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G.R. No. 176246               February 13, 2009

PREMIERE DEVELOPMENT BANK, Petitioner, vs.CENTRAL SURETY & INSURANCE COMPANY, INC., Respondent.

D E C I S I O N

NACHURA, J.:

Before us is a petition for review on certiorari assailing the Court of Appeals (CA) Decision1 in CA-G.R. CV No. 85930, which reversed and set aside the decision of the Regional Trial Court (RTC), Branch 132, Makati City in Civil Case No. 0051306.2

On August 20, 1999, respondent Central Surety & Insurance Company (Central Surety) obtained an industrial loan of P6,000,000.00 from petitioner Premiere Development Bank (Premiere Bank) with a maturity date of August 14, 2000. This P6,000,000.00 loan, evidenced by Promissory Note (PN) No. 714-Y,3 stipulates payment of 17% interest per annum payable monthly in arrears and the principal payable on due date. In addition, PN No. 714-Y provides for a penalty charge of 24% interest per annum based on the unpaid amortization/installment or the entire unpaid balance of the loan. In all, should Central Surety fail to pay, it would be liable to Premiere Bank for: (1) unpaid interest up to maturity date; (2) unpaid penalties up to maturity date; and (3) unpaid balance of the principal.

To secure payment of the P6,000,000.00 loan, Central Surety executed in favor of Premiere Bank a Deed of Assignment with Pledge4 covering Central Surety’s Membership Fee Certificate No. 217 representing its proprietary share in Wack Wack Golf and Country Club Incorporated (Wack Wack Membership). In both PN No. 714-Y and Deed of Assignment, Constancio T. Castañeda, Jr. and Engracio T. Castañeda, president and vice-president of Central Surety, respectively, represented Central Surety and solidarily bound themselves to the payment of the obligation.

Parenthetically, Central Surety had another commercial loan with Premiere Bank in the amount of P40,898,000.00 maturing on October 10, 2001. This loan was, likewise, evidenced by a PN numbered 376-X5 and secured by a real estate mortgage over Condominium Certificate of Title No. 8804, Makati City. PN No. 376-X was availed of through a renewal of Central Surety’s prior loan, then covered by PN No. 367-Z.6 As with the P6,000,000.00 loan and the constituted pledge over the Wack Wack Membership, the P40,898,000.00 loan with real estate mortgage was transacted by Constancio and Engracio Castañeda on behalf of Central Surety.

It appears that on August 22, 2000, Premiere Bank sent a letter to Central Surety demanding payment of the P6,000,000.00 loan, to wit:

August 22, 2000

CENTRAL SURETY AND INSURANCE CO.2nd Floor Universalre Bldg.No. 106 Paseo de Roxas, Legaspi VillageMakati City

Attention: Mr. Constancio T. Castaneda, Jr.President

Mr. Engracio T. CastanedaVice President

-------------------------------------------------

Gentlemen:

This has reference to your overdue loan of P6.0 Million.

We regret to inform you that despite efforts to restructure the same, you have failed up to this time, to submit the required documents and come up with equity necessary to implement the restructuring scheme.

In view thereof, we regret that unless the above loan is settled on or before five (5) days from the date hereof, we shall exercise our option to have the Stock Certificate No. 217 with Serial No. 1793 duly issued by Wack Wack Golf and Country Club, Inc. transferred in the name of Premiere Development Bank in accordance with the terms and conditions of the Deed of Assignment with Pledge executed in favor of Premiere Development Bank.

We shall appreciate your prompt compliance.

Very truly yours,

(sgd.)IGNACIO R. NEBRIDA, JR.

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Senior Asst. Vice President/Business Development Group - Head7

Posthaste, Central Surety responded and sent the following letter dated August 24, 2000:

24 August 2000

Mr. Ignacio R. Nebrida, Jr.Senior Asst. Vice President/Business Development Group – HeadPremiere BankEDSA cor. Magallanes AvenueMakati City

Sir:

With reference to this 6.0 Million loan account, we have informed Ms. Evangeline Veloira that we are intending to settle the account by the end of September. As of 14 August 2000 we made payment to your bank as per receipt attached.

As you may know, present conditions have been difficult for the insurance industry whose performance is so closely linked to the nation’s economic prosperity; and we are now asking for some consideration and leeway on your very stiff and immediate demands.

Kindly extend to us your favorable approval.

Very truly yours,

(sgd.)ENGRACIO T. CASTANEDAVice-President8

Accordingly, by September 20, 2000, Central Surety issued Bank of Commerce (BC) Check No. 081149 dated September 22, 2000 in the amount of P6,000,000.00 and payable to Premiere Bank. The check was received by Premiere Bank’s Senior Account Manager, Evangeline Veloira, with the notation "full payment of loan-Wack Wack," as reflected in Central Surety’s Disbursement Voucher.10 However, for undisclosed reasons, Premiere Bank returned BC Check No. 08114 to Central Surety, and in its letter dated September 28, 2000, demanded from the latter, not just payment of the P6,000,000.00 loan, but also the P40,898,000.00 loan which was originally covered by PN No. 367-Z.11 In the same letter, Premiere Bank threatened foreclosure of the loans’ respective securities, the pledge and real estate mortgage, should Central Surety fail to pay these within ten days from date, thus:

28 September 2000

CENTRAL SURETY & INSURANCE CO.By: Constancio T. Castañeda Jr. – PresidentEngracio T. Castañeda – Vice President2nd Floor Universalre Bldg. No. 106Paseo de Roxas, Legaspi Village, Makati City

RE: YOUR COMMERCIAL LOAN OF P40,898,000.00 &P6,000,000.00 WITH PREMIERE DEVELOPMENT BANKUNDER ACCOUNT NOS. COM-367-Z AND COM 714-Y

**************************************************

Dear Sirs:

We write on behalf of our client, Premiere Development Bank, in connection with your above-captioned loan account.

While our client has given you all the concessions, facilities and opportunities to service your loans, we regret to inform you that you have failed to settle the same despite their past due status.

In view of the foregoing and to protect the interest of our client, please be advised that unless the outstanding balances of your loan accounts as of date plus interest, penalties and other fees and charges are paid in full or necessary arrangements acceptable to our client is made by you within ten (10) days from date hereof, we shall be constrained much to our regret, to file foreclosure proceedings against the collateral of the loan mortgaged to the Bank or pursue such action necessary in the premises.

We trust, therefore, that you will give this matter your preferential attention.

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Very truly yours,

(sgd.)PACITA M. ARAOS12

(italics supplied)

The very next day, on September 29, 2000, Central Surety, through its counsel, wrote Premiere Bank and re-tendered payment of the check:

29 September 2000

PREMIERE BANKEDSA cor. Magallanes AvenueMakati City

Attention: Mr. Ignacio R. Nebrida, Jr.Senior Asst. Vice President/Business Development Group – Head

Re : Promissory Note No. 714-Y

Sir:

This is further to our client’s letter to you dated 24 August 2000, informing you that it would settle its account by the end of September 2000.

Please be advised that on 20 September 2000 our client delivered to your bank BC cheque no. 08114 payable to Premiere Bank in the amount of SIX MILLION PESOS (P6,000,000.00), which was received by your Senior Account Manager, Ms. Evangeline Veloira. However, for unexplained reasons the cheque was returned to us.

We are again tendering to you the said cheque of SIX MILLION PESOS (P6,000,000.00), in payment of PN#714-Y. Please accept the cheque and issue the corresponding receipt thereof. Should you again refuse to accept this cheque, then I shall advise my client to deposit it in court for proper disposition.

Thank you.

Very truly yours,

(sgd.)EPIFANIO E. CUACounsel for Central Surety & Insurance Company13

(italics supplied)

On even date, a separate letter with another BC Check No. 08115 in the amount of P2,600,000.00 was also tendered to Premiere Bank as payment for the Spouses Engracio and Lourdes Castañeda’s (Spouses Castañeda’s) personal loan covered by PN No. 717-X and secured by Manila Polo Club, Inc. membership shares.

On October 13, 2000, Premiere Bank responded and signified acceptance of Central Surety’s checks under the following application of payments:

13 October 2000

ATTY. EPIFANIO E. CUA2/F Universalre Condominium106 Paseo de RoxasLegaspi Village, Makati City

Dear Atty. Cua:

Thank you for your two (2) letters both dated 29 September 2000 on behalf of your clients with the enclosed check nos. 0008114 and 0008115 for the total of P8,600,000.00.

As previously relayed to your client, Premiere Bank cannot accept the two (2) checks as full settlement of the obligation under Account Nos. PN #714-Y and PN # 717-X, as the amount is insufficient.

In accordance with the terms and conditions of the Promissory Notes executed by your clients in favor of Premiere Development Bank, we have applied the two (2) checks to the due obligations of your clients as follows:

1) Account No.: COM 235-Z14 P1,044,939.45

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2) Account No.: IND 717-X P1,459,693.15

3) Account No.: COM 367-Z15 P4,476,200.18

4) Account No.: COM 714-Y P 1,619,187.22

TOTAL P 8,600,000.00

We are enclosing Xerox copy each of four (4) official receipts covering the above payments. The originals are with us which your clients or their duly authorized representative may pick-up anytime during office hours.

We shall appreciate the settlement in full of the accounts of your client or necessary arrangements for settlement thereof be made as soon as possible to put the accounts on up to-date status.

Thank you.

Very truly yours,

(sgd.)MS. ELSA M. SAPAPOManagerLoans Accounting and Control Department16

Significantly, the P8,600,000.00 check payments were not applied in full to Central Surety’s P6,000,000.00 loan under PN No. 714-Y and the Spouses Castañeda’s personal loan of P2,600,000.00 under PN No. 717-X. Premiere Bank also applied proceeds thereof to a commercial loan under PN No. 235-Z taken out by Casent Realty and Development Corporation (Casent Realty),17 and to Central Surety’s loan originally covered by PN No. 367-Z, renewed under PN No. 376-X, maturing on October 20, 2001.

Strongly objecting to Premiere Bank’s application of payments, Central Surety’s counsel wrote Premiere Bank and reiterated Central Surety’s demand for the application of the check payments to the loans covered by PN Nos. 714-X and 714-Y. Additionally, Central Surety asked that the Wack Wack Membership pledge, the security for the P6,000,000.00 loan, should be released.

In the final exchange of correspondence, Premiere Bank, through its SAVP/Acting Head-LGC, Atty. Pacita Araos, responded and refused to accede to Central Surety’s demand. Premiere Bank insisted that the PN covering the P6,000,000.00 loan granted Premiere Bank sole discretion respecting: (1) debts to which payments should be applied in cases of several obligations by an obligor and/or debtor; and (2) the initial application of payments to other costs, advances, expenses, and past due interest stipulated thereunder.

As a result, Central Surety filed a complaint for damages and release of security collateral, specifically praying that the court render judgment: (1) declaring Central Surety’s P6,000,000.00 loan covered by PN No. 714-Y as fully paid; (2) ordering Premiere Bank to release to Central Surety its membership certificate of shares in Wack Wack; (3) ordering Premiere Bank to pay Central Surety compensatory and actual damages, exemplary damages, attorney’s fees, and expenses of litigation; and (4) directing Premiere Bank to pay the cost of suit.

On July 12, 2005, the RTC rendered a decision dismissing Central Surety’s complaint and ordering it to pay Premiere Bank P100,000.00 as attorney’s fees. The RTC ruled that the stipulation in the PN granting Premiere Bank sole discretion in the application of payments, although it partook of a contract of adhesion, was valid. It disposed of the case, to wit:

Now that the issue as to the validity of the stipulation is settled, [Premiere Bank] was right in contending that it had the right to apply [Central Surety’s] payment to the most onerous obligation or to the one it sees fit to be paid first from among the several obligations. The application of the payment to the other two loans of Central Surety namely, account nos. COM 367-Z and IND 714-Y was within [Premiere Bank’s] valid exercise of its right according the stipulation.lawphil.net However, [Premiere Bank] erred in applying the payment to the loan of Casent Realty and to the personal obligation of Mr. Engracio Castañeda despite their connection with one another. Therefore, [Premiere Bank] cannot apply the payment tendered by Central Surety to the other two entities capriciously and expressly violating the law and pertinent Central Bank rules and regulations. Hence, the application of the payment to the loan of Casent Realty (Account No. COM 236-Z) and to the loan of Mr. Engracio Castañeda (Account No. IND 717-X) is void and must be annulled.

As to the issue of whether or not [Central Surety] is entitled to the release of Membership Fee Certificate in the Wack Wack Golf and Country Club, considering now that [Central Surety] cannot compel [Premiere Bank] to release the subject collateral.

With regard to the issue of damages and attorney’s fees, the court finds no basis to grant [Premiere Bank’s] prayer for moral and exemplary damages but deems it just and equitable to award in its favor attorney’s fees in the sum of Php 100,000.00.

WHEREFORE, judgment is hereby rendered dismissing the complaint and ordering [Central Surety] to pay [Premiere Bank] Php 100,000.00 as attorney’s fees.18 (emphasis supplied)

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On appeal by Central Surety, the CA reversed and set aside the trial court’s ruling. The appellate court held that with Premiere Bank’s letter dated August 22, 2000 specifically demanding payment of Central Surety’s P6,000,000.00 loan, it was deemed to have waived the stipulation in PN No. 714-Y granting it the right to solely determine application of payments, and was, consequently, estopped from enforcing the same. In this regard, with the holding of full settlement of Central Surety’s P6,000,000.00 loan under PN No. 714-Y, the CA ordered the release of the Wack Wack Membership pledged to Premiere Bank.

Hence, this recourse by Premiere Bank positing the following issues:

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE AND PALPABLE ERROR WHEN IT APPLIED THE PRINCIPLE OF WAIVER AND ESTOPPEL IN THE PRESENT CASE INSOFAR AS THE DEMAND LETTER SENT TO [CENTRAL SURETY] IS CONCERNED NULLIFYING THE APPLICATION OF PAYMENTS EXERCISED BY [PREMIERE BANK]

WHETHER OR NOT THE FINDING OF WAIVER AND ESTOPPEL BY THE HONORABLE COURT OF APPEALS COULD PREVAIL OVER THE CLEAR AND UNMISTAKABLE STATUTORY AND CONTRACTUAL RIGHT OF [PREMIERE BANK] TO EXERCISE APPLICATION OF PAYMENT AS WARRANTED BY THE PROMISSORY NOTE

EVEN ASSUMING EX GRATIA THAT THE 6 MILLION SHOULD BE APPLIED TO THE SUBJECT LOAN OF RESPONDENT, WHETHER OR NOT THE SUBJECT WACK-WACK SHARES COULD BE RELEASE[D] DESPITE THE CROSS DEFAULT AND CROSS GUARANTEE PROVISIONS OF THE DEED OF ASSIGNMENT WITH PLEDGE AND RELEVANT REAL ESTATE MORTGAGE CONTRACTS EXECUTED BY [CENTRAL SURETY], CASENT REALTY AND SPS. CASTAÑEDA.

WHETHER OR NOT THERE IS A VALID TENDER OF PAYMENT AND CONSIGNATION OF THE SUBJECT TWO CHECK PAYMENTS BY [CENTRAL SURETY].

WHETHER OR NOT, AS CORRECTLY FOUND BY THE COURT A QUO [CENTRAL SURETY] IS ESTOPPED FROM CONTESTING THE STIPULATIONS OR PROVISIONS OF THE PROMISSORY NOTES AUTHORIZING [PREMIERE BANK] TO MAKE SUCH APPLICATION OF PAYMENTS

WHETHER OR NOT AS CORRECTLY FOUND BY THE LOWER COURT [PREMIERE BANK] IS ENTITLED TO AN AWARD OF DAMAGES AS OCCASIONED BY THE MALICIOUS FILING OF THIS SUIT.19

At the outset, we qualify that this case deals only with the extinguishment of Central Surety’s P6,000,000.00 loan secured by the Wack Wack Membership pledge. We do not dispose herein the matter of the P2,600,000.00 loan covered by PN No. 717-X subject of BC Check No. 08115.

We note that both lower courts were one in annulling Premiere Bank’s application of payments to the loans of Casent Realty and the Spouses Castañeda under PN Nos. 235-Z and 717-X, respectively, thus:

It bears stressing that the parties to PN No. 714-Y secured by Wack Wack membership certificate are only Central Surety, as debtor and [Premiere Bank], as creditor. Thus, when the questioned stipulation speaks of "several obligations", it only refers to the obligations of [Central Surety] and nobody else.

[I]t is plain that [Central Surety] has only two loan obligations, namely: 1.) Account No. 714-Y – secured by Wack Wack membership certificate; and 2.) Account No. 367-Z – secured by Condominium Certificate of Title. The two loans are secured by separate and different collaterals. The collateral for Account No. 714-Y, which is the Wack Wack membership certificate answers only for that account and nothing else. The collateral for Account No. 367-Z, which is the Condominium Certificate of Title, is answerable only for the said account.

The fact that the loan obligations of [Central Surety] are secured by separate and distinct collateral simply shows that each collateral secures only a particular loan obligation and does not cover loans including future loans or advancements.

As regards the loan covered by Account No. 235-Z, this was obtained by Casent Realty, not by [Central Surety]. Although Mr. Engracio Castañeda is the vice-president of [Central Surety], and president of Casent Realty, it does not follow that the two corporations are one and the same. Both are invested by law with a personality separate and distinct from each other.

Thus, [Central Surety] cannot be held liable for the obligation of Casent Realty, absent evidence showing that the latter is being used to defeat public convenience, justify wrong, protect fraud or defend crime; or used as a shield to confuse the legitimate issues, or when it is merely an adjunct, a business conduit or an alter ego of [Central Surety] or of another corporation; or used as a cloak to cover for fraud or illegality, or to work injustice, or where necessary to achieve equity or for the protection of creditors.1avvphi1

Likewise, [Central Surety] cannot be held accountable for the loan obligation of spouses Castañeda under Account No. IND 717-X. Settled is the rule that a corporation is invested by law with a personality separate and distinct from those of the persons composing it. The corporate debt or credit is not the debt or credit of the stockholder nor is the stockholder’s debt or credit that of the corporation.

The mere fact that a person is a president of the corporation does not render the property he owns or possesses the property of the corporation, since that president, as an individual, and the corporation are separate entities.20

In fact, Premiere Bank did not appeal or question the RTC’s ruling specifically annulling the application of the P6,000,000.00 check payment to the respective loans of Casent Realty and the Spouses Castañeda. Undoubtedly, Premiere Bank cannot be allowed, through this petition, to surreptitiously include the validity of its application of payments concerning the loans to Casent Realty and the Spouses Castañeda.

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Thus, we sift through the issues posited by Premiere Bank and restate the same, to wit:

1. Whether Premiere Bank waived its right of application of payments on the loans of Central Surety.

2. In the alternative, whether the P6,000,000.00 loan of Central Surety was extinguished by the encashment of BC Check No. 08114.

3. Corollarily, whether the release of the Wack Wack Membership pledge is in order.

The Petition is meritorious.

We shall take the first and the second issues in tandem.

Creditor given right to apply payments

At the hub of the controversy is the statutory provision on application of payments, specifically Article 1252 of the Civil Code, viz.:

Article 1252. He who has various debts of the same kind in favor of one and the same creditor, may declare at the time of making the payment, to which of them the same must be applied. Unless the parties so stipulate, or when the application of payment is made by the party for whose benefit the term has been constituted, application shall not be made as to debts which are not yet due.

If the debtor accepts from the creditor a receipt in which an application of the payment is made, the former cannot complain of the same, unless there is a cause for invalidating the contract.

The debtor’s right to apply payment is not mandatory. This is clear from the use of the word "may" rather than the word "shall" in the provision which reads: "He who has various debts of the same kind in favor of one and the same creditor, may declare at the time of making the payment, to which of the same must be applied."

Indeed, the debtor’s right to apply payment has been considered merely directory, and not mandatory,21 following this Court’s earlier pronouncement that "the ordinary acceptation of the terms ‘may’ and ‘shall’ may be resorted to as guides in ascertaining the mandatory or directory character of statutory provisions."22

Article 1252 gives the right to the debtor to choose to which of several obligations to apply a particular payment that he tenders to the creditor. But likewise granted in the same provision is the right of the creditor to apply such payment in case the debtor fails to direct its application. This is obvious in Art. 1252, par. 2, viz.: "If the debtor accepts from the creditor a receipt in which an application of payment is made, the former cannot complain of the same." It is the directory nature of this right and the subsidiary right of the creditor to apply payments when the debtor does not elect to do so that make this right, like any other right, waivable.

Rights may be waived, unless the waiver is contrary to law, public order, public policy, morals or good customs, or prejudicial to a third person with a right recognized by law.23

A debtor, in making a voluntary payment, may at the time of payment direct an application of it to whatever account he chooses, unless he has assigned or waived that right. If the debtor does not do so, the right passes to the creditor, who may make such application as he chooses. But if neither party has exercised its option, the court will apply the payment according to the justice and equity of the case, taking into consideration all its circumstances.24

Verily, the debtor’s right to apply payment can be waived and even granted to the creditor if the debtor so agrees.25 This was explained by former Senator Arturo M. Tolentino, an acknowledged expert on the Civil Code, thus:

The following are some limitations on the right of the debtor to apply his payment:

x x x x

5) when there is an agreement as to the debts which are to be paid first, the debtor cannot vary this agreement.26

Relevantly, in a Decision of the Supreme Court of Kansas in a case with parallel facts, it was held that:

The debtor requested Planters apply the payments to the 1981 loan rather than to the 1978 loan. Planters refused. Planters notes it was expressly provided in the security agreement on the 1981 loan that Planters had a legal right to direct application of payments in its sole discretion. Appellees do not refute this. Hence, the debtors had no right by agreement to direct the payments. This also precludes the application of the U.S. Rule, which applies only in absence of a statute or specific agreement. Thus the trial court erred. Planters was entitled to apply the Hi-Plains payments as it saw fit.27

In the case at bench, the records show that Premiere Bank and Central Surety entered into several contracts of loan, securities by way of pledges, and suretyship agreements. In at least two (2) promissory notes between the parties, Promissory Note No. 714-Y and Promissory Note No. 376-X, Central Surety expressly agreed to grant Premiere Bank the authority to apply any and all of Central Surety’s payments, thus:

In case I/We have several obligations with [Premiere Bank], I/We hereby empower [Premiere Bank] to apply without notice and in any manner it sees fit, any or all of my/our deposits and payments to any of my/our obligations whether due or not. Any such application of deposits or payments shall be conclusive and binding upon us.

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This proviso is representative of all the other Promissory Notes involved in this case. It is in the exercise of this express authority under the Promissory Notes, and following Bangko Sentral ng Pilipinas Regulations, that Premiere Bank applied payments made by Central Surety, as it deemed fit, to the several debts of the latter.

All debts were due; There was no waiver on the part of petitioner

Undoubtedly, at the time of conflict between the parties material to this case, Promissory Note No. 714-Y dated August 20, 1999, in the amount of P6,000,000.00 and secured by the pledge of the Wack Wack Membership, was past the due and demand stage. By its terms, Premiere Bank was entitled to declare said Note and all sums payable thereunder immediately due and payable, without need of "presentment, demand, protest or notice of any kind." The subsequent demand made by Premiere Bank was, therefore, merely a superfluity, which cannot be equated with a waiver of the right to demand payment of all the matured obligations of Central Surety to Premiere Bank.

Moreover, this Court may take judicial notice that the standard practice in commercial transactions to send demand letters has become part and parcel of every collection effort, especially in light of the legal requirement that demand is a prerequisite before default may set in, subject to certain well-known exceptions, including the situation where the law or the obligations expressly declare it unnecessary.28

Neither can it be said that Premiere Bank waived its right to apply payments when it specifically demanded payment of the P6,000,000.00 loan under Promissory Note No. 714-Y. It is an elementary rule that the existence of a waiver must be positively demonstrated since a waiver by implication is not normally countenanced. The norm is that a waiver must not only be voluntary, but must have been made knowingly, intelligently, and with sufficient awareness of the relevant circumstances and likely consequences. There must be persuasive evidence to show an actual intention to relinquish the right. Mere silence on the part of the holder of the right should not be construed as a surrender thereof; the courts must indulge every reasonable presumption against the existence and validity of such waiver.29

Besides, in this case, any inference of a waiver of Premiere Bank’s, as creditor, right to apply payments is eschewed by the express provision of the Promissory Note that: "no failure on the part of [Premiere Bank] to exercise, and no delay in exercising any right hereunder, shall operate as a waiver thereof."

Thus, we find it unnecessary to rule on the applicability of the equitable principle of waiver that the Court of Appeals ascribed to the demand made by Premiere Bank upon Central Surety to pay the amount of P6,000,000.00, in the face of both the express provisions of the law and the agreements entered into by the parties. After all, a diligent creditor should not needlessly be interfered with in the prosecution of his legal remedies.30

When Central Surety directed the application of its payment to a specific debt, it knew it had another debt with Premiere Bank, that covered by Promissory Note 367-Z, which had been renewed under Promissory Note 376-X, in the amount of P40.898 Million. Central Surety is aware that Promissory Note 367-Z (or 376-X) contains the same provision as in Promissory Note No 714-Y which grants the Premiere Bank authority to apply payments made by Central Surety, viz.:

In case I/We have several obligations with [Premiere Bank], I/We hereby empower [Premiere Bank] to apply without notice and in any manner it sees fit, any or all of my/our deposits and payments to any of my/our obligations whether due or not. Any such application of deposits or payments shall be conclusive and binding upon us.31

Obviously, Central Surety is also cognizant that Promissory Note 367-Z contains the proviso that:

the bank shall be entitled to declare this Note and all sums payable hereunder to be immediately due and payable, without need of presentment, demand, protest or notice of nay kind, all of which I/We hereby expressly waive, upon occurrence of any of the following events: x x x (ii) My/Our failure to pay any amortization or installment due hereunder; (iii) My/Our failure to pay money due under any other document or agreement evidencing obligations for borrowed money x x x.32

by virtue of which, it follows that the obligation under Promissory Note 367-Z had become past due and demandable, with further notice expressly waived, when Central Surety defaulted on its obligations under Promissory Note No. 714-Y.

Mendoza v. Court of Appeals33 forecloses any doubt that an acceleration clause is valid and produces legal effects. In fact, in Selegna Management and Development Corporation v. United Coconut Planters Bank,34 we held that:

Considering that the contract is the law between the parties, respondent is justified in invoking the acceleration clause declaring the entire obligation immediately due and payable. That clause obliged petitioners to pay the entire loan on January 29, 1999, the date fixed by respondent.

It is worth noting that after the delayed payment of P6,000,000.00 was tendered by Central Surety, Premiere Bank returned the amount as insufficient, ostensibly because there was, at least, another account that was likewise due. Obviously, in its demand of 28 September 2000, petitioner sought payment, not just of the P6,000,000.00, but of all these past due accounts. There is extant testimony to support this claim, as the transcript of stenographic notes on the testimony of Atty. Araos reveals:

Atty. Opinion: Q. But you accepted this payment of Six Million (P6,000,000.00) later on when together with this was paid another check for 1.8 Million?

Witness: A. We accepted.

Atty. Opinion: Q. And you applied this to four (4) other accounts three (3) other accounts or to four (4) accounts mentioned in Exhibit "J." Is that correct?

Atty. Tagalog: We can stipulate on that. Your Honor.

Court: This was stipulated?

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Atty. Tagalog: Yes, Your Honor. In fact, there is already stipulation that we confirm that those are the applications of payments made by the defendant Bank on those loan accounts.

Atty. Opinion: Q. Were these accounts due already when you made this application, distribution of payments?

Witness: A. Yes sir.35

Conversely, in its evidence-in-chief, Central Surety did not present any witness to testify on the payment of its obligations. In fact, the record shows that after marking its evidence, Central Surety proceeded to offer its evidence immediately. Only on the rebuttal stage did Central Surety present a witness; but even then, no evidence was adduced of payment of any other obligation. In this light, the Court is constrained to rule that all obligations of Central Surety to Premiere Bank were due; and thus, the application of payments was warranted.

Being in receipt of amounts tendered by Central Surety, which were insufficient to cover its more onerous obligations, Premiere Bank cannot be faulted for exercising the authority granted to it under the Promissory Notes, and applying payment to the obligations as it deemed fit. Subject to the caveat that our ruling herein shall be limited only to the transactions entered into by the parties to this case, the Court will not disturb the finding of the lower court that Premiere Bank rightly applied the payments that Central Surety had tendered. Corollary thereto, and upon the second issue, the tender of the amount of P6,000,000.00 by Central Surety, and the encashment of BC Check No. 08114 did not totally extinguish the debt covered by PN No. 714-Y.

Release of the pledged

Wack Wack Membership

Contract of Adhesion

To the extent that the subject promissory notes were prepared by the Premiere Bank and presented to Central Surety for signature, these agreements were, indeed, contracts of adhesion. But contracts of adhesion are not invalid per se. Contracts of adhesion, where one party imposes a ready-made form of contract on the other, are not entirely prohibited. The one who adheres to the contract is, in reality, free to reject it entirely; if he adheres, he gives his consent.

In interpreting such contracts, however, courts are expected to observe greater vigilance in order to shield the unwary or weaker party from deceptive schemes contained in ready-made covenants.36 Thus, Article 24 of the Civil Code pertinently states:

In all contractual, property or other relations, when one of the parties is at a disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, tender age or other handicap, the courts must be vigilant for his protection.

But in this case, Central Surety does not appear so weak as to be placed at a distinct disadvantage vis-à-vis the bank. As found by the lower court:

Considering that [Central Surety] is a known business entity, the [Premiere Bank] was right in assuming that the [Central Surety] could not have been cheated or misled in agreeing thereto, it could have negotiated with the bank on a more favorable term considering that it has already established a certain reputation with the [Premiere Bank] as evidenced by its numerous transactions. It is therefore absurd that an established company such as the [Central Surety] has no knowledge of the law regarding bank practice in loan transactions.

The Dragnet Clause.

The factual circumstances of this case showing the chain of transactions and long-standing relationship between Premiere Bank and Central Surety militate against the latter’s prayer in its complaint for the release of the Wack Wack Membership, the security attached to Promissory Note 714-Y.

A tally of the facts shows the following transactions between Premiere Bank and Central Surety:

Date Instrument Amount covered

Stipulation

August 20, 1999 PN 714-Y P 6 M  

August 29, 1999 Deed of Assignment with Pledge

P 15 M As security for PN 714-Y and/or such Promissory Note/s which the ASSIGNOR / PLEDGOR shall hereafter execute in favor of the ASSIGNEE/PLEDGEE

From these transactions and the proviso in the Deed of Assignment with Pledge, it is clear that the security, which peculiarly specified an amount at P15,000,000.00 (notably greater than the amount of the promissory note it secured), was intended to guarantee not just the obligation under PN 714-Y, but also future advances. Thus, the said deed is explicit:

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As security for the payment of loan obtained by the ASSIGNOR/PLEDGOR from the ASSIGNEE/PLEDGEE in the amount of FIFTEEN MILLION PESOS (15,000,000.00) Philippine Currency in accordance with the Promissory Note attached hereto and made an integral part hereof as Annex "A" and/or such Promissory Note/s which the ASSIGNOR/PLEDGOR shall hereafter execute in favor of the ASSIGNEE/PLEDGEE, the ASSIGNOR/PLEDGOR hereby transfers, assigns, conveys, endorses, encumbers and delivers by way of first pledge unto the ASSIGNEE/PLEDGEE, its successors and assigns, that certain Membership fee Certificate Share in Wack Wack Golf and Country Club Incorporate covered by Stock Certificate No. 217 with Serial No. 1793 duly issue by Wack Wack Golf and Country Club Incorporated on August 27, 1996 in the name of the ASSIGNOR." (Emphasis made in the Petition.)

Then, a Continuing Guaranty/Comprehensive Surety Agreement was later executed by Central Surety as follows:

Date Instrument Amount Stipulation

Notarized, Sept. 22, 1999

Continuing Guaranty/Comprehensive Surety Agreement

P40,898,000.00 In consideration of the loan and/or any credit accommodation which you (petitioner) have extended and/or will extend to Central Surety and Insurance Co.

And on October 10, 2000, Promissory Note 376-X was entered into, a renewal of the prior Promissory Note 367-Z, in the amount of P40,898,000.00. In all, the transactions that transpired between Premiere Bank and Central Surety manifest themselves, thusly:

DateInstrument

Amount covered

Stipulation

August 20, 1999 PN 714-Y P 6 M

August 29, 1999 Deed of Assignment with Pledge

P 15 M As security for PN 714-Y and/or such Promissory Note/s which the ASSIGNOR / PLEDGOR shall hereafter execute in favor of the ASSIGNEE/PLEDGEE

Notarized, Sept. 22, 1999

Continuing Guaranty/Comprehensive Surety Agreement

P40,898,000.00 In consideration of the loan and/or any credit accommodation which you (petitioner) have extended and/or will extend to Central Surety and Insurance Co.

October 10, 2000 Promissory Note 376-X (PN 367-Z)

P40,898,000.00

From the foregoing, it is more than apparent that when, on August 29, 1999, the parties executed the Deed of Assignment with Pledge (of the Wack Wack Membership), to serve as security for an obligation in the amount of P15,000,000.00 (when the actual loan covered by PN No. 714-Y was only P6,000,000.00), the intent of the parties was for the Wack Wack Membership to serve as security also for future advancements. The subsequent loan was nothing more than a fulfillment of the intention of the parties. Of course, because the subsequent loan was for a much greater amount (P40,898,000.00), it became necessary to put up another security, in addition to the Wack Wack Membership. Thus, the subsequent surety agreement and the specific security for PN No. 367-X were, like the Wack Wack Membership, meant to secure the ballooning debt of the Central Surety.

The above-quoted provision in the Deed of Assignment, also known as the "dragnet clause" in American jurisprudence, would subsume all debts of respondent of past and future origins. It is a valid and legal undertaking, and the amounts specified as consideration in the contracts do not limit the amount for which the pledge or mortgage stands as security, if from the four corners of the instrument, the intent to secure future and other indebtedness can be gathered. A pledge or mortgage given to secure future advancements is a continuing security and is not discharged by the repayment of the amount named in the mortgage until the full amount of all advancements shall have been paid.37

Our ruling in Prudential Bank v. Alviar38 is instructive:

A "blanket mortgage clause," also known as a "dragnet clause" in American jurisprudence, is one which 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, et cetera. Indeed, it has been settled in a long line of decisions that mortgages given to secure future advancements are valid and legal contracts, and the amounts 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.

The "blanket mortgage clause" in the instant case states:

That for and in consideration of certain loans, overdraft and other credit accommodations obtained from the Mortgagee by the Mortgagor and/or ________________ hereinafter referred to, irrespective of number, as DEBTOR, and to secure the payment of the same and those that may hereafter be obtained, the principal or all of which is hereby fixed at Two Hundred Fifty Thousand (P250,000.00) Pesos, Philippine Currency, as well as those that the Mortgagee may extend to the Mortgagor and/or DEBTOR, 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 successors or assigns, the parcels of land which are described in the list inserted on the back of this document, and/or appended hereto, together with all the buildings and improvements now

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existing or which may hereafter be erected or constructed thereon, of which the Mortgagor declares that he/it is the absolute owner free from all liens and incumbrances. . . .

x x x x

In the case at bar, the subsequent loans obtained by respondents were secured by other securities, thus: PN BD#76/C-345, executed by Don Alviar was secured by a "hold-out" on his foreign currency savings account, while PN BD#76/C-430, executed by respondents for Donalco Trading, Inc., was secured by "Clean-Phase out TOD CA 3923" and eventually by a deed of assignment on two promissory notes executed by Bancom Realty Corporation with Deed of Guarantee in favor of A.U. Valencia and Co., and by a chattel mortgage on various heavy and transportation equipment. The matter of PN BD#76/C-430 has already been discussed. Thus, the critical issue is whether the "blanket mortgage" clause applies even to subsequent advancements for which other securities were intended, or particularly, to PN BD#76/C-345.

Under American jurisprudence, two schools of thought have emerged on this question. One school advocates that a "dragnet clause" so worded as to be broad enough to cover all other debts in addition to the one specifically secured will be construed to cover a different debt, although such other debt is secured by another mortgage. The contrary thinking maintains that a mortgage with such a clause will not secure a note that expresses on its face that it is otherwise secured as to its entirety, at least to anything other than a deficiency after exhausting the security specified therein, such deficiency being an indebtedness within the meaning of the mortgage, in the absence of a special contract excluding it from the arrangement.

The latter school represents the better position. The parties having conformed to the "blanket mortgage clause" or "dragnet clause," it is reasonable to conclude that they also agreed to an implied understanding that subsequent loans need not be secured by other securities, as the subsequent loans will be secured by the first mortgage. In other words, the sufficiency of the first security is a corollary component of the "dragnet clause." But of course, there is no prohibition, as in the mortgage contract in issue, against contractually requiring other securities for the subsequent loans. Thus, when the mortgagor takes another loan for which another security was given it could not be inferred that such loan was made in reliance solely on the original security with the "dragnet clause," but rather, on the new security given. This is the "reliance on the security test."

Hence, based on the "reliance on the security test," the California court in the cited case made an inquiry whether the second loan was made in reliance on the original security containing a "dragnet clause." Accordingly, finding a different security was taken for the second loan no intent that the parties relied on the security of the first loan could be inferred, so it was held. The rationale involved, the court said, was that the "dragnet clause" in the first security instrument constituted a continuing offer by the borrower to secure further loans under the security of the first security instrument, and that when the lender accepted a different security he did not accept the offer.

In another case, it was held that a mortgage with a "dragnet clause" is an "offer" by the mortgagor to the bank to provide the security of the mortgage for advances of and when they were made. Thus, it was concluded that the "offer" was not accepted by the bank when a subsequent advance was made because (1) the second note was secured by a chattel mortgage on certain vehicles, and the clause therein stated that the note was secured by such chattel mortgage; (2) there was no reference in the second note or chattel mortgage indicating a connection between the real estate mortgage and the advance; (3) the mortgagor signed the real estate mortgage by her name alone, whereas the second note and chattel mortgage were signed by the mortgagor doing business under an assumed name; and (4) there was no allegation by the bank, and apparently no proof, that it relied on the security of the real estate mortgage in making the advance.

Indeed, in some instances, it has been held that in the absence of clear, supportive evidence of a contrary intention, a mortgage containing a "dragnet clause" will not be extended to cover future advances unless the document evidencing the subsequent advance refers to the mortgage as providing security therefor.

It was therefore improper for petitioner in this case to seek foreclosure of the mortgaged property because of non-payment of all the three promissory notes. While the existence and validity of the "dragnet clause" cannot be denied, there is a need to respect the existence of the other security given for PN BD#76/C-345. The foreclosure of the mortgaged property should only be for the P250,000.00 loan covered by PN BD#75/C-252, and for any amount not covered by the security for the second promissory note. As held in one case, where deeds absolute in form were executed to secure any and all kinds of indebtedness that might subsequently become due, a balance due on a note, after exhausting the special security given for the payment of such note, was in the absence of a special agreement to the contrary, within the protection of the mortgage, notwithstanding the giving of the special security. This is recognition that while the "dragnet clause" subsists, the security specifically executed for subsequent loans must first be exhausted before the mortgaged property can be resorted to.

The security clause involved in the case at bar shows that, by its terms:

As security for the payment of loan obtained by the ASSIGNOR/PLEDGOR from the ASSIGNEE/PLEDGEE in the amount of FIFTEEN MILLION PESOS (15,000,000.00) Philippine Currency in accordance with the Promissory Note attached hereto and made an integral part hereof as Annex "A" and/or such Promissory Note/s which the ASSIGNOR/PLEDGOR shall hereafter execute in favor of the ASSIGNEE/PLEDGEE, the ASSIGNOR/ PLEDGOR hereby transfers, assigns, conveys, endorses, encumbers and delivers by way of first pledge unto the ASSIGNEE/PLEDGEE, its successors and assigns, that certain Membership fee Certificate Share in Wack Wack Golf and Country Club Incorporated covered by Stock Certificate No. 217 with Serial No. 1793 duly issue by Wack Wack Golf and Country Club Incorporated on August 27, 1996 in the name of the ASSIGNOR."

it is comparable with the security clause in the case of Prudential, viz.:

That for and in consideration of certain loans, overdraft and other credit accommodations obtained from the Mortgagee by the Mortgagor and/or ________________ hereinafter referred to, irrespective of number, as DEBTOR, and to secure the payment of the same and those that may hereafter be obtained, the principal or all of which is hereby fixed at Two Hundred Fifty Thousand (P250,000.00) Pesos, Philippine Currency, as well as those that the Mortgagee may extend to the Mortgagor and/or DEBTOR, 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 successors or assigns, the parcels of land which are described in the list inserted on the back of this document, and/or appended hereto, together with all the buildings and improvements now existing or which may hereafter be erected or constructed thereon, of which the Mortgagor declares that he/it is the absolute owner free from all liens and incumbrances. . . .

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and there is no substantive difference between the terms utilized in both clauses securing future advances.

To recall, the critical issue resolved in Prudential was whether the "blanket mortgage" clause applies even to subsequent advancements for which other securities were intended. We then declared that the special security for subsequent loans must first be exhausted in a situation where the creditor desires to foreclose on the "subsequent" loans that are due. However, the "dragnet clause" allows the creditor to hold on to the first security in case of deficiency after foreclosure on the special security for the subsequent loans.

In Prudential, we disallowed the petitioner’s attempt at multiple foreclosures, as it foreclosed on all of the mortgaged properties serving as individual securities for each of the three loans. This Court then laid down the rule, thus:

where deeds absolute in form were executed to secure any and all kinds of indebtedness that might subsequently become due, a balance due on a note, after exhausting the special security given for the payment of such note, was, in the absence of a special agreement to the contrary, within the protection of the mortgage, notwithstanding the giving of the special security. This is recognition that while the "dragnet clause" subsists, the security specifically executed for subsequent loans must first be exhausted before the mortgaged property can be resorted to.

However, this does not prevent the creditor from foreclosing on the security for the first loan if that loan is past due, because there is nothing in law that prohibits the exercise of that right. Hence, in the case at bench, Premiere Bank has the right to foreclose on the Wack Wack Membership, the security corresponding to the first promissory note, with the deed of assignment that originated the "dragnet clause." This conforms to the doctrine in Prudential, as, in fact, acknowledged in the decision’s penultimate paragraph, viz.:

Petitioner, however, is not without recourse. Both the Court of Appeals and the trial court found that respondents have not yet paid the P250,000.00 and gave no credence to their claim that they paid the said amount when they paid petitioner P2,000,000.00. Thus, the mortgaged property could still be properly subjected to foreclosure proceedings for the unpaid P250,000.00 loan, and as mentioned earlier, for any deficiency after D/A SFDX#129, security for PN BD#76/c-345, has been exhausted, subject of course to defenses which are available to respondents.

In any event, even without this Court’s prescription in Prudential, the release of the Wack Wack Membership as the pledged security for Promissory Note 714-Y cannot yet be done as sought by Central Surety. The chain of contracts concluded between Premiere Bank and Central Surety reveals that the Wack Wack Membership, which stood as security for Promissory Note 714-Y, and which also stands as security for subsequent debts of Central Surety, is a security in the form of a pledge. Its return to Central Surety upon the pretext that Central Surety is entitled to pay only the obligation in Promissory Note No. 714-Y, will result in the extinguishment of the pledge, even with respect to the subsequent obligations, because Article 2110 of the Civil Code provides:

(I)f the thing pledged is returned by the pledgor or owner, the pledge is extinguished. Any stipulation to the contrary is void.

This is contrary to the express agreement of the parties, something which Central Surety wants this Court to undo. We reiterate that, as a rule, courts cannot intervene to save parties from disadvantageous provisions of their contracts if they consented to the same freely and voluntarily.39

Attorney’s Fees

The final issue is the propriety of attorney’s fees. The trial court based its award on the supposed malice of Central Surety in instituting this case against Premiere Bank. We find no malice on the part of Central Surety; indeed, we are convinced that Central Surety filed the case in the lower court in good faith, upon the honest belief that it had the prerogative to choose to which loan its payments should be applied.

Malicious prosecution, both in criminal and civil cases, requires the presence of two elements, to wit: (a) malice and (b) absence of probable cause. Moreover, there must be proof that the prosecution was prompted by a sinister design to vex and humiliate a person; and that it was initiated deliberately, knowing that the charge was false and baseless. Hence, the mere filing of what turns out to be an unsuccessful suit does not render a person liable for malicious prosecution, for the law could not have meant to impose a penalty on the right to litigate.40 Malice must be proved with clear and convincing evidence, which we find wanting in this case.

WHEREFORE, the instant petition is PARTIALLY GRANTED. The assailed Decision of the Court of Appeals in CA-G.R. CV No. 85930 dated July 31, 2006, as well as its Resolution dated January 4, 2007, are REVERSED and SET ASIDE. The Decision of the Regional Trial Court of Makati City, Branch 132, in Civil Case No. 00-1536, dated July 12, 2005, is REINSTATED with the MODIFICATION that the award of attorney’s fees to petitioner is DELETED. No pronouncement as to costs.

SO ORDERED.

[G.R. No. 156846.  February 23, 2004]

TEDDY G. PABUGAIS, petitioner, vs. DAVE P. SAHIJWANI, respondent.

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D E C I S I O N

YNARES-SANTIAGO, J.:

Assailed in this petition for review on certiorari is the January 16, 2003 Amended Decision of the Court of Appeals in CA-G.R. CV No. 55740 which set aside the November 29, 1996 Decision of the Regional Trial Court of Makati, Branch 64, in Civil Case No. 94-2363.

Pursuant to an “Agreement And Undertaking” dated December 3, 1993, petitioner Teddy G. Pabugais, in consideration of the amount of Fifteen Million Four Hundred Eighty Seven Thousand Five Hundred Pesos (P15,487,500.00), agreed to sell to respondent Dave P. Sahijwani a lot containing 1,239 square meters located at Jacaranda Street, North Forbes Park, Makati, Metro Manila.  Respondent paid petitioner the amount of P600,000.00 as option/reservation fee and the balance of P14,887,500.00 to be paid within 60 days from the execution of the contract, simultaneous with delivery of the owner’s duplicate Transfer Certificate of Title in respondent’s name the Deed of Absolute Sale; the Certificate of Non-Tax Delinquency on real estate taxes and Clearance on Payment of Association Dues.  The parties further agreed that failure on the part of respondent to pay the balance of the purchase price entitles petitioner to forfeit the P600,000.00 option/reservation fee; while  non-delivery by the latter of the necessary documents obliges him to return to respondent the said option/reservation fee with interest at 18% per annum, thus –

5.       DEFAULT – In case the FIRST PARTY [herein respondent] fails to pay the balance of the purchase price within the stipulated due date, the sum of P600,000.00 shall be deemed forfeited, on the other hand, should the SECOND PARTY [herein petitioner] fail to deliver within the stipulated period the documents hereby undertaken, the SECOND PARTY shall return the sum of P600,000.00 with interest at 18% per annum.

Petitioner failed to deliver the required documents.  In compliance with their agreement, he returned to respondent the latter’s P600,000.00 option/reservation fee by way of Far East Bank & Trust Company Check No. 25AO54252P, which was, however, dishonored. 

What transpired thereafter is disputed by both parties.  Petitioner claimed that he twice tendered to respondent, through his counsel, the amount of P672,900.00 (representing the P600,000.00 option/reservation fee plus 18% interest per annum computed from December 3, 1993 to August 3, 1994) in the form of Far East Bank & Trust Company Manager’s Check No. 088498, dated August 3, 1994, but said counsel refused to accept the same.  His first attempt to tender payment was allegedly made on August 3, 1994 through his messenger; while the second one was on August 8, 1994, when he sent via DHL Worldwide Services, the manager’s check attached to a letter dated August 5, 1994.  On August 11, 1994, petitioner wrote a letter to respondent saying that he is consigning the amount tendered with the Regional Trial Court of Makati City. On August 15, 1994, petitioner filed a complaint for consignation.

Respondent’s counsel, on the other hand, admitted that his office received petitioner’s letter dated August 5, 1994, but claimed that no check was appended thereto. He averred that there was no valid tender of payment because no check was tendered and the computation of the amount to be tendered was insufficient, because petitioner verbally promised to pay 3% monthly interest and 25% attorney’s fees as penalty for default, in addition to the interest of 18% per annum on the P600,000.00 option/reservation fee.

On November 29, 1996, the trial court rendered a decision declaring the consignation invalid for failure to prove that petitioner tendered payment to respondent and that the latter refused to receive the same.  It further held that even assuming that respondent refused the tender, the same is justified because the manager’s check allegedly offered by petitioner was not legal tender, hence, there was no valid tender of payment.   The trial court ordered petitioner to pay respondent the amount of P600,000.00 with interest of 18% per annum from December 3, 1993 until fully paid, plus moral damages and attorney’s fees.

Petitioner appealed the decision to the Court of Appeals.  Meanwhile, his counsel, Atty. Wilhelmina V. Joven, died and she was substituted by Atty. Salvador P. De Guzman, Jr. On December 20, 2001, petitioner executed a “Deed of Assignment” assigning in favor of Atty. De Guzman, Jr., part of the P672,900.00 consigned with the trial court as partial payment of the latter’s attorney’s fees. Thereafter, on January 7, 2002, petitioner filed an Ex Parte Motion to Withdraw Consigned Money. This was followed by a “Motion to Intervene” filed by Atty. De Guzman, Jr., praying that the amount consigned be released to him by virtue of the Deed of Assignment.

Petitioner’s motion to withdraw the amount consigned was denied by the Court of Appeals and the decision of the trial court was affirmed with modification as to the amount of moral damages and attorney’s fees. 

On a motion for reconsideration, the Court of Appeals declared the consignation as valid in an Amended Decision dated January 16, 2003.  It held that the validity of the consignation had the effect of extinguishing petitioner’s obligation to return the option/reservation fee to respondent.  Hence, petitioner can no longer withdraw the same. The decretal portion of the Amended Decision states:

WHEREFORE, premises considered, our decision dated April 26, 2002 is RECONSIDERED.  The trial court’s decision is hereby REVERSED and SET ASIDE, and a new one is entered (1) DECLARING as valid the consignation by the plaintiff-appellant in favor of defendant-appellee of the amount of P672,900.00 with the Makati City RTC Clerk of Court and deposited under Official Receipt No. 379061 dated 15 August 1994 and (2) DECLARING as extinguished appellant’s obligation in favor of appellee under paragraph 5 of the parties’ “AGREEMENT AND UNDERTAKING”.  Neither party shall recover costs from the other.

SO ORDERED.

Unfazed, petitioner filed the instant petition for review contending, inter alia, that he can withdraw the amount deposited with the trial court as a matter of right because at the time he moved for the withdrawal thereof, the Court of Appeals has yet to rule on the consignation’s validity and the respondent had not yet accepted the same.

The resolution of the case at bar hinges on the following issues: (1) Was there a valid consignation? and (2) Can petitioner withdraw the amount consigned as a matter of right?

Consignation is the act of depositing the thing due with the court or judicial authorities whenever the creditor cannot accept or refuses to accept payment and it generally requires a prior tender of payment. In order that consignation may be effective, the debtor must show that: (1) there was a debt due; (2) the consignation of the

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obligation had been made because the creditor to whom tender of payment was made refused to accept it, or because he was absent or incapacitated, or because several persons claimed to be entitled to receive the amount due or because the title to the obligation has been lost; (3) previous notice of the consignation had been given to the person interested in the performance of the obligation; (4) the amount due was placed at the disposal of the court; and (5) after the consignation had been made the person interested was notified thereof.  Failure in any of these requirements is enough ground to render a consignation ineffective.

The issues to be resolved in the instant case concerns one of the important requisites of consignation, i.e, the existence of a valid tender of payment.  As testified by the counsel for respondent, the reasons why his client did not accept petitioner’s tender of payment were – (1) the check mentioned in the August 5, 1994 letter of petitioner manifesting that he is settling the obligation was not attached to the said letter; and (2) the amount tendered was insufficient to cover the obligation.  It is obvious that the reason for respondent’s non-acceptance of the tender of payment was the alleged insufficiency thereof – and not because the said check was not tendered to respondent, or because it was in the form of manager’s check.  While it is true that in general, a manager’s check is not legal tender, the creditor has the option of refusing or accepting it. Payment in check by the debtor may be acceptable as valid, if no prompt objection to said payment is made. Consequently, petitioner’s tender of payment in the form of manager’s check is valid.

Anent the sufficiency of the amount tendered, it appears that only the interest of 18% per annum on the P600,000.00 option/reservation fee stated in the default clause of the “Agreement And Undertaking” was agreed upon by the parties, thus –

5.       DEFAULT – In case the FIRST PARTY [herein respondent] fails to pay the balance of the purchase price within the stipulated due date, the sum of P600,000.00 shall be deemed forfeited, on the other hand, should the SECOND PARTY [herein petitioner] fail to deliver within the stipulated period the documents hereby undertaken, the SECOND PARTY shall return the sum of P600,000.00 with interest at 18% per annum.

The manager’s check in the amount of P672,900.00 (representing the P600,000.00 option/reservation fee plus 18% interest per annum computed from December 3, 1993 to August 3, 1994)  which was tendered but refused by respondent, and thereafter consigned with the court, was enough to satisfy the obligation. There being a valid tender of payment in an amount sufficient to extinguish the obligation, the consignation is valid.

As regards petitioner’s right to withdraw the amount consigned, reliance on Article 1260 of the Civil Code is misplaced.   The said Article provides –

Art. 1260. Once the consignation has been duly made, the debtor may ask the judge to order the cancellation of the obligation.

Before the creditor has accepted the consignation, or before a judicial confirmation that the consignation has been properly made, the debtor may withdraw the thing or the sum deposited, allowing the obligation to remain in force.

The amount consigned with the trial court can no longer be withdrawn by petitioner because respondent’s prayer in his answer that the amount consigned be awarded to him is equivalent to an acceptance of the consignation, which has the effect of extinguishing petitioner’s obligation.Moreover, petitioner failed to manifest his intention to comply with the “Agreement And Undertaking” by delivering the necessary documents and the lot subject of the sale to respondent in exchange for the amount deposited.  Withdrawal of the money consigned would enrich petitioner and unjustly prejudice respondent.

The withdrawal of the amount deposited in order to pay attorney’s fees to petitioner’s counsel, Atty. De Guzman, Jr., violates Article 1491 of the Civil Code which forbids lawyers from acquiring by assignment, property and rights which are the object of any litigation in which they may take part by virtue of their profession. Furthermore, Rule 10 of the Canons of Professional Ethics provides that “the lawyer should not purchase any interest in the subject matter of the litigation which he is conducting.”  The assailed transaction falls within the prohibition because the Deed assigning the amount of P672,900.00 to Atty. De Guzman, Jr., as part of his attorney’s fees was executed during the pendency of this case with the Court of Appeals.  In his Motion to Intervene, Atty. De Guzman, Jr., not only asserted ownership over said amount, but likewise prayed that the same be released to him.  That petitioner knowingly and voluntarily assigned the subject amount to his counsel did not remove their agreement within the ambit of the prohibitory provisions. To grant the withdrawal would be to sanction a void contract.

WHEREFORE, in view of all the foregoing, the instant petition for review is DENIED.  The January 16, 2003 Amended Decision of the Court of Appeals in CA-G.R. CV No. 55740, which declared the consignation by the petitioner in favor of respondent of the amount of P672,900.00 with the Clerk of Court of the Regional Trial Court of Makati City valid, and which declared petitioner’s obligation to respondent under paragraph 5 of the “Agreement And Undertaking” as having been extinguished, is AFFIRMED.  No costs.

SO ORDERED.

G.R. No. 142882             May 2, 2006

SPS. RICARDO AND LYDIA LLOBRERA, SPS. BENJAMIN AND ESTHER LLOBRERA, SPS. MIKE AND RESIDA MALA, SPS. OTOR AND DOLINANG BAGONTE, SPS. EDUARDO AND DAMIANA ICO, SPS. ANTONIO AND MERLY SOLOMON, SPS. ANSELMO AND VICKY SOLOMON, SPS. ALEX AND CARMELITA CALLEJO, SPS. DEMETRIO AND JOSEFINA FERRER, SPS. BENJAMIN AND ANITA MISLANG, SPS. DOMINGO AND FELICIDAD SANCHEZ, SPS. FERNANDO AND CARMELITA QUEBRAL, SPS. BERNARDO AND PRISCILLA MOLINA, PRISCILLA BAGA AND BELEN SEMBRANO, Petitioners,

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vs.JOSEFINA V. FERNANDEZ, Respondent.

D E C I S I O N

GARCIA, J.:

Under consideration is this petition for review on certiorari under Rule 45 of the Rules of Court to nullify and set aside the following issuances of the Court of Appeals (CA) in CA-G.R. SP No. 48918, to wit:

1. Decision dated June 30, 1999,1 affirming the Decision dated August 7, 1998 of the Regional Trial Court (RTC) of Dagupan City, Branch 41, in Civil Case No. 98-02353-D which affirmed an earlier decision of the Municipal Trial Court in Cities (MTCC), Dagupan City, Branch 2, in Civil Case No. 10848, entitled "Josefina F. De Venecia Fernandez vs. Sps. Mariano and Lourdes Melecio, et al.," an action for ejectment.

2. Resolution dated March 27, 2000,2 denying petitioners’ motion for reconsideration.

Subject of the controversy is a 1,849 square-meter parcel of land, covered by Transfer Certificate of Title No. 9042. Respondent Josefina V. Fernandez, as one of the registered co-owners of the land, served a written demand letter upon petitioners Spouses Llobrera, et al., to vacate the premises within fifteen (15) days from notice. Receipt of the demand letter notwithstanding, petitioners refused to vacate, necessitating the filing by the respondent of a formal complaint against them before the Barangay Captain of Barangay 11, Dagupan City. Upon failure of the parties to reach any settlement, the Barangay Captain issued the necessary certification to file action.

Respondent then filed a verified Complaint for ejectment and damages against the petitioners before the MTCC of Dagupan City, which complaint was raffled to Branch 2 thereof.

By way of defense, petitioners alleged in their Answer that they had been occupying the property in question beginning the year 1945 onwards, when their predecessors-in-interest, with the permission of Gualberto de Venecia, one of the other co-owners of said land, developed and occupied the same on condition that they will pay their monthly rental of P20.00 each. From then on, they have continuously paid their monthly rentals to Gualberto de Venecia or Rosita de Venecia or their representatives, such payments being duly acknowledged by receipts. Beginning sometime June 1996, however, the representative of Gualberto de Venecia refused to accept their rentals, prompting them to consign the same to Banco San Juan, which bank deposit they continued to maintain and update with their monthly rental payments.

In a decision dated February 18, 1998, the MTCC rendered judgment for the respondent as plaintiff, thus:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the defendants as follows:

1. Ordering each of the defendants to vacate the portion of the land in question they respectively occupy and to restore the possession thereof to the plaintiff and her co-owners;

2. Ordering each of the defendants to pay to the plaintiff the amount of P300.00 per month from January 17, 1997 until they vacate the land in question as the reasonable compensation for the use and occupation of the premises;

3. Ordering the defendants to pay proportionately the amount of P10,000.00 as attorney’s fee and P2,000.00 as litigation expenses, and to pay the cost of suit.

SO ORDERED.

On petitioners’ appeal to the RTC of Dagupan City, Branch 41 thereof, in its decision of August 7, 1998, affirmed the foregoing judgment.

Therefrom, petitioners went to the CA whereat their recourse was docketed as CA-G.R. SP. No. 48918. As stated at the threshold hereof, the CA, in its Decision of June 30, 1999, affirmed that of the RTC. With the CA’s denial of their motion for reconsideration, in its Resolution of March 27, 2000, petitioners are now before this Court with the following assignment of errors:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN:

A. HOLDING THAT THE OCCUPATION AND POSSESSION oF THE PROPERTY in question is by mere tolerance of the respondent.

B. holding that the failure of the petitioners (defendants) to vacate the premises after demands were made upon them is a valid ground for their ejectment.

C. holding that the consignation made by petitioners in contemplation of article 1256 of the new civil code is not legally tenable.1avvphil.net

D. affirming the decision of the regional trial court dated August 7, 1998 which, likewise affirmed the decision of the mtcc decision dated February 18, 1998 insofar as the order for the petitioners (defendants) to pay rental and attorney’s fees and litigation expenses.

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At the heart of the controversy is the issue of whether petitioners’ possession of the subject property is founded on contract or not. This factual issue was resolved by the three (3) courts below in favor of respondent. As tersely put by the CA in its assailed decision of June 30, 1999:

Petitioners failed to present any written memorandum of the alleged lease arrangements between them and Gualberto De Venecia. The receipts claimed to have been issued by the owner were not presented on the excuse that the March 19, 1996 fire burned the same. Simply put, there is a dearth of evidence to substantiate the averred lessor-lessee relationship. x x x.3

Consistent with this Court’s long-standing policy, when the three courts below have consistently and unanimously ruled on a factual issue, such ruling is deemed final and conclusive upon this Court, especially in the absence of any cogent reason to depart therefrom.

From the absence of proof of any contractual basis for petitioners’ possession of the subject premises, the only legal implication is that their possession thereof is by mere tolerance. In Roxas vs. Court of Appeals,4 we ruled:

A person who occupies the land of another at the latter’s tolerance or permission, without any contract between them, is necessarily bound by an implied promise that he will vacate upon demand, failing which, a summary action for ejectment is the proper remedy against him.

The judgment favoring the ejectment of petitioners being consistent with law and jurisprudence can only be affirmed. The alleged consignation of the P20.00 monthly rental to a bank account in respondent’s name cannot save the day for the petitioners simply because of the absence of any contractual basis for their claim to rightful possession of the subject property. Consignation based on Article 1256 of the Civil Code indispensably requires a creditor-debtor relationship between the parties, in the absence of which, the legal effects thereof cannot be availed of.

Article 1256 pertinently provides:

Art. 1256. If the creditor to whom tender of payment has been made refuses without just cause to accept it, the debtor shall be released from responsibility by the consignation of the thing or sum due.

Unless there is an unjust refusal by a creditor to accept payment from a debtor, Article 1256 cannot apply. In the present case, the possession of the property by the petitioners being by mere tolerance as they failed to establish through competent evidence the existence of any contractual relations between them and the respondent, the latter has no obligation to receive any payment from them. Since respondent is not a creditor to petitioners as far as the alleged P20.00 monthly rental payment is concerned, respondent cannot be compelled to receive such payment even through consignation under Article 1256. The bank deposit made by the petitioners intended as consignation has no legal effect insofar as the respondent is concerned.

Finally, as regards the damages awarded by the MTCC in favor of the respondent, as affirmed by both the RTC and the CA, petitioners failed to present any convincing argument for the Court to modify the same. The facts of the case duly warrant payment by the petitioners to respondent of actual and compensatory damages for depriving the latter of the beneficial use and possession of the property. Also, the unjustified refusal to surrender possession of the property by the petitioners who were fully aware that they cannot present any competent evidence before the court to prove their claim to rightful possession as against the true owners is a valid legal basis to award attorney’s fees as damages, as well as litigation expenses and cost of suit.

Rule 70 of the Rules of Court relevantly reads:

Sec. 17. Judgment. – If after trial the court finds that the allegations of the complaint are true, it shall render judgment in favor of the plaintiff for the restitution of the premises, the sum justly due as arrears of rent or as reasonable compensation for the use and occupation of the premises, attorney’s fees and costs. If it finds that said allegations are not true, it shall render judgment for the defendant to recover his costs. If a counterclaim is established, the court shall render judgment for the sum found in arrears from either party and award costs as justice requires. (Emphasis supplied).

There is no doubt whatsoever that it is within the MTCC’s competence and jurisdiction to award attorney’s fees and costs in an ejectment case. After thoroughly considering petitioners’ arguments in this respect, the Court cannot find any strong and compelling reason to disturb the unanimous ruling of the three (3) courts below on the matter of damages.

WHEREFORE, the petition is hereby DENIED for lack of merit, with costs against petitioners.

SO ORDERED.

G.R. No. 169501              June 8, 2007

B.E. SAN DIEGO, INC., petitioner, vs.ROSARIO T. ALZUL, respondent.

D E C I S I O N

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VELASCO, JR., J.:

The Case

This Petition for Review on Certiorari1 under Rule 45 questions the February 18, 2005 Decision2 of the Court of Appeals (CA) in CA-G.R. SP No. 81341, which granted respondent Alzul the right to pay the balance of the purchase price within five (5) days from receipt of the CA Decision despite the lapse of the original period given to said party through the final Resolution of this Court in an earlier case. The CA ruling reversed the September 18, 2003 Resolution3 and December 2, 2003 Order4 of the Office of the President (OP) in O.P. Case No. 01-1-097, which upheld the dismissal of respondent Alzul’s complaint for consignation and specific performance before the Housing and Land Use Regulatory Board (HLURB) in HLURB Case No. REM-A-99097-0167. Likewise challenged is the August 31, 2005 CA Resolution5 rejecting petitioner’s Motion for Reconsideration.

The Facts

The facts culled by the CA are as follows:

On February 10, 1975, [respondent] Rosario T. Alzul purchased from [petitioner] B.E. San Diego, Inc. four (4) subdivision lots with an aggregate area of 1,275 square meters located at Aurora Subdivision, Maysilo, Malabon. These lots, which are now subject of this petition, were bought through installment under Contract to Sell No. 867 at One Hundred Pesos (₧100.00) per square meter, with a downpayment [sic] of Twelve Thousand Seven Hundred Fifty Pesos (₧12,750.00), and monthly installments of One Thousand Two Hundred Forty-Nine Pesos (₧1,249.50). The interest agreed upon was 12 percent (12%) per annum until fully paid, thus, the total purchase price was Two Hundred Thirty Seven Thousand Six Hundred Sixty Pesos (₧237,660.00).

[Respondent] took immediate possession of the subject property, setting up a perimeter fence and constructing a house thereon.

On July 25, 1977, [respondent] signed a "Conditional Deed of Assignment and Transfer of Rights" which assigned to a certain Wilson P. Yu her rights under the Contract to Sell. [Petitioner] was notified of the execution of such deed. Later on, the Contract to Sell in [respondent’s] name was cancelled, and [petitioner] issued a new one in favor of Yu although it was also denominated as "Contract to Sell No. 867".

On July 4, 1979, [respondent] informed [petitioner] about Yu’s failure and refusal to pay the amounts due under the conditional deed. She also manifested that she would be the one to pay the installments due to respondent on account of Yu’s default.

On August 25, 1980, [respondent] commenced an action for rescission of the conditional deed of assignment against Yu before the Regional Trial Court of Caloocan City. Subsequently, on September 30, 1985, [respondent] caused the annotation of notices of lis pendens on the titles covering the subject lots.

The trial court ruled in [respondent’s] favor in the rescission case. The decision was even affirmed by this [appellate] Court. Yu brought his cause before the Supreme Court in a Petition for Review, but this was likewise denied.

On February 17, 1989, [petitioner] notified [respondent] that Contract to Sell No. 867 was declared rescinded and cancelled. On April 28, 1989, the subject lots were sold to spouses Carlos and Sandra Ventura who were allegedly surprised to find the annotation of lis pendens in their owner’s duplicate title.

On May 8, 1990, the Ventura spouses filed an action for Quieting of Title with Prayer for Cancellation of Annotation and Damages before the Regional Trial Court of Malabon. The trial court ruled in favor of the Ventura spouses. On appeal before this [appellate] Court, however, the decision was reversed on November 27, 1992, as follows:

"WHEREFORE, the appealed decision is hereby REVERSED and SET ASIDE, and the complaint therein is ordered dismissed. Transfer Certificates of Title Nos. N-1922, N-1923, N-1924, and N-1925, all of the Register of Deeds of Metro Manila, District III, Malabon Branch, in the names of plaintiffs-appellees Carlos N. Ventura and Sandra L. Ventura are hereby declared null and void, and the titles of ownership reinstated in the name of B.E. San Diego, Inc. with the corresponding notices of lis pendens therein annotated in favor of defendant-appellant until such time that ownership of the subject parcels of land is transferred to herein defendant-appellant Rosario Alzul. Costs against plaintiff-appellees.

SO ORDERED."

Upon filing of an appeal to the Supreme Court docketed as GR No. 109078, the above decision was affirmed on December 26, 1995. A motion for reconsideration was filed, but this was denied by the Highest Tribunal on February 5, 1996.

On June 17, 1996, a resolution was issued by the Supreme Court, ordering, as follows:

"We, however, agree with the observation made by movants that no time limit was set by the respondent Court of Appeals in its assailed Decision for the private respondent herein, Rosario Alzul, to pay B.E. San Diego, Inc. the original owner of the properties in litigation. To rectify such oversight, private respondent Rosario T. Alzul is hereby given a non-extendible period of thirty (30) days from entry of judgment, within which to make full payment for the properties in question. xxx" (Emphasis supplied.)

On July 12, 1996, an Entry of Judgment was issued. In an attempt to comply with the Supreme Court’s directive, herein [respondent] tried to serve payment upon [petitioner] on August 29, 1996, August 30, 1996 and September 28, 1996. On all these dates, however, [petitioner] allegedly refused to accept payment from [respondent].

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On November 11, 1996, [respondent] filed a Manifestation in GR No. 109078 informing the Supreme Court that [petitioner], on three (3) occasions, refused to accept [her] payment of the balance in the amount of ₧187,380.00. On January 29, 1997, a Resolution was issued by the Supreme Court referring the case to the court of origin for appropriate action, on account of [respondent’s] manifestation.

On October 21, 1997, [respondent’s] counsel wrote a letter to [petitioner] citing the latter’s refusal to accept her payment on several occasions. It was also mentioned therein that due to its refusal, [respondent] would just consign the balance due to [petitioner] before the proper judicial authority.

On January 14, 1998, a reply was sent by [petitioner] through a certain Flora San Diego. [Respondent’s] request was rejected on account of the following:

1. We have long legally rescinded the sale in her favor in view of her failure to pay the monthly amortization as per contract.

2. She sold her rights to Mr. Wilson Yu who failed to pay his monthly amortizations, too.

3. We are not and have never been a part of the case you are alluding to hence we cannot be bound by the same.

4. The property in question is now under process to be reconveyed to us as ordered by the court by virtue of a compromised (sic) agreement entered into in Civil Case No. 2655 MN of the Malabon RTC Branch entitled Spouses Carlos Ventura and Sandra Ventura vs. B.E. San Diego, Inc. xxx

Thinking that an action for consignation alone would not be sufficient to allow for the execution of a final judgment in her favor, [respondent] decided to file an action for consignation and specific performance against [petitioner] before the Housing and Land Use Regulatory Board on March 12, 1998. The complaint, docketed as REM-031298-10039, prayed that a) [respondent] be considered to have fully paid the total purchase price of the subject properties; b) TCT Nos. N-155545 to 48 which were declared void in CA GR No. L-109078 be cancelled; c) new certificates of title over the subject properties be issued in the name of [respondent]; and d) [petitioner] be ordered to reimburse [respondent] the sum of Fifty Thousand Pesos (₧50,000.00) as attorney’s fees and litigation expenses.

On July 12, 1999, a decision was rendered by the HLURB through Housing and Land Use Arbiter Dunstan T. San Vicente. It was held, thus:

"The purported "consignation" in this case is thus of no moment, inasmuch as the amount allegedly due was not even deposited or placed at the disposal of this Office by the complainant.

In any event, we agree with [petitioner] that even if the complainant had actually made the consignation of the amount, such consignation is still ineffective and void for having been done long after the expiration of the non-extendible period set forth in the 17 June 1996 Supreme Court Resolution that expired on 20 September 1996.

WHEREFORE, Premises Considered, a judgment is hereby rendered DISMISSING the complaint. Cost against complainant.

IT (sic) SO ORDERED."

Aggrieved by the above decision, [respondent] filed a Petition for Review before the HLURB’s First Division. On March 17, 2000, a decision was rendered dismissing the petition for lack of merit, and affirming the decision dated July 12, 1999. [Respondent] filed a Motion for Reconsideration, but this was denied on July 31, 2001.

[Respondent] then filed an appeal to the Office of the President. This was, however, dismissed on June 2, 2003 for having been filed out of time. Again, [respondent] moved for its reconsideration. On September 18, 2003, the Office of the President gave due course to [respondent’s] motion, and resolved the motion according to its merits. The single question resolved was whether or not [respondent’s] offer of consignation was correctly denied by the HLURB. Said office ruled in the affirmative, and We quote:

"From the foregoing, it is evident that there was no valid consignation of the balance of the purchase price. The 30-day non-extendible period set forth in the 17 June 1996 resolution had already expired on 20 September 1996. The HLURB is therefore justified in refusing the consignation, otherwise it would be accused of extending the period beyond that provided by the Supreme Court. A valid consignation is effected when there is an actual consignation of the amount due within the prescribed period (St. Dominic Corporation vs. Intermediate Appellate Court, 138 SCRA 242). x x x

WHEREFORE, premises considered, the appeal is hereby DISMISSED for lack of merit. x x x"

[Respondent] filed a Motion for Reconsideration [of] the above Resolution, but this was denied with finality on December 2, 2003.6

The Ruling of the Court of Appeals

Respondent Alzul brought before the CA a petition for certiorari docketed as CA-G.R. SP No. 67637, ascribing grave abuse of discretion to the OP in dismissing her appeal in O.P. Case No. 01-1-097 and affirming the March 17, 2000 Decision7 and July 31, 2001 Resolution8 of the HLURB First Division in HLURB Case No. REM-A-990907-0167.

On February 18, 2005, the CA rendered its assailed Decision reversing the September 18, 2003 Resolution and December 2, 2003 Order of the OP, the fallo of which reads:

WHEREFORE, in the higher interest of justice, the assailed Decision, Resolution and Order dated March 17, 2000, September 18, 2003 and December 2, 2003, respectively, are hereby REVERSED and SET ASIDE. Accordingly, [respondent Alzul] is hereby ordered to pay [petitioner B.E. San Diego, Inc.] the balance due for

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the sale of the subject four parcels of land within five (5) days from receipt of this decision. [Petitioner B.E. San Diego, Inc.], on the other hand, is ordered to accept such payment from [respondent Alzul], after which, the corresponding Deed of Sale must be issued.

SO ORDERED.9

The CA agreed with the HLURB that no valid consignation was made by respondent but found that justice would be better served by allowing respondent Alzul to effect the consignation, albeit belatedly. It cited the respondent’s right over the disputed lots as confirmed by this Court in G.R. No. 109078, which, if taken away on account of the delay in completing the payment, would amount to a grave injustice.

Moreover, the CA pointed out that respondent’s counsel concededly lacked the vigilance and competence in defending his client’s right when he failed to consign the balance on time; nonetheless, such may be disregarded in the interest of justice. It considered the failure of respondent’s counsel to avail of the remedy of consignation as a procedural lapse, citing the principle that where a rigid application of the rules will result in a manifest failure or miscarriage of justice, technicalities can be ignored.

A copy of the February 18, 2005 CA Decision was received by respondent Alzul through her counsel on February 24, 2005.

On March 4, 2005, respondent filed a Compliance and Motion for Extension of Time to Comply with the Decision of the [CA]10 praying that she be given an extension of ten (10) days or from March 2 to 11, 2005 to comply with the CA Decision. On the other hand, on March 8, 2005, petitioner filed its Motion for Reconsideration with Opposition to Petitioner’s "Motion for Extension of Time to Comply with the Decision of the [CA]."11

Through its assailed August 31, 2005 Resolution, the CA denied petitioner’s Motion for Reconsideration, and finding that respondent duly exerted efforts to comply with its Decision and a valid consignation was made by respondent, it granted the requested 10-day extension of time to comply with the February 18, 2005 Decision and her motion for consignation. The fallo of said Resolution reads:

IN VIEW OF THE FOREGOING, the motion for extension to comply with the Decision is hereby GRANTED, the motion for reconsideration is DENIED and the motion for consignation is GRANTED. [Petitioner] B.E. San Diego, Inc. is hereby ordered to receive the payment of [respondent] Rosario T. Alzul and to issue, in her favor, the corresponding Deed of Sale.12

The Issues

Hence, before us is the instant petition with the following issues:

1. Whether or not the Court of Appeals, in issuing the assailed 18 February 2005 Decision and 31 August 2005 Resolution in CA-G.R. SP No. 81341, has decided questions of law in a way not in accord with law and with the applicable decisions of the Honorable Court;

2. Whether or not the Court of Appeals committed patent grave abuse of discretion and/or acted without or in excess of jurisdiction in granting respondent Alzul’s subsequent motion for extension of time to comply with the 18 February 2005 decision and motion for consignation; and

3. Whether or not the 18 February 2005 Decision and 31 August 2005 Resolution of the Court of Appeals in CA-G.R. SP No. 81341 ought to be annulled and set aside, for being contrary to law and jurisprudence.13

The Court’s Ruling

On the procedural issue, petitioner B.E. San Diego, Inc. assails the sufficiency of respondent Alzul’s CA petition as the latter, in violation of the rules, allegedly lacked the essential and relevant pleadings filed with the HLURB and the OP.

Section 6 of Rule 43, 1997 Rules of Civil Procedure pertinently provides:

SEC. 6. Contents of the petition.—The petition for review shall x x x (c) be accompanied by a clearly legible duplicate original or a certified true copy of the award, judgment, final order or resolution appealed from, together with certified true copies of such material portions of the record referred to therein and other supporting papers; x x x (Emphasis supplied.)

The above proviso explicitly requires the following to be appended to a petition: 1) clearly legible duplicate original or a certified true copy of the award, judgment, final order, or resolution appealed from; 2) certified true copies of such material portions of the record referred to in the petition; and 3) other supporting papers.

Obviously, the main reason for the prescribed attachments is to facilitate the review and evaluation of the petition by making readily available to the CA all the orders, resolutions, decisions, pleadings, transcripts, documents, and pieces of evidence that are material and relevant to the issues presented in the petition without relying on the case records of the lower court. The rule is the reviewing court can determine the merits of the petition solely on the basis of the submissions by the parties14 without the use of the records of the court a quo. It is a fact that it takes several months before the records are elevated to the higher court, thus the resulting delay in the review of the petition. The attachment of all essential and necessary papers and documents is mandatory; otherwise, the petition can be rejected outright under Sec. 7 of Rule 43 of the Rules of Court, which provides:

Effect of failure to comply with requirements.—The failure of the petitioner to comply with any of the foregoing requirements regarding the payment of the docket and other lawful fees, the deposit for costs, proof of service of the petition, and the contents of and the documents which should accompany the petition shall be sufficient ground for the dismissal thereof.

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To prevent premature dismissals, the requirements under Sec. 6 on the contents of the petition have to be elucidated.

First, there can be no question that only the award, judgment, or final order or resolution issued by the lower court or agency and appealed from has to be certified as true.

The second set of attachments refers to the "certified true copies of such material portions of the record referred to therein."

Material is defined as "important; more or less necessary; having influence or effect; going to the merits; having to do with matter, as distinguished from form."15 Thus, material portions of the records are those parts of the records that are relevant and directly bear on the issues and arguments raised and discussed in the petition. They may include any of the pleadings that are subject of any issue, documentary evidence, transcripts of testimonial evidence, and parts of the records pertinent and relevant to the grounds supporting the petition. The attachment of the material portions is subject to the qualification that these are referred to or cited in the petition. Thus, only the material parts specified in the petition have to be appended and that would be sufficient compliance with the rule as to form.

It would be prudent however for the petitioner to attach all parts of the records which are relevant, necessary, or important in whatever way to be able to reach the resolution of the issues of the petition. The availability of such documents to the ponente and members of a Division can easily provide the substance and support to the merits of the grounds put forward by the petitioner. Moreover, the processing time for the review and resolution of the petition is greatly abbreviated, thereby obviating intolerable delays.

Lastly, it has to be explained whether the material portions of the records have to be certified as true by the clerk of court or his/her duly authorized representative as provided in Sec. 6 of Rule 43. If strictly required, the rule to require attachment of certified true copies of the material portions will surely make the preparation of the petition more tedious, cumbersome, and expensive. It should therefore be construed that merely clear and legible copies of the material portions will suffice. The rules on the different modes of appeal from the lower courts or quasi-judicial agencies to the CA reveal that it is only Rule 43 that specifically states that the material portions to be appended to the petition should be certified true copies. Rule 41 of course does not require attachment of the pertinent records since the entire records are elevated to the CA. Rule 42 on petition for review from the trial court in aid of its appellate jurisdiction to the CA speaks of plain copies of the material portions of the record as would support the allegations of the petition.16 Even Rule 45 on appeal by certiorari from the CA to this Court simply speaks of material portions of the records without indicating that these should be certified true copies. Rule 46 on original cases to this Court only requires plain copies of the material portions of the records. Finally, Rule 65 on special civil actions requires only copies of relevant and pertinent pleadings and documents.

From the foregoing premises, the inescapable conclusion is that only plain and clear copies of the material portions of the records are required under Sec. 3 of Rule 43. This finding is buttressed by our ruling in Cadayona v. CA, where it was held that only judgments or final orders of the lower courts are needed to be certified true copies or duplicate originals.17 There is no plausible reason why a different treatment or stricter requirement should be applied to petitions under Rule 43.

The last requirement is the attachment of "other supporting papers." Again, it is only in Rule 43 that we encounter the requirement of annexing "supporting papers" to the petition. This can be interpreted to mean other documents, pictures, and pieces of evidence not forming parts of the records of the lower court or agency that can bolster and shore up the petition. While not so specified in Sec. 3 of Rule 43, it is inarguable that said papers must also be relevant and material to the petition; otherwise, the attachments would be mere surplusages and devoid of use and value.

Petitioner claims respondent’s petition in CA-G.R. SP No. 81341 failed to attach material documents of the records of the HLURB and the OP. They cry foul that none of the pleadings filed with the HLURB and the OP found their way into the CA petition. It prays that the CA petition should have been dismissed under Sec. 7 of Rule 43 due to the lack of needed attachments.

Petitioner’s postulation must fail.

Sec. 7 of Rule 43 does not prescribe outright rejection of the petition if it is not accompanied by the required documents but simply gives the discretion to the CA to determine whether such breach constitutes a "sufficient ground" for dismissal. Apparently, petitioner was not able to convince the CA that the alleged missing attachments deprived said court of the full opportunity and facility in examining and resolving the petition. It has not been satisfactorily shown that the pleadings filed by petitioner with the quasi-judicial agencies have material bearing or importance to the CA petition. Such pleadings could have been attached to the comment of respondent and hence, no prejudice would be suffered. Thus, the CA did not exercise its discretion in an arbitrary or oppressive manner by giving due course to the petition.

In addition, it was noted in Cusi-Hernandez v. Diaz that the CA Revised Internal Rules provide certain flexibility in the submission of additional documents:

When a petition does not have the complete annexes or the required number of copies, the Chief of the Judicial Records Division shall require the petitioner to complete the annexes or file the necessary number of copies of the petition before docketing the case. Pleadings improperly filed in court shall be returned to the sender by the Chief of the Judicial Records Division.18

In Rosa Yap Paras, et al. v. Judge Ismael O. Baldado, et al., the Court preferred the determination of cases on the merits over technicality or procedural imperfections so that the ends of justice would be served better, thus:

At the same time, the Rules of Court encourage a reading of the procedural requirements in a manner that will help secure and not defeat justice. Thus:

Section 6. Construction.—These Rules shall be liberally construed in order to promote their objective of securing a just, speedy and inexpensive disposition of every action and proceeding.

As expressed in Alberto vs. Court of Appeals, "(w)hat should guide judicial action is the principle that a party-litigant is to be given the fullest opportunity to establish the merits of his complaint or defense rather than for him to lose life, liberty, honor or property on technicalities. x x x (T)he rules of procedure should be viewed as

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mere tools designed to facilitate the attainment of justice. Their strict and rigid application, which would result in technicalities that tend to frustrate rather than promote substantial justice, must always be eschewed."19

Now we will address the main issue—whether respondent Alzul is still entitled to consignation despite the lapse of the period provided by the Court in G.R. No. 109078 entitled Yu v. Court of Appeals.

Petitioner stresses the fact that respondent Alzul did not comply with this Court’s June 17, 1996 Resolution20 which gave a non-extendible period of thirty (30) days from entry of judgment within which to make full payment for the subject properties. The entry of judgment shows that the December 26, 1995 Resolution21 in G.R. No. 109078 became final and executory on July 2, 1996. Respondent Alzul received through counsel a copy of the entry of judgment on August 21, 1996. Thus, respondent had until September 20, 1996 within which to make the full payment.

After three (3) unsuccessful tenders of payment, respondent Alzul made no consignation of the amount to the court of origin. It was only on March 12, 1998 or about a year and a half later that respondent offered to consign said amount in an action for consignment before the HLURB. Relying on the case of St. Dominic Corporation v. Intermediate Appellate Court,22 petitioner strongly asserts that upon its refusal to accept the tendered payment, respondent ought to have consigned it with the court of origin also within the 30-day period or within a reasonable time thereafter. Respondent failed to do this as she waited for a year and a half before instituting the instant action for specific performance and consignment before the HLURB.

Moreover, petitioner argues that respondent’s delay of a year and a half to pursue full payment must be regarded as a waiver on her part to claim whatever residual remedies she might still have for the enforcement of the June 17, 1996 Resolution in G.R. No. 109078.

Petitioner further contends that even if the action before the HLURB was made on time, that is, within the 30-day period, still it is fatally defective as respondent did not deposit any amount with the HLURB which violated the rules for consignment which require actual deposit of the amount allegedly due with the proper judicial authority.

Premised upon these considerations, petitioner faults the appellate court for its grant of respondent’s petition for review which nullified the denial by the HLURB Arbiter, HLURB First Division, and the OP of respondent’s action.

On the other hand, respondent contends that the June 17, 1996 Resolution of this Court should not be construed against her inability to effect payment due to the obstinate and unjust refusal by petitioner—a supervening circumstance beyond her control. Respondent underscores that within the 30-day period, she repeatedly attempted to effect the payment to no avail. Moreover, the much delayed response of petitioner embodied in its January 14, 1998 letter23 confirming its refusal was based on untenable, baseless, and contrived grounds.

Moreover, she argues that the December 26, 1995 Resolution in G.R. No. 109078 granting her proprietary rights over the subject lots has long become final and executory.

Anent the issue of laches and estoppel, respondent strongly contends that such do not apply in the instant case as incontrovertible circumstances show that she has relentlessly pursued the protection and enforcement of her rights over the disputed lots for over a quarter of a century.

After a careful study of the factual milieu, applicable laws, and jurisprudence, we find the petition meritorious.

Respondent Alzul was accorded legal rights over subject properties

In G.R. No. 109078, finding no reversible error on the part of the CA, we denied Wilson P. Yu’s petition and affirmed the appellate court’s ruling that as between Wilson P. Yu, the Ventura spouses, petitioner B.E. San Diego, Inc., and respondent Alzul, respondent has inchoate proprietary rights over the disputed lots. We upheld the CA ruling declaring as "null and void" the titles issued in the name of the Ventura spouses and reinstating them in the name of B.E. San Diego, Inc., with the corresponding notices of lis pendens annotated on them in favor of respondent until such time that ownership of the subject parcels of land is transferred to respondent Rosario Alzul.

It is thus clear that we accorded respondent Alzul expectant rights over the disputed lots, but such is conditioned on the payment of the balance of the purchase price. Having been conceded such rights, respondent had the obligation to pay the remaining balance to vest absolute title and rights of ownership in his name over the subject properties.

In our June 17, 1996 Resolution, we clearly specified thirty (30) days from entry of judgment for respondent to promptly effect the full payment of the balance of the purchase price for the subject properties, thus:

We however agree with the observation made by movants that no time limit was set by the respondent Court of Appeals in its assailed Decision for the private respondent herein, Rosario Alzul, to pay B.E. San Diego, Inc., the original owner of the properties in litigation. To rectify such oversight, private respondent Rosario T. Alzul is hereby given a non-extendible period of thirty (30) days from entry of judgment, within which to make full payment for the properties in question.24 (Emphasis supplied.)

The non-compliance with our June 17, 1996 Resolution is fatal to respondent Alzul’s action for consignation and specific performance

Unfortunately, respondent failed to effect such full payment of the balance of the purchase price for the subject properties.

No consignation within the 30-day period or at a reasonable time thereafter

21

It is clear as day that respondent did not attempt nor pursue consignation within the 30-day period given to her in accordance with the prescribed legal procedure. She received a copy of the entry of judgment on August 21, 1996 and had 30 days or until September 20, 1996 to pay the balance of the purchase price to petitioner. She made a tender of payment on August 29, 1996, August 30, 1996, and September 28, 1996, all of which were refused by petitioner possibly because the latter is of the view that it is not bound by the November 27, 1992 Decision in CA-G.R. CV No. 33619 nor the December 26, 1995 Resolution in G.R. No. 109078, and the fact that respondent has forfeited her rights to the lots because of her failure to pay the monthly amortizations.

It must be borne in mind however that a mere tender of payment is not enough to extinguish an obligation. In Meat Packing Corporation of the Philippines v. Sandiganbayan, we distinguished consignation from tender of payment and reiterated the rule that both must be validly done in order to effect the extinguishment of the obligation, thus:

Consignation is the act of depositing the thing due with the court or judicial authorities whenever the creditor cannot accept or refuses to accept payment, and it generally requires a prior tender of payment. It should be distinguished from tender of payment. Tender is the antecedent of consignation, that is, an act preparatory to the consignation, which is the principal, and from which are derived the immediate consequences which the debtor desires or seeks to obtain. Tender of payment may be extrajudicial, while consignation is necessarily judicial, and the priority of the first is the attempt to make a private settlement before proceeding to the solemnities of consignation. Tender and consignation, where validly made, produces the effect of payment and extinguishes the obligation.25 (Emphasis supplied.)

There is no dispute that a valid tender of payment had been made by respondent. Absent however a valid consignation, mere tender will not suffice to extinguish her obligation and consummate the acquisition of the subject properties.

In St. Dominic Corporation involving the payment of the installment balance for the purchase of a lot similar to the case at bar, where a period has been judicially directed to effect the payment, the Court held that a valid consignation is made when the amount is consigned with the court within the required period or within a reasonable time thereafter. We ruled as follows:

First of all, the decision of the then Court of Appeals which was promulgated on October 21, 1981, is quite clear when it ordered the payment of the balance of the purchase price for the disputed lot within 60 days "from receipt hereof" meaning from the receipt of the decision by the respondents. It is an admitted fact that the respondents received a copy of the decision on October 30, 1981. Hence, they had up to December 29, 1981 to make the payment. Upon refusal by the petitioner to receive such payment, the proper procedure was for the respondent to consign the same with the court also within the 60-day period or within a reasonable time thereafter.26 (Emphasis supplied.)

The records also reveal that respondent failed to effect consignation within a reasonable time after the 30-day period which expired on September 20, 1996. Instead of consigning the amount with the court of origin, respondent filed her November 11, 1996 Manifestation informing this Court of petitioner’s unjust refusal of the tender of payment. We acted favorably to it by issuing our January 28, 1997 Resolution which ordered, thus:

Considering the manifestation, dated November 11, 1996, filed by counsel for private respondent Rosario T. Alzul, stating that private respondent tendered to B.E. San Diego, Inc. the payment of the sum of P187,380.00 representing the balance of the purchase price of the properties which are the subject of this litigation, but B.E. San Diego, Inc., refused to accept the same, the Court resolved to REFER the case to the court of origin, for appropriate action.27

Respondent still failed to take the cue by her inaction to consign the amount with the court of origin. Undoubtedly, pursuing the action for consignation on March 12, 1998 or over a year after the Court issued its January 28, 1997 Resolution is way beyond a "reasonable time thereafter." Indeed, we have accorded respondent, through said Resolution, all the opportunity to pursue consignation with the court of origin and yet, respondent failed to make a valid consignation. This is already inexcusable neglect on the part of respondent.

No valid consignation made

We agree with petitioner’s assertion that even granting arguendo that the instant case for consignation was instituted within the 30-day period or within a reasonable time thereafter, it would still not accord respondent relief as no valid consignation was made. Certainly, the records show that there was no valid consignation made by respondent before the HLURB as she did not deposit the amount with the quasi-judicial body as required by law and the rules.

Pertinently, the first paragraph of Article 1258 of the Civil Code provides that "[c]onsignation shall be made by depositing the things due at the disposal of judicial authority, before whom the tender of payment shall be proved, in a proper case, and the announcement of the consignation in other cases (emphasis supplied)."

It is true enough that respondent tendered payment to petitioner three (3) times through a Solidbank Manager’s Check No. 1146 in the amount of PhP 187,38028 on August 29 and 30, 1996 and September 28, 1996. It is true likewise that petitioner refused to accept it but not without good reasons. Petitioner was not impleaded as a party by the Ventura spouses in the Malabon City RTC case for quieting of title against Wilson Yu nor in the appealed case to the CA nor in G.R. No. 109078.

Petitioner is of the view that there was no jurisdiction acquired over its person and hence, it is not bound by the final judgment and June 17, 1996 Resolution in G.R. No. 109078. Secondly, petitioner believed that respondent Alzul has lost her rights over the subject lot by the rescission of the sale in her favor due to the latter’s failure to pay the installments and also as a result of her transferee’s failure to pay the agreed amortizations. And even in the face of the refusal by petitioner to accept tender of payment, respondent is not left without a remedy. It is basic that consignation is an available remedy, and respondent, with the aid of her counsel, could have easily availed of such course of action sanctioned under the Civil Code.

Considering the tenor of our June 17, 1996 Resolution, respondent ought to have consigned the amount with the court of origin within the non-extendible period of 30 days that was accorded her or within a reasonable time thereafter.

As cited earlier, consignation is the act of depositing the thing due with the court or judicial authorities whenever the creditor cannot accept or refuses to accept payment and it generally requires a prior tender of payment.29 It is of no moment if the refusal to accept payment be reasonable or not. Indeed, consignation is the remedy for an

22

unjust refusal to accept payment. The first paragraph of Art. 1256 of the Civil Code precisely provides that "[i]f the creditor to whom tender of payment has been made refuses without just cause to accept it, the debtor shall be released from responsibility by the consignation of the thing or sum due (emphasis supplied)."

The proper and valid consignation of the amount due with the court of origin, which shall judicially pronounce the validity of the consignation and declare the debtor to be released from his/her responsibility, shall extinguish the corresponding obligation.

Moreover, in order that consignation may be effective, the debtor must show that: (1) there was a debt due; (2) the consignation of the obligation had been made because the creditor to whom tender of payment was made refused to accept it, or because s/he was absent or incapacitated, or because several persons claimed to be entitled to receive the amount due or because the title to the obligation had been lost; (3) previous notice of the consignation had been given to the person interested in the performance of the obligation; (4) the amount due was placed at the disposal of the court; and (5) after the consignation had been made, the person interested was notified of the action.30

Respondent did not comply with the provisions of law particularly with the fourth and fifth requirements specified above for a valid consignation. In her complaint for consignation and specific performance, respondent only prayed that she be allowed to make the consignation without placing or depositing the amount due at the disposal of the court of origin. Verily, respondent made no valid consignation.

The rights of petitioner and respondent over the 1,275 square meter lot subject of this petition will be determined by the significance and effects of the December 26, 1995 Resolution rendered in G.R. No. 109078 entitled Yu v. Court of Appeals.31

The subject matter of G.R. No. 109078 is the November 27, 1992 Decision rendered in CA-G.R. CV No. 33619 entitled Carlos N. Ventura and Sandra L. Ventura v. Rosario T. Alzul, et al., the fallo of which reads:

WHEREFORE, the appealed decision is hereby REVERSED AND SET ASIDE, and the complaint therein is ordered dismissed. Transfer Certificates of Title Nos. N-1922, N-1923, N-1924, and N-1925, all of the Register of Deeds of Metro Manila, District III, Malabon Branch, in the names of plaintiffs-appellees Carlos N. Ventura and Sandra L. Ventura are hereby declared null and void, and the titles of ownership reinstated in the name of B.E. San Diego, Inc., with the corresponding notices of lis pendens therein annotated in favor of defendant-appellant until such time that ownership of the subject parcels of land is transferred to herein defendant-appellant Rosario Alzul. Costs against plaintiff-appellees.

SO ORDERED.32

On December 26, 1995, this Court issued the Resolution in G.R. No. 109078 wherein it found no reversible error in the actions of the CA in its aforequoted disposition in CA-G.R. CV No. 33619, and resolved to deny the petition for lack of merit. On February 5, 1996, this Court denied with finality the Motion for Reconsideration filed by petitioner Wilson Yu.

However, on June 17, 1996, this Court, in resolving the Motion for Reconsideration of private respondents Spouses Carlos and Sandra Ventura, granted respondent Alzul "a non-extendible period of thirty (30) days from entry of judgment, within which to make full payment for the properties in question."33

The question is—can the Court, the CA, or the Malabon City RTC order petitioner B.E. San Diego, Inc. to accept the tender of payment made by respondent Alzul?

Definitely, they cannot. The reason is that petitioner was not impleaded as a party in the Malabon City RTC civil case, CA-G.R. CV No. 33619, nor in G.R. No. 109078 and hence is not under the jurisdiction of said courts. What were determined and decided in the CA Decision in CA-G.R. CV No. 33619 were the annulment of the titles of spouses Carlos and Sandra Ventura, the reinstatement of said titles to the name of petitioner, and the declaration that the ownership of the lots subject of said titles will be transferred to respondent. There is no directive to respondent granting her the right to pay the balance of the price to petitioner and, more importantly, there is no order for petitioner to accept the payment. The dispositive or fallo of the decision is what actually constitutes the judgment or resolution of the court that can be the subject of execution. Where there is a conflict between the dispositive portion of the decision and its body, the dispositive portion controls irrespective of what appears in the body of the decision.34 Such being the case, petitioner is not duty bound to accept any tender of payment from respondent precisely because such diktat is absent in the fallo of the CA Decision which was affirmed by this Court in its December 26, 1995 Resolution in G.R. No. 109078.

The lacuna in the CA Decision was sought to be corrected in its June 17, 1996 Resolution in G.R. No. 109078 where respondent was given "a non-extendible period of thirty (30) days from entry of judgment, within which to make full payment for the properties in question." Pursuant to this Resolution, what was established was the right of respondent to pay the balance of the purchase price within 30 days. Again, the query is—can this Court, the CA, or the trial court compel petitioner to accept the tender of payment from respondent?

The answer is no. The reason is obvious as jurisdiction was never acquired over the person of petitioner. The action for quieting of title is characterized as quasi in rem. In Realty Sales Enterprise, Inc. v. Intermediate Appellate Court, it was held that:

Suits to quiet title are not technically suits in rem, nor are they, strictly speaking, in personam, but being against the person in respect of the res, these proceedings are characterized as quasi in rem. (McDaniel v. McElvy, 108 So. 820 [1926].) The judgment in such proceedings is conclusive only between the parties. (Emphasis supplied.)35

Not being impleaded as a necessary or indispensable party, petitioner is not bound by the dispositions in the CA Decision in CA-G.R. CV No. 33619 and the Resolutions of this Court in G.R. No. 109078. Moreover, there is no explicit and clear directive for petitioner to accept the payment of the balance of the price.

It is for this reason that respondent cannot ask for a writ of execution from the trial court where the complaint was originally instituted as said court has no jurisdiction over the person of petitioner. Even if a writ is issued, it should conform to the judgment, and the fallo of the CA Decision does not impose the duty or obligation on the

23

part of petitioner to accept the payment from respondent. It is the settled doctrine that a writ of execution must conform to the judgment and if it is different from or exceeds the terms of the judgment, then it is a nullity.36

In addition, Sec. 10, Rule 39 provides the procedure for execution of judgments for specific acts, thus:

Sec. 10. Execution of judgments for specific act.—(a) Conveyance, delivery of deeds, or other specific acts; vesting title.—If a judgment directs a party to execute a conveyance of land or personal property, or to deliver deeds or other documents, or to perform any other specific act in connection therewith, and the party fails to comply within the time specified, the court may direct the act to be done at the cost of the disobedient party by some other person appointed by the court and the act when so done shall have like effect as if done by the party. If real or personal property is situated within the Philippines, the court in lieu of directing a conveyance thereof may by an order divest the title of any party and vest it in others, which shall have the force and effect of a conveyance executed in due form of law.

The rule mentions the directive to a "party." It is therefore essential that the person tasked to perform the specific act is impleaded as a party to the case. Otherwise, the judgment cannot be executed. In the case at bar, petitioner should have been impleaded as a party so as to compel it to accept payment and execute the deed of sale over the disputed lots in favor of respondent. As petitioner was not impleaded as a party, then the CA Decision in CA-G.R. CV No. 33619 as affirmed in G.R. No. 109078 cannot be enforced against it.

The cause of action available to respondent is to file an action for consignation against petitioner which she did by registering a complaint for consignation before the HLURB on March 12, 1998. Unfortunately, it was filed way beyond the 30-day period which lapsed on September 20, 1996 or immediately thereafter. Because of the failure of respondent to effect payment to petitioner within the 30-day period or soon thereafter, her rights to buy the disputed lots have been forfeited, lost, and extinguished.

In St. Dominic Corporation, which is substantially similar to the case at bar, we explained the procedure when a party is directed to pay the balance of the purchase price based on a court decision, thus:

First of all, the decision of the then Court of Appeals which was promulgated on October 21, 1981, is quite clear when it ordered the payment of the balance of the purchase price for the disputed lot within 60 days "from receipt hereof," meaning from the receipt of the decision by the respondents. It is an admitted fact that the respondents received a copy of the decision on October 30, 1981. Hence, they had up to December 29, 1981 to make the payment. Upon refusal by the petitioner to receive such payment, the proper procedure was for the respondent to consign the same with the court also within the 60-day period or within a reasonable time thereafter. The fact that efforts were made by the petitioner to reach an agreement with the respondents after the promulgation of the decision did not in anyway affect the finality of the judgment. This was clearly emphasized in the order of the appellate court on May 6, 1982.

Secondly, even if we reckon the 60-day period from the date of the finality of the decision as interpreted by the appellate court, such finality should be counted from March 5, 1982, which was the date the decision became final as indicated in the entry of judgment and not from August 26, 1982 which is the date the entry was made. The date of a finality of a decision is entirely distinct from the date of its entry and the delay in the latter does not affect the effectivity of the former as such is counted from the expiration of the period to appeal.37 x x x

In the aforecited case, the lot owner was made a party to the case and the judgment of the court was for the plaintiff to pay to the lot owner the balance of the purchase price within 60 days from receipt of the Decision. Even assuming arguendo that petitioner B.E. San Diego, Inc., though not a party in the complaint for quieting of title, can be compelled to receive the purchase price, still, the refusal to receive the money requires respondent Alzul to follow the procedure in St. Dominic Corporation and consign the money with the court of origin. Having failed in this respect, respondent’s rights to the property have been forfeited as a result of non-payment within the prescribed time frame.

The CA relied on justice and equity in granting an additional period of five (5) days from receipt of the February 18, 2005 Decision in CA-G.R. SP No. 81341 to pay the balance due for the sale of the four lots.38 While we commiserate with the plight of respondent, the CA ruling will not prevail over the established axiom that equity is applied only in the absence of and never against statutory law or judicial rules of procedure.39 For all its conceded merits, equity is available only in the absence of law and not as its replacement.40 Equity as an exceptional extenuating circumstance does not favor, nor may it be used to reward, the indolent. This Court will not allow a party, in guise of equity, to benefit from respondent’s own negligence.41

In the light of the foregoing considerations, we find that the grant of respondent’s petition in CA-G.R. SP No. 81341 and the recognition of the belated consignation of the amount find no support nor basis in law, rule, or jurisprudence. The CA’s holding that the non-consignation of the amount due is merely a procedural lapse on the part of respondent’s counsel is misplaced and is contrary to settled jurisprudence. Plainly, respondent’s rights over the subject property are now lost and forfeited.

Having resolved the core issue on the validity of the consignation, the Court sees no further need to discuss the remaining issues raised in the petition.

Petitioner to reimburse payments

However, respondent had made payments over the subject properties based on her agreement with petitioner. So as not to enrich itself at the expense of respondent, petitioner is obliged to reimburse respondent whatever amount was paid by her in form of monthly amortizations. On the other hand, if respondent is in possession of the subject properties, she and all persons claiming under her should surrender the possession to petitioner.

WHEREFORE, the petition is GRANTED, the February 18, 2005 Decision and August 31, 2005 Resolution of the CA are REVERSED and SET ASIDE, and the September 18, 2003 Resolution and December 2, 2003 Order of the OP are hereby REINSTATED. Petitioner is ORDERED to reimburse respondent whatever amount the latter has paid for the subject properties per the Contract to Sell No. 867. Petitioner is DECLARED to be the true and legal owner of Lots Nos. 5, 6, 7, and 8, Block 18, Aurora Subdivision, Maysilo, Malabon City. The Register of Deeds of Manila, District III, Malabon City Branch is ORDERED to cancel Transfer Certificates of Title Nos. N-1922, N-1923, N-1924, and N-1925 in the names of spouses Carlos N. Ventura and Sandra L. Ventura and register the same in the name of petitioner. The lis pendens in favor of respondent annotated on the Transfer Certificates of Title over the subject properties is hereby LIFTED, and the Register of Deeds for Metro Manila, District III is DIRECTED to CANCEL said lis pendens. Respondent and all persons claiming under her are ORDERED to vacate the subject properties and surrender them to petitioner within sixty (60) days from finality of this judgment. No pronouncement as to costs.

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SO ORDERED.

[G.R. No. 166051, April 08, 2008]

SOLID HOMES, INC., PETITIONER, VS. EVELINA LASERNA AND GLORIA CAJIPE, REPRESENTED BY PROCESO F. CRUZ, RESPONDENTS.

D E C I S I O N

CHICO-NAZARIO, J.:

This is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure seeking to annul, reverse and set aside (1) the Decision[1] dated 21 July 2004 of the Court of Appeals in CA-G.R. SP No. 82153, which denied and dismissed the Petition filed before it by the petitioner for lack of merit; and (2) the Resolution[2] dated 10 November 2004 of the same court, which denied the petitioner’s Motion for Reconsideration.

The factual antecedents of this case are as follows:

On 1 April 1977, respondents Evelina Laserna and Gloria Cajipe, represented by their attorney-in-fact, Proceso F. Cruz, as buyers, entered into a Contract to Sell [3] with

25

petitioner Solid Homes, Inc. (SHI), a corporation engaged in the development and sale of subdivision lots, as seller. The subject of the said Contract to Sell was a parcel of land located at Lot 3, Block I, Phase II, Loyola Grand Villas, Quezon City, with a total area of 600 square meters, more or less. The total contract price agreed upon by the parties for the said parcel of land was P172,260.00, to be paid in the following manner: (1) the P33,060.00 down payment should be paid upon the signing of the contract; and (2) the remaining balance of P166,421.88[4] was payable for a period of three years at a monthly installment of P4,622.83 beginning 1 April 1977. The respondents made the down payment and several monthly installments. When the respondents had allegedly paid 90% of the purchase price, they demanded the execution and delivery of the Deed of Sale and the Transfer Certificate of Title (TCT) of the subject property upon the final payment of the balance. But the petitioner did not comply with the demands of the respondents.

The respondents whereupon filed against the petitioner a Complaint for Delivery of Title and Execution of Deed of Sale with Damages, dated 28 June 1990, before the Housing and Land Use Regulatory Board (HLURB). The same was docketed as HLURB Case No. REM-073090-4511. In their Complaint, respondents alleged that as their outstanding balance was only P5,928.18, they were already demanding the execution and delivery of the Deed of Sale and the TCT of the subject property upon final payment of the said amount. The petitioner filed a Motion to Admit Answer,[5] together with its Answer[6] dated 17 September 1990, asserting that the respondents have no cause of action against it because the respondents failed to show that they had complied with their obligations under the Contract to Sell, since the respondents had not yet paid in full the total purchase price of the subject property. In view of the said non-payment, the petitioner considered the Contract to Sell abandoned by the respondents and rescinded in accordance with the provisions of the same contract.

On 7 October 1992, HLURB Arbiter Gerardo L. Dean rendered a Decision[7] denying respondents’ prayer for the issuance of the Deed of Sale and the delivery of the TCT. He, however, directed the petitioner to execute and deliver the aforesaid Deed of Sale and TCT the moment that the purchase price is fully settled by the respondents. Further, he ordered the petitioner to cease and desist from charging and/or collecting fees from the respondents other than those authorized by Presidential Decree (P.D.) No. 957[8] and similar statutes.[9]

Feeling aggrieved, the petitioner appealed[10] the aforesaid Decision to the HLURB Board of Commissioners. The case was then docketed as HLURB Case No. REM-A-1298.

On 10 August 1994, the HLURB Board of Commissioners rendered a Decision,[11] modifying the 7 October 1992 Decision of HLURB Arbiter Dean. The decretal portion of the Board’s Decision reads:WHEREFORE, in view of the foregoing, the [D]ecision of [HLURB] Arbiter Gerardo Dean dated 07 October 1992 is hereby MODIFIED to read as follows:

1. [Herein respondent][12] is hereby directed to pay the balance of P11,585.41 within the (sic) thirty (30) days from finality of this [D]ecision.

2. [Herein petitioner] is hereby directed to execute the necessary deed of sale and deliver the TCT over the subject property immediately upon full payment.

3. [Petitioner] is hereby directed to cease and desist from charging and/or collecting fees other than those authorized by P.D. 957 and other related laws. [13] (Emphasis supplied).

Petitioner remained unsatisfied with the Decision of the HLURB Board of Commissioners, thus, it appealed the same before the Office of the President, wherein it was docketed as O.P. Case No. 5919.

After evaluating the established facts and pieces of evidence on record, the Office of the President rendered a Decision[14] dated 10 June 2003, affirming in toto the 10 August 1994 Decision of the HLURB Board of Commissioners. In rendering its Decision, the Office of the President merely adopted by reference the findings of fact and conclusions of law contained in the Decision of the HLURB Board of Commissioners.

Resultantly, petitioner moved for the reconsideration[15] of the 10 June 2003 Decision of the Office of the President. However, in an Order[16] dated 9 December 2003, the Office of the President denied the same.

The petitioner thereafter elevated its case to the Court of Appeals by way of Petition for Review under Rule 43[17] of the 1997 Revised Rules of Civil Procedure, docketed as CA-G.R. SP No. 82153, raising the following issues, to wit: (1) the Honorable Office of the President seriously erred in merely adopting by reference the findings and conclusions of the HLURB Board of Commissioners in arriving at the questioned [D]ecision; and (2) the Honorable Office of the President seriously erred in not dismissing the complaint for lack of cause of action.[18]

On 21 July 2004, the appellate court rendered a Decision denying due course and dismissing the petitioner’s Petition for Review for lack of merit, thus affirming the Decision of the Office of the President dated 10 June 2003, viz:WHEREFORE, in view of the foregoing, the instant [P]etition is hereby DENIED DUE COURSE and DISMISSED for lack of merit.[19] (Emphasis supplied).Petitioner moved for reconsideration of the aforesaid Decision but, it was denied by the Court of Appeals in a Resolution dated 10 November 2004.

Hence, this Petition.

Petitioner raises the following issues for this Court’s resolution:

I. WHETHER OR NOT THE [HONORABLE] COURT OF APPEALS SERIOUSLY ERRED IN HOLDING THAT THE DECISION OF THE OFFICE OF THE PRESIDENT, WHICH MERELY ADOPTS BY REFERENCE THE FINDINGS AND CONCLUSIONS OF THE BOARD OF COMMISSIONERS OF THE [HLURB], IS IN ACCORDANCE WITH THE MANDATE OF THE CONSTITUTION THAT THE DECISION SHOULD BE BASED ON THE FINDINGS OF FACTS AND LAW TO ARRIVE AT A DECISION; AND

II. WHETHER OR NOT THE [HONORABLE] COURT OF APPEALS SERIOUSLY ERRED IN NOT REVERSING THE DECISION OF THE OFFICE OF THE PRESIDENT CONSIDERING THAT THE COMPLAINT OF THE RESPONDENTS LACKS CAUSE OF ACTION.[20]

In its Memorandum,[21] the petitioner alleges that the Decision of the Office of the President, as affirmed by the Court of Appeals, which merely adopted by reference the Decision of the HLURB Board of Commissioners, without a recitation of the facts and law on which it was based, runs afoul of the mandate of Section 14, Article VIII of the 1987 Philippine Constitution which provides that: “No decision shall be rendered by any court without expressing therein clearly and distinctly the facts and law on which it is based.†The Office of the President, being a government agency, should have adhered to this principle.�

26

Petitioner further avers that a full exposition of the facts and the law upon which a decision was based goes to the very essence of due process as it is intended to inform the parties of the factual and legal considerations employed to support a decision. The same was not complied with by the Office of the President when it rendered its one-page Decision dated 10 June 2003. Without a complete statement in the judgment of the facts proven, it is not possible to pass upon and determine the issues in the case, inasmuch as when the facts are not supported by evidence, it is impossible to administer justice to apply the law to the points argued, or to uphold the rights of the litigant who has the law on his side.

Lastly, petitioner argues that the Complaint filed against it by the respondents stated no cause of action because the respondents have not yet paid in full the purchase price of the subject property. The right of action of the respondents to file a case with the HLURB would only accrue once they have fulfilled their obligation to pay the balance of the purchase price for the subject property. Hence, the respondents’ Complaint against the petitioner should have been dismissed outright by the HLURB for being prematurely filed and for lack of cause of action.

The Petition is unmeritorious.

The constitutional mandate that, “no decision shall be rendered by any court without expressing therein clearly and distinctly the facts and the law on which it is based,†�[22] does not preclude the validity of “memorandum decisions,†which adopt by reference the findings of fact and conclusions of law contained in the �decisions of inferior tribunals.[23] In fact, in Yao v. Court of Appeals,[24] this Court has sanctioned the use of “memorandum decisions,†a specie of succinctly written �decisions by appellate courts in accordance with the provisions of Section 40,[25] B.P. Blg. 129, as amended,[26] on the grounds of expediency, practicality, convenience and docket status of our courts. This Court likewise declared that “memorandum decisions†comply with the constitutional mandate.� [27]

This Court found in Romero v. Court of Appeals[28] that the Court of Appeals substantially complied with its constitutional duty when it adopted in its Decision the findings and disposition of the Court of Agrarian Relations in this wise:“We have, therefore, carefully reviewed the evidence and made a re-assessment of the same, and We are persuaded, nay compelled, to affirm the correctness of the trial court’s factual findings and the soundness of its conclusion. For judicial convenience and expediency, therefore, We hereby adopt, by way of reference, the findings of facts and conclusions of the court a quo spread in its decision, as integral part of this Our decision.†(Underscoring supplied)�In Francisco v. Permskul,[29] this Court similarly held that the following memorandum decision of the Regional Trial Court (RTC) of Makati City did not transgress the requirements of Section 14, Article VIII of the 1997 Philippine Constitution:

“MEMORANDUM DECISION

After a careful perusal, evaluation and study of the records of this case, this Court hereby adopts by reference the findings of fact and conclusions of law contained in the decision of the Metropolitan Trial Court of Makati, Metro Manila, Branch 63 and finds that there is no cogent reason to disturb the same.

“WHEREFORE, judgment appealed from is hereby affirmed in toto.†(Underscoring supplied.)�Hence, incorporation by reference is allowed if only to avoid the cumbersome reproduction of the decision of the lower courts, or portions thereof, in the decision of the higher court.[30]

However, also in Permskul,[31] this Court laid down the conditions for the validity of memorandum decisions, to wit:The memorandum decision, to be valid, cannot incorporate the findings of fact and the conclusions of law of the lower court only by remote reference, which is to say that the challenged decision is not easily and immediately available to the person reading the memorandum decision. For the incorporation by reference to be allowed, it must provide for direct access to the facts and the law being adopted, which must be contained in a statement attached to the said decision. In other words, the memorandum decision authorized under Section 40 of B.P. Blg. 129 should actually embody the findings of fact and conclusions of law of the lower court in an annex attached to and made an indispensable part of the decision.

It is expected that this requirement will allay the suspicion that no study was made of the decision of the lower court and that its decision was merely affirmed without a proper examination of the facts and the law on which it is based. The proximity at least of the annexed statement should suggest that such an examination has been undertaken. It is, of course, also understood that the decision being adopted should, to begin with, comply with Article VIII, Section 14 as no amount of incorporation or adoption will rectify its violation.

The Court finds necessary to emphasize that the memorandum decision should be sparingly used lest it become an addictive excuse for judicial sloth. It is an additional condition for the validity that this kind of decision may be resorted to only in cases where the facts are in the main accepted by both parties and easily determinable by the judge and there are no doctrinal complications involved that will require an extended discussion of the laws involved. The memorandum decision may be employed in simple litigations only, such as ordinary collection cases, where the appeal is obviously groundless and deserves no more than the time needed to dismiss it.

x x x x

Henceforth, all memorandum decisions shall comply with the requirements herein set forth both as to the form prescribed and the occasions when they may be rendered. Any deviation will summon the strict enforcement of Article VIII, Section 14 of the Constitution and strike down the flawed judgment as a lawless disobedience.[32]

In the case at bar, we quote verbatim the Decision dated 10 June 2003 of the Office of the President which adopted by reference the Decision dated 10 August 1994 of the HLURB Board of Commissioners:This resolves the appeal filed by [herein petitioner] Solid Homes, Inc. from the [D]ecision of the [HLURB] dated [10 August 1994].

After a careful study and thorough evaluation of the records of the case, this Office is convinced by the findings of the HLURB, thus we find no cogent reason to depart from the assailed [D]ecision. Therefore, we hereby adopt by reference the findings of fact and conclusions of law contained in the aforesaid [D]ecision, copy of which is hereto attached as “Annex A.†�

WHEREFORE, premises considered, judgment appealed from is hereby AFFIRMED in toto.[33] (Emphasis supplied).It must be stated that Section 14, Article VIII of the 1987 Constitution need not apply to decisions rendered in administrative proceedings, as in the case a bar. Said section applies only to decisions rendered in judicial proceedings. In fact, Article VIII is titled “Judiciary,†and all of its provisions have particular concern only �with respect to the judicial branch of government. Certainly, it would be error to hold or even imply that decisions of executive departments or administrative agencies are oblige to meet the requirements under Section 14, Article VIII.

The rights of parties in administrative proceedings are not violated as long as the constitutional requirement of due process has been satisfied. [34] In the landmark case of Ang Tibay v. CIR, we laid down the cardinal rights of parties in administrative proceedings, as follows:

27

1) The right to a hearing, which includes the right to present one’s case and submit evidence in support thereof.2) The tribunal must consider the evidence presented.3) The decision must have something to support itself.4) The evidence must be substantial.5) The decision must be rendered on the evidence presented at the hearing,or at least contained in the record and disclosed to the parties  affected.6) The tribunal or body or any of its judges must act on its or his own independent consideration of the law and facts of the  controversy and not simply accept the

views of a subordinate in arriving at a decision.7) The board or body should, in all controversial question, render its decision in such a manner that the parties to the proceeding can know the various issues

involved, and the reason for the decision rendered.[35]

As can be seen above, among these rights are “the decision must be rendered on the evidence presented at the hearing, or at least contained in the record and disclosed to the parties affected;†and that the decision be rendered “in such a manner that the parties to the proceedings can know the various issues involved, and �the reasons for the decisions rendered.†Note that there is no requirement in � Ang Tibay that the decision must express clearly and distinctly the facts and the law on which it is based. For as long as the administrative decision is grounded on evidence, and expressed in a manner that sufficiently informs the parties of the factual and legal bases of the decision, the due process requirement is satisfied.

At bar, the Office of the President apparently considered the Decision of HLURB as correct and sufficient, and said so in its own Decision. The brevity of the assailed Decision was not the product of willing concealment of its factual and legal bases. Such bases, the assailed Decision noted, were already contained in the HLURB decision, and the parties adversely affected need only refer to the HLURB Decision in order to be able to interpose an informed appeal or action for certiorari under Rule 65.

However, it bears observation that while decisions of the Office of the President need not comply with the constitutional requirement imposed on courts under Section 14, Article VIII of the Constitution, the Rules of Court may still find application, although suppletory only in character and apply only whenever practicable and convenient. There is no mandate that requires the application of the Rules of Court in administrative proceedings.

Even assuming arguendo that the constitutional provision invoked by petitioner applies in the instant case, the decision of the OP satisfied the standards set forth in the case of Permskul.

Firstly, the Decision of the Office of the President readily made available to the parties a copy of the Decision of the HLURB Board of Commissioners, which it adopted and affirmed in toto, because it was attached as an annex to its Decision.

Secondly, the findings of fact and conclusions of law of the HLURB Board of Commissioners have been embodied in the Decision of the Office of the President and made an indispensable part thereof. With the attachment of a copy of the Decision of the HLURB Board of Commissioners to the Decision of the Office of the President, the parties reading the latter can also directly access the factual and legal findings adopted from the former. As the Court of Appeals ratiocinated in its Decision dated 21 July 2004, “the facts narrated and the laws concluded in the Decision of the HLURB Board of Commissioners should be considered as written in the Decision of the Office of the President. It was still easy for the parties to determine the facts and the laws on which the decision were based. Moreover, through the attached decision, the parties could still identify the issues that could be appealed to the proper tribunal.†�[36]

Thirdly, it was categorically stated in the Decision of the Office of the President that it conducted a careful study and thorough evaluation of the records of the present case and it was fully convinced as regards the findings of the HLURB Board of Commissioners.

And lastly, the facts of the present case were not contested by the parties and it can be easily determined by the hearing officer or tribunal. Even the respondents admitted that, indeed, the total purchase price for the subject property has not yet been fully settled and the outstanding balance is yet to be paid by them. In addition, this case is a simple action for specific performance with damages, thus, there are neither doctrinal complications involved in this case that will require an extended discussion of the laws involved.

Accordingly, based on close scrutiny of the Decision of the Office of the President, this Court rules that the said Decision of the Office of the President fully complied with both administrative due process and Section 14, Article VIII of the 1987 Philippine Constitution.

The Office of the President did not violate petitioner’s right to due process when it rendered its one-page Decision. In the case at bar, it is safe to conclude that all the parties, including petitioner, were well-informed as to how the Decision of the Office of the President was arrived at, as well as the facts, the laws and the issues involved therein because the Office of the President attached to and made an integral part of its Decision the Decision of the HLURB Board of Commissioners, which it adopted by reference. If it were otherwise, the petitioner would not have been able to lodge an appeal before the Court of Appeals and make a presentation of its arguments before said court without knowing the facts and the issues involved in its case.

This Court also quotes with approval the following declaration of the Court of Appeals in its Decision on the alleged violation of petitioner’s right to due process:The contention of the [herein] petitioner that the said [D]ecision runs afoul to the Constitutional provision on due process cannot be given credence. The case already had gone through the Offices of the HLURB Arbiter and the Board of Commissioners where petitioner was given the opportunity to be heard and present its evidence, before the case reached the Office of the President which rendered the assailed [D]ecision after a thorough evaluation of the evidence presented. What is important is that the parties were given the opportunity to be heard before the [D]ecision was rendered. To nullify the assailed [D]ecision would in effect be a violation of the Constitution because it would deny the parties of the right to speedy disposition of cases.[37]

Petitioner’s assertion that respondents’ complaint filed with the HLURB lacked a cause of action deserves scant consideration.

Section 7 of the 1987 HLURB Rules of Procedure states that:Section 7. Dismissal of the Complaint or Opposition. – The Housing and Land Use Arbiter (HLA) to whom a complaint or opposition is assigned may immediately dismiss the same for lack of jurisdiction or cause of action. (Emphasis supplied).It is noticeable that the afore-quoted provision of the 1987 HLURB Rules of Procedure used the word “may†instead of “shall,†meaning, that the dismissal of a� � complaint or opposition filed before the HLURB Arbiter on the ground of lack of jurisdiction or cause of action is simply permissive and not directive. The HLURB Arbiter has the discretion of whether to dismiss immediately the complaint or opposition filed before him for lack of jurisdiction or cause of action, or to still proceed with the hearing of the case for presentation of evidence. HLURB Arbiter Dean in his Decision explained thus:This Office is well aware of instances when complainants/petitioners fail, through excusable negligence, to incorporate every pertinent allegations (sic) necessary to constitute a cause of action. We will not hesitate to go outside of the complaint/petition and consider other available evidences if the same is necessary to a judicious, speedy, and inexpensive settlement of the issues laid before us or when there are reasons to believe that the [com]plaints are meritorious. “Administrative rules should be construed liberally in order to PROMOTE THEIR OBJECT AND ASSIST THE PARTIES IN OBTAINING A JUST, SPEEDY AND INEXPENSIVE DETERMINATION OF THEIR RESPECTIVE CLAIMS AND DEFENSES†(� Mangubat vs. de Castro, 163 SCRA 608).[38] (Emphasis supplied).

28

Given the fact that the respondents have not yet paid in full the purchase price of the subject property so they have yet no right to demand the execution and delivery of the Deed of Sale and the TCT, nevertheless, it was still within the HLURB Arbiter’s discretion to proceed hearing the respondents’ complaint in pursuit of a judicious, speedy and inexpensive determination of the parties’ claims and defenses.

Furthermore, the Court of Appeals already sufficiently addressed the issue of lack of cause of action in its Decision, viz:The Offices below, instead of dismissing the complaint because of the clear showing that there was no full payment of the purchase price, decided to try the case and render judgment on the basis of the evidence presented. The complaint of the respondents does not totally lack cause of action because of their right against the cancellation of the contract to sell and the forfeiture of their payments due to non-payment of their monthly amortization.

xxxx

The HLURB Arbiter in his [D]ecision, stated that it is undisputed that the contract price is not yet fully paid. This was affirmed by the HLURB Board of Commissioners and the Office of the President. No less than the respondents admitted such fact when they contended that they are willing to pay their unpaid balance. Without full payment, the respondents have no right to compel the petitioner to execute the Deed of Sale and deliver the title to the property. xxx.

xxxx

Lastly, notwithstanding such failure to pay the monthly amortization, the petitioner cannot consider the contract as cancelled and the payments made as forfeited.

Section 24, PD 957 provides:“Section 24. Failure to pay installments. - The rights of the buyer in the event of his failure to pay the installments due for reasons other than the failure of the owner or developer to develop the project shall be governed by Republic Act No. 6552. x x x.†�Section 4, RA 6552 or the Realty Installment Buyer Protection Act provides:“Section 4. In case where less than two years of installments were paid, the seller shall give the buyer a grace period of not less than sixty days from the date the installment became due. If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act.†�It is therefore clear from the above provisions that the petitioner cannot consider the [C]ontract to [S]ell as cancelled. The requirements above should still be complied with.[39] (Emphasis supplied).Hence, during the hearing conducted by HLURB Arbiter Dean, it became apparent that respondents’ cause of action against petitioner is not limited to the non-execution and non-delivery by petitioner of the Deed of Sale and TCT of the subject property, which is dependent on their full payment of the purchase price thereof; but also the wrongful rescission by the petitioner of the Contract to Sell. By virtue thereof, there is ample basis for HLURB Arbiter Dean not to dismiss respondents’ complaint against petitioner and continue hearing and resolving the case.

As a final point. Based on the records of this case, respondents have tendered payment in the amount of P11,584.41,[40] representing the balance of the purchase price of the subject property, as determined in the 10 August 1994 Decision of the HLURB Board of Commissioners, and affirmed by both the Office of the President and the Court of Appeals. However, the petitioner, without any justifiable reason, refused to accept the same. In Ramos v. Sarao,[41] this Court held that tender of payment is the manifestation by debtors of their desire to comply with or to pay their obligation. If the creditor refuses the tender of payment without just cause, the debtors are discharged from the obligation by the consignation of the sum due. Consignation is made by depositing the proper amount with the judicial authority, before whom the tender of payment and the announcement of the consignation shall be proved. All interested parties are to be notified of the consignation. Compliance with these requisites is mandatory.[42] In the case at bar, after the petitioner refused to accept the tender of payment made by the respondents, the latter failed to make any consignation of the sum due. Consequently, there was no valid tender of payment and the respondents are not yet discharged from the obligation to pay the outstanding balance of the purchase price of the subject property.

Since petitioner did not rescind the Contract to Sell it executed with the respondents by a notarial act, the said Contract still stands. Both parties must comply with their obligations under the said Contract. As ruled by the HLURB Board of Commissioners, and affirmed by the Office of the President and the Court of Appeals, the respondents must first pay the balance of the purchase price of the subject property, after which, the petitioner must execute and deliver the necessary Deed of Sale and TCT of said property.

WHEREFORE, premises considered, the instant Petition is hereby DENIED. Costs against the petitioner.

SO ORDERED.

[G.R. No. 118349.  May 23, 1997]

PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, petitioner, vs. COURT OF APPEALS and STRONGHOLD INSURANCE CO., INC., respondents.

D E C I S I O N

BELLOSILLO, J.:

PHILIPPINE NATIONAL CONSTRUCTION CORPORATION (formerly Construction Development Corporation of the Philippines) filed on 18 March 1985 an action for a sum of money with damages against Ronaldo L. Calupitan and Stronghold Insurance Co., Inc., before the Regional Trial Court of Pasig.

On 4 January 1991 judgment was rendered ordering Calupitan and his surety, respondent Stronghold, to pay petitioner jointly and severally (a) P317,500.00 representing the downpayment pursuant to the Subcontract Agreement of 23 December 1982; (b) P500,000.00 as liquidated damages; and, (c) P50,000.00 as attorney's fees and expenses of litigation, all the foregoing amounts to earn interest at twelve percent (12%) per annum from the filing of the case until fully paid.  As to the cross

29

claim, Calupitan was ordered to pay Stronghold any and all amounts paid by the latter to petitioner by reason of the judgment as well as P50,000.00 for attorney's fees and litigation expenses, said amounts likewise to earn twelve percent (12%) interest per annum from the date of payment by Stronghold to petitioner until fully paid.

On 4 February 1991 Stronghold filed a notice of appeal, approved by the trial court the following day, 5 February 1991, with an order to elevate the records to the Court of Appeals.

On 17 June 1994 petitioner moved for the dismissal of the appeal on the ground that despite the lapse of more than three (3) years respondent Stronghold had not taken steps to prosecute its appeal.  Petitioner relied heavily on our rulings in Estella v. Court of Appeals that gross inaction for more than one (1) year amounts to failure to prosecute, and in Fagtanac v. Court of Appeals that it is the duty of the appellant to prosecute his appeal with reasonable diligence.

Stronghold opposed the motion contending that it had not yet received notices from respondent court to pay the docket fee and other charges and thereafter to file its brief.  It claimed good faith in waiting for said notices.

On 15 August 1994 respondent court denied the motion on the rationalization that -

x x x x  the so-called failure to prosecute is not due to the fault of appellant considering that the omission to transmit the records of the case to this Court is not the responsibility of appellant.  Rather, it is the duty of the Branch Clerk of Court (Sec. 1, Rule 4 of the Internal Rules of this Court) to elevate the entire record from approval of the notice of appeal.

Thus, respondent court directed the Branch Clerk of Court to transmit the entire records of the case within five (5) days from receipt of its resolution. On 4 November 1994 it denied reconsideration.

Petitioner now challenges the Resolutions of 15 August 1994 and 4 November 1994 contending that they were issued without or in excess of jurisdiction and/or with grave abuse of discretion.  It stresses that the appeal should have been dismissed by respondent court based on the same cases it previously invoked.

 The arguments of petitioner are well taken.  It strains credulity that respondent court should still look the other way.  In relying solely on Sec. 1, Rule 4, of its Internal Rules, respondent court ignored settled jurisprudence timely brought to its attention.  Our rulings take precedence over the  Internal Rules of respondent appellate court.

In Arcega v. Court of Appeals the petitioners disputed the dismissal of their appeal based practically on the same grounds invoked in the present case.  Therein they asserted that they had not yet been notified that the records of the case were already with the appellate court and that they had to pay the required docket and other fees.  Furthermore, they claimed that the elevation of the records of the case was beyond their means and control.

But we were not impressed -

x x x x while it is the duty of the clerk of the lower court to transmit the records of an appealed case to the appellate court, it is also the duty of the appellant to make the clerk of court act, and the failure of the clerk to perform his legal duty is no justification for the appellant's failure to perform his, and he cannot justify his failure by saying that the fault was that of the clerk of the lower court (underscoring supplied).

We also quoted therein the disquisition in the earlier case of Fagtanac -

x  x  x  x  A rule long familiar to practitioners  in this jurisdiction is that it is the duty of the appellant to prosecute his appeal with reasonable diligence.  He cannot simply fold his arms and say that it is the duty of the Clerk of Court of First Instance under the provisions of Section 11, Rule 41 of the Rules of Court, to transmit the record on appeal to the appellate court.  It is appellant's duty to make the Clerk act and, if necessary, procure a court order to compel him to act.  He cannot idly sit by and wait till this is done.  He cannot afterwards wash his hands and say that delay in the transmittal of the record on appeal was not his fault.  For, indeed, this duty imposed upon him was precisely to spur on the slothful (underscoring supplied).

The Court was impelled in Fagtanac to make a policy statement that failure to prosecute will not be countenanced on the consideration that delays in litigation have always been a bane in our judicial system and there is a growing tendency of defeated suitors and their lawyers to disregard their duties under the Rules of Court in the hope that they can stall the final day of reckoning. 

Since it appeared that the petitioners in Arcega did nothing to effect or facilitate the transmittal of the records to the appellate court for almost two (2) years from the order to elevate the records, we sustained the dismissal of their appeal.

Estella v. Court of Appeals dwells on the same indolence of an appellant -

We cannot subscribe to petitioners' gratuitous statement that "as the rule now exists, the appellant is justified if he merely 'folds his hands' after the trial judge has ordered that the records of the case be transmitted to the appellate court."

Conceding to the point that it is the clerk of court who is primarily responsible for seeing to it that the records of appealed cases are properly sent to the appellate court without delay (and having failed to do so subjects him to administrative liability), it behooves the litigants to be more vigilant of their rights.   They should take it upon themselves to call the attention of the trial court as to any delay in action over their cases.

The rule that it is the duty of the appellant to prosecute his appeal with reasonable diligence is still a sound rule.  He cannot simply  "fold his hands" and say that it is the duty of the clerk of court to have his case promptly submitted to the appellate court for the disposition of his appeal.

30

This absence of an awareness or regard on the part of the defeated litigant to personally see to it that the needed records are forthwith sent to the appellate court is one major cause of delays in litigations x x x x  (underscoring supplied).

Likewise, we sustained therein the dismissal of the appeal for failure to prosecute covering a period of only one (1) year, one (1) month and twenty-two (22) days, as compared to Stronghold's appeal which has remained dormant for three (3) years and four (4) months.  With more reason therefore that the appeal in the present case should have been dismissed.

Rule 4 of the Revised Internal Rules of the Court of Appeals outlines the procedure in appealed civil cases.  As aforementioned, Sec. 1 imposes the duty on the Clerk of the Regional Trial Court to transmit to the Court of Appeals the entire original records and other documents.  The  Civil Cases Section of its Judicial Records Division, upon receipt of the records, is then mandated under Sec. 2 to immediately, inter alia, issue the proper notice to the appellant to pay the docketing  and other legal fees. Therefore, rather than having waited for the receipt of the notices to pay the docket fee and other charges and thereafter to file its brief, Stronghold should have ascertained whether the records of the case had already been transmitted to respondent court; otherwise, it should have caused the elevation thereof.  We take a dim view of its complacent attitude.  Ex nihilo nihil fit.

It is manifest that respondent court gravely abused its discretion  in denying petitioner's motion to dismiss the appeal of respondent Stronghold and, corollarily, in denying reconsideration thereof.

WHEREFORE, the petition is GRANTED.  The Resolutions of respondent Court of Appeals of 15 August 1994 denying petitioner's motion to dismiss the appeal and of 4 November 1994 denying reconsideration thereof are SET ASIDE.  Respondent court is directed to DISMISS the appeal of respondent Stronghold Insurance Co., Inc., for failure to prosecute for an unreasonable length of time.

SO ORDERED.

[G.R. No. 183628, February 09, 2011]

DANIEL T. SO, PETITIONER, VS. FOOD FEST LAND, INC. RESPONDENT

[G.R. NO. 183670 ]

FOOD FEST LAND, INC., PETITIONER, VS. DANIEL T. SO, RESPONDENT.

R E S O L U T I O N

CARPIO MORALES, J.:

For resolution is the Motion for Reconsideration and Clarification of Daniel T. So (So) from the Court's Decision of April 14, 2010 in these consolidated cases which disposed as follows:

Per Raffle dated June 2, 2010.

31

WHEREFORE, the Court of Appeals Decision of April 18, 2008 is AFFIRMED with MODIFICATION. Food Fest is ORDERED to pay So liquidated damages in the amount equivalent to 25% of the total sum due and demandable. Further, So is ORDERED to pay attorney's fees in the amount equivalent to 25% of the total sum due and demandable. In all other respects, the decision is AFFIRMED.

SO ORDERED, (emphasis in the original; underscoring supplied)

After passing on the arguments raised in the Motion for Reconsideration, the Court finds no cogent reason to disturb the Court's Decision.

Clarification is in order, however, respecting the second paragraph of the above-quoted dispositive portion of the Decision which ordered So to pay attorney's fees in the amount equivalent to 25% of the total sum due and demandable. The relevant portion of this Court's Decision - basis of the order reads:

This Court notes that the appellate court did not award liquidated damages in contravention of the contract.  As for the appellate court's award of P20,000.00 as attorney's fees, the contractual stipulation should prevail, (underscoring supplied)

The relevant portion of the Lease Contract between So and Food Fest provides:

23.1. Should LESSOR[-So] be compelled to seek judicial relief against LESSEE the latter shall, in addition to any other claim for damages pay as liquidated damages to LESSOR[-So] an amount equivalent to twenty-five percent (25%) of the amount due, but in no case less than P500.00: and an attorney's fee in the amount equivalent to 25% of the amount claimed but in no case less than P3,000.00 as well as all expenses of litigation.[1] (underscoring supplied)

The general rule is that where there is a conflict between the dispositive portion or the follo and the body of the decision, the fallo controls. This rule rests on the theory that the fallo is the final order while the opinion in the body is merely a statement ordering nothing. However, where the inevitable conclusion from the body of the decision is so clear as to show that there was a mistake in the dispositive portion, the body of the decision will prevail. [2]

Given the above-quoted portion of the Decision vis-a-vis the above quoted Lease Contract between the parties, it should be Food Fest Land, Inc., as lessee, not So, the lessor, who should be ORDERED to pay attorney's fees as stipulated in the contract.

WHEREFORE, the dispositive portion of the Court's Decision of April 14, 2010 is AMENDED to read as follows:

WHEREFORE, the Court of Appeals Decision of April 18, 2008 is AFFIRMED with MODIFICATION.

Food Fest is ORDERED to pay So liquidated damages in the amount equivalent to 25% of the total sum due and demandable.  Further, Food Fest is ORDERED to pay So attorney's fees in the amount equivalent to 25% of the total sum due and demandable. In all other respects, the decision is AFFIRMED.

SO ORDERED.

[G.R. No. 118349.  May 23, 1997]

PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, petitioner, vs. COURT OF APPEALS and STRONGHOLD INSURANCE CO., INC., respondents.

D E C I S I O N

BELLOSILLO, J.:

PHILIPPINE NATIONAL CONSTRUCTION CORPORATION (formerly Construction Development Corporation of the Philippines) filed on 18 March 1985 an action for a sum of money with damages against Ronaldo L. Calupitan and Stronghold Insurance Co., Inc., before the Regional Trial Court of Pasig.

On 4 January 1991 judgment was rendered ordering Calupitan and his surety, respondent Stronghold, to pay petitioner jointly and severally (a) P317,500.00 representing the downpayment pursuant to the Subcontract Agreement of 23 December 1982; (b) P500,000.00 as liquidated damages; and, (c) P50,000.00 as attorney's fees and expenses of litigation, all the foregoing amounts to earn interest at twelve percent (12%) per annum from the filing of the case until fully paid.  As to the cross claim, Calupitan was ordered to pay Stronghold any and all amounts paid by the latter to petitioner by reason of the judgment as well as P50,000.00 for attorney's fees and litigation expenses, said amounts likewise to earn twelve percent (12%) interest per annum from the date of payment by Stronghold to petitioner until fully paid.

On 4 February 1991 Stronghold filed a notice of appeal, approved by the trial court the following day, 5 February 1991, with an order to elevate the records to the Court of Appeals.

On 17 June 1994 petitioner moved for the dismissal of the appeal on the ground that despite the lapse of more than three (3) years respondent Stronghold had not taken steps to prosecute its appeal.  Petitioner relied heavily on our rulings in Estella v. Court of Appeals that gross inaction for more than one (1) year amounts to failure to prosecute, and in Fagtanac v. Court of Appeals that it is the duty of the appellant to prosecute his appeal with reasonable diligence.

Stronghold opposed the motion contending that it had not yet received notices from respondent court to pay the docket fee and other charges and thereafter to file its brief.  It claimed good faith in waiting for said notices.

On 15 August 1994 respondent court denied the motion on the rationalization that -

32

x x x x  the so-called failure to prosecute is not due to the fault of appellant considering that the omission to transmit the records of the case to this Court is not the responsibility of appellant.  Rather, it is the duty of the Branch Clerk of Court (Sec. 1, Rule 4 of the Internal Rules of this Court) to elevate the entire record from approval of the notice of appeal.

Thus, respondent court directed the Branch Clerk of Court to transmit the entire records of the case within five (5) days from receipt of its resolution. On 4 November 1994 it denied reconsideration.

Petitioner now challenges the Resolutions of 15 August 1994 and 4 November 1994 contending that they were issued without or in excess of jurisdiction and/or with grave abuse of discretion.  It stresses that the appeal should have been dismissed by respondent court based on the same cases it previously invoked.

 The arguments of petitioner are well taken.  It strains credulity that respondent court should still look the other way.  In relying solely on Sec. 1, Rule 4, of its Internal Rules, respondent court ignored settled jurisprudence timely brought to its attention.  Our rulings take precedence over the  Internal Rules of respondent appellate court.

In Arcega v. Court of Appeals the petitioners disputed the dismissal of their appeal based practically on the same grounds invoked in the present case.  Therein they asserted that they had not yet been notified that the records of the case were already with the appellate court and that they had to pay the required docket and other fees.  Furthermore, they claimed that the elevation of the records of the case was beyond their means and control.

But we were not impressed -

x x x x while it is the duty of the clerk of the lower court to transmit the records of an appealed case to the appellate court, it is also the duty of the appellant to make the clerk of court act, and the failure of the clerk to perform his legal duty is no justification for the appellant's failure to perform his, and he cannot justify his failure by saying that the fault was that of the clerk of the lower court (underscoring supplied).

We also quoted therein the disquisition in the earlier case of Fagtanac -

x  x  x  x  A rule long familiar to practitioners  in this jurisdiction is that it is the duty of the appellant to prosecute his appeal with reasonable diligence.  He cannot simply fold his arms and say that it is the duty of the Clerk of Court of First Instance under the provisions of Section 11, Rule 41 of the Rules of Court, to transmit the record on appeal to the appellate court.  It is appellant's duty to make the Clerk act and, if necessary, procure a court order to compel him to act.  He cannot idly sit by and wait till this is done.  He cannot afterwards wash his hands and say that delay in the transmittal of the record on appeal was not his fault.  For, indeed, this duty imposed upon him was precisely to spur on the slothful (underscoring supplied).

The Court was impelled in Fagtanac to make a policy statement that failure to prosecute will not be countenanced on the consideration that delays in litigation have always been a bane in our judicial system and there is a growing tendency of defeated suitors and their lawyers to disregard their duties under the Rules of Court in the hope that they can stall the final day of reckoning. 

Since it appeared that the petitioners in Arcega did nothing to effect or facilitate the transmittal of the records to the appellate court for almost two (2) years from the order to elevate the records, we sustained the dismissal of their appeal.

Estella v. Court of Appeals dwells on the same indolence of an appellant -

We cannot subscribe to petitioners' gratuitous statement that "as the rule now exists, the appellant is justified if he merely 'folds his hands' after the trial judge has ordered that the records of the case be transmitted to the appellate court."

Conceding to the point that it is the clerk of court who is primarily responsible for seeing to it that the records of appealed cases are properly sent to the appellate court without delay (and having failed to do so subjects him to administrative liability), it behooves the litigants to be more vigilant of their rights.   They should take it upon themselves to call the attention of the trial court as to any delay in action over their cases.

The rule that it is the duty of the appellant to prosecute his appeal with reasonable diligence is still a sound rule.  He cannot simply  "fold his hands" and say that it is the duty of the clerk of court to have his case promptly submitted to the appellate court for the disposition of his appeal.

This absence of an awareness or regard on the part of the defeated litigant to personally see to it that the needed records are forthwith sent to the appellate court is one major cause of delays in litigations x x x x  (underscoring supplied).

Likewise, we sustained therein the dismissal of the appeal for failure to prosecute covering a period of only one (1) year, one (1) month and twenty-two (22) days, as compared to Stronghold's appeal which has remained dormant for three (3) years and four (4) months.  With more reason therefore that the appeal in the present case should have been dismissed.

Rule 4 of the Revised Internal Rules of the Court of Appeals outlines the procedure in appealed civil cases.  As aforementioned, Sec. 1 imposes the duty on the Clerk of the Regional Trial Court to transmit to the Court of Appeals the entire original records and other documents.  The  Civil Cases Section of its Judicial Records Division, upon receipt of the records, is then mandated under Sec. 2 to immediately, inter alia, issue the proper notice to the appellant to pay the docketing  and other legal fees. Therefore, rather than having waited for the receipt of the notices to pay the docket fee and other charges and thereafter to file its brief, Stronghold should have ascertained whether the records of the case had already been transmitted to respondent court; otherwise, it should have caused the elevation thereof.  We take a dim view of its complacent attitude.  Ex nihilo nihil fit.

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It is manifest that respondent court gravely abused its discretion  in denying petitioner's motion to dismiss the appeal of respondent Stronghold and, corollarily, in denying reconsideration thereof.

WHEREFORE, the petition is GRANTED.  The Resolutions of respondent Court of Appeals of 15 August 1994 denying petitioner's motion to dismiss the appeal and of 4 November 1994 denying reconsideration thereof are SET ASIDE.  Respondent court is directed to DISMISS the appeal of respondent Stronghold Insurance Co., Inc., for failure to prosecute for an unreasonable length of time.

SO ORDERED.