Vs. Hon. Court of Appeals, Producers Bank of The Philippines and
Vs. Hon. Court of Appeals, Producers Bank of The Philippines and
Vs. Hon. Court of Appeals, Producers Bank of The Philippines and
VITUG, J.:
Would it be valid and effective to have a clause in a chattel
mortgage that purports to likewise extend its coverage to
obligations yet to be contracted or incurred? This question is the
core issue in the instant petition for review on certiorari.
Petitioner Chua Pac, the president and general manager of co-
petitioner "Acme Shoe, Rubber & Plastic Corporation," executed on
27 June 1978, for and in behalf of the company, a chattel mortgage
in favor of private respondent Producers Bank of the
Philippines. The mortgage stood by way of security for
petitioner's corporate loan of three million pesos
(P3,000,000.00). A provision in the chattel mortgage agreement was
to this effect -
"(c) If the MORTGAGOR, his heirs, executors or administrators shall
well and truly perform the full obligation or obligations above-
stated according to the terms thereof, then this mortgage shall be
null and void. x x x.
"In case the MORTGAGOR executes subsequent promissory note or notes
either as a renewal of the former note, as an extension thereof,
or as a new loan, or is given any other kind of accommodations
such as overdrafts, letters of credit, acceptances and bills of
exchange, releases of import shipments on Trust Receipts, etc.,
this mortgage shall also stand as security for the payment of the
said promissory note or notes and/or accommodations without the
necessity of executing a new contract and this mortgage shall have
the same force and effect as if the said promissory note or notes
and/or accommodations were existing on the date thereof. This
mortgage shall also stand as security for said obligations and any
and all other obligations of the MORTGAGOR to the MORTGAGEE of
whatever kind and nature, whether such obligations have been
contracted before, during or after the constitution of this
mortgage."[1]
In due time, the loan of P3,000,000.00 was paid by petitioner
corporation. Subsequently, in 1981, it obtained from respondent
bank additional financial accommodations totalling
P2,700,000.00.[2] These borrowings were on due date also fully
paid.
On 10 and 11 January 1984, the bank yet again extended to
petitioner corporation a loan of one million pesos (P1,000,000.00)
covered by four promissory notes for P250,000.00 each. Due to
financial constraints, the loan was not settled at
maturity.[3] Respondent bank thereupon applied for an extrajudicial
foreclosure of the chattel mortgage, hereinbefore cited, with the
Sheriff of Caloocan City, prompting petitioner corporation to
forthwith file an action for injunction, with damages and a prayer
for a writ of preliminary injunction, before the Regional Trial
Court of Caloocan City (Civil Case No. C-12081). Ultimately, the
court dismissed the complaint and ordered the foreclosure of the
chattel mortgage. It held petitioner corporation bound by the
stipulations, aforequoted, of the chattel mortgage.
Petitioner corporation appealed to the Court of
Appeals[4] which, on 14 August 1991, affirmed, "in all respects,"
the decision of the court a quo. The motion for reconsideration
was denied on 24 January 1992.
The instant petition interposed by petitioner corporation was
initially denied on 04 March 1992 by this Court for having been
insufficient in form and substance. Private respondent filed a
motion to dismiss the petition while petitioner corporation filed
a compliance and an opposition to private respondent's motion to
dismiss. The Court denied petitioner's first motion for
reconsideration but granted a second motion for reconsideration,
thereby reinstating the petition and requiring private respondent
to comment thereon.[5]
Except in criminal cases where the penalty of reclusion
perpetua or death is imposed[6] which the Court so reviews as a
matter of course, an appeal from judgments of lower courts is not
a matter of right but of sound judicial discretion. The circulars
of the Court prescribing technical and other procedural
requirements are meant to weed out unmeritorious petitions that
can unnecessarily clog the docket and needlessly consume the time
of the Court. These technical and procedural rules, however, are
intended to help secure, not suppress, substantial justice. A
deviation from the rigid enforcement of the rules may thus be
allowed to attain the prime objective for, after all, the
dispensation of justice is the core reason for the existence of
courts. In this instance, once again, the Court is constrained to
relax the rules in order to give way to and uphold the paramount
and overriding interest of justice.
Contracts of security are either personal or real. In contracts
of personal security, such as a guaranty or a suretyship, the
faithful performance of the obligation by the principal debtor is
secured by the personal commitment of another (the guarantor or
surety). In contracts of real security, such as a pledge, a
mortgage or an antichresis, that fulfillment is secured by
an encumbrance of property- in pledge, the placing of movable
property in the possession of the creditor; in chattel mortgage,
by the execution of the corresponding deed substantially in the
form prescribed by law; in real estate mortgage, by the execution
of a public instrument encumbering the real property covered
thereby; and in antichresis, by a written instrument granting to
the creditor the right to receive the fruits of an immovable
property with the obligation to apply such fruits to the payment
of interest, if owing, and thereafter to the principal of his
credit - upon the essential condition that if the principal
obligation becomes due and the debtor defaults, then the property
encumbered can be alienated for the payment of the
obligation,[7] but that should the obligation be duly paid, then
the contract is automatically extinguished proceeding from the
accessory character[8] of the agreement. As the law so puts it,
once the obligation is complied with, then the contract of security
becomes, ipso facto, null and void.[9]
While a pledge, real estate mortgage, or antichresis may
exceptionally secure after-incurred obligations so long as these
future debts are accurately described,[10] a chattel mortgage,
however, can only cover obligations existing at the time the
mortgage is constituted. Although a promise expressed in a chattel
mortgage to include debts that are yet to be contracted can be a
binding commitment that can be compelled upon, the security itself,
however, does not come into existence or arise until after a
chattel mortgage agreement covering the newly contracted debt is
executed either by concluding a fresh chattel mortgage or by
amending the old contract conformably with the form prescribed by
the Chattel Mortgage Law.[11] Refusal on the part of the borrower
to execute the agreement so as to cover the after-incurred
obligation can constitute an act of default on the part of the
borrower of the financing agreement whereon the promise is written
but, of course, the remedy of foreclosure can only cover the debts
extant at the time of constitution and during the life of the
chattel mortgage sought to be foreclosed.
A chattel mortgage, as hereinbefore so intimated, must comply
substantially with the form prescribed by the Chattel Mortgage Law
itself. One of the requisites, under Section 5 thereof, is an
affidavit of good faith. While it is not doubted that if such an
affidavit is not appended to the agreement, the chattel mortgage
would still be valid between the parties (not against third persons
acting in good faith[12]), the fact, however, that the statute has
provided that the parties to the contract must execute an oath
that -
"x x x (the) mortgage is made for the purpose of securing the
obligation specified in the conditions thereof, and for no other
purpose, and that the same is a just and valid obligation, and one
not entered into for the purpose of fraud."[13]
makes it obvious that the debt referred to in the law is a current,
not an obligation that is yet merely contemplated. In the chattel
mortgage here involved, the only obligation specified in the
chattel mortgage contract was the P3,000,000.00 loan which
petitioner corporation later fully paid. By virtue of Section 3 of
the Chattel Mortgage Law, the payment of the obligation
automatically rendered the chattel mortgage void or
terminated. In Belgian Catholic Missionaries, Inc., vs. Magallanes
Press, Inc., et al.,[14] the Court said -
"x x x A mortgage that contains a stipulation in regard to future
advances in the credit will take effect only from the date the
same are made and not from the date of the mortgage."[15]
The significance of the ruling to the instant problem would be
that since the 1978 chattel mortgage had ceased to exist
coincidentally with the full payment of the P3,000,000.00
loan,[16] there no longer was any chattel mortgage that could cover
the new loans that were concluded thereafter.
We find no merit in petitioner corporation's other prayer that
the case should be remanded to the trial court for a specific
finding on the amount of damages it has sustained "as a result of
the unlawful action taken by respondent bank against it."[17] This
prayer is not reflected in its complaint which has merely asked
for the amount of P3,000,000.00 by way of moral damages.[18] In LBC
Express, Inc. vs. Court of Appeals,[19] we have said:
"Moral damages are granted in recompense for physical suffering,
mental anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, and similar
injury. A corporation, being an artificial person and having
existence only in legal contemplation, has no feelings, no
emotions, no senses; therefore, it cannot experience physical
suffering and mental anguish. Mental suffering can be experienced
only by one having a nervous system and it flows from real ills,
sorrows, and griefs of life - all of which cannot be suffered by
respondent bank as an artificial person."[20]
While Chua Pac is included in the case, the complaint, however,
clearly states that he has merely been so named as a party
in representation of petitioner corporation.
Petitioner corporation's counsel could be commended for his
zeal in pursuing his client's cause.It instead turned out to be,
however, a source of disappointment for this Court to read in
petitioner's reply to private respondent's comment on the petition
his so-called "One Final Word;" viz:
"In simply quoting in toto the patently erroneous decision of the
trial court, respondent Court of Appeals should be required to
justify its decision which completely disregarded the basic laws
on obligations and contracts, as well as the clear provisions of
the Chattel Mortgage Law and well-settled jurisprudence of this
Honorable Court; that in the event that its explanation is wholly
unacceptable, this Honorable Court should impose appropriate
sanctions on the erring justices. This is one positive step in
ridding our courts of law of incompetent and dishonest magistrates
especially members of a superior court of appellate
jurisdiction."[21] (Italics supplied.)
The statement is not called for. The Court invites counsel's
attention to the admonition in Guerrero vs. Villamor;[22] thus:
"(L)awyers x x x should bear in mind their basic duty `to observe
and maintain the respect due to the courts of justice and judicial
officers and x x x (to) insist on similar conduct by others.' This
respectful attitude towards the court is to be observed, `not for
the sake of the temporary incumbent of the judicial office, but
for the maintenance of its supreme importance.' And it is `through
a scrupulous preference for respectful language that a lawyer best
demonstrates his observance of the respect due to the courts and
judicial officers x x x.'"[23]
The virtues of humility and of respect and concern for others must
still live on even in an age of materialism.
WHEREFORE, the questioned decisions of the appellate court and
the lower court are set aside without prejudice to the appropriate
legal recourse by private respondent as may still be warranted as
an unsecured creditor. No costs.
Atty. Francisco R. Sotto, counsel for petitioners, is
admonished to be circumspect in dealing with the courts.
SO ORDERED.
Kapunan and Hermosisima, Jr., JJ., concur.
Padilla, J., took no part in view of lessor-lessee relationship
with respondent bank.
Bellosillo, J., on leave.
FIRST DIVISION
[G.R. No. 146364. June 3, 2004]
The Case
The Antecedents
A) vacate the house and lot occupied by the defendant or any other
person or persons claiming any right under him;
SO ORDERED.[7]
SO ORDERED.[8]
On 3 January 1997, Guevarra filed his petition for review with the
Supreme Court.
On 8 January 1997, the First Division of the Supreme Court issued
a Resolution[9] referring the motion for extension to the Court of
Appeals which has concurrent jurisdiction over the case. The case
presented no special and important matter for the Supreme Court to
take cognizance of at the first instance.
SO ORDERED.[11]
SO ORDERED.[12]
The MTC ruled that the subject of the agreement between Pajuyo and
Guevarra is the house and not the lot. Pajuyo is the owner of the
house, and he allowed Guevarra to use the house only by tolerance.
Thus, Guevarras refusal to vacate the house on Pajuyos demand made
Guevarras continued possession of the house illegal.
The Ruling of the RTC
The RTC upheld the Kasunduan, which established the landlord and
tenant relationship between Pajuyo and Guevarra. The terms of the
Kasunduan bound Guevarra to return possession of the house on
demand.
Perez, the person from whom Pajuyo acquired his rights, was also
a squatter. Perez had no right or title over the lot because it is
public land. The assignment of rights between Perez and Pajuyo,
and the Kasunduan between Pajuyo and Guevarra, did not have any
legal effect. Pajuyo and Guevarra are in pari delicto or in equal
fault. The court will leave them where they are.
The Court of Appeals reversed the MTC and RTC rulings, which held
that the Kasunduan between Pajuyo and Guevarra created a legal tie
akin to that of a landlord and tenant relationship. The Court of
Appeals ruled that the Kasunduan is not a lease contract but a
commodatum because the agreement is not for a price certain.
The Issues
Procedural Issues
The Court of Appeals did not commit grave abuse of discretion when
it approved Guevarras motion for extension. The Court of Appeals
gave due course to the motion for extension because it complied
with the condition set by the appellate court in its resolution
dated 28 January 1997. The resolution stated that the Court of
Appeals would only give due course to the motion for extension if
filed on time. The motion for extension met this condition.
Guevarra had until 14 December 1996 to file an appeal from the RTC
decision. Guevarra filed his motion for extension before this Court
on 13 December 1996, the date stamped by this Courts Receiving
Clerk on the motion for extension. Clearly, Guevarra filed the
motion for extension exactly one day before the lapse of the
reglementary period to appeal.
Absence of Title over the Disputed Property will not Divest the
Courts of Jurisdiction to Resolve the Issue of Possession
In this case, what Guevarra raised before the courts was that he
and Pajuyo are not the owners of the contested property and that
they are mere squatters. Will the defense that the parties to the
ejectment case are not the owners of the disputed lot allow the
courts to renounce their jurisdiction over the case? The Court of
Appeals believed so and held that it would just leave the parties
where they are since they are in pari delicto.
Thus, a party who can prove prior possession can recover such
possession even against the owner himself.[41] Whatever may be the
character of his possession, if he has in his favor prior
possession in time, he has the security that entitles him to remain
on the property until a person with a better right lawfully ejects
him.[42] To repeat, the only issue that the court has to settle in
an ejectment suit is the right to physical possession.
In Pitargue v. Sorilla,[43] the government owned the land in
dispute. The government did not authorize either the plaintiff or
the defendant in the case of forcible entry case to occupy the
land. The plaintiff had prior possession and had already introduced
improvements on the public land. The plaintiff had a pending
application for the land with the Bureau of Lands when the
defendant ousted him from possession. The plaintiff filed the
action of forcible entry against the defendant. The government was
not a party in the case of forcible entry.
While the Court did not brand the plaintiff and the defendant in
Pitargue[44] as squatters, strictly speaking, their entry into the
disputed land was illegal. Both the plaintiff and defendant entered
the public land without the owners permission. Title to the land
remained with the government because it had not awarded to anyone
ownership of the contested public land. Both the plaintiff and the
defendant were in effect squatting on government property. Yet, we
upheld the courts jurisdiction to resolve the issue of possession
even if the plaintiff and the defendant in the ejectment case did
not have any title over the contested land.
The question that is before this Court is: Are courts without
jurisdiction to take cognizance of possessory actions involving
these public lands before final award is made by the Lands
Department, and before title is given any of the conflicting
claimants? It is one of utmost importance, as there are public
lands everywhere and there are thousands of settlers, especially
in newly opened regions. It also involves a matter of policy, as
it requires the determination of the respective authorities and
functions of two coordinate branches of the Government in
connection with public land conflicts.
Our problem is made simple by the fact that under the Civil Code,
either in the old, which was in force in this country before the
American occupation, or in the new, we have a possessory action,
the aim and purpose of which is the recovery of the physical
possession of real property, irrespective of the question as to
who has the title thereto. Under the Spanish Civil Code we had the
accion interdictal, a summary proceeding which could be brought
within one year from dispossession (Roman Catholic Bishop of Cebu
vs. Mangaron, 6 Phil. 286, 291); and as early as October 1, 1901,
upon the enactment of the Code of Civil Procedure (Act No. 190 of
the Philippine Commission) we implanted the common law action of
forcible entry (section 80 of Act No. 190), the object of which
has been stated by this Court to be to prevent breaches of the
peace and criminal disorder which would ensue from the withdrawal
of the remedy, and the reasonable hope such withdrawal would create
that some advantage must accrue to those persons who, believing
themselves entitled to the possession of property, resort to force
to gain possession rather than to some appropriate action in the
court to assert their claims. (Supia and Batioco vs. Quintero and
Ayala, 59 Phil. 312, 314.) So before the enactment of the first
Public Land Act (Act No. 926) the action of forcible entry was
already available in the courts of the country. So the question to
be resolved is, Did the Legislature intend, when it vested the
power and authority to alienate and dispose of the public lands in
the Lands Department, to exclude the courts from entertaining the
possessory action of forcible entry between rival claimants or
occupants of any land before award thereof to any of the parties?
Did Congress intend that the lands applied for, or all public lands
for that matter, be removed from the jurisdiction of the judicial
Branch of the Government, so that any troubles arising therefrom,
or any breaches of the peace or disorders caused by rival
claimants, could be inquired into only by the Lands Department to
the exclusion of the courts? The answer to this question seems to
us evident. The Lands Department does not have the means to police
public lands; neither does it have the means to prevent disorders
arising therefrom, or contain breaches of the peace among settlers;
or to pass promptly upon conflicts of possession. Then its power
is clearly limited to disposition and alienation, and while it may
decide conflicts of possession in order to make proper award, the
settlement of conflicts of possession which is recognized in the
court herein has another ultimate purpose, i.e., the protection of
actual possessors and occupants with a view to the prevention of
breaches of the peace. The power to dispose and alienate could not
have been intended to include the power to prevent or settle
disorders or breaches of the peace among rival settlers or
claimants prior to the final award. As to this, therefore, the
corresponding branches of the Government must continue to exercise
power and jurisdiction within the limits of their respective
functions. The vesting of the Lands Department with authority to
administer, dispose, and alienate public lands, therefore, must
not be understood as depriving the other branches of the Government
of the exercise of the respective functions or powers thereon,
such as the authority to stop disorders and quell breaches of the
peace by the police, the authority on the part of the courts to
take jurisdiction over possessory actions arising therefrom not
involving, directly or indirectly, alienation and disposition.
Articles 1411 and 1412 of the Civil Code[48] embody the principle
of pari delicto. We explained the principle of pari delicto in
these words:
The case for review before the Court of Appeals was a simple case
of ejectment. The Court of Appeals refused to rule on the issue of
physical possession. Nevertheless, the appellate court held that
the pivotal issue in this case is who between Pajuyo and Guevarra
has the priority right as beneficiary of the contested land under
Proclamation No. 137.[54] According to the Court of Appeals,
Guevarra enjoys preferential right under Proclamation No. 137
because Article VI of the Code declares that the actual occupant
or caretaker is the one qualified to apply for socialized housing.
The ruling of the Court of Appeals has no factual and legal basis.
First. Guevarra did not present evidence to show that the contested
lot is part of a relocation site under Proclamation No. 137.
Proclamation No. 137 laid down the metes and bounds of the land
that it declared open for disposition to bona fide residents.
The records do not show that the contested lot is within the land
specified by Proclamation No. 137. Guevarra had the burden to prove
that the disputed lot is within the coverage of Proclamation No.
137. He failed to do so.
Third. Even assuming that the disputed lot is within the coverage
of Proclamation No. 137 and Guevarra has a pending application
over the lot, courts should still assume jurisdiction and resolve
the issue of possession. However, the jurisdiction of the courts
would be limited to the issue of physical possession only.
Guevarra does not dispute Pajuyos prior possession of the lot and
ownership of the house built on it. Guevarra expressly admitted
the existence and due execution of the Kasunduan. The Kasunduan
reads:
Guevarra turned his back on the Kasunduan on the sole ground that
like him, Pajuyo is also a squatter. Squatters, Guevarra pointed
out, cannot enter into a contract involving the land they illegally
occupy. Guevarra insists that the contract is void.
Pajuyo did not profit from his arrangement with Guevarra because
Guevarra stayed in the property without paying any rent. There is
also no proof that Pajuyo is a professional squatter who rents out
usurped properties to other squatters. Moreover, it is for the
proper government agency to decide who between Pajuyo and Guevarra
qualifies for socialized housing. The only issue that we are
addressing is physical possession.
Prior possession is not always a condition sine qua non in
ejectment.[73] This is one of the distinctions between forcible
entry and unlawful detainer.[74] In forcible entry, the plaintiff
is deprived of physical possession of his land or building by means
of force, intimidation, threat, strategy or stealth. Thus, he must
allege and prove prior possession.[75] But in unlawful detainer,
the defendant unlawfully withholds possession after the expiration
or termination of his right to possess under any contract, express
or implied. In such a case, prior physical possession is not
required.[76]
Since the party that has title or a better right over the property
is not impleaded in this case, we cannot evict on our own the
parties. Such a ruling would discourage squatters from seeking the
aid of the courts in settling the issue of physical possession.
Stripping both the plaintiff and the defendant of possession just
because they are squatters would have the same dangerous
implications as the application of the principle of pari delicto.
Squatters would then rather settle the issue of physical possession
among themselves than seek relief from the courts if the plaintiff
and defendant in the ejectment case would both stand to lose
possession of the disputed property. This would subvert the policy
underlying actions for recovery of possession.
We sustain the P300 monthly rentals the MTC and RTC assessed
against Guevarra. Guevarra did not dispute this factual finding of
the two courts. We find the amount reasonable compensation to
Pajuyo. The P300 monthly rental is counted from the last demand to
vacate, which was on 16 February 1995.
SO ORDERED.
CHEE KIONG YAM, AMPANG MAH, ANITA YAM JOSE Y.C. YAM AND RICHARD
YAM, Petitioners, vs. HON. NABDAR J. MALIK, Municipal Judge of
Jolo, Sulu (Branch I), THE PEOPLE OF THE PHILIPPINES, ROSALINDA
AMIN, TAN CHU KAO and LT. COL. AGOSTO SAJOR Respondents.
We agree with the petitioners that the facts alleged in the three
criminal complaints do not constitute estafa through
misappropriation.chanroblesvirtualawlibrary chanrobles virtual
law library
In U.S. vs. Ibaez, 19 Phil. 559, 560 (1911), this Court held that
it is not estafa for a person to refuse to nay his debt or to deny
its existence.
With respect to the other respondents, this Court is not the proper
forum for the consideration of the claim for damages against
them.chanroblesvirtualawlibrarychanrobles virtual law library
SO ORDERED.
D E C I S I O N
Factual Antecedents
The MeTC, in its Decision10 of June 30, 2006, upheld the 6% monthly
interest. In so ruling, it ratiocinated that since L&J agreed
thereto and voluntarily paid the interest at such rate from 2000
to 2003, it is already estopped from impugning the same.
Nonetheless, for reasons of equity, the said court reduced the
interest rate to 12% per annum on the remaining principal
obligation of P350,000.00. With regard to Rolandos prayer for
moral damages, the MeTC denied the same as it found no malice or
bad faith on the part of L&J in not paying the obligation. It
likewise relieved Atty. Salonga of any liability as it found that
he merely acted in his official capacity in obtaining the loan.
The MeTC disposed of the case as
follows:ChanRoblesVirtualawlibrary
WHEREFORE, premises considered, judgment is hereby rendered in
favor of the plaintiff, Arch. Rolando C. Dela Paz, and against the
defendant, L & J Development Co., Inc., as
follows:ChanRoblesVirtualawlibrary
SO ORDERED.11cralawred
SO ORDERED.15
Undaunted, L&J went to the CA and echoed its arguments and proposed
computation as proffered before the RTC.
WHEREFORE, the DECISION DATED APRIL 19, 2007 is REVERSED and SET
ASIDE.
SO ORDERED.19
Rolando argues that the 6% monthly interest rate should not have
been invalidated because Atty. Salonga took advantage of his legal
knowledge to hoodwink him into believing that no document was
necessary to reflect the interest rate. Moreover, the cases anent
unconscionable interest rates that the CA relied upon involve
lenders who imposed the excessive rates, which are totally
different from the case at bench where it is the borrower who
decided on the high interest rate. This case does not fall under
a scenario that enslaves the borrower or that leads to the
hemorrhaging of his assets that the courts seek to prevent.
Issue
Our Ruling
Here, it is undisputed that the parties did not put down in writing
their agreement. Thus, no interest is due. The collection of
interest without any stipulation in writing is prohibited by
law.22cralawred
While the Court recognizes the right of the parties to enter into
contracts and who are expected to comply with their terms and
obligations, this rule is not absolute. Stipulated interest rates
are illegal if they are unconscionable and the Court is allowed to
temper interest rates when necessary. In exercising this vested
power to determine what is iniquitous and unconscionable, the Court
must consider the circumstances of each case. What may be
iniquitous and unconscionable in one case, may be just in another.
x x x28
The situation that it was the debtor who insisted on the interest
rate will not exempt Rolando from a ruling that the rate is void.
As this Court cited in Asian Cathay Finance and Leasing Corporation
v. Gravador,32 [t]he imposition of an unconscionable rate of
interest on a money debt, even if knowingly and voluntarily
assumed, is immoral and unjust. It is tantamount to a repugnant
spoliation and an iniquitous deprivation of property, repulsive to
the common sense of man.33 Indeed, voluntariness does not make
the stipulation on [an unconscionable] interest valid.34cralawred
SO ORDERED.cralawlaw library