G.R. No. 160758. January 15, 2014.

*
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs.
GUARIÑA AGRICULTURAL AND REALTY DEVELOPMENT
CORPORATION, respondent.

Civil Law; Contracts; Loans; Under the law, a loan requires the
delivery of money or any other consumable object by one party to another
who acquires ownership thereof, on the condition that the same amount or
quality shall be paid.—The agreement between DBP and Guariña
Corporation was a loan. Under the law, a loan requires the delivery of
money or any other consumable object by one party to another who acquires
ownership thereof, on the condition that the same amount or quality shall be
paid. Loan is a reciprocal obligation, as it arises from the same cause where
one party is the creditor, and the other the debtor. The obligation of one
party in a reciprocal obligation is dependent upon the obligation of the
other, and the performance should ideally be simultaneous. This means that
in a loan, the creditor should release the full loan amount and the debtor
repays it when it becomes due and demandable.
Same; Same; Mortgages; By its nature, a mortgage remains an
accessory contract dependent on the principal obligation, such that
enforcement of the mortgage contract will depend on whether or not there
has been a violation of the principal obligation.—DBP’s actuations were
legally unfounded. It is true that loans are often secured by a mortgage
constituted on real or personal property to protect the creditor’s interest in
case of the default of the debtor. By its nature, however, a mortgage remains
an accessory contract dependent on the principal obligation, such that
enforcement of the mortgage contract will depend on whether or not there
has been a violation of the principal obligation. While a creditor and a
debtor could regulate the order in which they should comply with their
reciprocal obligations, it is presupposed that in a loan the lender should
perform its obligation — the release of the full loan amount — before it
could demand that the borrower repay the loaned amount. In other words,

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* FIRST DIVISION.

293

Guariña Corporation would not incur in delay before DBP fully performed
its reciprocal obligation.
 Mercantile Law; Banks and Banking; Being a banking institution, DBP
owed it to Guariña Corporation to exercise the highest degree of diligence,
as well as to observe the high standards of integrity and performance in all
its transactions because its business was imbued with public interest.—
Being a banking institution, DBP owed it to Guariña Corporation to exercise
the highest degree of diligence, as well as to observe the high standards of
integrity and performance in all its transactions because its business was
imbued with public interest. The high standards were also necessary to
ensure public confidence in the banking system, for, according to Philippine
National Bank v. Pike, 470 SCRA 328 (2005): “The stability of banks
largely depends on the confidence of the people in the honesty and
efficiency of banks.” Thus, DBP had to act with great care in applying the
stipulations of its agreement with Guariña Corporation, lest it erodes such
public confidence. Yet, DBP failed in its duty to exercise the highest degree
of diligence by prematurely foreclosing the mortgages and unwarrantedly
causing the foreclosure sale of the mortgaged properties despite Guariña
Corporation not being yet in default. DBP wrongly relied on Stipulation No.
26 as its basis to accelerate the obligation of Guariña Corporation, for the
stipulation was relevant to an Omnibus Agricultural Loan, to Guariña
Corporation’s loan which was intended for a project other than agricultural
in nature.
Remedial Law; Civil Procedure; Law of the Case; Words and Phrases;
Law of the case has been defined as the opinion delivered on a former
appeal, and means, more specifically, that whatever is once irrevocably
established as the controlling legal rule of 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.—Law
of the case has been defined as the opinion delivered on a former appeal,
and means, more specifically, that whatever is once irrevocably established
as the controlling legal rule of 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. The concept of law of
the

294

case is well explained in Mangold v. Bacon, an American case, thusly: The

general rule, nakedly and boldly put, is that legal conclusions announced on
a first appeal, whether on the general law or the law as applied to the
concrete facts, not only prescribe the duty and limit the power of the trial
court to strict obedience and conformity thereto, but they become and
remain the law of the case in all other steps below or above on subsequent
appeal. The rule is grounded on convenience, experience, and reason.
Without the rule there would be no end to criticism, reagitation,
reexamination, and reformulation. In short, there would be endless
litigation. It would be intolerable if parties litigants were allowed to
speculate on changes in the personnel of a court, or on the chance of our
rewriting propositions once gravely ruled on solemn argument and handed
down as the law of a given case. An itch to reopen questions foreclosed on a
first appeal would result in the foolishness of the inquisitive youth who
pulled up his corn to see how it grew. Courts are allowed, if they so choose,
to act like ordinary sensible persons. The administration of justice is a
practical affair. The rule is a practical and a good one of frequent and
beneficial use.
Same; Same; Same; Same; The doctrine of law of the case simply
means, that when an appellate court has once declared the law in a case, its
declaration continues to be the law of that case even on a subsequent
appeal, notwithstanding that the rule thus laid down may have been
reversed in other cases.—The doctrine of law of the case simply means,
therefore, that when an appellate court has once declared the law in a case,
its declaration continues to be the law of that case even on a subsequent
appeal, notwithstanding that the rule thus laid down may have been reversed
in other cases. For practical considerations, indeed, once the appellate court
has issued a pronouncement on a point that was presented to it with full
opportunity to be heard having been accorded to the parties, the
pronouncement should be regarded as the law of the case and should not be
reopened on remand of the case to determine other issues of the case, like
damages. But the law of the case, as the name implies, concerns only legal
questions or issues thereby adjudicated in the former appeal.

PETITION for review on certiorari of a decision of the Court of

Appeals.

295

   The facts are stated in the opinion of the Court.

  Office of the Legal Counsel for petitioner.
  Marie Karen C. Jiz for respondent.

BERSAMIN, J.:
The foreclosure of a mortgage prior to the mortgagor’s default on
the principal obligation is premature, and should be undone for
being void and ineffectual. The mortgagee who has been meanwhile
given possession of the mortgaged property by virtue of a writ of
possession issued to it as the purchaser at the foreclosure sale may
be required to restore the possession of the property to the
mortgagor and to pay reasonable rent for the use of the property
during the intervening period.
The Case
In this appeal, Development Bank of the Philippines (DBP) seeks
the reversal of the adverse decision promulgated on March 26, 2003
in C.A.-G.R. CV No. 59491,[1] whereby the Court of Appeals (CA)
upheld the judgment rendered on January 6, 1998[2] by the Regional
Trial Court, Branch 25, in Iloilo City (RTC) annulling the extra-
judicial foreclosure of the real estate and chattel mortgages at the
instance of DBP because the debtor-mortgagor, Guariña Agricultural
and Realty Development Corporation (Guariña Corporation), had
not yet defaulted on its obligations in favor of DBP.

_______________
[1] Rollo, at pp. 36-44; penned by Associate Justice Juan Q. Enriquez, Jr. (retired),
and concurred in by Associate Justice Rodrigo V. Cosico (retired) and Associate
Justice Edgardo F. Sundiam (retired/deceased).
[2] CA Rollo, at pp. 23-34; penned by Judge Bartolome M. Fanuñal.

296

Antecedents
In July 1976, Guariña Corporation applied for a loan from DBP
to finance the development of its resort complex situated in
Trapiche, Oton, Iloilo. The loan, in the amount of P3,387,000.00,
was approved on August 5, 1976.[3] Guariña Corporation executed a
promissory note that would be due on November 3, 1988.[4] On
October 5, 1976, Guariña Corporation executed a real estate
mortgage over several real properties in favor of DBP as security for
the repayment of the loan. On May 17, 1977, Guariña Corporation
executed a chattel mortgage over the personal properties existing at
the resort complex and those yet to be acquired out of the proceeds
of the loan, also to secure the performance of the obligation.[5] Prior
to the release of the loan, DBP required Guariña Corporation to put
up a cash equity of P1,470,951.00 for the construction of the
buildings and other improvements on the resort complex.
The loan was released in several instalments, and Guariña
Corporation used the proceeds to defray the cost of additional
improvements in the resort complex. In all, the amount released
totalled P3,003,617.49, from which DBP withheld P148,102.98 as
interest.[6]
Guariña Corporation demanded the release of the balance of the
loan, but DBP refused. Instead, DBP directly paid some suppliers of
Guariña Corporation over the latter’s objection. DBP found upon
inspection of the resort project, its developments and improvements
that Guariña Corporation had not completed the construction works.
[7] In a letter dated February 27, 1978,[8] and a telegram dated June
9, 1978,[9] DBP thus de-

_______________
[3] Rollo, p. 37.
[4] Records, Vol. 1, p. 8.
[5] Id., at pp. 9-10.
[6] Rollo, pp. 37-38.
[7] Id., at p. 38.
[8] Records, Vol. 1, pp. 23-24.
 [9] Id., at p. 25.

297

manded that Guariña Corporation expedite the completion of the

project, and warned that it would initiate foreclosure proceedings
should Guariña Corporation not do so.[10]
Unsatisfied with the non-action and objection of Guariña
Corporation, DBP initiated extrajudicial foreclosure proceedings. A
notice of foreclosure sale was sent to Guariña Corporation. The
notice was eventually published, leading the clients and patrons of
Guariña Corporation to think that its business operation had slowed
down, and that its resort had already closed.[11]
On January 6, 1979, Guariña Corporation sued DBP in the RTC
to demand specific performance of the latter’s obligations under the
loan agreement, and to stop the foreclosure of the mortgages (Civil
Case No. 12707).[12] However, DBP moved for the dismissal of the
complaint, stating that the mortgaged properties had already been
sold to satisfy the obligation of Guariña Corporation at a public
auction held on January 15, 1979 at the Costa Mario Resort Beach
Resort in Oton, Iloilo.[13] Due to this, Guariña Corporation amended
the complaint on February 6, 1979[14] to seek the nullification of the
foreclosure proceedings and the cancellation of the certificate of
sale. DBP filed its answer on December 17, 1979,[15] and trial
followed upon the termination of the pre-trial without any agreement
being reached by the parties.[16]
In the meantime, DBP applied for the issuance of a writ of
possession by the RTC. At first, the RTC denied the application but
later granted it upon DBP’s motion for reconsideration. Aggrieved,
Guariña Corporation assailed the granting of

_______________
[10] Rollo, p. 38.
[11] Id.
[12] Records pp. 1-7.
[13] Id., at pp. 30-31.
[14] Id., at pp. 40-46.
[15] Id., at pp. 55-57.
[16] Rollo, pp. 38-39.

298

the application before the CA on certiorari (C.A.-G.R. No. 12670-

SP entitled Guariña Agricultural and Realty Development
Corporation v. Development Bank of the Philippines). After the CA
dismissed the petition for certiorari, DBP sought the
implementation of the order for the issuance of the writ of
possession. Over Guariña Corporation’s opposition, the RTC issued
the writ of possession on June 16, 1982.[17]

Judgment of the RTC

On January 6, 1998, the RTC rendered its judgment in Civil Case

No. 12707, disposing as follows:

WHEREFORE, premises considered, the court hereby resolves

that the extra-judicial sales of the mortgaged properties of the
plaintiff by the Office of the Provincial Sheriff of Iloilo on January
15, 1979 are null and void, so with the consequent issuance of
certificates of sale to the defendant of said properties, the registration
thereof with the Registry of Deeds and the issuance of the transfer
certificates of title involving the real property in its name.
It is also resolved that defendant give back to the plaintiff or its
representative the actual possession and enjoyment of all the
properties foreclosed and possessed by it. To pay the plaintiff the
reasonable rental for the use of its beach resort during the period
starting from the time it (defendant) took over its occupation and use
up to the time possession is actually restored to the plaintiff.
And, on the part of the plaintiff, to pay the defendant the loan it
obtained as soon as it takes possession and management of the beach
resort and resume its business operation.
Furthermore, defendant is ordered to pay plaintiff’s attorney’s fee
of P50,000.00.
SO ORDERED.[18]

_______________
[17] Id., at p. 39.
[18] CA Rollo, p. 34.

299

Decision of the CA
On appeal (C.A.-G.R. CV No. 59491), DBP challenged the
judgment of the RTC, and insisted that:

I
THE TRIAL COURT ERRED AND COMMITTED REVERSIBLE
ERROR IN DECLARING DBP’S FORECLOSURE OF THE
MORTGAGED PROPERTIES AS INVALID AND UNCALLED
FOR.
II
THE TRIAL COURT GRIEVOUSLY ERRED IN HOLDING THE
GROUNDS INVOKED BY DBP TO JUSTIFY FORECLOSURE
AS “NOT SUFFICIENT.” ON THE CONTRARY, THE
MORTGAGE WAS FORECLOSED BY EXPRESS AUTHORITY
OF PARAGRAPH NO. 4 OF THE MORTGAGE CONTRACT AND
 SECTION 2 OF P.D. 385 IN ADDITION TO THE QUESTIONED
PAR. NO. 26 PRINTED AT THE BACK OF THE FIRST PAGE OF
THE MORTGAGE CONRACT.
III
THE TRIAL COURT ERRED IN HOLDING THE SALES OF THE
MORTGAGED PROPERTIES TO DBP AS INVALID UNDER
ARTICLES 2113 AND 2141 OF THE CIVIL CODE.
IV
THE TRIAL COURT GRAVELY ERRED AND COMMITTED
[REVERSIBLE] ERROR IN ORDERING DBP TO RETURN TO
PLAINTIFF THE ACTUAL POSSESSION AND ENJOYMENT OF
ALL THE FORECLOSED PROPERTIES AND TO PAY
PLAINTIFF REASONABLE RENTAL FOR THE USE OF THE
FORECLOSED BEACH RESORT.

300

V
THE TRIAL COURT ERRED IN AWARDING ATTORNEY’S
FEES AGAINST DBP WHICH MERELY EXERCISED ITS
RIGHTS UNDER THE MORTGAGE CONTRACT.[19]

In its decision promulgated on March 26, 2003,[20] however, the

CA sustained the RTC’s judgment but deleted the award of
attorney’s fees, decreeing:

WHEREFORE, in view of the foregoing, the Decision dated

January 6, 1998, rendered by the Regional Trial Court of Iloilo City,
Branch 25 in Civil Case No. 12707 for Specific Performance with
Preliminary Injunction is hereby AFFIRMED with
MODIFICATION, in that the award for attorney’s fees is deleted.
SO ORDERED.[21]

DBP timely filed a motion for reconsideration, but the CA denied

its motion on October 9, 2003.
Hence, this appeal by DBP.

Issues

DBP submits the following issues for consideration, namely:

WHETHER OR NOT THE DECISION OF THE COURT OF

APPEALS DATED MARCH 26, 2003 AND ITS RESOLUTION
DATED OCTOBER 9, DENYING PETITIONER’S MOTION FOR
RECONSIDERATION WERE ISSUED IN ACCORDANCE WITH
LAW, PREVAILING JURISPRUDENTIAL DECISION AND
SUPPORTED BY EVIDENCE;

_______________
[19] Id., at pp. 49-51.
 [20] Supra note 1.
[21] Rollo, p. 43.

301

WHETHER OR NOT THE HONORABLE COURT OF APPEALS

ADHERED TO THE USUAL COURSE OF JUDICIAL
PROCEEDINGS IN DECIDING C.A.-G.R. CV NO. 59491 AND
THEREFORE IN ACCORDANCE WITH THE “LAW OF THE
CASE DOCTRINE.”[22]

Ruling
The appeal lacks merit.
1.
Findings of the CA were supported by the
evidence as well as by law and jurisprudence
DBP submits that the loan had been granted under its supervised
credit financing scheme for the development of a beach resort, and
the releases of the proceeds would be subject to conditions that
included the verification of the progress of works in the project to
forestall diversion of the loan proceeds; and that under Stipulation
No. 26 of the mortgage contract, further loan releases would be
terminated and the account would be considered due and
demandable in the event of a deviation from the purpose of the loan,
[23] including the failure to put up the required equity and the
diversion of the loan proceeds to other purposes.[24] It assails the
declaration by the CA that Guariña Corporation had not yet been in
default in its obligations despite violations of the terms of the
mortgage contract securing the promissory note.
Guariña Corporation counters that it did not violate the terms of
the promissory note and the mortgage contracts because DBP had
fully collected the interest notwithstanding

_______________
[22] Id., at p. 23.
[23] Id., at p. 25.
[24] Id., at pp. 28-29.

302

that the principal obligation did not yet fall due and become
demandable.[25]
The submissions of DBP lack merit and substance.
The agreement between DBP and Guariña Corporation was a
loan. Under the law, a loan requires the delivery of money or any
other consumable object by one party to another who acquires
ownership thereof, on the condition that the same amount or quality
shall be paid.[26] Loan is a reciprocal obligation, as it arises from the
same cause where one party is the creditor, and the other the debtor.
[27] The obligation of one party in a reciprocal obligation is
dependent upon the obligation of the other, and the performance
should ideally be simultaneous. This means that in a loan, the
creditor should release the full loan amount and the debtor repays it
when it becomes due and demandable.[28]
In its assailed decision, the CA found and held thusly:

xxxx
x x x It is undisputed that appellee obtained a loan from appellant,
and as security, executed real estate and chattel mortgages. However,
it was never established that appellee was already in default.
Appellant, in a telegram to the appellee reminded the latter to make
good on its construction works, otherwise, it would foreclose the
mortgage it executed. It did not mention that appellee was already in
default. The records show that appellant did not make any demand
for payment of the promissory note. It appears that the basis of the
foreclosure was not a default on the loan but appellee’s failure to
complete the project in accordance with appellant’s standards. In fact,
appellant refused to release the remaining balance

_______________
[25] Id., at pp. 127-137.
[26] Article 1953, in relation to Article 1933, Civil Code.
[27] IV Tolentino, The Civil Code of the Philippines, p. 175 (1999).
[28] Subic Bay Metropolitan Authority v. Court of Appeals, G.R. No. 192885, July 4, 2012,
675 SCRA 758, 766.

303

of the approved loan after it found that the improvements introduced

by appellee were below appellant’s expectations.
The loan agreement between the parties is a reciprocal obligation.
Appellant in the instant case bound itself to grant appellee the loan
amount of P3,387,000.00 condition on appellee’s payment of the
amount when it falls due. Furthermore, the loan was evidenced by the
promissory note which was secured by real estate mortgage over
several properties and additional chattel mortgage. Reciprocal
obligations are those which arise from the same cause, and in which
each party is a debtor and a creditor of the other, such that the
obligation of one is dependent upon the obligation of the other
(Areola vs. Court of Appeals, 236 SCRA 643 [1994]). They are to be
performed simultaneously such that the performance of one is
conditioned upon the simultaneous fulfilment of the other (Jaime
Ong vs. Court of Appeals, 310 SCRA 1 [1999]). The promise of
appellee to pay the loan upon due date as well as to execute sufficient
security for said loan by way of mortgage gave rise to a reciprocal
obligation on the part of appellant to release the entire approved loan
 amount. Thus, appellees are entitled to receive the total loan amount
as agreed upon and not an incomplete amount.
The appellant did not release the total amount of the approved
loan. Appellant therefore could not have made a demand for payment
of the loan since it had yet to fulfil its own obligation. Moreover, the
fact that appellee was not yet in default rendered the foreclosure
proceedings premature and improper.
The properties which stood as security for the loan were
foreclosed without any demand having been made on the principal
obligation. For an obligation to become due, there must generally be
a demand. Default generally begins from the moment the creditor
demands the performance of the obligation. Without such demand,
judicial or extrajudicial, the effects of default will not arise (Namarco
vs. Federation of United Namarco Distributors,

304

Inc., 49 SCRA 238 [1973]; Borje vs. CFI of Misamis Occidental, 88

SCRA 576 [1979]).
xxxx
Appellant also admitted in its brief that it indeed failed to release
the full amount of the approved loan. As a consequence, the real
estate mortgage of appellee becomes unenforceable, as it cannot be
entirely foreclosed to satisfy appellee’s total debt to appellant
(Central Bank of the Philippines vs. Court of Appeals, 139 SCRA 46
[1985]).
Since the foreclosure proceedings were premature and
unenforceable, it only follows that appellee is still entitled to
possession of the foreclosed properties. However, appellant took
possession of the same by virtue of a writ of possession issued in its
favor during the pendency of the case. Thus, the trial court correctly
ruled when it ordered appellant to return actual possession of the
subject properties to appellee or its representative and to pay appellee
reasonable rents.
However, the award for attorney’s fees is deleted. As a rule, the
award of attorney’s fees is the exception rather than the rule and
counsel’s fees are not to be awarded every time a party wins a suit.
Attorney’s fees cannot be recovered as part of damages because of
the policy that no premium should be placed on the right to litigate
(Pimentel vs. Court of Appeals, et al., 307 SCRA 38 [1999]).[29]
xxxx

We uphold the CA.

To start with, considering that the CA thereby affirmed the
factual findings of the RTC, the Court is bound to uphold such
findings, for it is axiomatic that the trial court’s factual findings as
affirmed by the CA are binding on appeal due to the Court not being
a trier of facts.
 _______________
[29] Supra note 1, at pp. 41-43.

305

Secondly, by its failure to release the proceeds of the loan in their

entirety, DBP had no right yet to exact on Guariña Corporation the
latter’s compliance with its own obligation under the loan. Indeed, if
a party in a reciprocal contract like a loan does not perform its
obligation, the other party cannot be obliged to perform what is
expected of it while the other’s obligation remains unfulfilled.[30] In
other words, the latter party does not incur delay.[31]
Still, DBP called upon Guariña Corporation to make good on the
construction works pursuant to the acceleration clause written in the
mortgage contract (i.e., Stipulation No. 26),[32] or else it would
foreclose the mortgages.
DBP’s actuations were legally unfounded. It is true that loans are
often secured by a mortgage constituted on real or personal property
to protect the creditor’s interest in case of the default of the debtor.
By its nature, however, a mortgage remains an accessory contract
dependent on the principal obligation,[33] such that enforcement of
the mortgage contract will depend on whether or not there has been
a violation of the principal obligation. While a creditor and a debtor
could regulate the order in which they should comply with their

_______________
[30] Cortes v. Court of Appeals, G.R. No. 126083, July 12, 2006, 494 SCRA 570,
576.
[31] Article 1169, Civil Code; IV Tolentino, op. cit., at p. 109.
[32] Records, Volume 2, at p. 646-a.
Stipulation No. 26 reads:
26. That the Mortgagee reserves the right to reduce or stop releases/advances if
after inspection and verification the accomplishment of the financed project does not justify
giving the full amount, or if the conditions of the project do not show improvement
commensurate with the amount already advanced/released. In such an event or in the event
of abandonment of the project, all advances/releases made shall automatically become due
and demandable and the Mortgagee shall take such legal steps as are necessary to protect its
interest.
[33] Rigor v. Consolidated Orix Leasing and Financing Corporation, 387 SCRA
437, 444 (2002).

306

reciprocal obligations, it is presupposed that in a loan the lender

should perform its obligation — the release of the full loan amount
— before it could demand that the borrower repay the loaned
amount. In other words, Guariña Corporation would not incur in
delay before DBP fully performed its reciprocal obligation.[34]
 Considering that it had yet to release the entire proceeds of the
loan, DBP could not yet make an effective demand for payment
upon Guariña Corporation to perform its obligation under the loan.
According to Development Bank of the Philippines v. Licuanan,[35]
it would only be when a demand to pay had been made and was
subsequently refused that a borrower could be considered in default,
and the lender could obtain the right to collect the debt or to
foreclose the mortgage. Hence, Guariña Corporation would not be in
default without the demand.
Assuming that DBP could already exact from the latter its
compliance with the loan agreement, the letter dated February 27,
1978 that DBP sent would still not be regarded as a demand to
render Guariña Corporation in default under the principal contract
because DBP was only thereby requesting the latter “to put up the
deficiency in the value of improvements.”[36]
Under the circumstances, DBP’s foreclosure of the mortgage and
the sale of the mortgaged properties at its instance were premature,
and, therefore, void and ineffectual.[37]
Being a banking institution, DBP owed it to Guariña Corporation
to exercise the highest degree of diligence, as well as

_______________
[34] Selegna Management and Development Corporation v. United Coconut
Planters Bank, G.R. No. 165662, May 3, 2006, 489 SCRA 125, 138.
[35] G.R. No. 150097, February 26, 2007, 516 SCRA 644.
[36] Supra note 8.
[37] Development Bank of the Philippines v. Licuanan, supra, note 35, at p. 654.

307

to observe the high standards of integrity and performance in all its

transactions because its business was imbued with public interest.
[38] The high standards were also necessary to ensure public
confidence in the banking system, for, according to Philippine
National Bank v. Pike:[39] “The stability of banks largely depends on
the confidence of the people in the honesty and efficiency of banks.”
Thus, DBP had to act with great care in applying the stipulations of
its agreement with Guariña Corporation, lest it erodes such public
confidence. Yet, DBP failed in its duty to exercise the highest degree
of diligence by prematurely foreclosing the mortgages and
unwarrantedly causing the foreclosure sale of the mortgaged
properties despite Guariña Corporation not being yet in default. DBP
wrongly relied on Stipulation No. 26 as its basis to accelerate the
obligation of Guariña Corporation, for the stipulation was relevant to
an Omnibus Agricultural Loan, to Guariña Corporation’s loan which
was intended for a project other than agricultural in nature.
Even so, Guariña Corporation did not elevate the actionability of
DBP’s negligence to the CA, and did not also appeal the CA’s
deletion of the award of attorney’s fees allowed by the RTC. With
the decision of the CA consequently becoming final and immutable
as to Guariña Corporation, we will not delve any further on DBP’s
actionable actuations.

_______________
[38] Comsavings Bank (now GSIS Family Savings Bank) v. Capistrano, G.R. No.
170942, August 28, 2013, 704 SCRA 72; citing Philippine National Bank v. Chea
Chee Chong, G.R. Nos. 170865 and 170892, April 25, 2012, 671 SCRA 49, 62-63;
Solidbank Corporation v. Arrieta, G.R. No. 152720, February 17, 2005, 451 SCRA
711, 720; and Philippine Commercial International Bank v. Court of Appeals, G.R.
Nos. 121413, 121479 and 128604, January 29, 2001, 350 SCRA 446, 472.
[39] G.R. No. 157845, September 20, 2005, 470 SCRA 328, 347.

308

2.
The doctrine of law of the case
did not apply herein

DBP insists that the decision of the CA in C.A.-G.R. No. 12670-

SP already constituted the law of the case. Hence, the CA could not
decide the appeal in C.A.-G.R. CV No. 59491 differently.
Guariña Corporation counters that the ruling in C.A.-G.R. No.
12670-SP did not constitute the law of the case because C.A.-G.R.
No. 12670-SP concerned the issue of possession by DBP as the
winning bidder in the foreclosure sale, and had no bearing
whatsoever to the legal issues presented in C.A.-G.R. CV No.
59491.
Law of the case has been defined as the opinion delivered on a
former appeal, and means, more specifically, that whatever is once
irrevocably established as the controlling legal rule of 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.[40]
The concept of law of the case is well explained in Mangold v.
Bacon,[41] an American case, thusly:

The general rule, nakedly and boldly put, is that legal conclusions
announced on a first appeal, whether on the general law or the law as
applied to the concrete facts, not only prescribe the duty and limit the
power of the trial court to strict obedience and conformity thereto,
but they become and remain the law of the case in all

_______________
[40] Kilosbayan, Incorporated v. Morato, G.R. No. 118910, July 17, 1995, 246 SCRA 540,
559, citing People v. Pinuila, 103 Phil. 992, 999 (1958).
 [41] 237 Mo. 496, cited and quoted in Zarate v. Director of Lands, 39 Phil. 747, 750 (1919).

309

other steps below or above on subsequent appeal. The rule is

grounded on convenience, experience, and reason. Without the rule
there would be no end to criticism, reagitation, reexamination, and
reformulation. In short, there would be endless litigation. It would be
intolerable if parties litigants were allowed to speculate on changes in
the personnel of a court, or on the chance of our rewriting
propositions once gravely ruled on solemn argument and handed
down as the law of a given case. An itch to reopen questions
foreclosed on a first appeal would result in the foolishness of the
inquisitive youth who pulled up his corn to see how it grew. Courts
are allowed, if they so choose, to act like ordinary sensible persons.
The administration of justice is a practical affair. The rule is a
practical and a good one of frequent and beneficial use.

The doctrine of law of the case simply means, therefore, that

when an appellate court has once declared the law in a case, its
declaration continues to be the law of that case even on a subsequent
appeal, notwithstanding that the rule thus laid down may have been
reversed in other cases.[42] For practical considerations, indeed,
once the appellate court has issued a pronouncement on a point that
was presented to it with full opportunity to be heard having been
accorded to the parties, the pronouncement should be regarded as
the law of the case and should not be reopened on remand of the
case to determine other issues of the case, like damages.[43] But the
law of the case, as the name implies, concerns only legal questions
or issues thereby adjudicated in the former appeal.
The foregoing understanding of the concept of the law of the case
exposes DBP’s insistence to be unwarranted.
To start with, the ex parte proceeding on DBP’s application for
the issuance of the writ of possession was entirely independent from
the judicial demand for specific performance herein. In fact, C.A.-
G.R. No. 12670-SP, being the interlocu-

_______________
[42] Zarate v. Director of Lands, 39 Phil. 747, 750 (1919).
[43] Bachrach Motor Co. v. Esteva, 67 Phil. 16 (1938).

310

tory appeal concerning the issuance of the writ of possession while

the main case was pending, was not at all intertwined with any legal
issue properly raised and litigated in C.A.-G.R. CV No. 59491,
which was the appeal to determine whether or not DBP’s foreclosure
was valid and effectual. And, secondly, the ruling in C.A.-G.R. No.
12670-SP did not settle any question of law involved herein because
this case for specific performance was not a continuation of C.A.-
G.R. No. 12670-SP (which was limited to the propriety of the
issuance of the writ of possession in favor of DBP), and vice versa.
3.
Guariña Corporation is legally entitled to the
restoration of the possession of the resort complex
and payment of reasonable rentals by DBP
Having found and pronounced that the extrajudicial foreclosure
by DBP was premature, and that the ensuing foreclosure sale was
void and ineffectual, the Court affirms the order for the restoration
of possession to Guariña Corporation and the payment of reasonable
rentals for the use of the resort. The CA properly held that the
premature and invalid foreclosure had unjustly dispossessed Guariña
Corporation of its properties. Consequently, the restoration of
possession and the payment of reasonable rentals were in
accordance with Article 561 of the Civil Code, which expressly
states that one who recovers, according to law, possession unjustly
lost shall be deemed for all purposes which may redound to his
benefit to have enjoyed it without interruption.
WHEREFORE, the Court AFFIRMS the decision promulgated
on March 26, 2003; and ORDERS the petitioner to pay the costs of
suit.
SO ORDERED.

Sereno (CJ.), Leonardo-De Castro, Villarama, Jr. and Reyes,

JJ., concur.

Judgment affirmed.

311

Notes.—It is a basic legal principle that whatever is once

irrevocably established as the controlling legal rule or decision
between the same parties in the 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. (Albaña vs. Belo, 602 SCRA 140
[2009])
The principle of the law of the case holds that whatever has been
irrevocably established as the controlling legal rule between the
parties in a 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 facts of the case before the
Court. (Penta Capital Finance Corporation vs. Bay, 663 SCRA 192
[2012])
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