cases add'l credit.docx

8/13/2019 cases add'l credit.docx

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12. CA Agro Industrial Development Corp., vs Court of Appeals GR# 90027 March 3, 1993

DAVIDE, JR., J:

Facts:

Petitioner and the spouses Ramon and Paula Pugao entered into an agreement whereby the former

purchased from the latter two (2) parcels of land. Among the terms and conditions of the agreement were

that the titles to the lots shall be transferred to the petitioner upon full payment of the purchase price and

that the owner's copies of the certificates of titles thereto, and that title shall be deposited in a safety deposit

box of any bank. Petitioner and the Pugaos then rented Safety Deposit Box of private respondent Security

Bank and Trust Company.

Thereafter, a certain Mrs. Margarita Ramos offered to buy from the petitioner the two (2) lots. Mrs. Ramos

demanded the execution of a deed of sale which necessarily entailed the production of the certificates of title.

In view thereof, Aguirre, accompanied by the Pugaos, then proceeded to the respondent Bank to open the

safety deposit box and get the certificates of title. However, when opened in the presence of the Bank's

representative, the box yielded no such certificates.

Issue:

Is the contractual relation between a commercial bank and another party in a contract of rent of a safety

deposit box with respect to its contents placed by the latter one of bailor and bailee or one of lessor and

lessee?

Held:

The contract for the rent of the safety deposit box is not an ordinary contract of lease as defined in Article

1643 of the Civil Code. However, We do not fully subscribed to its view that the same is a contract of deposit

that is to be strictly governed by the provisions in the Civil Code on deposit; the contract in the case at bar is a

special kind of deposit. It cannot be characterized as an ordinary contract of lease under Article 1643 because

the full and absolute possession and control of the safety deposit box was not given to the joint renters the

petitioner and the Pugaos. The guard key of the box remained with the respondent Bank; without this key,

neither of the renters could open the box. On the other hand, the respondent Bank could not likewise open

the box without the renter's key. In this case, the said key had a duplicate which was made so that both

renters could have access to the box.

13. [G.R. No. 160544. February 21, 2005]

TRIPLE-V vs.FILIPINO MERCHANTS

THIRD DIVISION

Gentlemen:

Quoted hereunder, for your information, is a resolution of this Court dated FEB 21 2005.

G.R. No. 160544 (Triple-V Food Services, Inc. vs. Filipino Merchants Insurance Company, Inc.)

Assailed in this petition for review on certiorari is the decision[1] dated October 21, 2003 of the Court of

Appeals in CA-G.R. CV No. 71223, affirming an earlier decision of the Regional Trial Court at Makati City,

Branch 148, in its Civil Case No. 98-838, an action for damages thereat filed by respondent Filipino Merchants

Insurance, Company, Inc., against the herein petitioner, Triple-V Food Services, Inc.

On March 2, 1997, at around 2:15 o'clock in the afternoon, a certain Mary Jo-Anne De Asis (De Asis)

dined at petitioner's Kamayan Restaurantat 15 West Avenue, Quezon City. De Asis was using a Mitsubishi
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Galant Super Saloon Model 1995 with plate number UBU 955, assigned to her by her employer Crispa Textile

Inc. (Crispa). On said date, De Asis availed of the valet parking service of petitioner and entrusted her car key

to petitioner's valet counter. A corresponding parking ticket was issued as receipt for the car. The car was

then parked by petitioner's valet attendant, a certain Madridano, at the designated parking area. Few minutes

later, Madridano noticed that the car was not in its parking slot and its key no longer in the box where valet

attendants usually keep the keys of cars entrusted to them. The car was never recovered. Thereafter, Crispa

filed a claim against its insurer, herein respondent Filipino Merchants Insurance Company, Inc. (FMICI).Having indemnified Crispa in the amount of P669.500 for the loss of the subject vehicle, FMICI, as subrogee to

Crispa's rights, filed with the RTC at Makati City an action for damages against petitioner Triple-V Food

Services, Inc., thereat docketed as Civil Case No. 98-838 which was raffled to Branch 148.

In its answer, petitioner argued that the complaint failed to aver facts to support the allegations of

recklessness and negligence committed in the safekeeping and custody of the subject vehicle, claiming that it

and its employees wasted no time in ascertaining the loss of the car and in informing De Asis of the discovery

of the loss. Petitioner further argued that in accepting the complimentary valet parking service, De Asis

received a parking ticket whereunder it is so provided that "[Management and staff will not be responsible

for any loss of or damage incurred on the vehicle nor of valuables contained therein", a provision which, to

petitioner's mind, is an explicit waiver of any right to claim indemnity for the loss of the car; and that De Asis

knowingly assumed the risk of loss when she allowed petitioner to park her vehicle, adding that its valet

parking service did not include extending a contract of insurance or warranty for the loss of the vehicle.

During trial, petitioner challenged FMICI's subrogation to Crispa's right to file a claim for the loss of the

car, arguing that theft is not a risk insured against under FMICI's Insurance Policy No. PC-5975 for the subject

vehicle.

In a decision dated June 22, 2001, the trial court rendered judgment for respondent FMICI, thus:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the

plaintiff (FMICI) and against the defendant Triple V (herein petitioner) and the latter is

hereby ordered to pay plaintiff the following:

1. The amount of P669,500.00, representing actual damages plus compounded (sic);

2. The amount of P30,000.00 as acceptance fee plus the amount equal to 25% of the total amount

due as attorney's fees;

3. The amount of P50,000.00 as exemplary damages;

4. Plus, cost of suit.

Defendant Triple V is not therefore precluded from taking appropriate action against

defendant Armando Madridano.

SO ORDERED.

Obviously displeased, petitioner appealed to the Court of Appeals reiterating its argument that it was not

a depositary of the subject car and that it exercised due diligence and prudence in the safe keeping of the

vehicle, in handling the car-napping incident and in the supervision of its employees. It further argued that

there was no valid subrogation of rights between Crispa and respondent FMICI.

In a decision dated October 21, 2003,[2]the Court of Appeals dismissed petitioner's appeal and affirmed

the appealed decision of the trial court, thus:

WHEREFORE, based on the foregoing premises, the instant appeal is hereby DISMISSED.

Accordingly, the assailed June 22, 2001 Decision of the RTC of Makati City - Branch 148 in Civil Case

No. 98-838 is AFFIRMED.

SO ORDERED.

In so dismissing the appeal and affirming the appealed decision, the appellate court agreed with the

findings and conclusions of the trial court that: (a) petitioner was a depositary of the subject vehicle; (b)
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petitioner was negligent in its duties as a depositary thereof and as an employer of the valet attendant; and

(c) there was a valid subrogation of rights between Crispa and respondent FMICI.

Hence, petitioner's present recourse.

We agree with the two (2) courts below.

When De Asis entrusted the car in question to petitioners valet attendant while eating at petitioner's

Kamayan Restaurant, the former expected the car's safe return at the end of her meal. Thus, petitioner wasconstituted as a depositary of the same car. Petitioner cannot evade liability by arguing that neither a contract

of deposit nor that of insurance, guaranty or surety for the loss of the car was constituted when De Asis

availed of its free valet parking service.

In a contract of deposit, a person receives an object belonging to another with the obligation of safely

keeping it and returning the same.[3]A deposit may be constituted even without any consideration. It is not

necessary that the depositary receives a fee before it becomes obligated to keep the item entrusted for

safekeeping and to return it later to the depositor.

Specious is petitioner's insistence that the valet parking claim stub it issued to De Asis contains a clear

exclusion of its liability and operates as an explicit waiver by the customer of any right to claim indemnity for

any loss of or damage to the vehicle.

The parking claim stub embodying the terms and conditions of the parking, including that of relievingpetitioner from any loss or damage to the car, is essentially a contract of adhesion, drafted and prepared as it

is by the petitioner alone with no participation whatsoever on the part of the customers, like De Asis, who

merely adheres to the printed stipulations therein appearing. While contracts of adhesion are not void in

themselves, yet this Court will not hesitate to rule out blind adherence thereto if they prove to be one-sided

under the attendant facts and circumstances.[4]

Hence, and as aptly pointed out by the Court of Appeals, petitioner must not be allowed to use its

parking claim stub's exclusionary stipulation as a shield from any responsibility for any loss or damage to

vehicles or to the valuables contained therein. Here, it is evident that De Asis deposited the car in question

with the petitioner as part of the latter's enticement for customers by providing them a safe parking space

within the vicinity of its restaurant. In a very real sense, a safe parking space is an added attraction to

petitioner's restaurant business because customers are thereby somehow assured that their vehicle are

safely kept, rather than parking them elsewhere at their own risk. Having entrusted the subject car to

petitioner's valet attendant, customer De Asis, like all of petitioner's customers, fully expects the security ofher car while at petitioner's premises/designated parking areas and its safe return at the end of her visit at

petitioner's restaurant.

Petitioner's argument that there was no valid subrogation of rights between Crispa and FMICI because

theft was not a risk insured against under FMICI's Insurance Policy No. PC-5975 holds no water.

Insurance Policy No. PC-5975 which respondent FMICI issued to Crispa contains, among others things,

the following item: "Insured's Estimate of Value of Scheduled Vehicle- P800.000".[5]On the basis of such item,

the trial court concluded that the coverage includes a full comprehensive insurance of the vehicle in case of

damage or loss. Besides, Crispa paid a premium of P10,304 to cover theft. This is clearly shown in the

breakdown of premiums in the same policy.[6] Thus, having indemnified CRISPA for the stolen car, FMICI, as

correctly ruled by the trial court and the Court of Appeals, was properly subrogated to Crispa's rights against

petitioner, pursuant toArticle 2207 of the New Civil Code[7].

Anent the trial court's findings of negligence on the part of the petitioner, which findings were affirmed

by the appellate court, we have consistently ruled that findings of facts of trial courts, more so when affirmed,

as here, by the Court of Appeals, are conclusive on this Court unless the trial court itself ignored, overlooked

or misconstrued facts and circumstances which, if considered, warrant a reversal of the outcome of the

case.[8]This is not so in the case at bar. For, we have ourselves reviewed the records and find no justification

to deviate from the trial court's findings.

WHEREFORE, petition is hereby DENIED DUE COURSE.

SO ORDERED.
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Very truly yours,

(Sgd.) LUCITA ABJELINA-SORIANO

Clerk of Court

14. YHT Realty Corp, et al vs. Court of Appeals

G.R. No. 126780. February 17, 2005

Facts: MAURICE McLaughlin is an Australian national who comes to the Philippines for business. During his

trips he stays in Tropicana, a hotel recommended to him by Brunhilda Tan. McLaughlin deposited cash andjewelry to the safety deposit box of the Hotel. The safety deposit box cannot be opened unless the key of the

guest and that of the management are present. Lainez and Payam are employees of Tropicana who is charged

with the custody of the keys. Thereafter, McLaughlin found out that some of the money and jewelry he

deposited were missing. Lainez and Payam admitted that they assisted Tan to open his deposit box. Tan

admitted that she stole McLaughlins keys. Tan executed a promissory note to cover the amount of the stolen

money and jewelry. McLaughlin wanted to make the management liable.

Issue: Whether or not a hotel may evade liability for the loss of items left with it for safekeeping by its guests,

by having these guests execute written waivers holding the establishment or its employees free from blame

for such loss in light of Article 2003 of the Civil Code which voids such waivers.

Held: The issue of whether the Undertaking For The Use of Safety Deposit Box executed by McLoughlin is

tainted with nullity presents a legal question appropriate for resolution in this petition. Notably, both the trial

court and the appellate court found the same to be null and void. We find no reason to reverse their common

conclusion. Article 2003 is controlling, thus:

Art. 2003. The hotel-keeper cannot free himself from responsibility by posting notices to the effect that he is

not liable for the articles brought by the guest. Any stipulation between the hotel-keeper and the guest

whereby the responsibility of the former as set forth in Articles 1998 to 2001[37] is suppressed or

diminished shall be void.

Article 2003 was incorporated in the New Civil Code as an expression of public policy precisely to apply to

situations such as that presented in this case. The hotel business like the common carriers business isimbued with public interest. Catering to the public, hotelkeepers are bound to provide not only lodging for

hotel guests and security to their persons and belongings. The twin duty constitutes the essence of the

business. The law in turn does not allow such duty to the public to be negated or diluted by any contrary

stipulation in so-called undertakings that ordinarily appear in prepared forms imposed by hotel keepers on

guests for their signature.
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15. FIRST DIVISION

[G.R. No. 118342. January 5, 1998]

DEVELOPMENT BANK OF THE PHILIPPINES,petitioner, vs. COURT OF APPEALS and LYDIA CUBA,respondents.

[G.R. No. 118367. January 5, 1998]

LYDIA P. CUBA,petitioner, vs. COURT OF APPEALS, DEVELOPMENT BANK OF THE PHILIPPINES and

AGRIPINA P. CAPERAL, respondents.

D E C I S I O N

DAVIDE, JR.,J.:

These two consolidated cases stemmed from a complaint[1] filed against the Development Bank of the

Philippines (hereafter DBP) and Agripina Caperal filed by Lydia Cuba (hereafter CUBA) on 21 May 1985 with

the Regional Trial Court of Pangasinan, Branch 54. The said complaint sought (1) the declaration of nullity of

DBPs appropriation of CUBAs rights, title, and interests over a 44-hectare fishpond located in Bolinao,

Pangasinan, for being violative of Article 2088 of the Civil Code; (2) the annulment of the Deed of Conditional

Sale executed in her favor by DBP; (3) the annulment of DBPs sale of the subject fishpond to Caperal; (4) the

restoration of her rights, title, and interests over the fishpond; and (5) the recovery of damages, attorneys

fees, and expenses of litigation.

After the joinder of issues following the filing by the parties of their respective pleadings, the trial court

conducted a pre-trial where CUBA and DBP agreed on the following facts, which were embodied in the pre-

trial order:[2]

1. Plaintiff Lydia P. Cuba is a grantee of a Fishpond Lease Agreement No. 2083 (new) dated May 13, 1974

from the Government;

2. Plaintiff Lydia P. Cuba obtained loans from the Development Bank of the Philippines in the amounts of

P109,000.00; P109,000.00; and P98,700.00 under the terms stated in the Promissory Notes dated September

6, 1974; August 11, 1975; and April 4, 1977;

3. As security for said loans, plaintiff Lydia P. Cuba executed two Deeds of Assignment of her Leasehold

Rights;


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4. Plaintiff failed to pay her loan on the scheduled dates thereof in accordance with the terms of the

Promissory Notes;

5. Without foreclosure proceedings, whether judicial or extra-judicial, defendant DBP appropriated the

Leasehold Rights of plaintiff Lydia Cuba over the fishpond in question;

6. After defendant DBP has appropriated the Leasehold Rights of plaintiff Lydia Cuba over the fishpond in

question, defendant DBP, in turn, executed a Deed of Conditional Sale of the Leasehold Rights in favor of

plaintiff Lydia Cuba over the same fishpond in question;

7. In the negotiation for repurchase, plaintiff Lydia Cuba addressed two letters to the Manager DBP, Dagupan

City dated November 6, 1979 and December 20, 1979. DBP thereafter accepted the offer to repurchase in a

letter addressed to plaintiff dated February 1, 1982;

8. After the Deed of Conditional Sale was executed in favor of plaintiff Lydia Cuba, a new Fishpond Lease

Agreement No. 2083-A dated March 24, 1980 was issued by the Ministry of Agriculture and Food in favor of

plaintiff Lydia Cuba only, excluding her husband;

9. Plaintiff Lydia Cuba failed to pay the amortizations stipulated in the Deed of Conditional Sale;

10. After plaintiff Lydia Cuba failed to pay the amortization as stated in Deed of Conditional Sale, she entered

with the DBP a temporary arrangement whereby in consideration for the deferment of the Notarial

Rescission of Deed of Conditional Sale, plaintiff Lydia Cuba promised to make certain payments as stated in

temporary Arrangement dated February 23, 1982;

11. Defendant DBP thereafter sent a Notice of Rescission thru Notarial Act dated March 13, 1984, and which

was received by plaintiff Lydia Cuba;

12. After the Notice of Rescission, defendant DBP took possession of the Leasehold Rights of the fishpond in

question;

13. That after defendant DBP took possession of the Leasehold Rights over the fishpond in question, DBPadvertised in the SUNDAY PUNCH the public bidding dated June 24, 1984, to dispose of the property;

14. That the DBP thereafter executed a Deed of Conditional Sale in favor of defendant Agripina Caperal on

August 16, 1984;


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15. Thereafter, defendant Caperal was awarded Fishpond Lease Agreement No. 2083-A on December 28,

1984 by the Ministry of Agriculture and Food.

Defendant Caperal admitted only the facts stated in paragraphs 14 and 15 of the pre-trial order. [3]

Trial was thereafter had on other matters.

The principal issue presented was whether the act of DBP in appropriating to itself CUBAs leasehold rights

over the fishpond in question without foreclosure proceedings was contrary to Article 2088 of the Civil Code

and, therefore, invalid.CUBA insisted on an affirmative resolution. DBP stressed that it merely exercised its

contractual right under the Assignments of Leasehold Rights, which was not a contract of mortgage.

Defendant Caperal sided with DBP.

The trial court resolved the issue in favor of CUBA by declaring that DBPs taking possession and ownershipof the property without foreclosure was plainly violative of Article 2088 of the Civil Code which provides as

follows:

ART. 2088. The creditor cannot appropriate the things given by way of pledge or mortgage, or dispose of

them. Any stipulation to the contrary is null and void.

It disagreed with DBPs stand that the Assignments of Leasehold Rights were not contracts of mortgage

because (1) they were given as security for loans, (2) although the fishpond land in question is still a public

land, CUBAs leasehold rights and interest thereon are alienable rights which can be the proper subject of a

mortgage; and (3) the intention of the contracting parties to treat the Assignment of Leasehold Rights as a

mortgage was obvious and unmistakable; hence, upon CUBAs default, DBPs only right was to foreclose the

Assignment in accordance with law.

The trial court also declared invalid condition no. 12 of the Assignment of Leasehold Rights for being a clear

case of pactum commissorium expressly prohibited and declared null and void by Article 2088 of the Civil

Code. It then concluded that since DBP never acquired lawful ownership of CUBAs leasehold rights, all acts of

ownership and possession by the said bank were void. Accordingly, the Deed of Conditional Sale in favor of

CUBA, the notarial rescission of such sale, and the Deed of Conditional Sale in favor of defendant Caperal, as

well as the Assignment of Leasehold Rights executed by Caperal in favor of DBP, were also void and

ineffective.

As to damages, the trial court found ample evidence on record that in 1984 the representatives of DBP

ejected CUBA and her caretakers not only from the fishpond area but also from the adjoining big house; and


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that when CUBAs son and caretaker went there on 15 September 1985, they found the said house

unoccupied and destroyed and CUBAs personal belongings, machineries, equipment, tools, and other articles

used in fishpond operation which were kept in the house were missing. The missing items were valued at

about P550,000. It further found that when CUBA and her men were ejected by DBP for the first time in 1979,

CUBA had stocked the fishpond with 250,000 pieces of bangus fish (milkfish), all of which died because the

DBP representatives prevented CUBAs men from feeding the fish. At the conservative price of P3.00 per fish,

the gross value would have been P690,000, and after deducting 25% of said value as reasonable allowance for

the cost of feeds, CUBA suffered a loss of P517,500. It then set the aggregate of the actual damages sustained

by CUBA at P1,067,500.

The trial court further found that DBP was guilty of gross bad faith in falsely representing to the Bureau of

Fisheries that it had foreclosed its mortgage on CUBAs leasehold rights.Such representation induced the said

Bureau to terminate CUBAs leasehold rights and to approve the Deed of Conditional Sale in favor of CUBA.

And considering that by reason of her unlawful ejectment by DBP, CUBA suffered moral shock, degradation,

social humiliation, and serious anxieties for which she became sick and had to be hospitalized the trial court

found her entitled to moral and exemplary damages. The trial court also held that CUBA was entitled to

P100,000 attorneys fees in view of the considerable expenses she incurred for lawyers fees and in view of

the finding that she was entitled to exemplary damages.

In its decision of 31 January 1990, [4] the trial court disposed as follows:

WHEREFORE, judgment is hereby rendered in favor of plaintiff:

1. DECLARING null and void and without any legal effect the act of defendant Development Bank of the

Philippines in appropriating for its own interest, without any judicial or extra-judicial foreclosure, plaintiffs

leasehold rights and interest over the fishpond land in question under her Fishpond Lease Agreement No.

2083 (new);

2. DECLARING the Deed of Conditional Sale dated February 21, 1980 by and between the defendant

Development Bank of the Philippines and plaintiff (Exh. E and Exh. 1) and the acts of notarial rescission of the

Development Bank of the Philippines relative to said sale (Exhs. 16 and 26) as void and ineffective;

3. DECLARING the Deed of Conditional Sale dated August 16, 1984 by and between the Development Bank of

the Philippines and defendant Agripina Caperal (Exh. F and Exh. 21), the Fishpond Lease Agreement No.

2083-A dated December 28, 1984 of defendant Agripina Caperal (Exh. 23) and the Assignment of Leasehold

Rights dated February 12, 1985 executed by defendant Agripina Caperal in favor of the defendant

Development Bank of the Philippines (Exh. 24) as void ab initio;


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4. ORDERING defendant Development Bank of the Philippines and defendant Agripina Caperal, jointly and

severally, to restore to plaintiff the latters leasehold rights and interests and right of possession over the

fishpond land in question, without prejudice to the right of defendant Development Bank of the Philippines to

foreclose the securities given by plaintiff;

5. ORDERING defendant Development Bank of the Philippines to pay to plaintiff the following amounts:

a) The sum of ONE MILLION SIXTY-SEVEN THOUSAND FIVE HUNDRED PESOS (P1,067,500.00), as and for

actual damages;

b) The sum of ONE HUNDRED THOUSAND (P100,000.00) PESOS as moral damages;

c) The sum of FIFTY THOUSAND (P50,000.00) PESOS, as and for exemplary damages;

d) And the sum of ONE HUNDRED THOUSAND (P100,000.00) PESOS, as and for attorneys fees;

6. And ORDERING defendant Development Bank of the Philippines to reimburse and pay to defendant

Agripina Caperal the sum of ONE MILLION FIVE HUNDRED THIRTY-TWO THOUSAND SIX HUNDRED TEN

PESOS AND SEVENTY-FIVE CENTAVOS (P1,532,610.75) representing the amounts paid by defendant

Agripina Caperal to defendant Development Bank of the Philippines under their Deed of Conditional Sale.

CUBA and DBP interposed separate appeals from the decision to the Court of Appeals. The former sought an

increase in the amount of damages, while the latter questioned the findings of fact and law of the lower court.

In its decision [5] of 25 May 1994, the Court of Appeals ruled that (1) the trial court erred in declaring that

the deed of assignment was null and void and that defendant Caperal could not validly acquire the leasehold

rights from DBP; (2) contrary to the claim of DBP, the assignment was not a cession under Article 1255 of the

Civil Code because DBP appeared to be the sole creditor to CUBA - cession presupposes plurality of debts and

creditors; (3) the deeds of assignment represented the voluntary act of CUBA in assigning her property rights

in payment of her debts, which amounted to a novation of the promissory notes executed by CUBA in favor of

DBP; (4) CUBA was estopped from questioning the assignment of the leasehold rights, since she agreed to

repurchase the said rights under a deed of conditional sale; and (5) condition no. 12 of the deed of assignment

was an express authority from CUBA for DBP to sell whatever right she had over the fishpond. It also ruled

that CUBA was not entitled to loss of profits for lack of evidence, but agreed with the trial court as to the

actual damages of P1,067,500. It, however, deleted the amount of exemplary damages and reduced the award

of moral damages from P100,000 to P50,000 and attorneys fees, from P100,000 to P50,000.


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The Court of Appeals thus declared as valid the following: (1) the act of DBP in appropriating Cubas leasehold

rights and interest under Fishpond Lease Agreement No. 2083; (2) the deeds of assignment executed by Cuba

in favor of DBP; (3) the deed of conditional sale between CUBA and DBP; and (4) the deed of conditional sale

between DBP and Caperal, the Fishpond Lease Agreement in favor of Caperal, and the assignment of

leasehold rights executed by Caperal in favor of DBP. It then ordered DBP to turn over possession of the

property to Caperal as lawful holder of the leasehold rights and to pay CUBA the following amounts: (a)

P1,067,500 as actual damages; P50,000 as moral damages; and P50,000 as attorneys fees.

Since their motions for reconsideration were denied,[6] DBP and CUBA filed separate petitions for review.

In its petition (G.R. No. 118342), DBP assails the award of actual and moral damages and attorneys fees in

favor of CUBA.

Upon the other hand, in her petition (G.R. No. 118367), CUBA contends that the Court of Appeals erred (1) in

not holding that the questioned deed of assignment was a pactum commissoriumcontrary to Article 2088 of

the Civil Code;(b) in holding that the deed of assignment effected a novation of the promissory notes; (c) in

holding that CUBA was estopped from questioning the validity of the deed of assignment when she agreed to

repurchase her leasehold rights under a deed of conditional sale; and (d) in reducing the amounts of moral

damages and attorneys fees, in deleting the award of exemplary damages, and in not increasing the amount

of damages.

We agree with CUBA that the assignment of leasehold rights was a mortgage contract.

It is undisputed that CUBA obtained from DBP three separate loans totalling P335,000, each of which was

covered by a promissory note. In all of these notes, there was a provision that: In the event of foreclosure of

the mortgage securing this notes, I/We further bind myself/ourselves, jointly and severally, to pay the

deficiency, if any. [7]

Simultaneous with the execution of the notes was the execution of Assignments of Leasehold Rights [8]

where CUBA assigned her leasehold rights and interest on a 44-hectare fishpond, together with the

improvements thereon. As pointed out by CUBA, the deeds of assignment constantly referred to the assignor

(CUBA) as borrower; the assigned rights, as mortgaged properties; and the instrument itself, as mortgage

contract. Moreover, under condition no. 22 of the deed, it was provided that failure to comply with the terms

and condition of any of the loans shall cause all other loans to become due and demandable and all mortgages

shall be foreclosed. And, condition no. 33 provided that if foreclosure is actually accomplished, the usual

10% attorneys fees and 10% liquidated damages of the total obligation shall be imposed. There is, therefore,

no shred of doubt that a mortgage was intended.


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Besides, in their stipulation of facts the parties admitted that the assignment was by way of security for the

payment of the loans; thus:

3. As security for said loans, plaintiff Lydia P. Cuba executed two Deeds of Assignment of her Leasehold

Rights.

In Peoples Bank & Trust Co. vs. Odom,[9] this Court had the occasion to rule that an assignment to guarantee

an obligation is in effect a mortgage.

We find no merit in DBPs contention that the assignment novated the promissory notes in that the obligation

to pay a sum of money the loans (under the promissory notes) was substituted by the assignment of the

rights over the fishpond (under the deed of assignment). As correctly pointed out by CUBA, the said

assignment merely complemented or supplemented the notes; both could stand together. The former was

only an accessory to the latter. Contrary to DBPs submission, the obligation to pay a sum of money remained,

and the assignment merely served as security for the loans covered by the promissory notes. Significantly,

both the deeds of assignment and the promissory notes were executed on the same dates the loans were

granted. Also, the last paragraph of the assignment stated: The assignor further reiterates and states all

terms, covenants, and conditions stipulated in the promissory note or notes covering the proceeds of this

loan, making said promissory note or notes, to all intent and purposes, an integral part hereof.

Neither did the assignment amount to payment by cessionunder Article 1255 of the Civil Code for the plain

and simple reason that there was only one creditor, the DBP. Article 1255 contemplates the existence of two

or more creditors and involves the assignment of all the debtors property.

Nor did the assignment constitute dation in payment under Article 1245 of the civil Code, which reads:

Dation[10] in payment, whereby property is alienated to the creditor in satisfaction of a debt in money, shall

be governed by the law on sales. It bears stressing that the assignment, being in its essence a mortgage, was

but a security and not a satisfaction of indebtedness.

We do not, however, buy CUBAs argument that condition no. 12 of the deed of assignment constituted

pactum commissorium. Said condition reads:

12. That effective upon the breach of any condition of this assignment, the Assignor hereby appoints the

Assignee his Attorney-in-fact with full power and authority to take actual possession of the property above-

described, together with all improvements thereon, subject to the approval of the Secretary of Agriculture

and Natural Resources, to lease the same or any portion thereof and collect rentals, to make repairs or

improvements thereon and pay the same, to sell or otherwise dispose of whatever rights the Assignor has or


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might have over said property and/or its improvements and perform any other act which the Assignee may

deem convenient to protect its interest. All expenses advanced by the Assignee in connection with purpose

above indicated which shall bear the same rate of interest aforementioned are also guaranteed by this

Assignment. Any amount received from rents, administration, sale or disposal of said property may be

supplied by the Assignee to the payment of repairs, improvements, taxes, assessments and other incidental

expenses and obligations and the balance, if any, to the payment of interest and then on the capital of the

indebtedness secured hereby. If after disposal or sale of said property and upon application of total amounts

received there shall remain a deficiency, said Assignor hereby binds himself to pay the same to the Assignee

upon demand, together with all interest thereon until fully paid. The power herein granted shall not be

revoked as long as the Assignor is indebted to the Assignee and all acts that may be executed by the Assignee

by virtue of said power are hereby ratified.

The elements of pactum commissoriumare as follows: (1) there should be a property mortgaged by way of

security for the payment of the principal obligation, and (2) there should be a stipulation for automatic

appropriation by the creditor of the thing mortgaged in case of non-payment of the principal obligation

within the stipulated period.[11]

Condition no. 12 did not provide that the ownership over the leasehold rights would automatically pass to

DBP upon CUBAs failure to pay the loan on time. It merely provided for the appointment of DBP as attorney-

in-fact with authority, among other things, to sell or otherwise dispose of the said real rights, in case of

default by CUBA, and to apply the proceeds to the payment of the loan. This provision is a standard condition

in mortgage contracts and is in conformity with Article 2087 of the Civil Code, which authorizes themortgagee to foreclose the mortgage and alienate the mortgaged property for the payment of the principal

obligation.

DBP, however, exceeded the authority vested by condition no. 12 of the deed of assignment. As admitted by it

during the pre-trial, it had [w]ithout foreclosure proceedings, whether judicial or extrajudicial,

appropriated the [l]easehold [r]ights of plaintiff Lydia Cuba over the fishpond in question. Its contention that

it limited itself to mere administration by posting caretakers is further belied by the deed of conditional sale it

executed in favor of CUBA. The deed stated:

WHEREAS, the Vendor [DBP] by virtue of a deed of assignment executed in its favor by the herein vendees

[Cuba spouses] the former acquired all the rights and interest of the latter over the above-described property;


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The title to the real estate property [sic] and all improvements thereon shall remain in the name of the

Vendor until after the purchase price, advances and interest shall have been fully paid. (Emphasis supplied).

It is obvious from the above-quoted paragraphs that DBP had appropriated and taken ownership of CUBAs

leasehold rights merely on the strength of the deed of assignment.

DBP cannot take refuge in condition no. 12 of the deed of assignment to justify its act of appropriating the

leasehold rights. As stated earlier, condition no. 12 did not provide that CUBAs default would operate to vest

in DBP ownership of the said rights. Besides, an assignment to guarantee an obligation, as in the present case,

is virtually a mortgage and not an absolute conveyance of title which confers ownership on the assignee.[12]

At any rate, DBPs act of appropriating CUBAs leasehold rights was violative of Article 2088 of the Civil Code,

which forbids a creditor from appropriating, or disposing of, the thing given as security for the payment of a

debt.

The fact that CUBA offered and agreed to repurchase her leasehold rights from DBP did not estop her from

questioning DBPs act of appropriation. Estoppel is unavailing in this case. As held by this Court in some

cases,[13] estoppel cannot give validity to an act that is prohibited by law or against public policy. Hence, the

appropriation of the leasehold rights, being contrary to Article 2088 of the Civil Code and to public policy,

cannot be deemed validated by estoppel.

Instead of taking ownership of the questioned real rights upon default by CUBA, DBP should have foreclosed

the mortgage, as has been stipulated in condition no. 22 of the deed of assignment. But, as admitted by DBP,

there was no such foreclosure. Yet, in its letter dated 26 October 1979, addressed to the Minister of

Agriculture and Natural Resources and coursed through the Director of the Bureau of Fisheries and Aquatic

Resources, DBP declared that it had foreclosed the mortgage and enforced the assignment of leasehold rights

on March 21, 1979 for failure of said spouses [Cuba spouces] to pay their loan amortizations.[14] This only

goes to show that DBP was aware of the necessity of foreclosure proceedings.

In view of the false representation of DBP that it had already foreclosed the mortgage, the Bureau of Fisheries

cancelled CUBAs original lease permit, approved the deed of conditional sale, and issued a new permit in

favor of CUBA. Said acts which were predicated on such false representation, as well as the subsequent acts

emanating from DBPs appropriation of the leasehold rights, should therefore beset aside. To validate these

acts would open the floodgates to circumvention of Article 2088 of the Civil Code.

Even in cases where foreclosure proceedings were had, this Court had not hesitated to nullify the consequent

auction sale for failure to comply with the requirements laid down by law, such as Act No. 3135, as


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amended.[15] With more reason that the sale of property given as security for the payment of a debt be set

aside if there was no prior foreclosure proceeding.

Hence, DBP should render an accounting of the income derived from the operation of the fishpond in question

and apply the said income in accordance with condition no. 12 of the deed of assignment which provided:

Any amount received from rents, administration, may be applied to the payment of repairs, improvements,

taxes, assessment, and other incidental expenses and obligations and the balance, if any, to the payment of

interest and then on the capital of the indebtedness.

We shall now take up the issue of damages.

Article 2199 provides:

Except as provided by law or by stipulation, one is entitled to an adequate compensation only for suchpecuniary loss suffered by him as he has duly proved. Such compensation is referred to as actual or

compensatory damages.

Actual or compensatory damages cannot be presumed, but must be proved with reasonable degree of

certainty.[16] A court cannot rely on speculations, conjectures, or guesswork as to the fact and amount of

damages, but must depend upon competent proof that they have been suffered by the injured party and on

the best obtainable evidence of the actual amount thereof.[17] It must point out specific facts which could

afford a basis for measuring whatever compensatory or actual damages are borne.[18]

In the present case, the trial court awarded in favor of CUBA P1,067,500 as actual damages consisting of

P550,000 which represented the value of the alleged lost articles of CUBA and P517,500 which represented

the value of the 230,000 pieces of bangus allegedly stocked in 1979 when DBP first ejected CUBA from the

fishpond and the adjoining house. This award was affirmed by the Court of Appeals.

We find that the alleged loss of personal belongings and equipment was not proved by clear evidence. Other

than the testimony of CUBA and her caretaker, there was no proof as to the existence of those items before

DBP took over the fishpond in question. As pointed out by DBP, there was not inventory of the alleged lost

items before the loss which is normal in a project which sometimes, if not most often, is left to the care of

other persons. Neither was a single receipt or record of acquisition presented.

Curiously, in her complaint dated 17 May 1985, CUBA included losses of property as among the damages

resulting from DBPs take-over of the fishpond. Yet, it was only in September 1985 when her son and a

caretaker went to the fishpond and the adjoining house that she came to know of the alleged loss of several


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articles. Such claim for losses of property, having been made before knowledge of the alleged actual loss,

was therefore speculative. The alleged loss could have been a mere afterthought or subterfuge to justify her

claim for actual damages.

With regard to the award of P517,000 representing the value of the alleged 230,000 pieces of bangus which

died when DBP took possession of the fishpond in March 1979, the same was not called for. Such loss was not

duly proved; besides, the claim therefor was delayed unreasonably. From 1979 until after the filing of her

complaint in court in May 1985, CUBA did not bring to the attention of DBP the alleged loss. In fact, in her

letter dated 24 October 1979,[19] she declared:

1. That from February to May 1978, I was then seriously ill in Manila and within the same period I neglected

the management and supervision of the cultivation and harvest of the produce of the aforesaid fishpond

thereby resulting to the irreparable loss in the produce of the same in the amount of about P500,000.00 to my

great damage and prejudice due to fraudulent acts of some of my fishpond workers.

Nowhere in the said letter, which was written seven months after DBP took possession of the fishpond, did

CUBA intimate that upon DBPs take-over there was a total of 230,000 pieces of bangus, but all of which died

because of DBPs representatives prevented her men from feeding the fish.

The award of actual damages should, therefore, be struck down for lack of sufficient basis.

In view, however, of DBPs act of appropriating CUBAs leasehold rights which was contrary to law and public

policy, as well as its false representation to the then Ministry of Agriculture and Natural Resources that it had

foreclosed the mortgage, an award of moral damages in the amount of P50,000 is in order conformably with

Article 2219(10), in relation to Article 21, of the Civil Code. Exemplary or corrective damages in the amount

of P25,000 should likewise be awarded by way of example or correction for the public good.[20] There being

an award of exemplary damages, attorneys fees are also recoverable.[21]

WHEREFORE, the 25 May 1994 Decision of the Court of Appeals in CA-G.R. CV No. 26535 is hereby

REVERSED, except as to the award of P50,000 as moral damages, which is hereby sustained. The 31 January

1990 Decision of the Regional Trial Court of Pangasinan, Branch 54, in Civil Case No. A-1574 is MODIFIED

setting aside the finding that condition no. 12 of the deed of assignment constituted pactum commissorium

and the award of actual damages; and by reducing the amounts of moral damages from P100,000 to P50,000;

the exemplary damages, from P50,000 to P25,000; and the attorneys fees, from P100,000 to P20,000. The

Development Bank of the Philippines is hereby ordered to render an accounting of the income derived from

the operation of the fishpond in question.


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Let this case be REMANDED to the trial court for the reception of the income statement of DBP, as well as the

statement of the account of Lydia P. Cuba, and for the determination of each partys financial obligation to one

another.

SO ORDERED.

Bellosillo, Vitug, and Kapunan, JJ., concur.

16. SECOND DIVISION

[G.R. No. 172592, July 09, 2008]

SPOUSES WILFREDO N. ONG AND EDNA SHEILA PAGUIO-ONG, PETITIONERS, VS. ROBAN LENDING

CORPORATION, RESPONDENT.

D E C I S I O N

CARPIO MORALES, J.:

On different dates from July 14, 1999 to March 20, 2000, petitioner-spousesWilfredo N. Ongand Edna Sheila

Paguio-Ong obtained several loans from Roban Lending Corporation (respondent) in the total amount of

P4,000,000.00. These loans were secured by a real estate mortgage on petitioners' parcels of land located in

Binauganan, Tarlac Cityand covered by TCT No. 297840.[1]

On February 12, 2001, petitioners and respondent executed an Amendment to Amended Real Estate

Mortgage[2]consolidating their loans inclusive of charges thereon which totaled P5,916,117.50. On even date,the parties executed a Dacion in Payment Agreement[3]wherein petitioners assigned the properties covered

by TCT No. 297840 to respondent in settlement of their total obligation, and a Memorandum of Agreement[4]

reading:

That the FIRST PARTY [Roban Lending Corporation] and the SECOND PARTY [the petitioners] agreed to

consolidate and restructure all aforementioned loans, which have been all past due and delinqu ent since April

19, 2000, and outstanding obligations totaling P5,916,117.50. The SECOND PARTY hereby sign [sic] another

promissory note in the amount of P5,916,117.50 (a copy of which is hereto attached and forms xxx an integral

part of this document), with a promise to pay the FIRST PARTY in full within one year from the date of the

consolidation and restructuring, otherwise the SECOND PARTY agree to have their "DACION IN PAYMENT"

agreement, which they have executed and signed today in favor of the FIRST PARTY be enforced[.][5]

In April 2002 (the day is illegible), petitioners filed a Complaint,[6]docketed as Civil Case No. 9322, before the

Regional Trial Court (RTC) of Tarlac City, for declaration of mortgage contract as abandoned, annulment ofdeeds, illegal exaction, unjust enrichment, accounting, and damages, alleging that the Memorandum of

Agreement and the Dacion in Payment executed are void for beingpactum commissorium.[7]

Petitioners alleged that the loans extended to them from July 14, 1999 to March 20, 2000 were founded on

several uniform promissory notes, which provided for 3.5% monthly interest rates, 5% penalty per month on

the total amount due and demandable, and a further sum of 25% attorney's fees thereon, [8]and in addition,

respondent exacted certain sums denominated as "EVAT/AR."[9]Petitioners decried these additional charges

as "illegal, iniquitous, unconscionable, and revolting to the conscience as they hardly allow any borrower any


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chance of survival in case of default."[10]

Petitioners further alleged that they had previously made payments on their loan accounts, but because of the

illegal exactions thereon, the total balance appears not to have moved at all, hence, accounting was in

order.[11]

Petitioners thus prayed for judgment:a) Declaring the Real Estate Mortgage Contract and its amendments x x x as null and void and without legal

force and effect for having been renounced, abandoned, and given up;

b) Declaring the "Memorandum of Agreement" xxx and "Dacion in Payment" x x x as null and void for being

pactum commissorium;

c) Declaring the interests, penalties, Evat [sic] and attorney's fees assessed and loaded into the loan accounts

of the plaintiffs with defendant as unjust, iniquitous, unconscionable and illegal and therefore, stricken out or

set aside;

d) Ordering an accounting on plaintiffs' loan accounts to determine the true and correct balances on their

obligation against legal charges only; and

e) Ordering defendant to [pay] to the plaintiffs: --

e.1 Moral damages in an amount not less than P100,000.00 and exemplary damages of P50,000.00;

e.2 Attorney's fees in the amount of P50,000.00 plus P1,000.00 appearance fee per hearing; and

e.3 The cost of suit.[12]

as well as other just and equitable reliefs.

In its Answer with Counterclaim,[13]respondent maintained the legality of its transactions with petitioners,

alleging that:

x x x x

If the voluntary execution of the Memorandum of Agreement and Dacion in Payment Agreement novated the

Real Estate Mortgage then the allegation of Pactum Commissorium has no more legal leg to stand on;

The Dacion in Payment Agreement is lawful and valid as it is recognized x x x under Art. 1245 of the Civil

Code as a special form of payment whereby the debtor-Plaintiffs alienates their property to the creditor-

Defendant in satisfaction of their monetary obligation;

The accumulated interest and other charges which were computed for more than two (2) years would stand

reasonable and valid taking into consideration [that] the principal loan is P4,000,000 and if indeed it became

beyond the Plaintiffs' capacity to pay then the fault is attributed to them and not the Defendant[.][14]

After pre-trial, the initial hearing of the case, originally set on December 11, 2002, was reset several times due

to, among other things, the parties' efforts to settle the case amicably.[15]

During the scheduled initial hearing of May 7, 2003, the RTC issued the following order:

Considering that the plaintiff Wilfredo Ong is not around on the ground that he is in Manila and he is

attending to a very sick relative, without objection on the part of the defendant's counsel, the initial hearing of

this case is reset to June 18, 2003 at 10:00 o'clock in the morning.

Just in case [plaintiff's counsel] Atty. Concepcion cannot present his witness in the person of Mr. Wilfredo Ong

in the next scheduled hearing, the counsel manifested that he will submit the case for summary judgment.[16]

(Underscoring supplied)


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It appears that the June 18, 2003 setting was eventually rescheduled to February 11, 2004 at which both

counsels were present[17]and the RTC issued the following order:

The counsel[s] agreed to reset this case on April 14, 2004, at 10:00 o'clock in the morning. However, the

counsels are directed to be ready with their memorand[a] together with all the exhibits or evidence needed to

support their respective positions which should be the basis for the judgment on the pleadings if the parties

fail to settle the case in the next scheduled setting.

x x x x[18](Underscoring supplied)

At the scheduled April 14, 2004 hearing, both counsels appeared but only the counsel of respondent filed a

memorandum.[19]

By Decision of April 21, 2004, Branch 64 of the Tarlac City RTC, finding on the basis of the pleadings that

there was nopactum commissorium, dismissed the complaint.[20]

On appeal,[21]the Court of Appeals[22]noted that

x x x [W]hile the trial court in its decision stated that it was rendering judgment on the pleadings, x x x what it

actually rendered was a summary judgment. A judgment on the pleadings is proper when the answer fails to

tender an issue, or otherwise admits the material allegations of the adverse party's pleading. However, a

judgment on the pleadings would not have been proper in this case as the answer tendered an issue, i.e. the

validity of the MOA and DPA. On the other hand, a summary judgment may be rendered by the court if thepleadings, supporting affidavits, and other documents show that, except as to the amount of damages, there is

no genuine issue as to any material fact.[23]

Nevertheless, finding the error in nomenclature "to be mere semantics with no bearing on the merits of the

case",[24]the Court of Appeals upheld the RTC decision that there was no pactum commissorium.[25]

Their Motion for Reconsideration[26]having been denied,[27]petitioners filed the instant Petition for Review

on Certiorari,[28]faulting the Court of Appeals for having committed a clear and reversible error

I. . . . WHEN IT FAILED AND REFUSED TO APPLY PROCEDURAL REQUISITES WHICH WOULDWARRANT THE SETTING ASIDE OF THE SUMMARY JUDGMENT IN VIOLATION OF APPELLANTS'

RIGHT TO DUE PROCESS;

II. . . . WHEN IT FAILED TO CONSIDER THAT TRIAL IN THIS CASE IS NECESSARY BECAUSE THE FACTSARE VERY MUCH IN DISPUTE;

III. . . . WHEN IT FAILED AND REFUSED TO HOLD THAT THE MEMORANDUM OF AGREEMENT (MOA)AND THE DACION EN PAGO AGREEMENT (DPA) WERE DESIGNED TO CIRCUMVENT THE LAW

AGAINST PACTUM COMMISSORIUM; and

IV. . . . WHEN IT FAILED TO CONSIDER THAT THE MEMORANDUM OF AGREEMENT (MOA) AND THE

DACION EN PAGO (DPA) ARE NULL AND VOID FOR BEING CONTRARY TO LAW AND PUBLIC

POLICY.[29]

The petition is meritorious.

Both parties admit the execution and contents of the Memorandum of Agreement and Dacion in Payment.They differ, however, on whether both contracts constitutepactum commissoriumor dacion en pago.

This Court finds that the Memorandum of Agreement and Dacion in Payment constitutepactum

commissorium, which is prohibited under Article 2088 of the Civil Code which provides:

The creditor cannot appropriate the things given by way of pledge or mortgage, or dispose of them. Any

stipulation to the contrary is null and void."

The elements ofpactum commissorium, which enables the mortgagee to acquire ownership of the mortgaged

property without the need of any foreclosure proceedings,[30]are: (1) there should be a property mortgaged


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by way of security for the payment of the principal obligation, and (2) there should be a stipulation for

automatic appropriation by the creditor of the thing mortgaged in case of non-payment of the principal

obligation within the stipulated period.[31]

In the case at bar, the Memorandum of Agreement and the Dacion in Payment contain no provisions for

foreclosure proceedings nor redemption. Under the Memorandum of Agreement, the failure by the

petitioners to pay their debt within the one-year period gives respondent the right to enforce the Dacion inPayment transferring to it ownership of the properties covered by TCT No. 297840. Respondent, in effect,

automatically acquires ownership of the properties upon petitioners' failure to pay their debt within the

stipulated period.

Respondent argues that the law recognizes dacion en pagoas a special form of payment whereby the debtor

alienates property to the creditor in satisfaction of a monetary obligation.[32]This does not persuade. In a true

dacion en pago, the assignment of the property extinguishes the monetary debt.[33]In the case at bar, the

alienation of the properties was by way of security, and not by way of satisfying the debt.[34]The Dacion in

Payment did not extinguish petitioners' obligation to respondent. On the contrary, under the Memorandum of

Agreement executed on the same day as the Dacion in Payment, petitioners had to execute a promissory note

for P5,916,117.50 which they were to pay within one year. [35]

Respondent cites Solid Homes, Inc. v. Court of Appeals[36]

where this Court upheld a Memorandum ofAgreement/Dacion en Pago .[37]That case did not involve the issue ofpactum commissorium.[38]

That the questioned contracts were freely and voluntarily executed by petitioners and respondent is of no

moment,pactum commissoriumbeing void for being prohibited by law.[39]

Respecting the charges on the loans, courts may reduce interest rates, penalty charges, and attorney's fees if

they are iniquitous or unconscionable.[40]

This Court, based on existing jurisprudence,[41]finds the monthly interest rate of 3.5%, or 42% per annum

unconscionable and thus reduces it to 12% per annum. This Court finds too the penalty fee at the monthly

rate of 5% (60% per annum) of the total amount due and demandable principal plus interest, with interest

not paid when due added to and becoming part of the principal and likewise bearing interest at the same rate,

compounded monthly[42]

unconscionable and reduces it to a yearly rate of 12% of the amount due, to becomputed from the time of demand.[43]This Court finds the attorney's fees of 25% of the principal, interests

and interests thereon, and the penalty fees unconscionable, and thus reduces the attorney's fees to 25% of the

principal amount only.[44]

The prayer for accounting in petitioners' complaint requires presentation of evidence, they claiming to have

made partial payments on their loans, vis a vis respondent's denial thereof.[45]A remand of the case is thus in

order.

Prescinding from the above disquisition, the trial court and the Court of Appeals erred in holding that a

summary judgment is proper. A summary judgment is permitted only if there is no genuine issue as to any

material fact and a moving party is entitled to a judgment as a matter of law.[46]A summary judgment is

proper if, while the pleadings on their face appear to raise issues, the affidavits, depositions, and admissions

presented by the moving party show that such issues are not genuine.

[47]

A genuine issue, as opposed to afictitious or contrived one, is an issue of fact that requires the presentation of evidence.[48]As mentioned

above, petitioners' prayer for accounting requires the presentation of evidence on the issue of partial

payment.

But neither is a judgment on the pleadings proper. A judgment on the pleadings may be rendered only when

an answer fails to tender an issue or otherwise admits the material allegations of the adverse party's

pleadings.[49]In the case at bar, respondent's Answer with Counterclaim disputed petitioners' claims that the

Memorandum of Agreement and Dation in Payment are illegal and that the extra charges on the loans are

unconscionable.[50]Respondent disputed too petitioners' allegation of bad faith. [51]


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WHEREFORE, the challenged Court of Appeals Decision is REVERSED and SET ASIDE. The Memorandum of

Agreement and the Dacion in Payment executed by petitioner- spouses Wilfredo N. Ong and Edna Sheila

Paguio-Ong and respondent Roban Lending Corporation on February 12, 2001 are declared NULL AND VOID

for beingpactum commissorium.

In line with the foregoing findings, the following terms of the loan contracts between the parties areMODIFIED as follows:

1. The monthly interest rate of 3.5%, or 42%per annum, is reduced to 12%per annum;

2. The monthly penalty fee of 5% of the total amount due and demandable is reduced to 12%per

annum, to be computed from the time of demand; and

3. The attorney's fees are reduced to 25% of the principal amount only.

Civil Case No. 9322 is REMANDED to the court of origin only for the purpose of receiving evidence on

petitioners' prayer for accounting.

SO ORDERED.

Quisumbing, (Chairperson), Tinga, Velasco, Jr., and Brion, JJ., concur.

17.

It must be additionally noted that right of redemption is different from equity of redemption. The

Supreme Court in the case of Huerta Alba REsort Inc. v. Court of Appeals, G.R. No. 128567, September 1, 2000,

citing therein the ruling in Limpin v.Intermediate Apellate Court, held that: x x x T h e e q u i t y o f

re d em pt io n is , to b e s ur e, di ff er en t fr om an d should not be confused with the right of redemption.

The right of redemption in relation to a mortgage - understood in th e se n se o f a pr e ro ga ti v e to re -

a c q u i r e m o r t g a g e d p r o p e rt y a f t e r r e g i s t r a t i o n o f t h e f o r e c l o s u r e s a l e - e x i s t s o n l y i n

t he c a se of t h e extrajudicial foreclosure of the mortgage. No such right is recognized i n a j u d i c i a l

f or ec l os u r e ex c ep t o nl y wh en th e m o r t g a g e e i s th e Philipine National Bank or a bank or

banking institution.Where a mortgage is foreclosed extrajudicially, Act 313 grants to the m o r t g a g o r t h e

r i g h t o f r e d e m p t i o n w i t h i n o n e ( 1 ) y e a r f r o m t h e registration of the sheriffs certificate of

foreclosure sale. Where the foreclosure is judicially effected, however, no equivalent right of

redemption exists. The law declares that a judicial foreclosure sale 'when confirmed by an order of the

court....shall operate to divest the right of a ll t he pa rties to the action and to v est their rights in

thepurchaser, subject to such rights of redemption as may be allowed byl a w . S u c h r i g h t s

e x c e p t i o n a l l y a l l o w e d b y l a w ( i . e . e v e n a f t e r confirmation by an order of the court) are thosegranted by the charter of the Philippine National Bank (Acts No. 2747 and 2938), and

t h e G e n e r a l B a n k i n g A c t ( R . A . N o . 3 3 7 ) . T h e s e l a w s c o n f e r o n t h e mortgagor, his

successors in interest or any judgment creditor of the mortgagor, the right to redeem the property sold on

foreclosure after confirmation by the court of the foreclosure sale - which right may be exe rci sed within a

per iod of one (1) yea r, cou nted fro m the dat e o f registration of the certificate of sale in the Registry of

Property. x x x


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HUERTA ALBA RESORT INC. vs. COURT OF APPEALS and SYNDICATEDMANAGEMENT GROUP INC. (G.R. No. 128567, September 1, 2000)

Security Transactions: Equity of Redemption and Right of Redemption; Estoppel

The right of redemption in relation to a mortgageunderstood in the sense of a prerogative to re-

acquire mortgaged property after registration of the foreclosure saleexists only in the case of

the extrajudicial foreclosure of the mortgage. No such right is recognized in a judicialforeclosure except only where the mortgagee is the Philippine National Bank or a bank or

banking institution.

Where a mortgage is foreclosed extrajudicially, Act 3135 grants to the mortgagor the right ofredemption within one (1) year from the registration of the sheriffs certificate of foreclosure

sale. Where the foreclosure is judicially effected, however, no equivalent right of redemption

exists. The law declares that a judicial foreclosure sale when confirmed be an order of the court.

. . . shall operate to divest the rights of all the parties to the action and to vest their rights in thepurchaser, subject to such rights of redemption as may be allowed by law. Such rights

exceptionally allowed by law (i.e., even after confirmation by an order of the court) are those

granted by the charter of the Philippine National Bank (Acts No. 2747 and 2938), and theGeneral Banking Act (R.A. 337). These laws confer on the mortgagor, his successors in interest

or any judgment creditor of the mortgagor, the right to redeem the property sold on foreclosure

after confirmation by the court of the foreclosure salewhich right may be exercised within

a period of one (1) year, counted from the date of registration of the certificate of sale in theRegistry of Property.

To repeat, no such right of redemption exists in case of judicial foreclosure of a mortgage if the

mortgagee is not the PNB or a bank or banking institution. In such a case, the foreclosure sale,when confirmed by an order of the court. . . shall operate to divest the rights of all the parties to

the action and to vest their rights in thepurchaser. There then exists only what is known as the

equity of redemption. This is simply the right of the defendant mortgagor to extinguish the

mortgage and retain ownership of the property by paying the secured debt within the 90-dayperiod after the judgment becomes final, in accordance with Rule 68, or even after the

foreclosure sale but prior to its confirmation.

THIRD DIVISION

[G.R. No. 128567. September 1, 2000]

HUERTA ALBA RESORT, INC., petitioner, vs. COURT OF APPEALS and SYNDICATED MANAGEMENT

GROUP, INC., respondents.

D E C I S I O N


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PURISIMA,J.:

Litigation must at some time be terminated, even at the risk of occasional errors. Public policy dictates

that once a judgment becomes final, executory and unappealable, the prevailing party should not be denied

the fruits of his victory by some subterfuge devised by the losing party. Unjustified delay in the enforcement

of a judgment sets at naught the role of courts in disposing justiciable controversies with finality.

T h e C a s e

At bar is a petition assailing the Decision, dated November 14, 1996, and Resolution, dated March 11,

1997, of the Court of Appeals in CA-G.R. No. 38747, which set aside the Order, dated July 21, 1995, and Order,

dated September 4, 1997, of the Regional Trial Court of Makati City, in Civil Case No. 89-5424. The aforesaid

orders of the trial court held that petitioner had the right to redeem subject pieces of property within the one-

year period prescribed by Section 78 of Republic Act No. 337 otherwise known as the General Banking Act.

Section 78 of R.A. No. 337 provides that in case of a foreclosure of a mortgage in favor of a bank,banking or credit institution, whether judicially or extrajudicially, the mortgagor shall have the right, within

one year after the sale of the real estate as a result of the foreclosure of the respective mortgage, to redeemthe property.

T h e F a c t s

The facts that matter are undisputed:

In a complaint for judicial foreclosure of mortgage with preliminary injunction filed on October 19, 1989,

docketed as Civil Case No. 89-5424 before the Regional Trial Court of Makati City, the herein private

respondent sought the foreclosure of four (4) parcels of land mortgaged by petitioner to Intercon Fund

Resource, Inc. (Intercon).

Private respondent instituted Civil Case No. 89-5424 as mortgagee-assignee of a loan amounting to P8.5million obtained by petitioner from Intercon, in whose favor petitioner mortgaged the aforesaid parcels of

land as security for the said loan.

In its answer below, petitioner questioned the assignment by Intercon of its mortgage right thereover to

the private respondent, on the ground that the same was ultra vires. Petitioner also questioned during the

trial the correctness of the charges and interest on the mortgage debt in question.

On April 30, 1992, the trial court, through the then Judge now Court of Appeals Justice Buenaventura J.

Guerrero, came out with its decision granting herein private respondent SMGIs complaint for jud icialforeclosure of mortgage,disposing as follows:

WHEREFORE, judgment is hereby rendered ordering defendant to pay plaintiff the following:

(1) P8,500,000.00 representing the principal of the amount due;(2) P850,000.00 as penalty charges with interest at 6% per annum, until fully paid;

(3) 22% per annum interest on the above principal from September 6, 1998, until fully paid;

(4) 5% of the sum total of the above amounts, as reasonable attorneys fees; and,

(5) Costs.

All the above must be paid within a period of not less than 150 days from receipt hereof by the

defendant. In default of such payment, the four parcels of land subject matter of the suit including its


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improvements shall be sold to realize the mortgage debt and costs, in the manner and under the regulations

that govern sales of real estate under execution.i[1]

Petitioner appealed the decision of the trial court to the Court of Appeals, the appeal docketed as CA-G.R.

CV No. 39243 before the Sixth Division of the appellate court, which dismissed the case on June 29, 1993 on

the ground of late payment of docket fees.

Dissatisfied with the dismissal of CA-G.R. No. 39243, petitioner came to this Court via a petition forcertiorari, docketed as G.R. No. 112044, which this court resolved to dismiss on December 13, 1993, on the

finding that the Court of Appeals erred not in dismissing the appeal of petitioner.

Petitioners motion for reconsideration of the dismissal of its petition in G.R. No. 112044 was deniedwith finality in this Courts Resolution promulgated on February 16, 1994. On March 10, 1994, leave to

present a second motion for reconsideration in G.R. No. 112044 or to submit the case for hearing by the Court

en banc was filed, but to no avail. The Court resolved to deny the same on May 11, 1994.

On March 14, 1994, the Resolution dated December 13, 1993, in G.R. No. 112044 became final and

executory and was entered in the Book of Entries of Judgment.

On July 4, 1994, private respondent filed with the trial court of origin a motion for execution of the

Decision promulgated on April 30, 1992 in Civil Case No. 89-5424. The said motion was granted on July 13,

1994.Accordingly, on July 15, 1994 a writ of execution issued and, on July 20, 1994, a Notice of Levy and

Execution was issued by the Sheriff concerned, who issued on August 1, 1994 a Notice of Sheriffs Sale for theauction of subject properties on September 6, 1994.

On August 23, 1994, petitioner filed with the same trial court an Urgent Motion to Quash and Set Aside

Writ of Execution ascribing to it grave abuse of discretion in issuing the questioned Writ of Execution. To

support its motion, petitioner invited attention and argued that the records of the case were still with the

Court of Appeals and therefore, issuance of the writ of execution was premature since the 150-day period for

petitioner to pay the judgment obligation had not yet lapsed and petitioner had not yet defaulted in the

payment thereof since no demand for its payment was made by the private respondent. In petitioners own

words, the dispute between the parties was principally on the issue as to when the 150 -day period within

which Huerta Alba may exercise its equity of redemption should be counted.

In its Order of September 2, 1994, the lower court denied petitioners urgent motion to quash the writ ofexecution in Civil Case No. 89-5424, opining that subject judgment had become final and executory and

consequently, execution thereof was a matter of right and the issuance of the corresponding writ of execution

became its ministerial duty.

Challenging the said order granting execution, petitioner filed once more with the Court of Appeals

another petition for certiorari and prohibition with preliminary injunction, docketed as C.A.-G.R. SP No.

35086, predicated on the same grounds invoked for its Motion to Quash Writ of Execution.

On September 6, 1994, the scheduled auction sale of subject pieces of properties proceeded and the

private respondent was declared the highest bidder. Thus, private respondent was awarded subject bidded

pieces of property. The covering Certificate of Sale issued in its favor was registered with the Registry of

Deeds on October 21, 1994.

On September 7, 1994, petitioner presented an Ex-Parte Motion for Clarification asking the trial court to

clarify whether or not the twelve (12) month period of redemption for ordinary execution applied in thecase.

On September 26, 1994, the trial court ruled that the period of redemption of subject property should be

governed by the rule on the sale of judicially foreclosed property under Rule 68 of the Rules of Court.

Thereafter, petitioner then filed an Exception to the Order dated September 26, 1994 and Motion to Set

Aside Said Order, contending that the said Order materially altered the Decision dated April 30, 1992 whichdeclared that the satisfaction of the judgment shall be in the manner and under the regulation that govern


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sale of real estate under execution.

Meanwhile, in its Decision of September 30, 1994, the Court of Appeals resolved the issues raised by the

petitioner in C.A.-G.R. SP No. 35086, holding that the one hundred-fifty day period within which petitioner

may redeem subject properties should be computed from the date petitioner was notified of the Entry of

Judgment in G.R. No. 112044; and that the 150-day period within which petitioner may exercise its equity of

redemption expired on September 11, 1994. Thus:

Petitioner must have received the resolution of the Supreme Court dated February 16, 1994 denying

with finality its motion for reconsideration in G.R. No. 112044 before March 14, 1994, otherwise the Supreme

Court would not have made an entry of judgment on March 14, 1994. While, computing the 150-day period,

petitioner may have until September 11, 1994, within which to pay the amounts covered by the judgment,

such period has already expired by this time, and therefore, this Court has no more reason to pass upon the

parties opposing contentions, the same having become moot and academic. ii[2](Underscoring supplied).

Petitioner moved for reconsideration of the Decision of the Court of Appeals in C.A.-G.R. SP No. 35086. In

its Motion for Reconsideration dated October 18, 1994, petitioner theorized that the period of one hundred

fifty (150) days should not be reckoned with from Entry of Judgment but from receipt on or before July 29,

1994 by the trial court of the records of Civil Case No. 89-5424 from the Court of Appeals. So also, petitioner

maintained that it may not be considered in default, even after the expiration of 150 days from July 29, 1994,

because prior demand to pay was never made on it by the private respondent. According to petitioner, it was

therefore, premature for the trial court to issue a writ of execution to enforce the judgment.

The trial court deferred action on the Motion for Confirmation of the Certificate of Sale in view of the

pendency of petitioners Motion for Reconsideration in CA-G.R. SP No. 35086.

On December 23, 1994, the Court of Appeals denied petitioners motion for reconsideration in CA-G.R. SPNo. 35086. Absent any further action with respect to the denial of the subject motion for reconsideration,

private respondent presented a Second Motion for Confirmation of Certificate of Sale before the trial court.

As regards the Decision rendered on September 30, 1994 by the Court of Appeals in CA G.R. SP No.

35086 it became final and executory on January 25, 1995.

On February 10, 1995, the lower court confirmed the sale of subject properties to the private

respondent. The pertinent Order declared that all pending incidents relating to the Order dated September

26, 1994 had become moot and academic. Conformably, the Transfer Certificates of Title to subject pieces ofproperty were then issued to the private respondent.

On February 27, 1995, petitioner filed with the Court of Appeals a Motion for Clarification seeking

clarification of the date of commencement of the one (1) year period for the redemption of the properties inquestion.

In its Resolution dated March 20, 1995, the Court of Appeals merely noted such Motion for Clarification

since its Decision promulgated on September 30, 1994 had already become final and executory; ratiocinating

thus:

We view the motion for clarification filed by petitioner, purportedly signed by its proprietor, but whichwe believe was prepared by a lawyer who wishes to hide under the cloak of anonymity, as a veiled attempt to

buy time and to delay further the disposition of this case.

Our decision of September 30, 1994 never dealt on the right and period of redemption of petitioner, but

was merely circumscribed to the question of whether respondent judge could issue a writ of execution in its

Civil Case No. 89-5424 xxx.

We further ruled that the one-hundred fifty day period within which petitioner may exercise its equity of

redemption should be counted, not from the receipt of respondent court of the records of Civil Case No. 89-

5424 but from the date petitioner was notified of the entry of judgment made by the appellate court.

But we never made any pronouncement on the one- year right of redemption of petitioner because, in

the first place, the foreclosure in this case is judicial, and as such, the mortgagor has only the equity, not the


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right of redemption xxx. While it may be true that under Section 78 of R.A. 337 as amended, otherwise known

as the General Banking Act, a mortgagor of a bank, banking or credit institution, whether the foreclosure was

done judicially or extrajudicially, has a period of one year from the auction sale within which to redeem the

foreclosed property, the question of whether the Syndicated Management Group, Inc., is a bank or credit

institution was never brought before us squarely, and it is indeed odd and strange that petitioner would now

sarcastically ask a rhetorical question in its motion for clarification. iii[3](Underscoring supplied).

Indeed, if petitioner did really act in good faith, it would have ventilated before the Court of Appeals inCA-G.R. No. 35086 its pretended right under Section 78 of R.A. No. 337 but it never did so.

At the earliest opportunity, when it filed its answer to the complaint for judicial foreclosure, petitioner

should have averred in its pleading that it was entitled to the beneficial provisions of Section 78 of R.A. No.

337; but again, petitioner did not make any such allegation in its answer.

From the said Resolution, petitioner took no further step such that on March 31, 1995, the private

respondent filed a Motion for Issuance of Writ of Possession with the trial court.

During the hearing called on April 21, 1995, the counsel of record of petitioner entered appearance and

asked for time to interpose opposition to the Motion for Issuance of /Writ of Possession.

On May 2, 1995, in opposition to private respondents Motion for Issuance of /writ of Possession,

petitioner filed a Motion to Compel Private Respondent to Accept Redemption. It was the first timepetitioner ever asserted the right to redeem subject properties under Section 78 of R.A. No. 337, the General

Banking Act; theorizing that the original mortgagee, being a credit institution, its assignment of the mortgage

credit to petitioner did not remove petitioner from the coverage of Section 78 of R.A. No. 337. Therefore, it

should have the right to redeem subject properties within one year from registration of the auction sale,

theorized the petitioner which concluded that in view of its right of redemption, the issuance of the titlesover subject parcels of land to the private respondent was irregular and premature.

In its Order of July 21, 1995, the trial court, presided over by Judge Napoleon Inoturan, denied private

respondents motion for a writ of possession, opining that Section 78 of the General Banking Act wasapplicable and therefore, the petitioner had until October 21, 1995 to redeem the said parcels of land, said

Order ruled as follows:

It is undisputed that Intercon is a credit institution from which defendant obtained a loan secured with

a real estate mortgage over four (4) parcels of land. Assuming that the mortgage debt had not been assignedto plaintiff, there is then no question that defendant would have a right of redemption in case of foreclosure,

judicially or extrajudicially, pursuant to the above quoted Section 78 of RA 337, as amended.

However, the pivotal issue here is whether or not the defendant lost its right of redemption by virtue of

the assignment of its mortgage debt by Intercon to plaintiff, which is not a bank or credit institution. The issue

is resolved in the negative. The right of redemption in this case is vested by law and is therefore an absolute

privilege which defendant may not lose even though plaintiff-assignee is not a bank or credit institution

(Tolentino versus Court of Appeals, 106 SCRA 513). Indeed, a contrary ruling will lead to a possible

circumvention of Section 78 because all that may be needed to deprive a defaulting mortgagor of his right of

redemption is to assign his mortgage debt from a bank or credit institution to one which is not. Protection of

defaulting mortgagors, which is the avowed policy behind the provision, would not be achieved if the ruling

were otherwise. Consequently, defendant still possesses its right of redemption which it may exercise up to

October 21, 1995 only, which is one year from the date of registration of the certificate of sale of subject

properties (GSIS versus Iloilo, 175 SCRA 19, citing Limpin versus IAC, 166 SCRA 87).

Since the period to exercise defendants right of redemption has not yet expired, the cancellation of

defendants transfer certificates of title and the issuance of new ones in l ieu thereof in favor of plaintiff aretherefore illegal for being premature, thereby necessitating reconveyance (see Sec. 63 (a) PD 1529, as

amended).

WHEREFORE, the Court hereby rules as follows:

(1) The Motion for Issuance of Writ of Possession is hereby denied;


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(2) Plaintiff is directed to accept the redemption on or before October 21, 1995 in an amount computed

according to the terms stated in the Writ of Execution dated July 15, 1994 plus all other related costs and

expenses mentioned under Section 78, RA 337, as amended; and

(3) The Register of Deeds of Valenzuela, Bulacan is directed (a) to reconvey to the defendant the

following titles of the four (4) parcels of land, namely TCT Nos. V-38878, V-38879, V-38880, and V-38881,

now in the name of plaintiff, and (b) to register the certificate of sale dated October 7, 1994 and the Order

confirming the sale dated February 10, 1995 by a brief memorandum thereof upon the transfer certificates oftitle to be issued in the name of defendant, pursuant to Sec. 63 (a) PD 1529, as amended.

The Omnibus Motion dated June 5, 1995, together with the Opposition thereto, is now deemed resolved.

SO ORDERED.iv[4]

Private respondent interposed a Motion for Reconsideration seeking the reversal of the Order but to no

avail. In its Order dated September 4, 1995, the trial court denied the same.

To attack and challenge the aforesaid order of July 21, 1995 and subsequent Order of September 4, 1995

of the trial court, the private respondent filed with this court a Petition for Certiorari, Prohibition and

Mandamus, docketed as G.R. No. 121893, but absent any special and cogent reason shown for entertaining the

same, the Court referred the petition to the Court of A

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