article 1177 - oblicon

8/10/2019 Article 1177 - Oblicon

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Republic of the PhilippinesSUPREME COURTManila

SECOND DIVISION

G.R. No. 176479 October 6, 2010

RIZAL COMMERCIAL BANKING CORPORATION, Petitioner,vs.

PEDRO P. BUENAVENTURA, Respondent.

R E S O L U T I O N

NACHURA, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court. Petitioner Rizal Commercial BankingCorporation (RCBC) assails the Decision1 dated November 21, 2006 and the Resolution2 dated January 30, 2007 of the Courtof Appeals (CA) in CA-G.R. CV No. 82079.

Respondent Pedro P. Buenaventura and his first wife (now deceased) owned a townhouse unit in Casa Nueva ManilaTownhouse, Quezon City. On December 27, 1994, they obtained a loan from petitioner. As security for the loan, they mortgagedthe townhouse to petitioner.3 Under the loan agreement, respondent was to pay RCBC a fixed monthly payment with adjustableinterest for five years. For this purpose, respondent opened an account with RCBCs Binondo branch from which the bank was

to deduct the monthly amortizations.4

On April 19, 1999, respondent received a Notice of Public Auction of the mortgaged townhouse unit. He wrote Atty. SaturninoBasconcillo, the notary public conducting the auction sale, demanding the cancellation of the auction sale. However, the notarypublic proceeded with the public sale on May 25, 1999, where RCBC emerged as the highest bidder. The Notary PublicsCertificate of Sale was registered with the Register of Deeds on September 28, 2000.

On September 18, 2001, respondent filed with the Regional Trial Court (RTC) of Quezon City a complaint for Annulment of Saleand Damages against RCBC, notary public Saturnino Basconcillo, and the Registrar of Deeds of Quezon City. Respondentprayed that the RTC (1) annul the extra-judicial foreclosure and sale of the property; (2) cancel the Certificate of Sale; and (3)direct the payment of P170,000.00 as actual damages, P100,000.00 as moral damages, P50,000.00 as exemplary damages,P70,000.00 as attorneys fees, plus P2,500.00 for every court appearance of his counsel, and the costs of the suit.

RCBC failed to timely file an Answer and was declared in default. Based on respondents evidence, the RTC rendered a

decision,5 the dispositive portion of which reads:

WHEREFORE, judgment is rendered:

1. Declaring the foreclosure sale of the plaintiffs (respondents) property covered by Transfer Certificate of Title No. 392 34 of theRegistry of Deeds of Quezon City conducted on May 25, 1999 by notary public ATTY. SATURNINO M. BASCONCILLO, and theresulting certificate of sale issued by said notary public on May 27, 1999 null and void and of no effect; and

2. Ordering RIZAL COMMERCIAL BANKING CORPORATION to pay to the plaintiff P100,000.00 as moral damages;P50,000.00 as exemplary damages; P70,000.00 as actual damages; and the costs of suit; and

3. Dismissing the complaint as against ATTY. SATURNINO M. BASCONCILLO and the REGISTRAR OF DEEDS OF QUEZONCITY.

SO ORDERED.6

The RTC found that respondent made regular payments of the monthly amortizations as they fell due, as evidenced by hispassbooks and the various deposit slips acknowledged by RCBC.7 The RTC also found that RCBCs own computer -generatedamortization schedule showed that no balance was due respondent after his last payment on March 27, 2000.8

RCBC filed a motion for reconsideration. It was denied in a resolution9 dated February 11, 2004.

RCBC then appealed to the CA. In the assailed November 21, 2006 Decision,10 the CA affirmed the RTCs decision withmodification, deleting the award of moral and exemplary damages.

The CA ruled that the foreclosure sale was premature. It held that respondent made valid and sufficient payments on his loanobligation. It found respondents evidence as sufficient proof to negate def ault on his part in paying the monthly amortizations. Itnoted that sometime in September 1996, RCBC sent respondent a letter informing the latter of past due accounts since January

27, 1996, which would warrant the application of the acceleration clause. The CA, however, deemed the same to have been"cured" by a subsequent Amortization Schedule given by the bank to respondent stating that, as of March 27, 2000, he nolonger had an unpaid balance on his loan. The CA said this clearly suggests the uninterrupted receipt by RCBC of theinstallments, thus, negating the claim that respondent was in default. It also noted respondents evidence (his passbooks) wh ichindicated that he had sufficient funds to cover the remaining balance of his loan at the time of the foreclosure sale. Moreover, theCA said that based on the term of the loan (April 27, 1995 to March 27, 2000), the loan was not yet due and demandable at thetime of the foreclosure.

On the other hand, the CA found the award of moral and exemplary damages unwarranted. It held that since respondentirregularly paid his monthly amortizations, RCBC did not act maliciously and in bad faith when it initiated the foreclosureproceedings.

RCBC moved for reconsideration of the Decision, but it was denied in a Resolution dated January 30, 2007.


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In this petition, RCBC argues that the CA Decision is not in accord with law and applicable jurisprudence. In particular, it assailsthe CAs finding that respondent was not in default at that time of the foreclosure of th e mortgage. It says that the foreclosuresale was done in the lawful exercise of its right as mortgagee of the property as, at the time of the foreclosure sale, respondenthad unpaid amortizations. The bank points out that respondent made payments until March 2000, but these payments were notwithdrawn by the bank and credited to respondents loan payments but remained in his account.

In his Comment, respondent avers that he never received a copy of petitioners Motion for Extension of Time to file the Pet itionfor Review in violation of Rule 45, Section 2. Thus, he argues that the motion is without legal effect, and therefore, the petitionhas been filed out of time. He also alleges that the petition lacks the requisite affidavit of material dates. Respondent likewise

posits that the petition does not raise questions of law. He argues that the issue raised by petitioner, while purportedly aquestion of law, in reality questions the sufficiency of evidence relied upon by both the trial court and the CA, which this Courthas held in the past to be a question of fact.

In its Reply, petitioner counters respondents arguments by saying that the issue it raised whether respondents subsequentpayment of unpaid amortizations done after the foreclosure and public sale of the property invalidates the extra-judicialforeclosure and public sale proceedings is a purely legal question.

The petition lacks merit and must be denied.

Clearly, the petition disputes the factual findings of the CA,11 which, in turn, merely affirmed the factual findings of the RTC.

It is settled that factual findings of the trial court, when adopted and confirmed by the CA, are binding and conclusive on thisCourt and will generally not be reviewed on appeal. Inquiry into the veracity of the CAs factual findings and conclusions is not

the function of the Supreme Court, because this Court is not a trier of facts. Neither is it our function to reexamine and weighanew the respective evidence of the parties.121avvphi1

While it is true that there are well-established exceptions to this principle, petitioner in this case has failed to show that this casefalls under one of such exceptions.

The RTC and the CA both found that respondent was not in default on the monthly payments of his loan obligation.

These findings are supported by the evidence on record.

At the time of foreclosure April 1999 respondents savings account deposits showed a balance of P852,913.26.13 This wasmore than enough to cover whatever amortizations were due from him at that time. Moreover, the Amortization Schedule showsthat, as of April 27, 1999, respondents loan account with the bank totaled only P269,023.38.14 The same schedule shows that, by March 27, 2000, he had "0.00" balance left to pay,15 meaning he had paid his loan in full.

Foreclosure is valid only when the debtor is in default in the payment of his obligation.16 It is a necessary consequence of non-payment of mortgage indebtedness. As a rule, the mortgage can be foreclosed only when the debt remains unpaid at the time itis due.17

In a real estate mortgage, when the principal obligation is not paid when due, the mortgagee has the right to foreclose on themortgage, to have the property seized and sold, and to apply the proceeds to the obligation.18

RCBCs own Amortization Schedule readily shows the applicability of Article 1176 of the Civil Code, which states:

Art. 1176. The receipt of the principal by the creditor, without reservation with respect to the interest, shall give rise to thepresumption that the said interest has been paid.

The receipt of a later installment of a debt without reservation as to prior installments, shall likewise raise the presumption that

such installments have been paid.19

Respondents passbooks ind icate that RCBC continued to receive his payments even after it made demands for him to pay hispast due accounts, and even after the auction sale.

RCBC cannot deny receipt of the payments, even when it claims that the deposits were "not withdrawn."20 It is not respondentsfault that RCBC did not withdraw the money he deposited. His obligation under the mortgage agreement was to deposit hispayment in the savings account he had opened for that purpose, in order that RCBC may debit the amount of his monthlyliabilities therefrom. He complied with his part of the agreement.

This bolsters the conclusion of the CA that respondent had no unpaid installments and was not in default as would warrant theapplication of the acceleration clause and the subsequent foreclosure and auction sale of the property.

WHEREFORE, the foregoing premises considered, the petit ion is DENIED. The Decision dated November 21, 2006 and the

Resolution dated January 30, 2007 of the Court of Appeals in CA-G.R. CV No. 82079 are hereby AFFIRMED.

SO ORDERED.


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FIRST DIVISION

[G.R. No. 134685. November 19, 1999]

MARIA ANTONIA SIGUAN, pet i t ioner, vs . ROSA LIM, LINDE LIM, INGRID LIM and NEIL LIM, responden ts .

D E C I S I O N

DAVIDE, JR., C.J .:

May the Deed of Donation executed by respondent Rosa Lim (hereafter LIM) in favor of her children be rescinded forbeing in fraud of her alleged creditor, petitioner Maria Antonia Siguan? This is the pivotal issue to be resolved in thispetition for review on certiorari under Rule 45 of the Revised Rules of Court.

The relevant facts, as borne out of the records, are as follows:

On 25 and 26 August 1990, LIM issued two Metrobank checks in the sums of P300,000 and P241,668, respectively,payable to cash. U pon presentment by petitioner with the drawee bank, the checks were dishonored for the reasonaccount closed. Demands to make good the checks proved futile. As a consequence, a criminal case for violation ofBatas Pambansa Blg. 22, docketed as Criminal Cases Nos. 22127-28, were filed by petitioner against LIM with Branch 23of the Regional Trial Court (RTC) of Cebu City. In its decision [1] dated 29 December 1992, the court a quo convicted LIMas charged. The case is pending before this Court for review and docketed as G.R. No. 134685.

It also appears that on 31 July 1990 LIM was convicted of estafa by the RTC of Quezon City in Criminal Case No. Q-89-2216 [2] filed by a certain Victoria Suarez . This decision was affirmed by the Court of Appeals. On appeal, however,this Court, in a decision [3] promulgated on 7 April 1997, acquitted LIM but held her civilly liable in the amount of P169,000,as actual damages, plus legal interest.

Meanwhile, on 2 July 1991, a Deed of Donation [4] conveying the following parcels of land and purportedly executedby LIM on 10 August 1989 in favor of her children, Linde, Ingrid and Neil, was registered with the Office of the Register ofDeeds of Cebu City:

(1) a parcel of land situated at Barrio Lahug, Cebu City, containing an area of 563 sq. m. and covered by TCTNo. 93433;

(2) a parcel of land situated at Barrio Lahug, Cebu City, containing an area of 600 sq. m. and covered by TCTNo. 93434;

(3) a parcel of land situated at Cebu City containing an area of 368 sq. m. and covered by TCT No. 87019; and

(4) a parcel of land situated at Cebu City, Cebu containing an area of 511 sq. m. and covered by TCT No.87020.

New transfer certificates of title were thereafter issued in the names of the donees . [5]

On 23 June 1993, petitioner filed an accion pauliana against LIM and her children before Branch 18 of the RTC ofCebu City to rescind the questioned Deed of Donation and to declare as null and void the new transfer certificates of titleissued for the lots covered by the questioned Deed. The complaint was docketed as Civil Case No. CEB-14181. Petitioner claimed therein that sometime in July 1991, LIM, through a Deed of Donation, fraudulently transferredall her real property to her children in bad faith and in fraud of creditors, including her; that LIM conspired andconfederated with her children in antedating the questioned Deed of Donation, to petitioners and other creditorsprejudice; and that LIM, at the time of the fraudulent conveyance, left no sufficient properties to pay her obligations.

On the other hand, LIM denied any liability to petitioner. She claimed that her convictions in Criminal Cases Nos.

22127-28 were erroneous, which was the reason why she appealed said decision to the Court of Appeals. As regards thequestioned Deed of Donation, she maintained that it was not antedated but was made in good faith at a time when shehad sufficient property. Finally, she alleged that the Deed of Donation was registered only on 2 July 1991 because shewas seriously ill.

In its decision of 31 December 1994 , [6] the trial court ordered the rescission of the questioned deed of donation; (2)declared null and void the transfer certificates of title issued in the names of private respondents Linde, Ingrid and NeilLim; (3) ordered the Register of Deeds of Cebu City to cancel said titles and to reinstate the previous titles in the name ofRosa Lim; and (4) directed the LIMs to pay the petit ioner, jointly and severally, the sum of P10,000 as moraldamages; P 10,000 as attorneys fees; and P5,000 as expenses of litigation.

On appeal, the Court of Appeals, in a decisio n [7] promulgated on 20 February 1998, reversed the decision of the trialcourt and dismissed petitioners accion pauliana . It held that two of the requisites for filing an accion pauliana wereabsent, namely, (1) there must be a credit existing prior to the celebration of the contract; and (2) there must be a fraud, or

at least the intent to commit fraud, to the prejudice of the creditor seeking the rescission. According to the Court of Appeals, the Deed of Donation, which was executed and acknowledged before a notary

public, appears on its face to have been executed on 10 August 1989. Under Section 23 of Rule 132 of the Rules ofCourt, the questioned Deed, being a public document, is evidence of the fact which gave rise to its execution and of thedate thereof. No antedating of the Deed of Donation was made, there being no convincing evidence on record to indicatethat the notary public and the parties did antedate it. Since LIMs indebtedness to petitioner was incurred in August 1990,or a year after the execution of the Deed of Donation, the first requirement for accion pauliana was not met.

Anent petitioners contention that assuming that the Deed of Donation was not antedated it was nevertheless in fraudof creditors because Victoria Suarez beca me LIMs creditor on 8 October 1987, the Court of Appeals found the sameuntenable, for the rule is basic that the fraud must prejudice the creditor seeking the rescission.
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SEC. 19. Classes of documents . -- For the purpose of their presentation in evidence, documents are either public orprivate.

Public documents are:

(a) . . .

(b) Documents acknowledged before a notary public except last wills and testaments. . . .

It bears repeating that notarial documents, except last wills and testaments, are public documents and are evidenceof the facts that gave rise to their execution and of their date.

In the present case, the fact that the questioned Deed was registered only on 2 July 1991 is not enough to overcomethe presumption as to the truthfulness of the statement of the date in the questioned deed, which is 10 August1989. Petitioners claim against LIM was constituted only in August 1990, or a y ear after the questioned alienation. Thus,the first two requisites for the rescission of contracts are absent.

Even assuming arguendo that petitioner became a creditor of LIM prior to the celebration of the contract of donation,still her action for rescission would not fare well because the third requisite was not met. Under Article 1381 of the CivilCode, contracts entered into in fraud of creditors may be rescinded only when the creditors cannot in any manner collectthe claims due them. Also, Article 1383 of the same Code provides that the action for rescission is but a subsidiaryremedy which cannot be instituted except when the party suffering damage has no other legal means to obtain reparationfor the same. The term subsidiary remedy has been defined as the exhaustion of all remedies by the prejudicedcreditor to collect claims due him before rescission is resorted to. [19] It is, therefore, essential that the party asking forrescission prove that he has exhausted all other legal means to obtain satisfaction of his claim . [20] Petitioner neitheralleged nor proved that she did so. On this score, her action for the rescission of the questioned deed is not maintainableeven if the fraud charged actually did exist. [21]

The fourth requisite for an accion pauliana to prosper is not present either.

Article 1387, first paragraph, of the Civil Code provides: All contracts by virtue of which the debtor alienatesproperty by gratuitous title are presumed to have been entered into in fraud of creditors when the donor did not reservesufficient property to pay all debts contracted before the donation. Likewise, Article 759 of the same Code, secondparagraph, states that the donation is always presumed to be in fraud of creditors when at the time thereof the donor didnot reserve sufficient property to pay his debts prior to the donation.

For this presumption of fraud to apply, it must be established that the donor did not leave adequate properties which

creditors might have recourse for the collection of their credits existing before the execution of the donation. As earlier discussed, petitioners alleged credit existed only a year after the deed of donation was executed. She

cannot, therefore, be said to have been prejudiced or defrauded by such alienation. Besides, the evidence disclose thatas of 10 August 1989, when the deed of donation was executed, LIM had the following properties:

(1) A parcel of land containing an area of 220 square meters, together with the house constructedthereon, situated in Sto. Nio Village, Mandaue City, Cebu, registered in the name of Rosa Lim and coveredby TCT No. 19706 ;[22]

(2) A parcel of land located in Benros Subdivision, Lawa-an, Talisay, Cebu ;[23]

(3) A parcel of land containing an area of 2.152 hectares, with coconut trees thereon, situated at Hindag-an, St. Bernard, Southern Leyte, and covered by Tax Declaration No. 13572 . [24]

(4) A parcel of land containing an area of 3.6 hectares, with coconut trees thereon, situated at Hindag-an,St. Bernard, Southern Leyte, and covered by Tax Declaration No. 13571 . [25]

During her cross-examination, LIM declared that the house and lot mentioned in no. 1 was bought by her in theamount of about P800,000 to P900,000 .[26] Thus:

ATTY. FLORIDO:

Q These properties at the Sto. Nio Village, how much did you acquire this property?

A Including the residential house P800,000.00 to P900,000.00.

Q How about the lot which includes the house. How much was the price in the Deed of Sale of the house and lot atSto. Nio Violage [ sic ]?

A I forgot.

Q How much did you pay for it?

A That is P800,000.00 to P900,000.00.

Petitioner did not adduce any evidence that the price of said property was lower. Anent the property in no. 2, LIMtestified that she sold it in 1990 . [27] As to the properties in nos. 3 and 4, the total market value stated in the taxdeclarations dated 23 November 1993 was P56,871.60. Aside from these tax declarations, petitioner did not presentevidence that would indicate the actual market value of said properties. It was not, therefore, sufficiently established thatthe properties left behind by LIM were not sufficient to cover her debts existing before the donation was made. Hence, thepresumption of fraud will not come into play.
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Nevertheless, a creditor need not depend solely upon the presumption laid down in Articles 759 and 1387 of the CivilCode. Under the third paragraph of Article 1387, the design to defraud may be proved in any other manner recognized bythe law of evidence. Thus in the consideration of whether certain transfers are fraudulent, the Court has laid downspecific rules by which the character of the transaction may be determined. The following have been denominated by theCourt as badges of fraud:

(1) The fact that the consideration of the conveyance is fictitious or is inadequate;

(2) A transfer made by a debtor after suit has begun and while it is pending against him;

(3) A sale upon credit by an insolvent debtor;

(4) Evidence of large indebtedness or complete insolvency;

(5) The transfer of all or nearly all of his property by a debtor, especially when he is insolvent or greatlyembarrassed financially;

(6) The fact that the transfer is made between father and son, when there are present other of the abovecircumstances; and

(7) The failure of the vendee to take exclusive possession of all the property . [28]

The above enumeration, however, is not an exclusive list. The circumstances evidencing fraud are as varied as themen who perpetrate the fraud in each case. This Court has therefore declined to define it, reserving the liberty to dealwith it under whatever form it may present itself . [29]

Petitioner failed to discharge the burden of proving any of the circumstances enumerated above or any othercircumstance from which fraud can be inferred. Accordingly, since the four requirements for the rescission of a gratuitouscontract are not present in this case, petitioners action must fail.

In her further attempt to support her action for rescission, petitioner brings to our attention the 31 July 1990Decision [30] of the RTC of Quezon City, Branch 92, in Criminal Case No. Q-89-2216. LIM was therein held guilty of estafaand was ordered to pay complainant Victoria Suarez the sum of P169,000 for the obligation LIM incurred on 8 October1987. This decision was affirmed by the Court of Appeals. Upon appeal, however, this Court acquitted LIM of estafa butheld her civilly liable for P169,000 as actual damages.

It should be noted that the complainant in that case, Victoria Suarez, albeit a creditor prior to the questionedalienation, is not a party to this accion pauliana . Article 1384 of the Civil Code provides that rescission shall only be to theextent necessary to cover the damages caused. Under this Article, only the creditor who brought the action for rescissioncan benefit from the rescission; those who are strangers to the action cannot benefit from its effects . [31] And the revocation

is only to the extent of the plaintiff creditors unsatisfied credit; as to the excess, the alienation is maintained .[32]

Thus,petitioner cannot invoke the credit of Suarez to justify rescission of the subject deed of donation.

Now on the propriety of the trial courts awards of moral damages, attorneys fees and expenses of litigation in favorof the petitioner. We have pored over the records and found no factual or legal basis therefor. The trial court made theseawards in the dispositive portion of its decision without stating, however, any justification for the same in the ratiodecidendi . Hence, the Court of Appeals correctly deleted these awards for want of basis in fact, law or equity.

WHEREFORE, the petition is hereby DISMISSED and the challenged decision of the Court of Appeals in CA-G.R.CV. No. 50091 is AFFIRMED in toto .

No pronouncement as to costs.

SO ORDERED.
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Republic of the Philippines Supreme Court

Manila

EN BANC

UNITED PLANTERS SUGAR MILLING CO., INC. (UPSUMCO), Petitioner,

- versus -

THE HONORABLE COURT OF APPEALS, PHILIPPINENATIONAL BANK (PNB) and ASSET PRIVATIZATION TRUST(APT), AS TRUSTEE OF THE REPUBLIC OF THEPHILIPPINES

Respondents.

G.R. No. 126890

Present:

PUNO, C.J. ,QUISUMBING,CARPIO,CORONA,CARPIO MORALES,VELASCO, JR.,NACHURA,LEONARDO-DE CASTRO,BRION,PERALTA,BERSAMIN,DEL CASTILLO,

ABAD,VILLARAMA,PEREZ, andMENDOZA, JJ .

Promulgated:

March 9, 2010x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

RESOLUTION PERALTA, J . :

For consideration is the Motion for Reconsideration of petitioner United Planters Sugar Milling Company, Inc. (UPSUMCO)seeking to reverse and set aside the Resolution of the Court dated April 2, 2009 which granted both Second Motions forReconsideration filed by respondents Privatization and Management Office (PMO), formerly Asset Privatization Trust (APT), andPhilippine National Bank (PNB), and reinstated the Decision of the Court of Appeals dated February 29, 1996 which, in turn, reversedand set aside the Decision of the Regional Trial Court, Branch 45, Bais, Negros Oriental. The dispositive portion of the CA Decisionreads:

WHEREFORE, the appealed decision is hereby set aside and judgment is herein rendered declaring thatthe subject Deed of Assignm ent has not condoned all of UPSUMCOs obligations to APT as assignee of PNB.

To determine how much APT is entitled to recover on its counterclaim, it is required to render an accountingbefore the Regional Trial Court on the total payments made by UPSUMCO on its obligations including the followingamounts:

(1) The sum seized from it by APT whether in cash or in kind (from UPSUMCOs bank deposits as well assugar and molasses proceeds):

(2) The total obligations covered by the following documents:

(a) Credit agreement dated November 05, 1974 (Exh. 1, Record p. 528); and (b)(c) The Restructuring Agreements dated (i) June 24, 1982, (ii) December 10, 1982, and

(3) May 9, 1984 and

(3) The P450,000,000.00 proceeds of the foreclosure

Should there be any deficiency due APT after deducting the foregoing amounts from UPSUMCOstotal obligation in the amount of (P2,137,076,433.15), the latter is hereby ordered to pay thesame. However, if after such deduction there should be any excess payment, the same should be turnedover to UPSUMCO.

The Regional Trial Court is hereby directed to receive APTs accounting and thereafter, to render the properdisposal of this case in accordance with the foregoing findings and disposition.

Costs against appellees.

SO ORDERED.


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Petitioner prefaces its arguments that it is the aggrieved party, not the government as represented by respondent APT (nowthe PMO), as its deposits with respondent PNB were taken without its prior knowledge and that it was reluctant to give assent to thedesire of the government to forego redemption of its assets by reason of uncontested foreclosure.

Facts showed that in 1974, petitioner, engaged in the business of milling sugar, obtained takeoff loans from respondent PNBto finance the construction of a sugar milling plant which were covered by a Credit Agreement dated November 5, 1974. The said loanswere thrice restructured through Restructuring Agreements dated June 24, 1982, December 10, 1982, and May 9, 1984. The takeoffloans were secured by a real estate mortgage over two parcels of land where the milling plant stood and chattel mortgages over certainmachineries and equipment. Also included in the condition for the takeoff loans, petitioner agreed to open an d/or maintain a depositaccount with [respondent PNB] and the bank is authorized at its option to apply to the payment of any unpaid obligations of the clientany/and all monies, securities which may be in its hands on deposit.

From 1984 to 1987, petitioner contracted another set of loans from respondent PNB, denominated as operational loans, forthe purpose of financing its operations, which also contained setoff clauses relative to the application of payments from pet itionersbank accounts. They were likewise secured by pledge contracts whereby petitioner assigned to respondent PNB all its sugar producefor the latter to sell and apply the proceeds to satisfy the indebtedness arising from the operational loans.

Later, respondent APT and petitioner agreed to an uncontested or friendly foreclosure of the mortgaged assets, inexchange for petitioners waiver of its right of redemption. On July 28, 1987, respondent PNB (as mortgagee) and respondent A PT (asassignee and transferee of PNBs rights, titles and interests) filed a Petition for Extrajudicial Foreclosure Sale with the Ex-OfficioRegional Sheriff of Dumaguete City, seeking to foreclose on the real estate and chattel mortgages which were executed to secure thetakeoff loans. The foreclosure sale was conducted on August 27, 1987 whereby respondent APT purchased the auctioned propertiesfor P450,000,000.00.

Seven (7) days after the foreclosure sale, or on September 3, 1987, petitioner executed a Deed of Assignment assigned torespondent APT its right to redeem the foreclosed properties, in exchange for or in consideration of respondent APT condonin g anydeficiency amount it may be entitled to recover from the Petitioner under the Credit Agreement dated November 5, 1974, and theRestructuring Agreements[s] dated June 24 and December 10, 1982, and May 9, 1984, respectively, executed between [UPSUMCO]and PNB On the same day, the Board of Directors of petitioner approved the Board Resolution authorizing Joaquin Montenegro, itsPresident, to enter into said Deed of Assignment.

Despite the Deed of Assignment, petitioner filed a complaint on March 10, 1989 for sum of money and damages againstrespondents PNB and APT before the Regional Trial Court (RTC) of Bais City alleging therein that respondents had illegallyappropriated funds belonging to petitioner, through the following means: (1) withdrawals made from the bank accounts opened bypetitioner beginning August 27, 1987 until February 12, 1990; (2) the application of the proceeds from the sale of the sugar of petitionerbeginning August 27, 1987 until December 4, 1987; (3) the payment from the funds of petitioner with respondent PNB for the op eratingexpenses of the sugar mill after September 3, 1987, allegedly upon the instruction of respondent APT and with the consent ofrespondent PNB.

The RTC rendered judgment in favor of the petitioner. On appeal, the CA reversed and set aside the RTC Decision and ruled

that only the takeoff loans and not the operational loans were condoned by the Deed of Assignment. In a Decision dated November28, 2006 and Resolution dated July 11, 2007, the Court (Third Division) reversed and set aside the CA Decision. The case wasthereafter referred to the Court en banc which reversed the ruling of the Third Division.

In its Motion for Reconsideration, petitioner raises the following grounds:

1. The order of the Honorable Court En Banc reinstating the decision of the Honorable Court of Appealswould be inconsistent with the facts of the case and the findings of this Honorable Court.

2. There is no valid ground to conclude that APT has still the right to the deposit of UPSUMCO after the August 27, 1987 friendly foreclosure, and the withdrawal of P80,200,806.41 as payment could be applied either asrepayment on the Take-off Loans or for the Operational Loans.

3. The findings that the condonation took effect only after the execution of the Deed of Assignment henceupholds the validity of APTs taking of the deposit of P 80,200,806.41 in UPSUMCOs PNB account as payment of thedeficiency is without basis.

4. The admission of the case by Honorable Court En Banc after the denial of the Second Division of theSecond Motion for Reconsideration and the referral of the case to the Honorable Court En Banc appear not to be inaccordance with the Rules of Procedure.

5. The basis for admission of the case to the Honorable Court En Banc are belated issues which have noother purpose but to give apparent reasons for the elevation of the case.

6. There is no legal basis for the withdrawals of UPSUMCOs deposit on the ground of conventional

compensation.

7. Since the amount of P17,773,185.24 could not be the subject of conventional compensation, it should bereturned to petitioner immediately by respondents.

After a careful review of the arguments in the petitioners motion for reconsideration, the Court finds the same to be mererehash o f the main points already set forth in the Courts En Banc Resolution of April 2, 2009 and, hence, denies the same for lack ofmerit. The pertinent portions of the decision read as follows:


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The rulings of the lower courts, as well as the petition itself, are not clear as to the amount extended by wayof takeoff loans by PNB to UPSUMCO. However, the Court of Appeals did enumerate the following transactionsconsisting of the operational loans, to wit:

(1) Trust Receipts dated August 26, 1987; February 5, 1987; and July 10, 1987;(2) Deed of Assignment By Way of Payment dated November 16, 1984 (Exh. 3 [PNB]; Exh. 12 [APT]; Record,

p. 545);(3) Two (2) documents of Pledge both dated February 19, 1987;(4) Sugar Quedans (Exh. 13 to 16; Record, pp 548 to 551);(5) Credit Agreements dated February 19, 1987 (Exhs. 2 [PNB] & 4 [APT]; Record, pp. 541 -544) and April

29, 1987 (Exh. 11 [APT]; Record, pp. 314 -317).(6) Promissory Notes dated February 20, 1987 (Exh. 17; Record, p. 573); March 2, 1987 (Exh. 18; Record,

p. 574); March 3, 1987 (Exh. 19; Record, p. 575); March 27, 1987; (Exh. 20; Record, p. 576); March 30,1987(Exh. 21; Record, p. 577); April 7, 1987 (Exh. 22; Record, p. 578); May 22, 1987 (Exh. 23; Record,p. 579); and July 30, 1987 (Exh. 24; record p. 580).

On 27 February 1987, through a Deed of Transfer, PNB assigned to the Government its rights titles andinterests over UPSUMCO, among several other assets. The Deed of Transfer acknowledged that said assignmentwas being undertaken in compliance with Presidential Proclamation No. 50. The Government subsequentlytransferred these rights titles and interests over UPSUMCO to respondent Asset and Privatization Trust (APT),[now PMO].

x x x x

This much is clear. The Deed of Assignment condoned only the take-off loans, and not the operationalloans. The Deed of Assignment in its operative part provides, thus:

That United Planter[s] Sugar Milling Co., Inc. (the Corporation) pursuant to a resolution passed by itsboard of Directors on September 3, 1087, and confirmed by the Corporations stockholders in a stockholdersMeeting held on the same (date), for and in consideration of the Asset Privatization Trust (APT) condoningany deficiency amount it may be entitled to recover from the Corporation under the Credit Agreementdated November 5, 1974 and the Restructuring Agreement[s] dated June 24, and December 10, 1982, andMay 9, 1984, respectively, executed between the Corporation and the Philippine National Bank(PNB), which financial claims have been assigned to APT, through the National Government, by PNB, herebyirrevocably sells, assigns and transfer to APT its right to redeem the foreclosed real properties coveredby Transfer Certificates of Titles Nos. T-16700 and T-16701.

IN WITNESS WHEREOF, the Corporation has caused this instrument to be executed on its behalf by Mr.Joaquin S. Montenegro, thereunto duly authorized, this 3 rd day of September, 1997.

x x x x

This notwithstanding, the RTC Decision was based on the premise that all of UPSUMCOs loans werecondoned in the Deed of Assignment. In contrast, the Court of Appeals acknowledged that only the take-off loanswere condoned, and thus ruled that APT was entitled to have the funds from UPSUMCOSs accounts transferred toits own account to the extent of UPSUMCOs remaining obligation, less the amount condoned in the Deed of

Assignment and the 450,000,000.00 proceeds of the foreclosure.

The challenged acts of respondents all occurred on or after 27 August 1987, the day of the executionsale. UPSUMCO argues that after that date, respondents no longer had the right to collect monies from thePNB bank accounts which UPSUMCO had opened and maintained as collateral for its operational take-offloans. UPSUMCO is wrong. After 27 August 1987, there were at least two causes for the application ofpayments from UPSUMCOs PNB accounts. The first was for the repayment of the operational loans, whichwere never condoned. The second was for the repayment of the take-off loans which APT could obtainuntil 3 September 1987, the day the condonation took effect.

The error of the Courts earlier rulings, particularly the Resolution dated 11 July 2007, was in assuming that thenon-condonation of the operational loans was immaterial to the application of payments made in favor of APT fromUPSUMCOSs PNB accounts that occurred after 27 August 1987. For as long as there remained outstandingobligations due to A PT (as PNBs successor -in-interest), APT would be entitled to apply payments from the bankaccounts of PNB. That right had been granted in favor of PNB, whether on account of the take-off loans or theoperational loans.

Petitioner filed with the RTC the complaint which alleged that among the conditions of the friendlyforeclosure are: (A) That all the accounts of [United Planters] are condoned, including the JSS notes at the time ofthe public bidding. It was incumbent on petitioner, not respondents, to prove that particular allegation in itscomplaint. Was petitioner able to establish that among the conditions of the friendly foreclosure was that all itsaccounts are condoned? It did not, as it is now agreed by all that only the take-off loans were condoned.

This point is material, since the 2007 Resolution negated the findings that only the take-off loans werecondoned by faulting respondents for failing to establish that there remained outstanding operational loans on which

APT could apply payments from UPSUMCOs bank accounts. By the very language of the Deed of Assignment, itwas evident that UPSUMCOs allegation in its complaint that all of its accounts were condoned was not proven. Evenif neither PNB nor APT had filed an answer, there would have been no basis in fact for the trial court to conclude thatall of UPSUMCOs loans were condoned (as the RTC in this case did), or issue reliefs as if all the loans werecondoned (as the 2007 Resolution did).

As noted earlier, APT had the right to apply payments from UPSUMCOs bank accounts, by virtue of theterms of the operational loan agreements. Considering that UPSUMCO was spectacularly unable to repay the take-off loans it had earlier transacted, it simply beggars belief to assume that it had fully paid its operationalloans. Moreover, APT had the right to obtain payment of the operational loans by simply applying payments fromUPSUMCOs bank accounts, without need of filing an action for collection wi th the courts. The bank accounts wereestablished precisely to afford PNB (and later APT) extrajudicial and legal means to obtain repayment ofUPSUMCOs outstanding loans without hassle.


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B.

There is no question that the Deed of Assignment condoned the outstanding take-off loans of UPSUMCOdue then to APT. The Deed of Assignment was executed on 3 September 1987as was the UPSUMCO BoardResolution authorizing its President to sign the Deed of Assignment. However, despite the absence of any terms tothat effect in the Deed of Assignment, it is UPSUMCOs position that the condonation actually had retroacted to 27

August 1987. The previous rulings of the Court unfortunately upheld that position.

It is easy to see why UPSUMCO would pose such an argument. It appears that between 27 August1987 and 3 September 1987. APT applied payments from UPSOMCOs bank accounts in the amount of around 80Million Pesos. UPSUMCO obviously desires the return of the said amount. But again, under the terms of the loanarguments, APT as successor-in-interest of PNB, had the right to seize any amounts deposited in UPSUMCOSbank accounts as long as UPSUMCO remained indebted under the loan agreements. Since UPSUMCO wasreleased from its take-off loans only on 3 September 1987, as indicated in the Deed of Assignment, then APTsapplication of payments is perfectly legal.

The earlier rulings of the Court were predicated on a finding that there was a friendly foreclosure agreementbetween APT and UPSUMCO, whereby APT agreed to condone all of UPSUMCOs outstanding obligations inexchange for UPSUMCOs waiver of its right to redeem the foreclosed property. However, no such agreement to theeffect was ever committed to writing or presented in evidence. The written agreement actually set forth was not ascontended by UPSUMCO. For one, not all of the outstanding loans were condoned by APT since the take-off loanswere left extant. For another, the agreement itself did not indicate any date of effectivity other than the date of theexecution of the agreement, namely 3 September 1987.

It is argued that the use of the word any in any deficiency amount sufficiently establishes the retroactivenature of the condonation. The argument hardly convinces. The phrase any deficiency amount could refer not onlyto the remaining deficiency amount after the 27 August foreclosure sale, but also the remaining deficiency amount asof 3 September 1987, when the Deed of Assignment was executed and after APT had exercised its right as creditorto apply payments from petitioners PNB accounts. The Deed of Assignment was not cast in intractably preciseterms, and both interpretations can certainly be accommodated.

It is in that context that the question of parol evidence comes into play. The parol evidence rule states thatgenerally, when the terms of an agreement have been reduced into writing, it is considered as containing all theterms agreed upon and there can be no evidence of such terms other than the contents of the writtenagreement. Assuming that the Deed of Assignment failed to accurately reflect an intent of the parties to retroact theeffect of condonation to the date of the foreclosure sale, none of the parties, particularly UPSUMCO, availed of itsright to seek the reformation of the instrument to the end that such true intention may be expressed. As there isnothing in the text of Deed of Assignment that clearly gives retroactive effect to the condonation, the parol evidencerule generally bars any other evidence of such terms other than the contents of the written agreement, such as

evidence that the said Deed had retroactive effect.

It is argued that under Section 9, Rule 130, a party may present evidence to modify, explain or add to theterms of the written agreement if it is put in issue in the pleading, [t]he failure of the written agreement to express thetrue intent and the agreement of the parties thereto.

Petitioner did not exactly state in its Amended Complaint that the condonation effected in the Deed of Assignment had retroacted to the date of the foreclosure sale. What petitioner contented in its amended complaintwas that the Deed of Assi gnment released and discharged plaintiff from any and all obligations due the defendantPNB and defendant APT, that after the foreclosure by PNB/APT plaintiff is entitled to all the funds it deposited orbeing held by PNB in all its branches, and that among the conditions of the friendly foreclosure are that all theaccounts of the plaintiff are condoned. It remains unclear whether petitioner had indeed alleged in its AmendedComplaint that the Deed of Assignment executed on 3 September1987 had retroacted effect as of the foreclosuresale, or on 27 August 1987. If petitioner were truly mindful to invoke the exception to the parol evidence rule andintent on claiming that the condonation had such retroactive effect, it should have employed more precise language

to the effect in their original and amended complaints.

x x x x

The right of respondent PNB to set-off payments from UPSUMCO arose from conventional compensationrather than legal compensation, even if all the requisites for legal compensation were present between those twoparties. The determinative factor is the mutual agreement between PNB and UPSUMCO to set-off payments. Evenwithout an express agreement stipulating compensation, PNB and UPSUMCO would have been entitled to set-off ofpayments, as the legal requisites for compensation under Article 1279 were present.

As soon as PNB assigned its credit to APT, the mutual creditor-debtor relation between PNB andUPSUMCO ceased to exist. However, PNB and UPSUMCO had agreed to a conventional compensation, arelationship which does not require the presence of all the requisites under Article 1279. And PNB too had assignedall its rights as creditor to APT, including its rights under conventional compensation. The absence of the mutualcreditor-debtor relation between the new creditor APT and UPSUMCO cannot negate the conventionalcompensation. Accordingly, APT, as the assignee of credit of PNB, had the right to set-off the outstanding obligationsof UPSUMCO on the basis of conventional compensation before the condonation took effect on 3 September 1987.

V.

The conclusions are clear. First. Between 27 August to 3 September 1987, APT had the right to applypayments from UPSUMCOs bank accounts maintained with PNB as repayment for the take -off loans and/or theoperational loans. Considering that as of 30 June 1987, the total indebtedness of UPSUMCO as to the take-off loansamounted to P2,137,076,433.15, and because the foreclosed properties were sold during the execution sale for only450 Million Pesos, it is safe to conclude that the total amount of P80,200,806.41 debit ed from UPSUMCOs bankaccounts from 27 August to 3 September 1987 was very well less than the then outstanding indebtedness for thetake-off loans. It was only on 3 September 1987 that the take-off loans were condoned by APT, which lost only onthat date too the right to apply payments from UPSUMCOS bank accounts to pay the take -off loans.


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Second. After 3 September 1987, APT retained the right to apply payments from the bank accounts of

UPSUMCO with PNB to answer for the outstanding indebtedness under the operational loan agreements. It appearsthat the amount of P17,773,185.24 was debited from UPSUMCOs bank accounts after 3 September. At the sametime, it remains unclear what were the amounts of outstanding indebtedness under the operational loans at thevarious points after 3 September 1987 when the bank accounts of UPSUMCO were debited.

The Court of Appeals ordered the remand of the case to the trial court, on the premise that it was unclearhow much APT was entitled to recover by way of counterclaim. It is clear that the amount claimed by APT by way ofcounterclaim over 1.6 Billion Pesos is over and beyond what it can possibly be entitled to, since it is clear that thetake-off loans were actually condoned as of 3 September 1987. At the same time, APT was still entitled to repaymentof UPSUMCOs operational loans. It is not clear to what extent, if at all, the amounts debited from UPSUMCOs bankaccounts after 3 September 1987 covered UPSUMCOs outstanding indebtedness under the operational loans. Saidamounts could be insufficient, just enough, or over and beyond what UPSUMCO actually owed, in which case thepetitioner should be entitled to that excess amount debited after 3 September 1987. Because it is not evident fromthe voluminous records what was the outstanding balance of the operational loans at the various times post-September 3 UPSUMCOs bank accounts were debited, the remand ordered by the Court of Appeal is ultimately thewisest and fairest recourse . [1]

Petitioner insists that the Court should not have taken cognizance of the respondents second motions for reconsideration wit hthe prayer that the case be referred to the Court en banc as the same appear not to be in accordance with the rules.

Generally, under Section 3 of the Courts Circular No. 2 -89, effective March 1, 1989, the referral to the Court en banc of casesassigned to a Division is to be denied on the ground that the Court en banc is not an Appellate Court to which decisions or resolutionsof a Division may be appealed. Moreover, a second motion for reconsideration of a judgment or final resolution shall not be entertainedfor being a prohibited pleading under Section 2, Rule 52, in relation to Section 4, Rule 56 of the Rules of Court, except forextraordinarily persuasive reasons and only after an express leave shall have first been obtained . [2] Accordingly, the Court, in theexercise of its sound discretion, determines the issues which are of transcendental importance, as in the present case, whichnecessitates it to accept the referral of a Division case before it and the grant of a second motion for reconsideration.

In sum, the Resolution of the Court En Banc reinstating the Decision of the CA categorically ruled that only its takeoff loans,not the operational loans, were condoned by the Deed of Assignment dated September 3, 1987. The Deed of Assignment expresslystipulated the particular loan agreements which were covered therein. As such, respondent APT was entitled to have the funds frompetitioners savings accounts with respondent PNB transferred to its own account, to the extent of petitioners remaining obligationsunder the operational loans, less the amount condoned in the Deed of Assignment and the P450,000,000.00 proceeds of theforeclosure. As the En Banc Resolution explained, respondent APT had a right to go after the bank deposits of petitioner, in its capacityas the creditor of the latter. Likewise, respondent PNB had the right to apply the proceeds of the sale of petitioners sugar andmolasses, in satisfaction of petitioners obligat ions. Respondent PNB never waived these rights and the same were transferred torespondent APT (now PMO) by virtue of the Deed of Transfer executed between them. Moreover, there was no conventional

subrogation since such requires the consent of the original parties and of the third persons and there was no evidence that the consentof petitioner (as debtor) was secured when respondent PNB assigned its rights to respondent APT, and that the assignment byrespondent PNB to respondent APT arose by mandate of law and not by the volition of the parties. Accordingly, the remand of the caseto the RTC for computation of the parties remaining outstanding balances was proper.

The doctrine of stare decisis et no quieta mover e [3 ] or principle of adherence to precedents does not apply to the present caseso as to bar the Court en banc from taking cognizance over the case which rectified the disposition of the case and reversed and setaside the Decision rendered by a Division thereof.

WHEREFORE, the Motion for Reconsideration filed by petitioner United Planters Sugar Milling Company, Inc. (UPSUMCO)is DENIED WITH FINALITY for lack of merit.

SO ORDERED.
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