Title
Spouses Alagar vs. Philippine National Bank
Case
G.R. No. 171870
Decision Date
Mar 16, 2011
The Alagars sought mandamus to compel PNB to release a mortgaged title after paying their personal loan, but PNB refused, citing an unsettled corporate loan. Courts ruled PNB’s retention valid, dismissing the Alagars' claims.
estopped
motion for reconsideration
due course

Case Summary (G.R. No. 171870)

Factual Background

The Alagars’ personal loan obligations increased over time. By May 31, 1997, their outstanding balance on their personal loan had risen to P4,003,134.36. They negotiated with PNB and requested condonation of interests to settle their debt. They paid P3,900,000.00 while waiting for approval. When PNB granted condonation, the Alagars paid the remaining P330,221.50, and they demanded the release of the General Luna title. PNB refused, asserting that the Alagars still had other unsettled obligations.

The Alagars insisted that the “unsettled account” cited by PNB actually referred to the corporate loan of New Taj Resources, Inc., secured by the Pantay Daya title. They also traced their entitlement to release to the payment of the personal loan and alleged that PNB’s continued retention of the title deprived them of the use and enjoyment of their property, entitling them to damages.

PNB resisted the petition by challenging the sufficiency of the cause of action. It argued that mandamus was not the proper remedy to compel performance of contractual obligations. PNB further maintained it had the right to retain the mortgaged title because of a mortgage stipulation providing that the property on General Luna was security not only for the personal loan but also for “any and all other obligations of the Mortgagors to the Mortgagees of whatever kind and nature.” PNB anchored its position on the claim that, as solidary debtors in the corporate loan, the Alagars remained obligated to the bank.

Petition for Mandamus and RTC Handling of Evidence

At trial, the Alagars presented evidence and formally offered documentary exhibits on June 26, 2001. The RTC set PNB’s evidence for presentation on July 30, 2001, but PNB’s counsel did not appear. The RTC therefore treated PNB as having waived evidence and submitted the case for decision.

The RTC’s record, however, reflected a letter from PNB’s Vigan branch manager on the hearing day explaining that PNB could not attend due to the retirement of counsel of record. PNB asked for 60 days to find another lawyer. On August 6, 2001, Atty. Benjamin V. Sotero entered his appearance for PNB and filed a motion for reconsideration to allow PNB to present evidence, setting the motion for hearing on September 17, 2001. On August 7, 2001, the RTC denied the motion, citing violations of Sections 3 and 5 of Rule 15 of the Rules of Court, in particular the failure to include required supporting affidavits and papers and the setting of hearing beyond the ten (10)-day limit prescribed by the rules.

PNB did not appear on September 17, 2001, despite setting the hearing itself. As a consequence, the RTC issued an order that reiterated the submission for decision and noted that PNB did not react to the August 7 order, which the RTC sent by registered mail. On October 5, 2001, PNB filed an omnibus motion for reconsideration covering the RTC’s July 30, August 7, and September 17 orders, again seeking leave to present evidence. In an order dated October 29, 2001, the RTC denied the omnibus motion for lack of information as to when PNB received the questioned orders and rejected counsel’s excuse for not reacting to the August 7 order.

RTC Judgment on the Merits and Subsequent Motions

On January 15, 2002, the RTC rendered judgment for the Alagars. The RTC acknowledged that the pleading had been denominated as mandamus, but it held that the allegations actually established a case for specific performance. It reasoned that since the personal loan had been fully paid, the real estate mortgage had nothing more to secure. Accordingly, it ordered the release of the collateral, consistent with law and equity, and awarded damages to the Alagars.

After judgment, PNB moved for new trial or reconsideration. In addition to merit arguments, PNB argued that the RTC lacked jurisdiction over the validity and binding effect of the mortgage stipulation. Meanwhile, PNB also pursued CA-G.R. SP 68661, a petition for certiorari before the CA seeking to annul the RTC’s orders of August 7, September 17, and October 29, 2001. The CA eventually dismissed that petition on March 20, 2002 for being moot and academic because the RTC had already rendered a decision.

On March 25, 2002, the RTC denied PNB’s motion for new trial or reconsideration on grounds including failure to raise new matters and violation of the ten-day hearing schedule rule. PNB then filed a notice of appeal. The RTC, however, issued an order on April 29, 2002 denying due course to the appeal. It ruled that PNB’s motion was pro forma and did not toll the reglementary period to appeal.

As the RTC’s decision was treated as final and executory, the RTC issued a writ of execution upon motion of the Alagars on June 4, 2002. PNB then filed CA-G.R. SP 71116 on June 13, 2002, a special civil action of certiorari before the CA, assailing the RTC orders of March 25, April 29, and June 4, 2002, as well as the writ of execution.

RTC Denial of Motions to Quash the Writ and Alleged Amendment of Dispositive Orders

PNB sought to quash the writ, arguing that it was improvidently issued and that, as a matter of judicial courtesy, it should await the CA’s action on PNB’s petition. On July 17, 2002, the RTC denied the motion to quash, holding that issuance of the writ was ministerial after the decision became final and executory and that the CA had issued no restraining order.

PNB moved for reconsideration, but the RTC denied it on September 16, 2002. The RTC later issued an alias writ of execution and compelled PNB to comply. Thereafter, the Alagars asked the RTC to cancel the mortgage annotated on their title, contending it followed logically from execution. The RTC granted this request on August 4, 2003, stating that although the dispositive portion of the January 15, 2002 decision did not explicitly mention cancellation, the order to release the General Luna title necessarily included the cancellation of the mortgage.

PNB sought reconsideration and quashal of the second writ of execution. The Alagars then filed a petition to cite PNB for indirect contempt. On October 21, 2003, the RTC granted PNB’s motion for reconsideration and dismissed the petition for indirect contempt, while simultaneously amending the dispositive portion of its January 15, 2002 decision. The amended dispositive portion included not only the release of the title and the award of damages, but also an instruction that PNB execute a deed sufficient to cancel the mortgage, with a sheriff appointed as alternative executor in case of PNB’s failure.

On December 18, 2003, the RTC granted the Alagars’ motion for reconsideration insofar as it directed reinstatement of the earlier August 4, 2003 order. It deleted paragraphs ordering sheriff execution and reinstated the original version.

PNB moved for reconsideration of the December 18, 2003 order and sought abeyance in view of the CA’s pending action in CA-G.R. SP 71116. The RTC denied the request on March 11, 2004, citing its inherent power to amend its decision to conform to law and justice and finding no adequate basis for suspension of proceedings. The RTC later recalled the writ of execution on June 14, 2004 while resolving a motion for clarification, and it deleted paragraph five of the amended dispositive portion but retained paragraph four ordering PNB to execute a deed of cancellation of the mortgage.

CA’s Ruling in CA-G.R. SP 71116

The CA, in its judgment dated September 30, 2005 in CA-G.R. SP 71116, annulled and set aside all RTC orders starting March 25, 2002, when the RTC denied as pro forma PNB’s motion for reconsideration of its January 12, 2002 decision. The CA held that the motion was not pro forma and, therefore, it tolled the period for appeal. The CA concluded that PNB filed a timely appeal after the motion was denied, so the RTC decision had not become final and executory. It therefore ruled that the decision could not validly be the subject of execution.

The CA also held that the RTC committed grave abuse of discretion when it substantially amended the decision after, by its own ruling, it had already become final and executory. The CA reasoned that the additional order directing cancellation and release of the mortgage constituted on the title was not a mere clerical correction because it substantially prejudiced PNB’s rights as mortgagee. The CA denied the Alagars’ motion for reconsideration.

Issues Framed Before the Court

The petition before the Court assigned three errors. First, it argued that the CA failed to rule that PNB was estopped from assailing the validity of the writ of execution after it had complied. Second, it contended that the CA failed to rule that PNB could no longer nullify RTC orders challenged through supplemental petition beyond sixty (60) days from their issuance, invoking finality under Rule 65. Third, it asserted that the CA erred in failing to rule that PNB’s petition in the CA was not the proper remedy, contending that mandamus—rather than certiorari—was required when the RTC denied due course to an appeal.

The Court’s Ruling on Estoppel

The Court addressed first the Alagars’ estoppel argument. The Alagars claimed that the execution issue had become moot because PNB had allegedly voluntarily complied by returning the title and paying the damages awarded. They further claimed that full implementation foreclosed any challenge to the decision’s validity.

The Court held that execution pending an action in a higher court challenging its finality could not be treated as voluntary abandonment. It emphasized that the rules allow parties to challenge orders and rulings of inferior courts through special civil actions for grave abuse of discretion. The Court reasoned that PNB’s compliance with the writ could not amount to estoppel because it had no choice but to obey while the CA had not issued a restraining order. It further noted that PNB did not abandon its CA action and continued to pursue its petition. The Court

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