A.M. No. P-04-1927 - Aradanas vs. Dimaclid

Case Digest (A.M. No. P-04-1927)
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Facts:

Parties and Background

Petitioners: Albert M. Ching and Romeo J. Bautista.
Respondents: Felix M. Bantolo, Antonio O. Adriano, and Eulogio Sta. Cruz, Jr. (with the latter substituted by his children represented by Raul Sta. Cruz, Jr.).
Subject matter: Several parcels of land in Tagaytay City, identified by respective Original Certificates of Title (OCT Nos. OP-787, OP-788, OP-789, OP-799 for Bantolo; OP-793, OP-805, OP-806, OP-807 for Adriano; and OP-790, OP-791, OP-800, OP-801 for Sta. Cruz, Jr.).

Execution and Terms of the Special Power of Attorney (SPA)

On April 3, 2000, respondents executed an SPA in favor of petitioners authorizing them to obtain a loan using the respondents’ properties as collateral.
The SPA provided petitioners the authority:

To borrow money and secure a loan with any bank/financial institution, within the loanable value determined by an appraisal report (dated March 24, 1995, from Asian Appraisal Co., Inc.).
To deed, convey, and transfer the respondents’ property rights by way of a first mortgage in favor of the lending institution.
To sign, execute, and deliver deeds or instruments for real estate mortgage and secure surety agreements.
To ratify and confirm all acts performed under the SPA, treating them as if done personally by the respondents.

Revocation of the SPA and Subsequent Loan Application

Respondents, without notice to petitioners, executed a Revocation of the SPA effective at the end of business hours on July 17, 2000.
On July 18, 2000, petitioners were informed that Philippine Veterans Bank (PVB) approved a P25-million loan application with stipulated conditions, including:

Acceptance of third-party mortgages with a directive that all mortgaged properties should eventually be in the name of American Boulevard or Albert Ching within one year.
Submission of updated, clear tax declarations and DENR certification about the absence of forest reserve claims.
Provision for an access road of at least 6 meters wide.

Petitioners notified respondents on July 31, 2000 via a letter regarding the loan approval, only to learn later that the SPA had been revoked.

Initiation of Litigation

In the first week of August 2000, petitioners discovered the revocation of the SPA.
Petitioners sent a letter demanding that respondents annul the revocation and abide by the SPA terms.
On September 8, 2000, petitioners filed a Complaint before the RTC of Quezon City seeking:

Annulment of the revocation of the SPA.
Enforcement of the SPA and/or acknowledgment of interest in the properties.
Claims for damages.

The Complaint was later amended to include an alternative prayer declaring petitioners as owners of one-half of the properties subject to the SPA.
Petitioners argued that the SPA was irrevocable as it was a contract of agency coupled with an interest, noting that respondents had agreed to share the loan proceeds or the subject properties if petitioners defrayed the costs.

Responses and Counterclaims

Respondents contended that:

Petitioners lacked a valid cause of action.
The SPA was executed based on an assurance of a P50-million loan, of which an initial P30 million was purportedly to go to respondents.
The subsequent dealings included petitioner Ching advancing P500,000 in exchange for the original certificates of title, money which was never returned despite later disputes and a revised loan amount (P25 million) disfavoring respondents’ expected share (P6 million).

Respondents maintained that they never agreed to transfer or share ownership of the properties, and that petitioner Ching alone assumed responsibility for the expenses incurred in processing the loan.

Proceedings in Lower Courts

Regional Trial Court (RTC) Decision (December 18, 2002):

Upheld the validity of the SPA and declared the revocation illegal and unjust.
Held that, although the SPA was valid, it was no longer enforceable because the circumstances had changed.
Found respondents liable for damages, awarding:

Actual damages based on receipts used in procuring the loan (P949,960.40).
An additional P500,000 actual damages for the amount advanced by petitioner Ching in exchange for the titles.
Moral, exemplary damages, and attorney’s fees.

Declared petitioners owners of 50% or one-half (pro-indiviso) of the properties.

Court of Appeals (CA) Decision:

Modified the RTC decision by:

Declaring the revocation of the SPA null and void, thus affirming the SPA as valid and subsisting.
Ordering that the P500,000 paid by petitioner Ching be deducted from the amount to be loaned (rendering it conditional).
Holding that petitioners were not entitled to one-half of the properties on the ground that it was against common human experience to share one’s property with someone scarcely known.
Denying petitioners’ claim for reimbursement of all expenses and for exemplary damages.

Petitioners’ petition for reconsideration of the CA ruling was denied by Resolution dated March 12, 2007.

Subsequent Developments

A Motion for Intervention was filed by First Aikka Development, Inc. and Sadamu Watanabe, alleging involvement through separate Deeds of Irrevocable SPA and related Memoranda of Agreement with respondents and TTMC, but the CA dismissed the motion due to tardiness.
The central issues on appeal thus revolved around:

The conditional nature of the award of actual damages.
The entitlement to a one-half share in the subject properties.
The allocation of expenses for the loan application.
The award (or deletion) of exemplary damages.

Issues:

Whether the CA erred in ruling that petitioner Ching’s recovery of actual damages in the amount of P500,000.00 be made contingent upon the obtaining of a loan through the SPA, given that the respondents had revoked the SPA in bad faith and illegally.
Whether the CA erred in ruling that petitioners are not entitled to one-half of the respondents’ properties despite:

The RTC’s finding that the consideration for the SPA was that petitioners would pay for the loan using the respondents’ properties as collateral.
The RTC’s finding that petitioner Ching failed to utilize the loan proceeds for the respondents’ intended business plan and to recover his share in the advanced expenses.

Whether the CA erred in ruling that the expenses incurred (and to be incurred) by petitioners in applying for the loan should be borne solely by petitioners despite an existing agreement to the contrary as found by the RTC.
Whether the CA erred in ruling that respondents are not liable to pay exemplary damages for revoking the SPA in bad faith, based on the rationale that the respondents did not act in a wanton, fraudulent, reckless, oppressive, or malevolent manner, given that they were allegedly dissatisfied with the approved loan amount.

Ruling:

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Ratio:

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Case Digest (A.M. No. P-04-1927)
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Case Digest (A.M. No. P-04-1927)
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