First Foreclosure Sale of January 11, 2000: Ruling of The RTC

amboa (Jeanette), and Lourdes,
et al. were co-owners of a parcel of land covered by Transfer

Certificate of Title (TCT)No. T-34811 (subject property).6
In 1996 and 1997, Domacia, Renato, Richard, Teresita, and Jeanette (Domacia, et al.) executed
Promissory Notes7 in favor of Summit Bank to cover their separate loans.8 As security of the loans,
they executed a Real Estate Mortgage9 over the subject property. Meanwhile, Lourdes et al. (co-
owners but non-borrowers) joined in executing the real estate mortgage.
First foreclosure sale of

January 11, 2000
Domacia, et al. failed to pay their loan obligations.10 Thus, on December 3, 1999, Summit Bank
extrajudicially foreclosed the real estate mortgage. The foreclosure sale was held on January 11,
2000 wherein Summit Bank emerged as the winning bidder.11
Domacia, et al. assert that Summit Bank had no basis to foreclose the real estate mortgage; thus
they instituted an action for annulment and/or declaration of nullity of the loans, the real estate
mortgage, and the foreclosure proceedings.12 The case was docketed as Civil Case No. 01-CV-
1584 and raffled to Presiding Judge Agapito K. Laoagan of Branch 63, Regional Trial Court (RTC),
La Trinidad, Benguet.13
Ruling of the RTC
On September 17, 2007, the RTC rendered a Decision14 upholding the validity of the Real Estate
Mortgage and Promissory Notes, but nullifying the December 3, 1999 extrajudicial foreclosure sale.
The fallo of the Decision reads:
WHEREFORE, in view of the foregoing, judgment is hereby rendered as follows:
1. Declaring the Real Estate of Mortgage executed by the plaintiffs dated December 27,
1996 as valid and binding;
2. Declaring the Promissory Notes individually executed by the plaintiffs dated December 24,
1996 and January 8, 1997 as valid and binding with the modification that the rate of penalty
as well as the back charges be reduced from 9% to 3%;
1997 and January 8, 1998 as valid and binding with a modification that [the] rate of interest
be reduced from 28% to 17% per annum and the penalty be reduced from l 8% to 3% per
annum and the bank charges be reduced from 18% to 3% per annum. The renewal fee at
3% is hereby declared null and void.
4. Declaring the Foreclosure proceedings and the sheriff's Certificate of Sale null and void.
5. The defendant-bank is hereby ordered to make another accounting of the accounts of the
plaintiffs based on the rates of interests of 17% per annum, penalties at 3% per annum and
bank charges at 3% per annum to be computed from the date of the execution of the subject
Promissory Notes dated December 24, 1996 and January 8, 1997.
No pronouncement as to the award of damages and cost of the suit.

SO ORDERED.15
The RTC noted the following: except for their bare allegations, Domacia, et al. did not present any
evidence to support their claim that at the time they signed the promissory notes, the [blank spaces]
for the rate of interest, the penalty, and the bank charges were unfilled.16 Renato himself admitted
that after they signed their respective promissory notes, Summit Bank furnished them separately
with copies of documents with the annual rate of interest, penalty, and bank charges already
indicated; and Domacia, et al. did not object to the contents of the documents. Thus, all of them
knew at the outset that they were bound by the interest, penalty, and the bank charges.17
Nevertheless, the RTC sustained the assertion of Domacia, et al. that the increase in the rate of
interest to 28% per annum on the restructured loans was confiscatory, inequitable, and
excessive.18 Thus, it ruled for the nullification of the foreclosure proceedings, Sheriffs Certificate of
Sale, the 18% increase on the annual penalty, bank charges, and the auction sale undertaken by the
sheriff.19
On August 17, 2009, after Summit filed a written manifestation agreeing to reduce the penalty, the
RTC issued a Resolution20 confirming the indebtedness of Domacia, et al. in the amount of
P28,508,425.50.21 The Resolution became final and executory on September 3, 2009.22
Second Foreclosure Sale of

May 12, 2010
Again, Summit Bank demanded payment from Domacia, et al., but the latter failed to pay. Thus,
Summit proceeded with a second foreclosure proceeding. On December 15, 2009, the RTC issued
ℒαwρhi ৷
a writ of execution. On January 14, 2010, it annotated the notice of levy on TCT No. T-
34811.23 Following the publication of the notice of sale, an auction sale over the subject property
proceeded on May 12, 2010 with a final certificate of sale issued in the name of Summit Bank on
May 26, 2011.24 In the process, TCT No. T-34811 was cancelled and TCT No. 016-
201100159025 was issued in lieu thereof. On September 29, 2011, the RTC issued a Writ of
Possession26 in favor of Summit Bank.27
The Third-Party Claim
In October 2011, Lourdes, et al. (the co-owners but non-borrowers) filed a Third-Party Affidavit of
Claim or Terceria28 before the RTC alleging that their consent was not sought when they were
impleaded as co-plaintiffs in Civil Case No. 01-CV-1584.29 Meanwhile, Renato, Richard, Teresita,
and Jeanette filed an Entry of Appearance with Omnibus Motion30 for the annulment of: (1) the levy
of the property covered by TCT No. T-34811 made on January 14, 2010; (2) the public auction sale
held on May 12, 2010; (3) the sheriff's Certificate of Sale dated May 14, 2010; (4) the Sheriff's final
certificate of sale dated May 26, 2011; and (5) the writ of possession dated September 29, 2011 on
the ground that Lourdes, et al. had filed a third-party claim.31
In the Resolution32 dated November 25, 2011, the RTC nullified (1) its previous Order dated
November 10, 2009 granting Summit Bank's Motion for the Issuance of Writ of Execution; (2) the
Writ of Execution dated December 15, 2009; and (3) the Writ of Possession dated September 29,
2011. It further directed Summit Bank to reapply for an extrajudicial foreclosure of the real estate
mortgage but to exclude the pro indiviso shares of Lourdes et al. It adjudged as follows:
WHEREFORE, the Order dated November 10, 2009 granting the Motion for Issuance of Writ of
Execution, the Writ of Execution dated December 15, 2009, the Order granting the Motion for
Issuance of Deed of Conveyance, as well as the Order for the Issuance of Writ of Possession and
the Writ of Possession itself, dated September 29, 2011 and all other subsequent issuances are
hereby recalled and set aside, for all being null and void.
As above stated, defendant Summit Bank is hereby directed to re-apply for an Extrajudicial
Foreclosure of. the Real Estate Mortgage, pursuant to Act No. 3135, but should exclude the pro-
indiviso shares of Lourdes C. Akiapat, Billy Cachero and Noel Cachero, of the subject parcel of land.
SO ORDERED.33
Summit Bank moved for a reconsideration, but the RTC denied it in its Order34 dated March 16,
2012. It explained in this wise:
In its Resolution dated November 25, 2011, the Court ruled that since Lourdes, Hilly and Noel did
not avail of or did not secure loans from Summit Bank, their share in the mortgaged property should
be excluded from foreclosure. On this point, Summit Bank argues that a Real Estate Mortgage is
one and indivisible. Hence, it is error on the part of this Court to order the exclusion of the pro
indiviso shares of said Lourdes, Billy and Noel.
Resolving the Motion, it is still the firm opinion of this Court that it is more in accordance with justice
and equity for Summit Bank to exclude the shares of Lourdes, Billy and Noel, by whatever means. If
Summit Bank argues that the REM is indivisible, then they should buy out the pro-indiviso shares of
Lourdes, Billy and Noel, then foreclose the remaining Real Estate Mortgage.
If the Court allow reconsideration as prayed for, then one who did not avail of loan services will be
prejudiced and it is axiomatic that no one should be unjustly enriched, at the expense of another.
WHEREFORE, the Motion for Reconsideration is hereby denied. The second paragraph of the
dispositive portion of the Resolution, dated November 25, 2011 is hereby affirmed.
SO ORDERED.35
Aggrieved, Summit Bank elevated the matter to the CA by way of a Petition36 for Certiorari raising

the sole issue of whether the RTC gravely abused its discretion in ordering the exclusion of the pro
indiviso shares of Lourdes, et al. in the mortgaged property for the foreclosure proceedings.37
The CA Ruling
In the Decision38 dated February 27, 2015, the CA granted the petition. It found that: first, the RTC
erred in entertaining the third-party claim of Lourdes, et al., emphasizing that the remedy
of terceria is only available to a third person other than the judgment obligor or the latter's
agent; second, the RTC cannot declare the pro indiviso shares of Lourdes, et al. to be excluded from
the foreclosure proceedings sale as it would modify an earlier decision which had already attained
finality; and third, by directing Summit Bank to reapply for an extrajudicial foreclosure, the Resolution
dated November 25, 2011 of the RTC effectively added a new directive to the final decision in Civil
Case No. 01-CV-1584.39
Petitioners filed their respective motions for reconsideration.40 The CA denied both in its Resolution
dated January 8, 2016.
Hence, the consolidated petitions.

Lourdes, et al., petitioners in G.R. No. 222505, averred that they belatedly filed their third-party claim
as it was only after two years from the finality of the Decision in Civil Case No. 01-CV-1584 that they
came to know that their pro indiviso shares in the subject property were included in the Sheriff's
demand to vacate.41 They further averred that the act of the RTC in correcting or amending its own
judgment was in harmony with justice and the facts of the case.42
On the other hand, Richard, Jeanette, and Teresita, petitioners in G.R. No. 222776, explained: that
the whole controversy stemmed from the first extrajudicial foreclosure sale held on January 11, 2000
which was declared null and void per RTC Decision dated September 17, 2007;43 that while the
Decision sustained the validity of the real estate mortgage, it nonetheless nullified some of the
charges imposed by the bank, the foreclosure proceeding, and the sheriffs certificate of sale;44 that
after the decision, the parties reverted to their original situation prior to the foreclosure; that the
option was once again opened to Summit Bank to either foreclose the mortgage or to recover the
indebtedness by instituting an ordinary action;45 and that soon after, Summit Bank asked for the
issuance of a writ of execution as if the decision sought to be enforced is one for collection of
indebtedness.46 Thus, Richard, Jeanette and Teresita argued that the changes violated their right to
due process.47
In its Joint Comment,48 Summit Bank disclosed that after the RTC resolution confirming the
indebtedness of Domacia, et al., it again demanded payment from the petitioners.49 As no payment
was made despite demand, it filed another petition for extrajudicial foreclosure against the
mortgaged property.50 On March 12, 2012, the ex-officio sheriff issued a notice of public auction
sale wherein Summit Bank became the highest bidder at the public auction held on April 10,
2012.51 On the basis thereof, Branch 63, RTC, La Trinidad, Benguet issued a Writ of Possession on
January 17, 2013.52 The petitioners failed to redeem the subject property within the one year
redemption period, and hence, a final certificate of sale was issued in its favor on April 23, 2013.53
The Issue
In the main, the issue before the Court is whether the CA erred in granting Summit Bank's petition
for certiorari.
Our Ruling
The petitions are without merit.
As mortgagors, the petitioners already lost all interests over the foreclosed property after the
expiration of the redemption period. On the other hand, Summit Bank, as purchaser, became the
absolute owner thereof when no redemption was made. As such, Summit Bank is entitled to the
possession of the subject property as a matter of right. In Town and Country Enterprises, Inc. v.
Hon. Quisumbing, Jr., et al.,54 the Court declared:
Not having exercised its right of redemption in the intervening period, TCEI cannot be heard to
complain about the cancellation of its titles and the issuance of new ones in favor of Metrobank on
26 June 2003. In Union Bank of the Philippines v. Court of Appeals, the Court ruled that, after the
purchaser's consolidation of title over foreclosed property, the issuance of a certificate of title in his
favor is ministerial upon the Register of Deeds, thus:
In real estate mortgage, when the principal obligation is not paid when due, the mortgage has the
right to foreclose the mortgage and to have the property seized and sold with a view to applying the
proceeds to the payment of the principal obligation. Foreclosure may be effected either judicially or
extrajudicially. In a public bidding during extra-judicial foreclosure, the creditor-mortgagee, trustee, or
other person authorized to act for the creditor may participate and purchase the mortgaged property
as any other bidder. Thereafter the mortgagor has one year within which to redeem the property
from and after registration of sale with the Register of Deeds. In case of non-redemption, the
purchaser at foreclosure sale shall file with the Register of Deeds, either a final deed of sale
executed by the person authorized by virtue of the power of attorney embodied in the deed or
mortgage, or his sworn statement attesting to the fact of non-redemption; whereupon, the Register of
Deeds shall issue a new certificate of title in favor of the purchaser after the owner's duplicate of the
certificate has been previously delivered and cancelled. Thus, upon failure to redeem foreclosed
realty, consolidation of title becomes a matter of right on the part of the auction buyer, and the
issuance of a certificate of title in favor of the purchaser becomes ministerial upon the Register of
Deeds.55 (Italics supplied.)
Still, the Court cannot order the exclusion of the pro indiviso shares of Lourdes, et al. for the
following reasons:
First, the Court is not convinced with the assertion of Lourdes, et al. that they did not authorize their
inclusion as plaintiffs in Civil Case No. 01-CV-1584; and that they only discovered the public auction
two years after the RTC resolution confirming the indebtedness of their co-owners had become final
and executory.
In Bank of America, NT and SA, v. American Realty Corp.56 (Bank of America), American Realty
Corporation (ARC) executed two real estate mortgages in favor of therein petitioner Bank of
America, NT and SA (Bank of America) as security for the restructured loans. The borrowers
eventually defaulted in the payment of their loans which compelled Bank of America therein to file
collection suits before foreign courts. Afterwards, it filed an application for extrajudicial foreclosure of
the real estate mortgage against ARC. Meanwhile, ARC filed an action for damages against Bank of
America.57 In sustaining the action of therein Bank of America against ARC, the Court considered
the fact that ARC constituted real estate mortgages over its properties as security for the debt of the
principal debtors. By doing so, ARC subjected itself to the liabilities of a third-party mortgagor.58
Similarly, in Lustan v. CA59 (Lustan), the Court ruled that third persons who are not parties to a loan
may secure the latter by pledging or mortgaging their own property. So long as a valid consent was
given, the fact that the loans were solely for the benefit of the private respondent in that case would
not invalidate the mortgage with respect to petitioner's property. In consenting thereto, even granting
that therein petitioner may not be assuming personal liability for the debt, her property shall secure
and respond for the performance of the principal obligation.60
In this case, it is not disputed that co-owners but non-borrowers Lourdes, et al. assented to, and in
fact signed, the real estate mortgage constituted by their co-owners Domacia, et al. as security for
the latter's loan with Summit Bank. Considerably, Lourdes, et al. have undeniably assumed the
personality of a third-party mortgagor. As stated in Bank of America and Lustan, the property of third
persons like Lourdes, et al. which has been expressly mortgaged to guarantee an obligation to which
they are foreign, is directly and jointly liable for the fulfillment thereof. It is subject to execution and
sale for the purpose of paying the amount of the debt for which it is liable.61 The fact that the loans
did not accrue to the benefit of Lourdes, et al. would not invalidate the mortgage. The RTC properly
observed:
x x x In nutshell, the petitioner argues that the oppositors-in-intervention are not third parties "holding
the property adversely to the judgment obligor" but are parties to the mortgage contract.
The Court went over the record again and found that indeed the oppositors-in-intervention Lourdes
Cachero Akiapat, Billy Cachero, and Noel Cachero xxx, are not third persons who have adverse
claim to the property sough to be possessed by petitioner. In the Real Estate Mortgage, the
oppositors-in-intervention were named as mortgagors:
xxxx
This deed was duly signed by the said oppositors-in-intervention. The oppositors Renato Cachero,
Richard Cachero, Jeanette Gamboa and Teresita Mainem xxx and oppositors-in-intervention filed a
case for Annulment and/or Declaration of Nullity of Real Estate Mortgage xxx, which was raffled to,
heard, and decided by the Regional Trial Court, Branch 63, La Trinidad Benguet xxx. In the Decision
of RTC, Branch 63, the validity of the Real Estate Mortgage was upheld. This ruling was made
without qualification; there is nothing in the decision which segregates the shares of the oppositors-
in-intervention from the mortgage or which states that the oppositors-in-intervention are not bound
by the mortgage. The oppositors and oppositors-in-intervention did not appeal the decision; hence, it
has became final and executory.
It was only when the decision was being executed that the oppositors-in-intervention filed a third
party claim. This was the basis of the RTC Branch 63 in stating in the Resolution dated 11
November 2011 that the shares of the oppositors-in-intervention "should be excluded from
foreclosure", and Order dated 16 March 2012 "that it is more in accordance with justice and equity
xxx to exclude the shares of Lourdes, Billy and Noel". xxx Nonetheless, in the said Resolution and
Order, it was not ruled that the Real Estate Mortgage as against the oppositors-in-intervention is null
and void.
Subsequently, in the letter-petition for extrajudicial foreclosure of the mortgage filed by the petitioner,
oppositors-in-intervention were included as mortgagors. Notice of the public auction sale was
published and posted. The oppositors-in-intervention however did not oppose this, neither did they
mo
amboa (Jeanette), and Lourdes, et al. were co-owners of a parcel of land covered by Transfer

January 11, 2000
Ruling of the RTC

SO ORDERED.15
sheriff.19

May 12, 2010
ℒαwρhi ৷
SO ORDERED.33
SO ORDERED.35

The CA Ruling
Case No. 01-CV-1584.39
due process.47
The Issue
for certiorari.
Our Ruling
following reasons:
and executory.
observed:
xxxx
and void.
mo
They Antecedents
On April 9,2003, petitioner PCSO and respondent DFNNI5 entered into an Equipment Lease
Agreement (ELA) for systems design and development and upgrade of a lotto betting
platform via Personal Communication Devices (PCD)6. Under the ELA, PCSO agreed to exclusively
lease from DFNNI all hardware, software and technical skills to design and develop the application
of PCD for the acceptance and processing of bets from PCD users in the Philippines. The ELA
contained an arbitration clause mandating that any dispute or controversy shall be settled through
arbitration.7
On March 9, amboa (Jeanette), and Lourdes, et al. were co-owners of a parcel of land covered by
Transfer Certificate of Title (TCT)No. T-34811 (subject property).6

January 11, 2000
Ruling of the RTC
SO ORDERED.15
sheriff.19

May 12, 2010
ℒαwρhi ৷
SO ORDERED.33
SO ORDERED.35
The CA Ruling
Case No. 01-CV-1584.39
due process.47
The Issue
for certiorari.
Our Ruling
following reasons:
and executory.
observed:
xxxx
and void.
mo
amboa (Jeanette), and Lourdes, et al. were co-owners of a parcel of land covered by Transfer

January 11, 2000
Ruling of the RTC
SO ORDERED.15
sheriff.19

May 12, 2010
ℒαwρhi ৷
SO ORDERED.33
SO ORDERED.35

The CA Ruling
Case No. 01-CV-1584.39
due process.47
The Issue
for certiorari.
Our Ruling
following reasons:
and executory.
observed:
xxxx
and void.
mo
2005, prior to the launch of the System, PCSO issued Board Resolution No. 080, series of 2005
unilaterally rescinding the ELA for DFNNI's supposed failure to comply with its obligations and
commitment, including the implementation of the project within six (6) months from the execution of
the contract, viz.:
"WHEREAS, DFN[N]I, in a letter to GM Rosario Uriarte, dated January 18, 2005, admitted and
confirmed its failure to secure the conformity and cooperation of Smart and Globe and instead (sic)
argued that "the signed contracts were the obligations of the PCSO[,]"(sic) despite the clear
agreement between the parties that it should be DFN[N]I that should procure the conformity of the
telecoms w[h]ile co
The hobbits reach the village of Bree, where they encounter a Ranger named Strider. The innkeeper
gives Frodo a letter from Gandalf written three months before which identifies Strider as a friend.
Knowing the riders will attempt to seize the party, Strider cunningly avoids their attack and leads the
hobbits through the wilderness toward the Elven sanctuary of Rivendell. On the way to Rivendell, the
group stops at the hill Weathertop. Strider identifies the riders as the Nazgûl, men from ancient times
that were enslaved by lesser Rings of Power to serve Sauron. While at Weathertop, they are again
attacked by five of the nine Black Riders. The hobbits reach the village of Bree, where they
encounter a Ranger named Strider. The innkeeper gives Frodo a letter from Gandalf written three
months before which identifies Strider as a friend. Knowing the riders will attempt to seize the party,
Strider cunningly avoids their attack and leads the hobbits through the wilderness toward
the Elven sanctuary of Rivendell. On the way to Rivendell, the group stops at the hill Weathertop.
Strider identifies the riders as the Nazgûl, men from ancient times that were enslaved by lesser
Rings of Power to serve Sauron. While at Weathertop, they are again attacked by five of the nine
Black Riders. The hobbits reach the village of Bree, where they encounter a Ranger named Strider.
The innkeeper gives Frodo a letter from Gandalf written three months before which identifies Strider
as a friend. Knowing the riders will attempt to seize the party, Strider cunningly avoids their attack
and leads the hobbits through the wilderness toward the Elven sanctuary of Rivendell. On the way to
Rivendell, the group stops at the hill Weathertop. Strider identifies the riders as the Nazgûl, men
from ancient times that were enslaved by lesser Rings of Power to serve Sauron. While at
Weathertop, they are again attacked by five of the nine Black Riders. The hobbits reach the village
of Bree, where they encounter a Ranger named Strider. The innkeeper gives Frodo a letter from
Gandalf written three months before which identifies Strider as a friend. Knowing the riders will
attempt to seize the party, Strider cunningly avoids their attack and leads the hobbits through the
wilderness toward the Elven sanctuary of Rivendell. On the way to Rivendell, the group stops at the
hill Weathertop. Strider identifies the riders as the Nazgûl, men from ancient times that were
enslaved by lesser Rings of Power to serve Sauron. While at Weathertop, they are again attacked
by five of the nine Black Riders. Antecedents
lease from DFN
Today is Sunday, August 21, 2022
Constitution
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AUSL Exclusive
SECOND DIVISION
[ G.R. No. 199565, June 30, 2021 ]
HONGKONG AND SHANGHAI BANKING CORP. (HSBC), LTD. STAFF RETIREMENT PLAN (NOW
INCORPORATED AS HSBC RETIREMENT TRUST FUND, INC.) AND MANUEL FSTACION,
PETITIONERS, VS. SPOUSES JUAN I. GALANG AND MA. THERESA OFELIA G. GALANG,
RESPONDENTS.
G.R. NO. 199635
HONGKONG AND SHANGHAI BANKING CORP. (HSBC), LTD., PETITIONER, VS. SPOUSES
JUAN I. GALANG AND MA. THERESA OFELIA G. GALANG, RESPONDENTS.
DECISION
LAZARO-JAVIER, J.:
The Cases
These consolidated petitions seek to reverse and set aside the following dispositions of the Court of
Appeals in CA-G.R. CV No. 90491 entitled Spouses Juan I. Galang and Ma. Theresa Ofelia G. Galang
v. Hongkong and Shanghai Banking Corporation, Ltd., Manuel S. Estacion, as rep. by Atty. Manuel
Montecillo, Stuart Milne, and Alejandro Custodio, Atty. Grace S. Belvis and Sofronio M. Villarin, in their
capacity as Clerk of Court/Ex-Officio Sheriff and Sheriff in Charge of the Regional Trial Court of Pasig,
Defendants., Hongkong and Shanghai Banking Corporation, Ltd., and HSBC Staff Retirement Fund,
Inc. (Formerly Hongkong and Shanghai Banking Corp., Ltd. Staff Retirement Plan):
1. Decision1 dated March 31. 2011 nullifying the foreclosure of mortgage of Spouses

Galang; and
2. Resolution2 dated December 6, 2011 denying reconsideration;
Antecedents
Respondent Ma. Theresa Ofelia G. Galang was a regular employee of petitioner Hongkong and
Shanghai Banking Corporation, Ltd. (HSBC), a foreign banking institution duly licensed to do business
in the Philippines.3 HSBC offered benefit plans for its employees, including housing loans,
administered and managed by Hongkong and Shanghai Banking Corporation, Ltd. Staff Retirement
Plan (HSBC-SRP).4
On March 1, 1990, Ma. Theresa applied for a P400,000.00 housing loan, payable monthly for twenty-
five (25) years at six percent (6%) interest per annum. HSBC-SRP approved the loan. The monthly
amortizations were then paid through deductions from Ma. Theresa's payroll account. The loan was
secured by a mortgage she and her husband petitioner Juan I. Galang executed on their property in
Mandaluyong City in favor of HSBC-SRP. The property is covered by TCT No. 3340.
Notably, the HSBC Retirement Plan Rules and Regulations provide that the loan may be accelerated in
case of separation, viz.:
Article VII
xxx Regardless of the Employees, (sic) length of service to the Bank, an employee who is separated
from the service of the Bank for cause or any other act for which the bank suffers loss or
damages[,] shall lose all his rights to the benefits provided under the Plan.
xxxx
Article IX
xxxx
Section 5.
xxx Should the Employee's service with the Bank be terminated prior to full repayment of the loan, the
Employee shall make a single payment to cover the outstanding balance." (Emphases and
underscoring supplied).5
On the other hand, pertinent provisions of the Mortgage Agreement, read:
The BOARD OF TRUSTEES, the body duly authorized to act for and on behalf of the IISBC
RETIREMENT FUND, a trust fund established in accordance with law by the Hongkong and Shanghai
Banking Corporation to finance the HSBC Retirement Plan with postal address at P.O. Box No. 1299.
Makati. Commercial Centre, Municipality of Makati, Metro Manila, and herein after referred to as the
"MORTGAGEE,"
—and—
SPOUSES MA. THERESA OFELIA G. GALANG & JUAN I. GALANG both of legal age. Filipino and
resident of 52 A. Pinagtipunan, Mandaluyong. Metro Manila, hereinafter referred to as the --
MORTGAGOR(S)."
WITNESSETH
WHEREAS, the MORGAGOR(S) has/have applied to the MORTGAGEE for certain credit or credit
facilities and the MORTGAGEE has agreed to grant said credit or credit facilities, under the express
terms and conditions set forth hereinafter:
NOW. THEREFORE, in consideration of the premises, and of the mutual premises, convenants (sic)
and stipulations herein contained, the parties hereto have agreed, and do agree, the one with the other
or others, as follows:
The MORTGAGEE hereby grants to the MORTGAGOR(S) a credit or credit facilities consisting of - a
loan of PESOS: FOUR HUNDRED THOUSAND ON FY (P400.000.-) Philippine Currency payable on
demand.
xxxx
III
THE MORTGAGOR(S) hereby undertake(s) and agree(s) to pay the MORTGAGEE, upon demand,
any and all sums that may be or become due from and owing by the MORTGAGOR(S) to said
MORTGAGEE, under and in virtue of the credit or credit facilities hereby granted or hereinafter to be
granted by the latter to the former together with the interest thereon at the rate computed in the manner
set out in Article II hereof.
VI.
x x x II. In the event that the MORTGAGOR(S) should fail to pay the sums of money secured by this
mortgage, or any part thereof in accordance with the terms and conditions herein set forth,or should the
MORTGAGOR(S) fail to perform any of the conditions stipulated herein, then and in that case, the
MORTGAGE shall have the right, at his election to foreclose this mortgage and sell the mortgaged
property extrajudicially, in the manner hereinafter in this paragraph set forth; and for such purpose the
MORTGAGE is hereby appointed the attorney-in-fact of the MORTGAGOR(S), with full power of
substitution and revocation6 x x x.
In January 1993, a labor dispute broke out between HSBC and Hongkong and Shanghai Baking
Corporation Employees Union (HSBC-EU), the union of rank-and-file employees of which Ma. Theresa
was a member.7 On December 22, 1993, the tension climaxed into a full-blown strike, prompting HSBC
to dismiss ninety percent (90%) of its rank-and-file employees, including Ma. Theresa.8 Dropped from
the payroll, Ma. Theresa was unable to pay the monthly loan amortizations from January to November
1994.9
On November 28, 1994, HSBC-SRP sent Spouses Galang a formal demand for full payment of the
loan. Spouses Galang, however, paid only their arrears and resumed remitting their monthly
amortizations in December 1994 when they were able to raise enough money. They had since
religiously paid their monthly amortizations until October 1996.10
In the interim, HSBC-SRP sent them Installment Overdue Reminders dated December 13, 1994,
informing them of their total outstanding balance of F338,636.00, which includes their overdue amounts
of interest, monthly amortizations, and the interest on the arrears.11 HSBC-SRP, too, sent demand
letters on September 25 1995 and July 19, 1996 for payment of the entire balance, which allegedly
amounted to P313,290.0012 and P347,367.02, respectively.13 It also threatened to foreclose the
mortgaged property unless the loan is paid in full. 14
In response, Ma. Theresa sent HSBC-SRP a letter dated September 2, 1996, explaining that her
account was up-to-date as she and her husband had paid the arrears and since December 1994, and
they had been paying their monthly amortizations regularly.15
HSBC-SRP, however, sent Spouses Galang yet another Installment Overdue Reminders on
September 11, 1996 regarding their overdue account which then totaled P295,948,000. A month later,
October 10, 1996, HSBC- SRP extrajudicially foreclosed the mortgage for P324,119.59 which covered
the outstanding balance of the housing loan then at P294,614.00.16 Petitioner Manuel Estacion, Vice
President of HSBC and former trustee of HSBC-SRP emerged as the highest bidder.17
On December 20, 1996, Spouses Galang sued HSBC and HSBC-SRP for Annulment of Sale with
Damages and Preliminary Injunction before the Regional Trial Court (RTC)-Pasig City. The case was
docketed Civil Case No. 66057 and raffled to Branch 68.18
On April 30, 1997, the trial court issued a writ of in junction, restraining petitioners and the Clerk of
Court and Sheriff of RTC, Pasig City from registering the Certificate of Sale or from executing and
registering a Final Deed of Sale and/or other documents with the Register of Deeds. They were also
restrained from taking any action that would cancel registration of TCT No. 3340 under the name of
Spouses Galang and consolidating ownership in favor of anyone else.19
In its answer, HSBC-SRP asserted that the complaint stated no cause of action. For based on the
HSBC Retirement Plan Rules and Regulations, upon termination of Ma. Theresa's employment with
HSBC, her loan balance automatically became due and demandable. Since she failed to settle this
amount in full upon demand, foreclosure of her mortgage logically followed.20
As for HSBC, it also sought to dismiss the case on the ground that it was not a privy to the real estate
mortgage contract between Spouses Galang and HSBC-SRP, a different and separate entity from
HSBC itself. In any event, its relationship with Ma. Theresa was purely one of employer-employee - no
other.21
During the pre-trial, the parties stipulated inter alia, that HSBC-SRP is managed by the Board of
Trustees appointed solely by HSBC's Board of Directors; HSBC was not a signatory to any contract
entered into and executed between Spouses Galang and HSBC-SRP; Ma. Theresa availed of the
benefits offered by HSBC to its employees; in connection with the loan, Ma. Theresa accomplished the
corresponding application and executed a Mortgage Agreement on the property in favor of HSBC-SRP;
and HSBC-SRP has its own policies, as defined in the HSBC Retirement Plan Rules and
Regulations.22
During the main trial, Ma. Theresa testified that while the labor dispute between HSBC and the rank-
and-file employees was pending compulsory arbitration, HSBC agreed to restructure the loans of some
striking employees.23
Meanwhile, HSBC Vice-President Manuel Estacion testified that he acted as a Trustee for HSBC-SRP.

He clarified that HSBC-SRP was not involved in the labor dispute between HSBC and its employees;
HSBC-SRP had no staff of its own, but had HSBC employees carry out its functions.24
The foreclosure was a necessary consequence of Ma. Theresa's failure to pay her amortizations in
1994 and was done in the regular course of business. Although Ma. Theresa resumed her amortization
payments, the same were not enough to cover the full outstanding balance of her loan that had already
become due and demandable.25 On cross, he admitted that HSBC accepted Ma. Theresa's payments
but claimed that this was merely due to oversight. He, too, admitted that HSBC-SRP got incorporated
and registered with the Securities and Exchange Commission (SEC) only after the mortgage on the
property of Spouses Galang already got foreclosed.26
HSBC Manager for Labor Relations Nilo Antonio J. Dicen corroborated Estacion's testimony. He added
that he joined HSBC-SRP in 1998 when it got incorporated; the other incorporators were also officers
of HSBC. He noted that Ma. Theresa was terminated by HSBC even before the strike was declared
illegal by the Department of Labor and Employment.27
Finally, HSBC Assistant Vice President for Credit Control Ma. Gina A. De Guzman testified that she
was in charge of the release of funds for loans, payment collections, and security documentations; the
mortgage on Ma. Theresa's property got foreclosed in October 1996 due to her separation from HSBC;
when a staff resigns, retires, or is terminated, his/her loans become due and demandable; the loans of
some of the striking employees were restructured; and Ma. Theresa was up-to-date in her monthly
payments when HSBC-SRP foreclosed the mortgage on her property.28
The Ruling of the Trial Court

By Decision29 dated July 24, 2004 the trial court disposed of the case, thus:
Quite obviously there is an apparent discrepancy between the plan's rules and regulations and the
mortgage contract. But the Court's hand, so to speak, is tied up from appreciating the plan's rules and
regulations because the matter of the plaintiff wife's dismissal is still sub judice. For this Court therefore
to appreciate the regularity or irregularity of the dismissal would be a clear preemption of the higher
court's resolution on the matter. And besides even if the Court could venture for a reconciliation of the
said documents, the discrepancy would still have to be resolved in favor of the plaintiff's (sic) in line
with the axiomatic precept of interpretation that doubts are resolved against the party that caused the
doubt.
In view thereof the Court is thus left with only the mortgage contract in determining if the foreclosure of
the mortgage in question is in order or not. It is. however, not difficult to see that the foreclosure of the
mortgage is highly irregular for the simple reason that plaintiffs were up to date in their monthly
payments. Foreclosure only appears in case of arrear and default, which under the mortgage contract
are wanting.
And yet. despite the above observation of the court, still the Court could not make a definitive
adjudication on this ease inasmuch as the dismissal issue between the parties remain unresolved. The
court reckons that if the dismissal issue is decided in plaintiff wife's favor, then perhaps the illegality of
the foreclosure would have been then clearly shown for the plan's rules will not come into play.
However, it is not far fetched that the decision may also be adverse to them. But by then preference of
priority- shall then be the issue between the two documents, which incidentally is not raised as an issue
in this case.
In line, the Court feels that the determination of whether or not the foreclosure of mortgage subject of
this case should be annulled is premature. It therefore could not be sustained. On the other hand, the
Court could not likewise sustain the counterclaims for damages of the defendants for the supposed
litigation expenses for this case as the plaintiffs were merely impelled in filing this case for their
legitimate exercise of property right protection.
WHEREFORE. in view of all the foregoing, the Court resolves to DISMISS this case for reason of
prematurity. However, in the interest ot justice and fair play, the Court resolves not to dissolve [sic] the
Temporary Restraining Order until the issues between the parties shall have been finally decided.
No pronouncement as to costs.
SO ORDERED.30
It emphasized that the parties failed to show the supposed interplay between the HSBC Retirement
Plan Rules and Regulations, on one hand and the mortgage contract, on the other. The court opined
that each is separate and distinct from the other.31 Thus, under the mortgage agreement, the entire
obligation becomes due and demandable when the mortgagor defaults and fails to pay despite
demand. In contrast, under the HSBC Retirement Plan Rules and Regulations, the entire obligation is
accelerated upon the severance from employment of the employee-mortgagor.32 Although the court
recognized the need to reconcile these two (2) apparently conflicting sources of the parties' rights and
obligations, it declined to pass upon the issue in view of what it perceived is a prejudicial question to
the issue of default, to wit: the validity or invalidity of the termination of Ma. Theresa then pending
before the Court.33 Hence, the court dismissed the complaint for being supposedly premature.
Proceedings before the Court of Appeals
HSBC, HSBC-SRP together with Estacion, and Spouses Galang filed their respective appeals.34
HSBC-SRP and Estacion faulted the trial court for not finding that HSBC-SRP had the right to foreclose
the mortgage on the subject property.35 They maintained that although Spouses Galang were able to
update their account, the same did not prevent the foreclosure of mortgage36 Too, the issue affecting
the validity or invalidity of Ma, Theresa's termination did not bear on the right of HSBC-SRP to
foreclose.37
As for HSBC,38 it faulted the trial court for not dismissing the complaint against it despite the patent
absence of any showing on record that it participated in the transaction or even in the subsequent
foreclosure proceedings between Spouses Galang and HSBC-SRP.
For their part, Spouses Galang faulted the trial court for dismissing the complaint on the supposed
ground that it was premature and for not holding petitioners liable for damages.39 They argued anew
that since they had been religiously paying their monthly amortizations, they could not be declared in
default, much less, could the mortgage on their property be foreclosed. More so since the resolution of
the issue of default here depended on the validity or invalidity of the termination of Ma. Theresa then
pending before the Supreme Court.
The Decision of the Court of Appeals
By Decision40 dated March 31, 2011, the Court of Appeals ruled in favor of Spouses Galang, declaring
as void the foreclosure of mortgage on their property, viz.:
WHEREFORE, the extrajudicial foreclosure of the mortgage is declared VOID and the claims for
damages and attorney's fees by the parties are DENIED.
SO ORDERED.41
For one, HSBC could not invoke lack of privity in the mortgage contracts to escape liability under the
complaint. First, it created HSBC-SRP tasked with administering retirement, pension, and other plans
for the benefit of its employees; second, when the loan agreement and the real estate mortgage were
executed in 1990, HSBC-SRP was still directly attached to HSBC as the former was only incorporated
in 1998; third, HSBC appointed the trustees to manage HSBC-SRP; and finally, HSBCs assets,
liabilities, or other interests were transferred to HSBC-SRP. For all intents and purposes, HSBC-SRP
was a mere conduit of HSBC which is the real party in interest. To be sure, the foreclosure proceedings
were predicated on the loan and mortgage contracts executed between Ma. Theresa and HSBC,
through HSBC-SRP. In sum, it was HSBC which stood to benefit from the foreclosure.42
For another, the illegal dismissal case against Ma. Theresa was still pending when the mortgage was
foreclosed. Thus, her employment with HSBC could not have been considered as "terminated with
cause" which could have obligated her to immediately pay the entire balance of her loan. More, Ma.
Theresa's failure to pay her amortizations from January to November 1994 did not justify the
foreclosure. For foreclosure is only proper when the debtor is in default alter demand has been made.
Here, after HSBC- SRP sent its demand letter on November 28, 1994, Ma. Theresa promptly paid the
arrears and regularly paid the succeeding monthly amortizations as well until October 1996-which
HSBC and HSBC-SRP accepted.43
As for the claim for damages and attorney's fees, the Court of Appeals found no basis to grant them.
Before moral damages may be awarded, the claimant must first allege and prove moral suffering,
mental anguish, and the like. Unfortunately for Spouses Galang, they offered no proof of "mental
anguish, sleepless nights, besmirched reputation, and embarrassment." Consequently, they cannot be
entitled to exemplary damages, either.44
The Court of Appeals denied reconsideration on December 6, 201l.45
The Present Petitions
Through their respective petitions for review on certiorari, HSBC-SRP and Manuel Estacion in G.R. No.
19956, and HSBC in G.R. No. 199635 now seek affirmative relief against the foregoing dispositions of
the Court of Appeals.46
G.R. No. 199565: Petition for Review

of HSBC-SRP and Manuel Estacion
HSBC-SRP and Estacion assert that Ma. Theresa was able to apply for the loan by reason of her
employment with HSBC. Her eligibility for the loan was predicated on her status as a regular employee.
Too, she was well aware of the terms of the HSBC Retirement Plan Rules and Regulations which
expressly provide that should her service with HSBC be terminated, she loses the benefit, and her
loan, gets accelerated.
They also cite Article VI-H of the Mortgage Agreement, thus:
H. In the event that the MORTGAGOR(S) should fail to pay the sums of money secured by this
mortgage. or any part thereof in accordance with the terms and conditions herein set forth, or should
the MORTGAGOR(S) fail to perform any of the conditions stipulated herein, then and in that case, the
MORTGAGER shall have the right, at his election to foreclose this mortgage and sell the mortgaged
properly extrajudicially, in the manner hereinafter in this paragraph set forth; and for such purpose the
MORTGAGE!: is hereby appointed the attorney-in-fact of the MORTGAGOR(S). with full power of
substitution and revocation: xxx (Underscoring provided)
They emphasize anew that failure to pay any of the sums secured by the mortgage or failure to comply
with the conditions of the Mortgage Agreement already constitutes a valid ground to foreclose the
mortgage. Spouses Galang had admitted their failure to pay their monthly amortizations in 1994.
Consequently, the right of HSBC-SRP to foreclose the mortgage on the subject property automatically
accrued. The fact that they subsequently paid their arrears and monthly amortizations did not cure the
default already incurred by them under the Mortgage Agreement.47
Further, the validity or invalidity of the termination of Ma. Theresa's employment does not bear upon
the joint civil obligation of Ma. Theresa and her husband to HSBC-SRP which was not even a party to
the labor dispute.48
In Nestle Philippines Inc. v. NLRC49 and NDC Guthrie Plantations v. NLRC50 the Court consistently

ruled that enforcement of a loan agreement involves debtor-creditor relations founded on a contract,
which does not, in any way, concern employer-employee relations."51 Hence, the pendency of the
illegal dismissal case of Ma. Theresa should not affect her separation per se from HSBC and its effect
on her loan with HSBC-SRP.
The Court of Appeals ignored the relevant rulings of the Court in HSBC Ltd. Staff Retirement Plan (now
HSBC Retirement Trust Fund, Inc.) v. Spouses Broqueza52 and Spouses Tanionte v. HSBC Ltd., et
al.53 Both involved co-employees of Ma. Theresa who were also separated from HSBC because of
their participation in the same illegal strike. When these employees defaulted on their respective loans,
HSBC-SRP also sought to collect payments, albeit they, too, raised the defense that the HSBC-SRP
cannot exercise the right to collect and/or foreclose their mortgages in view of the pending illegal
dismissal case. In Broqueza, the Court ruled that a loan agreement involves a debtor-creditor relation
which does not in any way concern employee relations.54 Meanwhile, in Tamonte, the Court dismissed
a similar complaint for annulment of foreclosure proceedings filed by therein petitioners.55
The principle of estoppel does not apply here as none of its elements are present.56 It never made any
false representation to Spouses Galang for the latter to make partial payments of their outstanding
balance; it did not conceal material facts from them; it did not make any statement to mislead them into
believing that there would be no foreclosure if they continued paying their account; it was consistent in
its position that full payment was required to prevent foreclosure; and it did not act in bad faith nor
actively participate in the acceptance of their late payments.57
G.R. No. 199635: Petition for Review of HSBC
On the other hand, HSBC faults the Court of Appeals for (1) ruling that HSBC-SRP was merely its
conduit; (2) disregarding the relativity or privity of contracts under Article 1311 of the Civil Code; and (3)
making factual findings not based on evidence, but mere conjectures.58
It reiterates that HSBC and HSBC-SRP are separate and distinct entities. In fact, the Court of Appeals,
in its Decision dated March 31, 2011, expressly recognized the Trust Agreement between HSBC as
trustor and HSBC-SRP as trustee. HSBC put up funds for its employees as beneficiaries, to be
administered, managed, and maintained by HSBC-SRP with the former having no control over the
same. Thus, it is erroneous to conclude that HSBC- SRP is a "mere conduit" of HSBC.59
Too, contracts take effect only between the parties, their assigns, and heirs.60 The Court of Appeals
ruled that HSBC was a real party in interest because it executed Lhe loan and mortgage contracts
through HSBC-SRP and it stood to benefit from or could be held liable for violating said contracts. This
ruling contradicts the following factual findings of the Court of Appeals, viz.. Ma. Theresa applied for the
loan with HSBC-SRP; Ma. Theresa executed the mortgage contract in favor of HSBC-SRP; it
was HSBC-SRP which demanded payment for the loan through demand letters; and HSBC-SRP
instituted the foreclosure proceedings. Thus, it is clear that HSBC was not a party to any of these
transactions.61
More, the ruling of the Court of Appeals that HSBC could be held liable for violation of the loan and
mortgage contracts is not consistent with Broqueza and Tamonte.
Finally, the Court of Appeals erroneously ruled that HSBC failed to exercise the high degree of
diligence required of banks though such failure was not even imputed during trial. Notably, Estacion
testified that it was human error which caused the acceptance of the late payments of Spouses Galang,
not wanton carelessness or malice. Unfortunately, the Court of Appeals drew its conclusion, not based
on the evidence, but on mere speculations.62
Consolidated Comment of Spouses Galang

in G.R. Nos. 199565 and 199635
In their Consolidated Comment63 dated April 19, 2012, Spouses Galang reiterate that HSBC-SRP did
not have any legal basis to foreclose their property; the HSBC Retirement Plan Rules and Regulations
did not justify such foreclosure; and HSBC-SRP's acceptance of amortization payments from them
constitutes estoppel. Further, the Court of Appeals was correct in holding that HSBC is a privy to the
loan and mortgage contracts.64
Spouses Galang elucidate that since the HSBC Retirement Plan Rules and Regulations impose a
condition - separation for a cause, before an employee loses his/her right to the loan benefits, there
exists therefore a prejudicial question pertaining to the validity of the termination of Ma. Theresa,
hence, the unilateral withdrawal of the loan benefit done by HSBC- SRP pending final resolution of this
prejudicial question was premature. And while HSBC-SRP was not involved in the labor dispute, the
privileges it extended to the beneficiaries were dependent on the employment status of the latter. At
any rate, they were not in arrears anymore and were in fact up-to-date with their payments.65
Also, the provisions of the HSBC Retirement Plan Rules and Regulations constitute a contract of
adhesion where they did not have the opportunity to negotiate with HSBC-SRP on the provisions
affecting their loan. At any rate, they were not furnished copy of HSBC Retirement Plan Rules and
Regulations and were never apprised of its contents. Worse, Ma. Theresa was not made aware of her
automatic membership in the retirement benefit plan of HSBC-SRP. There was, therefore, no mutuality
of contract between them.66
Even assuming that the HSBC Retirement Plan Rules and Regulations were valid, the same have not
been incorporated in the Mortgage Agreement itself, specifically the automatic acceleration clause in
case of the employee's separation from HSBC. To be sure, Article VI, par. H of the Mortgage
Agreement limits the instances of default where the mortgagor fails to pay the sums secured by the
mortgage, or any part thereof or fails to perform any of the conditions stipulated therein - nothing more,
nothing less. Estacion could not even show where it states that the loan becomes due and demandable
should an employee be separated without cause.67
And even further assuming that HSBC-SRP had the right to foreclose by reason of Ma. Theresa's delay
in payment or her termination from employment, the fact that HSBC-SRP had accepted the payment of
aiTears and succeeding amortizations from them, sans any comment should be deemed a waiver of its
right to foreclose.68
Finally, while it is true that the named mortgagee is HSBC-SRP, not HSBC, the latter cannot deny
privity to the foreclosure of the mortgage because its interests are so closely intertwined with those of
HSBC-SRP that they practically have the same interests in the loan collection and foreclosure. Notably,
HSBC-SRP had no staff of its own; it was HSBC that issued statements of accounts and overdue
reminders, among others; it made continuations and receipts of payments; it debited and collected loan
payments from the employees' accounts; in the Memorandum of Understanding between some of the
striking employees and HSBC, HSBC- SRP was included in the restructuring of loans; and lastly,
HSBC-SRP did not even have a corporate personality of its own when their mortgage was foreclosed.
Issues
FIRST. Is the foreclosure of the subject mortgage dependent on the final resolution of
the illegal dismissal case filed by Ma. Theresa Galang against HSBC?
SECOND. Was HSBC-SRP estopped from demanding full payment of the obligation
from Spouses Galang and from subsequently foreclosing the mortgage on their
property?
THIRD. Are Spouses Galang entitled to damages?
FOURTH. Are HSBC-SRP and HSBC distinct from each other?
Ruling
On the right of HSBC-SRP to foreclose the

mortgage constituted to secure the housing
loan
The Mortgage Agreement of HSBC-SRP and Spouses Galang reads, inter alia, viz.:
III.
THE MORTGAGORS) hereby undertake(s) and agree(s) to nay the MORTGAGEE, upon demand, any
and all sums that may be or beeome due from and owing by the MORTGAGORS) to said
MORTGAGEE, under and in virtue of the credit or credit facilities hereby granted or hereinafter to be
granted by the latter to the former together with the interest thereon at the rate computed in the manner
set out in Article II hereof.
XXX
VI.
x x x II. In the event that the MORTGAGORS) should fail to pay the sums of money sccured by this
mortgage, or any part thereof in accordance with the terms and conditions herein set forth, or should
the MORTGAGORS) fail to perform any of the eonditions stipulated herein, then and in that case, the
MORTGAGEE shall have the right, at his election to foreclose this mortgage and sell the mortgaged
property extrajudicially, in the manner hereinafter in this paragraph set forth; and for such purpose the
MORTGAGEE is hereby appointed the attorney-in- fact of the MORTGAGOR(S), with full power of
substitution and revocation: xxx (Emphases and underscoring supplied)69
The Rules and Regulations, on the other hand, provide that the loan may be accelerated in case of
termination for cause, viz.:
Article VII
xxx Regardless of the Employees, (sic) length of service to the Bank, an employee who is separated
from the service of the Bank for cause or any other act for which the bank suffers loss or
damages[.] shall lose all his rights to the benefits provided under the Plan.
xxxx
Article IX
Section 5.
xxx Should the Employee's service with the Bank be terminated prior to full repayment of the loan, the
Employee shall make a single payment to cover the outstanding balance." (Emphases and
underscoring supplied).70
Taken together, these provisions clearly establish that Spouses Galang undertook to pay HSBC-SRP
their monthly dues; and HSBC-SRP shall have the right to foreclose the property extrajudicially: (1)
should they fail to pay any part of their loan OR (2) should Ma. Theresa be separated from her
employment with HSBC for cause.
Both circumstances obtain here.
a. HSBC-SRP's right to foreclose under the Mortgage Agreement
Under the Mortgage Agreement, the remedy of foreclosure becomes available to HSBC-SRP the
moment Spouses Galang fail to pay their installments. The rule is clear - foreclosure is valid when the
debtor is in default in the payment of his obligation.71 Undeniably, Spouses Galang had stopped
paying their amortization for almost the entire year in 1994 - default, plain and simple. We therefore
agree with HSBC-SRP that its right to foreclose had already accrued at that point.
To emphasize its right to foreclose, HSBC-SRP relies on HSBC Ltd. Staff Retirement Plan (now HSBC
Retirement Trust Fund, Inc.) v. Spouses Broqueza72 and Spouses Tamonte v. HSBC Ltd., et al..73
Tamonte and Broqueza share factual antecedents here, viz.: the co- employees of Ma. Theresa (1)
also availed of loans under the HSBC-SRP; (2) they were terminated for participating in the same strike
against HSBC; and (3) they also questioned the legality of their termination before the Labor Tribunals.
In both Tamonte and Broqueza, the Court ruled in favor of HSBC- SRP, explaining that the
enforcement of a loan agreement involves debtor- creditor relations founded on contract and does not,
in any way, concern employee relations. The Court added that HSBC-SRP need not wait for the results
of the illegal dismissal case before pursuing its remedies.
There is, however, a striking distinction between Tamonte and Broqueza, on the one hand, and the
present case, on the other, which prevents us from applying the doctrines in the former cases in a
straightforward manner here — Spouses Galang updated their accounts and continued paying their
monthly amortizations after Ma. Theresa got dismissed from employment. Notably, in Broqueza and
Tamonte, petitioners therein admitted to not having paid any installment at all.
But as will be shown below, HSBC-SRP has the right to foreclose the mortgaged property regardless of
whether the Court applies Tamonte and Broqueza here.
b. HSBC-SRP's right to foreclose under the Rules and Regulations
As judiciously observed by Senior Associate Justice Estela Perlas-Bernabe during deliberations,

HSBC-SRP's right to foreclose under the Rules and Regulations bears relevance not just here, but in
the other cases involving the same company and set of terminated employees.
Under the Rules and Regulations, Ma. Theresa is obligated to pay the entire amount of her outstanding
loan upon her termination from service for cause. In this regard, the Court takes judicial notice of its
earlier ruling in Hongkong & Shanghai Banking Corp. Employees Union v. National Labor Relations
Commission (G.R. No. 156635, January 11, 2016) which held that Ma. Theresa and her co-employees
were validly dismissed for staging an illegal strike, thus:
The petitioners insist that they did was to conduct an orderly, peaceful, and moving picket. They deny
employing any act of violence or obstruction of HSBC's entry and exit points during the period of the
strike.
The contrary was undeniably true. The strike was far from orderly and peaceful. HSBC's claim that
from the time when the strike was commenced on December 22. 1993 the petitioners had on several
instances obstructed the ingress into and egress from its offices in Makati and in Pasig was not
competently disputed, and should thus be accorded credence in the light of the records. We agree with
HSBC. for all the affidavits and testimonies of its witnesses, as well as the photographs and the video
recordings reviewed by LA Pati depicted the acts of obstruction, violence and intimidation committed by
the petitioners during their picketing. It was undeniable that such acts of the strikers forced HSBC's
officers to resort to unusual means of gaining access into its premises at one point. In this connection.
LA Pati even observed as follows:
[I]t must be pointed out that the Bank has shown by clear and indubitable evidence that most of the
respondents have actually violated the prescription provided for in paragraph (b) of Article 264 on free
ingress and egress. The incident depicted in the video footage of 05 January 1994. which has been
viewed several times during the trial and even privately, demonstrates beyond doubt that the picket
was a non-moving, stationary one — nothing less but a barricade. This office is more than convinced
that the respondents, at least on that day, have demonstrated an abnormally high degree of hatred and
anger at the Bank and its officers (including the Bank's chief executive officer who fell to the ground as
a result of the pushing and shoving) leading them to do anything to carry out their resolve not to let
anymore inside the Bank. Additionally, as observed by this Labor Arbiter, the tensed and disquieting
relation between the parties became all the more apparent during the actual hearings as clearly evident
from the demeanor and actuations of the respondents.
The situation during the strike actually went out of hand because of the petitioners' illegal conduct,
compelling HSBC to secure an injunction from the NLRC as well as to file its petition for habeas
corpus in the proper court in the interest of its trapped officers and employees: and at one point to
lease a helicopter to extract its employees and officers from its premises on the eve of Christmas Day
of 1993.
For sure, the petitioners could not justify their illegal strike by invoking the constitutional right of labor to
concerted actions. Although the Constitution recognized and promoted their right to strike, they should
still exercise the right within the hounds of law. Those bounds had been well-defined and well-known.
Specifically. Article 264 (e) of the Labor Code expressly enjoined the striking workers engaged in
picketing from committing any act of violence, coercion or intimidation, or from obstructing the free
ingress into or egress from the employer's premises for lawful purposes, or from obstructing public
thoroughfares. The employment of prohibited means in carrying out concerted actions injurious to the
right to propertv of others could only render their strike illegal. Moreover, their strike was rendered
unlawful because their picketing which constituted an obstruction to the free use of the employer's
property or the comfortable enjoyment of life or property, when accompanied by intimidation, threats,
violence, and coercion as to constitute nuisance, should be regulated. In line, the strike, even if justified
as to its ends, could become illegal because of the means employed, especially when the means came
within the prohibitions under Article 264 (e) of the Labor Code.
In view of our ruling in G.R. No. 1 56635, the acceleration clause under the Rules and Regulation
indubitably comes into play. Spouses Galang's failure to pay the accelerated amount of their obligation
therefore entitled HSCB-SRP to foreclose their mortgaged property in accordance with the Rules and
Regulations.
Notably, G.R. No. 156635 was only resolved in 2016. Thus, Spouses Galang assert that the
foreclosure of the mortgaged property in October 1996 was premature since the validity of Ma.
Theresa's dismissal from service was still pending at that time and was only resolved two (2) decades
later; whether she was validly dismissed for cause was a prejudicial question which had to be resolved
before foreclosure proceedings may be commenced. Both trial court and the Court of Appeals
concurred that the foreclosure was premature.
We disagree.
For one, the rule on prejudicial questions only finds application in criminal cases, thus:74
A prejudicial question is one that arises in a case the resolution of which is a logical antecedent of the
issue involved therein, and the cognizance of which pertains to another tribunal. It is a question based
on a fact distinct and separate from the crime but so intimately connected with it that it determines the
guilt or innocence of the accused, and lor it to suspend the criminal action, it must appear not only that
said case involves facts intimately related to those upon which the criminal prosecution would be based
but also that in the resolution of the issue or issues raised in the civil case, the guilt or innocence of the
accused would necessarily be determined.
Section 7, Rule 111 of the 2000 Rules of Criminal Procedure prescribes the elements that must concur
in order for a civil case to be considered a prejudicial question, to wit:
Section 7. Elements of prejudicial question. - The elements of a prejudicial question are: (a) the
previously instituted civil action involves an issue similar or intimately related to the issue raised in the
subsequent criminal action, and (b) the resolution of such issue determines whether or not the criminal
action may proceed.
Aptly put, the following requisites must be present for a civil action to be considered prejudicial to a
criminal case as to cause the suspension of the criminal proceedings until the final resolution of the civil
case: (1) the civil case involves facts intimately related to those upon which the criminal prosecution
would be based: (2) in the resolution of the issue or issues raised in the civil action, the guilt or
innocence of the accused would necessarily be determined; and (3) jurisdiction to try said question
must be lodged in another tribunal. Emphases supplied; citations omitted)
Since the present case is for annulment of the foreclosure sale and does not in any way involve a
criminal complaint, the concept of prejudicial question becomes inapplicable here.
For another, even assuming that G.R. No. 156635 may be treated as analogous to a prejudicial
question, this could have only resulted in the suspension of the annulment proceedings, thus:
Section 6. Suspension hy reason of prejudicial question. — A petition for suspension of the criminal
action based upon the pendency of a prejudicial question in a civil action may be filed in the office of
the prosecutor or the court conducting the preliminary investigation. When the criminal action has been
filed in court for trial, the petition to suspend shall be filed in the same criminal action al any time be
lore the prosecution rests.
Verily, the pendency of G.R. No. 1 56635, at best, could have constituted a valid ground for issuance of
an injunction and sufficient reason to hold the annulment proceedings in abeyance until G.R. No.
156635 got resolved. It does not, by itself, warrant the nullification of the foreclosure sale.
In any event, G.R. No. 156635 had already been resolved with finality against Ma. Theresa and her co-
employees. Consequently, there is no longer any "prejudicial question'1 or any other legal impediment
in resolving the case on the merits.
All told, whether under the Mortgage Agreement or the Rules and Regulations, HSBC-SRP's right to
foreclose the mortgaged property had already accrued.
HSBC-SRP and HSBC are nonetheless

estopped from demanding payment in full
and subsequently foreclosing the mortgage
Spouses Galang nevertheless insist that the acceptance75 of the payment for their arrears and
monthly amortizations from 1994 to 1996 and accordingly sending them their updated account after
twenty-two (22) months should place HSBC-SRP in estoppel from demanding full payment and later
on, foreclosing the mortgage.76
On the other hand, HSBC-SRP ripostes that estoppel does not apply here as none of its elements are
present.77 First, it never made any false representation to Spouses Galang for them to continue in their
monthly payments; second, it did not conceal material facts from them; third, it did not mislead them
into believing that there would be no foreclosure if they paid their arrears and continued paying their
account; fourth, it was consistent in its position that full payment was required to prevent foreclosure;
and finally, it did not aet in bad faith in receiving Spouses Galang's continued payments, as it did not
actively participate in the acceptance of their late payments.78
We agree with Spouses Galang.
Article 143 I of the Civil Code defines estoppel, thus:
Art. 1431. Through estoppel an admission or representation is rendered conclusive upon the person
making it. and cannot be denied or disproved as against the person relying thereon.
Spouses Loquellano v. HSBC, HSBC-SRP, and Manuel Estacion.79 is apropos:
Estoppel is a doctrine that prevents a person from adopting an inconsistent position, attitude, or action
if it will result in injury to another. One who. by his acts, representations or admissions, or by his own
ℒαwρhi ৷
silence when he ought to speak out. intentionally or through culpable negligence, induces another to
believe certain facts to exist and such other rightfully relies and acts on such belief, can no longer deny
the existence of such fact as it will prcjudiec the latter. The doctrine of estoppel is based upon the
grounds of public policy, fair dealing, good faith and justice. It springs from equitable principles and the
equities in the case. It is designed to aid the law in the administration of justice where, without its aid,
injustice might result. (Emphases and underscoring supplied)
Loquellano is another case involving similar events and incidents - almost on all fours here.
In Loquellano, petitioner Rosalina obtained a P400,000.00 housing loan from HSBC-SRP, similarly
secured by an analogous Mortgage Agreement and paid through monthly amortizations collected
through automatic salary deductions. Rosalina was terminated together with her co-employees
because of the strike they had staged. After losing her employment, she failed to pay her monthly dues
beginning January 1994. Rosalina nevertheless offered to make partial payments for her arrears which
HSBC-SRP rejected. Subsequently, she received an Installment Due Reminder dated July 26, 1995
which showed her monthly installment overdue and the accrued interest. On August 11, 1995, Rosalina
deposited amounts in her salary savings account to pay for the arrears reflected in the reminder, which
HSBC-SRP accepted. Consequently, she received updated Installment Due Reminders in August 28.
1995, September 27, 1995, December 21, 1995, February 26, 1996, March 13, 1996 and April 11,
1996 - all reflecting her payments and diminishing loan balances based on these payments which
HSBC-SRP accepted. Despite Rosalina's payments, HSBC-SRP proceeded to extrajudicially foreclose
her mortgage. The Court however ruled that such foreclosure was invalid, viz.:
To stress, respondent HSBC-SRP continuously sent out monthly Installment Due Reminders to

petitioner Rosalina despite its demand letter dated September 25. 1995 to pay the full amount of the
loan obligation within 3 days from receipt of the letter. It, likewise, continuously accepted petitioner
Rosalina's subsequent monthly amortization payments until June 1996: thus, making their default
immaterial. Moreover, there was no more demand for the payment of the full obligation
afterwards. Consequently, petitioners were made to believe that respondent HSBC-SRP was applying
their payments to their monthly loan obligations as it had done before. It is now estopped from
enforcing its right to foreclose by reason of its acceptance of the delayed payments.
Also, Article 1235 of the Civil Code provides that when the creditor accepts performance, knowing its
incompleteness and irregularity without protest or objection, the obligation is deemed complied with.
Respondent HSBC-SRP accepted Rosalina's payment of her housing loan account for almost one year
without any objection. (Emphases and underscoring supplied)
Conspicuously, the Court acknowledged that Spouses Loquellano were already in default, as with
Spouses Galang here, albeit it had become immaterial due to estoppel. The Court considered the
following circumstances: first, HSBC-SRP sent updated accounts through the monthly Installment Due
Reminders; second, it continuously accepted Rosalina's monthly amortizations; and third, HSBC-
SRP no longer demanded payment of the full obligation. Taken together, these acts induced Rosalina
to believe that her default had become immaterial and relied on such belief that HSBC- SRP can no
longer deny the same, as it would greatly prejudice Rosalina.
Here, too, HSBC-SRP sent Spouses Galang Installment Due Reminders, particularly in December 13,
1994 and September 11, 1996; this, despite the fact that it earlier sent Spouses Galang demand letters
in November 28, 1994, September 25 1995 and July 19, 1996. Interestingly, the final Installment Due
Reminder was sent two (2) months after the last demand letter was sent by HSBC-SRP The Court is
therefore convinced that by sending the Instalment Due Reminder after accepting unconditionally
twenty-two (22) monthly amortizations and after the last demand, HSBC-SRP made Spouses Galang
believe that they were up-to-date with their account and that their default with HSBC-SRP had become
immaterial. Indeed, to rule otherwise would greatly prejudice Spouses Galang who, in good faith,
believed that their payments had stalled the foreclosure. Hence, as in Loquellano , the HSBC- SRP's
foreclosure of Spouses Galang's property must be nullified.
Moving forward, however, the Court bears stress that in view of our ruling in G.R. No. 156635, it would
no longer be sufficient for Spouses Galang to pay their monthly installments. For as earlier stated,
under the Rules and Regulations, Spouses Galang are already under obligation to make a single
payment covering the entire outstanding balance. This is without prejudice, however, to proper
defenses which include future actions of HSBC- SRPs which may again place it in estoppel.
Should Spouses Galang fail to pay or comply with their obligation, HSBC-SRP may institute either a
personal action for its collection or a real action to extrajudicially foreclose the mortgage, which
remedies are alternative, not cumulative or successive,(80) and the election or use of one remedy
operates as a waiver of the others.81
Spouses Galang are not entitled to damages
As for their claim for damages, Spouses Galang continue to assert that HSBC-SRP's foreclosure was
not only without basis, but illegal and contrary' to morals, good customs and public policy. Assuming
that HSBC-SRP had basis to foreclose, it was exercised in bad faith and grave abuse of power. Thus,
damages should have been awarded to them.
Significantly, the courts below are consistent in ruling that Spouses Galang are not entitled to
damages. While the trial court did not grant damages on the ground that the case was prematurely
filed, the Court of Appeals simply found no basis for the award at all. It ruled that Spouses Galang
failed to allege, much less, prove moral suffering, mental anguish, sleepless nights, besmirched
reputation, or embarrassment. Consequently, they are also not entitled to exemplary damages.82
We agree with the courts below.
Spouses Estrada v. Philippine Bus Rabbit Lines, Inc.83 elucidates:
Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation, and similar injury. Though incapable of
pecuniary compulation, moral damages may be recovered if they arc the proximate result of the
defendant's wrongful act or omission.
Under Article 2219 of the Civil Code, moral damages are recoverable in Lhe following and analogous
eases: (1) a criminal offense resulting in physical injuries; (2) quasi-delicts causing physical injuries: (3)
seduction, abduction, rape or other lascivious acts: (4) adultery or concubinage; (5) illegal or arbitrary
detention or arrest; (6) illegal search; (7) libel, slander, or any other form of defamation; (8) malicious
prosecution: (9) acts mentioned in Article 309; 22 and (1) acts and actions referred to in Articles 21. 26,
27 . 2X. 29. 30, 32. 34. and 35.
xxx [Case law establishes the following requisites for the award of moral damages: (1) there must
be an injury clearly sustained by the claimant, whether physical, mental or psychological; (2) there must
be a culpable act or omission factually established; (3 ) the wrongful act or omission of the defendant is
the proximate cause of the injury sustained by the claimant; and (4) the award for damages is
predicated on any of the cases stated in Article 2219 of the Civil Code. (Emphases added; citations
omitted)
While Spouses Galang alleged bad faith, grave abuse, and illegality on part of petitioners, they utterly
failed to substantiate the same. In any event, HSBC-SRP had basis to foreclose the mortgage in
accordance with the Mortgage Agreement were it not for its actions which placed it on estoppel.
HSBC-SRP and HSBC are separate entities
Finally, in refusing to dismiss the case against HSBC, the Court of Appeals seemingly applied a
variation of the doctrine of piercing the veil of corporate fiction, thus: when two business enterprises are
owned, conducted and controlled by the same parties, both law and equity will, when necessary to
protect the rights of third parties, disregard the legal fiction that two corporations are distinct entities
and treat them as identical or one and the same.84
We disagree.
Though a subsidiary company's separate corporate personality may be disregarded when the evidence
shows that such separate personality was being used by its parent or holding corporation to perpetrate
a fraud or evade an existing obligation,85 none of these circumstances were alleged or proved by
Spouses Galang. They simply claimed that HSBC-SRP and HSBC acted in bad faith when they
foreclosed the mortgaged property though they (Spouses Galang) were up to date in their payments.
More, the insistence of Spouses Galang that HSBC was privy to the Mortgage Agreement for its
interests are so intertwined with those of HSBC- SRP that they have become identical — constitutes a
collateral attack on the corporate personality of HSBC-SRP which is prohibited by the Corporation
Code of the Philippines.86 Such an inquiry into the legal personality of a corporation may only be made
by the Solicitor General in a Quo Warranto proceeding.
At any rate, HSBC correctly argues that it had no participation in the foreclosure proceedings. The
parties even stipulated during the pre-trial that HSBC was not a signatory to any contract between
Spouses Galang and HSBC-SRP. Its role was limited to determining who among its employees were
eligible to apply for housing loans, processing and approval of which were left to the discretion of
HSBC-SRP.
Considering, too, that Spouses Galang are not entitled to damages, there is simply no reason to pierce
the corporate veil as they would have nothing to collect or regain from HSBC. Otherwise stated,
Spouses Galang do not have a cause of action against HSBC.
All told, the Court of Appeals correctly nullified the foreclosure sale, albeit for a different reason.
Meanwhile, there is simply no reason to involve HSBC in the fray as a non-party to the Mortgage
Agreement. Consequently, the Court is compelled to dismiss the petition of HSBC-SRP and grant the
petition of HSBC.
ACCORDINGLY, in G.R. No. 199565, the petition is DENIED The Decision dated March 31, 2011 and
Resolution dated December 6, 2011 of the Court of Appeals in CA-G.R. CV No. 90491 are AFFIRMED.
The foreclosure of the mortgage on the property of Spouses Juan I. Galang and Ma. Theresa Ofelia G.
Galang is declared VOID.
Meanwhile, in G.R. No. 199635, the petition is GRANTED. The complaint for Annulment of Sale with
Damages and Preliminary Injunction is DISMISSED as against HONGKONG AND SHANGHAI
BANKING CORP. for lack of cause of action.
SO ORDERED.
Perlas-Bernabe, Chairperson, Lazaro-Javier, Inting,*, Rosario, And Lopez, J.Y., JJ.,** concur.
Footnotes
* Designated additional member per Raffle dated 25 January 2021.

** Designated as additional member per Special Order No. 2822 dated April
1 Penned by Court of Appeals Associate Justice (now a member of the Supreme Court)
Mario V. Lopez, with Associate justices Magdangal de Leon and Edwin Sorongon.
concurring.
2 G.R. No. 199635, rollo, pp. 54-59.
3 Id. at 60.
4 HSBC-SRP had not yet been duly incorporated at the time the original case for
annulment of foreclosure sale with damages and preliminary injunction was filed on
December 20, 1996; id. at 60-61.
5 Id. at 30.
6 G.R. No. 199565. rollo. pp. 50-52.
7 G.R. No. 199635. rollo. p. 31.
8 Id.
9 Id.
10 G.R. No. 199565. rollo, p. 115.
11 Id.at 116.
12 G.R. No. 199635. rollo, p. 39.
13 G.R. No. 199565, rollo. p. 117.
14 Id. at 31.
15 Id. at 11 8.
16 Id.
17 G.R. No. 199635. rollo. p. 32.
18 Id.
19 G.R. No. 199565, rollo, p. 56.
20 G.R. No. 199635. rollo. p. 32.
21 Id
22 Id. at 65-67.
23 Id. at 67.
24 Id.
25 Id.
26 Id. at 68.
27 Id.
28 Id.
29 Penned by Judge Santiago G. Estrella; id. al 60-72.
30 Id. at 71-72
31 Id. at 69.
32 Id. at 69-70.
33 Id. at 70.
34 G.R. No. 199565. rollo. p. 66-85.
35 Id.at 73-75.
36 Id. at 75-80. 37
37 Id. at 80-82.
38 Id. at 75-94.
39 Id. at 109-130.
40 Penned by Court of Appeals Associate Justice (now a member of the Supreme

Court) Mario V. Lopez. with Associate Justices Magdangal de Leon and Edwin in
Sorongon. concurring.
41 CA Decision. p. 13.
42 Id. at 8.
43 Id. at l0-12.
44 Id. al 12-13.
45 G.R. No. 199635, rollo, p. 54-59.
46 G.R. No. 199565. rollo, p. 8-23; and G.R. No. 199635, rollo. p. 9-32.
47 G.R. No. 199565, rollo. p. 15- 17.
48 Id. at 17-22.
49 272-A Phil. 305,309 ( 1991 ).
50 414 Phil. 714. 716 (2001).
51 G.R. No. 199565, rollo. p. 18-19.
52 649 Phil 511. 518 (2010).
53 671 Phil. 377. 387 (2011 ).
54 G.R. No. 199565. rollo. p. 20.
55 Id.
56 '' (a) conduct amounting to false representation or concealment or material facts or

at least calculated lo convey the impression that the facts arc otherwise than. and
inconsistent with, those which the party subsequently attempts to assert: (b) intent. or at
least expectation that this conduct shall be acted upon, or at least influenced by the
other party: and (c) knowledge actual or constructive or the actual facts,
citing Maneclang vs. Baun. 284 Phil. 302. 317 (1992).
57 G.R. No. 199565. rollo, p. 181-182.
58 G.R. No. 199635. rollo. p. 9-32.
59 Id. at 17-22.
60 Id. at 22. citing Article 1311. Civil Code:
Contracts take effect only between the parties, their assigns and heirs, except in case
where the rights and obligations arising from the contract arc not transmissible by their
nature, or by stipulation or by provision or law. The heir is not liable beyond the value of
the property he received from the decedent. If a contract should contain some
stipulation in favor of a third person. he may demand its fulfillment provided he
communicated his acceptance to the obligor before its revocation. A mere incidental
benefit or interest or a person is not sufficient. The contracting parties must have clearly
and deliberately conferred a favor upon a third person. ( 1257a)
61 G.R. No. 199635. rollo. p. 22-24.

62 Id. at 28-31.
63 Id. at 11 428.
64 Id. at 11 7- 124.
65 Id. at 118-119.
66 Id. at 119.
67 Id. at 119-120.
68 Id. at 123.
69 G. R. No. 199565. rollo. p. 50-52.
70 G.R. No. 199635. rollo, p. 30. 71
71 Development Bank of the Philippines v. Licuanan, 545. 552 Phil. 544 (2007). citing
State Investment House Inc. v. Court of Appeals, 290 Phil. 222 (1992 ).
72 649 Phil 511 (2010).
73 671 Phil.37(2011).
74 People v. Arambulo, 760 Phil. 754. 761 (201 5).
75 NB. Payments were coursed through their payroll account with HSBC. in which
employees could make deposits for payment despite termination of salaries. the set-off
with such salaries were not the sole source or payment or amortizations.
76 G.R. No. 199635. rollo. p. 117- 124.
77 (a) conduct amounting to false representation or concealment or material facts or at

least calculated to convey the impression that the facts are otherwise than, and
inconsistent with. those which the party subsequently attempts to assert: (b) intent, or at
least expectation that this conduct shall be acted upon, or at least influenced by the
other party: and (c) knowledge actual or constructive of the actual facts., citing
Maneclang v. Baun. 284 Phil. 302. 317 (1992).
78 G.R. No. 199565. rollo. p. 181-182.
79 G.R. No. 200553. December 10, 2018.
80 Marilag v. Martinez, 764 Phil. 576, 5861 20 15).
81 Sycamore Ventures Corporation 721 Phil. 290, 297. (2013).

82 CA Decision. pp. 12-13.
83 813 Phil. 950, 064(2017).
84 Heirs of Fe Tan Uv v. lnternationul Exchange Bank. 703 Phil. 477 (2013 ); Goldkey

Development Corporation v. International Exchange Bank, 703 Phil. 477 (2013),
citing General Credit Corporation v . Alsons Development and lnvestment
Corporation, 542 Phil. 219. 231 (2007).
85 Maricalum Mining Corporation v. Florentino, et al. 836 Phil. 655. 664(2018).
86 Section 19. De facto Corporations. -The due incorporation of any corporation

claiming in good faith to be a corporation under this Code. and its right to exercise
corporate powers, shall not be inquired into collaterally in any private suit to which such
corporation may be a party. Such inqui1·y may be made by the Solicitor General in a
quo warranto proceeding.
The Lawphil Project - Arellano Law Foundation
NI all hardware, software and technical skills to design and develop the application of PCD for the
acceptance and processing of bets from PCD users in the Philippines. The ELA contained an
arbitration clause mandating that any dispute or controversy shall be settled through arbitration.7
On March 9, 2005, prior to the launch of the System, PCSO issued Board Resolution No. 080, series
of 2005 unilaterally rescinding the ELA for DFNNI's supposed failure to comply with its obligations
and commitment, including the implementation of the project within six (6) months from the
execution of the contract, viz.:
telecoms w[h]ile co
arbitration.7
telecoms w[h]ile co
arbitration.7
telecoms w[h]ile co
arbitration.7
telecoms w[h]ile co
arbitration.7
telecoms w[h]ile co
arbitration.7
telecoms w[h]ile co
arbitration.7
telecoms w[h]ile co
arbitration.7
telecoms w[h]ile co
arbitration.7
telecoms w[h]ile co
arbitration.7
telecoms w[h]ile co
arbitration.7
telecoms w[h]ile co
arbitration.7
telecoms w[h]ile co
arbitration.7
telecoms w[h]ile co
arbitration.7
telecoms w[h]ile co
arbitration.7
telecoms w[h]ile co
arbitration.7
telecoms w[h]ile co
by five of the nine Black Riders. decide to try to shake off the Black Riders by cutting through the Old
Forest. Merry and Pippin are trapped by Old Man Willow, an ancient tree who controls much of the
forest, but are rescued by Tom Bombad PHILIPPINE CHARITY SWEEPSTAKES OFFICE (PCSO),
PETITIONER, VS. DFNN, INC. (DFNNI), RESPONDENT.
DECISION
LAZARO-JAVIER, J.:
The Cases
In G.R. No. 232801, the Philippine Charity Sweepstakes Office (PCSO) assails the following
dispositions of the Court of Appeals in CA–G.R. SP No. 145462 entitled DFNN, Inc. v. Philippine
Charity Sweepstakes Office (PCSO), Hon. Judge Rizalina T. Capco-Umali (in her capacity as
Presiding Judge of Branch 212, Regional Trial Court of Mandaluyong City):
a. Decision1 dated February 20, 2017 reversing the Order dated April 11, 2016 of the
Regional Trial Court-Branch 212, Mandaluyong City (RTC-Mandaluyong) and ordering the
consolidation of Civil Case No. MCI5-9557 with Special Proceedings No. M-7844 before the
Regional Trial Court-Branch 66, Makati City (RTC-Makati); and
b. Resolution2 dated July 10, 2017 denying the motion for reconsideration of PCSO.
On the other hand, in G.R. No. 234193, PCSO assails the dispositions of the Court of Appeals
in CA-G.R. SP No. 145983 entitled Philippine Charity Sweepstakes Office (PCSO) v. DFNN,
Inc., viz.:
1. Decision3 dated November 17, 2016 affirming the Decision dated February 17, 2016 and
Order dated May 18, 2016 of the RTC-Makati in Special Proceedings No. M-7844 which
increased the award of damages decreed in the subject Arbitral Award in favor of DFNNI;
and
2. Resolution4 dated August 31, 2017 denying the motion for reconsideration of PCSO.
Antecedents
arbitration.7
telecoms w[h]ile conceding that the final contract should be signed by PCSO[;]
WHEREAS, to date, only minor telecom players, namely, Sun Cellular and Nextel, has expressed
their intention to cooperate in implementing the proposed project. Considering the limited number of
subscribers of the Sun Cellular and Nextel, the text betting project is no longer feasible, as it will not
generate the projected income, as proposed;
WHEREAS, PGMC, in its letter dated July 20,2004, from Mr. Kenny Low, Vice President for
Operations, cited the potentially grave risks to the integrity of the PCSO online lottery central system
due to the interconnection. Thus, PCSO and its lottery system runs a grave risk in incurring
problems relating to technical glitches, validation and claiming of winnings due to the proposed
interface of systems;
WHEREAS, in light of the foregoing, it appears that the System built by DFNN[I] cannot interface into
the PGMC's system in a seamless manner, thereby putting grave risks in the PCSO's betting
systems, which could generate controversies and negative publicity that will adversely affect the
integrity of the lotto project as well as the established trust of the playing public in PCSO's lotto
game;
WHEREFORE, for all the foregoing reasons, to wit: non-fulfillment of a suspensive condition relative
to the interconnection cooperation with PGMC and ILTS as well as the non-conformity of Globe
and/or Smart making the text betting project no longer feasible, doubts against the legality of the
ELA as being contrary to laws, morals and public policy; lack of authority of DFN[N]I to engage in the
proposed undertaking; absence of public bidding, as well as doubts arising from the unsigned
Minutes of the Meetings where the authority to enter into the ELA was allegedly given, RESOLVED,
THAT THE BOARD NOW RESCIND, AS IT HEREBY RESCINDS, THE ELA DATED APRIL 9, 2003
BETWEEN THE PCSO AND DFN[N]I, COPY OF WHICH IS ATTACHED HERETO AND MADE AN
INTEGRAL PART HEREOF;"8 (Emphasis retained.)
By letter dated April 5, 2005, PCSO informed DFNNI of the rescission. On December 12, 2005,
DFNNI replied, asking for a possible solution acceptable to all parties concerned.
On December 14, 2007, DFNNI wrote to PCSO requesting, this time, for voluntary proceedings to
resolve the issues which led to the cancellation of the ELA. PCSO denied the request.9 Thus,
DFNNI subsequently filed a Request for Arbitration against PCSO where it claimed
PhP1,913,948,850.00 as liquidated damages based on the estimated revenue of the project,
inclusive of temperate damages, attorney's fees, and litigation costs.
PHILIPPINE CHARITY SWEEPSTAKES OFFICE (PCSO), PETITIONER, VS. DFNN, INC. (DFNNI),
RESPONDENT.
DECISION
LAZARO-JAVIER, J.:
The Cases
Inc., viz.:
and
Antecedents
arbitration.7
game;
RESPONDENT.
DECISION
LAZARO-JAVIER, J.:
The Cases
Inc., viz.:
and
Antecedents
arbitration.7
game;
RESPONDENT.
DECISION
LAZARO-JAVIER, J.:
The Cases
Inc., viz.:
and
Antecedents
arbitration.7
game;
RESPONDENT.
DECISION
LAZARO-JAVIER, J.:
The Cases
Inc., viz.:
and
Antecedents
arbitration.7
telecoms w[h]ile co
by five of the nine Black Riders. nceding that the final contract should be signed by PCSO[;]
game;
il. Leaving the refuge of Tom's house, they get lost in a fog and are caught by a barrow-wight in
a barrow on the downs, but Frodo, awakening from the barrow-wight's spell, calls Tom Bombadil,
who frees them, and equips them with ancient swords from the barrow-wight's hoard.
attacked by five of the nine Black Riders. During the struggle, the Lord of the Nazgûl wounds Frodo
with a cursed blade. After fighting off the Nazgûl, Strider treats Frodo with the herb athelas, and
leads the hobbits towards Rivendell, but Frodo falls more and more deathly ill. The Nazgûl nearly
capture Frodo at the Ford of Bruinen, but upon attempting to cross the ford flood waters
summoned by Elrond, master of Rivendell, and Gandalf, rise up and overwhelm the Nazgul.
Book II: The Ring Goes South[edit]

Frodo recovers in Rivendell under Elrond's care. The Council of Elrond discusses the history of
Sauron and the Ring. Strider is revealed to be the heir of Isildur. Isildur had cut the One Ring from
Sauron's hand in the battle ending the Second Age, but refused to destroy it, claiming it for himself.
The Ring had been lost when Isildur was killed, finally ending up in Bilbo's possession after his
meeting with Gollum described in The Hobbit. Gandalf reports that the chief wizard, Saruman, has
betrayed them and is now working to become a power in his own right. Gandalf was captured by
Saruman, but escaped, explaining why he had failed to return to meet Frodo as he had promised.
The Council decides that the Ring must be destroyed, but that can only be done by sending it to the
fire of Mount Doom in Mordor where it was forged. Frodo takes this task upon himself. Elrond, with
the advice of Gandalf, chooses companions for him. The Fellowship of the Ring consists of nine
walkers to oppose the nine Black Riders: Frodo, Sam, Merry, Pippin, Aragorn,
Gandalf, Gimli the Dwarf, Legolas the Elf, and Boromir, son of the Steward of Gondor.

First Foreclosure Sale of January 11, 2000: Ruling of The RTC

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First Foreclosure Sale of January 11, 2000: Ruling of The RTC

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amboa (Jeanette), and Lourdes,

et al. were co-owners of a parcel of land covered by Transfer

First foreclosure sale of

Ruling of the RTC

WHEREFORE, in view of the foregoing, judgment is hereby rendered as follows:

No pronouncement as to the award of damages and cost of the suit.

Second Foreclosure Sale of

The Third-Party Claim

Aggrieved, Summit Bank elevated the matter to the CA by way of a Petition36 for Certiorari raising

Hence, the consolidated petitions.

The petitions are without merit.

First foreclosure sale of

Ruling of the RTC

WHEREFORE, in view of the foregoing, judgment is hereby rendered as follows:

No pronouncement as to the award of damages and cost of the suit.

Second Foreclosure Sale of

The Third-Party Claim

Aggrieved, Summit Bank elevated the matter to the CA by way of a Petition36 for Certiorari raising

Hence, the consolidated petitions.

The petitions are without merit.

First foreclosure sale of

Ruling of the RTC

WHEREFORE, in view of the foregoing, judgment is hereby rendered as follows:

No pronouncement as to the award of damages and cost of the suit.

Second Foreclosure Sale of

Hence, the consolidated petitions.

The petitions are without merit.

First foreclosure sale of

Ruling of the RTC

WHEREFORE, in view of the foregoing, judgment is hereby rendered as follows:

No pronouncement as to the award of damages and cost of the suit.

Second Foreclosure Sale of

The Third-Party Claim

Aggrieved, Summit Bank elevated the matter to the CA by way of a Petition36 for Certiorari raising

Hence, the consolidated petitions.

The petitions are without merit.

Today is Sunday, August 21, 2022

[ G.R. No. 199565, June 30, 2021 ]

1. Decision1 dated March 31. 2011 nullifying the foreclosure of mortgage of Spouses

2. Resolution2 dated December 6, 2011 denying reconsideration;

On the other hand, pertinent provisions of the Mortgage Agreement, read:

Meanwhile, HSBC Vice-President Manuel Estacion testified that he acted as a Trustee for HSBC-SRP.

The Ruling of the Trial Court

The Decision of the Court of Appeals

The Court of Appeals denied reconsideration on December 6, 201l.45

The Present Petitions

G.R. No. 199565: Petition for Review

They also cite Article VI-H of the Mortgage Agreement, thus:

In Nestle Philippines Inc. v. NLRC49 and NDC Guthrie Plantations v. NLRC50 the Court consistently

G.R. No. 199635: Petition for Review of HSBC

Consolidated Comment of Spouses Galang

THIRD. Are Spouses Galang entitled to damages?

FOURTH. Are HSBC-SRP and HSBC distinct from each other?

On the right of HSBC-SRP to foreclose the

The Mortgage Agreement of HSBC-SRP and Spouses Galang reads, inter alia, viz.:

Both circumstances obtain here.

a. HSBC-SRP's right to foreclose under the Mortgage Agreement

b. HSBC-SRP's right to foreclose under the Rules and Regulations

As judiciously observed by Senior Associate Justice Estela Perlas-Bernabe during deliberations,

HSBC-SRP and HSBC are nonetheless

We agree with Spouses Galang.

Article 143 I of the Civil Code defines estoppel, thus: