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Republic of the Philippines on December 15, 1983,[3] as evidenced by Provisional

Manila Receipt No. 1356 dated November 14, 1983.[4]

On December 5, 1983, a person claiming to be Lim

Sio Wan called up Cristina So, an officer of Allied,
and instructed the latter to pre-terminate Lim Sio
ALLIED BANKING G.R. No. 133179 Wans money market placement, to issue a managers
Petitioner, Present: check representing the proceeds of the placement,
QUISUMBING, J., Chairperson, and to give the check to one Deborah Dee Santos
- versus - CARPIO MORALES, who would pick up the check.[5] Lim Sio Wan
described the appearance of Santos so that So could
CHICO-NAZARIO,* JJ. easily identify her.[6]
BANK AND TRUST CO., and Promulgated:
Later, Santos arrived at the bank and signed the
Respondents. March 27, 2008 application form for a managers check to be
x------------------------------------------------------------------- issued.[7] The bank issued Managers Check No.
035669 for PhP 1,158,648.49, representing the
DECISION proceeds of Lim Sio Wans money market placement
in the name of Lim Sio Wan, as payee.[8] The check
VELASCO, JR., J.: was cross-checked For Payees Account Only and
given to Santos.[9]
To ingratiate themselves to their valued
depositors, some banks at times bend over Thereafter, the managers check was deposited in the
backwards that they unwittingly expose themselves account of Filipinas Cement Corporation (FCC) at
to great risks. respondent Metropolitan Bank and Trust Co.
The Case (Metrobank),[10] with the forged signature of Lim Sio
Wan as indorser.[11]
This Petition for Review on Certiorari under
Rule 45 seeks to reverse the Court of Appeals (CAs) Earlier, on September 21, 1983, FCC had deposited a
Decision promulgated on March 18, 1998[1] in CA- money market placement for PhP 2 million with
G.R. CV No. 46290 entitled Lim Sio Wan v. Allied respondent Producers Bank. Santos was the money
Banking Corporation, et al. The CA Decision modified market trader assigned to handle FCCs
the Decision dated November 15, 1993[2] of the account.[12] Such deposit is evidenced by Official
Regional Trial Court (RTC), Branch 63 Receipt No. 317568[13] and a Letter dated September
in Makati City rendered in Civil Case No. 6757. 21, 1983 of Santos addressed to Angie Lazo of FCC,
The Facts acknowledging receipt of the placement.[14] The
placement matured on October 25, 1983 and was
The facts as found by the RTC and affirmed by the rolled-over until December 5, 1983 as evidenced by
CA are as follows: a Letter dated October 25, 1983.[15] When the
placement matured, FCC demanded the payment of
On November 14, 1983, respondent Lim Sio Wan the proceeds of the placement.[16] On December 5,
deposited with petitioner Allied Banking 1983, the same date that So received the phone call
Corporation (Allied) at its Quintin Paredes Branch instructing her to pre-terminate Lim Sio Wans
in Manila a money market placement of PhP placement, the managers check in the name of Lim
1,152,597.35 for a term of 31 days to mature Sio Wan was deposited in the account of FCC,
purportedly representing the proceeds of FCCs

money market placement with Producers Consequently, Lim Sio Wan filed with the RTC a
Bank.[17] In other words, the Allied check was Complaint dated February 13, 1984[26] docketed as
deposited with Metrobank in the account of FCC as Civil Case No. 6757 against Allied to recover the
Producers Banks payment of its obligation to FCC. proceeds of her first money market placement.
Sometime in February 1984, she withdrew her
To clear the check and in compliance with the second placement from Allied.
requirements of the Philippine Clearing House
Corporation (PCHC) Rules and Regulations, Allied filed a third party complaint[27] against
Metrobank stamped a guaranty on the check, which Metrobank and Santos. In turn, Metrobank filed a
reads: All prior endorsements and/or lack of fourth party complaint[28] against FCC. FCC for its
endorsement guaranteed.[18] part filed a fifth party complaint[29] against
Producers Bank. Summonses were duly served
The check was sent to Allied through the PCHC. upon all the parties except for Santos, who was no
Upon the presentment of the check, Allied funded longer connected with Producers Bank.[30]
the check even without checking the authenticity of
Lim Sio Wans purported indorsement. Thus, the On May 15, 1984, or more than six (6) months after
amount on the face of the check was credited to the funding the check, Allied informed Metrobank that
account of FCC.[19] the signature on the check was forged.[31] Thus,
Metrobank withheld the amount represented by the
On December 9, 1983, Lim Sio Wan deposited with check from FCC. Later on, Metrobank agreed to
Allied a second money market placement to mature release the amount to FCC after the latter executed
on January 9, 1984.[20] an Undertaking, promising to indemnify Metrobank
in case it was made to reimburse the amount.[32]
On December 14, 1983, upon the maturity date of the
first money market placement, Lim Sio Wan went to Lim Sio Wan thereafter filed an amended
Allied to withdraw it.[21] She was then informed that complaint to include Metrobank as a party-
the placement had been pre-terminated upon her defendant, along with Allied.[33] The RTC admitted
instructions. She denied giving any instructions and the amended complaint despite the opposition of
receiving the proceeds thereof. She desisted from Metrobank.[34] Consequently, Allieds third party
further complaints when she was assured by the complaint against Metrobank was converted into a
banks manager that her money would be cross-claim and the latters fourth party complaint
recovered.[22] against FCC was converted into a third party
When Lim Sio Wans second placement matured
on January 9, 1984, So called Lim Sio Wan to ask for After trial, the RTC issued its Decision, holding as
the latters instructions on the second follows:
placement. Lim Sio Wan instructed So to roll-over
WHEREFORE, judgment is hereby
the placement for another 30 days.[23] On January 24, rendered as follows:
1984, Lim Sio Wan, realizing that the promise that
her money would be recovered would not 1. Ordering defendant Allied
Banking Corporation to pay plaintiff
materialize, sent a demand letter to Allied asking for the amount of P1,158,648.49 plus 12%
the payment of the first placement.[24] Allied refused interest per annum from March 16,
to pay Lim Sio Wan, claiming that the latter had 1984 until fully paid;
2. Ordering defendant Allied Bank to
authorized the pre-termination of the placement and
pay plaintiff the amount of
its subsequent release to Santos.[25] P100,000.00 by way of moral

3. Ordering defendant Allied Bank to
pay plaintiff the amount of
P173,792.20 by way of attorneys fees; Allied raises the following issues for our
and, consideration:
4. Ordering defendant Allied Bank to
pay the costs of suit.
The Honorable Court of
Defendant Allied Banks cross-claim Appeals erred in holding that Lim
against defendant Metrobank is Sio Wan did not authorize [Allied] to
DISMISSED. pre-terminate the initial placement
and to deliver the check to Deborah
Likewise defendant Metrobanks Santos.
third-party complaint as against
Filipinas Cement Corporation is The Honorable Court of
DISMISSED. Appeals erred in absolving
Producers Bank of any liability for
Filipinas Cement Corporations the reimbursement of amount
fourth-party complaint against adjudged demandable.
Producers Bank is also DISMISSED.
The Honorable Court of
SO ORDERED.[36] Appeals erred in holding [Allied]
liable to the extent of 60% of amount
adjudged demandable in clear
disregard to the ultimate liability of
The Decision of the Court of Appeals Metrobank as guarantor of all
endorsement on the check, it being
the collecting bank.[38]
Allied appealed to the CA, which in turn issued the
assailed Decision on March 18, 1998, modifying the
RTC Decision, as follows: The petition is partly meritorious.

WHEREFORE, premises considered, A Question of Fact

the decision appealed from is
MODIFIED. Judgment is rendered
ordering and sentencing defendant- Allied questions the finding of both the trial and
appellant Allied Banking appellate courts that Allied was not authorized to
Corporation to pay sixty (60%)
percent and defendant-appellee release the proceeds of Lim Sio Wans money market
Metropolitan Bank and Trust placement to Santos.Allied clearly raises a question
Company forty (40%) of the amount of fact. When the CA affirms the findings of fact of
of P1,158,648.49 plus 12% interest per
the RTC, the factual findings of both courts are
annum from March 16, 1984 until
fully paid. The moral damages, binding on this Court.[39]
attorneys fees and costs of suit
adjudged shall likewise be paid by
We also agree with the CA when it said that it could
defendant-appellant Allied Banking
Corporation and defendant-appellee not disturb the trial courts findings on the credibility
Metropolitan Bank and Trust of witness So inasmuch as it was the trial court that
Company in the same proportion of
heard the witness and had the opportunity to
60-40. Except as thus modified, the
decision appealed from is observe closely her deportment and manner of
AFFIRMED. testifying. Unless the trial court had plainly
overlooked facts of substance or value, which, if
considered, might affect the result of the case,[40] we
find it best to defer to the trial court on matters
Hence, Allied filed the instant petition. pertaining to credibility of witnesses.
Additionally, this Court has held that the matter of
The Issues negligence is also a factual question.[41] Thus, the

finding of the RTC, affirmed by the CA, that the placement, or until the bank is released from its
obligation as debtor. Until any such event, the
respective parties were negligent in the exercise of obligation of Allied to Lim Sio Wan remains
their obligations is also conclusive upon this Court. unextinguished.

Art. 1231 of the Civil Code enumerates the

The Liability of the Parties instances when obligations are considered
extinguished, thus:
As to the liability of the parties, we find that Allied
is liable to Lim Sio Wan. Fundamental and familiar
Art. 1231. Obligations are
is the doctrine that the relationship between a bank extinguished:
and a client is one of debtor-creditor.
(1) By payment or
Articles 1953 and 1980 of the Civil Code provide: (2) By the loss of the
thing due;
Art. 1953. A person who receives a (3) By the
loan of money or any other fungible condonation or remission of the
thing acquires the ownership thereof, debt;
and is bound to pay to the creditor an (4) By the confusion
equal amount of the same kind and or merger of the rights of creditor
quality. and debtor;
(5) By compensation;
Art. 1980. Fixed, savings, and current (6) By novation.
deposits of money in banks and
similar institutions shall be governed Other causes of
by the provisions concerning simple extinguishment of obligations, such
loan. as annulment, rescission, fulfillment
of a resolutory condition, and
prescription, are governed elsewhere
Thus, we have ruled in a line of cases that a in this Code. (Emphasis supplied.)
bank deposit is in the nature of a simple loan or
mutuum.[42] More succinctly, in Citibank,
N.A. (Formerly First National City Bank) v. Sabeniano, From the factual findings of the trial and
this Court ruled that a money market placement is a appellate courts that Lim Sio Wan did not authorize
simple loan or mutuum.[43] Further, we defined a the release of her money market placement to Santos
money market in Cebu International Finance and the bank had been negligent in so doing, there
Corporation v. Court of Appeals, as follows: is no question that the obligation of Allied to pay
Lim Sio Wan had not been extinguished. Art. 1240
[A] money market is a market of the Code states that payment shall be made to the
dealing in standardized short-term person in whose favor the obligation has been
credit instruments (involving large constituted, or his successor in interest, or any
amounts) where lenders and person authorized to receive it. As commented by
borrowers do not deal directly with Arturo Tolentino:
each other but through a middle man
or dealer in open market. In a money Payment made by the debtor
market transaction, the investor is a to a wrong party does not extinguish
lender who loans his money to a the obligation as to the creditor, if
borrower through a middleman or there is no fault or negligence which
dealer. can be imputed to the latter. Even
when the debtor acted in utmost
In the case at bar, the money good faith and by mistake as to the
market transaction between the person of his creditor, or through
petitioner and the private respondent error induced by the fraud of a third
is in the nature of a loan.[44] person, the payment to one who is
not in fact his creditor, or authorized
to receive such payment, is void,
Lim Sio Wan, as creditor of the bank for her except as provided in Article
money market placement, is entitled to payment 1241. Such payment does not
upon her request, or upon maturity of the prejudice the creditor, and accrual
of interest is not suspended by Metrobanks negligence in indorsing the check
it.[45](Emphasis supplied.)
without verifying the genuineness of the
indorsement thereon.
Since there was no effective payment of Lim Sio
Wans money market placement, the bank still has an
Section 66 in relation to Sec. 65 of the
obligation to pay her at six percent (6%) interest
Negotiable Instruments Law provides:
from March 16, 1984 until the payment thereof.
Section 66. Liability of general
We cannot, however, say outright that Allied is indorser.Every indorser who indorses
without qualification, warrants to all
solely liable to Lim Sio Wan. subsequent holders in due course;

Allied claims that Metrobank is the proximate cause a) The matters and
things mentioned in
of the loss of Lim Sio Wans money. It points out that subdivisions (a), (b)
Metrobank guaranteed all prior indorsements and (c) of the next
inscribed on the managers check, and without preceding section;
Metrobanks guarantee, the present controversy
would never have occurred. According to Allied: b) That the instrument
is at the time of his
Failure on the part of the collecting indorsement valid
bank to ensure that the proceeds of and subsisting;
the check is paid to the proper party
is, aside from being an efficient And in addition, he engages
intervening cause, also the last that on due presentment, it shall be
negligent act, x x x contributory to the accepted or paid, or both, as the case
injury caused in the present case, may be according to its tenor, and
which thereby leads to the conclusion that if it be dishonored, and the
that it is the collecting bank, necessary proceedings on dishonor
Metrobank that is the proximate be duly taken, he will pay the amount
cause of the alleged loss of the thereof to the holder, or to any
plaintiff in the instant case.[46] subsequent indorser who may be
compelled to pay it.

We are not persuaded. Section 65. Warranty where

negotiation by delivery, so forth.Every
person negotiating an instrument by
Proximate cause is that cause, which, in natural and
delivery or by a qualified
continuous sequence, unbroken by any efficient indorsement, warrants:
intervening cause, produces the injury and without
a) That the instrument
which the result would not have occurred.[47] Thus,
is genuine and in all
there is an efficient supervening event if the event respects what it
breaks the sequence leading from the cause to the purports to be;
b) That he has a good
ultimate result. To determine the proximate cause of
title of it;
a controversy, the question that needs to be asked c) That all prior parties
is: If the event did not happen, would the injury had capacity to
have resulted? If the answer is NO, then the event is
d) That he has no
the proximate cause. knowledge of any fact
which would impair
the validity of the
instrument or render
In the instant case, Allied avers that even if it had not it valueless.
issued the check payment, the money represented
But when the negotiation is
by the check would still be lost because of
by delivery only, the warranty
extends in favor of no holder other 60% of the amount on the face of the negotiable
than the immediate transferee.
instrument and the collecting bank is liable for
The provisions of subdivision 40%. We also noted the relative negligence exhibited
(c) of this section do not apply to by two banks, to wit:
persons negotiating public or
corporation securities, other than Both banks were negligent in
bills and notes. (Emphasis supplied.) the selection and supervision of their
employees resulting in the
encashment of the forged checks by
The warranty that the instrument is genuine and in an impostor. Both banks were not
all respects what it purports to be covers all the able to overcome the presumption of
negligence in the selection and
defects in the instrument affecting the validity supervision of their employees. It
thereof, including a forged indorsement. Thus, the was the gross negligence of the
last indorser will be liable for the amount indicated employees of both banks which
resulted in the fraud and the
in the negotiable instrument even if a previous subsequent loss. While it is true that
indorsement was forged. We held in a line of cases petitioner BPIs negligence may have
that a collecting bank which indorses a check been the proximate cause of the loss,
respondent CBCs
bearing a forged indorsement and presents it to the
negligence contributed equally to the
drawee bank guarantees all prior indorsements, success of the impostor in encashing
including the forged indorsement itself, and the proceeds of the forged checks.
Under these circumstances, we apply
ultimately should be held liable therefor.[48]
Article 2179 of the Civil Code to the
effect that while respondent CBC
However, this general rule is subject to exceptions. may recover its losses, such losses are
subject to mitigation by the courts.
One such exception is when the issuance of the
(See Phoenix Construction Inc. v.
check itself was attended with negligence. Thus, in Intermediate Appellate Courts, 148
the cases cited above where the collecting bank is SCRA 353 [1987]).
generally held liable, in two of the cases where the
Considering the comparative
checks were negligently issued, this Court held the negligence of the two (2) banks, we
institution issuing the check just as liable as or more rule that the demands of substantial
liable than the collecting bank. justice are satisfied by allocating the
loss of P2,413,215.16 and the costs of
the arbitration proceeding in the
In isolated cases where the checks were deposited in amount of P7,250.00 and the cost of
an account other than that of the payees on the litigation on a 60-40 ratio.[52]

strength of forged indorsements, we held the

collecting bank solely liable for the whole amount of Similarly, we ruled in Associated Bank v. Court of
the checks involved for having indorsed the Appeals that the issuing institution and the collecting
same. In Republic Bank v. Ebrada,[49] the check was bank should equally share the liability for the loss of
properly issued by the Bureau of Treasury. While amount represented by the checks concerned due to
in Banco de Oro Savings and Mortgage Bank (Banco de the negligence of both parties:
Oro) v. Equitable Banking Corporation,[50] Banco de
Oro admittedly issued the checks in the name of the
The Court finds as reasonable, the
correct payees.And in Traders Royal Bank v. Radio proportionate sharing of fifty
Philippines Network, Inc.,[51] the checks were issued at percent-fifty percent (50%-50%). Due
the request of Radio Philippines Network, Inc. from to the negligence of the Province of
Tarlac in releasing the checks to an
Traders Royal Bank.
unauthorized person (Fausto
However, in Bank of the Philippine Islands v. Court of Pangilinan), in allowing the retired
Appeals, we said that the drawee bank is liable for hospital cashier to receive the checks
for the payee hospital for a period
close to three years and in not The liability of Allied, however, is concurrent with
properly ascertaining why the retired
hospital cashier was collecting checks that of Metrobank as the last indorser of the
for the payee hospital in addition to check. When Metrobank indorsed the check in
the hospitals real cashier, respondent compliance with the PCHC Rules and
Province contributed to the loss
amounting to P203,300.00 and shall Regulations[55] without verifying the authenticity of
be liable to the PNB for fifty (50%) Lim Sio Wans indorsement and when it accepted the
percent thereof. In effect, check despite the fact that it was cross-checked
the Province of Tarlac can only
payable to payees account only,[56] its negligent and
recover fifty percent (50%) of
P203,300.00 from PNB. cavalier indorsement contributed to the easier
release of Lim Sio Wans money and perpetuation of
The collecting bank,
the fraud. Given the relative participation of Allied
Associated Bank, shall be liable to
PNB for fifty (50%) percent of and Metrobank to the instant case, both banks
P203,300.00. It is liable on its cannot be adjudged as equally liable. Hence, the
warranties as indorser of the checks
60:40 ratio of the liabilities of Allied and Metrobank,
which were deposited by Fausto
Pangilinan, having guaranteed the as ruled by the CA, must be upheld.
genuineness of all prior
indorsements, including that of the FCC, having no participation in the negotiation of
chief of the payee hospital, Dr. Adena
Canlas. Associated Bank was also the check and in the forgery of Lim Sio Wans
remiss in its duty to ascertain the indorsement, can raise the real defense of forgery as
genuineness of the payees against both banks.[57]

As to Producers Bank, Allied Banks

A reading of the facts of the two immediately
argument that Producers Bank must be held liable
preceding cases would reveal that the reason why
as employer of Santos under Art. 2180 of the Civil
the bank or institution which issued the check was
Code is erroneous. Art. 2180 pertains to the
held partially liable for the amount of the check was
vicarious liability of an employer for quasi-delicts
because of the negligence of these parties which
that an employee has committed. Such provision of
resulted in the issuance of the checks.
law does not apply to civil liability arising from
In the instant case, the trial court correctly found
Allied negligent in issuing the managers check and
in transmitting it to Santos without even a written
One also cannot apply the principle of
authorization.[54] In fact, Allied did not even ask for
subsidiary liability in Art. 103 of the Revised Penal
the certificate evidencing the money market
Code in the instant case. Such liability on the part of
placement or call up Lim Sio Wan at her residence
the employer for the civil aspect of the criminal act
or office to confirm her instructions. Both actions
of the employee is based on the conviction of the
could have prevented the whole fraudulent
employee for a crime. Here, there has been no
transaction from unfolding. Allieds negligence must
conviction for any crime.
be considered as the proximate cause of the resulting
As to the claim that there was unjust
enrichment on the part of Producers Bank, the same
To reiterate, had Allied exercised the diligence due
is correct. Allied correctly claims in its petition that
from a financial institution, the check would not
Producers Bank should reimburse Allied for
have been issued and no loss of funds would have
whatever judgment that may be rendered against it
resulted. In fact, there would have been no issuance
pursuant to Art. 22 of the Civil Code, which
of indorsement had there been no check in the first
provides: Every person who through an act of
performance by another, or any other means,

acquires or comes into possession of something at forged cannot be raised against FCC which was not a
the expense of the latter without just cause or legal part in any stage of the negotiation of the check. FCC
ground, shall return the same to him. was not unjustly enriched.

From the facts of the instant case, we see

The above provision of law was clarified that Santos could be the architect of the entire
in Reyes v. Lim, where we ruled that [t]here is unjust controversy. Unfortunately, since summons had not
enrichment when a person unjustly retains a benefit been served on Santos, the courts have not acquired
to the loss of another, or when a person retains jurisdiction over her.[60] We, therefore, cannot
money or property of another against the ascribe to her liability in the instant case.
fundamental principles of justice, equity and good
conscience.[58] Clearly, Producers Bank must be held liable
to Allied and Metrobank for the amount of the check
In Tamio v. Ticson, we further clarified the plus 12% interest per annum, moral damages,
principle of unjust enrichment, thus: Under Article attorneys fees, and costs of suit which Allied and
22 of the Civil Code, there is unjust enrichment Metrobank are adjudged to pay Lim Sio Wan based
when (1) a person is unjustly benefited, and (2) such on a proportion of 60:40.
benefit is derived at the expense of or with damages
to another.[59] WHEREFORE, the petition is PARTLY
GRANTED. The March 18, 1998 CA Decision in CA-
In the instant case, Lim Sio Wans money G.R. CV No. 46290 and the November 15, 1993 RTC
market placement in Allied Bank was pre- Decision in Civil Case No. 6757
terminated and withdrawn without her consent. are AFFIRMED with MODIFICATION.
Moreover, the proceeds of the placement were
deposited in Producers Banks account in Metrobank Thus, the CA Decision is AFFIRMED,
without any justification. In other words, there is no the fallo of which is reproduced, as follows:
reason that the proceeds of Lim Sio Wans placement
should be deposited in FCCs account purportedly as
WHEREFORE, premises considered,
payment for FCCs money market placement and the decision appealed from is
interest in Producers Bank. With such payment, MODIFIED. Judgment is rendered
Producers Banks indebtedness to FCC was ordering and sentencing defendant-
appellant Allied Banking
extinguished, thereby benefitting the former. Corporation to pay sixty (60%)
Clearly, Producers Bank was unjustly enriched at percent and defendant-appellee
the expense of Lim Sio Wan. Based on the facts and Metropolitan Bank and Trust
Company forty (40%) of the amount
circumstances of the case, Producers Bank should
of P1,158,648.49 plus 12% interest per
reimburse Allied and Metrobank for the amounts annum from March 16, 1984 until
the two latter banks are ordered to pay Lim Sio Wan. fully paid. The moral damages,
attorneys fees and costs of suit
adjudged shall likewise be paid by
It cannot be validly claimed that FCC, and defendant-appellant Allied Banking
not Producers Bank, should be considered as having Corporation and defendant-appellee
Metropolitan Bank and Trust
been unjustly enriched. It must be remembered that
Company in the same proportion of
FCCs money market placement with Producers 60-40. Except as thus modified, the
Bank was already due and demandable; thus, decision appealed from is
Producers Banks payment thereof was justified. AFFIRMED.

FCC was entitled to such payment. As earlier stated,

the fact that the indorsement on the check was

Additionally and by way
of MODIFICATION, Producers Bank is hereby
ordered to pay Allied and Metrobank the
aforementioned amounts. The liabilities of the
parties are concurrent and independent of each



a. 138814 Sept. 29, 1990 P9,000.00

b. 138804 Oct. 8, 1990 9,350.00
[G.R. No. 156940. December 14, 2004] c. 138787 Sept. 30, 1990 6,360.00
d. 138847 Sept. 29, 1990 21,850.00
e. 167054 Sept. 29, 1990 4,093.40
ASSOCIATED BANK (Now WESTMONT f. 138792 ` Sept. 29, 1990 3,546.00
BANK), petitioner, vs. VICENTE HENRY g. 138774 Oct. 2, 1990 6,600.00
TAN, respondent. h. 167072 Oct. 10, 1990 9,908.00
i. 168802 Oct. 10, 1990 3,650.00
However, his suppliers and business partners went
PANGANIBAN, J.: back to him alleging that the checks he issued
bounced for insufficiency of funds. Thereafter,
While banks are granted by law the right to TAN, thru his lawyer, informed the BANK to take
debit the value of a dishonored check from a positive steps regarding the matter for he has
depositors account, they must do so with the highest adequate and sufficient funds to pay the amount of
degree of care, so as not to prejudice the depositor the subject checks. Nonetheless, the BANK did not
unduly. bother nor offer any apology regarding the
incident. Consequently, TAN, as plaintiff, filed a
Complaint for Damages on December 19, 1990,
The Case with the Regional Trial Court of Cabanatuan City,
Third Judicial Region, docketed as Civil Case No.
Before us is a Petition for Review[1] under Rule 892-AF, against the BANK, as defendant.
45 of the Rules of Court, assailing the January 27,
2003 Decision[2] of the Court of Appeals (CA) in CA- In his [C]omplaint, [respondent] maintained that he
GR CV No. 56292. The CA disposed as follows: ha[d] sufficient funds to pay the subject checks and
alleged that his suppliers decreased in number for
WHEREFORE, premises considered, the Decision lack of trust. As he has been in the business
dated December 3, 1996, of community for quite a time and has established a
the Regional Trial Court of Cabanatuan City, Third good record of reputation and probity, plaintiff
Judicial Region, Branch 26, in Civil Case No. 892- claimed that he suffered embarrassment,
AF is hereby AFFIRMED. Costs against the humiliation, besmirched reputation, mental
[petitioner].[3] anxieties and sleepless nights because of the said
unfortunate incident. [Respondent] further averred
that he continuously lost profits in the amount
of P250,000.00. [Respondent] therefore prayed for
The Facts
exemplary damages and that [petitioner] be
ordered to pay him the sum of P1,000,000.00 by
The CA narrated the antecedents as follows: way of moral damages, P250,000.00 as lost
profits, P50,000.00 as attorneys fees plus 25% of the
Vicente Henry Tan (hereafter TAN) is a amount claimed including P1,000.00 per court
businessman and a regular depositor-creditor of appearance.
the Associated Bank (hereinafter referred to as the
BANK). Sometime in September 1990, he deposited Meanwhile, [petitioner] filed a Motion to Dismiss
a postdated UCPB check with the said BANK in the on February 7, 1991, but the same was denied for
amount of P101,000.00 issued to him by a certain lack of merit in an Order dated March 7,
Willy Cheng from Tarlac. The check was duly 1991. Thereafter, [petitioner] BANK on March 20,
entered in his bank record thereby making his 1991 filed its Answer denying, among others, the
balance in the amount of P297,000.00, as of October allegations of [respondent] and alleged that no
1, 1990, from his original deposit banking institution would give an assurance to any
of P196,000.00. Allegedly, upon advice and of its client/depositor that the check deposited by
instruction of the BANK that the P101,000.00 check him had already been cleared and backed up by
was already cleared and backed up by sufficient sufficient funds but it could only presume that the
funds, TAN, on the same date, withdrew the sum same has been honored by the drawee bank in view
of P240,000.00, leaving a balance of P57,793.45. A of the lapse of time that ordinarily takes for a check
day after, TAN deposited the amount of P50,000.00 to be cleared. For its part, [petitioner] alleged that
making his existing balance in the amount on October 2, 1990, it gave notice to the
of P107,793.45, because he has issued several [respondent] as to the return of his UCPB check
checks to his business partners, to wit: deposit in the amount of P101,000.00, hence, on
even date, [respondent] deposited the amount Ruling of the Court of Appeals
of P50,000.00 to cover the returned check.
Affirming the trial court, the CA ruled that the
By way of affirmative defense, [petitioner] averred
bank should not have authorized the withdrawal of
that [respondent] had no cause of action against it
the value of the deposited check prior to its
and argued that it has all the right to debit the
clearing. Having done so, contrary to its obligation
account of the [respondent] by reason of the
to treat respondents account with meticulous care,
dishonor of the check deposited by the
the bank violated its own policy. It thereby took
[respondent] which was withdrawn by him prior to
upon itself the obligation to officially inform
its clearing. [Petitioner] further averred that it has
respondent of the status of his account before
no liability with respect to the clearing of deposited
unilaterally debiting the amount
checks as the clearing is being undertaken by the
of P101,000. Without such notice, it is estopped from
Central Bank and in accepting [the] check deposit,
blaming him for failing to fund his account.
it merely obligates itself as depositors collecting
agent subject to actual payment by the drawee The CA opined that, had the P101,000 not been
bank. [Petitioner] therefore prayed that debited, respondent would have had sufficient
[respondent] be ordered to pay it the amount funds for the postdated checks he had issued. Thus,
of P1,000,000.00 by way of loss of the supposed accommodation accorded by
goodwill, P7,000.00 as acceptance fee plus P500.00 petitioner to him is the proximate cause of his
per appearance and by way of attorneys fees. business woes and shame, for which it is liable for
Considering that Westmont Bank has taken over
Because of the banks negligence, the CA
the management of the affairs/properties of the
awarded respondent moral damages of P100,000. It
BANK, [respondent] on October 10, 1996, filed an
also granted him exemplary damages of P75,000
Amended Complaint reiterating substantially his
and attorneys fees of P25,000.
allegations in the original complaint, except that
the name of the previous defendant ASSOCIATED Hence this Petition.[5]

Trial ensured and thereafter, the court rendered its Issue

Decision dated December 3, 1996 in favor of the
[respondent] and against the [petitioner], ordering
the latter to pay the [respondent] the sum In its Memorandum, petitioner raises the sole
of P100,000.00 by way of moral issue of whether or not the petitioner, which is
damages, P75,000.00 as exemplary acting as a collecting bank, has the right to debit the
damages, P25,000.00 as attorneys fees, plus the account of its client for a check deposit which was
costs of this suit. In making said ruling, it was dishonored by the drawee bank.[6]
shown that [respondent] was not officially
informed about the debiting of the P101,000.00
[from] his existing balance and that the BANK The Courts Ruling
merely allowed the [respondent] to use the fund
prior to clearing merely for accommodation The Petition has no merit.
because the BANK considered him as one of its
valued clients. The trial court ruled that the bank
manager was negligent in handling the particular
Sole Issue:
checking account of the [respondent] stating that
Debit of Depositors Account
such lapses caused all the inconveniences to the
[respondent]. The trial court also took into
consideration that [respondents] mother was Petitioner-bank contends that its rights and
originally maintaining with the x x x BANK [a] obligations under the present set of facts were
current account as well as [a] time deposit, but [o]n misappreciated by the CA. It insists that its right to
one occasion, although his mother made a deposit, debit the amount of the dishonored check from the
the same was not credited in her favor but in the account of respondent is clear and
name of another.[4] unmistakable. Even assuming that it did not give
him notice that the check had been dishonored, such
Petitioner appealed to the CA on the issues of right remains immediately enforceable.
whether it was within its rights, as collecting bank,
In particular, petitioner argues that the check
to debit the account of its client for a dishonored
deposit slip accomplished by respondent
check; and whether it had informed respondent
on September 17, 1990, expressly stipulated that the
about the dishonor prior to debiting his account.
bank was obligating itself merely as the depositors

collecting agent and -- until such time as actual thereof hinges, in turn, on the banks role and
payment would be made to it -- it was reserving the obligations, first, as respondents depositary bank;
right to charge against the depositors account any and second, as collecting agent for the check in
amount previously credited. Respondent was question.
allowed to withdraw the amount of the check prior
to clearing, merely as an act of accommodation, it
added. Obligation as
Depositary Bank
At the outset, we stress that the trial courts
factual findings that were affirmed by the CA are not
subject to review by this Court.[7] As petitioner itself In BPI v. Casa Montessori,[14] the Court has
takes no issue with those findings, we need only to emphasized that the banking business is impressed
determine the legal consequence, based on the with public interest. Consequently, the highest
established facts. degree of diligence is expected, and high standards
of integrity and performance are even required of
it. By the nature of its functions, a bank is under
Right of Setoff obligation to treat the accounts of its depositors with
meticulous care.[15]
A bank generally has a right of setoff over the Also affirming this long standing
deposits therein for the payment of any withdrawals doctrine, Philippine Bank of Commerce v. Court of
on the part of a depositor.[8] The right of a collecting Appeals[16] has held that the degree of diligence
bank to debit a clients account for the value of a required of banks is more than that of a good father
dishonored check that has previously been credited of a family where the fiduciary nature of their
has fairly been established by jurisprudence. To relationship with their depositors is
begin with, Article 1980 of the Civil Code provides concerned. Indeed, the banking business is vested

that [f]ixed, savings, and current deposits of money with the trust and confidence of the public; hence
in banks and similar institutions shall be governed the appropriate standard of diligence must be very
by the provisions concerning simple loan. high, if not the highest, degree of diligence.[18] The
standard applies, regardless of whether the account
Hence, the relationship between banks and
consists of only a few hundred pesos or of
depositors has been held to be that of creditor and
debtor.[9] Thus, legal compensation under Article
1278[10] of the Civil Code may take place when all the The fiduciary nature of banking, previously
requisites mentioned in Article 1279 are imposed by case law,[20] is now enshrined in
present,[11] as follows: Republic Act No. 8791 or the General Banking Law
of 2000. Section 2 of the law specifically says that the
(1) That each one of the obligors be bound State recognizes the fiduciary nature of banking that
principally, and that he be at the same time a requires high standards of integrity and
principal creditor of the other; performance.
(2) That both debts consist in a sum of
Did petitioner treat respondents account with
money, or if the things due are
the highest degree of care? From all indications, it
consumable, they be of the same kind, and
did not.
also of the same quality if the latter has
been stated; It is undisputed -- nay, even admitted -- that
(3) That the two debts be due; purportedly as an act of accommodation to a valued
(4) That they be liquidated and client, petitioner allowed the withdrawal of the face
demandable; value of the deposited check prior to its
(5) That over neither of them there be any retention clearing. That act certainly disregarded the
or controversy, commenced by third persons and clearance requirement of the banking system. Such
communicated in due time to the debtor.[12] a practice is unusual, because a check is not legal
tender or money;[21] and its value can properly be
Nonetheless, the real issue here is not so much transferred to a depositors account only after the
the right of petitioner to debit respondents account check has been cleared by the drawee bank.[22]
but, rather, the manner in which it exercised such
Under ordinary banking practice, after
right. The Court has held that even while the right
receiving a check deposit, a bank either immediately
of setoff is conceded, separate is the question of
credit the amount to a depositors account; or infuse
whether that remedy has properly been exercised.[13]
value to that account only after the drawee bank
The liability of petitioner in this case ultimately shall have paid such amount.[23] Before the check
revolves around the issue of whether it properly shall have been cleared for deposit, the collecting
exercised its right of setoff. The determination bank can only assume at its own risk -- as herein

petitioner did -- that the check would be cleared and and the employees under her control had breached
paid out. bank policies. They admittedly breached those
policies when, without clearance from the drawee
Reasonable business practice and prudence,
bank in Baguio, they allowed respondent to
moreover, dictated that petitioner should not have
withdraw on October 1, 1990, the amount of the
authorized the withdrawal by respondent
check deposited. Santiagotestified that respondent
of P240,000 on October 1, 1990, as this amount was
was not officially informed about the debiting of
over and above his outstanding cleared balance
the P101,000 from his existing balance of P170,000
of P196,793.45.[24] Hence, the lower courts correctly
on October 2, 1990 x x x.[33]
appreciated the evidence in his favor.
Being the branch manager, Santiago clearly
acted within the scope of her authority in
Obligation as authorizing the withdrawal and the subsequent
Collecting Agent debiting without notice. Accordingly, what remains
to be determined is whether her actions proximately
caused respondents injury. Proximate cause is that
Indeed, the bank deposit slip expressed this which -- in a natural and continuous sequence,
reservation: unbroken by any efficient intervening cause --
produces the injury, and without which the result
In receiving items on deposit, this Bank obligates would not have occurred.[34]
itself only as the Depositors Collecting agent,
assuming no responsibility beyond carefulness in Let us go back to the facts as they unfolded. It is
selecting correspondents, and until such time as undeniable that the banks premature authorization
actual payments shall have come to its possession, of the withdrawal by respondent on October 1, 1990,
this Bank reserves the right to charge back to the triggered -- in rapid succession and in a natural
Depositors account any amounts previously sequence -- the debiting of his account, the fall of his
credited whether or not the deposited item is account balance to insufficient levels, and the
returned. x x x."[25] subsequent dishonor of his own checks for lack of
funds. The CA correctly noted thus:
However, this reservation is not enough to
insulate the bank from any liability. In the past, we x x x [T]he depositor x x x withdrew his money
have expressed doubt about the binding force of upon the advice by [petitioner] that his money was
such conditions unilaterally imposed by a bank already cleared. Without such advice, [respondent]
without the consent of the depositor.[26] It is indeed would not have withdrawn the sum
arguable that in signing the deposit slip, the of P240,000.00.Therefore, it cannot be denied that it
depositor does so only to identify himself and not to was [petitioners] fault which allowed [respondent]
agree to the conditions set forth at the back of the to withdraw a huge sum which he believed was
deposit slip.[27] already his.

Further, by the express terms of the stipulation, To emphasize, it is beyond cavil that [respondent]
petitioner took upon itself certain obligations as had sufficient funds for the check. Had
respondents agent, consonant with the well-settled the P101,000.00 not [been] debited, the subject
rule that the relationship between the payee or checks would not have been dishonored. Hence,
holder of a commercial paper and the collecting we can say that [respondents] injury arose from the
bank is that of principal and agent.[28] Under Article dishonor of his well-funded checks. x x x.[35]
1909[29] of the Civil Code, such bank could be held
liable not only for fraud, but also for negligence. Aggravating matters, petitioner failed to show
As a general rule, a bank is liable for the that it had immediately and duly informed
wrongful or tortuous acts and declarations of its respondent of the debiting of his
officers or agents within the course and scope of account. Nonetheless, it argues that the giving of
their employment.[30] Due to the very nature of their notice was discernible from his act of
business, banks are expected to exercise the highest depositing P50,000 on October 2, 1990, to augment
degree of diligence in the selection and supervision his account and allow the debiting. This argument
of their employees.[31] Jurisprudence has established deserves short shrift.
that the lack of diligence of a servant is imputed to First, notice was proper and ought to be
the negligence of the employer, when the negligent expected. By the bank managers account,
or wrongful act of the former proximately results in
respondent was considered a valued client whose
an injury to a third person;[32] in this case, the checks had always been sufficiently funded from
depositor. 1987 to 1990,[36] until the October imbroglio. Thus,
The manager of the banks Cabanatuan branch, he deserved nothing less than an official notice of the
Consorcia Santiago, categorically admitted that she precarious condition of his account.
Second, under the provisions of the Negotiable
Instruments Law regarding the liability of a general
indorser[37] and the procedure for a notice of
dishonor,[38] it was incumbent on the bank to give
proper notice to respondent. In Gullas v. National
Bank,[39] the Court emphasized:

x x x [A] general indorser of a negotiable

instrument engages that if the instrument the check
in this case is dishonored and the necessary
proceedings for its dishonor are duly taken, he will
pay the amount thereof to the holder (Sec. 66) It has
been held by a long line of authorities that notice of
dishonor is necessary to charge an indorser and
that the right of action against him does not accrue
until the notice is given.

x x x. The fact we believe is undeniable that prior to

the mailing of notice of dishonor, and without
waiting for any action by Gullas, the bank made
use of the money standing in his account to make
good for the treasury warrant. At this point recall
that Gullas was merely an indorser and had issued
checks in good faith. As to a depositor who has funds
sufficient to meet payment of a check drawn by him in
favor of a third party, it has been held that he has a right
of action against the bank for its refusal to pay such a
check in the absence of notice to him that the bank has
applied the funds so deposited in extinguishment of past
due claims held against him. (Callahan vs. Bank of
Anderson [1904], 2 Ann. Cas., 203.) However this
may be, as to an indorser the situation is different, and
notice should actually have been given him in order that
he might protect his interests.[40]

Third, regarding the deposit of P50,000 made by

respondent on October 2, 1990, we fully subscribe to
the CAs observations that it was not unusual for a
well-reputed businessman like him, who ordinarily
takes note of the amount of money he takes and
releases, to immediately deposit money in his
current account to answer for the postdated checks
he had issued.[41]


Inasmuch as petitioner does not contest the

basis for the award of damages and attorneys fees,
we will no longer address these matters.

WHEREFORE, the Petition is DENIED and the

assailed Decision AFFIRMED. Costs against

FIRST DIVISION On October 31, 2001, BMC filed with the Office
of the Executive Judge of the Regional Trial Court of
San Pablo City a Request Not To Give Due Course
To The Application for Extra-Judicial
[G.R. No. 153571. September 18, 2003] Foreclosure in EJF No. Sp-2546 (01). BMC claimed

that the application should be denied because it is

insufficient in form and substance and there is no
BENGUET MANAGEMENT need to proceed with the foreclosure of its properties
CORPORATION, petitioner, vs. COURT situated in Laguna because it was willing to execute
OF APPEALS, KEPPEL BANK a dacion en pago in place of the mortgaged
PHILIPPINES, INC., as Trustee for properties. Subsequently, BMC filed a Compliance
METROPOLITAN BANK AND TRUST and Supplementary Grounds to Disapprove
COMPANY, UNITED COCONUT Application for Extra-judicial Foreclosure of Real
PLANTERS BANK, RIZAL Estate Mortgage[8] and a Memorandum.[9] BMC
COMMERCIAL BANKING contended that the application for foreclosure
CORPORATION, FAR EAST BANK AND should be denied because KBPI included
TRUST COMPANY and BANK OF THE unauthorized penalties in the statement of accounts
PHILIPPINE ISLANDS under the and it did not comply with its obligation to give
Mortgage Trust Indenture, and THE BMC a 60-day grace period. BMC further claimed
REGISTER OF DEEDS OF that the MTI securing the principal loan of P190
CALAMBA, respondents. Million cannot be foreclosed because it was not
registered with the Register of Deeds.
KBPI opposed the letter-request of BMC on the
YNARES-SANTIAGO, J.: ground, inter alia, of wrong remedy and forum
Assailed in this petition for certiorari under Rule
65 of the Revised Rules of Court is the Resolution of Meanwhile, on November 7, 2001, BMC filed
the Court of Appeals in CA-G.R. SP No. 69503 dated with the Regional Trial Court of Iba, Zambales,
April 5, 2002,[1] which denied petitioners application Branch 70, a complaint for damages, accounting and
for the issuance of a temporary restraining order, as nullification of foreclosure of its properties in
well as its May 28, 2002[2] Resolution denying the Zambales, with prayer for the issuance of a
motion for reconsideration. temporary restraining order, docketed as Civil Case
No. RTC-1852-I.[11] BMC averred that the foreclosure
The antecedent facts reveal that on November of its properties should be annulled because KBPI
29, 1994, petitioner Benguet Management imposed unauthorized penalties, interest and
Corporation (BMC) and Keppel Bank Philippines, charges. Assuming that the amount claimed is due
Inc. (KBPI),[3] acting as trustee of the other and demandable, BMC maintained that the same
respondent banks, entered into a Loan Agreement cannot be enforced because KBPI did not comply
and Mortgage Trust Indenture (MTI) whereby BMC, with the 60-day grace period. BMC added
in consideration of the syndicated loan of that dacion en pago should be preferred over the
P190,000,000.00, constituted in favor of KBPI a foreclosure of the collaterals because the other
mortgage on several lots located in Alaminos, respondent banks are agreeable to such proposal.
Laguna and Iba, Zambales.
On the same date, the Regional Trial Court of
On September 28, 2001, for failure of BMC to Iba, Zambales issued a temporary restraining order
pay in full the installments due on the Loan enjoining the sale at public auction of BMCs
Agreement and Mortgage Trust Indenture, KBPI properties in Zambales.[12]
filed an application[4] for extra-judicial foreclosure of
mortgage before the Office of the Clerk of Court of On February 6, 2002, KBPIs application for
the Regional Trial Court of Iba, Zambales. On extrajudicial foreclosure of mortgage was found to
October 29, 2001, a similar application[5] for extra- be sufficient in form and substance, and was
judicial foreclosure of mortgage was filed by KBPI granted.[13] BMC filed a motion for reconsideration,
with the Office of the Clerk of Court of the Regional which was denied on March 4, 2002.[14]
Trial Court of San Pablo City, docketed as EJF No. Hence, BMC filed a petition for certiorari with
Sp-2546 (01). Accompanying the latter application the Court of Appeals,[15] reiterating its arguments in
was a certification[6] from the Clerk of Court of the EJF No. Sp-2546 (01) and assailing the validity of the
Regional Trial Court of Iba, Zambales, stating that foreclosure of its properties in Laguna. It prayed for
KBPI had paid the corresponding foreclosure fees the issuance of a preliminary injunction and/or
covering BMCs properties situated in Zambales and temporary restraining order to enjoin the scheduled
Laguna. sale of its properties in Laguna on March 19, 2002 at
10:00 pm.Since no injunction or restraining order
was issued by the Court of Appeals, the auction sale the unauthorized insertion of the Register of Deeds
proceeded as scheduled with KBPI as the highest of Laguna to the Courts Notice of Resolution of
bidder. March 22, 2002.
To restrain the registration of the certificate of
sale,[16]BMC filed a Supplemental Petition[17] which
was favorably acted upon by the Court of Appeals
BMC filed a motion for reconsideration
on March 22, 2002.[18] On the same day, a temporary
claiming, among others, that Section 47 of the
restraining order enjoining the registration of the
General Banking Act (Republic Act No. 8791), which
certificate of sale was issued by the appellate court,
reduced the period of redemption for extra-
albeit, late as the certificate was already registered at
judicially foreclosed properties of juridical persons
2:15 p.m. of March 22, 2002.
from one year to until, but not after, the registration
Subsequently, BMC filed with the appellate of the certificate of foreclosure salewhich in no case
court an Amended Supplemental shall be more than three (3) months after foreclosure,
Petition,[19] followed by an Urgent whichever is earlier, is unduly discriminatory and
Manifestation praying for the issuance of a writ of
[20] therefore unconstitutional.
preliminary injunction and/or temporary
On May 28, 2002, the Court of Appeals denied
restraining order to enjoin the consolidation of titles
BMCs motion for reconsideration.[22] Hence, BMC
over the foreclosed properties in the name of
filed the instant petition, contending that
respondent banks. BMC contended that the
foreclosure sale should be annulled because (1) the I
bid price was grossly inadequate; (2) the sale was
conducted in violation of Sections 2 and 3 of Act No. THE COURT OF APPEALS ACTED WITH GRAVE
3135 on the requirements of place of sale and posting ABUSE OF DISCRETION IN DENYING
of notice; and (3) the other creditor banks are PETITIONERS APPLICATION FOR TRO TO
amenable to the proposed dacion en pago instead of RESTRAIN THE CONSOLIDATION OF TITLES
In its Resolution dated April 5, 2002, the Court
of Appeals denied BMCs prayer to restrain the
consolidation of title in the name of KBPI, thus:
The petitioners filing of an Amended Supplemental
Petition dated March 25, 2002, and an Urgent
Manifestation dated March 27, 2002 is hereby
However, we see no justifiable reason to grant an
injunctive relief at this point in time, since the acts
sought to be restrained or enjoined are positive
rights of a buyer in a foreclosure sale. Unless the
petitioner could prove the nullity of such sale, there
is no reason to stop the Register of Deeds
concerned from performing its ministerial duty
under the law.
WHEREFORE, the application for temporary
restraining order in the Amended Supplemental
Petition is hereby DENIED.
The respondents are directed to also file their
comment thereto within ten (10) days from notice
hereof. Should the parties prefer, the case shall be
MARKET VALUE OF P444,184,000.00, SOUND
set for hearing to enable the parties to prove their
VALUE OF P493,732,000.00 COST OF
respective positions as to issues in the petition as
well as subsequent Supplemental Petition and
Amended Supplemental Petition.
In the meantime, the Chief of the Mailing Section is
directed to investigate and report to us within
fifteen (15) days from notice, how and who made
THE AUCTION SALE CONDUCTED IN SAN the real estates and/or chattels mortgaged and
PABLO CITY IS NULL AND VOID FOR BEING IN their respective locations, which certificate shall
VIOLATION OF SECTION 2 OF ACT 3135, AS serve the purpose of having the application
AMENDED AND THE EXPRESS PROVISION OF docketed with the Clerks of Court of the places
THE MORTGAGE TRUST INDENTURE THAT: IN where the other properties are located and of
ANY EXTRA-JUDICIAL FORECLOSURE UNDER allowing the extrajudicial foreclosures to proceed
OF THE PROVINCE WHERE THE COLLATERAL In Spouses Caviles v. Court of Appeals,[26] we
IS SITUATED. recognized the predicament that confronts a
mortgagor seeking to restrain the extra-judicial
VI foreclosure of mortgages arising from a single
transaction but concerning properties found in
THE REQUIREMENTS OF SECTION 3 OF ACT different provinces. Thus
WERE NOT COMPLIED WITH IN THE [W]e find it necessary to dwell on the issue of
FORECLOSURE PROCEEDINGS IN QUESTION. whether or not the act of petitioners in filing three
civil actions - one with the RTC of Makati, another
VII with the RTC of Bian, Laguna (Branch 24) and the
third one, with the Bian Assisting Court, constitutes
NOTES IS NULL AND VOID FOR BEING The problem of petitioners is an off-shoot of the
POTESTATIVE IN CHARACTER AND FOR express provisions of B.P. Blg. 129, to wit:
MUTUALITY OF CONTRACT, HENCE THE Sec. 21. Original jurisdiction in other cases. -
FORECLOSURE MAY PROCEED ONLY ONCE Regional Trial Courts shall exercise original
MORTGAGOR CANNOT PAY FOLLOWING (1) In the issuance of writs of certiorari, prohibition,
THAT DETERMINATION.[23] mandamus, quo warranto, habeas corpus
and injunction which may be enforced in any part
On June 26, 2002, a status quo order was issued of their respective regions; (Emphasis, supplied)
enjoining the cancellation of titles over the
mortgaged properties in the name of BMC as well as and Section 3, Rule 2 of the Rules of Court which
the issuance of new titles and the consolidation provides that a party may not institute more than
thereof in the name of private respondent banks[24] one suit for a single cause of action. (Emphasis
We deem it proper to resolve the issue of forum
shopping raised by private respondents.
In the said case, the mortgagors filed separate
Under the Procedure on Extra-Judicial actions for breach of mortgage contract with
Foreclosure of Mortgage (A.M. No. 99-10-05- injunction to restrain the extra-judicial foreclosure
0),[25] the applicant in an extra-judicial foreclosure proceedings commenced by the mortgagee in
covering properties located in different provinces is Makati and Bian, Laguna where the properties were
required to pay only one filing fee regardless of the situated. The Court did not find the mortgagors
number of properties to be foreclosed so long as the guilty of forum shopping insofar as the cases filed
application covers only one transaction or with the Makati and Bian, Laguna (Branch 24) courts
indebtedness. The venue, however, of the extra- were concerned. The obvious reason is that since
judicial foreclosure proceedings is the place where injunction is enforceable only within the territorial
each of the mortgaged property is located. Pertinent limits of the trial court, the mortgagor is left without
portion thereof states remedy as to the properties located outside the
jurisdiction of the issuing court, unless an
Where the application concerns the extrajudicial application for injunction is made with another
foreclosure of mortgages of real estates and/or court which has jurisdiction over the latter
chattels in different locations covering one properties.
indebtedness, only one filing fee corresponding to
In the case at bar, BMC is not guilty of forum
such indebtedness shall be collected. The collecting
shopping precisely because the remedy available to
Clerk of Court shall, apart from the official receipt
them under the law was the filing of separate
of the fees, issue a certificate of payment indicating
injunction suits. It is mandated to file only one case
the amount of indebtedness, the filing fees
for a single cause of action, e.g., breach of mortgage
collected, the mortgages sought to be foreclosed,
contract, yet, it cannot enforce any injunctive writ latter may consider its consolidation with CA-G.R.
issued by the court to protect its properties situated SP No. 69503 if warranted.
outside the jurisdiction of said court. Besides, BMC
No pronouncement as to costs.
was honest enough to inform the Zambales court in
the certification[27] of its complaint that it has a SO ORDERED.
pending request not to give due course to the
foreclosure proceedings with the San Pablo court, in
the same manner that its petition for certiorari with
the Court of Appeals notified the appellate court of
the pendency of its complaint with the Zambales
court.[28] It would therefore be unfair to dismiss the
cases filed by BMC on the ground of forum
shopping where under the circumstances the law
gives it no other remedy.
The issues involved in the instant petition
for certiorari are not only limited to the propriety of
the Court of Appeals denial of BMCs prayer to
enjoin the consolidation of title of the foreclosed
properties in the name of private respondents. There
are likewise raised factual issues, i.e., the validity of
the foreclosure and the sale at public auction of its
properties, which are yet to be resolved by the Court
of Appeals. Since this Court is not a trier of facts, the
remand of this case to the appellate court is
Anent the constitutional issue raised by BMC,
we have repeatedly held that the constitutionality of
a law may be passed upon by the Court, where there
is an actual case and that the resolution of the
constitutional question must be necessary in
deciding the controversy.[29] In this case, the
resolution of the constitutionality of Section 47 of the
General Banking Act (Republic Act No. 8791) which
reduced the period of redemption of extra-judicially
foreclosed properties of juridical persons is not the
very lis mota of the controversy. BMC is not
asserting a legal right for which it is entitled to a
judicial determination at this time inasmuch as it
may not even be entitled to redeem the foreclosed
properties. Until an actual controversy is brought to
test the constitutionality of Republic Act No. 8791,
the presumption of validity, which inheres in every
statute, must be accorded to it.
WHEREFORE, in view of all the foregoing, the
petition is PARTLY GRANTED. The Resolutions of
the Court of Appeals dated April 5, 2002 and May
28, 2002, in CA-G.R. SP No. 69503, insofar as they
denied BMCs application for temporary restraining
order, are REVERSED and SET ASIDE. The status
quo order issued by the Court on June 26, 2002 shall
stand until further order of the Court, and the
instant case is REMANDED to the Court of Appeals
for determination of the case on its merits. Petitioner
BMC is ordered to inform the appellate court of the
present status of Civil Case No. RTC-1852-I, then
pending with the Regional Trial Court of Iba,
Zambales, Branch 70, and if it had been decided and
the decision is on appeal in the Court of Appeals, the

THIRD DIVISION separate promissory notes executed by Federico R.
Mendoza and Anastacio E. de Vera. To secure
SAN FERNANDO RURAL G.R. No. 168088 payment of the loans, respondent PODC executed a
BANK, INC., real estate mortgage over the subject lot in favor of
Petitioner, Present:
YNARES-SANTIAGO, J., the creditor banks.[6] The contract provided that in
Chairperson, case of failure or refusal of the mortgagor to pay the
- versus - AUSTRIA-MARTINEZ, obligation secured thereby, the real estate mortgage
CHICO-NAZARIO, and may be extrajudicially foreclosed in accordance with
PAMPANGA OMNIBUS NACHURA, JJ. Act No. 3135, as amended.[7]
CORPORATION and Promulgated:
DOMINIC G. AQUINO, Eliza M. Garbes (PODC President and daughter of
Respondents. April 3, 2007 Federico Mendoza), together with her husband
Aristedes Garbes, secured a P950,000.00 loan from
------------x petitioner on March 27, 1992. The loan was to
mature after 180 days or on September 23,
DECISION 1992.[8] Mendoza signed as co-borrower in the
promissory note executed by the spouses. The
CALLEJO, SR., J.: spouses also executed a chattel mortgage over their
personal property as security for the payment of
Before the Court is a Petition for Review under Rule their loan account.[9]
45 of the Rules of Court, assailing the Decision[1] of
the Court of Appeals (CA) in CA-G.R. SP No. 75787 Upon respondent PODCs failure to pay its loan to
as well as the Resolution[2] which denied the motion petitioner, the latter filed a petition for extrajudicial
for reconsideration thereof. The appellate court set foreclosure of real estate mortgage and
aside the Order[3] of the Regional Trial Court at the auction on April 23, 2001, petitioner emerged
(RTC), San Fernando, Pampanga, Branch 44, in LRC as the winning bidder for P1,245,982.05. The Ex-
No. 890, which in turn had granted the petition of Officio Sheriff executed a Certificate of
San Fernando Rural Bank, Inc. (petitioner) for the Sale[10] on May 9, 2001 which stated that the period
issuance of a writ of possession. of redemption of the property shall expire one (1)
year after registration in the Register of Deeds. The
certificate was annotated at the dorsal portion of
TCT No. 275745-R on June 7, 2001. Petitioner did not
The Antecedents
file a petition for a writ of possession during the
redemption period.
Pampanga Omnibus Development Corporation
(respondent PODC) was the registered owner of a
On May 11, 2002, petitioner, through Eliza Garbes
parcel of land in San Fernando, Pampanga (now San
(with the authority of petitioners board of
Fernando City). The 61,579-square-meter lot was
directors),[11] executed a notarized deed of
covered by Transfer Certificate of Title (TCT) No.
assignment[12] in favor of respondent Dominic G.
Aquino over its right to redeem the
property. On May 29, 2002, respondent Aquino
Respondent PODC secured two loans from
offered to redeem the property for P1,588,094.28, but
petitioner and Masantol Rural Bank, Inc. (MRBI) at
petitioner rejected the offer and demanded the
an annual interest of 24%: P750,000.00 on April 20,
payment of P16,805,414.71 (including the loan of the
1989, to mature on April 15, 1990;[4] and
spouses Garbes)[13] as redemption
another P750,000.00 on May 3, 1989, payable
on April 28, 1990.[5] The loans were evidenced by
money. Respondent Aquino rejected the demand of CERTIFICATE OF REDEMPTION
under the guarantees prescribed by
petitioner. law.

On May 30, 2002, respondent Aquino City of San Fernando (P), June 7,
remitted Cashiers Check No.
0000202756[14] for P1,588,094.28 to the Ex-
On the same day, petitioners representative
Officio Sheriff as redemption money for the property
Elvin Reyes went to the office of the Ex-
for which he was issued Receipt No. 15582906
Officio Sheriff and inquired how the amount
dated May 31, 2002.[15]
of P5,194,742.50 was arrived at. The Ex-
Officio Sheriff explained to him that she had
In a letter[16] dated June 4, 2002, the Ex-
accepted the redemption price in accordance with
Officio Sheriff informed petitioner that the property
the provisions of
had been redeemed by respondent Aquino
R.A. Nos. 8791 and 7353. She further explained that
for P1,588,094.28. She requested petitioner for the
she had furnished petitioner with a copy of the
computation of the correct redemption price before
Certificate of Redemption she had earlier executed;
the lapse of the reglementary period to redeem the
however, Reyes refused to receive a copy of the
property. Petitioner then submitted a statement of
Certificate of Redemption.[21]
account indicating that the redemption price
was P9,052,309.23, and including the loan of the
On June 10, 2002, petitioner, through its
spouses Garbes (P7,753,105.48), a total
president Rogelio D. Reyes, executed an Affidavit of
of P16,805,414.71.[17] Thereafter, the Ex-OfficioSheriff
Consolidation[22] over the property. It was alleged
computed the redemption price (based on the
therein that respondent PODC or any other
General Banking Act [R.A. No. 8791], and The Rural
person/entity with the right of redemption did not
Bank Act of 1992 R.A. No. 7353) to
exercise their right to repurchase within one year
be P5,194,742.50.[18] When respondent Aquino was
from June 7, 2001. The affidavit was filed with the
apprised of this, he remitted on June 7, 2002 a
Office of the Register of Deeds on the same day. The
cashiers check for P3,606,648.52, representing the
penultimate paragraph reads:
difference between the redemption price computed
by the Ex-Officio Sheriff (P5,194,742.50) and the That the aforesaid Mortgagors nor
amount he had earlier paid (P1,588,094.28). The Ex- any other persons or entity entitled
Officio Sheriff issued Official Receipt No. 15582907 with the right of redemption did not
exercise their right of repurchase and
to respondent Aquino, and on June 7, 2002, a
a period of more than one (1) year
Certificate of Redemption.[19] The certificate reads in from June 7, 2001 has already elapsed
part: and by reason thereof, the San
Fernando Rural Bank, Inc. do hereby
request the Registry of Deeds of the
WHEREAS, before the expiration of
province of Pampanga, after the
the one (1) year period to redeem, by
payment of the lawful fees of this
virtue of the Deed of Assignment
office to cancel Transfer Certificate of
executed by the President of the
Title No. 275745-R and to issue a new
Pampanga Omnibus Devt. Corp., Mr.
Certificate of Title in favor of the San
Fernando Rural Bank, Inc.[23]
the said property in the total amount
NINETY-FOUR THOUSAND The affidavit was entered in the Registry
Book in the Office of the Register of Deeds as Entry
and 50/100 (P5,194,742.50) paid
under Official Receipts Nos. No. 784. However, no new title was issued in favor
15582906 and 15582907 dated May of petitioner.
31, 2002 and June 7, 2002,
respectively, and have issued this
In a letter[24] dated June 10, 2002, the Ex- (LRA), by way of consulta, to issue an opinion on
Officio Sheriff informed petitioner that respondent whether a new title should be issued to petitioner, or
Aquino had redeemed the property and requested the Certificate of Redemption in favor of respondent
petitioner, through its president, to turn over the Aquino should be annotated at the dorsal portion of
owners duplicate of TCT No. 275745-R before the TCT No. 275745-R.
redemption price of P5,194,742.50 would be On October 15, 2002, petitioner filed a Petition for a
remitted. She appended to the letter a copy of the Writ of Possession in the RTC of
Certificate of Redemption she had executed in favor Pampanga. Petitioner alleged that it had purchased
of respondent Aquino. However, petitioner refused the property at public auction as evidenced by the
to do so. Certificate of Sale appended thereto; the Certificate
of Sale was annotated at the dorsal portion of TCT
Meanwhile, the Ex-Officio Sheriff fell ill and No. 275745-R on June 7, 2001; as far as he was
failed to report for work up to June 14, 2002. She concerned, the right of respondent PODC to redeem
then wrote petitioner, reiterating her request for the the property had already expired; and under Act
delivery of TCT No. 275745-R. She, however, failed No. 3135, as amended, it is entitled to the possession
to file the Certificate of Redemption with the of the property during or even after the redemption
Register of Deeds.[25] period. It prayed that the corresponding writ of
possession over the property be issued in its favor
When respondent Aquino learned that upon the filing of the requisite bond in an amount
petitioner had filed an Affidavit of Consolidation, he equivalent to the market value of the property or in
sent a letter[26] dated June 14, 2002 to the Register of an amount as the court may direct.[30] Petitioner
Deeds, informing the latter that he was the assignee appended to its petition a certified true copy of the
under the Deed of Assignment executed by Certificate of Sale executed by the Ex-Officio Sheriff
respondent PODC, and that as shown by the in its favor over the property. The case was docketed
appended Certificate of Redemption he had as LRC No. 890.
redeemed the property on June 7, 2002. He also
insisted that he had redeemed the property within The court set the hearing of the petition at 8:30
the period therefor, and requested the Register of a.m. on November 28, 2002 and sent the
Deeds not to register the Affidavit of Consolidation corresponding notices to respondent PODC. [31]
and to cancel TCT No. 275745-R.[27]
During the hearing, respondent PODC
On June 17, 2002, respondent Aquino filed opposed the petition on the following grounds:
the Certificate of Redemption executed by the Ex- petitioner deliberately concealed the fact that the
Officio Sheriff with the Office of the Register of property had been redeemed on June 7, 2002;
Deeds. The Register of Deeds entered the Certificate respondent Aquino had paid P5,194,742.00 as
of Redemption in the Primary Entry Book of Entries redemption money based on the computation of
under Entry No. 1205.[28] On even date, the Register petitioner; the Ex-Officio Sheriff had executed a
of Deeds entered the deed of assignment executed Certificate of Redemption in favor of respondent
by respondent PODC in favor of Aquino in the Aquino on June 7, 2002, a copy of which petitioner
Primary Book of Entries as Entry No. 1208. refused to receive; respondent Aquino, as assignee,
had offered to redeem the property on May 29, 2002
Meanwhile, the Registrar of Deeds was in a and tendered the amount of P1,588,094.28, but
quandary; he was not certain whether it was proper petitioner insisted that the redemption price
for him to issue a new title to petitioner. In a was P16,805,414.71, including the loan account of
letter[29] dated June 18, 2002, he requested the the spouses Garbes; that since respondent Aquino
Administrator of the Land Registration Authority had redeemed the property from the Ex-

Officio Sheriff on June 7, 2002 within the one-year On December 12, 2002, the LRA resolved
period after paying the total amount the consulta of the Register of Deeds as follows:
of P5,194,742.50, it was respondent Aquino, and not
petitioner, who is entitled to a writ of While it is clear from the records that
an agent of the assignee tried to
possession;[32] and that besides, he was already in redeem the property within the one
possession of the property.[33] It insisted that (1) year period of redemption and, in
petitioner filed its petition to preempt the resolution fact, the Certificate of Redemption
was executed by the Clerk of Court
of the LRA on the consulta of the Register of and Ex-Officio Sheriff of the Regional
Deeds. The oppositor prayed that the petition be Trial Court of San Fernando City,
denied and that it be granted such other relief and Pampanga on the last day of the
redemption period, the same was not
remedies just and equitable under the premises.
registered before the Registry of
Deeds within the one (1) year period
In its Reply, petitioner averred that since respondent of redemption. Borne by the records
is the receipt before the registry of the
Aquino had offered an amount short of the
Certificate of Redemption and other
redemption price of P16,805,414.71, under Section related documents on June 17,
47 of R.A. No. 8791 there was no valid redemption 2002 for annotation. Hence, the same
was not registered within the
of the property. The loan of the spouses Garbes was
aforesaid one (1) year redemption
intended for respondent PODC as period.
borrower. Petitioner alleged that it would have been
foolhardy for it to grant a P950,000.00 loan to the Considering that the document first
presented and entered in the Primary
spouses without any security. Hence, unless the Entry Book of the registry is the
entire loan account of respondent PODC and the Affidavit of Consolidation in favor of
spouses Garbes (P16,805,414.71) was paid, the the creditors, the mortgagee bank
and not the Certificate of
mortgage persisted.[34] It further posited that, since Redemption in favor of the assignee
respondent PODC had already assigned its right to of the debtor-mortgagor, although
redeem the property, the oppositor had no more admittedly, the latter instrument was
executed on the last day of the
right or interest over the property; it was thus not redemption period but not, in fact,
the proper party as oppositor. registered within the same period,
under the premises, the
consolidating mortgagee is
By way of rejoinder, respondent PODC averred that
possessed with a superior right than
the Certificate of Redemption executed by the Ex- the redemptioner. Under the law, the
Officio Sheriff is presumed valid and legal; the RTC, first in registration is the first in
acting as a Land Registration Court, had no
jurisdiction to pass upon the validity of the
The dispositive portion of the Resolution of the LRA
Certificate of Redemption;[35] upon the execution of
Administrator reads:
the Deed of Assignment in favor of respondent
Aquino and the payment of redemption money, the WHEREFORE, premises considered,
latter had taken actual possession of the property; this Authority is of the opinion and
so holds that the Affidavit of
based on the Certificate of Redemption, he had
Consolidation is superior over the
developed the property and introduced a lot of Certificate of Redemption, hence,
improvements; and since a third party was in registrable on TCT No. 275745-R.
possession of the property, possession could no
longer be given to petitioner via a writ of
possession. Respondent PODC maintained that
Respondents filed a motion for reconsideration of
petitioner was not entitled to a writ of possession
the Resolution of the LRA Administrator.
until the title was consolidated in its name.

On December 20, 2002, the court in LRC No. 890
issued an Order granting the petition and ordered Respondents filed a motion for reconsideration of
the issuance of a writ of possession, on a bond the order, contending that petitioner was entitled to
equivalent to the market value of the property. It a writ of possession after the lapse of the period for
ruled that petitioner, as purchaser at the foreclosure redemption only if a Torrens title had been issued in
sale, was entitled to a writ of possession. The its favor. Since the one-year redemption period had
question of the validity of the redemption made by lapsed without petitioner having been issued
respondent Aquino, to whom respondent PODC any Torrens title, the court erred when it granted the
had assigned its right to redeem the property, as petition for a writ of possession. It also pointed out
well as the registrability of the Affidavit of that petitioner had failed to present any title under
Consolidation executed by petitioner, through its its name.
president, and the validity of the Certificate of
Redemption executed by the clerk of court and Ex- For its part, petitioner stated in its
Officio Sheriff of the RTC cannot be raised as a Opposition to respondents motion for
justification for opposing the petition. It declared reconsideration, that it was not necessary that a
that the proceedings for the issuance of a writ of buyer in a public auction be issued a title in its name
possession were ex-parte and it was the courts before it could be entitled to a writ of possession
ministerial duty to issue the writ. upon the expiration of the redemption period. The
title is merely an evidence of ownership; it is the
Furthermore, the court held that petitioners Certificate of Sale that vests ownership in the buyer
right to the possession of the foreclosed property is over the property sold. It insisted that the purchaser
bolstered by the fact that no third party was actually was entitled to the possession of the property even
holding the property adverse to respondent after the lapse of the redemption period.[39]
PODC. Respondent Aquino, as assignee of
respondent PODCs right to redeem could not be On February 18, 2003, the court issued an
considered a party holding the property adversely Order denying the motion for reconsideration of
to respondent PODC. Neither was there any respondents. The court ruled that petitioner, as
pending civil case involving the rights of third purchaser at public auction, acquired the right to
parties. Consequently, it was the ministerial duty of possess the property, and the right of the mortgagor
the RTC to issue a writ of possession in favor of from the time it purchased the property and not
petitioner, as the winning bidder in the public from the issuance of the title over the property in its
auction. name.[40]

The court declared that the purpose of the law in On March 6, 2003, respondents filed a
requiring the filing of a bond is to answer for the Petition for Certiorari with the CA, assailing the
reasonable rental for a period of twelve months for orders of the RTC as follows:
the use of the property during the period of
redemption. Since the period of redemption had I. Public respondent committed
grave abuse of discretion
already expired, a bond was no longer amounting to lack or excess of
necessary. Nevertheless, the court granted jurisdiction when it granted
petitioners prayer to put up a bond in the amount private respondents prayer for
an issuance of writ of possession
equivalent to the market value of the property. The in its favor when serious issues
court ruled that petitioner was entitled to the affecting private respondents
possession of the property, together with right to possess the subject lot is
still pending determination by
improvements existing thereon, as a mere incident
the Land Registration Authority.
of its right of ownership.[38]

II. Public respondent committed The CA failed to resolve the plea of respondents for
grave abuse of discretion
amounting to lack or excess of a temporary restraining order. Petitioner filed a
jurisdiction when it allowed motion for execution of the December 20,
private respondent to post a 2002 Order of the trial court in LRC No. 890. The
redemption bond beyond the
redemption period.[41] RTC granted the motion and issued a writ of
possession on May 14, 2003.[45] The Sheriff
implemented the writ and placed petitioner in
They averred that the RTC should have denied the
possession of the property.
petition for a writ of possession pending the
On September 4, 2003, petitioner filed a
resolution of the consulta by the LRA. They asserted
Complaint[46] against respondents and the Ex-
that the issues before the RTC were substantial,
Officio Sheriff in the RTC of Pampanga, for the
namely: (a) whether
nullification of the Deed of Assignment executed by
respondent Aquino, as the assignee of the right of
PODC in favor of Aquino and of the Certificate of
respondent PODC to redeem the property, had the
Redemption executed by the Ex-Officio Sheriff, and
right to do so; (b) whether he had redeemed the
for damages with a plea for injunctive
property as evidenced by the Certificate of
relief. Petitioner filed an Amended/Supplemental
Redemption executed by the Ex-Officio Sheriff; and
Complaint and prayed that judgment be rendered in
(c) the redemption price. They insisted that the
its favor, thus:
obligation of the RTC to issue the writ of possession
ceased to be ministerial.
WHEREFORE, it is prayed that a
judgment be rendered in favor of the
Respondents maintained that they had the plaintiff and against the defendants:
right to redeem the property. Since there were grave
a) Annulling the Deed of Assignment
doubts about the parties contentions as to who had dated May 11, 2002 executed by and
the right to possess the property, the RTC should between defendants PODC and
have dismissed the petition for a writ of possession AQUINO.

pending determination of the substantial issues by b) Declaring the Certificate of

the LRA. The trial court should have relied on the Redemption dated June 7,
rulings of this Court in Rivero de Ortega v. 2001 issued by the defendant Clerk of
Court and Ex-Officio Sheriff as null
Natividad,[42] Barican v. Intermediate Appellate
and void ab initio.
Court,[43] and Sulit v. Court of
Appeals.[44] Respondents asserted that petitioner was c) Ordering the defendants, jointly
and severally, to pay the plaintiff the
not entitled to a writ of possession because contrary
amount of:
to Section 7 of Act No. 3135, it posted a bond beyond
the period for redemption. The case was docketed as A. P100,000.00 as and
for moral
CA-G.R. SP No. 75787.
B. P100,000.00 as and
In its Comment on the petition, petitioner insisted for exemplary
on its right to a writ of possession and that the trial
C. P50,000.00 as and
court acted in accordance with law and the facts of for attorneys
the case. Moreover, it averred that the RTC, sitting fees plus the
as a land registration court, had jurisdiction over the costs of suit.

petition for a writ of possession; thus, the remedy of OTHER RELIEF and remedies just
respondents was to appeal the assailed order and equitable are also prayed for.[47]
not to file a petition for certiorari in the CA. The case was docketed as Civil Case No.

Meanwhile, the LRA Administrator issued a the Certificate of Foreclosure Sale with the Register
Resolution recalling the Resolution dated December of Deeds which is in no case shall be more than three
12, 2002 and declared that the Certificate of (3) months after the foreclosure, whichever is
Redemption executed by the Ex-Officio Sheriff was earlier.[51] The Certificate of Foreclosure Sale was
superior to the Affidavit of Consolidation filed by registered on June 7, 2001 and since respondent
petitioner. Based on the June 14, 2002 letter of PODC had assigned/transferred the right to redeem
the Ex-Officio Sheriff and the Certificate of the property to respondent Aquino only on May 11,
Redemption, respondent Aquino, who was the 2002, the redemption period had already lapsed.
assignee of respondent PODC, had redeemed the
property on June 7, 2002. Petitioner was already On December 18, 2003, the CA rendered judgment
aware as early as June 7, 2002 of the redemption of in CA-G.R. SP No. 75787 granting the petition of
the property by respondent Aquino; hence, the date respondents and setting aside the assailed orders of
of registration of the Certificate of Redemption the trial court. The falloof the decision reads:
on June 17, 2002 was of no legal consequence.
Accordingly, on September 10, 2003, respondents WHEREFORE, the petition is
GRANTED and the orders
filed (in LRC No. 890) a Joint Motion to quash the dated December 20, 200[2]
writ of possession issued by the trial court and for and February 18, 2003 of respondent
the issuance of a new TCT. They averred that the judge are VACATED and SET
LRA Administrator finally resolved that the
Certificate of Redemption issued by the Ex- SO ORDERED.[52]
Officio Sheriff was superior to the Affidavit of
Consolidation of petitioner. On the basis of the LRA The appellate court ruled that the December 20,
Order, the Register of Deeds issued TCT No. 544978- 2002 Order of the RTC granting the petition for a
A over the property in the name of respondent writ of possession was interlocutory and not final;
Aquino as the registered owner. hence, it may be questioned only via petition
for certiorari under Rule 65 of the Rules of Court, not
The court denied the joint motion by appeal. The CA cited the ruling of this Court
on November 10, 2003, holding that respondent in City of Manila v. Serrano.[53]
Aquino, as the registered owner of the subject
property, should initiate the appropriate action in The CA further held that the RTC committed grave
the proper court in order to exclude petitioner or any abuse of discretion amounting to excess or lack of
other person from the physical possession of his jurisdiction when it granted the application of
property.[48] The court ruled that after placing petitioner for a writ of possession. Respondent
petitioner in possession of the property, the court Aquino, as successor-in-interest of respondent
had lost jurisdiction over the case. PODC, had redeemed the property on June 7,
2002 in accordance with Section 6 of Act No. 3135, as
On November 27, 2003, respondents filed before the amended, and in relation to Section 27(a), Rule 39 of
CA their Joint Notice of Appeal[49] from the Rules of Court. Thus, although the Certificate of
the November 10, 2003 Order of the RTC in LRC No. Redemption was not registered before the Register
890. The appeal was docketed as CA-G.R. CV No. of Deeds, he was entitled to the possession thereof;
81607. the registration of the Certificate of Redemption in
the Office of the Register of Deeds is merely required
On November 28, 2003, petitioner filed a to bind third persons. According to the CA,
Manifestation,[50] stating that under Section 47 of petitioner may not refuse the redemption by
R.A. No. 8791, the period to exercise the right to respondent Aquino because the right of petitioner
redeem shall be until but not after the registration of over the property was merely inchoate until after the
redemption period had lapsed without the right and certiorari on the same issues and
substantially the same set of facts.
being exercised by those allowed by law.
Petitioner moved for the reconsideration of Whether or not the Court of Appeals
committed serious error when it
its decision on the ground that, under Section 47 of ruled on a matter that was not and
R.A. No. 8791, respondent PODC had only up to the could not have been submitted for its
registration of the Certificate of Foreclosure Sale adjudication.
(June 7, 2001) but not more than three (3) months
from the public auction, whichever is earlier, within
which to redeem the property; respondent PODC, IV
Whether or not the Honorable Court
on the other hand, assigned its right to redeem the
is precluded from reviewing the
property on May 11, 2002, long after the redemption factual findings of the Court of
period had expired; hence, respondent PODC had Appeals.
no more right to assign it to respondent
Aquino. Consequently, the latter had no right to Whether or not the petitioner SAFER
redeem the property, and the Certificate of Bank, as well as the Honorable Court,
Redemption executed by the Ex-Officio Sheriff was is precluded from applying the
governing law, under which the
null and void. Moreover, respondent Aquino failed redemption period had clearly
to pay the correct amount of the redemption expired.[56]
price. Petitioner claimed that it acted in good faith
when it had its Affidavit of Consolidation registered On the first issue, petitioner avers that the
in the Register of Deeds. In sum, petitioner ascribes December 20, 2002 Order of the RTC granting the
error on the part of the CA in nullifying the order of writ of possession in its favor was final; hence, the
the RTC. remedy of respondents herein, as oppositors below,
was to appeal to the CA and not to file a special civil
However, the CA denied the motion of action for certiorari. In fact, petitioner asserts, the
petitioner on the ground that by invoking Section 47 writ of possession issued by the RTC had already
of R.A. No. 8791, it thereby changed its theory on been implemented when respondents filed their
appeal which, as held by this Court in Dalumpines v. petition in the CA on December 10, 2003.
Court of Appeals,[54] is prohibited.[55]
Petitioner also claims that the assailed order
Petitioner SFRBI then filed a petition for review of the RTC was in accordance with the law and the
on certiorari with this Court for the reversal of the Rules of Court; even if it is merely an error of
Decision and Resolution of the CA, and raised the judgment and not a jurisdictional error, resort to a
following issues: petition for certiorari was
inappropriate. Respondents were, thus, proscribed
I from filing a petition for certiorari in the CA since the
Whether or not the Court of Appeals
seriously erred when it sanctioned appeal was an adequate and speedy remedy in the
the Respondents resort ordinary course of law and, indeed, they appealed
to Certiorari under Rule 65 of the the November 10, 2003 Order of the RTC in LRC No.
Revised Rules of Court, questioning
890 to the CA in CA-G.R. CV No. 81607. It had also
a final order and not an interlocutory
order of the RTC. posted a bond in the RTC to answer for any
damages. The ruling of this Court in City of Manila v.
Serrano[57] is, therefore, not applicable.
Whether or not the respondents are
guilty of forum shopping by taking Petitioner further avers that the CA erred in
both the remedy of appeal applying Act No. 3135, as amended, instead of

Section 47 of R.A. No. 8791, the General Banking Act
of 2000. Respondent PODC had the right to redeem Petitioner further maintains that respondents filed
the property not later than June 7, their petition for certiorari in the CA and delineated
2001. Undisputably, respondent PODC failed to the issues to be resolved. It did not change its theory
redeem the property before the registration of the in the CA when it filed its motion for reconsideration
Certificate of Sale; hence, when respondent PODC of the CA decision. Citing the ruling in Rivera v.
executed the deed of assignment on May 11, 2002 in Court of Appeals,[58] petitioner
favor of respondent Aquino, it had no more right to avers that a theory of the case is that which refers to
redeem the property. the facts on which the cause of action is based. The
Thus, it could not have assigned the right to redeem facts are those alleged in the complaint and
the property to respondent Aquino. The latter satisfactorily proven at the trial. It insists that it did
redeemed the property only on June 7, 2002, long not change the set of facts that it submitted and
after the Certificate of Sale was registered on June 7, presented to the CA. It was not estopped from citing
2001. Since there was no valid redemption of the Section 47 of R.A. No. 8791. It had posited in the RTC
property by respondent Aquino, petitioner claimed that respondents failed to redeem the property
that it was entitled to the writ of possession of the before the expiration of the redemption
property. It further insisted that the RTC, acting as period. Besides, as held by this Court in Lianga
a Land Registration Court, had limited jurisdiction; Lumber Company v. Lianga Timber Co., Inc.,[59] a party
it had no jurisdiction to resolve the issues on the may change his theory on appeal when the factual
validity of the deed of assignment and the legality of basis thereof would not require presentation of any
respondent Aquinos redemption of the property, as further evidence by the adverse party to enable it to
well as its ownership. Only the RTC in the exercise properly meet the issue raised in the new
of its general jurisdiction in Civil Case No. 12765 theory. The failure of a party to invoke an applicable
(where petitioner assailed the deed of assignment law in a given case does not create a vested right,
and the Certificate of Redemption executed by and an erroneous interpretation does not give rise to
the Ex-Officio Sheriff) was vested with jurisdiction to estoppel. Even if petitioner did not invoke R.A. No.
resolve these issues. In resolving these issues, the 8791, it behooved the CA to apply the law before it,
CA thereby preempted the RTC in Civil Case No. prescinding from the theory advocated by the
12765 and deprived it of due process. In any event, parties. Neither may respondents invoke
according to petitioner, the pronouncement of the estoppel. They were aware of the provisions of the
CA on the validity of the Deed of Assignment and law as well as the facts and circumstances
Certificate of Redemption was merely an obiter warranting the application thereof.
dictum. Petitioner also imputes forum shopping to
respondents because the latter raised the issue of
Petitioner posits that the CAs reliance on the rulings possession in both CA-G.R. SP No. 75787 and CA-
of this Court in Rivero and Barican was erroneous G.R. CV No. 81607.Petitioner also accuses
because the right of third parties holding the respondents of using the decision in CA-G.R. SP No.
property adverse to respondent PODC was not 75787 to support their contention in CA-G.R. CV No.
involved. Neither was the pendency of 81607. It further contends that the writ of possession
the consulta of the Register of Deeds in the LRA a bar issued by the RTC was void.
to the issuance of a writ of possession in its favor by
the RTC acting as a land registration court. It was the For their part, respondents aver that the RTC
ministerial duty of the RTC to issue a writ of committed grave abuse of its discretion in issuing
possession over the property to petitioner as the December 20, 2002 and February 18,
purchaser at the foreclosure sale during and after 2003 Orders. Hence, the decision of the CA was in
the redemption period. accord with the law and the Rules of Court. They

assert that given the circumstances obtaining in this with it in the lower court.[61] The remedy to question
case, their petition for certiorari was a final order is appeal under Rule 41 of the Rules of
proper. Although they had the right to appeal the Court.
orders of the RTC, the same was not a speedy and
adequate We agree with petitioners contention that
remedy. They insist that they were not guilty of the December 20, 2002 Order of the RTC granting
forum shopping because the only issue in CA-G.R. the petition for a writ of possession is final. The
CV No. 81607 was the validity of the Order of the remedy of respondents was to appeal to the CA by
RTC dated November 10, 2003, which denied their filing their notice of appeal within the period
motion to quash the writ of possession. On the other therefor.[62] Indeed, when the RTC denied
hand, challenged in CA-G.R. SP No. 75787 was the on November 10, 2003 the motion of respondents to
Order of the RTC granting the petition for a writ of quash the writ the court had earlier issued,
possession. Since the Ex-Officio Sheriff declared in respondents appealed to the CA under Rule 41 of
the Certificate of Redemption that respondent the Rules of Court. The appeal was docketed as CA-
Aquino redeemed the property within the one-year G.R. CV No. 81607. Respondents did not file a
period, petitioner was estopped from relying on supplemental petition in CA-G.R. SP No. 75787.
Section 47 of R.A. No. 8791. Respondents point out
that in the RTC and the CA, petitioner had insisted The reliance of the CA in City of Manila v.
that respondent Aquino had one (1) year from June Serrano[63] is misplaced. In that case, the trial court
7, 2001 within which to redeem the property as issued the writ of possession in connection with a
provided in Act No. 3135, as amended; thus, complaint for expropriation under Rule 67 of the
petitioner was proscribed from changing the theory Rules of Court. Such a writ is interlocutory in
it pursued in the RTC and the CA. Moreover, under nature.[64] On the other hand, an order granting a
Section 71 of R.A. No. 8791, redemption by entities writ of possession under Act No. 3135, as amended,
of property mortgaged is governed by R.A. No. is of a different species. The latter order is final,
7353, under which the period of redemption is one hence, appealable.[65] Even if the trial court erred in
year from the registration of the Certificate of Sale. granting a petition for a writ of possession, such an
error is merely an error of judgment correctible by
The Ruling of the Court ordinary appeal and not by a petition for a writ
of certiorari.[66] Such writ cannot be legally used for
The petition is meritorious. any other purpose.

The CA erred in holding that the Order of the RTC Certiorari is a remedy narrow in its scope and
granting the petition for a writ of possession was inflexible in character. It is not a general utility tool
merely interlocutory. Interlocutory orders are those in the legal workshop.[67] Certiorari will issue only to
that determine incidental matters and which do not correct errors of jurisdiction and not to correct errors
touch on the merits of the case or put an end to the of judgment. An error of judgment is one which the
proceedings. A petition for certiorari under Rule 65 court may commit in the exercise of its jurisdiction,
of the Rules of Court is the proper remedy to and which error is reviewable only by an
question an improvident interlocutory order.[60] On appeal. Error of jurisdiction is one where the act
the other hand, a final order is one that disposes of complained of was issued by the court
the whole matter or terminates the particular without or in excess of jurisdiction and which error
proceedings or action leaving nothing to be done but is correctible only by the extraordinary writ
to enforce by execution what has been of certiorari. As long as the court acts within its
determined. It is one that finally disposes of the jurisdiction, any alleged errors committed in the
pending action so that nothing more can be done exercise of its discretion will amount to nothing

more than mere errors of judgment, correctible by specifying the damages suffered by
him, because the mortgage was not
an appeal if the aggrieved party raised factual and violated or the sale was not made in
legal issues; or a petition for review under Rule 45 of accordance with the provisions
the Rules of Court if only questions of law are hereof, and the court shall take
cognizance of this petition in
involved.[68] accordance with the summary
procedure provided for in section
A cert writ may be issued if the court or one hundred and twelve of Act
Numbered Four hundred and
quasi-judicial body issues an order with grave abuse
ninety-six; and if it finds the
of discretion amounting to excess or lack of complaint of the debtor justified, it
jurisdiction. Grave abuse of discretion implies such shall dispose in his favor of all or part
of the bond furnished by the person
capricious and whimsical exercise of judgment as is
who obtained possession. Either of
equivalent to lack of jurisdiction or, in other words, the parties may appeal from the
where the power is exercised in an arbitrary manner order of the judge in accordance with
section fourteen of Act Numbered
by reason of passion, prejudice, or personal hostility,
Four hundred and ninety-six; but the
and it must be so patent or gross as to amount to an order of possession shall continue in
evasion of a positive duty or to a virtual refusal to effect during the pendency of the
perform the duty enjoined or to act at all in appeal.

contemplation of law.[69] Mere abuse of discretion is

not enough. Moreover, a party is entitled to a writ The purchaser may appeal the order to the CA if his

of certiorari only if there is no appeal nor any plain, petition is denied by the RTC. However, during the

speedy or adequate relief in the ordinary course of pendency of the appeal, the purchaser must be

law. placed in possession of the property, such

possession being predicated on the right of

The raison detre for the rule is that when a court ownership.[70]

exercises its jurisdiction, an error committed while

so engaged does not deprive it of the jurisdiction The threshold issue between petitioner and

being exercised when the error was committed. If it respondents in the RTC was the correct amount of

did, every error committed by a court would redemption money under Section 47 of R.A. No.

deprive it of its jurisdiction and every erroneous 8791. Respondent Aquino had the right to file an

judgment would be a void judgment. In such a action against petitioner in the RTC in the exercise

situation, the administration of justice would not of its general jurisdiction to enforce redemption

survive. Hence, where the issue or question within the redemption period to preserve its right to

involved affects the wisdom or legal soundness of redeem the foreclosed property.[71] It bears stressing

the decision not the jurisdiction of the court to that the controversy between the parties relates to

render said decision the same is beyond the the precise amount of redemption: petitioner

province of a special civil action for certiorari. contended that, under the real estate mortgage
executed by respondent PODC in its favor, the loan

Under Section 8, Act No. 3135, as amended, the account of the spouses Garbes was secured by the

debtor-mortgagor may file a motion to set aside a property covered by said deed; on the other hand,

writ of execution: respondents averred that only the loan account of

respondent PODC was secured by the mortgage of
Section 8. Setting aside of sale and writ its property. Indeed, the parties could have raised
of possession. The debtor may, in the the issue of the redemption period under the second
proceedings in which possession was
requested, but not later than thirty paragraph of Section 47 of R.A. No. 8791. The
days after the purchaser was given provision reads:
possession, petition that the sale be set Notwithstanding Act 3135, juridical
aside and the writ of possession cancelled, persons whose property is being sold
pursuant to an extrajudicial SO ORDERED.
foreclosure, shall have the right to
redeem the property in accordance
with this provision until, but not
after, the registration of the certificate
of foreclosure sale with the
applicable Register of Deeds which in
no case shall be more than three (3)
months after foreclosure, whichever
is earlier. Owners of property that
has been sold in a foreclosure sale
prior to the effectivity of this Act shall
retain their redemption rights until
their expiration.

The ministerial duty of the RTC to issue a writ of

possession does not become discretionary simply
because the Register of Deeds had elevated
in consulta to the LRA the question of whether the
Torrens title should be issued in favor of petitioner
whose Affidavit of Consolidation was registered in
the Office of the Register of Deeds, or in favor of
respondent Aquino who claimed to have redeemed
the property on June 7, 2002 as gleaned from the
Certificate of Redemption of the Ex-Officio Sheriff
but registered only on June 17, 2002. Respondent
Aquino claimed to have redeemed the property with
the correct redemption price and within the one year
period of redemption. The LRA himself admitted
that the issue of whether respondent Aquino had
remitted the correct redemption price is a matter
that should be resolved by the regular courts.[72] The
LRA was vested with jurisdiction to resolve only the
registrability of the Affidavit of Consolidation
executed by petitioner and the Certificate of
Redemption executed by the Ex-Officio Sheriff.

We need not rule on the issue of whether respondent

Aquino had lawfully redeemed the property as
provided in Section 47 of R.A. No. 8791. This issue
shall be passed upon by the RTC in Civil Case No.
12785 after the parties present their testimonial and
documentary evidence.


is GRANTED. The Decision of the Court of Appeals