Civil Law Digest: BANK OF AMERICA V. AMERICAN REALTY CORP. [G.R. No. 133876, December 29, 1999]

BANK OF AMERICA V. AMERICAN REALTY CORP.

FACTS:

BANK OF AMERICA NT & SA (BANTSA) and Bank of America Ltd. (BAIL) on several occasions granted 3 major multi-million United States (US) Dollar loans to the following corporate borrowers: (1) Liberian Transport Navigation,S.A.; (2) El Challenger S.A. and (3) Eshley Compania Naviera S.A. (hereinafter collectively referred to as borrowers), all of which are existing under and by virtue of the laws of the Republic of Panama and are foreign affiliates of AMERICAN REALITY CORP (ARC). a Philippine corp.

Due to the default in the payment of the loan amortizations, BANTSA and the corporate borrowers signed and entered into restructuring agreements. As additional security for the restructured loans, private respondent ARC as third party mortgagor executed two real estate mortgages over its parcels of land including improvements thereon, located at Barrio Sto. Cristo, San Jose Del Monte, Bulacan.
Eventually, the corporate borrowers defaulted in the payment of the restructured loans prompting petitioner BANTSA to file civil actions before foreign courts for the collection of the principal loan, 2 in England and 2 in HK respectively. In the civil suits instituted before the foreign courts, private respondent ARC, being a third party mortgagor, was not impleaded as party-defendant.

In 1992, BANTSA filed before the Office of the Provincial Sheriff of Bulacan, Philippines, an application for extrajudicial foreclosure  of real estate mortgage. In 1993, after due publication and notice, the mortgaged real properties were sold at public auction in an extrajudicial foreclosure sale.
Thereafter, ARC filed an action for damages against BANTSA and BAIL, for the latter's act of foreclosing extra judicially the real estate mortgages despite the pendency of civil suits before foreign courts for the collection of the principal loan.

ISSUE:

If the filing in foreign courts by the defendant of collection suits against the principal debtors constituted a waiver of the security of the mortgages.

HELD:

YES. 

The act of filing of an ordinary action for collection operates as a waiver of the mortgage-creditor’s remedy to foreclose the mortgage. By the mere filing of the ordinary action for collection against the principal debtors, the petitioner in the present case is deemed to have elected a remedy, as a result of which a waiver of the other necessarily must arise.

In the absence of express statutory provisions, a mortgage creditor may institute against the mortgage debtor either a personal action for debt or a real action to foreclose the mortgage. In other words, he may pursue either of the two remedies, but not both. By such election, his cause of action can by no means be impaired, for each of the two remedies is complete in itself. In our jurisdiction, the remedies available to the mortgage creditor are deemed alternative and not cumulative. Notably, an election of one remedy operates as a waiver of the other.

Anent real properties in particular, the Court has laid down the rule that a mortgage creditor may institute against the mortgage debtor either a personal action for debt or a real action to foreclose the mortgage.

In the case at bench, private respondent ARC constituted real estate mortgages over its properties as security for the debt of the principal debtors. By doing so, private respondent subjected itself to the liabilities of a third party mortgagor. Under the law, third persons who are not parties to a loan may secure the latter by pledging or mortgaging their own property.

By the expediency of filing four civil suits before foreign courts, necessarily abandoned the remedy to foreclose the real estate mortgages constituted over the properties of third-party mortgagor and herein private respondent ARC. Moreover, by filing the four civil actions and by eventually foreclosing extrajudicially the mortgages, petitioner in effect transgressed the rules against splitting a cause of action well-enshrined in jurisprudence and our statute books.chanrobles.com:cralaw:red

Civil Law Digest: GONZALO TUASON v. DOLORES OROZCO [G.R. No. L-2344, February 10, 1906]

TUASON V. OROZCO 

FACTS:

In 1890, Enrique Grupe and Dolores Orozco (wife of Juan Vargas) obtained a loan from Gonzalo Tuason secured by a mortgage on the property. The mortgage property (house) was referred to in the power of attorney executed by Juan Vargas, instituting Grupe as his agent. In the SPA, Enrique Grupe, was authorized to dispose of all his property, and particularly of a certain house and lot known as No. 24 Calle Nueva, Malate, in the city of Manila, for the price at which it was actually sold. He was also authorized to mortgage the house for the purpose of securing the payment of any amount advanced to his wife, Dolores Orozco who, inasmuch as the property had been acquired with funds belonging to the conjugal partnership, was a necessary party to its sale or incumbrance.

In the instrument evidencing the debt, Enrique Grupe acknowledges to have received from Gonzalo Tuason as a loan, the sum of 3,500 pesos in cash, to his entire satisfaction, which sum he promises to pay within one year thereafter. 

To secure the payment of the 2,200 pesos delivered to Dolores Orozco, Grupe mortgaged the house and lot referred to in the SPA. This instrument of debt was duly recorded in the Registry of Property.

TUASON filed this complaint for the recovery of the debt against the mortgaged property. 
However, Orozco denied having receiving the 2,200 pesos. She claims that the instrument is evidence of a debt personally incurred by Enrique Grupe for his own benefit, and not incurred for the benefit of his principal, Vargas.

ISSUE:

If the debtor can foreclose the mortgage to fulfill the liability of the principal incurred by his agent.

HELD:

YES. 

A debt incurred by the agent is binding directly upon the principal, provided the former acted, as in the present case, within the scope of his authority. (Art. 1727 of the Civil Code.) 

The fact that the agent has also bound himself to pay the debt does not relieve from liability the principal for whose benefit the debt was incurred. The individual liability of the agent constitutes in the present case a further security in favor of the creditor and does not affect or preclude the liability of the principal. 

In the present case the latter's liability was further guaranteed by a mortgage upon his property. The law does not provide that the agent can not bind himself personally to the fulfillment of an obligation incurred by him in the name and on behalf of his principal. On the contrary, it provides that such act on the part of an agent would be valid. (Art. 1725 of the Civil Code.)

The above mortgage being valid and having been duly recorded in the Register of Property, directly subjects the property thus encumbered, whoever its possessor may be, to the fulfillment of the obligation for the security of which it was created. (Art. 1876 of the  Civil Code and Art. 105 of the Mortgage Law.) 

Civil Law Digest: CHINA BANKING CORP. V. LICHAUCO [G.R. No. L-22001 November 4, 1924]

CHINA BANKING CORP. V. LICHAUCO

 FACTS:

Lichauco & Company, Inc., owed the plaintiff a large sum by way of loan. 

On September 5, 1921, Faustino Lichauco and wife Luisa F. de Lichauco executed a document (Exhibit C) in favor of the plaintiff whereby they secured with a mortgage upon the property described in the document the payment of a part of this loan in the amount of P50,000 with interest at 9 per cent per year. It was agreed that in case of non-fulfillment of the contract, this mortgage would stand as security also for the payment of all the costs of the suit and expenses of any kind, including attorney’s fees, which by way of liquidated damages are fixed at 5 per cent of the principal. It is stated lastly in this document that if Faustino Lichauco and Luisa F. de Lichauco should fail to pay this amount of P50,000, the mortgage shall be in full force and effect.

ISSUE:

If the obligation of Faustino Lichauco and Luisa F. de Lichauco lacked consideration, because what they guaranteed with this mortgage was a debt of Lichauco & Co., Inc.

HELD:

NO. The consideration of a mortgage, which is an accessory contract, is that of the principal contract, from which it receives its life, and without which it cannot exist as an independent contract, even if the obligation thereby secured is of a third person, and therefore it will be valid, if the principal one is valid, and cannot be avoided on the ground of lack of consideration.

Remedial Law Digest: CARGILL PHILS. V. SAN FERNANDO REGALA TRADING [G.R. No. 178008,October 09, 2013]

CARGILL PHILS. v. SAN FERNANDO REGALA TRADING

Facts:

CARGILL and SAN FERNANDO are sellers and buyers of molasses under the contract. It was agreed that SAN FERNANDO would purchase 12,000 metric tons of Thailand origin cane blackstrap molasses at a certain price. CARGILL however failed to deliver the ordered molasses to SAN FERNANDO. Thus, SAN FERNANDO filed a complaint for rescission of contract with damages before the RTC.

CARGILL field a motion to dismiss or suspend the proceedings and to refer the controversy to voluntary arbitration pursuant to the arbitration clause. It alleged that the contract was never consummated because SAN FERNANDO did not return the proposed agreement bearing its written acceptance and conformity. The controversy being the existence of the contract, it argued that the RTC was not the proper forum but by an arbitration proceeding before the American Arbitration Association.

SAN FERNANDO opposed. It argued that RTC has jurisdiction over the action for rescission of contract and could not be changed by the arbitration clause.

RTC denied the motion to dismiss and directed CARGILL to file answer.

CARGILL filed a Petition for Certiorari with the CA. CA denied the petition and affirmed RTC’s Orders. It held that the case cannot be brought under the Arbitration Law for the purpose of suspending the proceedings before the RTC and it was proper that the issue on the validity of the contract and the arbitration clause be resolved first. Arbitration is not proper when one of the parties repudiated the existence or validity of the contract.

ISSUE: IS the CA correct?

HELD:

NO. Petition for Certiorari with the CA is the proper remedy.

RTC has acted in excess of its jurisdiction. In issuing the Order which denied CARGILL’s motion to dismiss and to refer to Voluntary arbitration and directing CARGILL to file an answer, the RTC went beyond its authority of determining ONLY the issue of whether or not there is an agreement in writing providing for arbitration.  RTC should have instead ordered the parties to proceed to arbitration.

Since RTC acted in excess of jurisdiction and since there is no plain, speedy and adequate remedy in the ordinary course of law, Petition for Certiorari is proper.

Remedial Law Digest: EQUITABLE PCI BANK V. RCBC CAPITAL CORPORATION [G.R. NO. 182248, December 18, 2008]

EQUITABLE PCI BANK V. RCBC CAPITAL CORPORATION

Facts:

Equitable PCI, as seller and RCBC as buyer executed a Share Purchase Agreement for the purchase of Equitable PCI’s interest in Bankard. After three years from the execution of the deed of sale, RCBC however informed Equitable PCI of overpayment of over P616M for the purchase price of the shares. RCBC claimed that Equitable PCI violated their warranty as sellers.

Following the unsuccessful attempts for settlement, RCBC filed a request for Arbitration on May 12, 2004 with the International Chamber of Commerce – International Court of Arbitration (ICC- ICA).

In its Answer, Equitable PCI denied RCBC’s averments, claimed that the period for filing the claim has already lapsed, was guilty of laches and was not entitled to rescission having had ample opportunity and reasonable time to file a claim against Equitable PCI.

The Arbitral Tribunal rendered a Partial Award holding that RCBC’s claim is not time-barred as it was filed within the 3 year period. It also exonerated RCBC from laches and it considered impracticable the rescission of the Agreements.

RCBC field with the RTC a Motion to Confirm Partial Award. Equitable PCI countered through a Motion to Vacate the Partial Award.

RTC ordered confirming the Partial Award. Equitable PCI sought reconsideration but RTC denied.

Thus, Equitable PCI filed a Petition for Review with the Supreme Court under Rule 45 of the Rules of Court.

ISSUE:  Is Rule 45 the proper remedy or the direct appeal to SC?

HELD:

NO. Rule 45 is not the remedy but an appeal before the CA pursuant to Sec. 46 of the ADR Act of 2004 which was already effective at the time the arbitral proceeding commenced or on May 12, 2004 through a request for arbitration with the ICC-ICA.  RA 9285 took effect on April 28, 2004.

Remedial Law Digest: DENR V. United Planners Consultants [G.R. No. 212081, February 23, 2015]

DENR v. United Planners Consultants

Principles involved: “expressio unios est exclusio alterius”

TOPIC: Only those allowed remedies provided in the Special ADR rules must apply.

FACTS:

DENR and UNITED PLANNERS entered into a consultancy agreement for one of DENR’S Land Resource Management Master Plan Project. It was agreed that DENR will pay around P4M based on a predetermined percentage corresponding to the particular stage of work accomplished. UNITED PLANNERS had completed the work but DENR only paid around P2M, only 47% of the total contract price. DENR failed to pay the remaining balance despite acknowledging its liability and assured payment at the soonest possible time.

UNITED PLANNERS then filed a complaint with the RTC. Likewise, it filed a Motion to Refer to Arbitration pursuant to the ARBITRATION CLAUSE in the contract.

During pre-trial, both agreed to adapt CIAC Rules to govern the arbitration proceeding. Hence, an Arbitral Tribunal (AT) was created. The AT rendered an award in favor of UNITED PLANNERS directing DENR to pay the unpaid balance, with interests and other costs.

DENR filed a Motion for Reconsideration (MR) to the Arbitral Award (AA) with the RTC.

UNITED PLANNERS opposed the MR and moved to confirm the AA. RTC confirmed the AA and issued a Writ of Execution.

DENR filed a Motion to Quash of the Writ of Execution. 

RTC denied the Motion to Quash.

DENR received RTC’s order on July 12, 2012. On Sept 10, DENR filed a PETITION FOR CERTIORARI before the COURT OF APPEALS questioning the merits of the Arbitral Award.

CA dismissed the Petition for Certiorari on 2 grounds:

1) the petition was prohibited under the CIAC rules because it assails the merits of the AA and

2) it was filed out of time, violating the 15 day reglementary period to file a Special Civil Action for certiorari under the Special ADR Rules.

ISSUE: Is the CA correct dismissing the petition for certiorari?

HELD: YES.

Under CIAC rules, filing a Motion for Reconsideration of the Arbitral Award was a prohibited pleading. Thus, rendering the Arbitral Award final and executory.

By referral to arbitration, the case falls within the coverage of the Special ADR Rules. A petition for certiorari under the Rules of Court, even in suppletory capacity is NOT allowed. 

Rule 22.1 of the Special ADR rules is explicit that the provisions of the Rules of Court that are applicable to the proceedings enumerated in Rule 1.1 of the Special ADR rules have either been included and incorporated or specifically referred to. Also, it in cases where no specific rule is provided under the Special ADR Rules, the court shall resolve the matter summarily and be guided by the spirit and intent of the Special ADR Rules and the ADR laws.

Further, Special ADR rules provides that Petition for Certiorari must be filed within 15 days from notice of RTC’s order. In this case, since the Petition was filed nearly 2 months after July 12, the petition is dismissible.

Labor Law Case Digest: HSBC v. NLRC, et al [G.R. No. 116542. July 30, 1996]

HSBC v. NLRC [G.R. No. 116542. July 30, 1996]

Facts:

Complainant is a regular rank and file employee of  HSBC in Makati City. It appears that on February 3, 1993, complainant called the bank to inform the latter that he had an upset stomach and would not be able to report for work. His superior, however, requested him to report for work because the department he was then in was undermanned but complainant insisted that it was impossible for him to report for work, hence, he was allowed to go on sick leave on that day.

On February 4, 1993 the bank called up Dr. Logos to verify the truth of complainants statement but the doctor denied that he examined or attended to complainant on February 3, 1993 and the last time complainant consulted him was in December 1992. For this reason, the bank directed complainant to explain his acts of dishonesty because allegedly he was not honest in telling the bank that he had an upset stomach on February 3, 1993, and that he consulted Dr. Logos on that day.

Complainant, in his written statement, further admitted that his statement about his not staying at his house for one week and his consulting a doctor was incorrect, but that the same was not given with malicious intention or deceit or meant to commit fraud against the bank, its operations, customers and employees. 

However, on February 16, 1993, the bank came out with a memorandum terminating his services effective March 16, 1993 pursuant to Article 13, Section VI of the Collective Bargaining Agreement between the union of the rank and file employees of the bank and the company and the banks Code of Conduct.

Petitioner insists that private respondent should be dismissed in accordance with rules contained in its employees handbook stating that any form of dishonesty shall constitute serious offenses calling for termination.

Issue:
(1) Whether or not private respondents act of making a false statement as to the real reason for his absence on did not constitute such dishonesty as would warrant his termination from service.

(2) Whether or not NLRC arbitrarily imposed its value judgment and standard on petitioners disciplinary rules, thereby unilaterally restricting the Banks power and prerogative to discipline its employees according to reasonable rules and regulations

Held:

(1) YES. It is unarguable that private respondents false information concerning his whereabouts on February 3, 1993 is not a fraud, nor a false entry in the books of the bank; neither is it a failure to turn over clients funds, or theft or use of company assets, or anything analogous as to constitute a serious offense meriting the extreme penalty of dismissal.

Under Art. 282 of the Labor Code, an employer may terminate an employment for any of the following causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work;

(b) Gross and habitual neglect by the employee of his duties;

(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative;

(d) Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representative; and

(e) Other causes analogous to the foregoing.

None of the above apply in the instant case. To be lawful, the cause for termination must be a serious and grave malfeasance to justify the deprivation of a means of livelihood.

(2)  NO. It is the NLRC's right and duty to review employers exercise of their prerogative to dismiss so as to prevent abuse and arbitrariness as granted under Arts. 217 and 218 of the Labor Code. The employers prerogative and power to discipline and terminate an employees services may not be exercised in an arbitrary or despotic manner as to erode or render meaningless the constitutional guarantees of security of tenure and due process. Our labor laws, both substantive and procedural, require strict compliance before an employee may be dismissed.

Petition DISMISSED.