Republic of the PhilippinesSUPREME COURTManilaSECOND DIVISIONCALIFORNIA BUS LINES, INC.,
STATE INVESTMENTHOUSE, INC.,
G.R. No. 147950December 11, 2003
D E C I S I O NQUISUMBING,
In this Petition for Review, California BusLines, Inc., assails the Decision, datedApril 17, 2001, of the Court of Appeals inCA-G.R. CV No. 52667, reversing the judgment, dated June 3, 1993, of theRegional Trial Court of Manila, Branch 13, inCivil Case No. 84-28505 entitled StateInvestment House, Inc. v. California BusLines, Inc., forcollection of a sum of money. The Court of Appeals heldpetitionerCalifornia Bus Lines, Inc., liablefor the value of five promissory notesassigned to respondent State InvestmentHouse, Inc. The facts, as culled from the records, are asfollows:Sometime in 1979, Delta MotorsCorporation - M.A.N. Division(Delta)applied for financial assistance fromrespondent State Investment House, Inc.(hereafterSIHI), a domestic corporationengaged in the business of quasi-banking.SIHI agreed to extend a credit line to Deltafor P25,000,000.00 in three separate creditagreements dated May 11, June 19, andAugust 22, 1979. On several occasions,Delta availed of the credit line bydiscounting with SIHI some of itsreceivables, which evidence actual sales of Delta's vehicles. Delta eventually becameindebted to SIHI to the tune of P24,010,269.32.
Meanwhile, from April 1979 to May 1980,petitioner California Bus Lines, Inc.(hereafter CBLI), purchased on installmentbasis 35 units of M.A.N. Diesel Buses andtwo (2) units of M.A.N. Diesel ConversionEngines from Delta. To secure the paymentof the purchase price of the 35 buses, CBLIand its president, Mr. Dionisio O. Llamas,executed sixteen (16) promissory notes infavor of Deltaon January 23 and April 25,1980. In each promissory note, CBLIpromised to pay Delta or order,P2,314,000payable in 60 monthly installmentsstartingAugust 31, 1980, with interest at 14% perannum. CBLI further promised to pay theholder of the said notes 25% of the amountdue on the same as attorney's fees andexpenses of collection, whether actuallyincurred or not, in case of judicialproceedings to enforce collection. Inaddition to the notes, CBLI executed chattelmortgages over the 35 buses in Delta'sfavor.When CBLI defaulted on all payments due,it entered into arestructuring agreementwith Deltaon October 7, 1981, to cover itsoverdue obligations under the promissorynotes. The restructuring agreementprovided for a new schedule of payments of CBLI's past due installments, extending theperiod to pay, andstipulating dailyremittance instead of the previously agreedmonthly remittance of payments. In case of default, Delta would have the authority totake over the management and operationsof CBLI until CBLI and/or its president, Mr.Dionisio Llamas, remitted and/or updatedCBLI's past due account. CBLI and Deltaalso increased the interest rate to 16% p.a.and added a documentation fee of 2% p.a.and a 4% p.a. restructuring fee.On December 23, 1981, Delta executed aContinuing Deed of Assignment of Receivables in favor of SIHI as securityfor the payment of its obligations to SIHIper the credit agreements. In view of Delta's failure to pay, the loan agreementswere restructured under a Memorandum of Agreementdated March 31, 1982. Delta
obligated itself to pay a fixed monthlyamortization of P400,000 to SIHI and todiscount with SIHI P8,000,000 worth of receivables with the understanding that