[G.R. No. 178218 : December 14, 2011]RAMONA RAMOS AND THE ESTATE OF LUIS T. RAMOS, PETITIONERS, VS. PHILIPPINE NATIONAL BANK,

Assailed in this Petition for Review on Certiorari 1 under Rule 45 of the Rules of Court are the Decision 2 dated November 8, 2006 and the Resolution 3 dated May 28, 2007 of the Court of Appeals in CA-G.R. CV No. 64360.cralaw

From the records of the case, the following facts emerge:

The Real Estate Mortgage

In 1973, Luis Ramos obtained a credit line under an agricultural loan account from the Philippine National Bank (PNB), Balayan Branch, for P83,000.00. 4 To secure the loan, the parties executed a Real Estate Mortgage 5 on October 23, 1973, the relevant provisions of which stated:That for and in consideration of certain loans, overdrafts and other credit accommodations obtained from the Mortgagee, which is hereby fixed at P83,000.00 Philippine Currency and to secure the payment of the same and those others that the Mortgagee may extend to the Mortgagor, including interest and expenses, and other obligations owing by the Mortgagor to the Mortgagee, whether direct or indirect principal or secondary, as appear in the accounts, books and records of the Mortgagee, the Mortgagor does hereby transfer and convey by way of mortgage unto the Mortgagee, its successors or assigns, the parcels of land which are described in the list inserted at the back of this document, or in a supplementary list attached hereto, together with all the buildings and improvements now existing or which may hereafter be erected or constructed thereon and all easements, sugar quotas, agricultural or land indemnities, aids or subsidies, including all other rights or benefits annexed to or inherent therein now existing or which may hereafter exist, and also other assets acquired with the proceeds of the loan hereby secured all of which the mortgagor declares that he is the absolute owner free from all liens and encumbrances. In case the Mortgagor executes subsequent promissory note or notes either as a renewal of the former note, as an extension thereof, or as a new loan, or is given any other kind of accommodations such as overdrafts, letters of credit, acceptances and bills of exchange, releases of import shipments on Trust Receipts, etc., this mortgage shall also stand as security for the payment of the said promissory note or notes and/or accommodations without the necessity of executing a new contract and this mortgage shall have the same force and effect as if the said promissory note or notes and/or accommodations were existing on the date thereof. This mortgage shall also stand as security for said obligations and any and all other obligations of the Mortgagor to the Mortgagee of whatever kind and nature whether such obligations have been contracted before, during or after the constitution of this mortgage. However, if the Mortgagor shall pay to the Mortgagee, its successors or assigns the obligations secured by this mortgage, together with interests, cost and other expenses, on or before the date they are due, and shall keep and perform all the covenants and agreements herein contained for the Mortgagor to keep and perform, then this mortgage shall be null and void, otherwise, it shall remain in full force and effect. 6

The properties included in the mortgage were the parcels of land covered under Transfer Certificate of Title (TCT) Nos. 17217, (T-262) RT-644, 259, (T-265) RT-646, (T-261) RT-643 7 of the Registry of Deeds of Batangas. From the year 1973, Luis Ramos would renew the loan every year after paying the amounts falling due therein. 8

The Sugar Quedan Financing Loans

On March 31, 1989, Luis Ramos and PNB entered into a Credit Line Agreement 9 in the amount of P50,000,000.00 under the bank's sugar quedan financing program. The agreement pertinently provided thus:For and in consideration of the Bank agreeing to extend to the Borrower a Revolving Credit Line (the "Line') in an amount not to exceed PESOS: FIFTY MILLION ONLY (P50,000,000.00), under the Bank's Sugar Quedan Financing Program for Crop Year 88/89, the parties hereto hereby agree as follows:SECTION 1. TERMS OF THE LINE

1.01 Amount and Purpose of the Line. The Line shall be available to the Borrower in an aggregate amount not to exceed FIFTY MILLION ONLY Pesos (P50,000,000.00). x x x Availments on the Line shall be used by the Borrower exclusively for additional capital in sugar quedan financing.

1.02 Availability Period; Availments. (a) Subject to the terms and conditions hereof, the Line shall be available to the Borrower in several availments (individually an "Availment' and collectively the "Availments') on any Banking Day x x x during the period commencing on the Effectivity Date x x x and terminating on the earliest of (i) August 31, 19__, or (ii) the date the Bank revokes the Line, or (iii) the date the Borrower ceases to be entitled to avail of the Line under the terms hereof.

1.03 Promissory Notes. Availments on the Line shall be evidenced by promissory notes (individually a "Note' and collectively the "Notes') issued by the Borrower in favor of the Bank in the form and substance acceptable to the Bank. Each Note shall be (i) dated the date of Availment, (ii) in the principal amount of such Availment, with interest thereon at the rate as provided in Section 1.04 hereof, and (iii) payable on the date occurring sixty (60) days from date of the availment, but in no case later than August 31, 19__ (the "Initial Repayment Date').SECTION 3. SECURITY

3.01 Security Document. The full payment of any and all sums payable by the Borrower hereunder and under the Notes, the Renewal Notes and the other documents contemplated hereby and the performance of all obligations of the Borrower hereunder and under the Notes, the Renewal Notes and such other documents shall be secured by a pledge (the "Pledge') on the Borrower's quedans for crop year ---____, as more particularly described in and subject to the terms and conditions of that Contract of Pledge to be executed by the Borrower in favor of the Bank, which Contract shall in any event be in form and substance acceptable to the Bank (the "Security Document').

Pursuant to the above agreement, Luis Ramos obtained an availment of P7,800,000.00, which was evidenced by a promissory note dated April 3, 1989. 11 Accordingly, Luis Ramos executed a Contract of Pledge 12 in favor of PNB on April 6, 1989. Pledged as security for the availment were two official warehouse receipts (quedans) for refined sugar issued by Noah's Ark Sugar Refinery (Noah's Ark), which bore the serial numbers NASR RS-18080 and NASR RS-18081. 13 The said quedans were duly indorsed to PNB.

On June 6, 1989, Luis Ramos procured another availment of P7,800,000.00 that was likewise contained in a promissory note 14 and for which he executed another Contract of Pledge 15 on the aforementioned quedans on even date.

Thereafter, Luis Ramos was granted a renewal on the promissory notes dated April 3, 1989 and June 6, 1989. Hence, he executed in favor of PNB the promissory notes dated October 3, 1989 and October 9, 1989. 16

Luis Ramos eventually failed to settle his sugar quedan financing loans amounting to P15,600,000.00. On December 28, 1989, he issued an Authorization 17 in favor of PNB, stating as follows:

AUTHORIZATION

KNOW ALL MEN BY THESE PRESENTS:

In consideration of my Sugar Quedan Financing line granted by Philippine National Bank, Balayan Branch in the amount of P50.0 Million, as evidenced by Credit Agreement dated March 31, 1989, the undersigned, as borrower, authorizes the Philippine National Bank, Balayan Branch, or any of its duly authorized officer, to dispose and sell all the Quedan Receipts (Warehouse Receipts) pledged to said bank, after maturity date of the Sugar Quedan Financing line.

The Sugar Quedan Receipts are hereunder specifically enumerated:Official Warehouse Receipt (Quedan) Serial Nos.:

1) NASR RS ' 18081 Crop Year 1988-89 (16,129.03 ' 50 kilo bags)2) NASR RS ' 18080 Crop Year 1988-89 (16,393.44 ' 50 kilo bags)

Incidentally, the above-mentioned sugar quedans became the subject of three other cases between PNB and Noah's Ark, which cases have since reached this Court. 18

The Agricultural Crop Loan

Meanwhile, on August 7, 1989, the spouses Luis Ramos and Ramona Ramos (spouses Ramos) also obtained an agricultural loan of P160,000.00 from PNB. Said loan was evidenced by a promissory note 19 issued by the spouses on even date. The said loan was secured by the real estate mortgage previously executed by the parties on October 23, 1973.

On November 2, 1990, the spouses Ramos fully settled the agricultural loan of P160,000.00. 20 They then demanded from PNB the release of the real estate mortgage. PNB, however, refused to heed the spouses' demand. 21

On February 28, 1996, the spouses Ramos filed a complaint for Specific Performance 22 against the PNB, Balayan Branch, which was docketed as Civil Case No. 3241 in the Regional Trial Court (RTC) of Balayan, Batangas. The spouses claimed that the actions of PNB impaired their rights in the properties included in the real estate mortgage. They alleged that they lost business opportunities since they could not raise enough capital, which they could have acquired by mortgaging or disposing of the said properties. The spouses Ramos prayed for the trial court to order PNB to release the real estate mortgage on their properties and to return to the spouses the TCTs of the properties subject of the mortgage.

In its Answer, 23 PNB countered that the spouses Ramos had no cause of action against it since the latter knew that the real estate mortgage secured not only their P160,000.00 agricultural loan but also the other loans the spouses obtained from the bank. Specifically, PNB alleged that the spouses' sugar quedan financing loan of P15,600,000.00 remained unpaid as the quedans were dishonored by the warehouseman Noah's Ark. PNB averred that it filed a civil action for specific performance against Noah's Ark involving the quedans and the case was still pending at that time. As PNB was still unable to collect on the quedans, it claimed that the spouses Ramos' loan obligations were yet to be fully satisfied. Thus, PNB argued that it could not release the real estate mortgage in favor of the spouses.

On March 26, 1999, the RTC rendered a Decision 24 in favor of the spouses Ramos, holding that:A careful analysis of the evidence on record clearly shows that there is merit to the [spouses Ramos'] complaint that their obligation with [PNB] has long been paid and satisfied.

As the records show, PNB admitted that [Luis Ramos] has already paid his sugar crop loan in the amount of P160,000.00 x x x. The reason why it refused to release the certificates of titles to the [spouses Ramos] was allegedly because the said titles were also mortgaged to secure the other obligations of Luis Ramos, particularly the sugar crop loan in the amount of P15.6 Million. However, even assuming that its argument is correct that the said certificates of titles were also security for the said sugar financing loan, the same is of no consequence since the [spouses Ramos] have likewise fully paid the sugar loan when they effectively transferred the sugar quedans to [PNB] by issuing a letter authority, authorizing it to dispose and sell all the Quedan Receipts (Warehouse Receipts) of the [spouses Ramos] which they pledged to the bank on December 29, 1989 x x x. [Luis Ramos] executed the said letter of authority to the PNB when he could not anymore afford to pay his loan which became due. There is no doubt that [PNB] accepted the said quedans with the understanding that the same shall be treated as payment of [spouses Ramos'] obligation, considering that it did not hesitate to proceed to demand from Noah's Ark Sugar Refinery, the delivery of the sugar stocks to them as new owners thereof. It is, therefore, very clear that the authorization issued by [Luis Ramos] in favor of [PNB], giving the latter the right to dispose and sell the pledged warehouse receipts/quedans totally terminated the contract of pledge between the [spouses Ramos] and [PNB]. In effect there was a novation of their agreement and dation in payment set in between the parties thereby extinguishing the loan obligation of the [spouses Ramos], as provided in Article 1245 of the Civil Code.

Article 1245 of the Civil Code provides that dation in payment is a special form of payment whereby property is alienated by the debtor to the creditor in satisfaction of a debt in money. As stated differently by the noted commentator Manresa, dacion en pago is the transfer of ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of an obligation. This was what precisely plaintiff Luis Ramos did in this case. He alienated the ownership of the sugar quedans and the goods covered by said quedans to [PNB] in

WHEREFORE, the defendant Philippine National Bank, Balayan Branch is hereby ORDERED to RELEASE the real estate mortgage on the properties of the [spouses Ramos] and to return to them all the transfer certificates of titles which were pledged as security for the agricultural loan which had long been paid and satisfied and to pay the costs. 25 (Emphasis ours.)

PNB filed a Notice of Appeal 26 involving the above decision, which was given due course by the RTC in an Order dated May 11, 1999. The records of the case were then forwarded to the Court of Appeals where the case was docketed as CA-G.R. CV No. 64360.

Before the appellate court, PNB contested the ruling of the RTC that the spouses Ramos have already settled their sugar quedan financing loan with PNB when they issued a letter of authority, which authorized PNB to sell the quedan receipts of the spouses Ramos. PNB also contended that the real estate mortgage executed by the spouses Ramos in its favor secured not only the spouses Ramos' agricultural crop loan in the amount of P160,000.00, but also their 1989 sugar quedan financing loan. 27

On the other hand, the spouses Ramos averred that the authorization issued by Luis Ramos in favor of PNB, authorizing the latter to dispose and sell the pledged sugar quedans terminated the contract of pledge between the spouses Ramos and PNB. There was in effect a novation of the contract of pledge and, thereafter, dation in payment set in between the parties. 28 The spouses Ramos also claimed that the condition in the parties' real estate mortgage, which stated that the "mortgage shall also stand as security for said obligations and any and all other obligations of the MORTGAGOR to the MORTGAGEE of whatever kind and nature, whether such obligations have been contracted before, during or after the constitution of mortgage[,]' was essentially a contract of adhesion and violated the doctrine of mutuality of contract. 29

On November 8, 2006, the Court of Appeals promulgated its assailed decision, reversing the judgment of the RTC. The appellate court elucidated thus:In the instant appeal, the trial court ruled that the issuance of [the] authorization letter by [spouses Ramos] in favor of [PNB] terminated the contract of pledge between the parties and in effect dation in payment sets-in.

We do not agree. First, the authorization letter did not provide that ownership of the goods pledged would pass to [PNB] for failure of [spouses Ramos] to pay the loan on time. This is contrary to the concept of Dacion en pago as the "delivery and transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of the obligation.' Second, the authorization merely provided for the appointment of [PNB] as attorney-in-fact with authority, among other things, to sell or otherwise dispose of the said real rights, in case of default by [spouses Ramos], and to apply the proceeds to the payment of the loan. This provision is a standard condition in pledge contracts and is in conformity with Article 2087 of the Civil Code, which authorizes the pledgee to foreclose the pledge and alienate the pledged property for the payment of the principal obligation. Lastly, there was no meeting of the minds between [spouses Ramos] and [PNB] that the loan would be extinguished by dation in payment.

Article 1245 of the Civil Code provides that the law on sales shall govern an agreement of dacion en pago. A contract of sale is perfected at the moment there is a meeting of the minds of the parties thereto upon the thing which is the object of the contract and upon the price. x x x.

In this case, there was no meeting of the mind between the parties that would lead us to conclude that dation in payment has set-in. The trial court based its decision that there was dation in payment solely on the authorization letter, which we do not agree. This is because the authorization letter merely authorizes "the Philippine National Bank, Balayan Branch, or any of its duly authorized officer, to dispose and sell all the Quedan Receipts (Warehouse Receipts) pledge to said bank, after maturity date of the Sugar Quedan Financing Loan.'

Moreover, in case of doubt as to whether a transaction is a pledge or dation in payment, the presumption is in favor of pledge, the latter being the lesser transmission of rights and interest.

WHEREFORE, the appeal is hereby GRANTED. ACCORDINGLY, the Decision dated March 26, 1999 of the Regional Trial Court of Balayan, Batangas, Branch 9, is hereby REVERSED and a new one is entered ordering [PNB] to hold the release of all the transfer certificates of titles which were pledged as security for the agricultural loan of [spouses Ramos]. 30

On November 30, 2006, the spouses Ramos filed a Motion for Reconsideration 31 of the Court of Appeals decision. The spouses then asserted that it was unclear whether the parties intended that the real estate mortgage would also secure the sugar quedan financing loan, which was specifically secured by the pledge on the quedans. They alleged that the sugar quedan financing loan, the contract of pledge and the promissory notes did not even make any reference to the real estate mortgage. PNB apparently violated its implied duty of good faith by wrongfully retaining the spouses Ramos' collateral and improperly invoking the obscure terms of the real estate mortgage it prepared.

Subsequently, the spouses Ramos filed a Motion for Leave to File Supplemental Argument. 32 They added that PNB could not have acquired a security interest on the real estate mortgage for the purpose of the sugar quedan financing loan because when the real estate mortgage was constituted, the credit line from whence the sugar quedan financing loan was sourced did not yet exist. The spouses Ramos also argued that PNB was in bad faith in retaining the collateral of their real estate mortgage as it knew or should have known that the said security was already void given that the agricultural crop loan secured by the mortgage was already fully paid.

In the assailed Resolution dated May 28, 2007, the Court of Appeals denied the spouses Ramos' motion for reconsideration as it found no compelling reason to reverse its Decision dated November 8, 2006.

On June 18, 2007, the counsel for the spouses Ramos notified the Court of Appeals that Luis Ramos had passed away and that the latter's wife, Ramona Ramos, acted as the legal representative of Luis' estate.

Thereafter, Ramona Ramos and the estate of Luis Ramos (petitioners) filed the instant petition in a final bid to have the real estate mortgage declared null and void as regards their sugar quedan financing loan, as well as to compel PNB to return the TCTs of the properties included in the said mortgage.

On September 10, 2007, PNB filed a Motion for Substitution of Party, 33 alleging that it has sold to Golden Dragon Star Equities, Inc. all of its rights, titles and interests in and all obligations arising out of or in connection with several cases, including the instant case. Afterwards, Golden Dragon Star Equities, Inc. assigned to Opal Portfolio Investments (SPV-AMC) Inc. all of its rights and obligations as a purchaser under the contract of sale with PNB. Thus, PNB prayed that it be substituted by Opal Portfolio Investments (SPV-AMC) Inc. as party respondent in the petition.

In the Resolution 34 dated October 10, 2007, the Court denied the above motion of PNB and instead ordered that Opal Portfolio Investments (SPV-AMC) Inc. and Golden Dragon Star Equities, Inc. be included as respondents in addition to PNB. The said corporations were then required to file their comment on the petition within ten days from notice. 35 On January 25, 2008, Opal Portfolio Investments (SPV-AMC) Inc. and Golden Dragon Star Equities, Inc. manifested that they were adopting as their own the comment filed by PNB. 36

The Issues

Petitioners raise the following issues:1.IS THE MEANING OF THE GENERAL TERMS OF THE REAL ESTATE MORTGAGE CLEAR AND LEAVE NO DOUBT THAT THERE IS NO NEED TO DETERMINE WHETHER THE PARTIES INTENDED TO CREATE AND PROVIDE SECURITY INTEREST ON THE REAL ESTATE COLLATERAL OF BORROWER LUIS T. RAMOS FOR THE SUGAR QUEDAN FINANCING LOAN GRANTED TO HIM BY LENDER PNB, IN ADDITION TO THE AGRICULTURAL CROP LOAN THAT WAS UNDISPUTEDLY AGREED UPON BY THEM TO BE COVERED BY THE COLLATERAL?2.SHOULD THE GENERAL TERMS OF THE REAL ESTATE MORTGAGE EXECUTED BY BORROWER LUIS T. RAMOS IN FAVOR OF LENDER PNB BE UNDERSTOOD TO INCLUDE IN ITS COVERAGE THE BORROWER'S SUGAR QUEDAN FINANCING LOAN THAT IS DIFFERENT FROM HIS AGRICULTURAL CROP LOAN UNDISPUTEDLY AGREED UPON BY THE PARTIES TO BE COVERED BY THE COLLATERAL?3.SHOULD THE REAL ESTATE MORTGAGE EXECUTED IN 1973 BE CONSIDERED VALID AND EXISTING SECURITY DEVICE AGREEMENT FOR SUGAR QUEDAN FINANCING LOAN OBTAINED PURSUANT TO CREDIT LINE AGREEMENT EXECUTED ONLY IN 1989? 37Petitioners principally argue that the scope and coverage of the real estate mortgage excluded the sugar quedan financing loan. Petitioners assert that the mortgage contained a blanket mortgage clause or a dragnet clause, which stated that the mortgage would secure not only the loans already obtained but also any other amount that Luis Ramos may loan from PNB. Petitioners posit that a dragnet clause will cover and secure a subsequent loan only if said loan is made in reliance on the original security containing the dragnet clause. Petitioners state that said condition did not exist in the instant case, as the sugar quedan financing loan was not obtained in reliance on the previously executed real estate mortgage. Such fact was supposedly apparent from the documents pertaining to the sugar quedan financing loans, i.e., the credit line agreement, the various promissory notes and the contracts of pledge.

PNB responded that the issue of whether the parties intended for the real estate mortgage to secure the sugar quedan financing loan was never raised in the RTC or in the Court of Appeals. Therefore, the same cannot be raised for the first time in the motion for reconsideration of the Court of Appeals decision and in the instant petition. Likewise, PNB asserts that the spouses Ramos consented to the terms of the real estate mortgage that the real properties subject thereof should be used to secure future and subsequent loans of the mortgagor. Since the spouses never contested the validity and enforceability of the real estate mortgage, the same must be respected and should govern the relations of the parties therein.

PNB also avers that the Court of Appeals did not err in ruling that there was no dacion en pago and/or novation under the circumstances prevailing in the instant case. The Authorization issued by Luis Ramos in favor of PNB did not terminate the contract of pledge between the parties as PNB was merely authorized to dispose and sell the sugar quedans to be applied as payment to the obligation. Hence, no transfer of ownership occurred. Article 2103 of the Civil Code expressly states that "unless the thing pledged is expropriated, the debtor continues to be the owner thereof.' PNB argued that when it accepted the Authorization, it recognized that it was merely being authorized by Luis Ramos to dispose of the quedans. Therefore, until the spouses Ramos fully settle their loans from PNB, the latter believes that it has every right to retain possession of the properties offered as collateral thereto.

After due consideration of the issues raised, we are compelled to deny the petition.

To begin with, we note that, indeed, petitioners are presently raising issues that were neither invoked nor discussed before the RTC and the main proceedings before the Court of Appeals. The very issues laid down by petitioners for our consideration were first brought up only in their motion for reconsideration of the Court of Appeals Decision dated November 8, 2006.

In their complaint before the RTC and in their reply to PNB's appeal to the Court of Appeals, petitioners relied on the theory that they have already settled all of their loan obligations with PNB, including their sugar quedan financing loan, such that they were entitled to the release of the real estate mortgage that secured the said obligations. When the Court of Appeals rendered the assailed decision, petitioners foisted a new argument in their motion for reconsideration that the parties did not intend for the sugar quedan financing loan to be covered by the real estate mortgage. Before this Court, petitioners are now reiterating and expounding on their argument that their sugar quedan financing loan was beyond the ambit of the previously executed real estate mortgage. We rule that such a change in petitioners' theory may not be allowed at such late a stage in the case.

The general rule is that issues raised for the first time on appeal and not raised in the proceedings in the lower court are barred by estoppel. Points of law, theories, issues, and arguments not brought to the attention of the trial court ought not to be considered by a reviewing court, as these cannot be raised for the first time on appeal. To consider the alleged facts and arguments raised belatedly would amount to trampling on the basic principles of fair play, justice, and due process. 38Jurisprudence, nonetheless, provides for certain exceptions to the above rule. First, it is a settled rule that the issue of jurisdiction may be raised at any time, even on appeal, provided that its application does not result in a mockery of the tenets of fair play. Second, as held in Lianga Lumber Company v. Lianga Timber Co., Inc., 39 in the interest of justice and within the sound discretion of the appellate court, a party may change his legal theory on appeal only when the factual bases thereof would not require presentation of any further evidence by the adverse party in order to enable it to properly meet the issue raised in the new theory.

None of the above exceptions, however, applies to the instant case. As regards the first exception, the issue of jurisdiction was never raised at any point in this case. Anent the second exception, the Court finds that the application of the same in the case would be improper, as further evidence is needed in order to answer and/or refute the issue raised in petitioners' new theory.

To recapitulate, petitioners are now claiming that the sugar quedan financing loan it availed from PNB was not obtained in reliance on the real estate mortgage. Petitioners even insist that the credit line agreement, the promissory notes and the contracts of pledge entered into by the parties were silent as to the applicability thereto of the real estate mortgage. Otherwise stated, petitioners are harping on the intention of the parties vis- -vis the security arrangement for the credit line agreement and the availments thereof constituting the sugar quedan financing loan. The impropriety of the petitioners' posturing is further confounded by the fact that the credit line agreement under PNB's sugar quedan financing program and the availments thereto were entered into by Luis Ramos and PNB as far back as the year 1989. Petitioners' new theory, on the other hand, was only raised much later on the spouses' motion for reconsideration of the Court of Appeals decision dated November 8, 2006, or after a period of more or less seventeen years since the execution of the credit line agreement. The Court, therefore, finds itself unable to give credit to the new theory proffered by petitioners since to do so would gravely offend the rights of PNB to due process.

Even if the Court were willing to overlook petitioners' procedural misstep on appeal, their belatedly proffered theory still fails to convince us that the Court of Appeals committed any reversible error in its resolution of the present case.

According to petitioners, their case requires an application of Article 1371 of the Civil Code, which provides that "in order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered.' To their mind, the mere fact that the 1989 credit line agreement, the promissory notes and the contracts of pledge executed in relation to the sugar quedan financing loan contained no reference to the real estate mortgage is sufficient proof that the parties did not intend the real estate mortgage to secure the sugar quedan financing loan, but only the agricultural crop loans. The Court finds that it cannot uphold this proposition.

In Prisma Construction & Development Corporation v. Menchavez, 40 we discussed the settled principles that:Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. When the terms of a contract are clear and leave no doubt as to the intention of the contracting parties, the literal meaning of its stipulations governs. In such cases, courts have no authority to alter the contract by construction or to make a new contract for the parties; a court's duty is confined to the interpretation of the contract the parties made for themselves without regard to its wisdom or folly, as the court cannot supply material stipulations or read into the contract words the contract does not contain. It is only when the contract is vague and ambiguous that courts are permitted to resort to the interpretation of its terms to determine the parties' intent. 41

Here, it cannot be denied that the real estate mortgage executed by the parties provided that it shall stand as security for any "subsequent promissory note or notes either as a renewal of the former note, as an extension thereof, or as a new loan, or is given any other kind of accommodations such as overdrafts, letters of credit, acceptances and bills of exchange, releases of import shipments on Trust Receipts, etc.' The same real estate mortgage likewise expressly covered "any and all other obligations of the Mortgagor to the Mortgagee of whatever kind and nature whether such obligations have been contracted before, during or after the constitution of this mortgage.' Thus, from the clear and unambiguous terms of the mortgage contract, the same has application even to future loans and obligations of the mortgagor of any kind, not only agricultural crop loans.

Such a "blanket clause' or "dragnet clause' in mortgage contracts has long been recognized in our jurisprudence. Thus, in another case, we held:As a general rule, a mortgage liability is usually limited to the amount mentioned in the contract. However, the amounts named as consideration in a contract of mortgage do not limit the amount for which the mortgage may stand as security if, from the four corners of the instrument, the intent to secure future and other indebtedness can be gathered. This stipulation is valid and binding between the parties and is known as the "blanket mortgage clause" (also known as the "dragnet clause)."

In the present case, the mortgage contract indisputably provides that the subject properties serve as security, not only for the payment of the subject loan, but also for "such other loans or advances already obtained, or still to be obtained." The cross-collateral stipulation in the mortgage contract between the parties is thus simply a variety of a dragnet clause. After agreeing to such stipulation, the petitioners cannot insist that the subject properties be released from mortgage since the security covers not only the subject loan but the two other loans as well. 42 (Emphases supplied.)

Moreover, petitioners' reliance on Prudential Bank v. Alviar 43 is sorely misplaced. In Prudential, the fact that another security was given for subsequent loans did not remove such loans from the ambit of the dragnet clause in a previous real estate mortgage contract. However, it was held in Prudential that the special security for subsequent loans must first be exhausted before the creditor may foreclose on the real estate mortgage. In other words, the creditor is allowed to hold on to the previous security (the real estate mortgage) in case of deficiency after resort to the special security given for the subsequent loans. Verily, even under the Prudential ruling cited by petitioners, they are not entitled to the release of the real estate mortgage and the titles to the properties mentioned therein.

Ultimately, we likewise find no reason to overturn the assailed ruling of the Court of Appeals that the contract of pledge between petitioners and PNB was not terminated by the Authorization letter issued by Luis Ramos in favor of PNB. The status of PNB as a pledgee of the sugar quedans involved in this case had long been confirmed by the Court in its Decision dated July 9, 1998 in Philippine National Bank v. Sayo, Jr. 44 and the same is neither disputed in the instant case. We reiterate our ruling in Sayo that:The creditor, in a contract of real security, like pledge, cannot appropriate without foreclosure the things given by way of pledge. Any stipulation to the contrary, termed pactum commissorio, is null and void. The law requires foreclosure in order to allow a transfer of title of the good given by way of security from its pledgor, and before any such foreclosure, the pledgor, not the pledgee, is the owner of the goods. x x x. 45

A close reading of the Authorization executed by Luis Ramos reveals that it was nothing more than a letter that gave PNB the authority to dispose of and sell the sugar quedans after the maturity date thereof. As held by the Court of Appeals, the said grant of authority on the part of PNB is a standard condition in a contract of pledge, in accordance with the provisions of Article 2087 of the Civil Code that "it is also of the essence of these contracts that when the principal obligation becomes due, the things in which the pledge or mortgage consists may be alienated for the payment to the creditor.' More importantly, Article 2115 of the Civil Code expressly provides that the sale of the thing pledged shall extinguish the principal obligation, whether or not the proceeds of the sale are equal to the amount of the principal obligation, interest and expenses in a proper case. As we adverted to in Sayo, it is the foreclosure of the thing pledged that results in the satisfaction of the loan liabilities to the pledgee of the pledgors. Thus, prior to the actual foreclosure of the thing pleged, the sugar quedan financing loan in this case is yet to be settled.

As matters stand, with more reason that PNB cannot be compelled to release the real estate mortgage and the titles involved therein since the issue of whether the sugar quedan financing loan will be fully paid through the pledged sugar receipts remains the subject of pending litigation.cralaw

WHEREFORE, the petition is DENIED. The Decision dated November 8, 2006 and the Resolution dated May 28, 2007 of the Court of Appeals in CA-G.R. CV No. 64360 are hereby AFFIRMED. Costs against petitioners.

G.R. No. 189871, August 13, 2013DARIO NACAR, Petitioner, v. GALLERY FRAMES AND/OR FELIPE BORDEY, JR., This is a petition for review on certiorari assailing the Decision1 dated September 23, 2008 of the Court of Appeals (CA) in CA-G.R. SP No. 98591, and the Resolution2 dated October 9, 2009 denying petitioners motion for reconsideration.

The factual antecedents are undisputed.

Petitioner Dario Nacar filed a complaint for constructive dismissal before the Arbitration Branch of the National Labor Relations Commission (NLRC) against respondents Gallery Frames (GF) and/or Felipe Bordey, Jr., docketed as NLRC NCR Case No. 01-00519-97.

On October 15, 1998, the Labor Arbiter rendered a Decision3 in favor of petitioner and found that he was dismissed from employment without a valid or just cause. Thus, petitioner was awarded backwages and separation pay in lieu of reinstatement in the amount of P158,919.92. The dispositive portion of the decision, reads:With the foregoing, we find and so rule that respondents failed to discharge the burden of showing that complainant was dismissed from employment for a just or valid cause. All the more, it is clear from the records that complainant was never afforded due process before he was terminated. As such, we are perforce constrained to grant complainants prayer for the payments of separation pay in lieu of reinstatement to his former position, considering the strained relationship between the parties, and his apparent reluctance to be reinstated, computed only up to promulgation of this decision as follows:cralawlibrarySEPARATION PAY

Date Hired=August 1990

Rate= P198/day

Date of Decision= Aug. 18, 1998

Length of Service= 8 yrs. & 1 month

P198.00 x 26 days x 8 months=P41,184.00

BACKWAGES

Date Dismissed=January 24, 1997

Rate per day=P196.00

Date of Decisions=Aug. 18, 1998

a)1/24/97 to 2/5/98=12.36 mos.

P196.00/dayx12.36 mos.=P62,986.56

b)2/6/98 to 8/18/98=6.4 months

Prevailing Rate per day=P62,986.00

P198.00 x 26 days x 6.4 mos.=P32,947.20

T O T A L=P95.933.76

WHEREFORE, premises considered, judgment is hereby rendered finding respondents guilty of constructive dismissal and are therefore, ordered:1. To pay jointly and severally the complainant the amount of sixty-two thousand nine hundred eighty-six pesos and 56/100 (P62,986.56) Pesos representing his separation pay;chanr0blesvirtualawlibrary2. To pay jointly and severally the complainant the amount of nine (sic) five thousand nine hundred thirty-three and 36/100 (P95,933.36) representing his backwages; and3. All other claims are hereby dismissed for lack of merit. SO ORDERED.4cralaw virtualaw libraryRespondents appealed to the NLRC, but it was dismissed for lack of merit in the Resolution5 dated February 29, 2000. Accordingly, the NLRC sustained the decision of the Labor Arbiter. Respondents filed a motion for reconsideration, but it was denied.6cralaw virtualaw library

Dissatisfied, respondents filed a Petition for Review on Certiorari before the CA. On August 24, 2000, the CA issued a Resolution dismissing the petition. Respondents filed a Motion for Reconsideration, but it was likewise denied in a Resolution dated May 8, 2001.7cralaw virtualaw library

Respondents then sought relief before the Supreme Court, docketed as G.R. No. 151332. Finding no reversible error on the part of the CA, this Court denied the petition in the Resolution dated April 17, 2002.8cralaw virtualaw library

An Entry of Judgment was later issued certifying that the resolution became final and executory on May 27, 2002.9 The case was, thereafter, referred back to the Labor Arbiter. A pre-execution conference was consequently scheduled, but respondents failed to appear.10cralaw virtualaw library

On November 5, 2002, petitioner filed a Motion for Correct Computation, praying that his backwages be computed from the date of his dismissal on January 24, 1997 up to the finality of the Resolution of the Supreme Court on May 27, 2002.11 Upon recomputation, the Computation and Examination Unit of the NLRC arrived at an updated amount in the sum of P471,320.31.12cralaw virtualaw library

On December 2, 2002, a Writ of Execution13 was issued by the Labor Arbiter ordering the Sheriff to collect from respondents the total amount of P471,320.31. Respondents filed a Motion to Quash Writ of Execution, arguing, among other things, that since the Labor Arbiter awarded separation pay of P62,986.56 and limited backwages of P95,933.36, no more recomputation is required to be made of the said awards. They claimed that after the decision becomes final and executory, the same cannot be altered or amended anymore.14 On January 13, 2003, the Labor Arbiter issued an Order15 denying the motion. Thus, an Alias Writ of Execution16 was issued on January 14, 2003.

Respondents again appealed before the NLRC, which on June 30, 2003 issued a Resolution17 granting the appeal in favor of the respondents and ordered the recomputation of the judgment award.

On August 20, 2003, an Entry of Judgment was issued declaring the Resolution of the NLRC to be final and executory. Consequently, another pre-execution conference was held, but respondents failed to appear on time. Meanwhile, petitioner moved that an Alias Writ of Execution be issued to enforce the earlier recomputed judgment award in the sum of P471,320.31.18cralaw virtualaw library

The records of the case were again forwarded to the Computation and Examination Unit for recomputation, where the judgment award of petitioner was reassessed to be in the total amount of only P147,560.19.

Petitioner then moved that a writ of execution be issued ordering respondents to pay him the original amount as determined by the Labor Arbiter in his Decision dated October 15, 1998, pending the final computation of his backwages and separation pay.

On January 14, 2003, the Labor Arbiter issued an Alias Writ of Execution to satisfy the judgment award that was due to petitioner in the amount of P147,560.19, which petitioner eventually received.

Petitioner then filed a Manifestation and Motion praying for the re-computation of the monetary award to include the appropriate interests.19cralaw virtualaw library

On May 10, 2005, the Labor Arbiter issued an Order20 granting the motion, but only up to the amount of P11,459.73. The Labor Arbiter reasoned that it is the October 15, 1998 Decision that should be enforced considering that it was the one that became final and executory. However, the Labor Arbiter reasoned that since the decision states that the separation pay and backwages are computed only up to the promulgation of the said decision, it is the amount of P158,919.92 that should be executed. Thus, since petitioner already received P147,560.19, he is only entitled to the balance of P11,459.73.

Petitioner then appealed before the NLRC,21 which appeal was denied by the NLRC in its Resolution22 dated September 27, 2006. Petitioner filed a Motion for Reconsideration, but it was likewise denied in the Resolution23 dated January 31, 2007.

Aggrieved, petitioner then sought recourse before the CA, docketed as CA-G.R. SP No. 98591.

On September 23, 2008, the CA rendered a Decision24 denying the petition. The CA opined that since petitioner no longer appealed the October 15, 1998 Decision of the Labor Arbiter, which already became final and executory, a belated correction thereof is no longer allowed. The CA stated that there is nothing left to be done except to enforce the said judgment. Consequently, it can no longer be modified in any respect, except to correct clerical errors or mistakes.

Petitioner filed a Motion for Reconsideration, but it was denied in the Resolution25 dated October 9, 2009.

Hence, the petition assigning the lone error:IWITH DUE RESPECT, THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED, COMMITTED GRAVE ABUSE OF DISCRETION AND DECIDED CONTRARY TO LAW IN UPHOLDING THE QUESTIONED RESOLUTIONS OF THE NLRC WHICH, IN TURN, SUSTAINED THE MAY 10, 2005 ORDER OF LABOR ARBITER MAGAT MAKING THE DISPOSITIVE PORTION OF THE OCTOBER 15, 1998 DECISION OF LABOR ARBITER LUSTRIA SUBSERVIENT TO AN OPINION EXPRESSED IN THE BODY OF THE SAME DECISION.26cralaw virtualaw library

Petitioner argues that notwithstanding the fact that there was a computation of backwages in the Labor Arbiters decision, the same is not final until reinstatement is made or until finality of the decision, in case of an award of separation pay. Petitioner maintains that considering that the October 15, 1998 decision of the Labor Arbiter did not become final and executory until the April 17, 2002 Resolution of the Supreme Court in G.R. No. 151332 was entered in the Book of Entries on May 27, 2002, the reckoning point for the computation of the backwages and separation pay should be on May 27, 2002 and not when the decision of the Labor Arbiter was rendered on October 15, 1998. Further, petitioner posits that he is also entitled to the payment of interest from the finality of the decision until full payment by the respondents.

On their part, respondents assert that since only separation pay and limited backwages were awarded to petitioner by the October 15, 1998 decision of the Labor Arbiter, no more recomputation is required to be made of said awards. Respondents insist that since the decision clearly stated that the separation pay and backwages are computed only up to [the] promulgation of this decision, and considering that petitioner no longer appealed the decision, petitioner is only entitled to the award as computed by the Labor Arbiter in the total amount of P158,919.92. Respondents added that it was only during the execution proceedings that the petitioner questioned the award, long after the decision had become final and executory. Respondents contend that to allow the further recomputation of the backwages to be awarded to petitioner at this point of the proceedings would substantially vary the decision of the Labor Arbiter as it violates the rule on immutability of judgments.

The petition is meritorious.

The instant case is similar to the case of Session Delights Ice Cream and Fast Foods v. Court of Appeals (Sixth Division),27 wherein the issue submitted to the Court for resolution was the propriety of the computation of the awards made, and whether this violated the principle of immutability of judgment. Like in the present case, it was a distinct feature of the judgment of the Labor Arbiter in the above-cited case that the decision already provided for the computation of the payable separation pay and backwages due and did not further order the computation of the monetary awards up to the time of the finality of the judgment. Also in Session Delights, the dismissed employee failed to appeal the decision of the labor arbiter. The Court clarified, thus:In concrete terms, the question is whether a re-computation in the course of execution of the labor arbiter's original computation of the awards made, pegged as of the time the decision was rendered and confirmed with modification by a final CA decision, is legally proper. The question is posed, given that the petitioner did not immediately pay the awards stated in the original labor arbiter's decision; it delayed payment because it continued with the litigation until final judgment at the CA level.

A source of misunderstanding in implementing the final decision in this case proceeds from the way the original labor arbiter framed his decision. The decision consists essentially of two parts.

The first is that part of the decision that cannot now be disputed because it has been confirmed with finality. This is the finding of the illegality of the dismissal and the awards of separation pay in lieu of reinstatement, backwages, attorney's fees, and legal interests.

The second part is the computation of the awards made. On its face, the computation the labor arbiter made shows that it was time-bound as can be seen from the figures used in the computation. This part, being merely a computation of what the first part of the decision established and declared, can, by its nature, be re-computed. This is the part, too, that the petitioner now posits should no longer be re-computed because the computation is already in the labor arbiter's decision that the CA had affirmed. The public and private respondents, on the other hand, posit that a re-computation is necessary because the relief in an illegal dismissal decision goes all the way up to reinstatement if reinstatement is to be made, or up to the finality of the decision, if separation pay is to be given in lieu reinstatement.

That the labor arbiter's decision, at the same time that it found that an illegal dismissal had taken place, also made a computation of the award, is understandable in light of Section 3, Rule VIII of the then NLRC Rules of Procedure which requires that a computation be made. This Section in part states:[T]he Labor Arbiter of origin, in cases involving monetary awards and at all events, as far as practicable, shall embody in any such decision or order the detailed and full amount awarded.Clearly implied from this original computation is its currency up to the finality of the labor arbiter's decision. As we noted above, this implication is apparent from the terms of the computation itself, and no question would have arisen had the parties terminated the case and implemented the decision at that point.

However, the petitioner disagreed with the labor arbiter's findings on all counts - i.e., on the finding of illegality as well as on all the consequent awards made. Hence, the petitioner appealed the case to the NLRC which, in turn, affirmed the labor arbiter's decision. By law, the NLRC decision is final, reviewable only by the CA on jurisdictional grounds.

The petitioner appropriately sought to nullify the NLRC decision on jurisdictional grounds through a timely filed Rule 65 petition for certiorari. The CA decision, finding that NLRC exceeded its authority in affirming the payment of 13th month pay and indemnity, lapsed to finality and was subsequently returned to the labor arbiter of origin for execution.

It was at this point that the present case arose. Focusing on the core illegal dismissal portion of the original labor arbiter's decision, the implementing labor arbiter ordered the award re-computed; he apparently read the figures originally ordered to be paid to be the computation due had the case been terminated and implemented at the labor arbiter's level. Thus, the labor arbiter re-computed the award to include the separation pay and the backwages due up to the finality of the CA decision that fully terminated the case on the merits. Unfortunately, the labor arbiter's approved computation went beyond the finality of the CA decision (July 29, 2003) and included as well the payment for awards the final CA decision had deleted - specifically, the proportionate 13th month pay and the indemnity awards. Hence, the CA issued the decision now questioned in the present petition.

We see no error in the CA decision confirming that a re-computation is necessary as it essentially considered the labor arbiter's original decision in accordance with its basic component parts as we discussed above. To reiterate, the first part contains the finding of illegality and its monetary consequences; the second part is the computation of the awards or monetary consequences of the illegal dismissal, computed as of the time of the labor arbiter's original decision.28cralaw virtualaw libraryConsequently, from the above disquisitions, under the terms of the decision which is sought to be executed by the petitioner, no essential change is made by a recomputation as this step is a necessary consequence that flows from the nature of the illegality of dismissal declared by the Labor Arbiter in that decision.29 A recomputation (or an original computation, if no previous computation has been made) is a part of the law specifically, Article 279 of the Labor Code and the established jurisprudence on this provision that is read into the decision. By the nature of an illegal dismissal case, the reliefs continue to add up until full satisfaction, as expressed under Article 279 of the Labor Code. The recomputation of the consequences of illegal dismissal upon execution of the decision does not constitute an alteration or amendment of the final decision being implemented. The illegal dismissal ruling stands; only the computation of monetary consequences of this dismissal is affected, and this is not a violation of the principle of immutability of final judgments.30cralaw virtualaw library

That the amount respondents shall now pay has greatly increased is a consequence that it cannot avoid as it is the risk that it ran when it continued to seek recourses against the Labor Arbiter's decision. Article 279 provides for the consequences of illegal dismissal in no uncertain terms, qualified only by jurisprudence in its interpretation of when separation pay in lieu of reinstatement is allowed. When that happens, the finality of the illegal dismissal decision becomes the reckoning point instead of the reinstatement that the law decrees. In allowing separation pay, the final decision effectively declares that the employment relationship ended so that separation pay and backwages are to be computed up to that point.31cralaw virtualaw library

Finally, anent the payment of legal interest. In the landmark case of Eastern Shipping Lines, Inc. v. Court of Appeals,32 the Court laid down the guidelines regarding the manner of computing legal interest, to wit:II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:cralawlibrary

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.33cralaw virtualaw libraryRecently, however, the Bangko Sentral ng Pilipinas Monetary Board (BSP-MB), in its Resolution No. 796 dated May 16, 2013, approved the amendment of Section 234 of Circular No. 905, Series of 1982 and, accordingly, issued Circular No. 799,35 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 X305.136 of the Manual of Regulations for Banks and Sections 4305Q.1,37 4305S.338 and 4303P.139 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 Lines40 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 Non-Bank 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.

Corollarily, in the recent case of Advocates for Truth in Lending, Inc. and Eduardo B. Olaguer v. Bangko Sentral Monetary Board,41 this Court affirmed the authority of the BSP-MB to set interest rates and to issue and enforce Circulars when it ruled that the BSP-MB may prescribe the maximum rate or rates of interest for all loans or renewals thereof or the forbearance of any money, goods or credits, including those for loans of low priority such as consumer loans, as well as such loans made by pawnshops, finance companies and similar credit institutions. It even authorizes the BSP-MB to prescribe different maximum rate or rates for different types of borrowings, including deposits and deposit substitutes, or loans of financial intermediaries.

Nonetheless, with regard to those judgments that have become final and executory prior to July 1, 2013, said judgments shall not be disturbed and shall continue to be implemented applying the rate of interest fixed therein.

To recapitulate and for future guidance, the guidelines laid down in the case of Eastern Shipping Lines42 are accordingly modified to embody BSP-MB Circular No. 799, as follows:

I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on Damages of the Civil Code govern in determining the measure of recoverable damages.

II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 6% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages, except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code), but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 6% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.And, in addition to the above, judgments that have become final and executory prior to July 1, 2013, shall not be disturbed and shall continue to be implemented applying the rate of interest fixed therein.

WHEREFORE, premises considered, the Decision dated September 23, 2008 of the Court of Appeals in CA-G.R. SP No. 98591, and the Resolution dated October 9, 2009 are REVERSED and SET ASIDE. Respondents are Ordered to Pay petitioner:cralawlibrary

(1) backwages computed from the time petitioner was illegally dismissed on January 24, 1997 up to May 27, 2002, when the Resolution of this Court in G.R. No. 151332 became final and executory;chanr0blesvirtualawlibrary(2) separation pay computed from August 1990 up to May 27, 2002 at the rate of one month pay per year of service; and(3) interest of twelve percent (12%) per annum of the total monetary awards, computed from May 27, 2002 to June 30, 2013 and six percent (6%) per annum from July 1, 2013 until their full satisfaction.

The Labor Arbiter is hereby ORDERED to make another recomputation of the total monetary benefits awarded and due to petitioner in accordance with this Decision.

[G.R. No. 138588. August 23, 2001.]FAR EAST BANK & TRUST COMPANY, Petitioner, v. DIAZ REALTY INC., Respondent.

For a valid tender of payment, it is necessary that there be a fusion of intent, ability and capability to make good such offer, which must be absolute and must cover the amount due. Though a check is not legal tender, and a creditor may validly refuse to accept it if tendered as payment, one who in fact accepted a fully funded check after the debtors manifestation that it had been given to settle an obligation is estopped from later on denouncing the efficacy of such tender of payment.chanrob1es virtua1 1aw 1ibraryThe Case

The foregoing principle is used by this Court in resolving the Petition for Review 1 on Certiorari before us, challenging the January 26, 1999 Decision 2 of the Court of Appeals 3 (CA) in GA-GR CV No. 45349. The dispositive portion of the assailed Decision reads as follows:jgc:chanrobles.com.ph

"WHEREFORE, the judgment appealed from is hereby MODIFIED, to read as follows:chanrob1es virtual 1aw library

WHEREFORE, JUDGMENT IS HEREBY RENDERED ORDERING:chanrob1es virtual 1aw library

1. The plaintiffs to pay Far East Bank & Trust Company the principal sum of P1,067,000.00 plus interests thereon computed at 12% per annum from July 9, 1988 until fully paid;

2. The parties to negotiate for a new lease over the subject premises; and

3. The defendant to pay the plaintiff the sum of fifteen thousand (P15,000.00) pesos as and for attorneys fees plus the costs of litigation.

"All other claims of the parties against each other are DENIED." 4

Likewise assailed is the May 4, 1999 CA Resolution, 5 which denied petitioners Motion for Reconsideration.chanrob1es virtua1 1aw 1ibraryThe Facts

The court a quo summarized the antecedents of the case as follows:jgc:chanrobles.com.ph

"Sometime in August 1973, Diaz and Company got a loan from the former PaBC [Pacific Banking Corporation] in the amount of P720,000.00, with interest at 12% per annum, later increased to 14%, 16%, 18% and 20%. The loan was secured by a real estate mortgage over two parcels of land owned by the plaintiff Diaz Realty, both located in Davao City. In 1981, Allied Banking Corporation rented an office space in the building constructed on the properties covered by the mortgage contract, with the conformity of mortgagee PaBC, whereby the parties agreed that the monthly rentals shall be paid directly to the mortgagee for the lessors account, either to partly or fully pay off the aforesaid mortgage indebtedness. Pursuant to such contract, Allied Bank paid the monthly rentals to PaBC instead of to the plaintiffs. On July 5, 1985, the Central Bank closed PaBC, placed it under receivership, and appointed Renan Santos as its liquidator. Sometime in December 1986, appellant FEBTC purchased the credit of Diaz & Company in favor of PaBC, but it was not until March 23, 1988 that Diaz was informed about it.

"According to the plaintiff as alleged in the complaint and testified to by Antonio Diaz (President of Diaz & Company and Vice-President of Diaz Realty), on March 23, 1988, he went to office of PaBC which by then housed FEBTC and was told that the latter had acquired PaBC; that Cashier Ramon Lim told him that as of such date, his loan was P1,447,142.03; that he (Diaz) asked the defendant to make an accounting of the monthly rental payments made by Allied Bank; that on December 14, 1988, 6 Diaz tendered to FEBTC the amount of P1,450,000.00 through an Interbank check, in order to prevent the imposition of additional interests, penalties and surcharges on its loan; that FEBTC did not accept it as payment; that instead, Diaz was asked to deposit the amount with the defendants Davao City Branch Office, allegedly pending the approval of Central Bank Liquidator Renan Santos; that in the meantime, Diaz wrote the defendant, asking that the interest rate be reduced from 20% to 12% per annum, but no reply was ever made; that subsequently, the defendant told him to change the P1,450,000.00 deposit into a money market placement, which he did; that the money market placement expired on April 14, 1989; that when there was still no news from the defendant whether or not it [would] accept his tender of payment, he filed this case at the Regional Trial Court of Davao City.

"In its responsive pleading, the defendant set up the following special/affirmative defenses: that sometime in December 1986, FEBTC purchased from the PaBC the account of the plaintiffs for a total consideration of P1,828,875.00; that despite such purchase, PaBC Davao Branch continued to collect interests and penalty charges on the loan from January 6, 1987 to July 8, 1988; that it was therefore not FEBTC which collected the interest rates mentioned in the complaint, but PaBC; that it is not true that FEBTC was trying to impose [exorbitant] rates of interest; that as a matter of fact, after the transfer of plaintiffs account, it sought to negotiate with the plaintiffs, and in fact, negotiations were made for a settlement and possible reduction of charges; that FEBTC has no knowledge of the rates of interest imposed and collected by PaBC prior to the purchase of the account from the latter, hence it could not be held responsible for those transactions which transpired prior to the purchase; and that the defendant acted at the opportune time for the settlement of the account, albeit exercising prudence in the handling of such account. The rest of the affirmative defenses are bare denials.chanrob1es virtua1 1aw 1ibrary

"After trial, the court a quo rendered judgment on August 6, 1993, the dispositive portion of which reads as follows:chanrob1es virtual 1aw libraryWHEREFORE, judgment is hereby rendered as follows:chanrob1es virtual 1aw library

1. The plaintiff and defendant shall jointly compute the interest due on the P1,057,000.00 loan from April 18, 1985 until November 14, 1988 at 12% per annum (IBAA Salazar Case Supra).2. That the parties shall then add the result of the joint computation mentioned in paragraph one of the dispositive portion to the P1,057,000.00 principal.3. The result of the addition of the P1,057,000.00 principal and the interests arrived at shall then be compared with the P1,450,000.00 deposit and if P1,450,000.00 is not enough, then the plaintiff shall pay the difference/deficiency between the P1,450,000.00 deposit and what the parties jointly computed[;] conversely, if the P1,450,000.00 is more than what the parties have arrived [at] after the computation, the defendant shall return the difference or the excess to the plaintiffs.4. The defendant shall cancel the mortgage.5. Paragraph eight of the Lease Contract between Allied Bank and the plaintiffs in which the defendants predecessor, Pacific Banking gave its conformity (Exh.H) is hereby cancelled, so that the rental should now be paid to the plaintiffs.6. The defendant shall pay the plaintiffs the sums:chanrob1es virtual 1aw library

6-A. Fifteen thousand pesos as attorneys fees.6-B. Three [h]undred [t]housand [p]esos (P300,000.00) as exemplary damages.

6-C. The cost of suit.chanrob1es virtua1 1aw 1ibrarySO ORDERED."cralaw virtua1aw library

"Upon a motion for reconsideration filed by defendant FEBTC and after due notice and hearing, the court a quo issued an order on October 12, 1993, modifying the aforequoted decision, such that its dispositive portion as amended would now read as follows:chanrob1es virtual 1aw library

IN VIEW WHEREOF, the decision rendered last August 6, is modified, accordingly, to wit:chanrob1es virtual 1aw library

1. The plaintiff and defendant shall jointly compute the interest due on the P1,167,000.00 loan from April 18, 1985 until November 14, 1988 at 12% per annum.2. That the parties shall then add the result of the joint computation mentioned in paragraph one above to the P1,067,000.00 principal.3. The result of the addition of the P1,067,000.00 principal and the interests arrived at shall then be compared with the P1,450,000.00 money market placement put up by the plaintiff with the defendant bank if the same is still existing or has not yet matured.4. The defendant shall cancel the mortgage. 5. Paragraph eight of the lease contract between Allied Bank and the plaintiff in which the defendant[s predecessor], Pacific Banking gave its conformity (Exh.H) is hereby cancelled and deleted, so that the rental should now be paid to the plaintiff.6. The defendant shall pay the plaintiff the sums:chanrob1es virtual 1aw library6.A. Fifteen [t]housand [p]esos as attorneys fees;6.B. Cost of suit." 7

The CA Ruling

The CA sustained the trial courts finding that there was a valid tender of payment in the sum of P1,450,000, made by Diaz Realty Inc. in favor of Far East and Trust Company. The appellate court reasoned that petitioner failed to effectively rebut respondents evidence that it so tendered the check to liquidate its indebtedness, and that petitioner had unilaterally treated the same as a deposit instead.cralaw : red

The CA further ruled that in the computation of interest charges, the legal rate of 12 percent per annum should apply, reckoned from July 9, 1988, until full and final payment of the whole indebtedness. It explained that while petitioners purchase of respondents account from Pacific Banking Corporation (PaBC) was valid, the 20 percent interest stipulated in the Promissory Note should not apply, because the account transfer was without the knowledge and the consent of respondent-obligor.

The appellate court, however, sustained petitioners assertion that the trial court should not have cancelled the real estate mortgage, inasmuch as the principal obligation upon which it was anchored was yet to be extinguished. Further, the CA held that the lease contract was subject to renegotiation by the parties.

Lastly, the court a quo upheld the trial courts award of attorneys fees, pointing to petitioners negligence in not immediately informing respondent of the purchase and transfer of its credit, and in failing to negotiate in order to avoid litigation.Issues

Petitioner submits for our resolution the following issues:jgc:chanrobles.com.ph

"A."Whether or not the Court of Appeals correctly ruled that the validity of the tender of payment was not properly raised in the trial court and could not thus be raised in the appeal.

"B."Whether or not the Court of Appeals erred in failing to apply settled jurisprudential principles militating against the private respondents contention that a valid tender of payment had been made by it.chanrob1es virtua1 1aw 1ibrary

"C."Whether or not the Court of Appeals correctly found that the transaction between petitioner and PaBC was an ineffective novation and that the consent of private respondent was necessary therefor.

"D."Whether or not the Court of Appeals erred in refusing to apply the rate of interest freely stipulated upon by the parties to the respondents obligation.

"E."Whether or not the Court of Appeals committed an irreconcilable error in ordering the parties to re-negotiate the terms of the contract while finding at the same time that the mortgage contract containing the lease was valid.

"F."Whether or not the petition, as argued by private respondent, raises questions of fact not reviewable by certiorari." 8

In the main, the Court will determine (1) the efficacy of the alleged tender of payment made by respondent, (2) the effect of the transfer to petitioner of respondents account with PaBC, (3) the interest rate applicable, and (4) the status of the Real Estate Mortgage.The Courts Ruling

The Petition 9 is not meritorious.

First Issue:chanrob1es virtual 1aw libraryTender of Payment

Petitioner resolutely argues that the CA erred in upholding the validity of the tender of payment made by Respondent. What the latter had tendered to settle its outstanding obligation, it points out, was a check which could not be considered legal tender.

We disagree. The records show that petitioner bank purchased respondents account from PaBC in December 1986, and that the latter was notified of the transaction only on March 23, 1988. Thereafter, Antonio Diaz, president of respondent corporation, inquired from petitioner on the status and the amount of its obligation. He was informed that the obligation summed up to P1,447,142.03. On November 14, 1988, petitioner received from respondent Interbank, Check No. 81399841 dated November 13, 1988, bearing the amount of P1,450,000, with the notation "Re: Full Payment of Pacific Bank Account now turn[ed] over to Far East Bank" 10 The check was subsequently cleared and honored by Interbank, as shown by the Certification it issued on January 20, 1992. 11

True, jurisprudence holds that, in general, a check does not constitute legal tender, and that a creditor may validly refuse it. 12 It must be emphasized, however, that this dictum does not prevent a creditor from accepting a check as payment. In other words, the creditor has the option and the discretion of refusing or accepting it.chanrob1es virtua1 1aw 1ibrary

In the present case, petitioner bank did not refuse respondents check. On the contrary, it accepted the check which, it insisted, was a deposit. As earlier stated, the check proved to be fully funded and was in fact honored by the drawee bank Moreover, petitioner was in possession of the money for several months.

In further contending that there was no valid tender of payment, petitioner emphasizes our pronouncement in Roman Catholic Bishop of Malolos, Inc. v. Intermediate Appellate Court, 13 as follows:jgc:chanrobles.com.ph

"Tender of payment involves a positive and unconditional act by the obligor of offering legal tender currency as payment to the obligee for the formers obligation and demanding that the latter accept the same."Thus, tender of payment cannot be presumed by a mere inference from surrounding circumstances. At most, sufficiency of available funds is only affirmative of the capacity or ability of the obligor to fulfill his part of the bargain. But whether or not the obligor avails himself of such funds to settle his outstanding account remains to be proven by independent and credible evidence. Tender of payment presupposes not only that the obligor is able, ready, and willing, but more so, in the act of performing his obligation. Ab posse ad actu non vale illatio.A proof that an act could have been done is no proof that it was actually done."

In other words, tender of payment is the definitive act of offering the creditor what is due him or her, together with the demand that the creditor accept the same. More important, there must be a fusion of intent, ability and capability to make good such offer, which must be absolute and must cover the amount due. 14

That respondent intended to settle its obligation with petitioner is evident from the records of the case. After learning that its loan balance was P1,447,142.03, it presented to petitioner a check in the amount of P1,450,000, with the specific notation that it was for full payment of its Pacific Bank account that had been purchased by petitioner. The latter accepted the check, even if it now insists that it considered the same as a mere deposit. The check was sufficiently funded, as in fact it was honored by the drawee bank. When petitioner refused to release the mortgage, respondent instituted the present case to compel the bank to acknowledge the tender of payment, accept payment and cancel the mortgage. These acts demonstrate respondents intent, ability and capability to fully settle and extinguish its obligation to petitioner.

That respondent subsequently withdrew the money from petitioner-bank is of no moment, because such withdrawal would not affect the efficacy or the legal ramifications of the tender of payment made on November 14, 1988. As already discussed, the tender of payment to settle respondents obligation as computed by petitioner was accepted, the check given in payment thereof converted into money, and the money kept in petitioners possession for several months.chanrob1es virtua1 1aw 1ibrary

Finally, petitioner points out that, in any case, tender of payment extinguishes the obligation only after proper consignation, which respondent did not do.

The argument does not persuade. For a consignation to be necessary, the creditor must have refused, without just cause, to accept the debtors payment. 15 However, as pointed out earlier, petitioner accepted respondents check.

To iterate, the tender was made by respondent for the purpose of settling its obligation. It was incumbent upon petitioner to refuse, or accept it as payment. The latter did not have the right or the option to accept and treat it as a deposit. Thus, by accepting the tendered check and converting it into money, petitioner is presumed to have accepted it as payment. To hold otherwise would be inequitable and unfair to the obligor.

Second Issue:chanrob1es virtual 1aw libraryNature of the Transfer of Respondents Account

Petitioner bewails the CAs characterization of the transfer of respondents account from Pacific Banking Corporation to petitioner as an "ineffective novation." Petitioner contends that the transfer was an assignment of credit.

Indeed, the transfer of respondents credit from PaBC to petitioner was an assignment of credit. Petitioners acquisition of respondents credit did not involve any changes in the original agreement between PaBC and respondent; neither did it vary the rights and the obligations of the parties. Thus, no novation by conventional subrogation could have taken place.

An assignment of credit is 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 the need of the debtors 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. 16

In the present case, it is undisputed that petitioner purchased respondents loan from PaBC. In doing so, the former acquired all of the latters rights against Respondent. Thus, petitioner had the right to collect the full value of the credit from respondent, subject to the terms as orally agreed upon in the Promissory Note. HCSEcI

Third Issue:chanrob1es virtual 1aw libraryApplicable Interest Rate

Petitioner bank, as assignee of respondents credit, is entitled to the interest rate of 20 percent in the computation of the debt of private respondent, as stipulated in the August 26, 1983 Promissory Note executed by the latter in favor of PaBC. 17

However, because there was a valid tender of payment made on November 14, 1988, the accrual of interest based on the stipulated rate should stop on that date. Thus, respondent should pay petitioner-bank its principal obligation in the amount of P1,067,000 plus accrued interest thereon at 20 percent per annum until November 14, 1988, less interest payments given to PaBC from December 1986 to July 8, 1988. 18 Thereafter, the interest shall be computed at 12 percent per annum until full payment.

Fourth Issue:chanrob1es virtual 1aw libraryStatus of Mortgage Contract

The Real Estate Mortgage executed between respondent and PaBC to secure the formers principal obligation, as well as the provision in the Contract of Lease between respondent and Allied Bank with regard to the application of rent payment to the formers indebtedness, should subsist until full and final settlement of such obligation pursuant to the guidelines set forth in this Decision. Thereafter, the parties are free to negotiate a renewal of either or both contracts, or to end any and all of their contractual relations.

WHEREFORE the Petition is hereby DENIED. The assailed Decision of the Court of Appeals is AFFIRMED with the following modifications: Respondent Diaz Realty Inc. is ORDERED to pay Far East Bank and Trust Co. its principal loan obligation in the amount of P1,067,000, with interest thereon computed at 20 percent per annum until November 14, 1988, less any interest payments made to PaBC, petitioners assignor. Thereafter, interest shall be computed at 12 percent per annum until fully paid.chanrob1es virtua1 1aw 1ibrary

G.R. No. 182128, February 19, 2014PHILIPPINE NATIONAL BANK, Petitioner, v. TERESITA TAN DEE, ANTIPOLO PROPERTIES, INC., (NOW PRIME EAST PROPERTIES, INC.) AND AFPRSBS, INC., Respondents.

This is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the Decision2 dated August 13, 2007 and Resolution3 dated March 13, 2008 rendered by the Court of Appeals (CA) in CAG.R. SP No. 86033, which affirmed the Decision4 dated August 4, 2004 of the Office of the President (OP) in O.P. Case No. 04D182 (HLURB Case No. REMA0307240186).Facts of the Case

Some time in July 1994, respondent Teresita Tan Dee (Dee) bought from respondent Prime East Properties Inc.5 (PEPI) on an installment basis a residential lot located in Binangonan, Rizal, with an area of 204 square meters6 and covered by Transfer Certificate of Title (TCT) No. 619608. Subsequently, PEPI assigned its rights over a 213,093sq m property on August 1996 to respondent Armed Forces of the PhilippinesRetirement and Separation Benefits System, Inc. (AFPRSBS), which included the property purchased by Dee.

Thereafter, or on September 10, 1996, PEPI obtained a P205,000,000.00 loan from petitioner Philippine National Bank (petitioner), secured by a mortgage over several properties, including Dees property. The mortgage was cleared by the Housing and Land Use Regulatory Board (HLURB) on September 18, 1996.7cralawred

After Dees full payment of the purchase price, a deed of sale was executed by respondents PEPI and AFPRSBS on July 1998 in Dees favor. Consequently, Dee sought from the petitioner the delivery of the owners duplicate title over the property, to no avail. Thus, she filed with the HLURB a complaint for specific performance to compel delivery of TCT No. 619608 by the petitioner, PEPI and AFPRSBS, among others. In its Decision8 dated May 21, 2003, the HLURB ruled in favor of Dee and disposed as follows:chanRoblesvirtualLawlibraryWHEREFORE, premises considered, judgment is hereby rendered as follows:chanroblesvirtuallawlibrary1. Directing [the petitioner] to cancel/release the mortgage on Lot 12, Block 21A, Village East Executive Homes covered by Transfer Certificate of Title No. 619608 (TCT No. 619608), and accordingly, surrender/release the title thereof to [Dee];2. Immediately upon receipt by [Dee] of the owners duplicate of Transfer Certificate of Title No. 619608 (TCT No. 619608), respondents PEPI and AFPRSBS are hereby ordered to deliver the title of the subject lot in the name of [Dee] free from all liens and encumbrances;3. Directing respondents PEPI and AFPRSBS to pay [the petitioner] the redemption value of Lot 12, Block 21A, Village East Executive Homes covered by Transfer Certificate of Title No. 619608 (TCT No. 619608) as agreed upon by them in their Real Estate Mortgage within six (6) months from the time the owners duplicate of Transfer Certificate of Title No. 619608 (TCT No. 619608) is actually surrendered and released by [the petitioner] to [Dee];4. In the alternative, in case of legal and physical impossibility on the part of [PEPI, AFPRSBS, and the petitioner] to comply and perform their respective obligation/s, as abovementioned, respondents PEPI and AFPRSBS are hereby ordered to jointly and severally pay to [Dee] the amount of FIVE HUNDRED TWENTY THOUSAND PESOS ([P]520,000.00) plus twelve percent (12%) interest to be computed from the filing of complaint on April 24, 2002 until fully paid; and5. Ordering [PEPI, AFPRSBS, and the petitioner] to pay jointly and severally [Dee] the following sums:a) The amount of TWENTY FIVE THOUSAND PESOS ([P]25,000.00) as attorneys fees;

b) The cost of litigation[;] and

c)An administrative fine of TEN THOUSAND PESOS ([P]10,000.00) payable to this Office fifteen (15) days upon receipt of this decision, for violation of Section 18 in relation to Section 38 of PD 957.

SO ORDERED.9ChanRoblesVirtualawlibrary The HLURB decision was affirmed by its Board of Commissioners per Decision dated March 15, 2004, with modification as to the rate of interest.10

On appeal, the Board of Commissioners decision was affirmed by the OP in its Decision dated August 4, 2004, with modification as to the monetary award.11cralawred

Hence, the petitioner filed a petition for review with the CA, which, in turn, issued the assailed Decision dated August 13, 2007, affirming the OP decision. The dispositive portion of the decision reads:chanRoblesvirtualLawlibraryWHEREFORE, in view of the foregoing, the petition is DENIED. The Decision dated August 4, 2004 rendered by the Office of the President in O. P. Case No. 04D182 (HLURB Case No. REMA0307240186) is hereby AFFIRMED.chanroblesvirtualawlibrary

SO ORDERED. 12ChanRoblesVirtualawlibrary Its motion for reconsideration having been denied by the CA in the Resolution dated March 13, 2008, the petitioner filed the present petition for review on the following grounds:chanRoblesvirtualLawlibraryI. THE HONORABLE COURT OF APPEALS ERRED IN ORDERING OUTRIGHT RELEASE OF TCT NO. 619608 DESPITE PNBS DULY REGISTERED AND HLURB[] APPROVED MORTGAGE ON TCT NO. 619608.II. THE HONORABLE COURT OF APPEALS ERRED IN ORDERING CANCELLATION OF MORTGAGE/RELEASE OF TITLE IN FAVOR OF RESPONDENT DEE DESPITE THE LACK OF PAYMENT OR SETTLEMENT BY THE MORTGAGOR (API/PEPI and AFPRSBS) OF ITS EXISTING LOAN OBLIGATION TO PNB, OR THE PRIOR EXERCISE OF RIGHT OF REDEMPTION BY THE MORTGAGOR AS MANDATED BY SECTION 25 OF PD 957 OR DIRECT PAYMENT MADE BY RESPONDENT DEE TO PNB PURSUANT TO THE DEED OF UNDERTAKING WHICH WOULD WARRANT RELEASE OF THE SAME.13The petitioner claims that it has a valid mortgage over Dees property, which was part of the property mortgaged by PEPI to it to secure its loan obligation, and that Dee and PEPI are bound by such mortgage. The petitioner also argues that it is not privy to the transactions between the subdivision project buyers and PEPI, and has no obligation to perform any of their respective undertakings under their contract.14

The petitioner also maintains that Presidential Decree (P.D.) No. 95715 cannot nullify the subsisting agreement between it and PEPI, and that the petitioners rights over the mortgaged properties are protected by Act 313516 . If at all, the petitioner can be compelled to release or cancel the mortgage only after the provisions of P.D. No. 957 on redemption of the mortgage by the owner/developer (Section 25) are complied with