Case Summary (G.R. No. 128448)
Petitioner
Spouses Alejandro and Lilia E. Mirasol
Respondents
Philippine National Bank (PNB)
Philippine Exchange Co., Inc. (PHILEX)
Court of Appeals
Key Dates
• Crop years 1973–1974 to 1976–1977: Loan and mortgage agreements executed
• August 9, 1979: Complaint for accounting, specific performance, and damages filed
• June 16, 1987: Complaint amended to implead PHILEX
• July 22, 1996: Court of Appeals decision reversing trial court
• February 1, 2001: Supreme Court decision
Applicable Law
• 1987 Philippine Constitution (judicial review, due process, taking of private property)
• Presidential Decree No. 579 (1974)
• Republic Act No. 7202 (Sugar Restitution Law)
• Civil Code, Articles 1278–1279 (compensation), 1891 (accounting by agent), 1170 (liability for breach), 2217–2220 (moral damages, attorney’s fees)
• Rules of Court, Rule 64, Sec. 3 (notice to Solicitor General)
Factual Background
The Mirasols produced and assigned sugar for export in 1973–1974 and 1974–1975, financing production through PNB. They mortgaged standing crops and real estate, granting PNB authority to sell export sugar and apply proceeds to their obligations. Under P.D. 579, PHILEX handled export purchases and remitted profits to a government fund. The Mirasols repeatedly requested an accounting of export‐sale proceeds, which PNB refused, asserting government ownership of profits under P.D. 579.
Trial Court Decision
The Regional Trial Court of Bacolod City declared P.D. 579 and related issuances unconstitutional, ordered PNB and PHILEX to pay the unliquidated cost price of export sugar for crop years 1973–1974 and 1974–1975 at specified average prices (less prior payments and fees), awarded 12% interest from institution of suit, and granted P50,000 moral damages and P50,000 attorney’s fees. The court’s May 14, 1992 Resolution added that the decision was without prejudice to benefits under R.A. 7202.
Court of Appeals Decision
The Court of Appeals reversed the trial court:
- Upheld the validity of the dacion en pago and foreclosure of mortgaged properties.
- Ordered PNB to render an accounting of the Mirasols’ sugar account and indebtedness.
- Directed recomputation of Mirasols’ indebtedness in accordance with R.A. 7202, crediting payments and auction proceeds.
- Stated that any balance or excess payment would be governed by R.A. 7202 provisions.
Issues Presented
- RTC’s jurisdiction to declare a statute unconstitutional without notice to the Solicitor General.
- Constitutionality of P.D. 579 and subsequent issuances.
- Application of the doctrine of piercing the corporate veil between PNB and PHILEX.
- Validity of foreclosure and dacion en pago.
- Failure to award damages for breach of accounting duty.
Jurisdiction to Declare Statute Unconstitutional
Regional Trial Courts possess constitutional authority to rule on the validity of laws and decrees. Rule 64, Sec. 3 of the Rules of Court mandates notice to the Solicitor General in any action challenging a statute’s validity. The Mirasols never notified the Solicitor General, and the trial court did not require his participation. The Court of Appeals correctly held that the trial court’s constitutional ruling on P.D. 579 was improper for lack of mandatory notice.
Judicial Review and Ripeness of Constitutional Question
Judicial review requires an actual case, ripeness, standing, timely raising of the issue, and that constitutionality be the lis mota. The Mirasols’ case was fundamentally for accounting and specific performance under agency law; its resolution did not necessitate constitutional review of P.D. 579. The Court of Appeals properly determined PNB’s duty to account without addressing P.D. 579’s constitutionality.
Impact of Republic Act No. 7202 on P.D. 579
R.A. 7202’s general repealing clause does not amount to a legislative declaration of P.D. 579’s unconstitutionality. Repeals by implication are disfavored, and only courts may declare a law unconstitutional. R.A. 7202 did not expressly repeal P.D. 579’s pertinent provisions.
Piercing the Corporate Veil
The appellate court found PNB and PHILEX to be separate juridical entities created under distinct organic acts, with separate operations and purposes. Such factual findings, affirmed on appeal, preclude applying the piercing‐veil doctrine absent evidence to the contrary.
Validity of Foreclosure and Dacion en Pago
The Court of Appeals held two account groups: (1) loan financing for crop years 1973–1974 to 1982 totaling P15,964,252.9
...continue readingCase Syllabus (G.R. No. 128448)
Factual Background
- Petitioners are sugarland owners and planters who produced 70,501.08 piculs of sugar in crop year 1973–1974 (25,662.36 piculs for export) and 65,100 piculs in crop year 1974–1975 (23,696.40 piculs for export).
- Philippine National Bank (PNB) financed their sugar ventures for crop years 1973–1974 through 1976–1977 under a crop‐loan scheme secured by chattel mortgages on standing crops and real‐estate mortgages.
- The chattel mortgage empowered PNB as attorney‐in‐fact to negotiate and sell petitioners’ sugar—domestic and export—and apply proceeds to their obligations.
- Presidential Decree No. 579 (November 1974) authorized Philippine Exchange Co., Inc. (PHILEX) to purchase export sugar at quantities and prices set by government agencies, with PNB financing PHILEX’s purchases and directing PHILEX to remit net profits to a government special fund after commissions and expenses.
- The government pegged export sugar prices at ₱180.00 per picul for the crop years in question.
- Petitioners, believing their export‐sale proceeds more than covered their debts, repeatedly requested PNB for an accounting; PNB refused.
- Petitioners incurred further loans and overdrafts; PNB demanded payment. On August 4, 1977, petitioners conveyed real properties valued at ₱1,410,466.00 by way of dacion en pago, yet remained overdrawn by ₱1,513,347.78.
- By August 10, 1982, petitioners’ outstanding balance on sugar crop and other loans reached ₱15,964,252.93; they failed to pay, prompting PNB’s extrajudicial foreclosure of mortgaged properties and a deficiency claim of ₱12,551,252.93.
Procedural History
- August 9, 1979: Petitioners filed suit for accounting, specific performance, and damages in RTC Bacolod City (Civil Case No. 14725).
- June 16, 1987: Complaint amended to implead PHILEX.
- Pre‐trial stipulated issues: (1) constitutionality of P.D. Nos. 338, 579, and 1192; (2) amount due petitioners for unliquidated cost price of export sugar (crop years 1973–1974 and 1974–1975).
- Trial court rendered judgment declaring P.D. No. 579 unconstitutional, ordered PNB and PHILEX to pay petitioners unliquidated balances on export sugar at specified rates, plus 12 % interest, ₱50,000 moral damages, and ₱50,000 attorney’s fees.
- May 14, 1992: Trial court modified decision to preserve petitioners’ rights under Republic Act No. 7202 (Sugar Restitution Law).
- Petitioners appealed to the Court of Appeals (CA-G.R. CV No. 38607).
- July 22, 1996: Court of Appeals reversed the RTC decision, holding the dacion en pago and foreclosure valid; ordering PNB to render accounting, recompute