G.R. NO. 143866 - POLIAND INDUSTRIAL LIMITED, VS. NATIONAL DEVELOPMENT COMPANY, DEVELOPMENT BANK OF THE PHILIPPINES, AND THE HONORABLE COURT OF APPEALS (FOURTEENTH DIVISION).[G.R. NO. 143877]NATIONAL DEVELOPMENT COMPANY, VS. POLIAND INDUSTRIAL LIMITED.D E C I S I O N - Supreme Court E-Library

Ruling

Accordingly, DBP argued that POLIAND's complaint stated no cause of action against DBP or was barred by the Statute of Frauds because DBP did not sign any memorandum to act as guarantor for the alleged credit advances/loan accommodations in favor of POLIAND. DBP also denied any liability under LOI No. 1155, which it described as immoral and unconstitutional, since it was rescinded by LOI No. 1195. By way of its Affirmative Allegations and Defenses , DBP countered that it was unaware of the maritime lien on the five vessels mortgaged in its favor and that as far as GALLEON's foreign borrowings are concerned, DBP agreed to act as guarantor thereof only under the conditions laid down under the Deed of Undertaking . DBP prayed for the award of actual, moral and exemplary damages and attorney's fees against POLIAND as compulsory counterclaim. In the event that it be adjudged liable for the payment of the loan accommodations and the maritime liens, DBP prayed that its co-defendant GALLEON be ordered to indemnify DBP for the full amount. [14] For its part, NDC denied any participation in the execution of the loan accommodations/credit advances and acquisition of ownership of GALLEON, asserting that it acted only as manager of GALLEON. NDC specifically denied having agreed to the assumption of GALLEON's liabilities because no purchase and sale agreement was executed and the delivery of the required shares of stock of GALLEON did not take place. [15] Upon motion by POLIAND, the trial court dropped GALLEON as a defendant, despite vigorous oppositions from NDC and DBP. At the pre-trial conference on April 29, 1993, the trial court issued an Order limiting the issues to the following: (1) whether or not GALLEON has an outstanding obligation in the amount of US$2,315,747.32; (2) whether or not NDC and DBP may be held solidarily liable therefor; and (3) whether or not there exists a preferred maritime lien of P1,000,000.00 in favor of POLIAND. [16] After trial on the merits, the court a quo rendered a decision on August 9, 1996 in favor of POLIAND. Finding that GALLEON's loan advances/credit accommodations were duly established by the evidence on record, the trial court concluded that under LOI No. 1155, DBP and NDC are liable for those obligations. The trial court also found NDC liable for GALLEON's obligations based on the Memorandum of Agreement dated August 1981 executed between GALLEON and NDC, where it was provided that NDC shall prioritize repayments of GALLEON's valid and subsisting liabilities subject of a meritorious lawsuit or which have been arranged and guaranteed by Cuenca. The trial court was of the opinion that despite the subsequent issuance of LOI No. 1195, NDC and DBP's obligation under LOI No. 1155 subsisted because "vested rights of the parties have arisen therefrom." Accordingly, the trial court interpreted LOI No. 1195's directive to "limit and protect" to mean that "DBP and NDC should not assume or incur additional exposure with respect