SPS. EDGAR AND DINAH G.R. No. 161319
OMENGAN,
Petitioners, Present:
PUNO,
C.J.,
SANDOVAL-GUTIERREZ,
Working Chairperson,
- v e r s u
s - CORONA,
AZCUNA and
GARCIA, JJ.
PHILIPPPINE NATIONAL BANK,
MANUEL S. ACIERTO,*
Respondents. Promulgated:
January
23, 2007
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D E C I S I O N
CORONA, J.
This petition for review on
certiorari[1] seeks a
review and reversal of the Court of Appeals (CA) decision[2] and
resolution[3] in
CA-G.R. CV No. 71302.
In
October 1996, the Philippine National Bank (PNB) Tabuk
(Kalinga) Branch approved petitioners-spouses’
application for a revolving credit line of P3 million. The loan was secured by two residential lots
in Tabuk, Kalinga-Apayao
covered by Transfer Certificate of Title (TCT) Nos. 12954 and 12112. The certificates of title, issued by the
Registry of Deeds of the Province of Kalinga-Apayao,
were in the name of Edgar[4] Omengan married to Dinah Omengan.
The
first P2.5 million was released by Branch Manager Henry Montalvo on three separate dates. The release of the final half million was,
however, withheld by Montalvo because of a letter
allegedly sent by Edgar’s sisters. It read:
Appas, Tabuk
Kalinga
7
November 1996
The Manager
Philippine National
Bank
Tabuk Branch
Poblacion, Tabuk
Kalinga
Sir:
This
refers to the land at Appas, Tabuk
in the name of our brother, Edgar Omengan, which was
mortgaged to [the] Bank in the amount of Three Million Pesos (P3,000,000.00),
the sum of [P2.5 Million] had already been released and received by our
brother, Edgar.
In this connection, it is requested
that the remaining unreleased balance of [half a million pesos] be held in
abeyance pending an understanding by the rest of the brothers and sisters of
Edgar. Please be informed that the property mortgaged, while in the name of
Edgar Omengan, is owned in co-ownership by all the
children of the late Roberto and Elnora Omengan. The lawyer who drafted the document registering
the subject property under Edgar’s name can attest to this fact. We had a prior understanding with Edgar in
allowing him to make use of the property as collateral, but he refuses to
comply with such arrangement. Hence,
this letter. (emphasis ours)
Very
truly yours,
(Sgd.)
Shirley O. Gamon (Sgd.) Imogene O.
Bangao
(Sgd.) Caroline O. Salicob (Sgd.) Alice O. Claver[5]
Montalvo was eventually replaced as branch
manager by Manuel Acierto who released the remaining
half million pesos to petitioners on May 2, 1997. Acierto
also recommended the approval of a P2 million increase in their credit line
to the Cagayan Valley Business Center Credit
Committee in Santiago City.
The credit committee approved the
increase of petitioners’ credit line (from P3 million to P5
million), provided Edgar’s sisters gave their conformity. Acierto
informed petitioners of the conditional approval of their credit line.
But petitioners failed to secure the
consent of Edgar’s sisters; hence, PNB put on hold the release of the
additional P2 million.
On October 7, 1998, Edgar Omengan demanded the release of the P2 million. He claimed that the condition for its release
was not part of his credit line agreement with PNB because it was added without
his consent. PNB denied his request.
On March 3, 1999, petitioners filed a
complaint for breach of contract and damages against PNB with the Regional
Trial Court (RTC), Branch 25 in Tabuk, Kalinga. After trial, the court decided in favor of
petitioners.
Accordingly,
judgment is hereby rendered finding in favor of [petitioners.] [PNB is
ordered]:
1)
To release without delay in favor of [petitioners] the
amount of P2,000,000.00 to complete the P5,000,000.00 credit line
agreement;
2)
To pay [petitioners] the amount of P2,760,000.00
representing the losses and/or expected income of the [petitioners] for three
years;
3)
To pay lawful interest, until the amount aforementioned
on paragraphs 1 and 2 above are fully paid; and
4)
To pay the costs.
SO ORDERED.[6]
The CA, however, on June 18, 2003,
reversed and set aside the RTC decision
dated April 21, 2001.[7]
Petitioners now contend that the CA
erred when it did not sustain the finding of breach of contract by the RTC. [8]
The existence of breach of contract is a factual matter not
usually reviewed in a petition filed under Rule 45. But since the RTC and the
CA had contradictory findings, we are constrained to rule on this issue.
Was there a breach of contract? There
was none.
Breach of contract is defined as
follows:
[It]
is the “failure without legal reason to comply with the terms of a contract.”
It is also defined as the “[f]ailure, without legal
excuse, to perform any promise which forms the whole or part of the contract.”[9]
In this case, the parties agreed on a
P3 million credit line. This sum
was completely released to petitioners who subsequently applied[10] for an
increase in their credit line. This was conditionally approved by PNB’s credit committee. For all intents and purposes,
petitioners sought an additional loan.
The condition attached to the
increase in credit line requiring petitioners to acquire the conformity of
Edgar’s sisters was never acknowledged and accepted by petitioners. Thus, as to the additional loan, no meeting
of the minds actually occurred and no breach of contract could be attributed to
PNB. There was no perfected contract over
the increase in credit line.
“[T]he business of a bank is one affected with
public interest, for which reason the bank should guard against loss due to
negligence or bad faith. In approving the loan of an applicant, the bank
concerns itself with proper [information] regarding its debtors.”[11] Any
investigation previously conducted on the property offered by petitioners as
collateral did not preclude PNB from considering new information on the same
property as security for a subsequent loan.
The credit and property investigation for the original loan of P3
million did not oblige PNB to grant and release any additional loan. At the time the original P3 million
credit line was approved, the title to the property appeared to pertain
exclusively to petitioners. By the time
the application for an increase was considered, however, PNB already had reason
to suspect petitioners’ claim of exclusive ownership.
A
mortgagee can rely on what appears on the certificate of title presented by the
mortgagor and an innocent mortgagee is not expected to conduct an exhaustive
investigation on the history of the mortgagor’s title. This rule is strictly
applied to banking institutions. xxx
Banks, indeed, should exercise
more care and prudence in dealing even with registered lands, than private
individuals, as their business is one affected with public interest. xxx Thus,
this Court clarified that the rule that persons dealing with registered lands
can rely solely on the certificate of title does not apply to banks.[12]
(emphasis supplied)
Here, PNB had acquired information
sufficient to induce a reasonably prudent person to inquire into the status of
the title over the subject property.
Instead of defending their position, petitioners merely insisted that
reliance on the face of the certificate of title (in their name) was sufficient. This principle, as already mentioned, was not
applicable to financial institutions like PNB.
In truth, petitioners had every
chance to turn the situation in their favor if, as they said, they really owned
the subject property alone, to the exclusion of any other owner(s). Unfortunately, all they offered were bare
denials of the co-ownership claimed by Edgar’s sisters.
PNB exercised reasonable prudence in
requiring the above-mentioned condition for the release of the additional
loan. If the condition proved
unacceptable to petitioners, the parties could have discussed other terms
instead of making an obstinate and outright demand for the release of the
additional amount. If the alleged
co-ownership in fact had no leg to stand on, petitioners could have introduced
evidence other than a simple denial of its existence.
Since PNB did not breach any contract
and since it exercised the degree of diligence expected of it, it cannot be
held liable for damages.
WHEREFORE, the decision and resolution of the
Court of Appeals in CA-G.R. CV No. 71302 are hereby AFFIRMED.
Costs
against petitioners.
SO
ORDERED.
RENATO C. CORONA
Associate
Justice
WE CONCUR:
REYNATO S. PUNO
Chief
Justice
ANGELINA SANDOVAL-GUTIERREZ ADOLFO S. AZCUNA
Associate Justice Associate Justice
Working Chairperson
CANCIO C. GARCIA
Associate Justice
Pursuant to Section 13, Article VIII of
the Constitution, I certify that the conclusions in the above decision had been
reached in consultation before the case was assigned to the writer of the
opinion of the Court’s Division.
REYNATO S. PUNO
Chief Justice
* Montalvo and Acierto were made parties to the petition in their capacity as branch managers of PNB, Tabuk, Kalinga.
[1] Filed under Rule 45 of the Rules of Court.
[2] Penned by Associate Justice Eugenio S. Labitoria and concurred in by Associate Justices Andres B. Reyes, Jr. and Regalado E. Maambong of the Fifth Division of the Court of Appeals. Annex “A,” rollo, pp. 40-47.
[3] Annex “B,” rollo, p. 49.
[4] The CA Decision stated that the properties were registered in the name of “plaintiff-appellee Danilo Omengan xxx.” We assume that this was a mere typographical error and that the CA referred to Edgar since no other “Danilo” was mentioned in the records.
[5] Annex “A,” rollo, pp. 41-42.
[6] Annex “A,” rollo, p. 43.
[7] Id., at 47.
[8] Petition, rollo, pp. 17-33.
[9] Cathay Pacific Airways, Ltd. v. Sps. Vasquez, 447 Phil. 306, 320 (2003). Citations omitted.
[10] Petition, rollo, p. 15.
[11] United Coconut Planters Bank v. Ramos, G.R. 147800, 11 November 2003, 415 SCRA 596, 609.
[12] Heirs of Eduardo Manlapat v. Court of Appeals G.R. No. 125585, June 8, 2005, 459 SCRA 412, 433. Citations omitted.