. Art. 748, par. 3 provides that the donation and acceptance of a movable, the value of which exceeds P5,000.00, must be made in writing, otherwise void. Under Art. 417, par. 1, obligations or credits are considered movable property. The alleged agreement to condone P266,146.88 of the second IGLF loan was undisputed not to have been reduced to writing. Thus, it was void and could not extinguish the obligation.
• Effect of Voucher Notation: The notation "full payment of IGLF loan" on the voucher merely stated petitioners' intention in making the payment; it did not bind private respondent. It would have been different if the notation appeared in a receipt issued by respondent corporation, through its receiver, because then it would be an admission against interest. Petitioners should have asked for a certificate of full payment from respondent corporation, as they did for the first IGLF loan. Destajo's countersignature on the voucher did not amount to assent to full payment; she merely acknowledged receipt of the payment and had no authority to condone any indebtedness, her functions being limited to issuing official receipts, preparing check vouchers, and documentation.
• Authority of Corporate President During Receivership: The alleged agreement to condone was supposedly entered into in July 1986, after respondent corporation had been placed under receivership on November 4, 1985. Under Villanueva vs. Court of Appeals, the appointment of a receiver operates to suspend the authority of a corporation and of its directors and officers over its property and effects, such authority being reposed in the receiver. Sobrepeñas therefore had no authority to condone the debt. Mrs. Yam herself testified that when she and her husband sought release of the chattel mortgage, they were told that only the Central Bank would authorize it because the Central Bank was the receiver; petitioners could not feign ignorance and plead good faith.
• Receipt of Demand Letters: Petitioners alleged they did not receive the two demand letters of September 4 and September 25, 1986. Both the lower court and the Court of Appeals found otherwise. The Court declined to disturb this factual finding, citing the settled rule that findings of fact of trial courts, adopted and confirmed by the Court of Appeals, are final and conclusive and, as a rule, will not be reviewed on appeal.

• Express Condonation and Donation Formalities — Express condonation must comply with the forms of donation. A donation and acceptance of a movable, the value of which exceeds P5,000.00, must be made in writing, otherwise void. Obligations or credits are considered movable property. In this case, the alleged oral condonation of P266,146.88 was not reduced to writing and was therefore void.
• Payment Voucher Notation — A notation on the debtor's own payment voucher stating "full payment of IGLF loan" merely states the debtor's intention in making the payment and does not bind the creditor. It would be an admission against interest only if it appeared in a receipt issued by the creditor. The Court applied this to reject petitioners' claim that the voucher evidenced full payment.
• Authority of Corporate Officers During Receivership — The appointment of a receiver operates to suspend the authority of a corporation and of its directors and officers over its property and effects, such authority being reposed in the receiver. Because Manphil was under receivership when the alleged condonation was made, its president, Sobrepeñas, had no authority to condone the debt.
• Countersignature by Receiver or Examiner — A receiver or examiner's countersignature on a payment voucher acknowledges receipt of payment only; it does not constitute assent to full payment or authority to condone indebtedness. Destajo's countersignature did not bind Manphil to the alleged condonation.
• Finality of Factual Findings — Findings of fact of trial courts, adopted and confirmed by the Court of Appeals, are final and conclusive and, as a rule, will not be reviewed on appeal. The Court applied this to uphold the finding that petitioners received the demand letters.

• "Art. 1270, par. 2 of the Civil Code provides that express condonation must comply with the forms of donation." — States the controlling rule that defeats the alleged oral condonation.
• "The notation in "full payment of IGLF loan" merely states petitioners' intention in making the payment, but in no way does it bind private respondent." — Rejects the voucher notation as evidence of full payment or condonation.
• "the appointment of a receiver operates to suspend the authority of a [corporation] and of its directors and officers over its property and effects, such authority being reposed in the receiver:" — States the rule that deprived Sobrepeñas of authority to condone the debt during receivership.
• "It is settled that findings of fact of trial courts, adopted and confirmed by the Court of Appeals, are final and conclusive and, as a rule, will not be reviewed on appeal." — States the standard that upheld the finding on receipt of demand letters.

• Villanueva vs. Court of Appeals, 244 SCRA 395 (1995) — Cited for the rule that the appointment of a receiver operates to suspend the authority of a corporation and of its directors and officers over its property and effects, such authority being reposed in the receiver. The Court applied this to hold that Sobrepeñas had no authority to condone the debt.
• GSIS vs. Court of Appeals, G.R. No. 128471, March 6, 1998 — Cited for the rule that findings of fact of trial courts, adopted and confirmed by the Court of Appeals, are final and conclusive and, as a rule, will not be reviewed on appeal. The Court applied this to the finding that petitioners received the demand letters.

• Art. 1270, par. 2, Civil Code — Provides that express condonation must comply with the forms of donation. Applied to invalidate the alleged oral condonation.
• Art. 748, par. 3, Civil Code — Provides that the donation and acceptance of a movable, the value of which exceeds P5,000.00, must be made in writing, otherwise void. Applied because the alleged condoned credit exceeded P5,000.00 and was not in writing.
• Art. 417, par. 1, Civil Code — Provides that obligations, actually referring to credits, are considered movable property. Applied to classify the condoned credit as movable property subject to the donation formalities.

Justices Bellosillo, Puno, Quisumbing, and Buena concurred.