G.R. No.

192971

FLORO MERCENE, Petitioner

vs.
GOVERNMENT SERVICE INSURANCE SYSTEM, Respondent

DECISION

MARTIRES, J.:

This petition for review on certiorari seeks to reverse and set aside the 29 April 2010
Decision1 and 20 July 2010 Resolution2 of the Court of Appeals (CA) in CA-G.R. CV
No. 86615 which reversed the 15 September 2005 Decision3 of the Regional Trial Court,
Branch 220, Quezon City (RTC).

THE FACTS

On 19 January 1965, petitioner Floro Mercene (Mercene) obtained a loan from

respondent Government Service Insurance System (GSIS) in the amount of ₱29,500.00.
As security, a real estate mortgage was executed over Mercene's property in Quezon City,
registered under Transfer Certificate of Title No. 90535. The mortgage was registered
and annotated on the title on 24 March 1965.4

On 14 May 1968, Mercene contracted another loan with GSIS for the amount of
₱14,500.00. The loan was likewise secured by a real estate mortgage on the same parcel
of land. The following day, the loan was registered and duly annotated on the title.5

On 11 June 2004, Mercene opted to file a complaint for Quieting of Title6 against GSIS.
He alleged that: since 1968 until the time the complaint was filed, GSIS never exercised
its rights as a mortgagee; the real estate mortgage over his property constituted a cloud on
the title; GSIS' right to foreclose had prescribed. In its answer,7 GSIS assailed that the
complaint failed to state a cause of action and that prescription does not run against it
because it is a government entity.

During the pre-trial conference, Mercene manifested that he would file a motion for
judgment on the pleadings. There being no objection, the RTC granted the motion for
judgment on the pleadings.8

The RTC Decision

In its 15 September 2005 decision, the RTC granted Mercene's complaint and ordered the
cancellation of the mortgages annotated on the title. It ruled that the real estate mortgages
annotated on the title constituted a cloud thereto, because the annotations appeared to be
valid but was ineffective and prejudicial to the title. The trial court opined that GSIS'
right as a mortgagee had prescribed because more than ten (10) years had lapsed from the
time the cause of action had accrued. The R TC stated that prescription ran against GSIS
because it is a juridical person with a separate personality, and with the power to sue and
be sued. The dispositive portion reads:

WHEREFORE, premises considered, judgment is hereby rendered:

1) Declaring the Real Estate Mortgage dated January 19, 1965, registered on
March 24, 1965 and Real Estate Mortgage dated May 14, 1965 registered on May
15, 1968, both annotated at the back of Transfer Certificate of Title No. 90435 of
the Registry of Deeds of Quezon City, registered in the name of plaintiff Floro
Mercene married to Felisa Mercene, to be ineffective.
 2) Ordering the Registry of Deeds of Quezon City to cancel the following entries
annotated on the subject title 1) Entry No. 4148/90535: mortgage to GSIS and; 2)
Entry No. 4815/90535: mortgage to GSIS.

3) The other claims and counter-claims are hereby denied for lack of merit.9

Aggrieved, GSIS appealed before the CA.

The CA Ruling

In its 30 January 2015 decision, the CA reversed the RTC decision. The appellate court
posited that the trial court erred in declaring that GSIS' right to foreclose the mortgaged
properties had prescribed. It highlighted that Mercene's complaint neither alleged the
maturity date of the loans, nor the fact that a demand for payment was made. The CA
explained that prescription commences only upon the accrual of the cause of action, and
that a cause of action in a written contract accrues only when there is an actual breach or
violation. Thus, the appellate court surmised that no prescription had set in against GSIS
because it has not made a demand to Mercene. It ruled:

WHEREFORE, the appeal is GRANTED. The decision appealed from is REVERSED

and SET ASIDE. The complaint for Quieting of Title is hereby DISMISSED.10

Mercene moved for reconsideration, but the same was denied by the CA in its assailed 7
April 2011 resolution.

Hence, this present petition raising the following:

ISSUES

WHETHER THE COURT OF APPEALS ERRED IN CONSIDERING ISSUES

NOT RAISED BEFORE THE TRIAL COURT;

II

WHETHER THE COURT OF APPEALS ERRED IN DISREGARDING THE

JUDICIAL ADMISSION ALLEGEDLY MADE BY GSIS; AND

III

WHETHER THE COURT OF APPEALS ERRED IN RULING THAT THE REAL

ESTATE MORTGAGES HAD YET TO PRESCRIBE.

THE COURTS RULING

The petition has no merit.

Related issues addressed by the trial courts

Mercene assails the CA decision for entertaining issues that were not addressed by the
trial court. He claims that for the first time on appeal, GSIS raised the issue on whether
the loans were still effective in view of his nonpayment. A reading of the CA decision,
however, reveals that the appellate court did not dwell on the issue of nonpayment, but
instead ruled that prescription had not commenced because the cause of action had not
yet accrued. Hence, it concluded that the complaint failed to state a cause of action. The
appellate court did not focus on the question of payment precisely because it was raised
for the first time on appeal. It is noteworthy that, in its answer, GSIS raised the
affirmative defense that Mercene's complaint failed to state a cause of action.

Only ultimate facts need be specifically denied

Further, Mercene insists that GSIS had judicially admitted that its right to foreclose the
mortgage had prescribed. He assails that GSIS failed to specifically deny the allegations
in his complaint, particularly paragraphs 11.1 and 11.2 which read:

11.1. The right of the defendant GSIS, to institute the necessary action in court, to
enforce its right as a mortgagee, under Real Estate Mortgages dated January 19, 1965 and
May 14, 1968, respectively, by filing a complaint for judicial foreclosure of Real Estate
Mortgage, with the Regional Trial Court of Quezon City, against the plaintiff, as the
mortgagor, pursuant to Rule 68 of the 1997 Rules of Civil Procedures (Rules, for
brevity); or by filing a petition for extra-judicial foreclosure of real estate mortgage,
under Act. 3135, as amended, with the Sheriff, or with the Notary Public, of the place
where the subject property is situated, for the purpose of collecting the loan secured by
the said real estate mortgages, or in lieu thereof, for the purpose of consolidating title to
the parcel of land xxx in the name of the defendant GSIS, has already prescribed, after
ten (10) years from May 15, 1968. More particularly, since May 15, 1968, up to the
present, more than thirty-five (35) years have already elapsed, without the mortgagee
defendant GSIS, having instituted a mortgage action[s] against the herein plaintiff-
mortgagor.

xxx

11.2. Since the defendant GSIS has not brought any action to foreclose either the first or
the second real estate mortgage on the subject real property, so as to collect the loan
secured by the said real estate mortgages, or in lieu thereof, to consolidate title to the said
parcel of land, covered by the documents entitled, first and second real estate mortgages,
in the name of the defendant GSIS, notwithstanding the lapse of ten (10) years from the
time the cause of action accrued, either then (10) years after May 15, 1968, or after the
alleged violation by the plaintiff of the terms and conditions of his real estate mortgages,
therefore, the said defendant GSIS, has lost its aforesaid mortgagee's right, not only by
virtue of Article 1142, N.C.C., but also under Article 476, N.C.C., which expressly
provides that there may also be an action to quiet title, or remove a cloud therefrom,
when the contract, instrument or other obligation has been extinguished or has
terminated, or has been barred by extinctive prescription;11

The Court agrees with Mercene that material averments not specifically denied are
deemed admitted.12 Nonetheless, his conclusion that GSIS judicially admitted that its
right to foreclose had prescribed is erroneous. It must be remembered that conclusions of
fact and law stated in the complaint are not deemed admitted by the failure to make a
specific denial.13 This is true considering that only ultimate facts must be alleged in any
pleading and only material allegation of facts need to be specifically denied.14

A conclusion of law is a legal inference on a question of law made as a result of a factual

showing where no further evidence is required.15 The allegation of prescription in
Mercene's complaint is a mere conclusion of law. In Abad v. Court of First Instance of
Pangasinan, 16 the Court ruled that the characterization of a contract as void or voidable
is a conclusion of law, to wit:

A pleading should state the ultimate facts essential to the rights of action or defense
asserted, as distinguished from mere conclusions of fact, or conclusions of law. General
allegations that a contract is valid or legal, or is just, fair and reasonable, are mere
conclusions of law. Likewise, allegations that a contract is void, voidable, invalid, illegal,
ultra vires, or against public policy, without stating facts showing its invalidity, are mere
conclusions of law.

In the same vein, labelling-an obligation to have prescribed without specifying the
circumstances behind it is a mere conclusion of law. As would be discussed further, the
fact that GSIS had not instituted any action within ten (10) years after the loan had been
contracted is insufficient to hold that prescription had set in. Thus, even if GSIS' denial
would not be considered as a specific denial, only the fact that GSIS had not commenced
any action, would be deemed admitted at the most. This is true considering that the
circumstances to establish prescription against GSIS have not been alleged with
particularity.

Commencement of the prescriptive period for real estate mortgages material in

determining cause of action

In its answer, GSIS raised the affirmative defense, among others, that the complaint
failed to state a cause of action.1âwphi1 In turn, the CA ruled that Mercene's complaint
did not state a cause of action because the maturity date of the loans, or the demand for
the satisfaction of the obligation, was never alleged.

In order for cause of action to arise, the following elements must be present: (1) a right in
favor of the plaintiff by whatever means and under whatever law it arises or is created;
(2) an obligation on the part of the named defendant to respect or not to violate such
right; and (3) an act or omission on the part of such defendant violative of the right of the
plaintiff or constituting a breach of obligation of the defendant to the plaintiff.17

In University of Mindanao, Inc. v. Bangko Sentral ng Pilipinas, et al., 18 the Court

clarified that prescription runs in mortgage contract from the time the cause of action
arose and not from the time of its execution, to wit:

The prescriptive period neither runs from the date of the execution of a contract nor does
the prescriptive period necessarily run on the date when the loan becomes due and
demandable. Prescriptive period runs from the date of demand, subject to certain
exceptions.

In other words, ten (10) years may lapse from the date of the execution of contract,
without barring a cause of action on the mortgage when there is a gap between the period
of execution of the contract and the due date or between the due date and the demand
date in cases when demand is necessary.

The mortgage contracts in this case were executed by Saturnino Petalcorin in 1982. The
maturity dates of FISLAI's loans were repeatedly extended until the loans became due
and demandable only in 1990. Respondent informed petitioner of its decision to foreclose
its properties and demanded payment in 1999.

The running of the prescriptive period of respondent's action on the mortgages did not
start when it executed the mortgage contracts with Saturnino Petalcorin in 1982.1âwphi1

The prescriptive period for filing an action may run either (1) from 1990 when the loan
became due, if the obligation was covered by the exceptions under Article 1169 of the
Civil Code; (2) or from 1999 when respondent demanded payment, if the obligation was
not covered by the exceptions under Article 116919 of the Civil Code. [emphasis
supplied]
In Maybank Philippines, Inc. v. Spouses Tarrosa, 20 the Court explained that the right to
foreclose prescribes after ten (10) years from the time a demand for payment is made, or
when then loan becomes due and demandable in cases where demand is unnecessary, viz:

An action to enforce a right arising from a mortgage should be enforced within ten (10)
years from the time the right of action accrues, i.e., when the mortgagor defaults in the
payment of his obligation to the mortgagee; otherwise, it will be barred by prescription
and the mortgagee will lose his rights under the mortgage. However, mere delinquency in
payment does not necessarily mean delay in the legal concept. To be in default is
different from mere delay in the grammatical sense, because it involves the beginning of
a special condition or status which has its own peculiar effects or results.

In order that the debtor may be in default, it is necessary that: (a) the obligation be
demandable and already liquidated; (b) the debtor delays performance; and (c) the
creditor requires the performance judicially or extrajudicially, unless demand is not
necessary - i.e., when there is an express stipulation to that effect; where the law so
provides; when the period is the controlling motive or the principal inducement for the
creation of the obligation; and where demand would be useless. Moreover, it is not
sufficient that the law or obligation fixes a date for performance; it must further state
expressly that after the period lapses, default will commence. Thus, it is only when
demand to pay is unnecessary in case of the aforementioned circumstances, or when
required, such demand is made and subsequently refused that the mortgagor can be
considered in default and the mortgagee obtains the right to file an action to collect the
debt or foreclose the mortgage.

Thus, applying the pronouncements of the Court regarding prescription on the right to
foreclose mortgages, the Court finds that the CA did not err in concluding that Mercene's
complaint failed to state a cause of action. It is undisputed that his complaint merely
stated the dates when the loan was contracted and when the mortgages were annotated on
the title of the lot used as a security. Conspicuously lacking were allegations concerning:
the maturity date of the loan contracted and whether demand was necessary under the
terms and conditions of the loan.

As such, the RTC erred in ruling that GSIS' right to foreclose had prescribed because the
allegations in Mercene's complaint were insufficient to establish prescription against
GSIS. The only information the trial court had were the dates of the execution of the loan,
and the annotation of the mortgages on the title. As elucidated in the above-mentioned
decisions, prescription of the right to foreclose mortgages is not reckoned from the date
of execution of the contract. Rather, prescription commences from the time the cause of
action accrues; in other words, from the time the obligation becomes due and
demandable, or upon demand by the creditor/mortgagor, as the case may be.

In addition, there was no judicial admission on the part of GSIS with regard to
prescription because treating the obligation as prescribed, was merely a conclusion of
law. It would have been different if Mercene's complaint alleged details necessary to
determine when GSIS' right to foreclose arose, i.e., date of maturity and whether demand
was necessary.

WHEREFORE, the petition is DENIED. The 29 April 2010 Decision and 20 July 2010
Resolution of the Court of Appeals (CA) in CAG. R. CV No. 86615 are AFFIRMED in
toto.

SO ORDERED.
G.R. No. 195887

BEN LINE AGENCIES PHILIPPINES, INC., rep. by RICARDO J. JAMANDRE,

Petitioner
vs.
CHARLES M.C. MADSON AND ALFREDO P. AMORADO, Respondents

DECISION

MARTIRES, J.:

This petition for review on certiorari seeks to reverse and set aside the 14 December
2010 Decision1 and 25 February 2011 Resolution2 of the Court of Appeals (CA) in CA-
G.R. SP No. 115492 which affirmed the 15 February 20103 and 11 June 20104
Resolution of the Department of Justice (DOJ) in LS. No. O8B-02516.

THE FACTS

Petitioner Ben Line Agencies Philippines, Inc. (Ben Line) is a domestic corporation
engaged in maritime business. On 19 September 2006, the vessel M/V Ho Feng 7, owned
and operated by Ben Line's foreign principal, had to discharge shipment consigned to La
Farge Cement Services Philippines, Inc. (La Farge). As such, it needed to hire a crane
capable of lifting heavy shipment of approximately 70 metric tons.5

Ben Line inquired with AAL TAFIL Incorporated whether the latter had the necessary
machinery to handle the unloading of the former's shipment. Through its president,
respondent Charles M.C. Madson (Madson), AAL T AFIL offered its 300-ton crane and
stated that it was capable of lifting the shipment from M/V Ho Feng 7. The equipment
was initially offered for ₱1,150,000.00.6

On 25 September 2006, Ben Line confirmed with AAL T AFIL its intention to hire the
crane. Madson, however, informed that the equipment had been leased to ACE Logistics,
Inc. Due to the urgency of the situation, Ben Line contacted respondent Aflredo Amorado
(Amorado), president of ACE Logistics, who said that the crane was available for sub-
leasing for the amount of ₱l,995,000.00 with an additional ₱400,000.00 to be paid
directly to AAL T AFIL should the radius be more than 16 meters. Thus, a crane rental
contract was executed between Ben Line and ACE Logistics, and the former paid the full
amount of ₱2,395,000.00 in consonance with the payment terms agreed upon.7

When Ben Line informed Madson that it had another small piece of cargo to be lifted, the
latter demanded an additional ₱200,000.00 because the previously agreed amount
covered only the lifting of a single heavy cargo. Thus, the total consideration for the use
of the crane amounted to ₱2,595,000.00: ₱l,995,000.00 was paid to ACE Logistics and
₱600,000.00 was paid directly to AALTAFIL.8

On 1 October 2006, the vessel was ready to discharge the cargo. Due to problems with
the crane operator and the crane itself, however, Ben Line was constrained to look for
their substitutes. It hired Renato Escarpe of Asian Terminals, Inc. (ATI) as a crane
operator and it leased ATI's floating crane barge.9

Thereafter, Ben Line repeatedly made demands for a refund from AALTAFIL and ACE
Logistics but respondents refused to do so. Believing it was deceived into renting a less
worthy crane, Ben Line filed a complaint-affidavit against respondents before the
National Bureau of Investigation (NBI). On 11 January 2008, the NBI issued a resolution
recommending the prosecution of respondents for estafa under Article 315(2) of the
Revised Penal Code.10 The case was forwarded to the Office of the Prosecutor (OCP) of
Manila.

Proceedings before the OCP and the DOJ

In its 23 May 2008 Resolution,11 the OCP issued a resolution recommending the
dismissal of the complaint for insufficiency of evidence. It opined that there was no
misrepresentation in Madson's claim that AALTAFIL owned the required crane. In
addition, the OCP found that respondents neither conspired nor employed machinations
against Ben Line in increasing the amount the latter would have to pay to lease its desired
equipment. The resolution reads:

Wherefore, from the foregoing the undersigned respectfully recommends the dismissal of
the instant case due to insufficiency of evidence.12

Aggrieved, Ben Line filed a petition for review before the DOJ.

In its 25 February 2010 resolution, the DOJ denied Ben Line's petition for review. It
noted that the petition for review failed to attach clear copies of the assailed resolution. It
opined that Ben Line lost its right to appeal because of its failure to comply with the
prevailing rules. The resolution reads:

WHEREFORE, the petition for review is hereby DISMISSED.13

Ben Line moved for reconsideration but it was denied by the DOJ in its 11 June 2010
resolution. Undeterred, it filed a petition for certiorari before the CA.

The CA Ruling

In its 14 December 2015 decision, the CA dismissed Ben Line's petition for certiorari.
The appellate court explained that the DOJ did not act with grave abuse of discretion
because it merely applied the rules when it dismissed Ben Line's petition. It noted that
Ben Line failed to comply with Sections 5 and 6 of the 2000 NPS Rules on Appeal after
failing to attach clear and legible copies of the resolutions sought to be reviewed. The CA
posited that the circumstances did not warrant the relaxation of the rules of procedure. It
ruled:

ACCORDINGLY, the petition is DISMISSED for lack of merit.14

Ben Line moved for reconsideration, but the same was denied by the CA in its assailed
25 February 2011 resolution.

Hence, this present petition raising the following:

ISSUES

WHETHER THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN

DISMISSING THE PETITION FOR CERTIORARI DATED 20 AUGUST 2010 AND
IN DENYING THE MOTION FOR RECONSIDERATION DATED 6 JANUARY 2011
OF PETITIONER BEN LINE AGENCIES PHILIPPINES, INC.; AND

II
WHETHER THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN
RULING THAT THE PETITION FOR REVIEW DATED 26 MARCH 2009 IS NOT
MERITORIOUS ON ITS FACE.15

OUR RULING

The petition is meritorious.

Principally, the issues under the present petition for review before the Court are whether
the DOJ acted with grave abuse of discretion in dismissing Ben Line's appeal only on
procedural grounds.

Relevant to the issue is Section 5 of the 2000 NPS Rule on Appeal, which reads:

Section 5. Contents of the petition. - The petition shall contain or state: (a) the names and
addresses of the parties; (b) the investigation Slip Number (I.S. No.) and criminal case
number, if any, and title of the case, including the offense charged in the complaint; (c)
the venue of the preliminary investigation; (d) the specific material dates showing that it
was filed on time; (e) a clear and concise statement of the facts, the assignment of errors,
and the reasons or arguments relied upon for the allowance of the appeal; and (f) proof of
service of a copy of the petition to the adverse party and the Prosecution Office
concerned.

The petition shall be accompanied by legible duplicate original or certified true copies of
the complaint, affidavit/sworn statements and other evidence submitted by the parties
during the preliminary investigation/reinvestigation.

In the case at bar, it is undisputed that Ben Line initially failed to submit clear and legible
copies of the resolutions of the OCP when it filed its petition for review before the DOJ.
Under Section 6 of the 2000 NPS rules, failure to comply with the requirements of
Section 5 constitutes sufficient ground to dismiss the petition. Thus, the DOJ decided to
dismiss Ben Line's complaint for failure to comply with Section 5.

It must be remembered, however, that rules of procedure are designed to facilitate the
attainment of justice and that their rigid application resulting in techinicalities tending to
delay or frustrate rather than promote substantial justice must be avoided.16 In other
words, procedural rules are set in place to ensure that the proceedings are in order and to
avoid unnecessary delays, but are never intended to prevent tribunals or administrative
agencies from resolving the substantive issues at hand.

In Air Philippines Corporation v. Zamora (Air Philippines), 17 the Court elucidated that
mere failure to attach legible copies does not ipso facto warrant the dismissal of a
complaint or a petititon, to wit:

As a general rule, a petition lacking copies of essential pleadings and portions of the case
record may be dismissed.1âwphi1 This rule, however, is not petrified. As the exact nature
of the pleadings and parts of the case record which must accompany a petition is not
specified, much discretion is left to the appellate court to determine the necessity for
copies of pleading and other documents. There are, however, guideposts it must follow.

First, not all pleadings and parts of case records are required to be attached to the petition.
Only those which are relevant and pertinent must accompany it. The test of relevancy is
whether the document in question will support the material allegations in the petition,
whether said document will make out a prima facie case of grave abuse of discretion as to
convince the court to give due course to the petition.
Second, even if a document is relevant and pertinent to the petition, it need not be
appended if it is shown that the contents thereof can also be found in another document
already attached to the petition. Thus, if the material allegations in a position paper are
summarized in a questioned judgment, it will suffice that only a certified true copy of the
judgment is attached.

Third, a petition lacking an essential pleading or part of the case record may still be given
due course or reinstated (if earlier dismissed) upon showing that petitioner later submitted
the documents required, or that it will serve the higher interests of justice that the case be
decided on the merits. [emphases and underscoring supplied]

Lest it be misunderstood, the Court does not belittle the compliance with the rules of
procedure. It recognizes that zealous observance of the rules is still the general course of
action as it serves to guarantee the orderly, just, and speedy dispensation of cases.18
Nevertheless, the Court finds that the CA erred when it did not find the DOJ to have
acted with grave abuse of discretion in dismissing Ben Line's petition for review.

Initially, the DOJ correctly acted when it dismissed Ben Line's petition for failure to
attach clear and legible copies of the appealed resolution of the OCP. However, it was
remiss in its duty to ensure that cases before it should be resolved on its merits when it
denied Ben Line's motion for reconsideration. In accordance with the pronouncements of
the Court in Air Philippines and in order that the subtantial issues of the case be fully
ventilated, the DOJ should have reinstated Ben Line's petition for review. It is noteworthy
that in its motion, Ben Line had already attached clear and legible copies of the
resolutions appealed from. Further, it pointed out that the copies it initially attached in its
petition for review before the DOJ were provided by the OCP.

The present case is comparable with Manila Electric Company v. Atilano (MERALCO)19
where the Court ruled:

In dismissing MERALCO's petition for review of the resolution of the Office of the City
Prosecutor of Pasig City, the Secretary of Justice ruled that after carefully examining the
petition and its attachments, no error on the part of the handling prosecutor was found to
have been committed which would warrant a reversal of the challenged resolution. Thus,
the December 17, 2002 DOJ resolution concluded that the challenged resolution was in
accord with the evidence and the law on the matter.

xxx

We rule, therefore, that the DOJ resolution satisfactorily complied with constitutional and
legal requirements when it stated its legal basis for denying MERALCO's petition for
review which is Section 7 of Department Circular No. 70, which authorizes the Secretary
of Justice to dismiss a petition outright if he finds it to be patently without merit or
manifestly intended for delay, or when the issues raised therein are too insubstantial to
require consideration. IaHCAD

The DOJ resolution noted that MERALCO failed to submit a legible true copy of the
confirmation of sale dated May 30, 2000 and considered the omission in violation of
Section 5 of Department Circular No. 70. MERALCO assails the dismissal on this
ground as an overly technical application of the rules and claims that it frustrated the ends
of substantial justice. We note, however, that the failure to attach the document was not
the sole reason of the DOJ's denial of MERALCO's petition for review. As mentioned,
the DOJ resolution dismissed the petition primarily because the prosecutor's resolution is
in accord with the evidence and the law on the matter. [Emphases and underscoring
supplied]
In MERALCO, the DOJ did not only dismiss the petition for review on purely technical
grounds but also found that the resolution of the prosecution were in accord with the
evidence and the law. As such, the issues in the said case were fully ventilated at the DOJ
level because not only did it rule on procedural grounds, but it likewise adressed
subtantive matters. In the case at bar, however, the DOJ imprudently dismissed Ben
Line's petition for review merely on procedural or technical grounds. It did not resolve
the substantive or factual matters even after Ben Line had substantially complied with the
rule on appeal when it filed its motion for reconsideration.

Nonetheless, respondents assail that the ruling of the Court in Lao v. Co, et al. (Lao) 20
should be applied in this case. They highlight that the circumstances are similar in Lao
where the Court upheld the dismissal by the CA of the petition for certiorari filed therein
for failure of the petitioner to attach clear and legible duplicate original or certified true
copy of the judgment, order, resolution or ruling subject thereof.

A closer scrutiny of Lao, however, reveals that its factual circumstances are not at par
with the present controversy. In the case relied upon by respondents, there was no
showing that petitioner attempted to remedy its failure to attach clear and legible copies
of the required documents. In contrast, Ben Line attached clear and legible copies of the
assailed OCP resolution after its petition for review was initially dismissed by the DOJ.
Thus, the guidelines outlined in Air Philippines are more applicable in that a petition
dismissed earlier, due to lack of an essential pleading or part of the case record, may still
be given due course or reinstated upon showing that petitioner had later submitted the
documents required, i.e., when such documents required are part of a subsequent motion
for reconsideration.

In finding for herein petitioner, the Court does not necessarily rule on whether its version
of events or legal arguments deserve more consideration than that of the respondents. It
simply corrects the DOJ's inordinate dismissal of Ben Line's petition for review where
precisely these issues could have been adequately and appropriately resolved.

WHEREFORE, the petition is GRANTED. The 14 December 2010 Decision and 25

February 2011 Resolution of the Court of Appeals in CAG. R. SP No. 115492 are
REVERSED and SET ASIDE. The case is REMANDED to the Department of Justice
for further review.

SO ORDERED.
G.R. No. 204039

UNITED COCONUT PLANTERS BANK, Petitioner

vs.
SPOUSES WALTER UY AND LILY UY, Respondents

DECISION

MARTIRES, J.:

This petition for review on certiorari seeks to reverse and set aside the 23 May 2012
Decision1 and the 18 October 2012 Resolution2 of the Court of Appeals (CA) in CA-
G.R. SP No. 118534 which affirmed with modification the 24 March 2010 Decision3 of
the Office of the President (OP).

THE FACTS

Prime Town Property Group, Inc. (PPGI) and E. Ganzon Inc. were the joint developers
of the Kiener Hills Mactan Condominium Project (Kiener Hills). In 1997, spouses Walter
and Lily Uy (respondents) entered into a Contract to Sell with PPGI for a unit in Kiener
Hills. The total contract price amounted to ₱1, 151,718. 7 5 payable according to the
following terms: (a) ₱l00,000.00 as down payment; and (b) the balance paid in 40
monthly installments at ₱26,297.97 from 16 January 1997 to 16 April 2000.4

On 23 April 1998, PPGI and petitioner United Coconut Planters Bank (UCPB) executed
the following: Memorandum of Agreement (MOA),5 and Sale of Receivables and
Assignment of Rights and Interests.6 By virtue of the said agreements, PPGI transferred
the right to collect the receivables of the buyers, which included respondents, of units in
Kiener Hills. The parties entered into the said agreement as PPGI's partial settlement of
its ₱l,814,500,000.00 loan with UCPB.7

On 17 April 2006, the Housing and Land Use Regulatory Board Regional Office
(HLURB Regional Office) received respondents' complaint for sum of money and
damages against PPGI and UCPB. They claimed that in spite of their full payment of the
purchase price, PPGI failed to complete the construction of their units in Kiener Hills.8

The HLURB Regional Office Decision

In its 29 November 2006 decision,9 the HLURB Regional Office found that respondents
were entitled to a refund in view of PPGI' s failure to complete the construction of their
units. Nonetheless, it found that UCPB cannot be solidarily liable with PPGI because
only the accounts receivables were conveyed to UCPB and not the entire condominium
project. The HLURB Regional Office suspended the proceedings as to PPGI on account
of its being in corporate rehabilitation. The dispositive portion reads:

WHEREFORE, premises considered, decision is hereby rendered suspending the

proceedings of the present case. The complainants are therefore directed to file their
claim before the Rehabilitation Receiver.

No judgment as to cost.10

Unsatisfied, respondents appealed before the HLURB-Board of Commissioners (HLURB

Board).

The HLURB Board Decision

In its 17 September 2007 decision,11 the HLURB Board reversed and set aside the HL
URB Regional Office decision. It agreed that the proceedings against PPGI should be
suspended on account of its corporate rehabilitation. Nevertheless, the HLURB Board
found UCPB solidarily liable with PPGI because it stepped into the latter's shoes insofar
as Kiener Hills is concerned pursuant to the MOA between them. It noted that UCPB was
PPGI's successor-in-interest, such that the delay in the completion of the condominium
project could be attributable to it and subject it to liability. The HLURB Board ruled that
as PPGI's assignee, UCPB was bound to refund the payments made, without prejudice to
its right of action against PPGI. Thus, it pronounced:

WHEREFORE, premises considered, the appeal is GRANTED and the decision of the
Regional Office is SET ASIDE and a new one is entered as follows:

1. Respondent UCPB is hereby ordered to refund to the complainant the amount

of ₱l,151,718.75 with interest at the legal rate of 6% per annum reckoned from
the date of extrajudicial demand on May 24, 2005 until fully paid without
prejudice to whatever claims UCPB may have against PPGI; and

2. Respondent UCPB and PPGI, jointly and severally, are declared liable to the
complainant for payment of exemplary damages in the amount of ₱30,000.00; and
attorney's fees in the amount of ₱30,000.00:12

Aggrieved, UCPB appealed before the OP.

The OP Decision

In its 24 March 2010 decision, the OP affirmed the decision of the HLURB Board. It
explained that the agreement between PPGI and UCPB clearly transferred all rights,
titles, interests, and participations over Kiener Hills to the latter. It concluded that as
successor-in-interest, UCPB now had the obligations relating to Kiener Hills, including
the reimbursement of payments to respondents. The OP added that benefit of suspension
of actions only attached to PPGI and not to UCPB. Thus:

WHEREFORE, based on the foregoing, the decision appealed from is hereby

AFFIRMED.13

Undeterred, UCPB appealed before the CA.

The CA Ruling

In its assailed 23 May 2012 decision, the CA affirmed with modification the OP decision.
While the appellate court agreed that respondents are entitled to a full refund of the
payments they may have made, it ruled that UCPB is not solidarily liable with PPGI, and
as such cannot be held liable for the full satisfaction of respondents' payments. It limited
UCPB's liability to the amount respondents have paid upon the former's assumption as
the party entitled to receive payments or on 23 April 1998 when the MOA and AIR
Agreement were made between UCPB and PPGI.

In addition, the appellate court noted the pronouncements of the CA in United Coconut
Planters Bank v. O'Halloran (O'Halloran). 14 It explained that it involved similar facts
and issues where the CA ruled that the assignment of the receivables did not make UCPB
the developer of Kiener Hills it being merely the assignee of the receivables under the
contract to sell and, as such, UCPB cannot be deemed as the debtor with respect to the
construction, development, and delivery of the subject condominium units. Thus, the CA
ruled:
WHEREFORE, in view of all the foregoing, the instant Petition for Review is
PARTIALLY GRANTED. The promulgated Decision dated 24 March 2010 and
Resolution dated 16 February 2011 are hereby AFFIRMED with MODIFICATION, as
follows:

1) UCPB is ordered to pay Spouses Uy the amount of ₱552,152.34, with legal interest at
6% per annum from the filing of the complaint until fully paid without prejudice to
whatever claims U CPB may have against Primetown; and

2) Without prejudice to a separate action Spouses Uy may file against Primetown,

Primetown is liable to pay Spouses Uy the amount of ₱599,566.41 with legal interest at
6% per annum from the filing of the complaint until fully paid.15

UCPB moved for reconsideration but it was denied by the CA in its assailed 18 October
2012 resolution.

Hence, this appeal raising the following:

ISSUES

[WHETHER] THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED

WHEN IT MISCONSTRUED THE APPLICABILITY TO THE INSTANT CASE OF
THE FINAL AND EXECUTORY DECISION IN UNITED COCONUT PLANTERS
BANK V. JOHN P. O'HALLORAN AND JOSEFINA O'HALLORAN (CA-G.R. SP
NO. 101699, 23 JULY 1999) UNDER THE PRINCIPLE OF STARE DECISIS; AND

II

[WHETHER] THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN

RULING THAT UCPB IS LIABLE TO THE RESPONDENTS FOR THE AMOUNT
THE RESPONDENTS DID NOT PAY THE BANK AND WHICH UCPB DID NOT
RECEIVE.16

OUR RULING

The petition is meritorious.

Issues that may be raised on appeal

Respondents assailed that the CA erred in applying O'Halloran because the

circumstances were different, notably the issue that estoppel did not arise in the said case.
In addition, they argued that 0 'Halloran and the other cases cited by UCPB are not
binding pursuant to the doctrine of stare decisis because they were decided by the CA
and not by this Court. As such, respondents posited that only decisions of the Court,
excluding all other courts such as the CA, form part of the legal system.

On the other hand, UCPB countered that the only issue to be resolved in the present
petition is the actual amount of its liability. It explained that the assailed CA decision had
become final and executory after respondents failed to appeal the same. UCPB pointed
out that the issues respondents raised were already ventilated before the appellate court. It
believed that respondents should have filed their own appeal to assail the issues they
found questionable.
It must be remembered that when a case is appealed, the appellate court has the power to
review the case in its entirety.17 In Heirs of Alcaraz v. Republic of the Phils., 18 the
Court explained that an appellate court is empowered to make its own judgment as it
deems to be a just determination of the case, to wit:

In any event, when petitioners interposed an appeal to the Court of Appeals, the appealed
case was thereby thrown wide open for review by that court, which is thus necessarily
empowered to come out with a judgment as it thinks would be a just determination of the
controversy. Given this power, the appellate court has the authority to either affirm,
reverse or modify the appealed decision of the trial court. To withhold from the appellate
court its power to render an entirely new decision would violate its power of review and
would, in effect, render it incapable of correcting patent errors committed by the lower
courts.19

Thus, when UCPB appealed the present controversy before the Court, it was not merely
limited to determine whether the CA accurately set UCPB's liability against respondents.
It is also empowered to determine whether the appellate court's determination of liability
was correct in the first place. This is especially true considering that the issue of the
nature of UCPB's liability is closely intertwined and inseparable from the determination
of the amount of its actual liability.

Stare Decisis applies only to cases decided by the Supreme Court

As above-mentioned, respondents bewail the reliance of the CA on 0 'Halloran arguing

that it was not a binding precedent since it was not issued by this Court. In De Mesa v.
Pepsi-Cola Products Phils. Inc., 20 the Court explained that the doctrine of stare decisis
deems decisions of this Court binding on the lower courts, to wit:

The principle of stare decisis et non quieta movere is entrenched in Article 8 of the Civil
Code, to wit:

xxxx

It enjoins adherence to judicial precedents. It requires our courts to follow a rule already
established in a final decision of the Supreme Court. That decision becomes a judicial
precedent to be followed in subsequent cases by all courts in the land. The doctrine of
stare decisis is based on the principle that once a question of law has been examined and
decided, it should be deemed settled and closed to further argument.21 (emphasis and
underscoring supplied)

In other words, the doctrine of stare decisis becomes operative only when judicial
precedents are set by pronouncements of this Court to the exclusion of lower courts. It is
true regardless whether the decisions of the lower courts are logically or legally sound as
only decisions issued by this Court become part of the legal system. At the most,
decisions of lower courts only have a persuasive effect. Thus, respondents are correct in
contesting the application of the doctrine of stare decisis when the CA relied on decisions
it had issued.

UCPB only jointly liable to PPGI in reimbursing unitowners of Kiener Hills

With that said, the Court still finds that the CA did not err in ruling that UCPB was only
jointly, and not solidarily liable to PPGI against respondents. In Spouses Choi v. UCPB
(Spouses Choi), 22 the Court had definitely ruled on UCPB 's liability to the purchasers
of Kiener Hills, viz:
The primordial issue to be resolved is whether, under the Agreement between Primetown
and UCPB, UCPB assumed the liabilities and obligations of Primetown under its contract
to sell with Spouses Choi.

An assignment of credit has been defined as an agreement by virtue of which the owner
of a credit, known as the assignor, by a legal cause - such as sale, dation in payment or
exchange or donation - and without need of the debtor's consent, transfers that credit and
its accessory rights to another, known as the assignee, who acquires the power to enforce
it to the same extent as the assignor could have enforced it against the debtor. In every
case, the obligations between assignor and assignee will depend upon the judicial relation
which is the basis of the assignment. An assignment will be construed in accordance with
the rules of construction governing contracts generally, the primary object being always
to ascertain and carry out the intention of the parties. This intention is to be derived from
a consideration of the whole instrument, all parts of which should be given effect, and is
to be sought in the words and language employed.

In the present case, the Agreement between Primetown and UCPB provided that
Primetown, in consideration of ₱748,000,000.00, "assigned, transferred, conveyed and
set over unto [UCPB] all Accounts Receivables accruing from [Primetown's Kiener] ...
together with the assignment of all its rights, titles, interests and participation over the
units covered by or arising from the Contracts to Sell from which the Accounts
Receivables have arisen."

The Agreement further stipulated that "x x x this sale/assignment is limited to the
Receivables accruing to [Primetown] from the [b]uyers of the condominium units in x x x
[Kiener] and the corresponding Assignment of Rights and Interests arising from the
pertinent Contract to Sell and does not include except for the amount not exceeding
30,000,000.00, Philippine currency, either singly or cumulatively any and all liabilities
which [Primetown] may have assumed under the individual Contract to Sell." (emphasis
omitted)

The Agreement conveys the straightforward intention of Primetown to "sell, assign,

transfer, convey and set over" to UCPB the receivables, rights, titles, interests and
participation over the units covered by the contracts to sell. It explicitly excluded any
and all liabilities and obligations, which Primetown assumed under the contracts to
sell. The intention to exclude Primetown's liabilities and obligations is further
shown by Primetown's subsequent letters to the buyers, which stated that "this
payment arrangement shall in no way cause any amendment of the other terms and
conditions, nor the cancellation of the Contract to Sell you have executed with
[Primetown]." x x x (emphasis and underlining supplied)

xxxx

The intention to merely assign the receivables and rights of Primetown to UCPB is even
bolstered by the CA decisions in the cases of UCPB v. O'Halloran and UCPB v. Ho.

In UCPB v. O'Halloran, docketed as CA-G.R. SP No. 101699, respondent O'Halloran's

accounts with Primetown were also assigned by Primetown to UCPB, under the same
Agreement as in this case. Since Primetown failed to deliver the condominium units upon
full payment of the purchase price, O'Halloran likewise sued both Primetown and UCPB
for cancellation of the contracts to sell, and the case eventually reached the CA. The CA
held UCPB liable to refund the amount it actually received from O'Halloran. The CA
held that there is no legal, statutory or contractual basis to hold UCPB solidarily liable
with Primetown for the full reimbursement of the payments made by O'Halloran. The CA
found that based on the Agreement, UCPB is merely the assignee of the receivables
under the contracts to sell to the extent that the assignment is a manner adopted by which
Primetown can pay its loan to the bank. The CA held that the assignment of receivables
did not make UCPB the owner or developer of the unfinished project to make it solidarily
liable with Primetown. The CA decision dated 23 July 2009 in CA-G.R. SP No. 101699
became final and executory upon Entry of Judgment on 17 August 2009 for O'Halloran
and 18 August 2009 for UCPB.

In UCPB v. Ho, docketed as CA-G.R. SP No. 113446, respondent Ho was similarly

situated with O'Halloran and Spouses Choi. Upon reaching the CA, the CA considered
the Agreement between UCPB and Primetown as an assignment of credit, because: 1) the
parties entered into the Agreement without the consent of the debtor; 2) UCPB's
obligation "to deliver to the buyer the title over the condominium unit upon their full
payment" signifies that the title to the condominium unit remained with Primetown; 3)
UCPB's prerogative "to rescind the contract to sell and transfer the title of condominium
unit to its name upon failure of the buyer to pay the full purchase price" indicates that
UCPB was merely given the right to transfer title in its name to apply the property as
partial payment of Primetown's obligation; and 4) the Agreement clearly states that the
assignment is limited to the receivables and does not include "any and all liabilities which
[Primetown] may have assumed under the individual contract to sell." Thus, the CA ruled
that UCPB was a mere assignee of the right of Primetown to collect on its contract to sell
with Ho. The CA, then, applied the ruling in UCPB v. O'Halloran in finding UCPB
jointly liable with Primetown only for the payments UCPB had actually received from
Ho.

On 4 December 2013, this Court issued a Resolution denying Ho's petition for review for
failure to show any reversible error on the part of the CA. On 2 April 2014, this Court
likewise denied the motion for reconsideration with finality. Thus, the 9 May 2013
Decision of the Special Fifteenth Division of the CA in CA-G.R. SP No. 113446 became
final and executory. (emphasis omitted)

Considering that UCPB is a mere assignee of the rights and receivables under the
Agreement, UCPB did not assume the obligations and liabilities of Primetown under its
contract to sell with Spouses Choi.

xxxx

Contrary to Spouses Choi's argument that UCPB was estopped, we find that estoppel
would not lie since UCPB's letters to the buyers only assured them of the completion of
their units by the developer. UCPB did not represent to be the new owner of Kiener or
that UCPB itself would complete Kiener.23 (emphases and underlining supplied)

In Liam v. UCPB (Liam), 24 the Court maintained its position that the transaction
between PPGI and UCPB was merely an assignment of credit. Hence, what was
transferred to UCPB was only the right to collect PPGI's receivables from the purchases
of Kiener Hills and not the obligation to complete the said condominium project. Thus:

The terms of the MOA and Deed of Sale/Assignment between PPGI and UCPB
unequivocally show that the parties intended an assignment of PPG l's credit in favor of
UCPB.

xxxx

The provisions of the foregoing agreements between PPGI and UCPB are clear, explicit
and unambiguous as to leave no doubt about their objective of executing an assignment
of credit instead of subrogation. The MOA and the Deed of Sale/Assignment clearly state
that UCPB became an assignee of PPGI's outstanding receivables of its condominium
buyers. The Court perceives no proviso or any extraneous factor that incites a contrary
interpretation. Even the simultaneous and subsequent acts of the parties accentuate their
intention to treat their agreements as assignment of credit.

xxxx

The last paragraph of the letter also confirms that UCPB's acquisition of PPGI's
receivables did not involve any changes in the Contract to Sell between PPGI and Liam;
neither did it vary the rights and the obligations of the parties therein. Thus, no novation
by subrogation could have taken place.

The CA was therefore correct in ruling that the agreement between PPGI and UCPB was
an assignment of credit. UCPB acquired PPGI's right to demand, collect and receive
Liam's outstanding balance; UCPB was not subrogated into PPGI's place as developer
under the Contract to Sen.25 (emphases and underlining supplied)

It is noteworthy that the circumstances and issues in Choi and Liam fall squarely with the
case at bar. First, PPGI and UCPB were prominent parties in the cited cases. Second, it
involved the same documents and agreement between PPGI and UCPB whereby the right
to collect the receivables were assigned to the latter. Third, the controversy arose from
the complaints of disgruntled unit owners to recover the amount they had paid from PPGI
or UCPB after Kiener Hills was not completed.

In addition, the issue on estoppel was addressed in Spouses Choi. There, the Court ruled
that the demand letters UCPB sent to the buyers, including herein respondents, only
assured the completion of the condominium project. Nevertheless, there was no
representation on the part of the UCPB that it would continue the construction of Kiener
Hills or that it was the new owner thereof. Guided by the previous pronouncements of
this Court, it is settled that UCPB is only jointly liable with PPGI to the disgruntled
purchasers of Kiener Hills, including respondents. Thus, UCPB is only bound to refund
the amount it had unquestionably received from respondents.

Only questions of law may he raised in a petition for review under Rule 45; exceptions

In the present petition, UCPB does not contest the CA's conclusion that it is jointly liable
with PPGI to the unit owners of Kiener Hills.1âwphi1 It, however, assails that the CA
erred in computing its actual liability because it was only bound to refund the amount it
had actually received. Meanwhile, respondents contest that the resolution of the correct
amount of UCPB's liability is a question of fact, which is beyond the ambit of a petition
for review under Rule 45.

It is axiomatic that, as a rule, only questions of law may be raised under a petition for
review under Rule 45 because the Court is not a trier of facts and the factual findings of
lower courts are final, binding or conclusive on the parties and to the Court.26 As with
every rule, however, it admits certain exceptions. Among the recognized exceptions are
when the conclusion of the lower court is one grounded entirely on speculation, surmises
or conjectures or when the judgment is based on a misapprehension of facts.27

The Court finds that the exceptions are present to warrant a review of the factual matters.

Jurisprudence has settled UCPB's liability to unit owners to refund the amount it
indubitably received from the purchasers of Kiener Hills. In this case, the CA determined
UCPB's actual liability of ₱552,152.34 by subtracting the amounts already paid to PPGI
from the total purchase price of ₱l,151,718.75.28

Such computation of the appellate court, however, merely assumes that the said balance
was actually paid by respondents and received by UCPB. A closer scrutiny of the records,
nonetheless, shows that the said amount is not supported by the evidence at hand. The
only document that identifies the amount respondents had paid to UCPB is the demand
letter it sent to the former. It is noteworthy that the said demand letter was materially
reproduced in respondents' complaint29 before the HLURB Regional Office. In the said
letter, the amount UCPB received from respondents is only ₱157,757.82.

While respondents alleged that they had paid in full the purchase price of the
condominium units, only ₱157,757.82 was sufficiently substantiated to have been
actually received by UCPB. Thus, UCPB should only be held liable for ₱157,757.82
because it was the only amount which was unequivocally shown it had received. This is
especially true considering that one who pleads payment has the burden of proving the
fact of payment.30

Thus, it was incumbent upon respondents to prove the actual amount UCPB had
unquestionably received.

WHEREFORE, the 23 May 2012 Decision of the Court of Appeals m CA-G.R. SP No.
118534 is AFFIRMED with MODIFICATION. Petitioner United Coconut Planters
Bank shall pay the amount of ₱157,757.82 to Spouses Walter and Lily Uy, with legal
interest at six percent (6%) per annum, without prejudice to any action which the parties
may have against Prime Town Property Group, Inc.

SO ORDERED.