JUANITA ERMITAÑO v. LAILANIE M.

PAGLAS

GR. No. 174436

JANUARY 23, 2013

Facts:

Respondent and petitioner, through her representative, Isabelo R. Ermitaño,

executed a Contract of lease wherein petitioner leased in favor of respondent a

336 square meter residential lot and a house standing thereon located at No.

20 Columbia St. ,... Phase 1, Doña Vicenta Village, Davao City.

respondent received information that... petitioner mortgaged the subject

property in favor of a certain Charlie Yap (Yap) and that the same was already

foreclosed with Yap as the purchaser of the disputed... lot in an extra- judicial

foreclosure sale which was registered on February 22, 2000. Yap's brother later

offered to sell the subject property to respondent. Respondent entertained the

said offer and negotiations ensued.

respondent bought the subject property... from Yap for P950,000.00. A Deed of

Sale of Real Property was executed by the parties

However, it was made clear in the said Deed that the property was still subject

to petitioner's right of redemption.

Prior to respondent's purchase of the subject property, petitioner filed a suit for

the declaration of nullity of the mortgage in favor of Yap as well as the sheriff's

provisional certificate of sale which was issued after the disputed house and lot

were sold on... foreclosure.

petitioner filed with the Municipal Trial Court in Cities (MTCC), Davao City, a

case of unlawful detainer against respondent.

the MTCC... dismissed the case filed by petitioner

Petitioner filed an appeal with the

RTC) of Davao City.

the RTC
AFFIRMED with MODIFICATION.

Aggrieved by the Decision of the RTC, petitioner filed a petition for review with

the CA.

Issues:

WHETHER OR NOT THE COURT OF APPEALS ERRED IN DISMISSING THE

UNLAWFUL DETAINER CASE BY RULING THAT A SHERIFF'S FINAL

CERTIFICATE OF SALE WAS ALREADY ISSUED WHICH DECISION IS NOT

BASED ON THE EVIDENCE AND IN ACCORDANCE WITH THE APPLICABLE

LAWS AND

JURISPRUDENCE.

Ruling:

In the instant case, pending final resolution of the suit filed by petitioner for

the declaration of nullity of the real estate mortgage in favor of Yap, the MTCC,

the RTC and the CA were unanimous in sustaining the presumption of validity

of the real estate mortgage over the... subject property in favor of Yap as well as

the presumption of regularity in the performance of the duties of the public

officers who subsequently conducted its foreclosure sale and issued a

provisional certificate of sale. Based on the presumed validity of the mortgage

and the... subsequent foreclosure sale, the MTCC, the RTC and the CA also

sustained the validity of respondent's purchase of the disputed property from

Yap. The Court finds no cogent reason to depart from these rulings of the

MTCC, RTC and CA. Thus, for purposes of resolving the issue as... to who

between petitioner and respondent is entitled to possess the subject property,

this presumption stands.

it is settled that in unlawful detainer, one unlawfully withholds possession

thereof after the expiration or termination of his right to hold possession under

any contract, express or implied.[11] In such... case, the possession was

originally lawful but became unlawful by the expiration or termination of the

right to possess; hence, the issue of rightful possession is decisive for, in such
action, the defendant is in actual possession and the plaintiff's cause of action

is the... termination of the defendant's right to continue in possession.[... what

a tenant is estopped from denying is the title of his landlord at the time of the

commencement of the landlord-tenant relation.[13] If the title asserted is one

that is alleged to have been acquired... subsequent to the commencement of

that relation, the presumption will not apply.[14] Hence, the tenant may show

that the landlord's title has expired or been conveyed to another or himself;

and he is not estopped to deny a claim for rent, if he has been... ousted or

evicted by title paramount.[15] In the present case, what respondent is

claiming is her supposed title to the subject property which she acquired

subsequent to the commencement of the landlord-tenant relation between her

and petitioner. Hence, the... presumption under Section 2 (b), Rule 131 of the

Rules of Court does not apply.

The foregoing notwithstanding, even if respondent is not estopped from denying

petitioner's claim for rent, her basis for such denial, which is her subsequent

acquisition of ownership of the disputed property, is nonetheless, an

insufficient excuse from refusing to pay the... rentals due to petitioner.

PHILIPPINE DEPOSIT INSURANCE CORPORATION vs. BUREAU OF

INTERNAL REVENUE

G.R. NO. 172892

DATE: June 13, 2013

FACTS: The Monetary Board of the BSP prohibited the Rural Bank of Tuba

(Benguet), Inc. (RBTI) from doing business in the Philippines, placed it under

receivership and designated the PDIC as receiver. PDIC conducted an

evaluation of RBTI’s financial condition and determined that RBTI remained

insolvent. Monetary Board issued Resolution directing PDIC to proceed with

the liquidation of RBTI.

ISSUE/S: Whether a bank placed under liquidation has to secure a tax

clearance from the BIR before the project of distribution of the assets of the

bank can be approved by the liquidation court.

RULING: NO. Section 52(C) of the Tax Code of 1997 is not applicable to banks

ordered placed under liquidation by the Monetary Board, and a tax clearance is

not a prerequisite to the approval of the project of distribution of the assets of a

bank under liquidation by the PDIC.

Thus, this Court has held that the RTC, acting as liquidation court under

Section 30 of the New Central Bank Act, commits grave abuse of discretion in

ordering the PDIC, as liquidator of a bank ordered closed by the Monetary

Board, to first secure a tax clearance from the appropriate BIR Regional Office,

and holding in abeyance the approval of the project of distribution of the assets

of the closed bank by virtue thereof. Three reasons have been given.

First, Section 52(C) of the Tax Code of 1997 pertains only to a regulation of the

relationship between the SEC and the BIR with respect to corporations

contemplating dissolution or reorganization. On the other hand, banks under

liquidation by the PDIC as ordered by the Monetary Board constitute a special

case governed by the special rules and procedures provided under Section 30

of the New Central Bank Act, which does not require that a tax clearance be

secured from the BIR.

Second, only a final tax return is required to satisfy the interest of the BIR in

the liquidation of a closed bank, which is the determination of the tax liabilities

of a bank under liquidation by the PDIC. In view of the timeline of the

liquidation proceedings under Section 30 of the New Central Bank Act, it is

unreasonable for the liquidation court to require that a tax clearance be first

secured as a condition for the approval of project of distribution of a bank

under liquidation.
To our mind, what the BIR should have requested from the RTC, and what was

within the discretion of the RTC to grant, is not an order for PDIC, as liquidator

of RBBI, to secure a tax clearance; but, rather, for it to submit the final return

of RBBI. The first paragraph of Section 30(C) of the Tax Code of 1997, read in

conjunction with Section 54 of the same Code, clearly imposes upon PDIC, as

the receiver and liquidator of RBBI, the duty to file such a return.

The filing by PDIC of a final tax return, on behalf of RBBI, should already

address the supposed concern of the BIR and would already enable the latter

to determine if RBBI still had outstanding tax liabilities.

The unreasonableness and impossibility of requiring a tax clearance before the

approval by the RTC of the Project of Distribution of the assets of the RBBI

becomes apparent when the timeline of the proceedings is considered.

The BIR can only issue a certificate of tax clearance when the taxpayer had

completely paid off his tax liabilities. The certificate of tax clearance attests

that the taxpayer no longer has any outstanding tax obligations to the

Government.

Should the BIR find that RBBI still had outstanding tax liabilities, PDIC will

not be able to pay the same because the Project of Distribution of the assets of

RBBI remains unapproved by the RTC; and, if RBBI still had outstanding tax

liabilities, the BIR will not issue a tax clearance; but, without the tax clearance,

the Project of Distribution of assets, which allocates the payment for the tax

liabilities, will not be approved by the RTC. It will be a chicken-and-egg

dilemma.

Third, it is not for this Court to fill in any gap, whether perceived or evident, in

current statutes and regulations as to the relations among the BIR, as tax

collector of the National Government; the BSP, as regulator of the banks; and
the PDIC, as the receiver and liquidator of banks ordered closed by the BSP. It

is up to the legislature to address the matter through appropriate legislation,

and to the executive to provide the regulations for its implementation.

There is another reason. The position of the BIR, insisting on prior compliance

with the tax clearance requirement as a condition for the approval of the

project of distribution of the assets of a bank under liquidation, is contrary to

both the letter and intent of the law on liquidation of banks by the PDIC.

The law expressly provides that debts and liabilities of the bank under

liquidation are to be paid in accordance with the rules on concurrence and

preference of credit under the Civil Code. Duties, taxes, and fees due the

Government enjoy priority only when they are with reference to a specific

movable property, under Article 2241(1) of the Civil Code, or immovable

property, under Article 2242(1) of the same Code. However, with reference to

the other real and personal property of the debtor, sometimes referred to as

"free property," the taxes and assessments due the National Government, other

than those in Articles 2241(1) and 2242(1) of the Civil Code, such as the

corporate income tax, will come only in ninth place in the order of preference.

On the other hand, if the BIR’s contention that a tax clearance be secured first

before the project of distribution of the assets of a bank under liquidation may

be approved, then the tax liabilities will be given absolute preference in all

instances, including those that do not fall under Articles 2241(1) and 2242(1)

of the Civil Code. In order to secure a tax clearance which will serve as proof

that the taxpayer had completely paid off his tax liabilities, PDIC will be

compelled to settle and pay first all tax liabilities and deficiencies of the bank,

regardless of the order of preference under the pertinent provisions of the Civil

Code. Following the BIR’s stance, therefore, only then may the project of

distribution of the bank’s assets be approved and the other debts and claims

thereafter settled, even though under Article 2244 of the Civil Code such debts

and claims enjoy preference over taxes and assessments due the National
Government. The BIR effectively wants this Court to ignore Section 30 of the

New Central Bank Act and disregard Article 2244 of the Civil Code. However, as

a court of law, this Court has the solemn duty to apply the law. It cannot and

will not give its imprimatur to a violation of the laws.

SPS. JUICO, VS. CHINA BANKING CORPORATION

G.R. NO. 187678

APRIL 10, 2013

Facts:

Petition for review on certiorari. Spouses Ignacio F. Juico and Alice P. Juico

(petitioners) obtained a loan from China Banking Corporation (respondent) as

evidenced by two Promissory Notes... for... the sums of P6,216,000 and

P4,139,000, respectively.  The loan was secured by a Real Estate Mortgage

(REM) over petitioners' property located at 49 Greensville St., White Plains,

Quezon City. When petitioners failed to pay the monthly amortizations due,

respondent demanded the full payment of the outstanding balance with

accrued monthly interests. The amount due on the two promissory notes

totaled P19,201,776.63 representing the principal, interests, penalties and

attorney's fees.  On the same day, the mortgaged property was sold at public

auction, with respondent as highest bidder for the... amount of P10,300,000.

petitioners received[8] a demand letter dated May 2, 2001 from respondent for

the payment of P8,901,776.63, the amount of deficiency after applying the

proceeds of the foreclosure sale to the mortgage debt. Respondent filed a

collection suit in the trial court. In their Answer, petitioners admitted the

existence of the debt but interposed, by way of special and affirmative defense,

that the complaint states no cause of action considering that the principal of

the loan was already paid when the mortgaged... property was extrajudicially

foreclosed and sold for P10,300,000. By way of counterclaim, petitioners

prayed that respondent be ordered to pay P100,000 in attorney's fees and costs

of suit. As of the date of the public auction, petitioners' outstanding balance

was P19,201,776.63 On cross-examination, Ms. Yu reiterated that the interest

rate changes every month based on the prevailing market rate and she notified

petitioners of the prevailing rate by calling them monthly before their account

becomes past due. When asked if there was any... written authority from

petitioners for respondent to increase the interest rate unilaterally, she

answered that petitioners signed a promissory note indicating that they agreed

to pay interest at the prevailing rate.

Petitioner Ignacio F. Juico testified that prior to the release of the loan, he was

required to sign a blank promissory note and was informed that the interest

rate on the loan will be based on prevailing market rates.

the RTC ruled in favor of respondent

The trial court agreed with respondent

It ruled that the amount realized at the auction sale was applied to the interest,

conformably with Article 1253 of the Civil Code which provides that if the debt

produces interest,... payment of the principal shall not be deemed to have been

made until the interests have been covered.

The trial court further held that Ignacio's claim that he signed the promissory

notes in blank cannot negate or mitigate his liability since he admitted reading

the promissory notes before signing them.

When the case was elevated to the CA, the latter affirmed the trial court's

decision.

Issues:

whether the interest rates imposed upon them by respondent are valid.

They insist that the interest rates... were unilaterally imposed by the bank and

thus violate the principle of mutuality of contracts. They argue that the

escalation clause in the promissory notes does not give respondent the
unbridled authority to increase the interest rate unilaterally. Any change must

be mutually... agreed upon.

Ruling:

The appeal is partly meritorious.

he provision in the promissory note authorizing respondent bank to increase,

decrease or otherwise change from time to time the rate of interest and/or

bank charges "without advance notice" to petitioner, "in the event of change in

the interest rate... prescribed by law or the Monetary Board of the Central

Bank of the Philippines," does not give respondent bank unrestrained freedom

to charge any rate other than that which was agreed upon. Here, the monthly

upward/downward adjustment of interest rate is left to the will of... respondent

bank alone. It violates the essence of mutuality of the contract.

lthough interest rates are no longer subject to a ceiling, the lender still does not

have an unbridled license to impose increased interest rates.  The lender and

the borrower should agree on the imposed rate, and  such imposed rate should

be in... writing.

In this case, the trial and appellate courts, in upholding the validity of the

escalation clause, underscored the fact that there was actually no fixed rate of

interest stipulated in the promissory notes as this was made dependent on

prevailing rates in the market.

In interpreting a contract, its provisions should not be read in isolation but in

relation to each other and in their entirety so as to render them effective

Here, the escalation clause in the promissory notes authorizing the respondent

to adjust the rate of interest on the basis of a law or regulation issued by the

Central Bank of the Philippines, should be read together with the statement

after the first paragraph where no rate of... interest was fixed as it would be

based on prevailing market rates.

Evidently, the parties intended the interest on... petitioners' loan, including any

upward or downward adjustment, to be determined by the prevailing market

rates and not dictated by respondent's policy.

There is no indication that petitioners were coerced into agreeing with the

foregoing provisions of the promissory notes... we hold that the escalation

clause is still void because it grants respondent the power to impose an

increased rate of interest without a written notice to petitioners and their

written consent.

WHEREFORE, the petition for review on certiorari is PARTLY GRANTED.

Petitioners Spouses Ignacio F. Juico and Alice

P. Juico are hereby ORDERED to pay jointly and severally respondent China

Banking Corporation P4,761,865.79 representing the amount of deficiency

inclusive of interest, penalty charge and attorney's fees.

TEODORO   DARCEN   vs.   V.R.   GONZALES   CREDIT   ENTREPRISES,  

INC

G.R.   No.   199747

April   3,   2013

FACTS:    Sometime in  January 2007, Gonzales appeared and claimed that     

Teodoro’s late mother Flora had mortgaged their properties to V.R.    Gonzales  

Credit     in     1995     and     demanded     payment     of several     loans     

taken     out     by     Flora.

      Upon    investigation,   Teodoro     found     out     that     their     

propertieshad indeed been     mortgaged      to      Gonzales      in     1995     

and     the     purported     signatures     of      her     mother     to     the

mortgage      contracts     were      allegedly     forged     by      his     

brothers    Manuel     and     Arturo When     Gonzales     extrajudicially     

foreclosed     the     subject      properties,Teodoro   filed     an     action     for

the     annulment     of     mortgage     against      Gonzales     and      his     

brothers     Manuel     and     Arturo.

          On     December     8,     2009,     Gonzales     filed     an     ex     parte     

petition    for     issuance     of     a     writ     of     possession.      The

order     of      court     dated     February     26,     2010    was     served      to

Teodoro. Teodoro     opposed     the     order     of     a      writ     of

possession      on     the     ground   that     he     is     the     adverse     

claimant     who     is     a     third     party     and     stranger     to     the     

real     estate     mortgage     executed     by     his     late     mother     Flora.

ISSUE:    Whether      Teodoro      be      considered      a     third      party     

and      stranger     who     is      actually     holding      the      properties

adversely      to      the      judgment      obligor.

HELD:   NO.     Teodoro     had     consented     to     the     extrajudicial

settlement     of     the     estate     of     his     father     as      well     as

waiver     by     them     of     their     shares     in     favor     of     their

mother.     For this     very     reason,     he     cannot     be     permitted     to     

interpose       an       adverse       claim       in      the       subject

mortgaged     properties and     defeat       the       writ       of       possession       

issued       to Gonzales.

NOVATEKNIKA vs. PNB

G.R. No. 194104  

March 13, 2013

FACTS: Petitioner Novateknika Land Corporation (NLC), together with 9 other

Corporations, entered into a Credit Agreement with PNB for the availment of an

omnibus line in the principal amount of ₱500,000,000.00.

After 2 Renewal Agreements, their total outstanding principal obligation went

up to ₱593,449,464.79. Due to nonpayment depsite repeated demands, PNB

filed petitions for extrajudicial foreclosure over the properties covered by the

Mortgage, which included the 4 parcels of land of NLC.

After the Extrajudicial Sale, the properties were awarded to PNB as the sole

bidder, and the bid amount was applied in partial satisfaction of the

outstanding obligation of the borrowers. NLC filed an action for injunction with

a prayer for the issuance of a TRO and/or a writ of preliminary injunction

arguing, inter alia, that PNB’s right to bring a mortgage action had already

prescribed.

The RTC granted NLC’s application for the issuance of a TRO, preventing PNB

from consummating the public sale of the subject properties.

The RTC denied NLC’s prayer for injunctive relief, ruling that the mortgage

action had not prescribed.

Aggrieved, NLC elevated the case to the CA via a petition for certiorari under

Rule 65. The CA dismissed the petition outright for failure of NLC to file a

motion for reconsideration before the RTC.

ISSUE: Whether or not a Motion for Reconsideration is a condition sine qua

non to certiorari.

RULING: A Motion for reconsideration is a condition sine qua non to certiorari.

Section 1, Rule 65 of the Rules of Court states that:

Section 1. Petition for certiorari. – When any tribunal, board or officer

exercising judicial or quasi-judicial functions has acted without or in excess of

its or his jurisdiction, or with grave abuse of discretion amounting to lack or

excess of jurisdiction, and there is no appeal, or any plain, speedy, and

adequate remedy in the ordinary course of law, a person aggrieved thereby may

file a verified petition in the proper court, alleging the facts with certainty and

praying that judgment be rendered annulling or modifying the proceedings of

such tribunal, board or officer, and granting such incidental reliefs as law and

justice may require.

Unmistakably, before a petition for certiorari can prosper, the petitioner must

be able to show, among others, that he does not have any other “plain, speedy

and adequate remedy in the ordinary course of law.” This remedy referred to in

Section 1 of Rule 65 is a motion for reconsideration of the questioned order.

Well established is the rule that the filing of a motion for reconsideration is a

prerequisite to the filing of a special civil action for certiorari, subject to certain

exceptions, to wit:

(a) where the order is a patent nullity, as where the court a quo has no

jurisdiction;

(b) where the questions raised in the certiorari proceeding have been duly

raised and passed upon by the lower court, or are the same as those raised

and passed upon in the lower court;

(c) where there is an urgent necessity for the resolution of the question and any

further delay would prejudice the interests of the government or the petitioner

or the subject matter of the action is perishable;

(d) where, under the circumstances, a motion for reconsideration would be

useless;

(e) where petitioner was deprived of due process and there is extreme urgency

for relief;

(f) where, in a criminal case, relief from an order of arrest is urgent and the

granting of such relief by the trial court is improbable;

(g) where the proceedings in the lower court are a nullity for lack of due

process;

(h) where the proceedings was ex parte or in which the petitioner had no

opportunity to object; and

(i) where the issue raised is one purely of law or where public interest is

involved.22

None of the exceptions, however, is present in this case.

Jurisprudence is replete with decisions which reiterate that before filing a

petition for certiorari in a higher court, the attention of the lower court should

be first called to its supposed error and its correction should be sought. Failing
this, the petition for certiorari should be denied. The reason for this is to afford

the lower court the opportunity to correct any actual or fancied error attributed

to it through a re-examination of the legal and factual aspects of the case. The

petitioner’s disregard of this rule deprived the trial court the right and the

opportunity to rectify an error unwittingly committed or to vindicate itself of an

act unfairly imputed.

In the case at bench, the proper recourse of NLC was to have filed a motion for

reconsideration of the RTC Order denying its application for injunctive relief.

Only after the denial of such motion can it be deemed to have exhausted all

available remedies and be justified in elevating the case to the CA through a

petition for certiorari under Rule 65.

JOSEPH GOYANKO vs. UNITED COCONUT PLANTERS BANK

G.R. NO. 179096

FEBRUARY 6, 2013

Facts:

Joseph Goyanko, Sr. (Goyanko) invested Two Million Pesos (P2,000,000.00)

with Philippine Asia Lending Investors, Inc. (PALII); he died before the

investment matured.  Goyanko's legitimate family, represented by the

petitioner, and his... illegitimate family presented conflicting claims to PALII for

the release of the investment.

Pending the investigation of the conflicting claims, PALII deposited the

proceeds of the investment with UCPB... under the name "Phil

Asia: ITF (In Trust For) The Heirs of Joseph Goyanko, Sr." (ACCOUNT).

UCPB allowed PALII to withdraw One Million Five Hundred Thousand Pesos

(P1,500,000.00) from the Account, leaving a balance of only P9,318.76. When

UCPB refused the demand to restore the amount withdrawn plus legal interest

from December 11, 1997, the... petitioner filed a complaint before the RTC
UCPB admitted, among others, the opening of the ACCOUNT under the name

"ITF (In Trust For) The Heirs of Joseph Goyanko, Sr.," (ITF HEIRS) and the

withdrawal on December 11, 1997.

In its August 27, 2003 decision, the RTC dismissed the petitioner's complaint

and awarded UCPB attorney's fees, litigation expenses and the costs of the sui

The RTC did not consider the words "ITF HEIRS" sufficient to charge UCPB

with knowledge... of any trust relation between PALII and Goyanko's heirs

(HEIRS)

The CA's Ruling

Before the CA, the petitioner maintained that by opening the ACCOUNT, PALII

established a trust by which it was the "trustee" and the HEIRS are the

"trustors-beneficiaries;"... thus, UCPB should be liable for allowing the

withdrawal.

The CA partially granted the petitioner's appeal

The CA held that no express trust was created between the HEIRS and PALII. 

For a trust to be... established, the law requires, among others, a competent

trustor and trustee and a clear intention to create a trust, which were absent

in this case

Quoting the RTC with approval, the CA noted that the contract of deposit was

only between PALII in its own capacity and

UCPB, and the words "ITF HEIRS" were insufficient to establish the existence

of a trust.

the CA denied the petitioner's motion for reconsideration.

The petitioner argues in his petition that: first, an express trust was created, as

clearly shown by PALII's March 28, 1996 and November 15, 1996 letters

Citing jurisprudence, the petitioner emphasizes that from the established

definition... of a trust
PALII is clearly the trustor as it created the trust; UCPB is the trustee as it is

the party in whom confidence is reposed as regards the property for the benefit

of another; and the HEIRS are the beneficiaries as they are the persons for...

whose benefit the trust is created... the petitioner argues that the naming of

the cestui que trust is not necessary as it suffices... that they are adequately

certain or identifiable

Second, UCPB was negligent and in bad faith in allowing the withdrawal and in

failing to inquire into the nature of the ACCOUNT.[14] The petitioner maintains

that the surrounding facts, the testimony of UCPB's witness, and UCPB's own

records showed... that: (1) UCPB was aware of the trust relation between PALII

and the HEIRS; and (2) PALII held the ACCOUNT in a trust capacity.

Issues: The issue before us is whether UCPB should be held liable for the

amount withdrawn because a trust agreement existed between PALII and

UCPB, in favor of the HEIRS, when PALII opened the ACCOUNT with UCPB.

Ruling:

No express trust exists; UCPB exercised the required diligence in handling the

ACCOUNT; petitioner has no cause of action against UCPB

Under these standards, we hold that no express trust was created.  First, while

an ascertainable trust res and sufficiently certain beneficiaries may exist, a

competent trustor and trustee do not.  Second, UCPB, as trustee of the

ACCOUNT, was never under... any equitable duty to deal with or given any

power of administration over it.  On the contrary, it was PALII that undertook

the duty to hold the title to the ACCOUNT for the benefit of the HEIRS.  Third,

PALII, as the trustor, did not have the right to the... beneficial enjoyment of the

ACCOUNT.  Finally, the terms by which UCPB is to administer the ACCOUNT

was not shown with reasonable certainty.  While we agree with the petitioner

that a trust's beneficiaries need not be particularly identified for a trust to...

exist, the intention to create an express trust must first be firmly established,

along with the other elements laid above; absent these, no express trust exists.
Contrary to the petitioner's contention, PALII's letters and UCPB's records

established UCPB's participation as a mere depositary of the proceeds of the

investment

In the March 28, 1996 letter, PALII manifested its intention to pursue an active

role in and up to the... turnover of those proceeds to their rightful owners,... in

the November 15, 1996 letter, PALII begged the petitioner to trust it with the

safekeeping of the investment proceeds and documents

Had it been PALII's intention to... create a trust in favor of the HEIRS, it would

have relinquished any right or claim over the proceeds in UCPB's favor as the

trustee.  As matters stand, PALII never did.

UCPB's records and the testimony of UCPB's witness... likewise lead us to the

same conclusion.  While the words "ITF HEIRS" may have created the

impression that a trust account was created, a closer scrutiny reveals that it is

an ordinary savings... account

We give credence to UCPB's explanation that the word "ITF" was merely used to

distinguish the ACCOUNT from PALII's other accounts with UCPB.  A trust can

be created without using the word "trust" or "trustee," but the mere use of...

these words does not automatically reveal an intention to create a trust

If at all, these words showed a trustee-beneficiary relationship between PALII

and the HEIRS.

UCPB did not become a trustee by the mere opening of the ACCOUNT.  While

this may seem to be the case, by reason of the fiduciary nature of the bank's

relationship with its depositor... this fiduciary... relationship does not "convert

the contract between the bank and its depositors from a simple loan to a trust

agreement, whether express or implied.

Since the records and the petitioner's own admission showed that the

ACCOUNT was opened by PALII, UCPB's receipt of the deposit signified that it

agreed to pay PALII upon its demand and only upon its order.  Thus, when
UCPB allowed PALII to withdraw from the ACCOUNT, it was... merely

performing its contractual obligation under their savings deposit agreement.

In these lights, we find the third assignment of error mooted.  A cause of action

requires that there be a right existing in favor of the plaintiff, the defendant's

obligation to respect that right, and an act or omission of the defendant in

breach of that righ

We reiterate that UCPB's obligation was towards PALII as its creditor-

depositor.  While the HEIRS may have a valid claim over the proceeds of the

investment, the obligation to turn-over those proceeds lies with PALII.

PHILIPPINE BANK OF COMMUNICATIONS vs. PRIDISONS REALTY

CORPORATION

G.R. No. 155113

January 9, 2013

FACTS:

Respondent Pridisons Realty Corporation (Pridisons) is the owner of a parcel of

land. Pridisons executed in favor of PBComm a deed of real estate mortgage over

the land and the improvements existing or to be erected thereon to secure the

loan it acquired from the bank. The deed of real estate mortgage was registered

and annotated on Pridisons title on the same day it was executed. Pridisons

thereafter transferred all its rights over the land to its sister company, Ivory Crest

Realty and Development Corporation (Ivory Crest).

Ivory Crest then applied for permits and licenses to construct and sell

condominium units on the land with the Housing and Land Use Regulatory

Board (HLURB). The HLURB issued the certificate of registration and the license

to sell. Among the buyers of the condominium units were respondents

Bormacheco, Inc., Nazario F. Santos, Teresita Chua Tek, Charito Ong Lee, and

Ernesto Sibal (collectively referred to as respondent buyers). When Pridisons

defaulted in paying its loan obligations, PBCommextrajudicially foreclosed the

mortgage. The public auction of the land, however, was forestalled by a

preliminary injunction issued by the HLURB in conjunction with the action for

specific performance with damages instituted by Bormacheco, Inc. against

Pridisons and/or Ivory Crest and PBComm.

ISSUES:

A. Whether or not HLURB has jurisdiction over mortgagee banks in cases

involving a condominium or subdivision project.

B. Whether or not the mortgage executed in favor of PBComm is valid.

HELD: The petition lacks merit. CIVIL LAW: Condominium and Subdivision

First Issue: Jurisprudence consistently recognizes the rationale behind the

enactment of PD No. 957 (The Subdivision and Condominium Buyers' Protective

Decree) to protect innocent lot buyers from scheming developers. For this reason,

the Court has broadly construed the jurisdiction of the HLURB to include

complaints for annulment of mortgages of condominium or subdivision units.

The Court thus upholds the HLURBs jurisdiction over the action to annul the

mortgage constituted in favor of PBComm.

Second Issue: The Court, in general, agrees with PBComms allegation that

Section 18 of PD No. 957 applies to mortgages constituted over

existingcondominium or subdivision projects, while Section 4 of the same law

applies to mortgages of raw lands that are to be developed as condominium or

subdivision projects. However, the Court believes that the surrounding

circumstances show that PBComm was aware of the proposed conversion of the

land into a condominium project, thus, meriting the application of Section 18 of

PD No. 957 to the case. Prior execution of the mortgage alone does not discount

the possibility that PBComm may have had foreknowledge and possible
complicity in the development plans of the condominium project; the factual

findings of HLURB, as affirmed by both the OP and the CA, indicate that this was

indeed the case.

Petition id DENIED. The decision of CA is affirmed.

Sps Dela Cruz vs Planters Products Inc.

G.R. No. 158649

February 18, 2013

Facts: Spouses Quirino V. Dela Cruz and Gloria Dela Cruz, petitioners herein,

operated the Barangay Agricultural Supply, an agricultural supply store in

Aliaga, Nueva Ecija engaged in the distribution and sale of fertilizers and

agricultural chemical products, among others. At the time material to the case,

Quirino, a lawyer, was the Municipal Mayor of Aliaga, Nueva Ecija. On March

23, 1978, Gloria applied for and was granted by respondent Planters Products,

Inc. (PPI) a regular credit line of P200,000.00 for a 60-day term, with trust

receipts as collaterals. Quirino and Gloria submitted a list of their assets in

support of her credit application for participation in the Special Credit Scheme

(SCS) of PPI. On August 28, 1978, Gloria signed in the presence of the PPI

distribution officer/assistant sales representative two documents labelled

“Trust Receipt/Special Credit Scheme,” indicating the invoice number,

quantity, value, and names of the agricultural inputs (i.e., fertilizer or

agricultural chemicals) she received “upon the trust” of PPI. Gloria thereby

subscribed to specific undertakings.

Issue: Whether or not Gloria can be held liable on the basis of the signed Trust

receipt/SCS.

Held: Yes. To be clear, the obligation assumed by Gloria under the Trust

Receipt/SCS involved “the execution of a Trust Agreement by the farmer-

participants” in her favor, which, in turn, she would assign “in favor of PPI with

recourse” in case of delivery and sale to the farmer-participants. The term

recourse as thus used means “resort to a person who is secondarily liable after

the default of the person who is primarily liable.” An indorsement “with

recourse” of a note, for instance, makes the indorser a general indorser,

because the indorsement is without qualification. Accordingly, the term with

recourse confirms the obligation of a general indorser, who has the same

liability as the original obligor. As the assignor “with recourse” of the Trust

Agreement executed by the farmer participating in the SCS, therefore, Gloria

made herself directly liable to PPI for the value of the inputs delivered to the

farmer-participants. Obviously, the signature of the representative of PPI found

in the demand letters Gloria sent to the farmer-participants only indicated that

the Trust Agreement was part of the SCS of PPI.

The petitioners could not validly justify the non-compliance by Gloria with her

obligations under the Trust Receipt/SCS by citing the loss of the farm outputs

due to typhoon Kading. There is no question that she had expressly agreed that

her liability would not be extinguished by the destruction or damage of the

crops. The use of the term with recourse was, in fact, consonant with the

provision of the Trust Receipt/SCS stating that if Gloria could not deliver or

serve “all the inputs” to the farmer-participants within 60 days, she agreed that

“the undelivered inputs will be charged” to her “regular credit line.” Under her

arrangement with PPI, the trust receipts were mere securities for the credit line

granted by PPI, having in fact indicated in her application for the credit line

that the trust receipts were “collaterals” or separate obligations “attached to

any other contract to guaranty its performance.

Goldenway Merchandising Corporation vs. Equitable PCI Bank

G.R. No. 195540

March 13, 2013

Facts: On November 29, 1985, Goldenway Merchandising Corporation

executed a Real Estate Mortgage in favor of Equitable PCI Bank over three

parcels of land. The mortgage secured the Two Million Pesos (P2,000,000.00)

loan granted to petitioner. Petitioner failed to settle its loan obligation, so

respondent extrajudicially foreclosed the mortgage on December 13, 2000.

Accordingly, a Certificate of Sale was issued to respondent on January 26,

2001. On February 16, 2001, the Certificate of Sale was registered.

In a letter dated March 8, 2001, petitioner’s counsel offered to redeem the

foreclosed properties by tendering a check. However, petitioner was told that

such redemption is no longer possible because the certificate of sale had

already been registered and consolidated in favor of respondent March 9, 2001.

Petitioner filed a complaint for specific performance and damages contending

that the 1-year period of redemption under Act 3135 should apply, and not the

shorter redemption period under RA 8791 as applying RA 8791 would result in

the impairment of obligations of contracts and would violate the equal

protection clause under the constitution.

The RTC dismissed the action of the petitioner ruling that redemption was

made belatedly and that there was no redemption made at all. The CA affirmed

the RTC, thus this petition for review.

Issue: Whether or not the redemption period should be the 1-year period

provided under Act 3135, and not the shorter period under RA 8791 as the

parties expressly agreed that foreclosure would be in accordance with Act

3135.

Held: No. The shorter period under RA 8791 should apply.

The one-year period of redemption is counted from the date of the registration

of the certificate of sale. In this case, the parties provided in their real estate

mortgage contract that upon petitioner’s default and the latter’s entire loan

obligation becoming due, respondent may immediately foreclose the mortgage

judicially in accordance with the Rules of Court, or extrajudicially in

accordance with Act No. 3135, as amended.

Amending Act no. 3135 is Sec 47 of RA 8791, which stated an exception made

in the case of juridical persons which are allowed to exercise the right of

redemption only “until, but not after, the registration of the certificate of

foreclosure sale” and in no case more than three (3) months after foreclosure,

whichever comes first.

The legislature clearly intended to shorten the period of redemption for juridical

persons whose properties were foreclosed and sold in accordance with the

provisions of Act No. 3135

The right of redemption being statutory, it must be exercised in the manner

prescribed by the statute, and within the prescribed time limit, to make it

effective.

Furthermore, the freedom to contract is not absolute; all contracts and all

rights are subject to the police power of the State and not only may regulations

which affect them be established by the State, but all such regulations must be

subject to change from time to time, as the general well-being of the

community may require, or as the circumstances may change, or as experience

may demonstrate the necessity.

THE MANILA INSURANCE COMPANY, INC., vs. SPOUSES AMURAO

G.R. No. 179628

January 16, 2013

FACTS:

Spouses Roberto and Aida Amurao (Sps. Amurao) entered into a Construction

Contract Agreement (CCA) with Aegean Construction and Development Corp.

(Aegean) for the construction of a six-storey commercial building. To guarantee

its obligation, Aegean posted performance bonds secured by petitioner Manila

Insurance Company, Inc. (Manila Insurance) and Intra Strata Assurance

Corporation (Intra Strata). Aegean failed to comply with its obligation. Hence,

the spouses filed a complaint before the RTC to enforce its claim against the

sureties.

During the pre-trial, Manila Insurance and Intra Strata discovered that the

CCA contained an arbitration clause. Consequently, they filed a Motion to

Dismiss on the grounds of lack of cause of action and lack of jurisdiction. The

RTC denied the motion to dismiss.

Manila Insurance appealed to the Court of Appeals. The CA dismissed the

petition.
Hence, Manila Insurance elevated the matter to the Supreme Court.

Manila Insurance argues that it cannot be held liable as a surety because the

claim of Sps. Amurao is premature. Manila Insurance contends that the

dispute between the spouses and Aegean should be brought first before the

CIAC for arbitration.

ISSUES:

I. Whether or not Manila Insurance can be held liable as surety of Aegean?

II. Whether or not the RTC has jurisdiction over the dispute?

HELD:

FIRST ISSUE: Manila Insurance is liable as surety.

A contract of suretyship is defined as “an agreement whereby a party, called

the surety, guarantees the performance by another party, called the principal

or obligor, of an obligation or undertaking in favor of a third party, called the

obligee.

The Court has consistently held that a surety’s liability is joint and several,

limited to the amount of the bond, and determined strictly by the terms of

contract of suretyship in relation to the principal contract between the obligor

and the obligee.It bears stressing, however, that although the contract of

suretyship is secondary to the principal contract, the surety’s liability to the

obligee is nevertheless direct, primary, and absolute. But while there is a cause

of action against Manila Insurance, the complaint must still be dismissed for

lack of jurisdiction.

SECOND ISSUE: The CIAC has jurisdiction over the case and not the RTC.

In order for the CIAC to acquire jurisdiction two requisites must concur: “first,

the dispute must be somehow connected to a construction contract; and

second, the parties must have agreed to submit the dispute to arbitration

proceedings.” In this case, both requisites are present. DISSMISSED.

SPOUSES RAMOS vs. RAUL OBISPO

G.R. No. 193804

February 27, 2013

FACTS: Spouses Ramos filed a complaint for annulment of real estate

mortgage with damages against FEBTC and Raul Obispo, alleging that

sometime in 1996, they executed a Real Estate Mortgage in favour of FEBTC-

Fairview Branch, over their property in Quezon City. The Spouses entrusted

their property to Obispo to secure their credit accommodations in the amount

of ₱250,000.00.

Obispo initially gave them ₱100,000.00 and the balance was given a few

months later. After supposedly completing payment of their loan, the Spouses

demanded the release of their title but Obispo refused to talk or see them, as

he is now hiding from them. Upon verification with the Registry of Deeds of

Quezon City, Spouses Ramos said they were surprised to learn that their

property was in fact mortgaged for ₱1,159,096.00 and that Obispo had instead

used the property as collateral for his personal indebtedness.

Because of the alleged fraud committed upon them by Obispo who made them

sign the REM form in blank, petitioners sought to have the REM annulled and

their title over the mortgaged property released by FEBTC. They claimed it was

Obispo who filled up the REM form contrary to their instructions and faulted

FEBTC for being negligent in not ascertaining the authority of Obispo and

failing to furnish petitioners with copies of mortgage documents. In other

words, Spouses Ramos contend that since their consent to the REM was

vitiated, judicial declaration of its nullity is in order. The RTC granted relief to

petitioners while the CA found the subject REM as a valid third- party or

accommodation mortgage under Article 2085 of the Civil Code due to

petitioners’ failure to substantiate their allegations with the requisite quantum

of evidence. Spouses Ramos filed a motion for reconsideration but it was

denied by the CA. Hence, this petition.

ISSUE: Whether or not Spouses Ramos are accommodation mortgagors of Raul

Obispo? (YES)

RULING: The validity of an accommodation mortgage is allowed under Article

2085 of the Civil Code which provides that "[t]hird persons who are not parties

to the principal obligation may secure the latter by pledging or mortgaging their

own property." An accommodation mortgagor, ordinarily, is not himself a

recipient of the loan, otherwise that would be contrary to his designation as

such.

It bears stressing that an accommodation mortgagor, ordinarily, is not himself

a recipient of the loan, otherwise that would be contrary to his designation as

such. It is not always necessary that the accommodation mortgagor be

apprised beforehand of the entire amount of the loan nor should it first be

determined before the execution of the Special Power of Attorney in favor of the

debtor. This is especially true when the words used by the parties indicate that

the mortgage serves as a continuing security for credit obtained as well as

future loan availments.

Here, Spouses Ramos as owners signed the REM as mortgagors and there is no

evidence adduced that suggests fraud or irregularity in its execution. Spouses

Ramos are not contracting parties whom the law considers ignorant or

disadvantaged but former overseas workers with sufficient education as to be

well-aware of the consequences of their personal decisions, consistent with the

legal presumption that a person takes ordinary care of his concerns. Hence, it

can be reasonably inferred from the facts on record that it was more probable

that Spouses Ramos allowed Obispo to use their property as additional

collateral so as to avail of his existing credit line with FEBTC instead of them

directly applying for a separate loan.

With the dearth of evidence to back up Spouses Ramos’ story, the CA found

implausible the alleged legal infirmities in the execution of the REM. The

appellate court thus aptly observed:

While Spouses Ramos claim that they sought the help of Obispo in securing

the loan from FEBTC, and not to secure the loans obtained by Obispo himself,

they failed to present any evidence, except for their bare assertion, that

they indeed gave their title to Obispo purportedly to facilitate their loan with

FEBTC. It may be argued that having received the amount of ₱250,000.00,

Spouses Ramos became parties to the principal obligation and as such, the

provision of the last paragraph of Article 2085 no longer applies. While it is

undisputed that Spouses Ramos received the amount of ₱250,000.00, the

record, however, reveals that they received the said amount not from FEBTC

but from Obispo. It could be inferred that the ₱250,000.00 given by Obispo to

Spouses Ramos was some form of remuneration in lending their title to him as

security for his credit line with FEBTC.

From all indications, the failure of Obispo to pay his loan resulted to the

prejudice of Spouses Ramos which may have led them to disown the Real

Estate Mortgage they executed in favor of defendant-appellant FEBTC to

accommodate the loan of defendant Obispo.

There being valid consent on the part of Spouses Ramos as accommodation

mortgagors, no reversible error was committed by the CA in reversing the trial

court’s decision which declared the REM as void and awarded damages to the

Spouses.

LAND BANK OF THE PHILIPPINES vs. POBLETE

G.R. No. 196577

FEBRUARY 25, 2013

Facts:

In November 1998, Poblete decided to sell Lot No. 29 to pay her loan. She

instructed her son-in-law Domingo Balen (Balen) to look for a buyer.

Balen referred Angelito Joseph Maniego (Maniego) to Poblete. According to

Poblete, Maniego agreed to buy Lot No. 29 for P900,000.00, but Maniego
suggested that a deed of absolute sale for P300,000.00 be executed instead to

reduce the taxes. Thus, Poblete executed the Deed of Absolute Sale dated 9

November 1998 (Deed dated 9 November 1998) with P300,000.00 as

consideration. Maniego paid Kapantay's Loan Account No. 97-CC-013 for

P448,202.08. On 8 June 2000, Maniego applied for a loan of P1,000,000.00

with Land Bank, using OCT No. P-12026 as collateral. Land Bank alleged that

as a condition for the approval of the loan, the title of the collateral should first

be transferred to Maniego.

On 14 August 2000, pursuant to a Deed of Absolute Sale dated 11 August

2000 (Deed dated 11 August 2000),[8] the Register of Deeds of Occidental

Mindoro issued Transfer Certificate of Title (TCT) No. T-20151 in Maniego's

name.

On 15 August 2000, Maniego and Land Bank executed a Credit Line

Agreement and a Real Estate Mortgage over TCT No. T-20151. On the same

day, Land Bank released the P1,000,000.00 loan proceeds to Maniego.

Subsequently, Maniego failed to pay the loan with Land Bank. On 4 November

2002, Land Bank filed an

Application for Extra-judicial Foreclosure of Real Estate Mortgage stating that

Maniego's total indebtedness amounted to P1,154,388.88.

Issues:

THE COURT OF APPEALS (FORMER SPECIAL ELEVENTH DIVISION)

MISCONSTRUED THE EVIDENCE AND THE LAW IN NOT FINDING LAND

BANK A MORTGAGEE IN GOOD FAITH.

Ruling:

It is a well-entrenched rule, as aptly applied by the CA, that a forged or

fraudulent deed is a nullity and conveys no title.[17] Moreover, where the deed

of sale states that the purchase price has been paid but in fact has never been

paid, the deed of sale... is void ab initio for lack of consideration.

Since the Deed dated 11 August 2000 is void, the corresponding TCT No. T-

20151 issued pursuant to the same deed is likewise void.

Since TCT No. T-20151 has been declared void by final judgment, the Real

Estate Mortgage constituted over it is also void. In a real estate mortgage

contract, it is essential that the mortgagor be the absolute owner of the

property to be mortgaged; otherwise, the mortgage is... void.

Land Bank insists that it is a mortgagee in good faith since it verified Maniego's

title, did a credit investigation, and inspected Lot No. 29. The issue of being a

mortgagee in good faith is a factual matter, which cannot be raised in this

petition.

However, to settle the issue, we carefully examined the records to determine

whether or not Land Bank is a mortgagee in good faith.

This is the doctrine of "the mortgagee in good faith" based on the rule that

buyers or mortgagees dealing with property covered by a Torrens Certificate of

Title are not required to go beyond what appears on the face of the title

However, it has been... consistently held that this rule does not apply to banks,

which are required to observe a higher standard of diligence. A bank cannot

assume that, simply because the title offered as security is on its face free of

any encumbrances or lien, it is relieved of the responsibility of taking further

steps to verify the... title and inspect the properties to be mortgaged. Applying

the same principles, we do not find Land Bank to be a mortgagee in good faith.