Additional Cases in Credit Trnasactions

7/28/2019 Additional Cases in Credit Trnasactions

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FIRST DIVISION

[ G.R. NO. 158261, December 18, 2006 ]

IN RE: PETITION FOR ASSISTANCE IN THELIQUIDATION OF THE RURAL BANK OF BOKOD

(BENGUET), INC., PHILIPPINE DEPOSIT INSURANCECORPORATION, PETITIONER, VS. BUREAU OF INTERNAL

REVENUE, RESPONDENT

D E C I S I O N

CHICO-NAZARIO, J.:

This is a Petition for Review on Certiorari[1] under Rule 45 of the revised Rulesof Court, praying that this Court set aside the Orders, dated 17 January2003[2] and 13 May 2003,[3] of the Regional Trial Court (RTC) of La Trinidad,Benguet, sitting as the Liquidation Court of the closed Rural Bank of Bokod(Benguet), Inc. (RBBI), in Spec. Proc. No. 91-SP-0060.

There is no dispute as to the antecedent facts of the case, recounted asfollows:

In 1986, a special examination of RBBI was conducted by the Supervisionand Examination Sector (SES) Department III of what is now the BangkoSentral ng Pilipinas (BSP),[4] wherein various loan irregularities wereuncovered. In a letter, dated 20 May 1986, the SES Department III requiredthe RBBI management to infuse fresh capital into the bank, within 30 daysfrom date of the advice, and to correct all the exceptions noted. However, upto the termination of the subsequent general examination conducted by theSES Department III, no concrete action was taken by the RBBI management.In view of the irregularities noted and the insolvent condition of RBBI, themembers of the RBBI Board of Directors were called for a conference at theBSP on 4 August 1986. Only one RBBI Director, a certain Mr. Wakit, attendedthe conference, and the examination findings and related recommendations

were discussed with him. In a letter, dated 4 August 1986, receipt of whichwas acknowledged by Mr. Wakit, the SES Department III warned the RBBIBoard of Directors that, unless substantial remedial measures are taken torehabilitate the bank, it will recommend that the bank be placed underreceivership. In a subsequent letter, dated 17 November 1986, a copy ofwhich was sent to every member of the RBBI Board of Directors viaregistered mail, the SES Department III reiterated its warning that it wouldrecommend the closure of the bank, unless the needed fresh capital wasimmediately infused. Despite these notices, the SES Department III receivedno word from RBBI or from any of its Directors as of 28 November 1986.[5]

In a meeting held on 9 January 1987, the Monetary Board of the BSP decidedto take the following action Rural Bank of Bokod (Benguet), Inc. Report on its examination as of June16, 1986, its placement under receivership

ACTION TAKENFinding to be true the statements of the Special Assistant to the Governorand Head, Supervision and Examination Sector (SES) Department III, in hermemorandum dated 28 November 1986 submitting a report on the general


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examination of the Rural Bank of Bokod (Benguet), Inc. as of 16 June 1986,that the financial condition of the rural bank is one of insolvency and itscontinuance in business would involve further losses to its depositors andcreditors, x x x

x x x x

[T]he Board decided as follows:

a. To forbid the bank to do business in the Philippines and place its assetsand affairs under receivership in accordance with Section 29 of R.A. No. 265,as amended.

b. To designate the Special Assistant to the Governor and Head, SESDepartment III, as Receiver of the bank;

c. To refer the cases of irregularities/frauds to the Office of SpecialInvestigation for further investigation and possible filing of appropriatecharges against the following present/former officers and employees of thebank:

x x x x

d. To include the names of the above-mentioned present and former officersand employees of the bank in the list of persons barred from employment inany financial institution under the supervision of the Central Bank withoutprior clearance from the Central Bank.[6]

A memorandum and report, dated 28 August 1990, were submitted by theDirector of the SES Department III concluding that the RBBI remained ininsolvent financial condition and it can no longer safely resume business withthe depositors, creditors, and the general public. On 7 September 1990, theMonetary Board, after determining and confirming the said memorandumand report, ordered the liquidation of the bank and designated the Director ofthe SES Department III as liquidator.[7]

On 10 April 1991, the designated BSP liquidator of RBBI caused the filingwith the RTC of a Petition for Assistance in the Liquidation of RBBI, docketedas Spec. Proc. No. 91-SP-0060.[8] Subsequently, on 2 June 1992, theMonetary Board transferred to herein petitioner Philippine Deposit Insurance

Corporation (PDIC) the receivership/liquidation of RBBI.[9]

PDIC then filed, on 11 September 2002, a Motion for Approval of Project ofDistribution[10] of the assets of RBBI, in accordance with Section 31, inrelation to Section 30, of Republic Act No. 7653, otherwise known as the NewCentral Bank Act. During the hearing held on 17 January 2003, therespondent Bureau of Internal Revenue (BIR), through Atty. Justo Reginaldo,manifested that PDIC should secure a tax clearance certificate from theappropriate BIR Regional Office, pursuant to Section 52(C) of Republic ActNo. 8424, or the Tax Code of 1997, before it could proceed with thedissolution of RBBI. On even date, the RTC issued one of the assailed Orders,[11]

directing PDIC to comply with Section 52(C) of the Tax Code of 1997within 30 days from receipt of a copy of the said order. Pending compliancetherewith, the RTC held in abeyance the Motion for Approval of Project ofDistribution. On 13 May 2003, the second assailed Order[12] was issued, inwhich the RTC, in resolving the Motion for Reconsideration filed by PDIC,ruled as follows

O R D E R


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Submitted for resolution is petitioner's motion for reconsideration of theorder of this court dated January 17, 2003 holding in abeyance the motionfor approval of the project of distribution pending their compliance with a taxclearance from the Bureau of Internal Revenue.

Petitioner in their motion state that Section 52-C of Republic Act 8424 doesnot cover closed banking institutions like the Rural Bank of Bokod as the lawthat covers liquidation of closed banks is Section 30 of Republic Act No. 7653otherwise known as the new Central Bank Law.

Commenting on the motion for reconsideration the Bureau of InternalRevenue states that the only logic why the Bureau is requesting for a taxclearance is to determine how much taxes, if there be any, is due thegovernment.

The court believes and so holds that petitioner should still secure the

necessary tax clearance in order for it to be cleared of all its tax liabilities asregardless of what law covers the liquidation of closed banks, still thesebanks are subject to payment of taxes mandated by law. Also in its motionfor approval of the project of distribution, paragraph 2, item 2.2 states thatthere are unremitted withholding taxes in the amount of P8,767.32.

This shows that indeed there are still taxes to be paid. In order therefore thatall taxes due the government should be paid, petitioner should secure a taxclearance from the Bureau of Internal Revenue.

Wherefore, based on the foregoing premises, the motion for reconsideration

filed by petitioner is hereby DENIED for lack of merit.

[13]

Hence, PDIC filed the present Petition for Review on Certiorari, under Rule 45of the revised Rules of Court, raising pure questions of law. It made a loneassignment of error, alleging that THE COURT A QUO ERRED IN APPLYING THE PROVISION OF SECTION 52-COF REPUBLIC ACT NO. 8424 DIRECTING THE SUBMISSION OF TAXCLEARANCE FOR CORPORATIONS CONTEMPLATING DISSOLUTION ON ABANK ORDERED CLOSED AND PLACED UNDER RECEIVERSHIP AND,THEREAFTER, UNDER LIQUIDATION, BY THE MONETARY BOARD PURSUANTTO SECTION 30 OF REPUBLIC ACT NO. 7653.[14]

PDIC argues that the closure of banks under Section 30 of the New CentralBank Act is summary in nature and procurement of tax clearance as required

under Section 52(C) of the Tax Code of 1997 is not a condition precedentthereto; that under Section 30, in relation to Section 31, of the New CentralBank Act, asset distribution of a closed bank requires only the approval of theliquidation court; and that the BIR is not without recourse since, subject tothe applicable provisions of the Tax Code of 1997, it may therefore assessthe closed RBBI for tax liabilities, if any.

In its Comment, the BIR countered with the following arguments: that thepresent Petition for Review on Certiorariunder Rule 45 of the revised Rulesof Court is not the proper remedy to question the Order, dated 17 January2003, of the RTC because said order is interlocutory and cannot be the

subject of an appeal; that Section 52(C) of the Tax Code of 1997 applies toall corporations, including banks ordered closed by the Monetary Boardpursuant to Section 30 of the New Central Bank Act; that the RTC may orderthe PDIC to obtain a tax clearance before proceeding to rule on the Motionfor Approval of Project of Distribution of the assets of RBBI; and that thepresent controversy should not have been elevated to this Court since theparties are both government agencies who should have administrativelysettled the dispute.


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This Court finds that there are only two primary issues for the resolution ofthe Petition at bar, one being procedural, and the other substantive. Theprocedural issue involves the question of whether the Petition for Review on

Certiorariunder Rule 45 of the revised Rules of Court is the proper remedyfrom the assailed Orders of the RTC. The substantive issue deals with thedetermination of whether a bank ordered closed and placed underreceivership by the Monetary Board of the BSP still needs to secure a taxclearance certificate from the BIR before the liquidation court approves theproject of distribution of the assets of the bank.

I

This Court shall first proceed with the procedural issue on theappropriateness of the remedy taken by PDIC from the assailed RTC Orders.

The differences between an appeal by certiorariunder Rule 45[15] of therevised Rules of Court and an original action for certiorari under Rule 65[16] ofthe same Rules have been laid down by this Court in the case ofAtty. Paa v.Court of Appeals,[17] to wit

a. In appeal by certiorari, the petition is based on questions of lawwhich the appellant desires the appellate court to resolve. Incertiorari as an original action, the petition raises the issue as towhether the lower court acted without or in excess of jurisdiction orwith grave abuse of discretion.

b. Certiorari, as a mode of appeal, involves the review of thejudgment, award or final order on the merits. The original action forcertiorarimay be directed against an interlocutory order of thecourt prior to appeal from the judgment or where there is noappeal or any other plain, speedy or adequate remedy.

c. Appeal by certiorarimust be made within the reglementary periodfor appeal. An original action for certiorari may be filed not laterthan sixty (60) days from notice of the judgment, order orresolution sought to be assailed.

d. Appeal by certioraristays the judgment, award or order appealedfrom. An original action for certiorari, unless a writ of preliminaryinjunction or a temporary restraining order shall have been issued,

does not stay the challenged proceeding.e. In appeal by certiorari, the petitioner and respondent are the

original parties to the action, and the lower court or quasi-judicialagency is not to be impleaded. In certiorari as an original action,the parties are the aggrieved party against the lower court orquasi-judicial agency and the prevailing parties, who therebyrespectively become the petitioner and respondents.

f. In certiorari for purposes of appeal, the prior filing of a motion forreconsideration is not required (Sec. 1, Rule 45); while in certiorarias an original action, a motion for reconsideration is a conditionprecedent (Villa-Rey Transit vs. Bello, L-18957, April 23, 1963),

subject to certain exceptions.g. In appeal by certiorari, the appellate court is in the exercise of itsappellate jurisdiction and power of review, while in certiorarias anoriginal action, the higher court exercises original jurisdiction underits power of control and supervision over the proccedings of lowercourts.


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Guided by the foregoing distinctions, this Court, in perusing the assailed RTCOrders, dated 17 January 2003 and 13 May 2003, reaches the conclusionthat these are merely interlocutory in nature and are not the proper subjectsof an appeal by certiorariunder Rule 45 of the revised Rules of Court.

This Court has repeatedly and uniformly held that a judgment or order maybe appealed only when it is final, meaning that it completely disposes of thecase and definitively adjudicates the respective rights of the parties, leavingthereafter no substantial proceeding to be had in connection with the caseexcept the proper execution of the judgment or order. Conversely, aninterlocutory order or judgment is not appealable for it does not decide theaction with finality and leaves substantial proceedings still to be had. [18]

The RTC Orders presently questioned before this Court has not disposed ofthe case nor has it adjudicated definitively the rights of the parties in Spec.Proc. No. 91-SP-0060. They only held in abeyance the approval of the Project

of Distribution of the assets of RBBI until PDIC, as liquidator, acquires a taxclearance from the BIR. Indubitably, there are still substantial proceedings tobe had after PDIC presents the required tax clearance to the trial court, sincethe Project of Distribution of assets still has to be finalized and approved.

PDIC avers that the RTC Orders of 17 January 2003 and 13 May 2003 arefinal because, as this Court pronounced in the case ofPacific BankingCorporation Employees' Organization (PaBCEO) v. Court of Appeals,[19] anorder of the liquidation court allowing or disallowing a claim is a final orderand may be the subject of an appeal. It further asserts that the legal issue ofwhether RBBI should secure a tax clearance is a "disputed claim," which was

already allowed by the RTC in its assailed Orders, thus, making the latterfinal.

This Court is unconvinced. The foregoing arguments of PDIC result from astrained interpretation of law and jurisprudence, and are raised in anapparent attempt to justify a very obvious faux pas on its part. While it istrue that in liquidation proceedings, the settlement of disputed or contentiousclaims may require a full-dress hearing and the resolution of legal issues, [20]it does not follow that all legal issues resolved in the course of the liquidationproceedings would automatically be tantamount to an allowance ordisallowance of a disputed or contentious claim. In Spec. Proc. No. 91-SP-0060 pending before the RTC, there can be no doubt that the claim of the

BIR against RBBI consists of the unpaid tax liabilities of the latter. The BIRcontends that it could only determine the existence and correct amount ofthe tax liabilities of RBBI if PDIC, as liquidator of the bank, secures a taxclearance from the appropriate BIR Regional Office. The acquirement of a taxclearance is not the claim of the BIR against RBBI, it is only the means bywhich to ascertain such claim. Whatever tax liabilities the BIR may claimagainst RBBI can still be disputed before the RTC by the PDIC, as liquidatorof the bank, whether as to the existence or computation of the said taxliabilities, and it is the ruling of the RTC on such matters that may constitutea final order which definitively settles the claim of the BIR. The mere grantby the RTC of the motion requiring PDIC, as liquidator of RBBI, to secure a

tax clearance, does not yet constitute an adjudication of the claim of the BIR.Hence, the assailed RTC Orders, dated 17 January 2003 and 13 May 2003,are clearly interlocutory in nature.

As a general rule, an interlocutory order is not appealable until after therendition of the judgment on the merits, given that a contrary rule woulddelay the administration of justice and unduly burden the courts. This Court,however, has also held that an original action for certiorariunder Rule 65 of


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the revised Rules of Court is an appropriate remedy to assail an interlocutoryorder when (1) the tribunal issued such order without or in excess of

jurisdiction or with grave abuse of discretion, and (2) the assailedinterlocutory order is patently erroneous and the remedy of appeal would not

afford adequate and expeditious relief.

[21]

Thus, despite this Court's findingthat PDIC, as the liquidator of RBBI, availed itself of the wrong remedy byfiling an appeal by certiorari under Rule 45 of the revised Rules of Court, Weshall adopt a positive and pragmatic approach, and, instead of dismissing theinstant Petition outright, it shall treat the same as an original action forcertiorariunder Rule 65 of the same Rules, in consideration of the crucialissues and substantial arguments already presented by the concerned partiesbefore this Court.[22]

II

Having disposed of the procedural issue, this Court now addresses the

substantive issue of whether RBBI, as represented by its liquidator, PDIC,still needs to secure a tax clearance from the BIR before the RTC couldapprove the Project of Distribution of the assets of RBBI.

The BIR anchors its position that a tax clearance is necessary on Section52(C) of the Tax Code of 1997, which provides SEC. 52. Corporation Returns.

x x x x

(C) Return of Corporation Contemplating Dissolution or Reorganization.

Every corporation shall, within thirty days (30) after the adoption by thecorporation of a resolution or plan for its dissolution, or for the liquidation ofthe whole or any part of its capital stock, including a corporation which hasbeen notified of possible involuntary dissolution by the Securities andExchange Commission, or for its reorganization, render a correct return tothe Commissioner, verified under oath, setting forth the terms of suchresolution or plan and such other information as the Secretary of Finance,upon recommendation of the Commissioner, shall, by rules and regulations,prescribe.

The dissolving or reorganizing corporation shall, prior to the issuance by theSecurities and Exchange Commission of the Certificate of Dissolution or

Reorganization, as may be defined by rules and regulations prescribed by theSecretary of Finance, upon recommendation of the Commissioner, secure acertificate of tax clearance from the Bureau of Internal Revenue whichcertificate shall be submitted to the Securities and Exchange Commission.To implement the foregoing provision, the BIR still relies on the regulations it

jointly issued with the Securities and Exchange Commission (SEC) in 1985,when the Tax Code of 1977 was still in effect and a similar provision could befound in Section 46(C) thereof. The full text of the regulations is reproducedbelow

BIR-SEC REGULATIONS NO. 1

SUBJECT: Regulations to Implement the Provisions of Executive Order No.1026, Amending Section 46(c) of the National Internal Revenue Code of1977, as amended, Requiring Dissolving Corporations to File InformationReturns and Secure Tax Clearance from the Commissioner of InternalRevenue, and Providing Adequate Penalties for Violations Thereof.

TO: All Internal Revenue Officers and Others Concerned.


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Pursuant to the provisions of Section 277, in relation to Section 4 of theNational Revenue Code of 1977, as amended, the following regulations arehereby promulgated.

Section 1. Scope. These regulations shall govern the procedure for theissuance of tax clearance certificates to dissolving corporations. This shallinclude corporations intending to dissolve or liquidate the whole or any partof its capital stocks, as well as, corporations which have been notified ofpossible involuntary dissolution by the Securities and Exchange Commission.

Section 2. Requirements in case of dissolution. a) Every Corporation shall,within thirty (30) days after

- the adoption by the corporation of a resolution or plan for the dissolution ofthe corporation, or for the liquidation of the whole or any part of its capitalstock, or

- the receipt of an order of suspension by the Securities and ExchangeCommission in case of involuntary dissolution,

file their income tax returns covering the income earned by them from thebeginning of the taxable year up to date of such dissolution.

In addition thereto, they shall submit within the same period and verifiedunder oath, the following documents:

1. a copy of the articles of incorporation and by-laws;2. a copy of the resolution authorizing dissolution; and

3. balance sheet as of the date of dissolution and a profit andloss statement covering the period from the beginning of thetaxable year to the date of dissolution.

b) The Securities and Exchange Commission whenever it issues an order ofinvoluntary dissolution or suspension of the primary franchise or certificate ofregistration of a corporation, shall at the same time furnish theCommissioner of Internal Revenue a copy of such order.

Section 3. Tax clearance certificate. a) Within thirty (30) days from receiptof the documents mentioned in the preceding Section, the Commissioner ofInternal Revenue, or his duly authorized representative, shall issue the

corresponding tax clearance certificate (BIR Form No. 17.61) for thecorporation which will be dissolved.

b) The Securities and Exchange Commission shall issue the final order ofdissolution only after a certificate of tax clearance has been submitted by thedissolving corporation: Provided, that in case of involuntary dissolution, theSecurities and Exchange Commission may nevertheless proceed with thedissolution if thirty (30) days after receipt of the suspension order no taxclearance has yet been issued.

Section 4. Penalty. Failure to render the return and secure the certificate of

tax clearance as above-mentioned shall subject the officer(s) of thecorporation required by law to file the return under Section 46(a) of theNational Internal Revenue Code of 1977, as amended, to a fine of not lessthan P5,000.00 or imprisonment of not less than two (2) years, and shallmake them liable for all outstanding or unpaid tax liabilities of the dissolvingcorporation.

Section 5. Effectivity. These regulations shall apply to all corporate


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dissolution taking place on or after May 14, 1985.

Section 6. Repealing Clause. All revenue regulations, orders and circularswhich are inconsistent herewith are hereby modified accordingly.

The afore-quoted Tax Code provision and regulations refer to a voluntarydissolution and/or liquidation of a corporation through its adoption of aresolution or plan to that effect, or an involuntary dissolution of a corporationby order of the SEC. They make no reference at all to a situation similar tothe one at bar in which a banking corporation is ordered closed and placedunder receivership by the BSP and its assets judicially liquidated. Now, thedetermining question is, whether Section 52(C) of the Tax Code of 1997 andBIR-SEC Regulations No. 1 could be made to apply to the present case.This Court rules in the negative.

First, Section 52(C) of the Tax Code of 1997 and the BIR-SEC RegulationsNo. 1 regulate the relations only as between the SEC and the BIR, making a

certificate of tax clearance a prior requirement before the SEC could approvethe dissolution of a corporation. In Spec. Proc. No. 91-SP-0060 pendingbefore the RTC, RBBI was placed under receivership and ordered liquidatedby the BSP, not the SEC; and the SEC is not even a party in the said case,although the BIR is. This Court cannot find any basis to extend the SECrequirements for dissolution of a corporation to the liquidation proceedings ofRBBI before the RTC when the SEC is not even involved therein.

It is conceded that the SEC has the authority to order the dissolution of acorporation pursuant to Section 121 of Batas Pambansa Blg. 68, otherwiseknown as the Corporation Code of the Philippines, which reads

Sec. 121. Involuntary dissolution. A corporation may be dissolved by theSecurities and Exchange Commission upon filing of a verified complaint andafter proper notice and hearing on the grounds provided by existing laws,rules and regulations.The Corporation Code, however, is a general law applying to all types ofcorporations, while the New Central Bank Act regulates specifically banks andother financial institutions, including the dissolution and liquidation thereof.As between a general and special law, the latter shall prevail generaliaspecialibus non derogant.[23]

The liquidation of RBBI is undertaken according to Sections 30 of the NewCentral Bank Act, viz

Sec. 30. Proceedings in Receivership and Liquidation. - Whenever, uponreport of the head of the supervising or examining department, the MonetaryBoard finds that a bank or quasi-bank:

(a) is unable to pay its liabilities as they become due in the ordinary courseof business: Provided, That this shall not include inability to pay caused byextraordinary demands induced by financial panic in the banking community;

(b) has insufficient realizable assets, as determined by the Bangko Sentral,to meet its liabilities; or

(c) cannot continue in business without involving probable losses to itsdepositors or creditors; or

(d) has wilfully violated a cease and desist order under Section 37 that hasbecome final, involving acts or transactions which amount to fraud or adissipation of the assets of the institution; in which cases, the MonetaryBoard may summarily and without need for prior hearing forbid theinstitution from doing business in the Philippines and designate the Philippine


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Deposit Insurance Corporation as receiver of the banking institution.

For a quasi-bank, any person of recognized competence in banking or financemay be designated as receiver.

The receiver shall immediately gather and take charge of all the assets andliabilities of the institution, administer the same for the benefit of itscreditors, and exercise the general powers of a receiver under the RevisedRules of Court but shall not, with the exception of administrativeexpenditures, pay or commit any act that will involve the transfer ordisposition of any asset of the institution: Provided, That the receiver maydeposit or place the funds of the institution in non-speculative investments.The receiver shall determine as soon as possible, but not later than ninety(90) days from take over, whether the institution may be rehabilitated orotherwise placed in such a condition that it may be permitted to resumebusiness with safety to its depositors and creditors and the general public:

Provided, That any determination for the resumption of business of theinstitution shall be subject to prior approval of the Monetary Board.

If the receiver determines that the institution cannot be rehabilitated orpermitted to resume business in accordance with the next precedingparagraph, the Monetary Board shall notify in writing the board of directorsof its findings and direct the receiver to proceed with the liquidation of theinstitution. The receiver shall:

(1) file ex parte with the proper regional trial court, and without requirementof prior notice or any other action, a petition for assistance in the liquidation

of the institution pursuant to a liquidation plan adopted by the PhilippineDeposit Insurance Corporation for general application to all closed banks. Incase of quasi-banks, the liquidation plan shall be adopted by the MonetaryBoard. Upon acquiring jurisdiction, the court shall, upon motion by thereceiver after due notice, adjudicate disputed claims against the institution,assist the enforcement of individual liabilities of the stockholders, directorsand officers, and decide on other issues as may be material to implement theliquidation plan adopted. The receiver shall pay the cost of the proceedingsfrom the assets of the institution.

(2) convert the assets of the institution to money, dispose of the same tocreditors and other parties, for the purpose of paying the debts of such

institution in accordance with the rules on concurrence and preference ofcredit under the Civil Code of the Philippines and he may, in the name of theinstitution, and with the assistance of counsel as he may retain, institutesuch actions as may be necessary to collect and recover accounts and assetsof, or defend any action against, the institution. The assets of an institutionunder receivership or liquidation shall be deemed in custodia legis in thehands of the receiver and shall, from the moment the institution was placedunder such receivership or liquidation, be exempt from any order ofgarnishment, levy, attachment, or execution.

The actions of the Monetary Board taken under this section or under Section

29 of this Act shall be final and executory, and may not be restrained or setaside by the court except on petition for certiorari on the ground that theaction taken was in excess of jurisdiction or with such grave abuse ofdiscretion as to amount to lack or excess of jurisdiction. The petition forcertiorari may only be filed by the stockholders of record representing themajority of the capital stock within ten (10) days from receipt by the board ofdirectors of the institution of the order directing receivership, liquidation orconservatorship.


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The designation of a conservator under Section 29 of this Act or theappointment of a receiver under this section shall be vested exclusively withthe Monetary Board. Furthermore, the designation of a conservator is not a

precondition to the designation of a receiver.Section 30 of the New Central Bank Act lays down the proceedings forreceivership and liquidation of a bank. The said provision is silent as regardsthe securing of a tax clearance from the BIR. The omission, nonetheless,cannot compel this Court to apply by analogy the tax clearance requirementof the SEC, as stated in Section 52(C) of the Tax Code of 1997 and BIR-SECRegulations No. 1, since, again, the dissolution of a corporation by the SEC isa totally different proceeding from the receivership and liquidation of a bankby the BSP. This Court cannot simply replace any reference by Section 52(C)of the Tax Code of 1997 and the provisions of the BIR-SEC Regulations No. 1to the "SEC" with the "BSP." To do so would be to read into the law and theregulations something that is simply not there, and would be tantamount to

judicial legislation.

It should be noted that there are substantial differences in the procedure forinvoluntary dissolution and liquidation of a corporation under the CorporationCode, and that of a banking corporation under the New Central Bank Act, sothat the requirements in one cannot simply be imposed in the other.

Under the Corporation Code, the SEC may dissolve a corporation, upon thefiling of a verified complaintand after proper notice and hearing, ongrounds provided by existing laws, rules, and regulations.[24] Upon receipt bythe corporation of the order of suspension from the SEC, it is required to

notify and submit a copy of the said order, together with its final tax return,to the BIR. The SEC is also required to furnish the BIR a copy of its order ofsuspension. The BIR is supposed to issue a tax clearance to the corporationwithin 30 days from receipt of the foregoing documentary requirements. TheSEC shall issue the final order of dissolution only after the corporation hassubmitted its tax clearance; or in case of involuntary dissolution, the SECmay proceed with the dissolution after 30 days from receipt by the BIR of thedocumentary requirements without a tax clearance having been issued.[25]The corporation is allowed to continue as a body corporate for three yearsafter its dissolution, for the purpose of prosecuting and defending suits by oragainst it, to settle and close its affairs, and to dispose of and convey itsproperty and distribute its assets, but not for the purpose of continuing its

business. The corporation may undertake its own

liquidation, or at any timeduring the said three years, it may conveyall of its property to trustees forthe benefit of its stockholders, members, creditors, and other persons ininterest.[26]

In contrast, the Monetary Board maysummarilyand without need forprior hearing, forbid the banking corporation from doing business in thePhilippines, for causes enumerated in Section 30 of the New Central BankAct; and appointthe PDIC as receiver of the bank. PDIC shall immediatelygather and take charge of all the assets and liabilities of the closed bank andadminister the same for the benefit of its creditors. The summary nature of

the procedure for the involuntary closure of a bank is especially stressed inSection 30 of the New Central Bank Act, which explicitly states that theactions of the Monetary Board under the said Section or Section 29 shall befinal and executory, and may not be restrained or set aside by the courtexcept on a Petition for Certiorari filed by the stockholders of record of thebank representing a majority of the capital stock. PDIC, as the appointedreceiver, shall file ex parte with the proper RTC, and without requirementof prior notice or any other action, apetition for assistance in the


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liquidation of the bank. The bank is not given the option to undertake itsown

liquidation.

Second, the alleged purpose of the BIR in requiring the liquidator PDIC to

secure a tax clearance is to enable it to determine the tax liabilities of theclosed bank. It raised the point that since the PDIC, as receiver andliquidator, failed to file the final return of RBBI for the year its operationswere stopped, the BIR had no way of determining whether the bank still hadoutstanding tax liabilities.

To our mind, what the BIR should have requested from the RTC, and whatwas within the discretion of the RTC to grant, is not an order for PDIC, asliquidator of RBBI, to secure a tax clearance; but, rather, for it to submit thefinal return of RBBI. The first paragraph of Section 30(C) of the Tax Code of1997, read in conjunction with Section 54 of the same Code, clearly imposesupon PDIC, as the receiver and liquidator of RBBI, the duty to file such a

return. The pertinent provisions are reproduced below for reference SEC. 52. Corporation Returns.

x x x x

(C) Return of Corporation Contemplating Dissolution or Reorganization. Every corporation shall, within thirty days (30) after the adoption by thecorporation of a resolution or plan for its dissolution, or for the liquidation ofthe whole or any part of its capital stock, including a corporation which hasbeen notified of possible involuntary dissolution by the Securities andExchange Commission, or for its reorganization, render a correct return to

the Commissioner, verified under oath, setting forth the terms of suchresolution or plan and such other information as the Secretary of Finance,upon recommendation of the Commissioner, shall, by rules and regulations,prescribe.

x x x x

SEC. 54. Returns of receivers, Trustees in Bankruptcy or Assignees. Incases wherein receivers, trustees in bankruptcy or assignees are operatingthe property or business of a corporation, subject to the tax imposed by thisTitle, such receivers, trustees or assignees shall make returns of net incomeas and for such corporation, in the same manner and form as such an

organization is hereinbefore required to make returns, and any tax due onthe income as returned by receivers, trustees or assignees shall be assessedand collected in the same manner as if assessed directly against theorganizations of whose businesses or properties they have custody orcontrol.Section 54 of the Tax Code of 1997 imposes a general duty on all receivers,trustees in bankruptcy, and assignees, who operate and preserve the assetsof a corporation, regardless of the circumstances or the law by which theycame to hold their positions, to file the necessary returns on behalf of thecorporation under their care.

The filing by PDIC of a final tax return, on behalf of RBBI, should alreadyaddress the supposed concern of the BIR and would already enable the latterto determine if RBBI still had outstanding tax liabilities.

The unreasonableness and impossibility of requiring a tax clearance beforethe approval by the RTC of the Project of Distribution of the assets of theRBBI becomes apparent when the timeline of the proceedings is considered.


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The BIR can only issue a certificate of tax clearance when the taxpayer hadcompletely paid off his tax liabilities. The certificate of tax clearance atteststhat the taxpayer no longer has any outstanding tax obligations to theGovernment.

Should the BIR find that RBBI still had outstanding tax liabilities, PDIC willnot be able to pay the same because the Project of Distribution of the assetsof RBBI remains unapproved by the RTC; and, if RBBI still had outstandingtax liabilities, the BIR will not issue a tax clearance; but, without the taxclearance, the Project of Distribution of assets, which allocates the paymentfor the tax liabilities, will not be approved by the RTC. It will be a chicken-and-egg dilemma.

The Government, in this case, cannot generally claim preference of credit,and receive payment ahead of the other creditors of RBBI. Duties, taxes, andfees due the Government enjoy priority only when they are with reference to

a specific movable property, under Article 2241(1) of the Civil Code, orimmovable property, under Article 2242(1) of the same Code. However, withreference to the other real and personal property of the debtor, sometimesreferred to as "free property," the taxes and assessments due the NationalGovernment, other than those in Articles 2241(1) and 2242(1) of the CivilCode, will come only in ninth place in the order of preference. [27]

Thus, the recourse of the BIR, after assessing the final return and examiningall other pertinent documents of RBBI, and making a determination of thelatter's outstanding tax liabilities, is to present its claim, on behalf of theNational Government, before the RTC during the liquidation proceedings. The

BIR is expected to prove and substantiate its claim, in the same manner asthe other creditors. It is only after the RTC allows the claim of the BIR,together with the claims of the other creditors, can a Project for Distributionof the assets of RBBI be finalized and approved. PDIC, then, as liquidator,may proceed with the disposition of the assets of RBBI and pay the latter'sfinancial obligations, including its outstanding tax liabilities. And, finally, onlyafter such payment, can the BIR issue a certificate of tax clearance in thename of RBBI.

Third, the evident void in current statutes and regulations as to the relationsamong the BIR, as tax collector of the National Government; the BSP, asregulator of the banks; and the PDIC, as the receiver and liquidator of banks

ordered closed by the BSP, is not for this Court to fill in. It is up to thelegislature to address the matter through appropriate legislation, and to theexecutive to provide the regulations for its implementation.

It is for these reasons that the RTC committed grave abuse of discretion, andcommitted patent error, in ordering the PDIC, as the liquidator of RBBI, tofirst secure a tax clearance from the appropriate BIR Regional Office, andholding in abeyance the approval of the Project of Distribution of the assetsof the RBBI by virtue thereof.

Although this Court rules in favor of PDIC, in the sense that a tax clearance is

not a prerequisite to the approval of the Project of Distribution of the assetsof RBBI, it cannot uphold its argument that the Spec. Proc. No. 91-SP-0060is summary in nature.

Section 30(d) of the New Central Bank Act gives the Monetary Board of theBSP the power to, summarily and without need for prior hearing, forbidabank or quasi-bank from doing business in the Philippines and designatingthe PDIC as receiver of the banking institution. It bears to emphasize that:


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(1) the power is granted to the Monetary Board of the BSP; and (2) what issummary in nature is the power of the Monetary Board of the BSP to forbidor stop a bank or quasi-bank from doing further business.

Once liquidation proceedings are instituted before the appropriate trial court,and the trial court assumes jurisdiction over the Petition, then theproceedings take a different character. Spec. Proc. No. 91-SP-0600 is theliquidation proceedings initiated by the PDIC before the RTC. Liquidationproceedings have been described in detail in the case ofPacific BankingCorporation Employees' Organization (PaBCEO) v. Court of Appeals,[28] to wit[A] liquidation proceeding resembles the proceeding for the settlement ofestate of deceased persons under Rules 73 to 91 of the Rules of Court. Thetwo have a common purpose: the determination of all the assets and thepayment of all the debts and liabilities of the insolvent corporation or theestate. The Liquidator and the administrator or executor are both charged

with the assets for the benefit of the claimants. In both instances, the liabilityof the corporation and the estate is not disputed. The court's concern iswith the declaration of creditors and their rights and thedetermination of their order of payment

x x x x

A

liquidation proceeding is a single proceeding which consists of a number ofcases properly classified as "claims." It is basically a two-phased proceeding.The first phase is concerned with the approval and disapproval of claims.Upon the approval of the petition seeking the assistance of the proper court

in the

liquidation of a closed entity, all money claims against the bank arerequired to be filed with the liquidation court. This phase may end with thedeclaration by the liquidation court that the claim is not proper or withoutbasis. On the other hand, it may also end with the liquidation court allowingthe claim. In the latter case, the claim shall be classified whether it isordinary or preferred, and thereafter included Liquidator. In either case, theorder allowing or disallowing a particular claim is final order, and may beappealed by the party aggrieved thereby.

Thesecond phase involves the approval by the Court of the distributionplan prepared by the duly appointed liquidator. The distribution plan specifiesin detail the total amount available for distribution to creditors whose claim

were earlier allowed. The Order finally disposes of the issue of how muchproperty is available for disposal. Moreover, it ushers in the final phase of the

liquidation proceeding - payment of all allowed claims in accordance with theorder of legal priority and the approved distribution plan.

x x x x

A liquidation proceeding is commenced by the filing of a single petition by theSolicitor General with a court of competent jurisdiction entitled, "Petition forAssistance in the Liquidation of e.g., Pacific Banking Corporation."All claimsagainst the insolvent are required to be filed with the liquidation court.

Although the claims are litigatedin the same proceeding, the treatment isindividual. Each claim is heard separately. And the Order issued relative to aparticular claim applies only to said claim, leaving the other claimsunaffected, as each claim is considered separate and distinct from the others.x x x [Emphases supplied.]Irrefragably,

liquidation proceedings cannot be summary in nature. Itrequires the holding of hearings and presentation of evidence of the partiesconcerned, i.e., creditors who must prove and substantiate their claims, and


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the liquidator disputing the same. It also allows for multiple appeals, so thateach creditor may appeal a final order rendered against its claim. Hence,liquidation proceedings may very well be highly-contested and drawn-out,because, at the end of it all, all claims against the corporation undergoing

litigation must be settled definitively and its assets properly disposed off.

WHEREFORE, in view of the foregoing, this Court rules as follows

(a) The instant Petition is GRANTED and the Orders, dated 17 January 2003and 13 May 2003, of the RTC, sitting as the Liquidation Court of the closedRBBI, in Spec. Proc. No. 91-SP-0060, are NULLIFIED and SET ASIDE forhaving been rendered with grave abuse of discretion;

(b) The PDIC, as liquidator, is ORDERED to submit to the BIR the final taxreturn of RBBI, in accordance with the first paragraph of Section 52(C), inconnection with Section 54, of the Tax Code of 1997; and

(c) The RTC is ORDERED to resume the liquidation proceedings in Spec.Proc. No. 91-SP-0060 in order to determine all the claims of the creditors,including that of the National Government, as determined and presented bythe BIR; and, pursuant to such determination, and guided accordingly by theprovisions of the Civil Code on preference of credit, to review and approvethe Project of Distribution of the assets of RBBI.

SO ORDERED.

Ynares-Santiago, Austria-Martinez, and Callejo, Sr., JJ., concur.

* Retired as of 7 December 2006.

[1]Rollo, pp. 16-36.

[2] Penned by Presiding Judge Marybelle L. Demot Marias, id. at 38-39.

[3] Id. at 41.

[4] Formerly referred to as the Central Bank of the Philippines, prior to

Republic Act No. 7653.

[5]Rollo, pp. 53, 56.

[6]Rollo, pp. 53-57.

[7] Records, vol. 1, pp. 26-28.

[8] Id. at 1-8.

[9]Rollo, p. 58.

[10] Records, pp. 186-201.

[11]Rollo, pp. 38-39.

[12] Id. at 41.

[13] Id.


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[14] Id. at 23-24.

[15] Section 1, Rule 45 of the revised Rules of Court reads

SECTION 1. Filing of petition with Supreme Court. A party desiring toappeal by certiorari from a judgment or final order or resolution of the Courtof Appeals, the Sandiganbayan, the Regional Trial Court or other courtswhenever authorized by law, may file with the Supreme Court a verifiedpetition for review on certiorari. The petition shall raise only questions of lawwhich must be distinctly set forth.[16] Section, Rule 65 of the revised Rules of Court provides SECTION 1. Petition for certiorari. When any tribunal, board or officerexercising judicial or quasi-judicial functions has acted without or in excess ofits or his jurisdiction, or with grave abuse of discretion amounting to lack orexcess of jurisdiction, and there is no appeal, nor any plain, speedy, andadequate remedy in the ordinary course of law, a person aggrieved thereby

may file a verified petition in the proper court, alleging the facts withcertainty and praying that judgment be rendered annulling or modifying theproceedings of such tribunal, board or officer, and granting such incidentalreliefs as law and justice may require.[17] 347 Phil. 122, 136-137 (1997).

[18]People v. Doriquez, 133 Phil. 295, 299 (1968).

[19] 312 Phil. 578 (1995).

[20]Hernandez v. Rural Bank of Lucena, G.R. No. L-29791, 10 January 1978,

81 SCRA 75, 88.[21]J.L. Bernardo Construction v. Court of Appeals, 381 Phil. 25, 36 (2000).

[22] See People v. Doriquez, supra note 15 at 301.

[23]Laureano v. Court of Appeals, 381 Phil. 403, 411-412 (2000).

[24] CORPORATION CODE, Section 121.

[25] BIR-SEC Regulations No. 1, Sections 2 and 3.

[26] CORPORATION CODE, Section 122.

[27]Republic v. Peralta, G.R. No. L-56568, 20 May 1987, 150 SCRA 37, 46-47.

[28] Supra note 16 at 593-594.

THIRD DIVISION

[ G.R. No. 170782, June 22, 2009 ]


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SIAIN ENTERPRISES, INC., PETITIONER, VS.CUPERTINO REALTY CORP. AND EDWIN R. CATACUTAN,

RESPONDENTS.

DECISION

NACHURA, J.:

Before us is a petition for review on certiorariunder Rule 45 of the Rules ofCourt assailing the decision of the Court of Appeals in CA-G.R. CV No.71424[1] which affirmed the decision of the Regional Trial Court, Branch 29,Iloilo City in Civil Case No. 23244.[2]

On April 10, 1995, petitioner Siain Enterprises, Inc. obtained a loan of

P37,000,000.00 from respondent Cupertino Realty Corporation (Cupertino)covered by a promissory note signed by both petitioner's and Cupertino'srespective presidents, Cua Le Leng and Wilfredo Lua. The promissory noteauthorizes Cupertino, as the creditor, to place in escrow the loan proceeds ofP37,000,000.00 with Metropolitan Bank & Trust Company to pay offpetitioner's loan obligation with Development Bank of the Philippines (DBP).To secure the loan, petitioner, on the same date, executed a real estatemortgage over two (2) parcels of land and other immovables, such asequipment and machineries.

Two (2) days thereafter, or on April 12, 1995, the parties executed an

amendment to promissory note which provided for a seventeen percent(17%) interest per annum on the P37,000,000.00 loan.[3] The amendment topromissory note was likewise signed by Cua Le Leng and Wilfredo Lua onbehalf of petitioner and Cupertino, respectively.

On August 16, 1995, Cua Le Leng signed a second promissory note in favorof Cupertino for P160,000,000.00. Cua Le Leng signed the second promissorynote as maker, on behalf of petitioner, and as co-maker, liable to Cupertinoin her personal capacity. This second promissory note provides:

PROMISSORY NOTE

AMOUNT DATE: AUGUST 16, 1995

ONE HUNDRED SIXTY MILLION PESOS(PHP 160,000,000.00)

FOR VALUE RECEIVED, after one (1) year from this date on or August 16,1996, WE, SIAIN ENTERPRISES INC. with Metro Manila office address at 306J.P. Rizal St., Mandaluyong City, represented herein by its duly authorizedPresident, Ms. LELENG CUA, (a copy of her authority is hereto attached asAnnex "A") and Ms. LELENG CUA in her personal capacity, a resident ofILOILO CITY, jointly and severally, unconditionally promise to payCUPERTINO REALTY CORPORATION, or order, an existing corporation dulyorganized under Philippine laws, the amount/sum of ONE HUNDRED SIXTY

MILLION PESOS (PHP 160,000,000.00), Philippine Currency, without furtherneed of any demand, at the office of CUPERTINO REALTY CORPORATION;

The amount/sum of ONE HUNDRED SIXTY MILLION PESOS (PHP160,000,000.00) shall earn a compounding interest of 30% per annum whichinterest shall be payable to CUPERTINO REALTY CORPORATION at its abovegiven address ON THE FIRST DAY OF EVERY MONTH WITHOUT THE NEED OFDEMAND.


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In case We fail to pay the principal amount of this note at maturity or in theevent of bankruptcy or insolvency, receivership, levy of execution,garnishment or attachment or in case of conviction for a criminal offense

carrying with it the penalty of civil interdiction or in any of the cases coveredby Article 1198 of the Civil Code of the Philippines, then the entire principalof this note and other interests and penalties due thereon shall, at the optionof CUPERTINO REALTY CORPORATION, immediately become due and payableand We jointly and severally agree to pay additionally a penalty at the rate ofTHREE PERCENT (3%) per month on the total amount/sum due until fullypaid. Furthermore, We jointly and severally agree to pay an additional sumequivalent to 20% of the total amount due but in no case less than PHP100,000.00 as and for attorney's fees in addition to expenses and costs ofsuit.

We hereby authorize and empower CUPERTINO REALTY CORPORATION at its

option at any time, without notice, to apply to the payment of this note andor any other particular obligation or obligations of all or any one of us toCUPERTINO REALTY CORPORATION, as it may select, irrespective of thedates of maturity, whether or not said obligations are then due, any and allmoneys, checks, securities and things of value which are now or which mayhereafter be in its hand on deposit or otherwise to the credit of, or belongingto, both or any one of us, and CUPERTINO REALTY CORPORATION is herebyauthorized to sell at public or private sale such checks, securities, or things ofvalue for the purpose of applying the proceeds thereof to such payments ofthis note.

We hereby expressly consent to any extension and/or renewals hereof inwhole or in part and/or partial payment on account which may be requestedby and granted to us or any one of us for the payment of this note as long asthe remaining unpaid balance shall earn an interest of THREE percent (3%) amonth until fully paid. Such renewals or extensions shall, in no case, beunderstood as a novation of this note or any provision thereof and We willthereby continue to be liable for the payment of this note.

We submit to the jurisdiction of the Courts of the City of Manila or of theplace of execution of this note, at the option of CUPERTINO REALTYCORPORATION without divesting any other court of the its jurisdiction, forany legal action which may arise out of this note. In case of judical execution

of this obligation, or any part of it, we hereby waive all our rights under theprovisions of Rule 39, section 12 of the Rules of Court.

We, who are justly indebted to CUPERTINO REALTY CORPORATION, agree toexecute respectively a real estate mortgage and a pledge or a chattelmortgage covering securities to serve as collaterals for this loan and toexecute likewise an irrevocable proxy to allow representatives of the creditorto be able to monitor acts of management so as to prevent any prematurecall of this loan. We further undertake to execute any other kind of documentwhich CUPERTINO REALTY CORPORATION may solely believe is necessary inorder to effect any security over any collateral.

For this purpose, Ms. LELENG CUA, upon the foregoing promissory note, hasthis 16th day of Aug 1995, pledged her shares of stocks in SIAINENTERPRISES, INC., worth PHP 1,800,000.00 which she hereby confesses asrepresenting 80% of the total outstanding shares of the said company.

In default of payment of said note or any part thereof at maturity, Ms.LELENG CUA hereby authorizes CUPERTINO REALTY CORPORATION or its


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assigns, to dispose of said security or any part thereof at public sale. Theproceeds of such sale or sales shall, after payment of all expenses andcommissions attending said sale or sales, be applied to this promissory noteand the balance, if any, after payment of this promissory note and interest

thereon, shall be returned to the undersigned, her heirs, successors andadministrators; it shall be optional for the owner of the promissory note tobid for and purchase the securities or any part thereof.

(signed)SIAIN ENTERPRISES, INC. LELENG CUAIn her personal capacityCO-MAKER

By:

(signed)

LELENG CUAMAKER

WITNESSES:

(signed)EDGARDO LUA

(signed)ROSE MARIE RAGODON[4]

Parenthetically, on even date, the parties executed an amendment of real

estate mortgage, providing in pertinent part:WHEREAS, on 10 April 1995, the [petitioner] executed, signed and delivereda Real Estate Mortgage to and in favor of [Cupertino] on certain real estateproperties to secure the payment to [Cupertino] of a loan in the amount ofTHIRTY SEVEN MILLION PESOS (P37,000,000.00) Philippine Currency,granted by [Cupertino] was ratified (sic) on 10 April 1995 before ConstancioMangoba, Jr., Notary Public in Makati City, as Doc. No. 242; in Page No. 50;Book No., XVI; Series of 1995, and duly recorded in the Office of the Registerof Deeds for the said City of Iloilo;

WHEREAS, the [petitioner] has increased its loan payable to [Cupertino]which now amounts to ONE HUNDRED NINETY SEVEN MILLION PESOS

(197,000,000.00); and

WHEREAS, the [petitioner] and [Cupertino] intend to amend the said RealEstate Mortgage in order to reflect the current total loan secured by the saidReal Estate Mortgage;

NOW, THEREFORE, for and in consideration of the foregoing premises, theparties hereto have agreed and by these presents do hereby agree to amendsaid Real Estate Mortgage dated 10 April 1995 mentioned above bysubstituting the total amount of the loan secured by said Real EstateMortgage from P37,000,000.00 to P197,000,000.00.

It is hereby expressly understood that with the foregoing amendment, allother terms and conditions of said Real Estate Mortgage dated 10 April 1995are hereby confirmed, ratified and continued to be in full force and effect,and that this agreement be made an integral part of said Real EstateMortgage.[5]

Curiously however, and contrary to the tenor of the foregoing loandocuments, petitioner, on March 11, 1996, through counsel, wrote Cupertino


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and demanded the release of the P160,000,000.00 loan increase covered bythe amendment of real estate mortgage.[6] In the demand letter, petitioner'scounsel stated that despite repeated verbal demands, Cupertino had yet torelease the P160,000,000.00 loan. On May 17, 1996, petitioner demanded

anew from Cupertino the release of the P160,000,000.00 loan.

[7]

In complete refutation, Cupertino, likewise through counsel, responded anddenied that it had yet to release the P160,000,000.00 loan. Cupertinomaintained that petitioner had long obtained the proceeds of the aforesaidloan. Cupertino declared petitioner's demand as made to "abscond from a

just and valid obligation," a mere afterthought, following Cupertino's letterdemanding payment of the P37,000,000.00 loan covered by the firstpromissory note which became overdue on March 5, 1996.

Not surprisingly, Cupertino instituted extrajudicial foreclosure proceedingsover the properties subject of the amended real estate mortgage. The

auction sale was scheduled on October 11, 1996 with respondent NotaryPublic Edwin R. Catacutan commissioned to conduct the same. This promptedpetitioner to file a complaint with a prayer for a restraining order to enjoinNotary Public Catacutan from proceeding with the public auction.

The following are the parties' conflicting claims, summarized by the RTC, andquoted verbatim by the CA in its decision:"The verified complaint alleges that [petitioner] is engaged in themanufacturing and retailing/wholesaling business. On the other hand,Cupertino is engaged in the realty business. That on April 10, 1995,[petitioner] executed a Real Estate Mortgage over its real properties covered

by Transfer Certificates of title Nos. T-75109 and T-73481 ("the mortgageproperties") of the Register of Deeds of Iloilo in favor of Cupertino to securethe former's loan obligation to the latter in the amount of Php37,000,000.00.That it has been the agreement between [petitioner] and Cupertino that theaforesaid loan will be non-interest bearing. Accordingly, the parties saw to itthat the promissory note (evidencing their loan agreement) did not provideany stipulation with respect to interest. On several occasions thereafter,[petitioner] made partial payments to Cupertino in respect of the aforesaidloan obligation by the former to the latter in the total amount ofPhp7,985,039.08, thereby leaving a balance of Php29,014,960.92. OnAugust 16, 1995, [petitioner] and Cupertino executed an amendment of RealEstate Mortgage (Annex "C") increasing the total loan covered by the

aforesaid REM from Php37,000,000.00 to P197,000,000.00. This amendmentto REM was executed preparatory to the promised release by Cupertino ofadditional loan proceeds to [petitioner] in the total amount ofPhp160,000,000.00. However, despite the execution of the said amendmentto REM and its subsequent registration with the Register of Deeds of IloiloCity and notwithstanding the clear agreement between [petitioner] andCupertino and the latter will release and deliver to the former the aforesaidadditional loan proceeds of P160,000,000.00 after the signing of pertinentdocuments and the registration of the amendment of REM, Cupertino failedand refused to release the said additional amount for no apparent reason atall, contrary to its repeated promises which [petitioner] continuously relied

on. On account of Cupertino's unfulfilled promises, [petitioner] repeatedlydemanded from Cupertino the release and/or delivery of the saidPhp160,000,000.00 to the former. However, Cupertino still failed and refusedand continuously fails and refuses to release and/or deliver thePhp160,000,000.00 to [petitioner]. When [petitioner] tendered payment ofthe amount of Php29,014,960.92 which is the remaining balance of thePhp37,000,000.00 loan subject of the REM, in order to discharge the same,Cupertino unreasonably and unjustifiably refused acceptance thereof on the


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ground that the previous payment amounting to Php7,985,039.08, wasapplied by Cupertino to alleged interests and not to principal amount, despitethe fact that, as earlier stated, the aforesaid loan by agreement of theparties, is non-interest bearing. Worst, unknown to [petitioner], Cupertino

was already making arrangements with [respondent] Notary Public for theextrajudicial sale of the mortgage properties even as [petitioner] is morethan willing to pay the Php29,014,960.92 which is the remaining balance ofthe Php37,000,000.00 loan and notwithstanding Cupertino's unjustifiedrefusal and failure to deliver to [petitioner] the amount ofPhp160,000,000.00. In fact, a notarial sale of the mortgaged properties isalready scheduled on 04 October 1996 by [respondent] Notary Public at hisoffice located at Rm. 100, Iloilo Casa Plaza, Gen Luna St., Iloilo City. In viewof the foregoing, Cupertino has no legal right to foreclose the mortgagedproperties. In any event, Cupertino cannot extrajudicially cause theforeclosure by notarial sale of the mortgage properties by [respondent]Notary Public as there is nothing in the REM (dated 10 April 1995) or in the

amendment thereto that grants Cupertino the said right.

x x x x

"[Respondents] finally filed an answer to the complaint, alleging that the loanhave (sic) an interest of 17% per annum: that no payment was ever madeby [petitioner], that [petitioner] has already received the amount of the loanprior to the execution of the promissory note and amendment of Real EstateMortgage, xxx.

"[Petitioner] filed a supplemental complaint alleging subsequent acts made

by defendants causing the subsequent auction sale and registering theCertificates of Auction Sale praying that said auction sale be declared nulland void and ordering the Register of Deeds to cancel the registration andannotation of the Certificate of Notarial Sale."

Thereafter, the Pre-Trial conference was set. Both parties submitted theirrespective Brief and the following facts were admitted, viz:

1. Execution of the mortgage dated April 10, 1995;

2. Amendment of Real Estate Mortgage dated August 16, 1995;3. Execution of an Extra-Judicial Foreclosure by the [Cupertino];

4. Existence of two (2) promissory notes;5. Existence but not the contents of the demand letter March 11, 1996

addressed to Mr. Wilfredo Lua and receipt of the same by[Cupertino]; and

6. Notice of Extra-Judicial Foreclosure Sale."

For failing to arrive at an amicable settlement, trial on the merits ensued.The parties presented oral and documentary evidence to support their claimsand contentions. [Petitioner] insisted that she never received the proceeds ofPhp160,000,000.00, thus, the foreclosure of the subject properties is nulland void. [Cupertino] on the other hand claimed otherwise.[8]

After trial, the RTC rendered a decision dismissing petitioner's complaint andordering it to pay Cupertino P100,000.00 each for actual and exemplarydamages, and P500,000.00 as attorney's fees. The RTC recalled and setaside its previous order declaring the notarial foreclosure of the mortgagedproperties as null and void. On appeal, the CA, as previously adverted to,affirmed the RTC's ruling.

In dismissing petitioner's complaint and finding for Cupertino, both the lower


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courts upheld the validity of the amended real estate mortgage. The RTCfound, as did the CA, that although the amended real estate mortgage fellwithin the exceptions to the parol evidence rule under Section 9, Rule 130 ofthe Rules of Court, petitioner still failed to overcome and debunk Cupertino's

evidence that the amended real estate mortgage had a consideration, andpetitioner did receive the amount of P160,000,000.00 representing itsincurred obligation to Cupertino. Both courts ruled that as betweenpetitioner's bare denial and negative evidence of non-receipt of theP160,000,000.00, and Cupertino's affirmative evidence on the existence ofthe consideration, the latter must be given more weight and value. In all, thelower courts gave credence to Cupertino's evidence that theP160,000,000.00 proceeds were the total amount received by petitioner andits affiliate companies over the years from Wilfredo Lua, Cupertino'spresident. In this regard, the lower courts applied the doctrine of "piercingthe veil of corporate fiction" to preclude petitioner from disavowing receipt ofthe P160,000,000.00 and paying its obligation under the amended real

estate mortgage.

Undaunted, petitioner filed this appeal insisting on the nullity of the amendedreal estate mortgage. Petitioner is adamant that the amended real estatemortgage is void as it did not receive the agreed consideration therefor i.e.P160,000,000.00. Petitioner avers that the amended real estate mortgagedoes not accurately reflect the agreement between the parties as, at the timeit signed the document, it actually had yet to receive the amount ofP160,000,000.00. Lastly, petitioner asseverates that the lower courtserroneously applied the doctrine of "piercing the veil of corporate fiction"when both gave credence to Cupertino's evidence showing that petitioner's

affiliates were the previous recipients of part of the P160,000,000.00indebtedness of petitioner to Cupertino.

We are in complete accord with the lower courts' rulings.

Well-entrenched in jurisprudence is the rule that factual findings of the trialcourt, especially when affirmed by the appellate court, are accorded thehighest degree of respect and are considered conclusive between the parties.[9] A review of such findings by this Court is not warranted except upon ashowing of highly meritorious circumstances, such as: (1) when the findingsof a trial court are grounded entirely on speculation, surmises or conjectures;(2) when a lower court's inference from its factual findings is manifestly

mistaken, absurd or impossible; (3) when there is grave abuse of discretionin the appreciation of facts; (4) when the findings of the appellate court gobeyond the issues of the case, or fail to notice certain relevant facts which, ifproperly considered, will justify a different conclusion; (5) when there is amisappreciation of facts; (6) when the findings of fact are conclusionswithout mention of the specific evidence on which they are based, arepremised on the absence of evidence, or are contradicted by evidence onrecord.[10] None of these exceptions necessitating a reversal of the assaileddecision obtains in this instance.

Conversely, we cannot subscribe to petitioner's faulty reasoning.

First. All the loan documents, on their face, unequivocally declare petitioner'sindebtedness to Cupertino:

1. Promissory Note dated April 10, 1995, prefaced with a "[f]or valuereceived," and the escrow arrangement for the release of theP37,000,000.00 obligation in favor of DBP, another creditor ofpetitioner.


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2. Mortgage likewise dated April 10, 1995 executed by petitioner tosecure its P37,000,000.00 loan obligation with Cupertino.

3. Amendment to Promissory Note for P37,000,000.00 dated April 12,1995 which tentatively sets the interest rate at seventeen percent

(17%) per annum.4. Promissory Note dated August 16, 1995, likewise prefaced with"[f]or value received," and unconditionally promising to payCupertino P160,000,000.00 with a stipulation on compoundinginterest at thirty percent (30%) per annum. The Promissory Noterequires, among others, the execution of a real estate mortgage toserve as collateral therefor. In case of default in payment,petitioner, specifically, through its president, Cua Le Leng,authorizes Cupertino to "dispose of said security or any part thereofat [a] public sale."

5. Amendment of Real Estate Mortgage also dated August 16, 1995with a recital that the mortgagor, herein petitioner, has increased

its loan payable to the mortgagee, Cupertino, from P37,000,000.00to P197,000,000.00. In connection with the increase in loanobligation, the parties confirmed and ratified the Real EstateMortgage dated April 10, 1995.

Unmistakably, from the foregoing chain of transactions, a presumption hasarisen that the loan documents were supported by a consideration.

Rule 131, Section 3 of the Rules of Court specifies that a disputablepresumption is satisfactory if uncontradicted and not overcome by otherevidence. Corollary thereto, paragraphs (r) and (s) thereof and Section 24 of

the Negotiable Instruments Law read:SEC. 3.Disputable presumptions.The following presumptions aresatisfactory if uncontradicted, but may be contradicted and overcome byother evidence:

x x x x

(r) That there was sufficient consideration for a contract;

(s) That a negotiable instrument was given or indorsed for a sufficientconsideration;

x x x

SEC. 24. Presumption of consideration.Every negotiable instrument isdeemedprima facie to have been issued for a valuable consideration; andevery person whose signature appears thereon to have become a partythereto for value.Second. The foregoing notwithstanding, petitioner insists that the AmendedReal Estate Mortgage was not supported by a consideration, asserting non-receipt of the P160,000,000.00 loan increase reflected in the Amended RealEstate Mortgage. However, petitioner's bare-faced assertion does not evendent, much less, overcome the aforesaid presumptions on consideration for a

contract. As deftly pointed out by the trial court:x x x In this case, this Court finds that the [petitioner] has not been able toestablish its claim of non-receipt by a preponderance of evidence. Rather, theCourt is inclined to give more weight and credence to the affirmative andstraightforward testimony of [Cupertino] explaining in plain and categoricalwords that the Php197,000,000.00 loan represented by the amended REMwas the total sum of the debit memo, the checks, the real estate mortgageand the amended real estate mortgage, the pledges of jewelries, the trucks


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and the condominiums plus the interests that will be incurred which all in allamounted to Php197,000,000.00. It is a basic axiom in this jurisdiction thatas between the plaintiff's negative evidence of denial and the defendant'saffirmative evidence on the existence of the consideration, the latter must be

given more weight and value. Moreover, [Cupertino's] foregoing testimonyon the existence of the consideration of the Php160,000,000.00 promissorynote has never been refuted nor denied by the [petitioner], who whileinitially having manifested that it will present rebuttal evidence eventuallyfailed to do so, despite all available opportunities accorded to it. By suchfailure to present rebutting evidence, [Cupertino's] testimony on theexistence of the consideration of the amended real estate mortgage does notonly become impliedly admitted by the [petitioner], more significantly, to themind of this Court, it is a clear indication that [petitioner] has no counterevidence to overcome and defeat the [Cupertino's] evidence on the matter.Otherwise, there is no logic for [petitioner] to withhold it if available.Assuming that indeed it exists, it may be safely assumed that such evidence

having been willfully suppressed is adverse if produced.

The presentation by [petitioner] of its cash Journal Receipt Book as proofthat it did not receive the proceeds of the Php160,000,000.00 promissorynote does not likewise persuade the Court. In the first place, the subject cashreceipt journal only contained cash receipts for the year 1995. But asappearing from the various checks and debit memos issued by Wilfredo Luaand his wife, Vicky Lua and from the former's unrebutted testimony in Court,the issuance of the checks, debit memos, pledges of jewelries, condominiumunits, trucks and the other components of the Php197,000,000.00 amendedreal estate mortgage had all taken place prior to the year 1995, hence, they

could not have been recorded therein. What is more, the said cash receiptjournal appears to be prepared solely at the behest of the [petitioner],hence, can be considered as emanating from a "poisonous tree" thereforeself-serving and cannot be given any serious credibility.[11]

Significantly, petitioner asseverates that the parol evidence rule, whichexcludes other evidence, apart from the written agreement, to prove theterms agreed upon by the parties contained therein,[12] is not applicable tothe Amended Real Estate Mortgage. Both the trial and appellate courtsagreed with petitioner and did not apply the parol evidence rule. Yet, despitethe allowance to present evidence and prove the invalidity of the AmendedReal Estate Mortgage, petitioner still failed to substantiate its claim of non-receipt of the proceeds of the P160,000,000.00 loan increase.

Moreover, petitioner was the plaintiff in the trial court, the party that broughtsuit against respondent. Accordingly, it had the burden of proof, the duty topresent a preponderance of evidence to establish its claim.[13] However,petitioner's evidence consisted only of a barefaced denial of receipt and avaguely drawn theory that in their previous loan transaction with respondentcovered by the first promissory note, it did not receive the proceeds of theP37,000,000.00. Petitioner conveniently ignores that this particularpromissory note secured by the real estate mortgage was under an escrowarrangement and taken out to pay its obligation to DBP. Thus, petitioner,quite obviously, would not be in possession of the proceeds of the loan.

Contrary to petitioner's contention, there is no precedent to explain its stancethat respondent undertook to release the P160,000,000.00 loan only after ithad first signed the Amended Real Estate Mortgage.

Third. Petitioner bewails the lower courts' application of the doctrine of"piercing the veil of corporate fiction."

As a general rule, a corporation will be deemed a separate legal entity until


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sufficient reason to the contrary appears.[14] But the rule is not absolute. Acorporation's separate and distinct legal personality may be disregarded andthe veil of corporate fiction pierced when the notion of legal entity is used todefeat public convenience, justify wrong, protect fraud, or defend crime.[15]

In this case, Cupertino presented overwhelming evidence that petitioner andits affiliate corporations had received the proceeds of the P160,000,000.00loan increase which was then made the consideration for the Amended RealEstate Mortgage. We quote with favor the RTC's and the CA's disquisitions onthis matter:That the checks, debit memos and the pledges of the jewelries, condominiumunits and trucks were constituted not exclusively in the name of [petitioner]but also either in the name of Yuyek Manufacturing Corporation, SiainTransport, Inc., Cua Leleng and Alberto Lim is of no moment. For the factsestablished in the case at bar has convinced the Court of the propriety toapply the principle known as "piercing the veil of the corporate entity" by

virtue of which, the juridical personalities of the various corporations involvedare disregarded and the ensuing liability of the corporation to attach directlyto its responsible officers and stockholders. x x x

x x x x

The conjunction of the identity of the [petitioner] corporation in relation toSiain Transport, Inc. (Siain Transport), Yuyek Manufacturing Corp. (Yuyek),as well as the individual personalities of Cua Leleng and Alberto Lim has beenindubitably shown in the instant case by the following establishedconsiderations, to wit:

1. Siain and Yuyek have [a] common set of [incorporators],

stockholders and board of directors;

2. They have the same internal bookkeeper and accountant in the

person of Rosemarie Ragodon;3. They have the same office address at 306 Jose Rizal St.,

Mandaluyong City;4. They have the same majority stockholder and president in the

person of Cua Le Leng; and5. In relation to Siain Transport, Cua Le Leng had the unlimited

authority by and on herself, without authority from the Board of

Directors, to use the funds of Siain Trucking to pay the obligationincurred by the [petitioner] corporation.

Thus, it is crystal clear that [petitioner] corporation, Yuyek andSiain Transport are characterized by oneness of operations vested

in the person of their common president, Cua Le Leng, and unity inthe keeping and maintenance of their corporate books and recordsthrough their common accountant and bookkeeper, RosemarieRagodon. Consequently, these corporations are proven to be the

mere alter-ego of their president Cua Leleng, and considering thatCua Leleng and Alberto Lim have been living together as common

law spouses with three children, this Court believes that whileAlberto Lim does not appear to be an officer of Siain and Yuyek,

nonetheless, his receipt of certain checks and debit memos fromWillie Lua and Victoria Lua was actually for the account of hiscommon-law wife, Cua Leleng and her alter ego corporations. Whilethis Court agrees with Siain that a corporation has a personality

separate and distinct from its individual stockholders or members,this legal fiction cannot, however, be applied to its benefit in this


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case where to do so would result to injustice and evasion of a validobligation, for well settled is the rule in this jurisdiction that the veil

of corporate fiction may be pierced when it is used as a shield tofurther an end subversive of justice, or for purposes that could not

have been intended by the law that created it; or to justify wrong,or for evasion of an existing obligation. Resultantly, the obligationincurred and/or the transactions entered into either by Yuyek, orby Siain Trucking, or by Cua Leleng, or by Alberto Lim with

Cupertino are deemed to be that of the [petitioner] itself.

The same principle equally applies to Cupertino. Thus, while it appears thatthe issuance of the checks and the debit memos as well as the pledges of thecondominium units, the jewelries, and the trucks had occurred prior to March2, 1995, the date when Cupertino was incorporated, the same does not affectthe validity of the subject transactions because applying again the principleof piercing the corporate veil, the transactions entered into by Cupertino

Realty Corporation, it being merely the alter ego of Wilfredo Lua, are deemedto be the latter's personal transactions and vice-versa.[16]

x x x x

x x x Firstly. As can be viewed from the extant record of the instant case,Cua Leleng is the majority stockholder of the three (3) corporations namely,Yuyek Manufacturing Corporation, Siain Transport, Inc., and Siain EnterprisesInc., at the same time the President thereof. Second. Being the majoritystockholder and the president, Cua Le leng has the unlimited power, controland authority without the approval from the board of directors to obtain for

and in behalf of the [petitioner] corporation from [Cupertino] therebymortgaging her jewelries, the condominiums of her common law husband,Alberto Lim, the trucks registered in the name of [petitioner] corporation'ssister company, Siain Transport Inc., the subject lots registered in the nameof [petitioner] corporation and her oil mill property at Iloilo City. And, toapply the proceeds thereof in whatever way she wants, to the prejudice ofthe public.

As such, [petitioner] corporation is now estopped from denying the aboveapparent authorities of Cua Le Leng who holds herself to the public aspossessing the power to do those acts, against any person who dealt in goodfaith as in the case of Cupertino.[17]

WHEREFORE, premises considered, the petition is DENIED. The Decision ofthe Court of Appeals in CA-G.R. CV No. 71424 is AFFIRMED. Costs againstthe petitioner.

SO ORDERED.

Ynares-Santiago, (Chairperson), Chico-Nazario, Velasco, Jr., and Peralta, JJ.,concur.

[1]

Penned by Associate Justice Vicente L. Yap, with Associate Justices IsaiasP. Dicdican and Enrico A. Lanzanas, concurring; rollo, pp. 66-81.

[2] Penned by Judge Rene B. Honrado; rollo, pp. 159-179.

[3] Records, p. 438.

[4] Id. at 439-441.


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[5] Id. at 24-25.

[6] Id. at 27-28.

[7] Id. at 31-32.

[8]Rollo, pp. 67-70.

[9]Titan Construction Corporation v. Uni-Field Enterprises, Inc., G.R. No.153874, March 1, 2007, 517 SCRA 180, 180; Sigaya v. Mayuga, G.R. No.143254, August 18, 2005, 467 SCRA 341, 343.

[10]Ilao-Quianay v. Mapile, G.R. No. 154087, October 25, 2005, 474 SCRA246, 247; See Child Learning Center, Inc. v. Tagorio, G.R. No. 150920,November 25, 2005, 476 SCRA 236, 236-237.

[11]Rollo, pp. 173-174.

[12] RULES OF COURT, Rule 130, Sec. 9.

[13]See RULES OF COURT, Rule 131, Sec. 1.

[14] CORPORATION CODE, Sec. 2. See also CIVIL CODE, Art. 44.

[15]United States v. Milwaukee Refirigerator Transit Co., 142 Fed. 247(1905).

[16]Rollo, pp. 174-176.

[17] Id. at 75

FIRST DIVISION

[ G.R. NO. 168736, April 19, 2006 ]

SPOUSES ADELINA S.CUYCO AND FELICIANO U. CUYCO,PETITIONERS, VS. SPOUSES RENATO CUYCO AND

FILIPINA CUYCO, RESPONDENTS.

DECISION

YNARES-SANTIAGO, J.:

This petition for review on certiorariassails the Decision [1] of the Court ofAppeals (CA) in CA G.R. CV No. 62352 dated November 5, 2003 whichmodified the Decision[2] of the Regional Trial Court (RTC) of Quezon City,


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Branch 105 in Civil Case No. Q-97-32130 dated January 27, 1999, as well asthe Resolution[3] dated June 28, 2005 denying the motion for reconsiderationthereof.

The facts of the case are as follows:

Petitioners, spouses Adelina and Feliciano Cuyco, obtained a loan in theamount of P1,500,000.00 from respondents, spouses Renato and FilipinaCuyco, payable within one year at 18% interest per annum, and secured by aReal Estate Mortgage[4] over a parcel of land with improvements thereonsituated in Cubao, Quezon City covered by TCT No. RT-43723 (188321).[5]

Subsequently, petitioners obtained additional loans from the respondents inthe aggregate amount of P1,250,000.00, broken down as follows: (1)P150,000.00 on May 30, 1992; (2) P150,000.00 on July 1, 1992; (3)P500,000.00 on September 5, 1992; (4) P200,000.00 on October 29, 1992;

and (5) P250,000.00 on January 13, 1993.[6]

Petitioners made payments amounting to P291,700.00,[7] but failed to settletheir outstanding loan obligations. Thus, on September 10, 1997,respondents filed a complaint[8] for foreclosure of mortgage with the RTC ofQuezon City, which was docketed as Civil Case No. Q-97-32130. They allegedthat petitioners' loans were secured by the real estate mortgage; that as ofAugust 31, 1997, their indebtedness amounted to P6,967,241.14, inclusive ofthe 18% interest compounded monthly; and that petitioners' refusal to settlethe same entitles the respondents to foreclose the real estate mortgage.

Petitioners filed a motion to dismiss

[9]

on the ground that the complaintstates no cause of action which was denied by the RTC [10] for lack of merit.

In their answer,[11] petitioners admitted their loan obligations but argued thatonly the original loan of P1,500,000.00 was secured by the real estatemortgage at 18%per annum and that there was no agreement that thesame will be compounded monthly.

On January 27, 1999, the RTC rendered judgment[12] in favor of therespondents, the dispositive portion of which reads:WHEREFORE, in the light of the foregoing, the Court renders judgment on theComplaint in favor of the plaintiffs and hereby orders the defendants to pay

to the Court or to the plaintiffs the amounts of P6,332,019.84, plus interestuntil fully paid, P25,000.00 as attorney's fees, and costs of suit, within aperiod of one hundred and twenty (120) days from the entry of judgment,and in case of default of such payment and upon proper motion, the propertyshall be ordered sold at public auction to satisfy the judgment. Further,defendants['] counterclaim is dismissed.

SO ORDERED.[13]

Petitioners appealed to the CA reiterating their previous claim that only theamount of P1,500,000.00 was secured by the real estate mortgage.[14] Theyalso contended that the RTC erred in ordering the foreclosure of the real

estate mortgage to satisfy the total indebtedness of P6,532,019.84, as ofJanuary 10, 1999, plus interest until fully paid, and in imposing legal interestof 12% per annum on the stipulated interest of 18% from the filing of thecase until fully paid.[15]

On November 5, 2003, the CA partially granted the petition and modified theRTC decision insofar as the amount of the loan obligations secured by thereal estate mortgage. It held that by express intention of the parties, the real


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estate mortgage secured the original P1,500,000.00 loan and the subsequentloans of P150,000.00 and P500,000.00 obtained on July 1, 1992 andSeptember 5, 1992, respectively. As regards the loans obtained on May 31,1992, October 29, 1992 and January 13, 1993 in the amounts of

P150,000.00, P200,000.00 and P250,000.00, respectively, the appellatetribunal held that the parties never intended the same to be secured by thereal estate mortgage. The Court of Appeals also found that the trial courtproperly imposed 12% legal interest on the stipulated interest from the dateof filing of the complaint. The dispositive portion of the Decision reads:WHEREFORE, the instant appeal is PARTIALLY GRANTED. The assaileddecision of the Regional Trial Court of Quezon City, Branch 105, in Civil CaseNo. Q-97-32130 is hereby MODIFIED to read:"WHEREFORE, in the light of the foregoing, the Court renders judgment onthe Complaint in favor of the plaintiffs and hereby orders the defendants topay to the Court or to the plaintiffs the amount of P2,149,113.92[,]representing the total outstanding principal loan of the said defendants, plus

the stipulated interest at the rate of 18% per annum accruing thereon untilfully paid, within a period of one hundred and twenty days from the entry of

judgment, and in case of default of such payment and upon motion, theproperty, subject of the real estate mortgage contract, shall be ordered soldat public auction in satisfaction of the mortgage de

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