Beruflich Dokumente
Kultur Dokumente
40% commission to her if the goods are sold; otherwise the money would
be returned to Rosales. Consequently, Rosales gave several cash
advances to Liwanag and Tabligan amounting to P633,650.00.
During the first two months, Liwanag and Tabligan made periodic
visits to Rosales to report on the progress of the transactions. The visits,
however, suddenly stopped, and all efforts by Rosales to obtain
information regarding their business proved futile.
Alarmed by this development and believing that the amounts she
advanced were being misappropriated, Rosales filed a case of estafa
against Liwanag.
After trial on the merits, the trial court rendered a decision dated
January 9, 1991, finding Liwanag guilty as charged. The dispositive
portion of the decision reads thus:
WHEREFORE, the Court holds, that the prosecution has established the
guilt of the accused, beyond reasonable doubt, and therefore, imposes
upon the accused, Carmen Liwanag, an Indeterminate Penalty of SIX (6)
YEARS, EIGHT (8) MONTHS AND TWENTY ONE (21) DAYS OF
PRISION CORRECCIONAL TO FOURTEEN (14) YEARS AND EIGHT (8)
MONTHS OF PRISION MAYOR AS MAXIMUM, AND TO PAY THE
COSTS.
The accused is likewise ordered to reimburse the private complainant the
sum of P526,650.00, without subsidiary imprisonment, in case of
insolvency.
Page |1
SO ORDERED.
CREDIT TRANSACTION
Received from Mrs. Isidora P. Rosales the sum of FIVE HUNDRED
TWENTY SIX THOUSAND AND SIX HUNDRED FIFTY PESOS
(P526,650.00) Philippine Currency, to purchase cigarrets (sic) (Philip &
Marlboro) to be sold to customers. In the event the said cigarrets (sic) are
not sold, the proceeds of the sale or the said products (shall) be returned
to said Mrs. Isidora P. Rosales the said amount of P526,650.00 or the said
items on or before August 30, 1988.
(SGD & Thumbedmarked) (sic)
CARMEN LIWANAG
26 H. Kaliraya St.
Quezon City
computed as constituting the interest or discount for the first eight years, in
the total sum P180,288.47. On August 20, 1970, the defendant-appellee,
explaining that there had been a mistake in computation, paid to the
appellant the additional sum of P2,182.70, thereby reducing the deducted
amount to only P98,828.03. 3
CRUZ, J.:
Page |2
CREDIT TRANSACTION
loan rather than a lease. The provision for the payment of rentals in
advance cannot be construed as a repayment of a loan because there
was no grant or forbearance of money as to constitute an indebtedness on
the part of the lessor. On the contrary, the defendant-appellee was
discharging its obligation in advance by paying the eight years rentals, and
it was for this advance payment that it was getting a rebate or discount.
The provision for a discount is not unusual in lease contracts. As to its
validity, it is settled that the parties may establish such stipulations,
clauses, terms and condition as they may want to include; and as long as
such agreements are not contrary to law, morals, good customs, public
policy or public order, they shall have the force of law between them. 8
There is no usury in this case because no money was given by the
defendant-appellee to the plaintiff-appellant, nor did it allow him to use its
money already in his possession. 9 There was neither loan nor
forbearance but a mere discount which the plaintiff-appellant allowed the
defendant-appellee to deduct from the total payments because they were
being made in advance for eight years. The discount was in effect a
reduction of the rentals which the lessor had the right to determine, and
any reduction thereof, by any amount, would not contravene the Usury
Law.
The difference between a discount and a loan or forbearance is that the
former does not have to be repaid. The loan or forbearance is subject to
repayment and is therefore governed by the laws on usury. 10
To constitute usury, "there must be loan or forbearance; the loan must be
of money or something circulating as money; it must be repayable
absolutely and in all events; and something must be exacted for the use of
the money in excess of and in addition to interest allowed by law." 11
It has been held that the elements of usury are (1) a loan, express or
implied; (2) an understanding between the parties that the money lent
shall or may be returned; that for such loan a greater rate or interest that is
allowed by law shall be paid, or agreed to be paid, as the case may be;
and (4) a corrupt intent to take more than the legal rate for the use of
money loaned. Unless these four things concur in every transaction, it is
safe to affirm that no case of usury can be declared. 12
Concerning the computation of the deductible discount, the trial court
declared:
Page |3
CREDIT TRANSACTION
G.R. No. 84719
January 25, 1991
YONG
CHAN
KIM, petitioner,
vs.
PEOPLE OF THE PHILIPPINES, HON. EDGAR D. GUSTILO, Presiding
Judge, RTC, 6th Judicial Region, Branch 28 Iloilo City and Court of
Appeals (13th Division) respondents.
Remedios C. Balbin and Manuel C. Cases, Jr. for petitioner.
Hector P. Teodosio for private respondent.
PADILLA, J.:
This petition seeks the review on certiorari of the following:
1. The decision dated 3 September 1986 of the 15th Municipal
Circuit Trial Court (Guimbal-Igbaras-Tigbauan-Tubungan) in
Guimbal, Iloilo, in Criminal Case No. 628, 1 and the affirming
decision of the Regional Trial Court, Branch XXVIII, Iloilo City, in
Criminal Case No. 20958, promulgated on 30 July 1987; 2
2. The decision of the Court of Appeals, dated 29 April 1988, 3
dismissing petitioner's appeal/petition for review for having been filed out
of time, and the resolution, dated 19 August 1988, denying petitioner's
motion for reconsideration. 4
The antecedent facts are as follows:
Petitioner Yong Chan Kim was employed as a Researcher at the
Aquaculture Department of the Southeast Asian Fisheries Development
Center (SEAFDEC) with head station at Tigbauan, Province of Iloilo. As
Head of the Economics Unit of the Research Division, he conducted
prawn surveys which required him to travel to various selected provinces
in the country where there are potentials for prawn culture.
On 15 June 1982, petitioner was issued Travel Order No. 2222 which
covered his travels to different places in Luzon from 16 June to 21 July
1982, a period of thirty five (35) days. Under this travel order, he received
P6,438.00 as cash advance to defray his travel expenses.
Within the same period, petitioner was issued another travel order, T.O.
2268, requiring him to travel from the Head Station at Tigbauan, Iloilo to
Roxas City from 30 June to 4 July 1982, a period of five (5) days. For this
travel order, petitioner received a cash advance of P495.00.
On 14 January 1983, petitioner presented both travel orders for liquidation,
submitting Travel Expense Reports to the Accounting Section. When the
Travel Expense Reports were audited, it was discovered that there was an
overlap of four (4) days (30 June to 3 July 1982) in the two (2) travel
orders for which petitioner collected per diems twice. In sum, the total
amount in the form of per diems and allowances charged and collected by
petitioner under Travel Order No. 2222, when he did not actually and
physically travel as represented by his liquidation papers, was P1,230.00.
Petitioner was required to comment on the internal auditor's report
regarding the alleged anomalous claim for per diems. In his reply,
petitioner denied the alleged anomaly, claiming that he made make-up
trips to compensate for the trips he failed to undertake under T.O. 2222
because he was recalled to the head office and given another assignment.
Page |4
In September 1983, two (2) complaints for Estafa were filed against the
petitioner before the Municipal Circuit Trial Court at Guimbal, Iloilo,
docketed as Criminal Case Nos. 628 and 631.
On 30 October 1987, petitioner filed with the appellate court a petition for
review. As earlier stated, on 29 April 1988, the Court of Appeals dismissed
the petition for having been filed out of time. Petitioner's motion for
reconsideration was denied for lack of merit.
After trial in Criminal Case No. 628, the Municipal Circuit Trial Court
rendered a decision, the dispositive part of which reads as follows:
CREDIT TRANSACTION
Petitioner's counsel submitted a Reply (erroneously termed
Comment) 7 wherein she contended that the peculiar circumstances of a
case, such as this, should be considered in order that the principle barring
a petitioner's right of review can be made flexible in the interest of justice
and equity.
In our Resolution of 29 May 1989, we resolved to deny the petition for
failure of petitioner to sufficiently show that the Court of Appeals had
committed any reversible error in its questioned judgment which had
dismissed petitioner's petition for review for having been filed out of time. 8
Petitioner filed a motion for reconsideration maintaining that his petition for
review did not limit itself to the issue upon which the appellate court's
decision of 29 April 1988 was based, but rather it delved into the
substance and merits of the case. 9
In the same resolution, the parties were required to file their respective
memoranda, and in compliance with said resolution, petitioner filed his
memorandum on 25 October 1989, while private respondent SEAFDEC
filed its required memorandum on 10 April 1990. On the other hand, the
Solicitor General filed on 13 March 1990 a Recommendation for Acquittal
in lieu of the required memorandum.
Page |5
which was covered by T.O. 2268. The dispute arose when petitioner
allegedly failed to return P1,230.00 out of the cash advance which he
received under T.O. 2222. For the alleged failure of petitioner to return the
amount of P1,230.00, he was charged with the crime of Estafa under
Article 315, par. 1(b) of the Revised Penal Code, which reads as follows:
Art. 315. Swindling (Estafa). Any person who shall defraud
another by any of the means mentioned herein below shall be
punished by:
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
CREDIT TRANSACTION
Liquidation simply means the settling of an indebtedness. An employee,
such as herein petitioner, who liquidates a cash advance is in fact paying
back his debt in the form of a loan of money advanced to him by his
employer, asper diems and allowances. Similarly, as stated in the assailed
decision of the lower court, "if the amount of the cash advance he received
is less than the amount he spent for actual travel . . . he has the right to
demand reimbursement from his employer the amount he spent coming
from his personal funds. 12 In other words, the money advanced by either
party is actually a loan to the other. Hence, petitioner was under no legal
obligation to return the same cash or money, i.e., the bills or coins, which
he received from the private respondent. 13
Article 1933 and Article 1953 of the Civil Code define the nature of a
simple loan.
Art. 1933. By the contract of loan, one of the parties delivers to
another, either something not consumable so that the latter may
use the same for a certain time and return it, in which case the
contract is called acommodatum; or money or other consumable
thing, upon the condition that the same amount of the same kind
and quality shall be paid, in which case the contract is simply
called a loan or mutuum.
Commodatum is essentially gratuitous.
Simple loan may be gratuitous or with a stipulation to pay
interest.
In commodatum the bailor retains the ownership of the thing
loaned, while in simple loan, ownership passes to the borrower.
Art. 1953. A person who receives a loan of money or any other
fungible thing acquires the ownership thereof, and is bound to
pay to the creditor an equal amount of the same kind and quality.
The ruling of the trial judge that ownership of the cash advanced to the
petitioner by private respondent was not transferred to the latter is
erroneous. Ownership of the money was transferred to the petitioner. Even
the prosecution witness, Virgilio Hierro, testified thus:
Q When you gave cash advance to the accused in this Travel
Order No. 2222 subject to liquidation, who owns the funds,
Page |6
Revised Penal Code and the affirming decision of the Regional Trial Court,
Branch XXVIII, Iloilo City, in Criminal Case No. 20958, promulgated on 30
July 1987 are both hereby SET ASIDE. Petitioner is ACQUITTED of
criminal charge filed against him.
SO ORDERED.
Melencio-Herrera, Paras, Sarmiento and Regalado JJ., concur.
Qxxx
xxx
xxx
POLO S. PANTALEON,
Petitioner,
-
versus -
CREDIT TRANSACTION
AMERICAN EXPRESS INTERNATIONAL, INC.,
Respondent.
x----------------------------------------------------------------------------------------x
RESOLUTION
BRION, J.:
We resolve the motion for reconsideration filed by respondent American
Express International, Inc. (AMEX) dated June 8, 2009,[1] seeking to
reverse our Decision dated May 8, 2009 where we ruled that AMEX was
guilty of culpable delay in fulfilling its obligation to its cardholder petitioner
Polo Pantaleon. Based on this conclusion, we held AMEX liable for moral
and exemplary damages, as well as attorneys fees and costs of litigation. [2]
FACTUAL ANTECEDENTS
The established antecedents of the case are narrated below.
AMEX is a resident foreign corporation engaged in the business of
providing credit services through the operation of a charge card system.
Pantaleon has been an AMEX cardholder since 1980.[3]
In October 1991, Pantaleon, together with his wife (Julialinda), daughter
(Regina), and son (Adrian Roberto), went on a guided European tour.
On October 25, 1991, the tour group arrived in Amsterdam. Due to their
late arrival, they postponed the tour of the city for the following day. [4]
The next day, the group began their sightseeing at around 8:50
a.m. with a trip to the Coster Diamond House (Coster). To have enough
time for take a guided city tour of Amsterdam before their departure
scheduled on that day, the tour group planned to leave Coster by 9:30
a.m. at the latest.
While at Coster, Mrs. Pantaleon decided to purchase some
diamond pieces worth a total of US$13,826.00. Pantaleon presented his
American Express credit card to the sales clerk to pay for this
purchase. He did this at around 9:15 a.m. The sales clerk swiped the
credit card and asked Pantaleon to sign the charge slip, which was then
electronically referred to AMEXs Amsterdam office at 9:20 a.m.[5]
At around 9:40 a.m., Coster had not received approval from AMEX for the
purchase so Pantaleon asked the store clerk to cancel the sale. The store
manager, however, convinced Pantaleon to wait a few more minutes.
Subsequently, the store manager informed Pantaleon that AMEX was
asking for bank references; Pantaleon responded by giving the names of
his Philippine depository banks.
At around 10 a.m., or 45 minutes after Pantaleon presented his credit
card, AMEX still had not approved the purchase. Since the city tour could
not begin until the Pantaleons were onboard the tour bus, Coster decided
to release at around 10:05 a.m. the purchased items to Pantaleon even
without AMEXs approval.
When the Pantaleons finally returned to the tour bus, they found their
travel companions visibly irritated. This irritation intensified when the tour
guide announced that they would have to cancel the tour because of lack
of time as they all had to be in Calais, Belgium by 3 p.m. to catch the ferry
to London.[6]
From the records, it appears that after Pantaleons purchase was
transmitted for approval to AMEXs Amsterdam office at 9:20 a.m.; was
referred to AMEXs Manilaoffice at 9:33 a.m.; and was approved by
the Manila office at 10:19 a.m. At 10:38 a.m., AMEXs Manila office finally
transmitted the Approval Code to AMEXsAmsterdam office. In all, it took
AMEX a total of 78 minutes to approve Pantaleons purchase and to
transmit the approval to the jewelry store.[7]
After the trip to Europe, the Pantaleon family proceeded to the United
States. Again, Pantaleon experienced delay in securing approval for
purchases using his American Express credit card on two separate
occasions. He experienced the first delay when he wanted to purchase
golf equipment in the amount of US$1,475.00 at the Richard Metz Golf
Studio in New York on October 30, 1991. Another delay occurred when he
wanted to purchase childrens shoes worth US$87.00 at the Quiency
Market in Boston on November 3, 1991.
Page |7
CREDIT TRANSACTION
references before he approved the purchase. Finding this delay
unwarranted, we reinstated the RTC decision and awarded Pantaleon
moral and exemplary damages, as well as attorneys fees and costs of
litigation.
THE MOTION FOR RECONSIDERATION
In its motion for reconsideration, AMEX argues that this Court erred when
it found AMEX guilty of culpable delay in complying with its obligation to
act with timely dispatch on Pantaleons purchases. While AMEX admits
that it normally takes seconds to approve charge purchases, it
emphasizes that Pantaleon experienced delay inAmsterdam because his
transaction was not a normal one. To recall, Pantaleon sought to charge in
a single transaction jewelry items purchased from Coster in the total
amount of US$13,826.00 or P383,746.16. While the total amount of
Pantaleons previous purchases using his AMEX credit card did exceed
US$13,826.00, AMEX points out that these purchases were made in a
span of more than 10 years, not in a single transaction.
consequences of delay; thus, even if AMEX had a justifiable reason for the
delay, this reason would not relieve it from the liability arising from its
failure to timely act on Pantaleons purchase.
In response to AMEXs assertion that the delay was in keeping
with its duty to perform its obligation with extraordinary diligence,
Pantaleon claims that this duty includes the timely or prompt performance
of its obligation.
As to AMEXs contention that moral or exemplary damages
cannot be awarded absent a finding of malice, Pantaleon argues that evil
motive or design is not always necessary to support a finding of bad faith;
gross negligence or wanton disregard of contractual obligations is
sufficient basis for the award of moral and exemplary damages.
OUR RULING
We GRANT the motion for reconsideration.
Because this was the biggest single transaction that Pantaleon ever made
using his AMEX credit card, AMEX argues that the transaction necessarily
required the credit authorizer to carefully review Pantaleons credit history
and bank references. AMEX maintains that it did this not only to ensure
Pantaleons protection (to minimize the possibility that a third party was
fraudulently using his credit card), but also to protect itself from the risk
that Pantaleon might not be able to pay for his purchases on credit. This
careful review, according to AMEX, is also in keeping with the
extraordinary degree of diligence required of banks in handling its
transactions. AMEX concluded that in these lights, the thorough review of
Pantaleons credit record was motivated by legitimate concerns and could
not be evidence of any ill will, fraud, or negligence by AMEX.
AMEX further points out that the proximate cause of Pantaleons
humiliation and embarrassment was his own decision to proceed with the
purchase despite his awareness that the tour group was waiting for him
and his wife. Pantaleon could have prevented the humiliation had he
cancelled the sale when he noticed that the credit approval for the Coster
purchase was unusually delayed.
In his Comment dated February 24, 2010, Pantaleon maintains
that AMEX was guilty of mora solvendi, or delay on the part of the debtor,
in complying with its obligation to him. Based on jurisprudence, a just
cause for delay does not relieve the debtor in delay from the
Brief historical
background
A credit card is defined as any card, plate, coupon book, or other credit
device existing for the purpose of obtaining money, goods, property, labor
or services or anything of value on credit. [9] It traces its roots to the charge
card first introduced by the Diners Club in New York City in 1950.
[10]
American Express followed suit by introducing its own charge card to
the American market in 1958.[11]
Page |8
CREDIT TRANSACTION
goods or services on a continuing basis as long as the
outstanding balance does not exceed a specified limit.
The card holder is, therefore, given the power to
obtain present control of goods or service on a
promise to pay for them in the future.
Business establishments may extend credit sales
through the use of the credit card facilities of a nonbank credit card company to avoid the risk of
uncollectible accounts from their customers. Under
this system, the establishments do not deposit in their
bank accounts the credit card drafts that arise from the
credit sales. Instead, they merely record their
receivables from the credit card company and
periodically send the drafts evidencing those
receivables to the latter.
The credit card company, in turn, sends checks
as payment to these business establishments, but it
does not redeem the drafts at full price. The
agreement between them usually provides for
discounts to be taken by the company upon its
redemption of the drafts. At the end of each month, it
then bills its credit card holders for their respective
drafts redeemed during the previous month. If the
holders fail to pay the amounts owed, the company
sustains the loss.
Page |9
anchors his claims. First, Pantaleon presumes that since his credit card
has no pre-set spending limit, AMEX has the obligation to approve all his
charge requests. Conversely, even if AMEX has no such obligation, at the
very least it is obliged to act on his charge requests within a specific period
of time.
i.
agreements
CREDIT TRANSACTION
obligation to approve any and all charge requests made by its card
holders.
ii. AMEX not guilty of culpable delay
Since AMEX has no obligation to approve the purchase requests of its
credit cardholders, Pantaleon cannot claim that AMEX defaulted in its
obligation. Article 1169 of the Civil Code, which provides the requisites to
hold a debtor guilty of culpable delay, states:
The three requisites for a finding of default are: (a) that the
obligation is demandable and liquidated; (b) the debtor delays
performance; and (c) the creditor judicially or extrajudicially requires the
debtors performance.[26]
Based on the above, the first requisite is no longer met because
AMEX, by the express terms of the credit card agreement, is not obligated
to approve Pantaleons purchase request. Without a demandable
obligation, there can be no finding of default.
Apart from the lack of any demandable obligation, we also find
that Pantaleon failed to make the demand required by Article 1169 of the
Civil Code.
As previously established, the use of a credit card to pay for a
purchase is only an offer to the credit card company to enter a loan
agreement with the credit card holder. Before the credit card issuer
accepts this offer, no obligation relating to the loan agreement exists
between them. On the other hand, a demand is defined as the assertion of
a legal right; xxx an asking with authority, claiming or challenging as due.
[27]
A demand presupposes the existence of an obligation between the
parties.
Thus, every time that Pantaleon used his AMEX credit card to
pay for his purchases, what the stores transmitted to AMEX were his offers
to execute loan contracts. These obviously could not be classified as the
demand required by law to make the debtor in default, given that no
obligation could arise on the part of AMEX until after AMEX transmitted its
acceptance of Pantaleons offers. Pantaleons act of insisting on and
waiting for the charge purchases to be approved by AMEX [28] is not the
demand contemplated by Article 1169 of the Civil Code.
For failing to comply with the requisites of Article 1169,
Pantaleons charge that AMEX is guilty of culpable delay in approving his
purchase requests must fail.
iii. On AMEXs obligation to act on the offer within a specific
period of time
Even assuming that AMEX had the right to review his credit card
history before it approved his purchase requests, Pantaleon insists that
AMEX had an obligation to act on his purchase requests, either to approve
or deny, in a matter of seconds or in timely dispatch. Pantaleon impresses
upon us the existence of this obligation by emphasizing two points: (a) his
card has no pre-set spending limit; and (b) in his twelve years of using his
AMEX card, AMEX had always approved his charges in a matter of
seconds.
Pantaleons assertions fail to convince us.
We originally held that AMEX was in culpable delay when it
acted on the Coster transaction, as well as the two other transactions in
the United States which took AMEX approximately 15 to 20 minutes to
approve. This conclusion appears valid and reasonable at first glance,
comparing the time it took to finally get the Coster purchase approved (a
total of 78 minutes), to AMEXs normal approval time of three to four
seconds (based on the testimony of Edgardo Jaurigue, as well as
Pantaleons previous experience). We come to a different result, however,
after a closer look at the factual and legal circumstances of the case.
AMEXs credit authorizer, Edgardo Jaurigue, explained that
having no pre-set spending limit in a credit card simply means that the
charges made by the cardholder are approved based on his ability to pay,
as demonstrated by his past spending, payment patterns, and personal
resources.[29] Nevertheless, every time Pantaleon charges a purchase on
his credit card, the credit card company still has to determine whether it
P a g e | 10
will allow this charge, based on his past credit history. This right to review
a card holders credit history, although not specifically set out in the card
membership agreement, is a necessary implication of AMEXs right to deny
authorization for any requested charge.
As for Pantaleons previous experiences with AMEX (i.e., that in
the past 12 years, AMEX has always approved his charge requests in
three or four seconds), this record does not establish that Pantaleon had a
legally enforceable obligation to expect AMEX to act on his charge
requests within a matter of seconds. For one, Pantaleon failed to present
any evidence to support his assertion that AMEX acted on purchase
requests in a matter of three or four seconds as an established practice.
More importantly, even if Pantaleon did prove that AMEX, as a matter of
practice or custom, acted on its customers purchase requests in a matter
of seconds, this would still not be enough to establish a legally
demandable right; as a general rule, a practice or custom is not a source
of a legally demandable or enforceable right.[30]
We next examine the credit card membership agreement, the
contract that primarily governs the relationship between AMEX and
Pantaleon. Significantly, there is no provision in this agreement that
obligates AMEX to act on all cardholder purchase requests within a
specifically defined period of time. Thus, regardless of whether the
obligation is worded was to act in a matter of seconds or to act in timely
dispatch, the fact remains that no obligation exists on the part of AMEX to
act within a specific period of time. Even Pantaleon admits in his testimony
that he could not recall any provision in the Agreement that guaranteed
AMEXs approval of his charge requests within a matter of minutes. [31]
Nor can Pantaleon look to the law or government issuances as
the source of AMEXs alleged obligation to act upon his credit card
purchases within a matter of seconds. As the following survey of Philippine
law on credit card transactions demonstrates, the State does not require
credit card companies to act upon its cardholders purchase requests
within a specific period of time.
Republic Act No. 8484 (RA 8484), or the Access Devices
Regulation Act of 1998, approved on February 11, 1998, is the controlling
legislation
that regulates the issuance and use of access devices, [32] including credit
cards. The more salient portions of this law include the imposition of the
obligation on a credit card company to disclose certain important financial
CREDIT TRANSACTION
information[33] to credit card applicants, as well as a definition of the acts
that constitute access device fraud.
As financial institutions engaged in the business of providing
credit, credit card companies fall under the supervisory powers of the
Bangko Sentral ng Pilipinas (BSP).[34] BSP Circular No. 398 dated August
21, 2003 embodies the BSPs policy when it comes to credit cards
The Bangko Sentral ng Pilipinas (BSP) shall
foster the development of consumer credit through
innovative products such as credit cards under
conditions of fair and sound consumer credit practices.
The BSP likewise encourages competition and
transparency to ensure more efficient delivery of
services and fair dealings with customers. (Emphasis
supplied)
Based on this Circular, x x x [b]efore issuing credit
cards, banks and/or their subsidiary credit card companies must
exercise proper diligence by ascertaining that applicants
possess good credit standing and are financially capable of
fulfilling their credit commitments. [35] As the above-quoted policy
expressly states, the general intent is to foster fair and sound
consumer credit practices.
P a g e | 11
CREDIT TRANSACTION
Pantaleon countered that this review procedure is primarily
intended to protect AMEXs interests, to make sure that the cardholder
making the purchase has enough means to pay for the credit extended.
Even if this were the case, however, we do not find any taint of bad faith in
such motive. It is but natural for AMEX to want to ensure that it will extend
credit only to people who will have sufficient means to pay for their
purchases. AMEX, after all, is running a business, not a charity, and it
would simply be ludicrous to suggest that it would not want to earn profit
for its services. Thus, so long as AMEX exercises its rights, performs its
obligations, and generally acts with good faith, with no intent to cause
harm, even if it may occasionally inconvenience others, it cannot be held
liable for damages.
We also cannot turn a blind eye to the circumstances
surrounding the Coster transaction which, in our opinion, justified the wait.
In Edgardo Jaurigues own words:
Q 21: With reference to the transaction at the Coster Diamond
House covered by Exhibit H, also Exhibit 4 for the defendant, the
approval came at 2:19 a.m. after the request was relayed at 1:33
a.m., can you explain why the approval came after about 46
minutes, more or less?
A21: Because we have to make certain
considerations and evaluations of [Pantaleons] past
spending pattern with [AMEX] at that time before
approving plaintiffs request because [Pantaleon] was
at that time making his very first single charge
purchase of US$13,826 [this is below the
US$16,112.58 actually billed and paid for by the
plaintiff because the difference was already
automatically approved by [AMEX] office in
Netherland[s] and the record of [Pantaleons] past
spending with [AMEX] at that time does not favorably
support his ability to pay for such purchase. In fact, if
the foregoing internal policy of [AMEX] had been
strictly followed, the transaction would not have been
approved at all considering that the past spending
pattern of the plaintiff with [AMEX] at that time does
not support his ability to pay for such purchase.[41]
xxxx
P a g e | 12
country. After 9:30 a.m., Pantaleons son, who had boarded the bus ahead
of his family, returned to the store to inform his family that they were the
only ones not on the bus and that the entire tour group was waiting for
them. Significantly, Pantaleon tried to cancel the sale at 9:40 a.m. because
he did not want to cause any inconvenience to the tour group. However,
when Costers sale manager asked him to wait a few more minutes for the
credit card approval, he agreed, despite the knowledge that he had
already caused a 10-minute delay and that the city tour could not start
without him.
In Nikko Hotel Manila Garden v. Reyes,[45] we ruled that a
person who knowingly and voluntarily exposes himself to danger cannot
claim damages for the resulting injury:
The doctrine of volenti non fit injuria (to which a person
assents is not esteemed in law as injury) refers to self-inflicted
injury or to the consent to injury which precludes the recovery of
damages by one who has knowingly and voluntarily exposed
himself to danger, even if he is not negligent in doing so.
This doctrine, in our view, is wholly applicable to this
case. Pantaleon himself testified that the most basic rule when
travelling in a tour group is that you must never be a cause of
any delay because the schedule is very strict.[46] When
Pantaleon made up his mind to push through with his purchase,
he must have known that the group would become annoyed and
irritated with him. This was the natural, foreseeable
consequence of his decision to make them all wait.
We do not discount the fact that Pantaleon and his family did feel
humiliated and embarrassed when they had to wait for AMEX to approve
the Coster purchase in Amsterdam. We have to acknowledge, however,
that Pantaleon was not a helpless victim in this scenario at any time, he
could have cancelled the sale so that the group could go on with the city
tour. But he did not.
More importantly, AMEX did not violate any legal duty to
Pantaleon under the circumstances under the principle of damnum
absque injuria, or damages without legal wrong, loss without injury. [47] As
we held in BPI Express Card v. CA:[48]
We do not dispute the findings of the lower
court that private respondent suffered damages as a
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result of the cancellation of his credit card. However,
there is a material distinction between damages and
injury. Injury is the illegal invasion of a legal right;
damage is the loss, hurt, or harm which results from
the injury; and damages are the recompense or
compensation
awarded
for
the
damage
suffered. Thus, there can be damage without injury in
those instances in which the loss or harm was not the
result of a violation of a legal duty. In such cases, the
consequences must be borne by the injured person
alone, the law affords no remedy for damages
resulting from an act which does not amount to a legal
injury or wrong. These situations are often
called damnum absque injuria.
Neither do we find any basis for the award of attorneys fees and
costs of litigation. No premium should be placed on the right to litigate and
not every winning party is entitled to an automatic grant of attorney's fees.
[51]
To be entitled to attorneys fees and litigation costs, a party must show
that he falls under one of the instances enumerated in Article 2208 of the
Civil Code.[52] This, Pantaleon failed to do. Since we eliminated the award
of moral and exemplary damages, so must we delete the award for
attorney's fees and litigation expenses.
P a g e | 13
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a fine of P150,000.00 without subsidiary imprisonment in case of
insolvency.
For Criminal Case No. 84-26968, the Court finds the accused Lina Lim
Lao guilty beyond reasonable doubt of the crime charged and is hereby
sentenced to suffer the penalty of ONE (1) YEAR imprisonment and to pay
a fine of P150,000.00 without subsidiary imprisonment in case of of (sic)
insolvency.
Society of the Divine Word through Mrs. Rosemarie Lachenal, a trader for
Premiere. Father Palijo was authorized to invest donations to the society
and had been investing the societys money with Premiere (TSN, June 23,
1987, pp. 5, 9-10). Father Palijo had invested a total of P514,484.04, as
evidenced by the Confirmation of Sale No. 82-6994 (Exh A) dated July 8,
1993. Father Palijo was also issued Traders Royal Bank (TRB) checks in
payment of interest, as follows:
Check Date Amount
For the two cases the accused is ordered to pay the cost of suit.
299961 Oct. 7, 1993 (sic) P150,000.00 (Exh. B)
The cash bond put up by the accused for her provisional liberty in Criminal
Case No. 84-26969 where she is declared acquitted is hereby ordered
cancelled (sic).
With reference to the accused Teodulo Asprec who has remained at large,
in order that the cases as against him may not remain pending in the
docket for an indefinite period, let the same be archived without prejudice
to its subsequent prosecution as soon as said accused is finally
apprehended.
Let a warrant issue for the arrest of the accused Teodulo Asprec which
warrant need not be returned to this Court until the accused is finally
arrested.
SO ORDERED.
The Facts
Version of the Prosecution
The facts are not disputed. We thus lift them from the assailed
Decision, as follows:
Appellant (and now Petitioner Lina Lim Lao) was a junior officer of
Premiere Investment House (Premiere) in its Binondo Branch. As such
officer, she was authorized to sign checks for and in behalf of the
corporation (TSN, August 16, 1990, p. 6). In the course of the business,
she met complainant Father Artelijo Pelijo, the provincial treasurer of the
All the checks were issued in favor of Artelijo A. Palijo and signed by
appellant (herein petitioner) and Teodulo Asprec, who was the head of
operations. Further evidence of the transaction was the acknowledgment
of postdated checks dated July 8, 1983 (Exh . D) and the cash
disbursement voucher (Exh. F, TSN, supra, at pp. 11-16).
When Father Palijo presented the checks for encashment, the same were
dishonored for the reason Drawn Against Insufficient Funds (DAIF). Father
Palijo immediately made demands on premiere to pay him the necessary
amounts. He first went to the Binondo Branch but was referred to the
Cubao Main Branch where he was able to talk with the President, Mr.
Cario. For his efforts, he was paid P5,000.00. Since no other payments
followed, Father Palijo wrote Premiere a formal letter of
demand. Subsequently, Premiere was placed under receivership (TSN,
supra, at pp. 16-19).[4]
Thereafter, on January 24, 1984, Private Complainant Palijo filed an
affidavit-complaint against Petitioner Lina Lim Lao and Teodulo Asprec for
violation of B.P. 22. After preliminary investigation,[5] three Informations
charging Lao and Asprec with the offense defined in the first paragraph of
Section 1, B.P. 22 were filed by Assistant Fiscal Felix S. Caballes before
the trial court on May 11, 1984,[6] worded as follows:
1. In Criminal Case No. 84-26967:
P a g e | 14
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dishonor, said accused failed to pay said Artelijo A. Palijo the amount of
the said check or to make arrangement for full payment of the same within
five (5) banking days from receipt of said notice.
CONTRARY TO LAW.
Upon being arraigned, petitioner assisted by counsel pleaded not
guilty. Asprec was not arrested; he has remained at large since the trial,
and even now on appeal.
After due trial, the Regional Trial Court convicted Petitioner Lina Lim
Lao in Criminal Case Nos. 84-26967 and 84-26968 but acquitted her in
Criminal Case No. 84-26969.[7]On appeal, the Court of Appeals affirmed
the decision of the trial court.
P a g e | 15
against the checks issued, and funding the checks thus issued, devolved
on the corporations Treasury Department in its main office in Cubao,
Quezon City, headed then by the Treasurer, Ms. Veronilyn
Ocampo. (Ocampo, T.S.N., 19 July 1990, p. 4; Lao, T.S.N., 28 September
1989, pp. 21-23) All bank statements regarding the corporate checking
account were likewise sent to the main branch in Cubao, Quezon City, and
not in Binondo, Manila, where petitioner was holding office.(Ocampo,
T.S.N., 19 July 1990, p. 24; Marqueses, T.S.N., 22 November 1988, p. 8)
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As a result of the financial crisis and distress, the Securities and Exchange
Commission placed Premier Financing Corporation under receivership,
appointing a rehabilitation receiver for the purpose of settling claims
against the corporation. (Exh. 1) As he himself admits, private complainant
filed a claim for the payment of the bounced check before and even after
the corporation had been placed under receivership. (Palijo, T.S.N., 24
July 1987, p. 10-17) A check was prepared by the receiver in favor of the
private complainant but the same was not claimed by him. (Lao, T.S.N., 15
May 1990, p. 18)
Private complainant then filed the instant criminal action. On 26
September 1990, the Regional Trial Court of Manila, Branch 33, rendered
a decision convicting petitioner, and sentencing the latter to suffer the
aggregate penalty of two (2) years and to pay a fine in the total amount
of P300,000.00. On appeal, the Court of Appeals affirmed said
decision. Hence, this petition for review.[8]
The Issue
In the main, petitioner contends that the public respondent
committed a reversible error in concluding that lack of actual knowledge of
insufficiency of funds was not a defense in a prosecution for violation of
B.P. 22. Additionally, the petitioner argues that the notice of dishonor sent
to the main office of the corporation, and not to petitioner herself who
holds office in that corporations branch office, does not constitute the
notice mandated in Section 2 of BP 22; thus, there can be no prima
facie presumption that she had knowledge of the insufficiency of funds.
The Courts Ruling
The petition is meritorious.
Strict Interpretation of Penal Statutes
It is well-settled in this jurisdiction that penal statutes are strictly
construed against the state and liberally for the accused, so much so that
the scope of a penal statute cannot be extended by good intention,
implication, or even equity consideration. Thus, for Petitioner Lina Lim
Laos acts to be penalized under the Bouncing Checks Law or B.P. 22, they
must come clearly within both the spirit and the letter of the statute. [9]
The salient portions of B.P. 22 read:
P a g e | 16
The same penalty shall be imposed upon any person who having sufficient
funds in or credit with the drawee bank when he makes or draws and
issues a check, shall fail to keep sufficient funds or to maintain a credit or
to cover the full amount of the check if presented within a period of ninety
(90) days from the date appearing thereon, for which reason it is
dishonored by the drawee bank.
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of which was subsequently refused for insufficiency of funds.It is important
to stress, however, that this is not a conclusive presumption that
forecloses or precludes the presentation of evidence to the contrary.
In the present case, the fact alone that petitioner was a signatory to
the checks that were subsequently dishonored merely engenders
the prima facie presumption that she knew of the insufficiency of funds, but
it does not render her automatically guilty under B.P. 22. The prosecution
has a duty to prove all the elements of the crime, including the acts that
give rise to the prima facie presumption; petitioner, on the other hand, has
a right to rebut the prima facie presumption.[16] Therefore, if such
knowledge of insufficiency of funds is proven to be actually absent or nonexistent, the accused should not be held liable for the offense defined
under the first paragraph of Section 1 of B.P. 22. Although the offense
charged is a malum prohibitum, the prosecution is not thereby excused
from its responsibility of proving beyond reasonable doubt all the elements
of the offense, one of which is knowledge of the insufficiency of funds.
After a thorough review of the case at bar, the Court finds that
Petitioner Lina Lim Lao did not have actual knowledge of the insufficiency
of funds in the corporate accounts at the time she affixed her signature to
the checks involved in this case, at the time the same were issued, and
even at the time the checks were subsequently dishonored by the drawee
bank.
The scope of petitioners duties and responsibilities did not
encompass the funding of the corporations checks; her duties were limited
to the marketing department of the Binondo branch. [17] Under the
organizational structure of Premiere Financing Corporation, funding of
checks was the sole responsibility of the Treasury Department. Veronilyn
Ocampo, former Treasurer of Premiere, testified thus:
Q Will you please tell us whose (sic) responsible for the
funding of checks in Premiere?
A The one in charge is the Treasury Division up to the
Treasury Disbursement and then they give it directly to
Jose Cabacan, President of Premiere.[18]
Furthermore, the Regional Trial Court itself found that,
since Petitioner Lina Lim Lao was often out in the field taking charge of the
marketing department of the Binondo branch, she signed the checks in
blank as to name of the payee and the amount to be drawn, and without
knowledge of the transaction for which they were issued.[19] As a matter of
company practice, her signature was required in addition to that of Teodulo
Asprec, who alone placed the name of the payee and the amount to be
drawn thereon.
Petitioner did not have any knowledge either of the identity of the
payee or the transaction which gave rise to the issuance of the checks. It
was her co-signatory, Teodulo Asprec, who alone filled in the blanks,
completed and issued the checks. That Petitioner Lina Lim Lao did not
have any knowledge or connection with the checks payee, Artelijo Palijo,
is clearly evident even from the latters testimony.
Since Petitioner Lina Lim Lao signed the checks without knowledge
of the insufficiency of funds, knowledge she was not expected or obliged
to possess under the organizational structure of the corporation, she may
not be held liable under B.P. 22. For in the final analysis, penal statutes
such as B.P. 22 must be construed with such strictness as to carefully
safeguard the rights of the defendant x x x.[22] The element of knowledge of
insufficiency of funds having been proven to be absent, petitioner is
therefore entitled to an acquittal.
This position finds support in Dingle vs. Intermediate Appellate
Court where we stressed that knowledge of insufficiency of funds at the
time of the issuance of the check was an essential requisite for the offense
penalized under B.P. 22. In that case, the spouses Paz and Nestor Dingle
owned a family business known as PMD Enterprises. Nestor transacted
the sale of 400 tons of silica sand to the buyer Ernesto Ang who paid for
the same. Nestor failed to deliver. Thus, he issued to Ernesto two checks,
signed by him and his wife as authorized signatories for PMD Enterprises,
to represent the value of the undelivered silica sand. These checks were
dishonored for having been drawn against insufficient funds. Nestor
thereafter issued to Ernesto another check, signed by him and his wife
Paz, which was likewise subsequently dishonored. No payment was ever
made; hence, the spouses were charged with a violation of B.P. 22 before
the trial court which found them both guilty. Paz appealed the judgment to
the then Intermediate Appellate Court which modified the same by
reducing the penalty of imprisonment to thirty days. Not satisfied, Paz filed
an appeal to this Court insisting on her innocence and contending that she
did not incur any criminal liability under B.P. 22 because she had no
knowledge of the dishonor of the checks issued by her husband and, for
that matter, even the transaction of her husband with Ang. The Court ruled
in Dingle as follows:
[23]
P a g e | 17
Paz Dingle ever mentioned in connection with the transaction and with the
issuance of the check. In fact, Ang categorically stated that it was Nestor
Dingle who received his two (2) letters of demand. This lends credence to
the testimony of Paz Dingle that she signed the questioned checks in
blank together with her husband without any knowledge of its issuance,
much less of the transaction and the fact of dishonor.
In the case of Florentino Lozano vs. Hon. Martinez, promulgated
December 18, 1986, it was held that an essential element of the offense
is knowledge on the part of the maker or drawer of the check of the
insufficiency of his funds.
WHEREFORE, on reasonable doubt, the assailed decision of the
Intermediate Appellate Court (now the Court of Appeals) is hereby SET
ASIDE and a new one is hereby rendered ACQUITTING petitioner on
reasonable doubt."[24]
In rejecting the defense of herein petitioner and ruling that
knowledge of the insufficiency of funds is legally presumed from the
dishonor of the checks for insufficiency of funds, Respondent Court of
Appeals cited People vs. Laggui[25] and Nierras vs. Dacuycuy.[26] These,
however, are inapplicable here. The accused in both cases issued
personal -- not corporate -- checks and did not aver lack of knowledge of
insufficiency of funds or absence of personal notice of the checks
dishonor. Furthermore, in People vs. Laggui[27]the Court ruled mainly on
the adequacy of an information which alleged lack of knowledge of
insufficiency of funds at the time the check was issued and not at the time
of its presentment. On the other hand, the Court in Nierras vs.
Dacuycuy[28] held mainly that an accused may be charged under B.P. 22
and Article 315 of the Revised Penal Code for the same act of issuing a
bouncing check.
The statement in the two cases -- that mere issuance of a
dishonored check gives rise to the presumption of knowledge on the part
of the drawer that he issued the same without funds -- does not support
the CA Decision. As observed earlier, there is here only a prima
facie presumption which does not preclude the presentation of contrary
evidence. On the contrary, People vs. Laggui clearly spells out as an
element of the offense the fact that the drawer must have knowledge of
the insufficiency of funds in, or of credit with, the drawee bank for the
payment of the same in full on presentment; hence, it even supports the
petitioners position.
Lack of Adequate Notice of Dishonor
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There is another equally cogent reason for the acquittal of the
accused. There can be no prima facie evidence of knowledge of
insufficiency of funds in the instant case because no notice of dishonor
was actually sent to or received by the petitioner.
The notice of dishonor may be sent by the offended party or the
drawee bank. The trial court itself found absent a personal notice of
dishonor to Petitioner Lina Lim Lao by the drawee bank based on the
unrebutted testimony of Ocampo (t)hat the checks bounced when
presented with the drawee bank but she did not inform anymore the
Binondo branch and Lina Lim Lao as there was no need to inform them as
the corporation was in distress. [29] The Court of Appeals affirmed this
factual finding. Pursuant to prevailing jurisprudence, this finding is binding
on this Court.[30]
Indeed, this factual matter is borne by the records. The records
show that the notice of dishonor was addressed to Premiere Financing
Corporation and sent to its main office in Cubao, Quezon
City. Furthermore, the same had not been transmitted to Premieres
Binondo Office where petitioner had been holding office.
Likewise no notice of dishonor from the offended party was actually
sent to or received by Petitioner Lao. Her testimony on this point is as
follows:
Because no notice of dishonor was actually sent to and received by
the petitioner, the prima facie presumption that she knew about the
insufficiency of funds cannot apply.Section 2 of B.P. 22 clearly provides
that this presumption arises not from the mere fact of drawing, making and
issuing a bum check; there must also be a showing that, within five
banking days from receipt of the notice of dishonor, such maker or drawer
failed to pay the holder of the check the amount due thereon or to make
arrangement for its payment in full by the drawee of such check.
It has been observed that the State, under this statute, actually
offers the violator a compromise by allowing him to perform some act
which operates to preempt the criminal action, and if he opts to perform it
the action is abated. This was also compared to certain laws [32] allowing
illegal possessors of firearms a certain period of time to surrender the
illegally possessed firearms to the Government, without incurring any
criminal liability.[33] In this light, the full payment of the amount appearing in
the check within five banking days from notice of dishonor is a complete
defense.[34] The absence of a notice of dishonor necessarily deprives an
accused an opportunity to preclude a criminal prosecution.Accordingly,
procedural due process clearly enjoins that a notice of dishonor be
actually served on petitioner. Petitioner has a right to demand -- and the
P a g e | 18
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G.R. No. L-47120 October 15, 1990
SPOUSES
LORETO
CLARAVALL
and
VICTORIA
CLARAVALL petitioners,
vs.
THE HONORABLE COURT OF APPEALS and SPOUSES FRANCISCO
RAMIREZ and CAROLINA RAMIREZ,respondents.
Emerito M. Salva & Associates for petitioners.
De Castro & Cagampang Law Offices for private respondents.
BIDIN, J.:
This is a petition for review on certiorari of: (a) the decision of respondent
Court of Appeals * promulgated on April 22, 1976 affirming the decision of
the Court of first Instance of Isabela, Branch I, in Civil Case No. 2043: (b)
its, re-solution dated June 22, 1977 setting aside its resolution of
December 14, 1976 and reaffirming its decision; and (c) its resolution of
September 29, 1977 denying petitioners' motion for reconsideration dated
July 27, 1977, all in CA-G.R. No. 46364-R, entitled "Spouses Loreto
Claravall and Victoria H. Claravall v. Spouses Francisco Ramirez, Jr. and
Carolina P. Ramirez."
The dispositive portion of the decision of the Court of First Instance of
Isabela, Branch I (Record on Appeal, p. 74) affirmed in toto by respondent
court in its decision (Rollo, p.124) reads as follows:
WHEREFORE, the court renders judgment (a)
dismissing the complaint of the plaintiffs Claravall as
against the defendant Ramirez with costs against the
plaintiffs; (b) declaring the document Exh. "A", same
as Exh. "I" and Exh. "B", same as Exh. "5" as
essentially an absolute sale, and an option to
repurchase, respectively; (c) declaring the defendants
herein as the owners in fee simple of the said property,
described under paragraph 2 of the complaint and
covered by TCT 28717; (d) no attorney's fee and no
damages awarded; (e) dismissing the complaint of
reconveyance filed by the intervenor as against the
plaintiffs, it appearing that the property sought to be
reconveyed had already passed to third and innocent
purchasers for valuable consideration. Sec. 38, Act
496; (f) dismissing the complaint Of intervention as
against the defendant Ramirez. With costs against the
intervenor (g) ordering the Register of Deeds to cancel
P a g e | 19
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On January 27, 1977, Associate Justice Samuel F. Reyes inhibited himself
from further participation in the disposition of the case "in view of certain
'influences' that have lately made themselves felt, especially because the
case arose from Isabela, my home province" (Rollo, p. 232).
P a g e | 20
Hence, this petition filed with the Court on November 26, 1977 (Rollo, p.
11).
Petitioners assigned the following errors:
I
RESPONDENT COURT GRAVELY ERRED IN SETTING ASIDE ITS
RESOLUTION DATED DECEMBER 14, 1976;
II
VI
RESPONDENT COURT GRAVELY ERRED IN DEPARTING FROM OR
CHANGING ITS PREVIOUS FINDING THAT THE IRRESPONSIBILITY
OR NEGLIGENCE OF PRIOR COUNSEL (ATTY. MINA) GREATLY
JEOPARDIZED PETITIONERS' CAUSE AND THAT PETITIONERS
WERE DENIED DUE PROCESS OF LAW BY THE FAILURE OF SAID
PRIOR COUNSEL TO PRESENT PETITIONERS' EVIDENCE;
XII
VII
III
VIII
IV
RESPONDENT COURT GRAVELY ERRED IN CONSIDERING,
ENTERTAINING AND PASSING UPON THE ISSUES FOR
IX
RESPONDENT COURT GRAVELY ERRED IN HAVING STATED THAT
THE TESTIMONY OF THE WITNESSES SOUGHT TO BE PRESENTED
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XV
RESPONDENT COURT GRAVELY ERRED IN DENYING PETITIONERS'
MOTION FOR RECONSIDERATION DATED JULY 27, 1977;
XVI
RESPONDENT COURT CORRECTLY IMPUTED NEGLIGENCE OR
INDIFFERENCE TO ATTY. TEOFILO LEONIN, RESPONDENT
RAMIREZES' FORMER COUNSEL, BUT RESPONDENT COURT
GRAVELY ERRED IN RELIEVING RESPONDENT RAMIREZES FROM
THE CONSEQUENCES OF ATTY. LEONIN'S NEGLIGENCE AND
INACTION SINCE RESPONDENT RAMIREZES THEMSELVES NEVER
ASSAILED THE FAILURE OF ATTY. LEONIN TO APPEAR DURING THE
ORAL ARGUMENTS AND TO REFUTE THE ARGUMENTS CONTAINED
IN PETITIONERS' MOTION FOR RECONSIDERATION AND
MEMORANDUM;
XVII
XVIII
(5) When the vendor binds himself to pay the taxes on the thing
sold;
(4) When the purchaser retains for himself a part of the purchase
price;
(6) In any other case where it may be fairly inferred that the real
intention of the parties is that the transaction shall secure the
payment of a debt or the performance of any other obligation. In
any of the foregoing case, any money, fruits, or other benefit to be
received by the vendees as rent or otherwise shall be considered
as interest which shall be subject to the usury laws.
ART. 1604. The provisions of Article 1602 shall also apply to a
contract purporting to be an absolute sale.
P a g e | 21
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necessity for money of the apparent vendor (Labasan v. Lacuesta, 86
SCRA 16 [1978]).
but is a right reserved by the vendor in the same instrument of sale as one
of the stipulations of the contract.
A third circumstance is the fact that on the date of expiration of the period
to repurchase the property, private respondents, specifically Carolina
Ramirez instead of accepting the repurchase price of the property on the
pretext that she would not want to transact business with petitioners in the
absence of her husband, executed a note extending the period of
redemption to January 2, 1968 (Rollo, p. 333). It is well-settled that
extension of the period of redemption is indicative of equitable mortgage
(Reyes v. de Leon, 20 SCRA 369 [1967]; Bundalian v. Court of Appeals,
129 SCRA 645 [19841).
From the foregoing transactions, it is evident that petitioners and private
respondents entered into a contract of equitable mortgage and not a deed
of absolute sale as the latter insisted.
But respondent Court of Appeals held the view that the two (2) contracts
entered into by the petitioners and private respondents herein were
separate and distinct and cannot be construed as an equitable mortgage
and/or a sale with pacto de retro. Among others, respondent Court based
its ruling on the doctrine laid down in the case of Villarica v. Court of
Appeals (26 SCRA 189 [1968]), to the effect that the right of repurchase is
not a right granted the vendor by the vendee in a subsequent instrument,
P a g e | 22
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EN BANC
[A.M. No. RTJ-89-380 : December 19, 1990.]
192 SCRA 434
EFREN JAVIER and PEDRO JAVIER, Complainants, vs. JUDGE
SALVADOR P. DE GUZMAN, JR., Respondent.
DECISION
PER CURIAM:
Disbarment proceedings on the ground of "dishonorable conduct" were
instituted on 8 August 1989 before the Committee on Bar Discipline of the
Integrated Bar by complainants Efren Javier (son) and Pedro Javier
(father) against respondent Salvador P. de Guzman, Jr., as a member of
the Bar and as Presiding Judge of the Regional Trial Court, Makati, Metro
Manila. However, pursuant to Supreme Court Circular No. 3-89, dated 9
February 1989, requiring that complaints filed in the IBP against Justices
and Judges of the lower Courts be promptly referred to the Supreme Court
for appropriate action, the Complaint was eventually transmitted to this
Court.
After the Comment by Respondent Judge and the Reply by Complainants
were filed, the Court referred the case to Mme. Justice Lorna L. de la
Fuente of the Court of Appeals for investigation, report and
recommendation.
The Report and Recommendation was submitted to the Court on 20
September 1990.: nad
Complainants allege that, on 7 December 1987, Efren Javier, and his
mother, Lolita Javier, borrowed P200,000.00 from Respondent Judge with
interest orally agreed upon at ten per cent (10%) monthly. They tendered
to the latter UCPB Check No. BNE 012872, dated 7 January 1988, in the
amount of P220,000.00. The drawer of the check was actually Donato
Belen, a brother-in-law of Efren, as the Javiers had no personal checking
account. The following day, Respondent required them to sign a
Memorandum of Agreement, which they did. Two of the conditions
imposed were interest at the rate of twenty per cent (20%) per month,
compounded monthly, and should they fail to pay the loan and its interest
upon maturity on 7 January 1988 and the check is deposited and
dishonored, an appropriate charge for violation of Batas Pambansa Blg.
P a g e | 23
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Agreement between the parties, which clearly point to the Respondent as
the lender. He is mentioned in said Agreement as the "Third Party," the
"First Party" being Lolita Javier, and the "Second Party" being Efren. The
UCPB postdated check was also made out in Respondent's name. The
foregoing refutes Respondent's contention that he became the lender only
"by force of circumstances" after the Javiers had failed to repay their
indebtedness. Further, it was Respondent who made collections on the
loan and it was to him that payments were made. Additionally, it was
Respondent who filed the civil case for collection of the loan as well as the
administrative cases against complainant Pedro.
As to the usurious rate of interest, while that issue was considered by
Justice de la Fuente as irrelevant since the Usury Law is now legally
inexistent pursuant to Central Bank Circular No. 905 and the interest now
legally chargeable depends upon the agreement of lender and borrower
(Liam Law v. Olympic Sawmill Co., G.R. No. L-30771, May 28, 1984, 129
SCRA 439), she found that the interest charged on the loan was
exorbitant. To quote:
"The Memorandum of Agreement (pls. see fifth whereas clause)
stipulates that for the period from December 7, 1987, when the
sum of P200,000.00 was lent to the Javiers, to December 22,
1987, on which date the loan fell due with extension up to
January 7, 1988' or for a period of from 15 to 30 days the
interest shall be `at the rate of Ten Percent (10%) for the period
of time', in other words, the interest rate is 10% a month. This
explains why the postdated check required under the Agreement
to be issued by Efren Javier to respondent is for P220,000.00,
the additional P20,000.00 being the amount earned on the sum
of P200,000.00 over a period of, at most, 30 days. Then, as
further stipulated in the Agreement (par. 2), if the loan and
interest due thereon shall not have been paid by January 7,
1988, the Javiers shall pay to respondent 'a sum equal to
Twenty Percent (20%) a month compounded monthly over the
initial principal plus the initial interest on the total sum of
P220,000.00, until the full amount is paid.' The result of this
stipulation is that despite the fact, established by the evidence
and admitted by respondent, that as of June 16, 1988 the total
payments made by the Javiers on the loan of P200,000.00 had
amounted to P177,000.00 or only P23,000.00 short of
P200,000.00, the amount originally invested by respondent
he sought to collect in his suit filed in September 1988 against
the Javiers the relatively and staggeringly huge amount of
P622,871.67 (pls. see Motion for Judgment on the Pleadings,
CC No. 88-1872, Annex C to Complaint, p. 12 Record). The
P a g e | 24
CREDIT TRANSACTION
Besides, in view of the closeness of 'the Filipino family ties which
usually extend to financial matters, similarly, while it was
respondent himself who had been expressly named the 'Third
Party' in the loan agreement, it was respondent's wife who,
although not at all mentioned as a party to the same Agreement,
took it upon herself to locate the funds with which to finance the
loan given to the Javiers. And considering that respondent had
the feeling, groundless or not, that the Javiers had, so to speak,
put one over on the de Guzmans when the former did not pay to
respondent the amount which he wished to collect on the loan,
respondent naturally felt aggrieved or wronged by Pedro Javier,
and this he undoubtedly thought could be righted by the filing of
the administrative charges against him (Pedro Javier). As the
undersigned sees it, this and not malice or a desire to harass
is the motivation for respondent's filing of said charges."
Except for the act complained of in the last charge, Respondent Judge's
actuations, indeed, show reproachable and improper conduct. He denied
that he was the lender when, in fact, he was, as concluded by Justice de
la Fuente.
While he had every right to protect his investment, and while the contract
of loan entered into between him and the Javiers was legal per se,
Respondent rendered it unconscionable by imposing a penalty of twenty
per cent (20%) interest per month compounded monthly. It strikes us, too,
that Respondent was equivocal as to the repayments that were made to
him by the Javiers. In his Verified Complaint before the Trial Court, he
averred failure to repay (Annex B, Complaint). However, in the
computation attached to his Motion for Judgment on the Pleadings (Annex
C, ibid.), he made mention of "alleged payments being accepted by (him)
at face value" and included them in the determination of the balance due.
Respondent also brought suit to collect the staggering sum of
P622,871.67 despite payments by the debtors of approximately
P177,000.00 of the original P200,000.00 loan. Although not illegal under
the terms of the Memorandum of Agreement, as in fact, the Trial Court had
ruled in Respondent's favor, it does not necessarily follow that it was moral
and fair. Respondent is not a hard-boiled and callous businessman. He is
a Judge.
A Judge's official conduct should be free from the appearance of
impropriety, and his personal behavior, not only upon the bench and in the
performance of judicial duties, but also in his everyday life, should be
beyond reproach (Canons of Judicial Ethics, Canon 3, which was
applicable at the time of the transaction in 1987; emphasis supplied). This
was reiterated in the Code of Judicial Conduct, Canon 2 and Rule 2.01,
P a g e | 25
knowledge that the latter was not the drawer of the check but his brotherin-law, although Efren had filled out the check himself, again exhibits
reproachable conduct. Respondent could have moved for the dismissal of
the case, considering his professional responsibility not to encourage, for
any motive or interest, any suit or proceeding (Rule 1.03, Code of
Professional Responsibility).
His explanation that the making and the issuance of a check without
sufficient funds constitute separate offenses so that he could proceed
even against Efren, exhibits "splitting of hairs" and a misuse of Court
processes in order to promote one's own interests. As it was, the criminal
charge was dismissed.
All told, traces of animosity and harassment on the part of Respondent
Judge are all too evident, in sharp contrast to what a Judge should be
the embodiment of what is judicious, proper and fair.: nad
WHEREFORE, finding Respondent Judge, Salvador P. de Guzman, Jr.
guilty on three (3) counts, of irresponsible, improper and dishonorable
conduct in disregard of the Code of Judicial Ethics, he is hereby
SEVERELY CENSURED, with a stern warning that a repetition of the said
acts or similar acts in the future shall receive graver sanctions.
Let this Decision be spread upon the personal records of Respondent
Judge.
SO ORDERED.
CREDIT TRANSACTION
G.R. No. 113412 April 17, 1996
Spouses PONCIANO ALMEDA and EUFEMIA P. ALMEDA, petitioner,
vs.
THE COURT OF APPEALS and PHILIPPINE NATIONAL
BANK, respondents.
KAPUNAN, J.:p
On various dates in 1981, the Philippine National Bank granted to herein
petitioners, the spouses Ponciano L. Almeda and Eufemia P. Almeda
several loan/credit accommodations totaling P18.0 Million pesos payable
in a period of six years at an interest rate of 21% per annum. To secure the
loan, the spouses Almeda executed a Real Estate Mortgage Contract
covering a 3,500 square meter parcel of land, together with the building
erected thereon (the Marvin Plaza) located at Pasong Tamo, Makati, Metro
Manila. A credit agreement embodying the terms and conditions of the
loan was executed between the parties. Pertinent portions of the said
agreement are quoted below:
SPECIAL CONDITIONS
xxx xxx xxx
The loan shall be subject to interest at the rate of
twenty one per cent (21%) per annum, payable semiannually in arrears, the first interest payment to
become due and payable six (6) months from date of
initial release of the loan. The loan shall likewise be
subject to the appropriate service charge and a
penalty charge of three per cent (30%) per annum to
be imposed on any amount remaining unpaid or not
rendered when due.
xxx xxx xxx
III. OTHER CONDITIONS
(c) Interest and Charges
P a g e | 26
CREDIT TRANSACTION
4. Order of Judge Capulong dated October 20, 1992
denying respondent bank's motion for reconsideration.
On August 27, 1993, respondent court rendered its decision setting aside
the assailed orders and upholding respondent bank's right to foreclose the
mortgaged property pursuant to Act 3135, as amended and P.D. 385.
Petitioners' Motion for Reconsideration and Supplemental Motion for
Reconsideration, dated September 15, 1993 and October 28, 1993,
respectively, were denied by respondent court in its resolution dated
January 10, 1994.
Hence the instant petition.
This appeal by certiorari from the respondent court's decision dated
August 27, 1993 raises two principal issues namely: 1) Whether or not
respondent bank was authorized to raise its interest rates from 21% to as
high as 68% under the credit agreement; and 2) Whether or not
respondent bank is granted the authority to foreclose the Marvin Plaza
under the mandatory foreclosure provisions of P.D. 385.
In its comment dated April 19, 1994, respondent bank vigorously denied
that the increases in the interest rates were illegal, unilateral, excessive
and arbitrary, it argues that the escalated rates of interest it imposed was
based on the agreement of the parties. Respondent bank further contends
that it had a right to foreclose the mortgaged property pursuant to P.D.
385, after petitioners were unable to pay their loan obligations to the bank
based on the increased rates upon maturity in 1984.
The instant petition is impressed with merit.
The binding effect of any agreement between parties to a contract is
premised on two settled principles: (1) that any obligation arising from
contract has the force of law between the parties; and (2) that there must
be mutuality between the parties based on their essential equality. 6 Any
contract which appears to be heavily weighed in favor of one of the parties
so as to lead to an unconscionable result is void. Any stipulation regarding
the validity or compliance of the contract which is left solely to the will of
one of the parties, is likewise, invalid.
It is plainly obvious, therefore, from the undisputed facts of the case that
respondent bank unilaterally altered the terms of its contract with
petitioners by increasing the interest rates on the loan without the prior
P a g e | 27
but it did not authorize the PNB, or any bank for that
matter, to unilaterally and successively increase the
agreed interest rates from 18% to 48% within a span
of four (4) months, in violation of P.D. 116 which limits
such changes to once every twelve months.
Besides violating P.D. 116, the unilateral action of the
PNB in increasing the interest rate on the private
respondent's loan, violated the mutuality of contracts
ordained in Article 1308 of the Civil Code:
Art. 308. The contract must bind both contracting
parties; its validity or compliance cannot be left to the
will of one of them.
In order that obligations arising from contracts may
have the force of law between the parties, there must
be mutuality between the parties based on their
essential equality. A contract containing a condition
which makes its fulfillment dependent exclusively upon
the uncontrolled will of one of the contracting parties,
is void (Garcia vs. Rita Legarda, Inc., 21 SCRA 555).
Hence, even assuming that the P1.8 million loan
agreement between the PNB and the private
respondent gave the PNB a license (although in fact
there was none) to increase the interest rate at will
during the term of the loan, that license would have
been null and void for being violative of the principle of
mutuality essential in contracts. It would have invested
the loan agreement with the character of a contract of
adhesion, where the parties do not bargain on equal
footing, the weaker party's (the debtor) participation
being reduced to the alternative "to take it or lease it"
(Qua vs. Law Union & Rock Insurance Co., 95 Phil.
85). Such a contract is a veritable trap for the weaker
party whom the courts of justice must protect against
abuse and imposition.
PNB's successive increases of the interest rate on the
private respondent's loan, over the latter's protest,
were arbitrary as they violated an express provision of
the Credit Agreement (Exh. 1) Section 9.01 that its
terms "may be amended only by an instrument in
CREDIT TRANSACTION
writing signed by the party to be bound as burdened
by such amendment." The increases imposed by PNB
also contravene Art. 1956 of the Civil Code which
provides that "no interest shall be due unless it has
been expressly stipulated in writing."
The debtor herein never agreed in writing to pay the
interest increases fixed by the PNB beyond 24%per
annum, hence, he is not bound to pay a higher rate
than that.
That an increase in the interest rate from 18% to 48%
within a period of four (4) months is excessive, as
found by the Court of Appeals, is indisputable.
Clearly, the galloping increases in interest rate imposed by respondent
bank on petitioners' loan, over the latter's vehement protests, were
arbitrary.
Moreover, respondent bank's reliance on C.B. Circular No. 905, Series of
1982 did not authorize the bank, or any lending institution for that matter,
to progressively increase interest rates on borrowings to an extent which
would have made it virtually impossible for debtors to comply with their
own obligations. True, escalation clauses in credit agreements are
perfectly valid and do not contravene public policy. Such clauses, however,
(as are stipulations in other contracts) are nonetheless still subject to laws
and provisions governing agreements between parties, which agreements
while they may be the law between the contracting parties implicitly
incorporate provisions of existing law. Consequently, while the Usury Law
ceiling on interest rates was lifted by C.B. Circular 905, nothing in the said
circular could possibly be read as granting respondent bank carte
blanche authority to raise interest rates to levels which would either
enslave its borrowers or lead to a hemorrhaging of their assets. Borrowing
represents a transfusion of capital from lending institutions to industries
and businesses in order to stimulate growth. This would not, obviously, be
the effect of PNB's unilateral and lopsided policy regarding the interest
rates of petitioners' borrowings in the instant case.
Apart from violating the principle of mutuality of contracts, there is
authority for disallowing the interest rates imposed by respondent bank, for
the credit agreement specifically requires that the increase be "within the
limits allowed by law". In the case of PNB v. Court of Appeals, cited above,
this Court clearly emphasized that C.B. Circular No. 905 could not be
Banco
Filipino
P a g e | 28
CREDIT TRANSACTION
is increased by law or by the
Monetary Board:
Provided, That such stipulation
shall be valid only if there is also a
stipulation in the agreement that
the rate of interest agreed upon
shall be reduced in the event that
the applicable maximum rate of
interest is reduced by law or by the
Monetary Board;
Provided, further, That the
adjustment in the rate of interest
agreed upon shall take effect on or
after the effectivity of the increase
or decrease in the maximum rate
of interest.' (Paragraphing and
emphasis supplied).
It is now clear that from March 17, 1980, escalation
clauses to be valid should specifically provide: (1) that
there can be an increase in interest if increased by law
or by the Monetary Board; and (2) in order for such
stipulation to be valid, it must include a provision for
reduction of the stipulated interest "in the event that
the applicable maximum rate of interest is reduced by
law or by the Monetary Board."
Petitioners never agreed in writing to pay the increased interest rates
demanded by respondent bank in contravention to the tenor of their credit
agreement. That an increase in interest rates from 18% to as much as
68% is excessive and unconscionable is indisputable. Between 1981 and
1984, petitioners had paid an amount equivalent to virtually half of the
entire principal (P7,735,004.66) which was applied to interest alone. By
the time the spouses tendered the amount of P40,142,518.00 in
settlement of their obligations; respondent bank was demanding
P58,377,487.00 over and above those amounts already previously paid by
the spouses.
Escalation clauses are not basically wrong or legally objectionable so long
as they are not solely potestative but based on reasonable and valid
grounds. 9 Here, as clearly demonstrated above, not only the increases of
P a g e | 29
CREDIT TRANSACTION
borrowers. That these increases, occasioned by crafty manipulations in
the interest rates is unconscionable and neutralizes the salutary policies of
extending loans to spur business cannot be disputed.
WHEREFORE, PREMISES CONSIDERED, the decision of the Court of
Appeals dated August 27, 1993, as well as the resolution dated February
10, 1994 is hereby REVERSED AND SET ASIDE. The case is remanded
to the Regional Trial Court of Makati for further proceedings.
SO ORDERED.
Petitioner,
,
-versus
CORONA,AZCUNA and
RICA MARIE S. THIO,
Respondent. Promulgated:
CORONA, J.:
Assailed in this petition for review on certiorari[1] are the June 19,
2002 decision[2] and August 20, 2002 resolution[3] of the Court of Appeals
(CA) in CA-G.R. CV No. 56577 which set aside the February 28,
1997 decision of the Regional Trial Court (RTC) of Makati City, Branch 58.
Sometime in February 1995, respondent Rica Marie S. Thio
received from petitioner Carolyn M. Garcia a crossed
check[4] dated February 24, 1995 in the amount of US$100,000 payable to
the order of a certain Marilou Santiago.[5] Thereafter, petitioner received
from respondent every month (specifically, on March 24, April 26, June 26
and July 26, all in 1995) the amount of US$3,000 [6] and P76,500[7] on July
26,[8] August 26, September 26 and October 26, 1995.
In June 1995, respondent received from petitioner another
crossed check[9] dated June 29, 1995 in the amount of P500,000, also
payable to the order of Marilou Santiago. [10] Consequently, petitioner
received from respondent the amount of P20,000 every month on August
5, September 5, October 5 and November 5, 1995.[11]
According to petitioner, respondent failed to pay the principal
amounts of the loans (US$100,000 and P500,000) when they fell
due. Thus, on February 22, 1996, petitioner filed a complaint for sum of
money and damages in the RTC of Makati City, Branch 58 against
respondent, seeking to collect the sums of US$100,000, with interest
thereon at 3% a month from October 26, 1995 and P500,000, with interest
thereon at 4% a month from November 5, 1995, plus attorneys fees and
actual damages.[12]
P a g e | 30
4.
CREDIT TRANSACTION
On appeal, the CA reversed the decision of the RTC and ruled that
there was no contract of loan between the parties:
A perusal of the record of the case shows
that [petitioner] failed to substantiate her claim that
[respondent] indeed borrowed money from her. There
is nothing in the record that shows that [respondent]
received money from [petitioner]. What is evident is
the fact that [respondent] received a MetroBank
[crossed] check dated February 24, 1995 in the sum of
US$100,000.00, payable to the order of Marilou
Santiago and a CityTrust [crossed] check dated June
29, 1995 in the amount of P500,000.00, again payable
to the order of Marilou Santiago, both of which were
issued by [petitioner]. The checks received by
[respondent], being crossed, may not be encashed but
only deposited in the bank by the payee thereof, that
is, by Marilou Santiago herself.
It must be noted that crossing a check has
the following effects: (a) the check may not be
encashed but only deposited in the bank; (b) the check
may be negotiated only onceto one who has an
account with the bank; (c) and the act of crossing the
check serves as warning to the holder that the check
has been issued for a definite purpose so that he must
inquire if he has received the check pursuant to that
purpose, otherwise, he is not a holder in due course.
Consequently, the receipt of the [crossed]
check by [respondent] is not the issuance and delivery
to the payee in contemplation of law since the latter is
not the person who could take the checks as a holder,
i.e., as a payee or indorsee thereof, with intent to
transfer title thereto. Neither could she be deemed as
an agent of Marilou Santiago with respect to the
checks because she was merely facilitating the
transactions between the former and [petitioner].
With the foregoing circumstances, it may be
fairly inferred that there were really no contracts of
loan that existed between the parties. x x x (emphasis
supplied)[22]
P a g e | 31
CREDIT TRANSACTION
credible witness, but must be credible in itself such as
the common experience of mankind can approve as
probable under the circumstances. We have no test of
the truth of human testimony except its conformity to
our knowledge, observation, and experience.
Whatever is repugnant to these belongs to the
miraculous, and is outside of juridical cognizance.[37]
Fourth, in the petition for insolvency sworn to and filed by
Santiago, it was respondent, not petitioner, who was listed as one of
her (Santiagos) creditors.[38]
Last, respondent inexplicably never presented Santiago as
a witness to corroborate her story. [39] The presumption is that
evidence willfully suppressed would be adverse if produced.
[40]
Respondent was not able to overturn this presumption.
We hold that the CA committed reversible error when it
ruled that respondent did not borrow the amounts of US$100,000
and P500,000 from petitioner. We instead agree with the ruling of the
RTC making respondent liable for the principal amounts of the loans.
We do not, however, agree that respondent is liable for the
3% and 4% monthly interest for the US$100,000 and P500,000 loans
respectively. There was no written proof of the interest payable
except for the verbal agreement that the loans would earn 3% and
4% interest per month. Article 1956 of the Civil Code provides that
[n]o interest shall be due unless it has been expressly stipulated in
writing.
DECISION
YNARES-SANTIAGO, J.:
This is a petition for review under Rule 45 of the Rules of Court
assailing the February 17, 1997 Decision [1] and the April 2, 1998
Resolution[2] of the Court of Appeals[3] in CA-G.R. SP No. 40996.
The undisputed facts are as follows:
On May 9, 1974, respondent, through its Japan Branch, entered into
an International Passenger Sales Agency Agreement with petitioner,
authorizing the latter to sell its air transport tickets.Petitioner failed to remit
the proceeds of the ticket sales, for which reason, respondent filed a
collection suit against petitioner before the Tokyo District Court which
rendered judgment on January 29, 1981, ordering petitioner to pay
respondent the amount of 83,158,195 Yen and damages for the delay at
the rate of 6% per annum from August 28, 1980 up to and until payment is
completed.[4] Unable to execute the decision in Japan, respondent filed a
case to enforce said foreign judgment with the Regional Trial Court of
Manila, Branch 54.[5] However, the case was dismissed on the ground of
failure of the Japanese Court to acquire jurisdiction over the person of the
petitioner. Respondent appealed to the Court of Appeals, which affirmed
the decision of the trial court.
Respondent filed a petition for review with this Court, docketed as
G.R. No. 112573. On February 9, 1995, a decision was rendered, the
dispositive portion of which reads:
WHEREFORE, the instant petition is partly GRANTED, and the
challenged decision is AFFIRMED insofar as it denied NORTHWESTs
claims for attorneys fees, litigation expenses, and exemplary damages but
REVERSED insofar as it sustained the trial courts dismissal of
NORTHWESTs complaint in Civil Case No. 83-17637 of Branch 54 of the
Regional Trial Court of Manila, and another in its stead is hereby rendered
ORDERING private respondent C.F. SHARP & COMPANY, INC. to pay to
NORTHWEST the amounts adjudged in the foreign judgment subject of
said case, with interest thereon at the legal rate from the filing of the
complaint therein until the said foreign judgment is fully satisfied.
Costs against the private respondent.
P a g e | 32
SO ORDERED.[6]
CREDIT TRANSACTION
Accordingly, the Regional Trial Court of Manila, Branch 54, issued a
writ of execution of the foregoing decision. [7] On November 22, 1995, the
trial court modified its order for the execution of the decision, viz:
paid in local currency based on the conversion rate prevailing at the time
of payment; plus 6% legal interest per annum from August 28, 1980, the
date of the filing of the complaint in the foreign judgment.
No costs.
SO ORDERED.[8]
SO ORDERED.[9]
On April 2, 1998, the Court of Appeals denied both the motion for
reconsideration and the partial motion for reconsideration filed by
petitioner and respondent, respectively.
P a g e | 33
to (a) transactions where the funds involved are the proceeds of loans or
investments made directly or indirectly, through bona fide intermediaries or
agents, by foreign governments, their agencies and instrumentalities, and
international financial banking institutions so long as the funds are
identifiable, as having emanated from the sources enumerated above; b)
transactions affecting high-priority economic projects for agricultural,
industrial and power development as may be determined by the National
Economic Council which are financed by or through foreign funds; (c)
forward exchange transactions entered into between banks or between
banks and individuals or juridical persons; (d) import-export and other
international banking, financial investment and industrial transactions. With
the exception of the cases enumerated in items (a), (b), (c) and (d) in the
foregoing provision, in which cases the terms of the parties agreement
shall apply, every other domestic obligation heretofore or hereafter
incurred, whether or not any such provision as to payment is contained
therein or made with respect thereto, shall be discharged upon payment in
any coin or currency which at the time of payment is legal tender for public
and private debts: Provided, That if the obligation was incurred prior to the
enactment of this Act and required payment in a particular kind of coin or
currency other than Philippine currency, it shall be discharged in Philippine
currency, measured at the prevailing rates of exchange at the time the
obligation was incurred, except in case of a loan made in a foreign
currency stipulated to be payable in the same currency in which case the
rate of exchange prevailing at the time of the stipulated date of payment
shall prevail. All coin and currency, including Central Bank notes,
heretofore or hereafter issued and declared by the Government of the
Philippines shall be legal tender for all debts, public and private.
Pertinent portion of Republic Act No. 8183 states:
SECTION 1. All monetary obligations shall be settled in the Philippine
currency which is legal tender in the Philippines. However, the parties may
agree that the obligation or transaction shall be settled in any other
currency at the time of payment.
SEC. 2. Republic Act Numbered Five Hundred and Twenty-Nine (R.A. No.
529), as amended, entitled An Act to Assure the Uniform Value of
Philippine Coin and Currency is hereby repealed.
The repeal of R.A. No. 529 by R.A. No. 8183 has the effect of
removing the prohibition on the stipulation of currency other than
Philippine currency, such that obligations or transactions may now be paid
in the currency agreed upon by the parties. Just like R.A. No. 529,
CREDIT TRANSACTION
however, the new law does not provide for the applicable rate of exchange
for the conversion of foreign currency-incurred obligations in their peso
equivalent. It follows, therefore, that the jurisprudence established in R.A.
No. 529 regarding the rate of conversion remains applicable. Thus, in Asia
World Recruitment, Inc. v. National Labor Relations Commission, [13] the
Court, applying R.A. No. 8183, sustained the ruling of the NLRC that
obligations in foreign currency may be discharged in Philippine currency
based on the prevailing rate at the time of payment. The wisdom on which
the jurisprudence interpreting R.A. No. 529 is based equally holds true
with R.A. No. 8183.Verily, it is just and fair to preserve the real value of the
foreign exchange- incurred obligation to the date of its payment. [14]
We find no denial of due process in the instant case. Contrary to the
argument of petitioner, the matter of the applicable conversion rate was
one of the issues submitted for resolution before the Court of
Appeals. Moreover, opportunity to be heard, which is the very essence of
due process, was afforded petitioner when it filed a motion for
reconsideration of the Court of Appeals decision.
Petitioners contention that it is Article 1250 [15] of the Civil Code that
should be applied is untenable. The rule that the value of the currency at
the time of the establishment of the obligation shall be the basis of
payment finds application only when there is an official pronouncement or
declaration of the existence of an extraordinary inflation or deflation. [16]
For its part, respondent prays for the modification of the Court of
Appeals award of interest. While as a general rule, a party who has not
appealed is not entitled to affirmative relief other than what was granted in
the decision of the court below, law and jurisprudence authorize a tribunal
to consider errors, although unassigned, if they involve (1) errors affecting
the lower courts jurisdiction over the subject matter, (2) plain errors not
specified, and (3) clerical errors.[17]
In the case at bar, the Court of Appeals failure to apply the correct
legal rate of interest, to which respondent is lawfully entitled, amounts to a
plain error. In Eastern Shipping Lines, Inc. v. Court of Appeals, [18] it was
held that absent any stipulation, the legal rate of interest in obligations
which consists in the payment of a sum of money, as in the present case,
is 12% per annum. As stated in the decision of the Court in G.R. No.
112573, which is final and executory, petitioner is liable to pay respondent
the amount adjudged in the foreign judgment, with interest thereon at the
legal rate [12% per annum] from the filing of the complaint therein [on
August 28, 1980] until the said foreign judgment is fully satisfied. Since
petitioner already made partial payments, his obligation was reduced to
61,734,633 Yen. Thus, petitioner should pay respondent the amount of
61,734,633 Yen plus damages for the delay at the rate of 6% per
annum from August 28, 1980 up to and until payment is completed, with
interest thereon at the rate of 12% per annum from the filing of the
complaint on August 28, 1980, until fully satisfied.
The Court is clothed with ample authority to review matters, even if
they are not assigned as errors on appeal, if it finds that their
consideration is necessary in arriving at a just decision of the case. Rules
of procedure are mere tools designed to facilitate the attainment of
justice. Their strict and rigid application, which would result in technicalities
that tend to frustrate rather than promote substantial justice, must be
avoided. Hence, substantive rights, like the applicable legal rate of interest
on petitioners long due and demandable obligation, must not be
prejudiced by a rigid and technical application of the rules. [19]
WHEREFORE, in view of all the foregoing, the instant petition is
DENIED. The February 17, 1997 decision and the April 2, 1998 resolution
of the Court of Appeals in CA-G.R. SP No. 40996 are AFFIRMED with
MODIFICATION. Petitioner is directed to pay respondent 61,734,633 Yen
plus damages for the delay at the rate of 6% per annum from August 28,
1980 up to and until payment is completed, with interest at the rate of
12% per annum counted from the date of filing of the complaint on August
28, 1980, until fully satisfied. Petitioners liability may be paid in Philippine
currency, computed at the exchange rate prevailing at the time of
payment.
SO ORDERED.
SECOND DIVISION
G.R. No. 175339
PREMIERE
vs.
BANK, petitioner,
P a g e | 34
CREDIT TRANSACTION
Since the P2.7 million released by Premiere Bank fell short of
the P4.1 million credit line which was previously approved,
Panacor negotiated for a take-out loan with IBA-Finance
Corporation (hereinafter referred to as IBA-Finance) in the sum
of P10 million, P7.5 million of which will be released outright in
order to take-out the loan from Premiere Bank and the balance
of P2.5 million (to complete the needed capital ofP4.1 million
with Colgate) to be released after the cancellation by Premiere
of the collateral mortgage on the property covered by TCT No. T3475. Pursuant to the said take-out agreement, IBA-Finance
was authorized to pay Premiere Bank the prior existing loan
obligations of Arizona in an amount not to exceedP6 million.
On October 5, 1995, Iba-Finance sent a letter to Ms. Arlene R.
Martillano, officer-in-charge of Premiere Banks San Juan
Branch, informing her of the approved loan in favor of Panacor
and Arizona, and requesting for the release of TCT No. T-3475.
Martillano, after reading the letter, affixed her signature of
conformity thereto and sent the original copy to Premiere Banks
legal office. x x x
On October 12, 1995, Premiere Bank sent a letter-reply to [IBA]Finance, informing the latter of its refusal to turn over the
requested documents on the ground that Arizona had existing
unpaid loan obligations and that it was the banks policy to
require full payment of all outstanding loan obligations prior to
the release of mortgage documents. Thereafter, Premiere Bank
issued to IBA-Finance a Final Statement of Account showing
Arizonas total loan indebtedness. On October 19, 1995,
Panacor and Arizona executed in favor of IBA-Finance a
promissory note in the amount of P7.5 million. Thereafter, IBAFinance paid to Premiere Bank the amount of P6,235,754.79,
representing the full outstanding loan account of Arizona.
Despite such payment, Premiere Bank still refused to release
the requested mortgage documents specifically, the owners
duplicate copy of TCT No. T-3475.
On November 2, 1995, Panacor requested IBA-Finance for the
immediate approval and release of the remaining P2.5 million
loan to meet the required monthly purchases from Colgate. IBAFinance explained however, that the processing of the P2.5
million loan application was conditioned, among others, on the
submission of the owners duplicate copy of TCT No. 3475 and
P a g e | 35
The Court, in a resolution dated 16 February 2005, did not give due
course to the petition for review of respondent corporations as it did not
find any reversible error in the decision of the appellate court. 10 After the
Court had denied with finality the motion for reconsideration, 11 the
mortgaged property was purchased by Premiere Development Bank at the
foreclosure sale held on 19 September 2005 for P6,600,000.00.12
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SECTION 1. Execution upon judgments or final orders.
Execution shall issue as a matter of right, on motion, upon a
judgment or order that disposes of the action or proceeding
upon the expiration of the period to appeal therefrom if no
appeal has been duly perfected.
If the appeal has been duly perfected and finally resolved, the
execution may forthwith be applied for in the court of origin, on
motion of the judgment obligee, submitting therewith certified
true copies of the judgment or judgments or final order or orders
sought to be enforced and of the entry thereof, with notice to the
adverse party.
The appellate court may, on motion in the same case, when the
interest of justice so requires, direct the court of origin to issue
the writ of execution. (Emphasis supplied.)
Jurisprudentially, the Court has recognized certain exceptions to the rule
as where in cases of special and exceptional nature it becomes imperative
in the higher interest of justice to direct the suspension of its execution;
whenever it is necessary to accomplish the aims of justice; or when certain
facts and circumstances transpired after the judgment became final which
could render the execution of the judgment unjust. 17
None of these exceptions avails to stay the execution of this Courts
decision in G.R. No. 159352. Premiere Development Bank has failed to
show how injustice would exist in executing the judgment other than the
allegation that respondent corporations are in the process of winding up.
Indeed, no new circumstance transpired after our judgment had become
final that would render the execution unjust.
The Court cannot give due course to Premiere Development Banks claim
of compensation or set-off on account of the pending Civil Case No.
MC03-2202 before the RTC of Mandaluyong City. For compensation to
apply, among other requisites, the two debts must be liquidated and
demandable already.18
A distinction must be made between a debt and a mere claim. A debt is an
amount actually ascertained. It is a claim which has been formally passed
upon by the courts or quasi-judicial bodies to which it can in law be
submitted and has been declared to be a debt. A claim, on the other hand,
is a debt in embryo. It is mere evidence of a debt and must pass thru the
process prescribed by law before it develops into what is properly called a
P a g e | 36
assets and sue and be sued as a corporation is limited to three years from
the time the period of dissolution commences, there is no time limit within
which the trustees must complete a liquidation placed in their hands. What
is provided in Section 12224 of the Corporation Code is that the
conveyance to the trustees must be made within the three-year period. But
it may be found impossible to complete the work of liquidation within the
three-year period or to reduce disputed claims to judgment. The trustees
to whom the corporate assets have been conveyed pursuant to the
authority of Section 122 may sue and be sued as such in all matters
connected with the liquidation.
Furthermore, Section 145 of the Corporation Code clearly provides that
"no right or remedy in favor of or against any corporation, its stockholders,
members, directors, trustees, or officers, nor any liability incurred by any
such corporation, stockholders, members, directors, trustees, or officers,
shall be removed or impaired either by the subsequent dissolution of said
corporation." Even if no trustee is appointed or designated during the
three-year period of the liquidation of the corporation, the Court has held
that the board of directors may be permitted to complete the corporate
liquidation by continuing as "trustees" by legal implication. 25 Therefore, no
injustice would arise even if the Court does not stay the execution of G.R.
159352.
Although it is commendable for Premiere Development Bank in offering to
deposit with the RTC the P800,000.00 as an alternative prayer, the Court
cannot allow it to defeat or subvert the right of respondent corporations to
have the final and executory decision in G.R. No. 159352 executed. The
offer to deposit cannot suspend the execution of this Courts decision for
this cannot be deemed as consignation. Consignation is the act of
depositing the thing due with the court or judicial authorities whenever the
creditor cannot accept or refuses to accept payment, and it generally
requires a prior tender of payment. In this case, it is Premiere
Development Bank, the judgment debtor, who refused to pay respondent
corporations P800,000.00 and not the other way around. Neither could
such offer to make a deposit with the RTC provide a ground for this Court
to issue an injunctive relief in this case.
WHEREFORE, the petition for review is DENIED. The decision of the
Court of Appeals in CA-G.R. SP No. 92908 is AFFIRMED.
SO ORDERED.
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DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari2 are the Decision3 dated
November 29, 2013 and the Resolution 4 dated May 13, 2014 of the Court
of Appeals (CA) in CA-G.R. CV No. 02211, which affirmed the
Decision5 dated June 16, 2005 of the Regional Trial Court of Bacolod City,
Branch 41 (RTC) in Civil Case No. 98-10451 declaring the extrajudicial
foreclosure sale of the property covered by Transfer Certificate of Title
(TCT) No. T-5649 as null and void for being barred by prescription.
The Facts
On December 15, 1980, respondents-spouses Oscar and Nenita Tarrosa
(Sps. Tarrosa) obtained from then PNB-Republic Bank, now petitioner
Maybank Philippines, Inc. (Maybank), a loan in the amount of P91,000.00.
The loan was secured by a Real Estate Mortgage 6 dated January 5, 1981
(real estate mortgage) over a 500-square meter parcel of land situated in
San Carlos City, Negros Occidental (subject property), covered by TCT
No. T-5649,7 and the improvements thereon.8
After paying the said loan, or sometime in March 1983, Sps. Tarrosa
obtained another loan from Maybank in the amount of P60,000.00 (second
loan),9 payable on March 11, 1984.10 However, Sps. Tarrosa failed to settle
the second loan upon maturity.11
P a g e | 37
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failed to present evidence of any timely written extrajudicial demand or
written acknowledgment by the debtors of their debt that could have
effectively interrupted the running of the prescriptive period. 31
Undaunted, Maybank moved for reconsideration,32 which was denied in a
Resolution33 dated May 13, 2014; hence this petition.
The Issues Before the Court
The essential issue for the Court's resolution is whether or not the CA
committed reversible error in finding that Maybank's right to foreclose the
real estate mortgage over the subject property was barred by prescription.
The Court's Ruling
The petition is meritorious.
An action to enforce a right arising from a mortgage should be enforced
within ten (10) years from the time the right of action accrues, i.e., when
the mortgagor defaults in the payment of his obligation to the mortgagee;
otherwise, it will be barred by prescription and the mortgagee will lose his
rights under the mortgage.34 However, mere delinquency in payment does
not necessarily mean delay in the legal concept. To be in default is
different from mere delay in the grammatical sense, because it involves
the beginning of a special condition or status which has its own peculiar
effects or results.35
In order that the debtor may be in default, it is necessary that: ( a) the
obligation be demandable and already liquidated; (b) the debtor delays
performance; and (c) the creditor requires the performance judicially or
extrajudicially,36unless demand is not necessary - i.e., when there is an
express stipulation to that effect; where the law so provides; when the
period is the controlling motive or the principal inducement for the creation
of the obligation; and where demand would be useless. Moreover, it is not
sufficient that the law or obligation fixes a date for performance; it must
further state expressly that after the period lapses, default will commence.
Thus, it is only when demand to pay is unnecessary in case of the
aforementioned circumstances, or when required, such demand is made
and subsequently refused that the mortgagor can be considered in default
and the mortgagee obtains the right to file an action to collect the debt or
foreclose the mortgage.38
In the present case, both the CA and the RTC reckoned the accrual of
Maybank's cause of action to foreclose the real estate mortgage over the
subject property from the maturity of the second loan on May 11, 1984.
The CA further held that demand was unnecessary for the accrual of the
cause of action in light of paragraph 5 of the real estate mortgage, which
pertinently provides:
P a g e | 38
5. In the event that the Mortgagor herein should fail or refuse to pay any of
the sums of money secured by this mortgage, or any part thereof, in
accordance with the terms and conditions herein set forth, or should he/it
fail to perform any of the conditions stipulated herein, then and in any such
case, the Mortgagee shall have the right, at its election to foreclose this
mortgage, [x x x].39
However, this provision merely articulated Maybank's right to elect
foreclosure upon Sps. Tarrosa's failure or refusal to comply with the
obligation secured, which is one of the rights duly accorded to mortgagees
in a similar situation.40 In no way did it affect the general parameters of
default, particularly the need of prior demand under Article 1169 41 of the
Civil Code, considering that it did not expressly declare: (a) that demand
shall not be necessary in order that the mortgagor may be in default; or (b)
that default shall commence upon mere failure to pay on the maturity date
of the loan. Hence, the CA erred in construing the above provision as one
through which the parties had dispensed with demand as a condition sine
qua non for the accrual of Maybank's right to foreclose the real estate
mortgage over the subject property, and thereby, mistakenly reckoned
such right from the maturity date of the loan on March 11, 1984. In the
absence of showing that demand is unnecessary for the loan obligation to
become due and demandable, Maybank's right to foreclose the real estate
mortgage accrued only after the lapse of the period indicated in its final
demand letter for Sps. Tarrosa to pay, i.e., after the lapse of five (5) days
from receipt of the final demand letter dated March 4,
1998.42 Consequently, both the CA and the RTC committed reversible
error in declaring that Maybank's right to foreclose the real estate
mortgage had already prescribed.
Thus, considering that the existence of the loan had been admitted, the
default on the part of the debtors-mortgagors had been duly established,
and the foreclosure proceedings had been initiated within the prescriptive
period as afore-discussed, the Court finds no reason to nullify the
extrajudicial foreclosure sale of the subject property.
WHEREFORE,
the
petition
is GRANTED. The
Decision
dated
November 29, 2013 and the Resolution dated May 13, 2014 of the Court
of Appeals in CA-G.R. CV No. 02211 are hereby REVERSED AND SET
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MANUEL LAO, petitioner, vs. COURT OF
APPEALS and BETTER HOMES
REALTY
&
HOUSING
CORPORATION, respondents.
No. 22184 of the Registry of Deeds of Quezon City; that (herein Petitioner
Manuel Lao) occupied the property without rent, but on (private
respondents) pure liberality with the understanding that he would vacate
the property upon demand, but despite demand to vacate made by letter
received by (herein petitioner) on February 5, 1992, the (herein petitioner)
refused to vacate the premises.
DECISION
PANGANIBAN, J.:
P a g e | 39
IT IS SO ORDERED.
On April 28, 1993, private respondent filed an appeal with the Court
of Appeals which reversed the decision of the Regional Trial Court. The
Respondent Court ruled:
The Metropolitan Trial Court has no jurisdiction to resolve the issue of
ownership in an action for unlawful detainer (B.P. 129, Sec. 33 [2]; Cf. Alvir
vs. Vera, 130 SCRA 357). The jurisdiction of a court is determined by the
nature of the action alleged in the complaint (Ching vs. Malaya, 153 SCRA
412). In its complaint in the inferior court, the plaintiff alleged that it is the
owner of the premises located at Unit I, No. 21 N. Domingo Street,
Quezon City, and that defendants occupation is rent free and based on
plaintiffs pure liberality coupled with defendants undertaking to vacate the
premises upon demand, but despite demands, defendant has refused to
vacate. The foregoing allegations suffice to constitute a cause of action for
ejectment (Banco de Oro vs. Court of Appeals, 182 SCRA 464).
The Metropolitan Trial Court is not ousted of jurisdiction simply because
the defendant raised the question of ownership (Bolus vs. Court of
Appeals, 218 SCRA 798). The inferior court shall resolve the issue of
ownership only to determine who is entitled to the possession of the
premises (B.P. 129, Sec. 33[2]; Bolus vs. Court of Appeals, supra).
Here, the Metropolitan Trial Court ruled that as owner, plaintiff (herein
private respondent Better Homes Realty and Housing Corporation) is
entitled to the possession of the premises because the defendants stay is
by mere tolerance of the plaintiff (herein private respondent).
On the other hand, the Regional Trial Court ruled that the subject property
is owned by the defendant, (herein petitioner Manuel Lao) and,
consequently, dismissed the complaint for unlawful detainer. Thus, the
Regional Trial Court resolved the issue of ownership, as if the case were
originally before it as an action for recovery of possession, or accion
publiciana, within its original jurisdiction. In an appeal from a decision of
the Municipal Trial Court, or Metropolitan Trial Court, in an unlawful
detainer case, the Regional Trial Court is simply to determine whether the
inferior court correctly resolved the issue of possession; it shall not delve
into the issue of ownership (Manuel vs. Court of Appeals, 199 SCRA
603). What the Regional Trial Court did was to rule that the real agreement
between the plaintiff and the previous owner of the property was not a
sale, but an equitable mortgage. Defendant was only a director of the
seller corporation, and his claim of ownership could not be true. This
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question could not be determined summarily. It was not properly in issue
before the inferior court because, as aforesaid, the only issue was
possessionde facto (Manlapaz vs. Court of Appeals, 191 SCRA 795), or
who has a better right to physical possession (Dalida vs. Court of Appeals,
117 SCRA 480). Consequently, the Regional Trial Court erred in reversing
the decision of the Metropolitan Trial Court.
WHEREFORE, the Court hereby REVERSES the decision of the Regional
Trial Court. In lieu thereof, We affirm the decision of the Metropolitan Trial
Court of Quezon City sentencing the defendant and all persons claiming
right under him to vacate the premises situated at Unit I, No. 21 N.
Domingo Street, Quezon City, and to surrender possession to the plaintiff;
to pay plaintiff the sum of P300.00, a day starting on January 31, 1992,
until defendant shall have vacated the premises; to pay plaintiff P5,000.00
as attorneys fees, and costs.
SO ORDERED.[6]
Manuel Laos motion for reconsideration dated January 24, 1994 was
denied by the Court of Appeals in its Resolution promulgated on April 28,
1994. Hence, this petition for review before this Court.[7]
The Issues
Petitioner Manuel Lao raises three issues:
3.1 Whether or not the lower court can decide on the issue of ownership in
the present ejectment case
3.2 Whether or not private respondent had acquired ownership over the
property in question
3.3 Whether or not petitioner should be ejected from the premises in
question[8]
P a g e | 40
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Petitioners now contend, among others, that the Court of Appeals erred in
resolving the question of ownership as if actual title, not mere possession
of subject premises, is involved in the instant case.
The petitioners contention is untenable. Since the MTC and RTC of
Laguna decided the question of ownership over the property in dispute, on
appeal the Court of Appeals had to review and resolve also the issue of
ownership. x x x
It is clear, therefore, that although an action for unlawful detainer is
inadequate for the ventilation of issues involving title or ownership of
controverted real property, [i]t is more in keeping with procedural due
process that where issues of title or ownership are raised in the summary
proceedings for unlawful detainer, said proceeding should bedismissed for
lack of jurisdiction, unless, in the case of an appeal from the inferior court
to the Court of First Instance, the parties agree to the latter Court hearing
the case in its original jurisdiction in accordance with Section 11, Rule 40 x
x x.[11]
In the case at bar, a determination of the issue of ownership is
indispensable to resolving the rights of both parties over the property in
controversy, and is inseparable from a determination of who between them
has the right to possess the same. Indeed, the very complaint for unlawful
detainer filed in the Metropolitan Trial Court of Quezon City is anchored on
the alleged ownership of private respondent over the subject premises.
[12]
The parties did not object to the incongruity of a question of ownership
being brought in an ejectment suit. Instead they both submitted evidence
on such question, and the Metropolitan Trial Court decided on the
issue. These facts are evident in the Metropolitan Trial Courts decision:
From the records of the case, the evidence presented and the various
arguments advanced by the parties, the Court finds that the property
subject matter of this case is in the name of (herein private respondent)
Better Homes and Realty Housing Corporation; that the Deed of Absolute
Sale which was the basis for the issuance of said TCT No. 22184 is
between N. Domingo Realty and Development Corporation and Better
Homes Realty and Housing Corporation which was signed by Artemio S.
Lao representing the seller N. Domingo and Realty Development
Corporation; that a Board Resolution of N. Domingo and Realty and
Development Corporation (Exhibit D position paper) shows that the
Directors of the Board of the N. Domingo Realty and Development
Corporation passed a resolution selling apartment units I and F located at
No. 21 N. Domingo St., Quezon City and designating the (herein
petitioner) with his brother Artemio S. Lao as signatories to the Deed of
Sale. The claim therefore of the (herein petitioner) that he owns the
property is not true. x x x[13]
When the MTC decision was appealed to the Regional Trial Court,
not one of the parties questioned the Metropolitan Trial Courts jurisdiction
to decide the issue of ownership. In fact, the records show that both
petitioner and private respondent discussed the issue in their respective
pleadings before the Regional Trial Court.[14] They participated in all
aspects of the trial without objection to its jurisdiction to decide the issue of
ownership. Consequently, the Regional Trial Court aptly decided the issue
based on the exercise of its original jurisdiction as authorized by Section
11, Rule 40 of the Rules of Court.
This Court further notes that in both of the contending parties
pleadings filed on appeal before the Court of Appeals, the issue of
ownership was likewise amply discussed.[15] The totality of evidence
presented was sufficient to decide categorically the issue of ownership.
These considerations, taken together with the fact that both the
Metropolitan Trial Court and the Regional Trial Court decided the issue of
ownership, justify the review of the lower courts findings of fact and
decision on the issue of ownership. This we now do, as we dispose of the
second issue and decide the case with finality to spare the parties the
time, trouble and expense of undergoing the rigors of another suit where
they will have to present the same evidence all over again and where, in
all probability, the same ultimate issue of ownership will be brought up on
appeal.
P a g e | 41
admissible to prove the true intent and agreement of the parties which the
Court will enforce even if the title of the property in question has already
been registered and a new transfer certificate of title issued in the name of
the transferee. In Macapinlac vs. Gutierrez Repide, which involved an
identical question, the Court succintly stated:
x x x This conclusion is fully supported by the decision in Cuyugan vs.
Santos (34 Phil., 100), where this court held that a conveyance in the form
of a contract of sale with pacto de retro will be treated as a mere
mortgage, if really executed as security for a debt, and that this fact can be
shown by oral evidence apart from the instrument of conveyance, a
doctrine which has been followed in the later cases of Villa vs. Santiago
(38 Phil., 157), and Cuyugan vs. Santos (39 Phil., 970).
xxxxxxxxx
In the first place, it must be borne in mind that the equitable doctrine which
has been so fully stated above, to the effect that any conveyance intended
as security for a debt will be held in effect to be a mortgage, whether so
actually expressed in the instrument or not, operates regardless of the
form of the agreement chosen by the contracting parties as the repository
of their will. Equity looks through the form and considers the substance;
and no kind of engagement can be adopted which will enable the parties
to escape from the equitable doctrine to which reference is made. In other
words, a conveyance of land, accompanied by registration in the name of
the transferee and the issuance of a new certificate, is no more secured
from the operation of this equitable doctrine than the most informal
conveyance that could be devised.[17]
The law enumerates when a contract may be presumed to be an
equitable mortgage:
(1) When the price of a sale with right to repurchase is unusually
inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase
another instrument extending the period of redemption or granting a
new period is executed;
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(4) When the purchaser retains for himself a part of the purchase
price;
(5) When the vendor binds himself to pay the taxes on the thing
sold;
(6) In any other case where it may be fairly inferred that the real
intention of the parties is that the transaction shall secure the
payment of a debt or the performance of any other obligation.
x x x x x x x x x[18]
The foregoing presumption applies also to a contract purporting to be an
absolute sale.[19]
Applying the preceding principles to the factual milieu of this case,
we find the agreement between the private respondent and N. Domingo
Realty & Housing Corporation, as represented by petitioner, manifestly
one of equitable mortgage. First, possession of the property in the
controversy remained with Petitioner Manuel Lao who was the beneficial
owner of the property, before, during and after the alleged sale. [20] It is
settled that a pacto de retro sale should be treated as a mortgage where
the (property) sold never left the possession of the vendors. [21] Second, the
option given to Manuel Lao to purchase the property in controversy had
been extended twice[22] through documents executed by Mr. Tan Bun Uy,
President and Chairman of the Board of Better Homes Realty & Housing
Corporation. The wording of the first extension is a refreshing revelation
that indeed the parties really intended to be bound by a loan with
mortgage, not by a pacto de retro. It reads, On June 10, 88, this option is
extended for another sixty days to expired (sic) on Aug. 11, 1988. The
purchase price is increased to P137,000.00. Since Mr. Lao borrow
(sic) P20,000.00 from me.[23] These extensions clearly represent the
extension of time to pay the loan given to Manuel Lao upon his failure to
pay said loan on its maturity. Mr. Lao was even granted an additional loan
of P20,000.00 as evidenced by the above-quoted document. Third,
unquestionably, Manuel Lao and his brother were in such dire need of
money that they mortgaged their townhouse units registered under the
name of N. Domingo Realty Corporation, the family corporation put up by
their parents, to Private Respondent Better Homes Realty & Housing
Corporation. In retrospect, it is easy to blame Petitioner Manuel Lao for not
demanding a reformation of the contract to reflect the true intent of the
parties. But this seeming inaction is sufficiently explained by the Lao
brothers desperate need for money, compelling them to sign the document
purporting to be a sale after they were told that the same was just for
Moreover, since the borrowers urgent need for money places the
latter at a disadvantage vis-a-vis the lender who can thus dictate the terms
of their contract, the Court, in case of an ambiguity, deems the contract to
be one which involves the lesser transmission of rights and interest over
the property in controversy.[26]
As aptly found and concluded by the regional trial court:
The evidence of record indicates that while as of April 4, 1988 (the date of
execution of the Deed of Absolute Sale whereby the N. Domingo and
Realty & Development Corporation purportedly sold the townhouse and lot
subject of this suit to [herein private respondent Better Homes Realty &
Housing Corporation] for P100,000.00) said N. Domingo Realty &
Development Corporation (NDRDC, for short) was the registered owner of
the subject property under Transfer Certificate of Title (TCT) No. 316634 of
the Registry of Deeds for Quezon City, (herein petitioner Manuel Lao) in
fact was and has been since 1975 the beneficial owner of the subject
property and, thus, the same was assigned to him by the NDRDC, the
family corporation set up by his parents and of which (herein petitioner)
and his siblings are directors. That the parties real transaction or contract
over the subject property was not one of sale but, rather, one of loan
secured by a mortgage thereon is unavoidably inferrable from the
following facts of record, to (herein petitioners) possession of the subject
property, which started in 1975 yet, continued and remained even after the
alleged sale of April 4, 1988; (herein private respondent) executed an
option to purchase in favor (herein petitioner) as early as April 2, 1988 or
two days before (herein private respondent) supposedly acquired
ownership of the property; the said option was renewed several times and
P a g e | 42
the price was increased with each renewal (thus, the original period for the
exercise of the option was up to June 11, 1988 and the price
was P109,000.00; then, on June 10, 1988, the option was extended for 60
days or until August 11, 1988 and the price was increased to P137,000.00;
and then on August 11, 1988, the option was again extended until
November 11, 1988 and the price was increased to P158, 840.00); and,
the Deed of Absolute Sale of April 4, 1988 was registered and the property
transferred in the name of (private respondent) only on May 10, 1989, per
TCT No. 22184 of the Registry of Deeds for Quezon City (Arts. 1602, nos.
2, 3, & 6, & 1604, Civil Code). Indeed, if it were true, as it would have the
Court believe, that (private respondent) was so appreciative of
(petitioners) alleged facilitation of the subject propertys sale to it, it is quite
strange why (private respondent) some two days before such supposed
sale would have been minded and inclined to execute an option to
purchase allowing (petitioner) to acquire the property -- the very same
property it was still hoping to acquire at the time. Certainly, what is more
likely and thus credible is that, if (private respondent) was indeed thankful
that it was able to purchase the property, it would not given (petitioner) any
option to purchase at all x x x.[27]
Based on the conduct of the petitioner and private respondent and
even the terminology of the second option to purchase, we rule that the
intent and agreement between them was undoubtedly one of equitable
mortgage and not of sale.
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P a g e | 43
Other Matters
Private respondent in his memorandum also contends that (1)
petitioner is not the real party in interest and (2) the petition should be
dismissed for raising/stating facts not so found by the Court of
Appeals. These deserve scant consideration. Petitioner was impleaded as
party defendant in the ejectment suit by private respondent itself. Thus,
private respondent cannot question his standing as a party. As such party,
petitioner should be allowed to raise defenses which negate private
respondents right to the property in question. The second point is really
academic. This ponencia relies on the factual narration of the Court of
Appeals and not on the facts supplied by petitioner.
WHEREFORE, the petition is hereby GRANTED. The challenged
Decision of the Court of Appeals is REVERSED and SET ASIDE. The
decision of the Regional Trial Court of Quezon City ordering the dismissal
of the complaint for ejectment is REINSTATED and AFFIRMED. No
pronouncement as to costs.
SO ORDERED
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COURT OF APPEALS, HEIRS OF EGMIDIO
OCTAVIANO AND JUAN VALDEZ, respondents.
Valdez, Ereso, Polido & Associates for petitioner.
Claustro, Claustro, Claustro Law Office collaborating
counsel for petitioner.
Jaime G. de Leon for the Heirs of Egmidio
Octaviano.
Cotabato Law Office for the Heirs of Juan Valdez.
GANCAYCO, J.:
The principal issue in this case is whether or not a
decision of the Court of Appeals promulgated a long
time ago can properly be considered res judicata by
respondent Court of Appeals in the present two
cases between petitioner and two private
respondents.
Petitioner questions as allegedly erroneous the
Decision dated August 31, 1987 of the Ninth Division
of Respondent Court of Appeals 1 in CA-G.R. No. 05148
[Civil Case No. 3607 (419)] and CA-G.R. No. 05149 [Civil
Case No. 3655 (429)], both for Recovery of Possession,
which affirmed the Decision of the Honorable Nicodemo T.
Ferrer, Judge of the Regional Trial Court of Baguio and
Benguet in Civil Case No. 3607 (419) and Civil Case No.
3655 (429), with the dispositive portion as follows:
P a g e | 44
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second by the women's dormitory and the sister's
convent.
On May 9, 1977, the Heirs of Octaviano filed a motion
for reconsideration praying the Court of Appeals to
order the registration of Lot 3 in the names of the Heirs
of Egmidio Octaviano, and on May 17, 1977, the Heirs
of Juan Valdez and Pacita Valdez filed their motion for
reconsideration praying that both Lots 2 and 3 be
ordered registered in the names of the Heirs of Juan
Valdez and Pacita Valdez. On August 12,1977, the
Court of Appeals denied the motion for reconsideration
filed by the Heirs of Juan Valdez on the ground that
there was "no sufficient merit to justify reconsideration
one way or the other ...," and likewise denied that of
the Heirs of Egmidio Octaviano.
Thereupon, the VICAR filed with the Supreme Court a
petition for review on certiorari of the decision of the
Court of Appeals dismissing his (its) application for
registration of Lots 2 and 3, docketed as G.R. No. L46832, entitled 'Catholic Vicar Apostolic of the
Mountain Province vs. Court ofAppeals and Heirs of
Egmidio Octaviano.'
From the denial by the Court of Appeals of their motion
for reconsideration the Heirs of Juan Valdez and
Pacita Valdez, on September 8, 1977, filed with the
Supreme Court a petition for review, docketed as G.R.
No. L-46872, entitled, Heirs of Juan Valdez and Pacita
Valdez vs. Court of Appeals, Vicar, Heirs of Egmidio
Octaviano and Annable O. Valdez.
On January 13, 1978, the Supreme Court denied in a
minute resolution both petitions (of VICAR on the one
hand and the Heirs of Juan Valdez and Pacita Valdez
on the other) for lack of merit. Upon the finality of both
Supreme Court resolutions in G.R. No. L-46832 and
G.R. No. L- 46872, the Heirs of Octaviano filed with
the then Court of First Instance of Baguio, Branch II, a
Motion For Execution of Judgment praying that the
Heirs of Octaviano be placed in possession of Lot 3.
The Court, presided over by Hon. Salvador J. Valdez,
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6. ERROR IN FINDING THAT PETITIONER DECLARED LOTS 2 AND 3
ONLY IN 1951 AND JUST TITLE IS A PRIME NECESSITY UNDER
ARTICLE 1134 IN RELATION TO ART. 1129 OF THE CIVIL CODE FOR
ORDINARY ACQUISITIVE PRESCRIPTION OF 10 YEARS;
7. ERROR IN FINDING THAT THE DECISION OF THE COURT OF
APPEALS IN CA G.R. NO. 038830 WAS AFFIRMED BY THE SUPREME
COURT;
8. ERROR IN FINDING THAT THE DECISION IN CA G.R. NO. 038830
TOUCHED ON OWNERSHIP OF LOTS 2 AND 3 AND THAT PRIVATE
RESPONDENTS AND THEIR PREDECESSORS WERE IN
POSSESSION OF LOTS 2 AND 3 UNDER A CLAIM OF OWNERSHIP IN
GOOD FAITH FROM 1906 TO 1951;
9. ERROR IN FINDING THAT PETITIONER HAD BEEN IN POSSESSION
OF LOTS 2 AND 3 MERELY AS BAILEE BOR ROWER) IN
COMMODATUM, A GRATUITOUS LOAN FOR USE;
10. ERROR IN FINDING THAT PETITIONER IS A POSSESSOR AND
BUILDER IN GOOD FAITH WITHOUT RIGHTS OF RETENTION AND
REIMBURSEMENT AND IS BARRED BY THE FINALITY AND
CONCLUSIVENESS OF THE DECISION IN CA G.R. NO. 038830. 3
The petition is bereft of merit.
Petitioner questions the ruling of respondent Court of Appeals in CA-G.R.
Nos. 05148 and 05149, when it clearly held that it was in agreement with
the findings of the trial court that the Decision of the Court of Appeals
dated May 4,1977 in CA-G.R. No. 38830-R, on the question of ownership
of Lots 2 and 3, declared that the said Court of Appeals Decision CA-G.R.
No. 38830-R) did not positively declare private respondents as owners of
the land, neither was it declared that they were not owners of the land, but
it held that the predecessors of private respondents were possessors of
Lots 2 and 3, with claim of ownership in good faith from 1906 to 1951.
Petitioner was in possession as borrower in commodatum up to 1951,
when it repudiated the trust by declaring the properties in its name for
taxation purposes. When petitioner applied for registration of Lots 2 and 3
in 1962, it had been in possession in concept of owner only for eleven
years. Ordinary acquisitive prescription requires possession for ten years,
but always with just title. Extraordinary acquisitive prescription requires 30
years. 4
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