Facts:

The case involves Banco Filipino Savings and Mortgage Bank as the petitioner and spouses Antonio G. Diaz and Elsie B. Diaz as the respondents. The events leading to this case began on March 8, 1979, when the respondents secured a loan from the petitioner bank amounting to P400,000.00 at an interest rate of 16% per annum. In November 1982, this loan was restructured to P3,163,000.00, payable over 20 years at an increased interest rate of 21% per annum, with monthly amortizations of P56,227.00, secured by a real estate mortgage on two commercial lots in Davao City. The respondents defaulted on their payments starting October 1986. Before the bank could initiate foreclosure proceedings, the respondents filed a complaint in the Regional Trial Court (RTC) of Davao City, seeking to declare the interest rates and penalty charges as unconscionable, among other claims. The RTC denied their application for a preliminary injunction, affirming the bank's right to foreclose due to the...

Facts:

Loan Contract and Restructuring

• In March 1979, respondents Antonio and Elsie Diaz secured a loan from Banco Filipino Savings and Mortgage Bank amounting to P400,000.00 with an initial interest rate of 16% per annum.
• In November 1982, the original loan was restructured/consolidated into an increased obligation of P3,163,000.00 to be paid over 20 years at 21% per annum, to be amortized in equal monthly installments of P56,227.00.
• The loan was secured by a real estate mortgage over two commercial lots in Davao City, with the respondents additionally assigning the rentals from these properties as further collateral.

Default, Foreclosure Proceedings, and Early Litigation

• The respondents defaulted on their payment obligations beginning in October 1986, despite repeated demands by the bank.
• Before foreclosure could be instituted, the respondents initiated litigation in the RTC of Davao City seeking declarations against high interest and penalty charges, reformation, annulment of rental assignments, and damages.
• The RTC of Davao City denied the application for a preliminary injunction, holding that respondents, by their own admission of non-payment, had violated the mortgage conditions, thereby authorizing foreclosure.
• On appeal, the Court of Appeals (CA) in its October 31, 1990 decision affirmed the RTC’s order regarding foreclosure rights.

Consignation and the Issue of Payment Tender

• The respondents, filing a separate complaint with the RTC of Makati City (Civil Case No. 91-3090), tendered a manager’s check dated December 5, 1991 for P1,034,600.00 as full payment of their loan obligation, based on their computation after applying past payments made between 1983 and 1991.
• The RTC of Makati City, relying on prior ex parte evidence, ruled that the respondents’ obligation amounted to only P1,034,600.00, thus considering the deposited check as a valid consignation and declaring the loan fully paid.
• On appeal, the CA in its November 14, 1997 decision reversed the RTC ruling, finding that the deposit of P1,034,600.00 did not represent a complete tender because it failed to include the accrued interests; consequently, a valid consignation had not occurred.

Motion to Withdraw Deposit and Subsequent Developments

• After the CA’s final decision in November 1997 dismissing the consignation claim, the respondents filed a motion with the RTC of Makati City to withdraw the deposit of P1,034,600.00, asserting that with the CA decision’s finality there was no valid acceptance of their attempt at consignation.
• In their motion, the respondents also argued that a compromise arrangement had been reached with the assistance of the Gaisano brothers, evidenced by the cancellation of the mortgage over their properties following a payment of approximately P25,000,000.00 (or P25,100,000.00, as later contended) negotiated by the attorneys-in-fact.
• The petitioner bank opposed the motion, contending that the deposit had been accepted—and duly accounted for—by deducting it from the respondents’ outstanding obligation, which it alleged amounted to P28,810,330.51 as of December 31, 1998.

Orders of the RTC and the CA’s Intervention

• The RTC of Makati City, in its orders dated July 31, 2000 and December 14, 2000, denied the respondents’ motion to withdraw the deposit, holding that it remained applicable to the payment of the outstanding loan.
• The respondents filed a Petition for Certiorari with the CA alleging grave abuse of discretion by the RTC.
• On November 12, 2001, the CA reversed the RTC orders and allowed the withdrawal of the deposit on the basis that the statutory right to withdraw under Article 1260 of the Civil Code had not been extinguished by any acceptance by the bank.
• The CA indicated that even if the bank had accepted the deposit as partial payment, such acceptance would need to retroact to the time of deposit, thereby reducing the accruing interests, which did not occur.
• A subsequent resolution dated April 12, 2002, denying petition for reconsideration, solidified the CA’s ruling.

Petitioner Bank’s Arguments on Appeal

• Banco Filipino Savings and Mortgage Bank contended that the CA erred in reversing the RTC orders by asserting that the deposit was already accepted as part of the payment of the respondents’ obligation.
• The bank maintained that the deposited amount did not include the necessary accrued interest, characterizing the tender as incomplete and thus supporting its entitlement to apply the deposit toward the outstanding balance.
• The bank further argued that the respondents improperly resorted to a petition for certiorari when the proper remedy should have been an ordinary appeal, given its acceptance of the deposit.
• It also defended the imposition of additional surcharges and interests, asserting that delays in foreclosure were attributable to the respondents’ own procedural antics.

Issue:

Procedural Issue

• Whether the respondents properly availed themselves of the remedy of certiorari to challenge the interlocutory orders of the RTC of Makati City denying their motion to withdraw deposit.
• Whether the absence of a regular appeal against these orders justified the use of the special civil action for certiorari.

Substantive Issue: Validity of the Consignation and the Right to Withdraw

• Whether the respondents’ deposit of P1,034,600.00 constituted a valid consignation under Article 1260 of the Civil Code.
• Whether petitioner bank’s alleged acceptance of the deposit as partial payment of their outstanding loan obligation effectively barred the respondents from exercising their right to withdraw the deposit.
• Whether the procedural and substantive findings regarding the computation of the respondents’ outstanding balance (including excessive interest and surcharges) affect the right to cancel the obligation by withdrawing the deposit.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)