Real Est Trans

8/12/2019 Real Est Trans

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TRISTAN LOPEZ as Attorney-in-Fact of LETICIA and CECILIA LOPEZ v. LETICIA R. FAJARDO

468 SCRA 664 (2005)

A month-to-month lease under the New Civil Code is a lease with a definite period and expires after the last day

of any given thirty-day period, upon proper demand and notice by the lessor to vacate.

Leonor Sobrepena and her kins (the Sobrepenas) were the owners of a 2-door apartment at 1326 and 1328 Tomas

Mapua St., Sta. Cruz, Manila. The apartment at No. 1328 has for so many years been occupied under a verbalcontract of lease Leticia Fajardo (Fajardo). The Sobrepenas sold such property to Leticia and Cecilia Lopez (theLopez sisters).

The Lopez sisters filed before the Metropolitan Trial Court of Manila (MeTC) a complaint for ejectment with

damages, against Fajardo on the ground of failure to pay her monthly rentals from May 1999 to February 2000.This was settled after Fajardo paid P35,000.00 representing rental in arrears and current rental for June 2000.

Fajardo again failed and refused to pay her July and August 2000 rentals, prompting Lopez, et al. to send her a

letter informing her that they have decided to terminate their monthly lease contract effective midnight of August31, 2000, the very time their oral lease contract shall expire and they are giving her a grace period of one (1)

month within which to vacate the premises. Fajardo then remitted to Lopez, et al. a check in the amount of P30,000representing payment of the rentals in arrears for July 2000, August 2000 and September 2000, and advance

rentals for October 2000 up to July 2001 but it was not accepted by Lopez, et al.

Having no settlement, Lopez, et al. filed a new complaint for ejectment and damages against Fajardo before the

MeTC wherein it held that Lopez, et al. had sufficiently established their cause of action arising from theexpiration of the lease contract, the lease being terminable at the end of any month after due notice, and failure of

Fajardo to pay the stipulated rental which are the grounds for ejectment under Article 1673 of the Civil Code.Such was appealed by Fajardo to the Regional Trial Court of Manila (RTC) which affirmed in toto the decision

of MeTC.

Fajardo appealed to the Court of Appeals which held that a minimum of 3-month arrearages is required to justifya lessor to eject a lessee and held that Fajardo had incurred back rentals of only 2 months when Lopez, et al. sent

her the letter of demand hence, the filing of the ejectment case was premature.

ISSUE:

Whether or not Lopez, et al. has a valid ground for the ejectment of Fajardo

HELD:

A month-to-month lease under Article 1687 is a lease with a definite period and expires after the last day of any

given thirty-day period, upon proper demand and notice by the lessor to vacate.Under the Rent Control Law, the prohibition against the ejectment of a lessee by his lessor is not absolute. There

are exceptions expressly provided by law, which include the expiration of a lease for a definite period. In theinstant case, it was noted that the rentals were paid on a month-to-month basis. Thus, the lease could be validly

terminated at the end of any given month upon prior notice to that effect on the lessee. After all, when the rentalsare paid monthly, the lease is deemed to be for a definite period, i.e., it expires at the end of every month.

When Lopez, et al. then sent the August 18, 2000 letter to respondent informing her that the lease would beterminated effective at the end of the same month, it was well within his rights.

In fine, it was error for the appellate court to ignore the fact that by the earlier-quoted August 18, 2000 letter of

which was annexed as Annex F to the complaint, they had notified Fajardo of the expiration of the leasecontract, another legal ground for judicial ejectment.

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THIRD DIVISION

[G.R. No. 131020. July 20, 2000]

PHILIPPINE ECONOMIC ZONE AUTHORITY,petitioner, vs. HON. BENJAMIN T. VIANZON, Judge, Branch 4, Regional Trial Court, Balanga, Bataan and SAFFIROU

SEACRAFTS, INC., respondents.

D E C I S I O N

GONZAGA-REYES, J.:

This Petition for Review on Certiorariseeks the reversal of the Decision of the Court of Appeals[1] in CA-G.R. SP No. 44080 entitled "PHILIPPINE ECONOMIC ZONE

AUTHORITY versus HON. BENJAMIN T. VIANZON, as Judge RTC of Balanga, Bataan, Branch 4 a nd SAFFIROU SEACRAFTS, INC.". The Court of Appeals affirmed the Order

of the Regional Trial Court (RTC) granting the herein respondents Saffirou Seacrafts, Inc. (SSI) the writ of preliminary injunction which enjoined and restrained the

Philippine Economic Zone Authority (PEZA) from enforcing and implementing its Board Resolution No. 97-023 and the "Notice of Cancellation, Termination and

Demand to Vacate" pending the hearing of the case.

The following facts as found by the Court of Appeals are undisputed:

"It appears that on July 21, 1992 petitioner Philippine Economic Zone Authority and private respondent Saffirou Seacrafts, Inc. entered into a fifteen-year Registration

Agreement under which petitioner leased to private respondent 1,500 square meters of land located in the Bataan Export Processing Zone for private respondents

business of manufacture and repair of seacrafts. The said agreement provided, among other things, for a schedule to be followed by private respondent, specifically,

building construction and importation of machineries by July, 1992, and start of commercial operation by August, 1992.

On December 2, 1994, petitioner and private respondent entered into a Supplemental Agreement which provided, among other things, that the leased area shall only

be used for launching or staging of private respondents boats for export; construction of additional buildings for use as production facilities and for storage ofmaterials and equipment; and construction of an a dministration building.

Allegedly, finding that private respondent has failed to comply wi th the above provisions of the agreements and after requiring private respondents explanation,

petitioner through its Board of Trustees promulgated a resolution on February 6, 1997 canceling the agreements and demanded from private respondent to vacate

the leased premises within thirty (30) days from notice. Said Board resolution was received by private respondent on February 13, 1997. Thus, on March 7, 1997,

private respondent filed in the respondent court a petition for certiorari, prohibition, and mandamus with prayer for temporary restraining order and preliminary

injunction against petitioner and its officers."[2]

The RTC issued a temporary restraining order[3] and on March 26, 1997 issued a writ of preliminary injunction enjoining and restraining the PEZA from enforcing and

implementing its Board Resolution No. 97-023 and the "Notice of Cancellation, Termination and Demand to Vacate" pending the hearing of the case and until further

notice from the court.[4]

From this Order, the PEZA appealed to the Court of Appeals, which affirmed the decision of the RTC and dismissed the petition for lack of merit.[5] Hence this petition

where the PEZA raises the following argument for consideration:

"The Court of Appeals erred in not finding that respondent Judge of the Regional Trial Court committed grave abuse of discretion in issuing the writ of preliminary

injunction and thus acted without jurisdiction."[6]

In support of its appeal, the PEZA maintains that the respondents had no factual or legal basis for the issuance of a preliminary injunction for said wr it may only be

issued if it is shown that the applicant has a clear and unmistakable right to protect. It cannot be granted when the alleged right is doubtful or disputed. In the case at

bench, SSI allegedly lost its right to occupy the leased premises when it violated the terms of its agreement with PEZA. Under said agreement, the PEZA was allegedly

authorized to cancel the same without need of judicial action. Thus, when the PEZA cancelled the agreement on January 22, 1997, it was merely exercising its right to

do so. Considering that the PEZA validly cancelled the agreement, SSI no longer had a r ight to occupy the leased premises at the time it filed the case against PEZA

and was therefore not entitled to the issuance of a writ of injunction as there was no existent right to protect.

In its Memorandum, the petitioner also assails the order of the RTC dated June 20, 1997 on the ground that it ministerially gives due course to and approves all SSIs

import applications. Petitioner argues that each application for importation should be separately evaluated for the reason that the merits of an import application is

primarily dependent on the nature of the material to be imported and the purpose for which it will be used. There was therefore no basis for the assailed order,

which removes the PEZAs discretionary authority to determine the merits of an importation. The petitioner likewise assails the order of the RTC dated October 11,

1999, which ordered the release of a sailboat deeming it an export sale notwithstanding that such release under PEZA law does not qualify as exportation. Thepetitioner therefore prays that the trial court be enjoined from proceeding with Civil Case No. 025-ML as it is an undue j udicial interference with the petitioners

exercise of its regulatory and police authority.

Finally, the petitioner alleges that it is not guilty of forum shopping inasmuch as the rule on forum shopping does not prevent a party from seeking relief by appeal to

another court.[7]

The only issue properly raised for determination in the present case is whether or not the trial court properly issued an injunction.

We rule affirmatively and resolve to affirm the decision of the Court of Appeals.

Petitioners main contention is that there was no legal basis for the issuance of an injunctive writ inasmuch as the respondents did not have a clear and unmistakable

right to protect. We disagree.

Injunction is a judicial writ, process or proceeding whereby a party is ordered to do or refrain from doing a particular act. A n applicant for preliminary injunction must

file a verified complaint showing facts entitling him to the relief demanded accompanied wi th a bond which shall answer for all the damages which the party sought

to be enjoined may sustain by reason of the injunction.[8] It may be issued when the following requisites are established:

"1.....The invasion of the right is material and substantial;

2.....The right of complainant is clear and unmistakable;

3.....There is an urgent and permanent necessity for the writ to prevent serious damage."[9]

The foregoing requisites are present in this case.

The petitioner does not contest the validity of the contractual right of SSI as lessee but claims that said right was extinguished pursuant to Board Resolution No. 97-

023 which cancelled and terminated SSIs right on the ground that SSI violated certain provisions in the Registration Agreement and Supplemental Agreement. It is

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also undisputed that SSI has possession over the subject property and in fact filed the action to prevent implementation of the demand made by the PEZA to vacate

the leased premises since SSI claims that the PEZAs cancellation was unauthorized and is illegal. Verily, SSI has a clear and unmistakable right to protect its

contractual right to lease the property lest it suffer business losses from its investments within the processing zone. We agree with the Court of Appeals that there

was sufficient ground for the issuance of an injunction and we quote with approval said courts ratiocination to wit:

"There is no question that private respondent is simply protecting its right under the Registration Agreement and the Supplemental Agreement it entered into with

the petitioner in praying for a writ of preliminary injunction. Under the said agreements, private respondent has t he right to lease the premises in question from 1992

to 2007 or for a period of fifteen years. When petitioner demanded of private respondent to vacate the leased premises in 1997, the latter had still ten (10) years to

go under the said agreements. Thus, in filing the instant case for injunction, private respondent was just protecting its right as a lessee under the said a greements

with petitioner.

Private respondents right as a lessee of the premises in question is clear and unmistakable as evidenced by the Retainer (sic) Agreement and SupplementalAgreement with the petitioner, granting private respondent fifteen years to lease the said premises. At the time of petitioners demand for private respondent to

vacate the leased premises, the latter had still ten years of the agreements subsisting as adverted to earlier. Petitioner relies heavily on Sec. 9.1, Article IX of the

Registration Agreement granting it the right to revoke the Agreement within thirty days from notice to private respondent if the latter violates said Agreement.

Precisely, private respondent is questioning petitioners basis in revoking the agreement, aggravated by lack of proper hearing even on the administrative level. This is

where the regular court comes in as to the validity of the ground of the petitioner in revoking the agreements with private respondent. Only after a proper hearing in

the respondent court can it be duly established that petitioner has the valid ground to revoke the agreements between the parties.

Finally, the urgent and permanent necessity for the issuance of the writ of injunction in this case appears to be so in order to prevent a serious damage to private

respondent. Said private respondent allegedly had already infused a capital of Fifty-Five Million (P55,000,000.00) Pesos in establishing its business in the leased

premises, and considering that it has not even recouped said investment under the agreements with petitioner, not to mention its already paid rentals, the loss of

employment for its workers as well as its business goodwill, private respondent stands to lose so much if it will just be unceremoniously evicted from its place of

business. Thus, the need for a full-blown hearing of this case before the respondent court to resolve the conflicting positions of the parties, and also the need,

meantime, to preserve the status quo through the writ of preliminary injunction until the respondent court issues a decision on the merits on private respondents

complaint."[10]

Considering that SSI was entitled to the issuance of the injunction, was the determination by the Court of Appeals of the status quo correct? The "status quo" is the

last actual peaceable uncontested situation, which precedes a controversy.[11]

We agree with the petitioners position that the status quo should be that existing at the time of the filing of the case.[12] However, we are not persuaded by

petitioners reasoning that at the time of the filing of the case, SSI was no longer a lessee, therefore SSI no longer had any right to occupy the premises for the reason

that the contractual right of SSI was extinguished when the PEZA cancelled the Registration Agreement on January 22, 1997. At the time of the filing of the case, SSI

was still in actual physicial possession of the property in question as the lessee thereof. Although the PEZA sent SSI a letter which they received on February 13, 1997

purportedly cancelling the lease agreement and demanding that SSI vacate the same within thirty days,[13] said demand was never effectively implemented by the

PEZA due to the filing of the present action for injunction on March 7, 1997 by SSI to prevent the enforcement of the PEZAs board resolution cancelling the lease. It is

precisely the propriety of the cancellation of the leas e, which compelled SSI to file an action to question the PEZA resolution and simultaneously sought to enjoin the

implementation thereof through an injunction. We therefore find that at the time of the filing of the case, SSI was still the lessee of the subject property and this is

precisely the status quo existing ante litem motam, which an injunction seeks to preserve.

The petitioners claim that the Court of Appeals gravely erred in holding that there was an absence of a n administrative hearing that violated SSIs right to due

process is misplaced. While the Court of Appeals found that the alleged cancellation of the agreement made by the PEZA with SSI was aggravated by lack of hearingon the administrative level, the Court of Appeals never ruled on the validity of the basis of the PEZA in revoking said agreement nor the manner by which said

cancellation was performed. The Court of Appeals correctly ruled that it was only after a proper hearing in the trial court where the main action (Special Civil Action

No. 025-ML) was still pending when the determination of the validity of the cancellation could be made. In the same manner, we limit ourselves to only the

determination of whether injunction was properly issued lest we preempt the trial courts decision in t he main action in Special Civil Action No. 025-ML where a

thorough hearing on the merits of the case must be held by the lower court to resolve the respective litigants claims. In general, courts should avoid issuing a writ of

preliminary injunction, which in effect disposes of the main case without trial.[14]

With respect to the validity of the orders issued by the respondent judge dated June 20, 1997 and October 11, 1999, the Court notes that the June 20 order is being

questioned by the PEZA for the first time in its Petition while the October 11 order is being questioned for the first time in its Memorandum. Inasmuch as the

petitioner, in its appeal to the Court of Appeals in G. R. SP No. 44080, never questioned these orders, there is no legal basis to determine their validity through this

petition where the only issue properly raised by the petitioner is the validity of the issuance of the injunction.

Finally, we rule that the petitioner is not guilty of a "special specie" of forum shopping even if it raises the same issues raised in the Court of Appeals in CA G.R. SP No.

44080. There is forum shopping whenever, as a result of an adverse decision in one forum, a party seeks a favorable opinion (other than by appeal or certiorari)in

another.[15] Considering that the petitioner is questioning the Court of A ppeals ruling in CA G.R. SP No. 44080 which held that the respondent judge did not commitgrave abuse of discretion in issuing a writ of injunction by virtue of a petition for certiorarito this Court on purely questions of law, the petitioner cannot be guilty of

forum shopping. To rule otherwise would render nugatory the PEZAs right to appeal the decision of the Court of Appeals to the Supreme Court on purely questions

of law.

ACCORDINGLY, the decision of the Court of Appeals in CA-G.R. SP No. 44080 is AFFIRMED and the instant petition is hereby DENIED.

No pronouncement as to costs.

SO ORDERED.

Melo, (Chairman), Vitug, Panganiban, and Purisima, JJ., concur.

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GO V. BACARON (2005)

THIRD DIVISION

[ G.R. NO. 159048, October 11, 2005 ]

BENNY GO, PETITIONER, VS. ELIODORO BACARON, RESPONDENT.

FACTS:

Eliodoro BACARON conveyed a 15.3955-hectare parcel of land in favor of Benny GO for P20,000.00. Hehowever averred that prior to extending said loan to him, GO required him to execute a document purporting to

be a Transfer of Rightsbut was told that the same would only be a formality as he could redeem theunregistered land the moment he pays the loan. BACARON remains in possession of the property even after the

conclusion of the transaction and continued paying the real property taxes subsequent to the alleged sale. Abouta year thereafter, BACARON, seeking to recover his property, went to GO to pay his alleged "loan" but the

latter refused to receive the same and to return his property saying that the transaction between them was a saleand not a mortgage.

ISSUE:

Whether the agreement entered into by the parties was one for equitable mortgage or for absolute sale.

HELD:

The instances in which a contract of sale is presumed to be an equitable mortgage are enumerated in Article

1602 of the Civil Code as follows:

Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases:

(1) When the price of a sale with right to repurchase is unusually inadequate;(2) When the vendor remains in possession as lessee or otherwise;

(3) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or

granting a new period is executed;

(4) When the purchaser retains for himself a part of the purchase price;

(5) When the vendor binds himself to pay the taxes on the thing sold;

(6) In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the

payment of a debt or the performance of any other obligation.

In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or otherwise shall be

considered as interest which shall be subject to the usury laws.

Furthermore,Article 1604 of the Civil Code provides thatthe provisions of Article 1602 shall also apply to a contract purporting to

be an absolute sale.

The present Contract, which purports to be an absolute deed of sale, should be deemed an equitable mortgage

for the following reasons: (1) the consideration has been proven to be unusually inadequate; (2) the supposedvendor has remained in possession of the property even after the execution of the instrument; and (3) the alleged

seller has continued to pay the real estate taxes on the property.

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Ramos vs. Sarao (461 SCRA 103)

06 Mar

MYRNA RAMOS,petitioner,

vs. SUSANA S. SARAO and JONAS RAMOS, respondents.

[G.R. No. 149756. February 11, 2005]

FACTS:

Spouses Jonas Ramos and Myrna Ramos executed a contract over their conjugal house and lot in favor ofrespondent for and in consideration of P1,310,430. Entitled DEED OF SALE UNDER PACTO DE RETRO,

the contract, inter alia, granted the Ramos spouses the option to repurchase the property within six months plusan interest of 4.5 percent. Petitioner tendered to Sarao the amount of P1,633,034.20 in the form of two managers

checks, which the latter refused to accept for being allegedly insufficient. Myrna filed a Complaint, and shedeposited with the RTC two checks that Sarao refused to accept. Sarao filed against the Ramos spouses a Petition

for consolidation of ownership inpacto de retro sale. Both RTC and CA dismissed petitioners complaint andappeal respectively in favor of respondent Sarao.

ISSUE:

Whether or not thepacto de retrosale was in reality an equitable mortgage?

RULING:

YES. In order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall

be principally considered (Art.1371, NCC). The contract shall be presumed to be an equitable mortgage, in any

of the following cases:(1) When the price of a sale with right to repurchase is unusually inadequate; (2) When thevendor remains in possession as lessee or otherwise; (3) When upon or after the expiration of the right torepurchase another instrument extending the period of redemption or granting a new period is executed; (4) When

the purchaser retains for himself a part of the purchase price; (5) When the vendor binds himself to pay the taxeson the thing sold; (6) In any other case where it may be fairly inferred that the real intention of the parties is that

the transaction shall secure the payment of a debt or the performance of any other obligation. (Art. 1602, NCC)

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Francisco vs CA

ADALIA FRANCISCO vs. COURT OF APPEALS, ET AL.

G.R. No. 116320 November 29, 1999

--agents

FACTS:

A. Francisco Realty & Development Corporation (AFRDC), of which petitioner Francisco is the president, entered

into a Land Development and Construction Contract with private respondent Herby Commercial & Construction

Corporation (HCCC), represented by its President and General Manager private respondent Ong. Under the

contract, HCCC was to be paid on the basis of the completed houses and developed lands delivered to and

accepted by AFRDC and the GSIS. Sometime in 1979, Ong discovered that Diaz and Francisco, the Vice-

President of GSIS, had executed and signed seven checks of various dates and amounts payable to HCCC for

completed and delivered work under the contract. Ong, however, claims that these checks were never delivered

to HCCC. It turned out that Francisco forged the indorsement of Ong on the checks and indorsed the checks for

a second time by signing her name at the back of the checks, petitioner then deposited said checks in her savings

account. A case was brought by private respondents against petitioner to recover the value of said

checks. Petitioner however claims that she was authorized to sign Ong's name on the checks by virtue of the

Certification executed by Ong in her favor giving her the authority to collect all the receivables of HCCC from the

GSIS, including the questioned checks.

ISSUE:

Whether petitioner cannot be held liable on the questioned checks by virtue of the Certification executed by Ong

giving her the authority to collect such checks from the GSIS.

RULING:

Petitioner is liable. The Negotiable Instruments Law provides that where any person is under obligation to

indorse in a representative capacity, he may indorse in such terms as to negative personal liability. An agent,

when so signing, should indicate that he is merely signing in behalf of the principal and must disclose the name

of his principal; otherwise he shall be held personally liable. Even assuming that Francisco was authorized by

HCCC to sign Ong's name, still, Francisco did not indorse the instrument in accordance with law. Instead of

signing Ong's name, Francisco should have signed her own name and expressly indicated that she was signing

as an agent of HCCC. Thus, the Certification cannot be used by Francisco to validate her act of forgery.

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Republic of the Philippines

SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 170785 October 19, 2007

REPUBLIC PLANTERS BANK (now known as MAYBANK PHILIPPINES, INC.) and PHILMAY PROPERTY, INC.,petitioners,

vs.VIVENCIO T. SARMIENTO, JESUSA N. SARMIENTO, JOSE N. SARMIENTO AND ELIZABETH B. SARMIENTO,respondents.

D E C I S I O N

TINGA,J.:

This is an appeal by certiorariunder Rule 45 of the 1997 Rules of Civil Procedure assailing the Decision1of the Court of

Appeals in CA-G.R. CV No. 74451. The Court of Appeals decision affirmed the decision2of the Regional Trial Court (RTC)

of Paraaque City, Branch 258, which ordered petitioner Maybank Philippines, Inc. (Maybank) to execute in favor of

respondents a deed of redemption covering two pieces of mortgaged realty and rescinded the deeds of sale executed by

Maybank in favor of petitioner Philmay Property, Inc. (Philmay) and Clara Fabra (Fabra).

As found by the Court of Appeals, the factual antecedents are as follows:

On 13 March 1979, respondents spouses Vivencio and Jesusa Sarmiento, their son, Jose, and the latters spouse,

Elizabeth, executed a promissory note, obligating themselves to pay Maybank, then known as Republic Planters Bank,

the amount of P80,000.00 due 360 days after date plus interest at the rate of 12 percent per annum.3

Earlier, on 9 March 1979, all four respondents executed a Real Estate Mortgage over two parcels of land covered by OCT

No. 5781 and TCT No. 145850 and registered under the names of respondents Jesusa and Jose, respectively. The

mortgage secured the payment of the principal loan of P80,000.00 and all other obligations, overdrafts and other credit

accommodations obtained and those that may be obtained in the future from Maybank.4

On 8 April 1980, Vivencio for himself and as attorney-in-fact of Jesusa and Jose, executed a promissory note in which heundertook to pay the amount of P100,000.00 plus 14% interest per annum on or before April 1981.5In the same month,

all four respondents executed an amendment to the real estate mortgage changing the consideration of the mortgage

from P80,000.00 to P100,000.00 but adopting all the terms and conditions of the previous mortgage as integral parts of

the later one.6

Vivencio was the owner of V. Sarmiento Rattan Furniture, a sole proprietorship engaged in export business. On various

occasions in 1981, he incurred loan obligations from Maybank by way of export advances. As of 08 September 1982, the

debts incurred under the export bills transactions totaled P1,281,748.03.

On 3 September 1981, Vivencio, Jose and Elizabeth executed a Suretyship Agreement,7whereby they agreed to be

solidarily liable with V. Sarmiento Rattan Furniture for the payment of P100,000.00 plus all obligations which the latter

incurred or would incur from Maybank.

Respondents defaulted in the payment of the export advances, prompting Maybank to institute an extrajudicial

foreclosure of the real estate mortgage on 9 November 1982. At the foreclosure sale, Maybank was awarded the

property for its bid of P254,000.00 and issued a certificate of sale. The certificate of sale was registered with the Register

of Deeds on 04 March 1983.8

Maricel Sarmiento, sister of respondent Jose, purchased a managers check from Maybank in the amount of P300,000.00

on 21 July 1983.9A week later, respondent Jesusa deposited the amount of P12,000.00.10Maybank treated the total

amount of P312,000.00 as a deposit and did not grant respondents request for certificate of redemption releasing the

foreclosed property. Sometime in November 1983, Maybank demanded the payment of all outstanding loans under the

export bills transactions. On 3 December 1983, respondents tendered the amount of P302,333.33 in the name of V.Sarmiento Rattan Furniture.

On 4 July 1990, Maybank consolidated its ownership over the foreclosed property. On 12 November 1997, Maybank and

Philmay executed a deed of absolute sale, transferring ownership of the foreclosed property to the latter. On 15 July

1998, Philmay sold the same to Fabra.

On 3 September 1998, respondents Vivencio and Jose instituted an action for specific performance against Maybank,

Philmay and Fabra. The Complaint,11docketed as Civil Case No. 98-0323, prayed for judgment directing Maybank to

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execute a deed of redemption in favor of respondents and revoking the subsequent sale of the property to Philmay and

Fabra. During the pendency of the trial, Fabra died and was substituted by Kim Caro as the legal representative of the

formers heirs.

On 8 January 2002, the RTC rendered a Decision, the dispositive portion of which reads:

WHEREFORE, viewed in the light of the foregoing, the plaintiffs having been able to preponderantly prove their case

against the defendants, judgment for specific performance is hereby rendered ordering defendant Maybank to execute

in favor of the plaintiffs a Deed of Redemption covering the two (2) parcels of land formerly embraced in and covered by

Transfer Certificates of Title Nos. 5281 and 145850 of the Register of Deeds of the City of Paraaque together with all

the improvements existing thereon free from all liens and encumbrances and once accomplished, to immediately deliver

the said document to plaintiffs.

Likewise, the Deed of Sale executed by Republic Planters Bank, now Maybank, in favor of Philmay Property, Inc., and

thereafter, from Philmay Property, Inc. to Clara Fabra, are hereby revoked and rescinded as well as Certificate of Title

No. 139161 registered in the latters name for being null and void.

So also, Phimay Property is hereby directed to reimburse Clara Fabra, now represented by Kim Caro, the amount of

P4,200,000.00[,] representing the purchase price of the property plus interest thereon at the legal rate computed from

the filing of the complaint until fully paid.

Defendants are likewise ordered to pay plaintiffs jointly and severally the following, to wit:

1. The amount of P100,000.00 as moral damages;

2. The amount of P50,000.00 as exemplary damages;

3. The amount of P100,000.00 as and by way of attorneys fees; and

4. The cost of suit.

The counterclaims of the defendants are DISMISSED.

SO ORDERED.12

The RTC based its finding that respondents were able to tender to Maybank within the redemption period the

redemption price of P312,000.00 on the testimony of respondent Jose on and the official bank receipts evidencing the

separate payments totaling said amount made by Maricel Sarmiento and respondent Jesusa. Upon this finding, the trial

court held that Maybank had no justifiable legal reason to refuse the execution of documents reconveying the titles of

the mortgaged property to respondents. Thus, the trial court concluded that the subsequent transfers of the mortgaged

property to Philmay and then to Fabra were void because Maybank had not acquired any rights thereto in the first place.

The trial court, however, declared Fabra as a purchaser in good faith and, therefore, entitled to reimbursement of the

purchase price.

The RTC rejected Maybanks defense that the suretyship agreement signed by respondents Vivencio, Jose and Elizabeth

also constituted the mortgaged property as security for the export advances incurred in the name of V. SarmientoRattan Furniture because the real estate mortgage documents were signed by respondents in their personal capacity,

whereas the suretyship agreement was signed by Vivencio in his capacity as manager of V. Sarmiento Rattan Furniture.

The trial court noted that the suretyship agreement was not even annotated in the titles of the mortgaged property.

On 12 December 2005, the Court of Appeals rendered the assailed Decision affirming the trial courts judgment,

particularly the latters finding that respondents made a valid tender of the redemption price and that the export

advances in the name of V. Sarmiento Rattan Furniture did not belong to the species of obligations secured by the real

estate mortgage. Furthermore, the appellate court construed as a contract of adhesion the proviso in the mortgage

contract that included "interest and expenses or any other obligation owing to the Mortgagee, whether direct or

indirect, principal or secondary, as appears in the accounts, books and records of the Mortgagee."13Describing the same

as a "dragnet clause," the appellate court held that it should be carefully scrutinized and strictly construed.

Only petitioners Maybank and Philmay appealed from the decision of the Court of Appeals. In the instant petition, they

raise the following arguments:

THE TRIAL COURT AND THE COURT OF APPEALS ERRED IN FINDING THAT PETITIONERS HAVE PROPERLY REDEEMED THE

FORECLOSED PROPERTIES.

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THE TRIAL COURT AND COURT OF APPEALS ERRED IN NOT TREATING RESPONDENTS EXPORT ADVANCES AS SECURED BY

THE REAL ESTATE MORTGAGE AND THUS SHOULD ALSO BE PAID.

THE TRIAL COURT AND COURT OF APPEALS ERRED IN NOT RULING THAT THE RESPONDENTS CLAIM IS ALREADY BARRED

BY LACHES.

THE TRIAL COURT AND COURT OF APPEALS ERRED IN NOT CONSIDERING AND FINDING THAT PHILMAY AND DEFENDANT

CLARA FABRA ARE BUYERS IN GOOD FAITH.

THE LOWER COURT AND THE COURT OF APPEALS ERRED IN FINDING THAT MAYBANK ACTED IN BAD FAITH.

RESPONDENTS ARE NOT ENTITLED TO MORAL AND EXEMPLARY DAMAGES AS WELL AS ATTORNEYS FEES.14

In a nutshell, the instant petition raises the issue of whether the deposits made by respondents constituted a valid

tender of the redemption price. Essential to the resolution of this issue is the determination of the amount of

indebtedness that respondents were legally obligated to satisfy in order to consider the payment thereof as a valid

redemption of the foreclosed property.

Maybank argues that respondents outstanding obligation amounted to more than P1 million as of the date of the

foreclosure sale. Hence, the tender by respondents of an amount less than that did not constitute a valid redemption of

the foreclosed property. For their part, respondents contend that the factual finding of both the trial court and the Court

of Appeals to the effect that they were able to make a valid tender of the redemption price, is binding on this Court.

The petition is meritorious.

The crux of the controversy pertains not to the amount of redemption price tendered by respondents but rather to the

sufficiency of the amount tendered that would warrant the redemption of the foreclosed property. The determination

of whether the amount tendered by respondents was enough to redeem the foreclosed property calls for the

ascertainment of the liabilities covered and secured by the mortgage based on the text of the mortgage deed. Both the

trial court and the appellate court concurred in concluding that the export advances obtained by respondent Vivencio

from Maybank did not belong to the species of obligations secured by the mortgage and that, hence, respondents

tender of an amount exceeding the principal loan of P100,000.00 was sufficient. Whether or not this conclusion is

correct is a question of law15

that is within the purview of a Rule 45 petition.

The real estate mortgage provides:

x x x

That, for and in consideration of certain loans, overdrafts and other credit accommodations obtained from the

Mortgagee, and to secure the payment of the same and those that may hereafter be obtained, the principal of all of

which is hereby fixed as EIGHTY THOUSAND ONLY Pesos (P80,000.00), Philippine Currency, as well as those that the

Mortgagee may extend to the Mortgagor, including interest and expenses or any other obligation owing to the

Mortgagee, whether direct or indirect, principal or secondary, as appears in the accounts, books and records of the

Mortgagee, the Mortgagor does hereby transfer and convey by way of mortgage unto the Mortgagee, its successor or

assigns, the parcels of land which are described in the list inserted on the back of this document, and/or appendedhereto; x x x (Emphasis supplied)16

The aforementioned clause is a "blanket mortgage clause." A blanket mortgage clause, also known as a dragnet clause in

American jurisprudence, is one that is specifically phrased to subsume all debts of past or future origins. Such clauses are

carefully scrutinized and strictly construed. Mortgages of this character enable the parties to provide continuous

dealings, the nature or extent of which may not be known or anticipated at the time, and they avoid the expense and

inconvenience of executing a new security on each new transaction. A dragnet clause operates as a convenience and

accommodation to the borrowers as it makes available additional funds without their having to execute additional

security documents, thereby saving time, travel, loan closing costs, costs of extra legal services, recording fees, etc.17

It is basic in the interpretation and construction of contracts that the literal meaning of the stipulations shall control if

the terms of the contract are clear and leave no doubt on the intention of the contracting parties.18It is only when the

words appear to contravene the evident intention of the parties that the latter shall prevail over the former. The real

nature of a contract may be determined from the express terms of the agreement and from the contemporaneous and

subsequent acts of the parties thereto.19

Although at the time of the execution of the real estate mortgage the export advances had not yet been incurred and

the principal obligation was fixed at P80,000.00 and thereafter amended to P100,000.00, the express tenor of the

mortgage contract contemplated the inclusion of future loans and obligations obtained from Maybank to be secured by

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the mortgaged property. Nothing in the mortgage contract would suggest that the parties actually intended to limit the

security to only the principal amount of the loan fixed therein. The stipulations of the mortgage contract being clear,

there is no necessity to ascertain the real intention of the parties. Be that as it may, nothing in the records would reveal

that by the parties acts contemporaneous and subsequent to the execution of the real estate mortgage, they intended

to be bound by terms and conditions other than those provided in the mortgage contract.

The trial court reached the conclusion that the export advances were excluded from the security of the real estate

mortgage based on the theory that respondent Vivencio agreed to be bound as surety for the payment of the export

advances in his capacity as manager of V. Sarmiento Rattan Furniture, whereas he signed the real estate mortgage in hispersonal capacity.

This theory is defensible if V. Sarmiento Rattan Furniture were a corporation having a personality distinct and separate

from its corporate officers and Vivencio signed merely as a corporate representative of V. Sarmiento Rattan Furniture.

Even then, a corporate officer may still be held personally liable for the debts of the corporation if he bound himself to

pay the debt of the corporation under a separate contract of surety or guaranty.

For its part, the Court of Appeals opined that the dragnet clause in the subject real estate mortgage should be strictly

construed and, therefore, the subsequent export advances obtained from Maybank should not be included in the

obligation secured by the mortgage contract.

It is well settled that mortgages given to secure future advancements or loans are valid and legal contracts, and that theamounts named as consideration in said contracts do not limit the amount for which the mortgage may stand as security

if from the four corners of the instrument the intent to secure future and other indebtedness can be gathered.20A

mortgage given to secure advancements is a continuing security and is not discharged by repayment of the amount

named in the mortgage, until the full amount of the advancements is paid.21

At the time of the foreclosure sale of the mortgaged property, the outstanding obligation arising from the export bills

transactions had already amounted to more than P1 million. In accordance with Section 78 of the General Banking Act,

as amended,22then governing the foreclosure of the mortgaged property, redemption may only be made by paying the

amount due under the mortgage deed within one year from the sale of the property. Since respondents failed to satisfy

the full amount of the indebtedness to Maybank, the latter was justified in refusing to grant respondents demand for

redemption of the foreclosed property.

WHEREFORE, the instant petition for review on certiorari is GRANTED and the Decision of the Court of Appeals in CA-

G.R. CV No. 74451 is hereby REVERSED and SET ASIDE. The complaint in Civil Case No. 98-0323 before the Regional Trial

Court, Branch 258, Paraaque City is DISMISSED. Costs against respondents.

SO ORDERED.

Quisumbing, Carpio, Carpio-Morales, Velasco, Jr., JJ.,concur.

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THIRD DIVISION

ANTONIO P. TAMBUNTING, G.R. No. 144101JR. and COMMERCIAL

HOUSE OF FINANCE, INC.,

Petitioners,

Present :PANGANIBAN, J., Chairman,

SANDOVAL-GUTIERREZ,- v e r s u s - CORONA,CARPIO MORALES andGARCIA, JJ.

SPOUSES EMILIO SUMABAT

and ESPERANZA BAELLO,

Respondents. Promulgated:September 16, 2005

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

D E C I S I O N

CORONA, J.:

This petition for review on certiorari under Rule 45 of the Rules of Court assails the February 11, 2000 decision of theRegionalTrial Court (RTC) of Caloocan City, Branch 120, in Civil Case No. C-16822.

This case involves a dispute over a parcel of land situated in Caloocan City covered by TCT No. (87655) 18837. It was previouslyregistered in the names of respondents, spouses Emilio Sumabat and Esperanza Baello. On May 3, 1973, respondents mortgaged it to

petitioner Antonio Tambunting, Jr. to secure the payment of a P7,727.95 loan. In August 1976, respondents were informed that theirindebtedness had ballooned to P15,000 for their failure to pay the monthly amortizations. In May 1977, because respondents defaulted intheir obligation, petitioner Commercial House of Finance, Inc. (CHFI), as assignee of the mortgage, initiated foreclosure proceedings on themortgaged property but the same did not push through. It was restrained by the then Court of First Instance (CFI) of Caloocan City, Branch33 (now RTC Branch 123) in Civil Case No. C-6329, a complaint for injunction filed by respondents against petitioners. However, the casewas subsequently dismissed for failure of the parties to appear at the hearing on November 9, 1977.

On March 16, 1979, respondents filed an action for declaratory relief with the CFI of Caloocan City, Branch 33, seeking a

declaration of the extent of their actual indebtedness. It was docketed as Civil Case No. C-7496. Petitioners were declared in default forfailure to file an answer within the reglementary period. They moved for the dismissal of the action on the ground that its subject, themortgage deed, had already been breached prior to the filing of the action. The motion was denied for having been filed out of time andpetitioners had already been declared in default.

On January 8, 1981, the CFI rendered its decision. It fixed respondents liability at P15,743.83 and authorized them to consign

the amount to the court for proper disposition. In compliance with the decision, respondents consigned the required amount on January9, 1981.

In March 1995, respondents received a notice of sheriffs sale indicating that the mortgage had been foreclosed by CHFI onFebruary 8, 1995 and that an extrajudicial sale of the property would be held on March 27, 1995.

On March 27, 1995, respondents instituted Civil Case No. C-16822, a petition for preliminary injunction, damages andcancellation of annotation of encumbrance with prayer for the issuance of a temporary restraining order, with the RTC of Caloocan City,Branch 120. However, the public auction scheduled on that same day proceeded and the property was sold to CHFI as the highest bidder.Respondents failed to redeem the property during the redemption period. Hence, title to the property was consolidated in favor of CHFI and

a new certificate of title (TCT No. 310191) was issued in its name. In view of these developments, respondents amended their complaint toan action for nullification of foreclosure, sheriffs sale and consolidation of title, reconveyance and damages.

On February 11, 2000, the RTC issued the assailed decision. It ruled that the 1981 CFI decision in Civil Case No. C-7496 (fixingrespondents liability at P15,743.83 and authorizing consignation) had long attained finality. The mortgage was extinguished whenrespondents paid their indebtedness by consigning the amount in court. Moreover, the ten-year period within which petitioners should

have foreclosed the property was already barred by prescription. They abused their right to foreclose the property and exercised it in badfaith. As a consequence, the trial court nullified the foreclosure and extrajudicial sale of the property, as well as the consolidation of title

in CHFIs name in 1995. It then ordered the register of deeds of Caloocan City to cancel TCT No. 310191 and to reconvey the property torespondents. It also held petitioners liable for moral damages, exemplary damages and attorneys fees.

Petitioners moved for a reconsideration of the trial courts decision but it was denied. Hence, this petition.

Petitioners claim that the trial court erred when it affirmed the validity of the consignation. They insist that the CFI was barredfrom taking cognizance of the action for declaratory relief since, petitioners being already in default in their loan amortizations, there existed

a violation of the mortgage deed even before the institution of the action. Hence, the CFI could not have rendered a valid judgment in CivilCase No. C-7496 and the consignation made pursuant to a void judgment was likewise void. Respondents also fault the trial court forholding that their right to foreclose the property had already prescribed.

True, the trial court erred when it ruled that the 1981 CFI decision in Civil Case No. C-7496 was already final and executory.

An action for declaratory relief should be filed by a person interested under a deed, will, contract or other written instrument, and

whose rights are affected by a statute, executive order, regulation or ordinance before breach or violation thereof.[1]The purpose of theaction is to secure an authoritative statement of the rights and obligations of the parties under a statute, deed, contract, etc.for theirguidance in its enforcement or compliance and not to settle issues arising from its alleged breach.[2]It may be entertained only before thebreach or violation of the statute, deed, contract, etc. to which it refers.[3]Where the law or contract has already been contravened prior tothe filing of an action for declaratory relief, the court can no longer assume jurisdiction over the action .[4]In other words, a court has nomore jurisdiction over an action for declaratory relief if its subject, i.e., the statute, deed, contract, etc., has already been infringed ortransgressed before the institution of the action. Under such circumstances, inasmuch as a cause of action has already accrued in favorof one or the other party, there is nothing more for the court to explain or clarify short of a judgment or final order.

Here, an infraction of the mortgage terms had already taken place before the filing of Civil Case No. C-7496. Thus, the CFI lackedjurisdiction when it took cognizance of the case in 1979. And in the absence of jurisdiction, its decision was void and without legal effect.As this Court held inArevalo v. Benedicto:[5]

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Furthermore, the want of jurisdiction by a court over the subject-matter renders its judgment void and a mere nullity, and consideringthat a void judgment is in legal effect no judgment, by which no rights are divested, from which no rights can be obtained, which neither

binds nor bars any one, and under which all acts performed and all claims flowing out of are void, and considering further, that thedecision, for want of jurisdiction of the court, is not a decision in contemplation of law, and, hence, can never become executory, itfollows that such a void judgment cannot constitute a bar to another case by reason of res judicata.

Nonetheless, the petition must fail.

Article 1142 of the Civil Code is clear. A mortgage action prescribes after ten years.

An action to enforce a right arising from a mortgage should be enforced within ten years from the time the right of action accrues.[6]

Otherwise, it will be barred by prescription and the mortgage creditor will lose his rights under the mortgage.

Here, petitioners right of action accrued in May 1977 when respondents defaulted in their obligation to pay their loanamortizations. It was from that time that the ten-year period to enforce the right under the mortgage started to run. The period wasinterrupted when respondents filed Civil Case No. C-6329 sometime after May 1977 and the CFI restrained the intended foreclosure of theproperty. However, the period commenced to run again on November 9, 1977 when the case was dismissed.

The respondents institution of Civil Case No. C-7496 in the CFI on March 16, 1979 did not interrupt the running of the ten-year

prescriptive period because, as discussed above, the court lacked jurisdiction over the action for declaratory relief. All proceedings thereinwere without legal effect. Thus, petitioners could have enforced their right under the mortgage, including its foreclosure, only until November7, 1987, the tenth year from the dismissal of Civil Case No. C-6329. Thereafter, their right to do so was already barred by prescription.

The foreclosure held on February 8, 1995 was therefore some seven years too late. The same thing can be said about the publicauction held on March 27, 1995, the consolidation of title in CHFIs favor and the issuance of TCT No. 310191 in its name. They were allvoid and did not exist in the eyes of the law.

WHEREFORE, the petition is hereby DENIED.

Costs against petitioners.

SO ORDERED.

RENATO C. CORONA

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Heirs of Sofia Quirong, etc. vs. Development Bank of the Philippines,G.R. No. 173441, December 3, 2009

Rescission (vs. resolution) of contract

Posted onJanuary 6, 2010byHector M. de Leon Jr Posted inCivil Law Taggedcontract,rescission,sale

If the heirs of a lot buyer were evicted from the lot because of a final judgment based on a right prior to the sale (i.e.,

the seller did not validly acquire the lot from the person who sold the lot to the seller), should the evicted heirs file an

action for rescission under article 1381 or an action for rescission/resolution under Article 1191? Within what period

should the appropriate action be filed? Should the prescriptive period be four years as provided under Article 1389 ofthe Civil Code, which states that the action to claim rescission must be commenced within four years? Or should the

prescriptive period be 10 years as provided under Article 1144 of the Civil Code, which states that actions upon a

written contract must be brought within 10 years from the date the right of action accrues?

In Heirs of Sofia Quirong, etc. vs. Development Bank of the Philippines,G.R. No. 173441, December 3, 2009,the late

Emillo Daloppe left a parcel of land to his wife Felisa and nine children. To enable one of the children (Rosa Dalope-

Funcion) to get a loan from the Development Bank of the Philippines (DBP), Felisa sold the parcel of land to Funcions.

The Funcions failed to pay the loan. DBP subsequently foreclosed the mortgage and made a conditional sale of the land

to Sofia Quirong for PhP78,000. In their contract of sale, Sofia Quirong waived any warranty against eviction. The

contract provided that the DBP did not guarantee possession of the property and that it would not be liable for any lien

or encumbrance on the same. Quirong gave a down payment of P14,000.00.

Two months after the conditional sale to Quirong, Felisa and her eight other children subsequently filed an action for

partition and declaration of nullity of documents with damages against DBP and the Funcions before the Regional Trial

Court (RTC) of Dagupan City. Notwithstanding the suit, the DBP executed a deed of absolute sale of the subject lot in

Sofia Quirongs favor. The deed of sale carried substantially the same waiver of warranty against eviction and of any

adverse lien or encumbrance.

Sofia Quirong having since died, her heirs filed an answer in intervention in which they asked the RTC to award the lot to

them and, should it instead be given to the Dalopes, to allow the Quirong heirs to recover the lots value from the DBP.

Because the heirs failed to file a formal offer of evidence, the trial court did not rule on the merits of their claim to the

lot and, alternatively, to relief from DBP.

The RTC rendered a decision, declaring DBPs sale to Sofia Quirong valid only with respect to the shares of Felisa and

Rosa Funcion in the property. It declared Felisas sale to the Funcions, the latters mortgage to the DBP, and the latters

sale to Sofia Quirong void insofar as they prejudiced the shares of the eight other children of Emilio and Felisa who were

each entitled to a tenth share in the subject lot.

The Quirong heirs then filed an action against DBP before the RTC of Dagupan City for rescission of the contract of sale

between Sofia Quirong, their predecessor, and the DBP and praying for the reimbursement of the price of P78,000.00

that she paid the bank plus damages. The heirs alleged that they were entitled to the rescission of the sale because the

decision in Civil Case D-7159 stripped them of nearly the whole of the lot that Sofia Quirong, their predecessor, bought

from DBP. DBP filed a motion to dismiss the action on ground of prescription and res judicata but the RTC denied their

motion.

After hearing the case, the RTC rendered a decision, rescinding the sale between Sofia Quirong and DBP and ordering

the latter to return to the Quirong heirs the PhP78,000.00 Sofia Quirong paid the bank. On appeal by DBP, Court of

Appeals (CA) reversed the RTC decision and dismissed the heirs action on the ground of prescription. The CA concluded

that, reckoned from the finality of the December 16, 1992 decision in Civil Case D-7159, the complaint filed on June 10,

1998 was already barred by the 4-year prescriptive period under Article 1389 of the Civil Code. The Quirong heirs filed a

motion for reconsideration of the decision but the CA court denied it.

According to DBP, the prescriptive period should be 4 years as provided under Article 1389 of the Civil Code, which

provides that the action to claim rescission must be commenced within four years. On the other hand, the Quirong

heirs argue that it should be 10 years as provided under Article 1144 which states that actions upon a written contractmust be brought within 10 years from the date the right of action accrues.

The Supreme Court agreed with DBP that the prescriptive period was 4 years because the action involved was one for

rescission under Article 1381. The Court distinguished between a rescission under Article 1381 and a rescission under

Article 1191:

The remedy of rescission is not confined to the rescissible contracts enumerated under Article 1381. Article 1191 of

the Civil Code gives the injured party in reciprocal obligations, such as what contracts are about, the option to choose

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between fulfillment and rescission. Arturo M. Tolentino, a well-known authority in civil law, is quick to note, however,

that the equivalent of Article 1191 in the old code actually uses the term resolution rather than the present

rescission. The calibrated meanings of these terms are distinct.

Rescission is a subsidiary action based on injury to the plaintiffs economic interests as described in Articles 1380 and

1381. Resolution, the action referred to in Article 1191, on the other hand, is based on the defendants breach of faith,

a violation of the reciprocity between the parties. As an action based on the binding force of a written contract,

therefore, rescission (resolution) under Article 1191 prescribes in 10 years. Ten years is the period of prescription of

actions based on a written contract under Article 1144.

The distinction makes sense. Article 1191 gives the injured party an option to choose between, first, fulfil lment of the

contract and, second, its rescission. An action to enforce a written contract (fulfillment) is definitely an action upon a

written contract, which prescribes in 10 years (Article 1144). It will not be logical to make the remedy of fulfillment

prescribe in 10 years while the alternative remedy of rescission (or resolution) is made to prescribe after only four years

as provided in Article 1389 when the injury from which the two kinds of actions derive is the same.

The Court noted that the action filed by the Quirong heirs was an action for rescission (not resolution):

Here, the Quirong heirs alleged in their complaint that they were entitled to the rescission of the contract of sale of the

lot between the DBP and Sofia Quirong because the decision in Civil Case D-7159 deprived her heirs of nearly the whole

of that lot. But what was the status of that contract at the time of the filing of the action for rescission? Apparently, thatcontract of sale had already been fully performed when Sofia Quirong paid the full price for the lot and when, in

exchange, the DBP executed the deed of absolute sale in her favor. There was a turnover of control of the property from

DBP to Sofia Quirong since she assumed under their contract, the ejectment of squatters and/or occupants on the lot,

at her own expense.

Actually, the cause of action of the Quirong heirs stems from their having been ousted by final judgment from the

ownership of the lot that the DBP sold to Sofia Quirong, their predecessor, in violation of the warranty against eviction

that comes with every sale of property or thing. Article 1548 of the Civil Code provides:

Article 1548. Eviction shall take place whenever by a final judgment based on a right prior to the sale or an act imputable

to the vendor, the vendee is deprived of the whole or of a part of thing purchased.

x x x x

With the loss of 80% of the subject lot to the Dalopes by reason of the judgment of the RTC in Civil Case D-7159, the

Quirong heirs had the right to file an action for rescission against the DBP pursuant to the provision of Article 1556 of

the Civil Code which provides:

Article 1556. Should the vendee lose, by reason of the eviction, a part of the thing sold of such importance, in relation to

the whole, that he would not have bought it without said part, he may demand the rescission of the contract; but with

the obligation to return the thing without other encumbrances than those which it had when he acquired it. x x x

Finally, the Court concluded that the action for rescission was barred by prescription as it was filed beyond the 4-year

prescriptive period:

And that action for rescission, which is based on a subsequent economic loss suffered by the buyer, was precisely the

action that the Quirong heirs took against the DBP. Consequently, it prescribed as Article 1389 provides in four years

from the time the action accrued. Since it accrued on January 28, 1993 when the decision in Civil Case D-7159 became

final and executory and ousted the heirs from a substantial portion of the lot, the latter had only until January 28, 1997

within which to file their action for rescission. Given that they filed their action on June 10, 1998, they did so beyond the

four-year period.

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EXECUTIVE ORDER NO. 80 December 3, 1986

PROVIDING FOR THE 1986 REVISED CHARTER OF THE PHILIPPINE NATIONAL BANK

WHEREAS, it is the policy of the state that the national interest in both the maintenance of economic stability and the promotion of economic development is best

served by a system of financial intermediation that places primary reliance on the private sector, on the market mechanism, and on the maintenance of conditions of

competition;

WHEREAS, within the context of the general policy there nevertheless exists a clear role for direct government participation in the banking system, particularly in

servicing the requirements of agriculture, small and medium scale industry, export development, and the government sector;

WHEREAS, in pursuit of this national policy there is need to restructure the government financial institutions, particularly the Philippine National Bank, to achieve a

more efficient and effective use of available scarce resources, to improve its viability, and to avoid unfair competition with the private sector; andWHEREAS, the reorganization and rehabilitation of the Philippine National Bank into a smaller but stronger and more operationally viable bank is an important

competent of the nationalization programs for both the financial system and the government corporation sector;

NOW, THEREFORE, I, CORAZON C. AQUINO, President of the Republic of the Philippines, do hereby order:

Sec. 1. This Executive Order shall be known as "The 1986 Revised Charter of the Philippine National Bank."

Sec. 2. Name, Place of Business; Branches; Agencies and Other Offices. The Philippine National Bank (hereinafter referred to as the "Bank"), a bank created under Act

No. 2612, as amended, and operating under the provisions of Presidential Decree No. 694, as amended, shall henceforth operate under the provisions of this 1986

Revised Charter.

The Bank's principal office and place of business shall be in the National Capital Region, also known as Metro Manila. It may open and maintain other branches,

agencies or other offices at such places in the Philippines or abroad as its Board of Directors may deem advisable, with the prior approval of the Monetary Board of

the Central Bank of the Philippines.

Sec. 3. Corporate Powers and Purposes. The Bank shall be a body corporate and shall have the following powers and purposes:

(a) To perform commercial banking, as well as expanded commercial banking functions; and, within the context of a financially viable and stable banking institution,

to provide banking services for the development of agriculture and small and medium scale commercial and industrial enterprises particularly in the countryside, as

provided in Section 4; to provide banking services to the National Government, other government entities and Local governments; and to engage in international

banking activities, particularly in the promotion of exports;

(b) To accept foreign currency deposits and operate foreign currency deposit unit as established under Republic Act No. 6426, as amended;(c) To accept and administer trusts and to carry on a general trust business;

(d) To act as official government depository with authority to maintain deposits of the government, its branches, subdivisions and instrumentalities, and of

government owned or controlled corporations, subject to the provisions of Section 6 hereof and such rules and regulations as the Monetary Board may prescribed;

and

(e) To adopt, amend or change its By-laws, to adopt, alter and use a seal, to make contracts; to sue and be sued, and to exercise the general powers of a corporation

as provided in the Corporation Code of the Philippines and the powers of a bank of its category under the General Banking Act.

The exercise of the above-mentioned powers on banking shall be subject to applicable law, as well as regulations promulgated by the Central Bank of the Philippines.

Sec. 4. Granting of Loans; Exposure Ceilings and Limits on Equity Investments. In the exercise of its lending authority, the Bank shall give preference to loans for

agricultural and small-and medium-scale commercial and industrial enterprises, particularly in the countryside.

Unless otherwise provided in this Charter, loans and other credit accommodations granted by the Bank shall be subject to the appropriate applicable loan limits to

any single borrower as provided for under Republic Act No. 337, as amended.

The aggregate amount of loans, guarantees a nd contingent accounts, to Government agencies and entities including government owned and controlled corporations,

shall at no time exceed the deposits and book value of the shareholdings of the Government, including government agencies and entities, government owned or

controlled corporations plus twenty percent (20%) of such total.

The authority of the Bank to invest in equities of allied undertakings, financial or non-financial, as well as in non-allied undertakings, shall be governed by the

provisions of Republic Act No. 337, as amended.

Sec. 5. Authorized Capital Stock; Par Value; Scale of Shares. The authorized capital stock of the Bank shall be Ten Billion Pesos to be divided into One Hundred Million

common shares with par value of P100 per share which are available for subscription by the National Government. The common shares may be offered for sale to or

subscription by private investors; Provided, that, the investment of private investors shall be subject to the applicable provisions of the General Banking Act.

The Board of Directors shall have authority to convert such number of unissued common voting shares into preferred non-voting shares to be issued for sale or

subscription, with such features, terms, and restrictions as it may determine.

The issue and offering for sale of additional shares to private investors which will result in more than one-third of the common voting shares being eligible for

acquisition by such investors shall require prior approval of the President of the Philippines; provided, that, where the sale of shares will result in a majority

ownership by the private sector, the prior approval of the President shall also be required.

6. Change in Ownership of the Majority of the Voting Equity of the Bank. When the ownership of the majority of the issued common voting shares passes to private

investors, the stockholders shall cause the adoption and registration with the Securities and Exchange Commission of the appropriate Articles of Incorporation and

revised by-laws within three (3) months from such transfer of ownership. Upon the issuance of the certificate of incorporation under the provisions of the

Corporation Code, this Charter shall cease to have force and effect, and shall be deemed repealed. Any special privileges granted to the Bank such as the authority to

act as official government depository, or restrictions imposed upon the Bank, shall be withdrawn, and the Bank shall thereafter be considered a privately organized

bank subject to the laws and regulations generally applicable to private banks. The Ba nk shall likewise cease to be a government owned or controlled corporation

subject to the coverage of service-wide ag encies such as the Commission on Audit and the Civil Service Commission.The fact of the change of the nature of the Bank from a government-owned and controlled financial institution to a privately-owned entity shall be given publicity.

Sec. 7. National Government Subscription. Upon the effectivity of this Charter, the National Government shall subscribe to Twenty-Five Million common shares of

stock worth Two Billion Five Hundred Million Pesos which shall be deemed paid for by the Government with the net ass et values of the Bank remaining after the

transfer of assets and liabilities as provided in Section 29 hereof.

Sec. 8. Who may Vote Government Owned Stock. The voting rights of all the stock of the Bank owned and controlled by the National Government shall be vested to

the President of the Philippines, or in such person or persons as the President may from time to time designate.

Sec. 9. Board of Directors; Compositions: Tenure; Per Diems. The affairs and business of the Bank shall be directed and its properties managed and preserved and its

corporate powers exercised, unless otherwise provided in this Charter, by a Board of Directors consisting of nine members, duly elected as herein provided for a term

of one year or until their successors are duly elected and qualified.

The Chairman of the Board shall be a ppointed by the President of the Philippines from among member of the Board: Provided, That the position of Chairman of the

Board and President of the Bank shall not be held by the same person.

The Chairman shall preside at meetings of the Board and of the Stockholders.

The President of the Bank shall be vice-chairman of the Board and, as such, shall assist the chairman and act in his stead in case of absence or incapacity. In case of

incapacity or absence of both the chairman and vice-chairman, the Board of Directors shall designate a temporary chairman from among its members.

Unless otherwise set by the Board and approved by the President of the Philippines, members of the Board shall be paid a per diem of one thousand pesos for each

meeting of the Board of Directors as actually attended: Provided, That the total amount of per diems for every single months shall not exceed the sum of FiveThousand Pesos.

Sec. 10. Election and Qualification of Members of the Board of Directors. Annually on the first Tuesday after the first Monday in March, the stockholders shall meet to

elect the members of the Board of directors for the current year. Each stockholder or proxy will be entitled to as many votes as he may have shares of stock register

his name on the thirty-first of January last preceding and held by him at the time of the election multiplied by the number of directions be elected. In the election of

the members of the Board, stockholders shall have the right of commutative voting as recognized by law.

No person shall be elected director of the Bank unless he is a natural-born citizen of the Philippines, not less than thirty-five years of age, of good moral character and

has attained proficiency expertise and recognized competence in one more of the following banking, finance, economics, law, agriculture, business management,

public utility or government administration.

At least four of the elective members of the Board shall concurrently hold appointive or elective positions in the National Government, any government-owned or

controlled corporation, or in any local government.

15


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Sec. 26. Applicability of Banking Laws. The provisions of Republic Acts No. 265, as amended, and No. 337, as amended, insofar as applicable and not in conflict with

any provisions of this Charter, shall apply to the Bank.

Sec. 27. Penalties for Violation of the Provisions of this Charter. Any director, officer or employee of the Bank who violates or knowingly permits the violation and any

person aiding or abetting any violations of any of the provisions of this Charter, shall be punished by a fine not to exceed ten thousand pesos or by imprisonment of

not more than five years or both such fine and imprisonment.

TRANSITORY PROVISIONS

Sec. 28. Preparatory Work. Upon the effectivity of this Executive Order, the Board of Directors and management of the Bank s hall undertake the appropriate steps to

establish its current financial condition for the purpose of determining its net asset values and the book value of shares thereof.

All shares of stock held by the Government of the Philippines in the Bank are deemed cancelled and exchanged for Twenty-Five Million common shares of stock

subscribed and paid-in by the Government, pursuant to Section 7 hereof.

The ratio of the shareholdings of the Government of the Philippines to the shareholdings of the private shareholders before the effectivity of this Charter shall be

maintained.

Private shareholders of the Bank, including holders of Common "A" shares, shall exchange their shares for such number of shares of stock of the Bank computed on

the basis of the ratio of the common shares held by the Government immediately prior to the effectivity of this Charter to the new shares of stock subscribed and

paid-in by the Government pursuant to Section 7 hereof.

Sec. 29. Transfer of Assets and Liabilities of the Philippine National Bank. The Bank shall transfer to the National Government such of its assets and liabilities as may

be necessary to rehabilitate the Bank and to start its operations under the Revised Charter on a viable basis, as determined by the a ppropriate authorities, such assets

to include but not necessarily be limited to its acquired assets and non-performing accounts, and such liabilities to include real as well as contingent liabilities. The

National Government is hereby authorized to accept the same under terms and conditions as may be mutually acceptable to the Bank and the National Government.

Sec. 30. Maintenance, Care and Preservation of Assets Transferred to the National Government. The Bank is hereby authorized to enter into an agreement with the

National Government as transferee of assets from the Bank as hereinabove provided, either as an interim arrangement or otherwise and under such terms and

conditions as may be necessary to preserve and/or to maintain and/or dispose of such assets transferred to the National Government.

Sec. 31. Banking Operations under the 1986 Revised Charters; Governing Laws. The Banking operations of the Bank shall be governed by the provisions of this Charter

beginning on January 1, 1987, or on such subsequent date as may be determine by the President of the Philippine upon the recommendation of the Minister of

Finance.

Sec. 32. Loans and Other Investments, and Liabilities in Excess of Prescribed Limits. Loans and other investments as

Real Est Trans

Documents

Transcript of Real Est Trans