[G.R. No. 134330.

July 18, 2001]

SPS. BELO et al vs. PNB et al.

SECOND DIVISION

Gentlemen:

Quoted hereunder, for your information, is a resolution of this Court dated JUL 18 2001.

G.R. No. 134330(Spouses Enrique M. Belo and Florencia G. Belo vs. Philippine National Bank and Spouses
Marcos and Arsenia Eslabons.)

Before us is a motion for reconsideration by respondent Philippine National Bank of the Decision dated
March 1, 2001 rendered by this Court in G.R. No. 134330 entitled Spouses Bolo v. Philippine National
Bank, et. al.

In the said decision we granted the petitioners who are the assignees of the accommodation mortgagor,
Eduarda Belo, the right to redeem the property mortgaged by the said accommodation mortgagor to the
respondent, by paying the bid price less the value of the mortgaged properties not belonging to the
petitioners spouses. We refused to apply the provisions of Section 25 of the Presidential Decree No. 694
to accommodation mortgagors.

In its supplemental motion for reconsideration, respondent bank cites the case of Arrow Head Golf Club,
Inc. v. Court of Appeals[1]cralaw wherein in two (2) unpublished resolutions, we basically held that the
said provision applies even to accommodation mortgagors. The said unpublished resolutions were based
on the purpose of the law which is to protect government investments in state-owned lending
institutions.

The motion is denied for lack of merit.

First, the facts in the present case and the facts in the Arrow Head case are different. In the case at bar,
there are indications that the respondent bank was disregarding the provisions of its Charter in the
foreclosure proceedings that ensued. The mortgage contract explicitly provided the application of Act
No. 3135 in case of foreclosure; the actual foreclosure proceeding was filed under Act No. 3135; and, the
notice of redemption to the spouses stated that the respondent was requiring the petitioners spouses to
redeem their properties without mention of the other properties not belonging to the spouses. These
circumstances certainly do not obtain in the Arrow Head case. Thus, under the doctrine of estoppel and
the basic principles on the rule on equity and fair play, Section 25 of P.D. No. 694 cannot and should not
be applied in the case at bar. That is the reason why in our decision we ruled that:

One wonders why respondent bank up to now invokes Act No. 3135 in its contracts without qualification
and yet in the end disregards the same when it finds its provisions unfavorable to it. This is downright
unfair for the other contracting party who in good faith believes that respondent would comply with the
contractual agreement. What makes matters worse is that respondent uses its Charter and the General
Banking Act to cover up its contractual violation and to put some vestige of legality thereto. As said
earlier, a law is not crafted to perpetrate injustice. We are not downgrading the higher interest of giving
protection to the banking system but said interest remains irrelevant when the banks themselves cower
under favorable laws to hide a contractual breach. Hence, if the respondent and other banks for that
matter would like to invoke the General Banking Act and at the same time the provisions of Act No. 3135
regarding extrajudicial foreclosure, they should clearly stipulate in their mortgage contracts the specific
provision on redemption that will govern the parties so that apparent conflicts in these laws will be
avoided and the parties will not be put in the same predicament.

Second, at the time the offer of redemption was made sometime in 1991 by the petitioners spouses, the
respondent bank was already partially privatized with 30% of the shares already owned by private
entities and with a further intention to fully privatize the same in the very near future. Meanwhile, in the
Arrow Head case, when the redemption was exercised on February 26, 1985, the respondent was still
fully government-owned. Hence, we fail to see the reason for an overly strict application of Section 25 of
the Charter, inasmuch as in the continuing operation of respondent bank the objective of increasing
government investment earnings have been relegated to a more primary concern, that is, its conversion
to a wholly privatized lending institution.

WHEREFORE, the motion for reconsideration is DENIED and this denial is FINAL.

SO ORDERED.