SPOUSES ALEX and JULIE LAM,

Petitioners,

- versus -

METROPOLITAN BANK AND TRUST COMPANY,

Respondent.

This Petition for Review on Certiorari assails the October 10, 2006 Decision[1] of the Court of Appeals (CA) in CA-G.R. SP No. 00088,
and the July 11, 2007 Resolution[2] denying the motion for its reconsideration.

Petitioners Alexander and Julie Lam obtained a loan of P2,000,000.00 from the respondent Metropolitan Bank & Trust Company. To
secure its payment, petitioners executed a deed of real estate mortgage[3] over their property in Davao City, covered by TCT No. T-
115893. Petitioners were subsequently granted additional loans and signed several amendments to the real estate mortgage.[4]

Petitioners, however, failed to pay the loans; hence, respondent instituted an extrajudicial foreclosure proceeding with the
Office of the Clerk of Court and the Ex-Officio Sheriff of Davao, which was granted by the latter. A sheriffs sale was held and the
property was awarded to the respondent as the sole bidder. A Provisional Certificate of Sale[5] was issued in favor of the respondent
on May 20, 1998, and it was registered with the Registry of Deeds on July 7, 1998.[6]

Petitioners failed to redeem the property within the one-year redemption period. Accordingly, a Final Certificate of Sale in favor
of the respondent was executed by the Sheriff on October 1, 1999.[7] Respondent consolidated its title to the subject property; thus,
TCT No. T-115893 in the name of petitioners was cancelled and TCT No. T-327605[8] in the name of respondent was issued.

Respondent demanded that petitioners turn over actual possession of the subject property,[9] but the latter failed and refused
to do so. This prompted respondent to file a Complaint[10] for the issuance of a writ of possession with the Regional Trial Court (RTC)
of Davao City, with the case docketed as Other Case No. 097-2001, and raffled to Branch 13.

Summons and notice of hearing were then sent to petitioners, who filed their answer denying the material allegations in the
complaint. They averred that respondents complaint was fatally defective for it did not allege its capacity to sue and be sued. Likewise,
there was no showing that the officer who signed the verification and certification was duly authorized to represent the respondent.
Petitioners also denied that they obtained the P3,900,000.00 loan.

During the pre-trial conference, the RTC directed the parties to proceed to mediation. The parties, however, failed to arrive at
an amicable settlement; hence, the case was referred back to the RTC for the continuation of the pre-trial conference.

At the pre-trial conference on October 15, 2003, respondent manifested and moved that the complaint for writ of possession
should be heard ex parte. The RTC then directed the parties to submit their respective memoranda on this issue.

On January 16, 2004, the RTC resolved respondents motion in this wise:

It would appear from the caption of this case that this case should be treated as an adversarial
proceeding. In fact, the court itself issued summons and copy of the complaint to defendants, and directed them to
file their Answer (which they did) to the complaint.

However, this case, as correctly noted by plaintiff (petitioner) is not an ordinary civil case, and it should not
be treated as such. To determine how this case should be treated, we can only be guided by the rulings of the
Supreme Court on the matter.

xxxx
It is clear from the law and jurisprudence that this case should be treated as an ex parte proceeding and not
an adversarial one. Such being the case, the defendant/respondent should not be allowed to participate in this case
as an adverse party as if the same is an ordinary civil action.

According to the Supreme Court, any question regarding the regularity and validity of the sale, as well as the
consequent cancellation of the writ is to be determined not in this proceeding for issuance of a writ of possession, but
in subsequent proceedings as outlined in Section 8 of Act. 3135.

WHEREFORE, in view of the foregoing, the court rules that the proceeding in case is ex parte, and not
adversarial. As such, defendant shall not be allowed to participate in the hearing of this case. The pre-trial conference
set on March 15, 2004, is hereby converted into the reception of plaintiff/petitioners evidence ex-parte.
 SO ORDERED.[11]

On January 23, 2004, petitioners filed a complaint for specific performance and annulment of foreclosure of mortgage with the
RTC. The case was docketed as Civil Case No. 30,216-2004, and, likewise, raffled to Branch 13.

Subsequently, on February 11, 2004, petitioners filed a motion for reconsideration of the January 16, 2004 Order issued in
Other Case No. 097-2001.

On July 19, 2004, the RTC granted petitioners motion for reconsideration. In reversing its earlier Order and allowing petitioners
to participate in the proceedings, the RTC declared that respondent was estopped from demanding a resolution ex parte, after allowing
petitioners to participate in the proceedings. The RTC added that under equitable circumstances, the duty of the court to issue a writ of
possession ceased to be ministerial, and the existence of these equitable circumstances can only be determined in adversarial
proceedings. The respondent filed a motion for reconsideration, but the RTC denied it.

Respondent went to the CA on certiorari. On October 10, 2006, the CA rendered the assailed Decision, granting respondents
petition for certiorari. Reversing the RTC, the CA declared that the RTC abused its discretion in declaring Other Case No. 097-2001 an
adversarial proceeding. According to the CA, law and jurisprudence are explicit that a petition for the issuance of a writ of possession
is ex parte and not adversarial. It was, therefore, plain and patent error for the RTC to issue orders contravening this basic and well-
entrenched legal principle. The CA also declared that the RTC mistakenly opined that it was prudent to consolidate Other Case No.
097-2001 with the civil case for annulment of the foreclosure sale. According to the CA, the rule on the consolidation of actions in a civil
procedure covers only civil actions, and an ex parte petition for the issuance of a writ of possession under Section 7 of Act No. 3135, is
not a civil action; thus, it cannot be consolidated with the case for annulment of mortgage. It further held that any question regarding the
validity of the mortgage or its foreclosure cannot be a legal ground for refusing the issuance of a writ of possession.

Petitioners filed a motion for reconsideration, but the CA denied it on July 11, 2007.

Forthwith, petitioners elevated the case to this Court and in support of their petition allege that:

THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE HONORABLE REGIONAL TRIAL
COURT JUDGE COMMITTED GRAVE ABUSE OF DISCRETION IN ISSUING THE ORDERS DATED 19 JULY 2004
AND 04 OCTOBER 2004 CONSIDERING [THAT] THE LATTER MERELY APPLIED PREVAILING
JURISPRUDENCE RECOGNIZING EXCEPTIONS TO THE GENERAL RULE THAT THE PROCEEDINGS FOR
THE ISSUANCE OF A WRIT OF POSSESSION IS EX-PARTE AND NOT ADVERSARIAL.

II

THE HONORABLE COURT OF APPEALS ERRED IN DISREGARDING THE EQUITABLE CONSIDERATIONS

EXISTING IN THIS CASE THAT WARRANT THE APPLICATION OF THE EXCEPTIONS TO THE GENERAL RULE
THAT THE PROCEEDINGS FOR THE ISSUANCE OF A WRIT OF POSSESSION IS EX-PARTE AND NOT
ADVERSARIAL.[12]

The petition is without merit.

It is settled that the issuance of a writ of possession to a purchaser in a public auction is a ministerial act. After the consolidation of title
in the buyer's name for failure of the mortgagor to redeem the property, entitlement to the writ of possession becomes a matter of right.
Its issuance to a purchaser in an extrajudicial foreclosure sale is merely a ministerial function.[13] It is undisputed that herein petitioners
failed to redeem the property within the redemption period and thereafter, ownership was consolidated in favor of herein respondent
and a new certificate of title (TCT No. T-327605) was issued in its name. Thus, it was a purely ministerial duty for the trial court to issue
a writ of possession in favor of herein respondent upon the latter's filing of a petition.

The nature of a petition for a writ of possession is explained in the case of Spouses Norberto Oliveros and Elvira Oliveros v. The
Honorable Presiding Judge, Regional Trial Court, Branch 24, Bian, Laguna and Metropolitan Bank & Trust Company,[14] viz.:

As to the nature of a petition for a writ of possession, it is well to state that the proceeding in a petition for a
writ of possession is ex parte and summary in nature. It is a judicial proceeding brought for the benefit of one party
only and without notice by the court to any person adverse of interest. It is a proceeding wherein relief is granted
without giving the person against whom the relief is sought an opportunity to be heard.
 By its very nature, an ex parte petition for issuance of a writ of possession is a non-litigious proceeding
authorized under Act No. 3135 as amended.

It is not strictly speaking a judicial process as contemplated in Article 433 of the Civil Code. It is a judicial
proceeding for the enforcement of one's right of possession as purchaser in a foreclosure sale. It is not an ordinary
suit filed in court, by which one party "sues another for the enforcement of a wrong or protection of a right, or the
prevention or redress of a wrong."

The law does not require that a petition for a writ of possession may be granted only after documentary and
testimonial evidence shall have been offered to and admitted by the court. As long as a verified petition states the
facts sufficient to entitle the petitioner to the relief requested, the court shall issue the writ prayed for. The petitioner
need not offer any documentary or testimonial evidence for the court to grant the petition.

In the present case, Metrobank purchased the properties at a public auction following the extrajudicial
foreclosure of the subject properties. Certificates of sale over the properties were issued in favor of Metrobank and
registered with the Registry of Deeds of Calamba, Laguna, on 4 February 2000. Petitioners as mortgagors failed to
redeem the properties within the one-year period of redemption from the registration of the Sheriff's Certificate of Sale
thereof with the Registry of Deeds; hence, Metrobank consolidated its ownership over the subject properties.

With this as jurisprudential yardstick, we quote with approval the following disquisition of the CA:

The respondent judges line of reasoning in declaring Other Case No. 097-2001 as an adversarial proceeding is
simply puerile. The fact that the Spouses Lam were allowed to actively participate in the proceedings for the said
case, by filing an Answer and going through pre-trial and mediation, was a glaring procedural anomaly that the court
a quo had inexcusably abetted. We cannot allow the erring court a quo to use that same aberration as an excuse for
a continuing defiance of the law and jurisprudence that defines a petition for the issuance of a writ of possession as a
non-litigious ex parte proceeding that does not require the participation of the mortgagor.[15]

Besides, we note that the issue regarding the validity of the mortgage or its foreclosure is not a legal ground for refusing the issuance of
a writ of possession. Regardless of whether or not there is a pending suit for annulment of the mortgage or of the foreclosure itself, the
purchaser is entitled to a writ of possession, without prejudice to the ensuing outcome of the proceedings in Civil Case No. 30,216-
2004.

In fine, we find no reversible error in the assailed rulings of the CA.

WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 00088,
are AFFIRMED.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 163744 February 29, 2008

METROPOLITAN BANK AND TRUST CO., petitioner,

vs.
NICHOLSON PASCUAL a.k.a. NELSON PASCUAL, respondent.

DECISION

VELASCO, JR., J.:

Respondent Nicholson Pascual and Florencia Nevalga were married on January 19, 1985. During the union, Florencia bought from
spouses Clarito and Belen Sering a 250-square meter lot with a three-door apartment standing thereon located in Makati City.
Subsequently, Transfer Certificate of Title (TCT) No. S-101473/T-510 covering the purchased lot was canceled and, in lieu thereof, TCT
No. 1562831 of the Registry of Deeds of Makati City was issued in the name of Florencia, "married to Nelson Pascual" a.k.a. Nicholson
Pascual.

In 1994, Florencia filed a suit for the declaration of nullity of marriage under Article 36 of the Family Code, docketed as Civil Case No.
Q-95-23533. After trial, the Regional Trial Court (RTC), Branch 94 in Quezon City rendered, on July 31, 1995, a Decision, 2 declaring the
marriage of Nicholson and Florencia null and void on the ground of psychological incapacity on the part of Nicholson. In the same
decision, the RTC, inter alia, ordered the dissolution and liquidation of the ex-spouses’ conjugal partnership of gains. Subsequent
events saw the couple going their separate ways without liquidating their conjugal partnership.

On April 30, 1997, Florencia, together with spouses Norberto and Elvira Oliveros, obtained a PhP 58 million loan from petitioner
Metropolitan Bank and Trust Co. (Metrobank). To secure the obligation, Florencia and the spouses Oliveros executed several real
estate mortgages (REMs) on their properties, including one involving the lot covered by TCT No. 156283. Among the documents
Florencia submitted to procure the loan were a copy of TCT No. 156283, a photocopy of the marriage-nullifying RTC decision, and a
document denominated as "Waiver" that Nicholson purportedly executed on April 9, 1995. The waiver, made in favor of Florencia,
covered the conjugal properties of the ex-spouses listed therein, but did not incidentally include the lot in question.

Due to the failure of Florencia and the spouses Oliveros to pay their loan obligation when it fell due, Metrobank, on November 29, 1999,
initiated foreclosure proceedings under Act No. 3135, as amended, before the Office of the Notary Public of Makati City. Subsequently,
Metrobank caused the publication of the notice of sale on three issues of Remate.3 At the auction sale on January 21, 2000, Metrobank
emerged as the highest bidder.

Getting wind of the foreclosure proceedings, Nicholson filed on June 28, 2000, before the RTC in Makati City, a Complaint to declare
the nullity of the mortgage of the disputed property, docketed as Civil Case No. 00-789 and eventually raffled to Branch 65 of the court.
In it, Nicholson alleged that the property, which is still conjugal property, was mortgaged without his consent.

Metrobank, in its Answer with Counterclaim and Cross-Claim,4 alleged that the disputed lot, being registered in Florencia’s name, was
paraphernal. Metrobank also asserted having approved the mortgage in good faith.

Florencia did not file an answer within the reglementary period and, hence, was subsequently declared in default.

The RTC Declared the REM Invalid

After trial on the merits, the RTC rendered, on September 24, 2001, judgment finding for Nicholson. The fallo reads:

PREMISES CONSIDERED, the Court renders judgment declaring the real estate mortgage on the property covered by [TCT]
No. 156283 of the Registry of Deeds for the City of Makati as well as all proceedings thereon null and void.

The Court further orders defendants [Metrobank and Florencia] jointly and severally to pay plaintiff [Nicholson]:

1. PhP100,000.00 by way of moral damages;

2. PhP75,000.00 by way of attorney’s fees; and

 3. The costs.

SO ORDERED.5

Even as it declared the invalidity of the mortgage, the trial court found the said lot to be conjugal, the same having been acquired during
the existence of the marriage of Nicholson and Florencia. In so ruling, the RTC invoked Art. 116 of the Family Code, providing that "all
property acquired during the marriage, whether the acquisition appears to have been made, contracted or registered in the name of one
or both spouses, is presumed to be conjugal unless the contrary is proved." To the trial court, Metrobank had not overcome the
presumptive conjugal nature of the lot. And being conjugal, the RTC concluded that the disputed property may not be validly
encumbered by Florencia without Nicholson’s consent.

The RTC also found the deed of waiver Florencia submitted to Metrobank to be fatally defective. For let alone the fact that Nicholson
denied executing the same and that the signature of the notarizing officer was a forgery, the waiver document was allegedly executed
on April 9, 1995 or a little over three months before the issuance of the RTC decision declaring the nullity of marriage between
Nicholson and Florencia.

The trial court also declared Metrobank as a mortgagee in bad faith on account of negligence, stating the observation that certain data
appeared in the supporting contract documents, which, if properly scrutinized, would have put the bank on guard against approving the
mortgage. Among the data referred to was the date of execution of the deed of waiver.

The RTC dismissed Metrobank’s counterclaim and cross-claim against the ex-spouses.

Metrobank’s motion for reconsideration was denied. Undeterred, Metrobank appealed to the Court of Appeals (CA), the appeal
docketed as CA-G.R. CV No. 74874.

The CA Affirmed with Modification the RTC’s Decision

On January 28, 2004, the CA rendered a Decision affirmatory of that of the RTC, except for the award therein of moral damages and
attorney’s fees which the CA ordered deleted. The dispositive portion of the CA’s Decision reads:

WHEREFORE, premises considered, the appealed decision is hereby AFFIRMED WITH MODIFICATION with respect to the
award of moral damages and attorney’s fees which is hereby DELETED.

SO ORDERED.6

Like the RTC earlier held, the CA ruled that Metrobank failed to overthrow the presumption established in Art. 116 of the Family Code.
And also decreed as going against Metrobank was Florencia’s failure to comply with the prescriptions of the succeeding Art. 124 of the
Code on the disposition of conjugal partnership property. Art. 124 states:

Art. 124. The administration and enjoyment of the conjugal partnership property shall belong to both spouses jointly. In case of
disagreement, the husband’s decision shall prevail, subject to recourse to the court by the wife for proper remedy x x x.

In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the conjugal properties,
the other spouse may assume sole powers of administration. These powers do not include disposition or encumbrance without
authority of the court or written consent of the other spouse. In the absence of such authority or consent, the disposition or
encumbrance shall be void. However, the transaction shall be construed as a continuing offer on the part of the consenting
spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse or
authorization by the court before the offer is withdrawn by either or both offerors.

As to the deletion of the award of moral damages and attorney’s fees, the CA, in gist, held that Metrobank did not enter into the
mortgage contract out of ill-will or for some fraudulent purpose, moral obliquity, or like dishonest considerations as to justify damages.

Metrobank moved but was denied reconsideration by the CA.

Thus, Metrobank filed this Petition for Review on Certiorari under Rule 45, raising the following issues for consideration:

a. Whether or not the [CA] erred in declaring subject property as conjugal by applying Article 116 of the Family Code.

b. Whether or not the [CA] erred in not holding that the declaration of nullity of marriage between the respondent Nicholson
Pascual and Florencia Nevalga ipso facto dissolved the regime of community of property of the spouses.

c. Whether or not the [CA] erred in ruling that the petitioner is an innocent purchaser for value. 7
 Our Ruling

A modification of the CA’s Decision is in order.

The Disputed Property is Conjugal

It is Metrobank’s threshold posture that Art. 160 of the Civil Code providing that "[a]ll property of the marriage is presumed to belong to
the conjugal partnership, unless it be prove[n] that it pertains exclusively to the husband or to the wife," applies. To Metrobank, Art. 116
of the Family Code could not be of governing application inasmuch as Nicholson and Florencia contracted marriage before the
effectivity of the Family Code on August 3, 1988. Citing Manongsong v. Estimo,8 Metrobank asserts that the presumption of conjugal
ownership under Art. 160 of the Civil Code applies when there is proof that the property was acquired during the marriage. Metrobank
adds, however, that for the presumption of conjugal ownership to operate, evidence must be adduced to prove that not only was the
property acquired during the marriage but that conjugal funds were used for the acquisition, a burden Nicholson allegedly failed to
discharge.

To bolster its thesis on the paraphernal nature of the disputed property, Metrobank cites Francisco v. Court of Appeals9 and Jocson v.
Court of Appeals,10 among other cases, where this Court held that a property registered in the name of a certain person with a
description of being married is no proof that the property was acquired during the spouses’ marriage.

On the other hand, Nicholson, banking on De Leon v. Rehabilitation Finance Corporation11 and Wong v. IAC,12contends that Metrobank
failed to overcome the legal presumption that the disputed property is conjugal. He asserts that Metrobank’s arguments on the matter of
presumption are misleading as only one postulate needs to be shown for the presumption in favor of conjugal ownership to arise, that
is, the fact of acquisition during marriage. Nicholson dismisses, as inapplicable, Francisco and Jocson, noting that they are relevant
only when there is no indication as to the exact date of acquisition of the property alleged to be conjugal.

As a final point, Nicholson invites attention to the fact that Metrobank had virtually recognized the conjugal nature of the property in at
least three instances. The first was when the bank lumped him with Florencia in Civil Case No. 00-789 as co-mortgagors and when they
were referred to as "spouses" in the petition for extrajudicial foreclosure of mortgage. Then came the published notice of foreclosure
sale where Nicholson was again designated as co-mortgagor. And third, in its demand-letter13 to vacate the disputed lot, Metrobank
addressed Nicholson and Florencia as "spouses," albeit the finality of the decree of nullity of marriage between them had long set in.

We find for Nicholson.

First, while Metrobank is correct in saying that Art. 160 of the Civil Code, not Art. 116 of the Family Code, is the applicable legal
provision since the property was acquired prior to the enactment of the Family Code, it errs in its theory that, before conjugal ownership
could be legally presumed, there must be a showing that the property was acquired during marriage using conjugal funds. Contrary to
Metrobank’s submission, the Court did not, in Manongsong,14 add the matter of the use of conjugal funds as an essential requirement
for the presumption of conjugal ownership to arise. Nicholson is correct in pointing out that only proof of acquisition during the marriage
is needed to raise the presumption that the property is conjugal. Indeed, if proof on the use of conjugal is still required as a necessary
condition before the presumption can arise, then the legal presumption set forth in the law would veritably be a superfluity. As we
stressed in Castro v. Miat:

Petitioners also overlook Article 160 of the New Civil Code. It provides that "all property of the marriage is presumed to be
conjugal partnership, unless it be prove[n] that it pertains exclusively to the husband or to the wife." This article does not
require proof that the property was acquired with funds of the partnership. The presumption applies even when the
manner in which the property was acquired does not appear. 15(Emphasis supplied.)

Second, Francisco and Jocson do not reinforce Metrobank’s theory. Metrobank would thrust on the Court, invoking the two cases, the
argument that the registration of the property in the name of "Florencia Nevalga, married to Nelson Pascual" operates to describe only
the marital status of the title holder, but not as proof that the property was acquired during the existence of the marriage.

Metrobank is wrong. As Nicholson aptly points out, if proof obtains on the acquisition of the property during the existence of the
marriage, then the presumption of conjugal ownership applies. The correct lesson of Francisco and Jocson is that proof of acquisition
during the marital coverture is a condition sine qua non for the operation of the presumption in favor of conjugal ownership. When there
is no showing as to when the property was acquired by the spouse, the fact that a title is in the name of the spouse is an indication that
the property belongs exclusively to said spouse.16

The Court, to be sure, has taken stock of Nicholson’s arguments regarding Metrobank having implicitly acknowledged, thus being in
virtual estoppel to question, the conjugal ownership of the disputed lot, the bank having named the former in the foreclosure
proceedings below as either the spouse of Florencia or her co-mortgagor. It is felt, however, that there is no compelling reason to delve
into the matter of estoppel, the same having been raised only for the first time in this petition. Besides, however Nicholson was
designated below does not really change, one way or another, the classification of the lot in question.
 Termination of Conjugal Property Regime does
not ipso facto End the Nature of Conjugal Ownership

Metrobank next maintains that, contrary to the CA’s holding, Art. 129 of the Family Code is inapplicable. Art. 129 in part reads:

Art. 129. Upon the dissolution of the conjugal partnership regime, the following procedure shall apply:

xxxx

(7) The net remainder of the conjugal partnership properties shall constitute the profits, which shall be divided equally between
husband and wife, unless a different proportion or division was agreed upon in the marriage settlements or unless there has
been a voluntary waiver or forfeiture of such share as provided in this Code.

Apropos the aforequoted provision, Metrobank asserts that the waiver executed by Nicholson, effected as it were before the
dissolution of the conjugal property regime, vested on Florencia full ownership of all the properties acquired during the
marriage.

Nicholson counters that the mere declaration of nullity of marriage, without more, does not automatically result in a regime of complete
separation when it is shown that there was no liquidation of the conjugal assets.

We again find for Nicholson.

While the declared nullity of marriage of Nicholson and Florencia severed their marital bond and dissolved the conjugal partnership, the
character of the properties acquired before such declaration continues to subsist as conjugal properties until and after the liquidation
and partition of the partnership. This conclusion holds true whether we apply Art. 129 of the Family Code on liquidation of the conjugal
partnership’s assets and liabilities which is generally prospective in application, or Section 7, Chapter 4, Title IV, Book I (Arts. 179 to
185) of the Civil Code on the subject, Conjugal Partnership of Gains. For, the relevant provisions of both Codes first require the
liquidation of the conjugal properties before a regime of separation of property reigns.

In Dael v. Intermediate Appellate Court, we ruled that pending its liquidation following its dissolution, the conjugal partnership of gains is
converted into an implied ordinary co-ownership among the surviving spouse and the other heirs of the deceased. 17

In this pre-liquidation scenario, Art. 493 of the Civil Code shall govern the property relationship between the former spouses, where:

Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining thereto, and he may therefore
alienate, assign or mortgage it, and even substitute another person in its enjoyment, except when personal rights are
involved. But the effect of the alienation or the mortgage, with respect to the co-owners, shall be limited to the portion
which may be allotted to him in the division upon the termination of the co-ownership. (Emphasis supplied.)

In the case at bar, Florencia constituted the mortgage on the disputed lot on April 30, 1997, or a little less than two years after the
dissolution of the conjugal partnership on July 31, 1995, but before the liquidation of the partnership. Be that as it may, what governed
the property relations of the former spouses when the mortgage was given is the aforequoted Art. 493. Under it, Florencia has the right
to mortgage or even sell her one-half (1/2) undivided interest in the disputed property even without the consent of Nicholson. However,
the rights of Metrobank, as mortgagee, are limited only to the 1/2 undivided portion that Florencia owned. Accordingly, the mortgage
contract insofar as it covered the remaining 1/2 undivided portion of the lot is null and void, Nicholson not having consented to the
mortgage of his undivided half.

The conclusion would have, however, been different if Nicholson indeed duly waived his share in the conjugal partnership. But, as
found by the courts a quo, the April 9, 1995 deed of waiver allegedly executed by Nicholson three months prior to the dissolution of the
marriage and the conjugal partnership of gains on July 31, 1995 bore his forged signature, not to mention that of the notarizing officer.
A spurious deed of waiver does not transfer any right at all, albeit it may become the root of a valid title in the hands of an innocent
buyer for value.

Upon the foregoing perspective, Metrobank’s right, as mortgagee and as the successful bidder at the auction of the lot, is confined only
to the 1/2 undivided portion thereof heretofore pertaining in ownership to Florencia. The other undivided half belongs to Nicholson. As
owner pro indiviso of a portion of the lot in question, Metrobank may ask for the partition of the lot and its property rights "shall be
limited to the portion which may be allotted to [the bank] in the division upon the termination of the co-ownership."18 This disposition is in
line with the well-established principle that the binding force of a contract must be recognized as far as it is legally possible to do so––
quando res non valet ut ago, valeat quantum valere potest.19

In view of our resolution on the validity of the auction of the lot in favor of Metrobank, there is hardly a need to discuss at length whether
or not Metrobank was a mortgagee in good faith. Suffice it to state for the nonce that where the mortgagee is a banking institution, the
general rule that a purchaser or mortgagee of the land need not look beyond the four corners of the title is inapplicable.20 Unlike private
individuals, it behooves banks to exercise greater care and due diligence before entering into a mortgage contract. The ascertainment
of the status or condition of the property offered as security and the validity of the mortgagor’s title must be standard and indispensable
part of the bank’s operation.21 A bank that failed to observe due diligence cannot be accorded the status of a bona fide mortgagee,22 as
here.

But as found by the CA, however, Metrobank’s failure to comply with the due diligence requirement was not the result of a dishonest
purpose, some moral obliquity or breach of a known duty for some interest or ill-will that partakes of fraud that would justify damages.

WHEREFORE, the petition is PARTLY GRANTED. The appealed Decision of the CA dated January 28, 2004, upholding with
modification the Decision of the RTC, Branch 65 in Makati City, in Civil Case No. 00-789, is AFFIRMED with the MODIFICATION that
the REM over the lot covered by TCT No. 156283 of the Registry of Deeds of Makati City is hereby declared valid only insofar as
the pro indiviso share of Florencia thereon is concerned.

As modified, the Decision of the RTC shall read:

PREMISES CONSIDERED, the real estate mortgage on the property covered by TCT No. 156283 of the Registry of Deeds of Makati
City and all proceedings thereon are NULL and VOID with respect to the undivided 1/2 portion of the disputed property owned by
Nicholson, but VALID with respect to the other undivided 1/2 portion belonging to Florencia.

The claims of Nicholson for moral damages and attorney’s fees are DENIED for lack of merit.

No pronouncement as to costs.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 156421 April 14, 2008

HON. JOSE FERNADEZ, RTC of PASIG CITY, BR. 158 and UNITED OVERSEAS BANK PHILS., petitioners,
vs.
SPS. GREGORIO ESPINOZA and JOJI GADOR-ESPINOZA, respondent.

DECISION

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court filed by petitioner United Overseas
Bank1 (UOB) seeking to reverse and set aside the Decision2 of the Court of Appeals dated 25 June 2002 and its Resolution 3 dated 28
November 2002 in CA-G.R. SP No. 60865. The assailed Decision of the Court of Appeals reversed the Orders 4 dated 10 May 2000, 10
July 2000, 13 July 2000 and 25 August 2000 of the Regional Trial Court (RTC) of Pasig City, Branch 158, in LRC Case No. R-5792.

The dispositive portion of the Court of Appeals Decision reads:

WHEREFORE, premises considered the assailed Orders dated May 10, 2000, July 10, 2000, July 13, 2000 and August 25,
2000 are hereby ANNULED and SET ASIDE. LRC Case No. R-5792 is hereby ordered to be consolidated with Civil Case No.
66256 of Branch 164 of the Regional Trial Court of Pasig City. No Costs. 5

The 10 May 2000 and 10 July 2000 Orders of the RTC denied the motion filed by respondent spouses Gregorio Espinoza and Joji
Gador-Espinoza (spouses Espinoza) for the consolidation of the Ex-Parte Petition for the Issuance of Writ of Possession filed by UOB,
docketed as LRC Case No. R-5792, with their Complaint for Nullification of Extrajudicial Proceedings and Certificate of Sale, docketed
as Civil Case No. 66256, pending with the RTC, Branch 164. The 13 July 2000 and 25 August 2000 Orders of the RTC granted the
Petition of UOB in LRC Case No. R-5792, and ordered the issuance of a writ of possession in favor of UOB over the real property
covered by Transfer Certificate of Title (TCT) No. PT-108565.

UOB is a banking institution duly organized and existing as such under the Philippine laws; while Firematic Philippines, Inc. (FPI) is a
domestic corporation duly organized and existing under Philippine laws represented by its President, Gregorio Espinoza.

On 24 March 1996, FPI was granted a revolving credit line by UOB in the amount of P11,000,000.00. Using the said credit line, FPI
obtained on several occasions from UOB loans in different amounts, reaching the total sum of P4,000,000.00, as evidenced by
promissory notes executed by Gregorio Espinoza. Likewise drawn against the credit line of FPI were trust receipts in the sum
of P6,325,588.71.

As a security for the loan obligations of FPI, the spouses Espinoza executed a Deed of Real Estate Mortgage over a parcel of land
located in Pasig City, with an area of 200 square meters, and covered by TCT No. PT-84838 in their names, with an area of 200 square
meters and registered by the Registry of Deeds of Pasig City (subject property). 6

Subsequently, FPI defaulted in the payment of the promissory notes and trust receipts drawn against its credit line, which prompted
UOB to cause the extrajudicial foreclosure of its mortgage on the subject property, and the public auction sale thereof. The UOB was
the highest bidder at the auction sale as evidenced by the Certificate of Sale 7dated 29 July 1996.

For failure of FPI and the spouses Espinoza to redeem the subject property within the redemption period, UOB filed an Affidavit of
Consolidation before the Register of Deeds of Pasig. Consequently, a new TCT covering the subject property was issued in the name
of UOB, particularly, TCT No. PT-108565.

In order to retain possession of the subject property, FPI and the spouses Espinoza instituted an action for nullification of the
extrajudicial foreclosure proceedings and certificate of sale, before the RTC, Branch 164, docketed as Civil Case No. 66256. In their
Amended Complaint, FPI and the spouses Espinoza alleged that there was bad faith on the part of UOB who made them sign the Deed
of Real Estate Mortgage in blank. In addition, FPI and the spouses Espinoza averred that there was already an agreement entered into
by the parties to restructure the loan, but for unknown reasons, the agreement was unilaterally rescinded by UOB. Finally, FPI and the
spouses Espinoza claimed that at the time they filed their complaint, FPI already paid UOB the sum of P5,275,012.43. Despite their
repeated requests, however, UOB still failed to give them proper accounting of their outstanding loan obligations and the payments they
made thereon.
For its part, UOB filed an Ex-Parte Petition for Issuance of a Writ of Possession before the RTC, Branch 158, docketed as LRC Case
No. R-5792. The spouses Espinoza opposed LRC Case No. R-5792 in view of the pendency of Civil Case No. 66256 and moved,
instead, for the consolidation of the two cases

In its Order dated 10 May 2000, the RTC, Branch 158, in LRC Case No. R-5792, denied the opposition to the Petition and the motion
for consolidation interposed by the spouses Espinoza, to wit:

This resolves the opposition to the ex-parte issuance of writ of possession with motion for consolidation together with the reply
to the opposition and the opposition to the motion.

Since [UOB] has already consolidated a title in its name, the pendency of separate civil action is not a bar to the issuance of
writ of possession because the same is a ministerial act of the trial court (Vaca v. Court of Appeals, et. al., G.R. No. 1109672,
July 14, 1994). Being so, the proceedings of this petition is ex-parte that does not require the appearance nor the intervention
of the [spouses Espinoza].

Consequently, [the spouses Espinoza’s] opposition to the issuance of writ of possession and its motion for consolidation are
denied.8

The Motion for Reconsideration of the afore-quoted 10 May 2000 Order filed by the spouses Espinoza was denied by the RTC, Branch
158, in its subsequent Order dated 10 July 2000, which reads:

This resolves [the spouses Espinoza’s] Motion for Reconsideration, Addendum to Motion for Reconsideration together with the
opposition to the motion.

The motion is denied. It is merely a reiteration of their earlier opposition to their Ex-parte Petition for Issuance of Writ of
Possession.9

On 13 July 2000, another Order was issued by the RTC, Branch 158, in LRC Case No. R-5792 granting UOB’s Ex-Parte Petition for the
Issuance of Writ of Possession over the subject property. The lower court decreed that UOB became the absolute owner of the subject
property being the highest bidder in the public auction sale, and since the spouses Espinoza failed to redeem the subject property
within one year from the registration of the certificate of sale, UOB is now entitled to possession of the same as the confirmed owner.
According to the decretal portion of RTC Order:

WHEREFORE, let a writ of possession be issued in favor of petitioner United Overseas Bank Phils., directing the spouses
Gregorio Espinoza and Joji Gador-Espinoza and all persons claiming rights under them to vacate the premises of the property
covered by Transfer Certificate of Title No. PT-108565 under [UOB’s] name and to turn to it over [UOB] within ten (10) days
from receipt of this Order.10

A motion was filed by the spouses Espinoza seeking reconsideration and clarification of the 13 July 2000 Order of the RTC, Branch
158, underscoring the alleged irregularities in the procurement of the mortgage, accounting of the loan obligations, and conduct of the
foreclosure proceedings.

The Motion for Clarification of the spouses Espinoza, however, was denied by the RTC, Branch 158, in its Order dated 25 August 2000,
which states:

The motion is denied. There is really nothing to clarify on the Order of this Court dated July 13, 2000. It is an Order for the
issuance of a writ of possession over a property covered by Transfer Certificate of Title No. PT-108565 formerly Transfer
Certificate of Title No. PT-84838. It is an Order directing Spouses Gregorio Espinoza and Joji Gador-Espinoza and all persons
claiming rights under them to vacate the premises and turn it over to [UOB].

Consequently, this Order of July 13, 2000 stays and the motion of the [the spouses Espinoza] for the consolidation of its (sic)
petition with Civil Case No. 66256 pending before Branch 164, also of this Court is denied. 11

Dissatisfied, the spouses Espinoza filed before the Court of Appeals a Petition for Certiorari under Rule 65 of the Rules of Court,
docketed as CA-G.R. SP No. 60865, averring that the foregoing RTC Orders were issued by the RTC in grave abuse of discretion and,
thus, must be nullified and set aside.

On 25 March 2002, the Court of Appeals rendered a Decision in favor of the spouses Espinoza and reversed the four RTC Orders. The
appellate court stressed that the duty of the trial court to issue the writ of possession after the expiration of the one-year redemption
period ceased to be ministerial in view of the pressing peculiar and equitable circumstances in the instant case.

In a Resolution dated 28 November 2002, the Court of Appeals denied UOB’s Motion for Reconsideration of its Decision.
Petitioner is now before this Court assailing the 25 March 2002 Decision and 28 November 2002 Resolution of the Court of
Appeals via a Petition for Review on Certiorari under Rule 45 of the Rules of Court, raising the following issues:

I. WHETHER OR NOT THE COURT OF APPEALS COMMITTED GROSS AND REVERSIBLE ERROR IN GIVING DUE
COURSE TO THE SPOUSES ESPINOZA’S PETITION.

II. WHETHER OR NOT THE COURT OF APPEALS COMMITTED GROSS AND REVERSIBLE ERROR IN NOT DECLARING
THAT [UOB] IS ENTITLED TO THE ISSUANCE OF THE WRIT OF POSSESSION

At the outset, it must be emphasized that what is on appeal before us is only the issuance of the writ of possession over the subject
property issued by the RTC, Branch 158, in LRC Case No. R-5792.

A writ of possession is an order whereby the sheriff is commanded to place a person in possession of a real or personal property. It
may be issued under the following instances: (1) land registration proceedings under Sec. 17 of Act No. 496 12; (2) judicial foreclosure,
provided the debtor is in possession of the mortgaged realty and no third person, not a party to the foreclosure suit, had intervened; and
(3) extrajudicial foreclosure of a real estate mortgage under Sec. 7 of Act No. 3135 13 as amended by Act No. 4118.14 The case at bar
falls under the third instance.

The issuance of a writ of possession is explicitly authorized by Act No. 3135, as amended by Act No. 4118, which regulates the manner
of effecting an extrajudicial foreclosure of mortgage.

In case of default of the mortgagor in the payment of the loan obligations, the mortgagee may foreclose the mortgaged property by filing
a Petition for Extrajudicial Foreclosure of Mortgage following the procedure laid down in A.M. No. 99-10-05-0.15 The mortgagor or his
successor-in-interest may redeem the foreclosed property within one year from the registration of the sale with the Register of
Deeds.16 During the redemption period, the buyer at public auction may file, with the RTC in the province or place where the property or
portion thereof is located, an ex partemotion for the issuance of a writ of possession within one year from the registration of the Sheriff’s
Certificate of Sale, and the court shall grant the said motion upon the petitioner’s posting a bond in an amount equivalent to the use of
the property for a period of twelve (12) months.17

A writ of possession may be issued during the redemption period in favor of the purchaser of the mortgaged property in the foreclosure
sale. Section 7 of Act No. 3135, as amended by Act No. 4118, provides:

Section 7. Possession during redemption period. – In any sale made under the provisions of this Act, the purchaser may
petition the [Regional Trial Court] where the property or any part thereof is situated, to give him possession thereof during the
redemption period, furnishing bond in an amount equivalent to the use of the property for a period of twelve months, to
indemnify the debtor in case it be shown that the sale was made without violating the mortgage or without complying with the
requirements of this Act. Such petition shall be made under oath and filed in form of an ex parte motion in the registration or
cadastral proceedings if the property is registered, or in special proceedings in the case of property registered under the
Mortgage Law or under section one hundred and ninety-four of the Administrative Code, or of any other real property
encumbered with a mortgage duly registered in the office of any register of deeds in accordance with any existing law, and in
each case the clerk of the court shall, upon the filing of such petition, collect the fees specified in paragraph eleven of section
one hundred and fourteen of Act Numbered Four hundred and ninety-six, as amended by Act Numbered Twenty-eight
hundred and sixty-six, and the court shall, upon approval of the bond, order that a writ of possession issue, addressed to the
sheriff of the province in which the property is situated, who shall execute said order immediately.

The above-quoted provision explicitly allows the purchaser in a foreclosure sale to apply for a writ of possession during the redemption
period by filing a petition in the form of an ex parte motion under oath for that purpose. Upon the filing of such motion with the RTC
having jurisdiction over the subject property and the approval of the corresponding bond, the law also in express terms directs the court
to issue the order for a writ of possession.18

Upon the expiration of the redemption period, the right of the purchaser to the possession of the foreclosed property becomes absolute.
The basis of this right to possession is the purchaser’s ownership of the property. Mere filing of an ex parte motion for the issuance of
the writ of possession would suffice, and the bond required is no longer necessary, since possession becomes an absolute right of the
purchaser as the confirmed owner.19

Under the foregoing judicial pronouncement, it is clear that UOB has an absolute right to take possession of the subject property since it
was the highest bidder in the foreclosure sale, and the spouses Espinoza failed to redeem the said property even after the redemption
period. Act No. 3135, as amended by Act No. 4118, is categorical in stating that the purchaser must first be placed in possession of the
mortgaged property pending proceedings assailing the issuance of the writ of possession. 20

Consequently, the RTC under which the application for the issuance of a writ of possession over the subject property is pending cannot
defer the issuance of the said writ in view of the pendency of an action for annulment of mortgage and foreclosure sale. The judge with
whom an application for a writ of possession is filed need not look into the validity of the mortgage or the manner of its foreclosure.21
Any question regarding the validity of the mortgage or its foreclosure cannot be a legal ground for the refusal to issue a wr it of
possession. Regardless of whether or not there is a pending suit for the annulment of the mortgage or the foreclosure itself, the
purchaser is entitled to a writ of possession, without prejudice, of course, to the eventual outcome of the pending annulment case. 22

The spouses Espinoza’s position that the issuance of the writ of possession must be deferred pending resolution of Civil Case No.
66256 is therefore unavailing. As we have recounted above, this Court has long settled that a pending action for annulment of mortgage
or foreclosure sale does not stay the issuance of the writ of possession. 23

Indeed, the proceeding in a petition for a writ of possession is ex parte and summary in nature. It is a judicial proceeding brought for the
benefit of one party only and without notice by the court to any person adverse of interest. It is a proceeding wherein relief is granted
without affording the person against whom the relief is sought the opportunity to be heard.24 Hence, the RTC may grant the petition in
the absence of the mortgagors, who are, in this case, the spouses Espinoza.

The RTC, Branch 158, which issued the writ of possession cannot be adjudged to have committed grave abuse of discretion, nor can
its order directing the issuance of said writ be considered patently illegal for, a fortiori, there is no discretion involved in its issuance of
such an order, it being the ministerial duty of the trial court under the circumstances.

In Mamerto Maniquiz Foundation, Inc. v. Pizarro,25 we emphasized the principle that the issuance of a writ of possession in favor of the
purchaser in a foreclosure sale is a ministerial act and does not entail the exercise of discretion:

This Court has consistently held that the duty of the trial court to grant a writ of possession is ministerial. Such writ
issues as a matter of course upon the filing of the proper motion and the approval of the corresponding bond. No
discretion is left to the trial court. Any question regarding regularity and validity of the sale, as well as the consequent
cancellation of the writ, is to be determined in a subsequent proceeding as outlined in Section 8 of Act 3135. Such question
cannot be raised to oppose the issuance of the writ, since the proceeding is ex parte. The recourse is available even before
the expiration of the redemption period provided by law and the Rules of Court.

The purchaser, who has a right to possession that extends after the expiration of the redemption period, becomes the
absolute owner of the property when no redemption is made. Hence, at any time following the consolidation of
ownership and the issuance of a new transfer certificate of title in the name of the purchaser, he or she is even more
entitled to possession of the property. In such a case, the bond required under Section 7 of Act 3135 is no longer
necessary, since possession becomes an absolute right of the purchaser as the confirmed owner. (Emphases supplied.)

The order for a writ of possession issues as a matter of course upon the filing of the proper motion and the approval of the
corresponding bond, if applied for by the purchaser during the redemption period; and upon the filing of the proper motion, with no more
need for a bond, if applied for by the purchaser after the lapse of the redemption period. The judge issuing the order, following the
express provisions of law and settled jurisprudence, cannot be charged with having acted with grave abuse of discretion. 26

Hence, certiorari does not lie in instances where the RTC granted the Petition for the Issuance of the Writ of Possession, for he is
mandated by the law to issue such writ and the buyer in the foreclosure sale is entitled to it as a matter of right. A special civil action
for certiorari could be availed of only if the lower tribunal has acted without or in excess of jurisdiction, or with grave abuse of discretion
amounting to lack or excess of jurisdiction; and if there is no appeal or any other plain, speedy, and adequate remedy in the ordinary
course of law. However, where the assailed Order was forthwith issued by the RTC pursuant to its ministerial duty, and in the absence
of any showing that the said Order is tainted with illegality, as in the case at bar, certiorari is not the proper remedy.27

In sum, We have established that LRC Case No. R-5792 is ex-parte and summary in nature, and it can proceed independently of Civil
Case No. 66256. The writ of possession shall be issued in favor of the purchaser of the mortgaged property in the foreclosure sale,
despite the pendency, but without prejudice to the subsequent outcome, of the case for annulment of the mortgage or the foreclosure
proceedings. Hence, RTC, Branch 158 also did not commit grave abuse of discretion amounting to lack or excess of jurisdiction when it
issued its Orders dated 10 May 2000 and 10 July 2000 denying the spouses Espinoza’s Motion for Consolidation of LRC Case No. R-
5792 with Civil Case No. 66256.

The Court of Appeals reversed the 13 July 2000 Order of the RTC, Branch 158, granting the issuance of a writ of possession over the
subject property to UOB, on the ground that there are peculiar and equitable circumstances attendant in the case which no longer made
the issuance of said writ a mere ministerial duty of the trial court.

Apparently, the appellate court relied on Cometa v. Intermediate Appellate Court28 and Barican v. Intermediate Appellate Court29 cited
in Vaca v. Court of Appeals30 in holding that the issuance of writ of possession had ceased to be ministerial. In Cometa, which actually
involved execution of judgment for the prevailing party in a damages suit, the subject properties were sold at the public auction at an
unusually lower price, while in Barican, the mortgagee bank took five years from the time of foreclosure before filing the petition for the
issuance of writ of possession. We have considered these equitable and peculiar circumstances in Cometa and Barican to justify the
relaxation of the otherwise absolute rule. None of these exceptional circumstances, however, attended herein so as to place the instant
case in the same stature as that of Cometa and Barican. Instead, the ruling in Vaca v. Court of Appeals on all fours with the present
petition. In Vaca, there is no dispute that the property was not redeemed within one year from the registration of the extrajudicial
foreclosure sale; thus, the mortgagee bank acquired an absolute right, as purchaser, to the issuance of the writ of possession. Similarly,
UOB, as the purchaser at the auction sale in the instant case, is entitled as a matter of right, to the issuance of the writ of possession.

The Court of Appeals evidently committed reversible error in finding otherwise.

WHEREFORE, IN VIEW OF THE FOREGOING, the instant Petition is GRANTED. The Decision dated 25 June 2002, and the
Resolution dated 28 November 2002, rendered by the Court of Appeals in CA-G.R. SP No. 60865, are hereby REVERSED and SET
ASIDE. The Orders dated 10 May 2000, 10 July 2000, 13 July 2000 and 25 August 2000 of the Regional Trial Court of Pasig City,
Branch 158, in LRC Case No. R-5792 are hereby REINSTATED.
 FIRST DIVISION

[G.R. No. 123871. August 31, 1998]

ALLIED BANKING CORPORATION, petitioner, vs. COURT OF APPEALS and BANK OF THE PHILIPPINE ISLANDS,
INC., respondents.

DECISION

PANGANIBAN, J.:

As a general rule, a trial court that has established jurisdiction over the main action also acquires jurisdiction over a third-party
complaint, even if it could not have done so had the latter been filed as an independent action. This rule, however, does not apply to
banks that have agreed to submit their disputes over check clearings to arbitration under the rules of the Philippine Clearing House
Corporation. In that event, primary recourse should be to the PCHC Arbitration Committee, without prejudice to an appeal to the trial
courts. In other words, without first resorting to the PCHC, the third-party complaint would be premature.

The Case

Before us is a petition for review on certiorari under Rule 45, assailing the Decision dated February 12, 1996 promulgated by the Court
of Appeals[1] in CA-GR CV No. 44804; which affirmed the trial courts Order dated September 16, 1991, dismissing petitioners third-
party complaint against private respondent.[2]

Facts of the Case

The facts are undisputed. Reproduced hereunder is Respondent Courts narration:

Hyatt Terraces Baguio issued two crossed checks drawn against Allied Banking Corp. (hereinafter, ALLIED) in favor of appellee
Meszellen Commodities Services, Inc. (hereinafter, MESZELLEN). Said checks were deposited on August 5, 1980 and August 18,
1980, respectively, with the now defunct Commercial Bank and Trust Company (hereinafter, COMTRUST). Upon receipt of the above
checks, COMTRUST stamped at the back thereof the warranty All prior endorsements and/or lack of endorsements guaranteed. After
the checks were cleared through the Philippine Clearing House Corporation (hereinafter, PCHC), ALLIED BANK paid the proceeds of
said checks to COMTRUST as the collecting bank.

On March 17, 1981, the payee, MESZELLEN, sued the drawee, ALLIED BANK, for damages which it allegedly suffered when the
value[s] of the checks were paid not to it but to some other person.

Almost ten years later, or on January 10, 1991, before defendant ALLIED BANK could finish presenting its evidence, it filed a third party
complaint against Bank of the Philippine Islands (hereinafter, BPI, appellee herein) as successor-in-interest of COMTRUST, for
reimbursement in the event that it would be adjudged liable in the main case to pay plaintiff, MESZELLEN. The third party complaint
was admitted [in] an Order dated May 16, 1991 issued by the Regional Trial Court of Pasig, Branch 162. On July 16, 1991, BPI filed a
motion to dismiss said third party complaint grounded on the following: 1) that the court ha[d] no jurisdiction over the nature of the
action; and 2) that the cause of action of the third party plaintiff ha[d] already prescribed.

On September 16, 1991, the trial court issued an order dismissing the third party complaint. Defendant-third party plaintiffs motion for
reconsideration of this order was subsequently denied.[3]

Respondent Courts Ruling

Respondent Court affirmed the trial court thus:

x x x Appellants submission that the cause of action of the third party plaintiff against the third party defendant accrued only when the
complaint in the original case was filed on March 17, 1981 is untenable. As earlier discussed, the defendant has a separate cause of
action (in respect of plaintiffs complaint) against a third party in the original and principal case. Reviewing the third-party complaint
below, that cause of action is the supposed erroneous endorsement made by COMTRUST for which ALLIED BANK is being held liable
for damages by the payee-appellee. Without COMTRUSTs warranties as a general endorser, ALLIED BANK allegedly would not have
paid on the checks. Should such warranties prove to be false and inaccurate, COMTRUST may be held liable for any damage arising
out of the falsity of its representation.

Based on the records the subject endorsement of COMTRUST was made in August 1980[;] and in the same period, ALLIED BANK
paid on the subject checks. From that moment, ALLIED BANK could have instituted an action against COMTRUST. It is the legal
possibility of bringing the action which determines the starting point for the computation of the period (Tolentino, Civil Code of the
Philippines, Vol. IV, p. 41, citing Manresa). This is the moment when a cause of action may be deemed to accrue. Thus, considering
that the third party complaint was filed more than ten years from August 1980, specifically on January 10, 1991, the same can no longer
be entertained.

Even granting arguendo that the lower court had jurisdiction over the third party complaint and the cause of action thereof had not yet
prescribed, the filing of the third party complaint should nevertheless be disallowed considering that defendant has already presented
several witnesses and is about ready to rest its case because, then, the allowance of the third party complaint would only delay the
resolution of the original case. (Firestone Tire and Rubber Co. of the Phil. vs. Tempengko, supra, p. 423).

A final word. We have noted the curious situation here where, instead of the payee suing its bank, i.e., the collecting bank (which is
COMTRUST), it opted to sue the drawee bank (ALLIED BANK). It is, however, up to the trial court to rule on the propriety of the latter
complaint.[4]

Not satisfied with the above ruling, petitioner filed the present petition before this Court.[5]

The Issues

Petitioner raises the following issues:[6]

I. The Respondent Honorable Court of Appeals erred in holding that the cause of action of the third-party complaint ha[d] already
prescribed.

II. The Respondent Honorable Court of Appeals erred in holding that the filing of the third party complaint should be disallowed as it
would only delay the resolution of the case.

On the other hand, private respondent argues that the trial court had no authority to admit a third-party claim that was filed by one bank
against another and involved a check cleared through the Philippine Clearing House Corporation (PCHC). To the mind of the Court, this
is the critical issue.

The Courts Ruling

The petition is bereft of merit.

Critical Issue: Mandatory Recourse to PCHC

To buttress its claim, private respondent contends that petitioners remedy rests with the PCHC, of which both Allied and BPI are
members, in consonance with the Clearing House Rules and Regulations which, in part, states:

Sec. 38 - Arbitration

Any dispute or controversy between two or more clearing participants involving any check/item cleared thru PCHC shall be submitted to
the Arbitration Committee, upon written complaint of any involved participant by filing the same with the PCHC serving the same upon
the other party or parties, who shall within fifteen (15) days after receipt thereof file with the Arbitration Committee its written answer to
such written complaint and also within the same period serve the same upon the complaining participant, xxx.

Private respondent cites Banco de Oro Savings and Mortgage Bank v. Equitable Banking Corporation[7] and Associated Bank v. Court
of Appeals,[8] which upheld the right of the PCHC to settle and adjudicate disputes between member banks. In Banco de Oro, the
Court ruled:

The participation of the two banks, petitioner and private respondent, in the clearing operations of PCHC is a manifestation of their
submission to its jurisdiction. Secs. 3 and 36.6 of the PCHC-CHRR clearing rules and regulations provide:

Sec. 3. AGREEMENT TO THESE RULES. - It is the general agreement and understanding that any participant in the Philippine
Clearing House Corporation, MICR clearing operations[,] by the mere fact of their participation, thereby manifests its agreement to
these Rules and Regulations and its subsequent amendments.

Sec. 36.6. (ARBITRATION) - The fact that a bank participates in the clearing operations of the PCHC shall be deemed its written and
subscribed consent to the binding effect of this arbitration agreement as if it had done so in accordance with section 4 of (the) Republic
Act. No. 876, otherwise known as the Arbitration Law.

Further[,] Section 2 of the Arbitration Law mandates:

Two or more persons or parties may submit to the arbitration of one or more arbitrators any controversy existing between them at the
time of the submission and which may be the subject of any action, or the parties of any contract may in such contract agree to settle by
arbitration a controversy thereafter arising between them. Such submission or contract shall be valid and irrevocable, save upon
grounds as exist at law for the revocation of any contract.

Such submission or contract may include question arising out of valuations, appraisals or other controversies which may be collateral,
incidental, precedent or subsequent to any issue between the parties. (Italics supplied.)

Associated Bank also disallowed a similar third-party complaint, ruling thus:

Under the rules and regulations of the Philippine Clearing House Corporation (PCHC), the mere act of participation of the parties
concerned in its operations in effect amounts to a manifestation of agreement by the parties to abide by its rules and regulations. As a
consequence of such participation, a party cannot invoke the jurisdiction of the courts over disputes and controversies which fall under
the PCHC Rules and Regulations without first going through the arbitration processes laid out by the body. Since claims relating to the
regularity of checks cleared by banking institutions are among those claims which should first be submitted for resolution by the PCHCs
Arbitration Committee, petitioner Associated Bank, having voluntarily bound itself to abide by such rules and regulations, is estopped
from seeking relief from the Regional Trial Court on the coattails of a private claim and in the guise of a third party complaint without
first having obtained a decision adverse to its claim from the said body. It cannot bypass the arbitration process on the basis of its
averment that its third party complaint is inextricably linked to the original complaint in the Regional Trial Court.

xxxxxxxxx

Clearly therefore, petitioner Associated Bank, by its voluntary participation and its consent to the arbitration rules cannot go directly to
the Regional Trial Court when it finds it convenient to do so. The jurisdiction of the PCHC under the rules and regulations is clear,
undeniable and is particularly applicable to all the parties in the third party complaint under their obligation to first seek redress of their
disputes and grievances [from] the PCHC before going to the trial court.

Finally, the contention that the third party complaint should not have been dismissed for being a necessary and inseparable offshoot of
the main case over which the court a quohad already exercised jurisdiction misses the fundamental point about such pleading. A third
party complaint is a mere procedural device which under the Rules of Court is allowed only with the courts permission. It is an action
actually independent of, separate and distinct from the plaintiffs complaint (s)uch that, were it not for the Rules of Court, it would be
necessary to file the action separately from the original complaint by the defendant against the third party. (Italics supplied.)

Banco de Oro and Associated Bank are clear and unequivocal: a third-party complaint of one bank against another involving a check
cleared through the PCHC is unavailing, unless the third-party claimant has first exhausted the arbitral authority of the PCHC Arbitration
Committee and obtained a decision from said body adverse to its claim.

Recognizing the role of the PCHC in the arbitration of disputes between participating banks, the Court in Associated Bank further held:
Pursuant to its function involving the clearing of checks and other clearing items, the PCHC has adopted rules and regulations designed
to provide member banks with a procedure whereby disputes involving the clearance of checks and other negotiable instruments
undergo a process of arbitration prior to submission to the courts below. This procedure not only ensures a uniformity of rulings relating
to factual disputes involving checks and other negotiable instruments but also provides a mechanism for settling minor disputes among
participating and member banks which would otherwise go directly to the trial courts.

We defer to the primary authority of PCHC over the present dispute, because its technical expertise in this field enables it to better
resolve questions of this nature. This is not prejudicial to the interest of any party, since primary recourse to the PCHC does not
preclude an appeal to the regional trial courts on questions of law. Section 13 of the PCHC Rules reads:

Sec. 13. The findings of facts of the decision or award rendered by the Arbitration Committee or by the sole Arbitrator as the case may
be shall be final and conclusive upon all the parties in said arbitration dispute. The decision or award of the Arbitration Committee or of
the Sole Arbitrator shall be appealable only on questions of law to any of the Regional Trial Courts in the National Capital Judicial
Region where the Head Office of any of the parties is located. The appellant shall perfect his appeal by filing a notice of appeal to the
Arbitration Secretariat and filing a Petition with the Regional Trial Court of the National Capital Region xxx.

Furthermore, when the error is so patent, gross and prejudicial as to constitute grave abuse of discretion, courts may address questions
of fact already decided by the arbitrator.[9]

We are not unaware of the rule that a trial court, which has jurisdiction over the main action, also has jurisdiction over the third party
complaint, even if the said court would have had no jurisdiction over it had it been filed as an independent action.[10] However, this
doctrine does not apply in the case of banks, which have given written and subscribed consent to arbitration under the auspices of the
PCHC.

By participating in the clearing operations of the PCHC, petitioner agreed to submit disputes of this nature to arbitration. Accordingly, it
cannot invoke the jurisdiction of the trial courts without a prior recourse to the PCHC Arbitration Committee. Having given its free and
voluntary consent to the arbitration clause, petitioner cannot unilaterally take it back according to its whim. In the world of commerce,
especially in the field of banking, the promised word is crucial. Once given, it may no longer be broken.

Upon the other hand, arbitration as an alternative method of dispute-resolution is encouraged by this Court. Aside from unclogging
judicial dockets, it also hastens solutions especially of commercial disputes.

In view of the foregoing, a discussion of the issues raised by the petitioners is unnecessary.

WHEREFORE, the petition is DENIED for lack of merit. Costs against petitioner.

SO ORDERED.