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THIRD DIVISION

SPS. FELIX A. CHUA and CARMEN G.R. No. 215999

L. CHUA, JAMES B. HERRERA,
EDUARDO L. ALMENDRAS, MILA
NG ROXAS, EUGENE C. LEE,
EDICER H. ALMENDRAS,
BENEDICT C. LEE, LOURDES C.
NG, LUCENA INDUSTRIAL
CORPORATION, LUCENA GRAND
CENTRAL TERMINAL, INC.,
represented by FELIX A. CHUA,
Petitioners Present:

BERSAMIN, Acting Chairperson,

- versus - CAGUIOA,*
MARTIRES,
TIJAM, ** and
UNITED COCONUT PLANTERS GESMUNDO, JJ
BANK, ASSET POOL A (SPV-
AMC), REVERE REALTY AND Promulgated:
DEVELOPMENT CORPORATION,
JOSE C. GO and the REGISTRAR August 16, 2017
OF DEEDS OF LUCENA CITY, ~~."'SJ~
Respondents.
x-----------------------------------------------------------------------------------------x

DECISION

BERSAMIN, J.:

This appeal assails the decision promulgated on March 25, 2014 1 and
the resolution promulgated on December 23, 2014, 2 whereby, the Court of

Designated additional Member, per Raffle dated August 14, 2017, due to the inhibition of Justice
Marvic Mario Victor F. Leonen.
•• Designated additional Member, per Raffle dated August 14, 2017, due to the inhibition of Justice
Presbitero J. Velasco, Jr.
1
Rollo, pp. 11-51; penned by Associate Justice Vicente S.E. Veloso, with the concurrence of Associate
Justice Jane Aurora C. Lantion and Associate Justice Nina G. Antonio-Valenzuela.
2
Id. at 52-59; penned by Judge Virgilio C. Alpajora.

.9r
Decision 2 G.R. No. 215999

Appeals (CA) respectively reversed and set aside the decision3 rendered on
January 6, 2009 by the Regional Trial Court (RTC), Branch 59, in Lucena
City and granted the appeal of respondent United Coconut Planters Bank
(UCPB), Revere Realty and Development Corporation (Revere), Jose Go
and The Register of Deeds of Lucena City; and denied the petitioners'
motion for reconsideration.

Antecedents

On March 3, 1997, petitioner Spouses Felix and Carmen Chua, for

themselves and representing their co-petitioners, entered into a Joint Venture
Agreement (JVA) with Gotesco Properties, Inc. (Gotesco) for the
development of their 44-hectare property situated in Ilayang Dupay, Lucena
City into a mixed use, residential and commercial subdivision. Gotesco was
then represented by respondent Jose Go. 4 It appears, however, that the
development project under this JVA did not ultimately materialize. 5

Pursuant to the JV A, several deeds of absolute sale were executed

over petitioners' 12 parcels of land situated in Lucena City in favor of
Revere, a corporation controlled and represented by Jose Go. The deeds of
absolute sale were complemented by a deed of trust dated April 30, 19986
under which it was confirmed that Revere did not part with any amount in its
supposed acquisition of the 12 parcels of land. The deed of trust further
confirmed petitioners' absolute ownership of the properties. Also on the
same date, Gotesco, also represented by Jose Go, and petitioners,
represented by Felix Chua, executed another deed of trust covering 20
parcels of land distinct from the 12 parcels of land already covered by the
first deed of trust. 7

Prior to the execution of the JVA, petitioners and Jose Go had

separate outstanding loan obligations with UCPB.

On June 2, 1997, the Spouses Chua executed a real estate mortgage

(REM) in favor of UCPB involving several parcels of land registered in the
names of petitioners to secure the loans obtained in their personal capacities
and in their capacities as corporate officers and stockholders of the Lucena
Grand Central Terminal, Inc. (LGCTI). 8

On March 21, 2000, petitioners entered into a Memorandum of

Agreement (MOA) with UCPB to consolidate the obligations of the Spouses

Id. at 612-632.
4
Id.at612.
Id. at 14.
6
Id. at 215-217.
Id. at 218-220.
Id. at 14.

9,
Decision 3 G.R. No. 215999

Chua and LGCTI, which was determined at P204,597,177.04 as of

November 30, 1999. The parties thereby agreed to deduct the sum of
Pl 03,893,450.00 from said total in exchange for 30 parcels of land including
the improvements thereon; 9 and that the remaining balance of
P68,000,000.00 would be converted by UCPB into equity interest in LGCTI.

To implement the March 21, 2000 MOA, UCPB drafted a REM

covering the properties listed in the MOA, which petitioners signed to secure
a credit accommodation for P404,597,177.04. Under its terms, this REM
covered the payment of all loans, overdrafts, credit lines and other credit
facilities or accommodations obtained or hereinafter obtained by the
mortgagors, LGCTI, Spouses Chua and Jose Go. 10

On even date, Jose Go, acting in behalf of Revere, and UCPB

executed another REM (Revere REM) involving the properties held in trust
by Revere for petitioners. The execution of the Revere REM was unknown
to petitioners. 11 Revere submitted a secretary's certificate signed by Lourdes
Ortiga to the effect that the Board of Directors had approved the mortgage of
various corporate properties situated in Ilayang Dupay, Lucena City to
secure any and all obligation of the Spouses Chua, LGCTI, and Jose Go.

Enforcing petitioners' REM as well as the Revere REM, UCPB

foreclosed the mortgages, and the properties were sold for a total bid price of
P227,700,000.00.

On February 14, 2003, UCPB and LGCTI executed a deed of

assignment of liabilities whereby LGCTI would issue 680,000 preferred
shares of its stocks to UCPB to offset its remaining obligations totaling
P68,000,000.00.

On September 4, 2003, UCPB wrote a letter to the Spouses Chua and

LGCTI regarding the transfer of LGCTI shares of stock to its favor pursuant
to the deed of assignment of liabilities. 12

On November 11, 2003, Spouses Chua wrote UCPB to request an

accounting of Jose Go's liabilities that had been mistakenly secured by the
mortgage of petitioners' properties, as well as to obtain a list of all the
properties subject of their REM as well as of the Revere REM for re-
appraisal by an independent appraiser. The Spouses Chua further requested
that the proceeds of the foreclosure sale of the properties be applied only to
petitioners' obligation of P204,597,l 77.04; and that the rest of the properties

9
Id. at 225.
10
Id. at 246.
11
Id. at 614.
12
Id. at 21.

~
Decision 4 G.R. No. 215999

or any excess of their obligations should be returned to them. 13 However,

UCPB did not heed petitioners' requests.

Thus, on February 3, 2004, petitioners filed their complaint against

UCPB, Revere, Jose Go, and the Register of Deeds of Lucena City in the
RTC in Lucena City. 14 The RTC issued a writ of preliminary injunction at
the instance of petitioners.

On October 4, 2004, the RTC declared Jose Go and Revere in default.

On February 22, 2005, the RTC denied the motion for reconsideration of
Jose Go and Revere. 15

Rulings of the RTC

On September 6, 2005, the RTC, through Judge Virgilio C. Alpajora,

rendered a partial judgment against Jose Go and Revere, viz.:

WHEREFORE, premises considered, judgment is hereby

rendered in favor of plaintiffs and against defendants JOSE C. GO and
REVERE REALTY DEVELOPMENT CORPORATION, as follows:

a) Declaring as legal and binding the Deeds of Trust dated April

30, 1998 and holding the properties held in trust for plaintiff by defendants
REVERE and GO.

b) Declaring that defendants REVERE and GO are not the owners

of the properties covered by the deeds of trust and did not have any
authority to constitute a mortgage over them to secure their personal and
corporate obligations, for which they should be liable.

c) Nullifying the Deed of Real Estate Mortgage dated March 21,

2000 executed by defendants REVERE and GO in favor of co-defendant
UNITED COCONUT PLANTERS BANK.

d) Ordering defendants REVERE and GO to reconvey in favor of

the plaintiff the thirty-two (32) real properties listed in the deeds of trust
and originally registered in the names of the plaintiffs under the following
titles, to wit: TCT Nos. T-40450, 40452, 40453, 64488, 71021, 71022,
71023, 71024, 71025, 71136,55033,55287, 58945, 58946,58947, 58948,
54186, 54187, 54189,54190, 54191, 55288, 54186, 54187, 54188, 55030,
55031,50426,50427,50428,50429,and50430.

e) Ordering defendants REVERE and GO to pay plaintiffs the

amount of Phpl,000,000.00 and as by way of moral damages, and
Php200,000.00 and by way of attorney's fees.

SO ORDERED. 16
13
Id. at 283.
14
Id. at 21.
15
Id. at 21.
16
Id. at 623.

_)b
Decision 5 G.R. No. 215999

On November 9, 2005, the RTC modified the partial judgment upon

UCPB' s motion for reconsideration, but otherwise affirmed it as against
Revere and Jose Go, disposing thusly:

WHEREFORE, premises considered, the Partial Judgment dated

September 6, 2005 is reconsidered and clarified as to United Coconut
Planters Bank, as follows:

a) The contested portion of the Partial Judgment ordering

reconveyance is directed at defendants Revere Realty and Development
Corp. and Jose Go and not at defendant United Coconut Planters Bank;
and

b) The resolution of the issue of whether or not defendant UCPB

is obliged to reconvey the properties listed in the Partial Judgment in favor
of the plaintiffs, as well as the other issues between UCPB and the
plaintiffs, shall be determined after the parties shall have presented their
evidence.

SO ORDERED. 17

Meanwhile, Asset Pool A moved to be substituted for UCPB as a

party-defendant on February 15, 2006 on the basis that UCPB had assigned
to it the rights over petitioners' P68,000,000.00 obligation. The RTC
approved the substitution on March 14, 2006. 18

On January 6, 2009, the RTC rendered judgment in favor of

petitioners, thusly:

WHEREFORE, premises considered, judgment is hereby

rendered in favor of plaintiffs and against defendants UNITED
COCONUT PLANTERS BANK, ASSET POOL A, REGISTRAR OF
DEEDS OF LUCENA CITY and EX-OFFICIO SHERIFF OF LUCENA
CITY, thus:

a) Declaring that the loan obligations of plaintiffs to defendant

UNITED COCONUT PLANTERS BANK under the Memorandum of
Agreement dated March 21, 2000 have been fully paid;

b) Declaring as legal and binding the Deeds of Trust dated April

30, 1998 and holding the properties listed therein were merely held-in-
trust for plaintiffs by defendants REVERE and JOSE GO and/or
corporations owned or associated with him;

c) Nullifying the Deed of Real Estate Mortgage dated March 21,

2000 executed by defendants REVERE and JOSE GO in favor of co-
defendant UNITED COCONUT PLANTERS BANK and the Deed of

17
Id. at 623-624.
18
Id. at 624.

.f/J
Decision 6 G.R. No. 215999

Assignment of Liability dated February 14, 2003 executed by plaintiffs in

favor of UNITED COCONUT PLANTERS BANK;

d) Ordering defendant REGISTRAR OF DEEDS of Lucena City

to cancel any and all titles derived or transferred from TCT Nos. T-40452
(89339), 40453 (89340), 84488 (89342), 71021 (89330), 71022 (89331),
71023 (89332), 71025 (95580-95581), 71136 (95587-95590), 55033
(89384) and issue new ones returning the ownership and registration of
these titles of the plaintiffs. For this purpose, defendant UNITED
COCONUT PLANTERS BANK is directed to execute the appropriate
Deeds of Reconveyance in favor of the plaintiffs over the eighteen ( 18)
real properties listed in the Real Estate Mortgage dated March 21, 2000
executed by defendants Revere Realty and JOSE GO and originally
registered in the names of the plaintiffs.

e) Ordering defendant UNITED COCONUT PLANTERS BANK

to return so much of the plaintiffs titles, of their choice, equivalent to
Php200,000,000.00 after applying so much of the mortgaged properties,
including those presently or formerly in the name of REVERE, to the
payment of plaintiffs' consolidated obligation to the bank in the amount of
Php204,597,177.04.

f) Declaring the Real Estate Mortgage dated June 02, 1997 as

having been extinguished by the Memorandum of Agreement date March
21, 2000, and converting the writ of preliminary injunction issued on
March 22, 2004 to a permanent one, forever prohibiting UNITED
COCONUT PLANTERS BANK and ASSET POOL A and all persons/
entities deriving rights under them from foreclosing on TCT Nos. T-
54182, T-54184, T-54185, T-54192, and T-71135. The court hereby
orders said defendants, or whoever is in custody of the said certificates of
title, to return the same to plaintiffs and to execute the appropriate release
of mortgage documents.

g) Finally, ordering defendant UNITED COCONUT PLANTERS

BANK, to pay plaintiffs:

(i) The excess of the foreclosure proceeds in the amount of

Php23,102,822.96, as actual damages;

(ii) Legal interest on the amount of Php223,102,822.96 at the

rate of 6% per annum from February 3, 2004 until finality of
judgment. Once the judgment becomes final and executor, the
interest of 12% per annum, should be imposed, to be computed
from the time the judgment becomes final and executor until fully
satisfied, as compensatory damages;

(iii)Phpl,000,000.00 as moral damages;

(iv)Phpl00,000.00 as exemplary damages;

(v) Php2,000,000.00 as attorney's fees; and

(vi) costs of suit;

SO ORDERED. 19

19
Id. at 631-632.

0
Decision 7 G.R. No. 215999

The R TC declared the Revere REM as null and void for having been
entered into outside the intent of the JVA; and opined that the Revere REM
did not even bear any of herein petitioners' signatures. It ruled that the
application of the proceeds of the foreclosure sale of petitioners' properties
to settle Jose Go's liabilities was improper, invalid and contrary to the intent
of the March 21, 2000 MOA, the principal contract of the parties. 20

The R TC observed that UCPB 's claim that it had no knowledge of the
trust nature of the properties covered by the deeds of trust, which were also
included in the MOA was belied by the letter signed by its First Vice
President Enrique L. Gana addressed to Spouses Chua wherein he stated that
UCPB had undertaken to obtain from Jose Go the certificates of title
necessary for the execution of the mortgages, and that should there be any
excess or residual value, the same would be applied to any outstanding
obligations that Jose Go would have in favor of UCPB; and that,
accordingly, it was an error on the part of UCPB to apply any portion of the
proceeds to settle the obligations of Jose Go without first totally
extinguishing petitioners' obligations.

Decision of the CA

Respondents appealed to the CA.

In the decision promulgated on March 25, 2014, 21 the CA reversed

and set aside the judgment of the RTC, disposing instead as follows:

WHEREFORE, the assailed January 6, 2009 Decision of the

Regional Trial Court of Lucena City, Branch 59, as well as its September
6, 2005 Partial Judgment are REVERSED and SET ASIDE. In its stead,
judgment is hereby rendered:

a) Declaring the Real Estate Mortgage dated June 2, 1997 as valid

and subsisting - accordingly, the writ of preliminary injunction issued on
March 22, 2004 by the Regional Trial Court of Lucena City, Branch 59 is
hereby lifted;

b) Declaring as legal and binding the March 21, 2000 Deed of

Real Estate Mortgage of defendants REVERE REAL TY AND
DEVELOPMENT CORPORATION and/or JOSE GO in favor of
defendant-appellant UNITED COCONUT PLANTERS BANK;

c) Declaring, pursuant to the parties' March 21, 2000 Deed of

Real Estate Mortgage, that the loan obligations of defendant JOSE GO to
defendant-appellant UNITED COCONUT PLANTERS BANK have been
satisfied up to P123,806,550.00; and

20
Id. at 624.
21
Supra note l.

fo
Decision 8 G.R. No. 215999

d) Declaring that the loan obligations of plaintiffs-appellees

SPOUSE CHUA, ET AL. to defendant-appellant UNITED COCONUT
PLANTERS BANK under the first Memorandum of Agreement dated
March 21, 2000 have been paid up to P103,893,450.00.

SO ORDERED. 22

The CA made reference to three REMs: the first, executed on June 2,

1997, would secure the Spouses Chua' s obligations with UCPB; the second,
executed on March 21, 2000, was petitioners' REM in connection with the
March 21, 2000 MOA; and the Revere REM, executed also on March 21,
2000. It opined that the first REM remained outstanding and was not
extinguished as claimed by petitioners; that the Revere REM was valid
based on the application of the complementary contracts construed together
doctrine whereby the accessory contract must be read in its entirety and
together with the principal contract between the parties; that it was the
intention of the parties to extend the benefits of the two REMs under the first
MOA in favor of Jose Go and/or his group of companies; and that
petitioners' obligations with UCPB under the first MOA had not been fully
settled.

Issues

Petitioners raise the following issues:

A. THE COURT OF APPEALS COMMITTED SERIOUS

ERROR OF LAW IN REFUSING TO HOLD THAT THE
OBLIGATIONS EVIDENCED BY THE 1997 AND 1998
PROMISSORY NOTES AND SECURED BY THE 1997 REM HAD
BEEN EXTINGUISHED BY NOV A TION IN TE FORM OF
CONSOLIDATION OF ALL OF PETITIONERS' LOANS UNDER THE
21 MARCH 2000 MOA.

B. THE COURT OF APPEALS COMMITTED PALPABLE

ERROR OF LAW AND ACTED WITH GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION IN REFUSING TO DELARE THE REVERE REM
VOID AB INJTJO DESPITE THE FACT THAT THE MORTGAGOR
WAS ADMITTEDLY MERE TRUSTEE OF THE MORTGAGED
PROPERTIES BUT THE TRUE AND ABSOLUTE OWNERS GA VE
NO CONSENT TO THE MORTGAGE.

C. THE COURT OF APPEALS COMMITTED PALPABLE

ERROR OF LAW AND ACTED WITH GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION IN APPL YING PART OF THE PROCEEDS OF THE
FORECLOSURE OF THE OTHER PLAINTIFFS' AND REVERE
REMS TO JOSE GO'S ALLEGED BUT UNPROVEN OBLIGATION,

22
Id. at 50-51.

_>;
Decision 9 G.R. No. 215999

INSTEAD OF APPL YING THE PROCEEDS AGAINST THE

REMAINING OBLIGATION OF PETITIONERS, AND DELIVERING
THE EXCESS TO THEM.

D. THE COURT OF APPEALS COMMITTED PALPABLE

ERROR OF LAW AND ACTED WITH GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION IN REFUSING TO HOLD THAT THE
RESTRUCTURED LOAN OF THE PETITIONERS HAD BEEN FULLY
23
SATISFIED.

Did the CA commit reversible errors in finding that the Revere REM
was valid and binding on petitioners, and in upholding the propriety of
applying the proceeds of the foreclosure sale to settle the obligations of Jose
Go and his group of companies before fully satisfying the liabilities of
petitioners?

Ruling of the Court

The petition for review on certiorari is meritorious.

While the RTC and the CA both dealt with and examined the same set
of facts and agreements of the parties, they ended up with totally opposing
factual findings. The Court's review jurisdiction is generally limited to
reviewing errors of law because the Court is not a trier of facts and is not the
proper venue to settle and determine factual issues. Nevertheless, this rule is
not ironclad, and a departure therefrom may be warranted where the findings
of fact of the CA as the appellate court are contrary to the factual findings
and conclusions of the trial court, like now. In this regard, there is a need to
review the records to determine which findings by the lower courts should
be preferred for being conformable with the records.

It is undisputed that petitioners Spouses Chua and LGCTI as well as

respondents Jose Go, had existing loan obligations with UCPB prior to the
March 1997 JV A. As an offshoot of the JV A, two deeds of trust were
executed by the parties involving petitioners' 44-hectare property covered by
32 titles. The deeds of trust were neither expressly cancelled not rescinded
despite the fact that the project under the NA never came to fruition.

On March 21, 2000, UCPB and petitioners entered into the MOA
consolidating the outstanding obligations of the Spouses Chua and LGCTI.
The relevant portions of the MOA are reproduced:

WITNESSETH:

23
Id. at 87-88.

~
Decision 10 G.R. No. 215999

(A) As of 30 November 1999, the BORROWER has outstanding

obligations due in favor of the BANK in the aggregate amount of Two
Hundred Four Million Five Hundred Ninety Seven Thousand One
Hundred Seventy Seven and 041100 Pesos (F204,597,177.04), Philippine
currency, inclusive of all interest, charges and fees (the "Obligation").

(B) To partially satisfy the Obligation to the extent of ONE

HUNDRED THREE MILLION EIGHT HUNDRED NINETY THREE
THOUSAND FOUR HUNDRED FIFTY PESOS (Fl 03,893,450.00),
Philippine currency, the BORROWER has agreed that the BANK shall
acquire title to the real property enumerated and described in the schedule
attached hereto and made an integral part hereof as Annex "A", together
with all the improvements thereon, if any (collectively called, the
"Property").

(C) The balance of the Obligation, in the total amount of Sixty

Eight Million Pesos (F68,000,000.00), Philippine currency, shall be
converted by the BANK to equity interest in LGCTI, with conformity of
the BORROWER.

(D) The Spouses Chua have requested the BANK to grant the
Spouses Chua: (i) a continuing option to re-purchase the Property and (ii)
develop the Property, under a joint-venture arrangement with the BANK.

(E) The BANK has acceded to the aforementioned request of the

Spouses Chua, subject to the terms and conditions of this Agreement.

In consideration of the foregoing premises, and the mutual

covenants and agreements contained herein, the parties hereto agree as
follows:

SECTION 1.0.

CONTRACTUAL INTENT

Section 1.1. Intent of the Parties - Subject to the provisions of this

Agreement, and the satisfactory performance by the BORROWER of the
obligations and undertakings set forth herein, the parties hereto declare,
confirm and agree that:

(a) title to the Property shall be transferred and conveyed

to the BANK; the BANK shall have the sole discretion to
determine and implement the appropriate actions for the
conveyance of such title in favor of the BANK;

(b) the BANK shall: (i) grant the Spouses Chua a

continuing right of first refusal over the Property and (ii)
consider entering into and concluding with the Spouses Chua a
contractual arrangement for the development of the Property;
and

(c) the parties shall implement the appropriate acts and

deeds necessary or required for the execution, delivery and
performance of this Agreement and the completion of the
transactions contemplated herein, conformably with the terms
and conditions set forth hereunder.

..~
Decision 11 G.R. No. 215999

xx xx

SECTION 5.0.

MISCELLANEOUS PROVISIONS

Section 5.1. Binding Effect - This Agreement shall take effect

upon its execution and the rights and obligation contained hereunder shall
be valid and binding on the parties and their respective successors-in-
interest.

Section 5.2. Governing Law - The provisions of this Agreement

shall be governed, and be construed in all respects, by the laws of the
Philippines.

Section 5.3. Further Assurance - LGCTI and the Spouses Chua

warrant that they shall execute and deliver any and all additional
documents or instruments and do such acts and deeds as may be necessary
to fully implement and consummate the transactions contemplated under
this Agreement.

Section 5.4. Entire Agreement - This Agreement constitutes the

entire, complete and exclusive statement of the terms and conditions of the
agreement between the parties with respect to the subject matter referred
to herein. No statement or agreement, oral or written, made prior to the
signing hereof and no prior conduct or practice by either party shall vary
or modify the written terms embodied hereof, and neither party shall claim
any modification of any provision set forth herein unless such
modification is in writing and signed by both parties. 24

It is clear that petitioners exchanged their 30 parcels of land to

effectively reduce their total unpaid obligations to only P68,000,000.00. To
settle the balance, they agreed to convert it into equity in LGCTI in case they
would default in their payment. To implement the MOA, they signed the
REM drafted by UCPB, which included the properties listed in the MOA as
security for the credit accommodation of P404,597,177.04. Unknown to
them, however, Jose Go, acting in behalf of Revere, likewise executed
another REM covering the properties that Revere was holding in trust for
them. When UCPB foreclosed the mortgages, it applied about P75.09
million out of the P227,700,000.00 proceeds of the foreclosure sale to the
obligations of Revere and Jose Go. Moreover, UCPB pursued petitioners for
their supposed deficiency amounting to P68,000,000.00, which was
meanwhile assigned to respondent Asset Pool A by UCPB.

We cannot subscribe to the CA' s declaration that the 1997 REM still
subsisted separately from the consolidated obligations of petitioners as stated
in the March 21, 2000 MOA. As early as the latter part of 1999,
correspondence and negotiation on the matter were already occurring
between UCPB, on one hand, and the Spouses Chua and LGCTI, on the

24
Id. at 225-228.
ft,
Decision 12 G.R. No. 215999

other. Specifically, in its November 10, 1999 letter to petitioners, UCPB

wrote: "This will formalize our earlier discussions on the manner of
settlement of your personal and that of LGCTI's outstanding
obligations. " 25 The outstanding obligations adverted to referred to the
Spouses Chua's unsettled, unpaid and remaining debt with UCPB. In
discussing how the Spouses Chua could settle their obligations, there was no
distinction whatsoever between the loans obtained in 1997 and those made
in subsequent years. To be readily inferred from the tenor of the
correspondence was that the Spouses Chua's obligations were already
consolidated.

The MOA referred to the outstanding obligations of LGCTI and the

Spouses Chua as being in the amount of 1!204,597,177.04 as a/November
30, 1999. This meant that all of the Spouses Chua's obligations with UCPB
on or prior to November 30, 1999 had already been combined. It was plain
enough to see that the MOA constituted the entire, complete and exclusive
agreement between the parties. Its Section 5.4 of the MOA expressly
stipulated that: "xxxx No statement or agreement, oral or written, made prior
to the signing hereof and no prior conduct or practice by either party shall
vary or modify the written terms embodied hereof, and neither party shall
claim any modification of any provision set forth herein unless such
modification is in writing and signed by both parties. " 26 Furthermore, the
REM executed by petitioners in support of the MOA indicated that the
mortgage would secure the payment of all loans, overdrafts, credit lines and
other credit facilities or accommodations obtained or hereinafter to be
obtained by the mortgagors. In light of the pertinent provisions of the MOA,
the only rational interpretation was that the parties agreed to consolidate the
Spouses Chua's past and future obligations, which would be secured by the
REM executed between the parties.

There is no question about the validity of the March 21, 2000 MOA as
well as the REM executed by petitioners in support of this MOA. However,
much controversy attended the Revere REM. Nonetheless, the RTC pointed
out in its decision:

The Court therefore affirms the nullity of the Revere REM dated
March 21, 2000 (Exhibit "!", Exhibit "7-APA) executed by Revere in
favor of defendant UCPB. There is no proof that plaintiffs have
consented to the application of the properties listed in Annex "B"
thereof to the loan obligation of defendant Jose Go. UCPB is therefore
lawfully bound to return to plaintiffs TCT Nos. T-40452 (89339),
40453 (89340), 84488 (89342), 71021 (89330), 71022 (89331), 71023
(89332), 71025 (95580-95581), 71136 (95587-95590), 55033 (89384),
conformably with this court's disquisition in the Partial Judgment
rendered on September 6, 2005. 27

25
Rollo, pp. 233-234 (bold underscoring supplied for emphasis only).
26
Id. at 228.
27
Id. at 625.

_!Z
Decision 13 G.R. No. 215999

We have to note that the REM was executed by Revere through Jose
Go purportedly in connection with the March 21, 2000 MOA on the very
same day that petitioners' REM were executed. Yet, petitioners disclaimed
any knowledge or conformity to the Revere REM. With the two deeds of
trust executed in favor of Revere not having been expressly cancelled or
rescinded, the properties mortgaged by Revere to UCPB were still owned by
petitioners for all intents and purposes.

For clarity, we excerpt relevant portions of the deeds of trust, to wit:

DEED OF TRUST 28

KNOW ALL MEN BY THESE PRESENTS:

This DEED OF TRUST made, executed, and entered into by and

between:

SPOUSES FELIX and CARMEN CHUA, both of legal

age, Filipinos and with postal address at Ilayang Dupay,
Lucena City and ADELA C. CHUA, of legal age, Filipino,
married to Luis A. Chua and a resident of LIC Bldg., Brgy.
Gulang-gulang, Lucena City, hereinafter called the
TRUSTORS:
- and-
REVERE REALTY AND DEVELOPMENT
CORPORATION, a corporation duly organized and
existing under the laws of the Philippines with office
address at 2478 Agatha St., San Andres Bukid, Manila,
herein represented by the President, MRS. LYDIA
SEVILLA and hereinafter called the TRUSTEE.

WITNESS ETH

WHEREAS, the TRUSTORS are the lawful and absolute owners

of twelve (12) parcels of land situated at Lucena City and previously
covered by the following transfer Certificates of Title and may be
described as follows:

xx xx

WHEREAS, by virtue of several Deeds of Absolute Sale executed

by the TRUSTOR in favor of the TRUSTEE, the twelve (12) parcels of
land were transferred in the name of the TRUSTEE and are now covered
by the following Transfer Certificates of Title:

xx xx

WHEREAS, the TRUSTEE hereby acknowledges and confirms

that it did not pay the TRUSTORS the consideration stated in the Deeds of
Absolute Sale covering the twelve (12) parcels of land and said Deeds of

28
Rollo, pp. 215-216.

9'
 .
Decision 14 G.R. No. 215999

Absolute Sale were executed by the TRUSTORS in compliance with the

terms and conditions stated in the Joint Venture Agreement dated March
3, 1997 executed by and between the TRUSTORS and GOTESCO
PROPERTIES, INC.;

WHEREAS, the TRUSTEE hereby acknowledges and confirms

that she is the authorized representative of GOTESCO PROPERTIES,
INC., with respect to the said Joint Venture Agreement and the transfer of
the twelve (12) parcels of land in her name is necessary for the
consolidation and subdivision of the properties in connection with the
preparation of the plans and designs of the project of the said Joint
Venture Agreement;

NOW THEREFORE, for and in consideration of the foregoing

premises and mutual covenants hereinafter set forth:

1. The TRUSTEE hereby acknowledges and confirms:

1.1 The absolute title and ownership of the TRUSTORS over

the twelve (12) parcels ofland above described;

1.2 Its role as TRUSTEE, to have and hold the said twelve (12)
parcels of land for the sole and exclusive use, benefit,
enjoyment of the TRUSTORS;

2. The TRUSTEE hereby acknowledges and obliges itself not

to dispose of, sell, transfer, convey, lease or mortgage the said twelve
(12) parcels of land without the written consent of the TRUSTORS
first obtained; (bold emphasis added)

3. The TRUSTEE hereby covenants and agrees to execute, deliver

and perform any and all arrangements, and acts, which in the opinion of
the TRUSTEES are necessary, required and/or appropriate for the exercise
by the TRUSTORS of their rights, title and interests over the said twelve
(12) parcels ofland. (Emphasis supplied)

The deeds of trust expressly provided that: "The TRUSTEE hereby

acknowledges and obliges itself not to dispose of, sell, transfer, convey,
lease or mortgage the said twelve (12) parcels of land without the written
consent of the TRUSTORS first obtained." By entering into the Revere
REM, therefore, Revere openly breached its undertakings under the deeds of
trust in contravention of the express prohibition therein against the
disposition or mortgage of the properties. It is also worth mentioning that the
records are bereft of any allegation that Revere had obtained the approval of
petitioners or that the latter had acquiesced to the mortgage of the properties
in favor of UCPB. Absent proof showing that petitioners had transferred the
ownership of some or all of the properties covered by the deeds of trust in
favor or Revere or Jose Go, the deeds of trust remained as the controlling
documents as to the parcels of land therein covered.

Additionally, UCPB could not now feign ignorance of the deeds of

trust. As the R TC aptly pointed out, UCPB 's own Vice President expressly

J,
Decision 15 G.R. No. 215999

mentioned in writing that UCPB would secure from Jose Go the titles
necessary for the execution of the mortgages. As such, UCPB's actual
knowledge of the deeds of trust became undeniable. In addition, UCPB,
being a banking institution whose business was imbued with public interest,
was expected to exercise much greater care and due diligence in its dealings
with the public. Any failure on its part to exercise such degree of caution and
diligence would invariably stigmatize its dealings with bad faith. It should
be customary and prudent for UCPB, therefore, to adopt certain standard
operating procedures to ascertain and verify the genuineness of the titles to
determine the real ownership of real properties involved in its dealings,
particularly in scrutinizing and approving loan applications. By approving
the loan application of Revere obviously without making prior verification
of the mortgaged properties' real owners, UCPB became a mortgagee in bad
faith. 29

The CA pronounced that the parties had intended to extend the

benefits of the two REMs under the first MOA to Jose Go and/or his group
of companies. It premised its pronouncement on the express stipulation in
petitioners' REM to the effect that it was "the intention of the parties to
secure as well the payment of all loans, overdrafts xx.xx by the
MORTGAGORS and/or by LGCTI, Spouses Chua, and Jose Go." In
addition, it cited the Spouses Chua's conformity to UCPB's letter dated
November 10, 1999 to the effect that should there be any excess or residual
value after the settlement of the Spouses Chua and LGCTI's obligations,
said excess would be applied to any outstanding obligations that Jose Go
might have with UCPB. We must point out, however, that the statements
adverted to by the CA had been supplied by UCPB itself - the first being
contained in the REM drafted by UCPB, and the second being written by
UCPB in its letter to the Spouses Chua. Assuming that petitioners were not
just misled into signing or agreeing to the stipulations in said documents, it
was still error for the CA to hold that Revere's or Jose Go's obligations
enjoyed a primacy or precedence over the J.!68,000,000.00 obligation of
petitioners.

The discussion of the RTC in its decision on this aspect, being apt and
in point, is reiterated with approval:

The conformity of the plaintiffs through Felix A. Chua only

appears on the Plaintiffs' REM dated March 21, 2000 (Exhibit "G",
Exhibit "6-APA "). By virtue of this Plaintiffs' REM, there is basis to
apply the properties listed in Annex "A " thereof to the obligations of both
plaintiffs and defendant Jose Go, but subject to the condition that
plaintiffs' obligations be totally extinguished first. However, up to the
termination of the trial of this case, neither defendant UCPB nor APA
presented any evidence to prove the precise amount of Jose Go's loan

29 See Hacienda Luisita, Incorporated v. Presidential Agrarian Reform Council, G.R. No. 171101, July
5, 2011, 653 SCRA 154; Alano v. Planter's Development Bank, G.R. No. 171628. June 13, 2011, 651
SCRA 766.

~
Decision 16 G.R. No. 215999

obligations with the bank. It must be emphasized that the Plaintiffs'

REM refers to Jose Go's obligations to the bank, not the obligations of
any of the corporations owned by him in the majority.

The Apportionment of Bid Price signed by UCPB's own

witness Milagros Alcabao (Exhibit "S", Exhibit "JO-APA) does not
show Jose Go's obligations, if any. What the Apportionment reveals is
the amount of Php75,093,180.00 was set aside for "Revere Realty &
Development Corporation and Lucena Industrial Corporation."
While the name of plaintiff Lucena Industrial Corporation ("LIC")
and Revere Realty and Development Corporation appears in said
Apportionment, it has not been shown that there was any loan
contracted by LIC and Revere to which the amount of
Php75,093,180.00 may be applied. Because the twenty-three (23)
properties listed in favor of Revere and LIC were sourced from the
two (2) Deeds of Trust and partly from the null and void Revere REM
dated March 21, 2000 (Exhibit "I", Exhibit "7-APA ''), it is only proper
that this particular apportionment valued by the bank at
Php75,093,180.00 should likewise be struck down. 30 (Bold underscoring
supplied for emphasis)

On the other hand, the CA maintained that petitioners' obligations to

UCPB under the March 21, 2000 MOA had not been fully satisfied, viz.:

The plaintiffs-appellees concede in their First MOA that the

outstanding obligations of Spouses Chua and LGCTI to UCPB were
restructured and fixed at the aggregate amount of 1!204,597,177.04; that
part of this restructured debts (of up to 1!103,893,450.00) will be settled by
transferring the titles of the properties listed in Annex "A" to the Bank;
and the remaining balance (in the amount of P68 million) will be
converted into equity interest in LGCTI. Since the contract is the law
between the parties, it necessarily follows that only by adhering to the
terms of the First MOA would the entire obligations of Spouses Chua
and LGCTI be deemed fully paid.

In pursuance of the foregoing conceded terms, and in accordance

with the provisions of Plaintiffs' REM and Revere's REM, UCPB
foreclosed the REM on all of the properties listed in Annex "A" of the
First MOA for a total bid price of P227,700,000.00. The foreclosure and
auction sale were deemed to cover not only plaintiffs-appellees'
obligations and REM, they covered as well the REM of Jose Go and
Revere as again, in UCPB's conformed upon November 10, 1999 letter
to Spouses Chua, et al., the latter undertook the following obligations:

xx xx

The imperatives of the parties' obligations under their contracts as

above-discussed therefore require the proceeds of the foreclosure in the
total amount of 1!227,700,000.00 be applied, first, to plaintiffs-appellees'
1!103,893,450.00, as agreed upon in the First MOA, and the remaining
balance of 1!123,806,550.00 to Jose Go's outstanding obligations with
UCPB. 31

30
Rollo, p. 625.
31
Rollo, pp. 46-47.

9-i
Decision 17 G.R. No. 215999

This disquisition of the CA would have resulted in an absurd situation

wherein a considerable portion of petitioners' properties were to be used to
settle Jose Go's personal liabilities, which were P20,000,000.00 more than
what were to be applied to petitioners' own obligations. Aside from enabling
this ludicrous interpretation of the agreements, petitioners were still left with
a hefty P68,000,000.00 balance in their obligations with UCPB. This absurd
situation does not find support in their contracts as well as in the course of
ordinary human experience. To reiterate, the P68,000,000.00 obligation was
not separate and distinct from the outstanding obligations consolidated by
the March 21, 2000 MOA. In fact, the February 14, 2003 MOA involving
the transfer of 680,000 preferred shares of stock to UCPB provided that:

4. This Agreement shall take effect upon execution hereof

provided however, that in the event the assignment of liabilities in
exchange for the Preferred Shares does not materialize for any cause
whatsoever, this Agreement shall be cancelled and automatically cease
to have any force and effect, thereby restoring to each of the parties
hereto whatever rights and liabilities they may each have in relation to the
other parties prior to this Agreement. 32 (Bold emphasis supplied)

Considering that such issuance of preferred shares in favor of UCPB did not
take place despite the execution of the second MOA in 2003, the February
14, 2003 MOA was deemed cancelled and the P68,000,000.00 must perforce
revert as part of petitioners' outstanding balance that was now fully and
completely settled.

A review of the MOA dated March 21, 2000 would reveal that
petitioners' outstanding obligation referred to, after deducting the amount of
the thirty properties, was reduced to only P68,000,000.00. To settle this
balance, petitioners agreed to convert this into equity in LGCTI in case they
defaulted in their payment. In this case, what prompted the foreclosure sale
of the mortgaged properties was petitioners' failure to pay their obligations.
When the proceeds of the foreclosure sale were applied to their outstanding
obligations, the payment of the balance of the P68,000,000.00 was
deliberately left out, and the proceeds were conveniently applied to settle
P75,000,000.00 of Revere and/or Jose Go's unpaid obligations with UCPB.
This application was in blatant contravention of the agreement that Revere's
or Jose Go's obligations would be paid only if there were excess in the
application of the foreclosure proceeds. Accordingly, the CA should have
applied the proceeds to the entire outstanding obligations of petitioners, and
only the excess, if any, should have been applied to pay off Revere and/or
Jose Go's obligations.

32
Rollo, pp. 233-235.

~
Decision 18 G.R. No. 215999

Based on the foregoing, therefore, we conclude that the deed of

assignment of liabilities covering the deficiency in its obligation to UCPB in
the amount of P68,000,000.00 was null and void. According to the
apportionment of bid price executed by UCPB 's account officer, the bid
amounting to P227,700,000.00 far exceeded the indebtedness of the Spouses
Chua and LGCTI in the amount of P204,597,177.04, which was inclusive of
the P68,000,000.00 subject of the deed of assignment of liabilities as well as
the P32,703,893,450.00 corresponding to the interests and penalties that
UCPB waived in favor of petitioners. 33

It can be further concluded that UCPB could not have validly assigned
to Asset Pool A any right or interest in the P68,000,000.00 balance because
the proper application of the proceeds of the foreclosure sale would have
necessarily resulted in the full extinguishment of petitioners' entire
obligation. Otherwise, unjust enrichment would ensue at the expense of
petitioners. There is unjust enrichment when a person unjustly retains a
benefit to the loss of another, or when a person retains money or property of
another against the fundamental principles of justice, equity and good
conscience. The principle of unjust enrichment requires the concurrence of
two conditions, namely: ( 1) that a person is benefited without a valid basis
or justification; and (2) that such benefit is derived at the expense of
another. 34 The main objective of the principle against unjust enrichment is to
prevent a person from enriching himself at the expense of another without
just cause or consideration. This principle against unjust enrichment would
be infringed if we were to uphold the decision of the CA despite its having
no basis in law and in equity.

The Court notes that one of the parcels of land covered by the Revere
REM was that registered under Transfer Certificate of Title (TCT) No.
89334 of the Registry of Deeds of Lucena City. According to the decision of
the CA, 35 the parcel of land registered under TCT No. 89334 had been
subdivided into Lot No. 3852 (TCT No. 95582 and TCT No. 95583) and
Lot No. 3854 (TCTNo. 95580 and TCTNo. 95581). However, the judgment
of the RTC did not include TCT No. 89334 although it should have. To
rectify the omission, which was obviously inadvertent, we should include
TCT No. 89334 due to its being admittedly one of the parcels of land of
petitioners covered by the Revere REM.

Finally, the interest of 6% per annum on the judgment upon its

finality shall be imposed in accordance with the pronouncement of the Court
in Nacar v. Gallery Frames. 36

33
Rollo, p. 974.
34
Flores v. Lindo Jr., G.R. No. 183984, April 13, 2011, 648 SCRA 772, 782-783.
35
See CA decision, p. IO (footnote no. 25), at rollo, p. 20.
36
G.R. No. 189871, August 13, 2013, 703 SCRA 439.

fLi
Decision 19 G.R. No. 215999

WHEREFORE, the Court GRANTS the petition for review on

certiorari; SETS ASIDE the decision of the Court of Appeals promulgated
on March 25, 2014 in CA-G.R. No. 93644; REINSTATES the judgment
rendered on January 6, 2009 by the Regional Trial Court, Branch 59, in
Lucena City, with the addition ofTCT No. 89334, to wit:

WHEREFORE, premises considered, judgment is hereby rendered

in favor of plaintiffs and against defendants UNITED COCONUT
PLANTERS BANK, ASSET POOL A, REGISTRAR OF DEEDS OF
LUCENA CITY and EX-OFFICIO SHERIFF OF LUCENA CITY, thus:

a. Declaring that the loan obligations of plaintiffs to defendant

UNITED COCONUT PLANTERS BANK under the Memorandum of
Agreement dated March 21, 2000 have been fully paid;

b. Declaring as legal and binding the Deeds of Trust dated April

30, 1998 and holding the properties listed therein were merely held-in-
trust for plaintiffs by defendants REVERE and JOSE GO and/or
corporations owned or associated with him;

c. Nullifying the Deed of Real Estate Mortgage dated March 21,

2000 executed by defendants REVERE and JOSE GO in favor of co-
defendant UNITED COCONUT PLANTERS BANK and the Deed of
Assignment of Liability dated February 14, 2003 executed by plaintiffs in
favor of UNITED COCONUT PLANTERS BANK;

d. Ordering defendant REGISTRAR OF DEEDS of Lucena City

to cancel any and all titles derived or transferred from TCT Nos. T-40452
(89339), 40453 (89340), 84488 (89342), 71021 (89330), 71022 (89331 ),
71023 (89332), 71025 (95580-95581), 71136 (95587-95590), 55033
(89384), 89334 and issue new ones returning the ownership and
registration of these titles of the plaintiffs. For this purpose, defendant
UNITED COCONUT PLANTERS BANK is directed to execute the
appropriate Deeds of Reconveyance in favor of the plaintiffs over the
eighteen ( 18) real properties listed in the Real Estate Mortgage dated
March 21, 2000 executed by defendants Revere Realty and JOSE GO and
originally registered in the names of the plaintiffs.

e. Ordering defendant UNITED COCONUT PLANTERS BANK

to return so much of the plaintiffs titles, of their choice, equivalent to
Php200,000,000.00 after applying so much of the mortgaged properties,
including those presently or formerly in the name of REVERE, to the
payment of plaintiffs' consolidated obligation to the bank in the amount of
Php204,597,177.04.

f. Declaring the Real Estate Mortgage dated June 02, 1997 as

having been extinguished by the Memorandum of Agreement date March
21, 2000, and converting the writ of preliminary injunction issued on
March 22, 2004 to a permanent one, forever prohibiting UNITED
COCONUT PLANTERS BANK and ASSET POOL A and all persons/
entities deriving rights under them from foreclosing on TCT Nos. T-
54182, T-54184, T-54185, T-54192, and T-71135. The court hereby
orders said defendants, or whoever is in custody of the said certificates of
title, to return the same to plaintiffs and to execute the appropriate release
of mortgage documents.

h
 ·•
Decision 20 G.R. No. 215999

g. Finally, ordering defendant UNITED COCONUT PLANTERS

BANK, to pay plaintiffs:

i. The excess of the foreclosure proceeds in the amount of

Php23,102,822.96, as actual damages;

IL Legal interest on the amount of Php223,102,822.96 at the rate of

6% per annum from February 3, 2004 until finality of judgment.
Once the judgment becomes final and executory, the interest of 6%
per annum, should be imposed, to be computed from the time the
judgment becomes final and executory until fully satisfied, as
compensatory damages;

iii. Phpl,000,000.00 as moral damages;

iv. Phpl00,000.00 as exemplary damages;

v. Php2,000,000.00 as attorney's fees; and

vi. Costs of suit;

SO ORDERED.

and DIRECTS respondents, except the Registrar of Deeds of Lucena City

and the Ex-Officio Sheriff of Lucena City, to pay the costs of suit.

SO ORDERED.

WE CONCUR:

(On Leave)
ALFREDO BENJAMIN S. CAGUIOA
Associate Justice

(
s .M1.TIRES
Associate Justice
NO
Asso ~ \~JAM
ustice
Decision 21 G.R. No. 215999

ATTESTATION

I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Court's Division.

'
r ............_
ustice
~

ing Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the

Division Acting Chairperson's Attestation, I certify that the conclusions in
the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court's Division.

''?W~fRlJE COPY

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MARIA LOURDES P.A. SERENO
Chief Justice
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