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Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 176479

October 6, 2010

RIZAL COMMERCIAL BANKING CORPORATION, Petitioner,
vs.
PEDRO P. BUENAVENTURA, Respondent.
RESOLUTION
NACHURA, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court. Petitioner Rizal Commercial Banking
Corporation (RCBC) assails the Decision1 dated November 21, 2006 and the Resolution2 dated January 30, 2007 of the Court
of Appeals (CA) in CA-G.R. CV No. 82079.
Respondent Pedro P. Buenaventura and his first wife (now deceased) owned a townhouse unit in Casa Nueva Manila
Townhouse, Quezon City. On December 27, 1994, they obtained a loan from petitioner. As security for the loan, they mortgaged
the townhouse to petitioner.3 Under the loan agreement, respondent was to pay RCBC a fixed monthly payment with adjustable
interest for five years. For this purpose, respondent opened an account with RCBC‟s Binondo branch from which the bank was
to deduct the monthly amortizations.4
On April 19, 1999, respondent received a Notice of Public Auction of the mortgaged townhouse unit. He wrote Atty. Saturnino
Basconcillo, the notary public conducting the auction sale, demanding the cancellation of the auction sale. However, the notary
public proceeded with the public sale on May 25, 1999, where RCBC emerged as the highest bidder. The Notary Public‟s
Certificate of Sale was registered with the Register of Deeds on September 28, 2000.
On September 18, 2001, respondent filed with the Regional Trial Court (RTC) of Quezon City a complaint for Annulment of Sale
and Damages against RCBC, notary public Saturnino Basconcillo, and the Registrar of Deeds of Quezon City. Respondent
prayed that the RTC (1) annul the extra-judicial foreclosure and sale of the property; (2) cancel the Certificate of Sale; and (3)
direct the payment of P170,000.00 as actual damages, P100,000.00 as moral damages, P50,000.00 as exemplary damages,
P70,000.00 as attorney‟s fees, plus P2,500.00 for every court appearance of his counsel, and the costs of the suit.
RCBC failed to timely file an Answer and was declared in default. Based on respondent‟s evidence, the RTC rendered a
decision,5 the dispositive portion of which reads:
WHEREFORE, judgment is rendered:
1. Declaring the foreclosure sale of the plaintiff‟s (respondent‟s) property covered by Transfer Certificate of Title No. 39234 of the
Registry of Deeds of Quezon City conducted on May 25, 1999 by notary public ATTY. SATURNINO M. BASCONCILLO, and the
resulting certificate of sale issued by said notary public on May 27, 1999 null and void and of no effect; and
2. Ordering RIZAL COMMERCIAL BANKING CORPORATION to pay to the plaintiff P100,000.00 as moral damages;
P50,000.00 as exemplary damages; P70,000.00 as actual damages; and the costs of suit; and
3. Dismissing the complaint as against ATTY. SATURNINO M. BASCONCILLO and the REGISTRAR OF DEEDS OF QUEZON
CITY.
SO ORDERED.6
The RTC found that respondent made regular payments of the monthly amortizations as they fell due, as evidenced by his
passbooks and the various deposit slips acknowledged by RCBC.7 The RTC also found that RCBC‟s own computer-generated
amortization schedule showed that no balance was due respondent after his last payment on March 27, 2000.8
RCBC filed a motion for reconsideration. It was denied in a resolution9 dated February 11, 2004.
RCBC then appealed to the CA. In the assailed November 21, 2006 Decision,10 the CA affirmed the RTC‟s decision with
modification, deleting the award of moral and exemplary damages.
The CA ruled that the foreclosure sale was premature. It held that respondent made valid and sufficient payments on his loan
obligation. It found respondent‟s evidence as sufficient proof to negate default on his part in paying the monthly amortizations. It
noted that sometime in September 1996, RCBC sent respondent a letter informing the latter of past due accounts since January
27, 1996, which would warrant the application of the acceleration clause. The CA, however, deemed the same to have been
"cured" by a subsequent Amortization Schedule given by the bank to respondent stating that, as of March 27, 2000, he no
longer had an unpaid balance on his loan. The CA said this clearly suggests the uninterrupted receipt by RCBC of the
installments, thus, negating the claim that respondent was in default. It also noted respondent‟s evidence (his passbooks) which
indicated that he had sufficient funds to cover the remaining balance of his loan at the time of the foreclosure sale. Moreover, the
CA said that based on the term of the loan (April 27, 1995 to March 27, 2000), the loan was not yet due and demandable at the
time of the foreclosure.
On the other hand, the CA found the award of moral and exemplary damages unwarranted. It held that since respondent
irregularly paid his monthly amortizations, RCBC did not act maliciously and in bad faith when it initiated the foreclosure
proceedings.
RCBC moved for reconsideration of the Decision, but it was denied in a Resolution dated January 30, 2007.

13 This was more than enough to cover whatever amortizations were due from him at that time. 1176. Neither is it our function to reexamine and weigh anew the respective evidence of the parties. 2007 of the Court of Appeals in CA-G. Respondent likewise posits that the petition does not raise questions of law. while purportedly a question of law.In this petition.19 Respondent‟s passbooks indicate that RCBC continued to receive his payments even after it made demands for him to pay his past due accounts. he had "0. The Decision dated November 21."20 It is not respondent‟s fault that RCBC did not withdraw the money he deposited.14 The same schedule shows that. He complied with his part of the agreement. which this Court has held in the past to be a question of fact. This bolsters the conclusion of the CA that respondent had no unpaid installments and was not in default as would warrant the application of the acceleration clause and the subsequent foreclosure and auction sale of the property. He argues that the issue raised by petitioner. The receipt of a later installment of a debt without reservation as to prior installments. Section 2. In its Reply. petitioner counters respondent‟s arguments by saying that the issue it raised – whether respondent‟s subsequent payment of unpaid amortizations done after the foreclosure and public sale of the property invalidates the extra-judicial foreclosure and public sale proceedings – is a purely legal question. Inquiry into the veracity of the CA‟s factual findings and conclusions is not the function of the Supreme Court. 2000. Thus. and even after the auction sale. because this Court is not a trier of facts. the mortgagee has the right to foreclose on the mortgage. The receipt of the principal by the creditor. in order that RCBC may debit the amount of his monthly liabilities therefrom. which states: Art. respondent‟s loan account with the bank totaled only P269. Moreover. RCBC cannot deny receipt of the payments. in turn. but these payments were not withdrawn by the bank and credited to respondent‟s loan payments but remained in his account.023. the foregoing premises considered. and therefore. The bank points out that respondent made payments until March 2000. petitioner in this case has failed to show that this case falls under one of such exceptions. In his Comment. at the time of the foreclosure sale. . the Amortization Schedule shows that. As a rule.R. respondent avers that he never received a copy of petitioner‟s Motion for Extension of Time to file the Petition for Review in violation of Rule 45. in reality questions the sufficiency of evidence relied upon by both the trial court and the CA. shall likewise raise the presumption that such installments have been paid. It is settled that factual findings of the trial court. WHEREFORE. when adopted and confirmed by the CA. he argues that the motion is without legal effect. In particular. CV No. RCBC argues that the CA Decision is not in accord with law and applicable jurisprudence. without reservation with respect to the interest. At the time of foreclosure – April 1999 – respondent‟s savings account deposits showed a balance of P852. These findings are supported by the evidence on record. by March 27. when the principal obligation is not paid when due. The RTC and the CA both found that respondent was not in default on the monthly payments of his loan obligation. Clearly. the petition disputes the factual findings of the CA. even when it claims that the deposits were "not withdrawn.18 RCBC‟s own Amortization Schedule readily shows the applicability of Article 1176 of the Civil Code. respondent had unpaid amortizations.913. 1999. to have the property seized and sold.11 which. are binding and conclusive on this Court and will generally not be reviewed on appeal.00" balance left to pay.16 It is a necessary consequence of nonpayment of mortgage indebtedness. It says that the foreclosure sale was done in the lawful exercise of its right as mortgagee of the property as. Foreclosure is valid only when the debtor is in default in the payment of his obligation. SO ORDERED.121avvphi1 While it is true that there are well-established exceptions to this principle. He also alleges that the petition lacks the requisite affidavit of material dates.17 In a real estate mortgage. 82079 are hereby AFFIRMED. as of April 27. the petition is DENIED. the petition has been filed out of time. the mortgage can be foreclosed only when the debt remains unpaid at the time it is due.15 meaning he had paid his loan in full. 2006 and the Resolution dated January 30.38. it assails the CA‟s finding that respondent was not in default at that time of the foreclosure of the mortgage. and to apply the proceeds to the obligation.26. shall give rise to the presumption that the said interest has been paid. merely affirmed the factual findings of the RTC. The petition lacks merit and must be denied. His obligation under the mortgage agreement was to deposit his payment in the savings account he had opened for that purpose.

a criminal case for violation of Batas Pambansa Blg. in a decision promulgated on 20 February 1998. containing an area of 563 sq. that LIM conspired and confederated with her children in antedating the questioned Deed of Donation. The case is pending before this Court for review and docketed as G. m. 93434. namely. Anent petitioner‟s contention that assuming that the Deed of Donation was not antedated it was nevertheless in fraud of creditors because Victoria Suarez became LIM‟s creditor on 8 October 1987. docketed as Criminal Cases Nos. 87019. were filed by petitioner against LIM with Branch 23 [1] of the Regional Trial Court (RTC) of Cebu City. are as follows: On 25 and 26 August 1990.668. to petitioner‟s and other creditors‟ prejudice. the Court of Appeals found the same untenable. and P5. and (2) there must be a fraud.000 as attorney‟s fees. in a decision promulgated on 7 April 1997. jointly and severally. It held that two of the requisites for filing an accion pauliana were absent. Petitioner claimed therein that sometime in July 1991. including her. Cebu City.J. the sum of P10. (2) declared null and void the transfer certificates of title issued in the names of private respondents Linde. INGRID LIM and NEIL LIM. As regards the questioned Deed of Donation. or at least the intent to commit fraud. on 2 July 1991.000 as expenses of litigation. No. New transfer certificates of title were thereafter issued in the names of the donees. 1999] MARIA ANTONIA SIGUAN. ROSA LIM. being a public document.” Demands to make good the checks proved futile. Under Section 23 of Rule 132 of the Rules of Court.R. JR. respectively. acquitted LIM but held her civilly liable in the amount of P169. payable to “cash. CEB14181. or a year after the execution of the Deed of Donation. LIM. left no sufficient properties to pay her obligations.000 and P241. Since LIM‟s indebtedness to petitioner was incurred in August 1990. Cebu containing an area of 511 sq.. 22127-28. and covered by TCT No. Q[2] 89-2216 filed by a certain Victoria Suarez. is evidence of the fact which gave rise to its execution and of the date thereof. m. through a Deed of Donation. as borne out of the records. for the rule is basic that the fraud must prejudice the creditor seeking the rescission. (3) a parcel of land situated at Cebu City containing an area of 368 sq. 22. Finally.: May the Deed of Donation executed by respondent Rosa Lim (hereafter LIM) in favor of her children be rescinded for being in fraud of her alleged creditor.000 as moral damages. She claimed that her convictions in Criminal Cases Nos.FIRST DIVISION [G. to the prejudice of the creditor seeking the rescission. the court a quo convicted LIM as charged. (2) a parcel of land situated at Barrio Lahug. LIM denied any liability to petitioner. appears on its face to have been executed on 10 August 1989. and covered by TCT No. (1) there must be a credit existing prior to the celebration of the contract. containing an area of 600 sq. the questioned Deed. respondents. This decision was affirmed by the Court of Appeals. petitioner filed an accion pauliana against LIM and her children before Branch 18 of the RTC of Cebu City to rescind the questioned Deed of Donation and to declare as null and void the new transfer certificates of title issued for the lots covered by the questioned Deed. DECISION DAVIDE. and (4) directed the LIMs to pay the petitioner. the first requirement for accion pauliana was not met. No antedating of the Deed of Donation was made. petitioner Maria Antonia Siguan? This is the pivotal issue to be resolved in this petition for review on certiorari under Rule 45 of the Revised Rules of Court. [7] On appeal. and that LIM. In its decision dated 29 December 1992. Ingrid and Neil. [3] this Court. which was the reason why she appealed said decision to the Court of Appeals.” Upon presentment by petitioner with the drawee bank.R. LIM issued two Metrobank checks in the sums of P300. On the other hand. . which was executed and acknowledged before a notary public. It also appears that on 31 July 1990 LIM was convicted of estafa by the RTC of Quezon City in Criminal Case No. According to the Court of Appeals. LINDE LIM. Linde. m. The relevant facts. 87020. C. the Deed of Donation. 93433. m. [4] Meanwhile. [6] In its decision of 31 December 1994. vs. As a consequence. 134685. she alleged that the Deed of Donation was registered only on 2 July 1991 because she was seriously ill. and (4) a parcel of land situated at Cebu City. On appeal. the trial court ordered the rescission of the questioned deed of donation. as actual damages. reversed the decision of the trial court and dismissed petitioner‟s accion pauliana. 22127-28 were erroneous. [5] On 23 June 1993. at the time of the fraudulent conveyance. there being no convincing evidence on record to indicate that the notary public and the parties did antedate it. the checks were dishonored for the reason “account closed.000. and covered by TCT No. Cebu City. fraudulently transferred all her real property to her children in bad faith and in fraud of creditors. plus legal interest. however. and covered by TCT No. P10. No. (3) ordered the Register of Deeds of Cebu City to cancel said titles and to reinstate the previous titles in the name of Rosa Lim. a Deed of Donation conveying the following parcels of land and purportedly executed by LIM on 10 August 1989 in favor of her children. she maintained that it was not antedated but was made in good faith at a time when she had sufficient property. the Court of Appeals. 134685. Ingrid and Neil Lim. was registered with the Office of the Register of Deeds of Cebu City: (1) a parcel of land situated at Barrio Lahug. petitioner. The complaint was docketed as Civil Case No. November 19.

although demandable later. to support her accion pauliana. While it is necessary that the credit of the plaintiff in the accion pauliana must exist prior to the fraudulent alienation. (3) [13] [14] the creditor has no other legal remedy to satisfy his claim. petitioner cannot take shelter under a different law. She reiterates her arguments below.Her motion for reconsideration having been denied. As such. if it is by onerous title. one of the recognized exceptions warranting a review by this Court of the factual findings of the Court of Appeals exists. (c) the Court of Appeals correctly applied or interpreted Section 23 of Rule 132 of the Rules of Court. Rule 132 of the Rules of Court. Even if the judgment be subsequent to the alienation. except in a [11] number of instances. which provides: “The donation is always presumed to be in fraud of creditors when at the time of the execution thereof the donor did not reserve sufficient property to pay his debts prior to the donation. rescissible. pursuant to Section 23. respondents argue that (a) having agreed on the law and requisites of accion pauliana. Q-89-2216 declaring Victoria Suarez as LIM‟s judgment creditor before the execution of the Deed of Donation. and among them are “those contracts undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them.” Said provision should be read with Section 30 of the same Rule which provides that notarial documents are prima facieevidence of their execution. Without any prior existing debt. Public documents as evidence. On the other hand. (2) the debtor has made a subsequent contract conveying a patrimonial benefit to a third person.” In this case. – Documents consisting of entries in public records made in the performance of a duty by a public officer are prima facie evidence of the facts therein stated. WAS ENTERED INTO IN FRAUD OF [THE] CREDITORS OF RESPONDENT ROSA [LIM]. Notably. to wit.” Finally. with retroactive effect to the date when the credit was [17] constituted. The general rule is that rescission requires the existence of creditors at the time of the alleged fraudulent alienation. We resolve these issues in the negative. The phrase “all other public documents” in the second sentence of Section 23 means those public documents other than the entries in public records made in the performance of a duty by a public officer. especially on the issue of whether the Deed of Donation in question was in fraud of creditors. Findings of fact of the latter court are conclusive. In the instant case. EXH. therefore. who is not a party to this case. (Emphasis supplied). 23. Petitioner argues that the finding of the Court of Appeals that the Deed of Donation was not in fraud of creditors is [8] contrary to well-settled jurisprudence laid down by this Court as early as 1912 in the case of Oria v. Rule 132 of the Rules of Court. and (e) the Court of Appeals correctly struck down the awards of damages. We are not convinced with the allegation of the petitioner that the questioned deed was antedated to make it appear that it was made prior to petitioner‟s credit. The rule is well settled that the jurisdiction of this Court in cases brought before it from the Court of Appeals via Rule 45 of the Rules of Court is limited to reviewing errors of law. petitioner avers that the Court of Appeals overlooked Article 759 of the New Civil Code. the date of the judgment enforcing it is immaterial. In the case at bar. McMicking. that deed is a public document. while the deed of donation was purportedly executed on 10 August 1989. like the subject deed of donation. in holding that “being a public document. The primordial issue for resolution is whether the questioned Deed of Donation was made in fraud of petitioner and. there can neither be injury nor fraud. Section 19. A corollary issue is whether the awards of damages. Section 23 reads: SEC. which enumerated the various circumstances indicating the existence of fraud in a transaction. of the fact which gave rise to their execution and of the date of the latter. All other public documents are evidence. it is evidence of the fact which gave rise to its execution and of its date. (d) petitioner failed to present convincing evidence that the Deed of Donation was antedated and executed in fraud of petitioner. the alleged debt of LIM in favor of petitioner was incurred in August 1990. it is merely declaratory. (b) petitioner cannot invoke the credit of Victoria Suarez. the said deed of donation is evidence of the fact which gave rise [10] to its execution and of the date of the latter. Article 1381 of the Civil Code enumerates the contracts which are rescissible. it having been acknowledged before [18] a notary public. Rule 132 of the Rules of Court provides: . has been an accomplice in the fraud. even against a third person. (5) the third [15] person who received the property conveyed. not “of the facts which gave rise to their execution and of the date of the latter. 1. attorney‟s fees and expenses of litigation are proper. the factual findings and conclusions of the lower court and Court of Appeals are conflicting.” The action to rescind contracts in fraud of creditors is known as accion pauliana. [9] Petitioner further argues that the Court of Appeals incorrectly applied or interpreted Section 23. [16] and this must be proved as one of the bases of the judicial pronouncement setting aside the contract. And these include notarial documents. For this action to prosper. LIM made no reservation of sufficient property to pay her creditors prior to the execution of the Deed of Donation. petitioner came to this Court and submits the following issue: WHETHER OR NOT THE DEED OF DONATION. attorney‟s fees and expenses of litigation because there is no factual basis therefor in the body of the trial court‟s decision. Petitioner‟s contention that the public documents referred to in said Section 23 are only those entries in public records made in the performance of a duty by a public officer does not hold water. and adds that another fact found by the trial court and admitted by the parties but untouched by the Court of Appeals is the existence of a prior final judgment against LIM in Criminal Case No. (4) the act being impugned is fraudulent. the [12] following requisites must be present: (1) the plaintiff asking for rescission has a credit prior to the alienation.

LIM [27] testified that she sold it in 1990. registered in the name of Rosa Lim and covered [22] by TCT No. contracts entered into in fraud of creditors may be rescinded only when the creditors cannot in any manner collect the claims due them. Under Article 1381 of the Civil Code.For the purpose of their presentation in evidence. Thus: ATTY. -. therefore. (b) Documents acknowledged before a notary public except last wills and testaments. Q How about the lot which includes the house.000. . Public documents are: (a) . her action for the rescission of the questioned deed is not maintainable [21] even if the fraud charged actually did exist. situated in Sto. petitioner did not present evidence that would indicate the actual market value of said properties. essential that the party asking for [20] rescission prove that he has exhausted all other legal means to obtain satisfaction of his claim.00. the first two requisites for the rescission of contracts are absent. The term “subsidiary remedy” has been defined as “the exhaustion of all remedies by the prejudiced [19] creditor to collect claims due him before rescission is resorted to.000. 13572. Q How much did you pay for it? A That is P800. be said to have been prejudiced or defrauded by such alienation. with coconut trees thereon. It bears repeating that notarial documents. Talisay. how much did you acquire this property? A Including the residential house P800. Niño Village. and covered by Tax Declaration No. 13571. Aside from these tax declarations. states that the donation is always presumed to be in fraud of creditors when at the time thereof the donor did not reserve sufficient property to pay his debts prior to the donation. Niño Violage [sic]? A I forgot. which is 10 August 1989. Cebu.871. 1 was bought by her in the [26] amount of about P800. Hence. For this presumption of fraud to apply. Petitioner did not adduce any evidence that the price of said property was lower.SEC. still her action for rescission would not fare well because the third requisite was not met. second paragraph. 2. It was not. the presumption of fraud will not come into play. [25] St. St. 3 and 4. Classes of documents. As to the properties in nos. first paragraph. Bernard. of the Civil Code provides: “All contracts by virtue of which the debtor alienates property by gratuitous title are presumed to have been entered into in fraud of creditors when the donor did not reserve sufficient property to pay all debts contracted before the donation. . Cebu. LIM declared that the house and lot mentioned in no. 19. with coconut trees thereon. Also.” The fourth requisite for an accion pauliana to prosper is not present either. . the fact that the questioned Deed was registered only on 2 July 1991 is not enough to overcome the presumption as to the truthfulness of the statement of the date in the questioned deed.00 to P900. situated at Hindag[24] an. together with the house constructed thereon. documents are either public or private. sufficiently established that the properties left behind by LIM were not sufficient to cover her debts existing before the donation was made. In the present case. (4) A parcel of land containing an area of 3.60. the evidence disclose that as of 10 August 1989.6 hectares. therefore. Bernard. and covered by Tax Declaration No. On this score. Petitioner‟s claim against LIM was constituted only in August 1990.00. Besides. Article 1387. Thus. Mandaue City. A parcel of land located in Benros Subdivision. except last wills and testaments. .000. Anent the property in no. are public documents and are evidence of the facts that gave rise to their execution and of their date. She cannot. As earlier discussed. . How much was the price in the Deed of Sale of the house and lot at Sto. Even assuming arguendo that petitioner became a creditor of LIM prior to the celebration of the contract of donation. petitioner‟s alleged credit existed only a year after the deed of donation was executed. Niño Village. LIM had the following properties: (1) (2) A parcel of land containing an area of 220 square meters. During her cross-examination. Lawa-an. Likewise. Southern Leyte.” It is. when the deed of donation was executed. Article 1383 of the same Code provides that the action for rescission is but a subsidiary remedy which cannot be instituted except when the party suffering damage has no other legal means to obtain reparation for the same. or a year after the questioned alienation. the total market value stated in the tax declarations dated 23 November 1993 was P56. Southern Leyte. it must be established that the donor did not leave adequate properties which creditors might have recourse for the collection of their credits existing before the execution of the donation. [23] (3) A parcel of land containing an area of 2. FLORIDO: Q These properties at the Sto. Article 759 of the same Code. therefore. situated at Hindag-an. Petitioner neither alleged nor proved that she did so. 19706.000 to P900.00 to P900.000. .152 hectares.000.

albeit a creditor prior to the questioned alienation. .R. since the four requirements for the rescission of a gratuitous contract are not present in this case. Hence. in Criminal Case No. however. No. attorney‟s fees and expenses of litigation in favor of the petitioner. a creditor need not depend solely upon the presumption laid down in Articles 759 and 1387 of the Civil Code. the design to defraud may be proved in any other manner recognized by the law of evidence. (6) The fact that the transfer is made between father and son. (4) Evidence of large indebtedness or complete insolvency. reserving the liberty to deal [29] with it under whatever form it may present itself. as to the excess. the petition is hereby DISMISSED and the challenged decision of the Court of Appeals in CA-G. only the creditor who brought the action for rescission [31] can benefit from the rescission. WHEREFORE. Accordingly. Thus in the consideration of whether certain transfers are fraudulent. Under this Article. Upon appeal. No pronouncement as to costs. This decision was affirmed by the Court of Appeals. the Court has laid down specific rules by which the character of the transaction may be determined. The trial court made these awards in the dispositive portion of its decision without stating.000 for the obligation LIM incurred on 8 October 1987. In her further attempt to support her action for rescission. Under the third paragraph of Article 1387. is not a party to this accion pauliana. We have pored over the records and found no factual or legal basis therefor. [28] The above enumeration. Thus. petitioner brings to our attention the 31 July 1990 [30] Decision of the RTC of Quezon City. It should be noted that the complainant in that case. petitioner‟s action must fail. the Court of Appeals correctly deleted these awards for want of basis in fact. Victoria Suarez. Article 1384 of the Civil Code provides that rescission shall only be to the extent necessary to cover the damages caused. The following have been denominated by the Court as badges of fraud: (1) The fact that the consideration of the conveyance is fictitious or is inadequate. however. and (7) The failure of the vendee to take exclusive possession of all the property.Nevertheless. (5) The transfer of all or nearly all of his property by a debtor. 50091 is AFFIRMED in toto. any justification for the same in the ratio decidendi. CV. however. LIM was therein held guilty of estafa and was ordered to pay complainant Victoria Suarez the sum of P169. petitioner cannot invoke the credit of Suarez to justify rescission of the subject deed of donation. (3) A sale upon credit by an insolvent debtor. Q-89-2216. Branch 92.000 as actual damages. Now on the propriety of the trial court‟s awards of moral damages. when there are present other of the above circumstances. those who are strangers to the action cannot benefit from its effects. this Court acquitted LIM of estafa but held her civilly liable for P169. (2) A transfer made by a debtor after suit has begun and while it is pending against him. law or equity. And the revocation [32] is only to the extent of the plaintiff creditor‟s unsatisfied credit. the alienation is maintained. Petitioner failed to discharge the burden of proving any of the circumstances enumerated above or any other circumstance from which fraud can be inferred. especially when he is insolvent or greatly embarrassed financially. SO ORDERED. is not an exclusive list. The circumstances evidencing fraud are as varied as the men who perpetrate the fraud in each case. This Court has therefore declined to define it.

and Philippine National Bank (PNB). (UPSUMCO).. Branch 45.000.. BRION.... J. 126890 Present: . LEONARDO-DE CASTRO...Republic of the Philippines Supreme Court Manila EN BANC UNITED PLANTERS SUGAR MILLING CO. C.. BERSAMIN. Promulgated: March 9.versus - THE HONORABLE COURT OF APPEALS. Costs against appellees.. JR. 1996 which. AS TRUSTEE OF THE REPUBLIC OF THEPHILIPPINES Respondents. CORONA. “1. QUISUMBING. CARPIO. 2009 which granted both Second Motions for Reconsideration filed by respondents Privatization and Management Office (PMO)... To determine how much APT is entitled to recover on its counterclaim...076. ABAD.. PERALTA. and (b) (c) The Restructuring Agreements dated (i) June 24.. G.... PUNO...433.. Inc... the appealed decision is hereby set aside and judgment is herein rendered declaring that the subject Deed of Assignment has not condoned all of UPSUMCO‟s obligations to APT as assignee of PNB. PHILIPPINE NATIONAL BANK (PNB) and ASSET PRIVATIZATION TRUST (APT)...: For consideration is the Motion for Reconsideration of petitioner United Planters Sugar Milling Company.. 528). VILLARAMA. However. formerly Asset Privatization Trust (APT). No..137.” Record p. PEREZ. INC.. Negros Oriental. CARPIO MORALES.. (ii) December 10. to render the proper disposal of this case in accordance with the foregoing findings and disposition.15)... 1974 (Exh. it is required to render an accounting before the Regional Trial Court on the total payments made by UPSUMCO on its obligations including the following amounts: (1) The sum seized from it by APT whether in cash or in kind (from UPSUMCO‟s bank deposits as well as sugar and molasses proceeds): (2) The total obligations covered by the following documents: (a) Credit agreement dated November 05. Bais... Petitioner.. the latter is hereby ordered to pay the same.00 proceeds of the foreclosure Should there be any deficiency due APT after deducting the foregoing amounts from UPSUMCO‟s total obligation in the amount of (P2.. if after such deduction there should be any excess payment. JJ.. 1984 and (3) The P450. in turn. and reinstated the Decision of the Court of Appeals dated February 29. The dispositive portion of the CA Decision reads: WHEREFORE.. and (3) May 9. 1982.. NACHURA. reversed and set aside the Decision of the Regional Trial Court. VELASCO.J. 1982. SO ORDERED.... (UPSUMCO) seeking to reverse and set aside the Resolution of the Court dated April 2.. the same should be turned over to UPSUMCO. and MENDOZA. DEL CASTILLO.. 2010 x .000.-x RESOLUTION PERALTA. The Regional Trial Court is hereby directed to receive APT‟s accounting and thereafter. ........R..

1987 until February 12. the CA reversed and set aside the RTC Decision and ruled that only the “takeoff” loans and not the operational loans were condoned by the Deed of Assignment.” From 1984 to 1987. Despite the Deed of Assignment. the Court finds the same to be mere rehash of the main points already set forth in the Court‟s En Banc Resolution of April 2. Also included in the condition for the takeoff loans. 6.000. 3. through the following means: (1) withdrawals made from the bank accounts opened by petitioner beginning August 27. 1987 whereby respondent APT purchased the auctioned properties for P450. 1989 for sum of money and damages against respondents PNB and APT before the Regional Trial Court (RTC) of Bais City alleging therein that respondents had illegally appropriated funds belonging to petitioner. 1987 friendly foreclosure.00. denies the same for lack of merit. In its Motion for Reconsideration. titles and interests) filed a Petition for Extrajudicial Foreclosure Sale with the Ex-Officio Regional Sheriff of Dumaguete City.000. petitioner. On July 28. 1987. (2) the application of the proceeds from the sale of the sugar of petitioner beginning August 27.806. engaged in the business of milling sugar.41 in UPSUMCO‟s PNB account as payment of the deficiency is without basis. the Court (Third Division) reversed and set aside the CA Decision. its President. 1982. securities which may be in its hands on deposit. or on September 3. 1990. The said loans were thrice restructured through Restructuring Agreements dated June 24. petitioner agreed to “open and/or maintain a deposit account with [respondent PNB] and the bank is authorized at its option to apply to the payment of any unpaid obligations of the client any/and all monies. petitioner executed a Deed of Assignment assigned to respondent APT its right to redeem the foreclosed properties. After a careful review of the arguments in the petitioner‟s motion for reconsideration. 2006 and Resolution dated July 11. 1974. 1987 until December 4. and May 9. They were likewise secured by pledge contracts whereby petitioner assigned to respondent PNB all its sugar produce for the latter to sell and apply the proceeds to satisfy the indebtedness arising from the operational loans. respondent PNB (as mortgagee) and respondent APT (as assignee and transferee of PNB‟s rights. Seven (7) days after the foreclosure sale. 2. petitioner filed a complaint on March 10. seeking to foreclose on the real estate and chattel mortgages which were executed to secure the takeoff loans. There is no legal basis for the withdrawals of UPSUMCO‟s deposit on the ground of conventional compensation.200. Since the amount of P17. executed between [UPSUMCO] and PNB…” On the same day. In a Decision dated November 28. The foreclosure sale was conducted on August 27. 1982. On appeal. The findings that the condonation took effect only after the execution of the Deed of Assignment hence upholds the validity of APT‟s taking of the deposit of P80. Later. 1987. it should be returned to petitioner immediately by respondents. 2009 and. Facts showed that in 1974. The RTC rendered judgment in favor of the petitioner. 5. respondent APT and petitioner agreed to an “uncontested” or “friendly foreclosure” of the mortgaged assets. 1984.24 could not be the subject of conventional compensation. in exchange for petitioner‟s waiver of its right of redemption. 2007. There is no valid ground to conclude that APT has still the right to the deposit of UPSUMCO after the August 27. The order of the Honorable Court En Banc reinstating the decision of the Honorable Court of Appeals would be inconsistent with the facts of the case and the findings of this Honorable Court. and the withdrawal of P80. 1984. denominated as “operational loans. petitioner raises the following grounds: 1. 1987.185.200.41 as payment could be applied either as repayment on the Take-off Loans or for the Operational Loans.806. not the government as represented by respondent APT (now the PMO). and the Restructuring Agreements[s] dated June 24 and December 10. (3) the payment from the funds of petitioner with respondent PNB for the operating expenses of the sugar mill after September 3. The takeoff loans were secured by a real estate mortgage over two parcels of land where the milling plant stood and chattel mortgages over certain machineries and equipment. December 10. petitioner contracted another set of loans from respondent PNB. 1987.Petitioner prefaces its arguments that it is the aggrieved party.773. the Board of Directors of petitioner approved the Board Resolution authorizing Joaquin Montenegro. The pertinent portions of the decision read as follows: . and May 9. which also contained setoff clauses relative to the application of payments from petitioner‟s bank accounts. respectively. 1974. in exchange for or in consideration of respondent APT “condoning any deficiency amount it may be entitled to recover from the Petitioner under the Credit Agreement dated November 5. obtained “takeoff loans” from respondent PNB to finance the construction of a sugar milling plant which were covered by a Credit Agreement dated November 5. to enter into said Deed of Assignment. hence.” for the purpose of financing its operations. as its deposits with respondent PNB were taken without its prior knowledge and that it was reluctant to give assent to the desire of the government to forego redemption of its assets by reason of uncontested foreclosure. 4. The case was thereafter referred to the Court en banc which reversed the ruling of the Third Division. 7. The basis for admission of the case to the Honorable Court En Banc are belated issues which have no other purpose but to give apparent reasons for the elevation of the case. allegedly upon the instruction of respondent APT and with the consent of respondent PNB. 1982. The admission of the case by Honorable Court En Banc after the denial of the Second Division of the Second Motion for Reconsideration and the referral of the case to the Honorable Court En Banc appear not to be in accordance with the Rules of Procedure.

and confirmed by the Corporation‟s stockholders in a stockholders‟ Meeting held on the same (date). p. In contrast. Even if neither PNB nor APT had filed an answer. The Deed of Assignment condoned only the take-off loans. 1987. Moreover. are not clear as to the amount extended by way of takeoff loans by PNB to UPSUMCO. the day the condonation took effect. which were never condoned. March 2. IN WITNESS WHEREOF. April 7. [now PMO]. and May 9. (the “Corporation”) – pursuant to a resolution passed by its board of Directors on September 3. March 27. The Deed of Transfer acknowledged that said assignment was being undertaken “in compliance with Presidential Proclamation No. 574). Promissory Notes dated February 20. The first was for the repayment of the operational loans. 1987 (Exh. T-16700 and T-16701. 576). 541-544) and April 29. which financial claims have been assigned to APT. That right had been granted in favor of PNB. For as long as there remained outstanding obligations due to APT (as PNB‟s successor-in-interest). “22”. 12 [APT]. as well as the petition itself. particularly the Resolution dated 11 July 2007. “24”. Inc. The second was for the repayment of the take-off loans which APT could obtain until 3 September 1987. the Court of Appeals did enumerate the following transactions consisting of the operational loans. through the National Government. executed between the Corporation and the Philippine National Bank (“PNB”). and July 30. as it is now agreed by all that only the take-off loans were condoned. After 27 August 1987. March 3. among several other assets. By the very language of the Deed of Assignment. Sugar Quedans (Exh. However. Two (2) documents of Pledge both dated February 19. The Deed of Assignment in its operative part provides. since the 2007 Resolution negated the findings that only the take-off loans were condoned by faulting respondents for failing to establish that there remained outstanding operational loans on which APT could apply payments from UPSUMCO‟s bank accounts. “11” [APT]. to wit: (1) (2) (3) (4) (5) (6) Trust Receipts dated August 26. by PNB. On 27 February 1987. (Exh. pp 548 to 551).000. 1087.. the RTC Decision was based on the premise that all of UPSUMCO‟s loans were condoned in the Deed of Assignment. and not the operational loans. Record. Was petitioner able to establish that among the conditions of the “friendly foreclosure‟ was that “all its accounts are condoned”? It did not. Considering that UPSUMCO was spectacularly unable to repay the takeoff loans it had earlier transacted.000. Record. APT had the right to obtain payment of the operational loans by simply applying payments from UPSUMCO‟s bank accounts. for and in consideration of the Asset Privatization Trust (“APT”) condoning any deficiency amount it may be entitled to recover from the Corporation under the Credit Agreement dated November 5. PNB assigned to the Government its “rights” titles and interests over UPSUMCO. 1987 (Exh.” The Government subsequently transferred these “rights” titles and interests” over UPSUMCO to respondent Asset and Privatization Trust (APT). the day of the execution sale. 579). Petitioner filed with the RTC the complaint which alleged that “among the conditions of the „friendly foreclosure‟ are: (A) That all the accounts of [United Planters] are condoned. by virtue of the terms of the operational loan agreements. 1987 (Exh. and thus ruled that APT was entitled to have the funds from UPSUMCOS‟s accounts transferred to its own account “to the extent of UPSUMCO‟s remaining obligation. pp. and July 10. “2” [PNB] & “4” [APT]. “17”. this 3 day of September. “19”. p. “20”. 575). 3 [PNB]. p. This point is material. Record. Record. 577). through a Deed of Transfer. “21”. p. 1984. Record. 573). 314-317). p. Record. March 30.” The challenged acts of respondents all occurred on or after 27 August 1987. there were at least two causes for the application of payments from UPSUMCO’s PNB accounts. whether on account of the take-off loans or the operational loans. Record. The bank accounts were established precisely to afford PNB (and later APT) extrajudicial and legal means to obtain repayment of UPSUMCO‟s outstanding loans without hassle. Montenegro. Record. 1987. less the amount condoned in the Deed of Assignment and the 450. 1987 (Exhs. to prove that particular allegation in its complaint. p. 1984 (Exh. . record p. and December 10. APT would be entitled to apply payments from the bank accounts of PNB. 580). hereby irrevocably sells. thereunto duly authorized. 13 to 16. 1987(Exh. not respondents. 545). 1974 and the Restructuring Agreement[s] dated June 24. xxxx This notwithstanding. including the JSS notes at the time of the public bidding. 1987. it simply beggars belief to assume that it had fully paid its operational loans. rd Joaquin S. “23”. May 22. it was evident that UPSUMCO‟s allegation in its complaint that all of its accounts were condoned was not proven. the Court of Appeals acknowledged that only the take-off loans were condoned. “18”. assigns and transfer to APT its right to redeem the foreclosed real properties covered by Transfer Certificates of Titles Nos. As noted earlier.00 proceeds of the foreclosure. pp. respectively. The error of the Court‟s earlier rulings. p.” It was incumbent on petitioner. 50. 578). was in assuming that the non-condonation of the operational loans was immaterial to the application of payments made in favor of APT from UPSUMCOS‟s PNB accounts that occurred after 27 August 1987. 1987. xxxx This much is clear. the Corporation has caused this instrument to be executed on its behalf by Mr. Exh. 1987 (Exh. Record. February 5. 1997. Record. 1987 (Exh. 1987. APT had the right to apply payments from UPSUMCO‟s bank accounts. p.The rulings of the lower courts. thus: That United Planter[s] Sugar Milling Co. UPSUMCO argues that after that date. 1987 (Exh. without need of filing an action for collection with the courts. there would have been no basis in fact for the trial court to conclude that all of UPSUMCO‟s loans were condoned (as the RTC in this case did). respondents no longer had the right to collect monies from the PNB bank accounts which UPSUMCO had opened and maintained as collateral for its operational take-off loans. Credit Agreements dated February 19. or issue reliefs as if all the loans were condoned (as the 2007 Resolution did). 1987 (Exh. UPSUMCO is wrong. Record. Deed of Assignment By Way of Payment dated November 16. 1982.

137. and because the foreclosed properties were sold during the execution sale for only 450 Million Pesos.” Petitioner did not exactly state in its Amended Complaint that the condonation effected in the Deed of Assignment had retroacted to the date of the foreclosure sale. Since UPSUMCO was released from its take-off loans only on 3 September 1987. PNB and UPSUMCO would have been entitled to set-off of payments. It was only on 3 September 1987 that the take-off loans were condoned by APT. APT. whereby APT agreed to condone all of UPSUMCO‟s outstanding obligations in exchange for UPSUMCO‟s waiver of its right to redeem the foreclosed property. PNB and UPSUMCO had agreed to a conventional compensation. under the terms of the loan arguments. Assuming that the Deed of Assignment failed to accurately reflect an intent of the parties to retroact the effect of condonation to the date of the foreclosure sale. and both interpretations can certainly be accommodated. UPSUMCO obviously desires the return of the said amount. including its rights under conventional compensation.076. APT as successor-in-interest of PNB. The Deed of Assignment was executed on 3 September 1987as was the UPSUMCO Board Resolution authorizing its President to sign the Deed of Assignment. then APT‟s application of payments is perfectly legal. As soon as PNB assigned its credit to APT. . The determinative factor is the mutual agreement between PNB and UPSUMCO to set-off payments. If petitioner were truly mindful to invoke the exception to the parol evidence rule and intent on claiming that the condonation had such retroactive effect. But again. xxxx The right of respondent PNB to set-off payments from UPSUMCO arose from conventional compensation rather than legal compensation. The earlier rulings of the Court were predicated on a finding that there was a “friendly foreclosure” agreement between APT and UPSUMCO. However. as the legal requisites for compensation under Article 1279 were present. V.B. Accordingly. The parol evidence rule states that generally. However. the total indebtedness of UPSUMCO as to the take-off loans amounted to P2. or on 27 August 1987. as indicated in the Deed of Assignment.” that “after the foreclosure by PNB/APT plaintiff is entitled to all the funds it deposited or being held by PNB in all its branches. It is argued that the use of the word “any” in “any deficiency amount” sufficiently establishes the retroactive nature of the condonation. “[t]he failure of the written agreement to express the true intent and the agreement of the parties thereto.” It remains unclear whether petitioner had indeed alleged in its Amended Complaint that the Deed of Assignment executed on 3 September1987 had retroacted effect as of the foreclosure sale.41 debited from UPSUMCO‟s bank accounts from 27 August to 3 September 1987 was very well less than the then outstanding indebtedness for the take-off loans. APT had the right to apply payments from UPSUMCO‟s bank accounts maintained with PNB as repayment for the take-off loans and/or the operational loans. despite the absence of any terms to that effect in the Deed of Assignment. First. it should have employed more precise language to the effect in their original and amended complaints. had the right to seize any amounts deposited in UPSUMCO‟S bank accounts as long as UPSUMCO remained indebted under the loan agreements. namely 3 September 1987. which lost only on that date too the right to apply payments from UPSUMCO‟S bank accounts to pay the take-off loans. It is easy to see why UPSUMCO would pose such an argument.806. no such agreement to the effect was ever committed to writing or presented in evidence. availed of its right to seek the reformation of the instrument to the end that such true intention may be expressed. The previous rulings of the Court unfortunately upheld that position. it is considered as containing all the terms agreed upon and there can be no evidence of such terms other than the contents of the written agreement. but also the remaining deficiency amount as of 3 September 1987. For one. However. as the assignee of credit of PNB. particularly UPSUMCO.15. There is no question that the Deed of Assignment condoned the outstanding take-off loans of UPSUMCO due then to APT. The phrase “any deficiency amount” could refer not only to the remaining deficiency amount after the 27 August foreclosure sale. had the right to set-off the outstanding obligations of UPSUMCO on the basis of conventional compensation before the condonation took effect on 3 September 1987. The written agreement actually set forth was not as contended by UPSUMCO. Between 27 August to 3 September 1987. a relationship which does not require the presence of all the requisites under Article 1279. such as evidence that the said Deed had retroactive effect. It appears that between 27 August 1987 and 3 September 1987. Rule 130.” and that “among the conditions of the „friendly foreclosure‟ are that all the accounts of the plaintiff are condoned. The Deed of Assignment was not cast in intractably precise terms. it is UPSUMCO‟s position that the condonation actually had retroacted to 27 August 1987. For another.200. Even without an express agreement stipulating compensation.433. explain or add to the terms of the written agreement if it is put in issue in the pleading. it is safe to conclude that the total amount of P80. none of the parties. when the terms of an agreement have been reduced into writing. What petitioner contented in its amended complaint was that the Deed of Assignment “released and discharged plaintiff from any and all obligations due the defendant PNB and defendant APT. And PNB too had assigned all its rights as creditor to APT. Considering that as of 30 June 1987. when the Deed of Assignment was executed and after APT had exercised its right as creditor to apply payments from petitioner‟s PNB accounts. It is argued that under Section 9. the parol evidence rule generally bars any other evidence of such terms other than the contents of the written agreement. The conclusions are clear. even if all the requisites for legal compensation were present between those two parties. the agreement itself did not indicate any date of effectivity other than the date of the execution of the agreement. the mutual creditor-debtor relation between PNB and UPSUMCO ceased to exist. a party may present evidence to modify. APT applied payments from UPSOMCO‟s bank accounts in the amount of around 80 Million Pesos. The absence of the mutual creditor-debtor relation between the new creditor APT and UPSUMCO cannot negate the conventional compensation. The argument hardly convinces. It is in that context that the question of parol evidence comes into play. not all of the outstanding loans were condoned by APT since the take-off loans were left extant. As there is nothing in the text of Deed of Assignment that clearly gives retroactive effect to the condonation.

to the extent of petitioner‟s remaining obligations under the operational loans. SO ORDERED. in which case the petitioner should be entitled to that excess amount debited after 3 September 1987. It is clear that the amount claimed by APT by way of counterclaim – over 1.000. determines the issues which are of transcendental importance. [3] The doctrine of stare decisis et no quieta movere or principle of adherence to precedents does not apply to the present case so as to bar the Court en banc from taking cognizance over the case which rectified the disposition of the case and reversed and set aside the Decision rendered by a Division thereof. effective March 1. At the same time. there was no conventional subrogation since such requires the consent of the original parties and of the third persons and there was no evidence that the consent of petitioner (as debtor) was secured when respondent PNB assigned its rights to respondent APT. WHEREFORE.000. The Court of Appeals ordered the remand of the case to the trial court. and that the assignment by respondent PNB to respondent APT arose by mandate of law and not by the volition of the parties. At the same time. the remand of the case to the RTC for computation of the parties‟ remaining outstanding balances was proper.185. in its capacity as the creditor of the latter.6 Billion Pesos – is over and beyond what it can possibly be entitled to. The Deed of Assignment expressly stipulated the particular loan agreements which were covered therein. which necessitates it to accept the referral of a Division case before it and the grant of a second motion for reconsideration. Accordingly. Moreover. APT was still entitled to repayment of UPSUMCO‟s operational loans. In sum. the referral to the Court en banc of cases assigned to a Division is to be denied on the ground that the Court en banc is not an Appellate Court to which decisions or resolutions of a Division may be appealed. Inc. it remains unclear what were the amounts of outstanding indebtedness under the operational loans at the various points after 3 September 1987 when the bank accounts of UPSUMCO were debited. Rule 56 of the Rules of Court. It is not clear to what extent. not the operational loans. Respondent PNB never waived these rights and the same were transferred to respondent APT (now PMO) by virtue of the Deed of Transfer executed between them. 1987. in the exercise of its sound discretion.Second. 2-89. on the premise that it was unclear how much APT was entitled to recover by way of counterclaim. except for [2] extraordinarily persuasive reasons and only after an express leave shall have first been obtained. As such. Accordingly. Likewise. Petitioner insists that the Court should not have taken cognizance of the respondents‟ second motions for reconsideration with the prayer that the case be referred to the Court en banc as the same appear not to be in accordance with the rules. 1989. It appears that the amount of P17.773. the remand ordered by the Court of Appeal is ultimately the [1] wisest and fairest recourse. the Motion for Reconsideration filed by petitioner United Planters Sugar Milling Company. a second motion for reconsideration of a judgment or final resolution shall not be entertained for being a prohibited pleading under Section 2. in satisfaction of petitioner‟s obligations. if at all. just enough. were condoned by the Deed of Assignment dated September 3. or over and beyond what UPSUMCO actually owed. less the amount condoned in the Deed of Assignment and the P450. the amounts debited from UPSUMCO‟s bank accounts after 3 September 1987 covered UPSUMCO‟s outstanding indebtedness under the operational loans. Moreover. the Resolution of the Court En Banc reinstating the Decision of the CA categorically ruled that only its takeoff loans. under Section 3 of the Court‟s Circular No. Generally. respondent PNB had the right to apply the proceeds of the sale of petitioner‟s sugar and molasses. respondent APT had a right to go after the bank deposits of petitioner. (UPSUMCO) is DENIED WITH FINALITY for lack of merit. . Said amounts could be insufficient. Because it is not evident from the voluminous records what was the outstanding balance of the operational loans at the various times postSeptember 3 UPSUMCO‟s bank accounts were debited. Rule 52.24 was debited from UPSUMCO‟s bank accounts after 3 September. as in the present case. APT retained the right to apply payments from the bank accounts of UPSUMCO with PNB to answer for the outstanding indebtedness under the operational loan agreements. After 3 September 1987. respondent APT was entitled to have the funds from petitioner‟s savings accounts with respondent PNB transferred to its own account. As the En Banc Resolution explained. the Court. since it is clear that the take-off loans were actually condoned as of 3 September 1987.00 proceeds of the foreclosure. in relation to Section 4.