THIRD DIVISION
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TRADERS ROYAL BANK, Petitioner, - versus
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G.R. No. 172020 Present: CARPIO MORALES, J., Chairperson, BRION, BERSAMIN, VILLARAMA, JR., and SERENO, JJ. |
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NORBERTO CASTAÑARES and MILAGROS CASTAÑARES, Respondents. |
Promulgated: December 6, 2010 |
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DECISION
VILLARAMA, JR., J.:
Assailed
in this petition for review under Rule 45 of the 1997 Rules of Civil
Procedure, as amended, is the Decision[1] dated January 11,
2006 of the Court of Appeals (CA) in CA-G.R. CV No. 67257 which reversed the
Joint Decision[2]
dated August 26, 1998 of the Regional Trial Court (RTC) of Cebu City, Branch 13
in Civil Case Nos. R-22608 and CEB-112.
The Facts
Respondent-spouses
Norberto and Milagros Castañares are engaged in the business of exporting shell
crafts and other handicrafts. Between
1977 and 1978, respondents obtained from petitioner Traders Royal Bank various
loans and credit accommodations. Respondents
executed two real estate mortgages (REMs) dated P35,000.00 although the mortgage
deeds indicated the principal amounts as P86,000.00 and P60,000.00.[3]
Respondents
were further granted additional funds on various dates under promissory notes[4] they executed in
favor of the petitioner:
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Type
of Loan |
Date
Granted |
Amount |
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Packing Credit |
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P19,000.00 |
|
Packing Credit |
|
P25,000.00 |
|
Packing Credit |
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P12,500.00 |
|
Packing Credit |
|
P 2,900.00 |
|
Packing Credit |
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P18,000.00 |
|
Packing Credit |
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P23,000.00 |
On P1,150.00 from respondents’ current account to their savings account,
which was erroneously posted as P1,500.00 but later corrected to reflect
the figure P1,150.00 in the savings account passbook. By the second quarter of 1978, the loans
began to mature and the letters of credit against which the packing advances
were granted started to expire. Meanwhile,
on December 7, 1979, petitioner, without notifying the respondents, applied to
the payment of respondents’ outstanding obligations the sum of $4,220.00 or P30,930.49
which was remitted to the respondents thru telegraphic transfer from AMROBANK,
Amsterdam by one Richard Wagner. The
aforesaid entries in the passbook of respondents and the $4,220.00 telegraphic
transfer were the subject of respondents’ letter-complaint[5]
dated
For failure of the respondents to pay
their outstanding loans with petitioner, the latter proceeded with the
extrajudicial foreclosure of the real estate mortgages.[6] Thereafter, a
Certificate of Sale[7]
covering all the mortgaged properties was issued by Deputy Sheriff Wilfredo P. Borces
in favor of petitioner as the lone bidder for P117,000.00 during the
auction sale conducted on November 24, 1981.
Said certificate of sale was registered with the Office of the Register
of Deeds on
On P200,397.78),
respondents were still indebted to petitioner for the sum of P83,397.68.[8] Respondents filed their Answer With
Counterclaim on
On P2,584.27 debited from their
savings account passbook and the equivalent amount of $4,220.00 telegraphic
transfer, and in addition, $55,258.85 representing the damage suffered by the
respondents from letters of credit left un-negotiated because of petitioner’s
refusal to pay the $4,220.00 demanded by the respondents.[10]
The cases were consolidated before
Branch 13, RTC of Cebu City.
Ruling of the RTC
In a Joint Decision[11] dated
WHEREFORE, in view of the foregoing, judgment is
hereby rendered in Civil Case No. R-22608 in favor of the plaintiff and against
the defendants directing the defendants jointly and solidarily to pay plaintiff
the sum of P83,397.68 with legal rate of interest to be computed from P10,000.00 plus litigation expenses in the
amount of P2,500.00.
With cost against defendants.
In CEB-112, judgment is hereby rendered dismissing the
complaint.
With cost against the plaintiff.
SO ORDERED.[12]
The trial court
found that despite respondents’ insistence that the REM covered only a separate
loan for P86,000.00 which they believed petitioner committed to lend
them, the evidence clearly shows that said REM was constituted as security for all
the promissory notes. No separate demand
was made for the amount of P86,000.00 stated in the REM, as the demand
was limited to the amounts of the promissory notes. The trial court further noted that
respondents never questioned the judgment for extrajudicial foreclosure, the
certificate of sale and the deficiency in that case.[13]
With respect to the passbook entries,
the trial court stated that no objection thereto was made by the respondents
until five years later when in a letter dated P1,150.00)
in the passbook to his account with petitioner. More important, respondent Norberto Castañares
in his testimony admitted that the matter was already clarified to him by
petitioner and that the latter had the right to apply his deposit to his loan
accounts. Admittedly, his complaint has
to do more with the lack of consent on his part and the non-issuance of
official receipt. However, he did not
follow up his request for official receipt as he did not want to be going back
and forth to the bank.[14]
CA Ruling
With the trial court’s denial of
their motion for reconsideration, respondents appealed to the CA. Finding merit in respondents’ arguments, the appellate
court set aside the trial court’s judgment under its Decision[15] dated
WHEREFORE, in view of the foregoing premises, judgment
is hereby rendered by us GRANTING the appeal filed in this case and REVERSING
AND SETTING ASIDE the Joint Decision dated
SO ORDERED.[16]
The CA held that the RTC overlooked
the fact that there were no adequate evidence presented to prove that
petitioner released in full to the respondents the proceeds of the REM
loan. Citing Filipinas Marble Corporation v. Intermediate Appellate Court[17] and Naguiat v. Court of Appeals,[18] the
appellate court declared that where there was failure of the mortgagee bank to
deliver the consideration for which the mortgage was executed, the contract of
loan was invalid and consequently the accessory contract of mortgage is
likewise null and void. In this case,
only P35,000.00 out of the P86,000.00 stated in the REM dated
The CA thus held that petitioner’s
remedy would be to file a collection case on the unpaid promissory notes which
were not secured by the REMs.
As to the $4,220.00 telegraphic
transfer, the CA ruled that petitioner had no basis for withholding and
applying the said amount to respondents’ loan account. Said transaction was separate and distinct
from the contract of loan between petitioner and respondents. Petitioner had no authority to convert the
said telegraphic transfer into cash since the participation of respondents was
necessary to sign and indorse the disbursement voucher and check. Moreover, petitioner was not transparent in
its actions as it did not inform the respondents of its intention to apply the
proceeds of the telegraphic transfer to their loan account and worse, it did
not even present an official receipt to prove payment. Section 5 of Republic Act No. 6426,
otherwise known as the Foreign Currency Deposit Act, provides that there
shall be no restriction on the withdrawability by the depositor of his deposit
or the transferability of the same abroad except those arising from contract
between the depositor and the bank.[21]
The Petition
Petitioner
raised the following grounds in the review of the CA decision:
I. THE COURT OF APPEALS ERRED IN HOLDING THAT THE REAL
ESTATE MORTGAGE DATED 18 APRIL 1977 IS VALID ONLY IN PART TO THE EXTENT OF
PHP35,000.00 WHICH IS ALLEGEDLY THE AMOUNT PROVED TO HAVE BEEN ACTUALLY
RELEASED TO RESPONDENTS OUT OF THE SUM OF PHP86,000.00.
II. THE COURT
OF APPEALS ERRED IN DECLARING AS NULL AND VOID THE REAL ESTATE MORTGAGE DATED
III. THE COURT
OF APPEALS ERRED IN HOLDING THAT PETITIONER HAD NO BASIS IN WITHHOLDING AND
SUBSEQUENTLY APPLYING IN PAYMENT OF RESPONDENTS’ OVERDUE ACCOUNT IN THE
TELEGRAPHIC TRANSFER IN THE AMOUNT OF U.S.$4,220.00.[22]
Petitioner
contends that the CA overlooked the specific stipulation in the REMs that the
mortgage extends not only to the amounts specified therein but also to loans or
credits subsequently granted, which include the packing credits and export advances
obtained by the respondents. Moreover,
the amounts indicated on the REMs need not exactly be the same amounts that
should be released and covered by checks or credit memos, the same being only
the maximum sum or “ceiling” which the REM secures, as explained by
petitioner’s witness, Ms. Blesy Nemeño.
Her testimony does not prove that the proceeds of the loans were not
released in full, as no credit memos in the specific amounts received by the
respondents can be presented.
Petitioner
argues that the rulings cited by the CA do not at all support its conclusion
that the promissory notes were totally unrelated to the REMs. In the Acme
case, the pronouncement was that the after-incurred obligations must, at
the time they are contracted, only be accurately described in a proper
instrument as in the case of a promissory note.
The confusion was brought by the use in the CA decision of the word
“therein” which is not found in the text of the Acme ruling. Besides, it is
way too impossible that future loans can be accurately described, as the CA
opined, at the time that a deed of real estate mortgage is executed. The CA’s reliance on the case of Filipinas Marble Corporation, is
likewise misplaced as it finds no application under the facts obtaining in the
present case. The misappropriation by some individuals of the loan proceeds
secured by petitioner was the consideration which compelled this Court to rule
that there was failure on the part of DBP to deliver the consideration for
which the mortgage was executed.
Similarly, the case of Naguiat is
inapplicable in that there was evidence that an agent of the creditor withheld
from the debtor the checks representing the proceeds of the loan pending
delivery of additional collateral.
Finally,
petitioner reiterates that it had the right by way of set-off the telegraphic
transfer in the sum of $4,220.00 against the unpaid loan account of
respondents. Citing Bank of the Philippine Islands v. Court of
Appeals,[23] petitioner
asserts that they are bound principally as both creditors and debtors of each
other, the debts consisting of a sum of
money, both due, liquidated and demandable, and are not claimed by a third
person. Hence, the RTC did not err in
holding that petitioner validly applied the amount of P30,930.20 (peso
equivalent of $4,220.00) to the loan account of the respondents.
Our Ruling
We
rule for the petitioner.
The
subject REMs contain the following provision:
That, for and in consideration of certain loans,
overdrafts and other credit accommodations obtained, from the Mortgagee by the
Mortgagor and/or SPS. NORBERTO V. CASTAÑARES & MILAGROS M. CASTAÑARES and to
secure the payment of the same, the principal of all of which is hereby
fixed at EIGHTY-SIX THOUSAND PESOS ONLY – (P86,000.00) Pesos, Philippine
Currency, as well as those that the
Mortgagee may hereafter extend to the
Mortgagor x x x, including interest and expenses or any other obligation owing to the Mortgagee, whether direct or
indirect, principal or secondary, as appears in the accounts, books and records
of the Mortgagee x x x.[24] (Emphasis
supplied.)
The
above stipulation is also known as “dragnet clause” or “blanket mortgage clause”
in American jurisprudence that would subsume all debts of past and future
origins. It has been held as a valid and
legal undertaking, the amounts specified as consideration in the contracts do
not limit the amount for which the pledge or mortgage stands as security, if
from the four corners of the instrument, the intent to secure future and other
indebtedness can be gathered. A pledge
or mortgage given to secure future advancements is a continuing security and is
not discharged by the repayment of the amount named in the mortgage until the
full amount of all advancements shall have been paid.[25]
A
“dragnet clause” operates as a convenience and accommodation to the borrowers
as it makes available additional funds without their having to execute
additional security documents, thereby saving time, travel, loan closing costs,
costs of extra legal services, recording fees, et cetera.[26]
While a real
estate mortgage may exceptionally secure future loans or advancements, these
future debts must be sufficiently described in the mortgage contract. An obligation is not secured by a mortgage
unless it comes fairly within the terms of the mortgage contract.[27]
In
holding that the REMs were null and void, the CA opined that the full amount of
the principal loan stated in the deed should have been released in full,
sustaining the position of the respondents that the promissory notes were not
secured by the mortgage and unrelated to it.
However, a reading of the afore-quoted provision of the REMs shows that
its terms are broad enough to cover packing credits and export advances granted
by the petitioner to respondents. That
the respondents subsequently availed of letters of credit and export advances
in various amounts as reflected in the promissory notes, buttressed the claim
of petitioner that the amounts of P86,000.00 and P60,000.00
stated in the REMs merely represent the maximum total loans which will be
secured by the mortgage. This must be so
as respondents confirmed that the mortgage was constituted for the purpose of
obtaining additional capital as dictated by the needs of their export business.
Significantly, no complaint was made by
the respondents as to the non-release of P86,000.00 and P60,000.00,
in full, simultaneous or immediately following the execution of the REMs --
under a single promissory note each equivalent to the said sums -- and no demand for the said specific amounts was ever made by the
petitioner. Even the letter-complaint
sent by respondents to the Central Bank almost a year after the extrajudicial foreclosure sale mentioned only the
questioned entries in their passbook and the $4,220.00 telegraphic transfer.
Considering that respondents deemed it a serious “banking malpractice” for
petitioner not to release in full the loan amount stated in the REMs, it can
only be inferred that respondents themselves understood that the P86,000.00
and P60,000.00 indicated in the REMs was intended merely to fix a
ceiling for the loan accommodations which will be secured thereby and not the
actual principal loan to be released at one time. Thus, the RTC did not err in upholding the
validity of the REMs and ordering the respondents to pay the deficiency in the
foreclosure sale to satisfy the remaining mortgage indebtedness.
The
cases relied upon by the CA are all inapplicable to the present
controversy. In Filipinas Marble Corporation, we held that pending the outcome of
litigation between DBP which together with Bancom officers were alleged by the
petitioner-mortgagor to have misspent and misappropriated the $5 million loan
granted by DBP, the provisions of P.D. No. 385 prohibiting injunctions against
foreclosures by government financial institutions, cannot be automatically applied. Foreclosure of the mortgaged properties for
the whole amount of the loan was deemed prejudicial to the petitioner, its
employees and their families since the true amount of the loan which was
applied for the benefit of the petitioner can be determined only after a trial
on the merits.[28] No such act of misappropriation by corporate
officers appointed by the mortgagee is involved in this case. Besides, the respondents never denied
receiving the amounts under the promissory notes which were all covered by the
REMs and the very obligations subject of the extrajudicial
foreclosure.
As
to the ruling in Naguiat, we found therein
no compelling reason to disturb the lower courts’ finding that the lender did
not remit and the borrower did not receive the proceeds of the loan. Hence, we held the mortgage contract, being
just an accessory contract, as null and void for absence of consideration.[29] In this case, however, respondents admitted
they received all the amounts under the promissory notes presented by the
petitioner. The consideration in the
execution of the REMs consist of those credit accommodations to fund their
export transactions. Respondents as an
afterthought raised issue on the nature of the amounts of principal loan
indicated in the REMs long after these obligations have matured and the
mortgage foreclosed due to their failure to fully settle their outstanding
accounts with petitioner. Having
expressly agreed to the terms of the REMs which are phrased to secure all such loans and advancements to be
obtained from petitioner, although the principal amount stated therein were not
released at one time and under several, not just one, subsequently issued promissory notes, respondents may not be
allowed to complain later that the amounts they received were unrelated to the
REMs.
On
the issue of the $4,220.00 telegraphic transfer which was applied by the
petitioner to the loan account of respondents, we hold that the CA erred in
holding that petitioner had no authority to do so by way of compensation or set
off. In this case, the parties
stipulated on the manner of such set off in case of non-payment of the amount
due under each promissory note.
The subject promissory notes thus
provide:
In case of non-payment of this note or any
installments thereof at maturity, I/We jointly and severally, agree to pay an
additional amount equivalent to two per cent (2%) per annum of the amount due
and demandable as penalty and collection charges, in the form of liquidated
damages, until fully paid; and the further sum of ten per cent (10%) thereof in
full, without any deduction, as and for attorney’s fees whether actually
incurred or not, exclusive of costs and judicial/extrajudicial expenses;
moreover, I/We, jointly and severally, further
empower and authorize the TRADERS ROYAL BANK, at its option, and without
notice, to set-off or to apply to the payment of this note any and all funds,
which may be in its hands on deposit or otherwise belonging to anyone or all of
us, and to hold as security therefor any real or personal property, which
may be in its possession or control by virtue of any other contract.[30] (Emphasis supplied.)
Agreements for compensation of debts
or any obligations when the parties are mutually creditors and debtors are allowed
under Art. 1282 of the Civil Code even though not all the legal requisites for
legal compensation are present. Voluntary or conventional compensation is not
limited to obligations which are not yet due.[31] The only requirements for conventional
compensation are (1) that each of the parties can fully dispose of the credit
he seeks to compensate, and (2) that they agree to the extinguishment of their
mutual credits.[32] Consequently, no error was committed by the
trial court in holding that petitioner validly applied, by way of compensation,
the $4,220.00 telegraphic transfer remitted by respondents’ foreign client
through the petitioner.
WHEREFORE, the
petition is GRANTED. The Decision dated
No
pronouncement as to costs.
SO
ORDERED.
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MARTIN S. VILLARAMA, JR. Associate Justice |
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WE CONCUR: CONCHITA CARPIO MORALES Associate Justice Chairperson |
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ARTURO D.
BRION Associate Justice |
LUCAS P. BERSAMIN Associate Justice |
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MARIA Associate Justice |
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A T T E S T A T I O N
I attest 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.
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CONCHITA CARPIO MORALES Associate Justice Chairperson, Third Division |
C E R T I F I C A T I O N
Pursuant to Section
13, Article VIII of the 1987 Constitution and the Division Chairperson’s
Attestation, 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.
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RENATO C. CORONA Chief Justice |
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[1] Rollo, pp. 32-43. Penned by Associate Justice Isaias P. Dicdican and concurred in by Associate Justices Ramon M. Bato, Jr. and Apolinario D. Bruselas, Jr.
[2]
[3] Index of Exhibit for the Plaintiff (Civil Case No. R-22608), pp. 207, 228-229.
[4]
[5] Records, pp. 7-9.
[6] Supra note 3 at 230-233.
[7] Records, pp. 48-50.
[8]
[9]
[10]
[11] Supra note 2.
[12]
[13]
[14]
[15] Supra
note 1.
[16]
[17] No.
L-68010,
[18] G.R.
No. 118375,
[19] G.R.
No. 103576,
[20] Rollo, pp. 38-40.
[21]
[22]
[23] G.R. No. 116792,
[24] Supra note 3 at 228.
[25] Republic
Planters Bank v. Sarmiento, G.R. No. 170785,
[26] Prudential Bank v. Alviar, G.R. No. 150197, July 28, 2005, 464 SCRA 353, 363, cited in Union Bank of the Philippines v. Court of Appeals, G.R. No. 164910, September 30, 2005, 471 SCRA 751, 759.
[27] Cuyco v. Cuyco, G.R. No. 168736, April 19, 2006, 487 SCRA 693, 706, citing Philippine Bank of Communications v. Court of Appeals, 323 Phil. 297, 313 (1996).
[28] Supra note 17 at 185, 189-190.
[29] Supra note 18 at 599.
[30] Index of Exhibit for the Plaintiff (Civil Case No. R-22608), pp. 207, 210, 213, 216, 219, 222 and 225.
[31] Arturo M. Tolentino, Commentaries and Jurisprudence on the Civil Code of the
[32] See CKH Industrial and Development Corp. v. Court of Appeals, G.R No. 111890, May 7, 1997, 272 SCRA 333, 348, citing IV Tolentino, Civil Code of the Philippines, 1985 ed., p. 368.