CASE 1

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 138104

April 11, 2002

MR HOLDINGS, LTD., petitioner,

vs.
SHERIFF CARLOS P. BAJAR, SHERIFF FERDINAND M. JANDUSAY, SOLIDBANK CORPORATION,
AND MARCOPPER MINING CORPORATION, respondents.
SANDOVAL-GUTIERREZ, J.:
In the present Petition for Review on Certiorari, petitioner MR Holdings, Ltd. assails
the a) Decision1 dated January 8, 1999 of the Court of Appeals in CA-G.R. SP No. 49226 finding
no grave abuse of discretion on the part of Judge Leonardo P. Ansaldo of the Regional Trial
Court (RTC), Branch 94, Boac, Marinduque, in denying petitioners application for a writ of
preliminary injunction;2 and b) Resolution3 dated March 29, 1999 denying petitioners motion
for reconsideration.
The facts of the case are as follows:
Under a "Principal Loan Agreement"4 and "Complementary Loan Agreement,"5 both dated
November 4, 1992, Asian Development Bank (ADB), a multilateral development finance
institution, agreed to extend to Marcopper Mining Corporation (Marcopper) a loan in the
aggregate amount of US$40,000,000.00 to finance the latters mining project at Sta. Cruz,
Marinduque. The principal loan of US$ 15,000,000.00 was sourced from ADBs ordinary capital
resources, while the complementary loan of US$ 25,000,000.00 was funded by the Bank of
Nova Scotia, a participating finance institution.
On even date, ADB and Placer Dome, Inc., (Placer Dome), a foreign corporation which owns
40% of Marcopper, executed a "Support and Standby Credit Agreement" whereby the latter
agreed to provide Marcopper with cash flow support for the payment of its obligations to ADB.
To secure the loan, Marcopper executed in favor of ADB a "Deed of Real Estate and Chattel
Mortgage"6 dated November 11, 1992, covering substantially all of its (Marcoppers) properties
and assets in Marinduque. It was registered with the Register of Deeds on November 12, 1992.

When Marcopper defaulted in the payment of its loan obligation, Placer Dome, in fulfillment of
its undertaking under the "Support and Standby Credit Agreement," and presumably to
preserve its international credit standing, agreed to have its subsidiary corporation, petitioner
MR Holding, Ltd., assumed Marcoppers obligation to ADB in the amount of US$ 18,453,450.02.
Consequently, in an "Assignment Agreement"7 dated March 20, 1997, ADB assigned to
petitioner all its rights, interests and obligations under the principal and complementary loan
agreements, ("Deed of Real Estate and Chattel Mortgage," and "Support and Standby Credit
Agreement"). On December 8, 1997, Marcopper likewise executed a "Deed of Assignment"8 in
favor of petitioner. Under its provisions, Marcopper assigns, transfers, cedes and conveys to
petitioner, its assigns and/or successors-in-interest all of its (Marcoppers) properties, mining
equipment and facilities, to wit:
Land and Mining Rights
Building and Other Structures
Other Land Improvements
Machineries & Equipment, and Warehouse Inventory
Mine/Mobile Equipment
Transportation Equipment and Furniture & Fixtures
Meanwhile, it appeared that on May 7, 1997, Solidbank Corporation (Solidbank) obtained a
Partial Judgment9against Marcopper from the RTC, Branch 26, Manila, in Civil Case No. 9680083 entitled "Solidbank Corporation vs. Marcopper Mining Corporation, John E. Loney, Jose E.
Reyes and Teodulo C. Gabor, Jr.," the decretal portion of which reads:
"WHEREFORE, PREMISES CONSIDERED, partial judgment is hereby rendered ordering
defendant Marcopper Mining Corporation, as follows:
1. To pay plaintiff Solidbank the sum of Fifty Two Million Nine Hundred Seventy
Thousand Pesos Seven Hundred Fifty Six and 89/100 only (PHP 52,970,756.89),
plus interest and charges until fully paid;
2. To pay an amount equivalent to Ten Percent (10%) of above-stated amount as
attorneys fees; and
3. To pay the costs of suit.
"SO ORDERED."

Upon Solidbanks motion, the RTC of Manila issued a writ of execution pending appeal directing
Carlos P. Bajar, respondent sheriff, to require Marcopper "to pay the sums of money to satisfy
the Partial Judgment."10Thereafter, respondent Bajar issued two notices of levy on Marcoppers
personal and real properties, and over all its stocks of scrap iron and unserviceable mining
equipment.11 Together with sheriff Ferdinand M. Jandusay (also a respondent) of the RTC,
Branch 94, Boac, Marinduque, respondent Bajar issued two notices setting the public auction
sale of the levied properties on August 27, 1998 at the Marcopper mine site. 12
Having learned of the scheduled auction sale, petitioner served an "Affidavit of Third-Party
Claim"13 upon respondent sheriffs on August 26, 1998, asserting its ownership over all
Marcoppers mining properties, equipment and facilities by virtue of the "Deed of Assignment."
Upon the denial of its "Affidavit of ThirdParty Claim" by the RTC of Manila,14 petitioner
commenced with the RTC of Boac, Marinduque, presided by Judge Leonardo P. Ansaldo, a
complaint for reivindication of properties, etc., with prayer for preliminary injunction and
temporary restraining order against respondents Solidbank, Marcopper, and sheriffs Bajar and
Jandusay.15 The case was docketed as Civil Case No. 98-13.
In an Order16 dated October 6, 1998, Judge Ansaldo denied petitioners application for a writ of
preliminary injunction on the ground that a) petitioner has no legal capacity to sue, it being a
foreign corporation doing business in the Philippines without license; b) an injunction will
amount "to staying the execution of a final judgment by a court of co-equal and concurrent
jurisdiction;" and c) the validity of the "Assignment Agreement" and the "Deed of Assignment"
has been "put into serious question by the timing of their execution and registration."
Unsatisfied, petitioner elevated the matter to the Court of Appeals on a Petition for Certiorari,
Prohibition and Mandamus, docketed therein as CA-G.R. SP No. 49226. On January 8, 1999, the
Court of Appeals rendered a Decision holding that Judge Ansaldo did not commit grave abuse of
discretion in denying petitioners prayer for a writ of preliminary injunction, ratiocinating as
follows:
"Petitioner contends that it has the legal capacity to sue and seek redress from
Philippine courts as it is a non-resident foreign corporation not doing business in the
Philippines and suing on isolated transactions.
xxx

xxx

"We agree with the finding of the respondent court that petitioner is not suing on an
isolated transaction as it claims to be, as it is very obvious from the deed of assignment
and its relationships with Marcopper and Placer Dome, Inc. that its unmistakable
intention is to continue the operations of Marcopper and shield its properties/assets
from the reach of legitimate creditors, even those holding valid and executory court
judgments against it. There is no other way for petitioner to recover its huge financial
investments which it poured into Marcoppers rehabilitation and the local situs where

the Deeds of Assignment were executed, without petitioner continuing to do business in

the country.
xxx

xxx

"While petitioner may just be an assignee to the Deeds of Assignment, it may

still fall within the meaning of "doing business" in light of the Supreme Court
ruling in the case of Far East International Import and Export Corporation vs.
Nankai Kogyo Co., 6 SCRA 725, that:
Where a single act or transaction however is not merely incidental or casual but
indicates the foreign corporations intention to do other business in the Philippines,
said single act or transaction constitutes doing or engaging in or transacting business
in the Philippines.
"Furthermore, the court went further by declaring that even a single act may
constitute doing business if it is intended to be the beginning of a series of
transactions. (Far East International Import and Export Corporation vs. Nankai Kogyo
Co. supra).
"On the issue of whether petitioner is the bona fide owner of all the mining facilities and
equipment of Marcopper, petitioner relies heavily on the Assignment Agreement
allegedly executed on March 20, 1997 wherein all the rights and interest of Asian
Development Bank (ADB) in a purported Loan Agreement were ceded and transferred in
favor of the petitioner as assignee, in addition to a subsequent Deed of Assignment
dated December 28, 1997 conveying absolutely all the properties, mining equipment
and facilities of Marcopper in favor of petitioner.
"The Deeds of Assignment executed in favor of petitioner cannot be binding on the
judgment creditor, private respondent Solidbank, under the general legal principle that
contracts can only bind the parties who had entered into it, and it cannot favor or
prejudice a third person (Quano vs. Court of Appeals, 211 SCRA 40). Moreover, by
express stipulation, the said deeds shall be governed, interpreted and construed in
accordance with laws of New York.1wphi1.nt
"The Deeds of Assignment executed by Marcopper, through its President, Atty.
Teodulo C. Gabor, Jr., were clearly made in bad faith and in fraud of creditors,
particularly private respondent Solidbank. The first Assignment Agreement
purportedly executed on March 20, 1997 was entered into after Solidbank had filed on
September 19, 1996 a case against Marcopper for collection of sum of money before
Branch 26 of the Regional Trial Court docketed as Civil Case No. 96-80083. The second
Deed of Assignment purportedly executed on December 28, 1997 was entered into by
President Gabor after Solidbank had filed its Motion for Partial Summary Judgment,
after the rendition by Branch 26 of the Regional Trial Court of Manila of a Partial

Summary Judgment and after the said trial court had issued a writ of execution, and
which judgment was later affirmed by the Court of Appeals. While the assignments
(which were not registered with the Registry of Property as required by Article 1625 of
the new Civil Code) may be valid between the parties thereof, it produces no effect as
against third parties. The purported execution of the Deeds of Assignment in favor of
petitioner was in violation of Article 1387 of the New Civil Code x x x." (Emphasis
Supplied)
Hence, the present Petition for Review on Certiorari by MR Holdings, Ltd. moored on the
following grounds:
"A. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN
COMPLETELY DISREGARDING AS A MATERIAL FACT OF THE CASE THE EXISTENCE OF
THE PRIOR, REGISTERED 1992 DEED OF REAL ESTATE AND CHATTEL MORTGAGE
CREATING A LIEN OVER THE LEVIED PROPERTIES, SUBJECT OF THE ASSIGNMENT
AGREEMENT DATED MARCH 20, 1997, THUS, MATERIALLY CONTRIBUTING TO THE
SAID COURTS MISPERCEPTION AND MISAPPRECIATION OF THE MERITS OF
PETITIONERS CASE.
B. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN MAKING A
FACTUAL FINDING THAT THE SAID ASSIGNMENT AGREEMENT IS NOT REGISTERED, THE
SAME BEING CONTRARY TO THE FACTS ON RECORD, THUS, MATERIALLY
CONTRIBUTING TO THE SAID COURTS MISPERCEPTION AND MISAPPRECIATION OF
THE MERITS OF PETITIONERS CASE.
C. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN MAKING A
FACTUAL FINDING ON THE EXISTENCE OF AN ATTACHMENT ON THE PROPERTIES
SUBJECT OF INSTANT CASE, THE SAME BEING CONTRARY TO THE FACTS ON RECORD,
THUS, MATERIALLY CONTRIBUTING TO THE SAID COURTS MISPERCEPTION AND
MISAPPRECIATION OF THE MERITS OF PETITIONERS CASE.
D. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN HOLDING
THAT THE SAID ASSIGNMENT AGREEMENT AND THE DEED OF ASSIGNMENT ARE NOT
BINDING ON RESPONDENT SOLIDBANK WHO IS NOT A PARTY THERETO, THE SAME
BEING CONTRARY TO LAW AND ESTABLISHED JURISPRUDENCE ON PRIOR REGISTERED
MORTGAGE LIENS AND ON PREFERENCE OF CREDITS.
E. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN FINDING
THAT THE AFOREMENTIONED ASSIGNMENT AGREEMENT AND DEED OF ASSIGNMENT
ARE SHAM, SIMULATED, OF DUBIOUS CHARACTER, AND WERE MADE IN BAD FAITH
AND IN FRAUD OF CREDITORS, PARTICULARLY RESPONDENT SOLIDBANK, THE SAME
BEING IN COMPLETE DISREGARD OF, VIZ: (1) THE LAW AND ESTABLISHED
JURISPRUDENCE ON PRIOR, REGISTERED MORTGAGE LIENS AND ON PREFERENCE OF
CREDITS, BY REASON OF WHICH THERE EXISTS NO CAUSAL CONNECTION BETWEEN

THE SAID CONTRACTS AND THE PROCEEDINGS IN CIVIL CASE NO. 96-80083; (2) THAT
THE ASIAN DEVELOPMENT BANK WILL NOT OR COULD NOT HAVE AGREED TO A
SHAM; SIMULATED, DUBIOUS AND FRAUDULENT TRANSACTION; AND (3) THAT
RESPONDENT SOLIDBANKS BIGGEST STOCKHOLDER, THE BANK OF NOVA SCOTIA,
WAS A MAJOR BENEFICIARY OF THE ASSIGNMENT AGREEMENT IN QUESTION.
F. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN HOLDING
THAT PETITIONER IS WITHOUT LEGAL CAPACITY TO SUE AND SEEK REDRESS FROM
PHILIPPINE COURTS, IT BEING THE CASE THAT SECTION 133 OF THE CORPORATION
CODE IS WITHOUT APPLICATION TO PETITIONER, AND IT BEING THE CASE THAT THE
SAID COURT MERELY RELIED ON SURMISES AND CONJECTURES IN OPINING THAT
PETITIONER INTENDS TO DO BUSINESS IN THE PHILIPPINES.
G. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN HOLDING
THAT RESPONDENT MARCOPPER, PLACER DOME, INC., AND PETITIONER ARE ONE
AND THE SAME ENTITY, THE SAME BEING WITHOUT FACTUAL OR LEGAL BASIS.
H. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN HOLDING
PETITIONER GUILTY OF FORUM SHOPPING, IT BEING CLEAR THAT NEITHER LITIS
PENDENTIANOR RES JUDICATA MAY BAR THE INSTANT REIVINDICATORY ACTION, AND
IT BEING CLEAR THAT AS THIRD-PARTY CLAIMANT, THE LAW AFFORDS PETITIONER
THE RIGHT TO FILE SUCH REIVINDICATORY ACTION.
I. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN
RENDERING A DECISION WHICH IN EFFECT SERVES AS JUDGMENT ON THE MERITS OF
THE CASE.
J. THE SHERIFFS LEVY AND SALE, THE SHERIFFS CERTIFICATE OF SALE DATED OCTOBER
12, 1998, THE RTC-MANILA ORDER DATED FEBRUARY 12, 1999, AND THE RTC-BOAC
ORDER DATED NOVEMBER 25, 1998 ARE NULL AND VOID.
K. THE HONORABLE COURT OF APPEALS COMMITS A REVERSIBLE ERROR IN
AFFIRMING THE DENIAL BY THE RTC-BOAC OF PETITIONERS APPLICATION FOR
PRELIMINARY INJUNCTION, THE SAME BEING IN TOTAL DISREGARD OF PETITIONERS
RIGHT AS ASSIGNEE OF A PRIOR, REGISTERED MORTGAGE LIEN, AND IN DISREGARD
OF THE LAW AND JURISPRUDENCE ON PREFERENCE OF CREDIT."
In its petition, petitioner alleges that it is not "doing business" in the Philippines and
characterizes its participation in the assignment contracts (whereby Marcoppers assets where
transferred to it) as mere isolated acts that cannot foreclose its right to sue in local courts.
Petitioner likewise maintains that the two assignment contracts, although executed during the
pendency of Civil Case No. 96-80083 in the RTC of Manila, are not fraudulent conveyances as
they were supported by valuable considerations. Moreover, they were executed in connection
with prior transactions that took place as early as 1992 which involved ADB, a reputable

financial institution. Petitioner further claims that when it paid Marcoppers obligation to ADB,
it stepped into the latters shoes and acquired its (ADBS) rights, titles, and interests under the
"Deed of Real Estate and Chattel Mortgage." Lastly, petitioner asserts its existence as a
corporation, separate and distinct from Placer Dome and Marcopper.
In its comment, Solidbank avers that: a) petitioner is "doing business" in the Philippines and this
is evidenced by the "huge investment" it poured into the assignment contracts; b) granting that
petitioner is not doing business in the Philippines, the nature of its transaction reveals an
"intention to do business" or "to begin a series of transaction" in the country; c) petitioner,
Marcopper and Placer Dome are one and the same entity, petitioner being then a whollyowned subsidiary of Placer Dome, which, in turn, owns 40% of Marcopper; d) the timing under
which the assignments contracts were executed shows that petitioners purpose was to defeat
any judgment favorable to it (Solidbank); and e) petitioner violated the rule on forum shopping
since the object of Civil Case No. 98-13 (at RTC, Boac, Marinduque) is similar to the other cases
filed by Marcopper in order to forestall the sale of the levied properties.
Marcopper, in a separate comment, states that it is merely a nominal party to the present case
and that its principal concerns are being ventilated in another case.
The petition is impressed with merit.
Crucial to the outcome of this case is our resolution of the following issues: 1) Does petitioner
have the legal capacity to sue? 2) Was the Deed of Assignment between Marcopper and
petitioner executed in fraud of creditors? 3) Are petitioner MR Holdings, Ltd., Placer Dome, and
Marcopper one and the same entity? and 4) Is petitioner guilty of forum shopping?
We shall resolve the issues in seriatim.
I
The Court of Appeals ruled that petitioner has no legal capacity to sue in the Philippine courts
because it is a foreign corporation doing business here without license. A review of this ruling
does not pose much complexity as the principles governing a foreign corporations right to sue
in local courts have long been settled by our Corporation Law.17 These principles may be
condensed in three statements, to wit: a) if a foreign corporationdoes business in the
Philippines without a license, it cannot sue before the Philippine courts;18 b) if a foreign
corporation is not doing business in the Philippines, it needs no license to sue before Philippine
courts on an isolated transaction19 or on a cause of action entirely independent of any business
transaction;20 and c) if a foreign corporation does business in the Philippines with the required
license, it can sue before Philippine courts on any transaction. Apparently, it is not the absence
of the prescribed license but the "doing (of) business" in the Philippines without such license
which debars the foreign corporation from access to our courts.21

The task at hand requires us to weigh the facts vis--vis the established principles. The question
whether or not a foreign corporation is doing business is dependent principally upon the facts
and circumstances of each particular case, considered in the light of the purposes and language
of the pertinent statute or statutes involved and of the general principles governing the
jurisdictional authority of the state over such corporations.22
Batas Pambansa Blg. 68, otherwise known as "The Corporation Code of the Philippines," is
silent as to what constitutes doing" or "transacting" business in the Philippines. Fortunately,
jurisprudence has supplied the deficiency and has held that the term "implies a continuity of
commercial dealings and arrangements, and contemplates, to that extent, the performance of
acts or works or the exercise of some of the functions normally incident to, and in progressive
prosecution of, the purpose and object for which the corporation was
organized."23In Mentholatum Co. Inc., vs. Mangaliman,24 this Court laid down the test to
determine whether a foreign company is "doing business," thus:
" x x x The true test, however, seems to be whether the foreign corporation is
continuing the body or substance of the business or enterprise for which it was
organized or whether it has substantially retired from it and turned it over to
another. (Traction Cos. vs. Collectors of Int. Revenue[C.C.A., Ohio], 223 F. 984,987.) x x
x."
The traditional case law definition has metamorphosed into a statutory definition, having been
adopted with some qualifications in various pieces of legislation in our jurisdiction. For instance,
Republic Act No. 7042, otherwise known as the "Foreign Investment Act of 1991," defines
"doing business" as follows:
"d) The phrase doing business shall include soliciting orders, service contracts, opening
offices, whether called liaison offices or branches; appointing representatives or
distributors domiciled in the Philippines or who in any calendar year stay in the country
for a period or periods totalling one hundred eight(y) (180) days or more; participating
in the management, supervision or control of any domestic business, firm, entity, or
corporation in the Philippines; and any other act or acts that imply a continuity of
commercial dealings or arrangements, and contemplate to that extent the
performance of acts or works; or the exercise of some of the functions normally
incident to, and in progressive prosecution of, commercial gain or of the purpose and
object of the business organization; Provided, however, That the phrase doing
business shall not be deemed to include mere investment as a shareholder by a foreign
entity in domestic corporations duly registered to do business, and/or the exercise of
rights as such investor, nor having a nominee director or officer to represent its
interests in such corporation, nor appointing a representative or distributor domiciled in
the Philippines which transacts business in its own name and for its own account."
(Emphasis supplied)25
Likewise, Section 1 of Republic Act No. 5455,26 provides that:

"SECTION. 1. Definition and scope of this Act. - (1) x x x the phrase doing business shall
include soliciting orders, purchases, service contracts, opening offices, whether called
liaison offices or branches; appointing representatives or distributors who are
domiciled in the Philippines or who in any calendar year stay in the Philippines for a
period or periods totaling one hundred eighty days or more; participating in the
management, supervision or control of any domestic business firm, entity or
corporation in the Philippines; and any other act or acts that imply a continuity of
commercial dealings or arrangements, and contemplate to that extent the
performance of acts or works, or the exercise of some of the functions normally
incident to, and in progressive prosecution of, commercial gain or of the purpose and
object of the business organization."
There are other statutes27 defining the term "doing business" in the same tenor as those abovequoted, and as may be observed, one common denominator among them all is the concept of
"continuity."
In the case at bar, the Court of Appeals categorized as "doing business" petitioners
participation under the "Assignment Agreement" and the "Deed of Assignment." This is simply
untenable. The expression "doing business" should not be given such a strict and literal
construction as to make it apply to any corporate dealing whatever.28 At this early stage and
with petitioners acts or transactions limited to the assignment contracts, it cannot be said that
it had performed acts intended to continue the business for which it was organized. It may not
be amiss to point out that the purpose or business for which petitioner was organized is not
discernible in the records. No effort was exerted by the Court of Appeals to establish the
nexus between petitioners business and the acts supposed to constitute "doing business."
Thus, whether the assignment contracts were incidental to petitioners business or were
continuation thereof is beyond determination. We cannot apply the case cited by the Court of
Appeals, Far East Intl Import and Export Corp. vs. Nankai Kogyo Co., Ltd.,29 which held that a
single act may still constitute "doing business" if "it is not merely incidental or casual, but is of
such character as distinctly to indicate a purpose on the part of the foreign corporation to do
other business in the state." In said case, there was an express admission from an official of the
foreign corporation that he was sent to the Philippines to look into the operation of mines,
thereby revealing the foreign corporations desire to continue engaging in business here. But in
the case at bar, there is no evidence of similar desire or intent. Unarguably, petitioner may, as
the Court of Appeals suggested, decide to operate Marcoppers mining business, but, of
course, at this stage, that is a mere speculation. Or it may decide to sell the credit secured by
the mining properties to an offshore investor, in which case the acts will still be isolated
transactions. To see through the present facts an intention on the part of petitioner to start a
series of business transaction is to rest on assumptions or probabilities falling short of actual
proof. Courts should never base its judgments on a state of facts so inadequately developed
that it cannot be determined where inference ends and conjecture begins.
Indeed, the Court of Appeals holding that petitioner was determined to be "doing business" in
the Philippines is based mainly on conjectures and speculation. In concluding that the

"unmistakable intention" of petitioner is to continue Marcoppers business, the Court of

Appeals hangs on the wobbly premise that "there is no other way for petitioner to recover its
huge financial investments which it poured into Marcoppers rehabilitation without it
(petitioner) continuing Marcoppers business in the country."30 This is a mere presumption.
Absent overt acts of petitioner from which we may directly infer its intention to continue
Marcoppers business, we cannot give our concurrence. Significantly, a view subscribed upon by
many authorities is that the mere ownership by a foreign corporation of a property in a certain
state, unaccompanied by its active use in furtherance of the business for which it was formed,
is insufficient in itself to constitute doing business.31 In Chittim vs. Belle Fourche Bentonite
Products Co.,32 it was held that even if a foreign corporation purchased and took conveyances
of a mining claim, did some assessment work thereon, and endeavored to sell it, its acts will
not constitute the doing of business so as to subject the corporation to the statutory
requirements for the transacting of business. On the same vein, petitioner, a foreign
corporation, which becomes the assignee of mining properties, facilities and equipment cannot
be automatically considered as doing business, nor presumed to have the intention of engaging
in mining business.
One important point. Long before petitioner assumed Marcoppers debt to ADB and became
their assignee under the two assignment contracts, there already existed a "Support and
Standby Credit Agreement" between ADB and Placer Dome whereby the latter bound itself to
provide cash flow support for Marcoppers payment of its obligations to ADB. Plainly,
petitioners payment of US$ 18,453,450.12 to ADB was more of a fulfillment of an obligation
under the "Support and Standby Credit Agreement" rather than an investment. That petitioner
had to step into the shoes of ADB as Marcoppers creditor was just a necessary legal
consequence of the transactions that transpired. Also, we must hasten to add that the "Support
and Standby Credit Agreement" was executed four (4) years prior to Marcoppers insovency,
hence, the alleged "intention of petitioner to continue Marcoppers business" could have no
basis for at that time, Marcoppers fate cannot yet be determined.
In the final analysis, we are convinced that petitioner was engaged only in isolated acts or
transactions. Single or isolated acts, contracts, or transactions of foreign corporations are not
regarded as a doing or carrying on of business. Typical examples of these are the making of a
single contract, sale, sale with the taking of a note and mortgage in the state to secure payment
therefor, purchase, or note, or the mere commission of a tort.33 In these instances, there is no
purpose to do any other business within the country.
II
Solidbank contends that from the chronology and timing of events, it is evident that there
existed a pre-set pattern of response on the part of Marcopper to defeat whatever court ruling
that may be rendered in favor of Solidbank.
We are not convinced.

While it may appear, at initial glance, that the assignment contracts are in the nature of
fraudulent conveyances, however, a closer look at the events that transpired prior to the
execution of those contracts gives rise to a different conclusion. The obvious flaw in the Court
of Appeals Decision lies in its constricted view of the facts obtaining in the case. In its factual
narration, the Court of Appeals definitely left out some events. We shall see later the
significance of those events.
Article 1387 of the Civil Code of the Philippines provides:
"Art. 1387. All contracts by virtue of which the debtor alienates property by gratuitous
title are presumed to have been entered into in fraud of creditors, when the donor did
not reserve sufficient property to pay all debts contracted before the donation.
Alienations by onerous title are also presumed fraudulent when made by persons
against whom some judgment has been rendered in any instance or some writ of
attachment has been issued. The decision or attachment need not refer to the
property alienated, and need not have been obtained by the party seeking rescission.
In addition to these presumptions, the design to defraud creditors may be proved in any
other manner recognized by law and of evidence.
This article presumes the existence of fraud made by a debtor. Thus, in the absence of
satisfactory evidence to the contrary, an alienation of a property will be held fraudulent if it is
made after a judgment has been rendered against the debtor making the alienation. 34 This
presumption of fraud is not conclusive and may be rebutted by satisfactory and convincing
evidence. All that is necessary is to establish affirmatively that the conveyance is made in
good faith and for a sufficient and valuable consideration. 35
The "Assignment Agreement" and the "Deed of Assignment" were executed for valuable
considerations. Patent from the "Assignment Agreement" is the fact that petitioner assumed
the payment of US$ 18,453,450.12 to ADB in satisfaction of Marcoppers remaining debt as of
March 20, 1997.36 Solidbank cannot deny this fact considering that a substantial portion of the
said payment, in the sum of US$ 13,886,791.06, was remitted in favor of the Bank of Nova
Scotia, its major stockholder.37
The facts of the case so far show that the assignment contracts were executed in good faith.
The execution of the "Assignment Agreement" on March 20, 1997 and the "Deed of
Assignment" on December 8,1997 is not the alphaof this case. While the execution of these
assignment contracts almost coincided with the rendition on May 7, 1997 of the Partial
Judgment in Civil Case No. 96-80083 by the Manila RTC, however, there was no intention on the
part of petitioner to defeat Solidbanks claim. It bears reiterating that as early as November 4,
1992, Placer Dome had already bound itself under a "Support and Standby Credit Agreement"
to provide Marcopper with cash flow support for the payment to ADB of its obligations. When
Marcopper ceased operations on account of disastrous mine tailings spill into the Boac River

and ADB pressed for payment of the loan, Placer Dome agreed to have its subsidiary, herein
petitioner, paid ADB the amount of US $18,453,450.12. Thereupon, ADB and Marcopper
executed, respectively, in favor of petitioner an "Assignment Agreement" and a "Deed of
Assignment." Obviously, the assignment contracts were connected with transactions that
happened long before the rendition in 1997 of the Partial Judgment in Civil Case No. 96-80083
by the Manila RTC. Those contracts cannot be viewed in isolation. If we may add, it is highly
inconceivable that ADB, a reputable international financial organization, will connive with
Marcopper to feign or simulate a contract in 1992 just to defraud Solidbank for its claim four
years thereafter. And it is equally incredible for petitioner to be paying the huge sum of US $
18,453,450.12 to ADB only for the purpose of defrauding Solidbank of the sum
of P52,970,756.89.
It is said that the test as to whether or not a conveyance is fraudulent is -- does it prejudice the
rights of creditors?38 We cannot see how Solidbanks right was prejudiced by the assignment
contracts considering that substantially all of Marcoppers properties were already covered by
the registered "Deed of Real Estate and Chattel Mortgage" executed by Marcopper in favor of
ADB as early as November 11, 1992. As such, Solidbank cannot assert a better right than ADB,
the latter being a preferred creditor. It is basic that mortgaged properties answer primarily for
the mortgaged credit, not for the judgment credit of the mortgagors unsecured creditor.
Considering that petitioner assumed Marcoppers debt to ADB, it follows that Solidbanks right
as judgment creditor over the subject properties must give way to that of the
former.1wphi1.nt
III
The record is lacking in circumstances that would suggest that petitioner corporation, Placer
Dome and Marcopper are one and the same entity. While admittedly, petitioner is a whollyowned subsidiary of Placer Dome, which in turn, which, in turn, was then a minority
stockholder of Marcopper, however, the mere fact that a corporation owns all of the stocks of
another corporation, taken alone is not sufficient to justify their being treated as one entity.
If used to perform legitimate functions, a subsidiarys separate existence shall be respected,
and the liability of the parent corporation as well as the subsidiary will be confined to those
arising in their respective business.39
The recent case of Philippine National Bank vs. Ritratto Group Inc.,40 outlines the circumstances
which are useful in the determination of whether a subsidiary is but a mere instrumentality of
the parent-corporation, to wit:
(a) The parent corporation owns all or most of the capital stock of the subsidiary.
(b) The parent and subsidiary corporations have common directors or officers.
(c) The parent corporation finances the subsidiary.

(d) The parent corporation subscribes to all the capital stock of the subsidiary or
otherwise causes its incorporation.
(e) The subsidiary has grossly inadequate capital.
(f) The parent corporation pays the salaries and other expenses or losses of the
subsidiary.
(g) The subsidiary has substantially no business except with the parent corporation or
no assets except those conveyed to or by the parent corporation.
(h) In the papers of the parent corporation or in the statements of its officers, the
subsidiary is described as a department or division of the parent corporation, or its
business or financial responsibility is referred to as the parent corporations own.
(i) The parent corporation uses the property of the subsidiary as its own.
(j) The directors or executives of the subsidiary do not act independently in the interest
of the subsidiary, but take their orders from the parent corporation.
(k) The formal legal requirements of the subsidiary are not observed.
In this catena of circumstances, what is only extant in the records is the matter of stock
ownership. There are no other factors indicative that petitioner is a mere instrumentality of
Marcopper or Placer Dome. The mere fact that Placer Dome agreed, under the terms of the
"Support and Standby Credit Agreement" to provide Marcopper with cash flow support in
paying its obligations to ADB, does not mean that its personality has merged with that of
Marcopper. This singular undertaking, performed by Placer Dome with its own stockholders in
Canada and elsewhere, is not a sufficient ground to merge its corporate personality with
Marcopper which has its own set of shareholders, dominated mostly by Filipino citizens. The
same view applies to petitioners payment of Marcoppers remaining debt to ADB.
With the foregoing considerations and the absence of fraud in the transaction of the three
foreign corporations, we find it improper to pierce the veil of corporate fiction that equitable
doctrine developed to address situations where the corporate personality of a corporation is
abused or used for wrongful purposes.
IV
On the issue of forum shopping, there could have been a violation of the rules thereon if
petitioner and Marcopper were indeed one and the same entity. But since petitioner has a
separate personality, it has the right to pursue its third-party claim by filing the independent
reivindicatory action with the RTC of Boac, Marinduque, pursuant to Rule 39, Section 16 of the

1997 Rules of Civil Procedures. This remedy has been recognized in a long line of cases decided
by this Court.41 In Rodriguez vs. Court of Appeals,42 we held:
". . . It has long been settled in this jurisdiction that the claim of ownership of a third
party over properties levied for execution of a judgment presents no issue for
determination by the court issuing the writ of execution.
. . .Thus, when a property levied upon by the sheriff pursuant to a writ of execution is
claimed by third person in a sworn statement of ownership thereof, as prescribed by the
rules, an entirely different matter calling for a new adjudication arises. And dealing as
it does with the all important question of title, it is reasonable to require the filing of
proper pleadings and the holding of a trial on the matter in view of the requirements of
due process.
. . . In other words, construing Section 17 of Rule 39 of the Revised Rules of Court (now
Section 16 of the 1997 Rules of Civil Procedure), the rights of third-party claimants over
certain properties levied upon by the sheriff to satisfy the judgment may not be taken
up in the case where such claims are presented but in a separate and independent
action instituted by the claimants." (Emphasis supplied)
This "reivindicatory action" has for its object the recovery of ownership or possession of the
property seized by the sheriff, despite the third party claim, as well as damages resulting
therefrom, and it may be brought against the sheriff and such other parties as may be alleged
to have connived with him in the supposedly wrongful execution proceedings, such as the
judgment creditor himself. Such action is an entirely separate and distinct action from that in
which execution has been issued. Thus, there being no identity of parties and cause of action
between Civil Case No. 98-13 (RTC, Boac) and those cases filed by Marcopper, including Civil
Case No. 96-80083 (RTC, Manila) as to give rise to res judicata or litis pendentia, Solidbanks
allegation of forum-shopping cannot prosper.43
All considered, we find petitioner to be entitled to the issuance of a writ of preliminary
injunction. Section 3, Rule 58 of the 1997 Rules of Civil Procedure provides:
"SEC. 3 Grounds for issuance of preliminary injunction. A preliminary injunction may be
granted when it is established:
(a) That the applicant is entitled to the relief demanded, and the whole or part of such
relief consists in restraining the commission or continuance of the act or acts
complained of, or in requiring the performance of an act or acts, either for a limited
period or perpetually;
(b) That the commission, continuance or non-performance of the acts or acts
complained of during the litigation would probably work injustice to the applicant; or

(c) That a party, court, agency or a person is doing, threatening, or is attempting to do,
or is procuring or suffering to be done, some act or acts probably in violation of the
rights of the applicant respecting the subject of the action or proceeding, and tending to
render the judgment ineffectual."
Petitioners right to stop the further execution of the properties covered by the assignment
contracts is clear under the facts so far established. An execution can be issued only against a
party and not against one who did not have his day in court.44 The duty of the sheriff is to levy
the property of the judgment debtor not that of a third person. For, as the saying goes, one
mans goods shall not be sold for another man's debts.45 To allow the execution of petitioners
properties would surely work injustice to it and render the judgment on the reivindicatory
action, should it be favorable, ineffectual. In Arabay, Inc., vs. Salvador,46 this Court held that an
injunction is a proper remedy to prevent a sheriff from selling the property of one person for
the purpose of paying the debts of another; and that while the general rule is that no court has
authority to interfere by injunction with the judgments or decrees of another court of equal or
concurrent or coordinate jurisdiction, however, it is not so when a third-party claimant is
involved. We quote the instructive words of Justice Querube C. Makalintal in Abiera vs. Court of
Appeals,47 thus:
"The rationale of the decision in the Herald Publishing Company case48 is peculiarly
applicable to the one before Us, and removes it from the general doctrine enunciated in
the decisions cited by the respondents and quoted earlier herein.
1. Under Section 17 of Rule 39 a third person who claims property levied upon on
execution may vindicate such claim by action. Obviously a judgment rendered in his
favor, that is, declaring him to be the owner of the property, would not constitute
interference with the powers or processes of the court which rendered the judgment to
enforce which the execution was levied. If that be so and it is so because the
property, being that of a stranger, is not subject to levy then an interlocutory order
such as injunction, upon a claim and prima facie showing of ownership by the
claimant, cannot be considered as such interference either."
WHEREFORE, the petition is GRANTED. The assailed Decision dated January 8, 1999 and the
Resolution dated March 29, 1999 of the Court of Appeals in CA G.R. No. 49226 are set aside.
Upon filing of a bond ofP1,000,000.00, respondent sheriffs are restrained from further
implementing the writ of execution issued in Civil Case No. 96-80083 by the RTC, Branch 26,
Manila, until further orders from this Court. The RTC, Branch 94, Boac, Marinduque, is directed
to dispose of Civil Case No. 98-13 with dispatch.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 167434 February 19, 2007
SPOUSES RAMON M. NISCE and A. NATIVIDAD PARAS-NISCE, Petitioners,
vs.
EQUITABLE PCI BANK, INC., Respondent.

DECISION
CALLEJO, SR., J.:
On November 26, 2002, Equitable PCI Bank1 (Bank) as creditor-mortgagee filed a petition for
extrajudicial foreclosure before the Office of the Clerk of Court as Ex-Officio Sheriff of the
Regional Trial Court (RTC) of Makati City. It sought to foreclose the following real estate
mortgage contracts executed by the spouses Ramon and Natividad Nisce over two parcels of
land covered by Transfer Certificate of Title (TCT) Nos. S-83466 and S-83467 of the Registry of
Deeds of Rizal: one dated February 26, 1974; two (2) sets of "Additional Real Estate Mortgage"
dated September 27, 1978 and June 3, 1996; and an "Amendment to Real Estate Mortgage"
dated February 28, 2000. The mortgage contracts were executed by the spouses Nisce to
secure their obligation under Promissory Note Nos. 1042793 and BD-150369, including a
Suretyship Agreement executed by Natividad. The obligation of the Nisce spouses
totaled P34,087,725.76 broken down as follows:
Spouses Ramon & Natividad Nisce - - - - - P17,422,285.99
Natividad P. Nisce (surety) - - - - - - - - - - US$57,306.59
and - - - - - - - - - - - - P16,665,439.772
On December 2, 2002, the Ex-Officio Sheriff set the sale at public auction at 10:00 a.m. on
January 14, 2003,3 or on January 30, 2003 in the event the public auction would not take place
on the earlier setting.
On January 28, 2003, the Nisce spouses filed before the RTC of Makati City a complaint for
"nullity of the Suretyship Agreement, damages and legal compensation" with prayer for
injunctive relief against the Bank and the Ex-Officio Sheriff. They alleged the following: in a
letter4 dated December 7, 2000 they had requested the bank (through their lawyer-son Atty.

Rosanno P. Nisce) to setoff the peso equivalent of their obligation against their US dollar
account with PCI Capital Asia Limited (Hong Kong), a subsidiary of the Bank, under Certificate
Deposit No. 016125 and Account No. 090-0104 (Passbook No. 83-3041);6 the Bank accepted
their offer and requested for an estimate of the balance of their account; they complied with
the Banks request and in a letter dated February 11, 2002, informed it that the estimated
balance of their account as of December 1991 (including the 11.875% per annum interest) was
US$51,000.42,7 and that as of December 2002, Natividads US dollar deposit with it amounted
to at least P9,000,000.00; they were surprised when they received a letter from the Bank
demanding payment of their loan account, and later a petition for extrajudicial foreclosure.
The spouses Nisce also pointed out that the petition for foreclosure filed by the Bank included
the alleged obligation of Natividad as surety for the loan of Vista Norte Trading Corporation, a
company owned and managed by their son Dino Giovanni P. Nisce (P16,665,439.77 and
US$57,306.59). They insisted, however, that the suretyship agreement was null and void for the
following reasons:
(a) x x x [I]t was executed without the knowledge and consent of plaintiff Ramon M.
Nisce, who is by law the administrator of the conjugal partnership;
(b) The suretyship agreement did not redound to the benefit of the conjugal partnership
and therefore did not bind the same;
(c) Assuming, arguendo, that the suretyship contract was valid and binding, any
obligation arising therefrom is not covered by plaintiffs real estate mortgages which
were constituted to secure the payment of certain specific obligations only. 8
The spouses Nisce likewise alleged that since they and the Bank were creditors and debtors
with respect to each other, their obligations should have been offset by legal compensation to
the extent of their account with the Bank.
To support their plea for a writ of preliminary and prohibitory injunction, the spouses Nisce
alleged that the amount for which their property was being sold at public auction
(P34,087,725.76) was grossly excessive; the US dollar deposit of Natividad with PCI Capital Asia
Ltd. (Hong Kong), and the obligation covered by the suretyship agreement had not been
deducted. They insisted that their property rights would be violated if the sale at public auction
would push through. Thus, the spouses Nisce prayed that they be granted the following reliefs:
(1) that upon the filing of this Complaint and/or after due notice and summary hearing,
the Honorable Court immediately issue a temporary restraining order (TRO) restraining
defendants, their representatives and/or deputies, and other persons acting for and on
their behalf from proceeding with the extrajudicial foreclosure sale of plaintiffs
mortgaged properties on 30 January 2003 or on any other dates subsequent thereto;

(2) that after due notice and hearing and posting of the appropriate bond, the
Honorable Court convert the TRO to a writ of preliminary prohibitory injunction;
(3) that after trial on the merits, the Honorable Court render judgment
(a) making the preliminary injunction final and permanent;
(b) ordering defendant Bank to set off the present peso value of Mrs. Nisces US
dollar time deposit, inclusive of stipulated interest, against plaintiffs loan
obligations with defendant Bank;
(c) declaring the Deed of Suretyship dated 25 May 1998 null and valid and
without any binding effect as to plaintiff spouses, and ordering defendant Bank
to exclude the amounts covered by said suretyship contract from plaintiffs
obligations with defendant Bank;
(d) ordering defendant Bank to pay plaintiffs the following sums:
(i) at least P3,000,000.00 as moral damages;
(ii) at least P1,500,000.00 as exemplary damages; and
(iii) at least P500,000.00 as attorneys fees and for other expenses of
litigation.
Plaintiffs further pray for costs of suit and such other reliefs as may be deemed just and
equitable.9
On same day, the Bank filed an "Amended Petition" with the Office of the Executive Judge for
extrajudicial foreclosure of the Real Estate Mortgage to satisfy the spouses loan account
of P30,533,552.24, exclusive of interests, penalties and other charges; and the amounts
of P16,665,439.77 and US$57,306.59 covered by the suretyship agreement executed by
Natividad Nisce.10
In the meantime, the parties agreed to have the sale at public auction reset to January 30,
2003.
In its Answer to the complaint, the Bank alleged that the spouses had no cause of action for
legal compensation since PCI Capital was a different corporation with a separate and distinct
personality; if at all, offsetting may occur only with respect to the spouses US$500.00 deposit
account in its Paseo de Roxas branch.
In the meantime, the Ex-Officio Sheriff set the sale at public auction at 10:00 a.m. on March 5
and 27, 2003.11The spouses Nisce then filed a Supplemental Complaint with plea for a

temporary restraining order to enjoin the sale at public auction.12 Thereafter, the RTC
conducted hearings on the plaintiffs plea for a temporary restraining order, and the parties
adduced testimonial and documentary evidence on their respective arguments.
The Case for the Spouses Nisce
Natividad frequently traveled abroad and needed a facility with easy access to foreign
exchange. She inquired from E.P. Nery, the Bank Manager for PCI Bank Paseo de Roxas Branch,
about opening an account. He assured her that she would be able to access it from anywhere in
the world. She and Nery also agreed that any balance of account remaining at maturity date
would be rolled over until further instructions, or until she terminated the facility. 13 Convinced,
Natividad deposited US$20,500.00 on July 19, 1984, and was issued Passbook No. 833041.14 Upon her request, the bank transferred the US$20,000.00 to PCI Capital Asia Ltd. in
Hong Kong via cable order.15
On July 11, 1996, the spouses Nisce secured a P20,000,000.00 loan from the Bank under
Promissory Note No. BD-150369.16 The maturity date of the loan was July 11, 2001, payable in
monthly installments at 16.731% interest per annum. To secure the payment of the loan
account, they executed an Amendment to the Real Estate Mortgage over the
properties17 located in Makati City covered by TCT Nos. S-83466 and S-83467.18 They later
secured another loan of P13,089,936.90 on March 1, 2000 (to mature on March 1, 2005)
payable quarterly at 13.9869% interest per annum; this loan agreement is evidenced by
Promissory Note (PN) No. 104279319 and covered by a Real Estate Mortgage20 executed on
February 28, 2000. They made a partial payment ofP13,866,666.50 on the principal of their loan
account covered by PN No. BD-150369, and P5,348,239.82 on the interests.21 These payments
are evidenced by receipts and checks.22 However, there were payments totalingP4,600,000.00
received by the Bank but were not covered by checks or receipts.23 As of September 2000, the
balance of their loan account under PN No. BD-150369 was only P4,333,333.46.24 They also
made partial payment on their loan account under PN No. 1042793 which, as of May 30, 2001,
amounted to P2,218,793.61.25
On July 20, 1984, PCI Capital issued Certificate of Deposit No. CD-01612;26 proof of receipt of
the US$20,000.00 transferred to it by PCI Bank Paseo de Roxas Branch as requested by
Natividad. The deposit account was to earn interest at the rate of 11.875% per annum, and
would mature on October 22, 1984, thereafter to be payable at the office of the depositary in
Hong Kong upon presentation of the Certificate of Deposit.
In June 1991, two sons of the Nisce spouses were stranded in Hong Kong. Natividad called the
Bank and requested for a partial release of her dollar deposit to her sons. However, she was
informed that according to its computer records, no such dollar account existed. Sometime in
November 1991, she submitted her US dollar passbook with a xerox copy of the Certificate of
Deposit for the PCIB to determine the whereabouts of the account.27 She reiterated her request
to the Bank on January 27, 199228 and September 11, 2000.29

In the meantime, in 1994, the Equitable Banking Corporation and the PCIB were merged under
the corporate name Equitable PCI Bank.
In a letter dated December 7, 2000, Natividad confirmed to the Bank, through Ms. Shellane R.
Casaysayan, her offer to settle their loan account by offsetting the peso equivalent of her dollar
account with PCI Capital under Account No. 090-0104.30 Their son, Atty. Rosanno Nisce, later
wrote the Bank, declaring that the estimated balance of the US dollar account with PCI Capital
as of December 1991 was US$51,000.42.31 Atty. Nisce corroborated this in his testimony, and
stated that Ms. Casaysayan had declared that she would refer the matter to her superiors.32 A
certain Rene Esteven also told him that another offer to setoff his parents account had been
accepted, and he was assured that its implementation was being processed.33 On cross
examination, Atty. Nisce declared that there was no response to his request for setoff,34 and
that Esteven assured him that the Bank would look for the records of his mothers US dollar
savings deposit.35 He was later told that the Bank had accepted the offer to setoff the
account.36
The Case for the Bank
The Bank adduced evidence that, as of January 31, 2003, the balance of the spouses account
under the two promissory notes, including interest and penalties, was P30,533,552.24.37 It had
agreed to restructure their loans on March 31, 1998, but they nevertheless failed to pay despite
repeated demands.38 The spouses had also been furnished with a statement of their account as
of June 2001. Thus, under the terms of the Real Estate Mortgage and Promissory Notes, it had
the right to the remedy of foreclosure. It insisted that there is no showing in its records that the
spouses had delivered checks amounting to P4,600,000.00.39
According to the Bank, Natividads US$20,000.00 deposit with the PCIB Paseo de Roxas branch
was transferred to PCI Capital via cable order,40 and that it later issued Certificate of Deposit
No. 01612 (Non-transferrable).41 In a letter dated May 9, 2001, it informed Natividad that it had
acted merely as a conduit in facilitating the transfer of the funds, and that her deposit was
made with PCI Capital and not with PCIB. PCI Capital had a separate and distinct personality
from the PCIB, and a claim against the former cannot be made against the latter. It was later
advised that PCI Capital had already ceased operations.42
The spouses Nisce presented rebuttal documentary evidence to show that PCI Capital was
registered in Hong Kong as a corporation under Registration No. 84555 on February 27,
198943 with an authorized capital stock of 50,000,000 (with par value of HKD1.00); the PCIB
subscribed to 29,039,993 issued shares at the par value of HKD1.00 per share; 44 on October 25,
2004, the corporate name of PCI Capital was changed to PCI Express Padala (HK) Ltd.; 45 and the
stockholdings of PCIB remained at 29,039,999 shares.46
On March 24, 2003, the RTC issued an Order47 granting the spouses Nisces plea for a writ of
preliminary injunction on a bond of P10,000,000.00. The dispositive portion of the Order reads:

WHEREFORE, in order not to render the judgment ineffectual, upon filing by the plaintiffs and
the approval thereof by the court of a bond in the amount of Php10,000,000.00, which shall
answer for any damage should the court finally decide that plaintiffs are not entitled thereto,
let a writ of preliminary injunction issue enjoining defendants Equitable-PCI Bank, Atty.
Engracio M. Escasinas, Jr., and any person or entity acting for and in their behalf from
proceeding with the extrajudicial foreclosure sale of TCT Nos. 437678 and 437679 registered in
the names of the plaintiffs.48
After weighing the parties arguments along with their documentary evidence, the RTC declared
that justice would be best served if a writ of preliminary injunction would be issued to preserve
the status quo. It had yet to resolve the issue of setoff since only Natividad dealt with the Bank
regarding her dollar account. It also had to resolve the issue of whether the Bank had failed to
credit the amount of P4,600,000.00 to the spouses Nisces account under PN No. BD-150369,
and their claim that the Bank had effectively accelerated the respective maturity dates of their
loan.49 The spouses Nisce posted the requisite bond which was approved by the
RTC.1awphi1.net
The Bank opted not to file a motion for reconsideration of the order, and instead assailed the
trial courts order before the CA via petition for certiorari under Rule 65 of the Rules of Court.
The Bank alleged that the RTC had acted without or in excess of its jurisdiction, or with grave
abuse of its discretion amounting to lack or excess of jurisdiction when it issued the assailed
order;50 the spouses Nisce had failed to prove the requisites for the issuance of a writ of
preliminary injunction; respondents claim that their account with petitioner had been
extinguished by legal compensation has no factual and legal basis. It further asserted that
according to the evidence, Natividad made the US$20,000.00 deposit with PCI Capital before it
merged with Equitable Bank hence, the Bank was not the debtor of Natividad relative to the
dollar account. The Bank cited the ruling of this Court in Escao v. Heirs of Escao and
Navarro51 to support its arguments. It insisted that the spouses Nisce had failed to establish
"irreparable injury" in case of denial of their plea for injunctive relief.
The spouses, for their part, pointed out that the Bank failed to file a motion for reconsideration
of the trial courts order, a condition sine qua non to the filing of a petition for certiorari under
Rule 65 of the Rules of Court. Moreover, the error committed by the trial court is a mere error
of judgment not correctible by certiorari; hence, the petition should have been dismissed
outright by the CA. They reiterated their claim that they had made a partial payment
of P4,600,000.00 on their loan account which petitioner failed to credit in their favor. The Bank
had agreed to debit their US dollar savings deposit in the PCI Capital as payment of their loan
account. They insisted that they had never deposited their US dollar account with PCI Capital
but with the Bank, and that they had never defaulted on their loan account. Contrary to the
Banks claim, they would have suffered irreparable injury had the trial court not enjoined the
extrajudicial foreclosure of the real estate mortgage.
On December 22, 2004, the CA rendered judgment granting the petition and nullifying the
assailed Order of the RTC.52 The appellate court declared that a petition for certiorari under

Rule 65 of the Rules of Court may be filed despite the failure to file a motion for
reconsideration, particularly in instances where the issue raised is one of law; where the error is
patent; the assailed order is void, or the questions raised are the same as those already ruled
upon by the lower court. According to the appellate court, the issue raised before it was purely
one of law: whether the loan account of the spouses was extinguished by legal compensation.
Thus, a motion for the reconsideration of the assailed order was not a prerequisite to a petition
for certiorari under Rule 65.
The appellate court further declared that the trial court committed grave abuse of its discretion
in issuing the assailed order, since no plausible reason was given by the spouses Nisce to justify
the injunction of the extrajudicial foreclosure of the real estate mortgage. Given their admission
that they had not settled the obligations secured by the mortgage, the Bank had a clear right to
seek the remedy of foreclosure.
The CA further declared as devoid of factual basis the spouses Nisces argument that the Bank
should have applied, by way of legal compensation, the peso equivalent of their time deposit
with PCI Capital as partial settlement of their obligations. It held that for compensation to take
place, the requirements set forth in Articles 1278 and 1279 of the Civil Code of the Philippines
must be present; in this case, the parties are not mutually creditors and debtors of each other.
It pointed out that the time deposit which the spouses Nisce sought to offset against their
obligations to the Bank is maintained with PCI Capital. Even if PCI Capital is a subsidiary of the
Bank, compensation cannot validly take place because the Bank and PCI Capital are two
separate and distinct corporations. It pointed out the settled principle "that a corporation has a
personality separate and distinct from its stockholders and from other corporations to which it
may be connected."
The CA further declared that the alleged P4,600,000.00 payment on PN No. BD-150369 was not
pleaded in the spouses complaint and supplemental complaint before the court a quo. What
they alleged, aside from legal compensation, was that the mortgage is not liable for the
obligation of Natividad Nisce as surety for the loans obtained by a trading firm owned and
managed by their son. The CA further pointed out that the Bank precisely amended the petition
for foreclosure sale by deleting the claim for Natividads obligation as surety. The appellate
court concluded that the injunctive writ was issued by the RTC without factual and legal basis. 53
The spouses Nisce moved to have the decision reconsidered, but the appellate court denied the
motion. They thus filed the instant petition for review on the following grounds:
5.1. THE HONORABLE COURT OF APPEALS ERRED IN TAKING COGNIZANCE OF THE
PETITION FOR CERTIORARI DESPITE THE BANKS FAILURE TO FILE A MOTION FOR
RECONSIDERATION WITH THE TRIAL COURT.
5.2. THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT
PREMATURELY RULED ON THE MERITS OF THE MAIN CASE.

5.3. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT RESPONDENT

JUDGE HAD COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION IN ISSUING A TEMPORARY RESTRAINING ORDER AND A WRIT
OF PRELIMINARY INJUNCTION IN FAVOR OF THE SPOUSES NISCE.54
Petitioners aver that the CA erred in not dismissing respondent Banks petition for certiorari
outright because of the absence of a condition precedent: the filing of a motion for
reconsideration of the assailed Order of the RTC before filing the petition for certiorari in the
CA. They insist that respondent banks failure to file a motion for reconsideration of the assailed
Order deprived the RTC of its option to resolve the issue of whether it erred in issuing the writ
of preliminary injunction in their favor.
Petitioners insist that in resolving whether a petition for a writ of preliminary injunction should
be granted, the trial court and the appellate court are not to resolve the merits of the main
case. In this case, however, the CA resolved the bone of contention of the parties in the trial
court: whether the loan account of petitioners with respondent bank had been extinguished by
legal compensation against petitioner Natividad Nisces US dollar savings account with PCI
Capital in Hong Kong. The CA reversed the assailed order of the trial court by resolving the main
issue in the trial court on its merits, and declaring that the US dollar savings deposit of the
petitioner Natividad Nisce with the PCI Capital cannot be used to offset the loan account of
petitioners with respondent bank. In fine, according to petitioners, the CA preempted the ruling
of the RTC on the main issue even before the parties could be given an opportunity to complete
the presentation of their respective evidences. Petitioners point out that in the assailed Order,
the RTC declared that to determine whether respondent had credited petitioners for the
amount of P4,600,000.00 under PN No. BD-150369 and whether respondent as mortgageecreditor accelerated the maturities of the two (2) promissory notes executed by petitioner,
there was a need for a full-blown trial and an exhaustive consideration of the evidence of the
parties.
Petitioners further insist that a petition for a writ of certiorari is designed solely to correct
errors of jurisdiction and not errors of judgment, such as errors in the findings and conclusions
of the trial court. Petitioners maintain that the trial courts erroneous findings and conclusions
(according to respondent bank) are not the proper subjects for a petition for certiorari.
Contrary to the findings of the CA, they did not admit in the trial court that they were in default
in the payment of their loan obligations. They had always maintained that they had no
outstanding obligation to respondent bank precisely because their loan account had been
offset by the US dollar deposit of petitioner Natividad Nisce, and that they had made check
payments of P4,600,000.00 which respondent bank had not credited in their favor. Likewise
erroneous is the CA ruling that they would not suffer irreparable damage or injury if their
properties would be sold at public auction following the extrajudicial foreclosure of the
mortgage. Petitioners point out that their conjugal home stands on the subject properties and
would be lost if sold at public auction. Besides, petitioners aver, the injury to respondent bank
resulting from the issuance of a writ of preliminary injunction is amply secured by
the P10,000,000.00 injunction bond which they had posted.

For its part, respondent avers that, as held by the CA, the requirement of the filing of a motion
for reconsideration of the assailed Order admits of exceptions, such as where the issue
presented in the appellate court is the same issue presented and resolved by the trial court. It
insists that petitioners failed to prove a clear legal right to injunctive relief; hence, the trial
court committed grave abuse of discretion in issuing a writ of preliminary injunction.
Respondent maintains that the sole issue involved in the petition for certiorari of respondent in
the CA was whether or not the trial court committed grave abuse of its discretion in issuing the
writ of preliminary injunction. Necessarily, the CA would have to delve into the circumstances
behind such issuance. In so doing, the CA had to consider and calibrate the testimonial and
documentary evidence adduced by the parties. However, the RTC and the CA did not resolve
with finality the threshold factual and legal issue of whether the loan account of petitioners had
been paid in full before it filed its petition for extrajudicial foreclosure of the real estate
mortgage.
The Ruling of the Court
The Petition in the
Court of Appeals
Not Premature
The general rule is that before filing a petition for certiorari under Rule 65 of the Rules of Court,
the petitioner is mandated to comply with a condition precedent: the filing of a motion for
reconsideration of the assailed order, and the subsequent denial of the court a quo. It must be
stressed that a petition for certiorari is an extraordinary remedy and should be filed only as a
last resort. The filing of a motion for reconsideration is intended to afford the public
respondent an opportunity to correct any actual error attributed to it by way of re-examination
of the legal and factual issues.55 However, the rule is subject to the following recognized
exceptions:
(a) where the order is a patent nullity, as where the court a quo has no jurisdiction; (b) where
the questions raised in the certiorari proceeding have been duly raised and passed upon by the
lower court, or are the same as those raised and passed upon in the lower court; (c) where
there is an urgent necessity for the resolution of the question and any further delay would
prejudice the interests of the Government or of the petitioner or the subject matter of the
action is perishable; (d) where, under the circumstances, a motion for reconsideration would be
useless; (e) where petitioner was deprived of due process and there is extreme urgency for
relief; (f) where, in a criminal case, relief from an order of arrest is urgent and the granting of
such relief by the trial court is improbable; (g) where the proceedings in the lower court are a
nullity for lack of due process; (h) where the proceedings was ex parte or in which the
petitioner had no opportunity to object; and (i) where the issue raised is one purely of law or
public interest is involved.56

As will be shown later, the March 24, 2003 Order of the trial court granting petitioners plea for
a writ of preliminary injunction was issued with grave abuse of discretion amounting to excess
or lack of jurisdiction and thus a nullity. If the trial court issues a writ of preliminary injunction
despite the absence of proof of a legal right and the injury sustained by the plaintiff, the writ is
a nullity.57
Petitioners Are Not
Entitled to a Writ of
Preliminary Prohibitory
Injunction
Section 3, Rule 58 of the Rules of Court provides that a preliminary injunction may be granted
when the following have been established:
(a) That the applicant is entitled to the relief demanded, and the whole or part of such
relief consists in restraining the commission or continuance of the act or acts
complained of, or in requiring the performance of an act or acts, either for a limited
period or perpetually;
(b) That the commission, continuance or nonperformance of the act or acts complained
of during the litigation would probably work injustice to the applicant; or
(c) That a party, court, agency or a person is doing, threatening, or is attempting to do,
or is procuring or suffering to be done, some act or acts probably in violation of the
rights of the applicant respecting the subject of the action or proceeding, and tendering
to render the judgment ineffectual.
The grant of a preliminary injunction in a case rests on the sound discretion of the court with
the caveat that it should be made with great caution. The exercise of sound judicial discretion
by the lower court should not be interfered with except in cases of manifest abuse. Injunction is
a preservative remedy for the protection of the parties substantive rights and interests. The
sole aim of a preliminary injunction is to preserve the status quo within the last actual status
that preceded the pending controversy until the merits of the case can be heard fully.
Moreover, a petition for a preliminary injunction is an equitable remedy, and one who comes to
claim for equity must do so with clean hands. It is to be resorted to by a litigant to prevent or
preserve a right or interest where there is a pressing necessity to avoid injurious consequences
which cannot be remedied under any standard of compensation. A petition for a writ of
preliminary injunction rests upon an alleged existence of an emergency or of a special reason
for such a writ before the case can be regularly tried. By issuing a writ of preliminary injunction,
the court can thereby prevent a threatened or continued irreparable injury to the plaintiff
before a judgment can be rendered on the claim.58
The plaintiff praying for a writ of preliminary injunction must further establish that he or she
has a present and unmistakable right to be protected; that the facts against which injunction is

directed violate such right;59 and there is a special and paramount necessity for the writ to
prevent serious damages. In the absence of proof of a legal right and the injury sustained by the
plaintiff, an order for the issuance of a writ of preliminary injunction will be nullified. Thus,
where the plaintiffs right is doubtful or disputed, a preliminary injunction is not proper. The
possibility of irreparable damage without proof of an actual existing right is not a ground for a
preliminary injunction.60
However, to establish the essential requisites for a preliminary injunction, the evidence to be
submitted by the plaintiff need not be conclusive and complete.61 The plaintiffs are only
required to show that they have an ostensible right to the final relief prayed for in their
complaint.62 A writ of preliminary injunction is generally based solely on initial or incomplete
evidence.63 Such evidence need only be a sampling intended merely to give the court an
evidence of justification for a preliminary injunction pending the decision on the merits of the
case, and is not conclusive of the principal action which has yet to be decided. 64
It bears stressing that findings of the trial court granting or denying a petition for a writ of
preliminary injunction based on the evidence on record are merely provisional until after the
trial on the merits of the case shall have been concluded.65
The trial court, in granting or dismissing an application for a writ of preliminary injunction based
on the pleadings of the parties and their respective evidence must state in its order the findings
and conclusions based on the evidence and the law. This is to enable the appellate court to
determine whether the trial court committed grave abuse of its discretion amounting to excess
or lack of jurisdiction in resolving, one way or the other, the plea for injunctive relief. The trial
courts exercise of its judicial discretion whether to grant or deny an application for a writ of
preliminary injunction involves the assessment and evaluation of the evidence, and its findings
of facts are ordinarily binding and conclusive on the appellate court and this Court. 66
We agree with respondents contention that as creditor-mortgagee, it has the right under the
real estate mortgage contract and the amendment thereto to foreclose extrajudicially, the real
estate mortgage and sell the property at public auction, considering that petitioners had failed
to pay their loans, plus interests and other incremental amounts as provided for in the deeds.
Petitioners contend, however, that if respondent bank extrajudicially forecloses the real estate
mortgage and has petitioners property sold at public auction for an amount in excess of the
balance of their loan account, petitioners contractual and substantive rights under the real
estate mortgage would be violated; in such a case, the extrajudicial foreclosure sale may be
enjoined by a writ of preliminary injunction.
Respondent bank sought the extrajudicial foreclosure of the real estate mortgage and was to
sell the property at public auction for P30,533,552.24. The amount is based on Promissory
Notes No. 1042793 and BD-150369, interests, penalty charges, and attorneys fees, as of
January 31, 2003, exclusive of all interests, penalties, other charges, and foreclosure costs
accruing thereafter.67 Petitioners asserted before the trial court that respondents sought the
extrajudicial foreclosure of the mortgaged deed for an amount far in excess of what they owed,

because the latter failed to credit P4,600,000.00 paid in checks but without any receipts having
been issued therefor; and the P9,000,000.00 peso equivalent of the US$20,000.00 deposit of
petitioner Natividad Nisce with PCIB under Passbook No. 83-3041 and Certificate of Deposit No.
CD-01612 issued by PCI Capital on July 23, 1984. Petitioners maintain that the US$20,000.00
dollar deposit should be setoff against their account with respondent against their loan
account, on their claim that respondent is their debtor insofar as said deposit is concerned.
It was the burden of petitioners, as plaintiffs below, to adduce preponderant evidence to prove
their claim that respondent bank was the debtor of petitioner Natividad Nisce relative to her
dollar deposit with PCIB, and later transferred to PCI Capital in Hong Kong, a subsidiary of
respondent Bank. Petitioners, however, failed to discharge their burden.
Under Article 1278 of the New Civil Code, compensation shall take place when two persons, in
their own right, are creditors and debtors of each other. In order that compensation may be
proper, petitioners were burdened to establish the following:
(1) That each one of the obligors be bound principally, and that he be at the same time a
principal creditor of the other;
(2) That both debts consist in a sum of money, or if the things due are consumable, they
be of the same kind, and also of the same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy, commenced by
third persons and communicated in due time to the debtor.68
Compensation takes effect by operation of law when all the requisites mentioned in Article
1279 of the New Civil Code are present and extinguishes both debts to the concurrent amount
even though the creditors and debtors are not aware of the compensation. Legal compensation
operates even against the will of the interested parties and even without their consent.69 Such
compensation takes place ipso jure; its effects arise on the very day on which all requisites
concur.70
As its minimum, compensation presupposes two persons who, in their own right and as
principals, are mutually indebted to each other respecting equally demandable and liquidated
obligations over any of which no retention or controversy commenced and communicated in
due time to the debtor exists. Compensation, be it legal or conventional, requires confluence in
the parties of the characters of mutual debtors and creditors, although their rights as such
creditors or their obligations as such debtors need not spring from one and the same contract
or transaction.71

Article 1980 of the New Civil Code provides that fixed, savings and current deposits of money in
banks and similar institutions shall be governed by the provisions concerning simple loans.
Under Article 1953, of the same Code, a person who secures a loan of money or any other
fungible thing acquires the ownership thereof, and is bound to pay the creditor an equal
amount of the same kind and quality. The relationship of the depositors and the Bank or similar
institution is that of creditor-debtor. Such deposit may be setoff against the obligation of the
depositor with the bank or similar institution.
When petitioner Natividad Nisce deposited her US$20,500.00 with the PCIB on July 19, 1984,
PCIB became the debtor of petitioner. However, when upon petitioners request, the amount of
US$20,000.00 was transferred to PCI Capital (which forthwith issued Certificate of Deposit No.
01612), PCI Capital, in turn, became the debtor of Natividad Nisce. Indeed, a certificate of
deposit is a written acknowledgment by a bank or borrower of the receipt of a sum of money or
deposit which the Bank or borrower promises to pay to the depositor, to the order of the
depositor; or to some other person; or to his order whereby the relation of debtor and creditor
between the bank and the depositor is created.72 The issuance of a certificate of deposit in
exchange for currency creates a debtor-creditor relationship.73
Admittedly, PCI Capital is a subsidiary of respondent Bank. Even then, PCI Capital [PCI Express
Padala (HK) Ltd.] has an independent and separate juridical personality from that of the
respondent Bank, its parent company; hence, any claim against the subsidiary is not a claim
against the parent company and vice versa.74 The evidence on record shows that PCIB, which
had been merged with Equitable Bank, owns almost all of the stocks of PCI Capital. However,
the fact that a corporation owns all of the stocks of another corporation, taken alone, is not
sufficient to justify their being treated as one entity. If used to perform legitimate functions, a
subsidiarys separate existence shall be respected, and the liability of the parent corporation, as
well as the subsidiary shall be confined to those arising in their respective business. 75 A
corporation has a separate personality distinct from its stockholders and from other
corporations to which it may be conducted. This separate and distinct personality of a
corporation is a fiction created by law for convenience and to prevent injustice.
This Court, in Martinez v. Court of Appeals76 held that, being a mere fiction of law, peculiar
situations or valid grounds can exist to warrant, albeit sparingly, the disregard of its
independent being and the piercing of the corporate veil. The veil of separate corporate
personality may be lifted when, inter alia, the corporation is merely an adjunct, a business
conduit or an alter ego of another corporation or where the corporation is so organized and
controlled and its affairs are so conducted as to make it merely an instrumentality, agency,
conduit or adjunct of another corporation; or when the corporation is used as a cloak or cover
for fraud or illegality; or to work injustice; or where necessary to achieve equity or for the
protection of the creditors. In those cases where valid grounds exist for piercing the veil of
corporate entity, the corporation will be considered as a mere association of persons. The
liability will directly attach to them.77

The Court likewise declared in the same case that the test in determining the application of the
instrumentality or alter ego doctrine is as follows:
1. Control, not mere majority or complete stock control, but complete dominion, not
only of finances but of policy and business practice in respect to the transaction
attacked so that the corporate entity as to this transaction had at the time no separate
mind, will or existence of its own;
2. Such control must have been used by the defendant to commit fraud or wrong, to
perpetuate the violation of a statutory or other positive legal duty, or dishonest and
unjust act in contravention of plaintiffs legal rights; and
3. The aforesaid control and breach of duty must proximately cause the injury or unjust
loss complaint of.
The Court emphasized that the absence of any one of these elements prevents "piercing the
corporate veil." In applying the "instrumentality" or "alter ego" doctrine, the courts are
concerned with reality and not form, with how the corporation operated and the individual
defendants relationship to that operation.78
Petitioners failed to adduce sufficient evidence to justify the piercing of the veil of corporate
entity and render respondent Bank liable for the US$20,000.00 deposit of petitioner Natividad
Nisce as debtor.
On hindsight, petitioners could have spared themselves the expenses and tribulation of a
litigation had they just withdrawn their deposit from the PCI Capital and remitted the same to
respondent. However, petitioner insisted on their contention of setoff.
On the P4,600,000.00 paid in checks allegedly remitted by petitioners to respondent in partial
payment of their loan account, petitioners failed to adduce in evidence the checks to show that,
indeed, the checks were drawn by petitioners and delivered to respondent, and that
respondent was able to cash the checks. The only evidence adduced by petitioners is a piece of
paper listing the serial numbers of the checks and the amount of each check:
PAYMENTS MADE & RECEIVED BY EBC BUT W/O RECEIPTS
1. Dec. 29, 1997 - EBC-0000039462 -

P2,000,000.0
0

2. Jan. 22, 1998 - EBC-213016118C -

1,000,000.00

3. Feb. 24, 1998 - UB -0000074619 -

800,000.00

4. Mar. 23, 1998 - EBC-213016121C -

800,000.00

P4,600,000.00

79

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. The Decision of the
Court of Appeals is AFFIRMED. Costs against petitioners.
SO ORDERED.

CASE 2

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 134068

December 25, 2001

UNION BANK OF THE PHILIPPINES, petitioner,

vs.
COURT OF APPEALS, APOLONIA DE JESUS GREGORIO, LUCIANA DE JESUS GREGORIO,
GONZALO VINCOY, married to TRINIDAD GREGORIO VINCOY, respondents.
RESOLUTION
DE LEON, JR., J.:
This is a motion for reconsideration of the resolution of this Court dated July 12, 1999
dismissing the petition for review on certiorari filed by petitioner Union Bank of the Philippines
which assailed the decision of the Court of Appeals (a) upholding the validity of the real estate
mortgage executed by respondents Gonzalo and Trinidad Vincoy in favor of petitioner as
security for a loan in the principal amount of Two Million Pesos (P2,000,000.00), and (b) fixing
the redemption price of the property mortgaged at Three Million Two Hundred Ninety
Thousand Pesos (P3,290,000.00) representing the purchase price of the said property at the
foreclosure sale plus one percent (1%) monthly interest from April 19, 1991, the date of the
foreclosure sale, until its redemption pursuant to Section 30, Rule 39 of the Rules of Court.
The following are the factual antecedents.
On March 2, 1990, respondents-spouses Gonzalo and Trinidad Vincoy mortgaged their
residence in favor of petitioner to secure the payment of a loan to Delco Industries (Phils.),
Incorporated1 in the amount of Two Million Pesos (P2,000,000.00). For failure of the
respondents to pay the loan at its date of maturity, petitioner extrajudicially foreclosured the
mortgage and scheduled the foreclosure sale on April 10, 1991. The petitioner submitted the
highest bid of Three Million Two Hundred Ninety Thousand Pesos (P3,290,000.00) at the
foreclosure sale. Accordingly, a certificate of sale was issued to petitioner and duly annotated at
the back of the Transfer Certificate of Title covering the property on May 8, 1991. 2
Prior to the expiration of the redemption period on May 8, 1992, the respondents filed a
complaint for annulment of mortgage with the lower court. In their complaint, respondents

alleged that the subject property mortgaged to petitioner had in fact been constituted as a
family home as early as October 27, 1989. Among the beneficiaries of the said family home are
the sisters of respondent Trinidad Vincoy, namely Apolonia and Luciana De Jesus Gregorio
whose consent to the mortgage was not obtained.3 Respondents thus assailed the validity of
the mortgage on the ground that Article 158 of the Family Code4 prohibits the execution, forced
sale, attachment or any other encumbrance of a family home without the written consent of
majority of the beneficiaries thereof of legal age.5 On the hand, petitioner maintained that the
mortgaged property of respondents could not be legally constituted as a family home because
its actual value exceeded Three Hundred Thousand Pesos (P300,000.00), the maximum value
for a family home in urban areas as stipulated in Article 157 of the Family Code. 6
The lower court rendered judgment declaring the constitution of the family home void and the
mortgage executed in favor of the petitioner valid. It held, among others, that Article 158 of the
Family Code was not applicable to respondents' family home as the value of the latter at the
time of its alleged constitution exceeded Three Hundred Thousand Pesos (P300,000.00). 7 It also
ordered respondent Gonzalo Vincoy and/or Delco Industries (Phils.), Inc. to pay petitioner his
and/or its outstanding obligation as of February 15, 1993 in the amount of Four Million Eight
Hundred Sixteen Thousand One Hundred Ninety-Four Pesos and Forty-Four Centavos
(P4,816,194.44) including such sums that may accrue by way of interests and penalties. 8
Aggrieved, respondents appealed to the Court of Appeals contending that the lower court erred
in finding that their family home was not duly constituted, and that the mortgage in favor of
petitioner is valid. Respondents also claimed that the correct amount sufficient for the
redemption of their property as of February 15, 1993 is Two Million Seven Hundred SeventyThree Thousand Seven Hundred Twelve Pesos and Eighty-Seven Centavos (P2,773,712.87)9 and
not Four Million Eight Hundred Sixteen Thousand One Hundred Ninety-Four Pesos and fortyfour Centavos (P4,816,194.44) as found by the lower court.
In a decision promulgated on June 4, 1997, the Court of Appeals sustained the finding of the
lower court that the alleged family home of the respondents did not fall within the purview of
Article 157 of the Family Code as its value at the time of its constitution was more than the
maximum value of Three Hundred Thousand Pesos (P300,000). Hence, the Court of Appeals
upheld the validity of the mortgage executed over the said property in favor of the
petitioner.10 However, it found that the amount sufficient for the redemption of the foreclosed
property is Three Million Two Hundred Ninety Thousand Pesos (P3,290,000.00) equivalent to
the purchase price at the foreclosure sale plus one percent (1%) monthly interest from April 19,
1991 up to the date of redemption11pursuant to Section 30, Rule 39 of the Rules of Court.12
Dissatisfied with the ruling of the Court of Appeals, the petitioner filed a petition for review on
certiorari with this Court submitting the following issues for resolution:
1. The Court of Appeals resolves an issue of redemption which was not even directly
raised by the parties and contrary to the evidence on record.

2. Assuming without admitting that respondents are entitled to redemption, the price
set by the Court of Appeals is not based on law.13
Petitioner contends, first of all, that in allowing the respondents to redeem the subject
foreclosed property, the Court of Appeals completely ignored the fact that neither respondents'
complaint before the lower court nor their brief filed before the Court of Appeals prayed for
the redemption of the said property. On the contrary, respondents had consistently insisted on
the nullity of the mortgage. Thus, to allow them to redeem the property would contradict the
very theory of their case.14
Petitioner also contends that the respondents had already lost their right to redeem the
foreclosured property when they failed to exercise their right of redemption by paying the
redemption price within the period provided for by law.15 In the event, however, that the Court
upholds the right of the respondents to redeem the said property, the petitioner claims that it
is not Section 30, Rule 39 of the Rules of Court that applies in determining the amount
sufficient for redemption but Section 78 of the General Banking Act as amended by Presidential
Decree No. 182816 which provides:
"xxx. In the event of foreclosure, whether judicially or extrajudicially, of any mortgage
on real estate which is security for any loan granted before the passage of this Act or
under the provisions of this Act, the mortgagor or debtor whose real property has been
sold at public auction, judicially or extrajudicially, for the full or partial payment of an
obligation to any bank, banking or credit institution, within the purview of this Act shall
have the right, within one year after the sale of the real estate as a result of the
foreclosure of the respective mortgage, to redeem the property by paying the amount
fixed by the court in the order of execution, or the amount due under the mortgage
deed, as the case may be, with interest thereon at the rate specified in the
mortgage, and all the costs, and judicial and other expenses incurred by the bank or
institution concerned by reason of the execution and sale and as a result of the custody
of the said property less the income received from the property." [Italics supplied].
This Court dismissed the petition in a Resolution promulgated on July 12, 1999 on the ground
that the Court of Appeals did not commit any reversible error and that the petition raises mere
questions of fact already amply passed upon by the appellate court.17 Hence, the instant
motion for reconsideration.
We are persuaded to reconsider.
First of all, it is important to note that the lower court decided this case on the basis only of the
pleadings submitted by the parties. No trial was conducted, thus, no evidence other than that
submitted with the pleadings could be considered.
A careful scrutiny of the pleadings filed by the respondents before the lower court reveals that
at no time did the respondents pray that they be allowed to redeem the subject foreclosed

property.18 On the other hand, respondents never wavered from the belief that the mortgage
over the said property is, in the first place, void for having been executed over a duly
constituted family home without the consent of the beneficiaries thereof. After upholding the
validity of the mortgage, the lower court ordered respondent Gonzalo Vincoy and/or Delco
Industries, Inc. to pay petitioner the amount of Four Million Eight Hundred Sixteen Thousand
One Hundred Ninety-Four Pesos and Forty-Four Centavos (P4,816,194.44) plus interest and
penalties representing Vincoy's and/or Delco's outstanding obligation to petitioner as of
February 15, 1993.19 There is no mention whatsoever of respondents' right to redeem the
property.
Respondents raised the issue of redemption for the first time only on appeal in contesting the
amount ordered by the lower court to be paid by respondents to the petitioner. Thus, the
actuation of the Court of Appeals in allowing the respondents to redeem the subject
foreclosured property is not legally permissible. In petitioners for review or appeal under Rule
45 of the Rules of Court, the appellate tribunal is limited to the determination for whether the
lower court committed reversible error.20
It is settled jurisprudence that an issue which was neither averred in the complaint nor raised
during the trial in the court below cannot be raised for the first time on appeal as it would be
offensive to the basic rules of fair play, justice and due process.21 On this ground alone, the
Court of Appeals should have completely ignored the issue of respondents' right to redeem the
subject foreclosed property. In addition, a reason just as glaringly obvious exists for declaring
the respondents' right of redemption already non-existent one year after May 8, 1991, the date
of the registration of the sale at public auction.
Pursuant to Section 78 of the General banking Act, a mortgagor whose real property has been
sold at a public auction, judicially or extrajudicially, for the full or partial payment of an
obligation to any bank, shall have the right, within one year after the sale of the real estate to
redeem the property. The one-year period is actually to be reckoned from the date of the
registration of the sale.22 Clearly therefore, respondents had only until May 8, 1992 to redeem
the subject foreclosed property. Their failure to exercise that right of redemption by paying the
redemption price within the period prescribed by law effectively divested them of said right. It
bears reiterating that during the one year redemption period, respondents never attempted to
redeem the subject property but instead persisted in their theory that the mortgage is null and
void. To allow them now to redeem the same property would, as petitioner aptly puts it, e
letting them have their cake and eat it too.
It cannot also be argued that the action for annulment of the mortgage filed by the
respondents tolled the running of the one-year period of redemption. In the case of Sumerariz
v. Development Bank of the Philippines,23petitioners therein contended that the one-year
period to redeem the property foreclosed by respondent was suspended by the institution of
an action to annul the foreclosure sale filed three (3) days before the expiration of the period.
To this we ruled that:

"We have not found, however, any statute or decision in support of this pretense.
Moreover, up to now plaintiffs have not exercised the right of redemption. Indeed,
although they have intimated their wish to redeem the property in question, they have
not deposited the amount necessary therefor. It may not be amiss to note that, unlike
Section 30 of Rule 39 of the Rules of Court, which permits the extension of the period of
redemption of mortgaged properties, Section 3 of Commonwealth Act No. 459, in
relation to Section 9 of Republic Act No. 85, which governs the redemption of property
mortgaged to the Bank does no contain a similar provision. Again this question has been
definitely settled by the previous case declaring that plaintiff's right of redemption has
already been extinguished in view of their failure to exercise it within the statutory
period."24
Also, in the more recent case of Vaca v. Court of Appeals,25 we declared that the pendency of
an action questioning the validity of a mortgage cannot bar the issuance of the writ of
possession after title to the property has been consolidated in the mortgagee. 26 The implication
is clear: the period of redemption is not interrupted by the filing of an action assailing the
validity of the mortgage, so that at the expiration thereof, the mortgagee who acquires the
property at the foreclosure sale can proceed to have the title consolidated in his name and a
writ of possession issued in his favor.
To rule otherwise, and allow the institution of an action questioning the validity of a mortgage
to suspend the running of the one year period of redemption would constitute a dangerous
precedent. A likely offshoot of such a ruling is the institution of frivolous suits for annulment of
mortgage intended merely to give the mortgagor more time to redeem the mortgaged
property.
As a final word, although the issue pertaining to the correct amount for the redemption of the
subject-foreclosed property has been rendered moot by the foregoing, a point of clarification
should perhaps be made as to the applicable legal provision. Petitioner's contention that
Section 78 of the General Banking Act governs the determination of the redemption price of
the subject property is meritorious. In Ponce de Leon v. Rehabilitation Finance
Corporation,27 this Court had occasion to rule that Section 78 of the General Banking Act had
the effect of amending Section 6 of Act No. 313528 insofar as the redemption price is concerned
when the mortgagee is a bank, as in this case, or a banking or credit institution. 29 The apparent
conflict between the provisions of Act No. 3135 and the General Banking Act was, therefore,
resolved in favor of the latter, being a special and subsequent legislation. This pronouncement
was reiterated in the case of Sy v. Court of Appeals30 where we held that the amount at which
the foreclosed property is redeemable is the amount due under the mortgage deed, or the
outstanding obligation of the mortgagor plus interest and expenses in accordance with Section
78 of the General Banking Act.31 It was therefore manifest error on the part of the Court of
Appeals to apply in the case at bar the provisions of Section 30 Rule 39 of the Rules of Court in
fixing the redemption price of the subject foreclosed property.

WHEREFORE, the motion for reconsideration is hereby GRANTED. This Court's Resolution dated
July 12, 1999 is MODIFIED insofar as respondents are found to have lost their right to redeem
the subject foreclosed property.
SO ORDERED.1wphi1.nt

CASE 3

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 131622 November 27, 1998

LETICIA Y. MEDEL, DR. RAFAEL MEDEL and SERVANDO FRANCO, petitioners,
vs.
COURT OF APPEALS, SPOUSES VERONICA R. GONZALES and DANILO G. GONZALES, JR. doing
lending business under the trade name and style "GONZALES CREDIT
ENTERPRISES", respondents.

PARDO, J.:
The case before the Court is a petition for review on certiorari, under Rule 45 of the Revised
Rules of Court, seeking to set aside the decision of the Court of Appeals, 1 and its resolution
denying reconsideration, 2 the dispositive portion of which decision reads as follows:
WHEREFORE, the appealed judgment is hereby MODIFIED such that defendants
are hereby-ordered to pay the plaintiff: the sum of P500,000.00, plus 5.5% per
month interest and 2% service charge per annum effective July 23, 1986, plus 1%
per month of the total amount due and demandable as penalty charges effective
August 23, 1986, until the entire amount is fully paid.
The award to the plaintiff of P50,000.00 as attorney's fees is affirmed. And so is
the imposition of costs against the defendants.
SO ORDERED. 3
The Court required the respondents to comment on the petition, 4 which was filed on April 3,
1998, 5 and the petitioners to reply thereto, which was filed on May 29, 1998. 6 We now resolve
to give due course to the petition and decide the case.

The facts of the case, as found by the Court of Appeals in its decision, which are considered
binding and conclusive on the parties herein, as the appeal is limited to questions of law, are as
follows:
On November 7, 1985, Servando Franco and Leticia Medel (hereafter Servando and Leticia)
obtained a loan from Veronica R. Gonzales (hereafter Veronica), who was engaged in the
money lending business under the name "Gonzales Credit Enterprises", in the amount of
P50,000.00, payable in two months. Veronica gave only the amount of P47,000.00, to the
borrowers, as she retained P3,000.00, as advance interest for one month at 6% per month.
Servando and Leticia executed a promissory note for P50,000.00, to evidence the loan, payable
on January 7, 1986.
On November 19, 1985, Servando and Liticia obtained from Veronica another loan in the
amount of P90,000.00, payable in two months, at 6% interest per month. They executed a
promissory note to evidence the loan, maturing on Janaury 19, 1986. They received only
P84,000.00, out of the proceeds of the loan.
On maturity of the two promissory notes, the borrowers failed to pay the indebtedness.
On June 11, 1986, Servando and Leticia secured from Veronica still another loan in the amout of
P300,000.00, maturing in one month, secured by a real estate mortgage over a property
belonging to Leticia Makalintal Yaptinchay, who issued a special power of attorney in favor of
Leticia Medel, authorizing her to execute the mortgage. Servando and Leticia executed a
promissory note in favor of Veronica to pay the sum of P300,000.00, after a month, or on July
11, 1986. However, only the sum of P275.000.00, was given to them out of the proceeds of the
loan.
Like the previous loans, Servando and Medel failed to pay the third loan on maturity.
On July 23, 1986, Servando and Leticia with the latter's husband, Dr. Rafael Medel, consolidated
all their previous unpaid loans totaling P440,000.00, and sought from Veronica another loan in
the amount of P60,000.00, bringing their indebtedness to a total of P500,000.00, payable on
August 23, 1986. They executed a promissory note, reading as follows:
Baliwag, Bulacan July 23, 1986
Maturity Date Augsut 23, 1986
P500,000.00
FOR VALUE RECEIVED, I/WE jointly and severally promise to pay to the order of
VERONICA R. GONZALES doing business in the business style of GONZALES
CREDIT ENTERPRISES, Filipino, of legal age, married to Danilo G. Gonzales, Jr., of
Baliwag, Bulacan, the sum of PESOS . . . FIVE HUNDRED THOUSAND . . .

(P500,000.00) Philippine Currency with interest thereon at the rate of 5.5 PER
CENT per month plus 2% service charge per annum from date hereof until fully
paid according to the amortization schedule contained herein. (Emphasis
supplied)
Payment will be made in full at the maturity date.
Should I/WE fail to pay any amortization or portion hereof when due, all the
other installments together with all interest accrued shall immediately be due
and payable and I/WE hereby agree to pay an additional amount equivalent to
one per cent (1%) per month of the amount due and demandable as penalty
charges in the form of liquidated damages until fully paid; and the furthersum of
TWENTY FIVE PER CENT (25%) thereof in full, without deductions as Attorney's
Fee whether actually incurred or not, of the total amount due and demandable,
exclusive of costs and judicial or extra judicial expenses. (Emphasis supplied).
I, WE further agree that in the event the present rate of interest on loan is
increased by law or the Central Bank of the Philippines, the holder shall have the
option to apply and collect the increased interest charges without notice
although the original interest have already been collected wholly or partially
unless the contrary is required by law.
It is also a special condition of this contract that the parties herein agree that the
amount of peso-obligation under this agreement is based on the present value
of the peso, and if there be any change in the value thereof, due to extraordinary
inflation or deflation, or any other cause or reason, then the peso-obligation
herein contracted shall be adjusted in accordance with the value of the peso
then prevailing at the time of the complete fulfillment of the obligation.
Demand and notice of dishonor waived. Holder may accept partial payments and
grant renewals of this note or extension of payments, reserving rights against
each and all indorsers and all parties to this note.
IN CASE OF JUDICIAL Execution of this obligation, or any part of it, the debtors
waive all his/their rights under the provisions of Section 12, Rule 39, of the
Revised Rules of Court.
On maturity of the loan, the borrowers failed to pay the indebtedness of P500,000.00, plus
interests and penalties, evidenced by the above-quoted promissory note.
On February 20, 1990, Veronica R. Gonzales, joined by her husband Danilo G. Gonzales, filed
with the Regional Trial Court of Bulacan, Branch 16, at Malolos, Bulacan, a complaint for
collection of the full amount of the loan including interests and other charges.

In his answer to the complaint filed with the trial court on April 5, 1990, defendant Servando
alleged that he did not obtain any loan from the plaintiffs; that it was defendants Leticia and Dr.
Rafael Medel who borrowed from the plaintiffs the sum of P500,000.00, and actually received
the amount and benefited therefrom; that the loan was secured by a real estate mortgage
executed in favor of the plaintiffs, and that he (Servando Franco) signed the promissory note
only as a witness.
In their separate answer filed on April 10, 1990, defendants Leticia and Rafael Medel alleged
that the loan was the transaction of Leticia Yaptinchay, who executed a mortgage in favor of
the plaintiffs over a parcel of real estate situated in San Juan, Batangas; that the interest rate is
excessive at 5.5% per month with additional service charge of 2% per annum, and penalty
charge of 1% per month; that the stipulation for attorney's fees of 25% of the amount due is
unconscionable, illegal and excessive, and that substantial payments made were applied to
interest, penalties and other charges.
After due trial, the lower court declared that the due execution and genuineness of the four
promissory notes had been duly proved, and ruled that although the Usury Law had been
repealed, the interest charged by the plaintiffs on the loans was unconscionable and "revolting
to the conscience". Hence, the trial court applied "the provision of the New [Civil] Code" that
the "legal rate of interest for loan or forbearance of money, goods or credit is 12% per
annum." 7
Accordingly, on December 9, 1991, the trial court rendered judgment, the dispositive portion of
which reads as follows:
WHEREFORE, premises considered, judgment is hereby rendered, as follows:
1. Ordering the defendants Servando Franco and Leticia Medel, jointly and
severally, to pay plaintiffs the amount of P47,000.00 plus 12% interest per
annum from November 7, 1985 and 1% per month as penalty, until the entire
amount is paid in full.
2. Ordering the defendants Servando Franco and Leticia Y. Medel to plaintiffs,
jointly and severally the amount of P84,000.00 with 12% interest per annum and
1% per cent per month as penalty from November 19, 1985 until the whole
amount is fully paid;
3. Ordering the defendants to pay the plaintiffs, jointly and severally, the amount
of P285,000.00 plus 12% interest per annum and 1% per month as penalty from
July 11, 1986, until the whole amount is fully paid;
4. Ordering the defendants to pay plaintiffs, jointly and severally, the amount of
P50,000.00 as attorney's fees;

5. All counterclaims are hereby dismissed.

With costs against the defendants. 8
In due time, both plaintiffs and defendants appealed to the Court of Appeals.
In their appeal, plaintiffs-appellants argued that the promissory note, which consolidated all the
unpaid loans of the defendants, is the law that governs the parties. They further argued that
Circular No. 416 of the Central Bank prescribing the rate of interest for loans or forbearance of
money, goods or credit at 12% per annum, applies only in the absence of a stipulation on
interest rate, but not when the parties agreed thereon.
The Court of Appeals sustained the plaintiffs-appellants' contention. It ruled that "the Usury
Law having become 'legally inexistent' with the promulgation by the Central Bank in 1982 of
Circular No. 905, the lender and borrower could agree on any interest that may be charged on
the loan". 9 The Court of Appeals further held that "the imposition of 'an additional amount
equivalent to 1% per month of the amount due and demandable as penalty charges in the form
of liquidated damages until fully paid' was allowed by
law". 10
Accordingly, on March 21, 1997, the Court of Appeals promulgated its decision reversing that of
the Regional Trial Court, disposing as follows:
WHEREFORE, the appealed judgment is hereby MODIFIED such that defendants
are hereby ordered to pay the plaintiffs the sum of P500,000.00, plus 5.5% per
month interest and 2% service charge per annum effective July 23, 1986, plus 1%
per month of the total amount due and demandable as penalty charges effective
August 24, 1986, until the entire amount is fully paid.
The award to the plaintiffs of P50,000.00 as attorney's fees is affirmed. And so is
the imposition of costs against the defendants.
SO ORDERED. 11
On April 15, 1997, defendants-appellants filed a motion for reconsideration of the said decision.
By resolution dated November 25, 1997, the Court of Appeals denied the motion. 12
Hence, defendants interposed the present recourse via petition for review on certiorari. 13
We find the petition meritorious.
Basically, the issue revolves on the validity of the interest rate stipulated upon. Thus, the
question presented is whether or not the stipulated rate of interest at 5.5% per month on the
loan in the sum of P500,000.00, that plaintiffs extended to the defendants is usurious. In other

words, is the Usury Law still effective, or has it been repealed by Central Bank Circular No. 905,
adopted on December 22, 1982, pursuant to its powers under P.D. No. 116, as amended by P.D.
No. 1684?
We agree with petitioners that the stipulated rate of interest at 5.5% per month on the
P500,000.00 loan is excessive, iniquitous, unconscionable and exorbitant. 13 However, we can
not consider the rate "usurious" because this Court has consistently held that Circular No. 905
of the Central Bank, adopted on December 22, 1982, has expressly removed the interest
ceilings prescribed by the Usury Law 14 and that the Usury Law is now "legally inexistent". 15
In Security Bank and Trust Company vs. Regional Trial Court of Makati, Branch 61 16 the Court
held that CB Circular No. 905 "did not repeal nor in anyway amend the Usury Law but simply
suspended the latter's effectivity." Indeed, we have held that "a Central Bank Circular can not
repeal a law. Only a law can repeal another law." 17 In the recent case ofFlorendo vs. Court of
Appeals 18, the Court reiterated the ruling that "by virtue of CB Circular 905, the Usury Law has
been rendered ineffective". "Usury has been legally non-existent in our jurisdiction. Interest can
now be charged as lender and borrower may agree upon." 19
Nevertheless, we find the interest at 5.5% per month, or 66% per annum, stipulated upon by
the parties in the promissory note iniquitous or unconscionable, and, hence, contrary to morals
("contra bonos mores"), if not against the law. 20 The stipulation is void. 21 The courts shall
reduce equitably liquidated damages, whether intended as an indemnity or a penalty if they are
iniquitous or unconscionable. 22
Consequently, the Court of Appeals erred in upholding the stipulation of the parties. Rather, we
agree with the trial court that, under the circumstances, interest at 12% per annum, and an
additional 1% a month penalty charge as liquidated damages may be more reasonable.
WHEREFORE, the Court hereby REVERSES and SETS ASIDE the decision of the Court of Appeals
promulgated on March 21, 1997, and its resolution dated November 25, 1997. Instead, we
render judgment REVIVING and AFFIRMING the decision dated December 9, 1991, of the
Regional Trial Court of Bulacan, Branch 16, Malolos, Bulacan, in Civil Case No. 134-M-90,
involving the same parties.
No pronouncement as to costs in this instance.
SO ORDERED.

CASE 4

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 123498

November 23, 2007

BPI FAMILY BANK, Petitioner,

vs.
AMADO FRANCO and COURT OF APPEALS, Respondents.
DECISION
NACHURA, J.:
Banks are exhorted to treat the accounts of their depositors with meticulous care and utmost
fidelity. We reiterate this exhortation in the case at bench.
Before us is a Petition for Review on Certiorari seeking the reversal of the Court of Appeals (CA)
Decision1 in CA-G.R. CV No. 43424 which affirmed with modification the judgment 2 of the
Regional Trial Court, Branch 55, Manila (Manila RTC), in Civil Case No. 90-53295.
This case has its genesis in an ostensible fraud perpetrated on the petitioner BPI Family Bank
(BPI-FB) allegedly by respondent Amado Franco (Franco) in conspiracy with other
individuals,3 some of whom opened and maintained separate accounts with BPI-FB, San
Francisco del Monte (SFDM) branch, in a series of transactions.
On August 15, 1989, Tevesteco Arrastre-Stevedoring Co., Inc. (Tevesteco) opened a savings and
current account with BPI-FB. Soon thereafter, or on August 25, 1989, First Metro Investment
Corporation (FMIC) also opened a time deposit account with the same branch of BPI-FB with a
deposit of P100,000,000.00, to mature one year thence.
Subsequently, on August 31, 1989, Franco opened three accounts, namely, a
current,4 savings,5 and time deposit,6 with BPI-FB. The current and savings accounts were
respectively funded with an initial deposit ofP500,000.00 each, while the time deposit account
had P1,000,000.00 with a maturity date of August 31, 1990. The total amount of P2,000,000.00
used to open these accounts is traceable to a check issued by Tevesteco allegedly in
consideration of Francos introduction of Eladio Teves,7 who was looking for a conduit bank to
facilitate Tevestecos business transactions, to Jaime Sebastian, who was then BPI-FB SFDMs

Branch Manager. In turn, the funding for the P2,000,000.00 check was part of
the P80,000,000.00 debited by BPI-FB from FMICs time deposit account and credited to
Tevestecos current account pursuant to an Authority to Debit purportedly signed by FMICs
officers.
It appears, however, that the signatures of FMICs officers on the Authority to Debit were
forged.8 On September 4, 1989, Antonio Ong,9 upon being shown the Authority to Debit,
personally declared his signature therein to be a forgery. Unfortunately, Tevesteco had already
effected several withdrawals from its current account (to which had been credited
the P80,000,000.00 covered by the forged Authority to Debit) amounting to P37,455,410.54,
including the P2,000,000.00 paid to Franco.
On September 8, 1989, impelled by the need to protect its interests in light of FMICs forgery
claim, BPI-FB, thru its Senior Vice-President, Severino Coronacion, instructed Jesus
Arangorin10 to debit Francos savings and current accounts for the amounts remaining
therein.11 However, Francos time deposit account could not be debited due to the capacity
limitations of BPI-FBs computer.12
In the meantime, two checks13 drawn by Franco against his BPI-FB current account were
dishonored upon presentment for payment, and stamped with a notation "account under
garnishment." Apparently, Francos current account was garnished by virtue of an Order of
Attachment issued by the Regional Trial Court of Makati (Makati RTC) in Civil Case No. 89-4996
(Makati Case), which had been filed by BPI-FB against Franco et al.,14 to recover
the P37,455,410.54 representing Tevestecos total withdrawals from its account.
Notably, the dishonored checks were issued by Franco and presented for payment at BPI-FB
prior to Francos receipt of notice that his accounts were under garnishment. 15 In fact, at the
time the Notice of Garnishment dated September 27, 1989 was served on BPI-FB, Franco had
yet to be impleaded in the Makati case where the writ of attachment was issued.
It was only on May 15, 1990, through the service of a copy of the Second Amended Complaint
in Civil Case No. 89-4996, that Franco was impleaded in the Makati case.16 Immediately, upon
receipt of such copy, Franco filed a Motion to Discharge Attachment which the Makati RTC
granted on May 16, 1990. The Order Lifting the Order of Attachment was served on BPI-FB on
even date, with Franco demanding the release to him of the funds in his savings and current
accounts. Jesus Arangorin, BPI-FBs new manager, could not forthwith comply with the demand
as the funds, as previously stated, had already been debited because of FMICs forgery claim. As
such, BPI-FBs computer at the SFDM Branch indicated that the current account record was
"not on file."
With respect to Francos savings account, it appears that Franco agreed to an arrangement, as a
favor to Sebastian, whereby P400,000.00 from his savings account was temporarily transferred
to Domingo Quiaoits savings account, subject to its immediate return upon issuance of a
certificate of deposit which Quiaoit needed in connection with his visa application at the

Taiwan Embassy. As part of the arrangement, Sebastian retained custody of Quiaoits savings
account passbook to ensure that no withdrawal would be effected therefrom, and to preserve
Francos deposits.
On May 17, 1990, Franco pre-terminated his time deposit account. BPI-FB deducted the
amount of P63,189.00 from the remaining balance of the time deposit account representing
advance interest paid to him.
These transactions spawned a number of cases, some of which we had already resolved.
FMIC filed a complaint against BPI-FB for the recovery of the amount of P80,000,000.00 debited
from its account.17 The case eventually reached this Court, and in BPI Family Savings Bank, Inc.
v. First Metro Investment Corporation,18 we upheld the finding of the courts below that BPI-FB
failed to exercise the degree of diligence required by the nature of its obligation to treat the
accounts of its depositors with meticulous care. Thus, BPI-FB was found liable to FMIC for the
debited amount in its time deposit. It was ordered to pay P65,332,321.99 plus interest at 17%
per annum from August 29, 1989 until fully restored. In turn, the 17% shall itself earn interest at
12% from October 4, 1989 until fully paid.
In a related case, Edgardo Buenaventura, Myrna Lizardo and Yolanda Tica (Buenaventura, et
al.),19 recipients of a P500,000.00 check proceeding from the P80,000,000.00 mistakenly
credited to Tevesteco, likewise filed suit. Buenaventura et al., as in the case of Franco, were
also prevented from effecting withdrawals20 from their current account with BPI-FB, Bonifacio
Market, Edsa, Caloocan City Branch. Likewise, when the case was elevated to this Court
docketed as BPI Family Bank v. Buenaventura,21 we ruled that BPI-FB had no right to freeze
Buenaventura, et al.s accounts and adjudged BPI-FB liable therefor, in addition to damages.
Meanwhile, BPI-FB filed separate civil and criminal cases against those believed to be the
perpetrators of the multi-million peso scam.22 In the criminal case, Franco, along with the other
accused, except for Manuel Bienvenida who was still at large, were acquitted of the crime of
Estafa as defined and penalized under Article 351, par. 2(a) of the Revised Penal
Code.23 However, the civil case24 remains under litigation and the respective rights and
liabilities of the parties have yet to be adjudicated.
Consequently, in light of BPI-FBs refusal to heed Francos demands to unfreeze his accounts
and release his deposits therein, the latter filed on June 4, 1990 with the Manila RTC the subject
suit. In his complaint, Franco prayed for the following reliefs: (1) the interest on the remaining
balance25 of his current account which was eventually released to him on October 31, 1991; (2)
the balance26 on his savings account, plus interest thereon; (3) the advance interest 27 paid to
him which had been deducted when he pre-terminated his time deposit account; and (4) the
payment of actual, moral and exemplary damages, as well as attorneys fees.
BPI-FB traversed this complaint, insisting that it was correct in freezing the accounts of Franco
and refusing to release his deposits, claiming that it had a better right to the amounts which

consisted of part of the money allegedly fraudulently withdrawn from it by Tevesteco and
ending up in Francos accounts. BPI-FB asseverated that the claimed consideration
of P2,000,000.00 for the introduction facilitated by Franco between George Daantos and Eladio
Teves, on the one hand, and Jaime Sebastian, on the other, spoke volumes of Francos
participation in the fraudulent transaction.
On August 4, 1993, the Manila RTC rendered judgment, the dispositive portion of which reads
as follows:
WHEREFORE, in view of all the foregoing, judgment is hereby rendered in favor of [Franco] and
against [BPI-FB], ordering the latter to pay to the former the following sums:
1. P76,500.00 representing the legal rate of interest on the amount of P450,000.00 from
May 18, 1990 to October 31, 1991;
2. P498,973.23 representing the balance on [Francos] savings account as of May 18,
1990, together with the interest thereon in accordance with the banks guidelines on
the payment therefor;
3. P30,000.00 by way of attorneys fees; and
4. P10,000.00 as nominal damages.
The counterclaim of the defendant is DISMISSED for lack of factual and legal anchor.
Costs against [BPI-FB].
SO ORDERED.28
Unsatisfied with the decision, both parties filed their respective appeals before the CA. Franco
confined his appeal to the Manila RTCs denial of his claim for moral and exemplary damages,
and the diminutive award of attorneys fees. In affirming with modification the lower courts
decision, the appellate court decreed, to wit:
WHEREFORE, foregoing considered, the appealed decision is hereby AFFIRMED with
modification ordering [BPI-FB] to pay [Franco] P63,189.00 representing the interest deducted
from the time deposit of plaintiff-appellant.P200,000.00 as moral damages and P100,000.00 as
exemplary damages, deleting the award of nominal damages (in view of the award of moral and
exemplary damages) and increasing the award of attorneys fees from P30,000.00
to P75,000.00.
Cost against [BPI-FB].
SO ORDERED.29

In this recourse, BPI-FB ascribes error to the CA when it ruled that: (1) Franco had a better right
to the deposits in the subject accounts which are part of the proceeds of a forged Authority to
Debit; (2) Franco is entitled to interest on his current account; (3) Franco can recover
the P400,000.00 deposit in Quiaoits savings account; (4) the dishonor of Francos checks was
not legally in order; (5) BPI-FB is liable for interest on Francos time deposit, and for moral and
exemplary damages; and (6) BPI-FBs counter-claim has no factual and legal anchor.
The petition is partly meritorious.
We are in full accord with the common ruling of the lower courts that BPI-FB cannot unilaterally
freeze Francos accounts and preclude him from withdrawing his deposits. However, contrary
to the appellate courts ruling, we hold that Franco is not entitled to unearned interest on the
time deposit as well as to moral and exemplary damages.
First. On the issue of who has a better right to the deposits in Francos accounts, BPI-FB urges
us that the legal consequence of FMICs forgery claim is that the money transferred by BPI-FB
to Tevesteco is its own, and considering that it was able to recover possession of the same
when the money was redeposited by Franco, it had the right to set up its ownership thereon
and freeze Francos accounts.
BPI-FB contends that its position is not unlike that of an owner of personal property who
regains possession after it is stolen, and to illustrate this point, BPI-FB gives the following
example: where Xs television set is stolen by Y who thereafter sells it to Z, and where Z
unwittingly entrusts possession of the TV set to X, the latter would have the right to keep
possession of the property and preclude Z from recovering possession thereof. To bolster its
position, BPI-FB cites Article 559 of the Civil Code, which provides:
Article 559. The possession of movable property acquired in good faith is equivalent to a title.
Nevertheless, one who has lost any movable or has been unlawfully deprived thereof, may
recover it from the person in possession of the same.
If the possessor of a movable lost or of which the owner has been unlawfully deprived, has
acquired it in good faith at a public sale, the owner cannot obtain its return without
reimbursing the price paid therefor.
BPI-FBs argument is unsound. To begin with, the movable property mentioned in Article 559 of
the Civil Code pertains to a specific or determinate thing.30 A determinate or specific thing is
one that is individualized and can be identified or distinguished from others of the same kind.31
In this case, the deposit in Francos accounts consists of money which, albeit characterized as a
movable, is generic and fungible.32 The quality of being fungible depends upon the possibility of
the property, because of its nature or the will of the parties, being substituted by others of the
same kind, not having a distinct individuality.33

Significantly, while Article 559 permits an owner who has lost or has been unlawfully deprived
of a movable to recover the exact same thing from the current possessor, BPI-FB simply claims
ownership of the equivalent amount of money, i.e., the value thereof, which it had mistakenly
debited from FMICs account and credited to Tevestecos, and subsequently traced to Francos
account. In fact, this is what BPI-FB did in filing the Makati Case against Franco, et al. It staked
its claim on the money itself which passed from one account to another, commencing with the
forged Authority to Debit.
It bears emphasizing that money bears no earmarks of peculiar ownership, 34 and this
characteristic is all the more manifest in the instant case which involves money in a banking
transaction gone awry. Its primary function is to pass from hand to hand as a medium of
exchange, without other evidence of its title.35 Money, which had passed through various
transactions in the general course of banking business, even if of traceable origin, is no
exception.
Thus, inasmuch as what is involved is not a specific or determinate personal property, BPI-FBs
illustrative example, ostensibly based on Article 559, is inapplicable to the instant case.
There is no doubt that BPI-FB owns the deposited monies in the accounts of Franco, but not as
a legal consequence of its unauthorized transfer of FMICs deposits to Tevestecos account. BPIFB conveniently forgets that the deposit of money in banks is governed by the Civil Code
provisions on simple loan or mutuum.36 As there is a debtor-creditor relationship between a
bank and its depositor, BPI-FB ultimately acquired ownership of Francos deposits, but such
ownership is coupled with a corresponding obligation to pay him an equal amount on
demand.37 Although BPI-FB owns the deposits in Francos accounts, it cannot prevent him from
demanding payment of BPI-FBs obligation by drawing checks against his current account, or
asking for the release of the funds in his savings account. Thus, when Franco issued checks
drawn against his current account, he had every right as creditor to expect that those checks
would be honored by BPI-FB as debtor.
More importantly, BPI-FB does not have a unilateral right to freeze the accounts of Franco
based on its mere suspicion that the funds therein were proceeds of the multi-million peso
scam Franco was allegedly involved in. To grant BPI-FB, or any bank for that matter, the right to
take whatever action it pleases on deposits which it supposes are derived from shady
transactions, would open the floodgates of public distrust in the banking industry.
Our pronouncement in Simex International (Manila), Inc. v. Court of Appeals 38 continues to
resonate, thus:
The banking system is an indispensable institution in the modern world and plays a vital role in
the economic life of every civilized nation. Whether as mere passive entities for the safekeeping
and saving of money or as active instruments of business and commerce, banks have become
an ubiquitous presence among the people, who have come to regard them with respect and
even gratitude and, most of all, confidence. Thus, even the humble wage-earner has not

hesitated to entrust his lifes savings to the bank of his choice, knowing that they will be safe in
its custody and will even earn some interest for him. The ordinary person, with equal faith,
usually maintains a modest checking account for security and convenience in the settling of his
monthly bills and the payment of ordinary expenses. x x x.
In every case, the depositor expects the bank to treat his account with the utmost fidelity,
whether such account consists only of a few hundred pesos or of millions. The bank must
record every single transaction accurately, down to the last centavo, and as promptly as
possible. This has to be done if the account is to reflect at any given time the amount of money
the depositor can dispose of as he sees fit, confident that the bank will deliver it as and to
whomever directs. A blunder on the part of the bank, such as the dishonor of the check without
good reason, can cause the depositor not a little embarrassment if not also financial loss and
perhaps even civil and criminal litigation.
The point is that as a business affected with public interest and because of the nature of its
functions, the bank is under obligation to treat the accounts of its depositors with meticulous
care, always having in mind the fiduciary nature of their relationship. x x x.
Ineluctably, BPI-FB, as the trustee in the fiduciary relationship, is duty bound to know the
signatures of its customers. Having failed to detect the forgery in the Authority to Debit and in
the process inadvertently facilitate the FMIC-Tevesteco transfer, BPI-FB cannot now shift
liability thereon to Franco and the other payees of checks issued by Tevesteco, or prevent
withdrawals from their respective accounts without the appropriate court writ or a favorable
final judgment.
Further, it boggles the mind why BPI-FB, even without delving into the authenticity of the
signature in the Authority to Debit, effected the transfer of P80,000,000.00 from FMICs to
Tevestecos account, when FMICs account was a time deposit and it had already paid advance
interest to FMIC. Considering that there is as yet no indubitable evidence establishing Francos
participation in the forgery, he remains an innocent party. As between him and BPI-FB, the
latter, which made possible the present predicament, must bear the resulting loss or
inconvenience.
Second. With respect to its liability for interest on Francos current account, BPI-FB argues that
its non-compliance with the Makati RTCs Order Lifting the Order of Attachment and the legal
consequences thereof, is a matter that ought to be taken up in that court.
The argument is tenuous. We agree with the succinct holding of the appellate court in this
respect. The Manila RTCs order to pay interests on Francos current account arose from BPIFBs unjustified refusal to comply with its obligation to pay Franco pursuant to their contract of
mutuum. In other words, from the time BPI-FB refused Francos demand for the release of the
deposits in his current account, specifically, from May 17, 1990, interest at the rate of 12%
began to accrue thereon.39

Undeniably, the Makati RTC is vested with the authority to determine the legal consequences
of BPI-FBs non-compliance with the Order Lifting the Order of Attachment. However, such
authority does not preclude the Manila RTC from ruling on BPI-FBs liability to Franco for
payment of interest based on its continued and unjustified refusal to perform a contractual
obligation upon demand. After all, this was the core issue raised by Franco in his complaint
before the Manila RTC.
Third. As to the award to Franco of the deposits in Quiaoits account, we find no reason to
depart from the factual findings of both the Manila RTC and the CA.
Noteworthy is the fact that Quiaoit himself testified that the deposits in his account are actually
owned by Franco who simply accommodated Jaime Sebastians request to temporarily
transfer P400,000.00 from Francos savings account to Quiaoits account.40 His testimony
cannot be characterized as hearsay as the records reveal that he had personal knowledge of the
arrangement made between Franco, Sebastian and himself.41
BPI-FB makes capital of Francos belated allegation relative to this particular arrangement. It
insists that the transaction with Quiaoit was not specifically alleged in Francos complaint
before the Manila RTC. However, it appears that BPI-FB had impliedly consented to the trial of
this issue given its extensive cross-examination of Quiaoit.
Section 5, Rule 10 of the Rules of Court provides:
Section 5. Amendment to conform to or authorize presentation of evidence. When issues not
raised by the pleadings are tried with the express or implied consent of the parties, they shall
be treated in all respects as if they had been raised in the pleadings. Such amendment of the
pleadings as may be necessary to cause them to conform to the evidence and to raise these
issues may be made upon motion of any party at any time, even after judgment; but failure to
amend does not affect the result of the trial of these issues. If evidence is objected to at the
trial on the ground that it is now within the issues made by the pleadings, the court may allow
the pleadings to be amended and shall do so with liberality if the presentation of the merits of
the action and the ends of substantial justice will be subserved thereby. The court may grant a
continuance to enable the amendment to be made. (Emphasis supplied)
In all, BPI-FBs argument that this case is not the right forum for Franco to recover
the P400,000.00 begs the issue. To reiterate, Quiaoit, testifying during the trial, unequivocally
disclaimed ownership of the funds in his account, and pointed to Franco as the actual owner
thereof. Clearly, Francos action for the recovery of his deposits appropriately covers the
deposits in Quiaoits account.
Fourth. Notwithstanding all the foregoing, BPI-FB continues to insist that the dishonor of
Francos checks respectively dated September 11 and 18, 1989 was legally in order in view of
the Makati RTCs supplemental writ of attachment issued on September 14, 1989. It posits that
as the party that applied for the writ of attachment before the Makati RTC, it need not be

served with the Notice of Garnishment before it could place Francos accounts under
garnishment.
The argument is specious. In this argument, we perceive BPI-FBs clever but transparent ploy to
circumvent Section 4,42 Rule 13 of the Rules of Court. It should be noted that the strict
requirement on service of court papers upon the parties affected is designed to comply with
the elementary requisites of due process. Franco was entitled, as a matter of right, to notice, if
the requirements of due process are to be observed. Yet, he received a copy of the Notice of
Garnishment only on September 27, 1989, several days after the two checks he issued were
dishonored by BPI-FB on September 20 and 21, 1989. Verily, it was premature for BPI-FB to
freeze Francos accounts without even awaiting service of the Makati RTCs Notice of
Garnishment on Franco.
Additionally, it should be remembered that the enforcement of a writ of attachment cannot be
made without including in the main suit the owner of the property attached by virtue thereof.
Section 5, Rule 13 of the Rules of Court specifically provides that "no levy or attachment
pursuant to the writ issued x x x shall be enforced unless it is preceded, or contemporaneously
accompanied, by service of summons, together with a copy of the complaint, the application
for attachment, on the defendant within the Philippines."
Franco was impleaded as party-defendant only on May 15, 1990. The Makati RTC had yet to
acquire jurisdiction over the person of Franco when BPI-FB garnished his accounts.43 Effectively,
therefore, the Makati RTC had no authority yet to bind the deposits of Franco through the writ
of attachment, and consequently, there was no legal basis for BPI-FB to dishonor the checks
issued by Franco.
Fifth. Anent the CAs finding that BPI-FB was in bad faith and as such liable for the advance
interest it deducted from Francos time deposit account, and for moral as well as exemplary
damages, we find it proper to reinstate the ruling of the trial court, and allow only the recovery
of nominal damages in the amount of P10,000.00. However, we retain the CAs award
of P75,000.00 as attorneys fees.
In granting Francos prayer for interest on his time deposit account and for moral and
exemplary damages, the CA attributed bad faith to BPI-FB because it (1) completely disregarded
its obligation to Franco; (2) misleadingly claimed that Francos deposits were under
garnishment; (3) misrepresented that Francos current account was not on file; and (4) refused
to return the P400,000.00 despite the fact that the ostensible owner, Quiaoit, wanted the
amount returned to Franco.
In this regard, we are guided by Article 2201 of the Civil Code which provides:
Article 2201. In contracts and quasi-contracts, the damages for which the obligor who acted in
good faith is liable shall be those that are the natural and probable consequences of the breach

of the obligation, and which the parties have foreseen or could have reasonable foreseen at the
time the obligation was constituted.
In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all
damages which may be reasonably attributed to the non-performance of the obligation.
(Emphasis supplied.)
We find, as the trial court did, that BPI-FB acted out of the impetus of self-protection and not
out of malevolence or ill will. BPI-FB was not in the corrupt state of mind contemplated in
Article 2201 and should not be held liable for all damages now being imputed to it for its breach
of obligation. For the same reason, it is not liable for the unearned interest on the time deposit.
Bad faith does not simply connote bad judgment or negligence; it imports a dishonest purpose
or some moral obliquity and conscious doing of wrong; it partakes of the nature of fraud.44 We
have held that it is a breach of a known duty through some motive of interest or ill will. 45 In the
instant case, we cannot attribute to BPI-FB fraud or even a motive of self-enrichment. As the
trial court found, there was no denial whatsoever by BPI-FB of the existence of the accounts.
The computer-generated document which indicated that the current account was "not on file"
resulted from the prior debit by BPI-FB of the deposits. The remedy of freezing the account, or
the garnishment, or even the outright refusal to honor any transaction thereon was resorted to
solely for the purpose of holding on to the funds as a security for its intended court
action,46 and with no other goal but to ensure the integrity of the accounts.
We have had occasion to hold that in the absence of fraud or bad faith,47 moral damages
cannot be awarded; and that the adverse result of an action does not per se make the action
wrongful, or the party liable for it. One may err, but error alone is not a ground for granting
such damages.48
An award of moral damages contemplates the existence of the following requisites: (1) there
must be an injury clearly sustained by the claimant, whether physical, mental or psychological;
(2) there must be a culpable act or omission factually established; (3) the wrongful act or
omission of the defendant is the proximate cause of the injury sustained by the claimant; and
(4) the award for damages is predicated on any of the cases stated in Article 2219 of the Civil
Code.49
Franco could not point to, or identify any particular circumstance in Article 2219 of the Civil
Code,50 upon which to base his claim for moral damages.1wphi1
Thus, not having acted in bad faith, BPI-FB cannot be held liable for moral damages under
Article 2220 of the Civil Code for breach of contract.51
We also deny the claim for exemplary damages. Franco should show that he is entitled to
moral, temperate, or compensatory damages before the court may even consider the question

of whether exemplary damages should be awarded to him.52 As there is no basis for the award
of moral damages, neither can exemplary damages be granted.
While it is a sound policy not to set a premium on the right to litigate, 53 we, however, find that
Franco is entitled to reasonable attorneys fees for having been compelled to go to court in
order to assert his right. Thus, we affirm the CAs grant of P75,000.00 as attorneys fees.
Attorneys fees may be awarded when a party is compelled to litigate or incur expenses to
protect his interest,54or when the court deems it just and equitable.55 In the case at bench, BPIFB refused to unfreeze the deposits of Franco despite the Makati RTCs Order Lifting the Order
of Attachment and Quiaoits unwavering assertion that the P400,000.00 was part of Francos
savings account. This refusal constrained Franco to incur expenses and litigate for almost two
(2) decades in order to protect his interests and recover his deposits. Therefore, this Court
deems it just and equitable to grant Franco P75,000.00 as attorneys fees. The award is
reasonable in view of the complexity of the issues and the time it has taken for this case to be
resolved.56
Sixth. As for the dismissal of BPI-FBs counter-claim, we uphold the Manila RTCs ruling, as
affirmed by the CA, that BPI-FB is not entitled to recover P3,800,000.00 as actual damages. BPIFBs alleged loss of profit as a result of Francos suit is, as already pointed out, of its own
making. Accordingly, the denial of its counter-claim is in order.
WHEREFORE, the petition is PARTIALLY GRANTED. The Court of Appeals Decision dated
November 29, 1995 is AFFIRMED with the MODIFICATION that the award of unearned interest
on the time deposit and of moral and exemplary damages is DELETED.
No pronouncement as to costs.
SO ORDERED.

CASE 5

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 104612 May 10, 1994

BANK OF THE PHILIPPINE ISLANDS (successor-in- interest of COMMERCIAL AND TRUST
CO.), petitioner,
vs.
HON. COURT OF APPEALS, EASTERN PLYWOOD CORP. and BENIGNO D. LIM, respondents.
Leonen, Ramirez & Associates for petitioner.
Constante A. Ancheta for private respondents.

DAVIDE, JR., J.:

The petitioner urges us to review and set aside the amended Decision 1 of 6 March 1992 of
respondent Court of Appeals in CA- G.R. CV No. 25739 which modified the Decision of 15
November 1990 of Branch 19 of the Regional Trial Court (RTC) of Manila in Civil Case No. 8742967, entitled Bank of the Philippine Islands (successor-in-interest of Commercial Bank and
Trust Company) versus Eastern Plywood Corporation and Benigno D. Lim. The Court of Appeals
had affirmed the dismissal of the complaint but had granted the defendants' counterclaim for
P331,261.44 which represents the outstanding balance of their account with the plaintiff.
As culled from the records and the pleadings of the parties, the following facts were duly
established:
Private respondents Eastern Plywood Corporation (Eastern) and
Benigno D. Lim (Lim), an officer and stockholder of Eastern, held at least one joint bank account
("and/or" account) with the Commercial Bank and Trust Co. (CBTC), the predecessor-in-interest
of petitioner Bank of the Philippine Islands (BPI). Sometime in March 1975, a joint checking
account ("and" account) with Lim in the amount of P120,000.00 was opened by Mariano
Velasco with funds withdrawn from the account of Eastern and/or Lim. Various amounts were

later deposited or withdrawn from the joint account of Velasco and Lim. The money therein
was placed in the money market.
Velasco died on 7 April 1977. At the time of his death, the outstanding balance of the account
stood at P662,522.87. On 5 May 1977, by virtue of an Indemnity Undertaking executed by Lim
for himself and as President and General Manager of Eastern, 2 one-half of this amount was
provisionally released and transferred to one of the bank accounts of Eastern with CBTC. 3
Thereafter, on 18 August 1978, Eastern obtained a loan of P73,000.00 from CBTC as "Additional
Working Capital," evidenced by the "Disclosure Statement on Loan/Credit Transaction"
(Disclosure Statement) signed by CBTC through its branch manager, Ceferino Jimenez, and
Eastern, through Lim, as its President and General Manager. 4 The loan was payable on demand
with interest at 14% per annum.
For this loan, Eastern issued on the same day a negotiable promissory note for P73,000.00
payable on demand to the order of CBTC with interest at 14% per annum. 5 The note was signed
by Lim both in his own capacity and as President and General Manager of Eastern. No reference
to any security for the loan appears on the note. In the Disclosure Statement, the box with the
printed word "UNSECURED" was marked with "X" meaning unsecured, while the line with
the words "this loan is wholly/partly secured by" is followed by the typewritten words "HoldOut on a 1:1 on C/A No. 2310-001-42," which refers to the joint account of Velasco and Lim
with a balance of P331,261.44.
In addition, Eastern and Lim, and CBTC signed another document entitled "Holdout
Agreement," also dated 18 August 1978, 6 wherein it was stated that "as security for the Loan
[Lim and Eastern] have offered [CBTC] and the latter accepts a holdout on said [Current
Account No. 2310-011-42 in the joint names of Lim and Velasco] to the full extent of their
alleged interests therein as these may appear as a result of final and definitive judicial action or
a settlement between and among the contesting parties thereto." 7 Paragraph 02 of the
Agreement provides as follows:
Eastply [Eastern] and Mr. Lim hereby confer upon Comtrust [CBTC], when and if
their alleged interests in the Account Balance shall have been established with
finality, ample and sufficient power as shall be necessary to retain said Account
Balance and enable Comtrust to apply the Account Balance for the purpose of
liquidating the Loan in respect of principal and/or accrued interest.
And paragraph 05 thereof reads:
The acceptance of this holdout shall not impair the right of Comtrust to declare
the loan payable on demand at any time, nor shall the existence hereof and the
non-resolution of the dispute between the contending parties in respect of
entitlement to the Account Balance, preclude Comtrust from instituting an
action for recovery against Eastply and/or Mr. Lim in the event the Loan is

declared due and payable and Eastply and/or Mr. Lim shall default in payment of
all obligations and liabilities thereunder.
In the meantime, a case for the settlement of Velasco's estate was filed with Branch 152 of the
RTC of Pasig, entitled "In re Intestate Estate of Mariano Velasco," and docketed as Sp. Proc. No.
8959. In the said case, the whole balance of P331,261.44 in the aforesaid joint account of
Velasco and Lim was being claimed as part of Velasco's estate. On 9 September 1986, the
intestate court granted the urgent motion of the heirs of Velasco to withdraw the deposit
under the joint account of Lim and Velasco and authorized the heirs to divide among
themselves the amount withdrawn. 8
Sometime in 1980, CBTC was merged with BPI. 9 On 2 December 1987, BPI filed with the RTC of
Manila a complaint against Lim and Eastern demanding payment of the promissory note for
P73,000.00. The complaint was docketed as Civil Case No. 87- 42967 and was raffled to Branch
19 of the said court, then presided over by Judge Wenceslao M. Polo. Defendants Lim and
Eastern, in turn, filed a counterclaim against BPI for the return of the balance in the disputed
account subject of the Holdout Agreement and the interests thereon after deducting the
amount due on the promissory note.
After due proceedings, the trial court rendered its decision on
15 November 1990 dismissing the complaint because BPI failed to make out its case.
Furthermore, it ruled that "the promissory note in question is subject to the 'hold-out'
agreement," 10 and that based on this agreement, "it was the duty of plaintiff Bank [BPI] to
debit the account of the defendants under the promissory note to set off the loan even though
the same has no fixed maturity." 11 As to the defendants' counterclaim, the trial court,
recognizing the fact that the entire amount in question had been withdrawn by Velasco's heirs
pursuant to the order of the intestate court in Sp. Proc. No. 8959, denied it because the "said
claim cannot be awarded without disturbing the resolution" of the intestate court. 12
Both parties appealed from the said decision to the Court of Appeals. Their appeal was
docketed as CA-G.R. CV No. 25739.
On 23 January 1991, the Court of Appeals rendered a decision affirming the decision of the trial
court. It, however, failed to rule on the defendants' (private respondents') partial appeal from
the trial court's denial of their counterclaim. Upon their motion for reconsideration, the Court
of Appeals promulgated on 6 March 1992 an Amended Decision 13 wherein it ruled that the
settlement of Velasco's estate had nothing to do with the claim of the defendants for the return
of the balance of their account with CBTC/BPI as they were not privy to that case, and that the
defendants, as depositors of CBTC/BPI, are the latter's creditors; hence, CBTC/BPI should have
protected the defendants' interest in Sp. Proc. No. 8959 when the said account was claimed by
Velasco's estate. It then ordered BPI "to pay defendants the amount of P331,261.44
representing the outstanding balance in the bank account of defendants." 14

On 22 April 1992, BPI filed the instant petition alleging therein that the Holdout Agreement in
question was subject to a suspensive condition stated therein, viz., that the "P331,261.44 shall
become a security for respondent Lim's promissory note only if respondents' Lim and Eastern
Plywood Corporation's interests to that amount are established as a result of a final and
definitive judicial action or a settlement between and among the contesting parties
thereto." 15 Hence, BPI asserts, the Court of Appeals erred in affirming the trial court's decision
dismissing the complaint on the ground that it was the duty of CBTC to debit the account of the
defendants to set off the amount of P73,000.00 covered by the promissory note.
Private respondents Eastern and Lim dispute the "suspensive condition" argument of the
petitioner. They interpret the findings of both the trial and appellate courts that the money
deposited in the joint account of Velasco and Lim came from Eastern and Lim's own account as
a finding that the money deposited in the joint account of Lim and Velasco "rightfully
belong[ed] to Eastern Plywood Corporation and/or Benigno Lim." And because the latter are
the rightful owners of the money in question, the suspensive condition does not find any
application in this case and the bank had the duty to set off this deposit with the loan. They add
that the ruling of the lower court that they own the disputed amount is the final and definitive
judicial action required by the Holdout Agreement; hence, the petitioner can only hold the
amount of P73,000.00 representing the security required for the note and must return the
rest. 16
The petitioner filed a Reply to the aforesaid Comment. The private respondents filed a
Rejoinder thereto.
We gave due course to the petition and required the parties to submit simultaneously their
memoranda.
The key issues in this case are whether BPI can demand payment of the loan of P73,000.00
despite the existence of the Holdout Agreement and whether BPI is still liable to the private
respondents on the account subject of the Holdout Agreement after its withdrawal by the heirs
of Velasco.
The collection suit of BPI is based on the promissory note for P73,000.00. On its face, the note is
an unconditional promise to pay the said amount, and as stated by the respondent Court of
Appeals, "[t]here is no question that the promissory note is a negotiable instrument." 17 It
further correctly ruled that BPI was not a holder in due course because the note was not
indorsed to BPI by the payee, CBTC. Only a negotiation by indorsement could have operated as
a valid transfer to make BPI a holder in due course. It acquired the note from CBTC by the
contract of merger or sale between the two banks. BPI, therefore, took the note subject to the
Holdout Agreement.
We disagree, however, with the Court of Appeals in its interpretation of the Holdout
Agreement. It is clear from paragraph 02 thereof that CBTC, or BPI as its successor-in-interest,
had every right to demand that Eastern and Lim settle their liability under the promissory note.

It cannot be compelled to retain and apply the deposit in Lim and Velasco's joint account to the
payment of the note. What the agreement conferred on CBTC was a power, not a duty.
Generally, a bank is under no duty or obligation to make the application. 18 To apply the deposit
to the payment of a loan is a privilege, a right of set-off which the bank has the option to
exercise. 19
Also, paragraph 05 of the Holdout Agreement itself states that notwithstanding the agreement,
CBTC was not in any way precluded from demanding payment from Eastern and from
instituting an action to recover payment of the loan. What it provides is an alternative, not an
exclusive, method of enforcing its claim on the note. When it demanded payment of the debt
directly from Eastern and Lim, BPI had opted not to exercise its right to apply part of the
deposit subject of the Holdout Agreement to the payment of the promissory note for
P73,000.00. Its suit for the enforcement of the note was then in order and it was error for the
trial court to dismiss it on the theory that it was set off by an equivalent portion in C/A No.
2310-001-42 which BPI should have debited. The Court of Appeals also erred in affirming such
dismissal.
The "suspensive condition" theory of the petitioner is, therefore, untenable.
The Court of Appeals correctly decided on the counterclaim. The counterclaim of Eastern and
Lim for the return of the P331,261.44 20 was equivalent to a demand that they be allowed to
withdraw their deposit with the bank. Article 1980 of the Civil Code expressly provides that
"[f]ixed, savings, and current deposits of money in banks and similar institutions shall be
governed by the provisions concerning simple loan." In Serrano vs. Central Bank of the
Philippines, 21we held that bank deposits are in the nature of irregular deposits; they are really
loans because they earn interest. The relationship then between a depositor and a bank is one
of creditor and debtor. The deposit under the questioned account was an ordinary bank
deposit; hence, it was payable on demand of the depositor. 22
The account was proved and established to belong to Eastern even if it was deposited in the
names of Lim and Velasco. As the real creditor of the bank, Eastern has the right to withdraw it
or to demand payment thereof. BPI cannot be relieved of its duty to pay Eastern simply
because it already allowed the heirs of Velasco to withdraw the whole balance of the account.
The petitioner should not have allowed such withdrawal because it had admitted in the
Holdout Agreement the questioned ownership of the money deposited in the account. As early
as 12 May 1979, CBTC was notified by the Corporate Secretary of Eastern that the deposit in
the joint account of Velasco and Lim was being claimed by them and that one-half was being
claimed by the heirs of Velasco. 23
Moreover, the order of the court in Sp. Proc. No. 8959 merely authorized the heirs of Velasco to
withdraw the account. BPI was not specifically ordered to release the account to the said heirs;
hence, it was under no judicial compulsion to do so. The authorization given to the heirs of
Velasco cannot be construed as a final determination or adjudication that the account belonged
to Velasco. We have ruled that when the ownership of a particular property is disputed, the

determination by a probate court of whether that property is included in the estate of a

deceased is merely provisional in character and cannot be the subject of execution. 24
Because the ownership of the deposit remained undetermined, BPI, as the debtor with respect
thereto, had no right to pay to persons other than those in whose favor the obligation was
constituted or whose right or authority to receive payment is indisputable. The payment of the
money deposited with BPI that will extinguish its obligation to the creditor-depositor is
payment to the person of the creditor or to one authorized by him or by the law to receive
it. 25 Payment made by the debtor to the wrong party does not extinguish the obligation as to
the creditor who is without fault or negligence, even if the debtor acted in utmost good faith
and by mistake as to the person of the creditor, or through error induced by fraud of a third
person. 26 The payment then by BPI to the heirs of Velasco, even if done in good faith, did not
extinguish its obligation to the true depositor, Eastern.
In the light of the above findings, the dismissal of the petitioner's complaint is reversed and set
aside. The award on the counterclaim is sustained subject to a modification of the interest.
WHEREFORE, the instant petition is partly GRANTED. The challenged amended decision in CAG.R. CV No. 25735 is hereby MODIFIED. As modified:
(1) Private respondents are ordered to pay the petitioner the promissory note
for P73,000.00 with interest at:
(a) 14% per annum on the principal, computed from
18 August 1978 until payment;
(b) 12% per annum on the interest which had accrued up to the
date of the filing of the complaint, computed from that date until
payment pursuant to Article 2212 of the Civil Code.
(2) The award of P331,264.44 in favor of the private respondents shall bear
interest at the rate of 12% per annum computed from the filing of the
counterclaim.
No pronouncement as to costs.
SO ORDERED.

CASE 6

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-61011 October 18, 1990
INSULAR BANK OF ASIA & AMERICA, INCORPORATED, petitioner,
vs.
HONORABLE COURT OF APPEALS, and COMMERCIAL CREDIT CORPORATION, respondents.
Sycip, Salazar, Feliciano & Hernandez for petitioner.
Augusto Kalaw for private respondent.

PADILLA, J.:
Petitioner Insular Bank of Asia and America (IBAA) made a money market placement with
respondent Commercial Credit Corporation (CCC) on 12 December 1980 in the amount of
P1,877,053.03. In consideration of such placement, Commercial Credit Corporation executed a
Non Negotiable Repurchase Agreement whereby it conveyed to IBAA securities issued by
International Corporate Bank (Interbank) with a face value of P2,000,000.00 and with a
maturity date of 22 April 1981. The parties (IBAA and CCC) also executed a resale agreement
which bound IBAA to re-sell to CCC the Interbank securities for P2,000,000.00 on 22 April 1981.
On due date (22 April 1981), CCC caused to be issued to IBAA a Commercial Bank and Trust Co.
(CBTC) cashier's check for P2,000,000.00 which was, however, dishonored upon presentment
for being drawn against uncollected deposits.
On 18 May 1981, IBAA advised CCC of the dishonor and demanded cash payment. In its reply,
CCC admitted difficulty in replacing the dishonored check and proposed payment on a
staggered basis, attaching to the proposal a copy of a Central Bank letter approving its (CCC's)
request for additional standby credit facility to meet its maturing money market placements.
Due to CCC's failure to meet its obligation despite demands, on 24 August 1981, IBAA filed an
action for recovery of sum of money with a prayer for the issuance of a writ of preliminary
attachment before the CFI of Rizal, Pasig, Branch X (docketed as Civil Case No. L-42585),
claiming that:

14. This is an action for money or property embezzled or fraudulently misapplied

or converted to his own use by defendant in a fiduciary capacity, or for a willful
violation of duty; this is an action against defendant who has been guilty of fraud
in contracting the debt or incurring the obligation upon which the action is
brought, or in concealing or disposing of the property for the taking, detention
or conversion of which the action is brought; this is an action against defendant
who has removed or disposed of his property, or is about to do so, with intent to
defraud his creditors. 1
On 20 October 1981, the CFI of Rizal issued an order granting the preliminary attachment
against real and personal properties of CCC. On 19 November 1981, CCC filed a petition for
certiorari with the Court of Appeals, docketed as CA-G.R. No. SP-13376-SCA, alleging grave
abuse of discretion amounting to lack of jurisdiction on the part of the RTC of Rizal in the
issuance of the attachment order.
Despite the issuance of a status quo order from the Court of Appeals, deposits of CCC with Bank
of the Philippine Islands and Far East Bank and Trust Co. were garnished. Heavy equipment
used in the construction of CCC's building in Makati and its office equipment were attached.
Two (2) urgent motions and a supplemental pleading were filed by CCC with the Court of
Appeals praying for release of the garnished funds and attached equipment. IBAA reiterated its
apprehension over CCC's financial viability and ability to pay 2 besides, IBAA claimed, it (CCC)
never had any serious intention to pay at the inception of the money market placement
transaction such that the intention to defraud the bank (IBAA) was very apparent. The
circumstances in the case at bar fall, according to IBAA, under Rule 57, Section 1 (d), 3 of the
Rules of Court.
In setting aside the RTC order of attachment, the Court of Appeals, in its decision, * held:
Petitioner (meaning, CCC) operates as an on-going concern. While
it is apparent that it is in a financial crisis with the Central Bank's
grant of an additional standby credit facility of P20 million in favor
of the latter, the attachment of its property will unduly hinder any
transaction where it can regain its financial solvency to meet its
obligations. ...
xxx xxx xxx
It is true that petitioner failed to pay the private respondent the
sum of P2,000,000.00 due to its financial difficulty at the time of
the maturity date for the payment of P2,000,000.00 but We find
no reason to uphold the order of attachment issued by the
respondent judge on October 20, 1981 where there is no showing
that the petitioner was performing acts to defraud its creditors or
by disposing its assets to the prejudice of its creditors or persons

who may have a claim to its assets. On the other hand, the
withdrawal of petitioner's bank deposits in the Far East Bank and
Trust Company (which were then subject to the garnishment
proceedings by the respondent Deputy Sheriff) was intended to
finance the operations of the petitioner as an on-going concern, in
payment of wages of its employees.
Not satisfied with the Court of Appeals decision, the present petition for review was filed by
petitioner bank.
There is insufficient merit in the petition. Essentially, the only question is whether or not the
questioned Court of Appeals decision setting aside the order of the CFI of Rizal, Branch X, Pasig
granting a writ of preliminary attachment upon a complaint for collection of a sum of money
which the respondent CCC allegedly fraudulently contracted and now has difficulty paying, is in
accordance with law or a reversible error.
The purpose of attachment is to secure a contingent lien on defendant's property until plaintiff
can obtain a judgment and have such property applied to its satisfaction or to make provision
for unsecured debts in such cases where the means of satisfaction thereof are liable to be
removed beyond the jurisdiction or improperly disposed of (by fraud or otherwise) or
concealed or placed beyond the reach of creditors . 4
Petitioner claims that at the time the obligation was incurred by respondent CCC the latter
already had the fraudulent intent not to pay the obligation or indebtedness. This contention is
not borne out by the records. Upon the other hand, respondent CCC has not denied that it was
undergoing financial difficulties and had in fact called a creditor's meeting 5 to make full
disclosure of its business condition and negotiate for payment of its outstanding obligations.
Petitioner also claims there was an incipient misrepresentation regarding respondent's capacity
to pay. The Court of Appeals found, on the other hand, that there was no dissipation of assets,
in fact, respondent's withdrawal of money from Far East Bank and Trust Co. was intended to
finance its operations. Inability to pay, we rule, is not necessarily synonymous with fraudulent
intent not to honor an admitted obligation.
There is thus no reversible error in the questioned Court of Appeals decision which we find to
be in accordance with law.
WHEREFORE, the petition is DENIED. The Court of Appeals decision in CA-G.R. No. SP-13376SCA is AFFIRMED in toto.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 71479 October 18, 1990
MELLON BANK, N.A., petitioner,
vs.
HON. CELSO L. MAGSINO, in his capacity as Presiding Judge of Branch CLIX of the Regional
Trial Court at Pasig; MELCHOR JAVIER, JR., VICTORIA JAVIER; HEIRS OF HONORIO POBLADOR,
JR., namely: Elsa Alunan Poblador, Honorio Poblador III, Rafael Poblador, Manuel Poblador,
Ma. Regina Poblador, Ma. Concepcion Poblador & Ma. Dolores Poblador; F.C. HAGEDORN &
CO., INC.; DOMINGO JHOCSON, JR.; JOSE MARQUEZ; ROBERTO GARINO; ELNOR INVESTMENT
CO., INC.; PARAMOUNT FINANCE CORPORATION; RAFAEL CABALLERO; and TRI-ARC
INVESTMENT and MANAGEMENT CO., INC.respondents.
Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for petitioner.
Jose Buendia for respondent Jose Marquez.
Raul L. Cornea & Associates for Jhocson and Garino.
Jesus L. Santos and Conrado Valera for Tri-Arc Investment, etc.
Bernardo D. Calderon for respondent ELNOR and Rafael Caballero.
Nazareno, Azada, Sabado & Dizon for Movants.
Balgos & Perez for Paramount Finance Corporation.
Meer, Meer & Meer for Hagedorn.
Alberto Villareza for F.C. Hagedorn & Co.

FERNAN, C.J.:
The issue in the instant special civil action of certiorari is whether or not, by virtue of the
principle of election of remedies, an action filed in California, U.S.A., to recover real property
located therein and to constitute a constructive trust on said property precludes the filing in
our jurisdiction of an action to recover the purchase price of said real property.

On May 27, 1977, Dolores Ventosa requested the transfer of $1,000 from the First National
Bank of Moundsville, West Virginia, U.S.A. to Victoria Javier in Manila through the Prudential
Bank. Accordingly, the First National Bank requested the petitioner, Mellon Bank, to effect the
transfer. Unfortunately the wire sent by Mellon Bank to Manufacturers Hanover Bank, a
correspondent of Prudential Bank, indicated the amount transferred as "US$1,000,000.00"
instead of US$1,000.00. Hence Manufacturers Hanover Bank transferred one million dollars less
bank charges of $6.30 to the Prudential Bank for the account of Victoria Javier.
On June 3, 1977, Javier opened a new dollar account (No. 343) in the Prudential Bank and
deposited $999,943.70. Immediately their, Victoria Javier and her husband, Melchor Javier, Jr.,
made withdrawals from the account, deposited them in several banks only to withdraw them
later in an apparent plan to conceal, "launder" and dissipate the erroneously sent amount.
On June 14, 1977, Javier withdrew $475,000 from account No. 343 and converted it into eight
cashier's checks made out to the following: (a) F.C. Hagedorn & Co., Inc., two cheeks for the
total amount of P1,000,000; (b) Elnor Investment Co., Inc., two checks for P1,000,000; (c)
Paramount Finance Corporation, two checks for P1,000,000; and (d) M. Javier, Jr., two checks
for P496,000. The first six checks were delivered to Jose Marquez and Honorio Poblador, Jr.
It appears that Melchor Javier, Jr. had requested Jose Marquez, a realtor, to look for properties
for sale in the United States. Marquez offered a 160-acre lot in the Mojave desert in California
City which was owned by Honorio Poblador, Jr. Javier, without having seen the property, agreed
to buy it for P3,236,800 (US$437,405) although it was actually appraised at around $38,500.
Consequently, as Poblador's agent, Marquez executed in Makati a deed of absolute sale in favor
of the Javiers and had the document notarized in Manila before an associate of Poblador.
Marquez executed another deed of sale indicating receipt of the purchase price and sent the
deed to the Kern County Registrar in California for registration.
Inasmuch as Poblador had requested that the purchase price should not be paid directly to him,
the payment of P3,000,000 was coursed through Elnor Investment Co., Inc., allegedly
Poblador's personal holding company; Paramount Finance, allegedly headed by Poblador's
brother, and F.C. Hagedorn, allegedly a stock brokerage with extensive dealings with Poblador.
The payment was made through the aforementioned six cashier's checks while the balance of
P236,000 was paid in cash by Javier who did not even ask for a receipt.
The two checks totalling P1,000,000 was delivered by Poblador to F.C. Hagedorn with specific
instructions to purchase Atlas, SMC and Philex shares. The four checks for P2,000,000 with
Elnor Investment and Paramount Finance as payees were delivered to the latter to purchase
"bearer" notes.
Meanwhile, in July, 1977, Mellon Bank filed a complaint docketed as No. 148056 in the Superior
Court of California, County of Kern, against Melchor Javier, Jane Doe Javier, Honorio Poblador,
Jrn, and Does I through V. In its first amended complaint to impose constructive trust dated July
14, 1977, 1 Mellon Bank alleged that it had mistakenly and inadvertently cause the transfer of

the sum of $999,000.00 to Jane Doe Javier; that it believes that the defendants had withdrawn
said funds; that "the defendants and each of them have used a portion of said funds to
purchase real property located in Kern County, California"; and that because of defendants'
knowledge of Mellon Bank's mistake and inadvertence and their use of the funds to purchase
the property, they and "each of them are involuntary or constructive trustees of the real
property and of any profits therefrom, with a duty to convey the same to plaintiff forthwith." It
prayed that the defendants and each of them be declared as holders of the property in trust for
the plaintiff; that defendants be compelled to transfer legal title and possession of the property
to the plaintiff; that defendants be made to pay the costs of the suit, and that other reliefs be
granted them.
On July 29, 1977, Mellon Bank also filed in the Court of First Instance of Rizal, Branch X, a
complaint against the Javier spouses, Honorio Poblador, Jr., Domingo L. Jhocson, Jr., Jose
Marquez, Roberto Gario, Elnor Investment Co., Inc., F.C. Hagedorn & Co., Inc. and Paramount
Finance Corporation. After its amendment, Rafael Caballero and Tri-Arc Investment &
Management Company, Inc. were also named defendants. 2
The amended and supplemental complaint alleged the facts set forth above and added that
Roberto Gario, chief accountant of Prudential Bank, and who was the reference of Mrs.
Ventosa's dollar remittances to Victoria Javier, immediately informed the Javiers of the receipt
of US$1,000,000.00; that knowing the financial circumstances of Mrs. Ventosa and the fact that
a mistake had been committed, the Javiers, with undue haste, took unlawful advantage of the
mistake, withdrew the whole amount and transferred the same to a "343 dollar account"; that,
aided and abetted by Poblador and Domingo L. Jhocson, the Javiers "compounded and
completed the conversion" of the funds by withdrawing from the account dollars or pesos
equivalent to US $975,000; that by force of law, the Javiers had been constituted trustees of an
implied trust for the benefit of Mellon Bank with a clear duty to return to said bank the moneys
mistakenly paid to them; that, upon request of Mellon Bank and Manufacturers Hanover Bank,
Prudential Bank informed the Javiers of the erroneous transmittal of one million dollars first
orally and later by letter-demand; that conferences between the representatives of the Javiers,
led by Jhocson and Poblador, in the latter's capacity as legal and financial counsel, and
representatives of Mellon Bank, proved futile as the Javiers claimed that most of the moneys
had been irretrievably spent; that the Javiers could only return the amount if the Mellon Bank
should agree to make an absolute quitclaim and waiver of future rights against them, and that
in a scheme to conceal and dissipate the funds, through the active participation of Jose
Marquez, the Javiers bought the California property of Poblador.
It further alleged that trust fund moneys totalling P3,000,000.00 were made payable to
Hagedorn Paramount and Elnor; that Hagedorn on instructions of Poblador, purchased shares
of stock at a stock exchange for P1,000,000.00 but later, it hastily sold said shares at a loss of
approximately P150,000.00 to the prejudice of the plaintiff; that proceeds of the sale were
deposited by Hagedorn in the name of Poblador and/or the law office of Poblador, Nazareno,
Azada, Tomacruz and Paredes; that dividends declared on the shares were delivered by
Hagedorn to Caballero after the complaint had been filed and thereafter, Caballero deposited

the dividends in his personal account; that after receiving the P1,000,000.00 trust money,
Paramount issued promissory notes upon maturity of which Paramount released the amount to
unknown persons; that Elnor also invested P1,000,000.00 in Paramount for which the latter
also issued promissory notes; that after the filing of the complaint, counsel for plaintiff
requested Paramount not to release the amount after maturity; that in evident bad faith, Elnor
transferred the non-negotiable Paramount promissory notes to Tri-Arc. that when the notes
matured, Paramount delivered the proceeds of P1,000,000.00 to Tri-Arc; that Poblador knew or
should have known that the attorney's fees he received from the Javiers came from the trust
funds; and that despite formal demands even after the filing of the complaint, the defendants
refused to return the trust funds which they continued concealing and dissipating.
It prayed that: (a) the Javiers, Poblador, Elnor, Jhocson and Gario be ordered to account for
and pay jointly and severally unto the plaintiff US$999,000.00 plus increments, additions, fruits
and interests earned by the funds from receipt thereof until fully paid; (b) the other defendants
be ordered to account for and pay unto the plaintiff jointly and severally with the Javiers to the
extent of the amounts which each of them may have received directly or indirectly from the
US$999,000.00 plus increments, additions, fruits and interests; (c) Marquez be held jointly and
severally liable with Poblador for the amount received by the latter for the sale of the 160-acre
lot in California City; and (d) defendants be likewise held liable jointly and severally for
attomey's fees and litigation expenses plus exemplary damages.
In due course, the defendants filed their answers and hearing of the case ensued. In his
testimony, Jose Marquez stated that Prudential Bank and Trust Company checks Nos. 2530 and
2531 in the respective amounts of P100,000 and P900,000 payable to F. C. Hagedorn were
delivered to him by Melchor Javier, Jr. as partial consideration for the sale of Poblador's
property in California. After receiving the checks, Hagedorn purchased shares of Atlas Mining,
Philex, Marcopper and San Miguel Corporation for Account No. 3000, which, according to Fred
Hagedorn belonged to the law office of Poblador. 3
F.C. Hagedorn & Co., Inc. then sold the shares for P874,490.75 as evidenced by HSBC check No.
339736 for P400,000 and HSBC check No. 339737 for P474,490.75 payable to "cash". Mellon
Bank traced these checks to Account 2825-1 of the Philippine Veterans Bank in the name of
Cipriano Azada, Poblador's law partner and counsel to the Javiers. 4
An employee of the Philippine Veterans Bank thereafter introduced the specimen signature
cards for Account No. 2825-1 thereby confirming Azada's ownership of the account. Defendants
objected to this testimony on the grounds of Azada's absence, the confidentiality of the bank
account, and the best evidence rule. The court overruled the objection. Another employee of
the Philippine Veterans Bank then presented the ledger card for Account No. 2825-1, a check
deposit slip and a daily report of returned items. The defendants objected but they were again
overruled by the court.
Mellon Bank then subpoenaed Erlinda Baylosis of the Philippine Veterans Bank to show that
Azada deposited HSBC checks No. 339736 and 339737 amounting to P874,490.75 in his

personal current account with said bank. It also subpoenaed Pilologo Red, Jr. of Hongkong &
Shanghai Banking Corporation to prove that said amount was returned by Azada to Hagedorn.
The testimonies of these witnesses were objected to by the defense on the grounds of res inter
alios acta, immateriality, irrelevancy and confidentiality. To resolve the matter, the court
ordered the parties to submit memoranda. The defendants' objections were also discussed at
the hearing on July 13, 1982. For the first time, Poblador's counsel raised the matter of
"election of remedies." 5
At the July 20, 1982 hearing, the lower court, then presided by Judge Eficio Acosta,
conditionally allowed the testimonies of Baylosis and Red. Baylosis afffirmed that Azada
deposited checks Nos. 339736 and 339737 in the total amount of P874,490.75 in his personal
account with the Philippine Veterans Bank but almost simultaneously, Azada issued his PVB
check for the same amount in favor of Hagedorn Consequently, Azada's check initially bounced.
For his part, Red testified that Azada's check for P874,490.75 was received by the Hongkong &
Shanghai Banking Corporation and credited to the account of Hagedorn .
The defendants then moved to strike off the testimonies of Baylosis and Red from the record.
Defendant Paramount Finance Corporation, which is not a party to the California case,
thereafter filed its memorandum raising the matter of "election of remedies". It averred that
inasmuch as the Mellon Bank had filed in California an action to impose constructive trust on
the California property and to recover the same, Mellon Bank can no longer try to regain the
purchase price of the same property through Civil Case No. 26899. The other defendants
adopted Paramount's stand.
After Mellon Bank filed its reply to the memorandum of Paramount, on September 10, 1982,
Judge Acosta issued a resolution ordering that the testimonies of Baylosis and Red and the
documents they testified on, which were conditionally allowed, be stricken from the
records. 6 Judge Acosta explained:
After a judicious evaluation of the arguments of the parties the Court is of the
view that in cases where money held in trust was diverted by the trustee, under
the "rule of trust pursuit" the beneficiary "may elect whether to accept the trust
estate in its new form or hold the trustee responsible for it in its original
condition" (Lathrop vs. Hampton, 31 Cal. 17; Zodos vs. Marefalos 48 Idaho 291;
Bahle vs. Hasselbrach 64 NW Eq. 334, 51 Sections 508-76 Am Jur. 2d p. 475), and
that "an election to pursue one remedy waives and bars pursuit of any
inconsistent remedy"(76 Am Jur. 2d S253). The instant complaint among others
is for the recovery of the purchase price of the Kern property as held in trust for
the plaintiff while in the California case the plaintiff maintains that the Kern
property is held in trust for the plaintiff, which positions are inconsistent with
each other. Neither can the plaintiff now abandon his complaint for the recovery
of the Kern property and pursue his complaint for the recovery of the purchase
price of said property for "if he has first sought to follow the res, the plaintiff

cannot thereafter hold the trustee personally responsible" and "when once
there has been an election to do one of two things, you cannot retract it and do
the other thing. The election once made is finally made." (Fowler vs. Bowvery
Savings Bank 113 N.Y. 450, 21 N.E. 172, 4 LRA 145, 10 Am. S.R. 479. 2 Silv. 280,
23, Abb. N. Cos. 133065 C. J. p. 980 Note 32).
The fact that the California case has been stayed pending determination of the
instant case only means that should this case be dismissed, the California case
can proceed to its final determination.
Furthermore, when the plaintiff filed the California case for the transfer of legal
title and possession of the Kern property to the plaintiff it in effect ratified the
transaction for "by taking the proceeds or product of a wrongful transfer of trust
property or funds, the beneficiary ratifies the transaction" (Board of
Commissioner vs. Strawn [CA6 Ohio] 157 F. 49, 76 Am Jur. 2d Section 253).
Consequently the purchase price of the California property received by
defendant Poblador from Javier is no longer the proper subject matter of
litigation and the movement and disposition of the purchase price is therefore
within the scope of the absolutely confidential nature of bank deposits as
provided by Sec. 2, R.A. 1405 as amended by PD No. 1792.
Mellon Bank moved for reconsideration, alleging that said order prevented the presentation of
evidence on the purchase price of the California property; that the California case cannot be
considered a waiver of the pursuit of the purchase price as even if said case was filed fifteen
days prior to the filing of the original complaint in this case, except for the Javiers, no other
defendants raised in their answers the affirmative defense of the filing of the California case;
that after the amendment of the complaint, none of the defendants raised the matter of
"election of remedies" in their answers; that realizing this procedural error, Paramount sought
the amendment of its answer to reflect the "defence" of "election of remedies"; that,
disregarding its previous orders allowing evidence and testimonies on Account No. 2825-1, the
court made a turnabout and ruled that the testimonies on said account were irrelevant and
confidential under Republic Act No. 1405; that Philippine law and jurisprudence does not
require the election of remedies for they favor availment of all remedies; that even United
States jurisprudence frowns upon election of remedies if it will lead to an inequitable result;
that, as held by this Court in Radiowealth vs. Javier, 7 there can be no binding election of
remedies before the decision on the merits is had; that until Mellon Bank gets full recovery of
the trust moneys, any contention of election of remedy is premature, and that, the purchase
price being the subject of litigation, inquiring into its movement, including its deposit in banks,
is allowed under Republic Act No. 1405.
Defendants filed their respective comments and oppositions to the motion for reconsideration.
In its reply, the Mellon Bank presented proof to the effect that in the California case,
defendants filed motions to stake out the cross-complaint of Mellon Bank, for summary
judgment and to stay or dismiss the action on the ground of inconvenient forum but the first

two motions and the motion to dismiss were denied "without prejudice to renew upon
determination of the Philippine action." The motion to stay proceedings was "granted until
determination of the Philippine action." 8
On October 28, 1983, the lower court, through Judge Acosta, denied the motion for
reconsideration and ordered the continuation of the hearing (Rollo, p. 182). The plaintiff filed a
motion for the reconsideration of both the September 10, 1982 and October 28, 1983 orders.
After the parties had filed comments, opposition and reply, the court, through Judge Celso L.
Magsino, denied Mellon Bank's second motion for reconsideration on the ground that it was
"prescribed by the 1983 Interim Rules of Court" in an order dated July 9, 1985. 9
The court ruled that the determination of the relevancy of the testimonies of Baylosis and Red
was "premised directly and principally" on whether or not Mellon Bank could still recover the
purchase price of the California property notwithstanding the filing of the case in California to
recover title and possession of the said property. After quoting the resolution of September 10,
1982, the Court ruled that it was a "final order or a definitive judgment with respect to the
claim of plaintiff for the recovery" of the purchase price of the California property. It stated:
The adjudication in the Order of September 10, 1982 and the Order of October
28, 1983, which has the effect of declaring that plaintiff has no cause of action
against the defendants for the recovery of the proceeds of the sale of Kern
property in the amount of Three Million Three Hundred Fifty Thousand Pesos
(P3,500,000.00 [sic]) for having filed a complaint for the recovery of the Kern
property in the Superior Court of California, County of Kern is a final and
definitive disposition of the claim of the plaintiff to recover in the instant action
the proceeds of sale of said property against the defendants. The issue of
"election of remedy" by the plaintiff was lengthily and thoroughly discussed and
argued by the parties before the rendition of the resolution of September 10,
1982, and in the motion for reconsideration and oppositions thereto before its
resolution in the Order of October 28, 1983. Such issue is a substantive one as it
refers to the existence of plaintiffs cause of action to recover the proceeds of the
sale of the Kern property in this action, and that issue was presented to the Court
as if a motion to dismiss or a preliminary hearing of an affirmative defense on the
ground that plaintiff has no cause of action, and was resolved against plaintiff in
the Order of September 10, 1982, after a full hearing of all the parties. Said Order
of September 10, 1982 has the effect of putting an end to the controversy
between the parties as to the right of plaintiff to claim or recover the proceeds
of the sale of the Kern property from the defendants. It is therefore an
adjudication upon the merits. 10
Hence, Mellon Bank filed the instant petition for certiorari claiming that the resolution of
September 10, 1982 and the orders of October 28, 1983 and July 9, 1985 are void for being
unlawful and oppressive exercises of legal authority, subversive of the fair administration of
justice, and in excess of jurisdiction. The petition is founded on its allegations that: (a) the

resolution of September 10, 1982 is interlocutory as it does not dispose of Civil Case No. 26899
completely: (b) the evidence stricken from the records is relevant on the basis of the allegations
of the amended and supplemental complaint, and (c) the doctrine of election of remedies,
which has long been declared obsolete in the United States, is not applicable in this case.
With the exception of the Javiers, all the respondents filed their respective comments on the
petition. Having failed to file said comment, the Javiers' counsel of record, Azada, Tomacruz &
Cacanindin, 11 was required to show cause why disciplinary action should not be taken against
it. And, having also failed to show cause, it was fined P300.
In his motion for reconsideration of the resolution imposing said fine, Cipriano Azada alleged
that in Civil Case No. 26899, the Javiers were indeed represented by the law firm of Poblador,
Azada, Tomacruz & Cacanindin but he was never the lawyer of the Javiers' in his personal
capacity; that after the death of Honorio Poblador, Jr., he had withdrawn from the partnership;
that he is the counsel of the Administratrix of the Estate of Honorio Poblador, Jr. for which he
had filed a comment, and that should the Court still require him to file comment for the Javiers
despite the lack of client-lawyer relationship, he would adopt the comment he had filed for the
said Administratrix.12
In its effort to locate the Javiers so that their side could be heard, we required the petitioner to
furnish us with the Javiers' address as well as the name and address of their counsel. 13 In
compliance therewith, counsel for petitioner manifested that the Javiers had two known
addresses in San Juan, Metro Manila and in Sampaloc, Manila; that since their conviction in
Crim. Case No. CCC-VII 2369-P.C. of the Pasig Regional Trial Court, the Javiers had gone into
hiding and warrants for their arrest still remain unserved; 14 that the Javiers' counsel of record
in Civil Case No. 26899 is Atty. Cipriano Azada; that the same counsel appeared for the Javiers
in Criminal Case No. 39851 of the Pasig Regional Trial Court which is a tax evasion case filed by
the Republic of the Philippines, and that during the hearings of the civil and tax evasion cases
against the Javiers, Atty. Cipriano Azada, Jr. represented them. 15
Inasmuch as copies of the resolution requiring comment on the petition and the petition itself
addressed to Melchor Javier were returned with the notations "moved" and "deceased", the
Court required that said copies be sent to Mrs. Javier herself and that petitioner should inform
the Court of the veracity of Javier's death. 16 A copy of the resolution addressed to Mrs. Javier
was returned also with the notation "deceased." 17
Counsel for petitioner accordingly informed the Court that he learned that the Javiers had fled
the country and that he had no way of verifying whether Melchor Javier had indeed died. 18
In view of these circumstances, the Javiers' comment on the petition shall be dispensed with as
the Court deems the pleadings filed by the parties sufficient bases for resolving this case. The
Javiers shall be served copies of this decision in accordance with Section 6, Rule 13 of the Rules
of Court by delivering said copies to the clerk of court of the lower court, with proof of failure of
both personal service and service by mail.

We hold that the lower court gravely abused its discretion in ruling that the resolution of
September 10, 1982 is a "final and definitive disposition" of petitioner's claim for the purchase
price of the Kern property. The resolution is interlocutory and means no more than what it
states in its dispositive portion-the testimonies of Baylosis and Red and the documents they
testified on, should be stricken from the record.
That the resolution discusses the common-law principle of election of remedies, a subject
matter which shall be dealt with later, is beside the point. It is interlocutory because the issue
resolved therein is merely the admissibility of the plaintiff's evidence. 19 As such, it does not
dispose of the case completely but leaves something more to be done upon its merits. 20 There
are things left undone in Civil Case No. 26899 after the issuance of the September 10, 1982
resolution not only because of its explicit dispositive portion but also due to the fact that even
until now, the case is still pending and being heard. 21
Furthermore, the lower court's holding in its July 9, 1985 order that petitioner's second motion
for reconsideration is proscribed by the 1983 Interim Rules of Court which disallows such
motion on a final order or judgment, should be rectified. As explained above, the resolution of
September 10, 1982 is not a final one. It also contains conclusions on procedural matters which,
if left unchecked, would prejudice petitioner's substantive rights.
In effect, therefore, the July 9, 1985 order is a shortcut disposition of Civil Case No. 26899 in
total disregard of petitioner's right to a thorough ventilation of its claims. By putting a premium
on procedural technicalities over the resolution of the merits of the case, the lower court rode
roughshod over the basic judicial tenet that litigations should, as much as possible, be decided
on their merits and not on technicalities. 22 The trial court's patent grave abuse of discretion
therefore forces us to exercise supervisory authority to correct its errors notwithstanding the
fact that ordinarily, this Court would not entertain a petition for certiorari questioning the
legality and validity of an interlocutory order.23
Respondents' principal objection to the testimonies of Baylosis and Red is their alleged
irrelevance to the issues raised in Civil Case No. 26899. The fallacy of this objection comes to
fore upon a scrutiny of the complaint. Petitioner's theory therein is that after the Javiers had
maliciously appropriated unto themselves $999,000, the other private respondents conspired
and participated in the concealment and dissipation of said amount. The testimonies of Baylosis
and Red are therefore needed to establish the scheme to hide the erroneously sent amount.
Private respondents' protestations that to allow the questioned testimonies to remain on
record would be in violation of the provisions of Republic Act No. 1405 on the secrecy of bank
deposits, is unfounded. Section 2 of said law allows the disclosure of bank deposits in cases
where the money deposited is the subject matter of the litigation. 24 Inasmuch as Civil Case No.
26899 is aimed at recovering the amount converted by the Javiers for their own benefit,
necessarily, an inquiry into the whereabouts of the illegally acquired amount extends to
whatever is concealed by being held or recorded in the name of persons other than the one
responsible for the illegal acquisition. 25

We view respondents' reliance on the procedural principle of election of remedies as part of

their ploy to terminate Civil Case No. 26899 prematurely. With the exception of the Javiers,
respondents failed to raise it as a defense in their answers and therefore, by virtue of Section 2,
Rule 9 of the Rules of Court, such defense is deemed waived.26 Notwithstanding its lengthy and
thorough discussion during the hearing and in pleadings subsequent to the answers, the issue
of election of remedies has not, contrary to the lower court's assertion, been elevated to a
"substantive one." Having been waived as a defense, it cannot be treated as if it has been raised
in a motion to dismiss based on the nonexistence of a cause of action.
Moreover, granting that the defense was properly raised, it is inapplicable in this case. In its
broad sense, election of remedies refers to the choice by a party to an action of one of two or
more coexisting remedial rights, where several such rights arise out of the same facts, but the
term has been generally limited to a choice by a party between inconsistent remedial rights, the
assertion of one being necessarily repugnant to, or a repudiation of, the other. In its technical
and more restricted sense, election of remedies is the adoption of one of two or more
coexisting remedies, with the effect of precluding a resort to the others. 27
As a technical rule of procedure, the purpose of the doctrine of election of remedies is not to
prevent recourse to any remedy, but to prevent double redress for a single wrong. 28 It is
regarded as an application of the law of estoppel, upon the theory that a party cannot, in the
assertion of his right occupy inconsistent positions which form the basis of his respective
remedies. However, when a certain state of facts under the law entitles a party to alternative
remedies, both founded upon the Identical state of facts, these remedies are not considered
inconsistent remedies. In such case, the invocation of one remedy is not an election which will
bar the other, unless the suit upon the remedy first invoked shall reach the stage of final
adjudication or unless by the invocation of the remedy first sought to be enforced, the plaintiff
shall have gained an advantage thereby or caused detriment or change of situation to the
other. 29 It must be pointed out that ordinarily, election of remedies is not made until the
judicial proceedings has gone to judgment on the merits. 30
Consonant with these rulings, this Court, through Justice J.B.L. Reyes, opined that while some
American authorities hold that the mere initiation of proceedings constitutes a binding choice
of remedies that precludes pursuit of alternative courses, the better rule is that no binding
election occurs before a decision on the merits is had or a detriment to the other party
supervenes. 31 This is because the principle of election of remedies is discordant with the
modern procedural concepts embodied in the Code of Civil Procedure which Permits a party to
seek inconsistent remedies in his claim for relief without being required to elect between them
at the pleading stage of the litigation. 32
It should be noted that the remedies pursued in the California case and in Civil Case No. 26899
are not exactly repugnant or inconsistent with each other. If ever, they are merely alternative in
view of the inclusion of parties in the latter case who are not named defendants in the former.
The causes of action, although they all stem from the erroneous transmittal of dollars, are
distinct as shown by the complaints lengthily set out above. The bar of an election of remedies

does not apply to the assertion of distinct causes of action against different persons arising out
of independent transactions. 33
As correctly pointed out by the petitioner, the doctrine of election of remedies is not favored in
the United States for being harsh. 34 Its application with regard to two cases filed in two
different jurisdictions is also circumscribed by jurisprudence on abatement of suits. Thus,
in Brooks Erection Co. v. William R. Montgomery & Associates, Inc., 35 it is held:
The pendency of an action in the courts of one state or country is not a bar to
the institution of another action between the same parties and for the same
cause of action in a court of another state or country, nor is it the duty of the
court in which the latter action is brought to stay the same pending a
determination of the earlier action, even though the court in which the earlier
action is brought has jurisdiction sufficient to dispose of the entire controversy.
Nevertheless, sometimes stated as a matter of comity not of right, it is usual for
the court in which the later action is brought to stay proceedings under such
circumstances until the earlier action is determined.
However, in view of the fact that the California court wherein the case for recovery of the Kern
property was first filed against the Javiers had stayed proceedings therein until after the
termination of Civil Case No. 26899, the court below can do no less than expedite the
disposition of said case.
We cannot dispose of this case without condemning in the strongest terms possible the acts of
chicanery so apparent from the records. The respective liabilities of the respondents are still
being determined by the court below. We must warn, however, against the use of technicalities
and obstructive tactics to delay a just settlement of this case. The taking advantage of the
petitioner's mistake to gain sudden and undeserved wealth is marked by circumstances so
brazen and shocking that any further delay will reflect poorly on the kind of justice our courts
dispense. The possible involvement of lawyers in this sorry scheme stamps a black mark on the
legal profession. The Integrated Bar of the Philippines (IBP) must be made aware of the
ostensible participation, if not instigation, in the spiriting away of the missing funds. The IBP
must take the proper action at the appropriate time against all lawyers involved in any
misdeeds arising from this case.
WHEREFORE, the resolution of September 10, 1982 and the orders of October 28, 1982 and July
9, 1985 are hereby annulled. The lower court is ordered to proceed with dispatch in the
disposition of Civil case No. 26899, considering that thirteen (13) years have gone by since the
original erroneous remittance.
Service of this decision on the Javier spouses shall be in accordance with Section 6, Rule 13 of
the Rules of Court. A copy of this decision shall be served on the Integrated Bar of the
Philippines.

The decision is immediately executory. Costs against private respondents.

SO ORDERED.