G.R. No. 76902 - Land Bank of the Philippines vs. Court of Appeals

Petitioner: Land Bank of the Philippines (“Land Bank”), a government financial institution involved in supporting Operation Land Transfer and land reform initiatives.
Respondents: Spouses Rafael Suarez and Africa G. Suarez, former owners of agricultural lands subject to Operation Land Transfer under Presidential Decrees Nos. 2 and 127.

As partial payment for their lands, the Land Bank issued three Land Bank Interim Bond Certificates with the following details:

Terms of the bonds included a 25-year maturity and an interest rate of 6% per annum, tax-free, payable semi-annually on May 20 and November 20.

On March 17, 1975, the respondents requested the conversion of their registered bonds into bearer bonds in anticipation of transferring these bonds to third parties.
In connection with this conversion, respondents were required to complete three sets of LBP Form No. 64 (Request for Transfer/Redenomination of Bonds).
The respondents inserted a unilateral notation on each form stating: “NOTE: It is understood that the interest from November 21, 1974 to March 17, 1975 shall accrue to the transferor.”
The notation was added by a Land Bank clerk at the express request of the respondents and was not a response to any specific item or blank in the form.

The LBP Forms No. 64 were signed and processed by Mr. Bajada, the Manager of the Land Bank’s Cash Department.
Upon surrender of the registered bonds, the Land Bank issued eight new bearer bonds, each having different denominations but retaining an aggregate face value equivalent to the original bonds.
The terms of the new bearer bonds paralleled those of the prior registered bonds except that they were payable to the bearer rather than to a named owner.
The original registered bonds were retired upon conversion.

On May 20, 1975, following the conversion, respondents demanded payment of ₱11,877.24 representing the accrued interest on the original registered bonds for the period from November 21, 1974 to March 17, 1975.
The Land Bank declined the demand on the ground that respondents did not present the new bearer bond certificates, as required by the Land Bank’s Implementing Guidelines on “The Processing Payment of Interest on LBP Bonds.”
Subsequently, on November 10, 1975, respondents filed a complaint in the then Court of First Instance of Manila, seeking to compel the Land Bank to pay the accrued interest plus attorney’s fees and costs.
The trial court ruled in favor of the respondents, and the decision was later affirmed by the Court of Appeals, with the appellate court holding that the Land Bank was bound by the unilateral notation in the LBP Forms No. 64.

After the appellate court denied the Land Bank’s Motion for Reconsideration, the bank filed a Petition for Review with the Supreme Court.
The central legal question remaining was whether the unilateral notation inserted by the respondents in the LBP Forms No. 64 creates an obligation upon the Land Bank to pay the accrued interest for the period from November 21, 1974 to March 17, 1975.

Whether the unilateral notation inserted by the respondents in the LBP Forms No. 64 binds the Land Bank to pay the accrued interest from November 21, 1974 to March 17, 1975.

Does the notation act as an implicit modification of the Land Bank’s standard payment procedures?
Is there any contractual or legal basis for obligating the Land Bank to allocate the accrued interest in favor of the respondents given the notation?

Whether the Land Bank’s requirement for the presentation of bearer bond certificates before releasing interest payments is a valid and reasonable safeguard that precludes the effect of the unilateral notation.

Can the bank’s Implementing Guidelines, issued under statutory authority, override a notation unilaterally inserted by bondholders?
Was there any waiver of these requirements by the Land Bank through its conduct or by authorizing officer(s)?

Whether there was an effective novation or alteration of the terms of the lender-borrower relationship by converting registered bonds into bearer bonds in conjunction with the respondents’ inserted notation.