Case Citation: G. R. No.

L-49568
BANCO DE ORO, Petitioner-Appellant, v. JAIME Z. BAYUGA and ROBERTO P. TOLENTINO,
respondents-appellees, THE COURT OF APPEALS and HON. FRANCISCO DE LA ROSA in his
capacity as Judge of the CFI-Rizal, Branch VII-Pasay City, Respondents.

Date: October 17, 1979

Petitioners: BANCO DE ORO

Respondents: BAYUGA , TOLENTINO, CA

Antecedent Respondent Roberto Tolentino is a lawyer appearing on his own behalf and as counsel for his co-
Facts: respondent Jaime Bayuga.

On November 2, 1976, as security for a loan of P375,000.00 respondent Bayuga, as attorney-in-fact

According to petitioner BANK, it approved the loan subject to the following terms and conditions:
"1. That the interest rate shall be 19 % per annum;
2. That the monthly amortization shall be P7,000.12;
3. That the loan shall be payable within ten (10) years;
4. That the property sought to be acquired which is located in Tagaytay City, registered in the name
of Algue Incorporated shall be given as additional collateral;
5. That the property located at Calamba, Laguna (TCT No. T-48418) shall first be registered,
provided, however, that the release of the proceeds shall be paid directly to the owner of the property
above-mentioned, and
6. That the loan shall be subject to availability of funds"

Private respondents contend, however, that they were unaware of the foregoing conditions, the same
having been embodied only in the Minutes of the meeting of "the Board of Directors/Executive
Committee" of petitioner BANK, and, therefore, self-serving, as held by the trial Court.

the BANK made a partial release of P200,000.00 less charges of P6,000.00, which amount was
credited to the account of TOLENTINO in the said BANK. On the same date, out of the balance of
P194,000.00, TOLENTINO purchased from the BANK a certificate of time deposit in the amount of
P50,000.00. He also withdrew on the said date P100,000,00, and on November 16, 1976, the
amount of P44,000.00. TOLENTINO then purchased from the BANK a Manager’s check in the total
amount of P144,000.00, P135,000.00 of which he deposited in his savings account, and P9,000.00
in his checking account, both with the Far East Bank & Trust Company.

Thereafter, claiming that the borrowers showed no indication of complying with his obligation to pay
the amount of the loan to the vendor (Algue, Inc.) of the Tagaytay City property, which constituted
diversion in violation of Sec. 77, RA No. 337, the BANK stopped payment of its Manager’s check at
the same time that it refused to release the balance of the loan. That action was necessary, according
to the BANK, in order to prevent private respondent from perpetrating a fraud against it.

private respondents TOLENTINO and Bayuga, as plaintiffs, brought an action for Specific
Performance with Damages against the BANK before the CFI of Rizal. After a preliminary hearing,
the trial Court ordered the issuance of a Writ of Preliminary Mandatory Injunction directing the
 BANK to comply with the mortgage contract by releasing immediately to Bayuga the consideration
thereof in the amount of P375,000.00 upon private respondents’ posting of a bond of P200,000.00.
Apparently, however, the BANK did not release the amount.

MTC/RTC the trial Court rendered its Decision in favor of plaintiffs (private respondents herein): a) Ordering
Ruling: Defendant Bank (petitioner in this case) to comply with its obligations towards Plaintiff Bayuga
under the Real Estate Mortgage; b) to pay to Plaintiff Tolentino P144,000.00 in its manager’s check
and P50,000.00 in its Certificate of Time Deposit; c) to pay to Plaintiff Bayuga the balance of
P175,000.00 in cash or in check, as said Plaintiff Bayuga may demand; d) to pay to Plaintiff Bayuga
nominal, moral and exemplary damages, attorney’s fees; e) to pay Plaintiff Tolentino actual, moral
damages, and exemplary damages, attorney’s fees.

the BANK filed its Notice of Appeal to the CA, posted an appeal bond, and moved for extension of
time within which to submit its Record on Appeal. Before the perfection of said appeal, however, and
upon private respondents’ "Petition for Execution with Prayer for Contempt", the trial Court issued
an Order, confirming and reiterating the Writ of Preliminary Mandatory Injunction it had issued and
ordering the BANK to comply therewith.

The BANK challenged the aforestated Orders in a Petition for Certiorari and Prohibition filed before
the CA. Upon private respondents’ Motion for Execution Pending Appeal, the trial Court released a
"Special Order" authorizing execution. The corresponding Writ of Execution was issued by the trial
Court, by virtue of which, the amount of P389,000.00 the BANK’s deposit with the Central Bank,
was garnished.

a Supplemental Petition for Certiorari was filed by the BANK with the CA seeking the nullification of
the aforementioned Special Order and the issuance of a Restraining Order enjoining the enforcement
of execution pending appeal.

CA Ruling: The CA issued a Restraining Order as prayed for by the BANK. CA ruled that the trial Court
committed no grave abuse of discretion in granting execution pending appeal but excluded the
damages awarded to private respondents.

the BANK filed the instant appeal by way of Certiorari before this Court impugning the Decision of
the CA, as well as the trial Court Orders a) ordering the issuance of a Writ of Preliminary Mandatory
Injunction, b) reiterating the said Order, and c) the Special Order granting execution pending appeal.

In a Resolution, we required private respondents to submit their Comment and issued a Restraining
Order enjoining the trial Judge from further proceeding with Civil Case No. 5271-P and from
enforcing his Order, authorizing the Central Bank to release the amount of P389,000.00.

We denied the Petition for lack of merit and, lifted the Restraining Order. The BANK moved for
reconsideration and for the restoration of the Restraining Order, which was opposed by private
respondents. In support of its Motion for Reconsideration, the BANK claimed that the amount of
P375,000.00 would be secured only by the Calamba property, with a loan value of only P157,889.76;
that the bonds posted by private respondents totalling P55,000.00 only are grossly inadequate; that
it would be made to violate the General Banking Act. R. A. No. 337, which mandates that the loan in
question should be used only for the purpose of acquiring urban or rural land; and that release of the
loan would render its appeal in CA-G.R. No. 64130-R moot and academic.

In the interim, in view of the lifting of the Restraining Order, a check for P389,000.00 was released
by the Central Bank to the Deputy Sheriff. The check was encashed on the same date and turned over
to private respondents. The BANK claims that execution was implemented with irregularity and
haste, with no explanation as to why the amount of P369,000.00 was raised to P389,000.00.
 In a Motion filed before the trial Court, the BANK prayed for an Order directing private respondents
to execute the corresponding promissory note in its favor. This was followed by a Manifestation that
it was without prejudice to whatever action the Supreme Court may take in the premises.

In our Resolution of March 19, 1979, we required the BANK to file a Reply to private respondents’
Opposition to the MR, and we reinstated the Restraining Order, unaware that execution had been
implemented. The BANK filed its Reply and reiterated its prayer for the restoration of the amount of
P389,000.00.

Issue: WON the issuance of the Writ of execution pending appeal by the trial Court, and its affirmance, except as to
the aspect of damages, by the Court of Appeals is proper.

SC Ruling: While, prima facie, execution pending appeal seemed justified because of the unilateral cancellation
of the release of the loan by the BANK without notice, and the absence of complete supporting
documents to the Petition, disclosures by the parties during the hearing and pleadings and documents
subsequently filed uphold a contrary view. Thus, during the hearing as well as in his Comments,
TOLENTINO contended that he is not a party to the mortgage contract which was executed only
between the BANK and Bayuga; that he became a party only because he was "injured and damaged
by the bad faith of the BANK;" that he is not willing to co-sign a promissory note in the BANK’s
favor for the amount of P389,000.00, alleging that Bayuga had already signed a promissory note in
November, 1976 in the sum of P200,000.00; and that neither he nor Bayuga had obligated himself to
put up any additional collateral. Bayuga, for his part, during the hearing, assumed a very passive role
admitting that he was but an employee of TOLENTINO who was the prime mover in the entire
transaction. The lack of good faith and of a sense of fair play on the part of private respondents was
all too evident. They were treating the release of the amount of P389,000.00 in their favor more as a
money judgment, which it is not, rather than as a loan which it is. They want to avail of the full
benefits of the loan without assumption of the corresponding obligations, or very minimally at that.
Since receipt of the aforestated amount, they have even refused to make any monthly amortizations
even upon demand by the BANK, contending that "no amount of the said loan is due. It will only be
paid ten (10) years after the execution of the mortgage contract as interpreted by our Courts."

The unfairness and inequity of this posture to the banking business is too evident to require
elaboration. Funds of a bank are, in a sense, held in trust. There are the interests of depositors
to be protected. The collateral the BANK has in its favor, with a loan value of only P157,889.76, is
far from adequate to answer for the amount of P389,000.00 that is now in the hands of private
respondents. The manner of repayment by private respondents of that amount remains nebulous. Of
course, the BANK is not without fault for this sorry state of affairs.

The special reason cited by the trial Court and upheld by the Court of Appeals, i.e., the
"substantial injustice" wrought on private respondents whose land had been mortgaged
without any centavo paid for the loan, does not exist in law. As pointed out by the BANK, the
Calamba property need not have remained subject to the mortgage, the mortgage being but an
accessory contract to the contract of loan which is the principal obligation and which has been
cancelled. The consideration of the mortgage is the same consideration of the principal contract
without which it cannot exist as an independent contract. The "persuasive" factor considered by the
CA "that the loan is intended to buy real estate property, the price of which varies as days go by"
was disproved by the fact that TOLENTINO utilized the amount initially released to purchase a
certificate of time deposit and to open bank accounts in his name rather than pay for the Algue
property.
In the absence of good reasons, private respondents have not shown a clear entitlement to
execution pending appeal. Moreover, after having received the loan proceeds of P389,000.00 by
means of the execution pending appeal improvidently granted, they refused to make any monthly
amortizations since March, 1979, notwithstanding the BANK’s demands, on the outrageous claim
against all banking practice that they are not obligated to pay any amount on the loan until the lapse
of ten (10) years after the execution of the mortgage contract. Under the circumstances, defendants
are clearly in default on their loan and are liable to repay the whole amount with the stipulated
interest.

WHEREFORE, the judgment of the CA is hereby set aside. Private respondents are hereby jointly
and severally ordered to restore and repay petitioner Banco de Oro the sum of P389,000.00 with the
stipulated interest of (19%) per annum from February 26, 1979 until the whole amount due shall
have been fully paid. The property given in mortgage by respondents under the mortgage contract as
well as the bonds totalling P55,000.00 posted by respondents for the issuance of the questioned order
of execution pending appeal shall stand liable for satisfaction of the judgment herein rendered in
favor of petitioner bank.

In effect, this conclusion renders the appeal in CA-G.R. No. 64130-R moot and academic and the
judgment of the trial court is accordingly set aside. The interests of substantial justice and demands
of fair play so dictate.

SO ORDERED.