Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 192986 January 15, 2013

ADVOCATES FOR TRUTH IN LENDING, INC. and EDUARDO B. OLAGUER, Petitioners,

vs.
BANGKO SENTRAL MONETARY BOARD, represented by its Chairman, GOVERNOR ARMANDO M.
TETANGCO, JR., and its incumbent members: JUANITA D. AMATONG, ALFREDO C. ANTONIO,
PETER FA VILA, NELLY F. VILLAFUERTE, IGNACIO R. BUNYE and CESAR V.
PURISIMA, Respondents.

DECISION

REYES, J.:

Petitioners, claiming that they are raising issues of transcendental importance to the public, filed directly with this
Court this Petition for Certiorari under Rule 65 of the 1997 Rules of Court, seeking to declare that the Bangko
Sentral ng Pilipinas Monetary Board (BSP-MB), replacing the Central Bank Monetary Board (CB-MB) by virtue of
Republic Act (R.A.) No. 7653, has no authority to continue enforcing Central Bank Circular No. 905, 1 issued by the
CB-MB in 1982, which "suspended" Act No. 2655, or the Usury Law of 1916.

Factual Antecedents

Petitioner "Advocates for Truth in Lending, Inc." (AFTIL) is a non-profit, non-stock corporation organized to
engage in pro bono concerns and activities relating to money lending issues. It was incorporated on July 9,
2010,2 and a month later, it filed this petition, joined by its founder and president, Eduardo B. Olaguer, suing as a
taxpayer and a citizen.

R.A. No. 265, which created the Central Bank (CB) of the Philippines on June 15, 1948, empowered the CB-MB to,
among others, set the maximum interest rates which banks may charge for all types of loans and other credit
operations, within limits prescribed by the Usury Law. Section 109 of R.A. No. 265 reads:

Sec. 109. Interest Rates, Commissions and Charges. — The Monetary Board may fix the maximum rates of interest
which banks may pay on deposits and on other obligations.

The Monetary Board may, within the limits prescribed in the Usury Law fix the maximum rates of interest which
banks may charge for different types of loans and for any other credit operations, or may fix the maximum
differences which may exist between the interest or rediscount rates of the Central Bank and the rates which the
banks may charge their customers if the respective credit documents are not to lose their eligibility for rediscount or
advances in the Central Bank.

Any modifications in the maximum interest rates permitted for the borrowing or lending operations of the banks
shall apply only to future operations and not to those made prior to the date on which the modification becomes
effective.

In order to avoid possible evasion of maximum interest rates set by the Monetary Board, the Board may also fix the
maximum rates that banks may pay to or collect from their customers in the form of commissions, discounts,
charges, fees or payments of any sort. (Underlining ours)
On March 17, 1980, the Usury Law was amended by Presidential Decree (P.D.) No. 1684, giving the CB-MB
authority to prescribe different maximum rates of interest which may be imposed for a loan or renewal thereof or the
forbearance of any money, goods or credits, provided that the changes are effected gradually and announced in
advance. Thus, Section 1-a of Act No. 2655 now reads:

Sec. 1-a. The Monetary Board is hereby authorized to prescribe the maximum rate or rates of interest for the loan or
renewal thereof or the forbearance of any money, goods or credits, and to change such rate or rates whenever
warranted by prevailing economic and social conditions: Provided, That changes in such rate or rates may be
effected gradually on scheduled dates announced in advance.

In the exercise of the authority herein granted the Monetary Board may prescribe higher maximum rates for loans of
low priority, such as consumer loans or renewals thereof as well as such loans made by pawnshops, finance
companies and other similar credit institutions although the rates prescribed for these institutions need not
necessarily be uniform. The Monetary Board is also authorized to prescribe different maximum rate or rates for
different types of borrowings, including deposits and deposit substitutes, or loans of financial intermediaries.
(Underlining and emphasis ours)

In its Resolution No. 2224 dated December 3, 1982,3 the CB-MB issued CB Circular No. 905, Series of 1982,
effective on January 1, 1983. Section 1 of the Circular, under its General Provisions, removed the ceilings on
interest rates on loans or forbearance of any money, goods or credits, to wit:

Sec. 1. The rate of interest, including commissions, premiums, fees and other charges, on a loan or forbearance of
any money, goods, or credits, regardless of maturity and whether secured or unsecured, that may be charged or
collected by any person, whether natural or juridical, shall not be subject to any ceiling prescribed under or pursuant
to the Usury Law, as amended. (Underscoring and emphasis ours)

The Circular then went on to amend Books I to IV of the CB’s "Manual of Regulations for Banks and Other
Financial Intermediaries" (Manual of Regulations) by removing the applicable ceilings on specific interest rates.
Thus, Sections 5, 9 and 10 of CB Circular No. 905 amended Book I, Subsections 1303, 1349, 1388.1 of the Manual
of Regulations, by removing the ceilings for interest and other charges, commissions, premiums, and fees applicable
to commercial banks; Sections 12 and 17 removed the interest ceilings for thrift banks (Book II, Subsections 2303,
2349); Sections 19 and 21 removed the ceilings applicable to rural banks (Book III, Subsection 3152.3-c); and,
Sections 26, 28, 30 and 32 removed the ceilings for non-bank financial intermediaries (Book IV, Subsections
4303Q.1 to 4303Q.9, 4303N.1, 4303P). 4

On June 14, 1993, President Fidel V. Ramos signed into law R.A. No. 7653 establishing the Bangko Sentral ng
Pilipinas (BSP) to replace the CB. The repealing clause thereof, Section 135, reads:

Sec. 135. Repealing Clause. — Except as may be provided for in Sections 46 and 132 of this Act, Republic Act No.
265, as amended, the provisions of any other law, special charters, rule or regulation issued pursuant to said
Republic Act No. 265, as amended, or parts thereof, which may be inconsistent with the provisions of this Act are
hereby repealed. Presidential Decree No. 1792 is likewise repealed.

Petition for Certiorari

To justify their skipping the hierarchy of courts and going directly to this Court to secure a writ of certiorari,
petitioners contend that the transcendental importance of their Petition can readily be seen in the issues raised
therein, to wit:

a) Whether under R.A. No. 265 and/or P.D. No. 1684, the CB-MB had the statutory or constitutional
authority to prescribe the maximum rates of interest for all kinds of credit transactions and forbearance of
money, goods or credit beyond the limits prescribed in the Usury Law;
 b) If so, whether the CB-MB exceeded its authority when it issued CB Circular No. 905, which removed all
interest ceilings and thus suspended Act No. 2655 as regards usurious interest rates;

c) Whether under R.A. No. 7653, the new BSP-MB may continue to enforce CB Circular No. 905. 5

Petitioners attached to their petition copies of several Senate Bills and Resolutions of the 10th Congress, which held
its sessions from 1995 to 1998, calling for investigations by the Senate Committee on Banks and Financial
Institutions into alleged unconscionable commercial rates of interest imposed by these entities. Senate Bill (SB) Nos.
376 and 1860,7 filed by Senator Vicente C. Sotto III and the late Senator Blas F. Ople, respectively, sought to amend
Act No. 2655 by fixing the rates of interest on loans and forbearance of credit; Philippine Senate Resolution (SR)
No. 1053,8 10739 and 1102,10 filed by Senators Ramon B. Magsaysay, Jr., Gregorio B. Honasan and Franklin M.
Drilon, respectively, urged the aforesaid Senate Committee to investigate ways to curb the high commercial interest
rates then obtaining in the country; Senator Ernesto Maceda filed SB No. 1151 to prohibit the collection of more
than two months of advance interest on any loan of money; and Senator Raul Roco filed SR No. 1144 11seeking an
investigation into an alleged cartel of commercial banks, called "Club 1821", reportedly behind the regime of high
interest rates. The petitioners also attached news clippings 12 showing that in February 1998 the banks’ prime lending
rates, or interests on loans to their best borrowers, ranged from 26% to 31%.

Petitioners contend that under Section 1-a of Act No. 2655, as amended by P.D. No. 1684, the CB-MB was
authorized only to prescribe or set the maximum rates of interest for a loan or renewal thereof or for the forbearance
of any money, goods or credits, and to change such rates whenever warranted by prevailing economic and social
conditions, the changes to be effected gradually and on scheduled dates; that nothing in P.D. No. 1684 authorized
the CB-MB to lift or suspend the limits of interest on all credit transactions, when it issued CB Circular No. 905.
They further insist that under Section 109 of R.A. No. 265, the authority of the CB-MB was clearly only to fix the
banks’ maximum rates of interest, but always within the limits prescribed by the Usury Law.

Thus, according to petitioners, CB Circular No. 905, which was promulgated without the benefit of any prior public
hearing, is void because it violated Article 5 of the New Civil Code, which provides that "Acts executed against the
provisions of mandatory or prohibitory laws shall be void, except when the law itself authorizes their validity."

They further claim that just weeks after the issuance of CB Circular No. 905, the benchmark 91-day Treasury bills
(T-bills),13 then known as "Jobo" bills14 shot up to 40% per annum, as a result. The banks immediately followed suit
and re-priced their loans to rates which were even higher than those of the "Jobo" bills. Petitioners thus assert that
CB Circular No. 905 is also unconstitutional in light of Section 1 of the Bill of Rights, which commands that "no
person shall be deprived of life, liberty or property without due process of law, nor shall any person be denied the
equal protection of the laws."

Finally, petitioners point out that R.A. No. 7653 did not re-enact a provision similar to Section 109 of R.A. No. 265,
and therefore, in view of the repealing clause in Section 135 of R.A. No. 7653, the BSP-MB has been stripped of the
power either to prescribe the maximum rates of interest which banks may charge for different kinds of loans and
credit transactions, or to suspend Act No. 2655 and continue enforcing CB Circular No. 905.

Ruling

The petition must fail.

A. The Petition is procedurally infirm.

The decision on whether or not to accept a petition for certiorari, as well as to grant due course thereto, is addressed
to the sound discretion of the court.15 A petition for certiorari being an extraordinary remedy, the party seeking to
avail of the same must strictly observe the procedural rules laid down by law, and non-observance thereof may not
be brushed aside as mere technicality.16
As provided in Section 1 of Rule 65, a writ of certiorari is directed against a tribunal exercising judicial or quasi-
judicial functions.17 Judicial functions are exercised by a body or officer clothed with authority to determine what
the law is and what the legal rights of the parties are with respect to the matter in controversy. Quasi-judicial
function is a term that applies to the action or discretion of public administrative officers or bodies given the
authority to investigate facts or ascertain the existence of facts, hold hearings, and draw conclusions from them as a
basis for their official action using discretion of a judicial nature. 18

The CB-MB (now BSP-MB) was created to perform executive functions with respect to the establishment, operation
or liquidation of banking and credit institutions, and branches and agencies thereof. 19 It does not perform judicial or
quasi-judicial functions. Certainly, the issuance of CB Circular No. 905 was done in the exercise of an executive
function. Certiorari will not lie in the instant case.20

B. Petitioners have no locus standi to file the Petition

Locus standi is defined as "a right of appearance in a court of justice on a given question." In private suits, Section 2,
Rule 3 of the 1997 Rules of Civil Procedure provides that "every action must be prosecuted or defended in the name
of the real party in interest," who is "the party who stands to be benefited or injured by the judgment in the suit or
the party entitled to the avails of the suit." Succinctly put, a party’s standing is based on his own right to the relief
sought.21

Even in public interest cases such as this petition, the Court has generally adopted the "direct injury" test that the
person who impugns the validity of a statute must have "a personal and substantial interest in the case such that he
has sustained, or will sustain direct injury as a result." 22 Thus, while petitioners assert a public right to assail CB
Circular No. 905 as an illegal executive action, it is nonetheless required of them to make out a sufficient interest in
the vindication of the public order and the securing of relief. It is significant that in this petition, the petitioners do
not allege that they sustained any personal injury from the issuance of CB Circular No. 905.

Petitioners also do not claim that public funds were being misused in the enforcement of CB Circular No. 905. In
Kilosbayan, Inc. v. Morato,23 involving the on-line lottery contract of the PCSO, there was no allegation that public
funds were being misspent, which according to the Court would have made the action a public one, "and justify
relaxation of the requirement that an action must be prosecuted in the name of the real party-in-interest." The Court
held, moreover, that the status of Kilosbayan as a people’s organization did not give it the requisite personality to
question the validity of the contract. Thus:

Petitioners do not in fact show what particularized interest they have for bringing this suit. It does not detract from
the high regard for petitioners as civic leaders to say that their interest falls short of that required to maintain an
action under the Rule 3, Sec. 2.24

C. The Petition raises no issues of transcendental importance.

In the 1993 case of Joya v. Presidential Commission on Good Government, 25 it was held that no question involving
the constitutionality or validity of a law or governmental act may be heard and decided by the court unless there is
compliance with the legal requisites for judicial inquiry, namely: (a) that the question must be raised by the proper
party; (b) that there must be an actual case or controversy; (c) that the question must be raised at the earliest possible
opportunity; and (d) that the decision on the constitutional or legal question must be necessary to the determination
of the case itself.

In Prof. David v. Pres. Macapagal-Arroyo,26 the Court summarized the requirements before taxpayers, voters,
concerned citizens, and legislators can be accorded a standing to sue, viz:

(1) the cases involve constitutional issues;

 (2) for taxpayers, there must be a claim of illegal disbursement of public funds or that the tax measure is
unconstitutional;

(3) for voters, there must be a showing of obvious interest in the validity of the election law in question;

(4) for concerned citizens, there must be a showing that the issues raised are of transcendental importance
which must be settled early; and

(5) for legislators, there must be a claim that the official action complained of infringes upon their
prerogatives as legislators.

While the Court may have shown in recent decisions a certain toughening in its attitude concerning the question of
legal standing, it has nonetheless always made an exception where the transcendental importance of the issues has
been established, notwithstanding the petitioners’ failure to show a direct injury. 27 In CREBA v. ERC,28 the Court
set out the following instructive guides as determinants on whether a matter is of transcendental importance, namely:
(1) the character of the funds or other assets involved in the case; (2) the presence of a clear case of disregard of a
constitutional or statutory prohibition by the public respondent agency or instrumentality of the government; and (3)
the lack of any other party with a more direct and specific interest in the questions being raised. Further, the Court
stated in Anak Mindanao Party-List Group v. The Executive Secretary29 that the rule on standing will not be waived
where these determinants are not established.

In the instant case, there is no allegation of misuse of public funds in the implementation of CB Circular No. 905.
Neither were borrowers who were actually affected by the suspension of the Usury Law joined in this petition.
Absent any showing of transcendental importance, the petition must fail.

More importantly, the Court notes that the instant petition adverted to the regime of high interest rates which
obtained at least 15 years ago, when the banks’ prime lending rates ranged from 26% to 31%,30 or even 29 years
ago, when the 91-day Jobo bills reached 40% per annum. In contrast, according to the BSP, in the first two (2)
months of 2012 the bank lending rates averaged 5.91%, which implies that the banks’ prime lending rates were
lower; moreover, deposit interests on savings and long-term deposits have also gone very low, averaging 1.75% and
1.62%, respectively.31

Judging from the most recent auctions of T-bills, the savings rates must be approaching 0%.1âwphi1 In the auctions
held on November 12, 2012, the rates of 3-month, 6-month and 1-year T-bills have dropped to 0.150%, 0.450% and
0.680%, respectively.32 According to Manila Bulletin, this very low interest regime has been attributed to "high
liquidity and strong investor demand amid positive economic indicators of the country." 33

While the Court acknowledges that cases of transcendental importance demand that they be settled promptly and
definitely, brushing aside, if we must, technicalities of procedure, 34 the delay of at least 15 years in the filing of the
instant petition has actually rendered moot and academic the issues it now raises.

For its part, BSP-MB maintains that the petitioners’ allegations of constitutional and statutory violations of CB
Circular No. 905 are really mere challenges made by petitioners concerning the wisdom of the Circular. It explains
that it was in view of the global economic downturn in the early 1980’s that the executive department through the
CB-MB had to formulate policies to achieve economic recovery, and among these policies was the establishment of
a market-oriented interest rate structure which would require the removal of the government-imposed interest rate
ceilings.35

D. The CB-MB merely suspended the effectivity of the Usury Law when it issued CB Circular No. 905.

The power of the CB to effectively suspend the Usury Law pursuant to P.D. No. 1684 has long been recognized and
upheld in many cases. As the Court explained in the landmark case of Medel v. CA,36 citing several cases, CB
Circular No. 905 "did not repeal nor in anyway amend the Usury Law but simply suspended the latter’s
effectivity;"37that "a CB Circular cannot repeal a law, [for] only a law can repeal another law;" 38 that "by virtue of
CB Circular No. 905, the Usury Law has been rendered ineffective;" 39 and "Usury has been legally non-existent in
our jurisdiction. Interest can now be charged as lender and borrower may agree upon." 40

In First Metro Investment Corp. v. Este Del Sol Mountain Reserve, Inc.41 cited in DBP v. Perez,42 we also belied the
contention that the CB was engaged in self-legislation. Thus:

Central Bank Circular No. 905 did not repeal nor in any way amend the Usury Law but simply suspended the latter’s
effectivity. The illegality of usury is wholly the creature of legislation. A Central Bank Circular cannot repeal a law.
Only a law can repeal another law. x x x.43

In PNB v. Court of Appeals,44 an escalation clause in a loan agreement authorized the PNB to unilaterally increase
the rate of interest to 25% per annum, plus a penalty of 6% per annum on past dues, then to 30% on October 15,
1984, and to 42% on October 25, 1984. The Supreme Court invalidated the rate increases made by the PNB and
upheld the 12% interest imposed by the CA, in this wise:

P.D. No. 1684 and C.B. Circular No. 905 no more than allow contracting parties to stipulate freely regarding any
subsequent adjustment in the interest rate that shall accrue on a loan or forbearance of money, goods or credits. In
fine, they can agree to adjust, upward or downward, the interest previously stipulated. x x x. 45

Thus, according to the Court, by lifting the interest ceiling, CB Circular No. 905 merely upheld the parties’ freedom
of contract to agree freely on the rate of interest. It cited Article 1306 of the New Civil Code, under which the
contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient,
provided they are not contrary to law, morals, good customs, public order, or public policy.

E. The BSP-MB has authority to enforce CB Circular No. 905.

Section 1 of CB Circular No. 905 provides that "The rate of interest, including commissions, premiums, fees and
other charges, on a loan or forbearance of any money, goods, or credits, regardless of maturity and whether secured
or unsecured, that may be charged or collected by any person, whether natural or juridical, shall not be subject to
any ceiling prescribed under or pursuant to the Usury Law, as amended." It does not purport to suspend the Usury
Law only as it applies to banks, but to all lenders.

Petitioners contend that, granting that the CB had power to "suspend" the Usury Law, the new BSP-MB did not
retain this power of its predecessor, in view of Section 135 of R.A. No. 7653, which expressly repealed R.A. No.
265. The petitioners point out that R.A. No. 7653 did not reenact a provision similar to Section 109 of R.A. No. 265.

A closer perusal shows that Section 109 of R.A. No. 265 covered only loans extended by banks, whereas under
Section 1-a of the Usury Law, as amended, the BSP-MB may prescribe the maximum rate or rates of interest for all
loans or renewals thereof or the forbearance of any money, goods or credits, including those for loans of low priority
such as consumer loans, as well as such loans made by pawnshops, finance companies and similar credit institutions.
It even authorizes the BSP-MB to prescribe different maximum rate or rates for different types of borrowings,
including deposits and deposit substitutes, or loans of financial intermediaries.

Act No. 2655, an earlier law, is much broader in scope, whereas R.A. No. 265, now R.A. No. 7653, merely
supplemented it as it concerns loans by banks and other financial institutions. Had R.A. No. 7653 been intended to
repeal Section 1-a of Act No. 2655, it would have so stated in unequivocal terms.

Moreover, the rule is settled that repeals by implication are not favored, because laws are presumed to be passed
with deliberation and full knowledge of all laws existing pertaining to the subject.46 An implied repeal is predicated
upon the condition that a substantial conflict or repugnancy is found between the new and prior laws. Thus, in the
absence of an express repeal, a subsequent law cannot be construed as repealing a prior law unless an irreconcilable
inconsistency and repugnancy exists in the terms of the new and old laws.47 We find no such conflict between the
provisions of Act 2655 and R.A. No. 7653.

F. The lifting of the ceilings for interest rates does not authorize stipulations charging excessive, unconscionable,
and iniquitous interest.

It is settled that nothing in CB Circular No. 905 grants lenders a carte blanche authority to raise interest rates to
levels which will either enslave their borrowers or lead to a hemorrhaging of their assets. 48 As held in Castro v.
Tan:49

The imposition of an unconscionable rate of interest on a money debt, even if knowingly and voluntarily assumed, is
immoral and unjust. It is tantamount to a repugnant spoliation and an iniquitous deprivation of property, repulsive to
the common sense of man. It has no support in law, in principles of justice, or in the human conscience nor is there
any reason whatsoever which may justify such imposition as righteous and as one that may be sustained within the
sphere of public or private morals.50

Stipulations authorizing iniquitous or unconscionable interests have been invariably struck down for being contrary
to morals, if not against the law.51 Indeed, under Article 1409 of the Civil Code, these contracts are deemed
inexistent and void ab initio, and therefore cannot be ratified, nor may the right to set up their illegality as a defense
be waived.

Nonetheless, the nullity of the stipulation of usurious interest does not affect the lender’s right to recover the
principal of a loan, nor affect the other terms thereof. 52 Thus, in a usurious loan with mortgage, the right to foreclose
the mortgage subsists, and this right can be exercised by the creditor upon failure by the debtor to pay the debt due.
The debt due is considered as without the stipulated excessive interest, and a legal interest of 12% per annum will be
added in place of the excessive interest formerly imposed, 53following the guidelines laid down in the landmark case
of Eastern Shipping Lines, Inc. v. Court of Appeals,54 regarding the manner of computing legal interest:

II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of
interest, as well as the accrual thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the
absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No
interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand
can be established with reasonable certainty. Accordingly, where the demand is established with reasonable
certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art.
1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is
made, the interest shall begin to run only from the date the judgment of the court is made (at which time the
quantification of damages may be deemed to have been reasonably ascertained). The actual base for the
computation of legal interest shall, in any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal
interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such
finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance
of credit.55 (Citations omitted)

The foregoing rules were further clarified in Sunga-Chan v. Court of Appeals, 56 as follows:
Eastern Shipping Lines, Inc. synthesized the rules on the imposition of interest, if proper, and the applicable rate, as
follows: The 12% per annum rate under CB Circular No. 416 shall apply only to loans or forbearance of money,
goods, or credits, as well as to judgments involving such loan or forbearance of money, goods, or credit, while the
6% per annum under Art. 2209 of the Civil Code applies "when the transaction involves the payment of indemnities
in the concept of damage arising from the breach or a delay in the performance of obligations in general," with the
application of both rates reckoned "from the time the complaint was filed until the [adjudged] amount is fully paid."
In either instance, the reckoning period for the commencement of the running of the legal interest shall be subject to
the condition "that the courts are vested with discretion, depending on the equities of each case, on the award of
interest."57 (Citations omitted)

WHEREFORE, premises considered, the Petition for certiorari is DISMISSED.

SO ORDERED.

BIENVENIDO L. REYES
Associate Justice

WE CONCUR:

MARIA LOURDES P. A. SERENO

Chief Justice

ANTONIO T. CARPIO PRESBITERO J. VELASCO, JR.

Associate Justice Associate Justice

(On leave)
TERESITA J. LEONARDO-DE CASTRO
ARTURO D. BRION*
Associate Justice
Associate Justice

DIOSDADO M. PERALTA LUCAS P. BERSAMIN

Associate Justice Associate Justice

MARIANO C. DEL CASTILLO ROBERTO A. ABAD

Associate Justice Associate Justice

MARTIN S. VILLARAMA, JR. JOSE PORTUGAL PEREZ

Associate Justice Associate Justice

JOSE CATRAL MENDOZA ESTELA M. PERLAS-BERNABE

Associate Justice Associate Justice

MARVIC MARIO VICTOR F. LEONEN

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been
reached in consultation before the case was assigned to the writer of the opinion of the Court.

MARIA LOURDES P. A. SERENO

Chief Justice
Footnotes

* On leave.

1
Rollo, pp. 48-56.

2
Id. at 40-45.

3
Id. at 48-56.

4
Id. at 10-12.

5
Id. at 13.

6
Id. at 31-32.

7
Id. at 33.

8
Id. at 34-35.

9
Id. at 36-37.

10
Id. at 38.

11
Id. at 30.

12
Id. at 26-29.

13
Treasury bills are government debt securities issued by the Bureau of the Treasury with maturities of less
than 1 year.

14
Named after CB Governor Jose "Jobo" Fernandez.

15
Chong v. Dela Cruz, G.R. No. 184948, July 21, 2009, 593 SCRA 311, 313-314.

16
Sea Power Shipping Enterprises, Inc. v. Court of Appeals, 412 Phil. 603, 611 (2001).

17
Sec. 1. Petition for certiorari. — When any tribunal, board or officer exercising judicial or quasi-judicial
functions has acted without or in excess of its or his jurisdiction, or with grave abuse of discretion
amounting to lack or excess of jurisdiction, and there is no appeal, nor any plain, speedy, and adequate
remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper
court, alleging the facts with certainty and praying that judgment be rendered annulling or modifying the
proceedings of such tribunal, board or officer, and granting such incidental reliefs as law and justice may
require.

18
Chamber of Real Estate and Builders’ Associations, Inc. (CREBA) v. Energy Regulatory Commission
(ERC), G.R. No. 174697, July 8, 2010, 624 SCRA 556, 571.
19
Central Bank of the Philippines v. CA, 158 Phil. 986, 993 (1974).

20
In Philnabank Employees Association v. Estanislao (G.R. No. 104209, November 16, 1993, 227 SCRA
804), the Supreme Court refused to issue a writ of certiorari against the Secretaries of Finance and of Labor
after noting that they did not act in any judicial or quasi-judicial capacity but were merely promulgating the
implementing rules of R.A. No. 6971, the Productivity Incentives Act of 1990.

21
Prof. David v. Pres. Macapagal-Arroyo, 522 Phil. 705, 755-756 (2006). (Citations omitted)

22
People of the Philippines and HSBC v. Vera, 65 Phil. 56, 89 (1937).

23
320 Phil. 171 (1995); 316 Phil. 652 (1995).

24
Id. at 696.

25
G.R. No. 96541, August 24, 1993, 225 SCRA 568.

26
Supra note 21.

27
Id.

28
Supra note 18.

29
G.R. No. 166052, August 29, 2007, 531 SCRA 583.

30
Rollo, p. 27. In contrast, as reported in the October 10, 2012 issue of the Philippine Daily Inquirer,
Section B-2-1, a recent 25-year treasury bond issue, government securities which mature in more than a
year, carried an annual rate of 6.125%, way below 31%. It fetched P63 billion, more than double the
government’s original offer of P30 billion.

31
See www.bsp.gov.ph/statistics.online.asp.

32
Manila Bulletin article, November 13, 2012, p. B-1: "Treasury Bill Yields Tumble to Record Lows, 91-
Day at 0.150%"

33
Id.

34
Araneta v. Dinglasan, 84 Phil. 368, 373 (1949).

35
Rollo, pp. 79-80, 103-105.

36
359 Phil. 820 (1998).

37
Security Bank and Trust Co. v. RTC-Makati, Branch 61, 331 Phil. 787, 793 (1996).

38
Palanca v. Court of Appeals, G.R. No. 106685, December 2, 1994, 238 SCRA 593, 601.

39
Sps. Florendo v. CA, 333 Phil. 535, 546 (1996).

40
People v. Dizon, 329 Phil. 685, 696 (1996).
41
420 Phil. 902 (2001).

42
484 Phil. 843 (2004).

43
Supra note 41, at 914, citing Medel v. CA, supra note 36, at 829; Security Bank and Trust v. RTC-
Makati, Branch 61, supra note 37; Palanca v. CA, supra note 38.

44
G.R. No. 107569, November 8, 1994, 238 SCRA 20.

45
Id. at 25.

46
Sps. Recana, Jr. v. CA, 402 Phil. 26, 35 (2001), citing City Government of San Pablo, Laguna v. Reyes,
364 Phil. 842 (1999).

47
Berces v. Guingona, 311 Phil. 614, 620 (1995).

48
Spouses Solangon v. Salazar, 412 Phil. 816, 822 (2001), citing Sps. Almeda v. CA, 326 Phil. 309 (1996).

49
G.R. No. 168940, November 24, 2009, 605 SCRA 231

50
Id. at 232-233, citing Ibarra v. Aveyro, 37 Phil. 273, 282 (1917).

51
Medel v. CA, supra note 36, at 830.

52
First Metro Investment Corp. v. Este del Sol Mountain Reserve, Inc., supra note 41, at 918.

53
See Castro v. Tan, supra note 49, at 240; Heirs of Zoilo Espiritu v. Landrito, G.R. No. 169617, April 3,
2007, 520 SCRA 383, 394; Cuaton v. Salud, 465 Phil. 999 (2004); Sps. Almeda v. CA, supra note 48; First
Metro Investment Corp. v. Este Del Sol Mountain Reserve, Inc., supra note 41, at 918; Ruiz v. Court of
Appeals, 449 Phil. 419, 433-435 (2003); Spouses Solangon v. Salazar, supra note 48.

54
G.R. No. 97412, July 12, 1994, 234 SCRA 78.

55
Id. at 95-97.

56
G.R. No. 164401, June 25,2008, 555 SCRA 275.

57
Id. at 288.

SECOND DIVISION

[G.R. No. 144029. September 19, 2002]

SPOUSES GUILLERMO AGBADA and MAXIMA AGBADA, petitioners, vs. INTER-URBAN
DEVELOPERS, INC., and REGIONAL TRIAL COURT-BR. 105, QUEZON CITY, respondents.

DECISION
BELLOSILLO, J.:

This is a Petition for Review on Certiorari of the Decision of the Court of Appeals in CA-G.R. SP No.
54273, "Spouses Guillermo and Maxima Agbada v. Regional Trial Court, Quezon City, Branch 105, and Inter-
Urban Developers, Inc.," which dismissed the Petition for Annulment of Judgment with Preliminary Injunction filed
by petitioner-spouses, specifically to nullify and to set aside the Summary Judgment rendered by respondent
Regional Trial Court in its Civil Case No. Q-93-18592, "Inter-Urban Developers, Inc. (represented by Philip Tiam
Lee) v. Spouses Guillermo and Maxima Agbada," for Foreclosure of Real Estate Mortgage, as well as
the Resolution of the appellate court denying reconsideration of the assailed CA Decision.
On 21 February 1991 petitioner-spouses Guillermo Agbada and Maxima Agbada borrowed P1,500,000.00
from respondent Inter-Urban Developers, Inc. through its president, Simeon L. Ong Tiam.[1] To secure the loan, the
parties concurrently executed a Deed of Real Estate Mortgage over a parcel of land and the improvements thereon
situated in Tandang Sora, Quezon City owned by the spouses. [2] The loan was payable within six (6) months from 21
February 1991 at three percent (3%) interest per month, otherwise, failure to discharge the loan within the stipulated
period would entitle Inter-Urban Developers, Inc. to foreclose the mortgage judicially or extra-judicially.[3] The
spouses failed to pay the loan within the six-month period despite several out-of-court demands made by
respondent Inter-Urban Developers, Inc.[4]
On 10 December 1993 Inter-Urban Developers, Inc. filed with the Regional Trial Court of Quezon City,
Branch 105, a complaint for foreclosure of real estate mortgage.[5] On 2 March 1994, without assistance of counsel,
the spouses filed their unverified answer admitting that they had borrowed the amount of P1,500,000.00 from
respondent and had executed the real estate mortgage to secure the loan but denying that it was payable within six
(6) months and at three percent (3%) interest per month. [6] As affirmative defense they alleged in their answer that -

[petitioner-spouses] and Simeon L. Ong Tiam, then acting for and in behalf of [Inter-Urban Developers], were
compadre and comadre, for this reason, after the execution of the Real Estate Mortgage Contract x x x [Spouses
Guillermo and Maxima Agbada] were only charged with interest at legal rate and the period for the said contract is
five (5) years from execution thereof x x x x That the said contract is merely simulated and for formality sake
only x x x x That the claim or demand set forth in the plaintiffs complaint is not yet due and demandable, thus, the
complaint states no cause of action against the defendants x x x x[7]

The parties filed their respective pre-trial briefs with petitioner-spouses again filing their own and without the
assistance of counsel. When the pre-trial was set on 21 April 1994 it had to be postponed on account of petitioner-
spouses' absence. It was reset to 13 May 1994 but it was again postponed upon request of petitioner Guillermo
Agbada who had no lawyer yet to assist him. But he submitted a one-page hand written letter addressed to the trial
judge asking for continuance of the pre-trial and further admitting liability for the due and demandable loan: "hindi
ko po nais makipaglaban dito sa kasong ito dahilan po itong perang ito dapat ko pong bayaran."[8] On 8 June 1994,
pre-empting the pre-trial conference, Inter-Urban Developers, Inc. moved for summary judgment alleging that -

1. In [the spouses] answer which is dated 1 March 1994, they admit the amount of indebtedness as alleged in the
Complaint; 2. They likewise admit in their Special and Affirmative Defenses that they have executed the Real Estate
Mortgage Contract subject of this Complaint; 3. What [the spouses] are questioning in this Complaint is only the
period and their compadre, Simeon Ong Tiam, then President of [Inter-Urban Developers], to be payable after five
years and at the legal rate of interest; 4. Their Compadre, Simeon Ong Tiam, and the [Inter-Urban Developers] are
not one and the same entity so that their alleged arrangement with their compadre does not in anyway bind [Inter-
Urban Developers] who has relied on the subject Deed of Real Estate Mortgage; the said mortgage contract which
execution, [the spouses] admit, clearly shows that they contracted with the [Inter-Urban Developers], the amount
of P1,500,000.00 payable within six months from execution at the interest rate of three percent per month x x x x
5. The [petitioner] Mr. Guillermo Agbada, in one scheduled setting, has written this Honorable Court, as borne by
the records of this case, that he is admitting the total amount of indebtedness and is only bidding for time because he
has already arranged with a bank to pay the total amount of indebtedness so as to terminate the case once and for all
x x x x [9]

The motion for summary judgment was supported by an affidavit of the treasurer-cashier of Inter-Urban
Developers, Inc. to the effect that she witnessed the execution of the mortgage contract and that she personally gave
the check of P1,500,000.00 for the loan.[10] The spouses opposed the motion although they failed to submit
supporting counter- affidavits.[11]
On 7 July 1994, this time with the assitance of counsel, petitioner-spouses Agbada moved to amend their
answer to allege that the mortgage contract was not reflective of the true intention of the parties since in reality the
loan was interest-free and would mature only after five (5) years from execution thereof and that consequently they
were denying under oath the due execution and authenticity of the mortgage document, although the proposed
answer was still not verified by them.[12] Interestingly, the amended answer departed from the allegation in the
original answer that the loan would earn interest at the legal rate.The trial court denied the amendment of the
answer holding that the change would substantially alter the gist of the defense.[13]
On 13 January 1995 the trial court promulgated its Summary Judgment in favor of respondent Inter-Urban
Developers, Inc. It held that Simeon Ong Tiam, compadre of petitioner-spouses and then president of Inter-Urban
Developers, Inc. could not have obligated his principal by contemporaneous agreement amending the maturity of
the loan from six (6) months to five (5) years and the interest rate from three percent (3%) per month to the default
or statutory rate, much less interest-free, since the undertaking was contrary to the express provisions of the duly
executed loan and mortgage contract.[14] The trial court awarded Inter-Urban Developers, Inc. the amounts of "P1.5
million with monthly interest of 3% from February 21, 1991 until fully paid plus attorneys fees of P10,000.00
including the real estate taxes and registration expenses. In case of failure of defendants to do so within ninety (90)
days from finality, the decree of foreclosure shall issue." [15]
Petitioner-spouses did not appeal the Summary Judgment nor did they pay the judgment debt. On 31 May
1995 Inter-Urban Developers, Inc. moved for a decree of foreclosure which the spouses did not oppose nor did they
attend the hearing on the motion.[16] On 14 July 1995 the trial court granted the motion and issued a decree of
foreclosure.[17] On 19 August 1996 respondent moved for an order authorizing the sale of the mortgaged real estate
for failure of the spouses to pay the judgment debt. [18] Once again the petitioner-spouses did not oppose the motion
nor did they attend the hearing thereon.[19] On 26 August 1996 the trial court ordered the foreclosure sale of the
mortgaged property.[20] On 10 September 1996 Inter-Urban Developers, Inc. moved ex parte for the appointment of
a special sheriff to attend to the foreclosure sale since no sheriff was assigned in RTC-Br. 105.[21] On 11
September 1996, acting on the ex parte motion, the trial court ordered the Ex-Oficio Sheriff to designate a special
sheriff to carry out the foreclosure sale.[22]On 6 November 1996 the mortgaged real estate was sold at public auction
to respondent Inter-Urban Developers, Inc. as highest bidder for P4,637,092.74 which was supposed to be in full
satisfaction of the judgment debt.[23]
On 3 April 1997, upon motion of Inter-Urban Developers, Inc. and despite petitioner-spouses' opposition
thereto on the ground that the purchase price of the mortgaged property was below its appraised value according to
an appraisal report, the trial court confirmed the sale in favor of Inter-Urban Developers, Inc.[24] The trial court ruled
that it could not have given weight to the appraisal report since this report was not authenticated nor was the
appraiser presented as witness during the hearing of the motion to allow Inter-Urban Developers, Inc. an
opportunity to cross-examine on the appraised value of the property.[25]
The spouses moved for reconsideration of the confirmation order insisting on the inadequacy of the purchase
price but on 25 September 1997 the trial court denied the motion. On 27 October 1997, for the second time, the
spouses moved for reconsideration of the order denying their first motion for reconsideration, calling the attention of
the court to their affidavit to the effect that the appraiser deliberately absented himself from the hearing of the
motion.[26] On 6 March 1998 the trial court denied the motion.[27] Petitioner-spouses did not appeal the order of
confirmation of the sale nor any of the subsequent orders.
On 13 April 1998 petitioner-spouses filed with the Court of Appeals a motion for extension of time to file a
petition for review of a subject matter they did not identify. [28] In a Resolution of 16 April 1998 the appellate court
granted the motion and docketed the purported petition as CA-G.R. SP No. 47325 under Rule 43 of the 1997 Rules
of Civil Procedure as amended.[29] On 24 April 1998 the spouses moved for a second extension of the period to file
their petition for review[30] which on 22 May 1998 the Court of Appeals denied with finality and recorded entry of
judgment of the denial.[31] On 29 January 1998 Inter-Urban Developers, Inc. moved for the issuance of a writ of
possesion over the foreclosed real estate.
On 26 February 1999 the petitioner-spouses filed a Motion to Tender the Full Obligation of the Defendant
Spouses alleging that they had paid their obligation worth P6,307,532.66[32] in the form of cashier's check which
they left with the maid of the counsel of record for Inter-Urban Developers, Inc.[33] On 21 July 1999 the trial court
denied the motion.[34] On 23 March 1999 for the first time since Summary Judgment had been rendered against them,
petitioner-spouses filed with the trial court a Motion to Cancel Certificate of Sale for being Signed by an
Unauthorized Officer/Person and to Recall Summary Judgment for Lack of Jurisdiction[35] which was denied on 20
July 1999.[36] On 21 July 1999 the trial court issued a writ of possesion in favor of respondent Inter-Urban
Developers, Inc. over the subject real property.[37]
On 10 August 1999 petitioner-spouses Guillermo Agbada and Maxima Agbada filed with the Court of Appeals
a petition for annulment of judgment with prayer for preliminary injunction. The petition sought the annulment of
the Summary Judgment for alleged violation of their right to due process arising from the absence of a full-blown
trial on a genuine issue of fact that the loan and mortgage would mature only on the fifth year following its
execution on 21 February 1991.[38] The petition did not question compliance with legal requirements of the
foreclosure proceedings or any part thereof.
On 21 January 2000 the Court of Appeals dismissed the petition and held that the subject matter thereof was
barred by res judicata, referring to CA G.R. SP No. 47325 wherein the appellate court denied with finality
petitioner-spouses' second motion for extension of time to file Petition for Review. [39] The Court of Appeals also
ruled that petitioner-spouses were in no position to ask for annulment of the Summary Judgment since their
negligence denied them the right to avail of other remedies otherwise open to them, such as appeal, and that the
spouses were estopped from assailing the jurisdiction of the trial court after filing several motions to re-evaluate the
assessed value of the mortgaged property.[40] On 11 July 2000 the appellate court denied reconsideration of
its Decision,[41] hence, the instant petition for review on certiorari.
Petitioner-spouses argue that they were deprived of due process when their defense, i.e., that the real estate
mortgage carries a default interest rate and matures only on the fifth year following its execution on 21 February
1991, was considered sham and refused full blown trial, contrary to our ruling in Paz v. Court of Appeals.[42] They
further allege in their statement of facts that

On February 2, 1991, plaintiff Guillermo Agbada, being then an official of a security agency which is a sister
company of respondent Inter-Urban Developer and because of financial problem faced by the couple, arranged with
Simeon Lee Ong Tiam (his close compadre, being the sponsor and god father in the wedding of his daughter and
said Ong Tiam being the President of Inter-Urban Development) obtained a loan from respondent corporation under
the agreement, in view of their relationship, that the loan would only carry legal interest, and would be payable
within a period of 5 years. It is to be noted at this point that Inter-Urban Developers is not a money lending or
financial institution but is engaged in real estate development and the granting of loans was not part of its principal
business. It was clearly understood by petitioners as well as by the responsible officers of Inter-Urban, particularly,
Simeon Lee Ong and the other officers, who, in fact, have close family ties and relationship with petitioners, that the
loan was only an accommodation, hence, the charging only of nominal interest and its repayment within a period of
4 (sic) years.Petitioners were convinced to sign what they were then informed was only a formality, a sham deed of
mortgage which on its face purported to show that a rate of interest different from that initially agreed upon
appeared and the period of maturity of the loan was changed from 5 years to 6 months. [43]

On the other hand, respondent Inter-Urban Developers, Inc. claims that petitioner-spouses did not deny under
oath the authenticity and due execution of the real estate mortgage document, hence, were barred from setting up the
defense that the interest rate and maturity provisions of the loan and mortgage contract were different from those
stipulated in the written agreement.[44] Respondent further argues that the alleged promise made by Simeon Ong
Tiam even if true cannot be enforced against Inter-Urban Developers, Inc. since there is nothing to show that he was
authorized to enter into the alleged contemporaneous agreement. Finally, respondent asserts that there were other
remedies available to petitioners which they failed to exhaust by their own negligence, thus rendering the petition
for annulment of judgment clearly unavailing and that they voluntarily submitted to the jurisdiction of the trial court
by seeking affirmative relief from the effects of the assailed Summary Judgment.[45]
 The petition has no merit. As explained quite frequently, a party may be barred from raising questions of
jurisdiction where estoppel by laches has set in.[46] In a general sense, estoppel by laches is failure or neglect for an
unreasonable and unexplained length of time to do what, by exercising due diligence, ought to have been done
earlier, warranting a presumption that the party entitled to assert it has either abandoned to defend it or has
acquiesced to the correctness and fairness of its resolution. The doctrine is based on grounds of public policy which
for peace of society requires the discouragement of stale claims and, unlike the statute of limitations, is not a mere
question of time but is principally an issue of inequity or unfairness of permitting a right or claim to be enforced or
espoused. Verily, after voluntarily submitting a cause, it is too late for the loser to question the jurisdiction or power
of the court just so he could escape an adverse decision on the merits.
In the instant case, the allegation of deprivation of due process took more than four (4) years of hibernation, so
to speak, from 13 January 1995 when the trial court promulgated its Summary Judgment only to resurrect after failed
attempts to thwart the transfer of title over the foreclosed real estate in favor of respondent Inter-Urban Developers,
Inc. Evidently, petitioner-spouses are barred by laches from assailing the regularity of the Summary Judgment as
shown not only by their silence when they should have defended their alleged right to establish their understanding
of the interest rate and maturity of the loan and mortgage contract, but also by their full and knowing participation in
the proceedings, with the assistance of counsel, leading to the confirmation of the foreclosure sale in favor of
respondent Inter-Urban Developers, Inc.
During the period of their obtrusive reticence, instead of pushing for a full-blown trial where they could have
ventilated their affirmative defense, petitioner-spouses merely disagreed with the finding of the trial court regarding
the appraised value of the foreclosed property, thus strongly implying their acquiescence to the due and demandable
loan, and in fact attempted to write off the loan completely and recover the foreclosed lot and improvements thereon
by filing a Motion to Tender the Full Obligation of the Defendant Spouses in the form of a cashiers check
worth P6,307,532.66 which the trial court denied in due time for obvious lack of merit.
The foregoing circumstances also show that the due process routine vigorously pursued only now by
petitioner-spouses is a clear-cut afterthought meant to delay the settlement of an otherwise uncomplicated property
dispute. Aside from clogging court dockets, the strategy is deplorably a common curse resorted to by losing litigants
in the hope of evading manifest obligations

A natural question is why anyone should want to plead groundlessly when he should know that he will not be able to
make his pleading good when proof is called for. Unfortunately, there are reasons. A defendant from whom payment
is sought x x x often wants delay. Indeed, that may well be the very reason why suit had to be brought. And
defendant can have delay by the simple device of denying the debt, and perhaps gilding the lily by adding pleas of
payment and breach of warranty a trilogy known in the trade as the last refuge of the deadbeat. [47]

It bears stressing that the proper remedy to seek reversal of judgment in an action for foreclosure of real estate
mortgage is not a petition for annulment of judgment but an appeal from the judgment itself or from the order
confirming the sale of the foreclosed real estate. Since petitioner-spouses failed to avail of appeal without sufficient
justification, they cannot conveniently resort to the action for annulment for otherwise they would benefit from their
own inaction and negligence.[48]
Granting arguendo that the assailed Summary Judgment is properly brought before this Court, we nonetheless
find nothing irregular in its promulgation to justify its nullification or reversal. Summary judgment or accelerated
judgment is a procedural technique to promptly dispose of cases where the facts appear undisputed and certain from
the pleadings, depositions, admissions and affidavits on record, or for weeding out sham claims or defenses at an
early stage of the litigation to avoid the expense and loss of time involved in a trial. [49] Its object is to separate what
is formal or pretended in denial or averment from what is genuine and substantial so that only the latter may subject
a party in interest to the burden of trial. In the instant case, it is our conclusion that there is no basis for protesting
the Summary Judgment since the trial court faithfully adhered to the proper function of accelerated judgment by
adjudicating only the character of the issues raised in the pleadings as genuine, sham or fictitious, and only upon
clear determination thereof did the court a quo proceed to render verdict.
Since the civil action before the trial court was for foreclosure of real estate mortgage, the material issues were
the existence of the debt and its demandability. Petitioner-spouses admitted the existence of the debt in favor of
respondent Inter-Urban Developers, Inc. as well as the authenticity and due execution of the deed of real estate
mortgage. The mortgage deed, which the spouses duly signed and acknowledged before a notary public, pegged the
loans maturity date at six (6) months from 21 February 1991 at three percent (3%) interest per month. In effect, by
the admission of the due execution of the loan and mortgage deed, petitioner-spouses confessed that they voluntarily
signed it, and by the admission of the genuineness of the document, they also acknowledged that at the time it was
signed it was in the words and figures exactly as set out in the pleading of respondent Inter-Urban Developers, Inc.
Petitioner-spouses would however claim that a contemporaneous agreement was entered into between them
and Simeon Ong Tiam who was then the president of Inter-Urban Developers, Inc. that the loan was in reality for a
period of five (5) years from 21 February 1991 and, as alleged in their amended answer, interest-free or contrarily,
as stated in their other pleadings, at statutory rate of interest. The defense would thus not only self-contradict but
also appear to override and discard the simultaneous written formal agreement between the parties.
In the instant case, while petitioner-spouses appear to tender a material issue of fact, i.e., demandability and
interest rate of the loan, summary judgment would nonetheless be proper where it is shown that issues tendered are
sham, fictitious, contrived, set up in bad faith, or patently unsubstantial.[50] To forestall summary judgment, it is
essential for the non-moving party to confirm the existence of genuine issues where he has substantial, plausible and
fairly arguable defense, i.e., issues of fact calling for the presentation of evidence upon which a reasonable findings
of fact could return a verdict for the non-moving party although mere scintilla of evidence in support of the party
opposing summary judgment will be insufficient to preclude entry thereof. [51] The proper inquiry would therefore be
whether the affirmative defense offered by petitioner-spouses constitutes genuine issue of fact requiring a full-blown
trial.
We rule that the affirmative defense sets up a sham issue which justifies summary judgment. For one,
petitioner-spouses have not explained how their affirmative defense, since it attempts to vary a written agreement,
could be proved by admissible evidence. It would be useless to avail of a complete trial where the issue proposed by
petitioner-spouses could not be resolved in any manner other than by referring to the explicit terms of the loan and
mortgage agreement. To be sure, where the parties have reduced their agreement in writing, it is presumed that they
have made the writing the only repository and memorial of the truth and whatever is not found in the writing must
be understood to have been waived and abandoned. Specifically, under Sec. 9, Rule 130, Revised Rules of Evidence,
the trial court is barred from admitting evidence which proves or tends to prove the alleged concurrent agreement
with Simeon Ong Tiam which alters or varies the terms of the deed between the parties -

Sec. 9 Evidence of written agreements. - When the terms of an agreement have been reduced to 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 contents of the written agreement. 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: (a) An
intrinsic ambiguity, mistake or imperfection in the written agreement; (b) The failure of the written agreement to
express the true intent and agreement of the parties thereto; (c) The validity of the written agreement; or (d) The
existence of other terms agreed to by the parties or their successors in interest after the execution of the written
agreement x x x x

While it is true that contracting parties may establish stipulations, clauses, terms and conditions as they may
deem convenient provided they are not contrary to law, morals, good customs, public order, or public policy, the
parol evidence rule forbids any addition to or contradiction of the terms of an agreement reduced into writing by
testimony purporting to show that, at or before the signing of the document, other or different terms were orally
agreed upon by the parties. As applied herein, the alleged terms of the contemporaneous agreement between
petitioner-spouses and Simeon Ong Tiam cannot be proved for they are not embodied in the mortgage deed but exist
only in their faint recollection. Only the terms of the loan and mortgage agreement providing for six (6) months
maturity from date of execution thereof and the interest rate of three percent (3%) per month are worth considering
and implementing.
The instant case is not unprecedented. In Tarnate v. Court of Appeals[52] involving a case of foreclosure of real
estate mortgage that was resolved by means of summary judgment where neither the existence of the loans and the
mortgage deeds nor the fact of default on the due repayments was disputed, we rejected as genuine issue the
contention of petitioners therein that they were misled by respondent bank to believe that the loans were long-term
accommodations since the loan documents admittedly executed by the parties clearly contradicted petitioners
asseverations and the parties must have realized that when the terms of the agreement were unequivocally reduced in
writing, they could hardly be controverted by oral evidence to the contrary. Similarly, in Heirs of Amparo del
Rosario v. Santos,[53] where we rejected the alteration of the conditions imposed in the deed of sale, this Court ruled
that appellants therein could not be allowed to introduce evidence of conditions allegedly agreed upon by them other
than those stipulated in the deed of sale because when they reduced their agreement in writing, it is presumed that
they have made the writing the only repository and memorial of truth, and whatever is not found in the writing must
be understood to have been waived and abandoned.
Petitioner-spouses cannot invoke any of the exceptions to the parol evidence rule, more particularly, the
alleged failure of the writing to express the true intent and agreement of the parties. The exception obtains only
where the written contract is so ambiguous or obscure in terms that the contractual intention of the parties cannot be
understood from a mere reading of the instrument, thus necessitating the reception of relevant extrinsic evidence of
the contractual provision in dispute to enable the court to make a proper interpretation of the
instrument.[54] However, in the case at bar, the loan and mortgage deed is clear and without ambiguity, mistake or
imperfection in specifying the maturity of the loan exactly after six (6) months from date of execution thereof at
interest rate of three percent (3%) per month, and certainly these unmistakable terms forbid petitioner-spouses from
introducing evidence aliunde of the alleged contemporaneous agreement in violation of the parol evidence rule.
Indeed the literal meaning of the stipulations is bolstered by the intention of the parties as inferred from their
contemporaneous and subsequent acts.[55] It is a matter of record that, without hesitation, petitioner Guillermo
Agbada asked for the postponement of the pre-trial conference through a one-page handwritten letter addressed to
the trial judge admitting liability for the due and demandable loan: Hindi ko po nais makipaglaban dito sa kasong ito
dahilan po itong perang ito ay dapat ko pong bayaran [56] Furthermore, when proceedings had been ongoing in the
trial court for more than four (4) years, petitioner-spouses plainly assailed the finding of the trial court vis--vis the
appraised value of the foreclosed property, without more, thus strongly implying their acquiescence to the due and
demandable loan, and in fact attempted to pay the loan completely and recover the foreclosed lot and improvements
thereon by tendering a cashiers check worth P6,307,532.66 through a house help.
Furthermore, for purposes of defeating respondents motion for summary judgment, petitioner-spouses did not
avail of any means to prove prima facie that Simeon Ong Tiam had authority to change the terms of the real estate
mortgage by a contemporaneous agreement or, at the very least, to corroborate their allegations by means of the
verified statements of Simeon Ong Tiam himself. Verily the spouses were not able to adduce even a single
explanation why respondent Inter-Urban Developers, Inc. would suddenly and conveniently abandon the formalities
which it had gone through in drafting and executing the real estate mortgage in place of an alleged coincidental and
plain verbal novation of the original stipulations on interest rate and duration of the loan. In the absence of
even prima facie basis for inferring authority on the part of Simeon Ong Tiam or inferring his corroboration of
petitioner-spouses affirmative defense, we cannot bind over Inter-Urban Developers, Inc. to the test of trial to meet
the affirmative defense. In Narra Integrated Corporation v. Court of Appeals[57] we rejected as genuine issue for
lengthy trial the claim that the contractual undertaking of one person was also binding upon another without first
showing a plausible and fairly arguable and substantial circumstance indicating privity and consent to the contract
by the other person upon whom compliance was also sought.
Other circumstances confirm the sham character of petitioner-spouses defense. To be sure, they failed to offer
any counter-affidavit which would have debunked the allegations in the motion for summary judgment as well as its
supporting documents and explained their failure to act swiftly and precisely on the issue. In Heirs of Amparo Del
Rosario v. Santos,[58] and Tiu v. Court of Appeals,[59] we noted that the failure to adduce counter-evidence strongly
indicated the absence of serious factual issue to prevent summary judgment. It has also been said that while parties
are not required to offer affidavits in support of, or in opposition to, summary judgment motions, however, once a
properly supported motion for summary judgment has been filed, an adverse party cannot rest upon the mere
allegations or denials of his pleadings. As colorfully stated in American jurisprudence, [the rule on summary
judgment] x x x say[s] in effect Meet these affidavit facts or judicially die. The party opposing summary judgment
thus must offer either discovery responses or affidavits that set forth specific facts showing that there is a genuine
issue for trial.[60]
The maneuvering of petitioner-spouses before the trial court reinforces our belief that their claim is
unfounded. They contradicted themselves when they claimed that the loan was interest-free and then in another vein
contended that it bore the statutory rate of interest, only to change their recollection subsequently to a nominal rate
of interest. Petitioner-spouses would also vacillate with respect to the alleged reason for respondent Inter-Urban
Developers, Inc. to agree to different maturity and interest-rate provisions since the answer filed before the trial
court would assign as cause therefor the personal relationship between them and Simeon Ong Tiam although their
memorandum before this Court would assert that the preferential treatment was due to petitioner Guillermo Agbadas
employment as consultant of a sister company of Inter-Urban Developers, Inc. It is fatal to petitioner-spouses case,
not to mention a misuse of precious court resources, for them not to recall and convey in precise manner the
stipulations of the purported concurrent agreement with Simeon Ong Tiam when the alleged side contract is the very
defense sought to be heard in a full-blown trial.
Moreover, instead of filing opposing affidavits to support their affirmative defenses, petitioner-spouses
absented themselves from the proceedings a quo eventually leading to the foreclosure sale and its
confirmation. They did not pay the debt when, according to their own affirmative defense, it was already due and
demandable on the fifth year counted from 21 February 1991, that is, in any of the months in 1996.If they indeed
believed in the worthiness of their claim, they ought to have offered payment of the loan as it was then already
payable according to their own allegations and if refused by respondent Inter-Urban Developers, Inc. consigned the
money with the trial court. Quite the reverse, petitioner-spouses resorted to irrelevant legal actions, i.e., a motion for
extension of time to file an unspecified petition for review with the Court of Appeals, which they did not even
pursue thus manifesting a regrettable intention to delay the adverse effects of their prejudicial admissions and to
obscure the fact of finality of the Summary Judgment.[61]
The case of Paz v. Court of Appeals[62] cited by petitioner-spouses does not square with the instant
petition. The Paz case involved an action for quieting of title and recovery of possession, accounting and damages
with preliminary mandatory injunction filed by the buyers of several parcels of land against the defendant who was a
co-heir of the vendors thereof. n the defendant's answer, he alleged that the sale was void since he was not given the
opportunity to exercise his right of pre-emption to buy the property there being no notice of sale having been given
to him and that he was ready and willing to buy the property.Thereafter the defendant filed his own complaint
seeking to annul the sale of the lots in question again invoking his right of pre-emption which had been denied him
as a result of the seemingly deliberate omission of a notice of sale to him. This Court ruled that summary judgment
was improper given a plausible ground of substantial defense which was fairly arguable -

In the case at bar, not only did petitioner herein and defendant in Civil Case No. 54158 assert genuine issues of fact
and law which must be heard and tried, but he even filed Civil Case No. 54408 for the annulment of sale of the
controversial lots in favor of the Nepomucenos and also opposed the survey of the controversial lots in LRC Case
No. R-3730. The court a quo failed to consider that the affidavits of the two vendors Ramon and Luzonica Paz
presented to the court by private respondent only stated that they merely informed their brother Bienvenido of the
sale by way of showing their deeds of sale. The deeds of sale in favor of the Nepomucenos were already fait
accompliwhen they were shown to the petitioner, hence does not justify a summary judgment. Petitioner asserts that
he was unjustly denied as a co-heir of his right of legal pre-emption or redemption provided for under Art. 1623 of
the Civil Code by the failure of his co-heirs to give him notice in writing of their intended desire to sell their shares,
as well as the terms/consideration thereof, in order to enable him to match private respondents - Nepomuceno's offer
to buy or his co-heirs' selling price at P450.00 per square meter. Petitioner's allegation of the lack of written
notification to him by all his co-heirs is a factual and legal issue which cannot justify dispensation of a trial on the
merits.[63]

Clearly, Paz differs from the case at bar. Herein petitioner-spouses were grossly negligent in failing to pursue
an affirmative defense which if true would have certainly impelled them to raise hell the moment that the trial court
refused evidence of such allegation. Moreover, the spouses faced an impenetrable wall barring the alteration of the
specific and unambiguous terms of the real estate mortgage which was not the case in Paz. Indeed, while the
defendant in Paz could have proved the deprivation of his right to legal pre-emption, the petitioners in the instant
case could not do so upon veritable rules of evidence. Lastly, the representations of the defendant in Paz were fairly
arguable since the very evidence offered by the movant for summary judgment showed the absence of the relevant
notice to him. In contrast, we cannot say that the petitioner-spouses here have adequate basis for claiming an alleged
contemporaneous agreement affecting the contractual right of respondent Inter-Urban Developers, Inc. absent any
reasonable showing of the latter's consent to the alteration of the real estate mortgage contract it had earlier
executed. All in all, Paz presented genuine and material issues of fact while the instant case proffered only one issue
which could properly be characterized as sham.
Finally, we find no merit in petitioner-spouses' claim that the purchase price of the mortgaged real property
was way below its appraised value. To begin with, they deliberately withheld the presentation of their own evidence
which might have proved this matter and thus unfortunately deprived respondent Inter-Urban Developers, Inc. the
opportunity to cross-examine whatever such evidence would tend to establish.Equally significant, the low purchase
price could have worked in the petitioner-spouses' favor if they promptly exercised their equity of redemption. As
held in Tarnate v. Court of Appeals,[64] "[a]nent the contention that the property has been sold at an extremely low
price, suffice it to say that, if correct, it would have, in fact, favored an easy redemption of the property. That
remedy could have well been availed of but petitioners did not."
With respect to the award of attorneys fees and the reimbursement of advances for real estate taxes and
registration expenses allegedly incurred by respondent Inter-Urban Developers, Inc. we rule that the determination
thereof was done arbitrarily since the evidence on record, particularly the receipts proving payment of real estate
taxes and registration expenses in the names of petitioner-spouses as payor, does not support the
finding.[65] In Warner Barnes & Co. v. Luzon Surety[66] we held that the trial court cannot impose attorney's fees as
well as other charges through summary judgment absent the standard proof of liability for specified amounts truly
owing. Furthermore, since the attorney's fees along with the purported costs for real estate taxes and registration
expenses were unjustifiably satisfied from proceeds of the sale of the mortgaged property, [67] we must order
restitution of the amounts paid in excess of the duly established debt although the judgment may have become final
and executory. In Esler v. de la Cruz[68] we held -

The gist of the appeal is that since the order for the dismissal of the case was issued on August 20, 1960, and said
dismissal had become final, the court could no longer issue its order of December 9, 1960 directing the return of the
property. The argument while apparently correct would be productive of clear injustice. As a matter of principle
courts should be authorized, as in this case, at any time to order the return of property erroneously ordered to be
delivered to one party, if the order was found to have been issued without jurisdiction. Authority for the return of the
property is expressed under the provision of Section 5 of Rule 39, Rules of Court, which reads as follows:

Sec. 5. Effect of reversal of executed judgment. - Where the judgment executed is reversed totally or partially on
appeal, the trial court, on motion, after the case is remanded to it, may issue such orders of restitution as equity and
justice may warrant under the circumstances.

Under the same principle now expressed in Sec. 5, Rule 39, of the 1997 Rules of Civil
Procedure[69] respondent Inter-Urban Developers, Inc. must return to petitioner-spouses the amounts of P10,000.00
for attorney's fees, P1,691.15 for registration expenses and P10,582.02 for real estate taxes, with interest thereon at
twelve percent (12%) per annum from promulgation of this Decision until fully satisfied.[70]
WHEREFORE, the instant Petition for Review on Certiorari is DENIED. The Decision of the Court of
Appeals in CA-G.R. SP No. 54273, "Spouses Guillermo and Maxima Agbada v. Regional Trial Court, Quezon City,
Branch 105, and Inter-Urban Developers, Inc.," which dismissed the petition for annulment of judgment with
preliminary injunction filed by the Spouses Guillermo and Maxima Agbada to nullify and to set aside the Summary
Judgment rendered by the Regional Trial Court-Br. 105 of Quezon City in its Civil Case No. Q-93-18592 for
foreclosure of real estate mortgage, "Inter-Urban Developers, Inc. (represented by Philip Tiam Lee) v. Spouses
Guillermo and Maxima Agbada," as well as the Resolution of the Court of Appeals denying reconsideration of the
assailed Decision is AFFIRMED, with the MODIFICATION that respondent Inter-Urban Developers is directed
to return to petitioner-spouses Guillermo and Maxima Agbada the amounts of P10,000.00 for attorney's
fees, P1,691.15 for registration expenses and P10,582.02 for real estate taxes, with interest thereon at twelve percent
(12%) per annum from promulgation of this Decision until satisfied.
Upon finality of this Decision, let this case be REMANDED to the Regional Trial Court - Branch 105 of
Quezon City for prompt completion of the execution proceedings. No pronouncement as to costs.
SO ORDERED.
Mendoza, Quisumbing, Austria-Martinez, and Callejo, Sr., JJ., concur

[1]
Original Record, pp. 1, 12.
[2]
Id., pp. 5-6, 39-40
[3]
Id., pp. 5-6.
[4]
Id., p. 7.
[5]
Docketed as Civil Case No. Q-93-18592; id., pp. 1-4.
[6]
Id., p. 12.
[7]
Ibid.
[8]
Id., p. 23.
[9]
Id., pp. 29-30.
[10]
Id., pp. 32-33.
[11]
No copy of the opposition is attached to the original record but respondent Inter-Urban Developers, Inc. admitted
receiving a copy thereof to which it filed a reply; id., pp. 55-56.
[12]
Id., pp. 49-52.
[13]
Id., p. 67.
[14]
Decision penned by Judge Benedicto B. Ulep, RTC-Br. 105, Quezon City; id., pp. 68-69.
[15]
Id., p. 69.
[16]
Id., p. 75.
[17]
Id., p. 76.
[18]
Id., pp. 77-78.
[19]
Id., pp. 77-80.
[20]
Id., p. 81.
[21]
Id., pp. 82-83.
[22]
Id., p. 86.
[23]
Id., p. 90.
[24]
Id., p. 144.
[25]
Id., p. 158.
[26]
Id., pp. 100-108.
[27]
Id., p. 175.
[28]
The petition for review was procedurally erroneous since Rule 43 pertains to orders or decisions of the Regional
Trial Court acting in its appellate jurisdiction which certainly was not the case herein; id., pp. 180-182.
[29]
Id., pp. 189-190.
[30]
Id., pp. 185-187.
[31]
Id., p. 196.
[32]
Id., pp. 203-204.
[33]
Id., p. 206.
[34]
Id., p. 260.
[35]
Id., pp. 230-233.
[36]
Id., p. 259.
[37]
Id., p. 261.
[38]
Docketed as CA-G.R. SP No. 54273; CA Record, pp. 5-6.
[39]
Id., p. 150.
[40]
Id., pp. 151-152.
[41]
Id., pp. 185-187.
[42]
G.R. No. 85332, 11 January 1990, 181 SCRA 26; Rollo, pp. 14-18.
[43]
Id., pp. 11-12; see also petitioner-spouses Memorandum, id., pp. 152-153.
[44]
Id., p. 127.
[45]
Id., pp. 127, 131-134.
[46]
Tiham v. Sibonghanoy, G.R. No. L-21450, 15 April 1968, 23 SCRA 29.
[47]
F. James, Jr. and G. Hazard, Jr., Civil Procedure (1977), p. 220.
[48]
I F.D. Regalado, Remedial Law Compendium (1997), p. 557.
[49]
Excelsa Industries, Incorporated v. Court of Appeals, G.R. No. 105455, 23 August 1995, 247 SCRA 560.
[50]
Narra Integrated Corporation v. Court of Appeals, G.R. No. 137915, 15 November 2000, 344 SCRA 781, 786.
[51]
Puyat v. Zabarte, G.R. No. 141536, 26 February 2001; R.L. Dessem, Pre-Trial Litigation: Law, Policy and
Practice (1991), p. 453.
[52]
G.R. No. 100635, 13 February 1995, 241 SCRA 254, 258.
[53]
G.R. No. L-46892, 30 September 1981, 108 SCRA 43.
[54]
Id., p. 58.
[55]
Lola v. Court of Appeals, G.R. No. L-46573, 13 November 1986, 145 SCRA 439.
[56]
Record, p. 23.
[57]
See Note 50.
[58]
See Note 53.
[59]
G.R. No. 107481, 18 November 1993, 228 SCRA 51.
[60]
See Note 51, p. 454.
[61]
See Note 49.
[62]
See Note 41.
[63]
See Note 41, pp. 30-31.
[64]
See Note 52, p. 259.
[65]
Record, pp. 42-46.
[66]
95 Phil. 924 (1954); see Central Azucarera de Bais v. Court of Appeals, G.R. No. 87597, 3 August 1990, 188
SCRA 328; Filinvest Credit Corporation v. Mendez, G.R. No. L-66419, 31 July 1987, 152 SCRA 593.
[67]
Sheriffs Return dated 19 November 1996; Rollo, p. 124.
[68]
No. L-18236, 31 January 1964, 10 SCRA 138, 139-140.
[69]
The provision now reads: Where the executed judgment is reversed totally or partially, or annulled, on appeal or
otherwise, the trial court may, on motion, issue such orders of restitution or reparation of damages as equity and
justice may warrant under the circumstances.
[70]
Complaint dated 29 November 1993; Summary Judgment dated 13 January 1995; Rollo, pp. 106, 115; Crismina
Garments, Inc. v. Court of Appeals, G.R. No. 128721, 9 March 1999, 304 SCRA 356; Philippine National Bank v.
Court of Appeals, G.R. No. 123643, 30 October 1996, 263 SCRA 766.

FIRST DIVISION

[G.R. No. 109472. May 18, 1999]

DAVID MAGLAQUE, JOSE MAGLAQUE MAURO MAGLAQUE and PACITA MAGLAQUE, petitioners,
vs., PLANTERS DEVELOPMENT BANK, and SPOUSES ANGEL S. BELTRAN AND ERLINDA
C. BELTRAN, respondents.

DECISION
PARDO, J.:

The case is an appeal via certiorari from a decision[1] of the Court of Appeals[2] affirming that of the Regional
Trial Court, Branch 22, Malolos, Bulacan,[3] dismissing the petitioners' complaint[4] for revocation of sale and
reconveyance of title, with damages, against respondent bank, which had extra-judicially foreclosed the mortgage on
the land owned by petitioners' predecessors in interest, for non-payment of a loan secured by such mortgage.
The facts may be related as follows:
The spouses Egmidio Maglaque and Sabina Payawal were the owners of a parcel of land, situated in the
municipality of San Miguel, province of Bulacan, with an area of Four Hundred Sixty Four (464) square meters,
more or less, and a residential house of strong materials erected thereon, more particularly described as follows:

A parcel of land (Lot No. 315-A of the subdivision plan Psd-20633 being a portion of Lot 315 of the Cad. Survey of
San Miguel, G. L. R. O. Cadastral Record No. 696 situated in the Municipality of San Miguel, Province of Bulacan,
Island of Luzon, xx xx xx containing an area of FOUR HUNDRED SIXTY FOUR (464) SQUARE METERS, more
or less and covered by Transfer Certificate of Title No. 28303, assessed at P4,180.00 as per Tax Declaration No
250.[5]

covered by Transfer Certificate of Title No. 28303 of the Registry of Deeds of Bulacan.
On March 19, 1974, the spouses Maglaque obtained a loan of two thousand (P2,000.00) pesos from the
Bulacan Development Bank[6] evidenced by a promissory note, payable on or before March 19, 1975, in two
installments, the first payment of P1,000.00, shall be due on September 19, 1974, and the second payment of
P1,000.00, shall be due on March 19, 1975, with interest at 12% per annum. To secure the loan, the spouses
executed a deed of real estate mortgage on the above-described parcel of land, including its improvements.
On September 15, 1976, Sabina Payawal died. On December 22, 1977, Egmidio Maglaque paid Planters
Development Bank the amount of P2,000.00, which the bank accepted.
On April 9, 1979, Egmidio Maglaque died.
On September 15, 1978, for non-payment in full of the loan, the bank extra-judicially foreclosed on the real
estate mortgage, through the Provincial Sheriff of Bulacan, who conducted a public auction sale of the mortgaged
property pursuant to the authority provided for in the deed of real restate mortgage. The bank was the highest bidder.
On March 24, 1980, after the lapse of the redemption period, the bank consolidated its title to the property, and
became its registered owner under Transfer Certificate of Title No. T-259923 of the Registry of Deeds of Bulacan.
On September 4, 1980, David Maglaque, as heir of the deceased spouses Egmidio Maglaque and Sabina
Payawal, filed with the Court of First Instance of Bulacan, Branch 04, Baliuag, Bulacan, a complaint for annulment
of the sale conducted by the Provincial Sheriff of Bulacan, reconveyance of title, with damages, and injunction.
On September 24, 1980, the bank sold the property to the spouses Angel S. Beltran and Erlinda C. Beltran, for
thirty thousand (P30,000.00) pesos.
The plaintiff amended the complaint twice to implead the other heirs of the spouses Maglaque, and defendant
Beltran spouses, the buyers of the property in question.
On August 16, 1985, the parties submitted a joint stipulation of facts, as follows:
xxx

1.- The late Egmidio Maglaque and Sabina Payawal were the owners of a parcel of land located in San Miguel,
Province of Bulacan, the description of which appears in paragraph 2 of the amended complaint. The said parcel of
land was covered by TCT No. 28303 issued by the Register of Deeds of Bulacan;

2.- On March 19, 1974, said registered owners borrowed TWO THOUSAND PESOS (P2,000.00) from Bulacan
Development Bank pursuant to a promissory note with Loan No. 3423. The promissory note stipulated that the loan
shall be paid on or before March 19, 1975 and the interest shall be 12% per annum; that the first payment of
P1,000.00 shall be due on March 19, 1975, and that the unpaid amortization shall bear interest at the rate of 12% per
annum; that in case a litigation is resorted to the borrowers shall pay attorneys fees in addition to the legal expenses;

3.- Present plaintiffs are the children of the spouses Egmidio Maglaque and Sabina Payawal. David Maglaque has a
Special Power of Attorney to prosecute the present complaint;

4.- The borrowers failed to pay any of the payment agreed upon in the promissory note and the real estate mortgage
due to the untimely death of Sabina Payawal;

5.- On December 22, 1977, a payment of P2,000.00 was made and accepted, which were applied as shown by the
Official Receipt No. 7662-8 dated December 22, 1977;

6.- on September 15, 1978, the Provincial Sheriff of Bulacan conducted an extra-judicial foreclosure sale of the
property in question in accordance with the specific authority provided for in the Deed of Real Estate Mortgage as
authorized by law. The defendant-Bank contends that the formalities provided for by law were duly observed while
the plaintiff claims that there was no such compliance. Hence, this will be the subject matter of evidence in Court;

7.- The one year period allowed by law within which the delinquent borrowers should have exercised their right to
redeem expired without any redemption by them. Consequently, on March 24, 1980 the bank consolidated its title
on the property and became the registered owner of said property under TCT No. T-259923 issued by the Register
of Deeds of Bulacan on March 24, 1980;
8.- In September 24, 1980, defendant-Bank sold the property to the spouses Angel S. Beltran and Erlinda Beltran in
a Deed of Conditional Sale, x x x;

9.- The Register of Deeds wrote a letter dated September 8, 1980, informing the bank about a notice
of lis pendens. However, the records of the bank show that the letter was received only on November 19, 1981. On
March 16, 1984, Spouses Angel Beltran and Erlinda Beltran registered an adverse claim on the property;

10.- The plaintiffs sought the help of prominent persons to arrange the case amicably, namely, Dr. Sabino Santos,
Vice-President of Planters Development Bank; Mr. Miguel Sison, Jr. of the Malacaang Assistance Center; and,
Minister Blas Ople of the Ministry of Labor and Employment. However, no concrete result came out of these efforts
to settle.;

11.- The property in question is located behind the parish Church of San Miguel, Bulacan and adjacent to a
Municipal Street of said municipality;[7]

Thereafter, the parties submitted the case for decision on the basis of their memoranda.
On February 28, 1989, the trial rendered decision dismissing the complaint for lack of merit or insufficiency of
evidence.
On March 27, 1989, plaintiffs appealed the case to the Court of Appeals. [8]
After due proceedings, on March 26, 1993, the Court of Appeals rendered decision affirming the appealed
decision in toto.
Hence, this petition for review.[9]
On May 10, 1993, the Court required respondents to comment on the petition, within ten (10) days from
notice.[10]
On July 23, 1993, respondents filed their comment. On January 19, 1994, petitioners filed a reply to
comment.[11]
On February 2, 1994, the Court resolved to give due course to the petition and required the parties to file their
respective memoranda.
We now decide the case.
In this appeal, petitioners imputes the following errors to the Court of Appeals, namely:
1.The Honorable Court of Appeals erred in not finding that the Bank should have filed its claim in the
settlement of estate of the deceased mortgagors.
2.The Honorable Court of Appeals erred in not finding that there was no compliance as to the mandatory
requirements of extra-judicial foreclosure.
3.The Honorable Court of Appeals erred in not holding that the price of P4,202.70 realized from the
auction sale was palpably iniquitous and unconscionable.
4.The Honorable Court of Appeals erred in not finding that the appellee Bank is guilty of estoppel.
5.The Honorable Court of Appeals erred in not holding that the Bank is guilty of usury.
6.The Honorable Court of Appeals erred in not holding that Sps. Angel Beltran and Erlinda Beltran are
buyers in bad faith.
Except for the first assigned error, the rest of the issues raised are factual, hence, not subject to review by this
Court.[12]
As to the first assigned error, the rule is that a secured creditor holding a real estate mortgage has three (3)
options in case of death of the debtor.[13] These are:
"(l) to waive the mortgage and claim the entire debt from the estate of the mortgagor as an ordinary claim;

"(2) to foreclose the mortgage judicially and prove any deficiency as an ordinary claim; and

"(3) to rely on the mortgage exclusively, foreclosing the same at anytime before it is barred by prescription, without
right to file a claim for any deficiency."[14]

Obviously, respondent bank availed itself of the third option.

WHEREFORE, the Court hereby AFFIRMS in full the appealed decision of the Court of Appeals in CA-G.
R. CV No. 22489.
No costs in all instances.
SO ORDERED
Davide, Jr., C.J. (Chairman), Melo, Kapunan, and Ynares-Santiago, JJ., concur.

[1]
Nathanael P. de Pano, Jr., J., ponente, Abad Santos, Jr. and Austria-Martinez, JJ. concurring.
[2]
CA-G. R. CV No. 22489, promulgated on March 26, 1993.
[3]
Candido R. Belmonte, Judge.
[4]
In Civil Case No. 1189-B.
[5]
Amended Complaint, 2nd par., RTC Record, pp. 16-19.
[6]
Now known as Planters Development Bank.
[7]
RTC Record, pp. 116-118.
[8]
Docketed as CA-G. R. CV No. 22489.
[9]
Filed on April 12, 1993, Rollo, pp. 2-34.
[10]
Rollo, p. 35.
[11]
Rollo, pp. 58-61.
[12]
Guerrero vs. Court of Appeals, 285 SCRA 670.
[13]
Rule 86, Section 7, Revised Rules of Court.
[14]
Perez vs. Philippine National Bank, 17 SCRA 833, 838; Jacob vs. Court of Appeals, 184 SCRA 294, 301.
SYNOPSIS
A real estate mortgage was executed to secure a loan in the amount of P2,000 at 12% per annum obtained by
the spouses Sabina and Egmidio Maglaque from Bulacan Development Bank now known as Planters Development
Bank. After the death of Sabina, payment was made by Egmidio in the amount of P2,000 which the bank
accepted. However, the real estate mortgage was extra-judicially foreclosed for non-payment in full of the
loan. Title was consolidated in the name of the bank as the highest bidder. Thereafter, petitioners, heirs of the
spouses, filed a complaint for annulment of sale, reconveyance of title, with damages, and injunction. Meanwhile,
the subject property was sold to herein private respondents. The trial court rendered judgment dismissing the
complaint for insufficiency of evidence. This was affirmed on appeal by the Court of Appeals. Hence, this
recourse, petitioners assailing the findings of fact of the trial and appellate courts and that the Court of Appeals erred
in not finding that the bank should have filed its claim in the settlement of estate of estate of the deceased
mortgagor.
 The Supreme Court reiterated its ruling that factual issues are not subject to review by the Court; and that a
secured creditor has three options in case of death of the mortgagor namely: to waive the mortgage and claim the
entire debt from the estate of the mortgagor as an ordinary claim; to judicially foreclose the mortgage and prove any
deficiency as an ordinary claim; and to extrajudicially foreclose the mortgage without right to file a claim for any
deficiency. Here, respondent Bank availed itself of the third option.
SYLLABUS
1. REMEDIAL LAW; ACTIONS; APPEAL BY CERTIORARI; FACTUAL ISSUES, NOT SUBJECT
THEREOF.- Except for the first assigned error, the rest of the issues raised are factual, hence, not subject to
review by this Court.
2. ID.; SPECIAL PROCEEDINGS; CLAIMS AGAINST ESTATE; MORTGAGE DEBT DUE FROM
ESTATE; OPTIONS OF SECURED CREDITOR; MAY FORECLOSE PROPERTY WITHOUT
RIGHT TO FILE CLAIM OF DEFICIENCY.- A secured creditor holding a real estate mortgage has three
(3) options in case of death of the debtor. These are: (1) to waive the mortgage and claim the entire debt from
the estate of the mortgagor as an ordinary claim; (2) to foreclose the mortgage judicially and prove any
deficiency as an ordinary claim; and (3) to rely on the mortgage exclusively, foreclosing the same at anytime
before it is barred by prescription, without right to file a claim for any deficiency.
APPEARANCES OF COUNSEL
Antonio V. Reyes for petitioners.
The Solicitor General for respondents.