Radiowealth Finance vs.

del Rosario RADIOWEALTH 335 SCRA 288 FACTS: Spouses Vicente & Maria Del Rosario jointly & severally executed, signed and delivered in favor of Radiowealth Finance Company a promissory note for P138,948. Thereafter, respondents defaulted on the monthly installments. Despite repeated demands, they failed to pay their obligation. Petitioner filed a complaint for the collection of sum of money before the RTC. Trial court dismissed the complaint for the evidence presented were merely hearsay. CA reversed & remanded the case for further proceedings. Petitioner claims that respondents are liable for the whole amount of their debt and the interest thereon, after they defaulted on the monthly installments. Respondents counter that the installments were not yet due and demandable. They theorize that the action for immediate enforcement of their obligation is premature because its fulfillment is dependent on the sole will of the debtor. Hence, they consider that the proper court should first fix a period for payment, pursuant to Articles 1180 and 1197 of the Civil Code. ISSUE: WON the installments had already became due and demandable? YES HELD: The act of leaving blank space the due date of the first installment did not necessary mean that the debtors were allowed to pay as & when they could. If this was the intention of the parties, they should have so indicated in the promissory note. However, it did not reflect any such intention. While the specific date on which each installment would be due was left blank, the note clearly provided that each installment should be payable each month. Furthermore, it also provided for an acceleration clause and a late payment penalty, both of which showed the intention of the parties that the installment should be paid at a definite date. Had they intended that the debtors could pay as & when they could, there would have been no need for these 2 clauses. The installments had already became due & demandable is bolstered by the fact that respondents started paying installments on the promissory note. The obligation of the respondents had matured & they clearly defaulted when their checks bounced. Per the acceleration clause, the whole debt became due one month after the date of the note because the check representing their first installment bounced. FIRST DIVISON FINANCE COMPANY vs. DEL ROSARIO

[G.R. No. 113926. October 23, 1996]

SECURITY BANK AND TRUST COMPANY, petitioner, vs. REGIONAL TRIAL COURT OF MAKATI, BRANCH 61, MAGTANGGOL EUSEBIO and LEILA VENTURA, respondents. DECISION HERMOSISIMA, JR., J.: Questions of law which are the first impression are sought to be resolved in this case: Should the rate of interest on a loan or forbearance of money, goods or credits, as stipulated in a contract, far in excess of the ceiling prescribed under or pursuant to the Usury Law, prevail over Section 2 of Central Bank Circular No. 905 which prescribes that the rate of interest thereof shall continue to be 12% per annum? Do the Courts have the discretion to arbitrarily override stipulated interest rates of promissory notes and stipulated interest rates of promissory notes and thereby impose a 12% interest on the loans, in the absence of evidence justifying the impositions of a higher rate? This is a petition for review on certiorari for the purpose of assailing the decision of Honorable Judge Fernando V. Gorospe of the Regional Trial Court of Makati, Branch 61, dated March 30, 1993, which found private respondent Eusebio liable to petitioner for a sum of money. Interest was lowered by the court a quo from 23% per annum as agreed upon by the parties to 12% per annum. The undisputed facts are as follows: On April 27, 1983, private respondent Magtanggol Eusebio executed Promissory Note No. TL/74/178/83 in favor of petitioner Security Bank and Trust Co. (SBTC) in the total amount of One Hundred Thousand Pesos (P100,000.00) payable in six monthly installments with a stipulated interest of 23% per annum up to the fifth [1] installments. On July 28, 1983, respondent Eusebio again executed Promissory note No TL/74/1296/83 in favor of petitioner SBTC. Respondent bound himself to pay the sum of One Hundred Thousand Pesos (P100.000.00) in six [2] (6) monthly installments plus 23% interest per annum. Finally, another Promissory Note No. TL74/1491/83 was executed on August 31, 1983 in the amount of Sixty Five Thousand Pesos (P65,000.00). Respondent agreed to pay this note in six (6) monthly installments plus interest [3] at the rate of 23% per annum. On all the abovementioned notes, private respondents Leila Ventura had signed as co-maker.
[4]

Upon maturity which fell on the different dates below, the principal balance remaining on the notes stood at: 1) PN No. TL/74/748/83 2) PN No. TL/74/1296/83 3) PN No. TL/74/1991/83 P16,665.00 as of September 1983. P83,333.00 as of August 1983 P65,000.00 as of August 1983.

Upon the failure and refusal of respondent Eusebio to pay the aforestated balance payable, a collectible case [5] was filed in court by petitioner SBTC. On March 30, 1993, the court a quo rendered a judgment in favor of petitioner SBTC, the dispositive portion which reads: WHEREFORE, premises above-considered, and plaintiffs claim having been duly proven, judgment is hereby rendered in favor of plaintiff and as against defendant Eusebio who is hereby ordered to: 1. Pay the sum of P16,665.00, plus interest of 12% per annum starting 27 September 1983, until fully paid;

2. 3.

Pay the sum of P83,333.00, plus interest of 12% per annum starting 28 August 1983, until fully paid; Pay the sum of P65,000.00, plus interest of 12% per annum starting 31 August 1983, until fully paid;

4. Pay the sum equivalent to 20% of the total amount due and payable to plaintiff as and by way of attorneys fees; and to 5. Pay the cost of this suit.

BANCO DE ORO-EPCI, INC., VS JAPRL DEVELOPMENT CORPORATION, RAPID FORMING CORPORATION AND JOSE U. AROLLADOG.R. NO. 179901 The petitioner Banco de Oro-EPCI, Inc. extended credit facilities to JAPRL Development Corporation amounting to P230, 000000on March 28 2003. JAPRL defaulted in the payment of four trust receipts soon after the approval of its loan and later learnedfrom MRM management that JAPRL had altered and falsified its financial statements. Petitioner file a complaint for sum of money with an application for the issuance of a writ of preliminary attachemnt againt respondents in the RTC of Mackati City. ISSUE:Whether Banco de Oro have the right to demand immediate payment from respondent obligation. legitimate

HELD:YES. Section 40 of the General Banking Law provides that banks have the right to annul any credit accommodation or load , anddeman the immediate payment thereof, from borrowers proven to be guilty of fraud. Petitioner would then be entitled to theimmediate payment of P194, 493, 388.98 and other appropriate damages . China Banking Corporation v. CA, G.R. No. 140687, December 18, 2006 DECISION (1 Division)
st

CHICO-NAZARIO, J.:

I.

THE FACTS

A complaint for recovery of sums of money and annulment of sales of real properties and shares of stock was filed by Jose Gotianuy against his son-in-law, George Dee, and his daughter, Mary Margaret Dee. Jose Gotianuy accused his daughter Mary Margaret Dee of stealing, among his other properties, US dollar deposits with Citibank N.A. amounting to not less than P35,000,000.00 and US$864,000.00. Mary Margaret Dee received these

amounts from Citibank N.A. through checks which she allegedly deposited at China Banking Corporation (China Bank).

Jose Gotianuy died during the pendency of the case before the trial court. He was substituted by his other daughter, Elizabeth Gotianuy Lo. The latter presented six US Dollar checks withdrawn by Mary Margaret Dee from Jose Gotianuys US dollar placement with Citibank. In the course of the trial, the lower court ordered two employees of petitioner China Bank to testify and disclose in whose name the dollar fund was deposited. The CA affirmed the trial courts order; thus, China Bank appealed to the Supreme Court.

II. THE ISSUE

May the Citibank dollar checks with Jose Gotianuy and/or Mary Margaret Dee as payees, which were deposited with petitioner China Bank, be looked into notwithstanding the law on secrecy of foreign currency deposits? Corollarily, may Jose Gotianuy be considered a depositor who is entitled to seek an inquiry over the said foreign currency deposits?

III. THE RULING

[The ruling.]

Supreme

Court DENIED the

petition, AFFIRMED the

decision

of the

CA

pro

hac

vice,

and REMANDED the case to the trial court for continuation of hearing with utmost dispatch consistent with this

YES, the Citibank dollar checks with Jose Gotianuy and/or Mary Margaret Dee as payees, which were deposited with petitioner China Bank, may be looked into notwithstanding the law on secrecy of foreign currency deposits.

Sec. 8 of R.A. 6426, the Foreign Currency Deposit Act, provides that all authorized foreign currency deposits are considered absolutely confidential in nature and may not be inquired into. Under the same provision, there is only one exception to this rule, that is, when disclosure is allowed upon the written permission of the depositor.

In this case, Jose Gotianuy was considered by the Court as a co-depositor of Mary Margaret Dee. The Court reasoned that since Jose Gotianuy is the named co-payee of Mary Margaret Dee in the subject checks, which were deposited in China Bank, then Jose Gotianuy is likewise a depositor thereof. On that basis, no written consent from Mary Margaret Dee is necessary for the examination of the foreign currency deposits. As the owner of the funds unlawfully taken and which are undisputably now deposited with China Bank, Jose Gotianuy has the right to inquire into the said deposits.

A depositor, in cases of bank deposits, is one who pays money into the bank in the usual course of business, to be placed to his credit and subject to his check or the beneficiary of the funds held by the bank as trustee. On this score, the observations of the Court of Appeals are worth reiterating:

Furthermore, it is indubitable that the Citibank checks were drawn against the foreign currency account with Citibank, NA. The monies subject of said checks originally came from the late Jose Gotianuy, the owner of the account. Thus, he also has legal rights and interests in the CBC account where said monies were deposited. More importantly, the Citibank checks (Exhibits "AAA" to "AAA-5") readily demonstrate (sic) that the late Jose Gotianuy is one of the payees of said checks. Being a co-payee thereof, then he or his estate can be considered as a codepositor of said checks. Ergo, since the late Jose Gotianuy is a co-depositor of the CBC account, then his request for the assailed subpoena is tantamount to an express permission of a depositor for the disclosure of the name of the account holder. The April 16, 1999 Order perforce must be sustained. (Emphasis supplied.)

In the complaint of Jose Gotianuy, he alleged that his US dollar deposits with Citibank were illegally taken from him. On the other hand, China Bank employee Cristuta Labios testified that Mary Margaret Dee came to China Bank and deposited the money of Jose Gotianuy in Citibank US dollar checks to the dollar account of her sister Adrienne Chu. This fortifies the Courts conclusion that an inquiry into the said deposit at China Bank is justified. At the very least, Jose Gotianuy as the owner of these funds is entitled to a hearing on the whereabouts of these funds.

All things considered and in view of the distinctive circumstances attendant to the present case, the Court was constrained to render a limited pro hac vice ruling. Clearly it was not the intent of the legislature when it enacted the law on secrecy on foreign currency deposits to perpetuate injustice. This Court is of the view that the allowance of the inquiry would be in accord with the rudiments of fair play, the upholding of fairness in our judicial system and would be an avoidance of delay and time-wasteful and circuitous way of administering justice.

Los Baos Rural Bank vs Africa Petitioner Los Baos questioned the decision of the Court of Appeals in granting respondent Pacita Africa's application for the issuance of a writ of preliminary injunction to restrain petitioner from proceeding with the

foreclosure and consolidation of the title over the subject property after such property was allegedly sold to Macy Africa by forging Pacita Africa's signature. Los Baos argued that they should not be enjoined from foreclosing hte property because the foreclosure sale has long been effected and since it is a consummated act, it can no longer be restrained. The SC held that in the instant case, the status quo was the situation of the parties at the time of filing the Amended Complaint, at the poin where the property was already foreclosed. But, the last actual uncontested status that preceeded the conroversy was when the property in dispute was still registered int he name of Macy Africa, petitioner not having consolidated in its name the title thereto. Moreover, the court also held that the requisites for the issuance of a preliminary injunction are present and established by Pacita Africa. A writ of preliminary injunction is issued to preserve the status quo ante, upon an applican't showing of two important requisites; namely: (1) the right to be protected exists prima facie, and (2) the acts sought to be enjoined are violative of that right. It must be proven that the violation sought to be prevented would cause an irreparable injustice. The issuance of the wirt of preliminary injuction would no doubt preserve the status quo.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 143994 July 11, 2002

LOS BAOS RURAL BANK, INC., petitioner, vs. PACITA O. AFRICA, GLORIA AFRICA, ANTONIO AFRICA, ARISTEO AFRICA, SOCORRO AFRICA, CONSUELO AFRICA, AND LOURDES AFRICA, respondents. PANGANIBAN, J.: A writ of preliminary injunction is issued to preserve the status quo ante, upon an applicants showing of two important requisite conditions; namely, (1) the right to be protected exists prima facie, and (2) the acts sought to be enjoined are violative of that right. It must be proven that the violation sought to be prevented would cause an irreparable injustice. Statement of the Case Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the June 30, 2000 Decision of the 2 Court of Appeals (CA) in CA-GR SP No. 53355. The decretal portion of the Decision reads as follows: "WHEREFORE, the petition is GRANTED. The Order dated April 19, 1999 insofar as it denied the petitioners application for the issuance of a writ of preliminary injunction, is hereby RECALLED and SET ASIDE.
1

"Let a writ of preliminary injunction issue in this case to restrain the respondent bank from proceeding with the foreclosure and consolidation of the title over the subject property upon posting by petitioners 3 of a bond in the amount of Php20,000.00." The Order of the Regional Trial Court (RTC) of Quezon City (Branch 220), which was reversed by the CA, reads as follows: "WHEREFORE, premises considered, the Order of the Court dated July 22, 1997 is hereby recalled and set aside. The application for issuance of writ of preliminary injunction is hereby DENIED. "Issues in this case having been joined, let this case be set for pre-trial on May 28, 1999 at 8:30 o clock in 4 the morning. Send notice of pre-trial to the parties and counsels." The Facts The factual antecedents of the case are summarized by the Court of Appeals in this wise: "Petitioner Pacita Africa (Pacita for brevity) is the widow of Alberto Africa and the rest of her copetitioners are their children. "Records disclose that sometime in June 1989, the Quezon City Hall building where the Register of Deeds was then holding office was razed by fire, destroying some of its records/documents among which was the original Transfer Certificate of Title (TCT) No. 203492 covering a parcel of land situated in Diliman, Quezon City, and registered in the name of petitioner Pacita. The aforesaid property was part of the conjugal property of petitioner Pacita and her late husband Alberto Africa. "On request of Pacita, private respondent Macy Africa, the common-law wife of petitioner Antonio Africa, worked for the reconstitution of the aforesaid TCT No. 203492. The same was done and a new Transfer Certificate of Title (TCT) No. RT-76140 (203492) PR-36463 was issued in the name of Pacita Africa. While the reconstituted title was in her possession, Macy allegedly forged, or caused the forgery of, Pacitas signature on a Deed of Absolute Sale dated December 29, 1992, purporting to transfer ownership of the subject property to Macy. On the strength of the forged Deed of Absolute Sale, Macy was able to cause the issuance of TCT No. 81519 in her name, without the knowledge of any of herein petitioners. "Still as part of the scheme to defraud petitioners, Macy caused the preparation of a fake TCT No. 81519 in the name of Pacita, which the former showed to the latter to make Pacita believe that the said title was issued in her (Pacitas) name. "Sometime in March 1994, petitioners discovered private respondents fraudulent act. They (petitioners) likewise came to know that the subject property was mortgaged by Macy to the respondent bank. To protect their interests over the subject property, petitioners lodged an action in court against Macy and the respondent bank for Annulment of Title, Deed of Absolute Sale and Deed of Mortgage. The case was originally assigned to Branch 99 of the RTC of Quezon City and docketed as Civil Case No. Q-94-20898. "After the filing of the aforesaid case, the respondent bank in utter bad faith, foreclosed the subject property on June 11, 1996 without due notice to the petitioners, prompting the petitioners to amend [their] complaint, this time incorporating therein a prayer for the issuance of a temporary restraining order and/or writ of preliminary injunction, to stop the respondent bank from, among others, consolidating title to the subject property.

"On July 2, 1997, RTC Branch 99 issued an Order granting petitioners application for a temporary restraining order. Meanwhile, the respondent bank filed its Manifestation, Opposition and Motion to Postpone dated July 11, 1997, praying, inter alia, for the denial of petitioners application fo r a writ of preliminary injunction, or in the alternative, for the cancellation of the hearing thereon. On July 18, 1997, the aforesaid court denied the respondent banks motion to postpone and proceeded with the hearing of petitioners application. Thereafter, petitioners application was considered submitted for resolution. "On July 22, 1997, the Court issued an Order granting petitioners application for a writ of preliminary injunction to which respondent bank filed a Motion for Reconsideration dated July 11, 1997 followed by a Motion for Inhibition on January 1, 1998 praying that Hon. Felix M. de Guzman, presiding judge of RTC, Branch 99, inhibit himself from further trying the case. This latter motion was granted, and the case was re-raffled and assigned to Branch 220. "On April 19, 1999, RTC Branch 220, public respondent herein, issued the questioned Order." Ruling of the Court of Appeals The CA overturned the RTC Order dated April 19, 1999, and granted the issuance of a preliminary injunction to restrain petitioner from proceeding with the foreclosure and the consolidation of title over the subject property. The CA ruled that respondents had title to and possession of the property and were deprived thereof by petitioner. 6 Thus, respondents had a clear and unmistakable right to protect their title and possession. Hence, this Petition.
7 5

Issues In its Memorandum, petitioner raises the following issues for the Courts consideration: I "Whether the Court of Appeals acted with patent grave abuse of discretion in applying the ruling in Verzosa vs. Court of Appeals, (299 SCRA 100), to the instant case to justify its reversal of the 19 April 1999 Order of Branch 220 of the Regional Trial Court of Quezon City in Civil Case No. Q-94-20898[;] II "Whether the Court of Appeals acted with patent grave abuse of discretion when it rationalized its decision by citing factual premises therein that are not borne out by the records nor based on evidence and in fact contrary to reality[;] III "Whether the Court of Appeals acted with patent grave abuse of discretion when it ignored, disregarded and/or deviated from established jurisprudence governing the issuance of preliminary injunction demanded by private respondents against the petitioner bank[;] IV

"Whether the Court [of] Appeals acted with patent grave abuse of discretion when it disregarded the pertinent provisions of Section 3, Rule 58, of the Revised Rules of Court providing for the grounds for 8 issuance of preliminary injunction." In sum, the issues boil down to whether the appellate court erred in issuing a writ of preliminary injunction to stop petitioners consolidation of its title to the subject property. This Courts Ruling The Petition is not meritorious; it has not shown any reversible error in the CAs Decision. Main Issue: Propriety of Preliminary Injunction Petitioner argues that respondents do not have a right to the relief demanded, because they merely have 9 possession of the property, as the legal title is in the name of Macy Africa. Furthermore, it claims that the 10 consolidation of title in its name does not constitute an "invasion of a right that is material and substantial." On the other hand, respondents maintain that they would suffer great irreparable damage if the writ of 11 preliminary injunction is not granted. They likewise contend that if petitioner is allowed to consolidate its title to the subject property, they would lose their ancestral home, a loss that would result in unnecessary and protracted 12 proceedings involving third parties. We agree with respondents. The grounds for the issuance of a writ of preliminary injunction are enumerated in Rule 58, Section 3 of the Revised Rules of Court, which reads as follows: "Sec. 3. Grounds for issuance of preliminary injunction. A preliminary injunction may be granted when it is established; (a)That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the commission or continuance of the act or acts complained of, or in requiring the performance of an act or acts, either for a limited period or perpetually; (b)That the commission, continuance or non-performance of the act or acts complained of during the litigation would probably work injustice to the applicant; or (c)That a party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the subject of the action or proceeding, and tending to render the judgment ineffectual." Injunction is a preservative remedy aimed at no other purpose than to protect the complainants substantive rights 13 14 and interests during the pendency of the principal action. A preliminary injunction, as the term itself suggests, is 15 merely temporary. It is to be resorted to only when there is a pressing necessity to avoid injurious consequences 16 that cannot be remedied under any standard of compensation. Moreover, injunction, like other equitable remedies, should be issued only at the instance of a suitor who has 17 sufficient interest in or title to the right or the property sought to be protected. It is proper only when the 18 plaintiff appears to be entitled to the relief demanded in the complaint. In particular, the existence of the right 19 and the violation thereof must appear in the allegations of the complaint and must constitute at least a prima

facie showing of a right to the final relief. Thus, there are two requisite conditions for the issuance of a preliminary injunction, namely, (1) the right to be protected exists prima facie, and (2) the acts sought to be 21 enjoined are violative of that right. It must be proven that the violation sought to be prevented would cause an irreparable injustice. Further, while a clear showing of the right is necessary, its existence need not be conclusively established. In fact, the evidence required to justify the issuance of a writ of preliminary injunction in the hearing thereon need not be conclusive or complete. The evidence need only be a "sampling" intended merely to give the court an idea of the 23 justification for the preliminary injunction, pending the decision of the case on the merits. Thus, to be entitled to the writ, respondents are only required to show that they have the ostensible right to the final relief prayed for in 24 their Complaint. First Requisite: Existence of the Right In the case at bar, we find ample justification for the issuance of a writ of preliminary injunction. Evidently, the question on whether or not respondents possess the requisite right hinges on the prima facie existence of their 26 legal title to the subject property. They have shown that they have that right, and that it is directly threatened by 27 the act sought to be enjoined. First, as alleged in the Complaint, Respondent Pacita Africa is the registered owner of the subject property. Her ownership is evidenced by the reconstituted Transfer Certificate of Title (TCT) No. RT-76140 (203492) PR29 30 36463, issued by the Registry of Deeds of Quezon City. Second, the validity of the Deed of Sale dated December 29, 1992, is still in dispute because Respondent Pacita Africa claims that her signature was forged by the vendee, 31 Macy Africa. Third, there is doubt as to the validity of the mortgage in favor of petitioner, because there exists on 32 record two TCTs covering the mortgaged property: (1) TCT No. 81519 registered in the name of Pacita Africa and 33 (2) TCT No. 81519 registered in the name of Macy Africa. If indeed the Deed of Sale is a forgery, no parcel of land was ever transferred to the purported buyer who, not 35 being the owner, could not have validly mortgaged the property. Consequently, neither has petitioner -- the 36 buyer and mortgagee of the same lot -- ever acquired any title thereto. Significantly, no evidence was presented by petitioner to controvert these allegations put forward by respondents. Clearly then, on the basis of the evidence presented, respondents possess the right to prevent petitioner from consolidating the title in its name. 37 The first requisite -- the existence of a right to be protected -- is thus present. Second Requisite: Violation of Applicants Right As to the second requisite, what is sought to be enjoined by respondents is the consolidation of the title to the subject property in petitioners name. After having discovered that the property had been mortgaged to petitioner, respondents filed on June 12, 1994 an action for Annulment of Title, Deed of Sale, and Mortgage to 38 39 protect their rights over the property. This notwithstanding, petitioner foreclosed it on June 11, 1996. To enjoin 40 petitioner from consolidating the title in its name, respondents then filed an Amended Complaint, praying for a writ of preliminary injunction. Unless legally stopped, petitioner may consolidate title to the property in its name and enjoy the unbridled 41 freedom to dispose of it to third persons, to the damage and prejudice of respondents. What respondents stand 42 to lose is material and substantial. They would lose their ancestral home even without the benefit of a 43 44 trial. Clearly, the act sought to be enjoined is violative of their proprietary right over the property.
34 28 25 22

20

A writ of preliminary injunction is issued precisely to preserve threatened or continuous irremediable injury to 45 some of the parties before their claims can be thoroughly studied and adjudicated. Denial of the application for the writ may make the Complaint of respondents moot and academic. Furthermore, it would render ineffectual a final judgment in their favor or, at the very least, compel them to litigate needlessly with third persons who may 46 47 have acquired an interest in the property. Such a situation cannot be countenanced. Lis Pendens Petitioner further contends that respondents are not entitled to the relief prayed for, because they caused a notice of lis pendens to be annotated at the back of TCT No. 81519, registered in the name of Macy P. Africa; thus, that 48 notice provided ample protection of their rights and interests. We are not persuaded. A notice of lis pendens serves as an announcement to the whole world that a particular real property is in litigation and as a warning that those who acquire an interest in the property do so at their own risk 49 - they gamble on the result of the litigation over it. However, the cancellation of such notice may be ordered by 50 the court that has jurisdiction over it at any given time. Its continuance or removal -- like the continuance or the removal of a preliminary attachment or injunction -- is not contingent on the existence of a final judgment on the 51 action and ordinarily has no effect on the merits thereof. Thus, the notice of lis pendens does not suffice to 52 protect herein respondents rights over the property. It does not provide complete and ample protection. Status Quo Ante Petitioner further claims that the RTC erred in enjoining the foreclosure sale of the subject property. It argues 54 that the foreclosure may no longer be enjoined, because it has long been effected since 1996. We agree with petitioner. It is a well-entrenched rule that consummated acts can no longer be restrained by injunction whose sole 56 objective is to preserve the status quo until the merits of the case are fully heard. Status quo is defined as the last actual peaceful uncontested situation that precedes a controversy, and its preservation is the office of an 57 injunctive writ. In the instant case, the status quo was the situation of the parties at the time of the filing of the Amended 58 Complaint with a prayer for a writ of preliminary injunction. It was that point at which petitioner had already foreclosed the subject property and, hence, could no longer be enjoined from going on with the foreclosure. However, the last actual uncontested status that preceded the controversy was when the property in dispute was 59 still registered in the name of Macy Africa, petitioner not having consolidated in its name the title thereto. Thus, 60 the issuance of the writ would no doubt preserve the status quo. We cannot rule on the allegation of petitioner that this case is a "scam perpetrated by private respondents" to 61 defraud it. The truth or the falsity of that assertion cannot be ascertained by this Court at this time. Verily, we refrain from expressing any opinion on the merits of the case, pending a full consideration of the evidence that 62 would be presented by the parties. WHEREFORE, the Petition is DENIED and the assailed Decision of the Court of Appeals AFFIRMED. Costs against petitioner. SO ORDERED. Puno, Sandoval-Gutierrez, and Carpio, JJ., concur.
55 53

SUPERLINES TRANSPORTATION COMPANY, INC., Petitioner, vs.PHILIPPINE NATIONALCONSTRUCTION COMPANY and PEDRO BALUBAL, RespondentsG.R. No. 169596, March 28, 2007CARPIO MORALES, J.: FACTS:Superlines Transportation Company (Superlines) is engaged in the business of providing public transportation. On 13 December 1990, one of its buses swervedand crashed into the radio room of respondent Philippine National ConstructionCompany (PNCC). The incident was initially investigated by PNCCs toll way patrol, Sofronio Salvanera,and Pedro Balubal, then head of traffic control and security department of the SouthLuzon tollway. The bus was then towed by the PNCC patrol upon request of trafficinvestigator Cesar Lopera.Superlines made several requests for PNCC to release the bus, but Balubal deniedthe same, despite Superlines undertaking to repair the damaged radio room.Superlines thus filed a complaint for recovery of personal property with damagesagainst PNCC and Balubal. The claim for damages, however, failed to impleadLopera and any other police officer responsible for the seizure and distraint of thebus as indispensable parties.ISSUES:Whether or not Superlines claim for damages against can be passed upon.Whether or not Superlines failure to imple ad indispensable parties is fatal to itscause of action.RULING:Anent the first issue, the Supreme Court ruled in the negative. The reason is that acontract of deposit was perfected between the police authorities, through Lopera,and PNCC, the former having turned over the bus to PNCC for safekeeping. Hence,for Superlines to pursue its claim for damages, it or the trial court motu propriomust implead as defendants the indispensable parties.With respect to the second issue, the Court ruled, again, in the negative.Accordingly, the failure of Superlines to implead indispensable parties is not fatal toits cause of action, since misjoinder or non-joinder of parties is not a ground for itsdismissal. In other words, the non-joinder of indispensable parties is not a groundfor the dismissal of an action. According to Section 11, Rule 3 of the Rules of Court, parties may be added by order of the court on motion of the party or on its owninitiative at any stage of the action and/or such times as are just. If the petitionerrefuses to implead an indispensable party despite the order of the court, the lattermay dismiss the petition for its failure to comply therefor. The remedy is to impleadthe nonparty claimed to be indispensable.

ESCANO and SILOS vs. ORTIGAS, Jr., GR. No. 151953, June 29, 2007FACTS: Private Development Corporation of the Philippines (PDCP) entered into a loanagree ment with Falcon Minerals, Inc. whereby PDCP agreed to make available and lend t o Falcon a sum certain. Respondent Rafael Ortigas, Jr., et al., stockholder officers of Falcon,executed an Assumption of Solidary Liability whereby they agreed to assume in their individualcapacity, solidary liability with Falcon for the due and punctual payment of the loan contracted by Falcon with PDCP. Two separate guaranties were executed to guarantee the payment of thesame loan by other stockholders and officers of Falcon, acting in their personal and individualc a p a c i t i e s . O n e G u a r a n t y w a s e x e c u t e d b y p e t i t i o n e r S a l v a d o r E s c a o , w h i l e t h e o t h e r b y petitioners Mario M. Silos, Ricardo C. Silverio, et al. Two years later, an agreement developed tocede control of Falcon to Escao, Silos and Joseph M. Matti. Thus, contracts were executedwhereby Ortigas, George A. Scholey, Inductivo and the heirs of then already deceased George T.S c h o l e y a s s i g n e d t h e i r s h a r e s o f s t o c k i n F a l c o n t o E s c a o , S i l o s a n d M a t t i . P a r t o f t h e consideration that induced the sale of stock was a desire by Ortigas, et al., to relieve themselvesof all liability arising from their previous joint and several undertakings with Falcon, includingt h o s e related to the loan with PDCP. Thus, an Undertaking was executed by the c o n c e r n e d parties with Escao, Silos and Matti identified in the document as sureties, on one hand, andOrtigas, Inductivo and the Scholeys as obligors, on the other. However, Falcon subsequentlydefaulted in its payments. After PDCP foreclosed on the chattel mortgage, there remained asubsisting deficiency of P5,000,000, which Falcon did not satisfy despite demand. In order torecover the ind ebtedness, PDCP filed a complaint for sum of money against Falcon, Ortigas,E s c a o , S i l o s , S i l v e r i o a n d I n d u c t i v o . O r t i g a s f i l e d t o g e t h e r w i t h h i s a n s w e r a c r o s s - c l a i m against his co-defendants Falcon, Escao and Silos, and also manifested his intent to file a third-

party complaint against the Scholeys and Matti. The cross-claim lodged against Escao and Siloswas predicated on the 1982 Undertaking, wherein they agreed to assume the liabilities of Ortigaswith respect to the PDCP loan. Escao, Ortigas and Silos each sought to seek a settlement withP D C P . T h e f i r s t t o c o m e t o t e r m s w i t h P D C P w a s E s c a o , w h o e n t e r e d i n t o a c o m p r o m i s e agreement. In exchange, PDCP waived or assigned in favor of Escao 1/3 of its entire claim inthe complaint against all of the other defendants in the case. Then Ortigas entered into his own compromise agreement with PDCP, allegedly without the knowledge of Escao, Matti and Silos.Thereby, Ortigas agreed to pay PDCP P1.3M as full satisfaction of the PDCPs claim againstOrtigas. Silos and PDCP entered into a Partial Compromise Agreement whereby he agreed to pay P500k in exchange for PDCPs waiver of its claims against him. In the meantime, after having settled with PDCP, Ortigas pursued his claims against Escao, Silos and Matti, on the basis of the 1982 Undertaking. He initiated a third-party complaint against Matti and Silos, whilehe maintained his cross -claim against Escao. RTC issued the Summary Judgment, orderingEscao, Silos and Matti to pay Ortigas, jointly and severally, the amount of P1.3M, as well as P20K in attorneys fees. The trial court ratiocinated that none of the third -party defendantsdisputed the 1982 Undertaking. ISSUE: Whether or not petitioners are solidarily liable to respondent Ortigas. Held: Petitioners are not solidarily liable to respondent Ortigas. In case there is a concurrence of two or more creditors or of two or more debtors in one and the same obligation, Article 1207 of the Civil Code states that among them, there is a solidary liability only when the obliga tionexpressly so states, or when the law or the nature of the obligation requires solidarity. Article1210 supplies further that the indivisibility of an obligation does not necessarily give rise tosolidarity. Nor does solidarity of itself imply indivisibility. Thus, the presumption is that the obligation is only joint. It thus becomes incumbent upon the party alleging that the obligation isi n d e e d s o l i d a r y i n c h a r a c t e r t o p r o v e s u c h f a c t w i t h a p r e p o n d e r a n c e o f e v i d e n c e . T h e Undertaking does not contain any express stipulation that the petiti o n e r s a g r e e d t o b i n d themselves jointly and severally in their obligations to the Ortigas group, or any such terms tothat effect. Hence, such obligation established in the Undertaking is presumed only to be joint.Ortigas, as the party alleging that the obligation is in fact solidary, bears the burden to overcomethe presumption of jointness of obligations. He has failed to discharge such burden. The termsurety has a specific meaning under our Civil Code. As provided in Ar ticle 2047 in a suretyagreement the surety undertakes to be bound solidarily with the principal debtor. Thus, a suretyagreement is an ancillary contract as it presupposes the existence of a principal contract. It appears that Ortigas argument rests solely on the solidary nature of the obligation of the suretyunder Article2047. In tandem with the nomenclature sureties accorded to petitioners and Matti in the Undertaking, however, this argument can only be viable if the obligations established in the Undertaking do partake of the nature of a suretyship as defined under Article 2047 in the first place. That clearly is not the case here, notwithstanding the use of the nomenclature sureties inthe Undertaking.

Diamond Builders vs. Country BankersJoint/Solidary Obilgation on Surety ContractFacts Rogelio Acidre (sole proprietor of Diamond Builders) was sued by Marceliano Borja for breachof his obligation to construct a residential and commercial building Rogelio entered into a compromise agreement with Borja Rogelio in order to secure himself, entered into surety bond with Country Bankers

 Under the Surety Bond, Rogelio and his spouse and other petitioners in this case signed anindemnity agreement consenting to their joint and several liability to Country Bankers shouldthe surety bond be executed upon Rogelio violated the compromise agreement A writ of execution was issued against Country Bankers for v i o l a t i o n o f R o g e l i o t o t h e compromise agreement Country bankers payed the surety bond and ask for reimbursement from petitioners Petitioners refused to pay Country bankers filed a complaint for sum of money against petitioners\

Issue W/N Country Bankers is entitled for reimbursement? Ruling Yes. Art. 1217 of the Civil Code recognizes the right of reimbursement from a cod e b t o r (principal co-debtor in case of suretyship) in favor of one who paid the surety Only payments made after the obligation has prescribed or became illegal shall not entitle asolidary debtor for reimbursement (in accordance with Art. 1218)

THIRD DIVISION

DIAMOND BUILDERS CONGLOMERATION, ROGELIO S. ACIDRE, TERESITA P. ACIDRE, GRACE C. OSIAS, VIOLETA S. FAIYAZ and EMMA S. CUTILLAR, Petitioners,

G.R. No. 171820 Present:

YNARES-SANTIAGO, J., Chairperson, CHICO-NAZARIO, - versus -

VELASCO,* NACHURA, and COUNTRY BANKERS INSURANCE CORPORATION, Respondent. REYES, JJ.

Promulgated:

December 13, 2007

x------------------------------------------------------------------------------------x

DECISION

NACHURA, J.:

Before us is a petition for review on certiorari to annul the Decision[1] of the Court of Appeals (CA) in CA-G.R. C.V. No. 48603, which reversed the Decision[2] of the Regional Trial Court, Branch 7, Manila (RTC Manila) in Civil Case No. 92-62029 and granted respondent Country Bankers Insurance Corporations (Country Bankers) prayer for a sum of money against the petitioners.

The controversy originated from a civil case[3] pending before the Regional Trial Court, Branch 125, Caloocan City (RTC Caloocan) filed by Marceliano Borja (Borja) against Rogelio S. Acidre (Rogelio) for the latters breach of his obligation to construct a residential and commercial building. Rogelio is the sole proprietor of petitioner Diamond Builders Conglomeration (DBC).

To put an end to the foregoing litigation, the parties entered into a Compromise Agreement[4] which provided, in part:

COMPROMISE AGREEMENT

1.

xxx

a. In lieu of rescission, the parties have mutually agreed, subject to the provisions hereunder, to fully implement the building contract dated October 1, 1990 and supplemented on October 2, 1990 with an additional scope of work marked as Annex A of the complaint and the Letter-Agreement dated November 16, 1991 signed by the *petitioner Rogelio+ and plaintiffs son(,) Ferdinand A. Borja, marked as Annex B of the complaint, which required full compliance of the structural design of Engr. Ramos and explicit reminders in the constructing of the residential/commercial building and the additional works therein specified for the added consideration of P100,000.00 as alleged in paragraphs 2 and 3 of the complaint, Annex C hereof.

b. [Petitioner Rogelio] admits full payment of plaintiff to him the amount of P1,530,000.00 leaving the balance of P570,000.00 of the contractual price of P2,100,000.00 for the construction of the buildings aforementioned.

c. [Petitioner Rogelio] agrees to fully complete the construction of the residential/commercial building mentioned in paragraph 1 hereof provided plaintiff would pay to him, subject to hereunder terms, the aforesaid amount of P570,000.00.

d. The plaintiff agrees to pay [petitioner Rogelio] the amount of P570,000.00 subject to the terms hereunder set forth and subject strictly to the condition that [petitioner Rogelio] will finish the building above-described pursuant to the agreements *Annex(es) A and B+ set forth in paragraph 1 hereof.

e. follows:

Plaintiff shall pay [petitioner Rogelio] the amount of P570,000.00 as

i. P370,000.00 the 5th day from approval of this compromise agreement by this Honorable Court and to coincide (with) the start of the 75 days for [petitioner Rogelio] to complete the construction of the building.

ii. P200,000.00 When the aforedescribed building is fully constructed pursuant to agreements stated in paragraph 1 hereof.

iii. Said building must be fully finished pursuant to the agreement stated in paragraph 1 hereof within 75 days (excluding Sundays and Holidays) counted from receipt of payment of P370,000.00. The date of receipt to be issued by [petitioner Rogelio] will control. The 75th day will be 12:00 noon of the 75th day.

iv. From receipt of the aforesaid amount of P370,000.00, [petitioner Rogelio] shall submit in favor of plaintiff a performance or surety bond in the equivalent amount of P370,000.00 to answer or indemnify plaintiff in the event the building is not finished on the 75th day.

v. In the event the building is finished within 75 days as heretofore stated and pursuant to the agreements set forth in paragraph 1 hereof, in addition to the amount of P200,000.00, the plaintiff shall also pay [petitioner Rogelio] the amount of P90,000.00 by

way of [bonus]. However, in the event [petitioner Rogelio] shall fail to fully complete the construction of the building pursuant to the agreements set forth in paragraph 1 hereof within 75 days as heretofore stated, [petitioner Rogelio] shall not be entitled to any further payments and the performance or surety bond abovementioned shall be fully implemented by way of penalizing [petitioner Rogelio] and/or as award for damages in favor of plaintiff.

xxxx

f.

xxx

g. That the construction herein contemplated shall not extend beyond 75 days. Said period shall commence five days from the date of the final approval hereof by this Honorable Court.

i. That any violation and/or avoidance of the terms and conditions of this Compromise Agreement by either of the parties herein shall forthwith entitle the aggrieved party to an immediate execution hereof and to the necessary and corresponding reliefs and remedies therefore. (Emphasis supplied.)

The RTC Caloocan approved the Compromise Agreement and rendered a Decision[5] in accordance with the terms and conditions contained therein.

In compliance with the Compromise Agreement, Rogelio obtained a Surety Bond from Country Bankers in favor of the spouses Borja.[7] In this regard, Rogelio and his spouse, petitioner Teresita P. Acidre, together with DBC employees Grace C. Osias, Violeta S. Faiyaz and Emma S. Cutillar (the other petitioners herein), signed an Indemnity Agreement[8] consenting to their joint and several liability to Country Bankers should the surety bond be executed upon.
[6]

On April 23, 1992, Country Bankers received a Motion for Execution[9] of the surety bond filed by Borja with the RTC Caloocan for Rogelios alleged violation of the Compromise Agreement. Consequently, Country Bankers, in a letter[10] dated May 13, 1992, advised petitioners that in the event it is constrained to pay under the surety bond to Borja, it shall proceed against petitioners for reimbursement.

In turn, petitioners wrote Country Bankers informing the latter of the filing of an Opposition to Borjas Motion for Execution.[11] In spite of the opposition, [12] however, the RTC Caloocan issued a Writ of Execution on May 25, 1992. Petitioners then filed a motion for reconsideration.

On May 29, 1992, Sheriff Perceverando Pangan of RTC Caloocan served Country Bankers a copy of the writ. Posthaste, Country Bankers, in writing, requested Sheriff Pangan for a 10-day grace period within which to settle the claim.[13]

Subsequently, Rogelio filed an Urgent Omnibus Motion[14] to suspend the Writ of Execution and to resolve the Motion for Reconsideration dated June 3, 1992. Upon receipt of the Omnibus Motion, Country Bankers forthwith wrote Sheriff Pangan and requested that the implementation of the Writ of Execution be held in abeyance so as not to render moot and academic the RTC Caloocans resolution on the Omnibus Motion.[15]

Nonetheless, on June 9, 1992, Country Bankers was served a Notice of Levy/Sheriffs Sale[16] with a list of its personal properties to be sold at the scheduled public auction on June 15, 1992.

The next day, or on June 10, 1992, Country Bankers verified with the RTC Caloocan the status of petitioners Omnibus Motion. It was informed that the motion had yet to be acted upon. On the same date, Sheriff Pangan arrived at Country Bankers office, and the latter was thus constrained to pay the amount of the surety bond.[17]

Significantly, on June 22, 1992, twelve (12) days after the satisfaction of judgment in Civil Case No. C-14745, Rogelio filed a Petition for Certiorari and Prohibition with Preliminary Injunction and Restraining Order[18] with the CA, docketed as CA-G.R. SP No. 28205. Although the appellate court issued a Temporary Restraining Order (TRO), the petition was eventually denied due course and dismissed outright for being fait accompli, as what it sought to enjoin or prohibit had already been fully satisfied and executed.[19]

In the meantime, after Country Bankers was compelled to pay the amount of the surety bond, it demanded reimbursement from the petitioners under the Indemnity Agreement.[20] However, petitioners refused to reimburse Country Bankers.

In addition, upon the dismissal of their petition in CA-G.R. SP No. 28205, petitioners wrote Country Bankers and informed the latter that the voluntary payment of the bond effectively prevented them from contesting the validity of the issuance of the Writ of Execution.[21]

As a result, Country Bankers filed a complaint for sum of money against the petitioners which, as previously stated, the RTC Manila dismissed. It disposed of the case, thus:

WHEREFORE, and considering the foregoing, judgment is hereby rendered:

1.

Dismissing the complaint for lack of merit;

2. On the counterclaim, ordering [Country Bankers] to pay [petitioners] attorneys fees of P50,000.00, plus the costs of suit.

SO ORDERED.

On appeal, the CA reversed and set aside the decision of the RTC Manila, to wit:

WHEREFORE, premises considered, the Appeal is GRANTED and the Decision dated November 2, 1992 of Branch 7 of the Regional Trial Court of Manila is hereby REVERSED and a new one entered, ordering [petitioners] to pay [Country Bankers] the sum of THREE HUNDRED SEVENTY THOUSAND PESOS (P370,000.00), as reimbursement or actual damages, plus interest thereon at the rate of 12% per annum computed from the date of judicial demand, or from July 24, 1992, the date of filing of the complaint until the said amount has been fully paid.

SO ORDERED.

In reversing the trial court, the CA ruled that Country Bankers, as surety of Rogelios loan obligation, did not effect voluntary payment on the bond. The appellate court found that what Country Bankers paid was an obligation legally due and demandable. It declared that Country Bankers acted upon compulsion of a writ of execution, which appears to have been regularly, and validly issued, and, by its very nature, is immediately enforceable.

Hence, this appeal positing a sole issue for our resolution, to wit:

Whether petitioners should indemnify Country Bankers for the payment of the surety bond.

In fine, petitioners contend that Country Bankers is not entitled to reimbursement when it voluntarily paid the surety bond considering it knew full well the remedies availed of by petitioners to stay the execution of the compromise judgment. Thus, Country Bankers must bear the loss or damage arising from its voluntary act.

We deny the appeal and affirm the appellate courts ruling. Country Bankers should be reimbursed for the P370,000.00 it paid to Borja under the surety bond.

In impugning the CAs decision, petitioners invoke their pending Omnibus Motion to stay the execution of the compromise judgment. Petitioners theory is that, although the RTC Caloocan had already issued a writ of execution and Country Bankers had been served a Notice of Levy/Sheriffs Sale of its properties at the impending public auction, the payment made by Country Bankers to Borja is a voluntary act. Petitioners push their theory even further, and deign to suggest that Country Bankers should have itself intervened in the proceedings before the RTC Caloocan to stay the writ of execution.

We reject this preposterous suggestion. Petitioners ought to be reminded of the nature of a judgment on a compromise and a writ of execution issued in connection therewith.

A compromise judgment is a decision rendered by a court sanctioning the agreement between the parties concerning the determination of the controversy

at hand. Essentially, it is a contract, stamped with judicial imprimatur, between two or more persons, who, for preventing or putting an end to a lawsuit, adjust their difficulties by mutual consent in the manner which they agree on, and which each of them prefers in the hope of gaining, balanced by the danger of losing.[22] Upon court approval of a compromise agreement, it transcends its identity as a mere contract binding only upon the parties thereto, as it becomes a judgment that is subject to execution in accordance with Rule 39 of the Rules of Court.[23]

Ordinarily, a judgment based on compromise is not appealable. It should not be disturbed except upon a showing of vitiated consent or forgery. The reason for the rule is that when both parties enter into an agreement to end a pending litigation and request that a decision be rendered approving said agreement, it is only natural to presume that such action constitutes an implicit, as undeniable as an express, waiver of the right to appeal against said decision.[24] Thus, a decision on a compromise agreement is final and executory, and is conclusive between the parties.[25]

It is beyond cavil that if a party fails or refuses to abide by a compromise agreement, the other party may either enforce the compromise or regard it as rescinded and insist upon his original demand.[26] Following this mandatory rule, the RTC Caloocan granted Borjas motion, and subsequently issued an order to the sheriff to execute the compromise judgment. Notwithstanding the foregoing, petitioners still maintain that since they had taken steps to stay the execution of the compromise judgment, Country Bankers, with full knowledge of their active opposition to the execution thereof, should not have readily complied with the RTC Caloocan Order.

Petitioners argument contemplates a brazen defiance of a validly issued court order, which had not been restrained by the appellate court or this Court. The argument is unacceptable.

The Compromise Agreement between Borja and Rogelio explicitly provided that the latters failure to complete construction of the building within the stipulated period[27] shall cause the full implementation of the surety bond as a penalty for the default, and as an award of damages to Borja. Furthermore, the Compromise Agreement contained a default executory clause in case of a violation or avoidance of the terms and conditions thereof. Therefore, the payment made by Country Bankers to Borja was proper, as failure to pay would have amounted to contumacious disobedience of a valid court order.

Clearly, even without the aforesaid default clause, the compromise judgment remained executory as against Rogelio, as the principal obligor (codebtor), and Country Bankers as surety of the obligation. Section 4, Rule 39 of the Rules of Court provides:

SEC. 4. Judgments not stayed by appeal. Judgments in actions for injunction, receivership, accounting and support, and such other judgments as are now or may hereafter be declared to be immediately executory, shall be enforceable after their rendition and shall not be stayed by an appeal taken therefrom, unless otherwise ordered by the trial court. On appeal therefrom, the appellate court in its discretion may make an order suspending, modifying, restoring or granting the injunction, receivership, accounting, or award of support.

The stay of execution shall be upon such terms as to bind or otherwise as may be considered proper for the security or protection of the rights of the adverse party.

Other judgments in actions declared to be immediately executory and not stayed by the filing of an appeal are for: (1) compromise,[28] (2) forcible entry and unlawful detainer,[29] (3) direct contempt,[30] and (4) expropriation.[31]

Likewise, Section 9, paragraph (a),[32] of the same Rule outlines the procedure for execution of judgments for money, thus:

SEC. 9 Execution of judgments for money, how enforced.

(a) Immediate payment on demand. The officer shall enforce an execution of a judgment for money by demanding from the judgment obligor the immediate payment of the full amount stated in the writ of execution and all lawful fees. The judgment obligor shall pay in case, certified bank check payable to the judgment oblige, or any other form of payment acceptable to the latter, the amount of the judgment debt under proper receipt directly to the judgment oblige or his authorized representative if present at the time of payment. The lawful fees shall be handed under proper receipt to the executing sheriff who shall turn over the said amount within the same day to the clerk of court of the court that issued the writ.

As Rogelios obligation under the compromise agreement, and approved by the RTC Caloocan, had a penal clause[33] which is monetary in nature,[34] the writ of execution availed of by Borja, and paid by Country Bankers, strictly complied with the rules on execution of money judgments.

It is true that the petitioners did not directly question the compromise judgment. What was pending before the Caloocan RTC was petitioners Omnibus Motion praying for a stay in the implementation of the writ of execution. However, the bottom line issue raised in the Omnibus Motion is, actually, a question on the compromise judgment, since its resolution would require an inquiry into the stipulations contained in the Compromise Agreement, particularly the provision on immediate execution.

Thus, when the RTC Manila ruled that the payment on the bond made by Country Bankers was voluntary, the lower court effectively disregarded the rule

on the non-appealable nature and the immediately executory character of a judgment on a compromise.

Moreover, it has not escaped our attention that petitioners belatedly filed a Petition for Certiorari and Prohibition with prayer for a TRO with the CA, ostensibly to stop the execution of the compromise judgment. Not only was the filing thereof late, it was done twelve (12) days after the satisfaction of the compromise judgment. We are, therefore, perplexed why, despite the urgency of the matter, petitioners merely banked on a pending motion for reconsideration to stay the enforcement of an already issued writ of execution. Petitioners total reliance thereon was certainly misplaced.

Admittedly, the general rule is that certiorari will not lie unless a motion for reconsideration is first filed before the respondent tribunal to allow it an opportunity to correct the imputed errors.[35] Nonetheless, the rule admits of exceptions, thus:

(a) jurisdiction;

where the order is a patent nullity, as where the court a quo has no

(b) where the questions raised in the certiorari proceedings have been duly raised and passed upon by the lower court, or are the same as those raised and passed upon in the lower court;

(c) where there is an urgent necessity for the resolution of the question and any further delay would prejudice the interests of the Government or of the petitioner or the subject matter of the action is perishable;

(d) useless;

where, under the circumstances, a motion for reconsideration would be

(e) where petitioner was deprived of due process and there is extreme urgency for relief;

(f) where, in a criminal case, relief from an order of arrest is urgent and the granting of such relief by the trial court is improbable;

(g) process;

where the proceedings in the lower court are a nullity for lack of due

(h) where the proceedings was ex-parte or in which the petitioner had no opportunity to object; and

(i) involved.
[36]

where the issue raised is one purely of law or where public interest is

Evidently, it would not have been premature for petitioners to have filed a petition before the CA, upon the issuance by the RTC Caloocan of a writ of execution, because the RTC Caloocan already denied their Opposition to Borjas Motion for Execution on the surety bond. If, as petitioners insist, they had a meritorious challenge to the satisfaction of the writ of execution, they should have immediately filed a Petition for Certiorari with the CA and therein alleged the exceptional circumstance warranting the non-filing of a motion for reconsideration. Petitioners should not have persisted on waiting for the resolution of their Omnibus Motion.

We have consistently ruled that an order for the issuance of a writ of execution is ordinarily not appealable. The reason for this is that the merits of the case should not be delved into anew after a determination has been made

thereon with finality.[37] Otherwise, there would be practically no end to litigation since the losing party would always try to thwart execution by appealing from every order granting the writ. In this case, this aphorism should apply. Rogelio, after agreeing to an amicable settlement with Borja to put an end to the case before the RTC Caloocan, cannot flout compliance of the court order of execution by refusing to reimburse Country Bankers, the surety of his obligation in the compromise agreement.

Still, petitioners stubbornly refuse to pay Country Bankers, contending that the CA itself, in CA-G.R. SP No. 28205, declared that the payment effected was voluntary.

We are not persuaded.

Article 2047 of the Civil Code specifically calls for the application of the provisions on solidary obligations to suretyship contracts. In particular, Article 1217 of the Civil Code recognizes the right of reimbursement from a co-debtor (the principal co-debtor, in case of suretyship) in favor of the one who paid (i.e., the surety).[38]In contrast, Article 1218 of the Civil Code is definitive on when reimbursement is unavailing, such that only those payments made after the obligation has prescribed or became illegal shall not entitle a solidary debtor to reimbursement. Nowhere in the invoked CA Decision does it declare that a surety who pays, by virtue of a writ of execution, is not entitled to reimbursement from the principal co-debtor. The CA Decision was confined to the mootness of the issue presented and petitioners preclusion from the relief it prayed for, i.e., a stay of the writ of execution, considering that the writ had already been satisfied.

More importantly, the Indemnity Agreement signed by Rogelio and the other petitioners explicitly provided for an incontestability clause on payments made by Country Bankers. The said clause reads:

INCONTESTABILITY OF PAYMENTS MADE BY THE COMPANY: - Any payment or disbursement made by [Country Bankers] on account of the above-mentioned Bond, its renewals, extensions, alterations or substitutions either in the belief that [Country Bankers] was obligated to make such payment or in the belief that said payment was necessary or expedient in order to avoid greater losses or obligations for which [Country Bankers] might be liable by virtue of the terms of the above-mentioned Bond, its renewals, extensions, alterations, or substitutions, shall be final and shall not be disputed by the undersigned, who hereby jointly and severally bind themselves to indemnify [Country Bankers] of any and all such payments, as stated in the preceding clauses.

In case [Country Bankers] shall have paid, settled or compromised any liability, loss, costs, damages, attorneys fees, expenses, claims, demands, suits, or judgments as above-stated, arising out of or in connection with said bond, an itemized statement thereof, signed by an officer of [Country Bankers] and other evidence to show said payment, settlement or compromise, shall be prima facie evidence of said payment, settlement or compromise, as well as the liability of [petitioners] in any and all suits and claims against [petitioners] arising out of said bond or this bond application.

Ineluctably, petitioners are obligated to reimburse Country Bankers the amount of P370,000.00.

Finally, petitioners desperately attempt to inveigle out of this burden, which is of their own making, by imputing a lack of initiative on Country Bankers part to intervene in the execution proceedings before the RTC.

This contention, as with the rest of petitioners arguments, deserves scant consideration. Suffice it to state that Country Bankers is a surety of the obligation with a penal clause, constituted in the compromise judgment; it is not a joint and solidary co-debtor of Rogelio.

In the recent case of Escao v. Ortigas,[39] we elucidated on the distinction between a surety as a co-debtor under a suretyship agreement and a joint and solidary co-debtor, thus:

(A)s indicated by Article 2047, a suretyship requires a principal debtor to whom the surety is solidarily bound by way of an ancillary obligation of segregate identity from the obligation between the principal debtor and the creditor. The suretyship does not bind the surety to the creditor, inasmuch as the latter is vested with the right to proceed against the former to collect the credit in lieu of proceeding against the principal debtor for the same obligation. At the same time, there is also a legal tie created between the surety and the principal debtor to which the creditor is not privy or party to. The moment the surety fully answers to the creditor for the obligation created by the principal debtor, such obligation is extinguished. At the same time, the surety may seek reimbursement from the principal debtor for the amount paid, for the surety does in fact become subrogated to all the rights and remedies of the creditor.

WHEREFORE, the Petition is DENIED. The Decision of the Court of Appeals in CA-G.R. C.V. No. 48603 is hereby AFFIRMED. Costs against the petitioner.

SO ORDERED.

THIRD DIVISION

[G.R. No. 158138. April 12, 2005]

PHILIPPINE BANK OF, COMMUNICATIONS, petitioner, vs. ELENA LIM, RAMON CALDERON, and TRI-ORO INTERNATIONAL TRADING & MANUFACTURING CORPORATION, respondents. DECISION

PANGANIBAN, J.:

A restrictive stipulation on the venue of actions contained in a promissory note applies to the surety agreement supporting it, because the nature of the two contracts and the factual circumstances surrounding their execution are intertwined or interconnected. The surety agreement is merely an accessory to the principal loan agreement embodied in the promissory note. Hence, the enforcement of the former depends upon the latter. The Case Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, assailing the April 29, 2003 Decision[2] of the Court of Appeals (CA) in CA-GR SP No. 69786. The challenged Decision disposed as follows: WHEREFORE, based on the foregoing, the instant petition is hereby GRANTED. The assailed Orders dated June 9, 2000 and January 9, 2002 are hereby ANNULED and SET ASIDE. Civil Case No. 99-94976 is hereby ordered DISMISSED without prejudice to the filing thereof in the venue exclusively stipulated by the parties.[3] The Facts The facts are related by the CA as follows: On September 3, 1999, the Philippine Bank of Communications (hereinafter [petitioner]) filed a complaint against [Respondents Elena Lim, Ramon Calderon and Tri-Oro International Trading & Manufacturing Corporation (Tri -Oro for brevity)] with the Regional Trial Court of Manila for the collection of a deficiency amounting to P4,014,297.23 exclusive of interest. [Petitioner] alleged therein that [respondents] obtained a loan from it and executed a continuing surety agreement dated November 16, 1995 in favor of [petitioner] for all loans, credits, etc., that were extended or may be extended in the future to [respondents]. [Petitioner] granted a renewal of said loan upon [respondents] request, the most recent being on January 21, 1998 as evidenced by Promissory Note Renewal BD-Variable No. 8298021001 in the amount of P3,000,000.00. It was expressly stipulated therein that the venue for any legal action that may arise out of said promissory note shall be Makati City, to the exclusion of all other courts x x x. [Respondents allegedly] failed to pay said obligation upon maturity. Thus, [petitioner] foreclosed the real estate mortgage

executed by [respondents] valued at P1,081,600.00 leaving a deficiency balance of P4,014,297.23 as of August 31, 1999. [Respondents] moved to dismiss the complaint on the ground of improper venue, invoking the stipulation contained in the last paragraph of the promissory note with respect to the restrictive/exclusive venue. [The trial court] denied said motion asseverating that [petitioner] ha[d] separate causes of action arising from the promissory note and the continuing surety agreement. Thus, [under] Rule 4, Section 2, of the 1997 Rules of Civil Procedure, as amended, x x x venue was properly laid in Manila. [The trial court] supported [its] order with cases where venue was held to be merely permissive. A motion for reconsideration of said order was likewise denied.[4] Ruling of the Court of Appeals On appeal, the CA ruled that respondents alleged debt was based on the Promissory Note, which had provided an exclusionary stipulation on venue to the exclusion of all other courts.[5] The parties Surety Agreement, though silent as to venue, was an accessory contract that should have been interpreted in consonance with the Promissory Note.[6] Hence, this Petition.[7] The Issue Petitioner raises the following issue for our consideration: Whether or not the Honorable Court of Appeals had decided the issue of venue in a way not in accord with law and applicable decisions of this Honorable Court and had thereby departed from the accepted and usual course of judicial proceedings, as to call for this Honorable Supreme Courts power of supervision and appellate review.[8] The Courts Ruling The Petition is unmeritorious. Sole Issue: Venue

At the outset, this Court observes that petitioner took liberties with the stipulated facts to suit its allegations in the present Petition. In its Complaint, petitioner bank averred that respondents had entered into the Surety Agreement (SA) to guarantee existing and future credit facilities, and that they had executed the Promissory Note (PN) to document their loan.[9] Now, the bank is claiming that Tri-Oro issued the PN on which the other respondents should be made liable as sureties.[10] This strategy is obviously intended to disconnect the SA from the PN and to support the claim of petitioner that the stipulation on venue does not apply to the SA. However, as will be discussed below, the cause of action to recover on the basis of the SA is inseparable from that which is based on the PN. Rule on Venue Section 2 of Rule 4 of the Rules of Court provides that personal actions[11] must be commenced and tried (1) in the place where the plaintiff resides, or (2) where the defendant resides, or (3) in case of non-resident defendants, where they may be found, at the choice of the plaintiff.[12] This rule on venue does not apply when the law specifically provides otherwise, or when -- before the filing of the action -- the contracting parties agree in writing on the exclusive venue thereof.[13] Venue is not jurisdictional and may be waived by the parties.[14] A stipulation as to venue does not preclude the filing of the action in other places, unless qualifying or restrictive words are used in the agreement.[15] In the instant case, the stipulation on the exclusivity of the venue as stated in the PN is not at issue. What petitioner claims is that there was no restriction on the venue, because none was stipulated in the SA on which petitioner had allegedly based its suit.[16] Accordingly, the action on the SA may be filed in Manila, petitioners place of residence. Petitioner adds that its Complaint filed in the trial court had two causes of action: the first was founded on a breach of the PN; and the second, on a violation of the SA.[17]Consequently, it was allegedly correct to join the causes of action and to file the case in Manila, per Section 5 of Rule 2 of the Rules of Court, which reads:[18]

Section 5. Joinder of Causes of Action. A party may in one pleading assert, in the alternative or otherwise, as many causes of action as he may have against an opposing party, subject to the following conditions: xxx xxx xxx

(c) Where the causes of action are between the same parties but pertain to different venue or jurisdictions, the joinder may be allowed in the Regional Trial Court provided one of the causes of action falls within the jurisdiction of the said court and venue lies therein.[19] Surety Agreement Suretyship arises upon the solidary binding of a person -- deemed the surety -- with the principal debtor, for the purpose of fulfilling an obligation.[20] The prestation is not an original and direct obligation for the performance of the suretys own act, but merely accessory or collateral to the obligation contracted by the principal.[21] Although the surety contract is secondary to the principal obligation, the surety assumes liability as a regular party to the undertaking.[22] In enforcing a surety contract, the complementary-contracts-construedtogether doctrine finds application.[23] According to this principle, an accessory contract must be read in its entirety and together with the principal agreement.[24] This principle is used in construing contractual stipulations in order to arrive at their true meaning; certain stipulations cannot be segregated and then made to control.[25] This no-segregation principle is based on Article 1374 of the Civil Code, which we quote: Art. 1374. The various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of them taken jointly. The aforementioned doctrine is applicable to the present case. Incapable of standing by itself, the SA can be enforced only in conjunction with the PN. The latter documents the debt that is sought to be collected in the action against the sureties. The factual milieu of the present case shows that the SA was entered into to facilitate existing and future loan agreements. Petitioner approved the loan covered by the PN, partly because of the SA that assured the payment of the

principal obligation. The circumstances that related to the issuance of the PN and the SA are so intertwined that neither one could be separated from the other. It makes no sense to argue that the parties to the SA were not bound by the stipulations in the PN. Notably, the PN was a contract of adhesion that petitioner required the principal debtor to execute as a condition of the approval of the loan. It was made in the form and language prepared by the bank. By inserting the provision that Makati City would be the venue for any legal action [that] may arise out of [the] Promissory Note,[26] petitioner also restricted the venue of actions against the sureties. The legal action against the sureties arose not only from the SA, but also from the PN. Cause of Action Petitioner correctly argues that there are two causes of action contained in its Complaint. A cause of action is a partys act or omission that violates the rights of the other.[27]Only one suit may be commenced for a single cause of action.[28] If two or more suits are instituted on the basis of the same cause of action, only one case should remain and the others must be dismissed.[29] As against Tri-Oro International Trading & Manufacturing Corporation, petitioners cause of action is the alleged failure to pay the debt in violation of the PN; as against Elena Lim and Ramon Calderon, in violation of the SA. Because of the variance between the causes of action, petitioner could have filed separate actions against respondents to recover the debt, on condition that it could not recover twice from the same cause. It could have proceeded against only one or all of them,[30] as full payment by any one of them would have extinguished the obligation.[31] By the same token, respondents could have been joined as defendants in one suit, because petitioners alleged right of relief arose from the same transaction or series of transactions that had common questions of fact.[32] To avoid a multiplicity of suits, joinder of parties is encouraged by the law. The cause of action, however, does not affect the venue of the action. The vital issue in the present case is whether the action against the sureties is covered by the restriction on venue stipulated in the PN. As earlier stated, the answer is in the affirmative. Since the cases pertaining to both causes of action are restricted to Makati City as the proper venue, petitioner cannot rely on Section 5 of Rule 2 of the Rules of Court.

Liberal Construction Petitioners final plea for liberality in applying the rules on venue must be rejected. As earlier discussed, the PN was a contract of adhesion. Ambiguities therein are to be construed against the party that prepared the contract.[33] On the same principle, petitioner can no longer disavow the stipulation on venue, considering that it drafted the Surety Agreement. Besides, this alleged technicality caused no miscarriage of substantial justice, as petitioner may refile the case.[34] The inconveniences brought about by its failure to observe the rules on venue sprang from its own acts. Hence, it cannot blame the courts or anyone else for the resulting delay in the adjudication of the merits of its cause. WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against petitioner. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila

SECOND DIVISION GATEWAY ELECTRONICS G.R. No. 172041 CORPORATION and GERONIMO B. DELOS REYES, JR., Petitioners, Present: QUISUMBING, J., Chairperson, AUSTRIA-MARTINEZ,* CARPIO MORALES, TINGA, and VELASCO, JR., JJ. Promulgated:

- versus -

ASIANBANK CORPORATION, Respondent.

December 18, 2008 x-----------------------------------------------------------------------------------------x DECISION VELASCO, JR., J.: This petition for review under Rule 45 seeks to nullify and set aside the Decision[1] dated October 28, 2005 of the Court of Appeals (CA) in CA-G.R. CV No. 80734 and its Resolution[2] of March 17, 2006 denying petitioners motion for reconsideration. The Facts Petitioner Gateway Electronics Corporation (Gateway) is a domestic corporation that used to be engaged in the semi-conductor business. During the period material, petitioner Geronimo B. delos Reyes, Jr. was its president and one Andrew delos Reyes its executive vice-president. On July 23, 1996, Geronimo and Andrew executed separate but almost identical deeds of suretyship for Gateway in favor of respondent Asianbank Corporation (Asianbank), pertinently providing:
I/We Geronimo B. de los Reyes, Jr. x x x warrant to the ASIANBANK CORPORATION, x x x due and punctual payment by the following individuals/companies/firms, hereinafter called the DEBTOR(S), of such amounts whether due or not, as indicated opposite their respective names, to wit: NAME OF DEBTOR(S) GATEWAY ELECTRONICS BILLS CORPORATION AMOUNT OF OBLIGATION *P10,000,000.00*DOMESTIC [PURCHASED LINE] *US$3,000,000.00*OMNIBUS CREDIT LINE

owing to the said ASIANBANK CORPORATION, hereafter called the CREDITOR, as evidenced by all notes, drafts, overdrafts and other [credit] obligations of every kind and nature contracted/incurred by said DEBTOR(S) in favor of said CREDITOR. In case of default by any and/or all of the DEBTOR(S) to pay the whole part of said indebtedness herein secured at maturity, I/WE jointly and severally agree and engage to the CREDITOR, its successors and assigns, the prompt payment, x x x of such notes, drafts, overdrafts and other credit obligations on which the DEBTOR(S) may now be indebted or may hereafter become indebted to the CREDITOR, together with all interests, penalty and other bank charges as may accrue thereon x x x. I/WE further warrant the due and faithful performance by the DEBTOR(S) of all obligations to be performed under any contracts evidencing indebtedness/obligations and any supplements, amendments, changes or modifications made thereto, including but not limited to, the due and punctual payment by the said DEBTOR(S). MY/OUR liability on this Deed of Suretyship shall be solidary, direct and immediate and not contingent upon the pursuit by the CREDITOR x x x of whatever remedies it or they may have against the DEBTOR(S) or the securities or liens it or they may possess; and I/WE hereby agree to be and remain bound upon this suretyship, x x x and notwithstanding also that all obligations of the DEBTOR(S) to you outstanding and unpaid at any time may exceed the aggregate principal sum hereinabove stated.[3]

Later developments saw Asianbank extending to Gateway several export packing loans in the total aggregate amount of USD 1,700,883.48. This loan package was later consolidated with Dollar Promissory Note (PN) No. FCD-05992749[4] for the amount of USD 1,700,883.48 and secured by a chattel mortgage over Gateways equipment for USD 2 million. Gateway initially made payments on its loan obligations, but eventually defaulted. Upon Gateways request, Asianbank extended the maturity dates of the

loan several times. These extensions bore the conformity of three of Gateways officers, among them Andrew. On July 15 and 30, 1999, Gateway issued two Philippine Commercial International Bank checks for the amounts of USD 40,000 and USD 20,000, respectively, as payment for its arrearages and interests for the periods June 30 and July 30, 1999; but both checks were dishonored for insufficiency of funds. Asianbanks demands for payment made upon Gateway and its sureties went unheeded. As of November 23, 1999, Gateways obligation to Asianbank, inclusive of principal, interest, and penalties, totaled USD 2,235,452.17. Thus, on December 15, 1999, Asianbank filed with the Regional Trial Court (RTC) in Makati City a complaint for a sum of money against Gateway, Geronimo, and Andrew. The complaint, as later amended, was eventually raffled to Branch 60 of the court and docketed as Civil Case No. 99-2102 entitled Asian Bank Corporation v. Gateway Electronics Corporation, Geronimo B. De Los Reyes, Jr. and Andrew S. De Los Reyes. In its answer to the amended complaint, Gateway traced the cause of its financial difficulties, described the steps it had taken to address its mounting problem, and faulted Asianbank for trying to undermine its efforts toward recovery. Andrew also filed an answer alleging, among other things, that the deed of suretyship he executed covering the PhP 10 million-Domestic Bills Purchased Line and the USD 3 million-Omnibus Credit Line did not include PN No. FCD-05992749, the payment of which was extended several times without his consent. Geronimo, on the other hand, alleged that the subject deed of suretyship, assuming the authenticity of his signature on it, was signed without his wifes consent and should, thus, be considered as a mere continuing offer. Like Andrew, Geronimo argued that he ought to be relieved of his liability under the surety agreement inasmuch as he too never consented to the repeated loan maturity date extensions given by Asianbank to Gateway.

After due hearing, the RTC rendered judgment dated October 7, 2003[5] in favor of Gateway, the dispositive portion of which states:
WHEREFORE then, in view of the foregoing, judgment is rendered holding defendants Gateway Electronics Corporation, Geronimo De Los Reyes and Andrew De Los Reyes jointly and severally liable to pay the plaintiff the following: a) The sum of $2,235,452.17 United States Currency with interest to be added on at the prevailing market rate over a given thirty day London Interbank Offered Rate (LIBOR) plus a spread of 5.5358 percent or ten and [45,455/100,000] percent per annum for the first 35 days and every thirty days beginning November 23, 1999 until fully paid; b) a penalty charge after November 23, 1999 of two percent (2%) per month until fully paid; c) attorneys fees of twenty percent (20%) of the total amount due and unpaid; and d) costs of the suit. SO ORDERED.

Thereafter, Gateway, Geronimo, and Andrew appealed to the CA, their recourse docketed as CA-G.R. CV No. 80734. Following the filing of its and Geronimos joint appellants brief, Gateway filed on November 10, 2004 a petition for voluntary insolvency[6] with the RTC in Imus, Cavite, Branch 22, docketed as SEC Case No. 037-04, in which Asianbank was listed in the attached Schedule of Obligations as one of the creditors. On March 16, 2005, Metrobank, as successorin-interest of Asianbank, via a Notice of Creditors Claim, prayed that it be allowed to participate in the Gatewayss creditors meeting. In its Decision dated October 28, 2005, the CA affirmed the decision of the Makati City RTC. In time, Gateway and Geronimo interposed a motion for reconsideration. This was followed by a Supplemental Motion for Reconsideration dated January 20, 2006, stating that in SEC Case No. 037-04, the RTC in Imus, Cavite had issued an Order dated December 2, 2004, declaring Gateway insolvent and directing all its creditors to appear before the court on a certain date for the purpose of choosing among themselves the assignee of Gateways es tate which the

courts sheriff has meanwhile placed in custodia legis.[7] Gateway and Geronimo thus prayed that the assailed decision of the Makati City RTC be set aside, the insolvency court having acquired exclusive jurisdiction over the properties of Gateway by virtue of Section 60 of Act No. 1956, without prejudice to Asianbank pursuing its claim in the insolvency proceedings. In its March 17, 2006 Resolution, however, the CA denied the motion for reconsideration and its supplement. Hence, Gateway and Geronimo filed this petition anchored on the following grounds:
I The [CA] erred in disregarding the established rule that an action commenced by a creditor against a judicially declared insolvent for the recovery of his claim should be dismissed and referred to the insolvency court. Where, therefore, as in this case, petitioner GEC [referring to Gateway] has been declared insolvent x x x, respondent Asianbanks claim for the payment of GECs loans should be ventilated before the insolvency court x x x. II The [CA] erred in admitting as evidence the Deed of Surety purportedly signed by petitioner GBR [referring to Geronimo] despite the unexplained failure of respondent Asianbank to present the originals of the Deed of Surety during the trial. III The [CA] erred in holding that the repeated extensions granted by respondent Asianbank to GEC without notice to and the express consent of petitioner GBR did not discharge petitioner GBR from his liabilities as surety GEC in that: A. An extension granted to the debtor by the creditor without the consent of the guarantor extinguishes the guaranty. B. The [CA] interpreted the supposed Deed of Surety of petitioner GBR as too comprehensive and all encompassing as to amount to absurdity.

C. The repeated extensions granted by Asianbank to GEC prevented petitioner GBR from exercising his right of subrogation under Article 2080 of the Civil Code. As such, petitioner GBR should be released from his obligations as surety of GEC. IV It is a well-settled rule that when a bank deviates from normal banking practice in a transaction and sustains injury as a result thereof, the bank is deemed to have assumed the risk and no right of payment accrues to the latter against any party to the transaction. By repeatedly extending the period for the payment of GECs obligations and granting GEC other loans after the suretyship agreement despite GECs d efault and in failing to foreclose the chattel mortgage constituted as security for GECs loan contrary to normal banking practices, Asianbank failed to exercise reasonable caution for its own protection and assumed the risk of non-payment through its own acts, and thus has no right to proceed against petitioner GBR as surety for the payment of GECs loans. V In Agcaoili v. GSIS, this Honorable Court had occasion to state that in determining the precise relief to give, the court will balance the equities or the respective interests of the parties and take into account the relative hardship that one relief or another may occasion to them. Upon a balancing of interests of both petitioner GBR and respondent Asianbank, greater and irreparable harm and injury would be suffered by petitioner GBR than respondent Asianbank if the assailed Decision and Resolution of the [CA] would be upheld x x x. This Honorable Court x x x should thus exercise its equity jurisdiction in the instant case to the end that it may render complete justice to both parties and declare petitioner GBR as released and discharged from any liability in respect of respondent Asianbanks claims.[8]

The Ruling of the Court Gateway May Be Discharged from Liability But Not Geronimo Gateway, having been declared insolvent, argues that jurisdiction over all claims against all of its properties and assets properly pertains to the insolvency court. Accordingly, Gateway adds, citing Sec. 60 of Act No. 1956,[9] as amended, or the Insolvency Law, any pending action against its properties and assets must be

dismissed, the claimant relegated to the insolvency proceedings for the claimants relief. The contention, as formulated, is in a qualified sense meritorious. Under Sec. 18 of Act No. 1956, as couched, the issuance of an order declaring the petitioner insolvent after the insolvency court finds the corresponding petition for insolvency to be meritorious shall stay all pending civil actions against the petitioners property. For reference, said Sec. 18, setting forth the effects and contents of a voluntary insolvency order,[10] pertinently provides:
Section 18. Upon receiving and filing said petition, schedule, and inventory, the court x x x shall make an order declaring the petitioner insolvent, and directing the sheriff of the province or city in which the petition is filed to take possession of, and safely keep, until the appointment of a receiver or assignee, all the deeds, vouchers, books of account, papers, notes, bonds, bills, and securities of the debtor and all his real and personal property, estate and effects x x x. Said order shall further forbid the payment to the creditor of any debts due to him and the delivery to the debtor, or to any person for him, of any property belonging to him, and the transfer of any property by him, and shall further appoint a time and place for a meeting of the creditors to choose an assignee of the estate. Said order shall [be published] x x x. Upon the granting of said order, all civil proceedings pending against the said insolvent shall be stayed. When a receiver is appointed, or an assignee chosen, as provided in this Act, the sheriff shall thereupon deliver to such receiver or assignee, as the case may be all the property, assets, and belongings of the insolvent which have come into his possession x x x. (Emphasis supplied.)

Complementing Sec. 18 which appropriately comes into play upon the granting of [the] order of insolvency is the succeeding Sec. 60 which properly applies to the period after the commencement of proceedings in insolvency. The two provisions may be harmonized as follows: Upon the filing of the petition for insolvency, pending civil actions against the property of the petitioner are not ipso facto stayed, but the insolvent may apply with the court in which the actions are pending for a stay of the actions against the insolvents property. If the court grants such application, pending civil actions against the petitioners property sh all

be stayed; otherwise, they shall continue. Once an order of insolvency nevertheless issues, all civil proceedings against the petitioners property are, by statutory command, automatically stayed. Sec. 60 is reproduced below:
SECTION 60. Creditors proving claims cannot sue; Stay of action.No creditor, proving his debt or claim, shall be allowed to maintain any suit therefor against the debtor, but shall be deemed to have waived all right of action and suit against him, and all proceedings already commenced, or any unsatisfied judgment already obtained thereon, shall be deemed to be discharged and surrendered thereby; and after the debtors discharge, upon proper application and proof to the court having jurisdiction, all such proceedings shall be, dismissed, and such unsatisfied judgments satisfied of record: Provided, x x x. A creditor proving his debt or claim shall not be held to have waived his right of action or suit against the debtor when a discharge has have been refused or the proceedings have been determined to the without a discharge. No creditor whose debt is provable under this Act shall be allowed, after the commencement of proceedings in insolvency, to prosecute to final judgment any action therefor against the debtor until the question of the debtors discharge shall have been determined, and any such suit proceeding shall, upon the application of the debtor or of any creditor, or the assignee, be stayed to await the determination of the court on the question of discharge: Provided, That if the amount due the creditor is in dispute, the suit, by leave of the court in insolvency, may proceed to judgment for purpose of ascertaining the amount due, which amount, when adjudged, may be allowed in the insolvency proceedings, but execution shall be stayed aforesaid. (Emphasis supplied.)

Applying the aforequoted provisions, it can rightfully be said that the issuance of the insolvency order of December 2, 2004 had the effect of automatically staying the civil action for a sum of money filed by Asianbank against Gateway. In net effect, the proceedings before the CA in CA-G.R. CV No. 80734, but only insofar as the claim against Gateway was concerned, was, or ought to have been, suspended after December 2, 2004, Asianbank having been duly notified of and in fact was a participant in the insolvency proceedings. The Court of course takes stock of the proviso in Sec. 60 of Act No. 1956 which in a way provided the CA with a justifying tool to continue and to proceed to judgment in

CA-G.R. CV No. 80734, but only for the purpose of ascertaining the amount due from Gateway. At any event, on the postulate that jurisdiction over the properties of the insolvent-declared Gateway lies with the insolvency court, execution of the CA insolvency judgment against Gateway can only be pursued before the insolvency court. Asianbank, no less, tends to agree to this conclusion when it stated: [E]ven it if is assumed that the declaration of insolvency of petitioner Gateway can be taken cognizance of, such fact does relieve petitioner Geronimo and/or Andrew delos Reyes from performing their obligations based on the Deeds of Suretyship x x x.[11] Geronimo, however, is a different story. Asianbank argues that the stay of the collection suit against Gateway is without bearing on the liability of Geronimo as a surety, adding that claims against a surety may proceed independently from that against the principal debtor. Pursuing the point, Asianbank avers that Geronimo may not invoke the insolvency of Gateway as a defense to evade liability. Geronimo counters with the argument that his liability as a surety cannot be separated from Gateways liability. As surety, he continues, he is entitled to avail himself of all the defenses pertaining to Gateway, including its insolvency, suggesting that if Gateway is eventually released from what it owes Asianbank, he, too, should also be so relieved. Geronimos above contention is untenable. Suretyship is covered by Article 2047 of the Civil Code, which states:
By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so. If a person binds himself solidarily with the principal debtor, the provisions of Section 4, Chapter 3, Title I of this Book shall be observed. In such case the contract is called a suretyship.

The Courts disquisition in Palmares v. Court of Appeals on suretyship is instructive, thus:

A surety is an insurer of the debt, whereas a guarantor is an insurer of the solvency of the debtor. A suretyship is an undertaking that the debt shall be paid x x x. Stated differently, a surety promises to pay the principals debt if the principal will not pay, while a guarantor agrees that the creditor, after proceeding against the principal, may proceed against the guarantor if the principal is unable to pay. A surety binds himself to perform if the principal does not, without regard to his ability to do so. x x x In other words, a surety undertakes directly for the payment and is so responsible at once if the principal debtor makes default x x x. xxxx A creditors right to proceed against the surety exists independently of his right to proceed against the principal. Under Article 1216 of the Civil Code, the creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. The rule, therefore, is that if the obligation is joint and several, the creditor has the right to proceed even against the surety alone. Since, generally, it is not necessary for the creditor to proceed against a principal in order to hold the surety liable, where, by the terms of the contract, the obligation of the surety is the same as that of the principal, then soon as the principal is in default, the surety is likewise in default, and may be sued immediately and before any proceedings are had against the principal. Perforce, x x x a surety is primarily liable, and with the rule that his proper remedy is to pay the debt and pursue the principal for reimbursement, the surety cannot at law, unless permitted by statute and in the absence of any agreement limiting the application of the security, require the creditor or obligee, before proceeding against the surety, to resort to and exhaust his remedies against the principal, particularly where both principal and surety are equally bound.[12]

Clearly, Asianbanks right to collect payment for the full amount from Geronimo, as surety, exists independently of its right against Gateway as principal debtor;[13] it could thus proceed against one of them or file separate actions against them to recover the principal debt covered by the deed on suretyship, subject to the rule prohibiting double recovery from the same cause.[14] This legal postulate

becomes all the more cogent in case of an insolvency situation where, as here, the insolvency court is bereft of jurisdiction over the sureties of the principal debtor. As Asianbank aptly points out, a suit against the surety, insofar as the suretys solidary liability is concerned, is not affected by an insolvency proceeding instituted by or against the principal debtor. The same principle holds true with respect to the surety of a corporation in distress which is subject of a rehabilitation proceeding before the Securities and Exchange Commission (SEC). As we held inCommercial Banking Corporation v. CA, a surety of the distressed corporation can be sued separately to enforce his liability as such, notwithstanding an SEC order declaring the former under a state of suspension of payment.[15] Geronimo also states that, as things stand, his liability, as compared to that of Gateway, is contextually more onerous and burdensome, precluded as he is from seeking recourse against the insolvent corporation. From this premise, Geronimo claims that since Gateway cannot, owing to the order of insolvency, be made to pay its obligation, he, too, being just a surety, cannot also be made to pay, obviously having in mind Art. 2054 of the Civil Code, as follows: A guarantor may bind himself for less, but not for more than the principal debtor, both as regards the amount and the onerous nature of the conditions.
Should he have bound himself for more, his obligations shall be reduced to the limits of that of the debtor.

The Court is not convinced. The above article enunciates the rule that the obligation of a guarantor may be less, but cannot be more than the obligation of the principal debtor. The rule, however, cannot plausibly be stretched to mean that a guarantor or surety is freed from liability as such guarantor or surety in the event the principal debtor becomes insolvent or is unable to pay the obligation. This interpretation would defeat the very essence of a suretyship contract which, by definition, refers to an agreement whereunder one person, the surety, engages to be answerable for the debt, default, or miscarriage of another known as the principal.[16]Geronimos position that a surety cannot be made to pay when the principal is unable to pay is clearly specious and must be rejected. The CA Did Not Err in Admitting

the Deed of Suretyship as Evidence Going to the next ground, Geronimo maintains that the CA erred in admitting the Deed of Suretyship purportedly signed by him, given that Asianbank failed to present its original copy. This contention is bereft of merit. As may be noted, paragraph 6 of Asianbanks complaint alleged the following:
6. The loan was secured by the Deeds of Suretyship dated July 23, 1996 that were executed by defendants Geronimo B. De Los Reyes, Jr. and Andrew S. De Los Reyes. Attached as Annexes B and C, respectively, are photocopies of the Deeds of Suretyship executed by defendants Geronimo B. De Los Reyes, Jr. and Andrew S. De Los Reyes. Subsequently, a chattel mortgage over defendant Gateways equipment for $2 million, United States currency, was executed.[17]

Geronimo traversed in his answer the foregoing allegation in the following wise: 2.5. Paragraph 6 is denied, subject to the special and affirmative defenses and allegations hereinafter set forth. The ensuing special and affirmative defenses were raised in Gateways answer:
15. Granting even that [Geronimo] signed the Deed of Suretyship, his wife x x x had not given her consent thereto. Accordingly, the security created by the suretyship shall be construed only as a continuing offer on the part of [Geronimo] and plaintiff and may only be perfected as a binding contract upon acceptance by Mrs. Delos Reyes. x x x 17. Moreover, assuming, gratia argumenti, that [Geronimo] may be bound by the suretyship agreement, there is no showing that he has consented to the repeated extensions made by plaintiff in favor of GEC or to a waiver of notice of such extensions. It should be pointed out that Mr. Geronimo delos Reyes executed the suretyship agreement in his

personal capacity and not in his capacity as Chairman of the Board of GEC. His consent, insofar as the continuing application of the suretyship agreement to GECs obligations in view of the repeated extension extended by plaintiff [is concerned], is therefore necessary. Obviously, plaintiff cannot now hold him liable as a surety to GECs obligations.[18]

The Rules of Court prescribes, under its Secs. 7 and 8, Rule 8, the procedure should a suit or defense is predicated on a written document, thus:
Sec. 7. Action or defense based on document.Whenever an action or defense is based upon a written instrument or document, the substance of such instrument or document shall be set forth in the pleading, and the original or a copy thereof shall be attached to the pleading as an exhibit, which shall be deemed to be a part of the pleading, or said copy may with like effect be set forth in the pleading. Sec. 8. How to contest such documents.When an action or defense is founded upon a written instrument, copied in or attached to the corresponding pleading as provided in the preceding section, the genuineness and due execution of the instrument shall be deemed admitted unless the adverse party, under oath, specifically denies them, and sets forth what he claims to be the facts ; but the requirement of an oath does not apply when the adverse party does not appear to be a party to the instrument or when compliance with an order for an inspection of the original instrument is refused. (Emphasis supplied.)

Given the above perspective, Asianbank, by attaching a photocopy of the Deed of Suretyship to its underlying complaint, hewed to the requirements of the above twin provisions. Asianbank, thus, effectively alleged the due execution and genuineness of the said deed. From that point, Geronimo, if he intended to contest the surety deed, should have specifically denied the due execution and genuineness of the deed in the manner provided by Sec. 10, Rule 8 of the Rules of Court, thus:
Sec. 10. Specific denial.A defendant must specify each material allegation of fact the truth of which he does not admit and, whenever practicable, shall set forth the substance of the matters upon which he relies to support his denial. Where a defendant desires

to deny only a part of an averment, he shall specify so much of it as is true and material and shall deny only the remainder. Where a defendant is without knowledge or information sufficient to form a belief as to the truth of a material averment made in the complaint, he shall so state, and this shall have the effect of a denial. (Emphasis supplied.)

In the instant case, Geronimo should have categorically stated that he did not execute the Deed of Suretyship and that the signature appearing on it was not his or was falsified. His Answer does not, however, contain any such statement. Necessarily then, Geronimo had not specifically denied, and, thus, is deemed to have admitted, the genuineness and due execution of the deed in question. In this regard, Sec. 11, Rule 8 of the Rules of Court states:
Sec. 11. Allegations not specifically denied deemed admitted. Material averment in the complaint, other than those as to the amount of unliquidated damages, shall be deemed admitted when not specifically denied. x x x

Owing to Geronimos virtual admission of the genuineness and due execution of the deed of suretyship, Asianbank, contrary to the view of Gateway and Geronimo, need not present the original of the deed during the hearings of the case. Sec. 4, Rule 129 of the Rules says so: Sec. 4. Judicial admissions.An admission, verbal or written, made by the party in the course of the proceedings in the same case, does not require proof. The admission may be contradicted only by showing that it was made through palpable mistake or that no such admission was made. (Emphasis supplied.)

Geronimo Is Liable for PN No. FCD-0599-2749 under His Deed of Suretyship This brings us to the third ground which involves the issue of the coverage of the suretyship. Preliminarily, an overview on the process of taking out loans should first be made. Generally, especially for large loans, banks first approve a line or facility out of which a client may avail itself of loans in the form of promissory notes without need of further processing and/or approval every time a

draw down is made. In the instant case, Asianbank approved in favor of Gateway the PhP 10 million-Domestic Bills Purchased Line and the USD 3 millionOmnibus Credit Line. Asianbank approved these credit lines which were covered by a chattel mortgage as well as the deeds of suretyship, such that loans extended from these lines would already be secured and pre-approved. In other words, these facilities are not financial obligations yet. Asianbank did not yet lend out any money to Gateway with the approval of these lines. The loan transaction occurred or the principal obligation, as secured by a surety agreement, was born after the execution of loan documents, such as PN No. FCD-0599-2749. Geronimo now excepts from the ruling that the deed of suretyship he executed covered PN No. FCD-0599-2749 which embodied several export packing loans issued by Asianbank to Gateway. He claims that the deed only secured the PhP 10 million-Domestic Bills Purchased Line and the USD 3 million-Omnibus Credit Line. Geronimo describes as absurd the notion that a deed of suretyship would secure a loan obligation contracted three (3) years after the execution of the surety deed. Geronimos thesis that the deed in question cannot be accorded prospective application is erroneous. To be sure, the provisions of the subject deed of suretyship indicate a continuing suretyship. In Fortune Motors (Phils.) v. Court of Appeals,[19] the Court, citing cases, defined and upheld the validity of a continuing suretyship in this wise:
x x x Of course, a surety is not bound under any particular principal obligation until that principal obligation is born. But there is no theoretical or doctrinal difficulty inherent in saying that the suretyship agreement itself is valid and binding even before the principal obligation intended to be secured thereby is born, any more than there would be in saying that obligations which are subject to a condition precedent are valid and binding before the occurrence of the condition precedent. Comprehensive or continuing surety agreements are in fact quite commonplace in present day financial and commercial practice. A bank or financing company which anticipates entering into a series of credit

transactions with a particular company, commonly requires the projected principal debtor to execute a continuing surety agreement along with its sureties. By executing such an agreement, the principal places itself in a position to enter into the projected series of transactions with its creditor; with such suretyship agreement, there would be no need to execute a separate surety contract or bond for each financing or credit accommodation extended to the principal debtor.[20] In Dio vs. Court of Appeals,[21] we again had occasion to discourse on continuing guaranty/suretyship thus: x x x A continuing guaranty is one which is not limited to a single transaction, but which contemplates a future course of dealing, covering a series of transactions, generally for an indefinite time or until revoked. It is prospective in its operation and is generally intended to provide security with respect to future transactions within certain limits, and contemplates a succession of liabilities, for which, as they accrue, the guarantor becomes liable. Otherwise stated, a continuing guaranty is one which covers all transactions, including those arising in the future, which are within the description or contemplation of the contract, of guaranty, until the expiration or termination thereof. A guaranty shall be construed as continuing when by the terms thereof it is evident that the object is to give a standing credit to the principal debtor to be used from time to time either indefinitely or until a certain period x x x. In other jurisdictions, it has been held that the use of particular words and expressions such as payment of any debt, any indebtedness, any deficiency, or any sum, or the guaranty of any transaction or money to be furnished the principal debtor at any time, or on such time that the principal debtor may require, have been construed to indicate a continuing guaranty. (Emphasis supplied.)

By its nature, a continuing suretyship covers current and future loans, provided that, with respect to future loan transactions, they are, to borrow from Dio, as cited above, within the description or contemplation of the contract of guaranty. The Deed of Suretyship Geronimo signed envisaged a continuing suretyship when, by the express terms of the deed, he warranted payment of the PhP 10 million-Domestic Bills Purchased Line and the USD 3 million-Omnibus Credit Line, as evidenced by:
x x x notes, drafts, overdrafts and other credit obligations on which the DEBTOR(S) may now be indebted or may hereafter become indebted to the CREDITOR, together with all interests, penalty and other bank charges as may accrue thereon and all expenses which may be incurred by the latter in collecting any or all such instruments.[22]

Evidently, under the deed of suretyship, Geronimo undertook to secure all obligations obtained under the Domestic Bills Purchased Line and Omnibus Credit Line, without any specification as to the period of the loan. Geronimos application of Garcia v. Court of Appeals, a case covering two separate loans, denominated as SWAP Loan and Export Loan, is quite misplaced. There, the Court ruled that the continuing suretyship only covered the SWAP Loan as it was only this loan that was referred to in the continuing suretyship. The Court wrote in Garcia:
Particular attention must be paid to the statement appearing on the face of the Indemnity [Suretyship] Agreement x x x evidenced by those certain loan documents dated April 20, 1982x x x. From this statement, it is clear that the Indemnity Agreement refers only to the loan document of April 20, 1982 which is the SWAP loan. It did not include the EXPORT loan. Hence, petitioner cannot be held answerable for the EXPORT loan.[23] (Emphasis supplied.)

The Indemnity Agreement in Garcia specifically identified loan documents evidencing obligations of the debtor that the agreement was intended to secure. In the present case, however, the suretyship Geronimo assumed did not limit itself to a specific loan document to the exclusion of another. The suretyship document

merely mentioned the Domestic Bills Purchased Line and Omnibus Credit Line as evidenced by all notes, drafts x x x contracted/incurred by [Gateway] in favor of [Asianbank].[24] As explained earlier, such credit facilities are not loans by themselves. Thus, the Deed of Suretyship was intended to secure future loans for which these facilities were opened in the first place. Lest it be overlooked, both the trial and appellate courts found the Omnibus Credit Line referred to in the Deed of Suretyship as covering the export packing credit loans Asianbank extended to Gateway. We agree with this factual determination. By the very use of the term omnibus, and in practice, an omnibus credit line refers to a credit facility whence a borrower may avail of various kinds of credit loans. Defined as such, an omnibus line is broad enough to refer to or cover an export packing credit loan. Geronimos allegation that an export packing credit loan is separate and distinct from an omnibus credit line is but a bare and self-serving assertion bereft of any factual or legal basis. One who alleges something must prove it: a mere allegation is not evidence.[25] Geronimo has not discharged his burden of proof. His contention cannot be given any weight. As a final and major ground for his release as surety, Geronimo alleges that Asianbank repeatedly extended the maturity dates of the obligations of Gateway without his knowledge and consent. Pressing this point, he avers that, contrary to the findings of the CA, he did not waive his right to notice of extensions of Gateways obligations. Such contention is unacceptable as it glosses over the fact that the waiver to be notified of extensions is embedded in surety document itself, built in the ensuing provision:
In case of default by any and/or all of the DEBTOR(S) to pay the whole part of said indebtedness herein secured at maturity, I/WE jointly and severally, agree and engage to the CREDITOR, its successors and assigns, the prompt payment, without demand or notice from said CREDITOR of such notes, drafts, overdrafts and other credit obligations on which the DEBTOR(S) may now be indebted or may

hereafter become indebted to the CREDITOR, together with all interests, penalty and other bank charges as may accrue thereon and all expenses which may be incurred by the latter in collecting any or all such instruments.[26] (Emphasis supplied.)

In light of the above provision, Geronimo verily waived his right to notice of the maturity of notes, drafts, overdraft, and other credit obligations for which Gateway shall become indebted. This waiver necessarily includes new agreements resulting from the novation of previous agreements due to changes in their maturity dates. Additionally, Geronimos lament about losing his right to subrogation is erroneous. He argues that by virtue of the order of insolvency issued by the insolvency court, title and right to possession to all the properties and assets of Gateway were vested upon Gateways assignee in accordance with Sec. 32 of the Insolvency Law. The transfer of Gateways property to the insolvency assignee, if this be the case, does not negate Geronimos right of subrogation, for such right may b e had or exercised in the insolvency proceedings. The possibility that he may only recover a portion of the amount he is liable to pay is the risk he assumed as a surety of Gateway. Such loss does not, however, render ineffectual, let alone invalidate, his suretyship. Geronimos other arguments to escape liability are puerile and really partake more of a plea for liberality. They need not detain us long. In gist, Geronimo argues:first, that he is a gratuitous surety of Gateway; second, Asianbank deviated from normal banking practice, such as when it extended the period for payment of Gateways obligation and when it opted not to foreclose the chattel mortgage constituted as guarantee of Gateways loan obligation; and third, implementing the appealed CAs decision would cause him great harm and injury. Anent the first argument, suffice it to state that Geronimo was then the president of Gateway and, as such, was benefited, albeit perhaps indirectly, by the loan thus granted by Asianbank. And as we said in Security Pacific Assurance

Corporation, the surety is liable for the debt of another although the surety possesses no direct or personal interest over the obligation nor does the surety receive any benefit from it.[27] Whether or not Asianbank really deviated from normal banking practice by extending the period for Gateway to comply with its loan obligation or by not going after the chattel mortgage adverted to is really of no moment. Banks are primarily in the business of extending loans and earn income from their lending operations by way of service and interest charges. This is why Asianbank opted to give Gateway ample opportunity to pay its obligations instead of foreclosing the chattel mortgage and in the process holding on to assets of which the bank has really no direct use. The following excerpts from Palmares are in point:
We agree with respondent corporation that its mere failure to immediately sue petitioner on her obligation does not release her from liability. Where a creditor refrains from proceeding against the principal, the surety is not exonerated. In other words, mere want of diligence or forbearance does not affect the creditors righ ts vis--vis the surety, unless the surety requires him by appropriate notice to sue on the obligation. Such gratuitous indulgence of the principal does not discharge the surety whether given at the principals request or without it, and whether it is yielded by the creditor through sympathy or from an inclination to favor the principal x x x. The neglect of the creditor to sue the principal at the time the debt falls due does not discharge the surety, even if such delay continues until the principal becomes insolvent. And, in the absence of proof of resultant injury, a surety is not discharged by the creditors mere statement that the creditor will not look to the surety, or that he need not trouble himself. The consequences of the delay, such as the subsequent insolvency of the principal, or the fact that the remedies against the principal may be lost by lapse of time, are immaterial.[28]

The Courts Equity Jurisdiction Finds No Application to the Instant Case

Geronimo urges the Court to release and discharge him from any liability arising from Asianbanks claims if what he terms as complete justice is to be served. He cites, as supporting reference, Agcaoili v. GSIS,[29] presenting in the same breath the following arguments: first, the Deed of Suretyship is a gratuitous contract from which he did not benefit; second, Asianbank assured him that the deed would not be enforced against him; third, the enforcement of the judgment of the CA would reduce Geronimo and his family to a life of penury; and fourth, Geronimo would be unable to exercise his right of subrogation, Gateway having already been declared as insolvent. The first and last arguments have already been addressed and found to be without merit. The second argument is a matter of defense which has remained unproved and even belied by Asianbank by its filing of the complaint. We see no need to further belabor any of them. As regards the third allegation, suffice it to state that the predicament Geronimo finds himself in is his very own doing. His misfortune is but the result of the implementation of a bona fide contract he freely executed, the terms of which he is presumed to have thoroughly examined. He was not at all compelled to act as surety; he had a choice. It may be more offensive to public policy or good customs if he be allowed to go back on his undertaking under the surety contract. The Court cannot be a party to the contracts impairment and relieve a surety from the effects of an unwise but nonetheless a valid surety contract. WHEREFORE, the instant petition is hereby DENIED. The appealed Decision dated October 28, 2005 of the CA and its March 17, 2006 Resolution in CA-G.R. CV No. 80734 are hereby AFFIRMED with the modification that any claim of Asianbank or its successor-in-interest against Gateway, if any, arising from the judgment in this suit shall be pursued before the RTC, Branch 22 in Imus, Cavite as the insolvency court. Costs against petitioners. SO ORDERED.
Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

ILEANA DR. MACALINAO, Petitioner,

G.R. No. 175490

Present: - versus YNARES-SANTIAGO, J., Chairperson, BANK OF THE PHILIPPINEISLANDS, Respondent. CHICO-NAZARIO, VELASCO, JR., NACHURA, and . PERALTA, JJ.

Promulgated:

September 17, 2009 x-----------------------------------------------------------------------------------------x

DECISION

VELASCO, JR., J.:

The Case Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to reverse and set aside the June 30, 2006 Decision[1] of the Court of Appeals (CA) and its November 21, 2006 Resolution[2] denying petitioners motion for reconsideration. The Facts Petitioner Ileana Macalinao was an approved cardholder of BPI Mastercard, one of the credit card facilities of respondent Bank of the Philippine Islands (BPI).[3] Petitioner Macalinao made some purchases through the use of the said credit card and defaulted in paying for said purchases. She subsequently received a letter dated January 5, 2004 from respondent BPI, demanding payment of the amount of one hundred forty-one thousand five hundred eighteen pesos and thirty-four centavos (PhP 141,518.34), as follows:
Statement Date 10/27/2002 11/27/2002 12/31/2002 1/27/2003 Previous Balance 94,843.70 98,465.41 86,351.02 119,752.28 Purchases (Payments) (15,000) 30,308.80 Penalty Interest 559.72 0 259.05 618.23 Finance Charges 3,061.99 2,885.61 2,806.41 3,891.07 Balance Due 98,456.41 86,351.02 119,752.28 124,234.58

2/27/2003 3/27/2003 4/27/2003 5/27/2003 6/29/2003 7/27/2003 8/27/2003 9/28/2003 10/28/2003 11/28/2003 12/28/2003 1/27/2004

124,234.58 129,263.13 115,177.90 119,565.44 113,540.10 118,833.49 123,375.65 128,435.56

(18,000.00) (10,000.00) 8,362.50 (7,000.00)

990.93 298.72 644.26 402.95 323.57 608.07 1,050.20 1,435.51

4,037.62 3,616.05 3,743.28 3,571.71 3,607.32 3,862.09 4,009.71 4,174.16

129,263.13 115,177.90 119,565.44 113,540.10 118,833.49 123,375.65 128,435.56 134,045.23

141,518.34

8,491.10

4,599.34

154,608.78

Under the Terms and Conditions Governing the Issuance and Use of the BPI Credit and BPI Mastercard, the charges or balance thereof remaining unpaid after the payment due date indicated on the monthly Statement of Accounts shall bear interest at the rate of 3% per month and an additional penalty fee equivalent to another 3% per month. Particularly:
8. PAYMENT OF CHARGES BCC shall furnish the Cardholder a monthly Statement of Account (SOA) and the Cardholder agrees that all charges made through the use of the CARD shall be paid by the Cardholder as stated in the SOA on or before the last day for payment, which is twenty (20) days from the date of the said SOA, and such payment due date may be changed to an earlier date if the Cardholders account is considered overdue and/or with balances in excess of the approved credit limit, or to such other date as may be deemed proper by the CARD issuer with notice to the Cardholder on the same monthly SOA. If the last day fall on a Saturday, Sunday or a holiday, the last day for the payment automatically becomes the last working day prior to said payment date. However, notwithstanding the absence or lack of proof of service of the SOA of the Cardholder, the latter shall pay any and all charges made through the use of the CARD within thirty (30) days from date or dates thereof. Failure of the Cardholder to pay the charges made through the CARD within the payment period as stated in the SOA or within thirty (30) days from actual date or dates of purchase whichever occur earlier, shall render him in default without the necessity of demand from BCC, which the Cardholder expressly waives. The charges or balance thereof remaining unpaid after the payment due date indicated on the monthly Statement of

Accounts shall bear interest at the rate of 3% per month for BPI Express Credit, BPI Gold Mastercard and an additional penalty fee equivalent to another 3% of the amount due for every month or a fraction of a months delay. PROVIDED that if there occurs any change on the prevailing market rates, BCC shall have the option to adjust the rate of interest and/or penalty fee due on the outstanding obligation with prior notice to the cardholder. The Cardholder hereby authorizes BCC to correspondingly increase the rate of such interest [in] the event of changes in the prevailing market rates, and to charge additional service fees as may be deemed necessary in order to maintain its service to the Cardholder. A CARD with outstanding balance unpaid after thirty (30) days from original billing statement date shall automatically be suspended, and those with accounts unpaid after ninety (90) days from said original billing/statement date shall automatically be cancel (sic), without prejudice to BCCs right to suspend or cancel any card anytime and for whatever reason. In case of default in his obligation as provided herein, Cardholder shall surrender his/her card to BCC and in addition to the interest and penalty charges aforementioned , pay the following liquidated damages and/or fees (a) a collection fee of 25% of the amount due if the account is referred to a collection agency or attorney; (b) service fee for every dishonored check issued by the cardholder in payment of his account without prejudice, however, to BCCs right of considering Cardholders account, and (c) a final fee equivalent to 25% of the unpaid balance, exclusive of litigation expenses and judicial cost, if the payment of the account is enforced though court action. Venue of all civil suits to enforce this Agreement or any other suit directly or indirectly arising from the relationship between the parties as established herein, whether arising from crimes, negligence or breach thereof, shall be in the process of courts of the City of Makati or in other courts at the option of BCC.[4] (Emphasis supplied.)

For failure of petitioner Macalinao to settle her obligations, respondent BPI filed with the Metropolitan Trial Court (MeTC) of Makati City a complaint for a sum of money against her and her husband, Danilo SJ. Macalinao. This was raffled to Branch 66 of the MeTC and was docketed as Civil Case No. 84462 entitled Bank of the Philippine Islands vs. Spouses Ileana Dr. Macalinao and Danilo SJ. Macalinao.[5] In said complaint, respondent BPI prayed for the payment of the amount of one hundred fifty-four thousand six hundred eight pesos and seventy-eight centavos (PhP 154,608.78) plus 3.25% finance charges and late

payment charges equivalent to 6% of the amount due from February 29, 2004 and an amount equivalent to 25% of the total amount due as attorneys fees, and of the cost of suit.[6] After the summons and a copy of the complaint were served upon petitioner Macalinao and her husband, they failed to file their Answer.[7] Thus, respondent BPI moved that judgment be rendered in accordance with Section 6 of the Rule on Summary Procedure.[8] This was granted in an Order dated June 16, 2004.[9] Thereafter, respondent BPI submitted its documentary evidence.[10] In its Decision dated August 2, 2004, the MeTC ruled in favor of respondent BPI and ordered petitioner Macalinao and her husband to pay the amount of PhP 141,518.34 plus interest and penalty charges of 2% per month, to wit:
WHEREFORE, finding merit in the allegations of the complaint supported by documentary evidence, judgment is hereby rendered in favor of the plaintiff, Bank of the Philippine Islands and against defendant-spouses Ileana DR Macalinao and Danilo SJ Macalinao by ordering the latter to pay the former jointly and severally the following:

1. The amount of PESOS: ONE HUNDRED FORTY ONE THOUSAND FIVE HUNDRED EIGHTEEN AND 34/100 (P141,518.34) plus interest and penalty charges of 2% per month from January 05, 2004 until fully paid; 2. P10,000.00 as and by way of attorneys fees; and 3. Cost of suit. SO ORDERED.[11]

Only petitioner Macalinao and her husband appealed to the Regional Trial Court (RTC) of Makati City, their recourse docketed as Civil Case No. 04-

1153. In its Decision dated October 14, 2004, the RTC affirmed in toto the decision of the MeTC and held:
In any event, the sum of P141,518.34 adjudged by the trial court appeared to be the result of a recomputation at the reduced rate of 2% per month. Note that the total amount sought by the plaintiff-appellee was P154,608.75 exclusive of finance charge of 3.25% per month and late payment charge of 6% per month. WHEREFORE, the appealed decision is hereby affirmed in toto. No pronouncement as to costs. SO ORDERED.[12]

Unconvinced, petitioner Macalinao filed a petition for review with the CA, which was docketed as CA-G.R. SP No. 92031. The CA affirmed with modification the Decision of the RTC:
WHEREFORE, the appealed decision is AFFIRMED but MODIFIED with respect to the total amount due and interest rate. Accordingly, petitioners are jointly and severally ordered to pay respondent Bank of the Philippine Islands the following:

1. The amount of One Hundred Twenty Six Thousand Seven Hundred Six Pesos and Seventy Centavos plus interest and penalty charges of 3% per month from January 5, 2004 until fully paid; 2. P10,000.00 as and by way of attorneys fees; and 3. Cost of Suit. SO ORDERED.[13]

Although sued jointly with her husband, petitioner Macalinao was the only one who filed the petition before the CA since her husband already passed away on October 18, 2005.[14]

In its assailed decision, the CA held that the amount of PhP 141,518.34 (the amount sought to be satisfied in the demand letter of respondent BPI) is clearly not the result of the re-computation at the reduced interest rate as previous higher interest rates were already incorporated in the said amount. Thus, the said amount should not be made as basis in computing the total obligation of petitioner Macalinao. Further, the CA also emphasized that respondent BPI should not compound the interest in the instant case absent a stipulation to that effect. The CA also held, however, that the MeTC erred in modifying the amount of interest rate from 3% monthly to only 2% considering that petitioner Macalinao freely availed herself of the credit card facility offered by respondent BPI to the general public. It explained that contracts of adhesion are not invalid per se and are not entirely prohibited. Petitioner Macalinaos motion for reconsideration was denied by the CA in its Resolution dated November 21, 2006. Hence, petitioner Macalinao is now before this Court with the following assigned errors:
I.

THE REDUCTION OF INTEREST RATE, FROM 9.25% TO 2%, SHOULD BE UPHELD SINCE THE STIPULATED RATE OF INTEREST WAS UNCONSCIONABLE AND INIQUITOUS, AND THUS ILLEGAL.

II.

THE COURT OF APPEALS ARBITRARILY MODIFIED THE REDUCED RATE OF INTEREST FROM 2% TO 3%, CONTRARY TO THE TENOR OF ITS OWN DECISION.

III.

THE COURT A QUO, INSTEAD OF PROCEEDING WITH A RECOMPUTATION, SHOULD HAVE DISMISSED THE CASE FOR FAILURE OF RESPONDENT BPI TO PROVE THE CORRECT AMOUNT OF PETITIONERS OBLIGATION, OR IN THE ALTERNATIVE, REMANDED THE

CASE TO THE LOWER COURT FOR RESPONDENT BPI TO PRESENT PROOF OF THE CORRECT AMOUNT THEREOF.

Our Ruling The petition is partly meritorious. The Interest Rate and Penalty Charge of 3% Per Month or 36% Per Annum Should Be Reduced to 2% Per Month or 24% Per Annum In its Complaint, respondent BPI originally imposed the interest and penalty charges at the rate of 9.25% per month or 111% per annum. This was declared as unconscionable by the lower courts for being clearly excessive, and was thus reduced to 2% per month or 24% per annum. On appeal, the CA modified the rate of interest and penalty charge and increased them to 3% per month or 36% per annum based on the Terms and Conditions Governing the Issuance and Use of the BPI Credit Card, which governs the transaction between petitioner Macalinao and respondent BPI. In the instant petition, Macalinao claims that the interest rate and penalty charge of 3% per month imposed by the CA is iniquitous as the same translates to 36% per annum or thrice the legal rate of interest.[15] On the other hand, respondent BPI asserts that said interest rate and penalty charge are reasonable as the same are based on the Terms and Conditions Governing the Issuance and Use of the BPI Credit Card.[16] We find for petitioner. We are of the opinion that the interest rate and penalty charge of 3% per month should be equitably reduced to 2% per month or 24% per annum. Indeed, in the Terms and Conditions Governing the Issuance and Use of the BPI Credit Card, there was a stipulation on the 3% interest rate. Nevertheless, it should be noted that this is not the first time that this Court has considered the

interest rate of 36% per annum as excessive and unconscionable. We held in Chua vs. Timan:[17]
The stipulated interest rates of 7% and 5% per month imposed on respondents loans must be equitably reduced to 1% per month or 12% per annum. We need not unsettle the principle we had affirmed in a plethora of cases that stipulated interest rates of 3% per month and higher are excessive, iniquitous, unconscionable and exorbitant. Such stipulations are void for being contrary to morals, if not against the law. While C.B. Circular No. 905-82, which took effect on January 1, 1983, effectively removed the ceiling on interest rates for both secured and unsecured loans, regardless of maturity, nothing in the said circular could possibly be read as granting carte blanche authority to lenders to raise interest rates to levels which would either enslave their borrowers or lead to a hemorrhaging of their assets. (Emphasis supplied.)

Since the stipulation on the interest rate is void, it is as if there was no express contract thereon. Hence, courts may reduce the interest rate as reason and equity demand.[18] The same is true with respect to the penalty charge. Notably, under the Terms and Conditions Governing the Issuance and Use of the BPI Credit Card, it was also stated therein that respondent BPI shall impose an additional penalty charge of 3% per month. Pertinently, Article 1229 of the Civil Code states:
Art. 1229. The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. Even if there has been no performance, the penalty may also be reduced by the courts if it is iniquitous or unconscionable.

In exercising this power to determine what is iniquitous and unconscionable, courts must consider the circumstances of each case since what may be iniquitous and unconscionable in one may be totally just and equitable in another.[19]

In the instant case, the records would reveal that petitioner Macalinao made partial payments to respondent BPI, as indicated in her Billing Statements.[20] Further, the stipulated penalty charge of 3% per month or 36% per annum, in addition to regular interests, is indeed iniquitous and unconscionable. Thus, under the circumstances, the Court finds it equitable to reduce the interest rate pegged by the CA at 1.5% monthly to 1% monthly and penalty charge fixed by the CA at 1.5% monthly to 1% monthly or a total of 2% per month or 24% per annum in line with the prevailing jurisprudence and in accordance with Art. 1229 of the Civil Code.

There Is No Basis for the Dismissal of the Case, Much Less a Remand of the Same for Further Reception of Evidence

Petitioner Macalinao claims that the basis of the re-computation of the CA, that is, the amount of PhP 94,843.70 stated on the October 27, 2002 Statement of Account, was not the amount of the principal obligation. Thus, this allegedly necessitates a re-examination of the evidence presented by the parties. For this reason, petitioner Macalinao further contends that the dismissal of the case or its remand to the lower court would be a more appropriate disposition of the case. Such contention is untenable. Based on the records, the summons and a copy of the complaint were served upon petitioner Macalinao and her husband on May 4, 2004. Nevertheless, they failed to file their Answer despite such service. Thus, respondent BPI moved that judgment be rendered accordingly.[21] Consequently, a decision was rendered by the MeTC on the basis of the evidence submitted by respondent BPI. This is in consonance with Sec. 6 of the Revised Rule on Summary Procedure, which states:

Sec. 6. Effect of failure to answer. Should the defendant fail to answer the complaint within the period above provided, the court, motu proprio, or on motion of the plaintiff, shall render judgment as may be warranted by the facts alleged in the complaint and limited to what is prayed for therein: Provided, however, that the court may in its discretion reduce the amount of damages and attorneys fees claimed for being excessive or otherwise unconscionable. This is without prejudice to the applicability of Section 3(c), Rule 10 of the Rules of Court, if there are two or more defendants. (As amended by the 1997 Rules of Civil Procedure; emphasis supplied.)

Considering the foregoing rule, respondent BPI should not be made to suffer for petitioner Macalinaos failure to file an answer and concomitantly, to allow the latter to submit additional evidence by dismissing or remanding the case for further reception of evidence. Significantly, petitioner Macalinao herself admitted the existence of her obligation to respondent BPI, albeit with reservation as to the principal amount. Thus, a dismissal of the case would cause great injustice to respondent BPI. Similarly, a remand of the case for further reception of evidence would unduly prolong the proceedings of the instant case and render inutile the proceedings conducted before the lower courts. Significantly, the CA correctly used the beginning balance of PhP 94,843.70 as basis for the re-computation of the interest considering that this was the first amount which appeared on the Statement of Account of petitioner Macalinao. There is no other amount on which the re-computation could be based, as can be gathered from the evidence on record. Furthermore, barring a showing that the factual findings complained of are totally devoid of support in the record or that they are so glaringly erroneous as to constitute serious abuse of discretion, such findings must stand, for this Court is not expected or required to examine or contrast the evidence submitted by the parties.[22] In view of the ruling that only 1% monthly interest and 1% penalty charge can be applied to the beginning balance of PhP 94,843.70, this Court finds the following computation more appropriate:

Stateme nt Date

Previous Balance

Purchas es (Paymen ts)

Balance

Interest (1%)

Penalty Charge (1%)

10/27/20 02 11/27/20 02 12/31/20 02 1/27/200 3 2/27/200 3 3/27/200 3 4/27/200 3 5/27/200 3 6/29/200 3 7/27/200 3 8/27/200 3 9/28/200 3 10/28/20 03 11/28/20 03 12/28/20 03 1/27/200 4

94,843.7 0 94,843.7 0 79,843.7 0 110,152. 50 110,152. 50 110,152. 50 92,152.5 0 92,152.5 0 82,152.5 0 83,515.0 0 83,515.0 0 83,515.0 0 83,515.0 0 83,515.0 0 83,515.0 0 83,515.0 0

(15,000) 30,308.8 0

94,843.7 0 79,843.7 0 110,152. 50 110,152. 50 110,152. 50 92,152.5 0 92,152.5 0 82,152.5 0 83,515.0 0 83,515.0 0 83,515.0 0 83,515.0 0 83,515.0 0 83,515.0 0 83,515.0 0 83,515.0 0

948.44 798.44 1,101.5 3 1,101.5 3 1,101.5 3 921.53 921.53 821.53 835.15

948.44 798.44 1,101.5 3 1,101.5 3 1,101.5 3 921.53 921.53 821.53 835.15

Total Amount Due for the Month 96,740.5 8 81,440.5 8 112,355. 56 112,355. 56 112,355. 56 93,995.5 6 93,995.5 6 83,795.5 6 85,185.3 0 85,185.3 0 85,185.3 0 85,185.3 0 85,185.3 0 85,185.3 0 85,185.3 0 85,185.3 0

(18,000. 00)

(10,000. 00) 8,362.50 (7,000.0 0)

835.15 835.15 835.15 835.15 835.15 835.15 835.15

835.15 835.15 835.15 835.15 835.15 835.15 835.15

TOTAL

83,515.0 0

14,397. 26

14,397. 26

112,309. 52

WHEREFORE, the petition is PARTLY GRANTED. The CA Decision dated June 30, 2006 in CA-G.R. SP No. 92031 is hereby MODIFIED with respect to the total amount due, interest rate, and penalty charge. Accordingly, petitioner Macalinao is ordered to pay respondent BPI the following:

(1) The amount of one hundred twelve thousand three hundred nine pesos and fifty-two centavos (PhP 112,309.52) plus interest and penalty charges of 2% per month from January 5, 2004 until fully paid;

(2) PhP 10,000 as and by way of attorneys fees; and

(3) Cost of suit.

SO ORDERED.