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G.R. No.

L-11964 April 28, 1962 deed of transfer in question "bears no reasonable

connection with the constitutional purpose" underlying
REGISTER of DEEDS OF MANILA, petitioner- the provisions of Section 5, Article XIII of the
appellee, Constitution of the Philippines; hence, such holding or
vs. CHINA BANKING CORPORATION, acquisition "was not within the contemplation of the
respondent-appellant. framers of the Constitution"; (b) by judicial as well as by
executive-administrative an legislative construction,
Office of the Solicitor General for petitioner-appellee. the constitutional prohibition against alien landholding
Sycip-Salazar, Luna and Associates for respondent- does not preclude enjoyment by aliens of temporary
appellant. rights and land; (c) under the provisions of Section 25
Alfonso Ponce Enrile as Amicus Curiae. of Republic Act No. 337 (General Banking Act) an alien
or an alien-owned commercial bank may acquire land in
DIZON, J.: the Philippines subject to the obligation of disposing of
it within 5 years from the date of its acquisition.
Appeal from a resolution of the Land Registration 1äwphï1.ñët
Commission holding "that the deed of transfer in favor
of an alien bank, subject of the present Consulta, is Upon the other hand, the argument supporting the
unregistrable for being in contravention of the appealed resolution is that the privilege of acquiring real
Constitution of the Philippines". estate granted to commercial banks under the
provisions of Section 25 of Republic Act No. 337 was not
In an information filed on June 16, 1953 in the Court of intended as an amendment, much less as a nullification
First Instance of Manila (Criminal Case No. 22908) of the constitutional prohibition against alien
Alfonso Pangilinan and one Guillermo Chua were acquisition of lands in the Philippines, the same being
charged with qualified theft, the money involved merely an exception to the general rule, under existing
amounting to P275,000.00. On September 18, 1956, banking and corporation laws, that banks and
Pangilinan and his wife, Belen Sta. Ana, executed a corporations can engage only in the particular business
public instrument entitled DEED OF TRANSFER for which they were specifically created; that a mere
whereby, after admitting his civil liability in favor of his statute, like the republic act relied upon by, appellant,
employer, the China Banking Corporation, in relation to cannot amend the Constitution; that in connection with
the offense aforesaid, he ceded and transferred to the the particular constitutional prohibition involved
latter, in satisfaction thereof, a parcel of land located in herein, it is the character and nature of the possession
the City of Manila, registered in the name of "Belen Sta. — whether in strict ownership or otherwise — and not
Ana, married to Alfonso Pangilinan" (Transfer the length of possession that is material, the result being
Certificate of Title No. 32230). On October 24, 1956 the that, if real property is to be held in ownership, an alien
deed was presented for registration to the Register of may not legally do so even for a single day.
Deeds of the City of Manila, but because the transferee
— the China Banking Corporation — was alien-owned After considering the arguments adduced by appellant
and, as such, barred from acquiring lands in the in its brief, jointly with those expounded in the briefs
Philippines, in accordance with the provisions of submitted by Alfonso Ponce Enrile and William H.
Section 5, Article XIII of the Constitution of the Quasha and Associates, as amici curiae, on the one
Philippines, said officer submitted the matter of its hand, and on the other, those relied upon in the brief
registration to the Land Registration Commission for submitted by the Office of the Solicitor General on
resolution. After granting the parties concerned ample behalf of the Commission, we are inclined to uphold, as
opportunity to submit their views upon the issue, the we do uphold, the appealed resolution.
Commission issued the resolution appealed from.
To support its view appellant relies particularly upon
Plainly stated, the question before Us is whether paragraphs (c) and (d), Section 25 of Republic Act 337
appellant — an alien-owned bank — can acquire which read as follows: .
ownership of the residential lot covered by Transfer
Certificate of Title No. 32230 by virtue of the deed of SEC. 25. Any commercial bank may purchase,
transfer mentioned heretofore (Vide pages 1-6 of the hold, and convey real estate for the following
Record on Appeal). purposes:

Maintaining the affirmative, appellant argues that: (a) xxx xxx xxx
the temporary holding of land by an alien-owned
commercial bank under a public instrument such as the

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(c) Such shall be conveyed to it in satisfaction of juridical persons. This, of course, would make legal the
debts previously contracted in the course of its ownership acquired by appellant bank by virtue of the
dealings; . deed of transfer mentioned heretofore, subject to its
obligation to dispose of it in accordance with law, within
(d) Such as it shall purchase at sales under 5 years from the date of its acquisition. We can not give
judgments, decrees, mortgages, or trust deeds assent to this contention, in view of the fact that the
held by it and such as it shall purchase to secure constitutional prohibition in question is absolute in
debts due to it. terms. We have so held in Ong Sui Si Temple vs. The
Register of Deeds of Manila (G. R. No. L-6776, prom.
But no such bank shall hold the possession of May 21, 1955) where we said, inter alia, the following:
any real estate under mortgage or trust deed, or
the title and possession of any real estate We are of the opinion that the Court below has
purchased to secure any debt due to it, for a correctly held that in view of the absolute terms
longer period than five years. of section 5, Title XIII, of the Constitution, the
provisions of Act 271 of the old Philippine
Assuming, arguendo, that under the provisions of the Commission must be deemed repealed since
aforesaid Act any commercial bank, whether alien- the Constitution was enacted, in so far as
owned or controlled or not, may purchase and hold real incompatible therewith. In providing that —
estate for the specific purposes and in the particular
cases enumerated in Section 25 thereof, we find that the Save in cases of hereditary succession
case before Us does not fall under anyone of them. no private agricultural land shall be
transferred or assigned except to
Paragraph (c), Section 25 of Republic Act 337 allows a individuals, corporations or
commercial bank to purchase and hold such real estate associations qualified to acquire or
as shall be conveyed to it in satisfaction of debts hold lands of the public domain in the
previously contracted in the course of its dealings, We Philippines.
deem it quite clear and free from doubt that the "debts"
referred to in this provision are only those resulting the Constitution makes no exception in favor of
from previous loans and other similar transactions religious associations. Neither is there any such
made or entered into by a commercial bank in the saving found in Sections 1 and 2 of Article XIII,
ordinary course of its business as such. Obviously, restricting the acquisition of public agricultural
whatever "civil liability" — arising from the criminal lands and other natural resources to
offense of qualified theft — was admitted in favor of "corporations or associations at least sixty per
appellant bank by its former employee, Alfonso centum of the capital of which is owned by such
Pangilinan, was not a debt resulting from a loan or a citizens" (of the Philippines). (Emphasis ours) .
similar transaction had between the two parties in the
ordinary course of banking business. Even in the case of Smith Bell & Co. vs. Register of
Deeds of Davao (50 O.G., 5239) where a lease of a parcel
Neither do the provisions of paragraph (d) of the Same of land for a total period of 50 years in favor of an alien
section apply to the present case because the deed of corporation was held to be registerable, the reason we
transfer in question can in no sense be considered as a gave for such ruling was that a lease — unlike a sale —
sale made by virtue of a judgment, decree, mortgage, or does not involve the transfer of dominion over the land,
trust deed held by appellant bank. In the same manner the clear implication from this being that transfer of
it cannot be said that the real property in question was ownership over land, even for a limited period of time,
purchased by appellant "to secure debts due to it", is not permissible in view of the constitutional
considering that, as stated heretofore, the term debt prohibition. The reason for this is manifestly the desire
employed in the pertinent legal provision can logically and purpose of the Constitution to place and keep in the
refer only to such debts as may become payable to hands of the people the ownership over private lands in
appellant bank as a result of a banking transaction. order not to endanger the integrity of the nation.
Inasmuch as when an alien buys land he acquires and
That the constitutional prohibition under consideration will naturally exercise ownership over the same, either
has for its purpose the preservation of the patrimony of permanently or temporarily, to that extent his
the nation can not be denied, but appellant and the acquisition jeopardizes the purpose of the Constitution.
amici curiae claim that it should be liberally construed
so that the prohibition be limited to the permanent Some may say that this construction is too narrow and
acquisition of real estate by aliens — whether natural or unwise; to this we answer that it is not our privilege to

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determine the wisdom or lack of wisdom of this
constitutional mandate. It is, rather, Our sworn duty to
enforce it free from qualifications and distinctions that
tend to render futile the constitutional intent.

WHEREFORE, the resolution appealed from is hereby

affirmed, with costs.

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G. R. No. 147074 July 15, 2005 petitioners in the second case, the Bergado spouses.
Neither sale was registered, however.11
PADERES , Petitioners, On January 25, 1985, for failure of MICC to settle its
vs. obligations, Banco Filipino filed a verified Petition 12 for
The Hon. COURT OF APPEALS,1 Hon. CARLOTA the extrajudicial foreclosure of MICC’s mortgage. At the
P. VALENZUELA, in her capacity as the auction sale of the foreclosed properties on March 25,
Liquidator of Banco Filipino Savings and 1985, Banco Filipino submitted a bid of ₱3,092,547.82
Mortgage Bank,2 Respondents. and was declared the highest bidder. A Certificate of
Sale13 was issued in its favor which was registered with
x---------------------------------------------x the Registry of Deeds and annotated on the
corresponding TCTs covering the mortgaged properties
G. R. No. 147075 on July 29, 1985.

Spouses ISABELO BERGARDO and JUANA No redemption of the foreclosed mortgage having been
HERMINIA BERGARDO, Petitioners, made within the reglementary period, Carlota P.
vs. Valenzuela, the then Liquidator of Banco Filipino, filed
The Hon. COURT OF APPEALS,1 Hon. CARLOTA on October 16, 1987 an ex parte Petition14 for the
P. VALENZUELA, in her capacity as the issuance of a Writ of Possession of the foreclosed
Liquidator of Banco Filipino Savings and properties with the Regional Trial Court (RTC) of
Mortgage Bank,2 Respondents. Makati. After hearing, the Petition was granted by Order
dated September 8, 198815 of Branch 59 of the RTC.
On November 7, 1996, copies of the Writ of Possession
CARPIO MORALES, J.: dated November 5, 1996, together with a notice
addressed to MICC "and/or All persons claiming rights
By their Petition for review on certiorari under Rule 45 under them" to voluntarily vacate the premises within 7
of the Rules of Court, petitioners spouses Rodrigo and days from receipt thereof, were served on petitioners.16
Sonia Paderes and spouses Isabelo and Juana Bergado
seek the reversal of the September 20, 2000 Decision 3 Instead of vacating the two lots, however, petitioners
and February 16, 2001 Resolution of the Court of filed separate petitions before the Court of Appeals,
Appeals, which dismissed their original Petition and docketed as C.A. G.R. Numbers 42470 and 42471 which
denied their Motion for Reconsideration, respectively. were later consolidated,17 assailing the validity of the
Writ of Possession.
On September 14, 1982, Manila International
Construction Corporation (MICC) executed a real estate On September 20, 2000, the Court of Appeals
mortgage4 over 21 registered parcels of land including promulgated its questioned Decision18 dismissing the
the improvements thereon in favor of Banco Filipino consolidated petitions for lack of merit and upholding
Savings and Mortgage Bank (Banco Filipino) in order to the validity of the Writ of Possession.
secure a loan of ₱1,885,000.00. The mortgage was
registered with the Registry of Deeds of Pasay City and Petitioners’ Motion for Reconsideration of the appellate
annotated on the corresponding transfer certificates of court’s decision having been denied by Resolution of
title (TCTs) covering the properties on December 17, February 16, 2001, they jointly come before this Court
1982.5 arguing that: (1) having purchased their respective
properties in good faith from MICC, they are third
The 21 mortgaged properties included two lots, one with parties whose right thereto are superior to that of Banco
an area of 264 square meters, and the other with an area Filipino; (2) they are still entitled to redeem the
of 263, both located in the then Municipality of properties and in fact a binding agreement between
Parañaque (now Parañaque City) covered by TCT Nos. them and the bank had been reached; (3) their
610626 and 61078,7 respectively. respective houses should not have been included in the
auction sale of the mortgaged properties; (4) on the
Subsequently or in August 1983, MICC sold the lot8 contrary, as builders in good faith, they are entitled to
covered by TCT No. 61078, together with the house 9 the benefits of Article 448 of the Civil Code;
thereon, to the petitioners in the first case, the Paderes and (5) the writ of possession issued by the RTC in 1996
spouses. And on January 9, 1984, MICC sold the house10 had already lost its validity and efficacy.
built on the lot covered by TCT No. 61062 to the

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The petition must be denied. unaffected by the foreclosure and subsequent sale to
PNB, and she "neither secured nor contracted a loan"
In extra-judicial foreclosures of real estate mortgages, with said bank. What PNB foreclosed, she maintains,
the issuance of a writ of possession, which is an order "was that portion belonging to Ruperta Lavilles only,"
commanding the sheriff to place a person in possession not the part belonging to her.
of the foreclosed property,19 is governed by Section 7 of
Act No. 3135 (an act to regulate the sale of property Appellant’s position clashes with precepts well-
under special powers inserted in or annexed to real entrenched in law. By Article 2126 of the Civil Code, a
estate mortgages), as amended: "mortgage directly and immediately subjects the
property on which it is imposed, whoever the possessor
Sec. 7. In any sale made under the provisions of this Act, may be, to the fulfillment of the obligation for whose
the purchaser may petition the Court of First Instance security it was constituted." Sale or transfer cannot
of the province or place where the property or any part affect or release the mortgage. A purchaser is
thereof is situated, to give him possession thereof necessarily bound to acknowledge and respect
during the redemption period, furnishing bond in an the encumbrance to which is subjected the
amount equivalent to the use of the property for a period purchased thing and which is at the disposal of
of twelve months, to indemnify the debtor in case it be the creditor "in order that he, under the terms
shown that the sale was made without violating the of the contract, may recover the amount of his
mortgage or without complying with the requirements credit therefrom." For, a recorded real estate
of this Act. Such petition shall be made under oath and mortgage is a right in rem, a lien on the property
filed in form of an ex parte motion in the registration or whoever its owner may be. Because the
cadastral proceedings if the property is registered, or in personality of the owner is disregarded; the
special proceedings in the case of property registered mortgage subsists notwithstanding changes of
under the Mortgage Law or under section one hundred ownership; the last transferee is just as much of
and ninety-four of the Administrative Code, or of any a debtor as the first one; and this, independent
other real property encumbered with a mortgage duly of whether the transferee knows or not the
registered in the office of any register of deeds in person of the mortgagee. So it is, that a
accordance with any existing law, and in each case the mortgage lien is inseperable from the property
clerk of the court shall, upon the filing of such petition, mortgaged. All subsequent purchasers thereof
collect the fees specified in paragraph eleven of section must respect the mortgage, whether the
one hundred and fourteen of Act Numbered Four transfer to them be with or without the consent
hundred and ninety-six, as amended by Act Numbered of the mortgagee. For, the mortgage, until
Twenty-eight hundred and sixty-six, and the court shall, discharge, follows the property.25 (Emphasis and
upon approval of the bond, order that a writ of underscoring supplied; italics in the original; citations
possession issue, addressed to the sheriff of the omitted)
province in which the property is situated, who shall
execute said order immediately. And in Roxas v. Buan26 this Court held:

That petitioners purchased their properties from MICC Contending that petitioner Roxas is a party actually
in good faith is of no moment. The purchases took place holding the property adversely to the debtor, Arcadio
after MICC’s mortgage to Banco Filipino had been Valentin, petitioners argue that under the provisions of
registered in accordance with Article 212520 of the Civil Act No. 3135 they cannot be ordered to vacate the
Code and the provisions of P.D. 1529 (property registry property. Hence, the question of whether, under the
decree).21 As such, under Articles 131222 and 212623 of circumstances, petitioner Roxas indeed is a party
the Civil Code, a real right or lien in favor of Banco actually holding the property adversely to Valentin.
Filipino had already been established, subsisting over
the properties until the discharge of the principal It will be recalled that Roxas' possession of the
obligation, whoever the possessor(s) of the land might property was premised on its alleged sale to him
be. by Valentin for the amount of ₱100,000.00.
Assuming this to be true, it is readily apparent
In rejecting a similar argument, this Court, in Philippine that Roxas holds title to and possesses the
National Bank v. Mallorca,24 ratiocinated: property as Valentin's transferee. Any right he
has to the property is necessarily derived from
1. Appellant’s stand is that her undivided interest that of Valentin. As transferee, he steps into the
consisting of 20,000 square meters of the mortgaged latter's shoes. Thus, in the instant case, considering
lot, remained that the property had already been sold at public auction

P a g e 5 | 49
pursuant to an extrajudicial foreclosure, the only As transferees of mortgagor MICC, petitioners merely
interest stepped into its shoes and are necessarily bound to
that may be transferred by Valentin to Roxas is the right acknowledge and respect the mortgage it had earlier
to redeem it within the period prescribed by law. Roxas executed in favor of Banco Filipino.
is therefore the successor-in-interest of
Valentin, to whom the latter had conveyed his As for petitioners’ argument that they are still entitled
interest in the property for the purpose of to redeem the foreclosed properties, it must be rejected
redemption [Rule 39, Sec. 29 (a) of the Revised Rules too.
of Court; Magno v. Viola, 61 Phil. 80 (1934); Rosete v.
Prov. Sheriff of Zambales, 95 Phil. 560 (1954).] The debtor in extra-judicial foreclosures under Act No.
Consequently, Roxas' occupancy of the property 3135, or his successor-in-interest, has, one year from the
cannot be considered adverse to Valentin. date of registration of the Certificate of Sale with the
Registry of Deeds, a right to redeem the foreclosed
Thus, in Belleza v. Zandaga [98 Phil. 702 (1956)], the mortgage,28 hence, petitioners, as MICC’s successors-
Court held that where the purchaser in an execution sale in-interest, had one year from the registration of the
has already received the definitive deed of sale, he Certificate of Sale on July 29, 1985 or until July 29, 1986
becomes the owner of the property bought and, as for the purpose.
absolute owner, he is entitled to its possession and
cannot be excluded therefrom by one who merely claims Petitioners, however, failed to do so. Ownership of the
to be a "successor-in-interest of the judgment debtor," subject properties was thus consolidated in favor of
unless it is adjudged that the alleged successor has a Banco Filipino,29 and TCT Nos. 112352 (in lieu of TCT
better right to the property than the purchaser at the No. 61078) and 112353 (in lieu of TCT No. 61062) were
execution sale. Stated differently, the purchaser's issued in its name.
right of possession is recognized only as against
the judgment debtor and his successor-in- As this Court held in F. David Enterprises v. Insular
interest but not against persons whose right of Bank of Asia and America:30
possession is adverse to the latter. The rule was
reiterated in Guevara v. Ramos [G.R. No. L-24358, It is settled that the buyer in a foreclosure sale
March 31, 1971, 38 SCRA 194]. becomes the absolute owner of the property
purchased if it is not redeemed during the
The rule in Belleza, although relating to the possession period of one year after the registration of the
of property sold in execution sales under what is now sale. As such, he is entitled to the possession of
Sec. 35, Rule 39 of the Revised Rules of Court, is also the said property and can demand it at any time
applicable to the possession of property sold at following the consolidation of ownership in his
extrajudicial foreclosure sales pursuant to Sec. 6 of Act name and the issuance to him of a new transfer
No. 3135 [see IFC Service Leasing and Acceptance Corp. certificate of title. The buyer can in fact demand
v. Nera, supra]. Thus, as petitioner Roxas is not a possession of the land even during the redemption
party holding the property adversely to period except that he has to post a bond in accordance
Valentin, being the latter's successor-in- with Section 7 of Act No. 3135 as amended. No such
interest, there was no bar to the respondent bond is required after the redemption period if the
trial court's issuance of a writ of possession property is not redeemed. Possession of the land
upon private respondent Buan's application. then becomes an absolute right of the purchaser
as confirmed owner. Upon proper application
It does not matter that petitioner Roxas was not and proof of title, the issuance of the writ of
specifically named in the writ of possession, as he possession becomes a ministerial duty of the
merely stepped into the shoes of Valentin, being the court.31 (Emphasis supplied)
latter's successor-in-interest. On the other hand,
petitioner de Guia was occupying the house as Roxas' Petitioners assert, however, that a binding agreement
alleged tenant [Rollo, p. 24]. Moreover, respondent for the repurchase of the subject properties was reached
court's decision granting private respondent Buan's with Banco Filipino as, so they claim, reflected in the
petition for the issuance of a writ of possession ordered following exchange of communications:
the Provincial Sheriff of Zambales or any of his deputies
to remove Valentin "or any person claiming interest October 17, 1996
under him" from the property [Rollo, p. 16].
Mrs. Luz B. Dacasin
Undeniably, petitioners fell under this category. 27
(Emphasis supplied)

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Asst. Vice-President the bank. The spouses answered the letter and
disclaimed any knowledge of the foreclosure. In their
Real Estate Dept. answer to the said letter, they emphasized that their
unpaid balance with MICC was ₱188,985.60.
Banco Filipino Savings and Mortgage Bank
We are addressing your goodself [sic] to inform the
101 Paseo De Roxas cro. [sic] Dela Rosa Sts. bank that the spouses Sonia and Rodrigo Paderes
are exercising their right of redemption as
Makati City subrogees of the defunct MICC under special
Dear Madam:
From reliable information, the bank had
I am writing to you, on behalf of spouses Sonia and already made appraisal of the property and
Rodrigo Paderes re: TCT No. 61078 formerly owned by from that end, may we be informed [at] the
Manila International Construction Corporation (MICC soonest possible time the value of the property
for short) now TCT No. 112352, registered in the name to enable the spouses to prepare for such
of Banco Filipino Savings and Mortgage Bank in July eventuality. And, upon receipt of the said
30, 1996 at the Register of Deeds of Parañaque, Metro appraisal value we shall immediately inform
Manila. Incidentally, the property is denominated as you [of] our position on the matter.
Block 48, Lot 5 located at Leon Florentino St., BF
Executive , Parañaque, Metro Manila. Thank you very much.

The background facts of TCT No. 61078 are as follows: Very truly yours,

In August 1983, the MICC executed a Deed of Absolute [SGD.]

Sale of that lot covered by TCT No. 61078 in favor of
spouses Sonia and Rodrigo Paderes which was LUCIANO D. VALENCIA
acknowledged before a Notary Public on October 1,
1983. The value of the lot was ₱115,720.00. In the same Counsel for Spouses Paderes
year, the parties executed an addendum to the said deed
of absolute sale which covered a house valued at JPA Subdivision, City of Muntinlupa32
₱242,874.45. The net package price of the house and lot
was fixed at ₱329,405.75. From this amount, the x x x (Emphasis supplied).
spouses Sonia and Rodrigo Paderes paid MICC
inclusive of equity the amount of ₱125,437.35 leaving a October 25, 1996
balance of ₱212,985.60. The spouses moved in the
house in November 1983. Mr. Luciano D. Valencia

Unknown to the spouses, MICC mortgaged TCT No. Counsel for Sps. Paderes
61078 in favor of Banco Filipino Savings and Mortgage
JPA Subdivision, Muntinlupa
Bank for ₱1,885.00 duly inscribed in TCT No. 112352 on
December 12, 1982. It was foreclosed by the bank for
Dear Sir:
₱3,092,547.82 pursuant to the certificate of sale
executed by the sheriff as inscribed on TCT No. 112352
This is with regard to your letter dated October 17, 1996
[should be TCT No. 61078] on July 29, 1985 . . .
concerning the property formerly owned by Manila
International Construction Corporation (MICC)
Then came the news that Banco Filipino Savings and
foreclosed by the Bank.
Mortgage Bank was under conservatorship by the Board
of Liquidators. On the other hand, MICC became
Please inform Sps. Rodrigo and Sonia Paderes
bankrupt and closed shop. The spouses were [sic]
to come to the bank to discuss said foreclosed
nowhere to go to then at the time to get the title of the
property directly with the bank.
property they purchased from MICC.
Thank you.
Until, the spouses received a letter dated April 6, 1987
from the Board of Liquidators via Alberto Reyes, Deputy Very truly yours,
Liquidator, informing the spouses that the property
they purchased from MICC was already foreclosed by
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[SGD.] JPA Subdivision, City of Muntinlupa34

LUZ B. DACASIN x x x (Emphasis supplied).

Assistant Vice-President November 8, 1996

Real Estate Department33 Mrs. Luz B. Dacasin

x x x (Emphasis supplied; italics in the original). Asst. Vice-President

November 4, 1996 Real Estate Department

Mrs. Luz B. Dacasin Banco Filipino Savings & Mortgage Bank

Asst. Vice-President Makati City

Real Estate Dept., Banco Filipino Re: Lot 18, Block 48 Gamboa St.

Makati City BF Homes, Parañaque, MM (264 SQ.M.)

Dear Madam: Occupied by Sps. Isabelo Bergado &

Thank you very much for your letter dated October 25, Juana Herminia Bergado
1996, which was received on October 31, 1996, the
contents of which had been duly noted. Pursuant Lot 5, Block 48, L. Florentino St.
thereto I advised my clients – spouses Rodrigo and
Sonia Paderes to see [you]. BF Homes, Parañaque, MM (263 SQ.M.)

With your indulgence, I also advised my other clients – Occupied by Sps. Rodrigo Paderes &
spouses Isabelo and Juana Herminia Bergado to go
along with the spouses Paderes, who are similarly Sonia Paderes
situated with spouses Paderes property.
Dear Madam Asst. Vice-President:
Incidentally, on October 28, 1996, I also wrote your
goodself another letter at the behest of spouses Isabelo Pursuant to our conference this morning November 8,
and Juana Herminia Bergado whose property is equally 1996, regarding our desire to redeem the properties
footed with spouses Paderes. above-captioned, which your good office
accommodated, and per your advi[c]e, we submit the
It is hoped that, out of that conference per your following facts taken out and our proposals:
invitation my clients above-named be informed
formally the total amounts due the bank as a 1. Regarding the lot, you mentioned that, the
consequence of the right of redemption extended to cost per square meter was ₱7,500.00. To this
them. Of course, whatever appraised value price we are no-committal for the said price is
arrived at by the bank on the properties subject high. Although, we are still to have the amount
of redemption the same shall not be construed re-negotiated.
as my clients’ committed liability.
2. We appreciate very much your having excluded the
Thank you very much. house built in the said lot for purposes of fixing the
redemption price.
Very truly yours,
3. Your advi[c]e to subject the properties (house
[SGD.] and lot) to a real-estate mortgage with the bank
so that the amount to be loaned will be used as
LUCIANO D. VALENCIA payment of the properties to be redeemed is
accepted, and we are committed to it.
Counsel for Spouses Paderes
Thank you very much

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Very truly yours, alternative one; in other words, when something is
desired which is not exactly what is proposed in the
[SGD.] offer. It is necessary that the acceptance be
unequivocal and unconditional, and the
SPS. SONIA & acceptance and the proposition shall be without
any variation whatsoever; and any modification
RODRIGO PADERES or variation from the terms of the offer annuls
the latter and frees the offeror.37 (Emphasis
[SGD.] supplied)

SPS. ISABELO & A reading of the above-quoted correspondence reveals

the absence of both a definite offer and an absolute
acceptance of any definite offer by any of the parties.
(Emphasis supplied).
The letters dated October 17, 1996 and November 4,
1996, signed by petitioners’ counsel, while ostensibly
Petitioners’ assertion does not pass muster.
proposing to redeem the foreclosed properties and
requesting Banco Filipino to suggest a price for their
Under Article 1318 of the Civil Code, there are three
repurchase, made it clear that any proposal by the bank
essential requisites which must concur in order to give
would be subject to further action on the part of
rise to a binding contract: (1) consent of the contracting
parties; (2) object certain which is the subject matter of
the contract; and (3) cause of the obligation which is
The letter dated October 25, 1996 signed by Luz
established. "Consent" is further defined in Article 1319
Dacasin, Assistant Vice-President of Banco Filipino,
of the Code as follows:
merely invited petitioners to engage in further
negotiations and does not contain a recognition of
Art. 1319. Consent is manifested by the meeting of
petitioners’ claimed right of redemption or a definite
the offer and the acceptance upon the thing and
offer to sell the subject properties back to them.
the cause which are to constitute the contract.
The offer must be certain and the acceptance
Petitioners emphasize that in item no. 3 of their letter
absolute. A qualified acceptance constitutes a
dated November 8, 1996 they committed to "subject the
properties (house and lot) to a real-estate mortgage with
the bank so that the amount to be loaned will be used as
Acceptance made by letter or telegram does not bind the
payment of the properties to be redeemed." It is clear
offerer except from the time it came to his knowledge.
from item no. 1 of the same letter, however, that
The contract, in such a case, is presumed to have been
petitioners did not accept Banco Filipino’s valuation of
entered into in the place where the offer was made.
the properties at ₱7,500.00 per square meter and
(Emphasis supplied)
intended to "have the amount [renegotiated]."
By "offer" is meant a unilateral proposition which one
Moreover, while purporting to be a memorandum of the
party makes to the other for the celebration of the
matters taken up in the conference between petitioners
contract. There is an "offer" in the context of Article 1319
and Banco Filipino Vice-President Dacasin, petitioners’
only if the contract can come into existence by the mere
letter of November 8, 1996 does not contain the
acceptance of the offeree, without any further act on the
concurrence of Ms. Dacasin or any other authorized
part of the offeror. Hence, the "offer" must be definite,
agent of Banco Filipino. Where the alleged contract
complete and intentional.36
document was signed by only one party and the record
With regard to the "acceptance," a learned authority shows that the other party did not execute or sign the
notes that: same, there is no perfected contract.38

To produce a contract, the acceptance must not The Court of Appeals, therefore, committed no error in
qualify the terms of the offer. There is no concluding that "nothing concrete came out of the
acceptance sufficient to produce consent, when a meeting" between petitioners and Banco Filipino.
condition in the offer is removed, or a pure offer is
Respecting petitioners’ claim that their houses should
accepted with a condition, or when a term is established,
have been excluded from the auction sale of the
or changed, in the acceptance, or when a simple
mortgaged properties, it does not lie. The provision of
obligation is converted by the acceptance into an
P a g e 9 | 49
Article 44839 of the Civil Code, cited by petitioners, November 5, 1996, more than 8 years since the
which pertain to those who, in good faith, mistakenly promulgation of the RTC Order granting its petition on
build, plant or sow on the land of another, has no September 8, 1988, violated Section 6, Rule 39 of the
application to the case at bar. Rules of Court, viz:

Here, the record clearly shows that petitioners Sec. 6. Execution by motion or by independent action.
purchased their respective houses from MICC, as – A final and executory judgment or order may be
evidenced by the Addendum to Deed of Sale dated executed on motion within five (5) years from the date
October 1, 1983 and the Deed of Absolute Sale dated of its entry. After the lapse of such time, and before it is
January 9, 1984. barred by the statute of limitations, a judgment may be
enforced by action. The revived judgment may also be
Being improvements on the subject properties enforced by motion within five (5) years from the date
constructed by mortgagor MICC, there is no question of its entry and thereafter by action before it is barred
that they were also covered by MICC’s real estate by the statute of limitations.
mortgage following the terms of its contract with Banco
Filipino and Article 2127 of the Civil Code: Hence, petitioners argue, the writ of possession had lost
its validity and efficacy and should therefore be declared
Art. 2127. The mortgage extends to the natural null and void.
accessions, to the improvements, growing fruits, and
the rents or income not yet received when the obligation Petitioners’ ultimate argument fails too. In Rodil vs.
becomes due, and to the amount of the indemnity Benedicto,42 this Court categorically held that the right
granted or owing to the proprietor from the insurers of of the applicant or a subsequent purchaser to request for
the property mortgaged, or in virtue of expropriation for the issuance of a writ of possession of the land never
public use, with the declarations, amplifications and prescribes:
limitations established by law, whether the estate
remains in the possession of the mortgagor, or it passes The respondents claim that the petition for the issuance
into the hands of a third person. (Underscoring of a writ of possession was filed out of time, the said
supplied). petition having been filed more than five years after the
issuance of the final decree of registration. In support of
The early case of Cu Unjieng e Hijos v. Mabalacat their contention, the respondents cite the case of
Sugar Co.40 is illustrative. In that case, this Court held: Soroñgon vs. Makalintal [80 Phil. 259 (1948)], wherein
the following was stated:
. . . (1) That a mortgage constituted on a sugar central
includes not only the land on which it is built but "It is the law and well settled doctrine in this jurisdiction
also the buildings, machinery, and accessories that a writ of possession must be issued within the same
installed at the time the mortgage was period of time in which a judgment in ordinary civil
constituted as well as all the buildings, actions may be summarily executed (section 17, Act 496,
machinery and accessories belonging to the as amended), upon the petition of the registered owner
mortgagor, installed after the constitution or his successors in interest and against all parties who
thereof (Bischoff vs. Pomar and Compañia General de claim a right to or interest in the land registered prior to
Tabacos, 12 Phil. 690); (2) that the notice announcing the registration proceeding."
the sale at public auction of all the properties of a sugar
central extends to the machinery and accessories The better rule, however, is that enunciated in the
acquired and installed in its mill after the constitution case of Manlapas and Tolentino vs. Lorente [48 Phil.
of the mortgage; (3) that the court, that has ordered the 298 (1925)], which has not yet been abandoned, that
placing of the mortgaged properties in the hands of a the right of the applicant or a subsequent
receiver in a foreclosure suit, has jurisdiction to order purchaser to ask for the issuance of a writ of
the sale at public auction of the said mortgaged possession of the land never prescribes. . .
properties even before the termination of the
receivership; and (4) that the fact that the price at which xxx
the mortgaged properties were sold at public auction is
inadequate, is not in itself sufficient to justify the In a later case [Sta. Ana v. Menla, 111 Phil. 947 (1961)],
annulment of the sale.41 (Emphasis supplied) the Court also ruled that the provision in the Rules
of Court to the effect that judgment may be
Petitioners finally proffer that the issuance, on Banco enforced within five years by motion, and after
Filipino’s mere motion, of the Writ of Possession on five years but within ten years by an action

P a g e 10 | 49
(Section 6, Rule 39) refers to civil actions and is petitioners, as successors-in-interest of mortgagor
not applicable to special proceedings, such as MICC, have 30 days from the time Banco Filipino is
land registration cases. The Court said: given possession of the subject properties to question
the validity of the auction sale under any of the two
"The second assignment of error is as follows: grounds therein stated by filing a petition to set aside
the same and cancel the writ of possession.
'That the lower court erred in ordering that the decision
rendered in this land registration case on November 28, WHEREFORE, the petition is hereby DENIED.
1931 or twenty six years ago, has not yet become final
and unenforceable. Costs against petitioners.

We fail to understand the arguments of the appellant in SO ORDERED.

support of the above assignment, except in so far as it
supports his theory that after a decision in a land
registration case has become final, it may not be
enforced after the lapse of a period of 10 years, except
by another proceeding to enforce the judgment or
decision. Authority for this theory is the provision in the
Rules of Court to the effect that judgment may be
enforced within 5 years by motion, and after five years
but within 10 years, by an action (Sec. 6, Rule 39). This
provision of the Rules refers to civil actions and
is not applicable to special proceedings, such as
a land registration case. This is so because a
party in a civil action must immediately enforce
a judgment that is secured as against the
adverse party, and his failure to act to enforce
the same within a reasonable time as provided
in the Rules makes the decision unenforceable
against the losing party. In special proceedings
the purpose is to establish a status, condition or
fact; in land registration proceedings, the
ownership by a person or a parcel of land is
sought to be established. After the ownership
has been proved and confirmed by judicial
declaration, no further proceeding to enforce
said ownership is
necessary, except when the adverse or losing
party had been in possession of the land and the
winning party desires to oust him therefrom.43
(Emphasis and underscoring supplied)

Petitioners have not supplied any cogent reason for this

Court to deviate from the foregoing ruling.

The established doctrine that the issuance of a writ of

possession is a ministerial function whereby the issuing
court exercises neither discretion nor judgment bears
reiterating. The writ issues as a matter of course upon
the filing of the proper motion and, if filed before the
lapse of the redemption period, the approval of the
corresponding bond.44

Petitioners, however, are not without remedy. As

reflected in the challenged Court of Appeals decision,
under Section 845 of Act No. 3135, as amended,

P a g e 11 | 49
BANCO FILIPINO SSAVINGS AND MORTGAGE 6. That in a letter of the Deputy Liquidator dated
BANK, petitioner, vs. COURT OF APPEALS and January 23, 1992, plaintiff was given up to the end of
SANTIAGO (Isabela) MEMORIAL PARK, INC., March 1992 to negotiate and make special arrangement
respondents. for any satisfactory plan of payment for the redemption;

DECISION 7. That in a letter of the Deputy Liquidator dated March

12, 1992, plaintiff was directed to remit at least
AUSTRIA-MARTINEZ, J.: P50,000.00 to defendant which would manifest the
interest and willingness of plaintiff to redeem the
Before us is a petition for review on certiorari filed by property, and forthwith on March 24, 1992, plaintiff
petitioner seeking to annul the Decision[1] of the Court remitted the sum of P50,000.00 to defendant which
of Appeals (CA) dated March 31, 2000 in CA-G.R. CV was duly receipted by the latter under Official Receipt
No. 47044, which reversed the Order of the trial court No. 279968 A dated March 24, 1992;
dated May 10, 1994, dismissing private respondents
complaint for failure to state a cause of action; and the 8. That in a letter of the President of plaintiff dated
Resolution dated July 3, 2000[2] January 20, 1993, plaintiff amended its first offer and
made an offer of P1,000,000.00 as redemption which
denying petitioners motion for reconsideration. offer included a plan of payment;

On December 20, 1993, private respondent Santiago 9. That between January 20, 1993 to November 1993,
(Isabela) Memorial Park, Inc. filed a complaint for plaintiff exerted earnest efforts in order to finally effect
redemption and specific performance with the Regional the redemption, but defendant dilly dallied on the
Trial Court of Santiago, Isabela, Branch 21, against matter.
herein petitioner Banco Filipino Savings & Mortgage
Bank, the material and relevant allegations of which 10. That in a letter of Atty. ORLANDO O. SAMSON,
read as follows: Senior Vice President of defendant, dated November 5,
1993, there is a turn-around by defendant and is now
COMPLAINT demanding P5,830,000.00 as purchase price of the
property, instead of the original agreed redemption;
Plaintiff, by counsel, to this Honorable Court most
respectfully alleges: 11. That the delay of the defendant in the finalization of
the terms of redemption did not in any manner alter the
1. . right of plaintiff to redeem the property from defendant;

2. . 12. That plaintiff is still in actual possession of the

property and intend to remain in actual possession of
3. That in February 1981, plaintiff mortgaged the above the property, while defendant was never in actual
described property in favor of defendant to secure a loan possession of said property;
of P500,000.00 obtained by plaintiff from defendant;
13. That plaintiff is ready and willing to pay the
4. That due to the failure of plaintiff to pay the redemption money, which is the total bank claim of
aforementioned loan, defendant foreclosed the P925,448.17 plus lawful interest and other allowable
mortgage and in consequence thereof Sheriff David R. expenses incident to the foreclosure proceedings:
Medina of this Honorable Court issued a SHERIFFS
CERTIFICATE OF SALE in favor of defendant which is 14. That the latest actuations of defendant are indicative
dated October 9, 1990 and which instrument was of the refusal of defendant to allow the exercise of
inscribed at the back of TCT T-128647 of Isabela on redemption by herein plaintiff, reason for which there is
January 21, 1991; a need for judicial determination of the rights and
obligations of the parties to this case;
5. That in a letter of the President of plaintiff dated
August 6, 1991, plaintiff made manifest its interest to 15. That on account of the unlawful actuations of
exercise its right of redemption and made an offer of defendant in refusing the redemption of the property by
P700,000.00 as redemption to defendant through the plaintiff, the latter engaged the services of counsel for a
then Deputy Liquidator, ROSAURO NAPA; this started fee of P30,000.00 which defendant should pay to
the negotiation for the redemption of the above plaintiff.
described property;

P a g e 12 | 49
WHEREFORE, it is respectfully prayed of this for repurchase in the amount of P5,830,600.00 to
Honorable Court that, after due hearing, judgment be which private respondent in another letter asked for an
rendered: extension of 30 days to make an offer.

a. ordering defendant to accept from plaintiff Private respondent filed its opposition to the motion to
the lawful redemption amount which dismiss alleging among others that the complaint states
shall be determined by this Honorable a cause of action; that the annexes of the motion to
Court; dismiss should not be considered in the resolution of
such motion.
b. ordering defendant to execute the
necessary instrument in order to effect On May 10, 1994, the trial court rendered an Order[3]
the redemption of the property; dismissing the complaint. It ratiocinated that (1) the
letter dated August 6, 1991 was an offer to redeem for
c. ordering defendant to pay to plaintiff the P700,000.00 without any tender of the money; (2) the
sum of P30,000.00 by way of attorneys reply letter of petitioner dated August 28, 1991 stated
fees; that the redemption price is P1,146,837.81 representing
the banks claim of P925,448.17 plus 12% interest and
AND PLAINTIFF PRAYS for further reliefs just and expenses of foreclosure or the appraised value which
equitable under the premises. was P1,457,650.00; (3) the March 12, 1992 letter of the
petitioner categorically informed private respondent
Petitioner filed a motion to dismiss on the ground that that the period for redemption had expired, however,
the complaint does not state a cause of action. It alleges the bank agreed to postpone the consolidation of title of
that assuming that the allegations in the complaint are the land in the banks name up to the end of March 1992
true and correct, still there was no redemption effected if the plaintiff shall deposit P50,000.00 in order to
within one year from the date of registration of the avoid consolidation. Under Section 6 of Act 3135, on
sheriffs certificate of sale with the Register of Deeds on redemption of foreclosed property, it is provided that a
January 21, 1991, thus private respondent had lost its debtor may redeem the property at anytime within one
right to redeem the subject land. Petitioner claimed that year from and after the date of sale, i.e., one year period
the letter cited in paragraph 5 of the complaint was a to be reckoned from the registration of the sheriffs
mere offer to redeem the property which was promptly certificate of sale. The registration of sheriffs sale was
answered by a letter dated August 28, 1991, which on January 21, 1991 so that the redemption period was
categorically denied private respondents offer and until January 21, 1992; that although there was an offer
stated that when it comes to redemption, the basis of to redeem the property for P700,000.00 on August 6,
payment is the total claim of the bank at the time the 1991, which was within the redemption period, there
property was foreclosed plus 12% thereof and all was no tender of redemption price and the
litigation expenses attached thereto or its present P700,000.00 offered was not the correct redemption
appraised value whichever is higher; that the letter price. It found that the complaint did not state that
mentioned in paragraph 6 of the complaint dated private respondent tendered the correct redemption
January 23, 1992 of the Deputy Liquidator was about price within the redemption period as required under
negotiation and special arrangement and not Section 30 of Rule 39 of the Rules of Court. Private
redemption for at that stage the period of redemption respondents motion for reconsideration was denied in
had already expired; that the letter mentioned in an Order dated July 25, 1994.[4]
paragraph 7 dated March 12, 1992 was of the
postponement of the consolidation of the subject Private respondent filed its appeal with the CA which
property and not of any extension for the period of reversed the trial court in its assailed decision, the
redemption; that the amount of P50,000.00 remitted dispositive portion of which reads:
by private respondent was in consideration of the
postponement of the consolidation of the property in WHEREFORE, the Orders of the respondent trial court
petitioners name and as manifestation of private dated May 10, 1994, and July 25, 1994 are hereby
respondents sincerity to repurchase the foreclosed REVERSED and SET ASIDE. The appellants are
property; that when private respondent remitted declared entitled to repurchase the property in question
P50,000.00, the Deputy Liquidator of petitioner bank within THIRTY (30) days from notice hereof which shall
requested the legal counsel of petitioner to defer be effected upon payment of the repurchase price of
consolidation of property in petitioners name; that in a P925,448.17 less P50,000.00, which is the deposit on
letter dated November 5, 1993, petitioners Senior Vice the redemption price, with legal interest from March 24,
President declared that the subject property is available 1992, the time the contract extending the period of

P a g e 13 | 49
redemption of the property took effect until it is fully In compliance with the CA decision, private respondent
paid.[5] on April 27, 2000, made a tender of payment and
consignation with the CA in the amount of
The CA ruled that: P1,300,987.96 through a Philippine National Bank
check which was duly receipted by the appellate court.
A perusal of the allegations in the complaint shows that [7]
there was sufficient basis to make out a case against
Banco Filipino. The complaint alleged that as early as Hence, the herein petition for review on certiorari filed
August 6, 1991 or about six (6) months before the by petitioner alleging that the appellate court erred in
statutory period for redemption would expire, the holding that (1) the allegations in the complaint of
appellant had exerted earnest efforts to effect the private respondent against petitioner are sufficient to
redemption of the property in question and that after an constitute a cause of action for redemption and specific
agreement had been reached by the parties, with the performance; and (2) respondent was entitled to
corresponding deposit on the redemption price had repurchase back from petitioner its foreclosed property
been given by the appellant, the appellee bank led the for only P925,448.17.
appellant to believe that the appellee was negotiating
with the former in good faith. However, the true The basic issue is whether private respondents
intention of the appellee bank was to refuse the complaint for redemption and specific performance
redemption of the property as manifested by its act of states a cause of action against petitioner.
increasing the amount of the redemption price after the
period for redemption had expired and after a deposit It is a well-settled rule that the existence of a cause of
on the redemption price had been duly accepted by it as action is determined by the allegations in the
evidenced by a receipt issued by the appellee. complaint.[8] In resolving a motion to dismiss based on
the failure to state a cause of action, only the facts
Even assuming however that the appellant is now alleged in the complaint must be considered. The test is
barred from exercising its right of redemption, yet it can whether the court can render a valid judgment on the
still repurchase the property in question based on a new complaint based on the facts alleged and the prayer
contract entered into between the parties extending the asked for.[9] Indeed, the elementary test for failure to
period within which to purchase the property as state a cause of action is whether the complaint alleges
evidenced by the appellees Deputy Liquidator Rosauro facts which if true would justify the relief demanded.
Napas letter to Belen Jocson dated March 12, 1992 and Only ultimate facts and not legal conclusions or
the letter addressed to Atty. German M. Balot, Legal evidentiary facts, which should not be alleged in the
Counsel, Banco Filipino Santiago, Isabela dated April 7, complaint in the first place, are considered for purposes
1992. of applying the test.[10]

... Based on the allegations in the complaint, we find that

private respondent has no cause of action for
In the case of Philippine National Bank vs. Court of redemption against petitioner.
Appeals, the Court held: Indeed under Article 1482 of
the Civil Code, earnest money given in a sale transaction Paragraph 4 of the complaint states:
is considered part of the purchase price and proof of the
perfection of the sale. This provision, however, gives no 4. That due to the failure of plaintiff to pay the
more than a disputable presumption that prevails in the aforementioned loan, defendant foreclosed the
absence of contrary or rebuttal evidence. In the instant mortgage and in consequence thereof Sheriff David R.
case, the letter-agreements themselves are the evidence Medina of this Honorable Court issued a SHERIFFS
of an intention on the part of herein private parties to CERTIFICATE OF SALE in favor of defendant which is
enter into negotiations leading to a contract of sale that dated October 9, 1990 and which instrument was
is mutually acceptable as to absolutely bind them to the inscribed at the back of TCT T-128647 of Isabela on
performance of their obligations thereunder. The letter- January 21, 1991;
agreements are replete with substantial condition
precedents, acceptance of which on the part of private The sheriffs certificate of sale was registered on January
respondent must first be made in order for petitioner to 21, 1991. Section 6 of Act 3135 provides for the requisites
proceed to the next step in the negotiations. for a valid redemption, thus:

. . . [6] SEC. 6. In all cases in which an extrajudicial sale is made

under the special power hereinbefore referred to, the

P a g e 14 | 49
debtor, his successors in interest or any judicial creditor equivalent to a formal offer to redeem, would have the
or judgment creditor of said debtor, or any person effect of preserving his redemptive rights and freezing
having a lien on the property subsequent to the the expiration of the one-year period. In this case, the
mortgage or deed of trust under which the property is period of redemption expired on January 21, 1992. The
sold, may redeem the same at any time within the term complaint was filed on December 20, 1992.
of one year from and after the date of sale; and such
redemption shall be governed by the provisions of Moreover, while the complaint alleges that private
sections four hundred and sixty-four to four hundred respondent made an offer to redeem the subject
and sixty-six, inclusive, of the Code of Civil property on August 6, 1991, which was within the period
Procedure,[11] insofar as these are not inconsistent with of redemption, it is not alleged in the complaint that
the provisions of this Act. there was an actual tender of payment of the
redemption price as required by the rules. It was alleged
However, considering that petitioner is a banking that private respondent merely made an offer of
institution, the determination of the redemption price is P700,000.00 as redemption price, which however, as
governed by Section 78 of the General Banking Act stated under paragraph 13 of the same complaint, the
which provides: redemption money was the total bank claim of
P925,448.17 plus lawful interest and other allowable
In the event of foreclosure, whether judicially or expenses incident to the foreclosure proceedings. Thus,
extrajudicially, of any mortgage on real estate which is the offer was even very much lower than the price paid
security for any loan granted before the passage of this by petitioner as the highest bidder in the auction sale.
Act or under the provisions of this Act, the mortgagor or
debtor whose real property has been sold at public In BPI Family Savings Bank, Inc. vs. Veloso,[13] we
auction, judicially or extrajudicially, for the full or held:
partial payment of an obligation to any bank, banking
or credit institution, within the purview of this Act shall The general rule in redemption is that it is not sufficient
have the right, within one year after the sale of the real that a person offering to redeem manifests his desire to
estate as a result of the foreclosure of the respective do so. The statement of intention must be accompanied
mortgage, to redeem the property by paying the amount by an actual and simultaneous tender of payment. This
fixed by the court in the order of execution, or the constitutes the exercise of the right to repurchase.
amount due under the mortgage deed, as the case may
be, with interest thereon at the rate specified in the ...
mortgage, and all the costs, and judicial and other
expenses incurred by the bank or institution concerned Whether or not respondents were diligent in asserting
by reason of the execution and sale and as a result of the their willingness to pay is irrelevant. Redemption within
custody of said property less the income received from the period allowed by law is not a matter of intent but a
the property. question of payment or valid tender of the full
redemption price within said period.
Clearly, the right of redemption should be exercised
within the specified time limit, which is one year from Although the letter dated January 23, 1992 gave private
the date of registration of the certificate of sale. The respondent up to the end of March 1992, to negotiate
redemptioner should make an actual tender in good and make special arrangement for a satisfactory plan of
faith of the full amount of the purchase price as payment for the redemption, there was no categorical
provided above, i.e., the amount fixed by the court in the allegation in the complaint that the original period of
order of execution or the amount due under the redemption had been extended. Assuming arguendo
mortgage deed, as the case may be, with interest thereon that the period for redemption had been extended, i.e.,
at the rate specified in the mortgage, and all the costs, up to end of March 1992, still private respondent failed
and judicial and other expenses incurred by the bank or to exercise its right within said period. This is shown by
institution concerned by reason of the execution and private respondents allegation under paragraph 8 of its
sale and as a result of the custody of said property less complaint that in a letter dated January 20, 1993,
the income received from the property. private respondents President amended his first offer
and made an offer of P1 million as redemption price.
In case of disagreement over the redemption price, the Notably, such offer was made beyond the end of the
redemptioner may preserve his right of redemption March 1992 alleged extended period. Thus, private
through judicial action which in every case must be filed respondent has no more right to seek redemption by
within the one-year period of redemption.[12] The filing force of law which petitioner was bound to accept.
of the court action to enforce redemption, being

P a g e 15 | 49
We find that the CA also erred in stating that assuming Based on the foregoing, there is no basis for the order of
appellant is now barred from exercising its right of the CA to allow private respondent to repurchase the
redemption, it can still repurchase the property in foreclosed property in the amount of P925,448.17 plus
question based on a new contract entered into between the expenses incurred in the sale of the property,
the parties extending the period within which to including the necessary and useful expenses made on
purchase the property. the thing sold.

The allegations in the complaint do not show that a new WHEREFORE, the decision of the Court of Appeals
contract was entered into between the parties. The dated March 31, 2000 is hereby REVERSED and SET
March 12, 1992 letter referred to by the CA as well as in ASIDE. The Order of the Regional Trial Court of
the complaint only directed private respondent to remit Santiago, Isabela, Branch 21, dated May 10, 1994 in Civil
at least P50,000.00 to petitioner as a manifestation of Case No. 2036 dismissing the complaint for redemption
the formers interest and willingness to redeem the and specific performance is REINSTATED and
property. Thus, the P50,000.00 remitted by private AFFIRMED.
respondent was only the first step to show its interest in
redeeming the property. In no way did it establish that SO ORDERED.
a contract of sale, as found by the CA, had been
perfected and that the P50,000.00 remitted by private
respondent is considered as earnest money.

Article 1475 of the Civil Code provides:

The contract of sale is perfected at the moment there is

a meeting of minds upon the thing which is the object of
the contract and upon the price.

From that moment, the parties may reciprocally

demand performance, subject to the provisions of the
law governing the form of contracts.

There was no showing in the complaint that private

respondent and petitioner had already agreed on the
purchase price of the foreclosed property. In fact, the
allegations in paragraphs 8 to 10 of the complaint show
otherwise, thus:

8. That in a letter of the President of plaintiff

dated January 20, 1993, plaintiff amended its first
offer and made an offer of P1,000,000.00 as
redemption which offer included a plan of

9. That between January 20, 1993 to November

1993, plaintiff exerted earnest efforts in order to
finally effect the redemption, but defendant dilly
dallied on the matter.

10. That in a letter of Atty. ORLANDO O.

SAMSON, Senior Vice President of defendant,
dated November 5, 1993, there is a turn-around
by defendant and is now demanding
P5,830,000.00 as purchase price of the property,
instead of the original agreed redemption;

The complaint does not allege that there was already a

meeting of the minds of the parties.

P a g e 16 | 49
[G.R. No. 164510 : November 25, 2008] in-fact may deem necessary, appropriate or convenient,
any and all documents instruments or contract/s
SPOUSES SANTIAGO and RUFINA TANCHAN, (including without limitations, promissory notes, loan
Petitioners v. ALLIED BANKING CORPORATION, agreements, assignments, surety or guaranty
Respondent. undertakings, security agreements) involving, affecting
or creating a charge or liability on the Property."10
The liability of the sureties under both CG/CSAs is
AUSTRIA-MARTINEZ, J.: limited to Php150,000,000.00.11

By way of Petition for Review under Rule 45 of the Rules Exhibit "G" and all the Philippine peso promissory
of Court, spouses Santiago and Rufina Tanchan notes, including Exhibit "H", are secured not only by the
(petitioners) seek the modification of the June 15, 2004 two CG/CSAs but also by a Real Estate Mortgage
Decision1 of the Court of Appeals (CA) which affirmed executed on February 14, 1997 by Henry, for himself and
the August 3, 2001 Decision2 and August 8, 2002 Order3 as the legal guardian of the minors Henry Paul L.
of Branch 137, Regional Trial Court (RTC), Makati in Tanchan and Don Henry L. Tanchan; his wife Ma. Julie
Civil Case No. 98-2468.4 Ann; and Spouses Pablo and Milagros Lim, over real
properties registered in their names under Transfer
The relevant facts are of record. Certificates of Title No. 115804, No. 111149, No. 110672
and No. 3815, all located in Cebu City.12
For value received, Cebu Foremost Construction, Inc.
(Foremost), through its Chairman and President Henry In separate final demand letters, both dated May 14,
Tanchan (Henry) and his spouse, Vice-President and 1998, respondent sought from Foremost payment of
Treasurer Ma. Julie Ann Tanchan (Ma. Julie Ann) US$1,054,000.00, as the outstanding principal balance,
executed and delivered to Allied Banking Corporation exclusive of interest and charges, of its obligations
(respondent) seven US$ promissory notes,5 including under the seven US$ promissory notes,and
Promissory Note No. 0051-97-036966 (Exhibit "G") PhP28,900,000.00 under its Philippine peso
for US$379,000.00, at 9.50% interest rate per annum, promissory notes.13 Separate demands for payment
due on February 9, 1998. were also made upon Spouses Tanchan 14 and the
petitioners15 as sureties.
Foremost also issued to respondent several Philippine
peso promissory notes7 covering various loans in the In a letter dated April 6, 1998, Foremost offered to cede
aggregate amount of Php28,900,000.00, including to respondent, by way of dacion en pago, the mortgaged
Promissory Note No. 0051-97-03688 (Exhibit "H") real properties in full payment of its loan obligations.16
for PhpP16,500,000.00, at an interest rate of 14.5% per
annum, due on February 9, 1998.8 On August 3, 1998, respondent instituted the extra-
judicial foreclosure of the real estate mortgage to satisfy
All the foregoing promissory notes are secured by two its claim against Foremost in the aggregate "amount of
Continuing Guaranty/ Comprehensive Surety Php55,578,826.77, inclusive of interest, other charges
Agreements (CG/CSA) executed in the personal and attorney's fees, equivalent to 10% of the total
capacities of spouses Henry and Ma. Julie Ann (Spouses amount due as of May 3, 1998, plus the costs and
Tanchan) and Henry's brother, herein petitioner expenses of foreclosure."17 At the public auction sale,
Santiago Tanchan (Santiago),9 for himself and as respondent's bid of only Php37,745,283.67 for all the
attorney-in-fact of his wife and co-petitioner Rufina mortgaged properties, including the buildings and
Tanchan (Rufina) under a Special Power of Attorney, improvements thereon,18 was adjudged the sole and
dated April 30, 1993, which grants Santiago authority highest bid.
On October 13, 1998, respondent filed with the RTC a
x x x borrow and/or contract debts and obligations Complaint for Collection of Sum of Money with Petition
involving, affecting or creating a charge or liability on, for Issuance of Writ of Preliminary Injunction against
or which may involve, affect or create a liability on the Foremost, Spouses Tanchan and herein petitioners
Property and/or my interest therein, whether or not (collectively referred to as Foremost, et al.), praying that
such debt/s or obligation/s contracted or to be they be ordered to pay, jointly and severally, the
contracted will benefit me or the family, and to sign, following amounts:19
execute and deliver in my name to or in favor of any
party, under such terms and conditions as my attorney-

P a g e 17 | 49
Promissory Note Amount as additional working capital in consideration of which,
plaintiff [respondent] granted the loans but when
0051-96-09495 defendants
US$ 80,000.00 plus interest at the rate of 11.4% [Foremost,
per annum et al.] received the said
from December
29, 1997 until fully paid and a penalty chargeproceeds, they interest
on the unpaid divertedatthe
the same
rate to a purpose other
of 1% per month reckoned from Decemberthan 29, that
1997for which
until they
fully were
paid and intended
a as shown by the
fact that
penalty charge on the unpaid principal reckoned fromdefendants
May 28, 1998 [Foremost,
until fullyet al.] were not able to
paid. fully pay the obligations at its maturity date;

0051-96-17617 US$110,000.00 plus interest at the rate of 5.11.4%

is no security
annum andwhatsoever
a penalty for the claim plaintiff
[respondent] seeks to enforce
charge at the rate of 1% per month, all reckoned from December 29, 1997 untilby this action, and only by
fully paid. the issuance of a writ of preliminary attachment can its
interest be protected.20
0051-96-19008 US$250,000.00 plus interest at the rate of 11.4% per annum and a penalty
charge at the rate of 1% per month all reckoned application
Novemberfor 30,
of preliminary
until attachment was
fully paid. granted by the RTC in an Order dated November 3,
1998, to wit:
0051-96-24801 US$115,000.00 plus interest at the rate of 11.4% per annum and a penalty
WHEREFORE, finding plaintiff's [respondent's]
charge at the rate of 1% per month all reckoned from December 29, 1997 until
application for the issuance of a writ of preliminary
fully paid.
attachment sufficient in form and substance, and the
ground set forth therein being among those allowed by
0051-96-00603 US$75,000.00 plus interest at the rate of 11.4% per annum and a penalty
the Rules (Rule 57, Sec. 1 [e]), let a Writ of Preliminary
charge at the rate of 1% per month all reckoned from December 29, 1997 until
Attachment issue against the properties of defendants
fully paid.
Cebu Foremost Construction, Incorporated, Santiago
Tanchan, Jr., Rufina C. Tanchan, Henry Tanchan and
0051-97-02444 US$45,000.00 plus interest at the rate of 11.4% per annum and a penalty
Ma. Julie Ann T. Tanchan, upon plaintiff's
charge at the rate of 1% per month all reckoned from December 29, 1997 until
[respondent's] filing of a bond in the amount of FIFTY-
fully paid.
FOUR MILLION (P54,000,000.00) PESOS,
conditioned to answer for whatever damage that the
0051-97-03696 US$379,000.00 plus interest at the rate of 11.4% per annum reckoned from
said defendants [Foremost, et al.] may suffer by reason
(Exhibit "G") January 8, 1998 until fully paid and a penalty charge at the rate of 1% per
of the issuance of said writ should the Court finally
month from February 9, 1998 until fully paid.
adjudge that plaintiff [respondent] was not entitled
0051-97-03688 PhpP7,466,795.67 plus interest at the rate of 20% per annum and a penalty
(Exhibit "H") charge at the rate of 3% per month from August
SO 10, 1998. (Emphasis
ORDERED. 21 supplied)

Respondent also prayed for payment of attorney's fees Thus, armed with a writ of attachment,22 the sheriff
equivalent to 25% of the total amount due, expenses and levied several parcels of land registered in the name of
costs of suit, Foremost, et al.23

In support of its application for issuance of a writ of In their Amended Answer with Counterclaim,24
preliminary attachment, respondent submitted an Foremost, et al. acknowledged the authenticity and due
Affidavit executed by Elmer Elumbaring (Elumbaring), execution of the promissory notes but denied liability
Branch Cashier/Loans Supervisor, Cebu, Jakosalem for the amounts alleged in the Complaint, the
Branch, stating that: computation of which they dispute due to the
arbitrariness of the imposition of new interest rates.
4. Defendants [Foremost, et al.] committed fraud in They impugned the cause of action of respondent to
contracting the obligations upon which the action is collect the amount due under Exhibit "G" and Exhibit
brought in that: a) to induce plaintiff [respondent] to "H" in view of the bank's prior extra-judicial foreclosure
grant the credit accommodation they represented to the of the securities thereon, which recourse bars collection
plaintiff [respondent] that they were in a financial of the amounts due on the same promissory notes.25
position to pay their obligations on maturity date in
consideration of which plaintiff [respondent] granted Foremost, et al. questioned the inclusion of Rufina as a
the credit accommodations. It turned out, however, that party-defendant even when she was not bound by the
they were not in such financial position when they failed CG/CSAs which her husband Santiago signed in excess
to pay their obligations on maturity date; b) they falsely of his authority under the special power of attorney to
represented that the proceeds of the Loan would be used
P a g e 18 | 49
contract loans for the family but not to guarantee loans bid of only Php37,745,283.67 being adjudged the lone
obtained by third persons.26 and highest bid, there remained an unpaid balance of
Php23,415,115.69.34 Elumbaring corroborated
The issuance of the writ of preliminary attachment was Bandilla's testimony. 35

likewise objected to by Foremost on the ground that it

contracted the loans in good faith but was prevented On the other hand, Henry averred that even in the wake
from paying the same only because of the economic of the Asian financial crisis, Foremost struggled to meet
crisis that beset the country. On the part of Spouses interest payments on its loan obligations with
Tanchan and herein petitioners, they claim that they respondent, but the point came when there were no
had no personal participation or influence in the loan more construction jobs to be had, and Foremost was
transactions except to ensure its payment; hence, they constrained to default on its obligations.36
could not have practiced fraud upon respondent
because they did not personally contract the loans with Santiago testified that he and his spouse could not have
it.27 Thus, each sought payment of Php100,000,000.00 defrauded respondent because they did not directly
as moral damages for the emotional and mental contract the loans with it but merely acted as sureties.
vexation visited upon them by respondent in causing Thus, the issuance of the writ of attachment against
the unwarranted preliminary attachment of their their properties was arbitrary, and brought upon them
properties.28 social humiliation and emotional torment.37

At the pre-trial, respondent submitted an Amended Pre- After the parties submitted their respective
trial Brief where it admitted that Foremost's Exhibit "G" memoranda,38 the RTC rendered its August 31, 2001
and Exhibit "H" were among those secured by the real Decision, the dispositive portion of which reads:
estate mortgage29 that it earlierforeclosed, but the
proceeds of the foreclosure sale satisfied only part of the WHEREFORE, judgment is hereby rendered ordering
amounts due on said promissory notes and left a defendants Cebu Foremost Construction, Inc., Santiago
deficiency which is now the subject of their complaint.30 Tanchan, Jr., Rufina C. Tanchan, Henry Tanchan and
Ma. Julie Ann Tanchan, solidarily, [to] pay plaintiff
The RTC issued a Pre-trial Order which limited the Allied Banking Corporation the following amounts: (1)
issues to be resolved to the following: US $80,000.00, plus 8.75 % interest per annum from 7
June 1996 to 6 May 1997, 9.5% interest per annum from
1. Does the [respondent] have a cause of action with 7 May 1997 until fully paid, and 1% penalty per month
respect to the promissory notes marked as [Exhibits] on the amount due from maturity date and until fully
G31 and H32 ?cralawred paid; (2) US $110,00.00, plus 8.75% interest per annum
from 24 September to 29 May 1997, 9.5% interest per
2. Is [petitioner] Rufina C. Tanchan liable on the basis annum from 30 May 1997 until fully paid, and 1%
of the Continuing Guaranty/Comprehensive Surety penalty per month on the amount due from maturity
Agreements because of her authority from [sic] date until fully paid; (3) US $570,000.00, plus 8.75%
Santiago Tanchan, Jr. was limited to borrow money interest per annum from 8 October 1996 to 29 May
only for the benefit of the family?cralawred 1997, 9.5% interest per annum from 30 May 1997 until
fully paid, and 1% penalty per month on the amount due
3. Is the unilateral increase of the interest rate of from maturity date until fully paid; (4) US $115,000.00
[respondent] valid?cralawred plus 9.5% interest per month from 12 December 1996
until fully paid, and 1% penalty per month on the
4. What is the amount and nature of the damages that amount due from maturity date until fully paid; (5) US
should be adjudged against the losing party in favor of $75,000.00, plus 9.5% interest per annum from 7
the prevailing party?33 January 1997 until fully paid, and 1% penalty per month
on the amount due from maturity date until fully paid;
As directed by the RTC in its Pre-trial Order, both (7) US $379,000.00, plus 9.5% interest per annum from
parties presented affidavits in lieu of direct examination 12 February 1997 to 8 December 1997, 11.4% interest per
of their witnesses. annum from 9 December 1997 until fully paid, and 1%
penalty per month on the amount due from maturity
For respondent, Fresnido Bandilla (Bandilla), Manager,
date until fully paid; (8) P7,582,945.85, plus 28.5%
Legal Department, testified that the obligations of
interest per annum, and 3% penalty per month, from
Foremost which were secured by the real estate
the foreclosure sale on 10 August 1998 until fully paid;
mortgage had amounted to Php61,155,339.36 as of the
(9) attorney's fees equivalent to 10% of the amount due
date of the foreclosure sale, and that with respondent's
plaintiff. However, the liability of defendants' Santiago

P a g e 19 | 49
Tanchan, Jr., Rufina C. Tanchan, Henry Tanchan and The CA dismissed the appeal in the June 15, 2004
Ma. Julie Ann T. Tanchan is limited to P150,00,000.00 Decision assailed herein.
Only petitioners took the present recourse to raise the
Defendants' counterclaims are dismissed for lack of following issues:
sufficient merit.
I. Whether or not the petitioners as mere sureties of the
SO ORDERED.39 loans obtained by Cebu Foremost Construction, Inc.
were guilty of fraud in incurring the obligations so that
Foremost, et al. filed a Motion for Partial a writ of preliminary attachment may be issued against
Reconsideration of Decision on the ground that them?cralawred
respondent failed to state a cause of action for the
payment of any deficiency account under Exhibit "G" II. Whether or not the respondent may claim for
and Exhibit "H". Its Complaint does not contain any deficiency judgment on its seventh and eight causes of
allegation regarding a deficiency account; nor even an action, not having alleged in its complaint that said
allusion to the foreclosure sale conducted in partial loans were secured by a real estate mortgage and after
satisfaction of said promissory notes. Although in its the foreclosure there was a deficiency as in fact in its
Amended Pre-trial Brief, respondent mentioned that a complaint, the respondent sought full recovery of the
deficiency account remained after the foreclosure of the promissory notes subject of its seventh and eighth cause
real estate mortgage, such statement did not have the of action?cralawred
effect of amending the Complaint itself. Neither did the
testimonies of Bandilla and Elumbaring about a III. Whether or not the lower court and the Court of
deficiency account take the place of a specific allegation Appeals erred in not awarding petitioners damages for
of such cause of action in the Complaint. Thus, in the the wrongful issuance of a writ of preliminary
absence of an allegation in the Complaint of a cause of attachment against them?45
action for the payment of a deficiency account, the RTC
had no factual or legal basis to grant such claim.40 Being interrelated, the first and third issues will be
resolved jointly.
Spouses Tanchan and herein petitioners also filed a
Motion to Lift the Writ of Preliminary Attachment.41 The issues involve the validity of the writ of
preliminary attachment as against the
The RTC denied the Motion to Lift the Writ of properties of petitioners only, but not as against
Attachment in an Order42 dated September 25, 2001, the properties of Foremost and Spouses
and the Motion for Partial Reconsideration, in an Tanchan, neither of whom appealed before the
Order43 dated August 8, 2002. Court. The discussion that follows, therefore,
shall pertain only to the effect of the writ on
Foremost, et al. appealedto the CA under the following petitioners.
assignment of errors:
One of the grounds cited by the CA in refusing to
1. The lower court erred in not holding that having opted discharge the writ of attachment is that "it is now too
to extra-judicially foreclose the real estate mortgage late for [petitioners] to question the validity of the writ"
which was executed to secure the promissory notes because they waited three long years to have it lifted or
marked as Exhibits "G" and "H", the [respondent] is discharged.46
barred from filing an action for collection of the same;
Under Section 13, Rule 57 of the Rules of Court, a party
2. The lower court erred in not holding that Rufina whose property has been ordered attached may file a
Tanchan did not authorize her husband, Santiago J. motion "with the court in which the action is pending"
Tanchan, Jr. to sign the Continuing Guaranty/ for the discharge of the attachment on the ground that
Comprehensive Surety Agreement marked as Exhibit it has been improperly issued or enforced. In addition,
"I"; andcralawlibrary said party may file, under Section 20, Rule 57, a claim
for damages on account of improper attachment within
3. The lower court erred in not lifting the writ of the following periods:
preliminary attachment and granting the claim for
damages of the individual defendants by virtue of the Sec. 20. Claim for damages on account of improper,
wrongful issuance of the writ of preliminary irregular or excessive attachment. - An application for
attachment.44 damages on account of improper, irregular or excessive

P a g e 20 | 49
attachment must be filed before the trial or and on the basis solely of respondent's allegations in its
before appeal is perfected or before the Complaint "that defendants [Foremost, et al.] failed to
judgment becomes executory, with due notice to pay their obligations on maturity dates, with the
the attaching obligee or his surety or sureties, setting amount of US$1,054,000.00 and Php7,466795.69
forth the facts showing his right to damages and the remaining unpaid; that defendants are
amount thereof. Such damages may be awarded only disposing/concealing their properties with intent to
after proper hearing and shall be included in the defraud the plaintiff and/or are guilty of fraud in the
judgment on the main case. performance of their obligations; and that there is no
security whatsoever for the claim sought to be
If the judgment of the appellate court be favorable to the enforced."51
party against whom the attachment was issued, he must
claim damages sustained during the pendency of the Petitioners argue that the foregoing allegations are not
appeal by filing an application in the appellate court sufficient to justify issuance of the writ, especially in the
with notice to the party in whose favor the attachment absence of findings that they, as sureties, participated in
was issued or his surety or sureties, before the judgment specific fraudulent acts in the execution and
of the appellate court becomes executory. The appellate performance of the loan agreements with respondent.52
court may allow the application to be heard and decided
by the trial court.47 (Emphasis supplied)cralawlibrary In refusing to lift the writ, the RTC held that the lack of
a specific factual finding of fraud in its decision is not
Records reveal that the RTC issued the writ of among the grounds provided under Sections 12 and 13,
preliminary attachment on November 3, 1998,48 and as Rule 57 of the Rules of Court for the discharge of the
early as March 23, 1999, in their Amended Answer with writ.53 The CA agreed for the reason that the RTC's
Counterclaim, petitioners already sought the discharge affirmative action on the complaint filed by respondent
of the writ.49 Moreover, after the RTC rendered its signifies its agreement with the allegations found
Decision on August 3, 2001 but before appeal therefrom therein that Foremost, et al., including herein
was perfected, petitioners filed on August 23, 2001 a petitioners, committed fraudulent acts in procuring
Motion to Lift the Writ of Preliminary Attachment, loans from respondent.54
reiterating their objection to the writ and seeking
payment of damages for its wrongful issuance.50 Both courts are in error.

Clearly, petitioners' opposition to the writ was timely. The present case fits perfectly into the mold of Allied
Banking Corporation v. South Pacific Sugar
The question now is whether petitioner has a valid Corporation,55 where a writ of preliminary attachment
reason to have the writ discharged and to claim issued in favor of Allied Banking Corporation was
damages. discharged by the lower courts for lack of evidence of
fraud. In sustaining the discharge of the writ, the Court
It should be borne in mind that the questioned writ of held:
preliminary attachment was issued by the RTC under
Section 1(d), Rule 57 of the Rules of Court, to wit - Moreover, even a cursory examination of the bank's
complaint will reveal that it cited no factual
Sec. 1. Grounds upon which attachment may issue. - A circumstance to show fraud on the part of respondents.
plaintiff or any proper party may, at the commencement The complaint only had a general statement in the
of the action or at any time thereafter, have the property Prayer for the Issuance of a Writ of Preliminary
of the adverse party attached as security for the Attachment, reproduced in the attached affidavit of
satisfaction of any judgment that may be recovered in petitioner's witness Go who stated as follows:
the following cases:
4. Defendants committed fraud in contracting the
(d) In an action against a party who has been guilty of a obligations upon which the present action is based and
fraud in contracting the debt or incurring the obligation in the performance thereof. Among others, defendants
upon which the action is brought, or in concealing or induced plaintiff to grant the subject loans to defendant
disposing of the property for the taking, detention or corporation by willfully and deliberately
conversion of which the action is brought; misrepresenting that, one, the proceeds of the loans
would be used as additional working capital and, two,
x x x x. they would be in a financial position to pay, and would

P a g e 21 | 49
most certainly pay, the loan obligations on their placements. No other factual averment or
maturity dates. In truth, defendants had no intention of circumstance details how respondent
honoring their commitments as shown by the fact that committed a fraud or how he connived with the
upon their receipt of the proceeds of the loans, they other defendants to commit a fraud in the
diverted the same to illegitimate purposes and then transaction sued upon. In other words,
brazenly ignored and resisted plaintiff's lawful demands petitioner has not shown any specific act or
for them to settle their past due loan obligations deed to support the allegation that respondent
is guilty of fraud.
The affidavit, being the foundation of the writ, must
Such general averment will not suffice to contain such particulars as to how the fraud imputed to
support the issuance of the writ of preliminary respondent was committed for the court to decide
attachment. It is necessary to recite in what whether or not to issue the writ. Absent any statement
particular manner an applicant for the writ of of other factual circumstances to show that respondent,
attachment was defrauded x x x. at the time of contracting the obligation, had a
preconceived plan or intention not to pay, or without
Likewise, written contracts are presumed to have been any showing of how respondent committed the alleged
entered into voluntarily and for a sufficient fraud, the general averment in the affidavit that
consideration. Section 1, Rule 131 of the Rules of Court respondent is an officer and director of Wincorp who
instructs that each party must prove his own affirmative allegedly connived with the other defendants to commit
allegations. To repeat, in this jurisdiction, fraud is never a fraud, is insufficient to support the issuance of a writ
presumed. Moreover, written contracts such as the of preliminary attachment x x x. Verily, the mere
documents executed by the parties in the present case, fact that respondent is an officer and director
are presumed to have been entered into for a sufficient of the company does not necessarily give rise to
consideration. (Citations omitted) the inference that he committed a fraud or that
chanroblesvirtuallawlibrary he connived with the other defendants to
commit a fraud. While under certain
In the aforecited case - - as in the present case - - the circumstances, courts may treat a corporation
bank presented the testimony of its account officer who as a mere aggroupment of persons, to whom
processed the loan application, but the Court discarded liability will directly attach, this is only done
her testimony for it did not detail how the corporation when the wrongdoing has been clearly and
induced or deceived the bank into granting the loans.56 convincingly established. (Emphasis
Also apropos is Ng Wee v. Tankiansee57 where the
appellate court was questioned for discharging a writ of Indeed, a writ of preliminary attachment is too harsh a
preliminary attachment to the extent that it affected the provisional remedy to
properties of respondent Tankiansee, a corporate
officer of Wincorp, both defendants in the complaint for be issued based on mere abstractions of fraud.58 Rather,
damages which petitioner Ng Wee had filed with the the rules require that for the writ to issue, there must be
trial court. In holding that the appellate court correctly a recitation of clear and concrete factual circumstances
spared respondent Tankiansee from the writ of manifesting that the debtor practiced fraud upon the
preliminary attachment, the Court cited the following creditor at the time of the execution of their agreement
basis: in that said debtor had a pre-conceived plan or intention
not to pay the creditor.59 Being a state of mind, fraud
In the instant case, petitioner's October 12, 2000 cannot be merely inferred from a bare allegation of non-
Affidavit is bereft of any factual statement that payment of debt or non-performance of obligation.60
respondent committed a fraud. The affidavit narrated
only the alleged fraudulent transaction between As shown in Ng Wee, the requirement becomes all the
Wincorp and Virata and/or Power Merge, which, by the more stringent when the application for preliminary
way, explains why this Court, in G.R. No. 162928, attachment is directed against a defendant officer of a
affirmed the writ of attachment issued against the latter. defendant corporation, for it will not be inferred from
As to the participation of respondent in the said the affiliation of one to the other that the officer
transaction, the affidavit merely states that participated in or facilitated in any fraudulent practice
respondent, an officer and director of Wincorp, attributed to the corporation. There must be evidence
connived with the other defendants in the civil clear and convincing that the officer committed a fraud
case to defraud petitioner of his money or connived with the corporation to commit a fraud;

P a g e 22 | 49
only then may the properties of said officer, along with would make respondent liable to petitioners for moral
those of the corporation, be held under a writ of damages.
preliminary attachment.
To recapitulate, the Court partly dissolves the writ of
There is every reason to extend the foregoing rule, by preliminary attachment for having wrongfully issued
analogy, to a mere surety of the defendant. A surety's against the properties of petitioners who were not
involvement is marginal to the principal agreement shown to have committed fraud in the execution of the
between the defendant and the plaintiff; hence, in order loan agreements between Foremost and respondent,
for the surety to be subject to a proceeding for issuance but declines to award moral damages to petitioners in
of a writ of preliminary attachment, it must be shown the absence of evidence that respondent acted with
that said surety participated in or facilitated the malice in causing the wrongful issuance of the writ.
fraudulent practice of the defendant, such as by offering
a security solely to induce the plaintiff to enter into the The second issue involves that portion of the August 3,
agreement with the defendant. 2001 RTC Decision awarding respondent "(7) US
$379,000.00, plus 9.5% interest per annum from 12
There is neither allegation nor innuendo in the February 1997 to 8 December 1997, 11.4% interest per
Complaint of respondent or the Affidavit of Elumbaring annum from 9 December 1997 until fully paid, and 1%
that petitioners as sureties or officers of Foremost penalty per month on the amount due from maturity
participated in or facilitated the commission of fraud by date until fully paid" under Promissory Note No. 0051-
Foremost, et al. against respondent. In fact, there is no 97-03696, and "(8) P7,582,945.85, plus 28.5% interest
mention of petitioners, much less a recital of their role per annum, and 3% penalty per month, from the
or influence in the execution of the loan agreements. foreclosure sale on 10 August 1998 until fully paid"
The RTC cited an allegation that petitioners are under Promissory Note No. 0051-97-03688.
disposing/concealing their properties with intent to
defraud respondent, but there is no hint of such scheme Petitioners argue that respondent is barred from
in the five paragraphs of the Complaint61 or in the four claiming any amount under the Promissory Notes,
corners of the Affidavit of Elumbaring.62 All that is Exhibits "G" and "H", because it had already elected to
alleged is that Foremost obtained loans from foreclose on the mortgage security, and it failed to allege
respondent but failed to pay the same, but as the Court in its pleadings that a deficiency remained after the
has repeatedly held, no fraud can be inferred from a public auction sale of the securities and that what it is
mere failure to pay a loan.63 seeking is the payment of such deficiency.67

In fine, there was no factual basis for the issuance of a There is no question that a mortgage creditor has a
writ of preliminary attachment against the properties of single cause of action against a mortgagor debtor, which
petitioners. The immediate dissolution of the writ is is to recover the debt; but it has the option of either
called for. filing a personal action for collection of sum of money
or instituting a real action to foreclose on the mortgage
In so ruling, however, the Court does not go so far as to security.68 An election of the first bars recourse to the
grant petitioners' claim for moral damages. A wrongful second; otherwise, there would be multiplicity of suits
attachment may give rise to liability for moral damages in which the debtor would be tossed from one venue to
but evidence must be adduced not only of the torment another, depending on the location of the mortgaged
and humiliation brought upon the defendant by the properties and the residence of the parties.69 On the
attaching party but also of the latter's bad faith or malice other hand, a creditor who elects to foreclose on the
in causing the wrongful attachment,64 such as evidence mortgage may yet file an independent civil action for
that the latter deliberately made false statements in its recovery of whatever deficiency may remain in the
application for attachment.65 Absent such evidence of outstanding obligation of the debtor, after deducting the
malice, the attaching party cannot be held liable for price obtained in the sale of the mortgaged properties at
moral damages.66 public auction.70 The complaint, though, must
specifically allege that what is being sought is the
In the present case, petitioners cite the allegations made recovery of the deficiency,71 or that in the pre-trial, such
by respondent in its application for attachment as claim be raised as an issue.72
evidence of bad faith. However, the allegations in
question contain nothing but the stark truth that Contrary to petitioners' argument, it is clear from the
Foremost obtained loans and that it failed to pay. The allegations in the Complaint that what respondent
Court fails to see any malice in such bare allegations as sought was the payment of the deficiency amount under
the subject promissory notes. In particular, while the

P a g e 23 | 49
Promissory Note, Exhibit "H", is for the amount of
Php16,500,000.00, what respondent sought to recover
was only Php7,582,945.85, consistent with the fact that
part of said promissory note has been satisfied from the
proceeds of the extra-judicial foreclosure. While the
exact phrase "deficiency account" is not employed in the
Complaint, the intention of respondent to recover the
same is borne out by its allegations.

More importantly, in the Pre-trial Order issued by the

RTC, the right of respondent to recover the deficiency
account under the subject promissory notes was raised
as a specific issue.


The June 15, 2004 Decisionof the Court of Appeals is
MODIFIED to the effect that the November 3, 1998
Writ of Preliminary Attachment is LIFTED and
DISSOLVED insofar as it affects the properties of
petitioners Spouses Santiago and Rufina Tanchan.

No costs.


P a g e 24 | 49
direct participant and cannot be considered as winner
or loser and the contract itself, from its very nature,
G.R. No. 90707 February 1, 1993 cannot be considered as gambling.

ONAPAL PHILIPPINES COMMODITIES, INC., 2) A commodity futures contract, being a specie of

petitioner, securities, is valid and enforceable as its terms are
governed by special laws, notably the Revised Securities
vs. Act and the Revised Rules and Regulations on
Commodity Futures Trading issued by the Securities
THE HONORABLE COURT OF APPEALS and and Exchange Commission (SEC) and approved by the
SUSAN CHUA, respondents. Monetary Board of the Central Bank; hence, the Civil
Code is not the controlling piece of legislation.

Zosa & Quijano Law Offices for private respondents.

From the records, We gather the following antecedent
facts and proceedings.


The petitioner, ONAPAL Philippines Commodities, Inc.

(petitioner), a duly organized and existing corporation,
This is an appeal by way of a Petition for Certiorari
was licensed as commission merchant/broker by the
under Rule 45 of the Rules of Court to annul and set
SEC, to engage in commodity futures trading in Cebu
aside the following actions of the Court of Appeals:
City under Certificate of Registration No. CEB-182. On
April 27, 1983, petitioner and private respondent
concluded a "Trading Contract". Like all customers of
the petitioner, private respondent was furnished
a) Decision * in Case CA-G.R. CV No. 08924; and
regularly with "Commodities Daily Quotations"
showing daily movements of prices of commodity
futures traded and of market reports indicating the
b) Resolution ** denying a Motion for Reconsideration volume of trade in different future exchanges in
Hongkong, Tokyo and other centers. Every time a
customer enters into a trading transaction with
petitioner as broker, the trading order is communicated
on the ground of grave abuse of discretion amounting to by telex to its principal, Frankwell Enterprises of
lack or excess of jurisdiction and further ground that the Hongkong. If the transaction, either buying or selling
decision is contrary to law and evidence. The questioned commodity futures, is consummated by the principal,
decision upheld the trial court's findings that the the petitioner issues a document known as
Trading Contract1 on "futures" is a specie of gambling "Confirmation of Contract and Balance Sheet" to the
and therefore null and void. Accordingly, the petitioner customer. An order of a customer of the petitioner is
(as defendant in lower court) was ordered to refund to supposed to be transmitted from Cebu to petitioner's
the private respondent (as plaintiff) the losses incurred office in Manila. From Manila, it should be forwarded to
in the trading transactions. Hongkong and from there, transmitted to the
Commodity Futures Exchange in Japan.

In support of the petition, the grounds alleged are:

There were only two parties involved as far as the
transactions covered by the Trading Contract are
concerned — the petitioner and the private respondents.
1) Article 2018 of the New Civil Code is inapplicable to We quote hereunder the respondent Court's detailed
the factual milieu of the instant case considering that in findings of the transactions between the parties:
a commodity futures transaction the broker is not the

P a g e 25 | 49
It appears from plaintiff's testimony that sometime in A commodity futures contract is a specie of securities
April of 1983, she was invited by defendant's Account included in the broad definition of what constitutes
Executive Elizabeth Diaz to invest in the commodity securities under Section 2 of the Revised Securities
futures trading by depositing the amount of Act.3
P500,000.00 (Exh. "A"); She was further told that the
business is "profitable" and that she could withdraw her
money anytime; she was furthermore instructed to go to
the Onapal Office where she met the Manager, Mr. Sec. 2 . . .:
Ciam, and the Account Executive Elizabeth Diaz who
told her that they would take care of how to trade
business and her account. She was then made to sign the
Trading Contract and other documents without making (a) Securities shall include bonds, . . ., commodity
her aware/understand the risks involved; that at the futures contracts, . . . .
time they let her sign "those papers" they were telling
her that those papers were for "formality sake"; that
when she was told later on that she made a profit of
The Revised Rules and Regulations on Commodity
P20,480.00 in a span of three days in the first
Futures Trading issued by the SEC and approved by the
transaction, they told her that the business is "very
Monetary Board of the Central bank defines such
profitable" (tsn, Francisco, March 14, 1985, p. 11).
contracts as follows:

On June 2, 1983, plaintiff was informed by Miss Diaz

"Commodity Futures Contract" shall refer to an
that she had to deposit an additional amount of
agreement to buy or sell a specified quantity and grade
P300,000.00 "to pay the difference" in prices,
of a commodity at a future date at a price established at
otherwise she will lose her original deposit of
the floor of the exchange.
P500,000.00; Fearing the loss of her original deposit,
plaintiff was constrained to deposit an additional
amount of P300,000.00 (Exh. "B"); Since she was made
to understand that she could withdraw her The petitioner is a duly licensed commodity futures
deposit/investment anytime, she not knowing how the broker as defined under the Revised Rules and
business is operated/managed as she was not made to Regulations on Commodity Futures Trading as follows:
understand what the business was all about, she wanted
to withdraw her investment; but Elizabeth Diaz,
defendant's Account Executive, told her she could not
get out because there are some accounts hanging on the "Futures Commission Merchant/Broker" shall refer to a
transactions. corporation or partnership, which must be registered
and licensed as a Futures Commission
Merchant/Broker and is engaged in soliciting or in
accepting orders for the purchase or sale of any
Plaintiff further testified that she understood the commodity for future delivery on or subject to the rules
transaction of buying and selling as speculating in of the contract market and that, in connection with such
prices, and her paying the difference between gains and solicitation or acceptance of orders, accepts any money,
losses without actual delivery of the goods to be securities or property (or extends credit in lieu thereof)
gambling, and she would like to withdraw from this kind to margin, guarantee or secure any trade or contract
of business, the risk of which she was not made aware that results or may result therefrom.
of. Plaintiff further testified that she stopped trading in
commodity futures in September, 1983 when she
realized she was engaged in gambling. She was able to
get only P470,000.00 out of her total deposit of At the time private respondent entered into the
P800,000.00. In order to recover the loss of transaction with the petitioner, she signed a document
P330,000.00, she filed this case and engaged the denominated as "Trading Contract" in printed form as
services of counsel for P40,000.00 and expects to incur prepared by the petitioner represented by its Branch
expenses of litigation in the sum of P20,000.00."2 Manager, Albert Chiam, incorporating the Rules for
P a g e 26 | 49
Commodity Trading. A copy of said contract was were exhausted.5 Under the rules of the trading
furnished to the private respondent but the contents exchanges, weekly settlements were required if there
thereof were not explained to the former, beyond what was any difference in the prices of the cotton between
was told her by the petitioner's Account Executive those obtaining at the time of the contract and at the
Elizabeth Diaz. Private respondent was also told that the date of delivery so that under the contract made by the
petitioner's principal was Frankwell Enterprises with purchaser, if the price of cotton had advanced, he would
offices in Hongkong but the private respondent's money have received in cash from the seller each week the
which was supposed to have been transmitted to advance (increase) in price and if cotton prices declined,
Hongkong, was kept by petitioner in a separate account the purchaser had to make like payments to the seller.
in a local bank. In the terminology of the exchange, these payments are
called "margins".6 Either the seller or the buyer may
elect to make or demand delivery of the cotton agreed to
be sold and bought, but in general, it seems practically
Petitioner now contends that commodity futures a uniform custom that settlements are made by
trading is a legitimate business practiced in the United payments and receipts of difference in prices at the time
States, recognized by the SEC and permitted under the of delivery from that prevailing at the time of payment
Civil Code, specifically Article 1462 thereof, quoted as of the past weekly "margins". These settlements are
follows: made by "closing out" the contracts.7 Where the broker
represented the buyer in buying and selling cotton for
future delivery with himself extending credit margins,
and some of the transactions were closed at a profit
The goods which form the subject of a contract of sale while the others at a loss, payments being made of the
may be either existing goods, owned or possessed by the difference in prices arising out of their rise or fall above
seller, or goods to be manufactured, raised or acquired or below the contract price, and the facts showed that
by the seller after the perfection of the contract of sale, no actual delivery of cotton was contemplated, such
in this Title called "future goods". contracts are of the kind commonly called "futures".8
Making contracts for the purchase and sale of
commodities for future delivery, the parties not
intending an actual delivery, or contracts of the kind
There may be a contract of sale of goods, whose
commonly called futures, are unenforceable.9
acquisition by the seller depends upon a contingency
which may or may not happen.

The term "futures" has grown out of those purely

speculative transactions in which there are nominal
Petitioner further argues that the SEC, in the exercise of
contracts to sell for future delivery, but where in fact no
its powers, authorized the operation of commodity
delivery is intended or executed. The nominal seller
exchanges to supervise and regulate commodity futures
does not have or expect to have a stock of merchandise
he purports to sell nor does the nominal buyer expect to
receive it or to pay for the price. Instead of that, a
percentage or margin is paid, which is increased or
The contract between the parties falls under the kind diminished as the market rates go up and down, and
commonly called "futures". In the late 1880's, trading in accounted for to the buyer. This is simple speculation,
futures became rampant in the purchase and sale of gambling or wagering on prices within a given time; it is
cotton and grain in the United States, giving rise to not buying and selling and is illegal as against public
unregulated trading exchanges known as "bucket policy.10
shops". These were common in Chicago and New York
City where cotton from the South and grain from the
Mid-west were constantly traded in. The name of the
The facts as disclosed by the evidence on record show
party to whom the seller was to make delivery when the
that private respondent made arrangements with
future contract of sale was closed or from whom he was
Elizabeth Diaz, Account Executive of petitioner for her
to receive delivery in case of purchase is not given the
to see Mr. Albert Chiam, petitioner's Branch Manager.
memorandum (contract). The business dealings
The contract signed by private respondent purports to
between the parties were terminated by the closing of
be for the delivery of goods with the intention that the
the transaction of purchase and sale of commodities
difference between the price stipulated and the
without directions of the buyer because his margins
P a g e 27 | 49
exchange or market price at the time of the pretended fall in the market of the commodity, subject of the
delivery shall be paid by the loser to the winner. We transaction, below or above the contract price on the
quote with approval the following findings of the trial pretended date of delivery and, in fact, the defendant
court as cited in the Court of Appeals decision: even discourages its customers from taking or accepting
delivery of any commodity by making it hard, if not
impossible, for them to make or accept delivery of any
commodity. Proof of this is paragraph 10(d) of
The evidence of the plaintiff tend to show that in her defendant's rules for commodity trading which provides
transactions with the defendant, the parties never that the customer shall apply for the necessary licenses
intended to make or accept delivery of any particular and documents with the proper government agency for
commodity but the parties merely made a speculation the importation and exportation of any particular
on the rise or fall in the market of the contract price of commodity.11
the commodity, subject of the transaction, on the
pretended date of delivery so that if the forecast was
correct, one party would make a profit, but if the
forecast was wrong, one party would lose money. Under The trading contract signed by private respondent and
this scheme, plaintiff was only able to recover Albert Chiam, representing petitioner, is a contract for
P470,000.00 out of her original and "additional" the sale of products for future delivery, in which either
deposit of P800,000.00 with the defendant. seller or buyer may elect to make or demand delivery of
goods agreed to be bought and sold, but where no such
delivery is actually made. By delivery is meant the act by
which the res or subject is placed in the actual or
The defendant admits that in all the transactions that it constructive possession or control of another. It may be
had with the plaintiff, there was (sic) no actual actual as when physical possession is given to the
deliveries and that it has made no arrangement with the vendee or his representative; or constructive which
Central Bank for the remittance of its customer's money takes place without actual transfer of goods, but
abroad but defendant contends in its defense that the includes symbolic delivery or substituted delivery as
mere fact that there were no actual deliveries made in when the evidence of title to the goods, the key to the
the transactions which plaintiff had with the defendant, warehouse or bill of lading/warehouse receipt is
did not mean that no such actual deliveries were delivered.12 As a contract in printed form, prepared by
intended by the parties since paragraph 10 of the rules petitioner and served on private respondent, for the
for commodity trading, attached to the trading contract latter's signature, the trading contract bears all the
which plaintiff signed before she traded with the indicia of a valid trading contract because it complies
defendant, amply provides for actual delivery of the with the Rules and Regulations on Commodity Futures
commodity subject of the transaction. Trading as prescribed by the SEC. But when the
transaction which was carried out to implement the
written contract deviates from the true import of the
agreement as when no such delivery, actual or
The court has, therefore, to find out from all the facts constructive, of the commodity or goods is made, and
and circumstances of this case, whether the parties final settlement is made by payment and receipt of only
really intended to make or accept deliveries of the the difference in prices at the time of delivery from that
commodities traded or whether the defendant merely prevailing at the time the sale is made, the dealings in
placed a provision for delivery in its rules for commodity futures become mere speculative contracts in which the
futures trading so as to escape from being called a parties merely gamble on the rise or fall in prices. A
bucket shop, . . . contract for the sale or purchase of goods/commodity to
be delivered at future time, if entered into without the
intention of having any goods/commodity pass from
one party to another, but with an understanding that at
xxx xxx xxx
the appointed time, the purchaser is merely to receive
or pay the difference between the contract and the
market prices, is a transaction which the law will not
. . . the court is convinced that the parties never really sanction, for being illegal.13
intended to make or accept delivery of any commodity
being trade as, in fact, the unrebutted testimony of Mr.
Go is to the effect that all the defendant's customers
were mere speculators who merely forecast the rise or
P a g e 28 | 49
The written trading contract in question is not illegal parties binds himself to transfer the ownership of and
but the transaction between the petitioner and the deliver a determinate thing and the other to pay
private respondent purportedly to implement the therefore a price certain in money or its equivalent.14
contract is in the nature of a gambling agreement and The said article requires that there be delivery of goods,
falls within the ambit of Article 2018 of the New Civil actual or constructive, to be applicable. In the
Code, which is quoted hereunder: transaction in question, there was no such delivery;
neither was there any intention to deliver a determinate

If a contract which purports to be for the delivery of

goods, securities or shares of stock is entered into with
the intention that the difference between the price The transaction is not what the parties call it but what
stipulated and the exchange or market price at the time the law defines it to be.15
of the pretended delivery shall be paid by the loser to the
winner, the transaction is null and void. The loser may
recover what he has paid.
After considering all the evidence in this case, it appears
that petitioner and private respondent did not intend, in
the deals of purchasing and selling for future delivery,
The facts clearly establish that the petitioner is a direct the actual or constructive delivery of the
participant in the transaction, acting through its goods/commodity, despite the payment of the full price
authorized agents. It received the customer's orders and therefor. The contract between them falls under the
private respondent's money. As per terms of the trading definition of what is called "futures". The payments
contract, customer's orders shall be directly transmitted made under said contract were payments of difference
by the petitioner as broker to its principal, Frankwell in prices arising out of the rise or fall in the market price
Enterprises Ltd. of Hongkong, being a registered above or below the contract price thus making it purely
member of the International Commodity Clearing gambling and declared null and void by law.16
House, which in turn must place the customer's orders
with the Tokyo Exchange. There is no evidence that the
orders and money were transmitted to its principal
Frankwell Enterprises Ltd. in Hongkong nor were the In England and America where contracts commonly
orders forwarded to the Tokyo Exchange. We draw the called futures originated, such contracts were at first
conclusion that no actual delivery of goods and held valid and could be enforced by resort to courts.
commodity was intended and ever made by the parties. Later these contracts were held invalid for being
In the realities of the transaction, the parties merely speculative, and in some states in America, it was
speculated on the rise and fall in the price of the unlawful to make contracts commonly called "futures".
goods/commodity subject matter of the transaction. If Such contracts were found to be mere gambling or
private respondent's speculation was correct, she would wagering agreements covered and protected by the rules
be the winner and the petitioner, the loser, so petitioner and regulations of exchange in which they were
would have to pay private respondent the "margin". But transacted under devices which rendered it impossible
if private respondent was wrong in her speculation then for the courts to discover their true character.17 The evil
she would emerge as the loser and the petitioner, the sought to be suppressed by legislation is the speculative
winner. The petitioner would keep the money or collect dealings by means of such trading contracts, which
the difference from the private respondent. This is degenerated into mere gambling in the future price of
clearly a form of gambling provided for with goods/commodities ostensibly but not actually, bought
unmistakeable certainty under Article 2018 or sold.18
abovestated. It would thus be governed by the New Civil
Code and not by the Revised Securities Act nor the Rules
and Regulations on Commodity Futures Trading laid
down by the SEC. Under Article 2018, the private respondent is entitled to
refund from the petitioner what she paid. There is no
evidence that the orders of private respondent were
actually transmitted to the petitioner's principal in
Article 1462 of the New Civil Code does not govern this Hongkong and Tokyo. There was no arrangement made
case because the said provision contemplates a contract by petitioner with the Central Bank for the purpose of
of sale of specific goods where one of the contracting remitting the money of its customers abroad. The

P a g e 29 | 49
money which was supposed to be remitted to Frankwell
Enterprises of Hongkong was kept by petitioner in a
separate account in a local bank. Having received the
money and orders of private respondent under the
trading contract, petitioner has the burden of proving
that said orders and money of private respondent had
been transmitted. But petitioner failed to prove this

For reasons indicated and construed in the light of the

applicable rules and under the plain language of the
statute, We find no reversible error committed by the
respondent Court that would justify the setting aside of
the questioned decision and resolution. For lack of
merit, the petition is DISMISSED and the judgment
sought to be reversed is hereby AFFIRMED. With costs
against petitioner.


P a g e 30 | 49
G.R. No. 115849 January 24, 1996 The dispositive portion of the trial court's2 decision
dated July 10, 1991, on the other hand, is as follows:
(Formerly Producers Bank of the Philippines) WHEREFORE, premises considered, judgment
and MERCURIO RIVERA, petitioners, is hereby rendered in favor of the plaintiffs and
vs. against the defendants as follows:
substitution of DEMETRIO DEMETRIA, and 1. Declaring the existence of a perfected
JOSE JANOLO, respondents. contract to buy and sell over the six (6) parcels
of land situated at Don Jose, Sta. Rosa, Laguna
DECISION with an area of 101 hectares, more or less,
covered by and embraced in Transfer
PANGANIBAN, J.: Certificates of Title Nos. T-106932 to T-106937,
inclusive, of the Land Records of Laguna,
In the absence of a formal deed of sale, may between the plaintiffs as buyers and the
commitments given by bank officers in an exchange of defendant Producers Bank for an agreed price
letters and/or in a meeting with the buyers constitute a of Five and One Half Million (P5,500,000.00)
perfected and enforceable contract of sale over 101 Pesos;
hectares of land in Sta. Rosa, Laguna? Does the doctrine
of "apparent authority" apply in this case? If so, may the 2. Ordering defendant Producers Bank of the
Central Bank-appointed conservator of Producers Bank Philippines, upon finality of this decision and
(now First Philippine International Bank) repudiate receipt from the plaintiffs the amount of P5.5
such "apparent authority" after said contract has been Million, to execute in favor of said plaintiffs a
deemed perfected? During the pendency of a suit for deed of absolute sale over the aforementioned
specific performance, does the filing of a "derivative six (6) parcels of land, and to immediately
suit" by the majority shareholders and directors of the deliver to the plaintiffs the owner's copies of
distressed bank to prevent the enforcement or T.C.T. Nos. T-106932 to T- 106937, inclusive,
implementation of the sale violate the ban against for purposes of registration of the same deed
forum-shopping? and transfer of the six (6) titles in the names of
the plaintiffs;
Simply stated, these are the major questions brought
before this Court in the instant Petition for review on 3. Ordering the defendants, jointly and
certiorari under Rule 45 of the Rules of Court, to set severally, to pay plaintiffs Jose A. Janolo and
aside the Decision promulgated January 14, 1994 of the Demetrio Demetria the sums of P200,000.00
respondent Court of Appeals1 in CA-G.R CV No. 35756 each in moral damages;
and the Resolution promulgated June 14, 1994 denying
the motion for reconsideration. The dispositive portion 4. Ordering the defendants, jointly and
of the said Decision reads: severally, to pay plaintiffs the sum of
P100,000.00 as exemplary damages ;
WHEREFORE, the decision of the lower court
is MODIFIED by the elimination of the 5. Ordering the defendants, jointly and
damages awarded under paragraphs 3, 4 and 6 severally, to pay the plaintiffs the amount of
of its dispositive portion and the reduction of P400,000.00 for and by way of attorney's fees;
the award in paragraph 5 thereof to
P75,000.00, to be assessed against defendant 6. Ordering the defendants to pay the plaintiffs,
bank. In all other aspects, said decision is jointly and severally, actual and moderate
hereby AFFIRMED. damages in the amount of P20,000.00;

All references to the original plaintiffs in the With costs against the defendants.
decision and its dispositive portion are deemed,
herein and hereafter, to legally refer to the After the parties filed their comment, reply, rejoinder,
plaintiff-appellee Carlos C. Ejercito. sur-rejoinder and reply to sur-rejoinder, the petition
was given due course in a Resolution dated January 18,
Costs against appellant bank. 1995. Thence, the parties filed their respective
memoranda and reply memoranda. The First Division
transferred this case to the Third Division per resolution

P a g e 31 | 49
dated October 23, 1995. After carefully deliberating on August 30, 1987
the aforesaid submissions, the Court assigned the case
to the undersigned ponente for the writing of this The Producers Bank of the Philippines
Decision. Makati, Metro Manila

The Parties Attn. Mr. Mercurio Q. Rivera

Manager, Property Management Dept.
Petitioner First Philippine International Bank (formerly
Producers Bank of the Philippines; petitioner Bank, for Gentleman:
brevity) is a banking institution organized and existing
under the laws of the Republic of the Philippines. I have the honor to submit my formal offer to
Petitioner Mercurio Rivera (petitioner Rivera, for purchase your properties covered by titles listed
brevity) is of legal age and was, at all times material to hereunder located at Sta. Rosa, Laguna, with a
this case, Head-Manager of the Property Management total area of 101 hectares, more or less.
Department of the petitioner Bank.
Respondent Carlos Ejercito (respondent Ejercito, for
brevity) is of legal age and is the assignee of original
plaintiffs-appellees Demetrio Demetria and Jose T-106932 113,580 sq. m.
T-106933 70,899 sq. m.
Respondent Court of Appeals is the court which issued
the Decision and Resolution sought to be set aside T-106934 52,246 sq. m.
through this petition.
T-106935 96,768 sq. m.
The Facts

The facts of this case are summarized in the respondent T-106936 187,114 sq. m.
Court's Decision3 as follows:
T-106937 481,481 sq. m.
(1) In the course of its banking operations, the
defendant Producer Bank of the Philippines My offer is for PESOS: THREE MILLION FIVE
acquired six parcels of land with a total area of HUNDRED THOUSAND (P3,500,000.00)
101 hectares located at Don Jose, Sta. Rose, PESOS, in cash.
Laguna, and covered by Transfer Certificates of
Title Nos. T-106932 to T-106937. The property Kindly contact me at Telephone Number 921-
used to be owned by BYME Investment and 1344.
Development Corporation which had them
mortgaged with the bank as collateral for a loan. (3) On September 1, 1987, defendant Rivera
The original plaintiffs, Demetrio Demetria and made on behalf of the bank a formal reply by
Jose O. Janolo, wanted to purchase the letter which is hereunder quoted (Exh. "C"):
property and thus initiated negotiations for that
purpose. September 1, 1987

(2) In the early part of August 1987 said

plaintiffs, upon the suggestion of BYME
142 Charisma St., Doña Andres II
investment's legal counsel, Jose Fajardo, met
Rosario, Pasig, Metro Manila
with defendant Mercurio Rivera, Manager of
the Property Management Department of the Attention: JOSE O. JANOLO
defendant bank. The meeting was held
pursuant to plaintiffs' plan to buy the property Dear Sir:
(TSN of Jan. 16, 1990, pp. 7-10). After the
meeting, plaintiff Janolo, following the advice Thank you for your letter-offer to buy our six (6)
of defendant Rivera, made a formal purchase parcels of acquired lots at Sta. Rosa, Laguna
offer to the bank through a letter dated August (formerly owned by Byme Industrial Corp.).
30, 1987 (Exh. "B"), as follows: Please be informed however that the bank's

P a g e 32 | 49
counter-offer is at P5.5 million for more than FIVE MILLION FIVE HUNDRED THOUSAND
101 hectares on lot basis. (P5,500,000.00).

We shall be very glad to hear your position on Thank you.

the on the matter.
(6) On October 12, 1987, the conservator of the
Best regards. bank (which has been placed under
conservatorship by the Central Bank since
(4) On September 17, 1987, plaintiff Janolo, 1984) was replaced by an Acting Conservator in
responding to Rivera's aforequoted reply, wrote the person of defendant Leonida T.
(Exh. "D"): Encarnacion. On November 4, 1987, defendant
Rivera wrote plaintiff Demetria the following
September 17, 1987 letter (Exh. "F"):

Producers Bank Attention: Atty. Demetrio Demetria

Paseo de Roxas
Makati, Metro Manila Dear Sir:

Attention: Mr. Mercurio Rivera Your proposal to buy the properties the bank
foreclosed from Byme investment Corp. located
Gentlemen: at Sta. Rosa, Laguna is under study yet as of this
time by the newly created committee for
In reply to your letter regarding my proposal to submission to the newly designated Acting
purchase your 101-hectare lot located at Sta. Conservator of the bank.
Rosa, Laguna, I would like to amend my
previous offer and I now propose to buy the said For your information.
lot at P4.250 million in CASH..
(7) What thereafter transpired was a series of
Hoping that this proposal meets your demands by the plaintiffs for compliance by the
satisfaction. bank with what plaintiff considered as a
perfected contract of sale, which demands were
(5) There was no reply to Janolo's foregoing in one form or another refused by the bank. As
letter of September 17, 1987. What took place detailed by the trial court in its decision, on
was a meeting on September 28, 1987 between November 17, 1987, plaintiffs through a letter to
the plaintiffs and Luis Co, the Senior Vice- defendant Rivera (Exhibit "G") tendered
President of defendant bank. Rivera as well as payment of the amount of P5.5 million
Fajardo, the BYME lawyer, attended the "pursuant to (our) perfected sale agreement."
meeting. Two days later, or on September 30, Defendants refused to receive both the payment
1987, plaintiff Janolo sent to the bank, through and the letter. Instead, the parcels of land
Rivera, the following letter (Exh. "E"): involved in the transaction were advertised by
the bank for sale to any interested buyer (Exh,
The Producers Bank of the Philippines "H" and "H-1"). Plaintiffs demanded the
Paseo de Roxas, Makati execution by the bank of the documents on
Metro Manila what was considered as a "perfected
agreement." Thus:
Attention: Mr. Mercurio Rivera
Mr. Mercurio Rivera
Re: 101 Hectares of Land Manager, Producers Bank
in Sta. Rosa, Laguna Paseo de Roxas, Makati
Metro Manila
Dear Mr. Rivera:
Pursuant to our discussion last 28 September
1987, we are pleased to inform you that we are This is in connection with the offer of our client,
accepting your offer for us to purchase the Mr. Jose O. Janolo, to purchase your 101-
property at Sta. Rosa, Laguna, formerly owned hectare lot located in Sta. Rosa, Laguna, and
by Byme Investment, for a total price of PESOS:
P a g e 33 | 49
which are covered by TCT No. T-106932 to This is in connection with the perfected
106937. agreement consequent from your offer of P5.5
Million as the purchase price of the said lots.
From the documents at hand, it appears that Please inform us of the date of documentation
your counter-offer dated September 1, 1987 of of the sale immediately.
this same lot in the amount of P5.5 million was
accepted by our client thru a letter dated Kindly acknowledge receipt of our payment.
September 30, 1987 and was received by you on
October 5, 1987. (9) The foregoing letter drew no response for
more than four months. Then, on May 3, 1988,
In view of the above circumstances, we believe plaintiff, through counsel, made a final demand
that an agreement has been perfected. We were for compliance by the bank with its obligations
also informed that despite repeated follow-up under the considered perfected contract of sale
to consummate the purchase, you now refuse to (Exhibit "N"). As recounted by the trial court
honor your commitment. Instead, you have (Original Record, p. 656), in a reply letter dated
advertised for sale the same lot to others. May 12, 1988 (Annex "4" of defendant's answer
to amended complaint), the defendants
In behalf of our client, therefore, we are making through Acting Conservator Encarnacion
this formal demand upon you to consummate repudiated the authority of defendant Rivera
and execute the necessary and claimed that his dealings with the plaintiffs,
actions/documentation within three (3) days particularly his counter-offer of P5.5 Million are
from your receipt hereof. We are ready to remit unauthorized or illegal. On that basis, the
the agreed amount of P5.5 million at your defendants justified the refusal of the tenders of
advice. Otherwise, we shall be constrained to payment and the non-compliance with the
file the necessary court action to protect the obligations under what the plaintiffs
interest of our client. considered to be a perfected contract of sale.

We trust that you will be guided accordingly. (10) On May 16, 1988, plaintiffs filed a suit for
specific performance with damages against the
(8) Defendant bank, through defendant Rivera, bank, its Manager Rivers and Acting
acknowledged receipt of the foregoing letter Conservator Encarnacion. The basis of the suit
and stated, in its communication of December was that the transaction had with the bank
2, 1987 (Exh. "I"), that said letter has been resulted in a perfected contract of sale, The
"referred . . . to the office of our Conservator for defendants took the position that there was no
proper disposition" However, no response such perfected sale because the defendant
came from the Acting Conservator. On Rivera is not authorized to sell the property,
December 14, 1987, the plaintiffs made a second and that there was no meeting of the minds as
tender of payment (Exh. "L" and "L-1"), this to the price.
time through the Acting Conservator,
defendant Encarnacion. Plaintiffs' letter reads: On March 14, 1991, Henry L. Co (the brother of
Luis Co), through counsel Sycip Salazar
PRODUCERS BANK OF Hernandez and Gatmaitan, filed a motion to
THE PHILIPPINES intervene in the trial court, alleging that as
Paseo de Roxas, owner of 80% of the Bank's outstanding shares
Makati, Metro Manila of stock, he had a substantial interest in
resisting the complaint. On July 8, 1991, the
Attn.: Atty. NIDA ENCARNACION trial court issued an order denying the motion
Central Bank Conservator to intervene on the ground that it was filed after
trial had already been concluded. It also denied
We are sending you herewith, in - behalf of our a motion for reconsideration filed thereafter.
client, Mr. JOSE O. JANOLO, MBTC Check No. From the trial court's decision, the Bank,
258387 in the amount of P5.5 million as our petitioner Rivera and conservator Encarnacion
agreed purchase price of the 101-hectare lot appealed to the Court of Appeals which
covered by TCT Nos. 106932, 106933, 106934, subsequently affirmed with modification the
106935, 106936 and 106937 and registered said judgment. Henry Co did not appeal the
under Producers Bank. denial of his motion for intervention.

P a g e 34 | 49
In the course of the proceedings in the respondent On the other hand, petitioners prayed for dismissal of
Court, Carlos Ejercito was substituted in place of the instant suit on the ground8 that:
Demetria and Janolo, in view of the assignment of the
latters' rights in the matter in litigation to said private I.
Petitioners have engaged in forum shopping.
On July 11, 1992, during the pendency of the
proceedings in the Court of Appeals, Henry Co and II.
several other stockholders of the Bank, through counsel
Angara Abello Concepcion Regala and Cruz, filed an The factual findings and conclusions of the
action (hereafter, the "Second Case") — purportedly a Court of Appeals are supported by the evidence
"derivative suit" — with the Regional Trial Court of on record and may no longer be questioned in
Makati, Branch 134, docketed as Civil Case No. 92-1606, this case.
against Encarnacion, Demetria and Janolo "to declare
any perfected sale of the property as unenforceable and III.
to stop Ejercito from enforcing or implementing the
The Court of Appeals correctly held that there
sale"4 In his answer, Janolo argued that the Second
was a perfected contract between Demetria and
Case was barred by litis pendentia by virtue of the case
Janolo (substituted by; respondent Ejercito)
then pending in the Court of Appeals. During the pre-
and the bank.
trial conference in the Second Case, plaintiffs filed a
Motion for Leave of Court to Dismiss the Case Without
Prejudice. "Private respondent opposed this motion on
the ground, among others, that plaintiff's act of forum
The Court of Appeals has correctly held that the
shopping justifies the dismissal of both cases, with
conservator, apart from being estopped from
prejudice."5 Private respondent, in his memorandum,
repudiating the agency and the contract, has no
averred that this motion is still pending in the Makati
authority to revoke the contract of sale.
The Issues
In their Petition6 and Memorandum7 , petitioners
summarized their position as follows: From the foregoing positions of the parties, the issues in
this case may be summed up as follows:
1) Was there forum-shopping on the part of
The Court of Appeals erred in declaring that a
petitioner Bank?
contract of sale was perfected between Ejercito
(in substitution of Demetria and Janolo) and 2) Was there a perfected contract of sale
the bank. between the parties?

II. 3) Assuming there was, was the said contract

enforceable under the statute of frauds?
The Court of Appeals erred in declaring the
existence of an enforceable contract of sale 4) Did the bank conservator have the unilateral
between the parties. power to repudiate the authority of the bank
officers and/or to revoke the said contract?
5) Did the respondent Court commit any
The Court of Appeals erred in declaring that the
reversible error in its findings of facts?
conservator does not have the power to overrule
or revoke acts of previous management. The First Issue: Was There Forum-Shopping?

IV. In order to prevent the vexations of multiple petitions

and actions, the Supreme Court promulgated Revised
The findings and conclusions of the Court of
Circular No. 28-91 requiring that a party "must certify
Appeals do not conform to the evidence on
under oath . . . [that] (a) he has not (t)heretofore
commenced any other action or proceeding involving
the same issues in the Supreme Court, the Court of

P a g e 35 | 49
Appeals, or any other tribunal or agency; (b) to the best excuses, including to secure procedural advantages, to
of his knowledge, no such action or proceeding is annoy and harass the defendant, to avoid overcrowded
pending" in said courts or agencies. A violation of the dockets, or to select a more friendly venue. To combat
said circular entails sanctions that include the summary these less than honorable excuses, the principle of
dismissal of the multiple petitions or complaints. To be forum non conveniens was developed whereby a court,
sure, petitioners have included a in conflicts of law cases, may refuse impositions on its
VERIFICATION/CERTIFICATION in their Petition jurisdiction where it is not the most "convenient" or
stating "for the record(,) the pendency of Civil Case No. available forum and the parties are not precluded from
92-1606 before the Regional Trial Court of Makati, seeking remedies elsewhere.
Branch 134, involving a derivative suit filed by
stockholders of petitioner Bank against the conservator In this light, Black's Law Dictionary 13 says that forum
and other defendants but which is the subject of a shopping "occurs when a party attempts to have his
pending Motion to Dismiss Without Prejudice.9 action tried in a particular court or jurisdiction where
he feels he will receive the most favorable judgment or
Private respondent Ejercito vigorously argues that in verdict." Hence, according to Words and Phrases14 , "a
spite of this verification, petitioners are guilty of actual litigant is open to the charge of "forum shopping"
forum shopping because the instant petition pending whenever he chooses a forum with slight connection to
before this Court involves "identical parties or interests factual circumstances surrounding his suit, and litigants
represented, rights asserted and reliefs sought (as that) should be encouraged to attempt to settle their
currently pending before the Regional Trial Court, differences without imposing undue expenses and
Makati Branch 134 in the Second Case. In fact, the vexatious situations on the courts".
issues in the two cases are so interwined that a
judgement or resolution in either case will constitute res In the Philippines, forum shopping has acquired a
judicata in the other." 10 connotation encompassing not only a choice of venues,
as it was originally understood in conflicts of laws, but
On the other hand, petitioners explain 11 that there is no also to a choice of remedies. As to the first (choice of
forum-shopping because: venues), the Rules of Court, for example, allow a
plaintiff to commence personal actions "where the
1) In the earlier or "First Case" from which this defendant or any of the defendants resides or may be
proceeding arose, the Bank was impleaded as a found, or where the plaintiff or any of the plaintiffs
defendant, whereas in the "Second Case" resides, at the election of the plaintiff" (Rule 4, Sec, 2
(assuming the Bank is the real party in interest [b]). As to remedies, aggrieved parties, for example, are
in a derivative suit), it was plaintiff; given a choice of pursuing civil liabilities independently
of the criminal, arising from the same set of facts. A
2) "The derivative suit is not properly a suit for passenger of a public utility vehicle involved in a
and in behalf of the corporation under the vehicular accident may sue on culpa contractual, culpa
circumstances"; aquiliana or culpa criminal — each remedy being
available independently of the others — although he
3) Although the cannot recover more than once.
signed by the Bank president and attached to In either of these situations (choice of venue or
the Petition identifies the action as a "derivative choice of remedy), the litigant actually shops
suit," it "does not mean that it is one" and for a forum of his action, This was the original
"(t)hat is a legal question for the courts to concept of the term forum shopping.
Eventually, however, instead of actually making
4) Petitioners did not hide the Second Case at a choice of the forum of their actions, litigants,
they mentioned it in the said through the encouragement of their lawyers,
VERIFICATION/CERTIFICATION. file their actions in all available courts, or
invoke all relevant remedies simultaneously.
We rule for private respondent. This practice had not only resulted to (sic)
conflicting adjudications among different
To begin with, forum-shopping originated as a concept courts and consequent confusion enimical (sic)
in private international law.12 , where non-resident to an orderly administration of justice. It had
litigants are given the option to choose the forum or created extreme inconvenience to some of the
place wherein to bring their suit for various reasons or parties to the action.

P a g e 36 | 49
Thus, "forum shopping" had acquired a such that any judgment rendered in the other
different concept — which is unethical action, will, regardless of which party is
professional legal practice. And this successful, amount to res adjudicata in the
necessitated or had given rise to the action under consideration: all the requisites, in
formulation of rules and canons discouraging fine, of auter action pendant.
or altogether prohibiting the practice. 15
xxx xxx xxx
What therefore originally started both in conflicts of
laws and in our domestic law as a legitimate device for As already observed, there is between the action
solving problems has been abused and mis-used to at bar and RTC Case No. 86-36563, an identity
assure scheming litigants of dubious reliefs. as regards parties, or interests represented,
rights asserted and relief sought, as well as basis
To avoid or minimize this unethical practice of thereof, to a degree sufficient to give rise to the
subverting justice, the Supreme Court, as already ground for dismissal known as auter action
mentioned, promulgated Circular 28-91. And even pendant or lis pendens. That same identity puts
before that, the Court had prescribed it in the Interim into operation the sanction of twin dismissals
Rules and Guidelines issued on January 11, 1983 and just mentioned. The application of this sanction
had struck down in several cases 16 the inveterate use of will prevent any further delay in the settlement
this insidious malpractice. Forum shopping as "the of the controversy which might ensue from
filing of repetitious suits in different courts" has been attempts to seek reconsideration of or to appeal
condemned by Justice Andres R. Narvasa (now Chief from the Order of the Regional Trial Court in
Justice) in Minister of Natural Resources, et al., vs. Civil Case No. 86-36563 promulgated on July
Heirs of Orval Hughes, et al., "as a reprehensible 15, 1986, which dismissed the petition upon
manipulation of court processes and proceedings . . ." 17 grounds which appear persuasive.
when does forum shopping take place?
Consequently, where a litigant (or one representing the
There is forum-shopping whenever, as a result same interest or person) sues the same party against
of an adverse opinion in one forum, a party whom another action or actions for the alleged violation
seeks a favorable opinion (other than by appeal of the same right and the enforcement of the same relief
or certiorari) in another. The principle applies is/are still pending, the defense of litis pendencia in one
not only with respect to suits filed in the courts case is bar to the others; and, a final judgment in one
but also in connection with litigations would constitute res judicata and thus would cause the
commenced in the courts while an dismissal of the rest. In either case, forum shopping
administrative proceeding is pending, as in this could be cited by the other party as a ground to ask for
case, in order to defeat administrative summary dismissal of the two 20 (or more) complaints
processes and in anticipation of an unfavorable or petitions, and for imposition of the other sanctions,
administrative ruling and a favorable court which are direct contempt of court, criminal
ruling. This is specially so, as in this case, where prosecution, and disciplinary action against the erring
the court in which the second suit was brought, lawyer.
has no jurisdiction.18
Applying the foregoing principles in the case before us
The test for determining whether a party violated the and comparing it with the Second Case, it is obvious that
rule against forum shopping has been laid dawn in the there exist identity of parties or interests represented,
1986 case of Buan vs. Lopez 19 , also by Chief Justice identity of rights or causes and identity of reliefs sought.
Narvasa, and that is, forum shopping exists where the
elements of litis pendentia are present or where a final Very simply stated, the original complaint in the court a
judgment in one case will amount to res judicata in the quo which gave rise to the instant petition was filed by
other, as follows: the buyer (herein private respondent and his
predecessors-in-interest) against the seller (herein
There thus exists between the action before this petitioners) to enforce the alleged perfected sale of real
Court and RTC Case No. 86-36563 identity of estate. On the other hand, the complaint 21 in the
parties, or at least such parties as represent the Second Case seeks to declare such purported sale
same interests in both actions, as well as involving the same real property "as unenforceable as
identity of rights asserted and relief prayed for, against the Bank", which is the petitioner herein. In
the relief being founded on the same facts, and other words, in the Second Case, the majority
the identity on the two preceding particulars is stockholders, in representation of the Bank, are seeking

P a g e 37 | 49
to accomplish what the Bank itself failed to do in the obtaining the release of the pledged shares, etc.)
original case in the trial court. In brief, the objective or were the basic issues. So, too, the relief was the
the relief being sought, though worded differently, is the same: the prevention of such implementation
same, namely, to enable the petitioner Bank to escape and/or the restoration of the status quo ante.
from the obligation to sell the property to respondent. When the acts sought to be restrained took
In Danville Maritime, Inc. vs. Commission on Audit. 22 place anyway despite the issuance by the Trial
, this Court ruled that the filing by a party of two Court of a temporary restraining order, the RTC
apparently different actions, but with the same suit did not become functus oficio. It remained
objective, constituted forum shopping: an effective vehicle for obtention of relief; and
petitioners' remedy in the premises was plain
In the attempt to make the two actions appear and patent: the filing of an amended and
to be different, petitioner impleaded different supplemental pleading in the RTC suit, so as to
respondents therein — PNOC in the case before include the PCGG as defendant and seek
the lower court and the COA in the case before nullification of the acts sought to be enjoined
this Court and sought what seems to be but nonetheless done. The remedy was
different reliefs. Petitioner asks this Court to set certainly not the institution of another action in
aside the questioned letter-directive of the COA another forum based on essentially the same
dated October 10, 1988 and to direct said body facts, The adoption of this latter recourse
to approve the Memorandum of Agreement renders the petitioners amenable to
entered into by and between the PNOC and disciplinary action and both their actions, in
petitioner, while in the complaint before the this Court as well as in the Court a quo,
lower court petitioner seeks to enjoin the PNOC dismissible.
from conducting a rebidding and from selling to
other parties the vessel "T/T Andres Bonifacio", In the instant case before us, there is also identity of
and for an extension of time for it to comply parties, or at least, of interests represented. Although
with the paragraph 1 of the memorandum of the plaintiffs in the Second Case (Henry L. Co. et al.) are
agreement and damages. One can see that not name parties in the First Case, they represent the
although the relief prayed for in the two (2) same interest and entity, namely, petitioner Bank,
actions are ostensibly different, the ultimate because:
objective in both actions is the same, that is,
approval of the sale of vessel in favor of Firstly, they are not suing in their personal capacities,
petitioner and to overturn the letter-directive for they have no direct personal interest in the matter in
of the COA of October 10, 1988 disapproving controversy. They are not principally or even
the sale. (emphasis supplied). subsidiarily liable; much less are they direct parties in
the assailed contract of sale; and
In an earlier case 23 but with the same logic and vigor,
we held: Secondly, the allegations of the complaint in the Second
Case show that the stockholders are bringing a
In other words, the filing by the petitioners of "derivative suit". In the caption itself, petitioners claim
the instant special civil action for certiorari and to have brought suit "for and in behalf of the Producers
prohibition in this Court despite the pendency Bank of the Philippines" 24 . Indeed, this is the very
of their action in the Makati Regional Trial essence of a derivative suit:
Court, is a species of forum-shopping. Both
actions unquestionably involve the same An individual stockholder is permitted to
transactions, the same essential facts and institute a derivative suit on behalf of the
circumstances. The petitioners' claim of corporation wherein he holdsstock in order to
absence of identity simply because the PCGG protect or vindicate corporate rights, whenever
had not been impleaded in the RTC suit, and the the officials of the corporation refuse to sue, or
suit did not involve certain acts which are the ones to be sued or hold the control of the
transpired after its commencement, is specious. corporation. In such actions, the suing
In the RTC action, as in the action before this stockholder is regarded as a nominal party,
Court, the validity of the contract to purchase with the corporation as the real party in
and sell of September 1, 1986, i.e., whether or interest. (Gamboa v. Victoriano, 90 SCRA 40,
not it had been efficaciously rescinded, and the 47 [1979]; emphasis supplied).
propriety of implementing the same (by paying
the pledgee banks the amount of their loans,

P a g e 38 | 49
In the face of the damaging admissions taken from the defenses or even counterclaims, Thus,
complaint in the Second Case, petitioners, quite Velhagen's and King's motion to dismiss Civil
strangely, sought to deny that the Second Case was a Case No. 91-2069 by no means negates the
derivative suit, reasoning that it was brought, not by the charge of forum-shopping as such did not exist
minority shareholders, but by Henry Co et al., who not in the first place. (emphasis supplied)
only own, hold or control over 80% of the outstanding
capital stock, but also constitute the majority in the Petitioner pointed out that since it was merely the
Board of Directors of petitioner Bank. That being so, defendant in the original case, it could not have chosen
then they really represent the Bank. So, whether they the forum in said case.
sued "derivatively" or directly, there is undeniably an
identity of interests/entity represented. Respondent, on the other hand, replied that there is a
difference in factual setting between Victronics and the
Petitioner also tried to seek refuge in the corporate present suit. In the former, as underscored in the above-
fiction that the personality Of the Bank is separate and quoted Court ruling, the defendants did not file any
distinct from its shareholders. But the rulings of this responsive pleading in the first case. In other words,
Court are consistent: "When the fiction is urged as a they did not make any denial or raise any defense or
means of perpetrating a fraud or an illegal act or as a counter-claim therein In the case before us however,
vehicle for the evasion of an existing obligation, the petitioners filed a responsive pleading to the complaint
circumvention of statutes, the achievement or — as a result of which, the issues were joined.
perfection of a monopoly or generally the perpetration
of knavery or crime, the veil with which the law covers Indeed, by praying for affirmative reliefs and
and isolates the corporation from the members or interposing counter–claims in their responsive
stockholders who compose it will be lifted to allow for pleadings, the petitioners became plaintiffs themselves
its consideration merely as an aggregation of in the original case, giving unto themselves the very
individuals." 25 remedies they repeated in the Second Case.

In addition to the many cases 26 where the corporate Ultimately, what is truly important to consider in
fiction has been disregarded, we now add the instant determining whether forum-shopping exists or not is
case, and declare herewith that the corporate veil the vexation caused the courts and parties-litigant by a
cannot be used to shield an otherwise blatant violation party who asks different courts and/or administrative
of the prohibition against forum-shopping. agencies to rule on the same or related causes and/or to
Shareholders, whether suing as the majority in direct grant the same or substantially the same reliefs, in the
actions or as the minority in a derivative suit, cannot be process creating the possibility of conflicting decisions
allowed to trifle with court processes, particularly being rendered by the different fora upon the same
where, as in this case, the corporation itself has not been issue. In this case, this is exactly the problem: a decision
remiss in vigorously prosecuting or defending corporate recognizing the perfection and directing the
causes and in using and applying remedies available to enforcement of the contract of sale will directly conflict
it. To rule otherwise would be to encourage corporate with a possible decision in the Second Case barring the
litigants to use their shareholders as fronts to parties front enforcing or implementing the said sale.
circumvent the stringent rules against forum shopping. Indeed, a final decision in one would constitute res
judicata in the other 28 .
Finally, petitioner Bank argued that there cannot be any
forum shopping, even assuming arguendo that there is The foregoing conclusion finding the existence of
identity of parties, causes of action and reliefs sought, forum-shopping notwithstanding, the only sanction
"because it (the Bank) was the defendant in the (first) possible now is the dismissal of both cases with
case while it was the plaintiff in the other (Second prejudice, as the other sanctions cannot be imposed
Case)",citing as authority Victronics Computers, Inc., because petitioners' present counsel entered their
vs. Regional Trial Court, Branch 63, Makati, etc. et al., appearance only during the proceedings in this Court,
27 where Court held: and the Petition's VERIFICATION/CERTIFICATION
contained sufficient allegations as to the pendency of
The rule has not been extended to a defendant the Second Case to show good faith in observing
who, for reasons known only to him, Circular 28-91. The Lawyers who filed the Second Case
commences a new action against the plaintiff — are not before us; thus the rudiments of due process
instead of filing a responsive pleading in the prevent us from motu propio imposing disciplinary
other case — setting forth therein, as causes of measures against them in this Decision. However,
action, specific denials, special and affirmative petitioners themselves (and particularly Henry Co, et

P a g e 39 | 49
al.) as litigants are admonished to strictly follow the foreclosure, total claim of the bank, the
rules against forum-shopping and not to trifle with appraised value at the time the
court proceedings and processes They are warned that a property is being offered for sale and
repetition of the same will be dealt with more severely. then the information which are relative
to the evaluation of the bank to buy
Having said that, let it be emphasized that this petition which the Committee considers and it
should be dismissed not merely because of forum- is the Committee that evaluate as
shopping but also because of the substantive issues against the exposure of the bank and it
raised, as will be discussed shortly. is also the Committee that submit to
the Conservator for final approval and
The Second Issue: Was The Contract once approved, we have to execute the
Perfected? deed of sale and it is the Conservator
that sign the deed of sale, sir.
The respondent Court correctly treated the question of
whether or not there was, on the basis of the facts The plaintiffs, therefore, at that meeting of
established, a perfected contract of sale as the ultimate August 1987 regarding their purpose of buying
issue. Holding that a valid contract has been the property, dealt with and talked to the right
established, respondent Court stated: person. Necessarily, the agenda was the price of
the property, and plaintiffs were dealing with
There is no dispute that the object of the the bank official authorized to entertain offers,
transaction is that property owned by the to accept offers and to present the offer to the
defendant bank as acquired assets consisting of Committee before which the said official is
six (6) parcels of land specifically identified authorized to discuss information relative to
under Transfer Certificates of Title Nos. T- price determination. Necessarily, too, it being
106932 to T-106937. It is likewise beyond cavil inherent in his authority, Rivera is the officer
that the bank intended to sell the property. As from whom official information regarding the
testified to by the Bank's Deputy Conservator, price, as determined by the Committee and
Jose Entereso, the bank was looking for buyers approved by the Conservator, can be had. And
of the property. It is definite that the plaintiffs Rivera confirmed his authority when he talked
wanted to purchase the property and it was with the plaintiff in August 1987. The testimony
precisely for this purpose that they met with of plaintiff Demetria is clear on this point (TSN
defendant Rivera, Manager of the Property of May 31,1990, pp. 27-28):
Management Department of the defendant
bank, in early August 1987. The procedure in Q: When you went to the Producers
the sale of acquired assets as well as the nature Bank and talked with Mr. Mercurio
and scope of the authority of Rivera on the Rivera, did you ask him point-blank his
matter is clearly delineated in the testimony of authority to sell any property?
Rivera himself, which testimony was relied
upon by both the bank and by Rivera in their A: No, sir. Not point blank although it
appeal briefs. Thus (TSN of July 30, 1990. pp. came from him, (W)hen I asked him
19-20): how long it would take because he was
saying that the matter of pricing will be
A: The procedure runs this way: passed upon by the committee. And
Acquired assets was turned over to me when I asked him how long it will take
and then I published it in the form of an for the committee to decide and he said
inter-office memorandum distributed the committee meets every week. If I
to all branches that these are acquired am not mistaken Wednesday and in
assets for sale. I was instructed to about two week's (sic) time, in effect
advertise acquired assets for sale so on what he was saying he was not the one
that basis, I have to entertain offer; to who was to decide. But he would refer
accept offer, formal offer and upon it to the committee and he would relay
having been offered, I present it to the the decision of the committee to me.
Committee. I provide the Committee
with necessary information about the Q — Please answer the question.
property such as original loan of the
borrower, bid price during the

P a g e 40 | 49
A — He did not say that he had the of the Past Due Committee of the bank, claim
authority (.) But he said he would refer that the offer of the plaintiff was never
the matter to the committee and he discussed by the Committee. In the same vein,
would relay the decision to me and he both Co and Entereso openly admit that they
did just like that. seldom attend the meetings of the Committee.
It is important to note that negotiations on the
"Parenthetically, the Committee referred to was price had started in early August and the
the Past Due Committee of which Luis Co was plaintiffs had already offered an amount as
the Head, with Jose Entereso as one of the purchase price, having been made to
members. understand by Rivera, the official in charge of
the negotiation, that the price will be submitted
What transpired after the meeting of early for approval by the bank and that the bank's
August 1987 are consistent with the authority decision will be relayed to plaintiffs. From the
and the duties of Rivera and the bank's internal facts, the official bank price. At any rate, the
procedure in the matter of the sale of bank's bank placed its official, Rivera, in a position of
assets. As advised by Rivera, the plaintiffs made authority to accept offers to buy and negotiate
a formal offer by a letter dated August 20, 1987 the sale by having the offer officially acted upon
stating that they would buy at the price of P3.5 by the bank. The bank cannot turn around and
Million in cash. The letter was for the attention later say, as it now does, that what Rivera states
of Mercurio Rivera who was tasked to convey as the bank's action on the matter is not in fact
and accept such offers. Considering an aspect of so. It is a familiar doctrine, the doctrine of
the official duty of Rivera as some sort of ostensible authority, that if a corporation
intermediary between the plaintiffs-buyers knowingly permits one of its officers, or any
with their proposed buying price on one hand, other agent, to do acts within the scope of an
and the bank Committee, the Conservator and apparent authority, and thus holds him out to
ultimately the bank itself with the set price on the public as possessing power to do those acts,
the other, and considering further the the corporation will, as against any one who has
discussion of price at the meeting of August in good faith dealt with the corporation through
resulting in a formal offer of P3.5 Million in such agent, he estopped from denying his
cash, there can be no other logical conclusion authority (Francisco v. GSIS, 7 SCRA 577, 583-
than that when, on September 1, 1987, Rivera 584; PNB v. Court of Appeals, 94 SCRA 357,
informed plaintiffs by letter that "the bank's 369-370; Prudential Bank v. Court of Appeals,
counter-offer is at P5.5 Million for more than G.R. No. 103957, June 14, 1993). 29
101 hectares on lot basis," such counter-offer
price had been determined by the Past Due Article 1318 of the Civil Code enumerates the requisites
Committee and approved by the Conservator of a valid and perfected contract as follows: "(1) Consent
after Rivera had duly presented plaintiffs' offer of the contracting parties; (2) Object certain which is the
for discussion by the Committee of such subject matter of the contract; (3) Cause of the
matters as original loan of borrower, bid price obligation which is established."
during foreclosure, total claim of the bank, and
market value. Tersely put, under the There is no dispute on requisite no. 2. The object of the
established facts, the price of P5.5 Million was, questioned contract consists of the six (6) parcels of
as clearly worded in Rivera's letter (Exh. "E"), land in Sta. Rosa, Laguna with an aggregate area of
the official and definitive price at which the about 101 hectares, more or less, and covered by
bank was selling the property. Transfer Certificates of Title Nos. T-106932 to T-
106937. There is, however, a dispute on the first and
There were averments by defendants below, as third requisites.
well as before this Court, that the P5.5 Million
price was not discussed by the Committee and Petitioners allege that "there is no counter-offer made
that price. As correctly characterized by the trial by the Bank, and any supposed counter-offer which
court, this is not credible. The testimonies of Rivera (or Co) may have made is unauthorized. Since
Luis Co and Jose Entereso on this point are at there was no counter-offer by the Bank, there was
best equivocal and considering the gratuitous nothing for Ejercito (in substitution of Demetria and
and self-serving character of these declarations, Janolo) to accept." 30 They disputed the factual basis of
the bank's submission on this point does not the respondent Court's findings that there was an offer
inspire belief. Both Co ad Entereso, as members made by Janolo for P3.5 million, to which the Bank

P a g e 41 | 49
counter-offered P5.5 million. We have perused the made in the course of its business by an
evidence but cannot find fault with the said Court's agent acting within the general scope of
findings of fact. Verily, in a petition under Rule 45 such his authority even though, in the
as this, errors of fact — if there be any - are, as a rule, particular case, the agent is secretly
not reviewable. The mere fact that respondent Court abusing his authority and attempting to
(and the trial court as well) chose to believe the evidence perpetrate a fraud upon his principal or
presented by respondent more than that presented by some other person, for his own
petitioners is not by itself a reversible error. In fact, such ultimate benefit (McIntosh v. Dakota
findings merit serious consideration by this Court, Trust Co., 52 ND 752, 204 NW 818, 40
particularly where, as in this case, said courts carefully ALR 1021).
and meticulously discussed their findings. This is basic.
Application of these principles is especially
Be that as it may, and in addition to the foregoing necessary because banks have a fiduciary
disquisitions by the Court of Appeals, let us review the relationship with the public and their stability
question of Rivera's authority to act and petitioner's depends on the confidence of the people in their
allegations that the P5.5 million counter-offer was honesty and efficiency. Such faith will be
extinguished by the P4.25 million revised offer of eroded where banks do not exercise strict care
Janolo. Here, there are questions of law which could be in the selection and supervision of its
drawn from the factual findings of the respondent employees, resulting in prejudice to their
Court. They also delve into the contractual elements of depositors.
consent and cause.
From the evidence found by respondent Court, it is
The authority of a corporate officer in dealing with third obvious that petitioner Rivera has apparent or implied
persons may be actual or apparent. The doctrine of authority to act for the Bank in the matter of selling its
"apparent authority", with special reference to banks, acquired assets. This evidence includes the following:
was laid out in Prudential Bank vs. Court of Appeals31
, where it was held that: (a) The petition itself in par. II-i (p. 3) states
that Rivera was "at all times material to this
Conformably, we have declared in countless case, Manager of the Property Management
decisions that the principal is liable for Department of the Bank". By his own
obligations contracted by the agent. The agent's admission, Rivera was already the person in
apparent representation yields to the charge of the Bank's acquired assets (TSN,
principal's true representation and the contract August 6, 1990, pp. 8-9);
is considered as entered into between the
principal and the third person (citing National (b) As observed by respondent Court, the land
Food Authority vs. Intermediate Appellate was definitely being sold by the Bank. And
Court, 184 SCRA 166). during the initial meeting between the buyers
and Rivera, the latter suggested that the buyers'
A bank is liable for wrongful acts of its offer should be no less than P3.3 million (TSN,
officers done in the interests of the April 26, 1990, pp. 16-17);
bank or in the course of dealings of the
officers in their representative capacity (c) Rivera received the buyers' letter dated
but not for acts outside the scape of August 30, 1987 offering P3.5 million (TSN, 30
their authority (9 C.J.S., p. 417). A bank July 1990, p.11);
holding out its officers and agents as
worthy of confidence will not be (d) Rivera signed the letter dated September 1,
permitted to profit by the frauds they 1987 offering to sell the property for P5.5
may thus be enabled to perpetrate in million (TSN, July 30, p. 11);
the apparent scope of their
employment; nor will it be permitted to (e) Rivera received the letter dated September
shirk its responsibility for such frauds 17, 1987 containing the buyers' proposal to buy
even though no benefit may accrue to the property for P4.25 million (TSN, July 30,
the bank therefrom (10 Am Jur 2d, p. 1990, p. 12);
114). Accordingly, a banking
corporation is liable to innocent third (f) Rivera, in a telephone conversation,
persons where the representation is confirmed that the P5.5 million was the final

P a g e 42 | 49
price of the Bank (TSN, January 16, 1990, p. members (Atty. Susana Parker) acted in said criminal
18); cases.

(g) Rivera arranged the meeting between the Petitioners also alleged that Demetria's and Janolo's
buyers and Luis Co on September 28, 1994, P4.25 million counter-offer in the letter dated
during which the Bank's offer of P5.5 million September 17, 1987 extinguished the Bank's offer of
was confirmed by Rivera (TSN, April 26, 1990, P5.5 million 34 .They disputed the respondent Court's
pp. 34-35). At said meeting, Co, a major finding that "there was a meeting of minds when on 30
shareholder and officer of the Bank, confirmed September 1987 Demetria and Janolo through Annex
Rivera's statement as to the finality of the "L" (letter dated September 30, 1987) "accepted"
Bank's counter-offer of P5.5 million (TSN, Rivera's counter offer of P5.5 million under Annex "J"
January 16, 1990, p. 21; TSN, April 26, 1990, p. (letter dated September 17, 1987)", citing the late
35); Justice Paras35 , Art. 1319 of the Civil Code 36 and
related Supreme Court rulings starting with Beaumont
(h) In its newspaper advertisements and vs. Prieto 37 .
announcements, the Bank referred to Rivera as
the officer acting for the Bank in relation to However, the above-cited authorities and precedents
parties interested in buying assets cannot apply in the instant case because, as found by the
owned/acquired by the Bank. In fact, Rivera respondent Court which reviewed the testimonies on
was the officer mentioned in the Bank's this point, what was "accepted" by Janolo in his letter
advertisements offering for sale the property in dated September 30, 1987 was the Bank's offer of P5.5
question (cf. Exhs. "S" and "S-1"). million as confirmed and reiterated to Demetria and
Atty. Jose Fajardo by Rivera and Co during their
In the very recent case of Limketkai Sons Milling, Inc. meeting on September 28, 1987. Note that the said letter
vs. Court of Appeals, et. al.32 , the Court, through of September 30, 1987 begins with"(p)ursuant to our
Justice Jose A. R. Melo, affirmed the doctrine of discussion last 28 September 1987 . . .
apparent authority as it held that the apparent authority
of the officer of the Bank of P.I. in charge of acquired Petitioners insist that the respondent Court should have
assets is borne out by similar circumstances believed the testimonies of Rivera and Co that the
surrounding his dealings with buyers. September 28, 1987 meeting "was meant to have the
offerors improve on their position of P5.5. million."38
To be sure, petitioners attempted to repudiate Rivera's However, both the trial court and the Court of Appeals
apparent authority through documents and testimony found petitioners' testimonial evidence "not credible",
which seek to establish Rivera's actual authority. These and we find no basis for changing this finding of fact.
pieces of evidence, however, are inherently weak as they
consist of Rivera's self-serving testimony and various Indeed, we see no reason to disturb the lower courts'
inter-office memoranda that purport to show his limited (both the RTC and the CA) common finding that private
actual authority, of which private respondent cannot be respondents' evidence is more in keeping with truth and
charged with knowledge. In any event, since the issue is logic — that during the meeting on September 28, 1987,
apparent authority, the existence of which is borne out Luis Co and Rivera "confirmed that the P5.5 million
by the respondent Court's findings, the evidence of price has been passed upon by the Committee and could
actual authority is immaterial insofar as the liability of no longer be lowered (TSN of April 27, 1990, pp. 34-
a corporation is concerned 33 . 35)"39 . Hence, assuming arguendo that the counter-
offer of P4.25 million extinguished the offer of P5.5
Petitioners also argued that since Demetria and Janolo million, Luis Co's reiteration of the said P5.5 million
were experienced lawyers and their "law firm" had once price during the September 28, 1987 meeting revived
acted for the Bank in three criminal cases, they should the said offer. And by virtue of the September 30, 1987
be charged with actual knowledge of Rivera's limited letter accepting this revived offer, there was a meeting
authority. But the Court of Appeals in its Decision (p. of the minds, as the acceptance in said letter was
12) had already made a factual finding that the buyers absolute and unqualified.
had no notice of Rivera's actual authority prior to the
sale. In fact, the Bank has not shown that they acted as We note that the Bank's repudiation, through
its counsel in respect to any acquired assets; on the Conservator Encarnacion, of Rivera's authority and
other hand, respondent has proven that Demetria and action, particularly the latter's counter-offer of P5.5
Janolo merely associated with a loose aggrupation of million, as being "unauthorized and illegal" came only
lawyers (not a professional partnership), one of whose on May 12, 1988 or more than seven (7) months after

P a g e 43 | 49
Janolo' acceptance. Such delay, and the absence of any Even assuming that Luis Co or Rivera did relay
circumstance which might have justifiably prevented a verbal offer to sell at P5.5 million during the
the Bank from acting earlier, clearly characterizes the meeting of 28 September 1987, and it was this
repudiation as nothing more than a last-minute attempt verbal offer that Demetria and Janolo accepted
on the Bank's part to get out of a binding contractual with their letter of 30 September 1987, the
obligation. contract produced thereby would be
unenforceable by action — there being no note,
Taken together, the factual findings of the respondent memorandum or writing subscribed by the
Court point to an implied admission on the part of the Bank to evidence such contract. (Please see
petitioners that the written offer made on September 1, article 1403[2], Civil Code.)
1987 was carried through during the meeting of
September 28, 1987. This is the conclusion consistent Upon the other hand, the respondent Court in its
with human experience, truth and good faith. Decision (p, 14) stated:

It also bears noting that this issue of extinguishment of . . . Of course, the bank's letter of September 1,
the Bank's offer of P5.5 million was raised for the first 1987 on the official price and the plaintiffs'
time on appeal and should thus be disregarded. acceptance of the price on September 30, 1987,
are not, in themselves, formal contracts of sale.
This Court in several decisions has repeatedly They are however clear embodiments of the fact
adhered to the principle that points of law, that a contract of sale was perfected between
theories, issues of fact and arguments not the parties, such contract being binding in
adequately brought to the attention of the trial whatever form it may have been entered into
court need not be, and ordinarily will not be, (case citations omitted). Stated simply, the
considered by a reviewing court, as they cannot banks' letter of September 1, 1987, taken
be raised for the first time on appeal (Santos vs. together with plaintiffs' letter dated September
IAC, No. 74243, November 14, 1986, 145 SCRA 30, 1987, constitute in law a sufficient
592).40 memorandum of a perfected contract of sale.

. . . It is settled jurisprudence that an issue The respondent Court could have added that the written
which was neither averred in the complaint nor communications commenced not only from September
raised during the trial in the court below cannot 1, 1987 but from Janolo's August 20, 1987 letter. We
be raised for the first time on appeal as it would agree that, taken together, these letters constitute
be offensive to the basic rules of fair play, justice sufficient memoranda — since they include the names
and due process (Dihiansan vs. CA, 153 SCRA of the parties, the terms and conditions of the contract,
713 [1987]; Anchuelo vs. IAC, 147 SCRA 434 the price and a description of the property as the object
[1987]; Dulos Realty & Development Corp. vs. of the contract.
CA, 157 SCRA 425 [1988]; Ramos vs. IAC, 175
SCRA 70 [1989]; Gevero vs. IAC, G.R. 77029, But let it be assumed arguendo that the counter-offer
August 30, 1990).41 during the meeting on September 28, 1987 did
constitute a "new" offer which was accepted by Janolo
Since the issue was not raised in the pleadings as an on September 30, 1987. Still, the statute of frauds will
affirmative defense, private respondent was not given not apply by reason of the failure of petitioners to object
an opportunity in the trial court to controvert the same to oral testimony proving petitioner Bank's counter-
through opposing evidence. Indeed, this is a matter of offer of P5.5 million. Hence, petitioners — by such utter
due process. But we passed upon the issue anyway, if failure to object — are deemed to have waived any
only to avoid deciding the case on purely procedural defects of the contract under the statute of frauds,
grounds, and we repeat that, on the basis of the evidence pursuant to Article 1405 of the Civil Code:
already in the record and as appreciated by the lower
courts, the inevitable conclusion is simply that there Art. 1405. Contracts infringing the Statute of
was a perfected contract of sale. Frauds, referred to in No. 2 of article 1403, are
ratified by the failure to object to the
The Third Issue: Is the Contract Enforceable? presentation of oral evidence to prove the same,
or by the acceptance of benefits under them.
The petition alleged42 :
As private respondent pointed out in his Memorandum,
oral testimony on the reaffirmation of the counter-offer

P a g e 44 | 49
of P5.5 million is a plenty — and the silence of Q What was your response to the answer of Mr.
petitioners all throughout the presentation makes the Luis Co?
evidence binding on them thus;
A I said that we are going to give him our answer
A Yes, sir, I think it was September 28, 1987 and in a few days and he said that was it. Atty.
I was again present because Atty. Demetria told Fajardo and I and Mr. Mercurio [Rivera] was
me to accompany him we were able to meet Luis with us at the time at his office.
Co at the Bank.
Q For the record, your Honor please, will you
xxx xxx xxx tell this Court who was with Mr. Co in his Office
in Producers Bank Building during this
Q Now, what transpired during this meeting meeting?
with Luis Co of the Producers Bank?
A Mr. Co himself, Mr. Rivera, Atty. Fajardo and
A Atty. Demetria asked Mr. Luis Co whether the I.
price could be reduced, sir.
Q By Mr. Co you are referring to?
Q What price?
A Mr. Luis Co.
A The 5.5 million pesos and Mr. Luis Co said
that the amount cited by Mr. Mercurio Rivera is Q After this meeting with Mr. Luis Co, did you
the final price and that is the price they intends and your partner accede on (sic) the counter
(sic) to have, sir. offer by the bank?

Q What do you mean?. A Yes, sir, we did.? Two days thereafter we sent
our acceptance to the bank which offer we
A That is the amount they want, sir. accepted, the offer of the bank which is P5.5
Q What is the reaction of the plaintiff Demetria
to Luis Co's statement (sic) that the defendant [Direct testimony of Atty. Demetria, TSN, 26 April 1990,
Rivera's counter-offer of 5.5 million was the at pp. 34-36.]
defendant's bank (sic) final offer?
Q According to Atty. Demetrio Demetria, the
A He said in a day or two, he will make final amount of P5.5 million was reached by the
acceptance, sir. Committee and it is not within his power to
reduce this amount. What can you say to that
Q What is the response of Mr. Luis Co?. statement that the amount of P5.5 million was
reached by the Committee?
A He said he will wait for the position of Atty.
Demetria, sir. A It was not discussed by the Committee but it
was discussed initially by Luis Co and the group
[Direct testimony of Atty. Jose Fajardo, TSN, January of Atty. Demetrio Demetria and Atty. Pajardo
16, 1990, at pp. 18-21.] (sic) in that September 28, 1987 meeting, sir.

Q What transpired during that meeting [Direct testimony of Mercurio Rivera, TSN, 30 July
between you and Mr. Luis Co of the defendant 1990, pp. 14-15.]
The Fourth Issue: May the Conservator Revoke
A We went straight to the point because he the Perfected and Enforceable Contract.
being a busy person, I told him if the amount of
P5.5 million could still be reduced and he said It is not disputed that the petitioner Bank was under a
that was already passed upon by the committee. conservator placed by the Central Bank of the
What the bank expects which was contrary to Philippines during the time that the negotiation and
what Mr. Rivera stated. And he told me that is perfection of the contract of sale took place. Petitioners
the final offer of the bank P5.5 million and we energetically contended that the conservator has the
should indicate our position as soon as possible. power to revoke or overrule actions of the management
or the board of directors of a bank, under Section 28-A
P a g e 45 | 49
of Republic Act No. 265 (otherwise known as the Suite 323 Rufino Building
Central Bank Act) as follows: Ayala Avenue, Makati, Metro-Manila

Whenever, on the basis of a report submitted by Dear Atty. Zarate:

the appropriate supervising or examining
department, the Monetary Board finds that a This pertains to your letter dated May 5, 1988
bank or a non-bank financial intermediary on behalf of Attys. Janolo and Demetria
performing quasi-banking functions is in a state regarding the six (6) parcels of land located at
of continuing inability or unwillingness to Sta. Rosa, Laguna.
maintain a state of liquidity deemed adequate
to protect the interest of depositors and We deny that Producers Bank has ever made a
creditors, the Monetary Board may appoint a legal counter-offer to any of your clients nor
conservator to take charge of the assets, perfected a "contract to sell and buy" with any
liabilities, and the management of that of them for the following reasons.
institution, collect all monies and debts due
said institution and exercise all powers In the "Inter-Office Memorandum" dated April
necessary to preserve the assets of the 25, 1986 addressed to and approved by former
institution, reorganize the management Acting Conservator Mr. Andres I. Rustia,
thereof, and restore its viability. He shall have Producers Bank Senior Manager Perfecto M.
the power to overrule or revoke the actions of Pascua detailed the functions of Property
the previous management and board of Management Department (PMD) staff and
directors of the bank or non-bank financial officers (Annex A.), you will immediately read
intermediary performing quasi-banking that Manager Mr. Mercurio Rivera or any of his
functions, any provision of law to the contrary subordinates has no authority, power or right to
notwithstanding, and such other powers as the make any alleged counter-offer. In short, your
Monetary Board shall deem necessary. lawyer-clients did not deal with the authorized
officers of the bank.
In the first place, this issue of the Conservator's alleged
authority to revoke or repudiate the perfected contract Moreover, under Sec. 23 and 36 of the
of sale was raised for the first time in this Petition — as Corporation Code of the Philippines (Bates
this was not litigated in the trial court or Court of Pambansa Blg. 68.) and Sec. 28-A of the Central
Appeals. As already stated earlier, issues not raised Bank Act (Rep. Act No. 265, as amended), only
and/or ventilated in the trial court, let alone in the Court the Board of Directors/Conservator may
of Appeals, "cannot be raised for the first time on appeal authorize the sale of any property of the
as it would be offensive to the basic rules of fair play, corportion/bank..
justice and due process."43
Our records do not show that Mr. Rivera was
In the second place, there is absolutely no evidence that authorized by the old board or by any of the
the Conservator, at the time the contract was perfected, bank conservators (starting January, 1984) to
actually repudiated or overruled said contract of sale. sell the aforesaid property to any of your clients.
The Bank's acting conservator at the time, Rodolfo Apparently, what took place were just
Romey, never objected to the sale of the property to preliminary discussions/consultations between
Demetria and Janolo. What petitioners are really him and your clients, which everyone knows
referring to is the letter of Conservator Encarnacion, cannot bind the Bank's Board or Conservator.
who took over from Romey after the sale was perfected
on September 30, 1987 (Annex V, petition) which We are, therefore, constrained to refuse any
unilaterally repudiated — not the contract — but the tender of payment by your clients, as the same
authority of Rivera to make a binding offer — and which is patently violative of corporate and banking
unarguably came months after the perfection of the laws. We believe that this is more than
contract. Said letter dated May 12, 1988 is reproduced sufficient legal justification for refusing said
hereunder: alleged tender.

Rest assured that we have nothing personal

May 12, 1988
against your clients. All our acts are official,
legal and in accordance with law. We also have
Atty. Noe C. Zarate
Zarate Carandang Perlas & Ass.
P a g e 46 | 49
no personal interest in any of the properties of Court. In Andres vs. Manufacturers Hanover & Trust
the Bank. Corporation, 45 , we held:

Please be advised accordingly. . . . The rule regarding questions of fact being

raised with this Court in a petition for certiorari
Very truly yours, under Rule 45 of the Revised Rules of Court has
been stated in Remalante vs. Tibe, G.R. No.
(Sgd.) Leonida T. Encarnacion 59514, February 25, 1988, 158 SCRA 138, thus:
Acting Conservator The rule in this jurisdiction is that only
questions of law may be raised in a petition for
In the third place, while admittedly, the Central Bank certiorari under Rule 45 of the Revised Rules of
law gives vast and far-reaching powers to the Court. "The jurisdiction of the Supreme Court
conservator of a bank, it must be pointed out that such in cases brought to it from the Court of Appeals
powers must be related to the "(preservation of) the is limited to reviewing and revising the errors of
assets of the bank, (the reorganization of) the law imputed to it, its findings of the fact being
management thereof and (the restoration of) its conclusive " [Chan vs. Court of Appeals, G.R.
viability." Such powers, enormous and extensive as they No. L-27488, June 30, 1970, 33 SCRA 737,
are, cannot extend to the post-facto repudiation of reiterating a long line of decisions]. This Court
perfected transactions, otherwise they would infringe has emphatically declared that "it is not the
against the non-impairment clause of the Constitution function of the Supreme Court to analyze or
44 . If the legislature itself cannot revoke an existing weigh such evidence all over again, its
valid contract, how can it delegate such non-existent jurisdiction being limited to reviewing errors of
powers to the conservator under Section 28-A of said law that might have been committed by the
law? lower court" (Tiongco v. De la Merced, G. R. No.
L-24426, July 25, 1974, 58 SCRA 89; Corona vs.
Obviously, therefore, Section 28-A merely gives the Court of Appeals, G.R. No. L-62482, April 28,
conservator power to revoke contracts that are, under 1983, 121 SCRA 865; Baniqued vs. Court of
existing law, deemed to be defective — i.e., void, Appeals, G. R. No. L-47531, February 20, 1984,
voidable, unenforceable or rescissible. Hence, the 127 SCRA 596). "Barring, therefore, a showing
conservator merely takes the place of a bank's board of that the findings complained of are totally
directors. What the said board cannot do — such as devoid of support in the record, or that they are
repudiating a contract validly entered into under the so glaringly erroneous as to constitute serious
doctrine of implied authority — the conservator cannot abuse of discretion, such findings must stand,
do either. Ineluctably, his power is not unilateral and he for this Court is not expected or required to
cannot simply repudiate valid obligations of the Bank. examine or contrast the oral and documentary
His authority would be only to bring court actions to evidence submitted by the parties" [Santa Ana,
assail such contracts — as he has already done so in the Jr. vs. Hernandez, G. R. No. L-16394,
instant case. A contrary understanding of the law would December 17, 1966, 18 SCRA 973] [at pp. 144-
simply not be permitted by the Constitution. Neither by 145.]
common sense. To rule otherwise would be to enable a
failing bank to become solvent, at the expense of third Likewise, in Bernardo vs. Court of Appeals 46 , we held:
parties, by simply getting the conservator to unilaterally
revoke all previous dealings which had one way or The resolution of this petition invites us to
another or come to be considered unfavorable to the closely scrutinize the facts of the case, relating
Bank, yielding nothing to perfected contractual rights to the sufficiency of evidence and the credibility
nor vested interests of the third parties who had dealt of witnesses presented. This Court so held that
with the Bank. it is not the function of the Supreme Court to
analyze or weigh such evidence all over again.
The Fifth Issue: Were There Reversible Errors The Supreme Court's jurisdiction is limited to
of Facts? reviewing errors of law that may have been
committed by the lower court. The Supreme
Basic is the doctrine that in petitions for review under Court is not a trier of facts. . . .
Rule 45 of the Rules of Court, findings of fact by the
Court of Appeals are not reviewable by the Supreme

P a g e 47 | 49
As held in the recent case of Chua Tiong Tay vs. Court of There can be no other logical conclusion than
Appeals and Goldrock Construction and Development that when, on September 1, 1987, Rivera
Corp. 47 : informed plaintiffs by letter that "the bank's
counter-offer is at P5.5 Million for more than
The Court has consistently held that the factual 101 hectares on lot basis, "such counter-offer
findings of the trial court, as well as the Court of price had been determined by the Past Due
Appeals, are final and conclusive and may not Committee and approved by the Conservator
be reviewed on appeal. Among the exceptional after Rivera had duly presented plaintiffs' offer
circumstances where a reassessment of facts for discussion by the Committee . . . Tersely put,
found by the lower courts is allowed are when under the established fact, the price of P5.5
the conclusion is a finding grounded entirely on Million was, as clearly worded in Rivera's letter
speculation, surmises or conjectures; when the (Exh. "E"), the official and definitive price at
inference made is manifestly absurd, mistaken which the bank was selling the property. (p. 11,
or impossible; when there is grave abuse of CA Decision)
discretion in the appreciation of facts; when the
judgment is premised on a misapprehension of xxx xxx xxx
facts; when the findings went beyond the issues
of the case and the same are contrary to the . . . The argument deserves scant consideration.
admissions of both appellant and appellee. As pointed out by plaintiff, during the meeting
After a careful study of the case at bench, we of September 28, 1987 between the plaintiffs,
find none of the above grounds present to Rivera and Luis Co, the senior vice-president of
justify the re-evaluation of the findings of fact the bank, where the topic was the possible
made by the courts below. lowering of the price, the bank official refused it
and confirmed that the P5.5 Million price had
In the same vein, the ruling of this Court in the recent been passed upon by the Committee and could
case of South Sea Surety and Insurance Company Inc. no longer be lowered (TSN of April 27, 1990, pp.
vs. Hon. Court of Appeals, et al. 48 is equally applicable 34-35) (p. 15, CA Decision).
to the present case:
The respondent Court did not believe the evidence of the
We see no valid reason to discard the factual petitioners on this point, characterizing it as "not
conclusions of the appellate court, . . . (I)t is not credible" and "at best equivocal and considering the
the function of this Court to assess and evaluate gratuitous and self-serving character of these
all over again the evidence, testimonial and declarations, the bank's submissions on this point do
documentary, adduced by the parties, not inspire belief."
particularly where, such as here, the findings of
both the trial court and the appellate court on To become credible and unequivocal, petitioners should
the matter coincide. (emphasis supplied) have presented then Conservator Rodolfo Romey to
testify on their behalf, as he would have been in the best
Petitioners, however, assailed the respondent Court's position to establish their thesis. Under the rules on
Decision as "fraught with findings and conclusions evidence 51 , such suppression gives rise to the
which were not only contrary to the evidence on record presumption that his testimony would have been
but have no bases at all," specifically the findings that adverse, if produced.
(1) the "Bank's counter-offer price of P5.5 million had
been determined by the past due committee and The second point was squarely raised in the Court of
approved by conservator Romey, after Rivera presented Appeals, but petitioners' evidence was deemed
the same for discussion" and (2) "the meeting with Co insufficient by both the trial court and the respondent
was not to scale down the price and start negotiations Court, and instead, it was respondent's submissions
anew, but a meeting on the already determined price of that were believed and became bases of the conclusions
P5.5 million" Hence, citing Philippine National Bank vs. arrived at.
Court of Appeals 49 , petitioners are asking us to review
and reverse such factual findings. In fine, it is quite evident that the legal conclusions
arrived at from the findings of fact by the lower courts
The first point was clearly passed upon by the Court of are valid and correct. But the petitioners are now asking
Appeals 50 , thus: this Court to disturb these findings to fit the conclusion
they are espousing, This we cannot do.

P a g e 48 | 49
To be sure, there are settled exceptions where the to buy the subject properties for a substantial amount of
Supreme Court may disregard findings of fact by the money." 53
Court of Appeals 52 . We have studied both the records
and the CA Decision and we find no such exceptions in While we do not deny our sympathy for this distressed
this case. On the contrary, the findings of the said Court bank, at the same time, the Court cannot emotionally
are supported by a preponderance of competent and close its eyes to overriding considerations of substantive
credible evidence. The inferences and conclusions are and procedural law, like respect for perfected contracts,
seasonably based on evidence duly identified in the non-impairment of obligations and sanctions against
Decision. Indeed, the appellate court patiently traversed forum-shopping, which must be upheld under the rule
and dissected the issues presented before it, lending of law and blind justice.
credibility and dependability to its findings. The best
that can be said in favor of petitioners on this point is This Court cannot just gloss over private respondent's
that the factual findings of respondent Court did not submission that, while the subject properties may
correspond to petitioners' claims, but were closer to the currently command a much higher price, it is equally
evidence as presented in the trial court by private true that at the time of the transaction in 1987, the price
respondent. But this alone is no reason to reverse or agreed upon of P5.5 million was reasonable, considering
ignore such factual findings, particularly where, as in that the Bank acquired these properties at a foreclosure
this case, the trial court and the appellate court were in sale for no more than P3.5 million 54 . That the Bank
common agreement thereon. Indeed, conclusions of procrastinated and refused to honor its commitment to
fact of a trial judge — as affirmed by the Court of Appeals sell cannot now be used by it to promote its own
— are conclusive upon this Court, absent any serious advantage, to enable it to escape its binding obligation
abuse or evident lack of basis or capriciousness of any and to reap the benefits of the increase in land values.
kind, because the trial court is in a better position to To rule in favor of the Bank simply because the property
observe the demeanor of the witnesses and their in question has algebraically accelerated in price during
courtroom manner as well as to examine the real the long period of litigation is to reward lawlessness and
evidence presented. delays in the fulfillment of binding contracts. Certainly,
the Court cannot stamp its imprimatur on such
Epilogue. outrageous proposition.

In summary, there are two procedural issues involved WHEREFORE, finding no reversible error in the
forum-shopping and the raising of issues for the first questioned Decision and Resolution, the Court hereby
time on appeal [viz., the extinguishment of the Bank's DENIES the petition. The assailed Decision is
offer of P5.5 million and the conservator's powers to AFFIRMED. Moreover, petitioner Bank is
repudiate contracts entered into by the Bank's officers] REPRIMANDED for engaging in forum-shopping and
— which per se could justify the dismissal of the present WARNED that a repetition of the same or similar acts
case. We did not limit ourselves thereto, but delved as will be dealt with more severely. Costs against
well into the substantive issues — the perfection of the petitioners.
contract of sale and its enforceability, which required
the determination of questions of fact. While the SO ORDERED.
Supreme Court is not a trier of facts and as a rule we are
not required to look into the factual bases of respondent
Court's decisions and resolutions, we did so just the
same, if only to find out whether there is reason to
disturb any of its factual findings, for we are only too
aware of the depth, magnitude and vigor by which the
parties through their respective eloquent counsel,
argued their positions before this Court.

We are not unmindful of the tenacious plea that the

petitioner Bank is operating abnormally under a
government-appointed conservator and "there is need
to rehabilitate the Bank in order to get it back on its feet
. . . as many people depend on (it) for investments,
deposits and well as employment. As of June 1987, the
Bank's overdraft with the Central Bank had already
reached P1.023 billion . . . and there were (other) offers

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