G.R. No.

128703               October 18, 2000 charges, and ₱66,909.38 representing attorney's fees. As the demand was unheeded,
ASIA PACIFIC sued Teodoro Bañas, C. G. Dizon Construction and Cenen Dizon.
TEODORO BAÑAS,*C. G. DIZON CONSTRUCTION, INC., and CENEN
DIZON, petitioners, While defendants (herein petitioners) admitted the genuineness and due execution of
vs. the Promissory Note, the Deed of Chattel Mortgage and the Continuing Undertaking,
ASIA PACIFIC FINANCE CORPORATION,1 substituted by INTERNATIONAL they nevertheless maintained that these documents were never intended by the parties
CORPORATE BANK now known as UNION BANK OF THE to be legal, valid and binding but a mere subterfuge to conceal the loan of
PHILIPPINES, respondent. ₱390,000.00 with usurious interests.

DECISION Defendants claimed that since ASIA PACIFIC could not directly engage in banking
business, it proposed to them a scheme wherein plaintiff ASIA PACIFIC could extend
BELLOSILLO, J.:
a loan to them without violating banking laws: first, Cenen Dizon would secure a
C. G. DIZON CONSTRUCTION INC. and CENEN DIZON in this petition for review promissory note from Teodoro Bañas with a face value of ₱390,000.00 payable in
seek the reversal of the 24 July 1996 Decision of the Court of Appeals dismissing their installments; second, ASIA PACIFIC would then make it appear that the promissory
appeal for lack of merit and affirming in toto the decision of the trial court holding them note was sold to it by Cenen Dizon with the 14% usurious interest on the loan or
liable to Asia Pacific Finance Corporation in the amount of ₱87,637.50 at 14% interest ₱54,000.00 discounted and collected in advance by ASIA PACIFIC; and,  lastly,
per annum in addition to attorney's fees and costs of suit, as well as its 21 March 1997 Cenen Dizon would provide sufficient collateral to answer for the loan in case of
Resolution denying reconsideration thereof.2 default in payment and execute a continuing guaranty to assure continuous and
prompt payment of the loan. Defendants also alleged that out of the loan of
On 20 March 1981 Asia Pacific Finance Corporation (ASIA PACIFIC for short) filed a ₱390,000.00 defendants actually received only ₱329,185.00 after ASIA PACIFIC
complaint for a sum of money with prayer for a writ of replevin against Teodoro Bañas, deducted the discounted interest, service handling charges, insurance premium,
C. G. Dizon Construction and Cenen Dizon. Sometime in August 1980 Teodoro Bañas registration and notarial fees.
executed a Promissory Note in favor of C. G. Dizon Construction whereby for value
received he promised to pay to the order of C. G. Dizon Construction the sum of Sometime in October 1980 Cenen Dizon informed ASIA PACIFIC that he would be
₱390,000.00 in installments of "₱32,500.00 every 25th day of the month starting from delayed in meeting his monthly amortization on account of business reverses and
September 25, 1980 up to August 25, 1981."3 promised to pay instead in February 1981. Cenen Dizon made good his promise and
tendered payment to ASIA PACIFIC in an amount equivalent to two (2) monthly
Later, C. G. Dizon Construction endorsed with recourse the Promissory Note to ASIA amortizations. But ASIA PACIFIC attempted to impose a 3% interest for every month
PACIFIC, and to secure payment thereof, C. G. Dizon Construction, through its corporate of delay, which he flatly refused to pay for being usurious.
officers, Cenen Dizon, President, and Juliette B. Dizon, Vice President and Treasurer,
executed a Deed of Chattel Mortgage covering three (3) heavy equipment units of Afterwards, ASIA PACIFIC allegedly made a verbal proposal to Cenen Dizon to
Caterpillar Bulldozer Crawler Tractors with Model Nos. D8-14A, D8-2U and D8H in surrender to it the ownership of the two (2) bulldozer crawler tractors and, in turn, the
favor of ASIA PACIFIC.4 Moreover, Cenen Dizon executed on 25 August 1980 latter would treat the former's account as closed and the loan fully paid. Cenen Dizon
a Continuing Undertaking wherein he bound himself to pay the obligation jointly and supposedly agreed and accepted the offer. Defendants averred that the value of the
severally with C. G. Dizon Construction.5 bulldozer crawler tractors was more than adequate to cover their obligation to ASIA
PACIFIC.
In compliance with the provisions of the Promissory Note, C. G. Dizon Construction
made the following installment payments to ASIA PACIFIC: ₱32,500.00 on 25 Meanwhile, on 21 April 1981 the trial court issued a writ of replevin against
September 1980, ₱32,500.00 on 27 October 1980 and ₱65,000.00 on 27 February 1981, defendant C. G. Dizon Construction for the surrender of the bulldozer crawler tractors
or a total of ₱130,000.00. Thereafter, however, C. G. Dizon Construction defaulted in the subject of the Deed of Chattel Mortgage. Of the three (3) bulldozer crawler tractors,
payment of the remaining installments, prompting ASIA PACIFIC to send a Statement of only two (2) were actually turned over by defendants - D8-14A and D8-2U - which
Account to Cenen Dizon for the unpaid balance of ₱267,737.50 inclusive of interests and units were subsequently foreclosed by ASIA PACIFIC to satisfy the obligation. D8-
14A was sold for ₱120,000.00 and D8-2U for ₱60,000.00 both to ASIA PACIFIC as
the highest bidder.
During the pendency of the case, defendant Teodoro Bañas passed away, and on motion reinvesting or trading in securities.8 As defined in Sec. 2, par. (a), of the Revised
of the remaining defendants, the trial court dismissed the case against him. On the other Securities Act,9 securities "shall include x x x x commercial papers evidencing
hand, ASIA PACIFIC was substituted as party plaintiff by International Corporate Bank indebtedness of any person, financial or non-financial entity, irrespective of maturity,
after the disputed Promissory Note was assigned and/or transferred by ASIA PACIFIC to issued, endorsed, sold, transferred or in any manner conveyed to another with or
International Corporate Bank. Later, International Corporate Bank merged with Union without recourse, such as promissory notes x x x x" Clearly, the transaction between
Bank of the Philippines. As the surviving entity after the merger, and having succeeded to petitioners and respondent was one involving not a loan but purchase of receivables
all the rights and interests of International Corporate Bank in this case, Union Bank of the at a discount, well within the purview of "investing, reinvesting or trading in
Philippines was substituted as a party in lieu of International Corporate Bank.6 securities" which an investment company, like ASIA PACIFIC, is authorized to
perform and does not constitute a violation of the General Banking Act.10 Moreover,
On 25 September 1992 the Regional Trial Court ruled in favor of ASIA PACIFIC holding
Sec. 2 of the General Banking Act provides in part -
the defendants jointly and severally liable for the unpaid balance of the obligation under
the Promissory Note in the amount of ₱87,637.50 at 14% interest per annum, and Sec. 2. Only entities duly authorized by the Monetary Board of the Central Bank may
attorney's fees equivalent to 25% of the monetary award.7 engage in the lending of funds obtained from the public through the receipt of
deposits of any kind, and all entities regularly conducting such operations shall be
On 24 July 1996 the Court of Appeals affirmed in toto the decision of the trial court thus -
considered as banking institutions and shall be subject to the provisions of this Act, of
Defendant-appellants' contention that the instruments were executed merely as a the Central Bank Act, and of other pertinent laws (underscoring supplied).
subterfuge to skirt banking laws is an untenable defense. If that were so then they too
Indubitably, what is prohibited by law is for investment companies to lend funds
were parties to the illegal scheme. Why should they now be allowed to take advantage of
obtained from the public through receipts of deposit, which is a function of banking
their own knavery to escape the liabilities that their own chicanery created?
institutions. But here, the funds supposedly "lent" to petitioners have not been shown
Defendant-appellants also want us to believe their story that there was an agreement to have been obtained from the public by way of deposits, hence, the inapplicability
between them and the plaintiff-appellee that if the former would deliver their 2 bulldozer of banking laws.
crawler tractors to the latter, the defendant-appellants' obligation would fully be
On petitioners' submission that the true intention of the parties was to enter into a
extinguished. Again, nothing but the word that comes out between the teeth supports such
contract of loan, we have examined the Promissory Note and failed to discern
story. Why did they not write down such an important agreement? Is it believable that
anything therein that would support such theory. On the contrary, we find the terms
seasoned businessmen such as the defendant-appellant Cenen G. Dizon and the other
and conditions of the instrument clear, free from any ambiguity, and expressive of the
officers of the appellant corporation would deliver the bulldozers without a receipt of
real intent and agreement of the parties. We quote the pertinent portions of
acquittance from the plaintiff-appellee x x x x In our book, that is not credible.
the Promissory Note -
The pivotal issues raised are: (a) Whether the disputed transaction between petitioners
FOR VALUE RECEIVED, I/We, hereby promise to pay to the order of C.G. Dizon
and ASIA PACIFIC violated banking laws, hence, null and void; and (b) Whether the
Construction, Inc. the sum of THREE HUNDRED NINETY THOUSAND ONLY
surrender of the bulldozer crawler tractors to respondent resulted in the extinguishment of
(₱390,000.00), Philippine Currency in the following manner:
petitioners' obligation.
₱32,500.00 due every 25th of the month starting from September 25, 1980 up to
On the first issue, petitioners insist that ASIA PACIFIC was organized as an investment
August 25, 1981.
house which could not engage in the lending of funds obtained from the public through
receipt of deposits. The disputed Promissory Note, Deed of Chattel I/We agree that if any of the said installments is not paid as and when it respectively
Mortgage and Continuing Undertaking were not intended to be valid and binding on the falls due, all the installments covered hereby and not paid as yet shall forthwith
parties as they were merely devices to conceal their real intention which was to enter into become due and payable at the option of the holder of this note with interest at the
a contract of loan in violation of banking laws. rate of 14% per annum on each unpaid installment until fully paid.

We reject the argument. An investment company refers to any issuer which is or holds If any amount due on this note is not paid at its maturity and this note is placed in the
itself out as being engaged or proposes to engage primarily in the business of investing, hands of an attorney for collection, I/We agree to pay in addition to the aggregate of
the principal amount and interest due, a sum equivalent to TEN PERCENT (10%) thereof Petitioners contend that the parties already had a verbal understanding wherein ASIA
as Attorney's fees, in case no action is filed, otherwise, the sum will be equivalent to PACIFIC actually agreed to consider petitioners' account closed and the principal
TWENTY FIVE (25%) of the said principal amount and interest due x x x x obligation fully paid in exchange for the ownership of the two (2) bulldozer crawler
tractors.
Makati, Metro Manila, August 25, 1980.
We are not persuaded. Again, other than the bare allegations of petitioners, the records
(Sgd) Teodoro Bañas
are bereft of any evidence of the supposed agreement. As correctly observed by the
ENDORSED TO ASIA PACIFIC FINANCE CORPORATION WITH RECOURSE, Court of Appeals, it is unbelievable that the parties entirely neglected to write down
C.G. DIZON CONSTRUCTION, INC. such an important agreement. Equally incredulous is the fact that petitioner Cenen
Dizon, a seasoned businessman, readily consented to deliver the bulldozers to
By: (Sgd.) Cenen Dizon (Sgd.) Juliette B. Dizon respondent without a corresponding receipt of acquittance. Indeed, even the testimony
President VP/Treasurer of petitioner Cenen Dizon himself negates the supposed verbal understanding
between the parties -
Likewise, the Deed of Chattel Mortgage and Continuing Undertaking were duly
acknowledged before a notary public and, as such, have in their favor the presumption of Q: You said and is it not a fact that you surrendered the bulldozers to APCOR by
regularity. To contradict them there must be clear, convincing and more than merely virtue of the seizure order?
preponderant evidence. In the instant case, the records do not show even a preponderance A: There was no seizure order. Atty. Carag during that time said if I surrender the two
of evidence in favor of petitioners' claim that the Deed of Chattel equipment, we might finally close a deal if the equipment would come up to the
Mortgage and Continuing Undertaking were never intended by the parties to be legal, balance of the loan. So I voluntarily surrendered, I pulled them from the job site and
valid and binding. Notarial documents are evidence of the facts in clear and unequivocal returned them to APCOR x x x x
manner therein expressed.11
Q: You mentioned a certain Atty. Carag, who is he?
Interestingly, petitioners' assertions were based mainly on the self-serving testimony of
Cenen Dizon, and not on any other independent evidence. His testimony is not only A: He was the former legal counsel of APCOR. They were handling cases. 1âwphi1 In
unconvincing, as found by the trial court and the Court of Appeals, but also self-defeating fact, I talked with Atty. Carag, we have a verbal agreement if I surrender the
in light of the documents presented by respondent, i.e., Promissory Note, Deed of Chattel equipment it might suffice to pay off the debt so I did just that (underscoring ours).13
Mortgage and Continuing Undertaking, the accuracy, correctness and due execution of
In other words, there was no binding and perfected contract between petitioners and
which were admitted by petitioners. Oral evidence certainly cannot prevail over the
respondent regarding the settlement of the obligation, but only a conditional one, a
written agreements of the parties. The courts need only rely on the faces of the written
mere conjecture in fact, depending on whether the value of the tractors to be
contracts to determine their true intention on the principle that when the parties have
surrendered would equal the balance of the loan plus interests. And since the
reduced their agreements in writing, it is presumed that they have made the writings the
bulldozer crawler tractors were sold at the foreclosure sale for only
only repositories and memorials of their true agreement.
₱180,000.00,14 which was not enough to cover the unpaid balance of ₱267,637.50,
The second issue deals with a question of fact. We have ruled often enough that it is not petitioners are still liable for the deficiency.
the function of this Court to analyze and weigh the evidence all over again, its jurisdiction
Barring therefore a showing that the findings complained of are totally devoid of
being limited to reviewing errors of law that might have been committed by the lower
support in the records, or that they are so glaringly erroneous as to constitute serious
court.12 At any rate, while we are not a trier of facts, hence, not required as a rule to look
abuse of discretion, we see no valid reason to discard them. More so in this case
into the factual bases of the assailed decision of the Court of Appeals, we did so just the
where the findings of both the trial court and the appellate court coincide with each
same in this case if only to satisfy petitioners that we have carefully studied and evaluated
other on the matter.
the case, all too mindful of the tenacity and vigor with which the parties, through their
respective counsel, have pursued this case for nineteen (19) years. With regard to the computation of petitioners' liability, the records show that
petitioners actually paid to respondent a total sum of ₱130,000.00 in addition to the
₱180,000.00 proceeds realized from the sale of the bulldozer crawler tractors at public
auction. Deducting these amounts from the principal obligation of ₱390,000.00 leaves a
balance of ₱80,000.00, to which must be added ₱7,637.50 accrued interests and charges
as of 20 March 1981, or a total unpaid balance of ₱87,637.50 for which petitioners are
jointly and severally liable. Furthermore, the unpaid balance should earn 14% interest per
annum as stipulated in the Promissory Note, computed from 20 March 1981 until fully
paid.

On the amount of attorney's fees which under the Promissory Note is equivalent to 25%
of the principal obligation and interests due, it is not, strictly speaking, the attorney's fees
recoverable as between the attorney and his client regulated by the Rules of Court.
Rather, the attorney's fees here are in the nature of liquidated damages and the stipulation
therefor is aptly called a penal clause. It has been said that so long as such stipulation
does not contravene the law, morals and public order, it is strictly binding upon the
obligor. It is the litigant, not the counsel, who is the judgment creditor entitled to enforce
the judgment by execution.15

Nevertheless, it appears that petitioners' failure to fully comply with their part of the
bargain was not motivated by ill will or malice, but due to financial distress occasioned
by legitimate business reverses. Petitioners in fact paid a total of ₱130,000.00 in three (3)
installments, and even went to the extent of voluntarily turning over to respondent their
heavy equipment consisting of two (2) bulldozer crawler tractors, all in a bona fide effort
to settle their indebtedness in full. Article 1229 of the New Civil Code specifically
empowers the judge to equitably reduce the civil penalty when the principal obligation
has been partly or irregularly complied with. Upon the foregoing premise, we hold that
the reduction of the attorney's fees from 25% to 15% of the unpaid principal plus interests
is in order.

Finally, while we empathize with petitioners, we cannot close our eyes to the overriding
considerations of the law on obligations and contracts which must be upheld and honored
at all times. Petitioners have undoubtedly benefited from the transaction; they cannot now
be allowed to impugn its validity and legality to escape the fulfillment of a valid and
binding obligation.

WHEREFORE, no reversible error having been committed by the Court of Appeals, its
assailed Decision of 24 July 1996 and its Resolution of 21 March 1997 are AFFIRMED.
Accordingly, petitioners C.G. Construction Inc. and Cenen Dizon are ordered jointly and
severally to pay respondent Asia Pacific Finance Corporation, substituted by International
Corporate Bank (now known as Union Bank of the Philippines), ₱87,637.50 representing
the unpaid balance on the Promissory Note, with interest at fourteen percent (14%) per
annum computed from 20 March 1981 until fully paid, and fifteen percent (15%) of the
principal obligation and interests due by way of attorney's fees. Costs against petitioners.

SO ORDERED.