G.R. No.

110668 February 6, 1997

SMITH, BELL & CO., INC., petitioner,
vs.
COURT OF APPEALS and JOSEPH BENGZON CHUA, 1 respondents.

PANGANIBAN, J.:
The main issue raised in this case is whether a local claim or settling agent is personally and/or solidarily liable upon
a marine insurance policy issued by its disclosed foreign principal.
The Facts
The undisputed facts of the case have been succintly (sic) summarized by the lower court(,) as follows:
. . . in July 1982, the plaintiffs bought and imported to the Philippines from the Taiwan, 50 metric tons of
Dicalcium Phosphate, Feed Grade F-15% valued at US$13,000.00 CIF Manila. These were contained in
1,250 bags and shipped from the Port of Kaohsiung, Taiwan on Board S.S. "GOLDEN WEALTH" for the
Port on Manila. On July 27, 1982, this shipment was insured by the defendant First Insurance Co. for
US$19,500.00 "against all risks" at port of departure under Marine Policy No. 1000M82070033219, with
the note "Claim, if any, payable in U.S. currency at Manila (Exh. "1", 'D" for the plaintiff) and with
defendant Smith, Bell, and Co. stamped at the lower left side of the policy as "Claim Agent."
The cargo arrived at the Port of Manila on September 1, 1982 aboard the above-mentioned carrying vessel and
landed at port on September 2, 1982. Thereafter, the entire cargo was discharged to the local arrastre contractor,
Metroport Services Inc. with a number of the cargo in apparent bad order condition. On September 27, 1982,
the plaintiff secured the services of a cargo surveyor to conduct a survey of the damaged cargo which were (sic)
delivered by plaintiff's broker on said date to the plaintiffs premises at 12th Avenue, Grace Park, Caloocan City. The
surveyor's report showed that of the 1,250 bags of the imported material, 600 were damaged by tearing at the
sides of the container bags and the contents partly empty. Upon weighing, the contents of the damaged bags
were found to be 18,546.0 kg short. Accordingly, on October 16 following, the plaintiff filed with Smith, Bell,
and Co., Inc. a formal statement of claim (Exh. "G") with proof of loss and a demand for settlement of the
corresponding value of the losses, in the sum of US$7,357.78.00. (sic) After purportedly conveying the claim to its
principal, Smith, Bell, and Co., Inc. informed the plaintiff by letter dated February 15, 1983 (Exh."G-2") that its
principal offered only 50% of the claim or US$3,616.17 as redress, on the alleged ground of discrepancy
between the amounts contained in the shipping agent's reply to the claimant of only US$90.48 with that of
Metroport's. The offer not being acceptable to the plaintiff, the latter wrote Smith, Bell, & Co. expressing his
refusal to the "redress" offer. contending that the discrepancy was a result of loss from vessel to arrastre to
consignees' warehouse\which losses were still within the "all risk" insurance cover. No settlement of the claim
having been made, the plaintiff then caused the instant case to be filed. (p. 2, RTC Decision; p. 142, Record).
Denying any liability, defendant-appellant averred in its answer that it is merely a settling or claim agent of
defendant insurance company and as SUCH agent, it is not personally liable under the policy in which it has
not even taken part of. It then alleged that plaintiff-appellee has no cause of action against it.
Defendant The First Insurance Co. Ltd. did not file an Answer, hence it was declared in default.
After due trial and proceeding, the lower court rendered a decision favorable to plaintiff-appellee. It ruled that
plaintiff-appellee has fully established the liability of the insurance firm on the subject insurance contract as
the former presented concrete evidence of the amount of losses resulting from the risks insured against which
were supported, by reliable report and assessment of professional cargo surveyor. As regards defendantappellant, the lower court held that since it is admittedly a claim agent of the foreign insurance firm doing
business in the Philippines justice is better served if said agent is made liable without prejudice to its right of
action against its principal, the insurance firm. . . .

The Issue
"Whether or not a local settling or claim agent of a disclosed principal a foreign insurance company can be
held jointly and severally liable with said principal under the latter's marine cargo insurance policy, given that the
agent is not a party to the insurance contract.
Petitioner rejects liability under the said insurance contract, claiming that: (1) it is merely an agent and thus not
personally liable to the party with whom it contracts on behalf of its principal; (2) it had no participation at
all in the contract of insurance; and (3) the suit is not brought against the real party-in-interest. 9
On the other hand, respondent Court in ruling against petitioner disposed of the main issue by citing a case it
decided in 1987, where petitioner was also a party-litigant. 10 In that case, respondent Court held that petitioner as
resident agent of First Insurance Co. Ltd. was "authorized to settle claims against its principal . Its defense
that its authority excluded personal liability must be proven satisfactorily. There is a complete dearth of
evidence supportive of appellant's non-responsibility as resident agent." The ruling continued with the
statement that "the interest of justice is better served by holding the settling or claim agent jointly and
severally liable with its principal." 11
The Court's Ruling
There are three reasons why we find for petitioner.
First Reason: Existing Jurisprudence
Petitioner, undisputedly a settling agent acting within the scope of its authority, cannot be held personally and/or
solidarily liable for the obligations of its disclosed principal merely because there is allegedly a need for a speedy
settlement of the claim of private respondent. In the leading case of Salonga vs. Warner, Barnes & Co., Ltd. this
Court ruled in this wise: 15
We agree with counsel for the appellee that the defendant is a settlement and adjustment agent of the
foreign insurance company and that as such agent it has the authority to settle all the losses and claims that
may arise under the policies that may be issued by or in behalf of said company in accordance with the
instructions it may receive from time to time from its principal, but we disagree with counsel in his
contention that as such adjustment and settlement agent, the defendant has assumed personal liability under
said policies, and, therefore, it can be sued in its own right. An adjustment and settlement agent is no
different from any other agent from the point of view of his responsibility (sic), for he also acts in a
representative capacity. Whenever he adjusts or settles a claim, he does it in behalf of his principal, and his
action is binding not upon himself but upon his principal. And here again, the ordinary rule of agency
applies. The following authorities bear this out:
"An insurance adjuster is ordinarily a special agent for the person or company for whom he acts,
and his authority is prima facie coextensive with the business entrusted to him. . . ."
"An adjuster does not discharge functions of a quasi-judicial nature, but represents his employer,
to whom he owes faithful service, and for his acts, in the employer's interest, the employer is responsible so
long as the acts are done while the agent is acting within the scope of his employment." (45 C.J.S., 13381340.)
It, therefore, clearly appears that the scope and extent of the functions of an adjustment and settlement agent do
not include personal liability. His functions are merely to settle and adjusts claims in behalf of his principal if
those claims are proven and undisputed, and if the claim is disputed or is disapproved by the principal, like in the
instant case, the agent does not assume any personal liability. The recourse of the insured is to press his claim
against the principal. (Emphasis supplied).
The foregoing doctrine may have been enunciated by this Court in 1951, but the passage of time has not eroded its
value or merit. It still applies with equal force and vigor.

Private respondent's contention that Salonga does not apply simply because only the agent was sued therein
while here both agent and principal were impleaded and found solidarily liable is without merit.
Such distinction is immaterial. The agent can not be sued nor held liable whether singly or solidarily with its
principal.
Every cause of action ex contractu must be founded upon a contract, oral or written, either express or implied. 16The
only "involvement" of petitioner in the subject contract of insurance was having its name stamped at the bottom left
portion of the policy as "Claim Agent." Without anything else to back it up, such stamp cannot even be deemed by
the remotest interpretation to mean that petitioner participated in the preparation of said contract. There is
absolutely nothing in the contract which mentions the personal liability of petitioner.
Second Reason: Absence of Solidarity Liability
May then petitioner, in its capacity as resident agent (as found in the case cited by the respondent Court 19) be held
solidarily liable with the foreign insurer? Article 1207 of the Civil Code clearly provides that "(t)here is a solidary
liability only when the obligation expressly so states, or when the law or the nature of the obligation requires
solidarity." The well-entrenched rule is that solidary obligation cannot lightly be inferred. It must be positively
and clearly expressed. The contention that, in the end, it would really be First Insurance Company, Ltd. which
would be held liable is specious and cannot be accepted. Such a stance would inflict injustice upon petitioner which
would be made to advance the funds to settle the claim without any assurance that it can collect from the principal
which disapproved such claim, in the first place. More importantly, such ,position would have absolutely no legal
basis.
The Insurance Code is quite clear as to the Purpose and role of a resident agent. Such agent, as a representative of
the foreign insurance company, is tasked only to receive legal processes on behalf of its principal and not to
answer personally for any insurance claims.
Third Reason: Not Real Party-In-Interest
Lastly, being a mere agent and representative, petitioner is also not the real party-in-interest in this case. An
action is brought for a practical purpose, that is, to obtain actual and positive relief. If the party sued is not the proper
party, any decision that may be rendered against him would be futile, for the decision cannot be enforced or
executed.
The cause of action of private respondent is based on a contract of insurance which as already shown was not
participated in by petitioner. It is not a "person who claim(s) an interest adverse to the plaintiff" nor is said
respondent "necessary to a complete determination or settlement of the questions involved" in the controversy.
Petitioner is improperly impleaded for not being a real-party-interest. It will not benefit or suffer in case the action
prospers. 20
Resort to Equity Misplaced
Finally, respondent Court also contends that "the interest of justice is better served by holding the settling agent
jointly and severally liable with its principal." As no law backs up such pronouncement, the appellate Court is
thus resorting to equity. However, equity which has been aptly described as "justice outside legality," is
availed of only in the absence of, and never against, statutory law or judicial pronouncements. 21 Upon the other
hand the liability of agents is clearly provided for by our laws and existing jurisprudence.
WHEREFORE, in view of the foregoing considerations, the Petition is GRANTED and the Decision appealed from
is REVERSED and SET ASIDE.
No costs.
SO ORDERED.

G.R. No. 101723 May 11, 2000

INDUSTRIAL MANAGEMENT INTERNATIONAL DEVELOPMENT CORP. (INIMACO), petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, (Fourth Division) Cebu City, and ENRIQUE SULIT,
SOCORRO MAHINAY, ESMERALDO PEGARIDO, TITA BACUSMO, GINO NIERE, VIRGINIA BACUS,
ROBERTO NEMENZO, DARIO GO, and ROBERTO ALEGARBES, respondents.
This is a petition for certiorari assailing the issued by the National Labor Relations Commission in on the alleged
ground that it committed a grave abuse of discretion amounting to lack of jurisdiction in upholding the Alias Writ of
Execution issued by the Labor Arbiter which deviated from the dispositive portion of the Decision dated March 10,
1987, thereby holding that the liability of the six respondents in the case below is solidary despite the absence of the
word "solidary" in the dispositive portion of the Decision, when their liability should merely be joint.
The factual antecedents are undisputed:
In September 1984, private respondent Enrique Sulit, Socorro Mahinay, Esmeraldo Pegarido, Tita Bacusmo, Gino
Niere, Virginia Bacus, Roberto Nemenzo, Dariogo, and Roberto Alegarbes filed a complaint with the Department of
Labor and Employment, Regional Arbitration Branch No. VII in Cebu City against Filipinas Carbon Mining
Corporation, Gerardo Sicat, Antonio Gonzales, Chiu Chin Gin, Lo Kuan Chin, and petitioner Industrial Management
Development Corporation (INIMACO), for payment of separation pay and unpaid wages.
Labor Arbiter Bonifacio B. Tumamak held that:
RESPONSIVE, to all the foregoing, judgment is hereby entered, ordering respondents Filipinas Carbon and Mining
Corp. Gerardo Sicat, Antonio Gonzales/Industrial Management Development Corp. (INIMACO), Chiu Chin Gin
and Lo Kuan Chin, to pay complainants Enrique Sulit, the total award of P82,800.00; ESMERALDO PEGARIDO
the full award of P19,565.00; Roberto Nemenzo the total sum of P29,623.60 and DARIO GO the total award of
P6,599.71, or the total aggregate award of ONE HUNDRED THIRTY-EIGHT THOUSAND FIVE HUNDRED
EIGHTY-EIGHT PESOS AND 31/100 (P138,588.31) to be deposited with this Commission within ten (10) days
from receipt of this Decision for appropriate disposition. All other claims are hereby Dismiss (sic) for lack of merit.
SO ORDERED.
Cebu City, Philippines.
10 March 1987. 1
No appeal was filed within the reglementary period thus, the above Decision became final and executory . On
June 16, 1987, the Labor Arbiter issued a writ of execution but it was returned unsatisfied. On August 26, 1987, the
Labor Arbiter issued an Alias Writ of Execution which ordered thus:
NOW THEREFORE, by virtue of the powers vested in me by law, you are hereby commanded to proceed to the
premises of respondents Antonio Gonzales/Industrial Management Development Corporation (INIMACO) situated
at Barangay Lahug, Cebu City, in front of La Curacha Restaurant, and/or to Filipinas Carbon and Mining
corporation and Gerardo Sicat at 4th Floor Universal RE-Bldg. 106 Paseo de Roxas, Legaspi Village, Makati Metro
Manila and at Philippine National Bank, Escolta, Manila respectively, and collect the aggregate award of ONE
HUNDRED THIRTY-EIGHT THOUSAND FIVE HUNDRED EIGHTY-EIGHT PESOS AND THIRTY ONE
CENTAVOS (P138,588.31) and thereafter turnover said amount to complainants ENRIQUE SULIT, ESMERALDO
PEGARIDO, ROBERTO NEMENZO AND DARIO GO or to this Office for appropriate disposition. Should you
fail to collect the said sum in cash, you are hereby authorized to cause the satisfaction of the same on the movable or
immovable property(s) of respondents not exempt from execution. You are to return this writ sixty (6) ( sic) days
from your receipt hereof, together with your corresponding report.
You may collect your legal expenses from the respondents as provided for by law.
SO ORDERED. 2

On September 3, 1987, petitioner filed a "Motion to Quash Alias Writ of Execution and Set Aside
Decision," 3alleging among others that the alias writ of execution altered and changed the tenor of the decision
by changing the liability of therein respondents from joint to solidary, by the insertion of the words
"AND/OR" between "Antonio Gonzales/Industrial Management Development Corporation and Filipinas Carbon
and Mining Corporation, et al." However, in an order dated September 14, 1987, the Labor Arbiter denied the
motion.
On October 2, 1987, petitioner appealed 4 the Labor Arbiter's Order dated September 14, 1987 to the respondent
NLRC.
The respondent NLRC dismissed the appeal in a Decision 5 dated August 31, 1988, the pertinent portions of which
read:
In matters affecting labor rights and labor justice, we have always adopted the liberal approach which favors the
exercise of labor rights and which is beneficial to labor as a means to give full meaning and import to the
constitutional mandate to afford protection to labor. Considering the factual circumstances in this case, there is
no doubt in our mind that the respondents herein are called upon to pay, jointly and severally, the claims of
the complainants as was the latters' prayers. Inasmuch as respondents herein never controverted the claims of the
complainants below, there is no reason why complainants' prayer should not be granted. Further, in line with the
powers granted to the Commission under Article 218 (c) of the Labor code, "to waive any error, defect or
irregularity whether in substance or in form" in a proceeding before Us, We hold that the Writ of Execution be given
due course in all respects.
On July 31, 1989, petitioner filed a "Motion To Compel Sheriff To Accept Payment Of P23,198.05 Representing
One Sixth Pro Rata Share of Respondent INIMACO As Full and Final Satisfaction of Judgment As to Said
Respondent." 6 The private respondents opposed the motion. In an Order 7 dated August 15, 1989, the Labor Arbiter
denied the motion ruling thus:
WHEREFORE, responsive to the foregoing respondent INIMACO's Motions are hereby DENIED. The Sheriff of
this Office is order (sic) to accept INIMACO's tender payment (sic) of the sum of P23,198.05, as partial
satisfaction of the judgment and to proceed with the enforcement of the Alias Writ of Execution of the levied
properties, now issued by this Office, for the full and final satisfaction of the monetary award granted in the instant
case.
SO ORDERED.
Petitioner appealed the above Order of the Labor Arbiter but this was again dismissed by the respondent
NLRC in its Resolution 8 dated September 4, 1991 which held that:
The arguments of respondent on the finality of the dispositive portion of the decision in this case is beside the point.
What is important is that the Commission has ruled that the Writ of Execution issued by the Labor Arbiter in this
case is proper. It is not really correct to say that said Writ of Execution varied the terms of the judgment. At most,
considering the nature of labor proceedings there was, an ambiguity in said dispositive portion which was
subsequently clarified by the Labor Arbiter and the Commission in the incidents which were initiated by INIMACO
itself. By sheer technicality and unfounded assertions, INIMACO would now reopen the issue which was already
resolved against it. It is not in keeping with the established rules of practice and procedure to allow this attempt of
INIMACO to delay the final disposition of this case.
WHEREFORE, in view of all the foregoing, this appeal is DISMISSED and the Order appealed from is hereby
AFFIRMED.
With double costs against appellant.
Dissatisfied with the foregoing, petitioner filed the instant case, alleging that the respondent NLRC committed grave
abuse of discretion in affirming the Order of the Labor Arbiter dated August 15, 1989, which declared the liability of
petitioner to be solidary.

The only issue in this petition is whether petitioner's liability pursuant to the Decision of the Labor Arbiter
dated March 10, 1987, is solidary or not.
Upon careful examination of the pleadings filed by the parties, the Court finds that petitioner INIMACO's
liability is not solidary but merely joint and that the respondent NLRC acted with grave abuse of discretion in
upholding the Labor Arbiter's Alias Writ of Execution and subsequent Orders to the effect that petitioner's
liability is solidary.
Well-entrenched is the rule that solidary obligation cannot lightly be inferred. 11
In the dispositive portion of the Labor Arbiter, the word "solidary" does not appear.
Granting that the Labor Arbiter has committed a mistake in failing to indicate in the dispositive portion that the
liability of respondents therein is solidary, the correction which is substantial can no longer be allowed in this
case because the judgment has already become final and executory.
It is an elementary principle of procedure that the resolution of the court in a given issue as embodied in the
dispositive part of a decision or order is the controlling factor as to settlement of rights of the parties. 15 Once a
decision or order becomes final and executory, it is removed from the power or jurisdiction of the court which
rendered it to further alter or amend it. 16 It thereby becomes immutable and unalterable and any amendment or
alteration which substantially affects a final and executory judgment is null and void for lack of jurisdiction,
including the entire proceedings held for that purpose. 17 An order of execution which varies the tenor of the
judgment or exceeds the terms thereof is a nullity. 18
None of the parties in the case before the Labor Arbiter appealed the Decision dated March 10, 1987, hence the
same became final and executory. It was, therefore, removed from the jurisdiction of the Labor Arbiter or the NLRC
to further alter or amend it. Thus, the proceedings held for the purpose of amending or altering the dispositive
portion of the said decision are null and void for lack of jurisdiction. Also, the Alias Writ of Execution is null and
void because it varied the tenor of the judgment in that it sought to enforce the final judgment against "Antonio
Gonzales/Industrial Management Development Corp. (INIMACO) and/or Filipinas Carbon and Mining Corp. and
Gerardo Sicat," which makes the liability solidary.
WHEREFORE, the petition is hereby GRANTED. The Resolution dated September 4, 1991 of the respondent
National Labor Relations is hereby declared NULL and VOID. The liability of the respondents in RAB-VII-0711-84
pursuant to the Decision of the Labor Arbiter dated March 10, 1987 should be, as it is hereby, considered joint and
petitioner's payment which has been accepted considered as full satisfaction of its liability, without prejudice to the
enforcement of the award, against the other five (5) respondents in the said case.
SO ORDERED.

G.R. No. 165662

May 3, 2006

SELEGNA MANAGEMENT AND DEVELOPMENT CORPORATION; and Spouses EDGARDO and

ZENAIDA
ANGELES, Petitioners,
vs.
UNITED COCONUT PLANTERS BANK,* Respondent.
DECISION
PANGANIBAN, CJ:
A writ of preliminary injunction is issued to prevent an extrajudicial foreclosure, only upon a clear showing of a
violation of the mortgagors unmistakable right. Unsubstantiated allegations of denial of due process and
prematurity of a loan are not sufficient to defeat the mortgagees unmistakable right to an extrajudicial foreclosure.
The Case
Before us is a Petition for Review 1 under Rule 45 of the Rules of Court, assailing the May 4, 2004 Amended
Decision2 and the October 12, 2004 Resolution3 of the Court of Appeals (CA) in CA-GR SP No. 70966. The
challenged Amended Decision disposed thus:
"WHEREFORE, the Motion for Reconsideration is GRANTED. The July 18, 2003 Decision is hereby REVERSED
and SET ASIDE and another one entered GRANTING the petition and REVERSING and SETTING ASIDE the
March 15, 2002 Order of the Regional Trial Court, Branch 58, Makati City in Civil Case No. 99-1061."4
The assailed Resolution denied reconsideration.
The Facts
On September 19, 1995, Petitioners Selegna Management and Development Corporation and Spouses Edgardo and
Zenaida Angeles were granted a credit facility in the amount of P70 million by Respondent United Coconut Planters
Bank (UCPB). As security for this credit facility, petitioners executed real estate mortgages over several parcels of
land located in the cities of Muntinlupa, Las Pias, Antipolo and Quezon; and over several condominium units in
Makati. Petitioners were likewise required to execute a promissory note in favor of respondent every time they
availed of the credit facility. As required in these notes, they paid the interest in monthly amortizations.
The parties stipulated in their Credit Agreement dated September 19, 1995, 5 that failure to pay "any availment of the
accommodation or interest, or any sum due" shall constitute an event of default, 6 which shall consequently allow
respondent bank to "declare [as immediately due and payable] all outstanding availments
of the accommodation together with accrued interest and any other sum payable." 7
In need of further business capital, petitioners obtained from UCPB an increase in their credit facility. 8 For this
purpose, they executed a Promissory Note for P103,909,710.82, which was to mature on March 26, 1999. 9 In the
same note, they agreed to an interest rate of 21.75 percent per annum, payable by monthly amortizations.
On December 21, 1998, respondent sent petitioners a demand letter, worded as follows:
"Gentlemen:
"With reference to your loan with principal outstanding balance of [P103,909,710.82], it appears from the records of
United Coconut Planters Bank that you failed to pay interest amortizations amounting to [P14,959,525.10] on the
Promissory Note on its due date, 30 May 1998.
"x x x

xxx

xxx

"Accordingly, formal demand is hereby made upon you to pay your outstanding obligations in the total amount of
P14,959,525.10, which includes unpaid interest and penalties as of 21 December 1998 due on the promissory note,
eight (8) days from date hereof."10
Respondent decided to invoke the acceleration provision in their Credit Agreement. Accordingly, through counsel, it
relayed its move to petitioners on January 25, 1999 in a letter, which we quote:
"Gentlemen:
"x x x

xxx

xxx

"It appears from the record of [UCPB] that you failed to pay the monthly interest due on said obligation since May
30, 1998 as well as the penalty charges due thereon. Despite repeated demands, you refused and continue to refuse
to pay the same. Under the Credit Agreements/Letter Agreements you executed, failure to pay when due any
installments of the loan or interest or any sum due thereunder, is an event of default.
"Consequently, we hereby inform you that our client has declared your principal obligation in the amount of
[P103,909,710.82], interest and sums payable under the Credit Agreement/Letter Agreement/Promissory Note to be
immediately due and payable.
"Accordingly, formal demand is hereby made upon you to please pay within five (5) days from date hereof or up to
January 29, 1999 the principal amount of [P103,909,710.82], with the interest, penalty and other charges due
thereon, which as of January 25, 1999 amounts to [P17,351,478.55]."11
Respondent sent another letter of demand on March 4, 1999. It contained a final demand on petitioners "to settle in
full [petitioners] said past due obligation to [UCPB] within five (5) days from [petitioners] receipt of [the] letter." 12
In response, petitioners paid respondent the amount of P10,199,473.96 as partial payment of the accrued
interests.13 Apparently unsatisfied, UCPB applied for extrajudicial foreclosure of petitioners mortgaged properties.
When petitioners received the Notice of Extra Judicial Foreclosure Sale on May 18, 1999, they requested UCPB to
give them a period of sixty (60) days to update their accrued interest charges; and to restructure or, in the alternative,
to negotiate for a takeout of their account.14
On May 25, 1999, the Bank denied petitioners request in these words:
"This is to reply to your letter dated May 20, 1999, which confirms the request you made the previous day when you
paid us a visit.
"As earlier advised, your account has been referred to external counsel for appropriate legal action. Demand has also
been made for the full settlement of your account.
"We regret that the Bank is unable to grant your request unless a definite offer is made for settlement."15
In order to forestall the extrajudicial foreclosure scheduled for May 31, 1999, petitioners filed a
Complaint16(docketed as Civil Case No. 99-1061) for "Damages, Annulment of Interest, Penalty Increase and
Accounting with Prayer for Temporary Restraining Order/Preliminary Injunction." All subsequent proceedings in the
trial court and in the CA involved only the propriety of issuing a TRO and a writ of preliminary injunction.
Judge Josefina G. Salonga, 17 then executive judge of the Regional Trial Court (RTC) of Makati City, denied the
Urgent Ex-parte Motion for Immediate Issuance of a Temporary Restraining Order (TRO), filed by petitioners.
Judge Salonga denied their motion on the ground that no great or irreparable injury would be inflicted on them if the
parties would first be heard. 18 Unsatisfied, petitioners filed an Ex-Parte Motion for Reconsideration, by reason of
which the case was eventually raffled to Branch 148, presided by Judge Oscar B. Pimentel.19
After due hearing, Judge Pimentel issued an Order dated May 31, 1999, granting a 20-day TRO on the scheduled
foreclosure of the Antipolo properties, on the ground that the Notice of Foreclosure had indicated an inexistent
auction venue.20 To resolve that issue, respondent filed a Manifestation 21 that it would withdraw all its notices

relative to the foreclosure of the mortgaged properties, and that it would re-post or re-publish a new set of notices.
Accordingly, in an Order dated September 6, 1999, 22 Judge Pimentel denied petitioners application for a TRO for
having been rendered moot by respondents Manifestation.23
Subsequently, respondent filed new applications for foreclosure in the cities where the mortgaged properties were
located. Undaunted, petitioners filed another Motion for the Issuance of a TRO/Injunction and a Supplementary
Motion for the Issuance of TRO/Injunction with Motion to Clarify Order of September 6, 1999.24
On October 27, 1999, Judge Pimentel issued an Order 25 granting a 20-day TRO in favor of petitioners. After several
hearings, he issued his November 26, 1999 Order, 26 granting their prayer for a writ of preliminary injunction on the
foreclosures, but only for a period of twenty (20) days. The Order states:
"Admitted by defendant witness is the fact that in all the notices of foreclosure sale of the properties of the plaintiffs
x x x it is stated in each notice that the property will be sold at public auction to satisfy the mortgage indebtedness of
plaintiffs which as of August 31, 1999 amounts to P131,854,773.98.
"x x x

xxx

xxx

"As the court sees it, this is the problem that should be addressed by the defendant in this case and in the meantime,
the notice of foreclosure sale should be held in abeyance until such time as these matters are clarified and cleared by
the defendants x x x Should the defendant be able to remedy the situation this court will have no more alternative
but to allow the defendant to proceed to its intended action.
"x x x

xxx

xxx

"WHEREFORE, premises considered, and finding compelling reason at this point in time to grant the application for
preliminary injunction, the same is hereby granted upon posting of a preliminary injunction bond in the amount of
P3,500,000.00 duly approved by the court, let a writ of preliminary injunction be issued."27
The corresponding Writ of Preliminary Injunction28 was issued on November 29, 1999.
Respondent moved for reconsideration. On the other hand, petitioners filed a Motion to Clarify Order of November
26, 1999. Conceding that the November 26 Order had granted an injunction during the pendency of the case,
respondent contended that the injunctive writ merely restrained it for a period of 20 (twenty) days.
On December 29, 2000, Judge Pimentel issued an Order 29 granting respondents Motion for Reconsideration and
clarifying his November 26, 1999 Order in this manner:
"There may have been an error in the Writ of Preliminary Injunction issued dated November 29, 1999 as the same
[appeared to be actually] an extension of the TRO issued by this Court dated 27 October 1999 for another 20 days
period. Plaintiffs seeks to enjoin defendants for an indefinite period pending trial of the case.
"Be that as it may, the Court actually did not have any intention of restraining the defendants from foreclosing
plaintiff[s] property for an indefinite period and during the entire proceeding of the case x x x.
"x x x

xxx

xxx

"What the [c]ourt wanted the defendants to do was to merely modify the notice of [the] auction sale in order that the
amount of P131,854,773.98 x x x would not appear to be the value of each property being sold on auction. x x x.30
"WHEREFORE, premises considered and after finding merit on the arguments raised by herein defendants to be
impressed with merit, and having stated in the Order dated 26 November 1999 that no other alternative recourse is
available than to allow the defendants to proceed with their intended action, the Court hereby rules:
"1.] To give due course to defendant[]s motion for reconsideration, as the same is hereby GRANTED, however,
with reservation that this Order shall take effect upon after its[] finality[.]"31

Consequently, respondent proceeded with the foreclosure sale of some of the mortgaged properties. On the other
hand, petitioners filed an "[O]mnibus [M]otion [for Reconsideration] and to [S]pecify the [A]pplication of the P92
[M]illion [R]ealized from the [F]oreclosure [S]ale x x x." 32 Before this Omnibus Motion could be resolved, Judge
Pimentel inhibited himself from hearing the case.33
The case was then re-raffled to Branch 58 of the RTC of Makati City, presided by Judge Escolastico U. Cruz. 34 The
proceedings before him were, however, all nullified by the Supreme Court in its En Banc Resolution dated
September 18, 2001.35 He was eventually dismissed from service.36
The case was re-raffled to the pairing judge of Branch 58, Winlove M. Dumayas. On March 15, 2002, Judge
Dumayas granted petitioners Omnibus Motion for Reconsideration and Specification of the Foreclosure Proceeds,
as follows:
"WHEREFORE, premises considered, the Motion to Reconsider the Order dated December 29, 2000 is hereby
granted and the Order of November 26, 1999 granting the preliminary injunction is reinstated subject however to the
condition that all properties of plaintiffs which were extrajudicially foreclosed though public bidding are subject to
an accounting. [A]nd for this purpose defendant bank is hereby given fifteen (15) days from notice hereof to render
an accounting on the proceeds realized from the foreclosure of plaintiffs mortgaged properties located in Antipolo,
Makati, Muntinlupa and Las Pias."37
The aggrieved respondent filed before the Court of Appeals a Petition for Certiorari, seeking the nullification of the
RTC Order dated March 15, 2002, on the ground that it was issued with grave abuse of discretion.38
The Special Fifteenth Division, speaking through Justice Rebecca de Guia-Salvador, affirmed the ruling of Judge
Dumayas. It held that petitioners had a clear right to an injunction, based on the fact that respondent had kept them
in the dark as to how and why their principal obligation had ballooned to almost P132 million. The CA held that
respondents refusal to give them a detailed accounting had prevented the determination of the maturity of the
obligation and precluded the possibility of a foreclosure of the mortgaged properties. Moreover, their payment of
P10 million had the effect of updating, and thereby averting the maturity of, the outstanding obligation. 39
Respondent filed a Motion for Reconsideration, which was granted by a Special Division of Five of the Former
Special Fifteenth Division.
Ruling of the Court of Appeals
Citing China Banking Corporation v. Court of Appeals, 40 the appellate court held in its Amended Decision 41 that the
foreclosure proceedings should not be enjoined in the light of the clear failure of petitioners to meet their obligations
upon maturity.42
Also citing Zulueta v. Reyes, 43 the CA, through Justice Jose Catral Mendoza, went on to say that a pending question
on accounting did not warrant an injunction on the foreclosure.
Parenthetically, the CA added that petitioners were not without recourse or protection. Further, it noted their pending
action for annulment of interest, damages and accounting. It likewise said that they could protect themselves by
causing the annotation of lis pendens on the titles of the mortgaged or foreclosed properties.
In his Separate Concurring Opinion,44 Justice Magdangal M. de Leon added that a prior accounting was not essential
to extrajudicial foreclosure. He cited Abaca Corporation v. Garcia, 45 which had ruled that Act No. 3135 did not
require mortgaged properties to be sold by lot or by only as much as would cover just the obligation. Thus, he
concluded that a request for accounting -- for the purpose of determining whether the proceeds of the auction would
suffice to cover the indebtedness -- would not justify an injunction on the foreclosure.
Petitioners filed a Motion for Reconsideration dated May 31, 2004, which the appellate court denied.46
Hence, this Petition.47
Issues

Petitioners raise the following issues for our consideration:

p align="center">"I
"Whether or not the Honorable Court of Appeals denied the petitioners of due process.
"II
"Whether or not the Honorable Court of Appeals supported its Amended Decision by invoking jurisprudence not
applicable and completely identical with the instant case.
"III
"Whether or not the Honorable Court of Appeals failed to establish its finding that RTC Judge Winlove Dumayas
has acted with grave abuse of discretion."48
The resolution of this case hinges on two issues: 1) whether petitioners are in default; and 2) whether there is basis
for preliminarily enjoining the extrajudicial foreclosure. The other issues raised will be dealt with in the resolution
of these two main questions.
The Courts Ruling
The Petition has no merit.
First Issue:
Default
The resolution of the present controversy necessarily begins with a determination of respondents right to foreclose
the mortgaged properties extrajudicially.
It is a settled rule of law that foreclosure is proper when the debtors are in default of the payment of their obligation.
In fact, the parties stipulated in their credit agreements, mortgage contracts and promissory notes that respondent
was authorized to foreclose on the mortgages, in case of a default by petitioners. That this authority was granted is
not disputed.
Mora solvendi, or debtors default, is defined as a delay49 in the fulfillment of an obligation, by reason of a cause
imputable to the debtor.50 There are three requisites necessary for a finding of default. First, the obligation is
demandable and liquidated; second, the debtor delays performance; third, the creditor judicially or extrajudicially
requires the debtors performance.51
Mortgagors Default of Monthly Interest Amortizations
In the present case, the Promissory Note executed on March 29, 1998, expressly states that petitioners had an
obligation to pay monthly interest on the principal obligation. From respondents demand letter, 52 it is clear and
undisputed by petitioners that they failed to meet those monthly payments since May 30, 1998. Their nonpayment is
defined as an "event of default" in the parties Credit Agreement, which we quote:
"Section 8.01. Events of Default. Each of the following events and occurrences shall constitute an Event of Default
of this AGREEMENT:
"1. The CLIENT shall fail to pay, when due, any availment of the Accommodation or interest, or any other sum due
thereunder in accordance with the terms thereof;1avvphil.net
"x x x

xxx

x x x"

"Section 8.02. Consequences of Default. (a) If an Event of Default shall occur and be continuing, the Bank may:

"1. By written notice to the CLIENT, declare all outstanding availments of the Accommodation together with
accrued interest and any other sum payable hereunder to be immediately due and payable without presentment,
demand or notice of any kind, other than the notice specifically required by this Section, all of which are expressly
waived by the CLIENT[.]"53
Considering that the contract is the law between the parties, 54 respondent is justified in invoking the acceleration
clause declaring the entire obligation immediately due and payable. 55 That clause obliged petitioners to pay the
entire loan on January 29, 1999, the date fixed by respondent.56
Petitioners failure to pay on that date set into effect Article IX of the Real Estate Mortgage, 57 worded thus:
"If, at any time, an event of default as defined in the credit agreements, promissory notes and other related loan
documents referred to in paragraph 5 of ARTICLE I hereof (sic), or the MORTGAGOR and/or DEBTOR shall fail
or refuse to pay the SECURED OBLIGATIONS, or any of the amortization of such indebtedness when due, or to
comply any (sic) of the conditions and stipulations herein agreed, x x x then all the obligations of the
MORTGAGOR secured by this MORTGAGE and all the amortizations thereof shall immediately become due,
payable and defaulted and the MORTGAGEE may immediately foreclose this MORTGAGE judicially in
accordance with the Rules of Court, or extrajudicially in accordance with Act No. 3135, as amended, and
Presidential Decree No. 385. For the purpose of extrajudicial foreclosure, the MORTGAGOR hereby appoints the
MORTGAGEE his/her/its attorney-in-fact to sell the property mortgaged under Act No. 3135, as amended, to sign
all documents and perform any act requisite and necessary to accomplish said purpose and to appoint its substitutes
as such attorney-in-fact with the same powers as above specified. x x x[.]"58
The foregoing discussion satisfactorily shows that UCPB had every right to apply for extrajudicial foreclosure on
the basis of petitioners undisputed and continuing default.
Petitioners Debt Considered Liquidated Despite the Alleged
Lack of Accounting
Petitioners do not even attempt to deny the aforementioned matters. They assert, though, that they have a right to a
detailed accounting before they can be declared in default. As regards the three requisites of default, they say that the
first requisite -- liquidated debt -- is absent. Continuing with foreclosure on the basis of an unliquidated obligation
allegedly violates their right to due process. They also maintain that their partial payment of P10 million averted the
maturity of their obligation.59
On the other hand, respondent asserts that questions regarding the running balance of the obligation of petitioners
are not valid reasons for restraining the foreclosure. Nevertheless, it maintains that it has furnished them a detailed
monthly statement of account.
A debt is liquidated when the amount is known or is determinable by inspection of the terms and conditions of the
relevant promissory notes and related documentation. 60 Failure to furnish a debtor a detailed statement of account
does not ipso facto result in an unliquidated obligation.
Petitioners executed a Promissory Note, in which they stated that their principal obligation was in the amount of
P103,909,710.82, subject to an interest rate of 21.75 percent per annum. 61 Pursuant to the parties Credit Agreement,
petitioners likewise know that any delay in the payment of the principal obligation will subject them to a penalty
charge of one percent per month, computed from the due date until the obligation is paid in full.62
It is in fact clear from the agreement of the parties that when the payment is accelerated due to an event of default,
the penalty charge shall be based on the total principal amount outstanding, to be computed from the date of
acceleration until the obligation is paid in full. 63 Their Credit Agreement even provides for the application of
payments.64 It appears from the agreements that the amount of total obligation is known or, at the very least,
determinable.
Moreover, when they made their partial payment, petitioners did not question the principal, interest or penalties
demanded from them. They only sought additional time to update their interest payments or to negotiate a possible

restructuring of their account.65 Hence, there is no basis for their allegation that a statement of account was necessary
for them to know their obligation. We cannot impair respondents right to foreclose the properties on the basis of
their unsubstantiated allegation of a violation of due process.
In Spouses Estares v. CA,66 we did not find any justification to grant a preliminary injunction, even when the
mortgagors were disputing the amount being sought from them. We held in that case that "[u]pon the nonpayment of
the loan, which was secured by the mortgage, the mortgaged property is properly subject to a foreclosure sale."67
Compared with Estares, the denial of injunctive relief in this case is even more imperative, because the present
petitioners do not even assail the amounts due from them. Neither do they contend that a detailed accounting would
show that they are not in default. A pending question regarding the due amount was not a sufficient reason to enjoin
the foreclosure in Estares. Hence, with more reason should injunction be denied in the instant case, in which there is
no dispute as to the outstanding obligation of petitioners.
At any rate, whether respondent furnished them a detailed statement of account is a question of fact that this Court
need not and will not resolve in this instance. As held in Zulueta v. Reyes, 68 in which there was no genuine
controversy as to the amounts due and demandable, the foreclosure should not be restrained by the unnecessary
question of accounting.
Maturity of the Loan Not Averted by Partial Compliance with Respondents Demand
Petitioners allege that their partial payment of P10 million on March 25, 1999, had the effect of forestalling the
maturity of the loan;69 hence the foreclosure proceedings are premature. 70 We disagree.
To be sure, their partial payment did not extinguish the obligation. The Civil Code states that a debt is not paid
"unless the thing x x x in which the obligation consists has been completely delivered x x x." 71 Besides, a late partial
payment could not have possibly forestalled a long-expired maturity date.
The only possible legal relevance of the partial payment was to evidence the mortgagees amenability to granting the
mortgagor a grace period. Because the partial payment would constitute a waiver of the mortgagees vested right to
foreclose, the grant of a grace period cannot be casually assumed; 72 the banks agreement must be clearly shown.
Without a doubt, no express agreement was entered into by the parties. Petitioners only assumed that their partial
payment had satisfied respondents demand and obtained for them more time to update their account. 73
Petitioners are mistaken. When creditors receive partial payment, they are not ipso facto deemed to have abandoned
their prior demand for full payment. Article 1235 of the Civil Code provides:
"When the obligee accepts the performance, knowing its incompleteness or irregularity, and without expressing any
protest or objection, the obligation is deemed fully complied with."
Thus, to imply that creditors accept partial payment as complete performance of their obligation, their acceptance
must be made under circumstances that indicate their intention to consider the performance complete and to
renounce their claim arising from the defect.74
There are no circumstances that would indicate a renunciation of the right of respondent to foreclose the mortgaged
properties extrajudicially, on the basis of petitioners continuing default. On the contrary, it asserted its right by filing
an application for extrajudicial foreclosure after receiving the partial payment. Clearly, it did not intend to give
petitioners more time to meet their obligation.
Parenthetically, respondent cannot be reproved for accepting their partial payment. While Article 1248 of the Civil
Code states that creditors cannot be compelled to accept partial payments, it does not prohibit them from accepting
such payments.
Second Issue:
Enjoining the Extrajudicial Foreclosure

A writ of preliminary injunction is a provisional remedy that may be resorted to by litigants, only to protect or
preserve their rights or interests during the pendency of the principal action. To authorize a temporary injunction, the
plaintiff must show, at least prima facie, a right to the final relief. 75 Moreover, it must show that the invasion of the
right sought to be protected is material and substantial, and that there is an urgent and paramount necessity for the
writ to prevent serious damage.76
In the absence of a clear legal right, the issuance of the injunctive writ constitutes grave abuse of discretion.
Injunction is not designed to protect contingent or future rights. It is not proper when the complainants right is
doubtful or disputed.77
As a general rule, courts should avoid issuing this writ, which in effect disposes of the main case without trial. 78 In
Manila International Airport Authority v. CA,79 we urged courts to exercise caution in issuing the writ, as follows:
"x x x. We remind trial courts that while generally the grant of a writ of preliminary injunction rests on the sound
discretion of the court taking cognizance of the case, extreme caution must be observed in the exercise of such
discretion. The discretion of the court a quo to grant an injunctive writ must be exercised based on the grounds and
in the manner provided by law. Thus, the Court declared in Garcia v. Burgos:
It has been consistently held that there is no power the exercise of which is more delicate, which requires greater
caution, deliberation and sound discretion, or more dangerous in a doubtful case, than the issuance of an injunction.
It is the strong arm of equity that should never be extended unless to cases of great injury, where courts of law
cannot afford an adequate or commensurate remedy in damages.
Every court should remember that an injunction is a limitation upon the freedom of action of the defendant and
should not be granted lightly or precipitately. It should be granted only when the court is fully satisfied that the law
permits it and the emergency demands it."80 (Citations omitted)
Petitioners do not have any clear right to be protected. As shown in our earlier findings, they failed to substantiate
their allegations that their right to due process had been violated and the maturity of their obligation forestalled.
Since they indisputably failed to meet their obligations in spite of repeated demands, we hold that there is no legal
justification to enjoin respondent from enforcing its undeniable right to foreclose the mortgaged properties.
In any case, petitioners will not be deprived outrightly of their property. Pursuant to Section 47 of the General
Banking Law of 2000,81 mortgagors who have judicially or extrajudicially sold their real property for the full or
partial payment of their obligation have the right to redeem the property within one year after the sale. They can
redeem their real estate by paying the amount due, with interest rate specified, under the mortgage deed; as well as
all the costs and expenses incurred by the bank.82
Moreover, in extrajudicial foreclosures, petitioners have the right to receive any surplus in the selling price. This
right was recognized in Sulit v. CA, 83 in which the Court held that "if the mortgagee is retaining more of the
proceeds of the sale than he is entitled to, this fact alone will not affect the validity of the sale but simply gives the
mortgagor a cause of action to recover such surplus."84
Petitioners failed to demonstrate the prejudice they would probably suffer by reason of the foreclosure. Also, it is
clear that they would be adequately protected by law. Hence, we find no legal basis to reverse the assailed Amended
Decision of the CA dated May 4, 2004.
WHEREFORE, the Petition is DENIED and the assailed Amended Decision and Resolution AFFIRMED. Costs
against petitioners.
SO ORDERED.