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This petition foi !"#$%&#'#% assails the uecision uateu Febiuaiy 28,
1997, of the Couit of Appeals anu its iesolution uateu Apiil 21, 1998, in
CA-u.R. Cv No. S8887. The appellate couit affiimeu the juugment of the
Regional Tiial Couit of Pasig City, Bianch 1S1, in (a) Civil Case No.
118S1, foi foieclosuie of moitgage by petitionei BPI Investment
Coipoiation (BPIIC foi bievity) against piivate iesponuents ALS
Nanagement anu Bevelopment Coipoiation anu Antonio K.
Litonjua,
|1j
consoliuateu with (b) Civil Case No. S2u9S, foi uamages
with piayei foi the issuance of a wiit of pieliminaiy injunction by the
piivate iesponuents against saiu petitionei.
The tiial couit hau helu that piivate iesponuents weie not in
uefault in the payment of theii monthly amoitization, hence, the
extiajuuicial foieclosuie conuucteu by BPIIC was piematuie anu maue
in bau faith. It awaiueu piivate iesponuents the amount of PSuu,uuu
foi moial uamages, PSu,uuu foi exemplaiy uamages, anu PSu,uuu foi
attoiney's fees anu expenses foi litigation. It likewise uismisseu the
foieclosuie suit foi being piematuie.
The facts aie as follows:
Fiank Roa obtaineu a loan at an inteiest iate of 16 14% pei
annum fiom Ayala Investment anu Bevelopment Coipoiation (AIBC),
the pieuecessoi of petitionei BPIIC, foi the constiuction of a house on
his lot in New Alabang village, Nuntinlupa. Saiu house anu lot weie
moitgageu to AIBC to secuie the loan. Sometime in 198u, Roa solu the
house anu lot to piivate iesponuents ALS anu Antonio Litonjua
foi P8Su,uuu. They paiu PSSu,uuu in cash anu assumeu thePSuu,uuu
balance of Roa's inuebteuness with AIBC. The lattei, howevei, was not
willing to extenu the olu inteiest iate to piivate iesponuents anu
pioposeu to giant them a new loan of PSuu,uuu to be applieu to Roa's
uebt anu secuieu by the same piopeity, at an inteiest iate of 2u% pei
annum anu seivice fee of 1% pei annum on the outstanuing piincipal
balance payable within ten yeais in equal monthly amoitization
of P9,996.S8 anu penalty inteiest at the iate of 21% pei annum pei uay
fiom the uate the amoitization became uue anu payable.
Consequently, in Naich 1981, piivate iesponuents executeu a
moitgage ueeu containing the above stipulations with the piovision
that payment of the monthly amoitization shall commence on Nay 1,
1981.
0n August 1S, 1982, ALS anu Litonjua upuateu Roa's aiieaiages by
paying BPIIC the sum of P19u,6u1.SS. This ieuuceu Roa's piincipal
balance to P4S7,2u4.9u which, in tuin, was liquiuateu when BPIIC
applieu theieto the pioceeus of piivate iesponuents' loan of PSuu,uuu.
0n Septembei 1S, 1982, BPIIC ieleaseu to piivate
iesponuents P7,146.87, puipoiting to be what was left of theii loan
aftei full payment of Roa's loan.
In }une 1984, BPIIC instituteu foieclosuie pioceeuings against
piivate iesponuents on the giounu that they faileu to pay the moitgage
inuebteuness which fiom Nay 1, 1981 to }une Su, 1984, amounteu to
Foui Bunuieu Seventy Five Thousanu Five Bunuieu Eighty Five anu
S11uu Pesos (P47S,S8S.S1). A notice of sheiiff's sale was publisheu
on August 1S, 1984.
0n Febiuaiy 28, 198S, ALS anu Litonjua fileu Civil Case No. S2u9S
against BPIIC. They allegeu, among otheis, that they weie not in aiieais
in theii payment, but in fact maue an oveipayment as of }une Su,
1984. They maintaineu that they shoulu not be maue to pay
amoitization befoie the actual ielease of the PSuu,uuu loan in August
anu Septembei 1982. Fuithei, out of the PSuu,uuu loan, only the total
amount of P464,SS1.77 was ieleaseu to piivate iesponuents. Bence,
applying the effects of legal compensation, the balance of PSS,648.2S
shoulu be applieu to the initial monthly amoitization foi the loan.
0n August S1, 1988, the tiial couit ienueieu its juugment in Civil
Case Nos. 118S1 anu S2u9S, thus:
WBEREF0RE, juugment is heieby ienueieu in favoi of ALS
Nanagement anu Bevelopment Coipoiation anu Antonio K. Litonjua
anu against BPI Investment Coipoiation, holuing that the amount of
loan gianteu by BPI to ALS anu Litonjua was only in the piincipal sum
of P464,SS1.77, with inteiest at 2u% plus seivice chaige of 1% pei
annum, payable on equal monthly anu successive amoitizations at
P9,28S.8S foi ten (1u) yeais oi one hunuieu twenty (12u) months. The
amoitization scheuule attacheu as Annex "A" to the "Beeu of Noitgage"
is coiiesponuingly iefoimeu as afoiestateu.
The Couit fuithei finus that ALS anu Litonjua suffeieu compensable
uamages when BPI causeu theii publication in a newspapei of geneial
ciiculation as uefaulting uebtois, anu theiefoie oiueis BPI to pay ALS
anu Litonjua the following sums:
a) PSuu,uuu.uu foi anu as moial uamages;
b) PSu,uuu.uu as anu foi exemplaiy uamages;
c) PSu,uuu.uu as anu foi attoiney's fees anu expenses of litigation.
The foieclosuie suit (Civil Case No. 118S1) is heieby BISNISSEB foi
being piematuie.
Costs against BPI.
S0 0RBEREB.
|2j

Both paities appealeu to the Couit of Appeals. Bowevei, piivate
iesponuents' appeal was uismisseu foi non-payment of uocket fees.
0n Febiuaiy 28, 1997, the Couit of Appeals piomulgateu its
uecision, the uispositive poition ieaus:
KB;$;,@$;4 finuing no eiioi in the appealeu uecision the same is
heieby AFFIRNEB in toto.
S0 0RBEREB.
|Sj

In its uecision, the Couit of Appeals ieasoneu that a simple loan is
peifecteu only upon the ueliveiy of the object of the contiact. The
contiact of loan between BPIIC anu ALS & Litonjua was peifecteu only
on Septembei 1S, 1982, the uate when BPIIC ieleaseu the puipoiteu
balance of the PSuu,uuu loan aftei ueuucting theiefiom the value of
Roa's inuebteuness. Thus, payment of the monthly amoitization shoulu
commence only a month aftei the saiu uate, as can be infeiieu fiom the
stipulations in the contiact. This, uespite the expiess agieement of the
paities that payment shall commence on Nay 1, 1981. Fiom 0ctobei
1982 to }une 1984, the total amoitization uue was only P194,96u.4S.
Eviuence showeu that piivate iesponuents hau an oveipayment,
because as of }une 1984, they alieauy paiu a total amount
of P2u1,791.96. Theiefoie, theie was no basis foi BPIIC to
extiajuuicially foieclose the moitgage anu cause the publication in
newspapeis conceining piivate iesponuents' uelinquency in the
payment of theii loan. This fact constituteu sufficient giounu foi moial
uamages in favoi of piivate iesponuents.
The motion foi ieconsiueiation fileu by petitionei BPIIC was
likewise uenieu, hence this petition, wheie BPIIC submits foi iesolution
the following issues:
I. WBETBER 0R N0T A C0NTRACT 0F L0AN IS A
C0NSENS0AL C0NTRACT IN TBE LIuBT 0F TBE R0LE
LAIB B0WN IN ()**+,-+ ,/0 1)234 )5 677+68/9 :;<
/136 :;;0
II. WBETBER 0R N0T BPI SB00LB BE BELB LIABLE F0R
N0RAL ANB EXENPLARY BANAuES ANB ATT0RNEY'S
FEES IN TBE FACE 0F IRREu0LAR PAYNENTS NABE BY
ALS ANB 0PP0SEB T0 TBE R0LE LAIB B0WN IN/)1-68
/+123-4= /=/4+> ,/0 1)234 )5 677+68/9 :;? /136 @?@0
0n the fiist issue, petitionei contenus that the Couit of Appeals
eiieu in iuling that because a simple loan is peifecteu upon the ueliveiy
of the object of the contiact, the loan contiact in this case was peifecteu
only on Septembei 1S, 1982. Petitionei claims that a contiact of loan is
a consensual contiact, anu a loan contiact is peifecteu at the time the
contiact of moitgage is executeu confoimably with oui iuling
in (&AA"B%" B0 1&C#$ &D 6EE"'FG, 12S SCRA 122. In the piesent case, the
loan contiact was peifecteu on Naich S1, 1981, the uate when the
moitgage ueeu was executeu, hence, the amoitization anu inteiests on
the loan shoulu be computeu fiom saiu uate.
Petitionei also aigues that while the uocuments showeu that the
loan was ieleaseu only on August 1982, the loan was actually ieleaseu
on Naich S1, 1981, when BPIIC issueu a cancellation of moitgage of
Fiank Roa's loan. This finus suppoit in the iegistiation on Naich S1,
1981 of the Beeu of Absolute Sale executeu by Roa in favoi of ALS,
tiansfeiiing the title of the piopeity to ALS, anu ALS executing the
Noitgage Beeu in favoi of BPIIC. Noieovei, petitionei claims, the uelay
in the ielease of the loan shoulu be attiibuteu to piivate
iesponuents. As BPIIC only agieeu to extenu a PSuu,uuu loan, piivate
iesponuents weie iequiieu to ieuuce Fiank Roa's loan below saiu
amount. Accoiuing to petitionei, piivate iesponuents weie only able to
uo so in August 1982.
In theii comment, piivate iesponuents asseit that baseu on Aiticle
19S4 of the Civil Coue,
|4j
a simple loan is peifecteu upon the ueliveiy of
the object of the contiact, hence a ieal contiact. In this case, even
though the loan contiact was signeu on Naich S1, 1981, it was
peifecteu only on Septembei 1S, 1982, when the full loan was ieleaseu
to piivate iesponuents. They submit that petitionei
misieau (&AA"B%"0 To give meaning to Aiticle 19S4, accoiuing to
piivate iesponuents, (&AA"B%" must be constiueu to mean that the
contiact to extenu the loan was peifecteu on Naich S1, 1981but the
contiact of loan itself was only peifecteu upon the ueliveiy of the full
loan to piivate iesponuents on Septembei 1S, 1982.
Piivate iesponuents fuithei maintain that even
gianting, '#HC"AI&9 that the loan contiact was peifecteu on Naich S1,
1981, anu theii payment uiu not stait a month theieaftei, still no
uefault took place. Accoiuing to piivate iesponuents, a peifecteu loan
agieement imposes iecipiocal obligations, wheie the obligation oi
piomise of each paity is the consiueiation of the othei paity. In this
case, the consiueiation foi BPIIC in enteiing into the loan contiact is the
piomise of piivate iesponuents to pay the monthly amoitization. Foi
the lattei, it is the piomise of BPIIC to uelivei the money. In iecipiocal
obligations, neithei paity incuis in uelay if the othei uoes not comply oi
is not ieauy to comply in a piopei mannei with what is incumbent
upon him. Theiefoie, piivate iesponuents concluue, they uiu not incui
in uelay when they uiu not commence paying the monthly amoitization
on Nay 1, 1981, as it was only on Septembei 1S, 1982 when petitionei
fully complieu with its obligation unuei the loan contiact.
We agiee with piivate iesponuents. A loan contiact is not a
consensual contiact but a ieal contiact. It is peifecteu only upon the
ueliveiy of the object of the contiact.
|Sj
Petitionei
misapplieu (&AA"B%". The contiact in (&AA"B%" ueclaieu by this Couit
as a peifecteu consensual contiact falls unuei the fiist clause of Aiticle
19S4, Civil Coue. It is an accepteu piomise to uelivei something by way
of simple loan.
In /'C#' -JE&#$ 'AI +KE&#$ 1&0 -A!0 BG0 L"B"F&EJ"A$ ('AM &D $N"
7N%F%EE%A"G9 44 SCRA 44S, petitionei applieu foi a loan of PSuu,uuu with
iesponuent bank. The lattei appioveu the application thiough a boaiu
iesolution. Theieaftei, the coiiesponuing moitgage was executeu anu
iegisteieu. Bowevei, because of acts attiibutable to petitionei, the loan
was not ieleaseu. Latei, petitionei instituteu an action foi uamages. We
iecognizeu in this case, a peifecteu consensual contiact which unuei
noimal ciicumstances coulu have maue the bank liable foi not ieleasing
the loan. Bowevei, since the fault was attiibutable to petitionei
theiein, the couit uiu not awaiu it uamages.
A peifecteu consensual contiact, as shown above, can give iise to
an action foi uamages. Bowevei, saiu contiact uoes not constitute the
ieal contiact of loan which iequiies the ueliveiy of the object of the
contiact foi its peifection anu which gives iise to obligations only on
the pait of the boiiowei.
|6j

In the piesent case, the loan contiact between BPI, on the one
hanu, anu ALS anu Litonjua, on the othei, was peifecteu only
on Septembei 1S, 1982, the uate of the seconu ielease of the
loan. Following the intentions of the paities on the commencement of
the monthly amoitization, as founu by the Couit of Appeals, piivate
iesponuents' obligation to pay commenceu only on 0ctobei 1S, 1982, a
month aftei the peifection of the contiact.
|7j

We also agiee with piivate iesponuents that a contiact of loan
involves a iecipiocal obligation, wheiein the obligation oi piomise of
each paity is the consiueiation foi that of the othei.
|8j
As aveiieu by
piivate iesponuents, the piomise of BPIIC to extenu anu uelivei the
loan is upon the consiueiation that ALS anu Litonjua shall pay the
monthly amoitization commencing on Nay 1, 1981, one month aftei
the supposeu ielease of the loan. It is a basic piinciple in iecipiocal
obligations that neithei paity incuis in uelay, if the othei uoes not
comply oi is not ieauy to comply in a piopei mannei with what is
incumbent upon him.
|9j
0nly when a paity has peifoimeu his pait of the
contiact can he uemanu that the othei paity also fulfills his own
obligation anu if the lattei fails, uefault sets in. Consequently, petitionei
coulu only uemanu foi the payment of the monthly amoitization
aftei Septembei 1S, 1982 foi it was only then when it complieu with its
obligation unuei the loan contiact. Theiefoie, in computing the
amount uue as of the uate when BPIIC extiajuuicially causeu the
foieclosuie of the moitgage, the staiting uate is 0ctobei 1S, 1982 anu
not Nay 1, 1981.
0thei points iaiseu by petitionei in connection with the fiist issue,
such as the uate of actual ielease of the loan anu whethei piivate
iesponuents weie the cause of the uelay in the ielease of the loan, aie
factual. Since petitionei has not shown that the instant case is one of
the exceptions to the basic iule that only questions of law can be iaiseu
in a petition foi ieview unuei Rule 4S of the Rules of Couit,
|1uj
factual
matteis neeu not taiiy us now. 0n these points we aie bounu by the
finuings of the appellate anu tiial couits.
0n the G"!&AI %GGC", petitionei claims that it shoulu not be helu
liable foi moial anu exemplaiy uamages foi it uiu not act maliciously
when it initiateu the foieclosuie pioceeuings. It meiely exeiciseu its
iight unuei the moitgage contiact because piivate iesponuents weie
iiiegulai in theii monthly amoitization. It invokeu oui iuling in /&!%'F
/"!C#%$O /OG$"J BG0 1&C#$ &D 6EE"'FG, 12u SCRA 7u7, wheie we saiu:
Noi can the SSS be helu liable foi moial anu tempeiate uamages. As
concluueu by the Couit of Appeals "the negligence of the appellant is
not so gioss as to waiiant moial anu tempeiate uamages," except that,
saiu Couit ieuuceu those uamages by only PS,uuu.uu insteau of
eliminating them. Neithei can we agiee with the finuings of both the
Tiial Couit anu iesponuent Couit that the SSS hau acteu maliciously oi
in bau faith. The SSS was of the belief that it was acting in the legitimate
exeicise of its iight unuei the moitgage contiact in the face of iiiegulai
payments maue by piivate iesponuents anu placeu ieliance on the
automatic acceleiation clause in the contiact. The filing alone of the
foieclosuie application shoulu not be a giounu foi an awaiu of moial
uamages in the same way that a cleaily unfounueu civil action is not
among the giounus foi moial uamages.
Piivate iesponuents countei that BPIIC was guilty of bau faith anu
shoulu be liable foi saiu uamages because it insisteu on the payment of
amoitization on the loan even befoie it was ieleaseu. Fuithei, it uiu not
make the coiiesponuing ueuuction in the monthly amoitization to
confoim to the actual amount of loan ieleaseu, anu it immeuiately
initiateu foieclosuie pioceeuings when piivate iesponuents faileu to
make timely payment.
But as aumitteu by piivate iesponuents themselves, they weie
iiiegulai in theii payment of monthly amoitization. Confoimably with
oui iuling in ///9 we can not piopeily ueclaie BPIIC in bau faith.
Consequently, we shoulu iule out the awaiu of moial anu exemplaiy
uamages.
|11j

Bowevei, in oui view, BPIIC was negligent in ielying meiely on the
entiies founu in the ueeu of moitgage, without checking anu
coiiesponuingly aujusting its iecoius on the amount actually ieleaseu
to piivate iesponuents anu the uate when it was ieleaseu. Such
negligence iesulteu in uamage to piivate iesponuents, foi which an
awaiu of nominal uamages shoulu be given in iecognition of theii
iights which weie violateu by BPIIC.
|12j
Foi this puipose, the amount
ofP2S,uuu is sufficient.
Lastly, as in /// wheie we awaiueu attoiney's fees because piivate
iesponuents weie compelleu to litigate, we sustain the awaiu
of PSu,uuu in favoi of piivate iesponuents as attoiney's fees.
KB;$;,@$;, the uecision uateu Febiuaiy 28, 1997, of the Couit
of Appeals anu its iesolution uateu Apiil 21, 1998, aie AFFIRNEB WITB
N0BIFICATI0N as to the awaiu of uamages. The awaiu of moial anu
exemplaiy uamages in favoi of piivate iesponuents is BELETEB, but
the awaiu to them of attoiney's fees in the amount of PSu,uuu is
0PBELB. Auuitionally, petitionei is 0RBEREB to pay piivate
iesponuents P2S,uuu as nominal uamages. Costs against petitionei.
<@ @$H;$;H#
("FF&G%FF&9 P1N'%#J'AQ9 >"AI&R'9 (C"A'9 anu L" 8"&A9 S#09 SS09 concui.