Timbol v Philippine National Bank

G.R. No. 207408

Apr. 18, 2016

Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the Decision
dated 26 September 2012 and Resolution dated 31 May 2013 of the Court of Appeals in CA-G.R. CV No. 84649. The
Court of Appeals reversed and set aside the January 05 2005 Decision of the Regional Trial Court (RTC) of Makati
City, Branch 150, in Civil Case No. 00-946.

FACTS: Civil Case No. 00-946 stems from a Complaint for annulment of real estate mortgage, foreclosure of
mortgage, and auction sale; accounting and damages, with prayer for temporary restraining order and/or injunction
led by Felino M. Timbol, Jr. and his wife Emmanuela R. Laguardia (Spouses Timbol) against the Philippine National
Bank (PNB), Atty. Ricardo M. Espina, in his capacity as notary public of Makati, and the Register of Deeds of Makati.
Sometime in December 1996, Karrich Holdings Ltd. ["KHL"], based in Hong Kong and owned by Felino
Timbol applied with PNB's wholly-owned Hong Kong-based subsidiary, PNB International Finance Limited ["PNB-
IFL"] for credit facilities. Karrich Auto Exchange ["KAE"], then named Superkinis Auto Sales, a sole proprietorship
based in the Philippines and also owned by Timbol, acted as co-borrower. The credit facilities were granted in the
total amount of PhP22,796,200.00.
As security, Timbol executed real estate mortgages on his behalf and on behalf of Emmanuela Laguardia,
over nine (9) different parcels of real estate registered in the name of Mr. and Mrs. Felino Timbol, Jr. Timbol was
supposedly made to sign the real estate mortgage forms and Promissory Note forms in blank, among other documents,
and thereafter returned the same to PNB. Timbol was allegedly never furnished with copies of the finished forms, a
statement PNB would later categorically deny.
The First Real Estate Mortgage was in consideration of credit accommodations in the amount of
(Php13,053,600.00)
The consideration for the second Real Estate Mortgage amounted to (PhP7,598,850.00). The third Real Estate
Mortgage secured an obligation amounting to (Php2,143,750.00) The real estate mortgages were annotated on the
aforementioned transfer certificates of title. On later perusal of the transfer certificates of title. However, Timbol
supposedly discovered that the amounts annotated as mortgaged added up to (PhP101,117,800.00).
Over time, Timbol signed several Promissory Notes, attesting to availments under the credit line amounting
to (USD849,595.07). On April 1, 1998, the credit facilities were reduced to (USD848,300.00), pursuant to the letter
sent by PNB-IFL to KAE/KHL.
When Timbol, KAE, and KHL defaulted on the payment of their loan obligation, PNB, on behalf of PNB-
IFL, sent a demand letter dated September 2, 1999, advising them that their total outstanding obligation stood at
(PhP38,088,173.59), inclusive of penalties and interests. In a response apparently dated October 19, 1999, Timbol,
signing in representation of KHL, manifested that he was "well aware" of the "P33 Million" outstanding obligation
and that he was awaiting the outcome of a pending application for another loan. Timbol thus requested for additional
time to settle the obligation with PNB-IFL and for the conversion of the same to Philippine currency.
On November 15, 1999, PNB caused the foreclosure of the mortgaged properties, claiming that
Timbol/KAE/KHL had violated the terms of the real estate mortgage by defaulting on the payment of the loan
obligation despite demands. As of the date of the foreclosure, the outstanding obligation already amounted to
(PhP42,320,611.62). Atty. Espina then notarized the Notice of Extra-Judicial Sale.
Timbol and Laguardia filed a suit against PNB, Espina, and the Register of Deeds of Makati City for
annulment of the real estate mortgage, of the foreclosure and auction sale, for accounting and damages, and for a
temporary restraining order and/or injunction. They accused PNB of deliberately "bloating" the amount of the
obligation. They furthermore assailed the foreclosure proceedings as highly irregular, invalid, and illegal, because the
petition for the extra-judicial foreclosure had not been filed in accordance with Supreme Court Administrative Order
No. 3; the Notice of Notary Public's Sale did not specify the newspaper in which the Notice of Sale would be published,
and was neither raffled for this purpose nor properly posted; and the Notary did not conduct an actual public bidding.
Plaintiffs thus prayed that the mortgage and Promissory Notes, and the extra-judicial foreclosure, the
foreclosure sale, and any subsequent Certificate of Sale, be declared null and void; that the mortgage liens annotated
on the transfer certificates of title be cancelled; that PNB be directed to render an accounting of plaintiffs' true and
actual obligation; and that damages and attorney's fees be awarded. Plaintiffs also prayed for preliminary and
permanent injunctive relief to restrain PNB from consolidating its title to and ownership over the real properties, and
to restrain the Makati City Registry of Deeds from canceling plaintiffs' titles and issuing new ones in lieu thereof.
During the hearings on his prayer for a temporary restraining order or writ of preliminary injunction, Timbol affirmed
the Affidavit he executed for that purpose. By Order dated September 8, 2000, the RTC granted the issuance of a writ
of preliminary injunction prayed for. The RTC denied PNB's Motion for Reconsideration and Supplemental Motion
for Reconsideration, while granting the plaintiffs' Motion to Reduce Bond.
PNB elevated the RTC's Order all the way to the Supreme Court which would ultimately nullify and set aside
the same in its February 11, 2005 Decision in G.R. No. 157535.
Meanwhile, in his Answer, Espina defended the validity of the foreclosure sale proceedings and explained
that it was PNB's Atty. Geromo who rejected Plaintiff Timbol's request for copies of the mortgage documents and
promissory notes.
For its part, PNB insisted that the Real Estate Mortgage contracts had been "already in printed form" at the
time Timbol signed the same, and that it was not PNB-IFL's practice that these be signed in blank. PNB also argued
that the total amount of Timbol/KAE/KHL's obligation already included interest at agreed-upon rates and that the
foreclosure proceedings had been proper and valid. Thus PNB asserted that any damage that might result to plaintiffs
were merely damnum absque injuria. PNB added that the proceedings were governed by Act No. 3135, not
Administrative Order No. 3, as stipulated in the mortgage contract themselves.
The RTC in its January 5, 2005 ruling, declared the foreclosure of mortgage made by the defendant bank
to be null and void. It held that the mortgage loan annotated at the back of the titles did not reflect the actual amount
obtained by the plaintiffs and further said that there was obviously deliberate act of the bank in refusing to furnish the
plaintiff with copies of the loan documents, which led the RTC to believe the statement of the Timbol spouses that
they were virtually led to sign blank documents. The RTC further held that PNB failed "to show proof that when it
led the petition for foreclosure with defendant notary public, it was duly empowered by a board resolution, as
evidenced by a secretary's certificat to foreclose the mortgage constituted over the subject properties. Lastly, the RTC
found no basis to grant the claim for damages and attorney's fees.
Without filing a motion for reconsideration of the RTC decision, PNB elevated the case to the Court of
Appeals. While the case was pending, Timbol died and was substituted by his heirs, herein petitioners. In its Sept. 26,
2016 decision, the Court of Appeals reversed the RTC's decision. Finally, as to the claim for moral and exemplary
damages, the Court of Appeals denied the same for lack of basis.
Petitioners filed a motion for reconsideration, which was denied in the assailed Resolution dated 31 May
2013.

Petitioners' Arguments
Petitioners contend that PNB should have first filed a motion for reconsideration of the RTC Decision before
interposing its appeal. Likewise, petitioners argue that the Court of Appeals' application of the ruling in PNB v. Timbol
is misplaced. They emphasize that the earlier case dealt only with the application for the issuance of a writ of
preliminary injunction, and not the validity of the mortgage.
Petitioners also insist that the RTC's findings on PNB's alleged refusal to furnish the Spouses Timbol with
copies of the mortgage documents and the lack of evidence to show PNB-IFL's authority to assign its rights and
interests to PNB should have been upheld by the Court of Appeals.
Respondent's Arguments
PNB points out that petitioners are raising factual issues that have already been "exhaustively discussed and
resolved" by this Court in PNB v. Timbol. PNB also argues that the Court of Appeals correctly cited the Court's
decision in PNB v. Timbol.
Moreover, PNB argues that the Court of Appeals did not commit reversible error when it found that the PNB
"did not bloat the loan obligations of petitioners" and as such, had "no reason to refuse petitioners' request that they
be furnished copies of the loan documents." As further proof, PNB notes that petitioners, in the proceedings at the
RTC, "expressly admitted" the "genuineness and due execution of the real estate mortgage and the subject Promissory
Notes." PNB argues that "there is absolutely nothing in the 1997 Rules of Civil Procedure that requires a party-litigant
to first file a motion for reconsideration of an adverse decision before it can file a Notice of Appeal." PNB claims that
the provisions in the Rules of Civil Procedure on motions for reconsideration are "merely directory, and not
mandatory." Thus, PNB concludes that the petition must be dismissed for failure of petitioners to "present a valid and
legitimate question of law that would warrant the exercise of the Court's discretionary power of review."
ISSUE: Whether or not the Court of Appeals erred in reversing the RTC’s decision in the application of the Law of
the Case Doctrine
HELD: No. The Court of Appeals correctly applied the law of the case doctrine. In PNB v. Timbol, PNB brought a
petition for certiorari to set aside the order of Judge Zeus L. Abrogar that issued a writ of preliminary injunction in
Civil Case No. 00- 946. The Court struck down this order, holding that the order "was attended with grave abuse of
discretion." The Court found that the Spouses Timbol "never denied that they defaulted in the payment of the
obligation." In fact, they even acknowledged that they had an outstanding obligation with PNB, and simply requested
for more time to pay.
The Court also held that the extrajudicial foreclosure of the mortgage was proper, since it was done in
accordance with the terms of the Real Estate Mortgage, which was also the Court's basis in finding that Supreme Court
Administrative Order No. 3 does not apply in that case. The Court also found that the Spouses Timbol's claim that
PNB bloated the amount of their obligation was "grossly misleading and a gross misinterpretation" by the Spouses
Timbol. The Court noted the Spouses Timbol's letter to PNB that acknowledged they had an outstanding obligation
to PNB, as well as affirmed that they received the demand letter directing them to pay, contrary to their claim.
No doubt, this Court is bound by its earlier pronouncements in PNB v. Timbol.
The term law of the case has been held to mean that "whatever is once irrevocably established as the
controlling legal rule or decision between the same parties in the same case continues to be the law of the case,
whether correct on general principles or not, so long as the facts on which such decision was predicated continue to
be the facts of the case before the court. As a general rule, a decision on a prior appeal of the same case is held to be
the law of the case whether that question is right or wrong , the remedy of the party deeming himself aggrieved being
to seek a rehearing." The doctrine applies when "(1) a question is passed upon by an appellate court, and (2) the
appellate court remands the case to the lower court for further proceedings; the lower court and even the appellate
courts on subsequent appeal of the case are, thus, bound by how such question had been previously settled."
This must be so for reasons of practicality and the orderly adjudication of cases.The doctrine of the law of
the case is "necessary to enable an appellate court toperform its duties satisfactorily and efficiently, which would be
impossible if a question, once considered and decided by it, were to be litigated anew in the same case upon any and
every subsequent appeal." It is "founded on the policy of ending litigation." The need for "judicial orderliness and
economy require such stability in the final judgments of courts or tribunals of competent jurisdiction."