philippine national bank vs

7/21/2019 Philippine National Bank Vs

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Philippine National Bank vs. Court of Appeals

G.R. No. 121597, 3! "CRA 37!, #une 29, 2!!1

$his petition assails the %e&ision1 of the Court of Appeals %ate% #ul' 25, 1995 in CA(G.R. C) No. 35*,a+rin- the %e&ision %ate% "epteer *, 1991 of the Re-ional $rial Court of Bala'an, Batan-as, Bran&h1! in Civil Case No. 19//.

$he fa&ts, as foun% ' the trial &ourt an% ' the Court of Appeals, are not %ispute%.

$he spouses Antonio 0. Chua an% Asun&ion 0. Chua ere the oners of a par&el of lan% &overe% '$ransfer Certi&ate of $itle No. P(1*2 an% re-istere% in their naes. pon Antonio4s %eath, the proate&ourt appointe% his son, private respon%ent Allan 0. Chua, spe&ial a%inistrator of Antonio4s intestateestate. $he &ourt also authorie% Allan to otain a loan a&&oo%ation of ve hun%re% ft' thousan%6P55!,!!!.!! pesos fro petitioner Philippine National Bank to e se&ure% ' a real estate ort-a-e overthe aove(entione% par&el of lan%.

8n #une 29, 19/9, Allan otaine% a loan of P*5!,!!!.!! fro petitioner PNB evi%en&e% ' a proissor'note, pa'ale on #une 29, 199!, ith interest at 1/./ per&ent per annu. $o se&ure the loan, Allanee&ute% a %ee% of real estate ort-a-e on the aforesai% par&el of lan%.

8n :e&eer 27, 199!, for failure to pa' the loan in full, the ank etra;u%i&iall' fore&lose% the real estateort-a-e, throu-h the en&e, the present petition for revie on &ertiorari un%er Rule *5 of the Rules of Court. Petitioner &ites to-roun%s?

$>< CA A$ PNB CAN N8 8NG< @N$@" :<


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other assets of the estateH ut nothin- herein &ontaine% shall prohiit the ee&utor or a%inistrator frore%eein- the propert' ort-a-e% or ple%-e% ' pa'in- the %et for hi&h it is hol% as se&urit', un%erthe %ire&tion of the &ourt if the &ourt shall a%;u%-e it to e for the interest of the estate that su&hre%eption shall e a%e.

Pertinent to the issue at ar, a&&or%in- to petitioner, are our %e&isions he &ite%./ Pru%ential Bank v.0artine, 1/9 "CRA 12, 15 6199!, is parti&ularl' &ite% ' petitioner as pre&e%ent for hol%in- that inetra;u%i&ial fore&losure of ort-a-e, hen the pro&ee%s of the sale are insu+&ient to pa' the %et, theort-a-ee has the ri-ht to re&over the %e&ien&' fro the ort-a-or.

>oever, it ust e pointe% out that petitioner4s &ite% &ases involve or%inar' %ets se&ure% ' aort-a-e. $he &ase at ar, e ust stress, involves a fore&losure of ort-a-e arisin- out of a settleentof estate, herein the a%inistrator ort-a-e% a propert' elon-in- to the estate of the %e&e%ent,pursuant to an authorit' -iven ' the proate &ourt. As the Court of Appeals &orre&tl' state%, the Rules ofCourt on "pe&ial Pro&ee%in-s &oes into pla' %e&isivel'.

$o e-in ith, it is &lear fro the tet of "e&tion 7, Rule /9, that on&e the %ee% of real estate ort-a-e isre&or%e% in the proper Re-istr' of :ee%s, to-ether ith the &orrespon%in- &ourt or%er authoriin- thea%inistrator to ort-a-e the propert', sai% %ee% shall e vali% as if it has een ee&ute% ' the%e&ease% hiself. "e&tion 7 provi%es in part?

"e&. 7. Rule /9. Re-ulations for -rantin- authorit' to sell, ort-a-e, or otherise en&uer estate I $he&ourt havin- ;uris%i&tion of the estate of the %e&ease% a' authorie the ee&utor or a%inistrator to sellpersonal estate, or to sell, ort-a-e, or otherise en&uer real estate, in &ases provi%e% ' these ruleshen it appears ne&essar' or ene&ial un%er the folloin- re-ulations?

6f $here shall e re&or%e% in the re-istr' of %ee%s of the provin&e in hi&h the real estate thus sol%,ort-a-e%, or otherise en&uere% is situate%, a &ertie% &op' of the or%er of the &ourt, to-ether iththe %ee% of the ee&utor or a%inistrator for su&h real estate, hi&h shall e vali% as if the %ee% ha% eenee&ute% ' the %e&ease% in his lifetie.

@n the present &ase, it is un%ispute% that the &on%itions un%er the afore&ite% rule have een &oplie% ith.@t follos that e ust &onsi%er "e&. 7 of Rule /, appropriatel' appli&ale to the &ontrovers' at han%.

Case la no hol%s that this rule -rants to the ort-a-ee three %istin&t, in%epen%ent an% utuall'e&lusive ree%ies that &an e alternativel' pursue% ' the ort-a-e &re%itor for the satisfa&tion of his&re%it in &ase the ort-a-or %ies, aon- the?

61 to aive the ort-a-e an% &lai the entire %et fro the estate of the ort-a-or as an or%inar' &laiH

62 to fore&lose the ort-a-e ;u%i&iall' an% prove an' %e&ien&' as an or%inar' &laiH an%

63 to rel' on the ort-a-e e&lusivel', fore&losin- the sae at an' tie efore it is arre% ' pres&riptionithout ri-ht to le a &lai for an' %e&ien&'.9

@n Pere v. Philippine National Bank,1! reversin- Pasno vs. Ravina,11 e hel%?

$he rulin- in Pasno vs. Ravina not havin- een reiterate% in an' other &ase, e have &arefull' reeaine%the sae, an% after ature %elieration have rea&he% the &on&lusion that the %issentin- opinion is ore in&onforit' ith reason an% la. 8f the three alternative &ourses that se&tion 7, Rule /7 6no Rule /,o=ers the ort-a-e &re%itor, to it, 61 to aive the ort-a-e an% &lai the entire %et fro the estate ofthe ort-a-or as an or%inar' &laiH 62 fore&lose the ort-a-e ;u%i&iall' an% prove an' %e&ien&' as anor%inar' &laiH an% 63 to rel' on the ort-a-e e&lusivel', fore&losin- the sae at an' tie efore it isarre% ' pres&ription, ithout ri-ht to le a &lai for an' %e&ien&', the a;orit' opinion in Pasno vs.Ravina, in reJuirin- a ;u%i&ial fore&losure, virtuall' ipes out the thir% alternative &on&e%e% ' the Rules tothe ort-a-e &re%itor, an% hi&h oul% pre&isel' in&lu%e etra(;u%i&ial fore&losures ' &ontrast ith these&on% alternative.

$he plain result of a%optin- the last o%e of fore&losure is that the &re%itor aives his ri-ht to re&over an'%e&ien&' fro the estate.12 olloin- the Pere rulin- that the thir% o%e in&lu%es etra;u%i&ialfore&losure sales, the result of etra;u%i&ial fore&losure is that the &re%itor aives an' further %e&ien&'&lai. $he %issent in Pasno, as a%opte% in Pere, supports this &on&lusion, thus?

Ehen a&&ount is further taken of the fa&t that a &re%itor ho ele&ts to fore&lose ' etra;u%i&ial saleaives all ri-ht to re&over a-ainst the estate of the %e&ease% %etor for an' %e&ien&' reainin- unpai%after the sale it ill e rea%il' seen that the %e&ision in this &ase 6referrin- to the a;orit' opinion illipose a ur%en upon the estates of %e&ease% persons ho have ort-a-e% real propert' for the se&urit'of %ets, ithout an' &opensator' a%vanta-e.

Clearl', in our vie, petitioner herein has &hosen the ort-a-e(&re%itor4s option of etra;u%i&iall'fore&losin- the ort-a-e% propert' of the Chuas. $his &hoi&e no ars an' suseJuent %e&ien&' &laia-ainst the estate of the %e&ease%, Antonio 0. Chua. Petitioner a' no lon-er avail of the &oplaint forthe re&over' of the alan&e of in%ete%ness a-ainst sai% estate, after petitioner fore&lose% the propert'


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se&urin- the ort-a-e in its favor. @t follos that in this &ase no further liailit' reains on the part ofrespon%ents an% the late Antonio 0. Chua4s estate.

E>ea%Juarters on eruar' 13, 19/!H an%

&. "uppleental Chattel 0ort-a-e &onstitute% on 0) OAsean Greatness an% re&or%e% ith the PhilippineCoast Guar% >ea%Juarters on eruar' 3, 19/1.K*L

0eanhile, on 0ar&h 12, 1979, P@"C entere% into a Contra&t A-reeent ith >on- Mon- nite% :o&k'ar%s,t%. for the repair an% &onversion of the vessel 0) OAsean iert' at a &ontra&t pri&e of >MQ2,2!!,!!!.!!variale as provi%e% therein.K5L

8n 0a' 2/, 1979, the Central Bank of the Philippines authorie% P@"C to open ith private respon%entChina Bankin- Corporation 6hereinafter OCBC a stan%' letter of &re%it for "Q5*5,!!!.!! in favor ofCitiank, N.A. 6hereinafter OCitiank to &over the repair an% partial &onversion of the vessel 0) OAseaniert'. $his as pursuant to the letter of the Central Bank of the Philippines %ate% 0a' 2/, 1979 asaen%e% on #une 2!, 1979.KL

8n #une 15, 1979, P@"C ee&ute% an Appli&ation an% A-reeent for Coer&ial etter of Cre%it forQ5*5,!!!.!! ith private respon%ent CBC in favor of Citiank. Pursuant to this appli&ation an% a-reeent,private respon%ent CBC issue% on "epteer 12, 1979 its @rrevo&ale "tan%' etter of Cre%it No. 79*17*for "Q5*5,!!!.!! in favor of Citiank for a&&ount of P@"C.

8n "epteer 17, 1979, a Proissor' note for "Q5*5,!!!.!! as ee&ute% ' P@"C in favor of Citiankpursuant to the oan A-reeent for "Q5*5,!!!.!! eteen P@"C, as orroer, an% Citiank, as len%er.K7L

pon failure of P@"C to fulll its oli-ations un%er the sai% proissor' note, Citiank sent to privaterespon%ent CBC a letter %ate% 0ar&h 25, 19/3 %rain- on etter of Cre%it No. 79*17*. @n this letter,Citiank &ertie% that the %raft atta&he% thereto for "Q2*2,225.!! represente% the prin&ipal alan&e %ueto Citiank as of 0ar&h 17, 19/3 un%er the proissor' note ee&ute% ' P@"C, the pro&ee%s of hi&h ereuse% for the repair an% &onversion of 0) Asean iert'. $hus, on 0ar&h 3!, 19/3, CBC instru&te% its


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&orrespon%ent @rvin- $rust Co., ' &ale, to pa' to Citiank the aount of "Q2*2,225.!!. 8n the sae%ate, @rvin- $rust Co. a%vise% private respon%ent CBC ' ail that the aount of "Q2*2,225.!! ha% een%eite% a-ainst CBC4s A&&ount No. /!3327/29 an% reitte% to Citiank.K/L

8n 0a' 1!, 19/3, for failure of P@"C to settle its oli-ations in the aount of "Q*,7/9,*7!.9, petitionerPNB &on%u&te%, thru the "heri=4s 8+&e, an au&tion sale of the ort-a-e% vessels, e&ept for the vessel0) OAsean 8;e&tive. Petitioner N@:C eer-e% as the hi-hest i%%er in these au&tions.K9L

8n 0a' 27, 19/3, &laiin- that the fore&losure sale of its ort-a-e% vessels as ille-al, un;ust, irre-ular,

an% oppressive, P@"C institute% efore the Re-ional $rial Court of 0akati, a &ivil &aseK1!L a-ainst petitionersfor the annulent of the fore&losure an% au&tion sale of its vessels an% %aa-es.

As a&&uratel' narrate% in the trial &ourt4s 8r%er an% a%opte% ' the Court of Appeals in its :e&ision of0ar&h 21, 1997, the folloin- pro&ee%in-s transpire% in the loer &ourt?

ORe&or%s sho that on 0a' 27, 19/3, P@"C 6Philippine @nternational "hippin- Corporation le% suit a-ainstNational @nvestent an% :evelopent Corporation 6N@:C, for short an% Philippine National Bank 6PNB, forshort for annulent of fore&losure of ort-a-e an% au&tion sale ith %aa-es vis(S(vis the sale onfore&losure of vessels Asean 0ission, Asean Mnole%-e, Asean Nations an% Asean Greatness 6as ell asAsean iert' an% Asean @n%epen%en&e. N@:C ansere% the &oplaint, an% in an aen%e% anseriplea%e% a%%itional &ounter&lai %efen%ants. @n an 8r%er %ate% "epteer 29, 19/*, then #u%-e #ose .Cos&olluela, #r. %isisse% the &oplaint as a-ainst PNB an% the &ounter&laie% %efen%ants. An% un%er%ate of Noveer 3, 19/, the &oplaint itself a-ainst an% the N@:C &ounter&lais ere %isisse% ithpre;u%i&e.

@n the eantie, N@:C a&Juire% the vessels as hi-hest i%%er in the fore&losure thereof initiate% ' PNB,N@:C havin- thereafter %ispose% of sai% vessels in favor of the National "teel Corporation 6N"C.

Coplaints in intervention ere le% ' an% for nitor "hips "ervi&es P$MQ5,93!., MPoun%s C1!,33.*5 an% P9,53.!! as ein- in the nature of preferre% aritie liens on the vessels 0)OA"


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Plainti=s a%it the re&overailit' of sai% &lais as ein- in the nature of preferre% aritie liens, hereasPNB(N@:C &ontests the sai% &lais.

B. "$@PA$@8N" AN: A:0@""@8N".

Plainti=s, PNB(N@:C an% intervenor(&laiant lo'%4s Re-ister of "hippin- stipulate an% a%it that thetotalit' of its &lais as full' supporte% ' %o&uentation alrea%' verie% ' the parties are in the sus of>MQ5,93!,!!, MC1!,33.*5 an% P9,53.!!.

Plainti=s, PNB(N@:C an% intervenor(&laiant China Bankin- Corporation stipulate an% a%it that thetotalit' of its &lai is in the su of "Q3,/7!,227.53 as fortie% ' %o&uentation alrea%' verie% inpoint.

C. @""


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Corporation 6P@"C ere availe% of an% use%. $he issue thus raise% &annot e ;u%i&iousl' resolve% ithoutreviein- the proative ei-ht of the evi%en&e on re&or% &onsistin- in the ain of the various %o&uents,&ontra&ts an% transa&tions atta&he% to CBC4s &oplaint(in(intervention. @t is, therefore, in%uitale thatie% Juestions of fa&t an% of la are involve% over hi&h this Court has ;uris%i&tion.K1/L

$hus, in resolvin- the issues raise% ' private respon%ent in the Court of Appeals, the appellate &ourt ha%to ake a fa&tual inJuir', aon- others, on the nature an% ters of the &ontra&ts aon- the %i=erentparties, the relationship of the %i=erent parties ith one another an% ith respe&t to the vessels involve%in the &ase, ho the pro&ee%s of the loans ere use%, an% the &orre&t %ates hen the aritie an%ort-a-e liens ere &onstitute% on the vessels. $he %eterination of these fa&ts is &ru&ial as it illresolve hether the aount a%van&e% ' respon%ent CBC is in the nature of a aritie lien an% if so,hether the lien is superior to the ort-a-e lien of petitioners. @f the appellate &ourt, in the eer&ise of itsrevie poer, n%s that the aount a%van&e% ' CBC as use% for the repair of the vessels, then aort-a-e lien as in%uital' estalishe% over the shippin- vessels. 0oreover, a %eterination of the%ates hen the respe&tive liens of the parties ere &onstitute% over the vessels ill anser the Juestionas to hi&h lien is preferre% over the other. @n short, in or%er to a%%ress full' the issues raise% ' theparties in their plea%in-s, the appellate &ourt ne&essaril' ha% to ake fa&tual n%in-s.

)eril', the issues raise% ' private respon%ent in the appellate &ourt ere &o-niale ' the sai% &ourt, theissues ein- ie% Juestions of fa&t an% la. Respon%ent &ourt as therefore a&tin- ithin its ;uris%i&tionhen it proul-ate% its Juestione% %e&ision.

$he net issue rou-ht up ' petitioners is hether or not private respon%ent CBC4s &lai for"Q2*2,225.!! is in the nature of a aritie lien. @t is the &ontention of petitioners that O6the Court ofAppeals -ravel' erre% in la in hol%in- that private respon%ent CBC4s &lai un%er its "tan%' etter ofCre%it No. 79*17* is a aritie lien, an% that sai% aritie lien is preferre% over the ort-a-e lien ofpetitioners PNBN@:C on the fore&lose% vessel 0) Asean iert'.K19L

$he appli&ale la on the atter is Presi%ential :e&ree No. 1521, otherise knon as the "hip 0ort-a-e:e&ree of 197/. "e&tions 17 an% 21 of the sai% Presi%ential :e&ree provi%es as follos?

O"e&. 17. Preferre% 0aritie iens, Priorities, 8ther iens I 6a pon the sale of an' ort-a-e% vessel inan' etra(;u%i&ial sale or ' or%er of a %istri&t &ourt of the Philippines in an' suit in re in a%iralt' for theenfor&eent of a preferre% ort-a-e lien thereon, all pre(eistin- &lais on the vessel, in&lu%inan'possessor' &oon(la lien of hi&h a lienor is %eprive% un%er the provisions of "e&tion 1 of this :e&ree,shall e hel% terinate% an% shall thereafter atta&h, in like aount an% in a&&or%an&e ith the prioritiesestalishe% herein to the pro&ee%s of the sale. $he preferre% ort-a-e lien shall have priorit' over all&lais a-ainst the vessel, e&ept the folloin- &lais in the or%er state%? 61 epenses an% fees alloe%an% &osts tae% ' the &ourt an% taes %ue to the -overnentH 62 &re4s a-esH 63 -eneral avera-eH 6*salva-eH in&lu%in- &ontra&t salva-eH 65 aritie liens arisin- prior in tie to the re&or%in- of the preferre%ort-a-eH an% 6 %aa-es arisin- out of tortH an% 67 preferre% ort-a-e re-istere% prior in tie.

6 @f the pro&ee%s of the sale shoul% not e su+&ient to pa' all &re%itors in&lu%e% in one nuer or -ra%e,the resi%ue shall e %ivi%e% aon- the pro rata. All &re%its not pai%, hether full' or partiall' shallsusist as or%inar' &re%its enfor&eale ' personal a&tion a-ainst the %etor. $he re&or% of ;u%i&ial sale orsale ' puli& au&tion shall e re&or%e% in the Re&or% of $ransfers W


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$he fore-oin- provision of the &ontra&t a-reeent in%uital' shos that &re%it as -iven to the vessel0) OAsean iert' ' >on-kon- nite% :o&k'ar%s, t%. an% as a result, a aritie lien in favor of>on-kon- nite% :o&k'ar%s, t%. as &onstitute% on the sai% vessel ' virtue of "e&tion 21 of the "hip0ort-a-e :e&ree of 197/.

@t is the &ontention of private respon%ent CBC hoever, that it ultiatel' a&Juire% the aritie lien of>on-kon- nite% :o&k'ar%s, t%. over the vessel 0) OAsean iert'. As shon ' the %o&uentar'evi%en&e o=ere% ' private respon%ent CBC, its proof that it a&Juire% sai% aritie lien is as follos?

6a 8n 0ar&h 12, 1979, P@"C entere% into a Contra&t A-reeent ith >on-kon- nite% :o&k'ar%s, t%., as&ontra&tor, for the repair an% &onversion of its vessel 0) OAsean iert' for a &ontra&t pri&e of>MQ2,2!!,!!!.!!K21LH

6 8n 0a' 2/, 1979, the Central Bank of the Philippines approve% P@"C4s reJuest to open ith privaterespon%ent China Bankin- Corporation a "tan%' etter of Cre%it for "Q5*5,!!!.!! in favor of >on-kon-nite% :o&k'ar%s, t%. $his 0a' 2/, 1979 letter state% that the &re%it for "Q5*5,!!! oul% e use% Oto&over the partial &onversion &ost of the vessel TAsean iert'4. 8n #une 2!, 1979, the Central Bankapprove% the reJuest of P@"C to &han-e the ene&iar' of the sai% "tan%' etter of Cre%it fro >on-kon-nite% :o&k'ar%s, t%. to CitiankK22LH

6& 8n #une 15, 1979, P@"C ee&ute% an Appli&ation an% A-reeent ith private respon%ent CBC for theopenin- of a "tan%' etter of Cre%it for "Q5*5,!!!.!! in favor of Citiank, N.A., 0akati, 0etro 0anila asene&iar'. $he a-reeent &onre% that the letter of &re%it oul% e use% to -uarantee the loan in theaount of "Q5*5,!!!.!!, the pro&ee%s of hi&h ill e use% Oto nan&e partiall' the &onversion &ost ofthe vessel 0) TA"@AN @Bon-kon- nite% :o&k'ar%s,t%. an% the China "hipuil%in- Corporation of $aian, the' ein- the ones ho furnishe% the repair orks.>oever, sin&e it as CBC ho pai% o= these lienors, it steppe% into the shoes of the latter ' suro-ation.

$his is the prevailin- %o&trine in Aeri&an ;urispru%en&e hi&h hol%s that? TA &re%itor ho a%van&es one'spe&i&all' for the purpose of %is&har-in- a aritie lien is suro-ate% to the lienor4s ri-hts.4"i-ni&antl', the e%eral 0aritie ien A&t, like our "hip 0ort-a-e :e&ree of 197/, provi%es that, Tan'


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person furnishin- repairs, supplies, toa-e, use of %r'%o&k or arine raila', or other ne&essaries, to an'forei-n or %oesti& vessel on the or%er of the oner of su&h vessel, or of a person authorie% ' the onerof su&h vessel, or of a person authorie% ' the oner has a aritie lien on the vessel hi&h a' eenfor&e% ' suit in re.4 $he onl' %i=eren&e is that un%er the e%eral 0aritie ien A&t, it is not ne&essar'to alle-e or prove that the &re%it as -iven to the vessel. >en&e, insofar as the &reation of the lien an% thepersons entitle% to the lien are &on&erne%, Aeri&an ;urispru%en&e is hi-hl' persuasive. urtherore,Arti&le 13!2 62 of our Civil Co%e epli&itl' provi%es?

TArt. 13!2 62. @t is presue% that there is le-al suro-ation?

62 Ehen a thir% person not intereste% in the oli-ation pa's ith the epress or ta&it approval of the%etorH

A&&or%in-l', sin&e CBC4s pa'ent to the lienors as ith the epress &onsent of the %etor oner of thevessels repaire%, le-al suro-ation took pla&e in CBC4s favor.

Petitioners %o not Juestion the aoveJuote% rationale of the Court of Appeals. @t takes e&eption hoeverto the appellate &ourt4s n%inan% &on&lusion that it as ultiatel' private respon%ent CBC hi&h pai% o=the aritie lienor an% that the "Q5*5,!!!.!! a%van&e% ' Citiank as a&tuall' pai% to the personsho furnishe% the repairs on the vessels. 8n this point, petitioners ar-ue that the entiret' of the%o&uentar' evi%en&e of private respon%ent CBC %oes not sho that the latter a&tuall' pai% o= thearitie lienhol%er for the repair of 0) OAsean iert' as reJuire% ' "e&tion 21 of the "hip 0ort-a-eA&t of 197/.K29L urtherore, petitioners &lai that the respon%ent &ourt &oitte% serious error in lahen it &onsi%ere% an% -ave &re%en&e to the ritten %eposition of 0r. Geor-e i, the Presi%ent of P@"C,as asis for the sai% n%in- &onsi%erin- that the sae ha% earlier een %enie% a%ission ' the trial &ourt.

$here is no erit in the &ontentions of petitioners.

$he provisions of our "hip 0ort-a-e :e&ree of 197/ ere patterne% Juite &losel' after the .". "hip0ort-a-e A&t of 192!.K3!L "i-ni&antl', the e%eral 0aritie ien A&t of the nite% "tates, like our "hip0ort-a-e :e&ree of 197/, provi%es that Oan' person furnishin- repairs, supplies, toa-e, use of %r'%o&k,or arine raila', or other ne&essaries, to an' forei-n or %oesti& vessel on the or%er of the oner ofsu&h vessel, or of a person authorie% ' the oner has a aritie lien on the vessel, hi&h a' eenfor&e% ' suit in re.K31LBein- of forei-n ori-in, the provisions of the "hip 0ort-a-e :e&ree of 197/a' thus e &onstrue% ith the ai% of forei-n ;urispru%en&e fro hi&h the' are %erive% e&ept insofar asthe' &onYi&t ith eistin- las or are in&onsistent ith lo&al &ustos an% institutions.

As hel% ' the puli& respon%ent Court of Appeals, those ho provi%e &re%it to a aster of a vessel for thepurpose of %is&har-in- a aritie lien also a&Juire a lien over the sai% vessel. n%er Aeri&an

;urispru%en&e, O6furnishin- one' to a aster in -oo% faith to otain repairs or supplies or to reoveliens, in or%er to forar% the vo'a-e of the vessel, raises a lien ;ust as thou-h the thin-s 6for hi&h one'as otaine% to pa' for ha% een furnishe% ' the len%er.K32L ikeise, O6a%van&es to %is&har-earitie liens &reate a lien on the vessel, an% one a%van&in- one' to %is&har-e a vali% lien -ets a lien ofeJual %i-nit' ith the one %is&har-e%.K33L $here is no reason h' these %o&trines &annot e -ivenpersuasive appli&ation in the instant &ase &onsi%erin- that the' %o not violate or &ontravene an' of oureistin- las. 0oreover, as pointe% out ' the appellate &ourt, these %o&trines are in a&&or% ith ourprovisions on suro-ation parti&ularl' Art. 13!2, para-raph 2 of the Ne Civil Co%e hi&h provi%es thatthere is le-al suro-ation Ohen a thir% person, not intereste% in the fulllent in the oli-ation, pa's iththe epress or ta&it approval of the %etor.

n%er these %o&trines, a person ho eten%s &re%it for the purpose of %is&har-in- a aritie lien is notentitle% to the sai% lien Ohere the fun%s ere not furnishe% to the ship on the or%er of the aster an%there as no evi%en&e that the one' as a&tuall' use% to pa' %ets se&ure% ' the lien.K3*L As applie%in the instant &ase, it e&oes ne&essar' to prove that the &re%it a%van&e% ' Citiank to P@"C asa&tuall' utilie% for the repair an% &onversion of the vessel 0) OAsean iert'. 8therise, Citiank &oul%not have a&Juire% the aritie lien of >on-kon- nite% :o&k'ar%s, t%. over the vessel 0) OAseaniert'.

8n this point, e a-ree ith the position of private respon%ent that the Juestion of hether or not thepro&ee%s of the loans eten%e% ' Citiank ere use% for the repair an% &onversion of 0) OAsean iert'is a fa&tual issueK35L hi&h the Court &annot revie asent a shoin- that it as aritraril' resolve%.K3L

Contrar' to the assertions of petitioners, the re&or%s are replete ith %o&uents that sho that thepro&ee%s of the loans ere use% for the repair an% &onversion of the vessel 0) OAsean iert'.


10/70

n%in- that the aount sou-ht to e re&overe% ' petitioner as a&tuall' use% for the repair an%&onversion of the vessel 0) OAsean iert' is ase% on sustantial evi%en&e.

ro the fore-oin-, it is &lear that the aount use% for the repair of the vessel 0) OAsean iert' asa%van&e% ' Citiank an% as utilie% for the purpose of pa'in- o= the ori-inal aritie lienor, >on-kon-nite% :o&k'ar%s, t%. As a person not intereste% in the fulllent of the oli-ation eteen P@"C an%>on-kon- nite% :o&k'ar%s, t%., Citiank as suro-ate% to the ri-hts of >on-kon- nite% :o&k'ar%s,t%. as aritie lienor over the vessel, ' virtue of Arti&le 13!2, par. 2 of the Ne Civil Co%e. B'%enition, suro-ation is the transfer of all the ri-hts of the &re%itor to a thir% person, ho sustitutes hiin all his ri-hts.K37L Consi%erin- that Citiank pai% o= the %et of P@"C to >on-kon- nite% :o&k'ar%s, t%.it e&ae the transferee of all the ri-hts of >on-kon- nite% :o&k'ar%s, t%. as a-ainst P@"C, in&lu%in- thearitie lien over the vessel 0) OAsean iert'.

Private respon%ent CBC, as -uarantor, as itself suro-ate% to all the ri-hts of Citiank as a-ainst P@"C,the latter4s %etor. Arti&le 2!7 of the Ne Civil Co%e provi%es that O6the -uarantor ho pa's issuro-ate% ' virtue thereof to all the ri-hts hi&h the &re%itor ha% a-ainst the %etor. Privaterespon%ent, havin- pai% o= the %et of P@"C to Citiank, as therefore, suro-ate% to all the ri-htsCitiank ha% a-ainst its %etor P@"C. Consi%erin- that Citiank ha% a aritie lien over the vessel 0)OAsean iert', private respon%ent as likeise suro-ate% to this ri-ht hen it pai% o= Citiank un%erthe &ontra&t of -uarantee.

>avin- thus estalishe% that private respon%ent CBC possesse% a aritie lien over the vessel 0) OAseaniert', the net issue is hether the sai% aritie lien is preferre% over the ort-a-e lien of petitioners.

@n the &ase at en&h, petitioners4 ort-a-e lien arose on "epteer 25, 1979 hen the sai% ort-a-e asre-istere% ith the Philippine Coast Guar% >ea%Juarters.K3/L As su&h, in or%er for the aritie lien ofprivate respon%ent CBC to e preferre% over the ort-a-e lien of petitioners, the sae ust have arisenprior to the re&or%in- of the ort-a-e on "epteer 25, 1979.

8n this point, petitioners ar-ue that inasu&h as the "tan%' etter of Cre%it as in the nature of a-uarantee, the ri-ht of private respon%ent CBC to &lai or to &olle&t the aritie lien arose onl' at thetie CBC a&tuall' pai% o= the sai% lien to Citiank on 0ar&h 3!, 19/3. 8therise state%, it is the&ontention of petitioners that private respon%ent CBC4s aritie lien un%er its "tan%' etter of Cre%it No.79*17* arose onl' on 0ar&h 3!, 19/3 hen CBC a&tuall' pai% o= the outstan%in- oli-ation of P@"C toCitiank.K39LConsi%erin- that its ort-a-e lien arose on "epteer 25, 1979, petitioners thus &on&lu%ethat its lien is preferre% as a-ainst private respon%ent CBC4s aritie lien.

$here is no erit in this &ontention.

As state% ' a note% &oentator on the su;e&t, a aritie lien O&onstitutes a present ri-ht of propert'in the ship, a ;us in re, to e afterar% enfor&e% in a%iralt' ' pro&ess in re. ro the oent the&lai or privile-e atta&hes, it is in&hoate, an% hen &arrie% into e=e&t ' le-al pro&ess, ' a pro&ee%in- inre, it relates a&k to the perio% hen it rst atta&he%.K*!L

@n the &ase at en&h, the aritie lien over the vessel 0) OAsean iert' arose or as &onstitute% at thetie >on-kon- nite% :r'%o&ks, t%. a%e repairs on the sai% vessel on &re%it. As su&h, as earl' as 0ar&h12, 1979, the %ate of the &ontra&t for the repair an% &onversion of 0) OAsean iert', a aritie lien ha%alrea%' atta&he% to the sai% vessel. Ehen Citiank a%van&e% the aount of "Q2*2,225.!! for thepurpose of pa'in- o= P@"C4s %et to >on-kon- nite% :o&k'ar%s, t%., it a&Juire% the eistin- aritielien over the vessel. Ehen private respon%ent honore% its &ontra&t of -uarantee ith Citiank on 0ar&h3!, 19/3, it likeise a&Juire% ' suro-ation the aritie lien that as alrea%' eistin- over the vessel0) OAsean iert'. $hus, hen private respon%ent CBC &hose to eer&ise its ri-ht to the aritie lien%urin- the pro&ee%in-s in the trial &ourt, it as a&tuall' enfor&in- a privile-e that atta&he% to the ship asearl' as 0ar&h 12, 1979.

$he aritie lien of private respon%ent CBC thus arose prior in tie to the re&or%in- of petitioners4ort-a-e on "epteer 25, 1979. As su&h, the sai% aritie lien has priorit' over the sai% ort-a-elien. Pursuant to "e&tion 17 of the "hip 0ort-a-e :e&ree of 197/, a Opreferre% ort-a-e lien shall havepriorit' over all &lais a-ainst the vessel e&ept, aon- others, Oaritie liens arisin- prior in tie tothe re&or%in- of the preferre% ort-a-e. $he respon%ent &ourt thus &oitte% no reversile error hen itrule% that the aritie lien of private respon%ent CBC is superior to the ort-a-e lien of petitioners.

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11/70


12/70

Nevertheless, e n% the interest at 5.5X per onth, or X per annu, stipulate% upon ' the parties inthe proissor' note iniJuitous or un&ons&ionale, an%, hen&e, &ontrar' to orals 6O&ontra onos ores,if not a-ainst the la. $he stipulation is voi%. $he Court shall re%u&e eJuital' liJui%ate% %aa-es,hether inten%e% as an in%enit' or a penalt' if the' are iniJuitous or un&ons&ionale.K9L

@n a lon- line of &ases, this Court has invali%ate% siilar stipulations on interest rates for ein- e&essive,iniJuitous, un&ons&ionale an% eoritant. @n "olan-on v. "alaar,K1!L e annulle% the stipulation of Xper onth or 72X per annu interest on a P!,!!!.!! loan. @n @perial v. #au&ian,K11L e re%u&e% theinterest rate fro 1X to 1.17X per onth or 1*X per annu. @n Rui v. Court of Appeals,K12L eeJuital' re%u&e% the a-ree% 3X per onth or 3X per annu interest to 1X per onth or 12X perannu interest. $he 1!X an% /X interest rates per onth on a P1,!!!,!!!.!! loan ere re%u&e% to 12Xper annu inCuaton v. "alu%.K13L Re&entl', this Court, in Arrofo v. Vuino,K1*L re%u&e% the 7X interest peronth on a P15,!!!.!! loan aountin- to /*X interest per annu to 1/X per annu.

$here is no nee% to unsettle the prin&iple a+re% in 0e%el an% like &ases. ro that perspe&tive, itis apparent that the stipulate% interest in the su;e&t loan is e&essive, iniJuitous, un&ons&ionale an%eoritant. Pursuant to the free%o of &ontra&t prin&iple eo%ie% in Arti&le 13! of the Civil Co%e,&ontra&tin- parties a' estalish su&h stipulations, &lauses, ters an% &on%itions as the' a' %ee&onvenient, provi%e% the' are not &ontrar' to la, orals, -oo% &ustos, puli& or%er, or puli& poli&'. @nthe or%inar' &ourse, the &o%al provision a' e invoke% to annul the e&essive stipulate% interest.

@n the &ase at ar, the stipulate% interest rate is X per onth, or 72X per annu. B' the stan%ar%s set inthe aove(&ite% &ases, this stipulation is siilarl' invali%. >oever, the R$C refuse% to appl' the prin&iple&ite% an% eplo'e% in 0e%el on the -roun% that 0e%el %i% not pertain to the annulent of a real estateort-a-e,K15L as it as a &ase for annulent of the loan &ontra&t itself. $he Juestion thus sensil' ariseshether the invali%it' of the stipulation on interest &arries ith it the invali%it' of the prin&ipal oli-ation.

$he Juestion is &ru&ial to the present petition even if the su;e&t thereof is not the annulent of the loan&ontra&t ut that of the ort-a-e &ontra&t. $he &onsi%eration of the ort-a-e &ontra&t is the sae as thatof the prin&ipal &ontra&t fro hi&h it re&eives life, an% ithout hi&h it &annot eist as an in%epen%ent&ontra&t. Bein- a ere a&&essor' &ontra&t, the vali%it' of the ort-a-e &ontra&t oul% %epen% on thevali%it' of the loan se&ure% ' it.K1L

Notal' in 0e%el, the Court %i% not invali%ate the entire loan oli-ation %espite the ineJuitailit' ofthe stipulate% interest, ut instea% re%u&e% the rate of interest to the ore reasonale rate of 12X perannu. $he sae ree%ial approa&h to the ron-ful interest rates involve% as eplo'e% or a+re% 'the Court in "olan-on, @perial, Rui, Cuaton, an% Arrofo.

$he Court4s ultiate a+ration in the &ases &ite% of the vali%it' of the prin&ipal loan oli-ation si%e' si%e ith the invali%ation of the interest rates thereupon is &on-ruent ith the rule that a usurious loantransa&tion is not a &oplete nullit' ut %efe&tive onl' ith respe&t to the a-ree% interest.

Ee are aare that the Court of Appeals, on &ertain o&&asions, ha% rule% that a usurious loan is holl'null an% voi% oth as to the loan an% as to the usurious interest.K17L >oever, this Court a%opte% the&ontrar' rule,

as &oprehensivel' %is&usse% in Briones v. Caa'o?K1/L

@n Gui #on- W Co. vs. Rivera, et al., *5 Phil. 77/, this Court likeise %e&lare% that, in an' event, the %etorin a usurious &ontra&t of loan shoul% pa' the &re%itor the aount hi&h he ;ustl' oes hi, &itin- insupport of this rulin- its previous %e&isions in Go Chio&o, "upra, A-uilar vs. Ruiato, et al., *! Phil. 57!, an%:el-a%o vs. :uJue )al-ona, ** Phil. 739.

$hen in ope an% #avelona vs. o-ar ilipino, *7 Phil. 2*9, Ee also hel% that the stan%in- ;urispru%en&eof this Court on the Juestion un%er &onsi%eration as &learl' to the e=e&t that the sur' a, ' its letteran% spirit, %i% not %eprive the len%er of his ri-ht to re&over fro the orroer the one' a&tuall' loane% toan% en;o'e% ' the latter. $his Court ent further to sa' that the sur' a %i% not provi%e for theforfeiture of the &apital in favor of the %etor in usurious &ontra&ts, an% that hile the forfeiture i-htappear to e &onvenient as a %rasti& easure to era%i&ate the evil of usur', the le-al Juestion involve%shoul% not e resolve% on the asis of &onvenien&e.

8ther &ases uphol%in- the sae prin&iple are Palileo vs. Cosio, 97 Phil. 919 an% Pas&ua vs. Pere, (1955*,#anuar' 31, 19*, 1! "CRA 199, 2!!(2!2. @n the latter Ee epressl' hel% that hen a &ontra&t is foun% toe tainte% ith usur' Fthe onl' ri-ht of the respon%ent 6&re%itor . . . as erel' to &olle&t the aount ofthe loan, plus interest %ue thereon.F

$he vie has een epresse%, hoever, that the rulin- thus &onsistentl' a%here% to shoul% no eaan%one% e&ause Arti&le 1957 of the ne Civil Co%e a suseJuent la provi%es that &ontra&ts an%stipulations, un%er an' &loak or %evi&e hatever, inten%e% to &ir&uvent the las a-ainst usur', shall evoi%, an% that in su&h &ases Fthe orroer a' re&over in a&&or%an&e ith the las on usur'.F ro thisthe &on&lusion is %ran that the hole &ontra&t is voi% an% that, therefore, the &re%itor has no ri-ht tore&over not even his &apital.


13/70

$he eanin- an% s&ope of our rulin- in the &ases entione% heretofore is &learl' state%, an% the viereferre% to in the pre&e%in- para-raph is a%eJuatel' ansere%, in An-el #ose, et&. vs. Chel%a en&e, it is &lear an% settle% thatthe prin&ipal loan oli-ation still stan%s an% reains vali%. B' the sae token, sin&e the ort-a-e &ontra&t%erives its vitalit' fro the vali%it' of the prin&ipal oli-ation, the invali% stipulation on interest rate issiilarl' insu+&ient to ren%er voi% the an&illar' ort-a-e &ontra&t.

@t shoul% e note% that ha% the Court %e&lare% the loan an% ort-a-e a-reeents voi% for ein-&ontrar' to puli& poli&', no pres&riptive perio% &oul% have run.K2!L "u&h enet is oviousl' not availaleto petitioners.

et the R$C pronoun&e% that the &oplaint as arre% ' the four('ear pres&riptive perio% provi%e% inArti&le 1391 of the Civil Co%e, hi&h -overns voi%ale &ontra&ts. $his &on&lusion as %erive% fro thealle-ation in the &oplaint that the &onsent of petitioners as vitiate% throu-h un%ue inYuen&e. Ehile theR$C &orre&tl' a&knole%-e% the rule of pres&ription for voi%ale &ontra&ts, it erre% in appl'in- the rule inthis &ase. Ee are har% put to &on&lu%e in this &ase that there as an' un%ue inYuen&e in the rst pla&e.

$here is ultiatel' no shoin- that petitioners4 &onsent to the loan an% ort-a-e a-reeents as vitiate%' un%ue inYuen&e. $he nan&ial &on%ition of petitioners a' have otivate% the to &ontra&t ithrespon%ents, ut un%ue inYuen&e &annot e attriute% to respon%ents sipl' e&ause the' ha% lentone'. Arti&le 1391, in relation to Arti&le 139! of the Civil Co%e, -rants the a--rieve% part' the ri-ht tootain the annulent of &ontra&t on a&&ount of fa&tors hi&h vitiate &onsent. Arti&le 1337 %enes the&on&ept of un%ue inYuen&e, as follos?


14/70

$here is un%ue inYuen&e hen a person takes iproper a%vanta-e of his poer over the ill of another,%eprivin- the latter of a reasonale free%o of &hoi&e. $he folloin- &ir&ustan&es shall e &onsi%ere%?the &on%ential, fail', spiritual an% other relations eteen the parties or the fa&t that the person alle-e%to have een un%ul' inYuen&e% as su=erin- fro ental eakness, or as i-norant or in nan&ial%istress.

Ehile petitioners ere alle-e%l' nan&iall' %istresse%, it ust e proven that there is %eprivation oftheir free a-en&'. @n other or%s, for un%ue inYuen&e to e present, the inYuen&e eerte% ust have sooverpoere% or su;u-ate% the in% of a &ontra&tin- part' as to %estro' his free a-en&', akin- hiepress the ill of another rather than his on.K21L $he alle-e% lin-erin- nan&ial oes of petitioners perse &annot e eJuate% ith the presen&e of un%ue inYuen&e.

$he R$C ha% likeise &on&lu%e% that petitioners ere arre% ' la&hes fro assailin- the vali%it' of thereal estate ort-a-e. Ee holehearte%l' a-ree. @f in%ee% petitioners unillin-l' -ave their &onsent to thea-reeent, the' shoul% have raise% this issue as earl' as in the fore&losure pro&ee%in-s. @t as onl' henthe rit of possession as issue% %i% petitioners &hallen-e the stipulations in the loan &ontra&t in theira&tion for annulent of ort-a-e.


15/70

A&&or%in-l', no error &an e attriute% to the Court of Appeals in -rantin- the petition for &ertiorarian% an%aus. As pointe% out ' respon%ents, the ree%' of an%aus lies to &opel the perforan&eof a inisterial %ut'. $he issuan&e of a rit of possession to a pur&haser in an etra;u%i&ial fore&losure iserel' a inisterial fun&tion.K2L

$hus, e also a+r the Court of Appeals4 rulin- to set asi%e the R$C or%ers en;oinin- the enfor&eent ofthe rit of possession.K27L $he pur&haser in a fore&losure sale is entitle% as a atter of ri-ht to a rit ofpossession, re-ar%less of hether or not there is a pen%in- suit for annulent of the ort-a-e or thefore&losure pro&ee%in-s. An in;un&tion to prohiit the issuan&e or enfor&eent of the rit is entirel' out ofpla&e.K2/L

8ne nal note. $he issue on the vali%it' of the stipulate% interest rates, re-rettal' for petitioners, as notraise% at the earliest possile opportunit'. @t shoul% e pointe% out thou-h that sin&e an e&essivestipulate% interest rate a' e voi% for ein- &ontrar' to puli& poli&', an a&tion to annul sai% interest rate%oes not pres&rie. "u&h in%ee% is the ree%'H it is not the a&tion for annulent of the an&illar' real estateort-a-e. :espite the nullit' of the stipulate% interest rate, the prin&ipal loan oli-ation susists, an%alon- ith it the ort-a-e that serves as &ollateral se&urit' for it.

E>


16/70


17/70

e aar%e% interest of si per&ent

6X of the ;u%-ent aount '

a' of a&tual an% &opensator'

%aa-es.

@t appears fro the re&ital of fa&ts in the trial &ourt4s %e&ision that the respon%ent %ean%e% interest of

to per&ent 62X per onth upon the alan&e of the pur&hase pri&e of P/1,27.!!, fro ;u%i&ial %ean%until full pa'ent. $here is then an ovious &leri&al error &oitte% in the fallo of the trial &ourt4s %e&ision,for it in&orre&tl' or%ere% the %efen%ant there into pa' Fthe su eJuivalent to tent' per&ent 62!X peronth of the prin&ipal oli-ation %ue fro %ate of ;u%i&ial %ean% until full' pai% as an% for interest.F*2

A &leri&al istake is one hi&h is visile to the e'es or ovious to the un%erstan%in-H an error a%e ' a&lerk or a trans&rierH a istake in &op'in- or ritin-.*3 $he atin ais


18/70


19/70

%elete the sae. $he rule is settle% that the trial &ourt ust state the fa&tual, le-al or eJuitale;usti&ation for its aar% of attorne'4s fees.57@n%ee%, the atter of attorne'4s fees &annot e state% onl'in the %ispositive portion, ut the reasons ust e state% in the o%' of the &ourt4s %e&ision.5/ $his failureor oversi-ht of the trial &ourt &annot even e supplie% ' the CA. As &on&isel' eplaine% in rias v. "an:ie-o("ison59?

Arti&le 22!/ of the Ne Civil Co%e enuerates the instan&es here su&h a' e aar%e% an%, in all &ases,it ust e reasonale, ;ust an% eJuitale if the sae ere to e -rante%. Attorne'4s fees as part of%aa-es are not eant to enri&h the innin- part' at the epense of the losin- liti-ant. $he' are notaar%e% ever' tie a part' prevails in a suit e&ause of the poli&' that no preiu shoul% e pla&e% onthe ri-ht to liti-ate. $he aar% of attorne'4s fees is the e&eption rather than the -eneral rule. As su&h, it isne&essar' for the trial &ourt to ake n%in-s of fa&ts an% la that oul% rin- the &ase ithin thee&eption an% ;ustif' the -rant of su&h aar%. $he atter of attorne'4s fees &annot e entione% onl' inthe %ispositive portion of the %e&ision. $he' ust e &learl' eplaine% an% ;ustie% ' the trial &ourt in theo%' of its %e&ision. 8n appeal, the CA is pre&lu%e% fro suppleentin- the ases for aar%in- attorne'4sfees hen the trial &ourt faile% to %is&uss in its :e&ision the reasons for aar%in- the sae.1[phi1ConseJuentl', the aar% of attorne'4s fees shoul% e %elete%.! 6Citations oitte%

E>


20/70

@n %efense, Planters Bank ar-ue% that the spouses ope ha% no &ause of a&tion. @t pointe% out that itsrefusal to release the loan as the result of the spouses ope4s violations of the loan a-reeent, nael'?61 non(suission of the a&&oplishent reportsH an% 62 &onstru&tion of a si(stor' uil%in-. As a&ounter&lai, Planters Bank pra'e% for the pa'ent of the over%ue release% loan in the aount ofP3,5!!,!!!.!!, ith interest an% %aa-es.13

8n Noveer 1, 19/*, Planters Bank fore&lose% the ort-a-e% properties in favor of thir% parties afterthe spouses ope %efaulte% on their loan.1*

$he R$C Rulin-

@n a %e&ision15 %ate% Au-ust 1/, 1997, the R$C rule% in Planters Bank4s favor. @t hel% that the spousesope ha% no ri-ht to res&in% the loan a-reeents e&ause the' ere not the in;ure% parties. @t aintaine%that the spouses ope violate% the loan a-reeent ' failin- to suit a&&oplishent reports an% '%eviatin- fro the &onstru&tion pro;e&t plans. @t further %e&lare% that res&ission &oul% not e &arrie% oute&ause the ort-a-e% properties ha% alrea%' een sol% in favor of thir% parties. $he %ispositive portionof the R$C %e&ision provi%es?

@N )@< 8Run%re% $housan% Pesos 6P3,5!!,!!!.!! plus the 27X stipulate%interest per annu &oen&in- on #une 22, 199* until full' pai% inus the pro&ee%s of the fore&lose%ort-a-e% propert' in the au&tion sale.1 6ephasis ours "useJuentl', the R$C aen%e%17 its %e&ision,upon Planters Bank4s lin- of a 0otion for Partial Re&onsi%eration an%or Aen%ent of the :e&ision %ate%Au-ust 1/, 1997.1/ @t &larie% that the interest rate shall &oen&e on #une 22, 19/*, as proven %urin-trial, thus?

@N )@< 8Run%re% $housan% Pesos 6P3,5!!,!!!.!! plus the 27X stipulate%interest per annu &oen&in- on #une 22, 19/* until full' pai% inus the pro&ee%s of the fore&lose%ort-a-e% propert' in the au&tion sale.19 6ephasis ours

CA Rulin-

$he spouses ope %ie% %urin- the pen%en&' of the &ase. 8n appeal to the CA, &opulsor' heirs #osephEilfre%, #oseph Gilert an% 0arl'n, all surnae% #oven2! 6respon%ents sustitute% for the %e&ease%lorentina ope.

8n Noveer 27, 2!!, the CA reverse% the R$C rulin-.21 @t hel% that Planters Bank4s refusal to releasethe loan as a sustantial rea&h of the &ontra&t. @t foun% that the spouses ope suitte%a&&oplishent reports. @t -ave ei-ht to


21/70

Plainti=s(appellants are or%ere% to return to %efen%ant(appellee ank the aount of P2,//5,/3!.5 ithinterest of telve per&ent 612X per annu fro the tie this :e&ision e&oes nal an% ee&utor' untilit is full' pai%.

:efen%ant(appellee ank is or%ere% to &onve' an% restore to plainti=s(appellants the fore&lose%propert'.236ephases an% un%ers&ores supplie%

$he CA also %enie% Planters Bank4s 0otion for Re&onsi%eration %ate% Au-ust 22, 2!!7, proptin- it to lethe present petition.

$he Petitioner4s Position

Planters Bank reiterates in its petition efore this Court that the respon%ents ha% no &ause of a&tion. @tposits that the spouses ope violate% the loan a-reeents for their failure to suit a&&oplishentreports an% ' &onstru&tin- a si(stor' uil%in- instea% of a four(stor' uil%in-. @t aintains that there asno estoppel e&ause onl' one 'ear an% tent' %a's have elapse% fro the violation of the &ontra&t untilthe spouses ope4s lin- of the &oplaint. @t ar-ues that there ust e an un;ustiale ne-le&t for anunreasonale perio% of tie for estoppel to appl'. @t also avers that even assuin- that it rea&he% the&ontra&t, it as onl' a sli-ht rea&h e&ause onl'P7!!,!!!.!! of the P*,2!!,!!!.!! loan as not release%.0oreover, it hi-hli-hts that it &annot &onve' the fore&lose% properties e&ause the' ere alrea%' sol% tothir% parties.2*

Planters Bank also &laries its %ate of re&eipt of the CA aen%e% %e&ision in a 0anifestation %ate% 0ar&h13, 2!!9.25 @t states that it re&eive% the aen%e% %e&ision on Au-ust 7, 2!!7, as evi%en&e% ' theatta&he% &erti&ations fro the 0akati an% 0anila Central Post 8+&es.

$he Respon%ents4 Position

@n their Coents,2 the respon%ents reiterate the CA4s ar-uents. $he' also assert that the aen%e%%e&ision has alrea%' e&oe nal an% ee&utor' %ue to Planters Bank4s elate% lin- of a otion forre&onsi%eration on Au-ust 22, 2!!7. $he' point out that Planters Bank uneJuivo&al' state% in theplea%in-s that it re&eive% a &op' of the aen%e% %e&ision on Au-ust 2, 2!!7. urtherore, the' aver thatPlanters Bank4s otion for re&onsi%eration is a se&on% otion for re&onsi%eration %isalloe% ' the Rulesof Court. $he' hi-hli-ht that Planters Bank4s &oent to the respon%ents4 otion for re&onsi%erationsou-ht the reinstateent of the R$C rulin-. ConseJuentl', the &oent is Planters Bank4s rst otion forre&onsi%eration.

$he @ssues

$his &ase presents to us the folloin- issues?

1 Ehether the CA4s aen%e% %e&ision %ate% #ul' 3!, 2!!7 is nal an% ee&utor'H

2 Ehether the spouses ope violate% the loan a-reeentH

a Ehether the spouses ope suitte% a&&oplishent reports, an%

Ehether the spouses ope %eviate% fro the &onstru&tion pro;e&tH

3 Ehether Planters Bank sustantiall' rea&he% the loan a-reeentH an%

* Ehether the aount of aar%s ren%ere% ' the CA is proper.

$he Court4s Rulin-

Ee reverse the CA4s %e&ision.

$he CA4s aen%e% %e&ision %ate% #ul' 3!, 2!!7 is not 'et nal an% ee&utor'

"e&tion 13, Rule 13 of the Rules of Court provi%es that if servi&e is a%e ' re-istere% ail, proof shall ea%e ' an a+%avit of the person ailin- of fa&ts shoin- &oplian&e ith "e&tion 7, Rule 13 of the Rules

of Court an% the re-istr' re&eipt issue% ' the ailin- o+&e. >oever, the presentation of an a+%avit an%a re-istr' re&eipt is not in%ispensale in provin- servi&e ' re-istere% ail. 8ther &opetent evi%en&e,su&h as the &erti&ations fro the Philippine Post 8+&e, a' estalish the fa&t an% %ate of a&tual servi&e.

$hese &erti&ations are %ire&t an% priar' pie&es of evi%en&e of &opletion of servi&e.27

Ee elieve Planters Bank4s assertion that its otion for re&onsi%eration %ate% Au-ust 22, 2!!7 as le%on tie. $he 0anila Central Post 8+&e4s &erti&ation states that the aen%e% %e&ision as onl'%ispat&he% fro the 0anila Central Post 8+&e to the 0akati Central Post 8+&e on Au-ust 2, 2!!7.2/ 8nthe other han%, the 0akati Central Post 8+&e4s &erti&ation provi%es that Planters Bank4s a&tual re&eipt ofthe %e&ision as on Au-ust 7, 2!!7.29 $hese &erti&ations &on&lusivel' sho that Planters Bank4s &ounselre&eive% the aen%e% %e&ision on Au-ust 7, 2!!7 an% not on Au-ust 2, 2!!7.


22/70

$here is also no erit to the respon%ents4 ar-uent that Planters Bank4s otion for re&onsi%eration is%isalloe% un%er "e&tion 2, Rule 52 of the Rules of Court.3! Ee point out in this respe&t that there is a%i=eren&e eteen an aen%e% ;u%-ent an% a suppleental ;u%-ent. @n an aen%e% ;u%-ent, theloer &ourt akes a thorou-h stu%' of the ori-inal ;u%-ent an% ren%ers the aen%e% an% &larie%

;u%-ent onl' after &onsi%erin- all the fa&tual an% le-al issues. $he aen%e% an% &larie% %e&ision is anentirel' ne %e&ision hi&h superse%es or takes the pla&e of the ori-inal %e&ision. 8n the other han%, asuppleental %e&ision %oes not take the pla&e of the ori-inalH it onl' serves to a%% to the ori-inal%e&ision.31

@n the present &ase, the CA proul-ate% an aen%e% %e&ision e&ause it re(eaine% its fa&tual an% le-aln%in-s in its ori-inal %e&ision. $hus, Planters Bank a' le a otion for re&onsi%eration. $he aen%e%%e&ision is an entirel' ne %e&ision hi&h repla&e% the CA4s %e&ision %ate% Noveer 27, 2!!.

@n su, the aen%e% %e&ision is not 'et nal an% ee&utor' e&ause Planters Bank le% a otion forre&onsi%eration on tieH its lin- is alloe% ' the Rules of Court.

$he spouses ope suitte% a&&oplishent reports

Ee see no reason to %istur the CA4s n%in- that the spouses ope reli-iousl' suitte% a&&oplishentreports. $he evi%en&e on re&or%32 shos that


23/70


24/70

A%vo&ates for $ruth in en%in-, @n&., et al. v. Ban-ko "entral n- Pilipinas 0onetar' Boar%, et&.*9 "e&tion 2of CB Cir&ular No. 9!5(/2 provi%es?

"e&tion 2. $he rate of interest for the loan or forearan&e of an' one', -oo%s or &re%its an% the ratealloe% in ;u%-ents, in the asen&e of epress &ontra&t as to su&h rate of interest, shall &ontinue to etelve per&ent 612X per annu. Kephasis oursL

Pursuant to these &han-es, this Court o%ie% the -ui%elines in


25/70

AN: BANM 8 $>< P>@@PP@N


26/70

of the ;ust &opensation for the su;e&t propert'. 0oreover, the in&reental interest of X &opoun%e%annuall', as per PARC Resolution No. 9*(2*(1, shoul% e ipose% on the prin&ipal aount fro 1972 to199/ or for 2 'ears.2*

8n #anuar' 21, 2!!!, the "AC Bran&h 23 ren%ere% its :e&ision, the %ispositive portion of hi&h rea%s?

E>eirs of


27/70

8n "epteer 2/, 2!!7, the Court of Appeals, in CA(G.R. "P No. /2*7, a+re% the "AC Bran&h 234s:e&ision as o%ie% ' the "AC Bran&h 294s Resolution. $he %ispositive portion of that :e&ision rea%s?

E>< C8R$ 8 APP


28/70

oner, the ta %e &larations , an% the assessent a%e ' -overnent assessors shall e &onsi%ere%. $heso&ial an% e&onoi& enets &ontriute% ' the farers an% the far(orkers an% ' the Governent tothe propert' as ell as the non(pa'ent of taes or loans se&ure% fro an' -overnent nan&in-institution on the sai% lan% shall e &onsi%ere% as a%%itional fa&tors to %eterine its valuation.

ConseJuentl', the Juestion that arises is hi&h o f these to rulin-s shoul% e applie%Z

n%er the &ir&ustan&es of this &ase, the Court %ees it ore eJuitale to appl' the rulin- in theNativi%a% &ase. @n sai% &ase, the Court applie% the provisions of R.A. No. 57 in &oputin- ;ust

&opensation for propert' epropriate% un%er P.:. No. 27, statin-, vi?

an% BankUs &ontention that the propert' as a&Juire% for purposes of a-rarian refor on 8&toer 21,1972, the tie of the e=e&tivit' of P: 27, er-o ;ust &opensation shoul% e ase% on the value of thepropert' as of that tie an% not at the tie of possession in 1993, is like ise erroneous. @n 8+&e of thePresi%ent, 0ala&a^an-, 0anila v. Court of Appeals, e rule% that the seiure of the lan% hol%in- %i% nottake pla&e on the %ate of e=e&tivit' of P: 27 ut oul% take e=e&t on the pa'ent of ;ust &opensation.

n%er the fa&tual &ir&ustan&es of this &ase, the a-rarian refor pro&ess is still in&oplete as the ;ust&opensation to e pai% private respon%ents has 'et to e settle%. Consi%erin- the pass a-e of Repuli&A&t No. 57 6RA 57 efore the &opletion of this pro&ess, the ;ust &opensation shoul% e %eterine%an% the pro&ess &on&lu%e% un%er the sai% la. @n%ee%, RA 57 is the appli&ale la, ith P: 27 an%


29/70

$his Court is not unaare of the ne a-rarian refor la, Repuli& A&t No. 97!! or the CARP


30/70

All the &ourts a Juo ipose% a le-al interest on the ;ust &opensation %ue respon%ent, aleit the "ACBran&h 29 loere% it fro 12X to X per annu.

BP ar-ues that :ARA8 No. 13, hi&h provi%es for an in&reental interest of X, &opoun%e% annuall',shoul% e the -overnin- rule hen it &oes to the -rant of interest.52

Respon%ent on the other han%, pra's that the ori-inal aar% of 12X interest e reinstate% as theunreasonale %ela' in the pa'ent of his ;ust &opensation &onstitutes forearan&e of one'.53

$his Court notes that the aar% of X le-al interest as not -iven un%er :AR A8 No. 13, as the &ourts aJuo epli&itl' state% that :ARA8 No. 13 as not appli&ale, aleit &itin- a n in&orre&t reason, i.e., that thisas e&ause a hi-her G"P as alrea%' use%. As e have %is&usse% aove, Fthe la an% ;urispru%en&e onthe %eterination of ;ust &opensation of a-rarian lan%s are settle%,F5* an% the &ourts elo %eviate%fro the hen the' sipl' use% a hi-her G"P in the &oputation of respon%ent4s ;ust&opensation.1[phi1

$he Court has alloe% the -rant of interest in epropriation &ases here there is %ela' in the pa'ent of;ust &opensation.55 @n fa&t, the interest ipose% in &ase of %ela' in pa'ents in a-rarian &ases is 12Xper annu an% not X5 as Fthe iposition is in the nature of %aa-es for %ela' in pa'ent hi&hin e=e&t akes the oli-ation on the part of the -overnent one of forearan&e.F57

Vuotin- Repuli& v. Court of Appeals5/ this Court, in an% Bank of the Philippines v. Rivera,59 hel% ?

$he &onstitutional liitation of F;ust &opensationF is &onsi%ere% to e the su eJuivalent to the arketvalue of the propert', roa%l' %es&rie% to e the pri&e e% ' the seller in open arket in the usual an%or%inar' &ourse of le-al a&tion an% &opetition or the fair value of the propert' as eteen one hore&eives, an% one ho %esires to sell, if e% at the tie of the a&tual takin- ' the -overnent. $hus, ifpropert' is taken for puli& use efore &opensation is %eposite% ith the &ourt havin- ;uris%i&tion overthe &ase , the nal &opensation ust in&lu%e interest on its ;us t value to e &opute% fro the tie thepropert' is taken to the tie hen &opensation is a&tuall' pai% or %eposite% ith the &ourt. @n ne ,eteen the takin- of the propert' an% the a&tual pa'ent, le-al interests a&&rue in or%er to pla&e theoner in a position as -oo% as 6ut not etter than the position he as in efore the takin- o&&urre%.

$he Bula&an trial &ourt, in its 1979 %e&ision, as &orre&t in iposin- interest on the onal value of thepropert' to e &opute% fro the tie petitioner institute% &on%enation pro&ee%in-s an% FtookF thepropert' in "epteer 199. $his alloan&e of interest on the aount foun% to e the value of thepropert' as of the tie of the takin- &opute%, ein- an e=e&tive forearan&e, at 12X per annu shoul%help eliinate the issue of the &onstant Yu&tuation an% inYation of the value of the &urren&' over tie. !6Citation oitte%, ephasis in the ori-inal.

$he Court, in Repuli&, re&o-nie% that Fthe ;ust &opensation %ue to the lan%oners for theirepropriate% propert' aounte% to an e=e&tive forearan&e on the part of the "tate.F1 @n in- theinterest rate at 12X, it folloe% the -ui%elines on the aar% of interest that e enuerate% in


31/70

$his Court therefore %ees it proper to ipose a 12X le-al interest per annu, &opute% fro the %ate ofthe Ftakin-F of the su;e&t propert' on the ;ust &opensation to e %eterine% ' the "AC, %ue torespon%ent, less hatever he an% his &o(oners ha% alrea%' re&eive%.

Re an% of the Case

Given that the onl' fa&tor &onsi%ere% ' the "AC in the %eterination of ;ust &opensation as the&han-in- -overnent support pri&e for a &avan of pala', this Court is &onstraine% to rean% the &ase tothe "AC Bran&h 29 for the re&eption of evi%en&e an% %eterination of ;ust &opensation in a&&or%an&e

ith "e&tion 17 of Repuli& A&t No. 57* an% :AR A8 No. !2(!9 %ate% 8&toer 15, 2!!9, the latest :ARissuan&e on in- ;ust &opensation.5

Gui%elines in the Rean% of the Case

@n an% Bank of the Philippines v. >eirs of "alva%or


32/70

interest perio%s, ith prior noti&e to Kpetitioners(spousesL, in the event of &han-es in interest ratespres&rie% ' la or the 0onetar' Boar% , or in the ank4s overall &ost of fun%s.

$o se&ure the pa'ent of the sai% loan, Kpetitioners(spousesL ee&ute% in favor of Krespon%ent ankL a realestate ort-a-e usin- as &ollateral ve 65 par&els of lan% in&lu%in- all iproveents therein, all situate%in Batan-as Cit' an% &overe% ' $ransfer Certi&ate of $itle 6$C$ Nos. $(*1, $(32!37, $(173!, $(31193an% R$ 33 63351 of the Re-istr' of :ee%s of Batan-as Cit', in the nae of Kpetitioners(spousesL.

"useJuentl', Krespon%ent ankL a%vise% Kpetitioners(spousesL to pa' their loan oli-ation, otherise the

forer ill %e&lare the latter4s loan %ue an% %ean%ale. 8n #ul' 17, 2!!1, Kpetitioners(spousesL pai%P1*,/!!,!!!.!! to Krespon%ent ankL to avoi% fore&losure of the properties su;e&t of the real estateort-a-e. A&&or%in-l', Krespon%ent ankL ee&ute% a release of real estate ort-a-e over the par&els oflan% &overe% ' $C$ Nos. $(31193 an% R$(33 63351. >oever, %espite pa'ent , Krespon%ent ankLpro&ee%e% to fore&lose the real estate ort-a-e, parti&ularl' ith respe&t to the three 63 par&els of lan%&overe% ' $C$ Nos. $(*1, $(32!37 an% $(173! .

KAL puli& au&tion sale of the properties pro&ee%e%, ith the Krespon%ent ankL eer-in- as thehi-hest an% innin- i%%er. A&&or%in-l', on Au-ust 3!, 2!!2, a &erti&ate of sale of the properties involve%as issue%. KRespon%ent ankL &onsoli%ate% its onership over the sai% properties an% $C$ Nos. $(52//9,

$(52/9!, an% $(52/91 ere issue% in lieu of the &an&elle% $C$KsL . $his propte% Kpetitioners(spousesLto le a &oplaint for annulent of ort-a-e, sheri=4s &erti&ate of sale, %e&laration of nullit' of thein&rease% interest rates an% penalt' &har-es plus %aa-es, ith the R$C of Batan-as Cit'.

@n their aen%e% &oplaint, Kpetitioners(spousesL alle-e% that the' trie% to reli-iousl' pa' their loanoli-ation to Krespon%ent ankL, ut the eoritant rate of interest unilaterall' %eterine% an% ipose% 'the latter prevente% the forer fro pa'in- their oli-ation. KPetitioners(spousesL also alle-e% that the'si-ne% the proissor' notes in lank, rel'in- on the representation of Krespon%ent ankL that the' ereerel' profora Ksi&L ank reJuireents. urther, Kpetitioners(spousesL alle-e% that the unilateral in&reaseof interest rates an% eoritant penalt' &har-es are akin to un;ust enri&hent at their epense, -ivin-Krespon%ent ankL no ri-ht to fore&lose their ort-a-e% properties. .

8n Au-ust 27, 2!!* Krespon%ent ankL le% its anser, %en'in- the alle-ations in the &oplaint. Krespon%ent ankL alle-e% that? the penalt' &har-es ipose% on the loan as epressl' stipulate% un%erthe &re%it a-reeents an% in the proissor' notesH althou-h Kpetitioners(spousesL pai% to Krespon%entankL P1*,/!!,!!!.!! on #ul' 1!, 2!!1, the forer as still in%ete% to the latter in the aount ofP33,9!,33./7H assuin- ar-uen%o that the iposition as iproper, the fore&losure of the ort-a-e%properties is in or%er sin&e Krespon%ent ank4sL i% in the aount of P2/,95,1!!.!! as ase% on thea--re-ate appraise% rates of the fore&lose% properties. *

After trial, the R$C ren%ere% ;u%-ent5 in favor of petitioners(spouses an% a-ainst respon%ent ank,or%erin- that?

1. $he rate of interest shoul% e re%u&e% as it is here' re%u&e% to X in a&&or%an&e ith Arti&le 22!9 ofthe Civil Co%e e=e&tive the net 3!, 31 an% 1/! %a's respe&tivel' fro the %ate of the telve 612proissor' notes &overe% ' the real estate ort-a-es, to e applie% on a %e&linin- alan&e ofthe prin&ipal after the partial pa'ents of P1*,/!!,!!.!! 6pai% #ul' 17, 2!!1 an% P2,!!!,!!!.!!6pa'ents of P3!!,!!!.!! on 8&toer 1, 1999, P1,/!!,!!!.!! as KofL :e&eer 1, 1999, P7!!,!!!.!! KonL

#anuar' 31, 2!!! per &erti&ation of Krespon%ent ankL to e re&kone% at 6si& the %ates the sai%pa'ents ere a%e, thus the &orre&te% aounts of the liailit' for prin&ipal alan&e an% the sai% X&har-es per annu shall e the ne asis for the Kpetitioners(spousesL to ake pa'ents to theKrespon%ent ankL hi&h shall autoati&all' etin-uish an% release the ort-a-e &ontra&ts an% theoutstan%in- liailities of the Kpetitioners(spousesLH Krespon%ent ankL shall then surren%er the ne transfer&erti&ates of title in its nae to the K&Lourt , K&Lan&elin- the penalt' &har-es.

3. :e&larin- as ille-al an% voi% the fore&losure sales , the Certi&ates of "ales an% the &onsoli%ation oftitles of the su;e&t real properties, in&lu%in- the &an&ellation of the ne $ransfer Certi&ates of $itle in the nae of the Krespon%entL ank an% reinstatin- $ransfer Certi&ates of $itle Nos. $(*1, $(32!37 an%

$(173! in the naes of the Kpetitioners(spousesLH the latter a&ts to e ee&ute% ' the Re-ister of :ee%sof Batan-as Cit'.7

$he fore-oin- %isposition of the R$C as ase% on the folloin- n%in-s of fa&t?

As of this ritin- the Krespon%entL ank have 6si& not &oplie% ith the sai% or%ers as to the interest ratesit ha% een usin- on the loan of Kpetitioners(spousesL an% the onthl' &oputation of interest vis a vis6si& the total shon in the stateent of a&&ount as of Au- 3!, 2!!2. "u&h refusal aounts to suppressionof evi%en&e thus ten%in- to sho that the interest use% ' the ank as unilaterall' in&rease% ithout theritten &onsent of the Kpetitioners(spousesLorroer as reJuire% ' la an% Central Bank Cir&ular No.1171. $he latter &ir&ular provi%es that an' in&rease of interest in a -iven interest perio% ill have to eepressl' a-ree% to in ritin- ' the orroer. $he ort-a-e% properties ere su;e&t of fore&losure an%ere sol% on Au-ust 3!, 2!!2 an% the Krespon%entL ank4s stateent of a&&ount as of Au-ust 3!, 2!!2 shos unpai% interest up to #ul' 17, 2!!1 ofP12,95,71/.99 ithout spe&if'in- the rate of interest for


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ea&h interest perio% of thirt' %a's. Another stateent of a&&ount of Krespon%ent ankL as KofL the%ate of fore&losure on Au-ust 3!, 2!!2 shos a&&ount alan&e ofP2!,5!5,91.51 ith a i% pri&e ofP2/,95,1!!.!! an% shoin- an interest of P1,13,2/1.5. A-ain, there are no %etails of the interest use%for ea&h interest perio% fro the tie these loans ere in&urre% up to the %ate of fore&losure. $hesestateents of a&&ount to-ether ith the state% interest an% epenses after fore&losure ere furnishe% 'the Krespon%entL ank %urin- the &ourt hearin-s. $he &entral le-al Juestion is that there is no a-reeentin ritin- fro the Kpetitioners(spousesLorroers for the interest rate for ea&h interest perio% neitherfro the %ata &oin- fro the Central Bank or the &ost of one' hi&h is un%erstoo% to ean the interest&ost of the ank %eposits for the puli&. "u&h iposition of the in&rease% interest ithout the &onsent ofthe orroer is null an% voi% pursuant to Arti&le 195 of the Civil Co%e an% as hel% in the pronoun&eentof the "upree Court in several &ases an% C.B. Cir&ular No. 1191 that the interest rate for ea&h re(pri&in-perio% un%er the Yoatin- rate of interest is su;e&t to utual a-reeent in ritin-. Art. 195 states that nointerest is %ue unless it has een epressl' stipulate% an% a-ree% to in ritin-.

An' stipulation here the in- of interest rate is the sole prero-ative of the &re%itorort-a-ee, elon-sto the &lass of potestative &on%ition hi&h is null an% voi% un%er Art. 13!/ of the Ne Civil Co%e. $hefulllent of a &on%ition &annot e left to the sole ill of Kone ofL the &ontra&tin- parties.

@n the instant &ase, if the interest is %e&lare% null an% voi%, the fore&losure sale for a hi-her aount thanhat is le-all' %ue is likeise null an% voi% e&ause un%er the Civil Co%e, a ort-a-e a' e fore&lose%onl' to enfor&e the fulllent of the oli-ation for hose se&urit' it as &onstitute% 6Art. 212, Civil Co%e.

olloin- the %e&laration of nullit' of the stipulation on Yoatin- rate of interest sin&e no interest a' e&olle&te% ase% on the stipulation that is null an% voi% an% le-all' ineistent an% unenfor&eale. ."in&e the interest ipose% is ille-al an% voi% onl' the rate of X interest per onth shall e ipose% asliJui%ate% %aa-es un%er Art. 22!9 of the Civil Co%e.

@t is orth entionin- that these fors use% ' the ank are pre( printe% fors an% therefore &ontra&ts ofa%hesion an% an' %ispute or %out &on&ernin- the shall e resolve% in favor of the orroer.

$his 6si& &ir&ustan&es ten% to support the &ontention of the Kpetitioners(spousesL that the' ere a%e tosi-n the real estate ort-a-esproissor' notes in lank ith respe&t to the interest rates.

KRespon%ent ank hasL no ri-ht to fore&lose Kpetitioners(spouses4L propert' an% an' fore&losure thereof isille-al, unreasonale an% voi%, sin&e Kpetitioners(spousesL are not an% &annot e &onsi%ere% in %efault fortheir inailit' to pa' the aritraril', ille-all', an% un&ons&ional' a%;uste% interest rates an% penalt'&har-es unilaterall' a%e an% ipose% ' Krespon%entL ank.

$he Kpetitioners(spousesL suitte% to the &ourt &ertie% &opies of the ei-hte% avera-e of "ele&te%:oesti& @nterest Rates of the lo&al anks otaine% fro the Ban-ko "entral n- Pilipinas "tatisti&al Centeran% it shos a %e&linin- alan&e of interest rates .

$here is no shoin- ' the Krespon%ent ankL that an' of the fore-oin- rate as ever use% to in&rease or%e&rease the interest rates &har-e% upon the Kpetitioners(spouses4L ort-a-e loan for the 3! %a' re(pri&in- perio% suseJuent to the rst 3! %a's fro KtheL %ates of the proissor' notes. $hese %o&uentssuitte% ein- &ertie% puli& %o&uents are entitle% to ein- taken &o-nian&e of ' the &ourt as anai% to its %e&ision akin-. ./

Respon%ent ank appeale% the aove ;u%-ent of the trial &ourt to the CA. @ts ain &ontention is that theloer &ourt erre% in or%erin- the re(&oputation of petitioners(spouses4 loans an% appl'in- the interestrate of X per annu. A&&or%in- to respon%ent ank, the stipulation on the interest rates of 17.5X to27X, su;e&t to perio%i& a%;ustents, as voluntaril' a-ree% upon ' the partiesH hen&e, it as not left tothe sole ill of respon%ent ank. $hus, the loer &ourt erre% in re%u&in- the interest rate to X an% insettin- asi%e the penalt' &har-es, as su&h is &ontrar' to the prin&iple of the oli-ator' for&e of &ontra&tsun%er Arti&les 1315 an% 1159 of the Civil Co%e.9

$he CA %ispose% of the issue in the folloin- anner?

Ee partl' a-ree ith Krespon%ent ank4sL &ontention.

"ettle% is the rule that the &ontra&tin- parties are free to enter into stipulations, &lauses, ters an%&on%itions as the' a' %ee &onvenient, as lon- as these are not &ontrar' to la, orals, -oo% &ustos,puli& or%er or puli& poli&'. Pursuant to Arti&le 1159 of the Civil Co%e, these oli-ations arisin- fro su&h&ontra&ts have the for&e of la eteen the parties an% shoul% e &oplie% ith in -oo% faith. .


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@n the &ase at ar, Krespon%ent ankL an% Kpetitioners(spousesL epressl' stipulate% in the proissor'notes the rate of interest to e applie% to the loan otaine% ' the latter fro the forer, .

KRespon%ent ankL insists that Kpetitioner(spousesL a-ree% to the interest rates state% in the proissor'notes sin&e the latter voluntaril' si-ne% the sae. >oever, e n% ore &re%ile an% elievale the

version of Kpetitioners(spousesL that the' ere a%e to si-n the sai% proissor' notes in lank ithrespe&t to the rate of interest an% penalt' &har-es, an% suseJuentl', Krespon%entL ank lle% in thelanks, iposin- hi-h interest rate e'on% hi&h the' ere a%e to un%erstan% at the tie of the si-nin-of the proissor' notes.

$he si-nin- ' Kpetitioners(spousesL of the proissor' notes in lank enale% Krespon%entL ank to iposeinterest rates on the loan oli-ation ithout prior noti&e to Kpetitioners(spousesL. $he unilateral%eterination an% iposition of interest rates ' Krespon%entL ank ithout Kpetitioners(spouses4L assentis oviousl' violative of the prin&iple of utualit' of &ontra&ts or%aine% in Arti&le 13!/ of the Civil Co%e .

KRespon%ent ank4sL a&t &onverte% the loan a-reeent into a &ontra&t of a%hesion here the parties %onot ar-ain on eJual footin-, the eaker part'4s parti&ipation, herein Kpetitioners(spousesL, ein- re%u&e%to the alternative to take it or leave it. KRespon%entL ank trie% to si%estep this issue ' averrin- thatKpetitioners(spousesL, as usinessen, ere on eJual footin- ith Krespon%ent ankL as far as the su;e&tloan a-reeents are &on&erne%. $hat a' e true insofar as enterin- into the ori-inal loan a-reeentsan% ort-a-e &ontra&ts are &on&erne%. >oever, that %oes not hol% true hen it &oes to the unilateral%eterination an% iposition of the es&alate% interest rates ipose% ' Krespon%entL ank.

$he Court further notes that in the &ase at ar, Krespon%entL ank ipose% %i=erent rates in the telve612 proissor' notes? interest rate of 1/X in ve 65 proissor' notesH 17.5X in to 62 proissor' notesH23X in one 61 proissor' noteH an% 27X in three 63 proissor' notes. 8viousl', the interest rates aree&essive an% aritrar'. $hus, the fore-oin- interest rates ipose% on Kpetitioners(spouses4L loanoli-ation ithout their knole%-e an% &onsent shoul% e %isre-ar%e%, not onl' for ein- iniJuitous an%eoritant, ut also for ein- violative of the prin&iple of utualit' of &ontra&ts.

>oever, e %o not a-ree ith the trial &ourt in in- the rate of interest of X. @t is ell(settle% that henan oli-ation is rea&he% an% &onsists in the pa'ent of a su of one', i.e., loan or forearan&e ofone', the interest %ue shall e that hi&h a' have een stipulate% in ritin-. @n the asen&e ofstipulation, the rate of interest shall e 12X interest per annu to e &opute% fro %efault, i.e., fro

;u%i&ial or etra(;u%i&ial %ean% an% su;e&t to the provisions of Arti&le 119 of the Civil Co%e. "in&e theinterest rates printe% in the proissor' notes are voi% for the reasons aove(state%, the rate of interest toe applie% to the loan shoul% e 12X per annu onl'.1!

$he CA, &onseJuentl', %isisse% respon%ent ank4s appeal an% a+re% the %e&ision of the trial &ourt iththe o%i&ation that the rate of interest shall e 12X per annu instea% of X. Respon%ent ank le% a0otion for Re&onsi%eration of the CA %e&ision. Petitioners(spouses, on the other han%, le% a &oentpra'in- for the %enial of respon%ent ank4s otion for re&onsi%eration. $he' also le% an Fr-ent0anifestationF11 &allin- the attention of the CA to its respe&tive %e&isions in the &ases of "pouses


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stipulate% interest rate of interest, an% that upon aturit', the aount %ue as su;e&t to le-al interest atthe rate of 12X per annu. @n this &ase, hile e siilarl' annulle% the es&alation &lause &ontaine% in theproissor' notes, this Court opte% not to ipose the ori-inal rates of interest stipulate% therein for ein-e&essive, the sae ein- 17.5X to 27X per interest perio%.

Relevantl', the >i-h Court hel% in Asian Catha' inan&e an% easin- Corporation v. "pouses CesarioGrava%or an% Nora :e )era, et. al. that stipulations authoriin- the iposition of iniJuitous orun&ons&ionale interest are &ontrar' to orals, if not a-ainst the la. . $he nullit' of the stipulation onthe usurious interest %oes not, hoever, a=e&t the len%er4s ri-ht to re&over the prin&ipal of the loan. $he%et %ue is to e &onsi%ere% ithout the stipulation of the e&essive interest. A le-al interest of 12X perannu ill e a%%e% in pla&e of the e&essive interest forerl' ipose%.

olloin- the fore-oin- rulin-s of the "upree Court, it is &lear that the iposition ' this Court of a 12Xrate of interest per annu on the prin&ipal loan oli-ation of Kpetitioners(spousesL, &opute% fro thetie of %efault, is proper as it is &onsistent ith prevailin- ;urispru%en&e.

Ehile the %e&isions of the "pe&ial "eventh :ivision an% the Ninth :ivision of this Court in CA(G.R. C) No.753!3 an% in CA(G.R. No. 7!29 are nal an% ee&utor', the sae erel' have persuasive e=e&t ut %onot outei-h the %e&isions of the "upree Court hi&h e are %ut'(oun% to follo, &onforal' ith theprin&iple of stare %e&isis.

$he %o&trine of stare %e&isis en;oins a%heren&e to ;u%i&ial pre&e%ents.1[phi1 @t reJuires &ourts in a&ountr' to follo the rule estalishe% in a %e&ision of the "upree Court thereof. $hat %e&ision e&oes a

;u%i&ial pre&e%ent to e folloe% in suseJuent &ases ' all &ourts in the lan%. $he %o&trine of stare %e&isisis ase% on the prin&iple that on&e a Juestion of la has een eaine% an% %e&i%e%, it shoul% e %eee%settle% an% &lose% to further ar-uent.15 6


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@N )@< 8R


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$he issues are?

1. Ehether or not the shipent sustaine% losses%aa-esH

2. Ehether or not these losses%aa-es ere sustaine% hile in the &usto%' of %efen%ants 6in hoserespe&tive &usto%', if %eterinaleH

3. Ehether or not %efen%ant6s shoul% e hel% liale for the losses%aa-es 6see plainti=Us pre($rial Brief,Re&or%s, p. 3*H Allie%Us pre($rial Brief, a%optin- plainti=Us Re&or%s, p. 3/.

As to the rst issue, there &an e no %out that the shipent sustaine% losses%aa-es. $he to %rusere shippe% in -oo% or%er an% &on%ition, as &learl' shon ' the Bill of a%inan% Coer&ial @nvoi&ehi&h %o not in%i&ate an' %aa-es %ru that as shippe% 6


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@@. @$ >A$ $>< GRAN$ 8 @N$< :


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$he &ase of Reforina vs. $ool, 5 ren%ere% on 11 8&toer 19/5, as for FRe&over' of :aa-es for @n;ur'to Person an% oss of Propert'.F After trial, the loer &ourt %e&ree%?

E>


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p. 1! in%enit' in favor of the Philippine Bar Asso&iation of @)< 0@@8N 6P5,!!!,!!!.!! Pesos to &overall %aa-es 6ith the e&eption to attorne'Us fees o&&asione% ' the loss of the uil%in- 6in&lu%in-interest &har-es an% lost rentals an% an a%%itional 8N< >N:R8"AN: 6P1!!,!!!.!! Pesos as an%for attorne'Us fees, the total su ein- pa'ale upon the nalit' of this %e&ision. pon failure to pa' onsu&h nalit', telve 612X per &ent interest per annu shall e ipose% upon aforeentione% aountsfro nalit' until pai%. "oli%ar' &osts a-ainst the %efen%ant an% thir%(part' %efen%ants 6


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$he le-al interest reJuire% to e pai% on the aount of ;ust &opensation for the properties epropriate%is anifestl' in the for of in%enit' for %aa-es for the %ela' in the pa'ent thereof. $herefore, sin&ethe kin% of interest involve% in the ;oint ;u%-ent of the loer &ourt sou-ht to e enfor&e% in this &ase isinterest ' a' of %aa-es, an% not ' a' of earnin-s fro loans, et&. Art. 22!9 of the Civil Co%e shallappl'.

Con&e%e%l', there have een seein- varian&es in the aove hol%in-s. $he &ases &an perhaps e&lassie% into to -roups a&&or%in- to the siilarit' of the issues involve% an% the &orrespon%in- rulin-sren%ere% ' the &ourt. $he Frst -roupF oul% &onsist of the &ases of Reforina v. $ool 619/5, PhilippineRait Bus ines v. Cru619/, loren%o v. Rui 619/9

an% National Poer Corporation v. An-as 61992. @n the Fse&on% -roupF oul% e 0ala'an @nsuran&eCopan' v.0anila Port "ervi&e 6199, Nakpil an% "ons v. Court of Appeals 619//, an% Aeri&an


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E>


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&he&ks to -uarantee the pa'ent of her oli-ation. pon his approval of respon%ent4s reJuest forrestru&turin- of the loan, respon%ent ee&ute% a proissor' note %ate% 12 "epteer 199* herein shea%itte% havin- orroe% an aount of P1,2*!,!!!.!!, in&lusive of interest, fro petitioner an% that sheoul% pa' sai% aount in 0ar&h 1995. Respon%ent also issue% to hi si post%ate% &he&ks aountin- toP1,2*!,!!!.!! as -uarantee of &oplian&e ith her oli-ation. "useJuentl', he presente% the si &he&ksfor en&ashent ut onl' one &he&k as honore%. >e %ean%e% that respon%ent settle her oli-ation, utthe latter faile% to %o so. >en&e, he le% &riinal &ases for )iolation of the Boun&in- Che&ks a 6BatasPaansa Bl-. 22 a-ainst respon%ent. $he &ases ere assi-ne% to the 0etropolitan $rial Court of 0akatiCit', Bran&h 5 60e$C.K12L

Petitioner insiste% that there as no overpa'ent e&ause respon%ent a%itte% in the latter4s proissor'note that her onetar' oli-ation as of 12 "epteer 199* aounte% to P1,2*!,!!!.!! in&lusive ofinterests. >e ar-ue% that respon%ent as alrea%' estoppe% fro &oplainin- that she shoul% not havepai% an' interest, e&ause she as -iven several ties to settle her oli-ation ut faile% to %o so. >eaintaine% that to rule in favor of respon%ent is tantaount to &on&lu%in- that the loan as -iveninterest(free. Base% on the fore-oin- averents, he aske% the R$C to %isiss respon%ent4s &oplaint.

After trial, the R$C ren%ere% a :e&ision on 2 #anuar' 2!!1 hol%in- that respon%ent a%e an overpa'entof her loan oli-ation to petitioner an% that the latter shoul% refun% the e&ess aount to the forer. @tratio&inate% that respon%ent4s oli-ation as onl' to pa' the loane% aount of P5*!,!!!.!!, an% that thealle-e% interests %ue shoul% not e in&lu%e% in the &oputation of respon%ent4s total onetar' %ete&ause there as no a-reeent eteen the re-ar%in- pa'ent of interest. @t &on&lu%e% that sin&erespon%ent a%e an e&ess pa'ent to petitioner in the aount of P!,!!!.!! throu-h istake,petitioner shoul% return the sai% aount to respon%ent pursuant to the prin&iple of solutio in%eiti.K13L

$he R$C also rule% that petitioner shoul% pa' oral %aa-es for the sleepless ni-hts an% oun%e%feelin-s eperien&e% ' respon%ent. urther, petitioner shoul% pa' eeplar' %aa-es ' a' ofeaple or &orre&tion for the puli& -oo%, plus attorne'4s fees an% &osts of suit.

$he %ispositive portion of the R$C :e&ision rea%s?

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@t appears that petitioner an% respon%ent %i% not a-ree on the pa'ent of interest for the loan. Neitheras there &onvin&in- proof of ritten a-reeent eteen the to re-ar%in- the pa'ent of interest.Respon%ent testie% that althou-h she a&&epte% petitioner4s o=er of loan aountin- to P5*!,!!!.!!, thereas, nonetheless, no veral or ritten a-reeent for her to pa' interest on the loan.K22L

Petitioner presente% a han%ritten proissor' note %ate% 12 "epteer 199*K23L herein respon%entpurporte%l' a%itte% oin- petitioner O&apital an% interest. Respon%ent, hoever, eplaine% that it aspetitioner ho a%e a proissor' note an% she as tol% to &op' it in her on han%ritin-H that all hertransa&tions ith the PN8 ere su;e&t to the approval of petitioner as &optroller of the PN8H thatpetitioner threatene% to %isapprove her transa&tions ith the PN8 if she oul% not pa' interestH that ein-unaare of the la on interest an% fearin- that petitioner oul% ake -oo% of his threats if she oul% notoe' his instru&tion to &op' the proissor' note, she &opie% the proissor' note in her on han%ritin-Han% that su&h as the sae proissor' note presente% ' petitioner as alle-e% proof of their rittena-reeent on interest.K2*L Petitioner %i% not reut the fore-oin- testion'. @t is evi%ent that respon%ent%i% not reall' &onsent to the pa'ent of interest for the loan an% that she as erel' tri&ke% an% &oer&e%' petitioner to pa' interest. >en&e, it &annot e -ainfull' sai% that su&h proissor' note pertains to anepress stipulation of interest or ritten a-reeent of interest on the loan eteen petitioner an%respon%ent.

Petitioner, nevertheless, &lais that oth the R$C an% the Court of Appeals foun% that he an% respon%enta-ree% on the pa'ent of 7X rate of interest on the loanH that the a-ree% 7X rate of interest as %ul'a%itte% ' respon%ent in her testion' in the Batas Paansa Bl-. 22 &ases he le% a-ainst respon%entHthat %espite su&h ;u%i&ial a%ission ' respon%ent, the R$C an% the Court of Appeals, &itin- Arti&le 195 ofthe Civil Co%e, still hel% that no interest as %ue hi sin&e the a-reeent on interest as not re%u&e% inritin-H that the appli&ation of Arti&le 195 of the Civil Co%e shoul% not e asolute, an% an e&eption tothe appli&ation of su&h provision shoul% e a%e hen the orroer a%its that a spe&i& rate of interestas a-ree% upon as in the present &aseH an% that it oul% e unfair to allo respon%ent to pa' onl' theloan hen the latter ver' ell kne an% even a%itte% in the Batas Paansa Bl-. 22 &ases that thereas an a-ree% 7X rate of interest on the loan.K25L

Ee have &arefull' eaine% the R$C :e&ision an% foun% that the R$C %i% not ake a rulin- therein thatpetitioner an% respon%ent a-ree% on the pa'ent of interest at the rate of 7X for the loan. $he R$C&learl' state% that althou-h petitioner an% respon%ent entere% into a vali% oral &ontra&t of loan aountin-toP5*!,!!!.!!, the', nonetheless, never inten%e% the pa'ent of interest thereon.K2L Ehile the Court ofAppeals entione% in its :e&ision that it &on&urre% in the R$C4s rulin- that petitioner an% respon%enta-ree% on a &ertain rate of interest as re-ar%s the loan, e &onsi%er this as erel' an ina%verten&ee&ause, as earlier elu&i%ate%, oth the R$C an% the Court of Appeals rule% that petitioner is not entitle% tothe pa'ent of interest on the loan. $he rule is that fa&tual n%in-s of the trial &ourt %eserve -reat ei-htan% respe&t espe&iall' hen a+re% ' the appellate &ourt.K27L Ee foun% no &opellin- reason to%istur the rulin- of oth &ourts.

Petitioner4s relian&e on respon%ent4s alle-e% a%ission in t

philippine national bank vs

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