G.R. No. 158622.

January 27, 2016

SPOUSES ROBERT ALAN L. and NANCY LEE LIMSO, Petitioners,
vs. PHILIPPINE NATIONAL BANK and THE REGISTER OF DEEDS OF DAVAO
CITY, Respondents.
Principle/s:

A writ of possession may be issued as a matter of right when the title has been
consolidated in the buyer’s name due to nonredemption by the mortgagor.
Facts:

Spouses Limso and Davao Sunrise Investment and Development Corporation took
out a loan of P700 million divided into two kinds (300 million revolving credit ine and a
P 400 million seen year long term loan) with Philippine National Bank (PNB) and
secured it with real estate mortgage.
After having difficulty in paying the loan they requested to restructure their loan. PNB
then executed a Conversion, Restructuring and Extension Agreement which totaled to
1.067 billion which included the unpaid interest. A provision under the loan contract
was that the interest rate shall be determined "at the rate per annum to be set by the
Bank. The interest rate shall be reset by the Bank every month." The restructured
loan was secured with the properties which are 4 parcels of land registered under
Davao Sunrise. Spouses Limso and Davao Sunrise failed to pay even after PNB sent
demand letters. On August 21, 2000 PNB filed a Petition for Extrajudicial Foreclosure
of Real Estate Mortgage before the Sheriff’s Office in Davao. PNB was declared the
highest bidder. Before the Sherriff could issue the provisional Certificate of Sale,
spouses Limso and Davao Sunrise filed a Complaint for reformation or Annulment of
Contract against PNB and the sheriff of Davao City. After its filling the executive judge
of RTC Davao City issued a restraining order against PNB. The Sps. and Davao
Sunrise files a complaint in court praying for the declaration of nullity of unilateral
imposition and increases of interest rates.

Issue/s:

(1) Whether the provision under the loan contract regarding the unilateral
imposition and increases of interest rates violates the principle of mutuality of
contract.

(2) Whether PNB did not commit forum shopping when it filed an ex parte Petition
for the issuance of a writ of possession and an application for appointment as
receiver.
Ruling:
Yes. The Court held that the provision violates the principle of mutuality of contract.
There was no mutuality of contract between the parties since the interest rates
imposed were based on the sole discretion of Philippine National Bank. Further, the
escalation clauses in the real estate mortgage "[did] not specify a fixed or base
interest[.]" Thus, the interest rates are invalid.
The principle of mutuality of contracts is stated in Article 1308 of the Civil Code as
follows: Article 1308. The contract must bind both contracting parties; its validity or
compliance cannot be left to the will of one of them.

The binding effect of any agreement between parties to a contract is premised on two
settled principles: (1) that any obligation arising from contract has the force of law
between the parties; and (2) that there must be mutuality between the parties based
on their essential equality. Any contract which appears to be heavily weighed in favor
of one of the parties so as to lead to an unconscionable result is void. Any stipulation
regarding the validity or compliance of the contract which is left solely to the will of
one of the parties, is likewise, invalid.

When there is no mutuality between the parties to a contract, it means that the
parties were not on equal footing when the terms of the contract were negotiated.
Thus, the principle of mutuality of contracts dictates that a contract must be rendered
void when the execution of its terms is skewed in favor of one party.

Philippine National Bank did not commit forum shopping when it filed an ex
parte Petition for the issuance of a writ of possession and an application for
appointment as receiver. The elements of forum shopping are: (a) identity of parties,
or at least such parties as represent the same interests in both actions; (b) identity of
rights asserted and relief prayed for, the relief being founded on the same facts; and
(c) the identity of the two preceding particulars, such that any judgment rendered in
the other action will, regardless of which party is successful, amount to res judicata in
the action under consideration.

There is no identity of parties because the party to the Petition for Issuance of
Writ of Possession is Philippine National Bank only, while there are two parties to
application for appointment as receiver: Philippine National Bank on one hand, and
Spouses Limso and Davao Sunrise on the other. The causes of action are also
different. In the Petition for Issuance of Writ of Possession, Philippine National Bank
prays that it be granted a writ of possession over the foreclosed properties because it
is the winning bidder in the foreclosure sale. On the other hand, Philippine National
Bank’s application to be appointed as receiver is for the purpose of preserving these
properties pending the resolution of C.A.-G.R. CV No. 79732. While the issuance of a
writ of possession or the appointment as receiver would have the same result of
granting possession of the foreclosed properties to Philippine National Bank,
Philippine National Bank’s right to possess these properties as the winning bidder in
the foreclosure sale is different from its interest as creditor to preserve these
properties. A writ of possession may be issued as a matter of right when the title has
been consolidated in the buyer’s name due to non-redemption by the mortgagor.
Under this situation, the basis for the writ of possession is ownership of the property.
However, Philippine National Bank must still file a bond before the writ of possession
may be issued.

The Resolutions denying Philippine National Bank’s applications were

interlocutory orders since the Resolutions did not dispose of the merits of the main
case. Hence, the denial of Philippine National Bank’s applications did not determine
the issues on the interest rates imposed by Philippine National Bank. The proper
remedy for Philippine National Bank would have been to file a petition for certiorari
under Rule 65 or, in the alternative, to await the outcome of the main case and file an
appeal, raising the denial of its applications as an assignment of error.