Philippine Supreme Court Jurisprudence > Year 2016 > April 2016 Decisions > G.R. No. 207408, April 18, 2016 - HEIRS OF FELINO M. TIMBOL, JR., NAMELY, MICHAEL JOHN JORGE TIMBOL, FELINO JAMES JORGE TIMBOL, AND MARILOU TIMBOL, Petitioners, v. PHILIPPINE NATIONAL BANK, Respondent.:

Before this Court is a petition for review¹ on certiorari under Rule 45 of the Rules of Court assailing the Decision² dated 26 September 2012 and Resolution³ dated 31 May 2013 of the Court of Appeals in CA-G.R. CV No. 84649. The Court of Appeals reversed and set aside the 5 January 2005 Decision⁴ of the Regional Trial Court (RTC) of Makati City, Branch 150, in Civil Case No. 00-946.

The Facts

Civil Case No. 00-946 stems from a Complaint⁵ for annulment of real estate mortgage, foreclosure of mortgage, and auction sale; accounting and damages, with prayer for temporary restraining order and/or injunction filed by Felino M. Timbol, Jr. and his wife Emmanuela R. Laguardia (Spouses Timbol) against the Philippine National Bank (PNB), Atty. Ricardo M. Espina, in his capacity as notary public of Makati, and the Register of Deeds of Makati.

The facts of the case are as follows:
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Sometime in December 1996, Karrich Holdings Ltd. ["KHL"], based in Hong Kong and owned by Felino M. Timbol, Jr. ["Timbol"] applied with Philippine National Bank ["PNB"]'s wholly-owned Hong Kong-based subsidiary, PNB International Finance Limited ["PNB-IFL"] for credit facilities. Karrich Auto Exchange ["KAE"], then named Superkinis Auto Sales, a sole proprietorship based in the Philippines and also owned by Timbol, acted as co-borrower. The credit facilities were granted in the total amount of USD 850,000.00, or PhP 22,796,200.00.

As security, Timbol executed real estate mortgages on his behalf and on behalf of Emmanuela Laguardia ["Laguardia"], over nine (9) different parcels of real estate registered in the name of Mr. and Mrs. Felino M. Timbol, Jr. Timbol was supposedly made to sign the real estate mortgage forms and Promissory Note forms in blank, among other documents, and thereafter returned the same to PNB. Timbol was allegedly never furnished with copies of the finished forms, a statement PNB would later categorically deny.

The first Real Estate Mortgage was in consideration of credit accommodations in the amount of Thirteen Million Fifty Three Thousand Six Hundred Pesos (Php 13,053,600.00, Philippine currency) and further read pertinently as follows:
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WITNESSETH: That for and in consideration of credit accommodations obtained from the Mortgagee and to secure the payment of the same x x x the Mortgagors hereby transfer and convey by way of mortgage unto the Mortgagee its successors or assigns, the following:

Seven (7) real estate properties covered by TCT Nos. 196111, 196112, 196113, 196114, 196115, 196116 and 196117 with their technical descriptions detailed in the attached Annex A.

x x x

The consideration for the second Real Estate Mortgage amounted to Seven Million Five Hundred Ninety-Eight Thousand Eight Hundred Fifty Pesos and 0/100 (PhP 7,598,850.00, Philippine currency). The mortgage was constituted over a 293-sq.m. parcel of land covered by TCT No. 177564. The third Real Estate Mortgage secured an obligation amounting to Two Million One Hundred Forty-Three Thousand Seven Hundred Fifty Pesos and 0/100 (Php 2,143,750.00, Philippine currency) and covered an 87.5 sq.m. parcel of land under TCT No. 207636.

The real estate mortgages were annotated on the aforementioned transfer certificates of title. On later perusal of the transfer certificates of title, however, Timbol supposedly discovered that the amounts annotated as mortgaged added up to One Hundred One Million One Hundred Seventeen Thousand Eight Hundred Pesos and 0/100 (PhP 101,117,800.00). Over time, Timbol signed several Promissory Notes, attesting to availments under the credit line amounting to Eight Hundred Forty-Nine Thousand Five Hundred Ninety-Five US Dollars and 7/100 (USD 849,595.07). On April 1, 1998, the credit facilities were reduced to Eight Hundred Forty-Eight Thousand Three Hundred US Dollars and 0/100 (USD 848,300.00), pursuant to the letter sent by PNB-IFL to KAE/ KHL.

When Timbol, KAE, and KHL defaulted on the payment 6f their loan obligation, PNB, on behalf of PNB-IFL, sent a demand letter dated September 2, 1999, advising them that their total outstanding obligation stood at Thirty-Eight Million, Eighty-Eight Thousand One Hundred Seventy-Three Pesos and 59/100 (PhP 38,088,173.59), inclusive of penalties and interests. In a response apparently dated October 19, 1999, Timbol, signing in representation of KHL, manifested that he was "well aware" of the "P33 Million" outstanding obligation and that he was awaiting the outcome of a pending application for another loan. Timbol thus requested for additional time to settle the obligation with PNB-IFL and for the conversion of the same to Philippine currency.

On November 15, 1999, PNB caused the foreclosure of the mortgaged properties, claiming that Timbol/KAE/KHL had violated the terms of the real estate mortgage by defaulting on the payment of the loan obligation despite demands. As of the date of the foreclosure, the outstanding obligation already amounted to One Million Twenty-One Thousand Seven Hundred Forty-Three US Dollars and 40/100 (USD 1,021,743.40) or Forty-Two Million Three Hundred Twenty Thousand Six Hundred Eleven Pesos and 62/100 (PhP 42,320,611.62). Atty. Ricardo M. Espina ["Espina"] notarized the Notice of Extra-Judicial Sale.

PNB was allegedly the highest bidder at the public auction sale with a bid price of Thirty-Five Million Six Hundred Sixty-Nine Thousand Pesos and 0/100 (PhP 35,669,000.00). Espina issued the corresponding Certificate of Sale dated December 10, 1999.

On August 4, 2000, Timbol and Laguardia filed suit against PNB, Espina, and the Register of Deeds of Makati City for annulment of the real estate mortgage, of the foreclosure and auction sale, for accounting and damages, and for a temporary restraining order and/or injunction. They accused PNB of deliberately "bloating" the amount of the obligation. They furthermore assailed the foreclosure proceedings as highly irregular, invalid, and illegal, because the petition for the extra-judicial foreclosure had not been filed in accordance with Supreme Court Administrative Order No. 3; the Notice of Notary Public's Sale did not specify the newspaper in which the Notice of Sale would be published, and was neither raffled for this purpose nor properly posted; and the Notary did not conduct an actual public bidding. They moreover faulted Defendant Espina for refusing to furnish Timbol with copies of documents relative to the supposed auction sale. Meanwhile, the Makati City Register of Deeds gave plaintiff Timbol a Certification that no December 11, 1996 Deed of Mortgage in favor of PNB-IFL covering the transfer certificates of title in question was located in the records. Nor had any certificate of sale been registered on the titles. Plaintiffs thus prayed that the mortgage and Promissory Notes, and the extra-judicial foreclosure, the foreclosure sale, and any subsequent Certificate of Sale, be declared null and void; that the mortgage liens annotated on the transfer certificates of title be cancelled; that PNB be directed to render an accounting of plaintiffs' true and actual obligation; and that damages and attorney's fees be awarded. Plaintiffs also prayed for preliminary and permanent injunctive relief to restrain PNB from consolidating its title to and ownership over the real properties, and to restrain the Makati City Registry of Deeds from canceling plaintiffs' titles and issuing new ones in lieu thereof.

During the hearings on his prayer for a temporary restraining order or writ of preliminary injunction, Timbol affirmed the Affidavit he executed for that purpose.

By Order dated September 8, 2000, the RTC granted the issuance of a writ of preliminary injunction prayed for. The RTC denied PNB's Motion for Reconsideration and Supplemental Motion for Reconsideration, while granting the plaintiffs' Motion to Reduce Bond. PNB elevated the RTC's Order all the way to the Supreme Court which would ultimately nullify and set aside the same in its February 11, 2005 Decision in G.R. No. 157535.

Meanwhile, in his Answer, Espina defended the validity of the foreclosure sale proceedings and explained that it was PNB's Atty; Geromo who rejected Plaintiff Timbol's request for copies of the mortgage documents and promissory notes. Espina pointed out that the1 alleged Special Power of Attorney supposedly authorizing plaintiff Timbol to represent Laguardia had already been revoked by a July 20, 1998 Order of the Regional Trial Court of Para

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