85.

LIGAYA ESGUERRA, LOWELL ESGUERRA AND LIESELL ESGUERRA VS. HOLCIM PHILIPPINES, INC.,
G.R. No. 182571, September 2, 2013

FACTS:
Esguerra bought a truck from GAMI on installments. To secure the payment, a chattel mortgage was executed
by Esguerra. Later, Esguerra failed to pay 2 installements. Consequently GAMI filed an action for foreclosure of the
chattel mortgage. Agents of GAMI, impersonated sheriffs and took the said truck while it was in the possession of
Esguerra’s driver, Carlito Padua; and the same had remained in the possession of GAMI, notwithstanding demands for
its return by Esguerra.

Esguerra filed a complaint with the then Court of First Instance of Cavite, Branch IV, TagaytayCity to recover
said truck and for damages. Esguerra alleged, among others, that due to his failure to pay the installments due, the
agents of GAMI, Jose Tino and Samuel Dore, representing themselves as deputy sheriffs and with use of force, threats
and intimidation, seized the cargo truck in question from his driver, Carlito Padua, while unloading gravel and sand in
Pasay City; and that despite repeated demands, GAMI refused and failed to return the same. GAMI, et al. filed their
answer with a counterclaim, alleging as affirmative defense that the plaintiff gave his consent to the taking of the
truck by the agents of the corporation on condition that he be allowed to recover its possession upon payment of his
back accounts.

Issue:
Whether or not GAMI is liable for damages in taking the truck

Ruling:
The taking of Esguerra’s truck without proceeding to sell the same at public auction appropriating the same in
payment of Esguerra’s indebtedness is not lawful. However, the respondent appellate court did not err in holding that
while the mortgagee can take possession of the chattel, such taking did not amount to the foreclosure of the
mortgage. Otherwise stated, the taking of Esguerra’s truck without proceeding to the sale of the same at public
auction, but instead, appropriating the same in payment of Esguerra’s indebtedness, is not lawful. As clearly stated in
the chattel mortgage contract, the express purpose of the taking of the mortgaged property is to sell the same and/ or
foreclose the mortgage constituted thereon either judicially or extrajudicially and thereby, liquidate the indebtedness
in accordance with law.

A stipulation in a contract of sale regarding automatic appropriation amounts to pactum commissorium, and is
therefore null and void. More than that, even if such automatic appropriation of the cargo truck in question can be
inferred from or be contemplated under the aforesaid mortgage contract, such stipulation would be pactum
commissorium which is expressly prohibited by Article 2088 of the Civil Code and therefore, null and void. The three
remedies of the vendor in case the vendee defaults under Art. 1484 are alternative and cannot be exercised
simultaneously or cumulatively by the vendor creditor. Having opted to foreclose the chattel mortgage, respondent
GAMI can no longer cancel the sale. The three remedies of the vendor in case the vendee defaults, in a contract of sale
of personal property the price of which is payable in installment under Article 1484 of the Civil Code, are alternative
and cannot be exercised simultaneously or cumulatively by the vendor-creditor. In Cruz vs. Filipinas Investment and
Finance Corporation (23 SCRA 791, [1968]), the Supreme Court construing Article 1484 of the Civil Code, held: “Should
the vendee or purchaser of a personal property default in the payment of two or more of the agreed installments, the
vendor or seller has the option to avail of any one of these three.

86.
SPOUSES VICENTE AFULUGENCIA and LETICIA AFULUGENCIA, vs METROPOLITAN BANK & TRUST CO. and EMMANUEL
L. ORTEGA,
G.R. No. 185145, February 5, 2014

FACTS:
Petitioners, spouses Vicente and Leticia Afulugencia, filed a Complaint for nullification of mortgage,
foreclosure, auction sale, certificate of sale and other documents, with damages, against respondents Metropolitan
Bank & Trust Co. (Metrobank) and Emmanuel L. Ortega (Ortega) before the Regional Trial Court (RTC) of Malolos City,
where it was docketed as Civil Case No. 336-M-2004 and assigned to Branch 7. Metrobank is a domestic banking
corporation existing under Philippine laws, while Ortega is the Clerk of Court and Ex-Officio Sheriff of the Malolos RTC.
After the filing of the parties’ pleadings and with the conclusion of pre-trial, petitioners filed a Motion for Issuance of
Subpoena Duces Tecum Ad Testificandum to require Metrobank’s officers to appear and testify as the petitioners’
initial witnesses during the August 31, 2006 hearing for the presentation of their evidence-in-chief, and to bring the
documents relative to their loan with Metrobank, as well as those covering the extrajudicial foreclosure and sale of
petitioners’ 200-square meter land in Meycauayan, Bulacan.

Metrobank filed an Opposition arguing that for lack of a proper notice of hearing, the Motion must be denied;
that being a litigated motion, the failure of petitioners to set a date and time for the hearing renders the Motion
ineffective and pro forma; that pursuant to Sections 1 and 611 of Rule 25 of the Rules, Metrobank’s officers – who are
considered adverse parties – may not be compelled to appear and testify in court for the petitioners since they were
not initially served with written interrogatories; that petitioners have not shown the materiality and relevance of the
documents sought to be produced in court; and that petitioners were merely fishing for evidence. Petitioners
submitted a Reply to Metrobank’s Opposition, stating that the lack of a proper notice of hearing was cured by the filing
of Metrobank’s Opposition; that applying the principle of liberality, the defect may be ignored; that leave of court is
not necessary for the taking of Metrobank’s officers’ depositions; that for their case, the issuance of a subpoena is not
unreasonable and oppressive, but instead favorable to Metrobank, since it will present the testimony of these officers
just the same during the presentation of its own evidence; that the documents sought to be produced are relevant and
will prove whether petitioners have paid their obligations to Metrobank in full, and will settle the issue relative to the
validity or invalidity of the foreclosure proceedings; and that the Rules do not prohibit a party from presenting the
adverse party as its own witness. The trial court issued an Order denying petitioners’ Motion for Issuance of Subpoena
Duces Tecum Ad Testificandum. Upon appeal, the Court of Appeals affirmed the RTC ruling. ISSUE Whether the Court
of Appeals committed error in holding that the petitioners must first serve written interrogatories to respondent bank’s
officers before they can be subpoenaed. (NO) RULING As a rule, in civil cases, the procedure of calling the adverse
party to the witness stand is not allowed, unless written interrogatories are first served upon the latter. This is
embodied in Section 6, Rule 25 of the Rules, which provides – Sec. 6. Effect of failure to serve written interrogatories.
Unless thereafter allowed by the court for good cause shown and to prevent a failure of justice, a party not served
with written interrogatories may not be compelled by the adverse party to give testimony in open court, or to give a
deposition pending appeal. One of the purposes of the above rule is to prevent fishing expeditions and needless delays;
it is there to maintain order and facilitate the conduct of trial. It will be presumed that a party who does not serve
written interrogatories on the adverse party beforehand will most likely be unable to elicit facts useful to its case if it
later opts to call the adverse party to the witness stand as its witness. Instead, the process could be treated as a
fishing expedition or an attempt at delaying the proceedings; it produces no significant result that a prior written
interrogatories might bring. Another reason for the rule is that by requiring prior written interrogatories, the court may
limit the inquiry to what is relevant, and thus prevent the calling party from straying or harassing the adverse party
when it takes the latter to the stand.

Thus, the rule not only protects the adverse party from unwarranted surprises or harassment; it likewise
prevents the calling party from conducting a fishing expedition or bungling its own case. Using its own judgment and
discretion, the court can hold its own in resolving a dispute, and need not bear witness to the parties perpetrating
unfair court practices such as fishing for evidence, badgering, or altogether ruining their own cases. Ultimately, such
unnecessary processes can only constitute a waste of the court’s precious time, if not pointless entertainment. In the
present case, petitioners seek to call Metrobank’s officers to the witness stand as their initial and main witnesses, and
to present documents in Metrobank’s possession as part of their principal documentary evidence. This is improper.
Petitioners may not be allowed, at the incipient phase of the presentation of their evidence-in-chief at that, to present
Metrobank’s officers – who are considered adverse parties as well, based on the principle that corporations act only
through their officers and duly authorized agents – as their main witnesses; nor may they be allowed to gain access to
Metrobank’s documentary evidence for the purpose of making it their own. This is tantamount to building their whole
case from the evidence of their opponent. The burden of proof and evidence falls on petitioners, not on Metrobank; if
petitioners cannot prove their claim using their own evidence, then the adverse party Metrobank may not be pressured
to hang itself from its own defense. It is true that under the Rules, a party may, for good cause shown and to prevent a
failure of justice, be compelled to give testimony in court by the adverse party who has not served written
interrogatories. But what petitioners seek goes against the very principles of justice and fair play; they would want
that Metrobank provide the very evidence with which to prosecute and build their case from the start. This they may
not be allowed to do. Finally, the Court may not turn a blind eye to the possible consequences of such a move by
petitioners. As one of their causes of action in their Complaint, petitioners claim that they were not furnished with
specific documents relative to their loan agreement with Metrobank at the time they obtained the loan and while it
was outstanding. If Metrobank were to willingly provide petitioners with these documents even before petitioners can
present evidence to show that indeed they were never furnished the same, any inferences generated from this would
certainly not be useful for Metrobank. One may be that by providing petitioners with these documents, Metrobank
would be admitting that indeed, it did not furnish petitioners with these documents prior to the signing of the loan
agreement, and while the loan was outstanding, in violation of the law.

ISSUE
Whether the Court of Appeals committed error in holding that the petitioners must first serve written
interrogatories to respondent bank’s officers before they can be subpoenaed. (NO)
RULING
As a rule, in civil cases, the procedure of calling the adverse party to the witness stand is not allowed, unless
written interrogatories are first served upon the latter. This is embodied in Section 6, Rule 25 of the Rules, which
provides –

Sec. 6. Effect of failure to serve written interrogatories.

Unless thereafter allowed by the court for good cause shown and to prevent a failure of justice, a party not
served with written interrogatories may not be compelled by the adverse party to give testimony in open court, or to
give a deposition pending appeal.

One of the purposes of the above rule is to prevent fishing expeditions and needless delays; it is there to
maintain order and facilitate the conduct of trial. It will be presumed that a party who does not serve written
interrogatories on the adverse party beforehand will most likely be unable to elicit facts useful to its case if it later
opts to call the adverse party to the witness stand as its witness. Instead, the process could be treated as a fishing
expedition or an attempt at delaying the proceedings; it produces no significant result that a prior written
interrogatories might bring.

Another reason for the rule is that by requiring prior written interrogatories, the court may limit the inquiry to
what is relevant, and thus prevent the calling party from straying or harassing the adverse party when it takes the
latter to the stand.

Thus, the rule not only protects the adverse party from unwarranted surprises or harassment; it likewise
prevents the calling party from conducting a fishing expedition or bungling its own case. Using its own judgment and
discretion, the court can hold its own in resolving a dispute, and need not bear witness to the parties perpetrating
unfair court practices such as fishing for evidence, badgering, or altogether ruining their own cases. Ultimately, such
unnecessary processes can only constitute a waste of the court’s precious time, if not pointless entertainment.

In the present case, petitioners seek to call Metrobank’s officers to the witness stand as their initial and main
witnesses, and to present documents in Metrobank’s possession as part of their principal documentary evidence. This is
improper. Petitioners may not be allowed, at the incipient phase of the presentation of their evidence-in-chief at that,
to present Metrobank’s officers – who are considered adverse parties as well, based on the principle that corporations
act only through their officers and duly authorized agents – as their main witnesses; nor may they be allowed to gain
access to Metrobank’s documentary evidence for the purpose of making it their own. This is tantamount to building
their whole case from the evidence of their opponent. The burden of proof and evidence falls on petitioners, not on
Metrobank; if petitioners cannot prove their claim using their own evidence, then the adverse party Metrobank may not
be pressured to hang itself from its own defense.

It is true that under the Rules, a party may, for good cause shown and to prevent a failure of justice, be
compelled to give testimony in court by the adverse party who has not served written interrogatories. But what
petitioners seek goes against the very principles of justice and fair play; they would want that Metrobank provide the
very evidence with which to prosecute and build their case from the start. This they may not be allowed to do.

Finally, the Court may not turn a blind eye to the possible consequences of such a move by petitioners. As one
of their causes of action in their Complaint, petitioners claim that they were not furnished with specific documents
relative to their loan agreement with Metrobank at the time they obtained the loan and while it was outstanding. If
Metrobank were to willingly provide petitioners with these documents even before petitioners can present evidence to
show that indeed they were never furnished the same, any inferences generated from this would certainly not be
useful for Metrobank. One may be that by providing petitioners with these documents, Metrobank would be admitting
that indeed, it did not furnish petitioners with these documents prior to the signing of the loan agreement, and while
the loan was outstanding, in violation of the law.

87.
PHILIPPINE NATIONAL BANK vs. THE COURT OF FIRST INSTANCE OF RIZAL
G.R. No. L-63201, May 27, 1992

FACTS
Private respondents are the registered owners of three parcels of land in Pasig. Private respondents entered
into a contract of lease with Philippine Blooming Mills (PBM for brevity) whereby the latter shall lease parcels of land
as factory site. PBM was duly organized and incorporated on January 19, 1952 with a corporate term of 25 years. The
leasehold right of PBM was duly annotated at the back of the certificates of title.
 The contract of lease provides that the term of the lease is for 20 years beginning from the date of the
contract and "is extendable for another term of 20 years at the option of the LESSEE should its term of existence be
extended in accordance with law." The contract also states that the lessee agrees to "use the property as factory site
and for that purpose to construct whatever buildings or improvements may be necessary or convenient and/or for any
purpose it may deem fit; and before the termination of the lease to remove all such buildings and improvements." In
accordance with the contract, PBM introduced on the land certain buildings, machineries and other useful
improvements. These constructions and improvements were registered with the Registry of Deeds of Rizal and
annotated at the back of the respondents' certificates of title.

PBM executed in favor of petitioner PNB a deed of assignment, conveying and transferring all its rights and
interests under the contract of lease. The assignment was for and in consideration of the loans granted by PNB to PBM.
The deed of assignment was registered and annotated at the back of the private respondents' certificates of title.

On November 6, 1963 and December 23, 1963 respectively, PBM executed in favor of PNB a REM for a loan of
P100,000 and an addendum to REM for another loan of P1,590,000 covering all the improvements constructed by PBM
on the leased premises. These mortgages were registered and annotated at the back of respondents' certificates.

ISSUE
Whether or not the corporate life of PBM was extended by the continuance of the lease and subsequent
registration of the title to the improvements under its name. (NO)

RULING
The respondent court did not act in excess of its jurisdiction in ordering the cancellation of the entries on
respondent's certificates of title.

The contract of lease expressly provides that the term of the lease shall be 20 years from the execution of the
contract but can be extended for another period of 20 years at the option of the lessee should the corporate term be
extended in accordance with law. Clearly, the option of the lessee to extend the lease for another period of 20 years
can be exercised only if the lessee as corporation renews or extends its corporate term. Contracts are to be
interpreted according to their literal meaning. Thus, in the instant case, the initial term of the contract of lease which
commenced on March 1, 1954 ended on March 1, 1974. PBM as lessee continued to occupy the leased premises beyond
that date with the acquiescence and consent of the respondents as lessor. Records show however, that PBM as a
corporation had a corporate life of only 25 years which ended on January 19, 1977. It should be noted however that
PBM allowed its corporate term to expire without complying with the requirements provided by law for the extension
of its corporate term of existence.

Section 11 of Corporation Code provides that a corporation shall exist for a period not exceeding 50 years from
the date of incorporation unless sooner dissolved or unless said period is extended. Upon the expiration of the period
fixed in the articles of incorporation in the absence of compliance with the legal requisites for the extension of the
period, the corporation ceases to exist and is dissolved ipso facto. When the period of corporate life expires, the
corporation ceases to be a body corporate for the purpose of continuing the business for which it was organized. But it
shall nevertheless be continued as a body corporate for three years after the time when it would have been so
dissolved, for the purpose of prosecuting and defending suits by or against it and enabling it gradually to settle and
close its affairs, to dispose of and convey its property and to divide its assets (Sec. 122, Corporation Code). There is no
need for the institution of a proceeding for quo warranto to determine the time or date of the dissolution of a
corporation because the period of corporate existence is provided in the articles of incorporation. When such period
expires and without any extension having been made pursuant to law, the corporation is dissolved automatically insofar
as the continuation of its business is concerned. The quo warranto proceeding under Rule 66 of the Rules of Court, as
amended, may be instituted by the Solicitor General only for the involuntary dissolution of a corporation on the
following grounds: a) when the corporation has offended against a provision of an Act for its creation or renewal; b)
when it has forfeited its privileges and franchises by non-user; c) when it has committed or omitted an act which
amounts to a surrender of its corporate rights, privileges or franchises; d) when it has mis-used a right, privilege or
franchise conferred upon it by law, or when it has exercised a right, privilege or franchise in contravention of law.
Hence, there is no need for the SEC to make an involuntary dissolution of a corporation whose corporate term had
ended because its articles of incorporation had in effect expired by its own limitation.

Considering the foregoing in relation to the contract of lease between the parties herein, when PBM's corporate
life ended on January 19, 1977 and its 3-year period for winding up and liquidation expired on January 19, 1980, the
option of extending the lease was likewise terminated on January 19, 1977 because PBM failed to renew or extend its
corporate life in accordance with law. From then on, the respondents can exercise their right to terminate the lease
pursuant to the stipulations in the contract.
 88.
Chung Ka Bio vs Intermediate Appellate Court (1988)

Facts:
Philippine Blooming Mills Company, Inc. was incorporated for a term of 25 years. The members of its board of
directors executed a deed of assignment of all of the accounts receivables, properties, obligations and liabilities of the
old PBM in favor of Chung Siong Pek in his capacity as treasurer of the new PBM, then in the process of reincorporation.
The new PMB was issued a certificate of incorporation by the Securities and Exchange Commission. Chung Ka Bio and
the other petitioners herein, all stockholders of the old PBM, filed with the SEC a petition for liquidation of both the
old PBM and the new PBM. The allegation was that the former had become legally non-existent for failure to extend its
corporate life and that the latter had likewise beenipso facto dissolved for non-use of the charter and continuous
failure to operate within 2 years from incorporation.

Issue:
WON, The new corporation has not substantially complied with the two-year requirement of Section 22 of the
new Corporation Code on non-user because its stockholders never adopted a set of by-laws.

Ruling:
No. Non-filing of the by-laws will not result in automatic dissolution of the corporation. Under Section 6(i) of
PD 902-A, the SEC is empowered to “suspend or revoked, after proper notice and hearing, the franchise or certificate
of registration of a corporation” on the ground inter alia of “failure to file by-laws within the required period.” It is
clear from this provision that there must first of all be a hearing to determine the existence of the ground, and
secondly, assuming such finding, the penalty is not necessarily revocation but may be only suspension of the charter. In
fact, under the rules and regulations of the SEC, failure to file the by-laws on time may be penalized merely with the
imposition of an administrative fine without affecting the corporate existence of the erring firm.