Philippine Supreme Court Jurisprudence > Year 2018 > December 2018 Decisions > G.R. No. 215999, December 17, 2018 - SPS. FELIX A. CHUA AND CARMEN L. CHUA; JAMES B. HERRERA; EDUARDO L. ALMENDRAS; MILA NG ROXAS; EUGENE C. LEE; EDICER H. ALMENDRAS; BENEDICT C. LEE; LOURDES C. NG; AND LUCENA INDUSTRIAL CORPORATION, LUCENA GRAND CENTRAL TERMINAL, INC., REPRESENTED BY FELIX A. CHUA, Petitioners, v. UNITED COCONUT PLANTERS BANK; ASSET POOL A (SPV­AMC); REVERE REALTY AND DEVELOPMENT CORPORATION; JOSE C. GO; AND THE REGISTRAR OF DEEDS OF LUCENA CITY, Respondents.:

We hereby consider and resolve: (1) the respective motions for reconsideration filed by respondents United Coconut Planters Bank (UCPB),¹ Asset Pool A,² and Revere Realty Corp. and Jose Go;³ (2) the motion to inhibit the Third Division, and to reassign the case to another Division of the Court by raffle;⁴ and (3) the urgent motions to refer the case to the Court En Banc.⁵

Antecedents

For perspective, the Court revisits the factual and procedural antecedents.

Petitioners Felix A. Chua and Carmen L. Chua (Spouses Chua) and their co-petitioners entered into a Joint Venture Agreement⁶ (JVA) with Gotesco Properties, Inc. (Gotesco) for the development of petitioners' properties into a subdivision. Pursuant to the JVA, deeds of absolute sale were executed to transfer 32 parcels of land to Revere Realty and Development Corporation (Revere), a corporation controlled and represented by Jose C. Go. The deeds of absolute sale were in turn complemented by two deeds of trust,⁷ both dated April 30, 1998. The deeds of trust confirmed that the petitioners remained the true and absolute owners of the properties.

Subsequently, on March 21, 2000, petitioners Spouses Chua and Lucena Grand Central Terminal, Inc. (LGCTI), on the one hand, and respondent United Coconut Planters Bank (UCPB), on the other, entered into a Memorandum of Agreement (MOA) to consolidate petitioners' obligations as of November 30, 1999 to UCPB amounting to P204,597,177.04.⁸ They agreed to deduct P103,893,450.00 from such consolidated amount in exchange for petitioners' 30 parcels of land and the improvements existing thereon. To implement the MOA as regards the conveyance of the properties, petitioners executed a Real Estate Mortgage (REM) involving 26 of the 30 parcels of land also on March 21, 2000.⁹ UCPB and Revere executed another REM involving 18 properties on the same day.¹⁰ Apparently, UCPB agreed to waive the penalties and interests due on petitioners' obligations amounting to P32,703,727.04 thereby leaving a balance of P68,000,000.00. To settle such balance of petitioners' liability, the parties executed another agreement, the Deed of Assignment of Liabilities,¹¹ converting the balance of P68,000,000.00 into equity interest in LGCTI in favor of UCPB.

Enforcing petitioners' REM as well as the Revere REM, UCPB foreclosed the mortgages, and the properties were sold for a total bid price of P227,700,000.00.

On February 14, 2003, UCPB and LGCTI executed a deed of assignment of liabilities whereby LGCTI would issue 680,000 preferred shares of its stocks to UCPB to offset its remaining obligations totalling P68,000,000.00.

On September 4, 2003, UCPB wrote a letter to the Spouses Chua and LGCTI regarding the transfer of LGCTI shares of stock to its favor pursuant to the deed of assigm11ent of liabilities.¹²

On November 11, 2003, Spouses Chua wrote UCPB to request an accounting of Jose Go's liabilities that had been mistakenly secured by the mortgage of petitioners' properties, as well as to obtain a list of all the properties subject of their REM as well as of the Revere REM for re­appraisal by an independent appraiser. The Spouses Chua further requested that the proceeds of the foreclosure sale of the properties be applied only to petitioners' obligation of P204,597,177.04; and that the rest of the properties or any excess of their obligations should be returned to them.¹³

However, UCPB did not heed petitioners' requests. Thus, on February 3, 2004, petitioners filed their complaint against UCPB, Revere, Jose Go, and the Register of Deeds of Lucena City in the RTC in Lucena City.¹⁴ The RTC issued a writ of preliminary injunction at the instance of petitioners.

On October 4, 2004, the RTC declared Jose Go and Revere in default. On February 22, 2005, the RTC denied the motion for reconsideration of Jose Go and Revere.¹⁵

On September 6, 2005, the RTC, through Judge Virgilio C. Alpajora, rendered a partial judgment against Jose Go and Revere, viz.:

WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiffs and against defendants JOSE C. GO and REVERE REALTY DEVELOPMENT CORPORATION, as follows:

a) Declaring as legal and binding the Deeds of Trust dated April 30, 1998 and holding the properties held in trust for plaintiff by defendants REVERE and GO.

b) Declaring that defendants REVERE and GO are not the owners of the properties covered by the deeds of trust and did not have any authority to constitute a mortgage over them to secure their personal and corporate obligations, for which they should be liable.

c) Nullifying the Deed of Real Estate Mortgage dated March 21, 2000 executed by defendants REVERE and GO in favor of co-defendant UNITED COCONUT PLANTERS BANK.

d) Ordering defendants REVERE and GO to reconvey in favor of the plaintiff the thirty-two (32) real properties listed in the deeds of trust and originally registered in the names of the plaintiffs under the following titles, to wit: TCT Nos. T-40450, 40452, 40453, 64488, 71021, 71022, 71023, 71024, 71025, 71136, 55033, 55287, 58945, 58946, 58947, 58948, 54186, 54187, 54189, 54190, 54191, 55288, 54186, 54187, 54188, 55030, 55031, 50426, 50427, 50428, 50429, and 50430.

e) Ordering defendants REVERE and GO to pay plaintiffs the amount of Php1,000,000.00 and as by way of moral damages, and Php200,000.00 and by way of attorney's fees.

SO ORDERED.¹⁶

On November 9, 2005, the RTC modified the partial judgment upon UCPB's motion for reconsideration, but otherwise affirmed it as against Revere and Jose Go, disposing thusly:

WHEREFORE, premises considered, the Partial Judgment dated September 6, 2005 is reconsidered and clarified as to United Coconut Planters Bank, as follows:

a) The contested portion of the Partial Judgment ordering reconveyance is directed at defendants Revere Realty and Development Corp. and Jose Go and not at defendant United Coconut Planters Bank; and

b) The resolution of the issue of whether or not defendant UCPB is obliged to reconvey the properties listed in the Partial Judgment in favor of the plaintiffs, as well as the other issues between UCPB and the plaintiffs, shall be determined after the parties shall have presented their evidence.

SO ORDERED.¹⁷

Subsequently, UCPB foreclosed the two REMs. The Apportionment of Bid Price certified by UCPB's Account Officer stated that the properties under mortgage had been sold to UCPB during the foreclosure sale for the aggregate price of P227,700,000.00 broken down into P152,606,820.00 for petitioners' REM and P75,093,180.00 for the Revere REM.¹⁸

Despite UCPB's subsequent inquiries on the issuance of the preferred shares pursuant to the Deed of Assignment of Liabilities, petitioners refused to issue the stocks. They instead protested the application of the proceeds of the foreclosure sale to settle the personal and corporate obligations of Go for having been without their knowledge and consent. They also protested the inclusion in the foreclosure of the properties under the Revere REM on the ground that such inclusion had been undertaken without their express consent as the owners of the properties.

On January 6, 2009, the Lucena RTC rendered judgment in favor of petitioners.¹⁹ On appeal by respondents, the Court of Appeals (CA) reversed the RTC.²⁰

In the decision of August 16, 2017,²¹ the Court reversed the decision of the CA and reinstated the judgment of the RTC, disposing thusly:

WHEREFORE, the Court GRANTS the petition for review on certiorari; SETS ASIDE the decision of the Court of Appeals promulgated on March 25, 2014 in CA-G.R. No. 93644; REINSTATES the judgment rendered on January 6, 2009 by the Regional Trial Court, Branch 59, in Lucena City, with the addition of TCT No. 89334, to wit:

WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiffs and against defendants UNITED COCONUT PLANTERS BANK, ASSET POOL A, REGISTRAR OF DEEDS OF LUCENA CITY and EX­-OFFICIO SHERIFF OF LUCENA CITY, thus:

a. Declaring that the loan obligations of plaintiffs to defendant UNITED COCONUT PLANTERS BANK under the Memorandum of Agreement dated March 21, 2000 have been fully paid;

b. Declaring as legal and binding the Deeds of Trust dated April 30, 1998 and holding the properties listed therein were merely held-in-trust for plaintiffs by defendants REVERE and JOSE GO and/or corporations owned or associated with him;

c. Nullifying the Deed of Real Estate Mortgage dated March 21, 2000 executed by defendants REVERE and JOSE GO in favor of co-defendant UNITED COCONUT PLANTERS BANK and the Deed of Assignment of Liability dated February 14, 2003 executed by plaintiffs in favor of UNITED COCONUT PLANTERS BANK;

d. Ordering defendant REGISTRAR OF DEEDS of Lucena City to cancel any and all titles derived or transferred from TCT Nos. T-40452 (89339), 40453 (89340), 84488 (89342), 71021 (89330), 71022 (89331), 71023 (89332), 71025 (95580-95581), 71136 (95587-95590), 55033 (89384), 89334 and issue new ones returning the ownership and registration of these titles of the plaintiffs. For this purpose, defendant UNITED COCONUT PLANTERS BANK is directed to execute the appropriate Deeds of Reconveyance in favor of the plaintiffs over the eighteen (18) real properties listed in the Real Estate Mortgage dated March 21, 2000 executed by defendants Revere Realty and JOSE GO and originally registered in the names of the plaintiffs.

e. Ordering defendant UNITED COCONUT PLANTERS BANK to return so much of the plaintiffs titles, of their choice, equivalent to Php200,000,000.00 after applying so much of the mortgaged properties, including those presently or formerly in the name of REVERE, to the payment of plaintiffs' consolidated obligation to the bank in the amount of Php204,597,177.04.

f. Declaring the Real Estate Mortgage dated June 02, 1997 as having been extinguished by the Memorandum of Agreement date March 21, 2000, and converting the writ of preliminary injunction issued on March 22, 2004 to a permanent one, forever prohibiting UNITED COCONUT PLANTERS BANK and ASSET POOL A and all persons/entities deriving rights under them from foreclosing on TCT Nos. T-54182, T-54184, T-54185, T-54192, and T-71135. The court hereby orders said defendants, or whoever is in custody of the said certificates of title, to return the same to plaintiffs and to execute the appropriate release of mortgage documents.

g. Finally, ordering defendant UNITED COCONUT PLANTERS BANK, to pay plaintiffs:

i. The excess of the foreclosure proceeds in the amount of Php23,102,822.96, as actual damages;

ii. Legal interest on the amount of Php223,102,822.96 at the rate of 6% per annum from February 3, 2004 until finality of judgment. Once the judgment becomes final and executory, the interest of 6% per annum, should be imposed, to be computed from the time the judgment becomes final and executory until fully satisfied, as compensatory damages;

iii. Php1,000,000.00 as moral damages;

iv. Php100,000.00 as exemplary damages;

v. Php2,000,000.00 as attorney's fees; and

vi. Costs of suit;

SO ORDERED.

and DIRECTS respondents, except the Registrar of Deeds of Lucena City and the Ex-Officio Sheriff of Lucena City, to pay the costs of suit.

SO ORDERED.²²

Hence, the motions for reconsideration.

Issues

Through their respective motions for reconsideration, UCPB, Asset Pool A, Revere and Jose C. Go assail the decision of August 16, 2017 on supposed procedural and substantive infirmities.

Asset Pool A particularly submits that:

I. The Honorable Court erred in assuming that the petitioners were misled into signing or agreeing to the stipulations in the Petitioners' REM, MOAs, etc. as they were supplied by UCPB itself and in concluding that UCPB is a mortgagee in bad faith.

II. The Honorable Court erred in nullifying the Revere REM executed by Jose Go as titles registered under REVERE are merely held "in trust" by Jose Go.

The Honorable Court erred in finding that petitioners have no knowledge or confom1ity to the Revere REM.

Consequently, the Honorable Court committed grave error in ordering UCPB to execute Deeds of Reconveyance in favour of petitioners of real properties listed in the Revere REM.

III. The Honorable Court committed grave abuse of discretion when it ruled that the proceeds of foreclosure sale of properties to be conveyed to UCPB should have been applied to fully extinguish the debts of Spouses Chua and LGCTI to UCPB before they can be applied to the obligations of Jose Go to the Bank. This condition is nowhere to be found in the First MOA, Second MOA, Petitioners REM, Revere REM and the Deed of Assignment.

IV. The Honorable Court erred in declaring that the Real Estate Mortgage dated June 2, 1997 is deemed extinguished by the Memorandum of Agreement dated March 21, 2000.

As Spouse Chua and LCTI have remaining outstanding principal obligation to UCPB and/or its successor-in-interest APA, it is serious error for the Honorable Court to order the release of the mortgage and return of titles.

V. The Honorable Court erred in declaring that the remaining loan obligations of petitioners LGCTI and Spouses Chua are fully paid notwithstanding their non-payment.

VI. There is no legal and factual basis for the Honorable Court to award petitioners actual damages, interest, moral damages, exemplary damages, attorney's fees and costs of suit against UCPB.

VII. The Honorable Court promulgated the Decision of August 16, 2017 in less than two (2) days from the assignment or appointment to office of four of the five Members of the Supreme Court. This clearly violated the Constitution and the Internal Rules of the Supreme Court and resulted to the violation of respondents' right to procedural due process. Hence, it is null and void.

VIII. The Decision of August 16, 2017 is null and void for failure to comply with the substantive requirement of Sec. 14, Article VIII of the Constitution, i.e. "No decision shall be rendered by any court without expressing therein clearly and distinctly the facts and the law on which it is based."

This resulted to further violation of respondents' right to due process.²³

On the other hand, UCPB cites the following errors, namely:

I. THE HONORABLE COURT ERRED IN HOLDING THAT THE LOAN OBLIGATIONS OF HEREIN PETITIONERS TO UCPB UNDER THE MEMORANDUM OF AGREEMENT DATED MARCH 21, 2000 HAVE BEEN FULLY PAID

II. THE HONORABLE COURT ERRED IN DECLARING THE REAL ESTATE MORTGAGE DATED JUNE 02, 1997 AS HAVING BEEN EXTINGUISHED BY THE MEMORANDUM OF AGREEMENT DATED MARCH 21, 2000

III. THE HONORABLE COURT ERRED IN NULLIFYING THE DEED OF REAL ESTATE MORTGAGE DATED MARCH 21, 2000 EXECUTED BY REVERE AND GO IN FAVOR OF UCPB AND THE DEED OF ASSIGNMENT OF LIABILITY DATED FEBRUARY 14, 2003 EXECUTED BY HEREIN PETITIONERS IN FAVOR OF UCPB

IV. THE HONORABLE COURT ERRED IN HOLDING THAT HEREIN PETITIONERS WERE ENTITLED TO EXCESS FORECLOSURE PROCEEDS OF P23,000,000.00

V. THE HONORABLE COURT ERRED IN ORDERING UCPB TO RETURN P200,000,000.00 WORTH OF PROPERTIES TO HEREIN PETITIONERS

VI. WORSE, THE HONORABLE COURT ERRED IN IMPOSING INTERESTS AT 6% PER ANNUM ON THE RETURN OF PROPERTIES

VII. THE HONORABLE COURT ERRED IN ORDERING UCPB TO PAY PETITIONERS MORAL DAMAGES, EXEMPLARY DAMAGES, ATTORNEY'S FEES AND COSTS OF SUIT.²⁴

On their part, Revere and Jose C. Go posit that they had not been duly heard on the issues resolved by the Court.

Ruling of the Court

After careful consideration of the motions for reconsideration, we find and declare that respondents have not offered any argument or tendered any matter that would have justifiably overturned the factual basis and ratio decidendi of the decision of August 16, 2017. Accordingly, we deny the motions for reconsideration, and reiterate the decision.

1.
On the validity of the decision of August 16, 2017

Asset Pool A has taken issue against the promulgation of our decision on August 16, 2017, alleging that the promulgation was made -

x x x less than two (2) days from the assignment or appointment to office of four of the five Members of the Supreme Court. This clearly violated the Constitution and the Internal Rules of the Supreme Court and resulted to the violation of respondents' right to procedural due process. Hence, it is null and void.

and insisting that the decision was thereby rendered:

x x x null and void for failure to comply with the substantive requirement of Sec. 14, Article VIII of the Constitution, i.e. "No decision shall be rendered by any court without expressing therein clearly and distinctly the facts and the law on which it is based.

Additionally, respondents seek the referral of the case to the Banc on the ground of the supposed bias of the deciding Members of the Division, whose recusal they hereby also seek.

The attack against the validity of the decision is entirely bereft of merit and justification.

For sure, every party-litigant has the right to an impartial and disinterested tribunal. In view of this right, every party may seek the inhibition or disqualification of a judge who does not appear to be wholly free, disinterested, impartial and independent in handling a case. Nonetheless, the invocation of the right is always weighed against the duty of the judge to decide cases without fear of repression.²⁵

The motion by the litigant for the inhibition or disqualification of a judge is regulated by the Rules of Court. Section 1,²⁶ first paragraph, Rule 137 of the Rules of Court stipulates that a judge or judicial officer shall be mandatorily disqualified to sit in any of the instances enumerated therein, namely: where he, or his wife or child is pecuniarily interested as heir, legatee, creditor or otherwise; or where he is related to either party within the sixth degree of consanguinity or affinity; or where he is related to counsel within the fourth degree; or where he has been executor, administrator, guardian, trustee or counsel; or where he has presided in any inferior court, and his ruling or decision is the subject of review. The second paragraph of the rule concerns voluntary inhibition, and allows the judge, in the exercise of his sound discretion, to disqualify himself from sitting in a case "for just or valid reasons other than those mentioned above." The exercise of discretion for this purpose is a matter of conscience for him, and is addressed primarily to his sense of fairness and justice.²⁷

The grounds for the mandatory inhibition of the Members of the Court, which are analogous to those mentioned in Rule 137 of the Rules of Court, are embodied in Section 1, Rule 8 of the Internal Rules of the Supreme Court,²⁸ quoted as follows:

Section 1. Grounds for inhibition. - A Member of the Court shall inhibit himself or herself from participating in the resolution of the case for any of these and similar reasons:

(a) The Member of the Court was the ponente of the decision or participated in the proceedings in the appellate or trial court;

(b) The Member of the Court was counsel, partner, or member of a law firm that is or was the counsel in the case subject to Section 3(c) of this rule;

(c) The Member of the Court or his or her spouse, parent or child is pecuniarily interested in the case;

(d) The Member of the Court is related to either party in the case within the sixth degree of consanguinity or affinity;

(e) The Member of the Court was executor, administrator, guardian or trustee in the case; and

(f) The Member of the Court was an official or is the spouse of an official or former official of a government agency or private entity that is a party to the case, and the Justice or his or her spouse has reviewed or acted on any matter relating to the case.

A Member of the Court may in the exercise of his or her sound discretion, inhibit himself or herself for a just or valid reason other than any of those mentioned above.

The inhibiting Member must state the precise reason for the inhibition.

The grounds for seeking the inhibition of the Members of the Court must be stated in the motion. Yet, in now seeking the inhibition of all the Members of the Third Division who have ruled on the appeal, respondents neither advert to any of the grounds for mandatory inhibition nor point to the bias or partiality of said Members. Their motion only suggests that the earlier voluntary inhibition by Justice Velasco would not deter him from wielding undue influence over the remaining Members of the Third Division because he remained their Chairman.

The suggestion assaults not only Justice Velasco's character but also the character of the remaining Members of the Third Division. The assault is both unfair, and even worse, presumptuous. Indeed, Justice Velasco, following his self-disqualification, had nothing more to do with the case. At any rate, respondents ignore that the remaining Members of the Third Division would not be influenced by a disqualified Member upon matters involved in the case in which the latter no longer takes part.

Moreover, respondents' calling now for the inhibition of the Members of the Third Division only after they had rendered their decision adversely was no longer a viable remedy. Under Section 2, Rule 8 of the Internal Rules of the Supreme Court, the granting of any motion for the inhibition of a Division or a Member of the Court after a decision on the merits of the case had been rendered is forbidden except if there is some valid or just reason (such as a showing of graft and corrupt practice, or such as a valid ground not earlier apparent).

Respondents' motion to refer the case to the Court En Banc is equally unworthy of consideration. In this regard, the grounds to justify a referral of any case to the Banc are long recognized. Section 3, Rule 2 of the Internal Rules of the Supreme Court specifically enumerates the matters and cases that the Court En Banc shall act on, viz.:

SEC. 3. Court en banc matters and cases. - The Court en banc shall act on the following matters and cases:

(a)	cases in which the constitutionality or validity of any treaty, international or executive agreement, law, executive order, presidential decree, proclamation, order, instruction, ordinance, or regulation is in question;
(b)	criminal cases in which the appealed decision imposes the death penalty or reclusion perpetua;
(c)	cases raising novel questions of law;
(d)	cases affecting ambassadors, other public ministers, and consuls;
(e)	cases involving decisions, resolutions, and orders of the Civil Service Commission, the Commission on Elections, and the Commission on Audit;
(f)	cases where the penalty recommended or imposed is the dismissal of a judge, the disbarment of a lawyer, the suspension of any of them for a period of more than one year, or a fine exceeding forty thousand pesos;
(g)	cases covered by the preceding paragraph and involving the reinstatement in the judiciary of a dismissed judge, the reinstatement of a lawyer in the roll of attorneys, or the lifting of a judge's suspension or a lawyer's suspension from the practice of law;
(h)	cases involving the discipline of a Member of the Court, or a Presiding Justice, or any Associate Justice of the collegial appellate courts;
(i)	cases where a doctrine or principle laid down by the Court en banc or by a Division may be modified or reversed;
(j)	cases involving conflicting decisions of two or more divisions;
(k)	cases where three votes in a Division cannot be obtained;
(l)	Division cases where the subject matter has a huge financial impact on businesses or affects the welfare of a community;
(m)	subject to Section 11 (b) of this rule, other division cases that, in the opinion of at least three Members of the Division who are voting and present, are appropriate for transfer to the Court en banc;
(n)	cases that the Court en banc deems of sufficient importance to merit its attention; and
(o)	all matters involving policy decisions in the administrative supervision of all courts and their personnel.

None of the aforecited matters and cases is applicable to this case, for respondents did not show in their motion how, if at all, this case came under any of the matters and cases listed in Section 3, Rule 2 of the Internal Rules of the Supreme Court.

Respondents did not also demonstrate how the Third Division could have contravened the procedures for handling the appeal set in the Internal Rules of the Supreme Court. Their insistence that Justice Martires and Justice Gesmundo had not studied the case prior to the deliberations and voting held on August 16, 2017 was speculative, if not outrightly false. The truth is that the four deciding Members of the Third Division deliberated and unanimously voted on the result. The fifth Member, Justice Caguioa, was absent because he was then on leave?. but his absence did not render the deliberation and voting irregular. Far to the contrary, the deliberation and voting conformed to Section 4, second paragraph, Rule 8 of the Internal Rules of the Supreme Court, which reads:

Section 4. x x x

x x x x

When a Member of the Division is on leave, he/she shall no longer be replaced as long as there is a quorum of at least three (3) members, and said absent Member who participated in the deliberation of the case shall be allowed to leave his or her vote pursuant to Section 4 of Rule 12.

Worthy to stress is that the Court is composed of 15 Members who are assigned to the three Divisions.²⁹ The assignment of the Members to the Divisions pursuant to the Internal Rules of the Supreme Court is based on seniority and on the vacancies to be filled.³⁰ All the decisions promulgated and actions taken in Division cases rest upon the concurrence of at least three Members of the Division who actually take part in the deliberations and vote.³¹ The decisions or resolutions of each Division are not any less the decisions or resolutions of the Court itself.³² In short, the Court En Banc is not appellate in respect of the Divisions, for each Division is like the Court En Banc itself, not the inferior to the Court En Banc.³³

Lastly, respondents point to the initial dismissal of the appeal. However, such initial dismissal no longer matters considering that the Court already reconsidered it and reinstated the appeal as a consequence. As such, the decision on the merits promulgated herein was entirely valid and effective.

2.
Response to and comments on Justice Caguioa's separate opinion

The decision of August 16, 2018 has expressly concluded that the Memorandum of Agreement (MOA) of March 21, 2000 reflected the consolidation of all obligations ofpetitioners as ofNovember 30, 1999.

Although he agrees that the CA erred in declaring that the 1997 REM between petitioners and UCPB still subsisted despite the execution of the MOA of March 21, 2000, Justice Caguioa contends that the fact that the Revere REM and petitioners' REM had been executed on the same date indicated that petitioners had expressly consented to Revere REM; hence, the Revere REM was valid. He concludes that UCPB's foreclosure of the mortgage covering the 10 parcels of land involved in the Revere REM was effective; and that only UCPB's application of payments was not proper. As a result, he recommends that paragraphs c., d. and e., to wit:

x x x x

c. Nullifying the Deed of Real Estate Mortgage: dated March 21, 2000 executed by defendants REVERE and JOSE GO in favor of co­ defendant UNITED COCONUT PLANTERS BANK and the Deed of Assignment of Liability dated February 14, 2003 executed by plaintiffs in favor of UNITED COCONUT PLANTERS BANK;

d. Ordering defendant REGISTRAR OF DEEDS of Lucena City to cancel any and all titles derived or transferred from TCT Nos. T-40452 (89339), 40453 (89340), 84488 (89342), 71021 (89330), 71022 (89331), 71023 (89332), 71025 (95580-95581), 71136 (95587-95590), 55033 (89384), 89334 and issue new ones returning the ownership and registration of these titles of the plaintiffs. For this purpose, defendant UNITED COCONUT PLANTERS BANK is directed to execute the appropriate Deeds of Reconveyance in favor of the plaintiffs over the eighteen (18) real properties listed in the Real Estate Mortgage dated March 21, 2000 executed by defendants Revere Realty and JOSE GO and originally registered in the names of the plaintiffs.

e. Ordering defendant UNITED COCONUT PLANTERS BANK to return so much of the plaintiffs titles, of their choice, equivalent to Php200,000,000.00 after applying so much of the mortgaged properties, including those presently or formerly in the name of REVERE, to the payment of plaintiffs' consolidated obligation to the bank in the amount of Php204,597,177.04.

x x x x

be deleted from the fallo of the decision of August 16, 2017, and the following dispositive paragraph should instead be stated, namely:

x x x x

c. Declaring the Deed of Real Estate Mortgage dated March 21, 2000 executed by respondents Revere and Jose Go in favor of co­respondent United Coconut Planters Bank to be valid;

x x x x

The recommendation of Justice Caguioa is unacceptable. The original paragraph c. found in the fallo of the decision of August 16, 2017, supra, should stand and be maintained for several substantial and practical reasons.

To start with, we should not ignore that the Lucena RTC as the trial court rendered against respondents Jose Go and Revere a partial judgment on September 6, 2005, disposing therein as follows:

WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiffs and against defendants JOSE C. GO, and REVERE REALTY DEVELOPMENT CORPORATION, as follows:

a) Declaring as legal and binding the Deeds of Trust dated April 30, 1998 and holding the properties held in trust for plaintiff by defendants REVERE and GO.

b) Declaring that defendants REVERE and GO are not the owners of the properties covered by the deeds of trust and did not have any authority to constitute a mortgage over them to secure their personal and corporate obligations, for which they should be liable.

c) Nullifying the Deed of Real Estate Mortgage dated March 21, 2000 executed by defendants REVERE and GO in favor of co-­defendant UNITED COCONUT PLANTERS BANK.

d) Ordering defendants REVERE and GO to reconvey in favor of the plaintiff the thirty-two (32) real properties listed in the deeds of trust and originally registered in the names of the plaintiffs under the following titles, to wit: TCT Nos. T-40450, 40452, 40453, 64488, 71021, 71022, 71023, 71024, 71025, 71136, 55033, 55287, 58945, 58946, 58947, 58948, 54186, 54187, 54189, 54190, 54191, 55288, 54186, 54187, 54188, 55030, 55031, 50426, 50427, 50428, 50429, and 50430.

e) Ordering defendants REVERE and GO to pay plaintiffs the amount of Php1,000,000.00 and as by way of moral damages, and Php200,000.00 and by way of attorney's fees.

SO ORDERED.³⁴

The partial judgment became final and executory because Go and Revere did not appeal.

If we were to accept Justice Caguioa's recommendation to declare the Revere REM valid and to adopt his proposed disposition, we would be abetting an irreconcilable conflict between his recommendation, on one hand, and the fallo of the final and immutable September 6, 2005 partial judgment, on the other. It is true that the November 9, 2005 order of the Lucena RTC clarified that only Go and Revere were to be covered and adversely affected by the partial judgment; but it is also undeniable that Justice Caguioa's proposed disposition would give rise to the situation of the Revere REM being validated despite being already nullified under the September 6, 2005 partial judgment rendered in the same case. The consequences would be difficult and ridiculous, for how would petitioners enforce in their own favor by writ of execution the already final and executory partial judgment for the reconveyance of their 32 lots subject of the Deeds of Trust if the subsequent result decreed in the same case were to be as recommended by Justice Caguioa?

Secondly, Justice Caguioa assumes that petitioners had given their express consent to the Revere REM from the fact that the titles of the parcels of land subject of the Revere REM were then in the name of Revere. He theorizes that the only way petitioners could have "conveyed and transferred the parcels of land to UCPB was for petitioners to cause Revere to execute the Revere REM."

The assumption lacks factual basis. For one, the written agreements of the parties contained no express stipulation to support the assumption. Also, UCPB presented no evidence during the trial to establish the giving of petitioners' consent - whether express or implied - to the Revere REM. On the contrary, the MOA nowhere expressly authorized Revere to enter into and execute the REM in favor of UCPB in order to implement the terms of the MOA or realize the object of the MOA. In this connection, the Lucena RTC expressly observed as follows:

The Court therefore affirms the nullity of the Revere REM dated March 21, 2000 (Exhibit "I", Exhibit "7-APA") executed by Revere in favor of defendant UCPB. There is no proof that plaintiffs have consented to the application of the properties listed in Annex "B" thereof to the loan obligation of defendant Jose Go. UCPB is therefore lawfully bound to return to plaintiffs TCT Nos. (numbers omitted), conformably with this court's disquisition in the Partial Judgment rendered on September 6, 2005.

The conformity of the plaintiffs through Felix A. Chua only appears on the Plaintiff's REM dated March 21, 2000 (Exhibit "G", Exhibit "6-APA").³⁵ x x x

Thirdly, the stipulations of the MOA of March 21, 2000 related exclusively to the obligation of petitioners, to wit:

(A) As of 30 November 1989, the BORROWER has outstanding obligations due in favor of the Bank in the aggregate amount of Two Hundred Four Million Five Hundred Ninety Seven Thousand One Hundred Seventy Seven and 04/100 Pesos (P204,597,177.04), Philippine currency, inclusive of all interest, charges and fees (the "Obligation")."

The MOA of March 21, 2000 made no mention therein that petitioners had given their consent and approval to the Revere REM to securitize the obligations of Go. As such, it was unwarranted to assume that petitioners had consented to and approved the Revere REM, for to do so would run counter to the Parol Evidence Rule embodied in Section 9, Rule 130 of the Rules of Court, viz.:

Section 9. Evidence of written agreements. - When the terms of an agreement have been reduced into writing, it is considered as containing all the terms agreed upon and there can be, between the parties and their successors-in-interest, no evidence of such terms other than the contents of the written agreement.

x x x x

Under the Parol Evidence Rule, the affected party's pleadings must allege the basis for the exception, and only then may such party adduce evidence thereon.³⁶ However, UCPB adduced no evidence showing that the Spouses Chua had consented to or approved the Revere REM.

Moreover, the express terms of the MOA of March 21, 2000, which UCPB itself had prepared and drafted, did not indicate that the Spouses Chua had consented to or approved the Revere REM. On the contrary, Section 5.4 of the MOA expressly forbade the parties from varying or modifying the written terms thereof. For reference, Section 5.4 is quoted hereunder:

Section 5.4 Entire Agreement - This Agreement constitutes the entire, complete and exclusive statement of the terms and conditions of the agreement between the parties with respect to the subject matter referred to herein. No statement or agreement, oral or written, made prior to the signing hereof and no prior conduct or practice by either party shall vary or modify the written terms embodied hereof, and neither party shall claim any modification of any provision set forth herein unless such modification is in writing and signed by both parties.

Also underscoring the non-consent of petitioners, the Revere REM was signed only by Go acting for and in behalf of Revere. Nowhere in any of its 11 pages did the Revere REM bear the signatures of the Spouses Chua although its Article I patently lumped together the obligations of petitioners and Go at P404,597,177.04, as follows:

1. The payment of all loans, overdrafts, credit lines and other credit facilities or accommodations obtained or hereinafter obtained by the MORTGAGORS and/or by LUCENA GRAND CENTRAL TERMINAL, INC., SPOUSES FELIX AND CARMEN CHUA and JOSE C. GO (hereinafter referred to as DEBTORS) in the total aggregate amount of FOUR HUNDRED FOUR MILLION FIVE HUNDRED NINETY SEVEN THOUSAND ONE HUNDRED SEVENTY SEVEN and 04/100 PESOS (P404,597,177.04).

Fourthly, UCPB admittedly knew of stipulation 2³⁷ in the Deeds of Trust whereby Revere expressly acknowledged that it could not dispose of, sell, transfer, convey, lease or mortgage the 12 parcels of land "without the written consent of the TRUSTORS first obtained." In that regard, the decision of August 16, 2017 has pointed out:

Additionally, UCPB could not now feign ignorance of the deeds of trust. As the RTC aptly pointed out, UCPB's own Vice President expressly mentioned in writing that UCPB would secure from Jose Go the titles necessary for the execution of the mortgages. As such, UCPB's actual knowledge of the deeds of trust became undeniable. In addition, UCPB, being a banking institution whose business was imbued with public interest, was expected to exercise much greater care and due diligence in its dealings with the public. Any failure on its part to exercise such degree of caution and diligence would invariably stigmatize its dealings with bad faith. It should be customary and prudent for UCPB, therefore, to adopt certain standard operating procedures to ascertain and verify the genuineness of the titles to determine the real ownership of real properties involved in its dealings, pru1icularly in scrutinizing and approving loan applications. By approving the loan application of Revere obviously without making prior verification of the mortgaged properties' real owners, UCPB became a mortgagee in bad faith.

The foregoing indicated that UCPB had entered into the Revere REM in bad faith, rendering its foreclosure of the Revere REM as patently devoid of factual and legal support.

And, lastly, although the decision of August 16, 2017 points out that neither Revere nor Go was a party to the MOA of March 21, 2000, which concerned only petitioners' obligation of P204,597,177.04, the Revere REM stated the larger amount of P404,597,177.04 as the obligation, without mentioning or including therein petitioners' actual obligation of P204,597,144.04. As such, the Revere REM must be struck down as null and void for implicating petitioners in the foreclosure undertaken upon Jose Go's separate but undetermined liability.

Justice Caguioa further recommends the deletion of paragraph e. of the fallo of the decision promulgated on August 16, 2017, which says:

e. Ordering defendant UNITED COCONUT PLANTERS BANK to return so much of the plaintiffs' titles, of their choice, equivalent to Php200,000,000.00 after applying so much of the mortgaged properties, including those presently or formerly in the name of REVERE, to the payment of plaintiffs' consolidated obligation to the bank in the amount of Php204,597,177.04.

He explains that because petitioners' REM and the Revere REM were valid, and UCPB's foreclosure of such mortgages was consequently validly effected, the consolidated obligations of petitioners were extinguished and the properties subject of the foreclosure should be declared to rightfully belong to UCPB. He states:

x x x the two REMS are valid and as admitted by the parties, executed to effect or implement the obligations of the parties as detailed in the MOA. Because the REMS were valid and subsisting, their foreclosure was likewise proper and valid as they were done pursuant to the terms and conditions stated in both the REMS and MOA. And if the foreclosure was validly done by UCPB, then the entire consolidated obligations of the Petitioners was extinguished and the properties foreclosed now rightfully belong to UCPB. Consequently , the Decision's directive for UCPB to "execute the appropriate Deeds of Reconveyance in favor of {Petitioners}" and return so much of the {Petitioners'} titles . . . after applying so much of the mortgaged properties . . . to the payment of {Petitioners'} consolidated obligation to the bank is without legal basis. That said, UCPB's obligation is, as stated earlier, to return the excess of the foreclosure proceeds to the Petitioners.

We cannot join Justice Caguioa's recommendation. In the following disquisition, we graphically explain why paragraph e. of the fallo of the decision of August 16, 2017 - "ordering defendant UNITED COCONUT PLANTERS BANK to return so much of plaintiff's titles, of their choice, equivalent to Php200,000,000.00" - must be maintained and affirmed.

With the Revere REM being null and void as demonstrated herein and, therefore, ineffective, petitioners should not be thereby prejudiced. Consequently, the 10 parcels of land subject of the Revere REM have to be reconveyed to petitioners. Anent the 20 parcels of land subject of petitioners' REM, title over so much of the 24.8182 hectares (i.e., the total area of the 20 parcels of land) corresponding to their total obligation of P204,597,177.04 could remain in the name of UCPB, but the excess thereof should be returned to petitioners. The obligation of petitioners to UCPB would be thereby fully paid.

Such proper allocation of payment is fair to the parties, and ultimately prevents UCPB's unjust enrichment. As the decision of August 16, 2017 elucidates:

It can be further concluded that UCPB could not have validly assigned to Asset Pool A any right or interest in the P68,000,000.00 balance because the proper application of the proceeds of the foreclosure sale would have necessarily resulted in the full extinguishment of petitioners' entire obligation. Otherwise, unjust enrichment would ensue at the expense of petitioners. There is unjust enrichment when a person unjustly retains a benefit to the loss of another, or when a person retains money or property of another against the fundamental principles of justice, equity and good conscience. The principle of unjust enrichment requires the concurrence of two conditions, namely: (1) that a person is benefited without a valid basis or justification; and (2) that such benefit is derived at the expense of another. The main objectiv1e of the principle against unjust enrichment is to prevent a person from enriching himself at the expense of another without just cause or consideration. This principle against unjust enrichment would be infringed if we were to uphold the decision of the CA despite its having no basis in law and in equity.

The MOA of March 21, 2000 put petitioners' total liability at P204,597,177.04. On the other hand, the Revere REM stated the total of P404,597,177,04 ostensibly to include the outstanding obligation of Go although the entire extent of such obligation was not specifically disclosed. Given that petitioners' REM involved 20 parcels of land (as distinguished from the 10 parcels of land involved in the Revere REM), we should determine the true extent of petitioners' liability by extracting the ratio of P204,597,177.04 to the total of P404,597,177.04. This results to 50.56%, and the remainder is 49.44%, which was equivalent to P200,000,000.00. The latter amount represented petitioners' unused portion of the total credit accommodation of P404,597,177.04. Hence, UCPB should return to petitioners the equivalent of 49.44% of the total area of the 30 parcels of land involved in the transactions.

This proportionality was similarly discussed by the trial court, stating:

From the foregoing provisions, it is evident that the over-all intent of the said Real Estate Mortgage was to secure ALL past and future obligations of the plaintiffs and Jose Go to the extent of Php404,597,177.04. Considering that the outstanding obligation of the plaintiffs under the MOA dated March 21, 2000 were re-structured and consolidated to the final amount of Php204,597,177.04 which is 50.56% of the entire credit accommodation, defendant UCPB had no right to foreclose on the remaining 49.44% of the credit accommodation, which plaintiffs had not yet availed of at the time of the foreclosure.

As mentioned, the consolidated area of the 10 parcels of land involved in the Revere REM accounted for 121,907 square meters, while the consolidated area of the 20 parcels of land under petitioners' REM aggregated 248,182 square meters. In all, The 30 parcels of land had a combined area of 370,089 square meters. To derive the value per square meter, therefore, P404,597,177.04 is divided by 370,089, and the result is P1,093.24/square meter.

To determine the exact extent of the 370,089 square meters to be considered as payment to UCPB, we should multiply 370,089 by 50.568%, and the product is 187,146.60, which, rounded off, is 187,147. Hence, 187,147 multiplied by P1,093.24 results in P204,597,177.04, which sum represented the full payment to UCPB of petitioners' obligation in accordance with the MOA.

To prevent UCPB's unjust enrichment, the reconveyance by UCPB of so much of petitioners' assets as would be equal to the unused portion of their total credit accommodation of P404,597,177.04 should be decreed. The product of multiplying 370,089 by 49.43188% is 182,941.95, rounded off to 182,942, which, multiplied by P1,093.24, equates to P200,000,000.00, the value of petitioners' unused portion.

IN VIEW OF THE FOREGOING, the Court DENIES the respective motions for reconsideration of respondents United Coconut Planters Bank (UCPB), Asset Pool A, and Revere Realty Corp. and Jose Go; the motion to inhibit the Third Division and to reassign the case to another Division of the Court by raffle; and the urgent motions to refer the case to the Court En Banc; and REITERATES IN ALL RESPECTS the decision promulgated on August 16, 2017.

SO ORDERED.
Tijam, Gesmundo, and J. Reyes, Jr.,^*JJ., concur.
Caguioa, J., See separate opinion.

---

NOTICE OF JUDGMENT

Sirs / Mesdames:

Please take notice that on December 17, 2018 a Resolution, copy attached hereto, was rendered by the Supreme Court in the above-entitled case, the original of which was received by this Office on January 22, 2019 at 8:45 a.m.

Very truly yours, (SGD) WILFREDO V. LAPITAN Division Clerk of Court

Endnotes:

---

^* In lieu of Justice Ramon Paul L. Hernando, who has inhibited from the case because his spouse is a lawyer in the Office of the Government Corporate Counsel, who represents one of the parties, per the raffle of December 11, 2018.

¹Rollo (Vol. 3), pp. 1569-1605.

² Id. at 1249-1367.

³ Id. at 1234-1246.

⁴ Id. at 1211-1218.

⁵ Id. at 1608-1674; (Vol. 4), 1825-1838.

⁶Rollo (Vol. 1), pp. 204-214.

⁷ Id. at 215-220.

⁸ Id. at 237-243.

⁹ Id. at 245-260.

¹⁰ Id. at 261-274.

¹¹ Id. at 233-236.

¹² Id. at 21.

¹³ Id. at 283.

¹⁴ Id. at 21; 284-301.

¹⁵ Id. at 21.

¹⁶ Id. at 623.

¹⁷ Id. at 623-624.

¹⁸ Id. at 383.

¹⁹ Id. at 612-632; penned by Judge Virgilio C. Alpajora.

²⁰ Id. at 11-51; penned by Associate Justice Vicente S.E. Ve1oso, with the concurrence of Associate Justice Jane Aurora Lantion, and Associate Justice Nina G. Antonio-Valenzuela.

²¹Rollo (Vol. 2), pp. 1190-1209.

²² Id. at 1208-1209.

²³Rollo (Vol. 3), pp. 1305-1307.

²⁴ Id. at 1588-1589.

²⁵Castro v. Mangrobang, A.M. No. RTJ-16-2455, April 11, 2016, 789 SCRA 67, 85.

²⁶ Section 1. Disqualification of judges. - No judge or judicial officer shall sit in any case in which he, or his wife or child, is pecuniarily interested as heir, legatee, creditor or otherwise, or in which he is related to either party within the sixth degree of consanguinity or affinity, or to counsel within the fourth degree, computed according to the rules of the civil law, or in which he has been executor, administrator, guardian, trustee or counsel, or in which he has been presided in any inferior court when his ruling or decision is the subject of review, without the written consent of all parties in interest, signed by them and entered upon the record.

A judge may, in the exercise of his sound discretion, disqualify himself from sitting in a case, for just or valid reasons other than those mentioned above.

²⁷Castro v. Mangrobang, note 25, at 83.

²⁸ A.M. No. 10-4-20-SC, May 7, 2010.

²⁹ See Section 4(1), Article VIII of the 1987 Constitution.

³⁰ See Section 9, Rule 2 of the Internal Rules of the Supreme Court, which states:

SEC. 9. Composition and reorganization of a Division. - The composition of each Division shall be based on seniority as follows:

(a) First Division - Chief Justice, the fourth in seniority as working chairperson, the seventh in seniority, the tenth in seniority, and the thirteenth in seniority.

(b) Second Division the second in seniority as Chairperson, the fifth in seniority, the eighth in seniority; the eleventh in seniority, and the fourteenth in seniority.

(c) Third Division the third in seniority as Chairperson, the sixth in seniority, the ninth in seniority, the twelfth in seniority, and the fifteenth in seniority.

The Chief Justice may, however, consider factors other than seniority in Division assignments. The appointment of a new Member of the Court shall necessitate the reorganization of Divisions at the call of the Chief Justice.

³¹ Section 1(b), Rule 12 of the Internal Rules of the Supreme Court.

³² SC Circular No. 2-89, February 07, 1989.

³³Firestone Ceramics, Inc. v. Court of Appeals, G.R. No. 127022, June 28, 2000, 334 SCRA 465, 478.

³⁴Rollo, p. 623 (note - this fallo is quoted in the decision of August 16, 2017 under note 16.

³⁵ RTC Decision, p. 13 (bold underscoring supplied for emphasis).

³⁶ The Parol Evidence Rule and its exceptions are stated in Section 9, Rule 130 of the Rules of Court, viz.:

Section 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.

The terms "agreement" includes wills. (7a)

³⁷ 2. The TRUSTEE hereby acknowledges and obliges itself not to dispose of, sell, transfer, convey, lease or mortgage the said twelve (12) parcels of land without the written consent of the TRUSTORS first obtained;

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SEPARATE OPINION

CAGUIOA, J.:

I vote to partially grant the Motion for Reconsideration.

The Salient Facts and Antecedents

As culled from the records, the salient facts are:

On March 3, 1997, Petitioners - Spouses Felix A. Chua and Carmen L. Chua, James B. Herrera, Eduardo L. Almendras, Mila Ng Roxas, Eugene C. Lee, Edicer H. Almendras, Benedict C. Lee, Lourdes C. Ng and Lucena Industrial Corporation (LIC), Lucena Grand Central Terminal, Inc. (LGCTI), as represented by Felix Chua - along with Francisco A. Chua, Adela C. Chua, Green Valley Development Corporation, Doña Industries Corporation and Quezon Mktg. Corp. as represented again by its President, Felix A. Chua (hereinafter collectively referred to as the Owners) entered into a Joint Venture Agreement¹ (JVA) with Gotesco Properties, Inc. (Gotesco), a corporation controlled and represented by respondent Jose Go, for the purpose of developing a 44-hectare property in Ilayang Dupay, Lucena City.² This 44-hectare property is comprised of sixty-one (61) parcels of land registered in the names of the Owners.³ As the developer, Gotesco undertook to carry out the development work on the property, whereby a portion thereof would be developed as a Business Park and a Residential Subdivision.⁴

Based on the terms of the JVA, the Owners undertook to transfer certain parcels of land to the developer for the purpose of developing a commercial shopping mall complex.⁵ Pursuant to this undertaking, petitioners conveyed to Revere Realty and Development Corporation (Revere), another corporation controlled and represented by respondent Jose Go, by way of absolute sale dated November 18, 1997, twelve (12) parcels of land located in Lucena City.⁶

On April 30, 1998, two (2) Deeds of Trust⁷ (DoTs) were executed between (a) the petitioners, as the Trustors; and (b) Revere and Gotesco (as represented by Lydia Sevilla and Jose Go, respectively), as Trustees. The first DoT covered twelve (12) parcels of land originally registered under the names of Spouses Felix and Carmen Chua (Spouses Chua) and Adela C. Chua (as Trustors) and which were transferred to Revere.⁸ Pursuant to the provisions of the DoT, Revere "acknowledge[d] and confirm[ed]" (a) "[t]he absolute title and ownership of the TRUSTORS over the twelve (12) parcels of land x x x;"⁹ and (b) its role as Trustee was to hold the 12 parcels of land "in trust for the sole and exclusive use, benefit, enjoyment of the TRUSTORS."¹⁰

The second DoT covered twenty (20) parcels of land registered under the names of several of the petitioners, specifically James Herrera, Mila Ng Roxas, Eugene C. Lee, Edicer H. Almendras, Eduardo L. Almendras, Benedict C. Lee, Lourdes C. Ng and Lucena Industrial Corporation (as represented by Felix A. Chua), who were also the Trustors under the second DoT. Gotesco, as the Trustee, acknowledged "receipt of the x x x certificates of title from the TRUSTORS" and similarly confirmed the absolute ownership of the latter over the properties listed in the second DoT.¹¹

Pursuant to both DoTs, the Trustees further undertook not to sell, transfer, convey, lease or mortgage the said parcels of land without the written consent of the petitioners.¹²

However, as observed by the Court of Appeals (CA), it appears that the project under the JVA did not materialize.¹³

In the interim, petitioners Spouses Chua, Spouses Edicer and Evalor Almendras, and Eugene C. Lee executed a Real Estate Mortgage dated June 2, 1997 (1997 REM) in favor of United Coconut Planters Bank (UCPB) involving several parcels of land registered under their names. The 1997 REM served to secure all credit accommodations granted to or which may be obtained thereafter by the said mortgagors and Lucena Grand Central Terminal, Inc. (LGCTI) (of which the mortgagors were corporate officers and stockholders) in the amount of P103,000,000.00.¹⁴ It should be emphasized that these lots are separate and distinct from the lots covered by the JVA, the Deeds of Absolute Sale and the DoTs.

In 1998, LGCTI and the Spouses Chua both defaulted in the payment of their respective loans to UCPB.¹⁵ To forestall the impending foreclosure of the 1997 REM, the Spouses Chua and LGCTI, through their counsel,¹⁶ requested for a restructuring of their loans.¹⁷

On March 21, 2000, petitioners Spouses Chua and LGCTI (as the Borrower) entered into a Memorandum of Agreement¹⁸ (MOA) with UCPB to consolidate their obligations, which was determined at P204,597,177.04 as of November 30, 1999.¹⁹ The MOA provides in part:

(A) As of 30 November 1999, the BORROWER has outstanding obligations due in favor of the BANK in the aggregate amount of Two Hundred Four Million Five Hundred Ninety Seven Thousand One Hundred Seventy Seven and 04/100 Pesos (P204,597,177.04), Philippine currency, inclusive of all interest[s], charges and fees (the "Obligation").

(B) To partially satisfy the Obligation to the extent of ONE HUNDRED THREE MILLION EIGHT HUNDRED NINETY THREE THOUSAND FOUR HUNDRED FIFTY PESOS (P103,893,450.00), Philippine currency, the BORROWER has agreed that the BANK shall acquire title to the real property enumerated and described in the schedule attached hereto and made an integral part hereof as Annex "A", together with all the improvement thereon, if any (collectively called, the "Property").

(C) The balance of the Obligation, in the total amount of Sixty Eight Million Pesos (P68,000,000.00), Philippine currency, shall be converted by the BANK to equity interest in LGCTI, with the conformity of the BORROWER.²⁰

While there is no reference in the MOA as to the waiver of the penalties and charges, both petitioners and UCPB, in their submissions before the Court, have noted that there was a waiver of penalties and interest due in the amount of P32,703,727.04.²¹

To address the balance of P68,000,000.00, petitioners Spouses Chua and LGCTI and respondent UCPB executed another Memorandum of Agreement²²on the same date (2^nd MOA), where petitioners Spouses Chua and LGCTI acknowledged their remaining obligation (i.e., the amount of P68,000,000.00) and undertook to issue new shares of capital stock in LGCTI with an aggregate par value equivalent to this amount.²³

On the same date, and precisely to implement the undertaking of the Spouses Chua and LGCTI to transfer and convey the properties listed in the MOA,²⁴ two Real Estate Mortgages (REMs) were entered into: one between UCPB and the petitioners, specifically Eduardo L. Almendras, Edicer H. Almendras, Benedict C. Lee, Eugene C. Lee, James B. Herrera, Lourdes C. Ng, Mila Ng Roxas and LIC as represented by Felix A. Chua²⁵ (Petitioners' REM); and another between UCPB and Revere²⁶ (Revere REM). As indicated in each of the REMs executed, these were supposed to secure credit accommodations in the total aggregate amount of P404,597,177.04.²⁷ Moreover, under their terms, both REMs covered the payment of all loans, overdrafts, credit lines and other credit facilities or accommodations obtained or hereinafter obtained by the mortgagors, LGCTI, Spouses Chua and Jose Go.²⁸

It bears to note that the properties enumerated in Annex "A"²⁹ of the MOA are the very same properties that are covered by both the Petitioners' REM³⁰ and the Revere REM³¹ - as shown by the table below:

MOA (Lot No.)

Petitioners' REM

Revere REM

3853

/

 

3864

/

 

4607

/

 

5

/

 

3833

/

 

3838

/

 

3839

/

 

3827

/

 

3842A

/

 

3835

/

 

3843 A

/

 

3843 C

/

 

3847 A

/

 

3847 B

/

 

3836

/

 

3842 B

/

 

3846

/

 

3841

/

 

3843 B

/

 

7

/

 

3878

 

/

3885

 

/

3881

 

/

3854

 

/

3852

 

/

3851

 

/

3877

 

/

3876

 

/

3834

 

/

3845

 

/

3867-C

 

/

Subsequently, and in accordance with the MOA's expressed intent that UCPB "shall acquire title to the real property enumerated and described in the schedule attached hereto and made an integral part hereof as Annex 'A', together with all the improvement thereon, if any,"³² the Petitioners' REM and Revere REM were foreclosed on November 13, 2001 and December 20, 2001, respectively.³³

In the Apportionment of Bid Price³⁴ certified by UCPB's Account Officer, the properties from both REMs were sold for a total bid price of P227,700,000.00. The properties from Petitioners' REM yielded a bid price of P152,606,820.00, while the properties from Revere REM yielded a bid price of P75,093,180.00.

On February 14, 2003, UCPB and LGCTI executed a Deed of Assignment³⁵ whereby LGCTI acknowledged that it had outstanding obligations in the amount of P68,000,000.00 and, as means of settling the said obligations, it would issue 680,000 preferred shares of its stocks to UCPB.

On August 18, 2003, UCPB wrote a letter to LGCTI inquiring about the status of the issuance of the shares in favor of UCPB.³⁶ In the same letter, UCPB noted that should LGCTI continue to refuse to abide by the terms of the MOA, it would "be compelled to exercise alternative means for recovery as provided for under previously executed loan and security documents."³⁷

Instead of issuing the said shares in favor of UCPB, LGCTI (through the Spouses Chua) wrote UCPB on November 11, 2003³⁸ assailing the (a) acceptance and foreclosure by UCPB of the Revere REM notwithstanding its knowledge that the properties registered under the name of Revere were held in trust for the sole benefit of the petitioners; and (b) malicious and fraudulent application of the foreclosure proceeds of the Petitioners' REM and Revere REM to the personal and corporate obligation of Jose Go without the knowledge of the petitioners.³⁹ LGCTI further accused UCPB of conniving with respondent Jose Go to secure the latter's "clean"/unsecured loans by deliberately (a) undervaluing the petitioners' properties (with the difference between the actual value and the undervaluation as sufficient to cover Jose Go's liabilities); and (b) concealing from the petitioners the Apportionment of Bid Price - which contains a breakdown of the application of the proceeds from the extrajudicial foreclosure of the Petitioners' REM and Revere REM.⁴⁰

Based on the foregoing, LGCTI requested for an accounting of Jose Go's liabilities that had been secured and/or settled using petitioners' properties, and for UCPB to (a) submit all the properties subject of the Petitioners' REM and Revere REM for reappraisal by an independent appraiser; (b) apply only so much of their properties to cover their obligation in the amount to P204,597,177.04; and (c) reconvey any properties that are no longer necessary to cover their total obligation.⁴¹ However, UCPB did not heed these requests.

Thus, on February 3, 2004, petitioners filed before the Regional Trial Court (RTC) in Lucena City a complaint⁴² against UCPB, Revere, Jose Go and the Registrar of Deeds of Lucena City, for the Annulment of Real Estate Mortgage and Deed of Assignment of Liability, Delivery of Titles, Accounting, Re-Appraisal and Damages. The RTC issued a writ of preliminary injunction at the instance of petitioners.⁴³

On October 4, 2004, the RTC declared Jose Go and Revere in default. On February 22, 2005, the RTC denied the motion for reconsideration of Jose Go and Revere and on September 6, 2005 the RTC rendered Partial Judgment against Jose Go and Revere - nullifying the Revere REM.⁴⁴

Subsequently, respondent Asset Pool A (SPV-AMC) (APA) filed a Motion for Partial Substitution of UCPB as defendant alleging that UCPB had assigned to APA all its rights and interests over the (a) remaining P68,000,000.00 receivable from the Spouses Chua and LGCTI, and (b) 1997 REM.⁴⁵

The rulings of the lower court and the CA, as summarized in the Decision⁴⁶ dated August 16, 2017, are repeated herein:

Rulings of the RTC

On September 6, 2005, the RTC, through Judge Virgilio C. Alpajora, rendered a partial judgment against Jose Go and Revere, viz.:

WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiffs and against defendants JOSE C. GO and REVERE REALTY DEVELOPMENT CORPORATION, as follows:

a) Declaring as legal and binding the Deeds of Trust dated April 30, 1998 and holding the properties held in trust for plaintiff by defendants REVERE and GO.

b) Declaring that defendants REVERE and GO are not the owners of the properties covered by the deeds of trust and did not have any authority to constitute a mortgage over them to secure their personal and corporate obligations, for which they should be liable.

c) Nullifying the Deed of Real Estate Mortgage dated March 21, 2000 executed by defendants REVERE and GO in favor of co-defendant UNITED COCONUT PLANTERS BANK.

d) Ordering defendants REVERE and GO to reconvey in favor of the plaintiff the thirty-two (32) real properties listed in the deeds of trust and originally registered in the names of the plaintiffs under the following titles, to wit: TCT Nos. T-40450, 40452, 40453, 64488, 71021, 71022, 71023, 71024, 71025, 71136, 55033, 55287, 58945, 58946, 58947, 58948, 54186, 54187, 54189, 54190, 54191, 55288, 54186, 54187, 54188, 55030, 55031, 50426, 50427, 50428, 50429, and 50430.

e) Ordering defendants REVERE and GO to pay plaintiffs the amount of Php1,000,000.00 and as by way of moral damages, and Php200,000.00 [as] and by way of attorney's fees.

SO ORDERED.

On November 9, 2005, the RTC modified the partial judgment upon UCPB's motion for reconsideration, but otherwise affirmed it as against Revere and Jose Go, disposing thusly:

WHEREFORE, premises considered, the Partial Judgment dated September 6, 2005 is reconsidered and clarified as to United Coconut Planters Bank, as follows:

a) The contested portion of the Partial Judgment ordering reconveyance is directed at defendants Revere Realty and Development Corp. and Jose Go and not at defendant United Coconut Planters Bank; and

b) The resolution of the issue of whether or not defendant UCPB is obliged to reconvey the properties listed in the Partial Judgment in favor of the plaintiffs, as well as the other issues between UCPH and the plaintiffs, shall be determined after the parties shall have presented their evidence.

SO ORDERED.

Meanwhile, Asset Pool A moved to be substituted for UCPB as a party-defendant on February 15, 2006 on the basis that UCPB had assigned to it the rights over petitioners' P68,000,000.00 obligation. The RTC approved the substitution on March 14, 2006.

On January 6, 2009, the RTC rendered judgment in favor of petitioners, thusly:

WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiffs and against defendants UNITED COCONUT PLANTERS BANK, ASSET POOL A, REGISTRAR OF DEEDS OF LUCENA CITY and EX-OFFICIO SHERIFF OF LUCENA CITY, thus:

a) Declaring that the loan obligations of plaintiffs to defendant UNITED COCONUT PLANTERS BANK under the Memorandum of Agreement dated March 21, 2000 [to] have been fully paid;

b) Declaring as legal and binding the Deeds of Trust dated April 30, 1998 and holding the properties listed therein were merely held-in-trust for plaintiffs by defendants REVERE and JOSE GO and/or corporations owned or associated with him;

c) Nullifying the Deed of Real Estate Mortgage dated March 21, 2000 executed by defendants REVERE and JOSE GO in favor of co-defendant UNITED COCONUT PLANTERS BANK and the Deed of Assignment of Liability dated February 14, 2003 executed by plaintiffs in favor of UNITED COCONUT PLANTERS BANK;

d) Ordering defendant REGISTRAR OF DEEDS of Lucena City to cancel any and all titles derived or transferred from TCT Nos. T-40452 (89339), 40453 (89340), 84488 (89342), 71021 (89330), 71022 (89331), 71023 (89332), 71025 (95580-95581), 71136 (95587-95590), 55033 (89384) and issue new ones returning the ownership and registration of these titles of the plaintiffs. For this purpose, defendant UNITED COCONUT PLANTERS BANK is directed to execute the appropriate Deeds of Reconveyance in favor of the plaintiffs over the eighteen (18) real properties listed in the Real Estate Mortgage dated March 21, 2000 executed by defendants Revere Realty and JOSE GO and originally registered in the names of the plaintiffs.

e) Ordering defendant UNITED COCONUT PLANTERS BANK to return so much of the plaintiffs titles, of their choice, equivalent to Php200,000,000.00 after applying so much of the mortgaged properties, including those presently or formerly in the name of REVERE, to the payment of plaintiffs' consolidated obligation to the bank in the amount of Php204,597,177.04.

f) Declaring the Real Estate Mortgage dated June 02, 1997 as having been extinguished by the Memorandum of Agreement date[d] March 21, 2000, and converting the writ of preliminary injunction issued on March 22, 2004 to a permanent one, forever prohibiting UNITED COCONUT PLANTERS BANK and ASSET POOL A and all persons/entities deriving rights under them from foreclosing on TCT Nos. T-54182, T-54184, T-54185, T-54192, and T-71135. The court hereby orders said defendants, or whoever is in custody of the said certificates of title, to return the same to plaintiffs and to execute the appropriate release of mortgage documents.

g) Finally, ordering defendant UNITED COCONUT PLANTERS BANK, to pay plaintiffs:

(i) The excess of the foreclosure proceeds in the amount of Php23,102,822.96, as actual damages;

(ii) Legal interest on the amount of Php223,102,822.96 at the rate of 6% per annum from February 3, 2004 until finality of judgment. Once the judgment becomes final and executory, the interest of 12% per annum, should be imposed, to be computed from the time the judgment becomes final and executory until fully satisfied, as compensatory damages;

(iii) Php1,000,000.00 as moral damages;

(iv) Php100,000.00 as exemplary damages;

(v) Php2,000,000.00 as attorney's fees; and

(vi) costs of suit;

SO ORDERED.

The RTC declared the Revere REM as null and void (or having been entered into outside the intent of the JVA; and opined that the Revere REM did not even bear any of herein petitioners' signatures. It ruled that the application of the proceeds of the foreclosure sale of petitioners' properties to settle Jose Go's liabilities was improper, invalid and contrary to the intent of the March 21, 2000 MOA, the principal contract of the parties.

The RTC observed that UCPB's claim that it had no knowledge of the trust nature of the properties covered by the deeds of trust, which were also included in the MOA was belied by the letter signed! by its First Vice President Enrique L. Gana addressed to Spouses Chua wherein he stated that UCPB had undertaken to obtain from Jose Go the certificates of title necessary for the execution of the mortgages, and that should there be any excess or residual value, the same would be applied to any outstanding obligations that Jose Go would have in favor ofUCPB; and that, accordingly, it was an error on the part of UCPB to apply any portion of the proceeds to settle the obligations of Jose Go without first totally extinguishing petitioners' obligations.

Decision of the CA

Respondents appealed to the CA.

In the decision promulgated on March 25, 2014, the CA reversed and set aside the judgment of the RTC, disposing instead as follows:

WHEREFORE, the assailed January 6, 2009 Decision of the Regional Trial Court of Lucena City, Branch 59, as well as its September 6, 2005 Partial Judgment are REVERSED and SET ASIDE. In its stead, judgment is hereby rendered:

a) Declaring the Real Estate Mortgage dated June 2, 1997 as valid and subsisting - accordingly, the writ of preliminary injunction issued on March 22, 2004 by the Regional Trial Court of Lucena City, Branch 59 is hereby lifted;

b) Declaring as legal and binding the March 21, 2000 Deed of Real Estate Mortgage of defendants REVERE REALTY AND DEVELOPMENT CORPORATION and/or JOSE GO in favor of defendant-­appellant UNITED COCONUT PLANTERS BANK;

c) Declaring, pursuant to the parties' March 21, 2000 Deed of Real Estate Mortgage, that the loan obligations of defendant JOSE GO to defendant-appellant UNITED COCONUT PLANTERS BANK have been satisfied up to P123,806,550.00; and

d) Declaring that the loan obligations of plaintiffs­ appellees SPOUSE CHUA, ET AL. to defendant-appellant UNITED COCONUT PLANTERS BANK under the first Memorandum of Agreement dated March 21, 2000 have been paid up to P103,893,450.00.

SO ORDERED.

The CA made reference to three REMs: the first, executed on June 2, 1997, would secure the Spouses Chua's obligations with UCPB; the second, executed on March 21, 2000, was petitioners' REM in connection with the March 21, 2000 MOA; and the Revere REM, executed also on March 21, 2000. It opined that the first REM remained outstanding and was not extinguished as claimed by petitioners; that the Revere REM was valid based on the application of the complementary contracts construed together doctrine whereby the accessory contract must be read in its entirety and together with the principal contract between the parties; that it was the intention of the parties to extend the benefits of the two REMs under the first MOA in favor of Jose Go and/or his group of companies; and that petitioners' obligations with UCPB under the first MOA had not been fully settled.⁴⁷ (Emphasis supplied)

Aggrieved by the CA Decision⁴⁸ and Resolution⁴⁹ promulgated on March 25, 2014 and December 23, 2014, petitioners filed before the Court a Petition for Review⁵⁰ under Rule 45 assailing the said CA Decision and Resolution, which reversed and set aside the decision rendered by the RTC and granted the appeal of the respondents UCPB, Revere, Jose Go and the Registrar of Deeds of Lucena.

In a Decision⁵¹ dated August 16, 2017 (Decision), the Court's Third Division held that the CA committed reversible errors and reinstated the ruling of the RTC:

First, the Court declared that the 1997 REM cannot subsist separately from the consolidated obligations of the petitioners as stated in the MOA. Based on the tenor of the correspondences between UCPB, on the one hand, and the Spouses Chua and LGCTI, on the other, the obligations of the latter were already consolidated - and no distinction was made between the loans obtained in 1997 and those made in subsequent years. Moreover, based on the provisions of the MOA, it is evident that the MOA constituted the "entire, complete and exclusive agreement between the parties"⁵² consolidating the past and future obligations of the Spouses Chua and LGCTI. The REMs, executed on the same date as the MOA, also indicated that the mortgages would secure the payment of all loans, overdrafts, credit lines and other credit facilities or accommodations obtained or thereinafter to be obtained by the mortgagors.

Second, while the Court in the Decision upheld the validity of the MOA and the Petitioners' REM, it agreed with the RTC's conclusion and declared the Revere REM null and void. The reason of the Decision was because the properties covered by the Revere REM were covered by the DoTs which specifically acknowledged that (a) the said properties were still owned by petitioners for all intents and purposes, and (b) the consent and approval of the petitioners were necessary to sell, dispose and/or mortgage the properties covered by the DoT. Thus, absent any allegation that the consent/approval of the petitioners was obtained or a showing that petitioners transferred the beneficial ownership over the properties to Revere, Revere did not have the authority to mortgage said properties. Moreover, the Court agreed with the RTC that UCPB cannot feign ignorance of the DoTs as its knowledge is evident when "UCPB's own Vice President expressly mentioned in writing that UCPB would secure from Jose Go the titles necessary for the execution of the mortgages"⁵³ - making UCPB a mortgagee in bad faith.

The Decision also declared that it was erroneous for the CA to hold that Revere and/or Jose Go's obligations "enjoyed a primacy or precedence over the remaining P68,000,000.00 obligation of petitioners"⁵⁴ for the following reasons: (a) no evidence was presented to prove the precise amount of Jose Go's loan obligation, (b) the CA's interpretation where more than half of the balance of the foreclosure proceeds would be applied to Jose Go's debts "does not find support in their contracts as well as in the course of ordinary human experience,"⁵⁵ and (c) this contravened the "agreement that Revere's or Jose Go's obligation would be paid only if there were excess in the application of the foreclosure proceeds."⁵⁶ Accordingly, based on the Apportionment of Bid Price executed by UCPB, the foreclosure proceeds amounting to P227,700,000.00 should have been applied to the entire obligation of the Spouses Chua and LGCTI (in the amount of P204,597,177.04), and only the excess, if any, should have been applied to pay off the obligations of Jose Go.

As the Spouses Chua and LGCTI had no remaining obligation left to settle after the application of the entire foreclosure proceeds to their debt, the Deed of Assignment where the petitioners undertook to transfer LGCTI's shares of stock as payment for their remaining obligation in the amount of P68,000,000.00 was null and void. Similarly, as the entire obligation of the Spouses Chua and LGCTI have been extinguished, UCPB could not have validly assigned to APA any right or interest in the P68,000,000.00 balance.

Based on the foregoing rulings, the dispositive portion of the Decision provided as follows:

WHEREFORE, the Court GRANTS the petition for review on certiorari; SETS ASIDE the decision of the Court of Appeals promulgated on March 25, 2014 in CA-G.R. No. 93644; REINSTATES the judgment rendered on January 6, 2009 by the Regional Trial Court, Branch 59, in Lucena City, with the addition of TCT No. 89334, to wit:

WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiffs and against defendants UNITED COCONUT PLANTERS BANK, ASSET POOL A, REGISTRAR OF DEEDS OF LUCENA CITY and EX-OFFICIO SHERIFF OF LUCENA CITY, thus:

a. Declaring that the loan obligations of plaintiffs to defendant UNITED COCONUT PLANTERS BANK under the Memorandum of Agreement dated March 21, 2000 have been fully paid;

b. Declaring as legal and binding the Deeds of Trust dated April 30, 1998 and holding the properties listed therein were merely held-in-trust for plaintiffs by defendants REVERE and JOSE GO and/or corporations owned or associated with him;

c. Nullifying the Deed of Real Estate Mortgage dated March 21, 2000 executed by defendants REVERE and JOSE GO in favor of co-defendant UNITED COCONUT PLANTERS BANK and the Deed of Assignment of Liability dated February 14, 2003 executed by plaintiffs in favor of UNITED COCONUT PLANTERS BANK;

d. Ordering defendant REGISTRAR OF DEEDS of Lucena City to cancel any and all titles derived or transferred from TCT Nos. T-40452 (89339), 40453 (89340), 84488 (89342), 71021 (89330), 71022 (89331), 71023 (89332), 71025 (95580-95581), 71136 (95587-95590), 55033 (89384), 89334 and issue new ones returning the ownership and registration of these titles of the plaintiffs. For this purpose, defendant UNITED COCONUT PLANTERS BANK is directed to execute the appropriate Deeds of Reconveyance in favor of the plaintiffs over the eighteen (18) real properties listed in the Real Estate Mortgage dated March 21, 2000 executed by defendants Revere Realty and JOSE GO and originally registered in the names of the plaintiffs.

e. Ordering defendant UNITED COCONUT PLANTERS BANK to return so much of the plaintiffs['] titles, of their choice, equivalent to Php200,000,000.00 after applying so much of the mortgaged properties, including those presently or formerly in the name of REVERE, to the payment of plaintiffs' consolidated obligation to the bank in the amount of Php204,597,177.04.

f. Declaring the Real Estate Mortgage dated June 02, 1997 as having been extinguished by the Memorandum of Agreement date March 21, 2000, and converting the writ of preliminary injunction issued on March 22, 2004 to a permanent one, forever prohibiting. UNITED COCONUT PLANTERS BANK and ASSET POOL A and all persons/entities deriving rights under them from foreclosing on TCT Nos. T-54182, T-54184, T-54185, T-54192, and T-71135. The court hereby orders said defendants, or whoever is in custody of the said certificates of title, to return the same to plaintiffs and to execute the appropriate release of mortgage documents.

g. Finally, ordering defendant UNITED COCONUT PLANTERS BANK, to pay plaintiffs:

i. The excess of the foreclosure proceeds in the amount of Php23,102,822.96, as actual damages;

ii Legal interest on the amount of Php223,102,822.96 at the rate of 6% per annum from February 3, 2004 until finality of judgment. Once the judgment becomes final and executory, the interest of 6% per annum, should be imposed, to be computed from the time the judgment becomes final and executory until fully satisfied, as compensatory damages;

111. Php1,000,000.00 as moral damages;

IV. Php100,000.00 as exemplary damages;

v. Php2,000,000.00 as attorney's fees; and

vi. Costs of suit;

SO ORDERED.

and DIRECTS respondents, except the Registrar of Deeds of Lucena City and the Ex-Officio Sheriff of Lucena City, to pay the costs of suit.

SO ORDERED.⁵⁷

From the foregoing Decision, respondents UCPB, APA, Revere and Jose Go filed their respective motions for reconsideration (MRs).

Respondents Revere and Jose Go, in their MR⁵⁸ dated October 2, 2017, merely reiterated the pronouncements of the CA to support the contention that the Revere REM is valid. However, they did not raise any arguments as regards the application of the proceeds of the foreclosure sale.

On the other hand, respondent UCPB, in its MR⁵⁹ dated October 4, 2017, raised the following arguments: (a) the obligations of the petitioners under the MOA have not been fully paid because based on the terms of the MOA only the obligation in the amount of P103,893,450.00 was settled with the foreclosure; (b) the 1997 REM was not extinguished by the MOA as the annotations on the properties subject of the 1997 REM remain uncancelled; (c) the Revere REM and the Deed of Assignment should not have been declared void as the petitioners (i) consented to mortgage the properties covered by the REM by signing the MOA; and (ii) are estopped from assailing the validity of the Revere REM. Considering the foregoing, UCPB asserts that the Court erred in ordering UCPB to (a) return P200,000,00.00 worth of properties to the petitioners, (b) return the exct ss of the foreclosure proceeds to the petitioners, (c) pay interests on the "return of the properties," and (d) pay the petitioners moral damages, exemplary damages, attorney's fees and costs of suit.

For its part, APA raises the following arguments in its MR⁶⁰ dated October 2, 2017:

(a)

The petitioners were not misled into signing or executing the MOA, Petitioners' REM, Revere REM and the Deeds of Absolute Sale. Further, there was never any allegation that Revere was a debtor and as such, there is no factual basis for the Court's declaration that UCPB is in bad faith;

(b)

Revere REM is valid and the petitioners validly consented and had knowledge that the properties covered by the Revere REM would be conveyed to UCPB through foreclosure based on the language of the MOA;

(c)

There is no provision in the two MOAs, Petitioners' REM, Revere REM and the Deed of Assignment that the foreclosure proceeds should be applied first to the entire obligation of the petitioners before such can be applied to the debt of Jose Go;

(d)

The 1997 REM has not been extinguished by the execution of the MOAs as these can co-exist in harmony with the other documents;

(e)

The petitioners cannot be considered to have fully paid their obligations to UCPB as the petitioners explicitly acknowledged their remaining balance of P68,000,000.00 in the two MOAs and the Deed of Assignment; and

(f)

There is no legal and factual basis for the award of actual damages, interest, moral damages, exemplary damages, attorney's fees and costs of suit against UCPB.

THE COURT'S RULING

I agree with the Decision that the CA erred in declaring that the 1997 REM still subsisted separately from the consolidated obligations stated in the MOA. As noted in the Decision, to which I fully concur, the MOA superseded the 1997 REM so that the MOA constituted the "entire, complete and exclusive" agreement "between the parties." This, to me, is quite clear and readily apparent from the plain language of the MOA as well as the REMs which were executed at the same time as the MOA precisely to effect the intent of the MOA.

However, I disagree with the Decision's conclusion that the Revere REM is null and void and its consequent effect on the foreclosure of the REMs, as well as the application of the foreclosure proceeds.

At the outset, there appears to be no issue as to the existence of the DoTs and the terms and conditions stated therein. The DoTs categorically stated that Revere acknowledges the "absolute title and ownership of [Spouses Chua]"⁶¹ over the properties, i.e., twelve (12) parcels of land notwithstanding that the titles were registered under Revere's name. Further, the DoTs expressly provided that Revere "acknowledges and obliges itself not to dispose of, sell, transfer, convey, lease or mortgage [the property] without the written consent of the [Spouses Chua]."⁶²

Thus, to me, the preliminary question that must be answered is whether or not the consent of the Spouses Chua was secured by Revere when it executed the Revere REM.

The Decision echoed the RTC ruling that the Revere REM is null and void for failure of Revere to secure the express approval and consent of Spouses Chua, as stated in the DoTs. According to the Decision, which relied on the factual findings by the RTC,⁶³ "the records are bereft of any allegation that Revere had obtained the approval of [Spouses Chua] or that the latter had acquiesced to the mortgage of the properties in favor of UCPB,"⁶⁴ and therefore, the Revere REM is invalid and without effect. To reiterate, I disagree with this finding.

To stress, the following facts are undisputed: (a) the MOA was executed by the petitioners to consolidate all their obligations to UCPB; (b) the properties listed in the MOA all belong to the petitioners; and (c) the REMs were executed to implement and give life to the terms and conditions of the MOA.

Further, there is no question - as this is clear from even a cursory pe1usal of the MOA and the REMs - that the properties enumerated in Annex "A" of the MOA include the parcels of land subject of the Revere REM, as properties to be conveyed and transferred to UCPB to partially secure the obligations of the petitioners.

In this regard, it should be stressed that the Spouses Chua could not have conveyed and transferred to UCPB the parcels of land under the DoTs as they were not in their name. As the titles of these parcels were in the name of, and their owner's duplicate copies were in the possession of, Revere, then the only way for the Spouses Chua to have conveyed and transferred the parcels of land to UCPB was precisely to cause Revere to execute the Revere REM. In other words, by freely, voluntarily and knowingly entering into the MOA - which, to reiterate, enumerated (in Annex "A") the properties to be transferred to UCPB, including those in the name of Revere and covered by the Revere REM -the Spouses Chua had already expressly given their consent and approval to Revere to execute the Revere REM and to mortgage the parcels of land under the DoTs in favor of UCPB, precisely as security for the loan obligations of the petitioners as stated in the MOA. That this was the intent is evident not only from the language of the MOA and the inclusion of the Revere properties in the MOA's Annex "A," but also especially considering that the Revere REM was, like the Petitioners' REM, executed on the same day as the MOA. This compellingly reveals that, to be sure, the two REMs were executed to effect or otherwise implement the obligations of the parties enumerated and fleshed out in the MOA.

Given the validity of both REMs, as discussed above, the real questions on which this case pivot are these: whether the foreclosure of UCPB and its application of the foreclosure proceeds were legal and proper.

I submit that the foreclosure of UCPB was valid, but its application of payments was not proper.

First, it is clear from the submissions of both parties and the decisions rendered by both the RTC and the CA that the primordial instrument that must be considered and given weight is the MOA - as it embodies and encapsulates the agreement of the parties. It is equally clear that the only parties to the MOA are UCPB, LGCTI and the Spouses Chua. Likewise, it is also plainly evident from the terms of the MOA that the only "debtors" and/or the borrowers covered by the MOA are LGCTI and the Spouses Chua.

Most importantly, the parties admit that the Petitioners' REM and the Revere REM were executed to implement the terms amd conditions of the MOA.⁶⁵ As explained earlier, that this is the clear intent of the parties is also evident from the fact that the properties identified in Annex "A" of the MOA (as the properties to be transferred and conveyed to UCPB) are the very same properties mortgaged to UCPB through the execution of both the Petitioners' REM and the Revere REM-which were the same properties thereafter foreclosed and acquired by UCPB.⁶⁶

Following the "complementary contracts construed together doctrine" correctly used by the CA, the terms of both Petitioners' REM and Revere REM must be read in consonance with the MOA. Pursuant to the MOA, the properties that were conveyed and transferred to UCPB (as enumerated in Annex "A" of the MOA and as listed in both REMs) were to be applied against the loan obligations of the Borrowers stated in the MOA -which, again, are only LGCTI and the Spouses Chua. If, as UCPB and APA admit, the REMs were executed to implement the "first mode of payment (conveyance of properties to UCPB)"⁶⁷ under the MOA, then the foreclosure proceeds from the REMs could only be applied pursuant to the terms of the MOA - which is for the payment of the obligations only of LGCTI and Spouses Chua. There is absolutely nothing in the MOA (i.e., the primordial instrument governing the relationship of the parties thereto) which provides that the enumerated properties to be transferred and conveyed to UCPB would also be used to secure and thereafter answer for the debts of any other third parties. Accordingly, UCPB's application of the foreclosure proceeds to the debts of a third party (which in this case is Jose Go) is in clear contravention of the MOA and therefore erroneous and without basis.

Both APA and UCPB, however, argue that based on the recitals of the REMs, the petitioners as mortgagors agreed to also cover the loan of Jose Go. This assertion, however, misses and fails to establish two crucial facts to justify the action of applying the foreclosure proce ds to Jose Go's debt - (a) the existence and the actual amount of Jose Go's debt; and (b) the default on the part of Jose Go in the payment of his obligations.

It is a basic doctrine in civil law that a mortgage is a mere accessory contract - as such, the principal obligation must exist for the mortgage to subsist.⁶⁸ Similarly, it must also be established that at the time of the foreclosure, the debt is already due and demandable and that the debtor is in default in the payment of his obligation.⁶⁹

In this case, the only principal obligation that was admitted, established and proven by competent evidence was that of the Spouses Chua and LGCTI. In fact, the only loan document that was presented by UCPB and APA to establish the indebtedness of the debtors was the MOA - which, again, enumerates only the Spouses Chua and LGCTI as the borrowers.

Apart from the Petitioners' REM and the Revere REM, there is nothing on record that indicates the existence (i.e., Promissory Note) or the exact amount of Jose Go's indebtedness so as to justify the application of more than half of the foreclosure proceeds to extinguish this purported debt. As astutely observed by the RTC, "neither x x x UCPB nor APA presented any evidence to prove the precise amount of Jose Go's loan obligations to the bank x x x [nor] the obligations of any of the corporations owned by him in the majority."⁷⁰

In this regard, it bears noting that the petitiOners had repeatedly demanded UCPB to show proof of Jose Go's liabilities and to render an accounting thereof.⁷¹ In response, UCPB refused to present, as it never did, any evidence to prove the existence and amount of Jose Go's indebtedness. Had UCPB produced the loan documents showing Jose Go's indebtedness as demanded by the petitioners, it could have easily proved the existence and amount of Jose Go's indebtedness. That UCPB failed to do so - that it refused to do so - can only lead to the conclusion that no such debt or loan exists. Verily, the presumption that evidence willfully suppressed would be adverse if produced applies foursquare here.⁷²

Based on the foregoing, I agree with and find merit in the petitioners' assertion that "absent proof of unpaid loans of Go x x x there is utterly no basis for applying the proceeds of the foreclosure x x x to the asserted obligations of Go."⁷³ Accordingly, considering that the only loan that was substantiated by concrete evidence was that of the Spouses Chua and LGCTI, the foreclosure proceeds may only be applied to their debts - and no one else's.

Based on the Apportionment of Bid Price, the total foreclosure proceeds amounted to P227,700,000.00. As provided in the MOA, LGCTI and the Spouses Chua had an outstanding obligation in the aggregate amount of P204,497,177.04. Notwithstanding that the MOA stipulated that all the properties transferred and conveyed to UCPB would only extinguish Spouses Chua and LGCTI's debt to the extent of P103,893,450.00, when the foreclosure sale actually yielded an amount that was more than P103,893,450.00, that is, more than sufficient to discharge the debt ofLGCTI and Spouses Chua - then such proceeds should have been applied to the entirety of their debt, including already the P68,000,000.00 owed and which should have been paid through the issuance of 680,000 shares in LGCTI.

This application (i.e., that extinguishes the entire obligation) finds basis in the very language of the REMs, which provides that the mortgages shall secure all loans of the mortgagors, LGCTI, Spouses Chua and Jose Go.⁷⁴ This clearly covers the entire obligation of LGCTI and Spouses Chua as provided in the MOA - which, to repeat once more, is the only obligation that was proven and established before the RTC and the CA. Accordingly, the P227,700,000.00 foreclosure proceeds must be applied to the entire outstanding obligation of LGCTI and the Spouses Chua in the amount of P204,497,177.04 (inclusive already of the P68,000,000.00). Such application would totally extinguish the debt of LGCTI and the Spouses Chua and would yield a balance in their favor of P23,102,822.96.

As regards this remaining balance of P23,102,822.96, the Court's pronouncement in Spouses Suico v. PNB⁷⁵ explaining the application of Section 4,⁷⁶ Rule 68 is instructive:

x x x The application of the proceeds from the sale of the mortgaged property to the mortgagor's obligation is an act of payment, not payment by dacion; hence, it is the mortgagee's duty to return any surplus in the selling price to the mortgagor. Perforce, a mortgagee who exercises the power of sale contained in a mortgage is considered a custodian of the fund and, being bound to apply it properly, is liable to the persons entitled thereto if he fails to do so. And even though the mortgagee is not strictly considered a trustee in a purely equitable sense, but as far as concerns the unconsumed balance, the mortgagee is deemed a trustee for the mortgagor or owner of the equity of redemption.

Thus it has been held that if the mortgagee is retaining more of the proceeds of the sale than he is entitled to, this fact alone will not affect the validity of the sale but simply give the mortgagor a cause of action to recover such surplus.⁷⁷ (Italics and underscoring supplied)

Thus, considering that there is a balance left after paying off the entire obligation of LGCTI and Spouses Chua, and considering fi.u1her that there is no allegation that there are any junior encumbrancers, the balance in the amount of P23,102,822.96 must be returned to the owners of the mortgaged properties who, in this case, are the petitioners.

To reiterate, the two REMS were valid and, as admitted by the parties, executed to effect or implement the obligations of the parties as detailed in the MOA. Because the REMS were valid and subsisting, their foreclosure was likewise proper and valid as they were done pursuant to the terms and conditions stated in both the REMs and MOA. And if the foreclosure was validly done by UCPB, then the entire consolidated obligation of the petitioners was extinguished, and the properties foreclosed now rightfully belong to UCPB. Consequently, the Decision's directive for UCPB to "execute the appropriate Deeds of Reconveyance in favor of [the petitioners]" and "return so much of the [the petitioners'] titles x x x after applying so much of the mortgaged properties x x x to the payment of [petitioners'] consolidated obligation to the bank" is without legal basis. That said, UCPB's obligation is, as stated earlier, to return the excess of the foreclosure proceeds to the petitioners.

In its Resolution denying the motions for reconsideration of UCPB, APA, Revere and Jose Go, the ponencia maintains the dispositions or fallo of the Decision, refusing to consider the above reasoning, and insisting that the Revere REM is null and void, for a number of reasons. I respond to these ad seriatim:

Partial Judgment does not affect UCPB.

The first reason posited by the ponencia is that the Lucena RTC Partial Judgment, which upheld the validity of the DoTs and nullified the Revere REM for failure to secure the approval and consent of the Spouses Chua, had already become final and executory and cannot be disturbed, for the reason that Jose Go and Revere did not file any appeal. However, as earlier narrated, after it had rendered its Partial Judgment on September 6, 2005, the RTC, on November 9, 2005, modified this Partial Judgment by expressly and categorically clarifying as follows:

WHEREFORE, premises considered, the Partial Judgment dated September 6, 2005 is reconsidered and clarified as to United Coconut Planters Bank, as follows:

a) The contested portion of the Partial Judgment ordering reconvevance is directed at defendants Revere Realty and Development Corp. and Jose Go and not at defendant United Coconut Planters Bank; and

b) The resolution of the issue of whether or not defendant UCPB is obliged to reconvey the properties listed in the Partial Judgment in favor of the plaintiffs, as well as the other issues between UCPB and the plaintiffs, shall be determined after the parties shall have presented their evidence.

SO ORDERED.⁷⁸ (Emphasis supplied)

Clearly, therefore, the specific issue of whether or not defendant UCPB is obliged to reconvey the properties listed in the Partial Judgment in favor of the petitioners, as well as the other issues between UCPB and the petitioners "shall be determined after the parties shall have presented their evidence." Stated differently, the doctrine of immutability of judgment does not even come into play as far as UCPB is concerned vis-a-vis the failure of Jose Go and Revere to appeal the Partial Judgment of September 6, 2005.

Thus, there is nothing anomalous nor improper in a situation arising where the Revere REM will be considered valid (between UCPB and the petitioners) despite its earlier nullification by the Lucena RTC (which is binding, final and immutable only as to Jose Go and Revere, and only because the latter did not appeal the September 6, 2005 Partial Judgment). To hold otherwise, as what the ponencia is doing, is, in turn, to render inutile the November 9, 2005 modification by the RTC.

The Spouses Chua's consent and approval to Revere REM established.

That the petitioners gave their express consent to the Revere REM is characterized by the ponencia as a "mere inference" and insists that "there was neither factual basis or express stipulation in the written agreements" to support this inference. With due respect to the ponente, the conclusion that the petitioners had indeed given their express consent to the Revere REM is found in the very language of the MOA itself. As stated earlier, the properties enumerated in Annex "A" of the MOA are the very same properties that are covered by both the Petitioners' REM and the Revere REM. Again, for easier reference, the following table is presented anew:

MOA (Lot No.)

Petitioners' REM

Revere REM

3853

/

 

3864

/

 

4607

/

 

5

/

 

3833

/

 

3838

/

 

3839

/

 

3827

/

 

3842 A

/

 

3835

/

 

3843 A

/

 

3843 C

/

 

3847 A

/

 

3847 B

/

 

3836

/

 

3842 B

/

 

3846

/

 

3841

/

 

3843 B

/

 

7

/

 

3878

/

3885

/

3881

/

3854

/

3852

/

3851

/

3877

/

3876

/

3834

/

3845

/

3867-C

/

What this means is that all the properties listed in Annex A of the MOA - which includes the Revere REM properties - were conveyed by the Spouses Chua and transferred to UCPB under the MOA. In other words, in executing the MOA, the Spouses Chua were representing to UCPB that the parcels of land in the name and possession of Revere, were being conveyed by the Spouses Chua to UCPB as collateral for their loans. Thus, when the Revere REM was executed on the same date as the MOA, this was precisely in pursuance of the terms of the MOA. This is not, by any means, a "mere inference" but a reasonable conclusion drawn from undisputed facts. This compellingly reveals that, to be sure, the two REMs were executed to effect or otherwise implement the obligations of the parties enumerated and fleshed out in the MOA.

Hence, inasmuch as the factual basis is drawn from the very language of the MOA, and the attached Annex "A", there is no contravention of the Parol Evidence Rule.

Indeed, the MOA is replete with provisions that show that the Spouses Chua agreed to transfer and convey to the UCPB all the properties listed in Annex "A".

What is more, Section 4(b) of the MOA provides that the parties (i.e., the petitioners) warrant that they "have taken all appropriate and/or necessary corporate and legal action to authorize the execution, delivery and performance of this Agreement x x x and this Agreement constitutes legal, valid and binding obligations of all the parties."⁷⁹ This warranty includes the delivery of all instruments necessary to transfer title over the properties in Annex A - including those covered by the Revere REM.

Thus, the ponencia's insistence that UCPB failed to adduce evidence during the trial to establish the giving of the petitioners' consent - is absolutely and egregiously wrong because the MOA itself is the evidence of the consent of the Spouses Chua to the Revere REM. To insist that the MOA should have contained explicit language that the Spouses Chua "were giving consent" is to render nugatory the clear and unequivocal language of the MOA itself, which the ponencia concedes is valid.

The extent of the consent.

That the MOA related only to the obligations of the petitioners is not an argument to nullify the Revere REM. As I had previously stated, the only principal obligation that was admitted, established and proven by competent evidence was that of the Spouses Chua and LGCTI. The only loan document that was presented by UCPB and APA to establish the indebtedness of the debtors was the MOA - which, again, enumerates only the Spouses Chua and LGCTI as the borrowers. To be sure, there is nothing on record that indicates the existence (i.e., Promissory Note) or the exact amount of Jose Go's indebtedness. Thus, I agree with the ponencia that it has not been proven that the petitioners had given "their consent and approval to the Revere REM to securitize the obligations of Go".⁸⁰ However, this does not ipso facto mean that the Revere REM is null and void. On the contrary, it is admitted that the Revere REM was meant to securitize the obligations of the petitioners - as so provided in the MOA.

No requirement for Spouses Chua to sign the Revere REM

The ponencia makes much of the fact that the Revere REM was signed only by Jose Go, and that the Spouses Chua did not. This is much ado over nothing really. The Spouses Chua did not sign the Revere REM for the simple reason that the Revere properties were in the name of Revere, and that the Revere REM was executed only by Revere. What is important, however, is that the Spouses Chua had signed the MOA - and it is in the MOA, and the listing of the Revere properties in the MOA - that signified their consent to using the Revere properties (which they beneficially owned under the terms of the DoTs) as security for the petitioners' loans.

As to the fact that the Revere REM "lumped together the obligations of the petitioners and Go"⁸¹ does not furnish any basis for holding that the Revere REM was null and void. As already exhaustively explained, the Revere REM still stood as security for the obligations of the petitioners. The Revere REM did not stand as security for Jose Go's obligations.

UCPB 's awareness of Deed of Trust

Once more, the ponencia harps on UCPB's awareness of the DoTs between the petitioners and Jose Go as a sign of UCPB's bad faith. However, this misses the point. It is precisely because of this awareness of UCPB that petitioners were the true beneficial owners of the Revere properties that gives meaning to the dispositions made by the MOA. That the Spouses Chua were the real beneficial owners of the Revere properties show that they could, as they did, convey and deliver them to UCPB to secure their obligations.

RECAPITULATION

All told, I believe, and so submit that the evidence establishes the following:

(1) The MOA was executed by the petitioners to consolidate all their obligations to UCPB;

(2) The properties listed in Annex "A" of the MOA (which include the parcels of land subject of the Revere REM) all belong to the petitioners;

(3) All these properties were conveyed and transferred by the MOA to UCPB to partially secure the obligations of the petitioners - which means that the Spouses Chua had, by their signing the MOA, already expressly given their consent and approval to Revere to execute the Revere REM and to mortgage the parcels of land under the DoTs in favor of UCPB, precisely as security for the loan obligations of the petitioners as stated in the MOA;

(4) The Revere REM was thus executed to implement and give life to the terms and conditions of the MOA;

(5) Since the Revere REM was valid, its foreclosure by UCPB was likewise valid;

(6) The application of the foreclosure proceeds was not proper; the proceeds could be applied only to the debts of the MOA, that is, the debts of LGCTI and the Spouses Chua;

(7) The foreclosure proceeds could not have been applied to the debts of any other party, so that UCPB's application of the foreclosure proceeds to the debts of Jose Go is in clear contravention of the MOA and therefore erroneous and without basis;

(8) Based on the Apportionment of Bid Price, the total foreclosure proceeds amounted to P227,700,000.00. As provided in the MOA, LGCTI and the Spouses Chua had an outstanding obligation in the aggregate amount of P204,497,177.04. Notwithstanding that the MOA stipulated that all the properties transferred and conveyed to UCPB would only extinguish Spouses Chua and LGCTI's debt to the extent of P103,893,450.00, when the foreclosure sale actually yielded an amount that was more than P103,893,450.00, that is, more than sufficient to discharge the entirety of the debt of LGCTI and Spouses Chua - then such proceeds should have been applied to the entirety of their debt, including already the P68,000,000.00 owed and which should have been paid through the issuance of 680,000 shares in LGCTI.

(9) This application thus extinguishes the entire obligation of the petitioners, and yields a balance in their favor of P23,102,822.96, which amount should be returned to the owners of the mortgaged properties who, in this case, are the petitioners;

(10) Consequently, the Decision's directive for UCPB to "execute the appropriate Deeds of Reconveyance in favor of [the petitioners]"⁸² and "return so much of the [the petitioners'] titles x x x after applying so much of the mortgaged properties x x x to the payment of [the petitioners'] consolidated obligation to the bank"⁸³ is without legal basis. UCPB's only obligation is to return the excess of the foreclosure proceeds to the petitioners.

(11) Anent the interest rate, the excess of the foreclosure proceeds in the amount of P23,102,822.96 will earn interest at the rate of 6% per annum from the date of filing of the complaint until finality of judgment, consistent with the Court's pronouncement in Spouses Suico v. PNB,⁸⁴ as follows:

In Philippine National Bank v. Court of Appeals, it was held that:

The rate of 12% interest referred to in Cir. 416 applies only to:

Loan or forbearance of money, or to cases where money is transferred from one person to another and the obligation to return the same or a portion thereof is adjudged. Any other monetary judgment which does not involve or which has nothing to do with loans or forbearance of any, money, goods or credit does not fall within its coverage for such imposition is not within the ambit of the authority granted to the Central Bank. When an obligation not constituting a loan or forbearance of money is breached then an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum in accordance with Art. 2209 of the Civil Code. Indeed, the monetary judgment in favor of private respondent does not involve a loan or forbearance of money, hence the proper imposable rate of interest is six (6%) per cent.

Using the above rule as yardstick, since the responsibility of PNB arises not from a loan or forbearance of money which bears an interest rate of 12%, the proper rate of interest for the amount which PNB must return to the petitioners is only 6%. This interest according to Eastern Shipping shall be computed from the time of the filing of the complaint. However, once the judgment becomes final and executory, the "interim period from the finality of judgment awarding a monetary claim and until payment thereof, is deemed to be equivalent to a forbearance of credit." Thus, in accordance with the pronouncement in Eastern Shipping, the rate of 12% per annum should be imposed, to be computed from the time the judgment becomes final and executory until fully satisfied.⁸⁵ (Underscoring supplied)

(12) Once the judgment becomes final and executory, an interest of 6% per annum should be imposed, to be computed from the time of finality of judgment until full payment. This follows Nacar v. Gallery Frames⁸⁶ :

Recently, however, the Bangko Sentral ng Pilipinas Monetary Board (BSP-MB), in its Resolution No·. 796 dated May 16, 2013, approved the amendment of Section 2 of Circular No. 905, Series of 1982 and, accordingly, issued Circular No. 799, Series of 2013, effective July 1, 2013, the pertinent portion of which reads:

The Monetary Board, in its Resolution No. 796 dated 16 May 2013, approved the following revisions governing the rate of interest in the absence of stipulation in loan contracts, thereby amending Section 2 of Circular No. 905, Series of 1982:

Section 1. The rate of interest for the loan or forbearance of any money, goods or credits and the rate allowed in judgments, in the absence of an express contract as to such rate of interest, shall be six percent (6%) per annum.

Section 2. In view of the above, Subsection X305.1 of the Manual of Regulations for Banks and Sections 4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations for Non-Bank Financial Institutions are hereby amended accordingly.

This Circular shall take effect on 1 July 2013.

Thus, from the foregoing, in the absence of an express stipulation as to the rate of interest that would govern the parties, the rate of legal interest for loans or forbearance of any money, goods or credits and the rate allowed in judgments shall no longer be twelve percent (12%) per annum - as reflected in the case of Eastern Shipping Lines and Subsection X305.1 of the Manual of Regulations for Banks and Sections 4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations for Non­Bank Financial Institutions, before its amendment by BSP-MB Circular No. 799-but will now be six percent (6%) per annum effective July 1, 2013. It should be noted, nonetheless, that the new rate could only be applied prospectively and not retroactively. Consequently, the twelve percent (12%) per annum legal interest shall apply only until June 30, 2013. Come July 1, 2013 the new rate of six percent (6%) per annum shall be the prevailing rate of interest when applicable.⁸⁷

(13) Lastly, as regards the award of damages, I agree with the RTC's finding on the petitioners' entitlement to damages on the ground of UCPB 's fraud and deceit. As summarized by the RTC:

x x x Defendant UCPB committed breach of contract when it foreclosed on all the forty-five (45) properties in the two (2) Real Estate Mortgages dated March 21, 2000 for the total aggregate liability of Php404,596,177.04, despite the fact that the total outstanding obligation of the plaintiffs is only Php204,597,177.04. Despite the overpayment, it represented that the plaintiffs still had a remaining liability of Php68,000,000.00 that was to be converted into equity shares in Lucena Grand Central Terminal. The bank had also sought to foreclose TCT Nos. T-54182, T-54184, T-54185, T-54192, and T-71135, where the Lucena Grand Central Terminal stands, shortly after the filing of this Complaint, and relying on a Loan dated May 19, 1997 which the bank's own witness admits had already been included in the Memorandum of Agreement dated March 21, 2000.⁸⁸

UCPB's deceit and fraud is most evident in its unjustified refusal and failure to present proof of Jose Go's indebtedness despite repeated demands by the petitioners. Moreover, UCPB's unwarranted application of the foreclosure proceeds to the liabilities of Jose Go - which, to reiterate, have not been established - also manifests its bad faith that warrants the award of damages.⁸⁹

WHEREFORE, premises considered, the Motion for Reconsideration is PARTIALLY GRANTED, and the Court's Decision dated August 16, 2017 is MODIFIED, as follows:
Declaring the loan obligations of petitioners to respondent United Coconut Planters Bank under Memorandum of Agreement dated March 21, 2000 to have been fully paid;

Declaring as legal and binding the Deeds of Trust dated April 30, 1998 and holding the properties listed therein were merely held-in-trust for petitioners by respondent Revere and Jose Go and/or corporations owned or associated with him;

Declaring the Deed of Real Estate Mortgage dated March 21, 2000 executed by respondents Revere and Jose Go in favor of co-respondent United Coconut Planters Bank to be valid;

Declaring the Real Estate Mortgage dated June 02, 1997 as having been extinguished by the Memorandum of Agreement dated March 21, 2000, and converting the writ of preliminary injunction issued on March 22, 2004 to a permanent one, forever prohibiting respondent UNITED COCONUT PLANTERS BANK and ASSET POOL A and all persons/entities deriving rights under them from foreclosing on TCT Nos. T-54182, T-54184, T-54185, T-54192, and T-71135;

Directing respondents, or whoever is in custody of the said certificates of title, namely, TCT Nos. T-54182, T-54184, T-54185, T-54192, and T-71135, to return the same to petitioners and to execute the appropriate release of mortgage documents;

Ordering respondent United Coconut Planters Bank to pay petitioners the following:

The excess of the foreclosure proceeds in the amount of P23,102,822.96;

Legal interest on the amount of P223,102,822.96 at the rate of 6% per annum from the time of the filing of the complaint on February 3, 2004 until finality of judgment. Once the judgment becomes final and executory, the interest of 6% per annum should be imposed, to be computed from the time the judgment became final and executory until fully satisfied;

P1,000,000.00 as moral damages;

P100,000.00 as exemplary damages;

P2,000,000.00 as attorney's fees; and

Costs of suit.
SO ORDERED.

Endnotes:

¹Rollo (Vol. 1), pp. 204-214.

² See Decision dated August 16, 2017 (SC Decision), rollo (Vol. 2), p. 1191; see also Deeds of Trust dated April 30, 1998, rollo (Vol. 1), pp. 215-220; Regional Trial Court Decision dated January 6, 2009 (RTC Decision), rollo (Vol. 1), p. 612; and Court of Appeals Decision dated March 25, 2014 (CA Decision), rollo (Vol. 1), p. 14.

³ See Joint Venture Agreement dated March 3, 1997 (JVA), rollo (Vol. 1), pp. 211-212; see also RTC Decision, rollo (Vol. 1), p. 612.

⁴ See JVA, id. at 205.

⁵ See id. at 208.

⁶ See SC Decision, rollo (Vol. 2), p. 1191; see also RTC Decision, rollo (Vol. 1), p. 612; CA Decision, id. at 14; Petition for Review under Rule 45 dated February 23, 2015, id. at 67.

⁷Rollo (Vol. 1), pp. 215-220.

⁸ Id. at 215.

⁹ Id. at 216.

¹⁰ Id.

¹¹ Id. at 219.

¹² Id. at 216 and 219.

¹³ Id. at 14.

¹⁴ See Annex "2" of respondent Asset Pool A (SPV-AMC)'s Motion for Reconsideration dated October 2, 2017 (APA's MR), rollo (Vol. 3), pp. 1386-1391.

¹⁵Rollo (Vol. 1), p. 15.

¹⁶ See Annex "2" of APA's MR, rollo (Vol. 3), p. 1250; see also United Coconut Planters Bank's Motion for Reconsideration (UCPB's MR), rollo (Vol. 3), p. 1572.

¹⁷Rollo(Vol.1), p. 15.

¹⁸ Id. at 225-232.

¹⁹ Id. at 225.

²⁰ Id.

²¹ See UCPB's MR, at par. 15.c, p. 7, rollo (Vol. 3), p. 1575; and rollo (Vol. 1), p. 71. Thus, the total obligation of P204,597,177.04 was broken down as follows: P103,893,450.00 (partial obligation to be satisfied through conveyance of real properties); P68,000,000.00 (balance to be settled through issuance ofLGCTI shares to UCPB); and P32,703,727.04 (waiver of penalties and charges).

²²Rollo (Vol. 1), pp. 237-244.

²³ Id. at 237.

²⁴ See SC Decision, rollo (Vol. 2), pp. 1192 & 1200; APA's MR, par. 13, p. 4, rollo (Vol. 3), p. 1252; UCPB's MR, par. 16, p. 7, rollo (Vol. 3), p. 1575; and rollo (Vol. 1), p. 197.

²⁵Rollo (Vol. 1), pp. 245-260.

²⁶ Id. at 261-274.

²⁷ Id. at 246 and 261.

²⁸ Id.

²⁹ Id. at 231.

³⁰ Id. at 256-260.

³¹ Id. at 272 to 274.

³² Id. at 225.

³³ Id. at 20.

³⁴ Id. at 277.

³⁵ Id. at 233-236.

³⁶ Annex "35", rollo (Vol. 3), pp. 1549-1550.

³⁷ Id. at 1550.

³⁸Rollo (Vol. 1), pp. 278-283.

³⁹ Id. at 282.

⁴⁰ Id.

⁴¹ Id. at 283.

⁴² Id. at 284-302.

⁴³ Id. at 21.

⁴⁴ Id. at 21-22.

⁴⁵ Id. at 23.

⁴⁶Rollo (Vol. 3), pp. 1190-1210. Penned by Associate Justice Lucas P. Bersamin and concurred in by Associate Justices Samuel R. Martires, Noel Gimenez Tijam and Alexander G. Gesmundo; Associate Justice Alfredo Benjamin S. Caguioa was on leave.

⁴⁷ Id. at 1193-1197.

⁴⁸Rollo (Vol. 1), pp. 11-51. Penned by Associate Justice Vicente S.E. Veloso, with Associate Justices Jane Aurora C. Lantion and Nina G. Antonio-Valenzuela concurring.

⁴⁹ Id. at 52-59.

⁵⁰ Id. at 61-105.

⁵¹ SC Decision, supra note 46.

⁵² Id. at 1201.

⁵³ Id. at 1203-1204.

⁵⁴ Id. at 1204.

⁵⁵ Id. at 1206.

⁵⁶ Id.

⁵⁷ Id. at 1208-1209.

⁵⁸Rollo (Vol. 3), pp. 1234-1248.

⁵⁹ Id. at 1569-1607.

⁶⁰ Id. at 1249-1378.

⁶¹Rollo (Vol. 1), p. 216.

⁶² Id.

⁶³ Id. at 582 and 583.

⁶⁴Rollo (Vol. 2), p. 1203.

⁶⁵ See APA's MR, par. 13, p. 4, rollo (Vol. 3), p. 1252; see also UCPB's MR, pp. 5-7, id. at 1573-1575; rollo (Vol. 1), p. 197.

⁶⁶ See APA's MR, pp. 34-38, id. at 1282-1286.

⁶⁷ See APA's MR, p. 28, id. at 1276.

⁶⁸ See Spouses Rigor v. Consolidated Orix Leasing and Finance Corporation, 436 Phil. 243, 251-252 (2002); PNB v. Dee, 727 Phil. 473, 482 (2014); Acme Shoe, Rubber & Plastic Corporation v. CA, 329 Phil. 531, 538-539 (1996).

⁶⁹ See RCBC v. Buenaventura, 646 Phil. 673, 679 (2010); Producers Bank of the Philippines v. Court of Appeals, 417 Phil. 646, 656-657 (2001); Orix Metro Leasing and Finance Corp. v. M/V "Pilar-I", 615 Phil. 412, 427 (2009); Development Bank of the Phils. v. Guariña Agricultural & Realty Development Corp., 724 Phil. 209, 218-222 (2014); and Development Bank of the Philippines v. Licuanan, 545 Phil. 544, 554 (2007).

⁷⁰Rollo (Vol. 1), p. 625.

⁷¹ Id. at 278-283 and 300.

⁷² RULES OF COURT, Rule 131, Sec. 3(e). See Garcia v. Thio, 547 Phil. 341, 350 (2007); People v. Yabut, 285 Phil. 895, 899 (1992) and Caltex (Philippines), Inc. v. Court of Appeals, 287 Phil. 497, 511 (1992).

⁷³Rollo (Vol. 1), p. 99.

⁷⁴ Id. at 246.

⁷⁵ 558 Phil. 265 (2007).

⁷⁶ SEC. 4. Disposition of proceeds of sale. - The amount realized from the foreclosure sale of the mortgaged property shall, after deducting the costs of the sale, be paid to the person foreclosing the mortgage, and when there shall be any balance or residue, after paying of the mortgage debt due, the same shall be paid to junior encumbrancers in the order of their priority, to be ascertained by the court, or if there be no such encumbrancers or there be a balance or residue after payment to them, then to the mortgagor or his duly authorized agent, or to the person entitled to it. (Italics and underscoring supplied.)

⁷⁷Spouses Suico v. PNB, supra note 75, at 280.

⁷⁸Rollo (Vol. 1), pp. 623-624.

⁷⁹Rollo (Vol. 1), p. 228.

⁸⁰Ponencia, p. 17.

⁸¹ ld. at 18.

⁸²Rollo (Vol. 2), p. 1208.

⁸³ Id.

⁸⁴ Supra note 75.

⁸⁵ Id. at 283-284.

⁸⁶ 716 Phil. 267 (2013).

⁸⁷ Id. at 279-281.

⁸⁸Rollo (Vol. 1), p. 630.

⁸⁹ See Producers Bank of the Philippines v. Court of Appeals, supra note 69.