Republic
of the
Supreme
Court
Manila
FIRST DIVISION
|
UNION BANK OF THE PHILIPPINES, Petitioner, - versus - SPOUSES RODOLFO T. TIU AND VICTORIA N. TIU, Respondents. |
|
G.R. Nos. 173090-91 Present: CORONA, C.J.,
Chairperson, LEONARDO-DE
CASTRO, BERSAMIN, DEL
CASTILLO, and VILLARAMA, JR., JJ. Promulgated: September
7, 2011 |
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LEONARDO-DE
CASTRO, J.:
This is a Petition for
Review on Certiorari seeking to
reverse the Joint Decision[1] of
the Court of Appeals dated February 21, 2006 in CA-G.R. CV No. 00190 and
CA-G.R. SP No. 00253, as well as the Resolution[2]
dated
The factual and
procedural antecedents of this case are as follows:
On November 21, 1995, petitioner
Union Bank of the Philippines (Union Bank) and respondent spouses Rodolfo T.
Tiu and Victoria N. Tiu (the spouses Tiu) entered into a Credit Line Agreement
(CLA) whereby Union Bank agreed to make available to the spouses Tiu credit
facilities in such amounts as may be approved.[3] From September 22, 1997 to March 26, 1998,
the spouses Tiu took out various loans pursuant to this CLA in the total amount
of three million six hundred thirty-two thousand dollars (US$3,632,000.00), as
evidenced by promissory notes:
|
PN No. |
Amount in US$ |
Date Granted |
|
87/98/111 |
72,000.00 |
|
|
87/98/108 |
84,000.00 |
|
|
87/98/152 |
320,000.00 |
|
|
87/98/075 |
150,000.00 |
|
|
87/98/211 |
32,000.00 |
|
|
87/98/071 |
110,000.00 |
|
|
87/98/107 |
135,000.00 |
02/13//98 |
|
87/98/100 |
75,000.00 |
|
|
87/98/197 |
195,000.00 |
|
|
87/97/761 |
60,000.00 |
|
|
87/97/768 |
30,000.00 |
|
|
87/97/767 |
180,000.00 |
|
|
87/97/970 |
110,000.00 |
12/29/97 |
|
87/97/747 |
50,000.00 |
09/22/97 |
|
87/96/944 |
605,000.00 |
12/19/97 |
|
87/98/191 |
470,000.00 |
|
|
87/98/198 |
505,000.00 |
|
|
87/98/090 |
449,000.00 |
|
|
|
US$3,632,000.00[4] |
|
On June 23, 1998, Union Bank advised
the spouses Tiu through a letter[5] that,
in view of the existing currency risks, the loans shall be redenominated to
their equivalent Philippine peso amount on July 15, 1998. On P41.40[6]
with interest of 19% for one year.[7]
On December 21, 1999, Union Bank
and the spouses Tiu entered into a Restructuring Agreement.[8] The Restructuring Agreement contains a clause
wherein the spouses Tiu confirmed their debt and waived any action on account
thereof. To quote said clause:
1.
Confirmation of Debt The BORROWER hereby confirms
and accepts that as of December 8, 1999, its outstanding principal indebtedness
to the BANK under the Agreement and the Notes amount to ONE HUNDRED FIFTY[-]FIVE
MILLION THREE HUNDRED SIXTY[-]FOUR THOUSAND EIGHT HUNDRED PESOS (PHP 155,364,800.00) exclusive of interests,
service and penalty charges (the Indebtedness) and further confirms the
correctness, legality, collectability and enforceability of the
Indebtedness. The BORROWER
unconditionally waives any action, demand or claim that they may otherwise have
to dispute the amount of the Indebtedness as of the date specified in this
Section, or the collectability and enforceability thereof. It is the understanding of the parties that
the BORROWERs acknowledgment, affirmation, and waiver herein are material
considerations for the BANKs agreeing to restructure the Indebtedness which
would have already become due and payable as of the above date under the terms
of the Agreement and the Notes.[9]
The restructured amount (P155,364,800.00)
is the sum of the following figures: (1) P150,364,800.00, which is the
value of the US$3,632,000.00 loan as redenominated under the above-mentioned
exchange rate of US$1=P41.40; and (2) P5,000,000.00, an
additional loan given to the spouses Tiu to update their interest payments.[10]
Under the same Restructuring Agreement,
the parties declared that the loan obligation to be restructured (after
deducting the dacion price of
properties ceded by the Tiu spouses and adding: [1] the taxes, registration
fees and other expenses advanced by Union Bank in registering the Deeds of Dation
in Payment; and [2] other fees and charges incurred by the Indebtedness) is one
hundred four million six hundred sixty-eight thousand seven hundred forty-one
pesos (P104,668,741.00) (total restructured amount).[11] The Deeds of Dation in Payment referred to are
the following:
1.
Dation
of the Labangon properties Deed executed
by Juanita Tiu, the mother of respondent Rodolfo Tiu, involving ten parcels of
land with improvements located in Labangon, Cebu City and with a total land
area of 3,344 square meters, for the amount of P25,130,000.00. The Deed states that these properties shall
be leased to the Tiu spouses at a monthly rate of P98,000.00 for a
period of two years.[12]
2.
Dation
of the Mandaue property Deed executed
by the spouses Tiu involving one parcel of land with improvements located in
A.S. Fortuna St., P36,080,000.00. The Deed states that said property shall be
leased to the Tiu spouses at a monthly rate of P150,000.00 for a period
of two years.[13]
As likewise provided in the Restructuring
Agreement, the spouses Tiu executed a Real Estate Mortgage in favor of Union
Bank over their residential property inclusive of lot and improvements located
at P. Burgos St., Mandaue City, covered by TCT No. T-11951 with an area of
3,096 square meters.[14]
The spouses Tiu undertook to pay the total
restructured amount (P104,668,741.00) via three loan facilities (payment
schemes).
The spouses Tiu claim to have made
the following payments: (1) P15,000,000.00 on P13,197,546.79
as of P89,407,546.79.[15]
Asserting that the spouses Tiu
failed to comply with the payment schemes set up in the Restructuring Agreement,
Union Bank initiated extrajudicial foreclosure proceedings on the residential
property of the spouses Tiu, covered by TCT No. T-11951. The property was to be sold at public auction
on
The spouses Tiu, together with Juanita
T. Tiu, Rosalinda T. King, Rufino T. Tiu, Rosalie T. Young and Rosenda T. Tiu,
filed with the Regional Trial Court (RTC) of P10,000,000.00 as moral damages, P2,000,000.00
as exemplary damages, P3,000,000.00 as attorneys fees and P500,000.00
as expenses of litigation; and (5) a writ of preliminary injunction or
temporary restraining order be issued enjoining the public auction sale to be
held on July 18, 2002.[17]
The spouses Tiu claim that from the
beginning the loans were in pesos, not in dollars. Their office clerk, Lilia Gutierrez,
testified that the spouses Tiu merely received the peso equivalent of their US$3,632,000.00
loan at the rate of US$1=P26.00.
The spouses Tiu further claim that they were merely forced to sign the Restructuring
Agreement and take up an additional loan of P5,000,000.00, the proceeds
of which they never saw because this amount was immediately applied by Union
Bank to interest payments.[18]
The spouses Tiu allege that the
foreclosure sale of the mortgaged properties was invalid, as the loans have
already been fully paid. They also
allege that they are not the owners of the improvements constructed on the lot
because the real owners thereof are their co-petitioners, Juanita T. Tiu,
Rosalinda T. King, Rufino T. Tiu, Rosalie T. Young and Rosenda T. Tiu.[19]
The spouses Tiu further claim that prior
to the signing of the Restructuring Agreement, they entered into a Memorandum
of Agreement with Union Bank whereby the former deposited with the latter
several certificates of shares of stock of various companies and four certificates
of title of various parcels of land located in Cebu. The spouses Tiu claim that these properties
have not been subjected to any lien in favor of Union Bank, yet the latter
continues to hold on to these properties and has not returned the same to the
former.[20]
On the other hand, Union Bank
claims that the Restructuring Agreement was voluntarily and validly entered
into by both parties. Presenting as
evidence the Warranties embodied in the Real Estate Mortgage, Union Bank contends
that the foreclosure of the mortgage on the residential property of the spouses
Tiu was valid and that the improvements thereon were absolutely owned by them. Union Bank denies receiving certificates of
shares of stock of various companies or the four certificates of title of
various parcels of land from the spouses Tiu. However, Union Bank also alleges that even if
said certificates were in its possession it is authorized under the
Restructuring Agreement to retain any and all properties of the debtor as
security for the loan.[21]
The RTC issued a Temporary
Restraining Order[22]
and, eventually, a Writ of Preliminary Injunction[23]
preventing the sale of the residential property of the spouses Tiu. [24]
On
WHEREFORE,
premises considered, judgment is hereby rendered dismissing the Complaint and
lifting and setting aside the Writ of Preliminary Injunction. No pronouncement as to damages, attorneys
fees and costs of suit.[26]
In upholding the validity of the Restructuring
Agreement, the RTC held that the spouses Tiu failed to present any evidence to
prove either fraud or intimidation or any other act vitiating their consent to
the same. The exact obligation of the
spouses Tiu to Union Bank is therefore P104,668,741.00, as agreed upon
by the parties in the Restructuring Agreement.
As regards the contention of the spouses Tiu that they have fully paid
their indebtedness, the RTC noted that they could not present any detailed
accounting as to the total amount they have paid after the execution of the Restructuring
Agreement.[27]
On January 4, 2005, Union Bank
filed a Motion for Partial Reconsideration,[28]
protesting the finding in the body of the December 16, 2004 Decision that the
residential house on Lot No. 639 is not owned by the spouses Tiu and therefore
should be excluded from the real properties covered by the real estate
mortgage. On
On January 11, 2005, the spouses Tiu
received from Sheriff Oano a Second Notice of Extra-judicial Foreclosure Sale
of Lot No. 639 to be held on
On
Both the spouses Tiu and Union Bank
appealed the case to the Court of Appeals.[34] The two appeals were given a single docket
number, CA-G.R. CEB-CV No. 00190. Acting
on a motion filed by the spouses Tiu, the Court of Appeals consolidated CA-G.R. SP No. 00253 with CA-G.R.
CEB-CV No. 00190.[35]
On
On May 9, 2005, Sheriff Oano
proceeded to conduct the extrajudicial sale.
Union Bank submitted the lone bid of P18,576,000.00.[37] On June 14, 2005, Union Bank filed a motion
with the Court of Appeals praying that Sheriff Oano be ordered to issue a
definite and regular Certificate of Sale.[38] On P18,000,000.00 by the Tiu spouses.[39] The Tiu spouses failed to file said bond.[40]
On
On the other hand, the
Court of Appeals ruled in favor of the spouses Tiu in CA-G.R. CV No. 00190. The Court of Appeals held that the loan
transactions were in pesos, since there was supposedly no stipulation the loans
will be paid in dollars and since no dollars ever exchanged hands. Considering that the loans were in pesos from
the beginning, the Court of Appeals reasoned that there is no need to convert
the same. By making it appear that the
loans were originally in dollars, Union Bank overstepped its rights as
creditor, and made unwarranted interpretations of the original loan
agreement. According to the Court of
Appeals, the Restructuring Agreement, which purportedly attempts to create a
novation of the original loan, was not clearly authorized by the debtors and
was not supported by any cause or consideration. Since the Restructuring Agreement is void,
the original loan of P94,432,000.00 (representing the amount received by
the spouses Tiu of US$3,632,000.00 using the US$1=P26.00 exchange rate) should
subsist. The Court of Appeals likewise invalidated
(1) the P5,000,000.00 charge for interest in the Restructuring Agreement,
for having been unilaterally imposed by Union Bank; and (2) the lease of the
properties conveyed in dacion en pago,
for being against public policy. [42]
In sum, the Court of
Appeals found Union Bank liable to the spouses Tiu in the amount of P927,546.79. For convenient reference, we quote relevant
portion of the Court of Appeals Decision here:
To
summarize the obligation of the Tiu spouses, they owe Union Bank P94,432,000.00. The Tiu spouses had already paid Union Bank
the amount of P89,407,546.79. On
the other hand, Union Bank must return to the Tiu spouses the illegally
collected rentals in the amount of P5,952,000.00. Given these findings, the obligation of the
Tiu spouses has already been fully paid.
In fact, it is the Union Bank that must return to the Tiu spouses the
amount of NINE HUNDRED TWENTY[-]SEVEN THOUSAND FIVE HUNDRED FORTY[-]SIX PESOS
AND SEVENTY[-]NINE CENTAVOS (P927,546.79).[43]
With regard to the
ownership of the improvements on the subject mortgaged property, the Court of
Appeals ruled that it belonged to respondent Rodolfo Tius father, Jose Tiu,
since 1981. According to the Court of
Appeals, Union Bank should not have relied on warranties made by debtors that
they are the owners of the property. The
appellate court went on to permanently enjoin Union Bank from foreclosing the
mortgage not only of the property covered by TCT No. T-11951, but also any other
mortgage over any other property of the spouses Tiu.[44]
The Court of Appeals
likewise found Union Bank liable to return the certificates of stocks and
titles to real properties of the spouses Tiu in its possession. The appellate court held that Union Bank made
judicial admissions of such possession in its Reply to Plaintiffs Request for
Admission.[45] In the event that Union Bank can no longer
return these certificates and titles, it was mandated to shoulder the cost for
their replacement.[46]
Finally, the Court of
Appeals took judicial notice that before or during the financial crisis, banks
actively convinced debtors to make dollar loans in the guise of benevolence,
saddling borrowers with loans that ballooned twice or thrice their original
loans. The Court of Appeals, noting the
cavalier way with which banks exploited and manipulated the situation,[47] held
Union Bank liable to the spouses Tiu for P100,000.00 in moral damages, P100,000.00
in exemplary damages, and P50,000.00 in attorneys fees.[48]
The Court of Appeals disposed
of the case as follows:
WHEREFORE,
in view of the foregoing premises, judgment is hereby rendered by us
permanently enjoining Union Bank from foreclosing the mortgage of the
residential property of the Tiu spouses which is covered by Transfer
Certificate of Title No. 11951 and from pursuing other foreclosure of mortgages
over any other properties of the Tiu spouses for the above-litigated debt that
has already been fully paid. If a
foreclosure sale has already been made over such properties, this Court orders
the cancellation of such foreclosure sale and the Certificate of Sale thereof
if any has been issued. This Court
orders Union Bank to return to the Tiu
spouses the amount of NINE HUNDRED TWENTY[-]SEVEN THOUSAND FIVE HUNDRED FORTY[-]SIX
PESOS AND SEVENTY[-]NINE CENTAVOS (P927,546.79) representing illegally
collected rentals. This Court also
orders Union Bank to return to the Tiu spouses all the certificates of shares
of stocks and titles to real properties of the Tiu spouses that were deposited
to it or, in lieu thereof, to pay the cost for the replacement and issuance of
new certificates and new titles over the said properties. This Court finally orders Union Bank to pay
the Tiu spouses ONE HUNDRED THOUSAND PESOS (P100,000.00) in moral
damages, ONE HUNDRED THOUSAND PESOS (P100,000.00) in exemplary damages,
FIFTY THOUSAND PESOS (P50,000.00) in attorneys fees and cost, both in
the lower court and in this Court.[49]
On
Hence, this Petition
for Review on Certiorari, wherein
Union Bank submits the following issues for the consideration of this Court:
1. WHETHER OR NOT THE COURT OF
APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR WHEN IT CONCLUDED THAT THERE WERE
NO DOLLAR LOANS OBTAINED BY [THE] TIU SPOUSES FROM UNION BANK DESPITE [THE]
CLEAR ADMISSION OF INDEBTEDNESS BY THE BORROWER-MORTGAGOR TIU SPOUSES.
2. WHETHER OR NOT THE COURT OF
APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR WHEN IT NULLIFIED THE
RESTRUCTURING AGREEMENT BETWEEN TIU SPOUSES AND UNION BANK FOR LACK OF CAUSE OR
CONSIDERATION DESPITE THE ADMISSION OF THE BORROWER-MORTGAGOR TIU SPOUSES OF
THE DUE AND VOLUNTARY EXECUTION OF SAID RESTRUCTURING AGREEMENT.
3. WHETHER OR NOT THE COURT OF
APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR WHEN IT PERMANENTLY ENJOINED UNION
BANK FROM FORECLOSING THE MORTGAGE ON THE RESIDENTIAL PROPERTY OF THE TIU SPOUSES
DESPITE THE ADMISSION OF NON-PAYMENT OF THEIR OUTSTANDING LOAN TO THE BANK BY
THE BORROWER-MORTGAGOR TIU SPOUSES;
4. WHETHER OR NOT THE COURT OF
APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR WHEN IT FIXED THE AMOUNT OF THE OBLIGATION OF RESPONDENT SPOUSES
CONTRARY TO THE PROVISIONS OF THE PROMISSORY NOTES, RESTRUCTURING AGREEMENT AND
[THE] VOLUNTARY ADMISSIONS BY BORROWER-MORTGAGOR TIU SPOUSES;
5. WHETHER OR NOT THE COURT OF
APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR WHEN IT RULED ON THE ALLEGED
RENTALS PAID BY RESPONDENT SPOUSES WITHOUT ANY FACTUAL BASIS;
6. WHETHER OR NOT THE COURT OF
APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR WHEN IT HELD WITHOUT ANY FACTUAL
BASIS THAT THE LOAN OBLIGATION OF TIU SPOUSES HAS BEEN FULLY PAID;
7. WHETHER OR NOT THE COURT OF
APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR WHEN IT HELD WITHOUT ANY FACTUAL
BASIS THAT THE HOUSE INCLUDED IN THE REAL ESTATE MORTGAGE DID NOT BELONG TO THE
TIU SPOUSES.
8. WHETHER OR NOT THE COURT OF
APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR IN ORDERING UNION BANK TO RETURN
THE CERTIFICATES OF SHARES OF STOCK AND TITLES TO REAL PROPERTIES OF TIU
SPOUSES ALLEGEDLY IN THE POSSESSION OF UNION BANK.
9. WHETHER OR NOT THE COURT OF
APPEALS VIOLATED THE DOCTRINES AND PRINCIPLES ON APPELLATE JURISDICTION.
10. WHETHER OR NOT THE COURT OF
APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR IN AWARDING DAMAGES AGAINST UNION
BANK.[50]
Validity
of the Restructuring Agreement
As previously discussed,
the Court of Appeals declared that the Restructuring Agreement is void on account
of its being a failed novation of the original loan agreements. The Court of Appeals explained that since
there was no stipulation that the loans will be paid in dollars, and since no
dollars ever exchanged hands, the original loan transactions were in pesos.[51] Proceeding from this premise, the Court of
Appeals held that the Restructuring Agreement, which was meant to convert the
loans into pesos, was unwarranted. Thus,
the Court of Appeals reasoned that:
Be that
as it may, however, since the loans of the Tiu spouses from Union Bank were
peso loans from the very beginning, there is no need for conversion
thereof. A Restructuring Agreement
should merely confirm the loans, not add thereto. By making it appear in the Restructuring
Agreement that the loans were originally dollar loans, Union Bank overstepped
its rights as a creditor and made unwarranted interpretations of the original
loan agreement. This Court is not bound
by such interpretations made by Union Bank.
When one party makes an interpretation of a contract, he makes it at his
own risk, subject to a subsequent challenge by the other party and a
modification by the courts. In this
case, that party making the interpretation is not just any party, but a well
entrenched and highly respected bank.
The matter that was being interpreted was also a financial matter that
is within the profound expertise of the bank.
A normal person who does not possess the same financial proficiency or
acumen as that of a bank will most likely defer to the latters esteemed
opinion, representations and interpretations.
It has been often stated in our jurisprudence that banks have a
fiduciary duty to their depositors.
According to the case of Bank of
the Philippine Islands vs. IAC (G.R. No. 69162, February 21, 1992), as a
business affected with public interest and because of the nature of its
functions, the bank is under obligation to treat the accounts of its depositors
with meticulous care, always having in mind the fiduciary nature of their
relationship. Such fiduciary
relationship should also extend to the banks borrowers who, more often than
not, are also depositors of the bank.
Banks are in the business of lending while most borrowers hardly know
the basics of such business. When
transacting with a bank, most borrowers concede to the expertise of the bank
and consider their procedures, pronouncements and representations as
unassailable, whether such be true or not.
Therefore, when there is a doubtful banking transaction, this Court will
tip the scales in favor of the borrower.
Given the
above ruling, the Restructuring Agreement, therefore, between the Tiu spouses
and Union Bank does not operate to supersede all previous loan documents, as
claimed by Union Bank. But the said
Restructuring Agreement, as it was crafted by Union Bank, does not merely
confirm the original loan of the Tiu spouses but attempts to create a novation
of the said original loan that is not clearly authorized by the debtors and
that is not supported by any cause or consideration. According to Article 1292 of the New Civil
Code, in order that an obligation may by extinguished by another which
substitutes the same, it is imperative that it be so declared in unequivocal
terms, or that the old and the new obligations be on every point incompatible
with each other. Such is not the case in
this instance. No valid novation of the
original obligation took place. Even
granting arguendo that there was a novation, the sudden change in the original
amount of the loan to the new amount declared in the Restructuring Agreement is
not supported by any cause or consideration.
Under Article 1352 of the Civil Code, contracts without cause, or with
unlawful cause, produce no effect whatever.
A contract whose cause did not exist at the time of the transaction is
void. Accordingly, Article 1297 of the
New Civil Code mandates that, if the new obligation is void, the original one
shall subsist, unless the parties intended that the former relation should be
extinguished at any event. Since the
Restructuring Agreement is void and since there was no intention to extinguish
the original loan, the original loan shall subsist.[52]
Union Bank does not
dispute that the spouses Tiu received the loaned amount of US$3,632,000.00 in Philippine
pesos, not dollars, at the prevailing exchange rate of US$1=P26.[53] However, Union Bank claims that this does not
change the true nature of the loan as a foreign currency loan,[54] and
proceeded to illustrate in its Memorandum that the spouses Tiu obtained
favorable interest rates by opting to borrow in dollars (but receiving the
equivalent peso amount) as opposed to borrowing in pesos.[55]
We agree with Union
Bank on this point. Although indeed, the
spouses Tiu received peso equivalents of the borrowed amounts, the loan
documents presented as evidence, i.e.,
the promissory notes,[56] expressed
the amount of the loans in US dollars and not in any other currency. This clearly indicates that the spouses Tiu were
bound to pay Union Bank in dollars, the amount stipulated in said loan documents. Thus, before the Restructuring Agreement, the
spouses Tiu were bound to pay Union Bank the amount of US$3,632,000.00 plus the
interest stipulated in the promissory notes, without converting the same to
pesos. The spouses Tiu, who are in the
construction business and appear to be dealing primarily in Philippine
currency, should therefore purchase the necessary amount of dollars to pay
Union Bank, who could have justly refused payment in any currency other than
that which was stipulated in the promissory notes.
We disagree with the
finding of the Court of Appeals that the testimony of Lila Gutierrez, which
merely attests to the fact that the spouses Tiu received the peso equivalent of
their dollar loan, proves the intention of the parties that such loans should
be paid in pesos. If such had been the
intention of the parties, the promissory notes could have easily indicated the
same.
Such stipulation of
payment in dollars is not prohibited by any prevailing law or jurisprudence at
the time the loans were taken. In this regard, Article 1249 of the Civil Code
provides:
Art.
1249. The payment of debts in money
shall be made in the currency stipulated, and if it is not possible to deliver
such currency, then in the currency which is legal tender in the
Although the Civil Code took effect
on August 30, 1950, jurisprudence
had upheld[57] the continued
effectivity of Republic Act No. 529, which took effect earlier on
On
Although the Credit Line
Agreement between the spouses Tiu and Union Bank was entered into on November 21, 1995,[65]
when the agreement to pay in foreign currency was still considered void under
Republic Act No. 529, the actual loans,[66]
as shown in the promissory notes, were taken out from September 22, 1997 to March 26, 1998, during which time Republic
Act No. 8183 was already in effect. In United Coconut Planters Bank v. Beluso,[67]
we held that:
[O]pening a credit line does not
create a credit transaction of loan or mutuum,
since the former is merely a preparatory contract to the contract of loan or mutuum. Under such credit line, the bank is merely
obliged, for the considerations specified therefor, to lend to the other party
amounts not exceeding the limit provided. The credit transaction thus occurred not when
the credit line was opened, but rather when the credit line was availed of. x x x.[68]
Having established that
Union Bank and the spouses Tiu validly entered into dollar loans, the
conclusion of the Court of Appeals that there were no dollar loans to novate
into peso loans must necessarily fail.
Similarly, the Court of
Appeals pronouncement that the novation was not supported by any cause or
consideration is likewise incorrect. This
conclusion suggests that when the parties signed the Restructuring Agreement,
Union Bank got something out of nothing or that the spouses Tiu received no
benefit from the restructuring of their existing loan and was merely taken
advantage of by the bank. It is
important to note at this point that in the determination of the nullity of a
contract based on the lack of consideration, the debtor has the burden to prove
the same. Article 1354 of the Civil Code
provides that [a]though the cause is not stated in the contract, it is
presumed that it exists and is lawful, unless the debtor proves the contrary.
In the case at bar, the
Restructuring Agreement was signed at the height of the financial crisis when
the Philippine peso was rapidly depreciating.
Since the spouses Tiu were bound to pay their debt in dollars, the cost
of purchasing the required currency was likewise swiftly increasing. If the parties did not enter into the Restructuring
Agreement in December 1999 and the peso continued to deteriorate, the ability
of the spouses Tiu to pay and the ability of Union Bank to collect would both
have immensely suffered. As shown by the
evidence presented by Union Bank, the peso indeed continued to deteriorate,
climbing to US$1=P50.01 on December 2000.[69] Hence, in order to ensure the stability of the
loan agreement, Union Bank and the spouses Tiu agreed in the Restructuring Agreement
to peg the principal loan at P150,364,800.00 and the unpaid interest at P5,000,000.00.
Before this Court, the
spouses Tiu belatedly argue that their consent to the Restructuring Agreement
was vitiated by fraud and mistake, alleging that (1) the Restructuring Agreement
did not take into consideration their substantial payment in the amount of P40,447,185.60
before its execution; and (2) the dollar loans had already been redenominated
in 1997 at the rate of US$1=P26.34.[70]
We have painstakingly
perused over the records of this case, but failed to find any documentary
evidence of the alleged payment of P40,447,185.60 before the execution
of the Restructuring Agreement. In paragraph
16 of their Amended Complaint, the spouses Tiu alleged payment of P40,447,185.60
for interests before the conversion
of the dollar loan.[71] This was specifically denied by Union Bank in
paragraph 5 of its Answer with Counterclaim.[72] Respondent Rodolfo Tiu testified that they
made 50 million plus in cash payment plus other monthly interest payments,[73]
and identified a computation of payments dated July 17, 2002 signed by himself.[74] Such computation, however, was never formally
offered in evidence and was in any event, wholly self-serving.
As regards the alleged redenomination
of the same dollar loans in 1997 at the rate of US$1=P26.34, the spouses
Tiu merely relied on the following direct testimony of Herbert Hojas, one of
the witnesses of Union Bank:
Q: Could you please describe what kind of
loan was the loan of the spouses Rodolfo Tiu, the plaintiffs in this case?
A: It was originally an FCDU, meaning a
dollar loan.
Q: What happened to this FCDU loan or
dollar loan?
A: The dollar loan was re-denominated in
view of the very unstable exchange of the dollar and the peso at that time,
Q: Could you still remember what year this
account was re-denominated from dollar to peso?
A: I
think it was on the year 1997.
Q: Could [you] still remember what was then
the prevailing exchange rate between the dollar and the peso at that year 1997?
A: Yes.
I have here the list of the dollar exchange rate from January 1987 (sic). It was P26.34 per dollar.[75]
Neither party presented any
documentary evidence of the alleged redenomination in 1997. Respondent Rodolfo Tiu did not even mention
it in his testimony. Furthermore, Hojas
was obviously uncertain in his statement that said redenomination was made in
1997.
As pointed out by the trial court,
the Restructuring Agreement, being notarized, is a public document enjoying a prima facie presumption of authenticity
and due execution. Clear and convincing
evidence must be presented to overcome such legal presumption.[76] The spouses Tiu, who attested before the notary
public that the Restructuring Agreement is their own free and voluntary act
and deed,[77] failed
to present sufficient evidence to prove otherwise. It is difficult to believe that the spouses
Tiu, veteran businessmen who operate a multi-million peso company, would sign a
very important document without fully understanding its contents and
consequences.
This Court therefore
rules that the Restructuring Agreement is valid and, as such, a valid and binding
novation of loans of the spouses Tiu entered into from September 22, 1997 to
March 26, 1998 which had a total amount of US$3,632,000.00.
Validity
of the Foreclosure of Mortgage
The spouses Tiu
challenge the validity of the foreclosure of the mortgage on two grounds,
claiming that: (1) the debt had already been fully paid; and (2) they are not
the owners of the improvements on the mortgaged property.
(1) Allegation of full
payment of the mortgage debt
In the preceding
discussion, we have ruled that the Restructuring Agreement is a valid and
binding novation of loans of the spouses Tiu entered into from September 22,
1997 to March 26, 1998 in the total amount of US$3,632,000.00. Thus, in order that the spouses Tiu can be
held to have fully paid their loan obligation, they should present evidence
showing their payment of the total restructured amount under the Restructuring Agreement
which was P104,668,741.00. As we have discussed above, however, while
respondent Rodolfo Tiu appeared to have identified during his testimony a
computation dated July 17, 2002 of the alleged payments made to Union Bank,[78]
the same was not formally offered in evidence.
Applying Section 34, Rule 132[79]
of the Rules of Court, such computation cannot be considered by this
Court. We have held that a formal offer
is necessary because judges are mandated to rest their findings of facts and
their judgment only and strictly upon the evidence offered by the parties at
the trial. It has several functions: (1)
to enable the trial judge to know the purpose or purposes for which the proponent
is presenting the evidence; (2) to allow opposing parties to examine the
evidence and object to its admissibility; and (3) to facilitate review by the
appellate court, which will not be required to review documents not previously
scrutinized by the trial court.[80] Moreover, even if such computation were
admitted in evidence, the same is self-serving and cannot be given probative
weight. In the case at bar, the records do
not contain even a single receipt
evidencing payment to Union Bank.
The Court of Appeals,
however, held that several payments made by the spouses Tiu had been admitted
by Union Bank. Indeed, Section 11, Rule 8 of the Rules of Court provides that an
allegation not specifically denied is deemed admitted. In such a case, no further evidence would be
required to prove the antecedent facts. We
should therefore examine which of the payments specified by the spouses Tiu in
their Amended Complaint[81]
were not specifically denied by Union Bank.
The allegations of
payment are made in paragraphs 16 to 21 of the Amended Complaint:
16.
Before conversion of the dollar loan into a peso loan[,] the spouses Tiu had
already paid the defendant bank the amount of P40,447,185.60 for interests;
17. On P15,000,000.00;
18. In
order to lessen the obligation of plaintiffs, the mother of plaintiff Rodolfo
T. Tiu, plaintiff Juanita T. Tiu, executed a deed of dacion in payment in favor
of defendant involving her 10 parcels of land located in Labangon, P25,130,000.00.
Copy of the deed was attached to the original complaint as Annex C;
19. For
the same purpose, plaintiffs spouses Tiu also executed a deed of dacion in
payment of their property located at A.S. Fortuna St., Mandaue City for the
amount of P36,080,000.00. Copy of
the deed was attached to the original complaint as Annex D;
20. The total amount of the two dacions in
payment made by the plaintiffs was P61,210,000.00;
21.
Plaintiffs spouses Tiu also made other payment of the amount of P13,197,546.79
as of May 8, 2001;[82]
In paragraphs 4 and 5
of their Answer with Counterclaim,[83]
Union Bank specifically denied the allegation in paragraph 9 of the Complaint,
but admitted the allegations in paragraphs 17, 18, 19, 20 and 21 thereof. Paragraphs 18, 19 and 20 allege the two deeds
of dacion. However, these instruments were already incorporated
in the computation of the outstanding debt (i.e.,
subtracted from the confirmed debt of P155,364,800.00), as can be
gleaned from the following provisions in the Restructuring Agreement:
a.)
The
loan obligation to the BANK to be restructured herein after deducting from the
Indebtedness of the BORROWER the dacion price of the properties subject of the
Deeds of Dacion and adding to the Indebtedness all the taxes, registration fees
and other expenses advanced by the bank in registering the Deeds of Dacion, and
also adding to the Indebtedness the interest, and other fees and charges
incurred by the Indebtedness, amounts to ONE HUNDRED FOUR MILLION SIX HUNDRED
SIXTY-EIGHT THOUSAND SEVEN HUNDRED FORTY-ONE PESOS (PHP104,668,741.00) (the
TOTAL RESTRUCTURED AMOUNT).[84]
As regards the
allegations of cash payments in paragraphs 17 and 21 of the Amended Complaint,
the date of the alleged payment is critical as to whether they were included in
the Restructuring Agreement. The payment
of P15,000,000.00 alleged in paragraph 17 of the Amended Complaint was
supposedly made on August 3 and 12, 1999.
This payment was before the date of execution of the Restructuring
Agreement on December 21, 1999, and is therefore already factored into the
restructured obligation of the spouses.[85] On the other hand, the payment of P13,197,546.79
alleged in paragraph 21 of the Amended Complaint was dated May, 8, 2001. Said payment cannot be deemed included in
the computation of the spouses Tius debt in the Restructuring Agreement, which
was assented to more than a year earlier.
This amount (P13,197,546.79) is even absent[86]
in the computation of Union Bank of the outstanding debt, in contrast with the P15,000,000.00
payment which is included[87]
therein. Union Bank did not explain this
discrepancy and merely relied on the spouses Tius failure to formally offer
supporting evidence. Since this payment
of P13,197,546.79 on May 8, 2001 was admitted by Union Bank in their
Answer with Counterclaim, there was no need on the part of the spouses Tiu to
present evidence on the same. Nonetheless,
if we subtract this figure from the total restructured amount (P104,668,741.00)
in the Restructuring Agreement, the result is that the spouses Tiu still owe
Union Bank P91,471,194.21.
(2) Allegation of third
party ownership of the improvements on the mortgaged lot
The Court of Appeals, taking
into consideration its earlier ruling that the loan was already fully paid, permanently
enjoined Union Bank from foreclosing the mortgage on the property covered by
Transfer Certificate of Title No. 11951 (Lot No. 639) and from pursuing other
foreclosure of mortgages over any other properties of the spouses Tiu. The Court of Appeals ruled:
The
prayer, therefore, of the Tiu spouses to enjoin the foreclosure of the real
estate mortgage over their residential property has merit. The loan has already been fully paid. It should also be noted that the house
constructed on the residential property of the Tiu spouses is not registered in
the name of the Tiu spouses, but in the name of Jose Tiu (Records, pp.
127-132), the father of appellant and petitioner Rodolfo Tiu, since 1981. It had been alleged by the Tiu spouses that Jose
Tiu died on
We disagree. Contrary to the ruling of the Court of
Appeals, the burden to prove the spouses Tius allegation that they do not
own the improvements on Lot No. 639, despite having such improvements included
in the mortgage is on the spouses Tiu themselves. The fundamental rule is that he who alleges
must prove.[89] The allegations of the spouses Tiu on this
matter, which are found in paragraphs 35 to 39[90]
of their Amended Complaint, were specifically denied in paragraph 9 of Union
Banks Answer with Counterclaim.[91]
Upon careful
examination of the evidence, we find that the spouses Tiu failed to prove that
the improvements on Lot No. 639 were owned by third persons. In fact, the evidence presented by the
spouses Tiu merely attempt to prove that the improvements on Lot No. 639 were declared
for taxes in the name of respondent Rodolfo Tius father, Jose Tiu, who allegedly
died on December 18, 1983. There was no
effort to show how their co-plaintiffs in the original complaint, namely
Juanita T. Tiu, Rosalinda T. King, Rufino T. Tiu, Rosalie T. Young and Rosenda
T. Tiu, became co-owners of the house. The
spouses Tiu did not present evidence as to (1) who the heirs of Jose Tiu are;
(2) if Juanita T. Tiu, Rosalinda T. King, Rufino T. Tiu, Rosalie T. Young and
Rosenda T. Tiu are indeed included as heirs; and (3) why petitioner Rodolfo Tiu
is not included as an heir despite being the son of Jose Tiu. No birth certificate of the alleged heirs,
will of the deceased, or any other piece of evidence showing judicial or
extrajudicial settlement of the estate of Jose Tiu was presented.
In light of the
foregoing, this Court therefore sets aside the ruling of the Court of Appeals
permanently enjoining Union Bank from foreclosing the mortgage on Lot No. 639,
including the improvements thereon.
Validity of
Alleged Rental Payments on the
Properties Conveyed to the Bank via Dacion
en Pago
The Court of Appeals found
the lease contracts over the properties conveyed to Union Bank via dacion en pago to be void for being
against public policy. The appellate
court held that since the General Banking Law of 2000[92]
mandates banks to immediately dispose of real estate properties that are not
necessary for its own use in the conduct of its business, banks should not
enter into two-year contracts of lease over properties paid to them through dacion.[93] The Court of Appeals thus ordered Union Bank
to return the rentals it collected. To
determine the amount of rentals paid by the spouses Tiu to Union Bank, the
Court of Appeals simply multiplied the monthly rental stipulated in the Restructuring
Agreement by the stipulated period of the lease agreement:
For the
Labangon property, the Tiu spouses paid rentals in the amount of P98,000.00
per month for two years, or a total amount of P2,352,000.00. For the A.S. Fortuna property, the Tiu
spouses paid rentals in the amount of P150,000.00 per month for two
years, or a total amount of P3,600,000.00. The total amount in rentals paid by the Tiu
spouses to Union Bank is FIVE MILLION NINE HUNDRED FIFTY- TWO THOUSAND PESOS (P5,952,000.00). This Court finds that the return of this
amount to the Tiu spouses is called for since it will better serve public
policy. These properties that were given
by the Tiu spouses to Union Bank as payment should not be used by the latter to
extract more money from the former. This
situation is analogous to having a debtor pay interest for a debt already paid. Instead of leasing the properties, Union Bank
should have instructed the Tiu spouses to vacate the said properties so that it
could dispose of them.[94]
The Court of Appeals
committed a serious error in this regard. As pointed out by petitioner Union Bank, the
spouses Tiu did not present any proof of the alleged rental payments. Not a single receipt was formally offered in
evidence. The mere stipulation in a
contract of the monthly rent to be paid by the lessee is certainly not evidence
that the same has been paid. Since the
spouses Tiu failed to prove their payment to Union Bank of the amount of P5,952,000.00,
we are constrained to reverse the ruling of the Court of Appeals ordering its
return.
Even assuming arguendo that the spouses Tiu had duly
proven that it had paid rent to Union Bank, we nevertheless disagree with the
finding of the Court of Appeals that it is against public policy for banks to
enter into two-year contracts of lease of properties ceded to them through dacion en pago. The provisions of law cited by the Court of
Appeals, namely Sections 51 and 52 of the General Banking Law of 2000, merely
provide:
SECTION 51. Ceiling on Investments in Certain Assets.
Any bank may acquire real estate as shall be necessary for its own use in the
conduct of its business: Provided, however, That the total investment in
such real estate and improvements thereof, including bank equipment, shall not
exceed fifty percent (50%) of combined capital accounts: Provided, further, That the equity investment of a bank in another
corporation engaged primarily in real estate shall be considered as part of the
bank's total investment in real estate, unless otherwise provided by the
Monetary Board.
SECTION 52. Acquisition of Real Estate by Way of
Satisfaction of Claims. Notwithstanding the limitations of the preceding
Section, a bank may acquire, hold or convey real property under the following
circumstances:
52.1. Such as shall be mortgaged to it in good faith by way of security
for debts;
52.2. Such as shall be conveyed to it in satisfaction of debts
previously contracted in the course of its dealings; or
52.3. Such as it shall purchase at sales under judgments, decrees,
mortgages, or trust deeds held by it and such as it shall purchase to secure
debts due it.
Any real property acquired or
held under the circumstances enumerated in the above paragraph shall be
disposed of by the bank within a period of five (5) years or as may be
prescribed by the Monetary Board: Provided,
however, That the bank may, after said period, continue to hold the
property for its own use, subject to the limitations of the preceding Section.
Section 52.2
contemplates a dacion en pago. Thus, Section 52 undeniably gives banks five
years to dispose of properties conveyed to them in satisfaction of debts
previously contracted in the course of its dealings, unless another period is
prescribed by the Monetary Board. Furthermore,
there appears to be no legal impediment for a bank to lease the real properties
it has received in satisfaction of debts, within the five-year period that such
bank is allowed to hold the acquired realty.
We do not dispute the
interpretation of the Court of Appeals that the purpose of the law is to
prevent the concentration of land holdings in a few hands, and that banks
should not be allowed to hold on to the properties contemplated in Section 52 beyond
the five-year period unless such bank has exerted its best efforts to dispose
of the property in good faith but failed.
However, inquiries as to whether the banks exerted best efforts to
dispose of the property can only be done if said banks fail to dispose of the
same within the period provided. Such
inquiry is furthermore irrelevant to the issues in the case at bar.
Order to Return Certificates
Allegedly in Union Banks Possession
In the Amended Complaint, the spouses
Tiu alleged[95] that
they delivered several certificates and titles to Union Bank pursuant to a
Memorandum of Agreement. These
certificates and titles were not subjected to any lien in favor of Union Bank,
but the latter allegedly continued to hold on to said properties.
The RTC failed to rule
on this issue. The Court of Appeals,
tackling this issue for the first time, ruled in favor of the Tiu spouses and
ordered the return of these certificates and titles. The appellate court added that if Union Bank
can no longer return these certificates or titles, it should shoulder the cost
for their replacement.[96]
Union Bank, asserting that
the Memorandum of Agreement did not, in fact, push through, denies having
received the subject certificates and titles. Union Bank added that even assuming arguendo that it is in possession of
said documents, the Restructuring Agreement itself allows such possession.[97]
The evidence on hand
lends credibility to the allegation of Union Bank that the Memorandum of
Agreement did not push through. The copy
of the Memorandum of Agreement attached by the spouses Tiu themselves to their
original complaint did not bear the signature of any representative from Union
Bank and was not notarized.[98]
We, however, agree with
the finding of the Court of Appeals that despite the failure of the Memorandum
of Agreement to push through, the certificates and titles mentioned therein do
appear to be in the possession of Union Bank.
As held by the Court of Appeals:
Lastly,
this Court will order, as it hereby orders, Union Bank to return to the Tiu
spouses all the certificates of shares of stocks and titles to real properties
of the Tiu spouses in its possession.
Union Bank cannot deny possession of these items since it had made
judicial admissions of such possession in their document entitled Reply to
Plaintiffs request for Admission (records, pp. 216-217). While in that document, Union Bank only
admitted to the possession of four real estate titles, this Court is convinced
that all the certificates and titles mentioned in the unconsummated Memorandum
of Agreement (Records, pp. 211-213) were given by the Tiu spouses to Union Bank
for appraisal. This finding is further
bolstered by the admission of the Union Bank that it kept the titles for
safekeeping after it rejected the Memorandum of Agreement. Since Union Bank rejected these certificates
and titles of property, it should return the said items to the Tiu
spouses. If Union Bank can no longer
return these certificates and titles or if it has misplaced them, it shall
shoulder the cost for the replacement and issuance of new certificates and new
titles over the said properties.[99]
As regards Union Banks
argument that it has the right to retain said documents pursuant to the Restructuring
Agreement, it is referring to paragraph 11(b), which provides that:
11. Effects of Default When the
BORROWER is in default, such default shall have the following effects,
alternative, concurrent and cumulative with each other:
x x x x
(b) The
BANK shall be entitled to all the remedies provided for and further shall have
the right to effect or apply against the partial or full payment of any and all
obligations of the BORROWER under this Restructuring Agreement any and all
moneys or other properties of the BORROWER which, for any reason, are or may
hereafter come into the possession of the Bank or the Banks agent. All such moneys or properties shall be deemed
in the BANKs possession as soon as put in transit to the BANK by mail or
carrier.[100]
In the first place,
notwithstanding the foregoing provision, there is no clear intention on the
part of the spouses Tiu to deliver the certificates over certain shares of
stock and real properties as security for their debt. From the terms of the Memorandum of Agreement,
these certificates were surrendered to Union Bank in order that the said
properties described therein be given their corresponding loan values required
for the restructuring of the spouses Tius outstanding obligations. However, in the event the parties fail to agree
on the valuation of the subject properties, Union Bank agrees to release the
same.[101] As
Union Bank itself vehemently alleges, the Memorandum of Agreement was not
consummated. Moreover, despite the fact that the Bank was aware, or in
possession, of these certificates,[102]
at the time of execution of the Restructuring Agreement, only the mortgage over
the real property covered by TCT No. T-11951 was expressly mentioned as a
security in the Restructuring Agreement.
In fact, in its Reply to Request for Admission,[103] Union
Bank admitted that (1) the titles to the real properties were submitted to it
for appraisal but were subsequently rejected, and (2) no real estate mortgages
were executed over the said properties. There being no agreement that these
properties shall secure respondents obligation, Union Bank has no right to
retain said certificates.
Assuming arguendo that paragraph 11(b) of the
Restructuring Agreement indeed allows the retention of the certificates (submitted
to the Bank ostensibly for safekeeping and appraisal) as security for spouses
Tius debt, Union Banks position still cannot be upheld. Insofar as said
provision permits Union Bank to apply properties of the spouses Tiu in its
possession to the full or partial payment of the latters obligations, the same
appears to impliedly allow Union Bank to appropriate these properties for such
purpose. However, said provision cannot
be validly applied to the subject certificates and titles without violating the
prohibition against pactum commissorium
contained in Article 2088 of the Civil Code, to the effect that [t]he creditor
cannot appropriate the things given by way of pledge or mortgage, or dispose of
them[;] [a]ny stipulation to the contrary is null and void. Applicable by analogy to the present case is
our ruling in Nakpil v. Intermediate
Appellate Court,[104]
wherein property held in trust was ceded to the trustee upon failure of the
beneficiary to answer for the amounts owed to the former, to wit:
For, there was to be automatic
appropriation of the property by Valdes in the event of failure of petitioner
to pay the value of the advances. Thus, contrary to respondent's
manifestations, all the elements of a pactum
commissorium were present: there was a
creditor-debtor relationship between the parties; the property was used as security for the loan; and, there was automatic appropriation by respondent
of Pulong Maulap in case of default
of petitioner.[105] (Emphases supplied.)
This Court therefore
affirms the order of the Court of Appeals for Union Bank to return to the
spouses Tiu all the certificates of shares of stock and titles to real
properties that were submitted to it or, in lieu thereof, to pay the cost for
the replacement and issuance of new certificates and new titles over the said
properties.
Validity
of the Award of Damages
The Court of Appeals
awarded damages in favor of the spouses Tiu based on its taking judicial notice
of the alleged exploitation by many banks of the Asian financial crisis, as
well as the foreclosure of the mortgage of the home of the spouses Tiu despite
the alleged full payment by the latter.
As regards the alleged manipulation of the financial crisis, the Court
of Appeals held:
As a
final note, this Court observes the irregularity in the circumstances
[surrounding] dollar loans granted by banks right before or during the Asian
financial crisis. It is of common
knowledge that many banks, around that time, actively pursued and convinced
debtors to make dollar loans or to convert their peso loans to dollar loans
allegedly because of the lower interest rate of dollar loans. This is a highly suspect behavior on the part
of the banks because it is irrational for the banks to voluntarily and actively
proffer a conversion that would give them substantially less income. In the guise of benevolence, many banks were
able to convince borrowers to make dollar loans or to convert their peso loans
to dollar loans. Soon thereafter, the
Asian financial crisis hit, and many borrowers were saddled with loans that
ballooned to twice or thrice the amount of their original loans. This court takes judicial notice of these
events or matters which are of public knowledge. It is inconceivable that the banks were
unaware of the looming Asian financial crisis.
Being in the forefront of the financial world and having access to
financial data that were not available to the average borrower, the banks were
in such a position that they had a higher vantage point with respect to the financial
landscape over their average clients.
The cavalier way with which banks exploited and manipulated the
situation is almost too palpable that they openly and unabashedly struck heavy
blows on the Philippine economy, industries and businesses. The banks have a fiduciary duty to their clients
and to the Filipino people to be transparent in their dealings and to make sure
that the latters interest are not prejudiced by the formers interest. Article 1339 of the New Civil Code provides
that the failure to disclose facts, when there is a duty to reveal them, as
when the parties are bound by confidential relations, constitutes fraud. Undoubtedly, the banks and their clients are
bound by confidential relations. The
almost perfect timing of the banks in convincing their clients to shift to dollar
loans just when the Asian financial crisis struck indicates that the banks not
only failed to disclose facts to their clients of the looming crisis, but also
suggests of the insidious design to take advantage of these undisclosed facts.[106]
We have already held
that the foreclosure of the mortgage was warranted under the
circumstances. As regards the alleged
exploitation by many banks of the Asian financial crisis, this Court rules that
the generalization made by the appellate court is unfounded and cannot be the
subject of judicial notice. It is
axiomatic that good faith is always presumed unless convincing evidence to the
contrary is adduced. It is incumbent
upon the party alleging bad faith to sufficiently prove such allegation. Absent enough proof thereof, the presumption
of good faith prevails.[107] The alleged insidious design of many banks to
betray their clients during the Asian financial crisis is certainly not of
public knowledge. The deletion of the
award of moral and exemplary damages in favor of the spouses Tiu is therefore
in order.
WHEREFORE,
the
Petition is PARTIALLY GRANTED. The Joint Decision of the Court of
Appeals in CA-G.R. CV No. 00190 and CA-G.R. SP No. 00253 dated February 21,
2006 is hereby AFFIRMED insofar as
it ordered petitioner Union Bank of the Philippines to return to the respondent
spouses Rodolfo T. Tiu and Victoria N. Tiu all the certificates of shares of
stock and titles to real properties that were submitted to it or, in lieu
thereof, to pay the cost for the replacement and issuance of new certificates
and new titles over the said properties.
The foregoing Joint Decision is hereby SET ASIDE: (1) insofar as it permanently enjoined Union Bank of the
Philippines from foreclosing the mortgage of the residential property of respondent
spouses Rodolfo T. Tiu and Victoria N. Tiu which is covered by Transfer
Certificate of Title No. 11951; (2) insofar
as it ordered Union Bank of the Philippines to return to the respondent spouses
Rodolfo T. Tiu and Victoria N. Tiu the amount of P927,546.79 representing
illegally collected rentals; and (3) insofar as it ordered Union Bank of the
Philippines to pay the respondent spouses Rodolfo T. Tiu and Victoria N. Tiu P100,000.00
in moral damages, P100,000.00 in exemplary damages, P50,000.00 in
attorneys fees and cost, both in the lower court and in this Court.
No further
pronouncement as to costs.
SO ORDERED.
Associate
Justice
WE CONCUR:
Chief Justice
Chairperson
LUCAS P. BERSAMIN
Associate
Justice |
MARIANO C. DEL CASTILLO Associate Justice
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MARTIN S. VILLARAMA, JR. Associate Justice |
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[1] Rollo, pp. 74-96; penned by Associate
Justice Isaias P. Dicdican with Associate Justices Ramon M. Bato, Jr. and
Apolinario D. Bruselas, Jr., concurring.
[2] Id.
at 97-100.
[3] Records,
pp. 12-13.
[4] Id. at 14.
[5] Id.
[6] Written
in the document as @ 41.40%.
[7] Records, p. 333.
[8] Id.
at 334-344.
[9] Id.
at 335.
[10] Id.
at 115.
[11] Id. at 335.
[12] Id.
at 354-357.
[13] Id.
at 350-353.
[14] Id. at 339.
[15] Id.
at 114.
[16] Id.
at 2-11.
[17] Id.
at 10.
[18] Rollo, pp. 163-164.
[19] Id. at 169.
[20] Id. at 168.
[21] Id. at 42-61.
[22] Records, pp. 97-98.
[23] Id. at 420-423.
[24] Rollo, pp. 75-78.
[25] Id. at 101-120.
[26] Id.
at 120.
[27] Id.
at 117-118.
[28] Records,
pp. 787-794.
[29] Id.
at 799-815.
[30] Id.
at 814-815.
[31] CA
rollo (CA-G.R. SP No. 00253), pp.
2-8.
[32] Id.
at 90-91.
[33] Records,
p. 828.
[34] Id.
at 830-831, 836-837.
[35] CA
rollo (CA-G.R. SP No. 00253), pp.
140-141.
[36] CA
rollo (CA-G.R. SP No. 00190), pp. 92-95.
[37] Id.
at 253.
[38] Id.
at 250-256.
[39] Id.
at 305-307.
[40] Rollo, p. 78.
[41] Id.
at 79.
[42] Id.
at 83-91.
[43] Id. at 92.
[44] Id.
at 92-93.
[45] Id.
at 91.
[46] Id.
at 91-92.
[47] Id. at 93.
[48] Id.
at 93-95.
[49] Id.
at 95-96.
[50] Id.
at 282-283.
[51] Id.
at 83.
[52] Id.
at 85-87.
[53] Id.
at 292.
[54] Id.
at 293.
[55] Id. at 293-295.
[56] Records,
pp. 252-278.
[57] Eastboard Navigation, Ltd. v. Juan Ysmael
and Co., Inc., 102 Phil. 1, 9 (1957); Arrieta
v. National Rice and Corn Corporation, 119 Phil. 339, 349-350 (1964).
[58] SECTION
1. Every provision contained in,
or made with respect to, any obligation which provision purports to give the
obligee the right to require payment in gold or in a particular kind of coin or
currency other than Philippine currency or in an amount of money of the
Philippines measured thereby, be as it is hereby declared against public
policy, and null, void and of no effect, and no such provision shall be
contained in, or made with respect to, any obligation hereafter incurred. Every
obligation heretofore or hereafter incurred, whether or not any such provision
as to payment is contained therein or made with respect thereto, shall be
discharged upon payment in any coin or currency which at the time of payment is
legal tender for public and private debts: Provided,
That, if the obligation was incurred prior to the enactment of this Act and
required payment in a particular kind of coin or currency other than Philippine
currency, it shall be discharged in Philippine currency measured at the
prevailing rates of exchange at the time the obligation was incurred, except in
case of a loan made in a foreign currency stipulated to be payable in the same
currency in which case the rate of exchange prevailing at the time of the
stipulated date of payment shall prevail. All coin and currency, including
Central Bank notes, heretofore or hereafter issued and declared by the
Government of the
[59] Eastboard Navigation, Ltd. v. Juan Ysmael
and Co., Inc., supra note 57.
[60] SEC.
1. Every provision contained in, or
made with respect to, any domestic obligation to wit, any obligation contracted
in the Philippines which provisions purports to give the obligee the right to
require payment in gold or in a particular kind of coin or currency other than
Philippine currency or in an amount of money of the Philippines measured
thereby, be as it is hereby declared against public policy, and null, void, and
of no effect, and no such provision shall be contained in, or made with respect
to, any obligation hereafter incurred. The above prohibition shall not apply to
(a) transactions where the funds involved are the proceeds of loans or
investments made directly or indirectly, through bona fide intermediaries or
agents, by foreign governments, their agencies and instrumentalities, and
international financial and banking institutions so long as the funds are
identifiable, as having emanated from the sources enumerated above; (b)
transactions affecting high-priority economic projects for agricultural,
industrial and power development as may be determined by the National Economic
Council which are financed by or through foreign funds; (c) forward exchange
transactions entered into between banks or between banks and individuals or
juridical persons; (d) import-export and other international banking, financial
investment and industrial transactions. With the exception of the cases
enumerated in items (a), (b), (c) and (d) in the foregoing provision, in which
bases the terms of the parties' agreement shall apply, every other domestic
obligation heretofore or hereafter incurred, whether or not any such provision
as to payment is contained therein or made with respect thereto, shall be
discharged upon payment in any coin or currency which at the time of payment is
legal tender for public and private debts: Provided,
That if the obligation was incurred prior to the enactment of this Act and
required payment in a particular kind of coin or currency other than Philippine
currency, it shall be discharged in Philippine currency measured at the
prevailing rates of exchange at the time the obligation was incurred, except in
case of a loan made in a foreign currency stipulated to be payable in the same
currency in which case the rate of exchange prevailing at the time of the
stipulated date of payment shall prevail. All coin and currency, including
Central Bank notes, heretofore and hereafter issued and declared by the
Government of the
[61] Otherwise
known as the Consolidated Foreign Exchange Rules and Regulations.
[62] Republic Act No. 8183 provides that
it shall take effect fifteen (15) days after its publication in the Official
Gazette or in two (2) national newspapers of general circulation. It was
published in
[63] SECTION
2. Republic Act Numbered Five
Hundred Twenty-Nine (R.A. No. 529), as amended entitled "An Act to Assure
Uniform Value of Philippine Coin and Currency," is hereby repealed.
[64] SECTION 1. All monetary obligations shall be
settled in the Philippine currency which is legal tender in the
[65] Records,
pp. 12-13.
[66] Id.
at 252-278.
[67] G.R.
No. 159912, August 17, 2007, 530 SCRA 567.
[68] Id. at 599.
[69] TSN,
[70] Rollo, pp. 247-248.
[71] Records,
p. 114.
[72] Id.
at 232.
[73] TSN,
[74] Id.
at 18-19.
[75] TSN,
[76] Domingo v. Robles, 493 Phil. 916, 921
(2005).
[77] Records,
p. 344; Restructuring Agreement, p. 11.
[78] TSN,
[79] SEC. 34. Offer of Evidence.
The court shall consider no evidence which has not been formally offered. The
purpose for which the evidence is offered must be specified.
[80] Heirs of Pedro Pasag v. Parocha, G.R.
No. 155483,
[81] Records,
pp. 110-119.
[82] Id.
at 114.
[83] Id.
at 232.
[84] Id.
at 335.
[85] See records, pp. 134-135.
[86] Id.
[87] Id.
at 134.
[88] Rollo, pp. 92-93.
[89] Spouses Bejoc v. Cabreros, 502 Phil.
336, 343 (2005).
[90] 35. That in 1983, the Spouses Jose Tiu and
Juanita Tiu, and during the existence of their marriage, constructed their
house on Lot No. 639 and declared the same for taxation purposes in the name of
Jose Tiu;
36. That Jose Tiu died on
37. That consequently upon his death, the
plaintiffs Juanita T. Tiu, Rosalinda T. King, Rufino T. Tiu, Rosalie T. Young
and Rosenda T. Tiu became owners of the aforesaid house;
38. That the herein plaintiffs have not executed
any real estate mortgage on their house constructed on plaintiffs spouses Tius
lot in favor of defendant bank;
39.
Consequently, the extra-judicial foreclosure sale of said house is null
and void as the real owners of the same have not mortgaged the said house to
defendant bank; (Records, p.
116.)
[91] Records, pp. 232-233.
[92] Republic
Act No. 8791.
[93] Rollo, pp. 90-91.
[94] Id.
at 91.
[95] 40. Before the execution of the restructuring
agreement, the plaintiffs and the defendant bank entered into a memorandum of
agreement, whereby the plaintiffs turned over to defendant bank in the
meanwhile the following real and personal properties:
a)
Shares of stock of the Borrower/Mortgagor in Grand Convention Center, Cebu Country
Club, Subic Bay Yacht Club, Alta Vista Golf and Country Club and Cebu Grand
Salinas Development Corporation,
b)
Real Estate properties:
|
TCT number |
Registry of Deeds |
Location |
|
116288 |
Cebu City |
Panganiban St., Cebu City |
|
116287 |
Cebu City |
Panganiban
St., Cebu City |
|
OCT No. 0-3538 |
Cebu City |
Panganiban
St., Cebu City |
|
|
|
|
|
30271 |
Cebu City |
Minglanilla, Cebu Province |
Copy of the
memorandum of agreement was attached to the original complaint as Annex I;
41. As can be seen from the Restructuring
Agreement, only the lot subject of the sheriffs notice of extrajudicial
foreclosure sale was mortgaged to guarantee plaintiffs obligation;
42. None of the properties mentioned in
paragraph 40 hereof have been subjected to any lien in favor of defendant bank
but the defendant bank continues to hold on to said properties and has not
returned the same to the plaintiffs spouses Tiu (Records, p. 117).
[96] Rollo, pp. 91-92.
[97] Id.
at 317.
[98] Records,
pp. 41-42.
[99] Rollo, pp. 91-92.
[100] Records,
p. 341.
[101] Id.
at 41.
[102] Id.
at 209; see Acknowledgement Receipt
dated November 24, 1999.
[103] Id.
at 216-217.
[104] G.R. No. 74449, August 20, 1993, 225 SCRA 456.
[105] Id. at 467-468.
[106] Rollo, pp. 93-94.
[107] Pacific Basin Securities Co., Inc. v.
Oriental Petroleum And Minerals Corp., G.R. Nos. 143972, 144056 and 144056,
August 31, 2007, 531 SCRA 667, 689.