REMEDIAL LAW> CRIMINAL PROCEDURE >SEARCH WARRANT

Charlie Te, Petitioner,

vs.
Hon. Augusto V. Breva, In His Capacity as the Presiding Judge of the Regional
Trial Court, 11th Judicial Region, Branch 10, Davao City; U R. Bahinting, In His
Capacity as Special Investigator of the National Bureau of Investigation,
Saranggani District Office; and Pryce Gases Inc., Respondents
G.R. No. 164974, August 5, 2015
(First Division)

FACTS: Respondent Presiding Judge issued a search warrant against the petitioner
upon the application of respondent Special Investigator U R. Bahinting of the
Saranggani District Office of the National Bureau of Investigation (NBI SARDO) on the
basis of his finding of probable cause for a violation of Section 2(b) of Batas Pambansa
Blg. 33. Petitioner presented his Omnibus Motion to Quash Warrant and/or Suppress
Evidence and to Order Return of Seized Items, raising therein the lack of probable cause,
failure to specify the single offense committed, illegality of the nighttime search,
improper application of the plain view doctrine, and inclusion of other offenses.
The motion was denied by the presiding judge observing that he had issued the search
warrant for one specific offense; that there was probable cause to issue the search
warrant. The petitioner assailed the order in the Court of Appeals via a petition for
certiorari mainly positing that respondent Presiding Judge had committed grave abuse
of discretion amounting to excess of jurisdiction. However, the CA promulgated the first
assailed order dismissing the petition for certiorari for failure to implead the People of
the Philippines as respondents, and for lack of any showing that a copy of the petition
had been served on the OSG. The petitioner moved for reconsideration, arguing that
impleading the People of the Philippines as respondents was premature because no
criminal case had yet been filed against him with only the application for the issuance
of the search warrant having been made; and that serving the copy of the petition on
the OSG pursuant to Section 3, Rule 46 of the Rules of Court was not indispensable.
Not satisfied, the petitioner has come to the Court on appeal to reverse and set aside
the aforesaid resolutions by insisting that the failure to implead the People of the
Philippines was not a fatal defect.

ISSUE: Whether or not the People of the Philippines should be impleaded as respondents
in the petition for certiorari filed in the Court of Appeals (CA) to annul and set aside the
order of the Regional Trial Court (RTC) denying the petitioner's motion to quash the
search warrant issued against him.

HELD: YES. Impleading the People of the Philippines in the petition for certiorari did not
depend on whether or not an actual criminal action had already been commenced in
court against the petitioner. The impleading is expressly demanded in Section 3, Rule
461 of the Rules of Court. Accordingly, the omission of the People of the Philippines from
the petition was fatal. The requirement that the search warrant be issued in the name
of the People of the Philippines is also imposed by Section 1, Rule 126 of the Rules of
Court2.

We may agree with the petitioner that the application for the search warrant was not a
criminal action; and that the application for the search warrant was not of the same
form as that of a criminal action. Verily, the search warrant is not similar to a criminal
action but is rather a legal process that may be likened to a writ of discovery employed
by no less than the State to procure relevant evidence of a crime. In that respect, it is
an instrument or tool, issued under the State’s police power, and this is the reason why
it must issue in the name of the People of the Philippines. Equally clear is that the sworn

1
Section 3. Contents and filing of petition; effect of non-compliance with requirements. – The petition shall contain
the full names and actual addresses of all the petitioners and respondents, a concise statement of the matters
involved, the factual background of the case, and the grounds relied upon for the relief prayed for.
xxxx
The failure of the petitioner to comply with any of the foregoing requirements shall be sufficient ground for the
dismissal of the petition.
2
Section 1. Search warrant defined. -- A search warrant is an order in writing issued in the name of the People of
the Philippines, signed by a judge and directed to a peace officer, commanding him to search for personal property
described therein and bring it before the court.
application for the search warrant and the search warrant itself were upon the behest
of the People of the Philippines.

PP: The immutable truth is that every search warrant is applied for and issued by and
under the authority of the State, regardless of who initiates its application or causes its
issuance.

REMEDIAL LAW> CIVIL PROCEDURE> VENUE> RULE 4 SECTION 1

BPI Family Savings Bank Inc., Petitioner
vs.
Spouses Benedicto & Teresita Yujuico, Respondents
G.R. No. 175796, July 22, 2015
(First Division)

FACTS: The City of Manila filed a complaint against the respondents for the
expropriation of five parcels of land located in Tondo, Manila and registered in the name
of respondent Teresita Yujuico. Two of the parcels of land, covered by Transfer
Certificate of Title (TCT) No. 261331 and TCT No. 261332, were previously mortgaged to
Citytrust Banking Corporation, the petitioner's predecessor-in-interest, under a First
Real Estate Mortgage Contract. On June 30, 2000, the Regional Trial Court in Manila
(Manila RTC) rendered its judgment declaring the five parcels of land expropriated for
public use. The judgment became final and executory on January 28, 2001 and was
entered in the book of entries of judgment on March 23, 2001. The petitioner
subsequently filed a Motion to Intervene in Execution with Partial Opposition to
Defendant's Request to Release, but the RTC denied the motion for having been "filed
out of time." Hence, the petitioner decided to extrajudicially foreclose the mortgage
constituted on the two parcels of land subject of the respondents' loan. After holding
the public auction, the sheriff awarded the two lots to the petitioner as the highest
bidder at P10, 000, 000.00. Claiming a deficiency amounting to Pl8, 522155.42, the
petitioner sued the respondents to recover such deficiency in the Makati RTC The
respondents moved to dismiss the complaint on several grounds, namely: that the suit
was barred by res judicata; that the complaint stated no cause of action; and that the
plaintiffs claim had been waived, abandoned, or extinguished.

In its order issued on October 17, 2003, the Makati RTC denied the respondents' motion
to dismiss, ruling that there was no res judicata; that the complaint stated a sufficient
cause of action to recover the deficiency; and that there was nothing to support the
claim that the obligation had been abandoned or extinguished apart from the
respondents' contention that the properties had been subjected to expropriation by the
City of Manila. On November 4, 2003, the respondents moved for reconsideration,
reiterating their grounds earlier made in their motion to dismiss. In turn, the petitioner
adopted its comment/opposition to the motion to dismiss.

The respondents then filed their reply, in which they raised for the first time their
objection on the ground of improper venue. They contended that the action for the
recovery of the deficiency, being a supplementary action of the extrajudicial foreclosure
proceedings, was a real action that should have been brought in the Manila RTC because
Manila was the place where the properties were located.

ISSUE: Whether or not an action to recover the deficiency after extrajudicial foreclosure
of a real property mortgage is a personal action because it does not affect title to or
possession of real property, or any interest therein.

HELD: YES. It is basic that the venue of an action depends on whether it is a real or a
personal action. The determinants of whether an action is of a real or a personal nature
have been fixed by the Rules of Court and relevant jurisprudence. According to Section
1, Rule 4 of the Rules of Court, a real action is one that affects title to or possession of
real property, or an interest therein. Thus, an action for partition or condemnation of,
or foreclosure of mortgage on, real property is a real action. The real action is to be
commenced and tried in the proper court having jurisdiction over the area wherein the
real property involved, or a portion thereof, is situated, which explains why the action
is also referred to as a local action. In contrast, the Rules of Court declares all other
actions as personal actions such actions may include those brought for the recovery of
personal property, or for the enforcement of some contract or recovery of damages for
its breach, or for the recovery of damages for the commission of an injury to the person
or property. The venue of a personal action is the place where the plaintiff or any of the
principal plaintiffs resides, or where the defendant or any of the principal defendants
resides, or in the case of a non-resident defendant where he may be found, at the
election of the plaintiff, for which reason the action is considered a transitory one.

Based on the distinctions between real and personal actions, an action to recover the
deficiency after the extrajudicial foreclosure of the real property mortgage is a personal
action, for it does not affect title to or possession of real property, or any interest therein.

MAIN TOPIC: CIVIL LAW> OBLIGATIONS AND CONTRACTS > DACION

COMMERCIAL LAW> RECEIVERSHIP

Jose C. Go, GOTESCO Pproperties, Inc., Go Tong Electrical Supply, Inc., Ever
emporium, Inc., ever Gotesco Resources and Holdings, Inc., Gotesco Ty An Ming
Development, Inc., Evercrest Cebu golf Club, Nasugbu Resorts, Inc., GMCC
United Development Corporation, and Gulod Resort, Inc., Petitioners,
vs.
Bangko Sentral ng Pilipinas, and Register of Deeds of Nasugbu,Batangas,
Respondent.
G.R. No. 202262, July 8, 2015
(First Division)

FACTS: Respondent Orient Commercial Banking Corporation (OCBC) declared a bank

holiday on account of its inability to pay all its obligations to depositors, creditors and
petitioner Bangko Sentral ng Pilipinas (BSP).On March 17, 1998, OCBC filed a petition
for rehabilitation with the Monetary Board. The bank was placed under receivership and
the Philippine Deposit Insurance Corporation (PDIC) was designated as Receiver. PDIC
took over all the assets, properties, obligations and operations of OCBC. Respondent
Jose C. Go, the principal and biggest stockholder of OCBC, with his affiliates companies
(respondent corporations), challenged the said action of the PDIC before the RTC of
Manila, Branch 44. Said case was dismissed and the dismissal was appealed to the CA.

During the pendency of the appealed case, the Monetary Board adopted Resolution No.
602 dated May 7, 1999 directing the Receiver to proceed with the liquidation of OCBC.
In June, 1999, the PDIC instituted Special Proceeding No. 99-94328 before the RTC of
Manila, Branch 51 entitled "In Re: Petition for Assistance ion of Orient Commercial
Banking Corporation, Philippine Deposit Insurance Corporation, Petitioner."

On December 17, 1999, petitioner filed in the RTC of Manila (Branch 12) a complaint
for sum of money with preliminary attachment against the respondents seeking to
recover deficiency obligation owed by OCBC which then stood at P1,273,959,042.97
with interest at 8.894% per annum, overdraft obligation at P1,028,000,000.00,
attorney’s fees and cost of suit.

On January 14, 2000, the RTC of Manila, Branch 12 issued an Order granting
petitioner’s motion for preliminary attachment. On January 19, 2000, following the
posting of P50 million attachment bond issued by the Government Service Insurance
System (GSIS), the corresponding writ was issued ordering the Deputy Sheriffs to attach
the real and personal properties of respondents to the value of petitioner’s demand in
the amount of P2,301,951,042.97, exclusive of interest and costs, as security for the
said claim.

The parties eventually entered into a compromise agreement, the pertinent provisions
of which were as follows:

C. Additional Properties for Execution

c i) To ensure payment of the monthly amortizations due under this

Compromise Agreement, defendants Ever Crest Golf Clob Resort, Inc.,
and Mega Heights, Inc., have agreed to have its real properties with
 improvements covered by TCT Nos. T-68963, T-6890, T-68966 and
TD ARPN-AA- 1702 00582 and AA-17023-005 shall be subject of
existing writ of attachment to secure the faithful payment of the
outstanding obligation herein mentioned, until such obligation shall
have been fully paid by defendants to plaintiff.

c ii) That all the corporate approvals for the execution of this
Compromise agreement by Ever Crest Golf Club Resort, Inc., and
Mega Heights, Inc., consisting of stockholders resolution and Board
of Directors approval have already been obtained at the time of the
execution of this Agreement.

c iii) Failure on the part of the defendants to fully settle their outstanding
obligations and to comply with any of the terms of this Compromise
Agreement shall entitle the plaintiff to immediately ask for a Writ of
Execution against all assets of the Ever Crest Golf Club Resort, Inc.,
and Mega Heights, Inc., now or hereafter arising upon the signing of this
Compromise Agreement.

The RTC eventually approved the compromise agreement on December 29, 2003.

But the controversy was not laid to rest by the execution of the compromise agreement
because Go did not comply with its provisions. This prompted Bangko Sentral to move
for the execution of the compromise agreement against the properties of Ever Crest Golf
Club Resort, Inc. (Ever Crest) and Mega Heights, Inc. (Mega Heights) which were levied
upon by the sheriff. Initially, the RTC denied Bangko Sentral’s motion to execute on
December 12, 2008, but on Bangko Sentral’s motion for reconsideration, the RTC
relented and granted the motion. The writ of execution was issued on July 6, 2009.

The petitioners and Ever Crest then brought a petition for certiorari in the CA, imputing
grave abuse of discretion amounting to lack or excess of jurisdiction to the RTC for
issuing the writ of execution against Ever Crest despite its not having been a party to
the compromise agreement, and for ruling that Go had violated the terms of the
compromise agreement.

ISSUE: Whether or not the issuance of the order of execution was tainted with grave
abuse of discretion because the execution was directed against the properties of Ever
Crest despite Ever Crest being neither a defendant in the cases between Bangko Sentral
and Go, nor a signatory to the compromise agreement.

HELD: No. The petitioners and Ever Crest themselves firmly committed in the
compromise agreement to have their properties with their improvements be made
subject to the writ of attachment in order "to secure the faithful payment of the
outstanding obligation herein mentioned, until such obligation shall have been fully
paid by defendants to plaintiff," and expressly assured Bangko Sentral in the same
compromise agreement that "all the corporate approvals for the execution of this
Compromise agreement by Ever Crest Golf Club Resort, Inc., and Mega Heights, Inc.,
consisting of stockholders resolution and Board of Directors approval have already been
obtained at the time of the execution of this Agreement." They warranted in the
compromise agreement that: "Failure on the part of the defendants to fully settle their
outstanding obligations and to comply with any of the terms of this Compromise
Agreement shall entitle the plaintiff to immediately ask for a Writ of Execution against
all assets of the Ever Crest Golf Club Resort, Inc., and Mega Heights, Inc., now or
hereafter arising upon the signing of this Compromise Agreement." By such express
commitments, the petitioners and Ever Crest were estopped from claiming that the
properties of Ever Crest and Mega Heights could not be the subject of levy pursuant to
the writ of execution issued by the RTC. In other words, they could not anymore assail
the RTC for authorizing the enforcement of the judgment on the compromise agreement
against the assets of Ever Crest.

Moreover, the petitioners as well as Ever Crest and Mega Heights were contractually
prohibited from challenging the levy on the assets of Ever Crest. Through the
compromise agreement, the petitioners warranted that they would defend Bangko
Sentral's title and peaceful possession of such levied properties against all claims of
third persons. Their warranty was expressly made applicable to the properties subject
of the dacion as well as to the properties of Ever Crest and Mega Heights subject of the
preliminary attachment. Considering that the petitioners asserted that Ever Crest was
a third party or stranger to the compromise agreement, they were contractually
mandated to resist the adverse claim of Ever Crest and to defend the validity and efficacy
of the levy on execution. As such, they could not validly raise any issue that would defeat
the rights of Bangko Sentral in such properties.

REMEDIAL LAW> CIVIL PROCEDURE> MODES OF APPEAL> RULE 41

Heirs of Arturo Garcia I, (In Substitution of Heirs of Melecio Bueno), Petitioners,

vs.
Municipality of Iba, Zambales, Respondent.
G.R. No. 162217, July 22, 2015
(First Division)

FACTS: The late Melecio R. Bueno was the tenant-farmer beneficiary of an agricultural
land located in Poblacion, Iba, and Zambales. On October 18, 1999, he brought an
ejectment suit in the MTC of Iba against the Municipality of Iba, Province of Zambales,
claiming that in 1983, the Municipality of Iba had constructed the public market on a
substantial portion of his land without his consent; and that his repeated demands for
the Municipality of Iba to vacate the property had remained unheeded.

After due proceedings, the MTC ruled in favor of Bueno. Hence, the Municipality of Iba
filed its notice of appeal, but the MTC denied due course to the notice of appeal. Thus,
the Municipality of Iba filed its petition for certiorari in the RTC in Iba, Zambales to
assail the denial of due course by the MTC. The case was assigned to Branch 69 which
ultimately granted the petition for certiorari. The petitioners, who meanwhile
substituted Bueno upon his death, moved for the reconsideration of the judgment
granting the petition for certiorari, but the RTC denied their motion for reconsideration.
Aggrieved, the petitioners appealed to the CA by petition for review under Rule 42 of the
Rules of Court. As earlier mentioned, the CA "dismissed" the petitioners' petition for
review on October 28, 2003 for not being the proper mode of appeal, observing that the
assailed orders had been issued by the RTC in the exercise of its original jurisdiction.

ISSUE: Whether or not petition for review under Rule 42, although inappropriate, the
petitioners’ substantial compliance with the requirements of an ordinary appeal under
Rule 41 would suffice based on the Court’s exercise of equity jurisdiction vis-à-vis the
stringent application of the Rules of Court.

HELD: NO. The distinctions between the various modes of appeal cannot be taken for
granted, or easily dismissed, or lightly treated. The appeal by notice of appeal under
Rule 413 is a matter or right, but the appeal by petition for review under Rule 42 is a
matter of discretion. An appeal as a matter of right, which refers to the right to seek the
review by a superior court of the judgment rendered by the trial court, exists after the
trial in the first instance. In contrast, the discretionary appeal, which is taken from the
decision or final order rendered by a court in the exercise of its primary appellate
jurisdiction, may be disallowed by the superior court in its discretion. Verily, the CA
has the discretion whether to due course to the petition for review or not.

3
Rules of Court, Rule 41, Section 2.Modes of Appeal.

(a) Ordinary appeal. - The appeal to the Court of Appeals in cases decided by the Regional Trial
Court in the exercise of its original jurisdiction shall be taken by filing a notice of appeal with the
court which rendered the judgment or final order appealed from and serving a copy thereof upon
the adverse party. No record on appeal shall be required except in special proceedings and other
cases of multiple or separate appeals where the law or these Rules so require. In such cases, the
record on appeal shall be filed and served in like manner.

(b) Petition for review. - The appeal to the Court of Appeals in cases decided by the Regional Trial
Court in the exercise of its appellate jurisdiction shall be by petition for review in accordance with
Rule 42.

(c) Appeal by certiorari.-In all cases where only questions of law are raised or involved, the appeal
shall be to the Supreme Court by petition for review on certiorari in accordance with Rule 45.
The procedure taken after the perfection of an appeal under Rule 41 also significantly
differs from that taken under Rule 42. Under Section 10 of Rule 41, the clerk of court
of the RTC is burdened to immediately undertake the transmittal of the records by
verifying the correctness and completeness of the records of the case; the transmittal to
the CA must be made within 30 days from the perfection of the appeal. This
requirement of transmittal of the records does not arise under Rule 42, except upon
order of the CA when deemed necessary. As borne out in the foregoing, the petitioners'
resort to the petition for review under Rule 42 was wrong. Hence, the CA did not err in
denying due course to the petition for review.

Yet, the petitioners plead for liberality, insisting that their petition for review, albeit the
wrong mode, was a substantial compliance with the proper mode of appeal. The
petitioners did not give any good reason or cause that could warrant the relaxation of
the rules in their favor. Their bare plea for substantial justice was not enough ground
to suspend the rules. Acceding to their plea would conceal their shortcomings in
procedure, and thereby belittle the lofty objectives of instituting rules of procedure. We
cannot allow that to happen, for doing so would sacrifice the smooth administration of
justice guaranteed to every litigant. We have allowed exceptions only for the most
persuasive of reasons, like relieving the litigant of an injustice not commensurate with
the degree of his thoughtlessness in not complying with the procedure prescribed.

PP: The plea for liberality is unworthy of any sympathy from the Court. We have' always
looked at appeal as not a matter of right but a mere statutory privilege. As the parties
invoking the privilege, the petitioners should have faithfully complied with the
requirements of the Rules of Court. Their failure to do so forfeited their privilege to
appeal. Indeed, any liberality in the application of the rules of procedure may be properly
invoked only in cases of some excusable formal deficiency or error in a pleading, but
definitely not in cases like now where a liberal application would directly subvert the
essence of the proceedings or results in the utter disregard of the Rules of Court.

MAIN TOPIC: COMMERCIAL LAW> CORPORATION CODE

REMEDIAL LAW> CIVIL PROCEDURE> BURDEN OF PROOF

Grace Borgona Insigne, Diosdado Borgona, Osbourne Borgona, Imelda Borgona

Rivera, and Aristotle Borgona, Petitioners,
vs.
Abra Valley Colleges, Inc. and Francis Borgona, Respondent.
G.R. No. 204089, July 29, 2015
(First Division)

FACTS: Petitioners are siblings of the full blood. Respondent Francis Borgoña (Francis)
is their older half-blood brother. The petitioners are the children of the late Pedro
Borgoña (Pedro) by his second wife, while Francis was Pedro’s son by his first wife. In
his lifetime, Pedro was the founder, president and majority stockholder of respondent
Abra Valley Colleges, Inc. (Abra Valley), a stock corporation. After Pedro’s death, Francis
succeeded him as the president of Abra Valley. Petitioners filed a complaint (with
application for preliminary injunction) and damages in the RTC against Abra Valley
praying, among others, that the RTC direct Abra Valley to allow them to inspect its
corporate books and records, and the minutes of meetings, and to provide them with its
financial statements Due to Abra Valley’s failure to file its responsive pleading within
the reglementary period provided in the Interim Rules of Procedure Governing Intra-
Corporate Controversies, the RTC rendered judgment in favor of the petitioners ordering
respondent Abra Valley College to allow petitioners to inspect its corporate books and
records and minutes of meetings at reasonable hours on business days, copies of
excerpts from said books, records and minutes shall be allowed reproduction by
petitioners at their expense and after written demand pursuant to Section 74 of the
Corporation Code. Furthermore, ordering respondent Abra Valley College to furnish
petitioners its financial statement at their expense pursuant to Section 75 of the
Corporation Code. The RTC denied Abra Valley’s motion for reconsideration and Abra
Valley appealed to the CA.

ISSUE #1: Whether or not petitioners are stockholders of Abra Valley.

HELD #1: YES. The petitioners’ causes of action against the respondents were premised
on Sections 50, 74 and 75 of the Corporation Code.4

Conformably with these provisions, the petitioners had to establish that they were
stockholders of Abra Valley. Indeed, the CA concluded that it was the petitioners who
had failed to discharge the burden of proving their stock ownership because they did
not produce their stock certificates. The CA committed an error on this conclusion.

In civil cases, the party having the burden of proof must establish his case by a
preponderance of evidence, or evidence that is more convincing to the court as worthy
of belief than that which is offered in opposition thereto. Thus, the party, whether the
plaintiff or the defendant, who asserts the affirmative of an issue bears the onus to prove
his assertion in order to obtain a favorable judgment. From the plaintiff the burden to
prove his positive assertions never parts. Yet, for the defendant, an affirmative defense
is one that is not a denial of an essential ingredient in the plaintiff’s cause of action, but
rather one that, if established, will be a good defense – i.e., an "avoidance" of the claim.

First of all, the present issue was the offshoot of the RTC’s resolution of the Motion for
Preliminary Hearing of Special and Affirmative Defenses, wherein the respondents
alleged that the petitioners were not stockholders of Abra Valley; and that they had no
cause of action against the respondents. Being the parties who filed the Motion for
Preliminary Hearing of Special and Affirmative Defenses, the respondents bore the
burden of proof to establish that the petitioners were not stockholders of Abra Valley.
The respondents’ assertion therein, albeit negative, partook of a good defense that, if
established, would result to their "avoidance" of the claim. On that basis, the CA
erroneously laid the burden of proof on the petitioners.

Secondly, the petitioners, assuming that they bore the burden of proving their status as
stockholders of Abra Valley, nonetheless discharged their burden despite their non-
production of the stock certificates. A stock certificate is prima facie evidence that the
holder is a shareholder of the corporation, but the possession of the certificate is not
the sole determining factor of one’s stock ownership. A certificate of stock is merely: –

x x x the paper representative or tangible evidence of the stock itself and of the various
interests therein. The certificate is not stock in the corporation but is merely
evidence of the holder's interest and status in the corporation, his ownership of
the share represented thereby, but is not in law the equivalent of such
ownership. It expresses the contract between the corporation and the stockholder, but
it is not essential to the existence of a share in stock or the creation of the relation of
shareholder to the corporation. (Emphasis supplied.)5

4
Section 50. Regular and special meetings of stockholders or members. – Regular meetings
of stockholders or members shall be held annually on a date fixed in the by-laws, or if not so fixed, on any
date in April of every year as determined by the board of directors or trustees: Provided, That written notice
of regular meetings shall be sent to all stockholders or members of record at least two (2) weeks prior to the
meeting, unless a different period is required by the by-laws.

Section 74. Books to be kept; stock transfer agent. – x x x

The records of all business transactions of the corporation and the minutes of any meetings shall be open
to inspection by any director, trustee, stockholder or member of the corporation at reasonable hours on
business days and he may demand, in writing, for a copy of excerpts from said records or minutes, at his
expense.

xxxx

Section 75. Right to financial statements. – Within ten (10) days from receipt of a written request of
any stockholder or member, the corporation shall furnish to him its most recent financial statement, which
shall include a balance sheet as of the end of the last taxable year and a profit or loss statement for said
taxable year, showing in reasonable detail its assets and liabilities and the result of its operations.
(Emphasis supplied)

xxxx

5
Tan v. Securities and Exchange Commission, G.R. No. 95696, March 3, 1992
To establish their stock ownership, the petitioners actually turned over to the trial court
various documents showing their ownership of Abra Valley’s shares, specifically: the
official receipts of their payments for their subscriptions of the shares of Abra Valley;
and the copies duly certified by the Securities and Exchange Commission (SEC) stating
that Abra Valley had issued shares in favor of the petitioners, such as the issuance of
part of authorized and unissued capital stock; the secretary’s certificate; and the general
information sheet.

And, thirdly, the petitioners adduced competent proof showing that the respondents
had allowed the petitioners to become members of the Board of Directors. According to
the records submitted to the trial court, the petitioners attended the annual meeting of
1989 as stockholders of Abra Valley, and participated in the election of the Board of
Directors at which some of them were chosen as members. Considering that Section 23
of the Corporation Code requires every director to be the holder of at least one share of
capital stock of the corporation of which he is a director, the respondents would not
have then allowed any of the petitioners to be elected to sit in the Board of Directors as
members unless they believed that the petitioners so elected were not disqualified for
lack of stock ownership. Neither did the respondents thereafter assail their acts as
Board Directors. Conformably with the doctrine of estoppel, the respondents could no
longer deny the petitioners’ status as stockholders of Abra Valley.

ISSUE #2: Whether or not the petitioners were entitled to demand the production of
the stock and transfer book (STB) of Abra Valley.

HELD #2: YES. The respondents insist that the petitioners should establish that the
indorsement of the stock certificates by the original holders was registered in their favor
in the STB of Abra Valley. We do not agree with this insistence. A person becomes a
stockholder of a corporation by acquiring a share through either purchase or
subscription. Here, the petitioners acquired their shares in Abra Valley: (1) by
subscribing to 36 shares each from Abra Valley’s authorized and unissued capital
stock; and (2) by purchasing the shareholdings of existing stockholders, as borne out
by the latter’s indorsement on the stock certificates.

In determining the validity of the transfer of shares through purchase, we must resort
to Section 636 of the Corporation Code. For sure, the transfer of shares in favor of the
petitioners was made through the indorsement by the original holders who were
presumably the registered owners of the shares, coupled with the delivery of the stock
certificates. Such procedure conformed to Section 63 of the Corporation Code. Although
Abra Valley did not yet recognize such stock purchases until the surrender of the stock
certificates to the corporate secretary to enable the latter to exercise the ministerial duty
of recording the transfers, there was no way of avoiding or evading the production of the
STB in court on the part of the respondents. The STB would definitely be relevant and
necessary for the purpose of ascertaining whether or not the petitioners' subscriptions
to the authorized and unissued capital stock of Abra Valley had been duly registered.

PP: The application of the doctrine of estoppel, which is based on public policy, fair
dealing, good faith and justice, is only appropriate because the purpose of the doctrine
is to forbid one from speaking against his own act, representations, or commitments to
the injury of another to whom he directed such act, representations, or commitments,
and who reasonably relied thereon. The doctrine springs from equitable principles and
the equities in the case, and is designed to aid the law in the administration of justice
where without its aid injustice might result. The Court has applied the doctrine wherever
and whenever special circumstances of the case so demanded.

6
Section 63. Certificate of stock and transfer of shares. – x x x Shares of stock so issued are personal
property and may be transferred by delivery of the certificate or certificates indorsed by the owner or his
attorney-in-fact or other person legally authorized to make the transfer. No transfer, however, shall be valid,
except as between the parties, until the transfer is recorded in the books of the corporation showing the
names of the parties to the transaction, the date of the transfer, the number of the certificate or certificates
and the number of shares transferred.
CRIMINAL LAW> TARIFF AND CUSTOMS CODE OF THE PHILIPPINES (TCCP)

Alvin Mercado, Petitioner,

vs.
People of the Philippines, Respondent.
G.R. No. 167510, July 8, 2015
(First Division)

FACTS: Petitioner was charged in the RTC with the violation of Section 3602, in relation
to Section 2503, of the TCCP. The prosecution alleged in the information that accused
did, then and there willfully, unlawfully and feloniously made an entry of several
products by means of false and fraudulent invoice and declaration as regards the true
kind, nature, quality and quantity of the goods such that the goods indicated or declared
therein were 162 cartons of "personal effects of no commercial value". Contrary to the
declaration of personal effects, the shipment consisted of general merchandise on
commercial quantity such as fabrics, assorted bags of Ferragamo, Prada and Polo,
children's wear, shoes, slippers etc. which were brand new and not "used". Petitioner’s
co-accused, Sefia remained at large.

In his defense, the petitioner asserted that he had only accommodated the shipment
upon the request of Sefia and Apolonio Viray, President of Worth Brokerage
Corporation; that Sefia had represented to him that the shipment contained only
personal and household effects; that he did not have any participation in following up
the clearance for the shipment; that as a licensed customs broker, his signature did not
appear in the informal entry; that he executed a deed of assignment over the shipment
in favor of Benita Ochoa; and that the broker prepared the import entry declaration.

The RTC rendered its decision finding the petitioner guilty as charged. The CA affirmed
the ruling of the RTC.

ISSUE: Whether or not petitioner is guilty for violation of Section 2503 and Section 3602
of the TCCP.

HELD: NO. The provisions of law under which the petitioner was prosecuted and
convicted were Section 25037 and Section 36028 of the TCCP.

7
Section 2503. Undervaluation, Misclassification and Misdeclaration in Entry. - When the dutiable value of
the imported articles shall be so declared and entered that the duties, based on the declaration of the
importer on the face of the entry, would be less by ten percent (10%) than should be legally collected, or
when the imported articles shall be so described and entered that the duties based on the importer's
description on the face of the entry would be less by ten percent (10%) than should be legally collected
based on the tariff classification, or when the dutiable weight, measurement or quantity of imported articles
is found upon examination to exceed by ten percent (10%) or more than the entered weight, measurement
or quantity, a surcharge shall be collected from the importer in an amount of not less than the difference
between the full duty and the estimated duty based upon the declaration of the importer, nor more than
twice of such difference: Provided, That an undervaluation, misdeclaration in weight, measurement or
quantity of more than thirty percent (30%) between the value, weight, measurement or quantity declared
in the entry, and the actual value, weight, quantity, or measurement shall constitute a prima facie evidence
of fraud penalized under Section 2530 of this Code: Provided, further, That any misdeclared or undeclared
imported articles/items found upon examination shall ipso facto be forfeited in favour of the Government
to be disposed of pursuant to the provisions of this Code.

8
Section 3602. Various Fraudulent Practices Against Customs Revenue. - Any person who makes or
attempts to make any entry of imported or exported article by means of any false or fraudulent invoice,
declaration, affidavit, letter, paper or by any means of any false statement, written or verbal, or by any
means of any false or fraudulent practice whatsoever, or knowingly effects any entry of goods, wares or
merchandise, at less than true weight or measures thereof or upon a false classification as to quality or
value, or by the payment of less than the amount legally due, or knowingly and willfully files any false or
fraudulent entry or claim for the payment of drawback or refund of duties upon the exportation of
merchandise, or makes or files any affidavit abstract, record, certificate or other document, with a view to
securing the payment to himself or others of any drawback, allowance, or refund of duties on the exportation
of merchandise, greater than that legally due thereon, or who shall be guilty of any willful act or omission
shall, for each offence, be punished in accordance with the penalties prescribed in the preceding section.
When the undervaluation, misdescription, misclassification or misdeclaration in the
import entry is intentional, the importer shall be subject to the penal provision under
Section 3602 of this Code.

Section 3602 enumerates the various prohibited fraudulent practices, like the entry of
imported or exported articles by means of any false or fraudulent invoice, statement or
practice; the entry of goods at less than the true weight or measure; or the filing of any
false or fraudulent entry for the payment of drawback or refund of duties.30The following
specific acts are punishable under Section 3602:

1. Making or attempting to make any entry of imported or exported article by

means of any false or fraudulent invoice, declaration, affidavit, letter, or paper;

2. Making or attempting to make any entry of imported or exported article by

means of any false statement, written or verbal;

3. Making or attempting to make any entry of imported or exported article by

means of any false or fraudulent practice whatsoever;

4. Knowingly effects any entry of goods, wares or merchandise, at less than true
weight or measures thereof;

5. Knowingly effects any entry of goods, wares or merchandise upon a false

classification as to quality or value;

6. Knowingly effects any entry of goods, wares or merchandise by the payment of

less than the amount legally due;

7. Knowingly and willfully files any false or fraudulent entry or claim for the
payment of drawback or refund of duties upon the exportation of merchandise;

8. Knowingly and willfully makes or files any affidavit abstract, record, certificate
or other document, with a view to securing the payment to himself or others of
any drawback, allowance, or refund of duties on the exportation of merchandise,
greater than that legally due thereon.

In alleging the violation of the foregoing legal provisions, the information specified that
the petitioner had made an entry –

x x x by means of false and fraudulent invoice and declaration as regards the true
kind, nature, quality and quantity of the goods such that the goods indicated or declared
therein were 162 cartons of ''personal effects of no commercial value", when in truth
and in fact, they were the aforesaid various articles, so as to pay less than the amount
legally due to the Government, to its damage and prejudice. (Emphasis supplied)

The act thereby imputed against the petitioner - making an entry by means of false and
fraudulent invoice and declaration - fell under the first form of fraudulent practice
punished under Section 3602 of the TCCP. The elements to be established in order to
convict him of the crime charged are, specifically: (1) there must be an entry of imported
or exported articles; (2) the entry was made by means of any false or fraudulent invoice,
declaration, affidavit, letter, or paper; and (3) there must be intent to avoid payment of
taxes.

It is relevant to clarify that the term entry as used in the TCCP is susceptible of any of
the following three meanings, to wit: (1) the documents filed at the Customs house; or
(2) the submission and acceptance of the documents; or (3) the procedure of passing
goods through the Customs house. Customs declaration forms or customs entry forms
required to be accomplished by the passengers of incoming vessels or passenger planes
are embraced in the section. The petitioner was not charged with making an entry of
goods at less than the true weight or measure, or the filing of any false or fraudulent
entry for the payment of drawback or refund of duties, other acts punishable under
Section 3602 of the TCCP. He was specifically charged only of making an entry by means
of a false and fraudulent invoice and declaration. As such, he could not be tried for and
convicted of a crime, even if duly proved, unless the crime was properly and fully alleged
or necessarily included in the information filed against him.
To the mind of the Court the prosecution should not have spared Benita Ochoa (alleged
assignee of the shipment) as the real owner of the shipment, she should have been
impleaded as a co-accused. All persons working behind the shipments should have
suffered the consequences. After reviewing the records, the Court holds that the
petitioner deserved an acquittal because the Prosecution did not prove his guilt beyond
reasonable doubt. It is undisputed that the customs documents (like the IIDE and
Permit to Deliver) were filed with and the imported goods passed through the customs
authorities, thereby satisfying the first element of entry of imported articles. However,
the second and third elements were not established beyond reasonable doubt. Although
there was a discrepancy between the declaration made and the actual contents of the
shipment, the petitioner firmly disavowed his participation in securing the clearance for
the shipment as well as in preparing and filing the import documents. Even assuming
that the petitioner was involved in the preparation of the import documents, a clear
showing of his intent to falsify the same in order to avoid the payment of duties and
taxes would still be wanting. The Customs officials themselves testified that the
declarations made in the import documents largely depended on the description of the
goods made by the exporter or shipper from a foreign country.

PP: The importance of properly alleging the nature and cause of the accusation in the
information should not ever be taken for granted by the State. To determine whether or
not the guilt of the accused was established beyond reasonable doubt, therefore, the
Court must look at the text and tenor of the information to determine and to know what
was the offense charged against him. It is elementary that to try him for and convict him
of an offense other than that charged in the information would be violative of his
Constitutional right to be informed of the nature and cause of the accusation.

PP: It is timely to reiterate People v. Mamalias, where the Court has reminded with
emphasis about the main objective of the courts in the dispensation of justice in criminal
prosecutions: We emphasize that the great goal of our criminal law and procedure is not
to send people to the gaol but to do justice. The prosecution's job is to prove that the
accused is guilty beyond reasonable doubt. Conviction must be based on the strength
of the prosecution and not on the weakness of the defense - the obligation is upon the
shoulders of the prosecution to prove the guilt of the accused, not on the accused to
prove his innocence. Thus, when the evidence of the prosecution is not enough to
sustain a conviction, it must be rejected and the accused absolved and released at once.

CIVIL LAW> REPUBLIC ACT NO. 26> AN ACT PROVIDING A SPECIAL PROCEDURE
FOR THE RECONSTITUTION OF TORRENS CERTIFICATES OF TITLE LOST OR
DESTROYED

Republic of the Philippines, Petitioner,

vs.
Wilfredo Mancao, Respondent.
G.R. No. 174185, July 22, 2015
(First Division)

FACTS: Respondent filed his petition for judicial reconstitution of OCT No. 1097,
alleging that he is the owner of the land covered by said title. He alleged that no co-
owners or other duplicates of said Certificate of Title had been issued (other than the
copy held by herein Petitioner). Moreover, that the original copy of said Certificate Title
which used to be kept in the custody of the Register of Deeds of Cebu Province was
either lost or destroyed, but the Owner's Duplicate thereof is still held by herein
Petitioner. The respondent submitted a certification by the Office of the Register of Deeds
of Cebu Province stating that the records of all deeds/conveyances were either burned
or destroyed during the last World War. After the RTC granted the petition and CA
affirmed the ruling. The Republic of the Philippines appeals to undo the decision
promulgated by the Court of Appeals (CA) upholding the judgment of the Cebu City RTC
directing the judicial reconstitution of Original Certificate of Title (OCT) No. 11097 of the
Registry of Deeds of Cebu Province.

ISSUE: Whether or not the petition has a legal interest in the subject lot.

HELD: NO. No petition for the judicial reconstitution of a Torrens title that does not
strictly adhere to the requirements of Republic Act No. 26, albeit unopposed, should be
granted even on the pretext that the reconstitution would not affect the ownership or
possession of the property.
To ensure the reconstitution proceedings from abuse, Republic Act No. 26 has laid down
the mandatory requirements to be followed. For the judicial reconstitution of an existing
and valid original certificate of Torrens title, Section 2 9 of Republic Act No. 26 has
expressly listed the acceptable bases.

It was clear to both the R TC and the CA that the respondent did not comply with the
requirements for judicial reconstitution prescribed in Republic Act No. 26. Hence, they
should have dismissed the petition for judicial reconstitution instead of granting it. The
RTC and the CA thereby unwarrantedly disregarded the respondent's abject non-
compliance with the mandatory requirements for judicial reconstitution prescribed in
Republic Act No. 26. Accordingly, they did not exercise "the greatest caution" in
entertaining and processing petitions for judicial reconstitution of allegedly lost or
destroyed Torrens title despite the frequent warning from the Court for the lower courts
to exercise the greatest caution in the interest of preventing the filing of such petitions
after an unusual delay from the time of the alleged loss or destruction. Indeed, they
ought to have been aware that innumerable litigations and controversies have been
spawned by the reckless and hasty grant of such petitions.

Here, however, the respondent should have sufficiently averred in his petition his
interest in Lot No. 2291 and how he had acquired said interest, and should have
presented credible evidence proving such interest. But he did not. Surprisingly, the CA
ignored such failure of the respondent as the applicant, and affirmed the RTC's granting
of the petition for reconstitution. That was a very grave error on the part of the CA,
especially considering that the RTC had expressed serious misgivings about the
respondent's interest.

PP: There is no gainsaying the need for all courts to proceed with extreme caution in
proceedings for reconstitution of titles to land under Republic Act No. 26. Experience
has shown that such proceedings have many times been misused as the means of
divesting property owners of the title to their properties. The owners wake up one day
to discover that their certificates of title had been cancelled and replaced by
reconstituted titles in other persons' names through fraudulent reconstitution
proceedings. To prevent the fraud, the courts should not only require strict compliance
with the requirements of Republic Act No. 26 but should also ascertain the identities of
the persons who file petitions for reconstitution of title to land. The filing of petitions by
persons other than the registered owners should already raise a red flag that should
signal to the courts to spare no effort to assure themselves of the authenticity and due
execution of the petitioners' authority to institute the proceedings.

9
Section 2. Original certificates of title shall be reconstituted from such of the sources hereunder
enumerated as may be available, in the following order:

(a) The owner's duplicate of the certificate of title;

(b) The co-owner's, mortgagee's, or lessee's duplicate of the certificate of title;

(c) A certified copy of the certificate of title, previously issued by the register of deeds or by a legal
custodian thereof;

(d) An authenticated copy of the decree of registration or patent, as the case may be, pursuant to
which the original certificate of title was issued;

(e) A document, on file in the registry of deeds, by which the property, the description of which is
given in said document, is mortgaged, leased or encumbered, or an authenticated copy of said
document showing that its original had been registered; and

(f) Any other document which, in the judgment of the court, is sufficient and proper basis for
reconstituting the lost or destroyed certificate of title.
 MAIN TOPIC> REMEDIAL LAW> CRIMINAL PROCEDURE> RULE 120 SECTION 6,
PROMULGATION OF JUDGMENT
POLITICAL LAW> 1987 ADMINISTRATIVE CODE > POWERS AND FUNCTIONS OF THE
OFFICE OF THE SOLICITOR GENERAL

Horacio Salvador, Petitioner,

vs.
Lisa Chua, Respondent.
G.R. No. 212865, July 15, 2015
(First Division)

FACTS: The petitioner and his wife Marinel Salvador were charged in the RTC with estafa
penalized under Article 315 (a) of the Revised Penal Code. On the date scheduled for the
promulgation of the judgment, their counsel moved for the deferment of the
promulgation since the petitioner was then suffering from hypertension. Unconvinced
of the reason, the RTC proceeded to promulgate its decision and found the accused
spouses guilty beyond reasonable doubt of the crime of Estafa and sentenced to suffer
an indeterminate prison term of four (4) years and two (2) months of prision correccional,
as minimum, to twenty (20) years of reclusion temporal, as maximum. Both spouses are
further ordered to indemnify the victim Lisa Chua the sum of P l7,371, 780.00 with
interest of eight percent (8%) per annum until fully paid, plus the amount of P50,000.00,
as and by way of moral damages, and P 50,000 as attorney's fees. The RTC then issued
a warrant for the petitioner's arrest. Petitioner was apprehended eight days from the
promulgation of the judgment.

The petitioner filed his Motion for Leave to file Notice of Appeal and attached thereto the
medical certificate dated on the day of the promulgation purportedly issued by Dr. Paulo
Miguel A. David, certifying that the petitioner had submitted himself to a medical
consultation at the Rizal Medical Center and had been found to be suffering from
hypertension. The RTC Judge initially denied the petitioner's Motion for Leave to file
Notice of Appeal on the ground of non-compliance with Section 6, Rule 120 of the Rules
on Criminal Procedure. The petitioner moved for the reconsideration of and the RTC
Judge granted the petitioner's motion for reconsideration, thereby giving due course to
his notice of appeal.

Thereafter, the respondent, who was the complainant in the case filed her Motion for
Execution praying for the issuance of the writ of execution on the civil aspect. On its
part, the Prosecution, represented by the private prosecutor, filed its Motion for
Reconsideration against the order of the Judge granting the Motion for Leave to file
Notice of Appeal to petitioner attaching to the motion the affidavit executed by Dr. Paolo
Miguel A. David affirming that he had not examined the petitioner on the date of the
promulgation; that he had not issued any medical certificate in favor of the petitioner;
that his name of Paolo had been misspelled Paulo in the medical certificate submitted
by the petitioner; that the signature appearing in the medical certificate was not his;
and that the Rizal Medical Center did not officially issue the medical certificate in
question. Consequently, the respondent commenced a special civil action for certiorari
in the CA to nullify the order (giving due course to the petitioner's notice of appeal). The
CA granted the respondent’s certiorari petition.

Hence, this appeal, whereby the petitioner contends that the CA erred in rendering its
decision because: (1) the respondent had no legal personality to challenge the assailed
orders of the RTC because only the Office of the Solicitor General (OSG) could appeal in
a criminal case in behalf of the State; (2) she had no legal personality to file the petition
for certiorari in the CA because her Motion for Execution in respect of the civil aspect of
the criminal case had already been granted by the RTC; and (3) his hypertension on the
date of the promulgation of the decision by the RTC constituted a justifiable cause for
him to regain the right to avail himself of the remedies under the Rules of Court against
the judgment of conviction.

ISSUE #1: Whether or not the respondent as the complainant in the criminal case had
the legal personality to file the petition for certiorari in the CA to assail the orders of the
RTC despite the lack of consent of the OSG.

HELD #1: YES. The respondent had legal standing to assail the questioned orders
through certiorari. The OSG is the appellate counsel of the State in criminal proceedings
pending in this Court and in the CA. This is explicitly provided in Section 35(1)10,
Chapter 12, Title III, Book IV of the 1987 Administrative Code. The Court has stressed
that the People of the Philippines, being the real party in interest in every criminal
proceedings, can be represented only by the OSG in criminal proceedings in the CA or
in this Court. Yet, this rule admits of exceptions, for as pronounced in Rodriguez v.
Gadiane (G.R. No. 152903, July 17, 2006):

“A special civil action for certiorari may be filed by an aggrieved party alleging grave
abuse of discretion amounting to excess or lack of jurisdiction on the part of the trial
court. In a long line of cases, this Court construed the term aggrieved parties to include
the State and the private offended party or complainant.”

ISSUE #2: Whether or not the petitioner had lost his standing in court for his failure to
appear at the promulgation of his conviction.

HELD #2: YES. Petitioner has lost his right to appeal his conviction based on Section
611, Rule 120 of the Rules of Criminal Procedure. Under Section 6, the personal
presence of the petitioner at the promulgation of the judgment in the case was
mandatory because the offense of which he was found guilty was not a light felony or
offense. In the attempt to regain his right to avail himself of the remedies under the
Rules of Court, the petitioner filed a Motion for Leave to File a Notice of Appeal, and
attached thereto the medical certificate issued by Dr. Paulo Miguel David. Yet, he did
not thereby establish that his absence had been for a justifiable cause because the
purported issuer himself, Dr. Paolo Miguel A. David, directly impugned the credibility of
this certificate by denying to have issued the certificate, and to have examined the
petitioner on the date of the promulgation, or to have signed the certificate, or that the
Rizal Medical Center issued the certificate. Even assuming that he had suffered
hypertension, which could have validly excused his absence from the promulgation, the
petitioner did not fulfill the other requirement of Section 6, to surrender himself to the
trial court. The term surrender used in the rule visibly necessitated his physical and
voluntary submission to the jurisdiction of the court to suffer any consequences of the
verdict against him, (Villena v. People, G.R. No. 184091, January 31, 2011).

PP: He ought to be reminded that the right to appeal, being neither a natural right nor
a part of due process, is a merely statutory privilege that should be exercised in the
manner and in accordance with the provisions of the law establishing the right;
otherwise, it is lost,(citing Villena v. People, G.R. No. 184091, January 31, 2011).

10
Section 35. Powers and Functions. - The Office of the Solicitor General shall represent the Government
of the Philippines, its agencies and instrumentalities and its officials and agents in any litigation,
proceeding, investigation or matter requiring the services of lawyers x x x. It shall have the following specific
powers and functions:

(1) Represent the Government in the Supreme Court and the Court of Appeals in all criminal proceedings;
represent the Government and its officers in the Supreme Court and Court of Appeals, and all other courts
or tribunals in all civil actions and special proceedings in which the Government or any officer thereof in
his official capacity is a party.

11
Section 6. Promulgation of judgment. - The judgment is promulgated by reading it in the presence of the
accused and any judge of the court in which it was rendered. However, if the conviction is for a light offense,
the judgment may be pronounced in the presence of his counsel or representative. When the judge is absent
or outside the province or city, the judgment may be promulgated by the clerk of court.

xxxx

In case the accused fails to appear at the scheduled date of promulgation of judgment despite notice, the
promulgation shall be made by recording the judgment in the criminal docket and serving him a copy
thereof at his last known address or thru his counsel.

If the judgment is for conviction and the failure of the accused to appear was without justifiable cause, he
shall lose the remedies available in these rules against the judgment and the court shall order his arrest.
Within fifteen (15) days from promulgation of judgment, however, the accused may surrender and file a
motion for leave of court to avail of these remedies. He shall state the reasons for his absence at the
scheduled promulgation and if he proves that his absence was for a justifiable cause, he shall be allowed
to avail of said remedies within fifteen (15) days from notice.
MAIN TOPIC> CIVIL LAW> MORTGAGE > Act No. 3135 (AN ACT TO REGULATE THE
SALE OF PROPERTY UNDER SPECIAL POWERS INSERTED IN OR ANNEXED TO
REAL ESTATE MORTGAGES)
CIVIL LAW> AGENCY> SPECIAL POWER OF ATTORNEY
RULES OF COURT> FORECLOSURE OF REAL ESTATE MORTGAGE> RULE 68

Spouses Benito Baysa and Victoria Baysa, Petitioners,

vs.
Spouses Fidel Plantilla and Susan Plantilla, Register of Deeds of Quezon City and
the Sheriff of Quezon City, Respondents.
G.R. No. 159271, July 13, 2015
(First Division)

FACTS: The case involves a real estate mortgage (REM) entered into by the petitioners
involving their parcel of land in Cubao, Quezon City covered by their Transfer Certificate
of Title No. 260376 of the Register of Deeds of Quezon City to secure the payment of
their obligation amounting to P2.3 Million in favor of the respondent spouses. Based on
the terms of the REM, the petitioners agreed to pay interest on the principal amount at
the rate of 2.5%/month, or P 57,500.00/month. Upon the default of the petitioners, the
respondent spouses commenced the extrajudicial foreclosure of the REM to recover from
the petitioners the total liability of P 3,579, 100.00 (inclusive of the principal and the
unpaid interest).

The petitioners sued the respondent spouses in the Regional Trial Court (RTC) in Quezon
City to annul the extrajudicial foreclosure of the REM and the public auction conducted
pursuant to the extrajudicial foreclosure. They alleged that all the proceedings relevant
to the extrajudicial foreclosure were null and void, pointing out that there had been no
power or authority to sell inserted in the REM or attached thereto as required by Section
1 Act No. 3135; and that the interest rate of 8% was unconscionable and violative of the
Anti-Usury Law. The petitioners seek the reversal and setting aside of the decision of
the Court of Appeals (CA) declaring the extrajudicial foreclosure of their mortgaged
property valid.

ISSUE #1: Whether or not the Court of Appeals erred when it declared that the
extrajudicial foreclosure was valid despite the lack of provision in the mortgage deed
granting special power to sell to the mortgagee.

HELD #1: YES. In the extrajudicial foreclosure of property subject of a real estate
mortgage, Section 1 of Act No. 313512 (An Act to Regulate the Sale of Property Under
Special Powers Inserted in or Annexed to Real Estate Mortgages) is quite explicit and
definite about the special power to sell the property being required to be either inserted
in or attached to the deed of mortgage. Accordingly, to enable the extra judicial
foreclosure of the REM of the petitioners, the special power to sell should have been
either inserted in the REM itself or embodied in a separate instrument attached to the

12
Section 1. When a sale is made under a special power inserted in or attached to any real estate
mortgage hereafter made as security for the payment of money or the fulfillment of any other obligation,
the provisions of the following section shall govern as to the manner in which the sale and redemption shall
be effected, whether or not provision for the same is made in the power.
REM. But it is not disputed that no special power to sell was either inserted in the REM
or attached to the REM. Hence, the respondent spouses as the foreclosing mortgagees
could not initiate the extrajudicial foreclosure, but must resort to judicial foreclosure
pursuant to the procedure set forth in Rule 68 of the Rules of Court. The omission of
the special power to sell the property subject of the mortgage was fatal to the validity
and efficacy of the extrajudicial foreclosure, and warranted the invalidation of the entire
proceedings conducted by the sheriff.

ISSUE #2: Whether or not the Court of Appeals erred when it concluded that consenting
to the extrajudicial foreclosure of the property, by necessary implication, carries with it
the grant of power to sell the property at public action.

HELD #2: YES. What was necessary was the special power or authority to sell - whether
inserted in the REM itself, or annexed thereto - that authorized the respondent spouses
to sell in the public auction their mortgaged property. The requirement for the special
power or authority to sell finds support in the civil law. To begin with, because the sale
of the property by virtue of the extrajudicial foreclosure would be made through the
sheriff by the respondent spouses as the mortgagees acting as the agents of the
petitioners as the mortgagors-owners, there must be a written authority from the latter
in favor of the former as their agents; otherwise, the sale would be void. And, secondly,
considering that, pursuant to Article 1878, (5), of the Civil Code, a special power of
attorney was necessary for entering "into any contract by which the ownership of an
immovable is transmitted or acquired either gratuitously or for a valuable
consideration," the written authority must be a special power of attorney to sell.

ISSUE #3: Whether or not the Court of Appeals erred in not declaring the 2.5% monthly
interest illegal and usurious, considering that the 8% interest was already declared as
invalid and unwarranted.

HELD #3: NO. To start with, the petitioners are now estopped from assailing the validity
of the monthly interest payments made. They expressly consented to be liable to pay
2.5%/month on the principal loan of P2.3 Million, and actually made several payments
of interest at that rate. Secondly, they did not assail the rate of 2.5%/month as interest
in the lower courts, doing so only in this appeal. Hence, they cannot be permitted to
bring the issue for the first time in this Court, for that would be unfair not only to the
adverse parties but also to the lower courts by depriving the latter of the opportunity to
pass upon the issue. And, thirdly, the invalidation by the CA of the 8% compounded
interest does not justify deleting the stipulation on the 2.5%/month interest that was
really separate and distinct from the former.