Professional Documents
Culture Documents
NOTICE
Sirs/Mesdames :
Please take notice that the Court, First Division, issued a Resolution
dated July 29, 2015, which reads as follows:
"G.R. No. 167925 PHILIPPINE NATIONAL BANK, Petitioner, v.
D.B. TEODORO DEVELOPMENT CORPORATION, ET AL., Respondents;
G.R. No. 169362 ASSET PRIVATIZATION TRUST, Petitioner, v. D.B.
TEODORO DEVELOPMENT CORPORATION, ET AL., Respondents.
These are consolidated petitions for review on certiorari under Rule 45 of
the Rules of Court seeking the reversal of the Decision 1 dated April 25, 2005
of the Court of Appeals in CA-G.R. CV No. 57472, entitled "Philippine National
Bank and National Investment and Development Corporation, Plaintiffs-
Appellants, vs. D.B. Teodoro Development Corporation, et al., Defendants-
Appellees, Asset Privatization Trust, Plaintiff-Intervenor-Appellant," which
affirmed with modification the Decision 2 dated August 6, 1997 of the
Regional Trial Court (RTC) of Makati City, Branch 62, in Civil Case No. 12566.
In addition, the Petition in G.R. No. 169362 also assails the Resolution 3 dated
August 15, 2005 of the Court of Appeals which denied for lack of merit the
motion for reconsideration filed by petitioner Asset Privatization Trust (APT).
The aforementioned civil case at the center of this controversy (Civil
Case No. 12566) is a complaint for recovery of deficiency claims and
reformation of a Certificate of Sale with prayer for attachment filed by
petitioner Philippine National Bank (PNB) and its former subsidiary National
Investment and Development Corporation (NIDC) against respondents D.B.
Teodoro Development Corporation (Teodoro Development) and D.B. Teodoro
Integrated Homes Development Corporation (Teodoro Integrated) as the
principal borrowers and the following as sureties, namely: (a) Teodoro and
Teodoro Construction, Inc. (Teodoro Construction); (b) DBT Marbay
Construction Company, Inc. (Teodoro Marbay); (c) Marbay Construction and
Development Company, Inc. (Marbay); (d) Luzcon Incorporated (Luzcon); (e)
Constellation Management Corporation (Constellation); (f) Spouses Donato B.
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Teodoro and Soledad C. Teodoro; (g) Spouses Amado B. Teodoro and Herminia
L. Teodoro; (h) Natalia B. Vda. De Teodoro; (i) Spouses Jorge B. Teodoro and
Carol Roman Teodoro; (j) Spouses Edward Sevilla and Teresita Teodoro-Sevilla;
(k) Fe Teodoro-Gatchalian; (l) Artemio Teodoro Gatchalian; and (m) Spouses
Jose B. Teodoro and Constance Balanay Teodoro (collectively referred as
"Teodoros"). AScHCD
After the dissolution of NIDC, PNB absorbed all its assets and liabilities,
as well as all claims for and against it. On the other hand, petitioner APT, now
the Privatization Management Office (PMO), intervened in this case inasmuch
as the obligation of respondents was already assigned and transferred by PNB
to the Republic of the Philippines pursuant to Proclamation No. 50, as
amended, 4 and other relevant laws and issuances.
A brief factual outline of the case as stated by the Court of Appeals in its
assailed April 25, 2005 Decision follows:
PNB/NIDC granted various loans on different dates to [Teodoro
Development] and [Teodoro Integrated] as principal borrowers. Said
loans were secured by the other [respondents] enumerated above and
collectively referred to herein as the "Teodoros."
Unable to pay the loans, the two (2) principal borrowers
requested PNB to restructure their obligations, to which PNB agreed.
Thereupon, Teodoro Development and Teodoro Integrated
executed promissory notes pursuant to the Agreement for Plan of
Payment.
Later, NIDC granted a Guaranty Accommodation to Teodoro
Development for the prompt payment to Marubeni Nederland, B.V. of
Rotterdam ("Marubeni") of US$8,500,000.00 in the acquisition of
machinery and equipment and establishment of a lime plant at Guimaras
Island, Iloilo. This obligation was secured by a Surety Agreement
executed by the other [respondents] in favor of NIDC.
Subsequently, to finance the purchase of machinery and
equipment and the establishment of an integrated crushing plant (ICP),
NIDC granted to Teodoro Integrated a Foreign Sub-Loan in the amount
of US$9,300,000.00, which was also secured by the other
[respondents].
All existing registered mortgage instruments securing the various
aforestated loans granted to Teodoro Development and Teodoro
Integrated by PNB and NIDC were consolidated into one Deed of
Mortgage which was executed on April 13, 1982 by Teodoro
Development, Teodoro Integrated, the Phil. Portland Cement Co., Inc.
(PPCCI) and Donato Teodoro, as mortgagors, in favor of PNB/NIDC,
pari-passu.
Under this Deed of Mortgage, the mortgagors not only agreed to
consolidate the mortgage documents on properties already and
previously mortgaged but in addition thereto, constituted a mortgage
over the plant site, machinery and equipment for the Lime Plant Project
of Teodoro Development in Guimaras, Iloilo, and also over the plant site,
machinery and equipment for the Integrated Crushing Plant Project of
Teodoro Integrated in Angono, Rizal.
On appeal, the Court of Appeals affirmed the trial court's ruling with
respect to the validity of the certificate of sale, the non-demandability of the
Guaranty Accommodation in favor of Marubeni, and the award of
P3,900,000.00 as the amount allegedly deviated by NIDC for its own interest.
However, the appellate court deleted the amount of P11,896,623.88 awarded
as excess of the proceeds of the foreclosure sales and the award for moral and
exemplary damages. The dispositive portion of the assailed April 25, 2005
Decision of the Court of Appeals is reproduced here:
WHEREFORE, the Appeal is hereby DISMISSED. The assailed
Decision of the trial court dated August 6, 1997 is hereby AFFIRMED
with MODIFICATION by deleting the amount of P11,896,623.88 and the
award for moral and exemplary damages. 7
APT filed a motion for reconsideration but it was denied by the Court of
Appeals in its assailed Resolution dated August 15, 2005. Thereafter, both PNB
and APT elevated the matter before this Court.
PNB was first to file its petition for review on certiorari dated June 10,
2005, entitled "Philippine National Bank v. D.B. Teodoro Development
Corporation, et al.," which was docketed as G.R. No. 167925. 8 APT followed
with the filing of its own petition which was docketed as G.R. No. 169362, 9
entitled "Asset Privatization Trust v. D.B. Teodoro Development Corporation,
et al." Seeing that both petitions raise the same issues and arguments, this
Court issued a Resolution 10 dated January 30, 2006 ordering the consolidation
of the petitions each filed by PNB and APT.
From the pleadings, the issues raised for resolution are:
1. WHETHER OR NOT THE SHERIFF'S CERTIFICATE OF SALE DATED
NOVEMBER 15, 1983 CAN BE SUBJECT TO REFORMATION ON THE
BASIS OF FRAUD
2. WHETHER OR NOT THE COURT OF APPEALS WAS CORRECT IN
RULING THAT NIDC DEVIATED THE AMOUNT OF P3,900,000.00
FROM TEODORO DEVELOPMENT
On the other hand, respondents insist that NIDC had prior information of
the change of location of the integrated crushing plant as evidenced by the
documentary evidence it submitted before the trial court which, in turn, used
said evidence as basis for ruling on this particular issue in respondent's favor.
Moreover, respondents point out that petitioners failed to present any
agreement or stipulation to the effect that the integrated crushing plant must
be installed on the lot covered by TCT No. 496187, as a pre-condition for or
prerequisite to the approval of the corresponding loan. Pertinently,
respondents assert that they committed no fraud in this instance and insist
that it was PNB and NIDC that should be at fault for committing gross and
inexcusable negligence in the consummation of the transaction at issue.
We concur with the lower courts that the Sheriff's Certificate of Sale
dated November 15, 1983 cannot be the subject of reformation on the basis of
fraud allegedly committed by respondents.
The appellate court committed no error on this point since jurisprudence
tells us that reformation is a remedy in equity, whereby a written instrument
is made or construed so as to express or conform to the real intention of the
parties, where some error or mistake has been committed. In granting
reformation, the remedy in equity is not making a new contract for the
parties, but establishing and perpetuating the real contract between the
parties which, under the technical rules of law, could not be enforced but for
such reformation. 11 Moreover, in an action for reformation of contract, the
court determines whether the parties' written agreement reflects their true
intention. 12
An action for reformation finds legal ground in Article 1359 of the Civil
Code which is reproduced herein:
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Art. 1359. When, there having been a meeting of the minds of the
parties to a contract, their true intention is not expressed in the
instrument purporting to embody the agreement, by reason of mistake,
fraud, inequitable conduct or accident, one of the parties may ask for
the reformation of the instrument to the end that such true intention
may be expressed.
If mistake, fraud, inequitable conduct, or accident has prevented a
meeting of the minds of the parties, the proper remedy is not
reformation of the instrument but annulment of the contract.
Thus, on the basis of the foregoing provision of law, an action for
reformation may prosper only when the following requisites concur: (1) there
must have been a meeting of the minds of the parties to the contract; (2) the
instrument does not express the true intention of the parties; and (3) the
failure of the instrument to express the true intention of the parties is due to
mistake, fraud, inequitable conduct or accident.
To begin with, the Sheriff's Certificate of Sale is not even a contract
between petitioners and respondents such that their supposed true intention
should be gleaned in order to interpret its provisions. A certificate of sale is a
document evidencing that on a certain date, pursuant to an extrajudicial
foreclosure of mortgaged property or properties, the sheriff sold at public
auction the property or properties enumerated for the bid price or prices
stated therein.
A careful examination of their cause of action would reveal that what
petitioners are, in effect, asking the courts to inquire into are the terms of the
Deed of Mortgage 13 dated April 13, 1982 which consolidated all the
outstanding loans of respondents including the mortgage over the parcel of
land covered by TCT No. 496187. The same mortgage document also served as
the basis for the foreclosure sale wherein the certificate of sale at issue was
produced.
By insisting that NIDC and Teodoro Integrated agreed upon the
installation of the integrated crushing plant on the said mortgaged lot as a
condition for the approval of the loan used to finance its construction,
petitioners thereby imply that the aforementioned deed of mortgage or even
the loan agreements did not reflect the true intention of the contracting
parties. However, petitioners failed to present any clear and unequivocal
agreement or stipulation to the effect that Teodoro Integrated or any of the
other respondents for that matter have committed to such an undertaking to
build the integrated crushing plant on the lot covered by TCT No. 496187.
When PNB/NIDC and respondents executed the Deed of Mortgage on
April 13, 1982, it is presumed that all the terms they agreed upon are
incorporated therein. This is in accordance with the parol evidence rule laid
down in Section 9, Rule 130 of the Revised Rules of Court. 14 We elaborated on
this legal principle in Carganillo v. People 15 in this wise:
It is settled that the agreement or contract between the parties is
the formal expression of the parties' rights, duties and obligations and is
the best evidence of the parties' intention. Thus, when the terms of an
agreement have been reduced into writing, it is considered as containing
all the terms agreed upon and there can be, between the parties and
their successors-in-interest, no evidence of such terms other than the
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contents of the written agreement. . . . .
Nevertheless, the parol evidence rule is not ironclad and does admit of
exceptions. However, petitioners were not able to convince both the trial court
and the Court of Appeals of the existence of a clear and unequivocal
agreement between NIDC and the respondents concerning the alleged
mandatory location of the integrated crushing plant that was constructed by
Teodoro Integrated in Angono, Rizal. Respondents, on the other hand, were
able to persuade both tribunals by their documentary evidence and witness
testimony that NIDC was apprised by Teodoro Integrated of the construction
of the integrated crushing plant on a leased land different from the property
covered by TCT No. 496187. cDHAES
Contrary to the ruling of the trial court which was affirmed by the Court
of Appeals, a careful perusal of the allegations of Civil Case No. 6195 and Civil
Case No. 12566 reveal that the issues and causes of action involved in each of
those cases are distinct from each other. Civil Case No. 6195, entitled
"Philippine National Bank, et al. v. D.B. Teodoro Development Corporation, et
al.," filed before the RTC of Makati City, Branch 138 is a case for "Recovery
and Delivery of Personal Property with Application for Replevin" filed by PNB
against respondents in 1984. It seeks to recover certain machinery and
equipment worth P19,906,300.00 covered by the deeds of mortgage attached
to the complaint.
On the other hand, Civil Case No. 12566, entitled "Philippine National
Bank and National Investment and Development Corporation v. D.B. Teodoro
Development Corporation," is a complaint for reformation of certificate of sale,
deficiency claim, and attachment. It seeks the reformation of the Certificate of
Sale dated November 15, 1983 of the Sheriff as it supposedly did not reflect
the true intention of the parties, and the enforcement of deficiency
obligations against respondents.
To reiterate, we rule that there is no identity of the issues and the reliefs
sought in the aforementioned civil suits because a judgment in either case will
not amount to res judicata to the other proceeding. In Civil Case No. 6195, the
cause of action is the failure and/or refusal of the defendants to deliver to PNB
and NIDC the chattels mortgaged by respondents to secure their obligations,
for purposes of foreclosure. Civil Case No. 12566, on the other hand, poses the
following causes of action: (1) fraudulent misrepresentation by respondents in
the execution of the real estate mortgage of the parcel of land as the plant
site; (2) insufficiency of the amounts realized from various foreclosure sales;
and (3) enforcement of surety obligations of the sureties to the obligations.
It is also worth noting that the complaint in Civil Case No. 6195 had
been withdrawn pursuant to the Order 20 dated April 21, 1986 of the RTC of
Makati City, Branch 138 which was affirmed in the Order 21 dated June 27,
1990 of the same trial court. In line with past jurisprudence, the withdrawal of
this other case is additional reason not to dismiss the complaint involved
herein. 22
The guaranty accommodation extended
by NIDC to Teodoro Development in
favor of Marubeni Nederland, B.V.
is already due and demandable.
In its assailed Decision dated April 25, 2005, the Court of Appeals upheld
the ruling of the trial court which declared that the guaranty obligation of
Teodoro Development was not yet due and demandable in view of the pending
derivative suit filed by respondent Artemio Gatchalian in behalf of Teodoro
Development against NIDC, entitled "Artemio Gatchalian v. Marubeni
Nederland B.V., et al.," docketed as Civil Case No. Q-35534 before the RTC of
Quezon City, Branch 83 which was subsequently re-raffled to Branch 102.
This case seeks to prevent NIDC from paying Marubeni, the contractor of the
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lime plant that was built in Guimaras, Iloilo, now Guimaras Province, on the
ground that Marubeni failed to deliver and construct the facility according to
the specifications agreed upon.
In upholding the lower court, the appellate court quoted with approval
the following portions of the assailed August 6, 1997 Decision of the trial
court, to wit:
[P]laintiffs seek to compel individual defendants to pay jointly and
severally the various deficiency claims resulting from the foreclosures
conducted on the mortgaged properties securing the loan obligations
and financial accommodations extended to Teodoro Development and
Teodoro Integrated. Before disposing of this issue, the Court will first
resolve the Matter of Guaranty Accommodation in the amount of
U.S.$8,500,000.00 extended by plaintiff NIDC to Teodoro Development
in favor of Marubeni Nederland B.V. for the acquisition of machinery and
equipment and establishing of a lime plant in Guimaras, Iloilo.
. . . There is no issue that the lime plant project never got to be
completed and operational prompting defendant Teodoro Development
to reject, with concurrence of the plaintiffs (Exh. "4"), the plant
constructed by Marubeni. Since the exposure of plaintiff NIDC is one of
guaranty, the latter's liability to NIDC would arise only at such time that
Marubeni could legally pursue its claim against NIDC. Now, there is no
issue that in the derivative suit instituted by Mr. Artemio Gatchalian on
behalf of Teodoro Development, Civil Case No. Q-35534 (Exh. "8"), he
was seeking the stoppage of any payment by Plaintiff NIDC to Marubeni
due to the latter's contractual infractions and inability to deliver the
project on a turn-key basis. In view thereof, the Court is of the opinion
that the obligation of defendant Teodoro Development and individual
defendants solidarily liable with it has not yet arisen pending final
resolution of Civil Case No. Q-35534 (Exh. "8"). Therefore, the
foreclosure for this particular account was patently premature. 23
Notably, respondents do not refute petitioners' assertion that the
derivate suit filed by respondent Gatchalian had long been archived pursuant
to the Order 24 dated November 12, 1993 of the trial court hearing that case
for failure of the plaintiff "to take any positive step to pursue his case against
said defendant (NIDC)" and take "appropriate action with respect to the other
defendants (MARUBENI and TEODORO DEVELOPMENT)." Moreover,
respondent Gatchalian made no attempt to revive his derivative suit after the
case had been archived. We agree with petitioners that it would be the height
of iniquity to deem that the guaranty obligation of Teodoro Development is
not yet due and demandable because of a derivative suit which, from all
indications, has already been abandoned by its proponent who conveniently is
a defendant in the very case where said guaranty obligation is being enforced.
ITAaHc
2. Id. at 619-625.
3. Rollo (G.R. No, 169362), pp. 109-112.
6. Id. at 624-625.
7. Id. at 93.
8. Id. at 10-72.
However, a party may present evidence to modify, explain or add to the terms of
the written agreement if he puts in issue in his pleading:
19. G.R. No. 173331, December 11, 2013, 712 SCRA 238, 248.
20. Rollo (G.R. No. 169362), pp. 149-153.
22. See Philippine Woman's Christian Temperance Union, Inc. v. Abiertas House of
Friendship, Inc., 354 Phil. 791, 803 (1998).
27. Cargill Philippines, Inc. v. San Fernando Regala Trading, Inc., 656 Phil. 29, 42-43
(2011).
28. Rollo (G.R. No. 167925), p. 712. The term "CONTRACTS" included (a) the
Contract dated October 28, 1976 by the terms of which Marubeni sold to
Teodoro machinery and equipment of the Lime Plant; (b) the Construction
Loan Agreement to enable Teodoro to pay the costs and expenses for the
installation of the Lime Plant; and (c) Cash Loan Agreement by which
Marubeni extended an additional loan to Teodoro for the installation of the
Lime Plant.
31. See Oil and Natural Gas Commission v. Court of Appeals , 354 Phil. 830, 850
(1998).
32. G.R. No. 173183, November 18, 2013, 709 SCRA 559, 568.