G.R. No. L-49568. October 17, 1979
BANCO DE ORO, PETITIONER-APPELLANT, VS. JAIME Z. BAYUGA AND ROBERTO P. TOLENTINO, RESPONDENTS-APPELLEES, THE COURT OF APPEALS AND HON. FRANCISCO DE LA ROSA IN HIS CAPACITY AS JU…
MELENCIO-HERRERA, J.:
A Petition for Review by Certiorari of the Decision of the
Court of Appeals* upholding with modification the
Special Order, dated March 10, 1978,
issued by the Court of First Instance of Rizal,
Branch VII, Pasay
City, directing the issuance of a
Writ of Execution pending appeal.
Factual Antecedents:
Respondent Roberto P. TOLENTINO is a lawyer appearing on his own
behalf and as counsel for his co-respondent Jaime Z. Bayuga.
On November 2, 1976, as security for a loan of P375,000.00,
respondent Jaime Z. Bayuga, as attorney-in-fact of
respondent Roberto P. TOLENTINO, and Leonardo Zaballero,
executed a Real Estate Mortgage in favor of the Acme Savings Bank (now Banco de Oro, petitioner herein)
over a parcel of land covered by TCT No. 48418 in the names of TOLENTINO and Zaballero, with an area of 2 hectares, more or less,
situated at Mabato, Calamba,
Laguna.[1]
The purpose of the loan was for the “acquisition of real estate property.”[2]
The mortgage was duly registered.
According to petitioner BANK, it approved the loan subject to the
following terms and conditions:
“1. That the interest rate shall be 19% per annum;
2. That the monthly amortization shall be P7,000.12;
3. That the loan shall be payable within ten (10) years;
4. That the property sought to be acquired which is located in Tagaytay City, covered and described under TCT No. 2703,
Lot B (LRC) Psd-1537 registered in the name of Algue
Incorporated shall be given as additional collateral;
5. That the property located at Calamba,
Laguna (TCT No. T-48418, Lot 1995-U (LRC) Psd-6481)
shall first be registered, provided, however, that the release of the proceeds
shall be paid directly to the owner of the property above-mentioned, and
6. That the loan shall be subject to availability of funds.”[3]
Private respondents contend, however, that they were unaware of
the foregoing conditions, the same having been embodied only in the Minutes of
the meeting of “the Board of Directors/Executive Committee” of
petitioner BANK, and, therefore, self-serving, as held by the trial Court.
On November 15, 1976,
the BANK made a partial release of P200,000.00 less charges of P6,000.00, which
amount was credited to the account of TOLENTINO in the said BANK. On the same date, out of the balance of
P194,000.00, TOLENTINO purchased from the BANK a certificate of time deposit in
the amount of P50,000.00. He also
withdrew on the said date P100,000.00, and
on November 16, 1976, the
amount of P44,000.00. TOLENTINO then purchased
from the BANK a Manager’s check in the total amount of P144,000.00, P135,000.00
of which he deposited in his savings account, and P9,000.00 in his checking
account, both with the Far East Bank & Trust Company.
Thereafter, claiming that the borrowers showed no indication of
complying with his obligation to pay the amount of the loan to the vendor (Algue, Inc.) of the Tagaytay City
property, which constituted diversion in violation of Sec. 77, Republic Act No.
337, the BANK stopped payment of its Manager’s check at the same time that it
refused to release the balance of the loan.
That action was necessary, according to the BANK, in order to prevent
private respondent from perpetrating a fraud against it.
CC
NO. 5271-B, CFI, Rizal,
Branch VII, Pasay City,
and
CA-G.R. No. SP-07573, Court
of Appeals
On December 2, 1976, private respondents TOLENTINO and Bayuga, as plaintiffs, brought an action for Specific
Performance with Damages against the BANK before the Court of First Instance of
Rizal, Branch VII, Pasay
City, docketed as CC No. 5271-B. On December 27, 1976, after a
preliminary hearing, the trial Court ordered the issuance of a Writ of
Preliminary Mandatory Injunction directing the BANK to comply with the mortgage
contract by releasing immediately to Bayuga the
consideration thereof in the amount of P375,000.00 upon private respondents’
posting of a bond of P200,000.00.[4]
Apparently, however, the BANK did not release the amount.
On December 12, 1977,
the trial Court rendered its Decision with the following decretal
portion:
“WHEREFORE, judgment is hereby rendered in favor of plaintiffs
(private respondents herein):
a)
Ordering Defendant Bank
(petitioner in this case) to comply with its obligations towards Plaintiff Bayuga under the Real Estate Mortgage (Exhibit ‘E’, Exhibit
’14’);
b)
Ordering Defendant Bank to pay to
Plaintiff Tolentino P144,000.00 in its manager’s
check and P50,000.00 in its Certificate of Time Deposit;
c)
Ordering Defendant Bank to pay to
Plaintiff Bayuga the balance of P175,000.00 in cash
or in check, as said Plaintiff Bayuga may demand;
d)
Ordering Defendant Bank to pay to
Plaintiff Bayuga the following:
1)
P 5,000.00 – as nominal damages,
2)
P20,000.00 – as moral damages,
3)
P10,000.00 – as exemplary damages,
4)
P10,000.00 – as attorney’s fees;
e)
Ordering Defendant Bank to pay
Plaintiff Tolentino the following:
1)
P80,000.00 – as actual damages,
2)
P20,000.00 – as moral damages,
3)
P10,000.00 – as exemplary damages,
4)
P10,000.00 – as attorney’s fees.
COSTS AGAINST DEFENDANT BANK.”
On December 27, 1977,
the BANK filed its Notice of Appeal to the Court of Appeals, posted an appeal
bond, and moved for extension of time within which to submit its Record on
Appeal.
Before the perfection of said appeal, however, and upon private
respondents’ “Petition for Execution with Prayer for Contempt”, the
trial Court issued an Order, dated February
10, 1978, confirming and reiterating the Writ of Preliminary
Mandatory Injunction it had issued on December
27, 1976 and ordering the BANK to comply therewith.
The BANK challenged the aforestated
Orders of December 27, 1976
and February 10, 1978 in a
Petition for Certiorari and Prohibition filed before the Court of
Appeals on February 16, 1978
in CA-G.R. No. SP-07573.
On March 10, 1978,
upon private respondents’ Motion for Execution Pending Appeal, the trial Court
released a “Special Order” authorizing execution in this wise:
“WHEREFORE, independently of whatever resolution the Honorable
Court of Appeals may hand down in the Petition now pending before it (CA-G.R.
No. 07573), and without the necessity of passing upon the issue of delay
allegedly intended by the Defendant Bank, this Court finds that there is a good
reason for the granting of the writ of execution pending the appeal herein – to
deny the issuance of the writ of execution pending appeal will be to deny from
the Plaintiffs the relief from the substantial injustice which they have been
burdened, which injustice started from the time the parcel of land of Plaintiff
Tolentino was mortgaged in favor of Defendant Bank,
and the same will continue for some time more unless the writ of execution is
immediately granted. It bears repeating
that their substantial injustice consists of having said parcel of land
mortgaged to Defendant Bank and said Defendant Bank not paying any single
centavo of the loan guaranteed by the mortgage.
Plaintiffs are willing to post sufficient bonds, as a token of good
faith, to cover the award of damages of P120,000.00 in favor of Plaintiff Tolentino and of P45,000.00 in favor of Plaintiff Bayuga. It is,
therefore, hereby ordered that a writ of execution pending appeal be issued
immediately for the enforcement and execution of the DECISION of this Court
dated December 12, 1977, upon the posting, in favor of Defendant Bank, a bond
in the amount of P40,000.00 by Plaintiff Tolentino
and a bond in the amount of P15,000.00 by Plaintiff Bayuga.”
On March 13, 1978,
private respondents posted the required bonds for special execution in the
total sum of P55,000.00.[5]
The bonds were approved by the trial Court on the same date.
On March 14, 1978,
the corresponding Writ of Execution was issued by the trial Court, by virtue of
which, the amount of P389,000.00, the BANK’s deposit
with the Central Bank, was garnished.
On March 16, 1978,
a Supplemental Petition for Certiorari was filed by the BANK with the
Court of Appeals in the same CA-G.R. No. SP-07573, seeking the nullification of the aforementioned Special
Order of March 10, 1978 and the issuance of a Restraining Order
enjoining the enforcement of execution pending appeal.
On March 17, 1978,
the Court of Appeals issued a Restraining Order as prayed for by the BANK.
On October 16, 1978,
the Court of Appeals ruled that the trial Court committed no grave abuse of
discretion in granting execution pending appeal but excluded the damages
awarded to private respondents. Its
Decision, in CA-G.R. No. SP-07573, reads thus in its dispostive
portion:
“WHEREFORE, the herein petition is denied. The challenged order is accordingly modified
in order to exclude the damages assessed in favor of respondent Bayuga and respondent Tolentino
(letters D and C of the dispositive portion of the
decision a quo). In all
other respects, the challenged order dated March 10, 1978 and all other orders flowing therefrom stand.
With costs.”
On October 20, 1978,
in virtue of said Decision of the Court of Appeals, the trial Court issued its
Order granting private respondents’ ex-parte Motion
for the enforcement of the Writ and/or the issuance of an Alias Writ. On October
25, 1978, the BANK filed a Motion to Quash/Lift Order dated October 20, 1978, or in the
alternative, a Motion for Authority to File Supersedeas
Bond to stay execution pending appeal.
On December 11, 1978, the trial Court denied quashal
of the Writ as well as the BANK’s alternative prayer
to be allowed to file a supersedeas bond, and ordered
the Central Bank, upon receipt of the Order, to deliver to the Deputy Sheriff
the amount of P389,000.00, the amount garnished by virtue of the Writ of
Execution of March 14, 1978, for said Sheriff to deliver the mentioned amount
to the Clerk of Court, and for the latter, in turn, to deliver the same to
private respondents.[6]
On December 15, 1978,
the Court of Appeals, upon the BANK’s Motion, issued
a Restraining Order enjoining the execution of its Decision until the BANK
would be able to elevate an appeal to this Court. [7]On
January 22, 1979, the Court
of Appeals lifted its Restraining Order since a Petition for Review on Certiorari
had actually been filed with this Court.[8]
In the meantime, or on August
10, 1978, the trial Court approved the BANK’s
Record on Appeal. In the Court of
Appeals, the appealed case was docketed as GA-G.R. No. 64130-R, where it is
still pending.
G.R.
No. L-49568 before the
Supreme
Court
On January 12, 1979, after an extension having been granted, the BANk filed the instant appeal by way of Certiorari
before this Court impugning the Decision of the Court of Appeals, as well as
the trial Court Orders a) of December 27, 1976 ordering the issuance of a Writ
of Preliminary Mandatory Injunction, b) of February 10, 1978 reiterating the
said Order, and c) the Special Order of March 10, 1978 granting execution
pending appeal. On January 19, 1979, the
BANK filed an Urgent Petition for the Issuance of Preliminary Injunction with
Restraining Order,[9]
to enjoin the trial Court “from further proceeding with any matter in
connection with Civil Case No. 5271-P of this Court” and praying that
Injunction be made permanent until the final outcome of the appeal on the
merits in C.A.-G.R. No. 64130 of the Court of Appeals is known.
In a Resolution dated January
24, 1979, we required private respondents to submit their Comment
and issued a Restraining Order enjoining the trial Judge from further
proceeding with Civil Case No. 5271-P and from enforcing his Order dated December 11, 1978, authorizing the
Central Bank to release the amount of P389,000.00. Private respondents’ Comment, which included
a prayer for the dismissal of the Petition and the immediate quashing of the
Restraining Order, was filed on January
29, 1979,[10]
and contended mainly that execution pending appeal is a necessity in order to
serve the interest of justice.
On February 14, 1979,
we denied the Petition for lack of merit and, on February 21, 1979, lifted the Restraining Order.[11]
The BANK moved for reconsideration and for the restoration of the Restraining
Order, which was opposed by private respondents. In support of its Motion for Reconsideration,
the BANK claimed that the amount of P375,000.00 would be secured only by the Calamba property, with a loan value of only P157,889.76;
that the bonds posted by private respondents totalling
P55,000.00 only are grossly inadequate; that it would be made to violate the
General Banking Act, R. A. No. 337, which mandates that the loan in question
should be used only for the purpose of acquiring urban or rural land; and that
release of the loan would render its appeal in CA-G. R. No. 64130-R moot and
academic.
In the interim, in view of the lifting of the Restraining Order,
a check for P389,000.00 was released by the Central Bank to the Deputy Sheriff
on February 26, 1979. The check was encashed
on the same date and turned over to private respondents. The BANK claims that execution was
implemented with irregularity and haste, with no explanation as to why the
amount of P369,000.00 was raised to P389,000.00.
In a Motion filed before the trial Court on March 15, 1979, the BANK prayed for an Order directing
private respondents to execute the corresponding promissory note in its favor.[12]
This was followed by a Manifestation that it was without prejudice to whatever
action the Supreme Court may take in the premises.[13]
In our Resolution of March
19, 1979, we required the BANK to file a Reply to private
respondents’ Opposition to the Motion for Reconsideration, and we reinstated
the Restraining Order lifted on February
21, 1979, unaware that execution had been implemented.[14]
The BANK filed its Reply on March 26,
1979 and reiterated its prayer for the restoration of the amount of
P389,000.00.
We set the Petition and all pending incidents for hearing, which
was tantamount to a due course Order, on April 16, 1979.[15]
This was reset to May 14, 1979
for non-service of the notice of hearing of April 16 on TOLENTINO. On the date of the first hearing on April 16,
however, the same having been attended by the BANK’s
counsel, the Court required the BANK to submit such pertinent documents as
would give the Court a complete picture of the controversy. In its Compliance, petitioner submitted
Application for Loan of Jaime Z. Bayuga (Annex
“A”); Application for Loan of Roberto P. Tolentino
(Annex “A-1”); Resolution No. 76-93-G M of the Board of petitioner
Bank (Annex “B”); Real Estate Mortgage (Annex “C”);
Affidavit of Undertaking signed by Bayuga (Annex
“D”); Letter of the Bank dated April 4, 1979 addressed to Bayuga, Zaballero and TOLENTINO
reminding them of the monthly amortization due (Annex “E”). For its part, private respondents claimed
that those documents were misleading;[16]
that the Application for Loan, which he had signed (Annex “A-1”), had
nothing to do with the transaction in question; that the excerpt of the Minutes
of the meeting of petitioner Bank (Annex “B”) is self-serving; that
the Real Estate Mortgage (Annex “C”) was executed only between Bayuga and the BANK; that the Affidavit of Undertaking
signed by Bayuga (Annex “D”) should not be
given any value; that the subject mortgage is not yet due and the BANK’S letter
dated April 4, 1979 (Annex “E”) is “a worthless piece of paper
coming from (the BANK’s) dirty heart.”
The hearing of May 14, 1979 was further postponed to June 6, 1979
after denying TOLENTINO’s prayer that said hearing of
May 14, 1979 be cancelled for being “unnecessary, the facts of the case
being beyond dispute.” We resolved
to impose upon Atty. TOLENTINO a fine of P200.00, and instead we required the
personal appearance of both private respondents Bayuga
and TOLENTINO at the hearing set for June
6, 1979.
During the oral argument, the Bank was required to submit copies
of the Record on Appeal filed in CA-G.R.
No. 64130-R of the Court of Appeals and a chronology of relevant
incidents. Its Compliance was filed on June 8,
1979. TOLENTINO was also required to submit, not
later than the close of office hours of June 7, 1979, copy of the alleged deed showing the
purchase by him of about eight hectares of real estate in Tagaytay City on account of which he allegedly paid
P350,000.00 out of the P389,000.00 received by him from the loan proceeds. TOLENTINO complied by submitting on June 7,
1979, at 11:00 A.M., a Deed of Sale dated March 9, 1979 of a parcel of land of
5 hectares in Tagaytay City for which he is shown to
have made a down payment of P280,000.00.
At 3:00 P.M. of
the same day, he submitted another Deed of Sale dated April 2,
1979 over a piece of
property of 2 hectares in Tagaytay City for which he obligated himself to make a
down payment of P70,000.00. Both sales,
while duly acknowledged before a Notary Public, do not disclose any evidence of
registration.
On July 2,
1979, we granted
private respondents’ prayer for 10 days within which to file a comment to the BANK’s Compliance dated June 7, 1979, but the said comment was not filed. On August 3, 1979, the case was considered submitted for resolution, with the Court noting a Motion for Early Resolution filed
by the BANK on July 31, 1979.
In this Petition before
us, the BANK contends:
“I
RESPONDENT COURT OF APPEALS ERRED IN DISREGARDING THE ELEMENTARY
PRINCIPLE OF LAW THAT A MORTGAGE CONTRACT IS MERELY AN ACCESSORY CONTRACT, THUS
DISPLAYING LACK OF INSIGHT IN THE LAW AND THE REASONS OR PRINCIPLES UNDERLYING
THE SAME;
“II
RESPONDENT COURT OF APPEALS COMMITTED ERRORS OF LAW BY NOT
CONSIDERING THE LEGAL PROVISION ATTENDANT TO THE ORDERS COMPLAINED OF BEFORE IT
ISSUED BY THE RESPONDENT JUDGE;
“III
RESPONDENT COURT OF APPEALS ENTIRELY DISREGARDED THE SPECIFIC
DIRECTION LAID DOWN BY R.A. NO. 337;
“IV
RESPONDENT COURT OF APPEALS ERRED IN ARRIVING AT A DECISION
OBVIOUSLY CONTRARY TO PUBLIC INTEREST AND TO PUBLIC POLICY; and
“V
RESPONDENT COURT OF APPEALS ERRED IN NOT CONSIDERING THE FACT THAT
A WRIT OF EXECUTION IS NOT PROPER IN THE ABOVE-ENTITLED CASE, AGAIN DISPLAYING
LACK OF INSIGHT IN THE LAW.”
The critical issue posed before us is the propriety of the
issuance of the Writ of execution pending appeal by the trial Court, and its affirmance, except as to the aspect of damages, by the
Court of Appeals. The trial Court opined
that to deny execution pending appeal would have been to deny the borrowers
relief from the substantial injustice with which they have been burdened considering
that their land had been mortgaged without the BANK having paid any centavo for
the loan. The Court of Appeals, in turn,
ruled that the issuance of a Writ of execution pending appeal is a matter of
discretion on the part of the issuing Court and as long as it is not exercised
in a capricious or whimsical manner, and a special reason for its issuance is
stated in the Order, appellate Courts will not disturb the same. The Court of Appeals was “most persuaded
by the fact that the loan is intended to buy real estate property, the price of
which varies as days go by.” Upon
the other hand, the BANK maintains that the issuance of the Writ would patently
work violence with justice and equity because the property given as collateral
as well as the bonds which have been posted are inadequate, and petitioner
would be made to violate the General Banking Act,[17]
which provides that the loan in question should be for the purpose only of
acquiring urban or rural land; and that the appeal in CA-G.R. No. 64130 would
be rendered moot and academic.
While, prima facie, execution pending appeal seemed justified because of the
unilateral cancellation of the release of the loan by the BANK without notice,
and the absence of complete supporting documents to the Petition, disclosures
by the parties during the hearing and pleadings and documents subsequently
filed uphold a contrary view. Thus,
during the hearing as well as in his Comments filed on May 30, 1979, TOLENTINO
contended that he is not a party to the mortgage contract which was executed
only between the BANK and Bayuga; that he became a
party only because he was “injured and damaged by the bad faith of the
BANK;” that he is not willing to co-sign a promissory note in the BANK’s favor for the amount of P389,000.00, alleging that Bayuga had already signed a promissory note in November, 1976 in the sum of P200,000.00;
and that neither he nor Bayuga had obligated himself
to put up any additional collateral. Bayuga, for his part, during the hearing, assumed a very
passive role admitting that he was but an employee of TOLENTINO who was the
prime mover in the entire transaction.
The lack of good faith and of a sense of fair play on the part of
private respondents was all too evident.
They were treating the release of the amount of P389,000.00 in their
favor more as a money judgment, which it is not, rather than as a loan which it
is. They want to avail of the full
benefits of the loan without assumption of the corresponding obligations, or
very minimally at that. Since receipt of
the aforestated amount, they have even refused to
make any monthly amortizations even upon demand by the BANK, contending that
“no amount of the said loan is due.
It will only be paid ten (10) years after the execution of the mortgage
contract as interpreted by our Courts.”[18]
The unfairness and inequity of this posture to the banking
business is too evident to require elaboration.
Funds of a bank are, in a sense held in trust. There are the interests of depositors to be
protected. The collateral the BANK has
in its favor, with a loan value of only P157,889.76, is far from adequate to
answer for the amount of P389,000.00 that is now in the hands of private
respondents. The manner of repayment by
private respondents of that amount remains nebulous. Of course, the BANK is not without fault for
this sorry state of affairs.
The special reason cited by the trial Court and upheld by the
Court of Appeals, i.e., the “substantial injustice” wrought on
private respondents whose land had been mortgaged without any centavo paid for
the loan, does not exist in law. As
pointed out by the BANK, the Calamba property need
not have remained subject to the mortgage, the mortgage being but an accessory
contract to the contrast of loan which is the principal obligation and which
has been cancelled. The consideration of
the mortgage is the same consideration of the principal contract without which
it cannot exist as an independent contract.[19]
The “persuasive” factor considered by the Court of Appeals “that
the loan is intended to buy real estate property, the price of which varies as
days go by” was disproved by the fact that TOLENTINO utilized the amount
initially released to purchase a certificate of time deposit and to open bank
accounts in his name rather than pay for the Algue
property.
In the absence of good reasons,[20]
private respondents have not shown a clear entitlement to execution pending
appeal. Moreover, after having received
the loan proceeds of P389,000.00 on
February 26, 1979 by means of the execution pending appeal improvidently
granted, they refused to make any monthly amortizations since March, 1979,
notwithstanding the BANK’s demands, on the outrageous
claim against all banking practice that they are not obligated to pay any
amount on the loan until the lapse of ten (10) years after the execution of the
mortgage contract. Under the
circumstances, defendants are clearly in default on their loan and are liable
to repay the whole amount with the stipulated interest.
WHEREFORE, the judgment of the Court of Appeals in CA-G.R.
No. SP-07573 is hereby set aside.
Private respondents are hereby jointly and severally ordered to restore
and repay petitioner Banco de Oro
the sum of P389,000.00 with the
stipulated interest of nineteen per cent (19%)
per annum from February 26,
1979 until the whole amount due shall have been fully paid. The property given in mortgage by respondents
under the mortgage contract as well as the bonds totaling P55,000.00 posted by
respondents for the issuance of the questioned order of execution pending
appeal shall stand liable for satisfaction of the judgment herein rendered in
favor of petitioner bank.
In effect, this conclusion renders the appeal in CAG.R. No. 64130-R moot and academic and the
judgment of the trial court is accordingly set aside. The interests of substantial justice and
demands of fair play so dictate.
Costs against private respondents-appellees
jointly and severally.
This judgment shall be immediately executory
upon its promulgation.
SO ORDERED.
Teehankee, (Acting Chief Justice), Makasiar, Fernandez, Guerrero, and De Castro, JJ., concur.
* Former Fourth Division, composed
of Justices Ramon G. Gaviola, Jr., ponente, Buenaventura S. de la Fuente,
and Hugo E. Gutierrez, Jr.
[1]
Annex C, Compliance and Motion filed by petitioner, p. 254, Rollo.
[2]
ibid.
[3]
Resolution No. 76-93-GM, Annex I, Petition, pp. 54-55, Rollo.
[4]
Annex B, Petition, pp. 29-30, Rollo.
[5]
Annex A, Urgent Petition for Issuance of Preliminary Injunction with
Restraining Order, p. 71, Rollo.
[6]
Annex A, Urgent Petition for Issuance
of Preliminary Injunction with Restraining Order, pp. 71-81, Rollo.
[7]
Annex C, p. 85, Rollo.
[8]
Annex 13, Respondents’ Comment, p. 194, Rollo.
[9]
Pp. 66-70, Rollo.
[10]
P. 95, Rollo.
[11]
Pp. 214-215, Rollo.
[12]
P. 264, Rollo.
[13]
P. 271, Rollo.
[14]
P. 225, Rollo.
[15]
P. 240, Rollo.
[16]
Comments, p. 277, Rollo.
[17]
Republic Act No. 337.
[18]
Annex 1, Manifestation filed by petitioner on September 20, 1979.
[19]
China Banking Corporation vs. Lechauco, 46
Phil. 460 (1924).
[20]
Sec. 2, Rule 39, Rules of Court.