Being based on an obligation ex contractu and not ex delicto, the civil action may proceed independently of the criminal proceedings instituted against petitioners regardless of the result of the latter.
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[G.R. No. 133176. August 8, 2002]
PILIPINAS BANK, petitioner, vs. ALFREDO T. ONG and LEONCIA LIM, respondents.
Facts:
On April 1991, Baliwag Mahogany Corporation (BMC), through its president, respondent Alfredo T. Ong, applied for a domestic commercial letter of credit with petitioner Pilipinas Bank (hereinafter referred to as the bank) to finance the purchase of about 100,000 board feet of "Air Dried, Dark Red Lauan" sawn lumber.
The bank approved the application and issued Letter of Credit No. 91/725-HO in the amount of P3,500,000.00. To secure payment of the amount, BMC, through respondent Ong, executed two (2) trust receipts[3] providing inter alia that it shall turn over the proceeds of the goods to the bank, if sold, or return the goods, if unsold, upon maturity on July 28, 1991 and August 4, 1991.
On due dates, BMC failed to comply with the trust receipt agreement. On November 22, 1991, it filed with the Securities and Exchange Commission (SEC) a Petition for Rehabilitation and for a Declaration in a State of Suspension of Payments under Section 6 (c) of P.D. No. 902-A,[4] as amended, docketed as SEC Case No. 4109. On November 27, 1992, the SEC rendered a Decision[7] approving the Rehabilitation Plan of BMC as contained in the MOA and declaring it in a state of suspension of payments.
However, BMC and respondent Ong defaulted in the payment of their obligations under the rescheduled payment scheme provided in the MOA.
Issue: WON respondents Ong and Leoncia Lim (as president and treasurer of BMC, respectively) violated the Trust Receipts Law (PD No. 115).
Held: NO. The execution of the MOA constitutes a novation which "places petitioner Bank in estoppel to insist on the original trust relation and constitutes a bar to the filing of any criminal information for violation of the trust receipts law."
It has the effect of a compromise agreement, novated BMC’s existing obligations under the trust receipt agreement. The novation converted the parties’ relationship into one of an ordinary creditor and debtor. Moreover, the execution of the MOA precludes any criminal liability on their part which may arise in case they violate any provision thereof.
The execution of the MOA extinguished respondents’ obligation under the trust receipts. Respondents’ liability, if any, would only be civil in nature since the trust receipts were transformed into mere loan documents after the execution of the MOA. This is reinforced by the fact that the mortgage contracts executed by the BMC survive despite its non-compliance with the conditions set forth in the MOA.
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[G.R. NO. 117913. February 1, 2002]
CHARLES LEE, CHUA SIOK SUY, MARIANO SIO, ALFONSO YAP, RICHARD VELASCO and ALFONSO CO, petitioners, vs. COURT OF APPEALS and PHILIPPINE BANK OF COMMUNICATIONS, respondents.
Facts:
On March 2, 1979, Charles Lee, as President of MICO wrote private respondent Philippine Bank of Communications (PBCom) requesting for a grant of a discounting loan/credit line in the sum of Three Million Pesos (P3,000,000.00) for the purpose of carrying out MICO’s line of business as well as to maintain its volume of business.
On the same day, Charles Lee requested for another discounting loan/credit line of Three Million Pesos (P3,000,000.00) from PBCom for the purpose of opening letters of credit and trust receipts.
As per agreement, the proceeds of all the loan availments were credited to MICO’s current checking account with PBCom. To induce the PBCom to increase the credit line of MICO, petitioners executed another surety agreement in favor of PBCom on July 28, 1980, whereby they jointly and severally guaranteed the prompt payment on due dates or at maturity of overdrafts, promissory notes, discounts, drafts, letters of credit, bills of exchange, trust receipts and all other obligations of any kind and nature for which MICO may be held accountable by PBCom
Upon maturity of all credit availments obtained by MICO from PBCom, the latter made a demand for payment. Private respondent PBCom extrajudicially foreclosed MICO’s real estate mortgage upon repeated demands & emerged as the highest bidder. For the unpaid balance, PBCom then demanded the settlement of the aforesaid obligations from herein petitioners-sureties who, however, refused to acknowledge their obligations to PBCom under the surety agreements. Hence, PBCom filed a complaint with prayer for writ of preliminary attachment before the Regional Trial Court of Manila.
Petitioners (MICO and herein petitioners-sureties) denied all the allegations of the complaint filed by respondent PBCom, and alleged that: a) MICO was not granted the alleged loans and neither did it receive the proceeds of the aforesaid loans; b) Chua Siok Suy was never granted any valid Board Resolution to sign for and in behalf of MICO; c) PBCom acted in bad faith in granting the alleged loans and in releasing the proceeds thereof; d) petitioners were never advised of the alleged grant of loans and the subsequent releases therefor, if any; e) since no loan was ever released to or received by MICO, the corresponding real estate mortgage and the surety agreements signed concededly by the petitioners-sureties are null and void.
Issue: WON the proceeds of the loans or the goods under the trust receipts were ever delivered to and received by MICO.
Held: It is clear that letters of credit, being usually bank to bank transactions, involve more than just one bank. Consequently, there is nothing unusual in the fact that the drafts presented in evidence by respondent bank were not made payable to PBCom.
A trust receipt is considered as a security transaction intended to aid in financing importers and retail dealers who do not have sufficient funds or resources to finance the importation or purchase of merchandise, and who may not be able to acquire credit except through utilization, as collateral of the merchandise imported or purchased.
A trust receipt, therefor, is a document of security pursuant to which a bank acquires a “security interest” in the goods under trust receipt. Under a letter of credit-trust receipt arrangement, a bank extends a loan covered by a letter of credit, with the trust receipt as a security for the loan. The transaction involves a loan feature represented by a letter of credit, and a security feature which is in the covering trust receipt which secures an indebtedness.
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G.R. No. 135462 December 7, 2001
SOUTH CITY HOMES, INC., FORTUNE MOTORS (PHILS.), PALAWAN LUMBER MANUFACTURING CORPORATION, petitioners,
vs.
BA FINANCE CORPORATION, respondent.
Facts:
On January 17, 1983, Joseph L. G. Chua, President of Fortune Motors Corporation, executed in favor of plaintiff-appellant a Continuing Suretyship Agreement, in which he "jointly and severally unconditionally" guaranteed the "full, faithful and prompt payment and discharge of any and all indebtedness" of Fortune Motors Corporation to BA Finance Corporation. On February 3, 1983, Palawan Lumber Manufacturing Corporation represented by Joseph L.G. Chua, George D. Tan, Edgar C. Rodrigueza and Joselito C. Baltazar, executed in favor of plaintiff-appellant a Continuing Suretyship Agreement in which, said corporation "jointly and severally unconditionally" guaranteed the "full, faithful and prompt payment and discharge of any and all indebtedness of Fortune Motors Corporation to BA Finance Corporation (Folder of Exhibits, pp. 19-20). On the same date, South City Homes, Inc. represented by Edgar C. Rodrigueza and Aurelio F. Tablante, likewise executed a Continuing Suretyship Agreement in which said corporation "jointly and severally unconditionally" guaranteed the "full, faithful and prompt payment and discharge of any and all indebtedness" of Fortune Motors Corporation to BA Finance Corporation.
Fortune Motors Corporation thereafter executed trust receipts covering the motor vehicles delivered to it by CARCO under which it agreed to remit to the Entruster (CARCO) the proceeds of any sale and immediately surrender the remaining unsold vehicles. ). The drafts and trust receipts were assigned to plaintiff-appellant, under Deeds of Assignment executed by CARCO.
Upon failure of the defendant-appellant Fortune Motors Corporation to pay the amounts due under the drafts and to remit the proceeds of motor vehicles sold or to return those remaining unsold in accordance with the terms of the trust receipt agreements, BA Finance Corporation sent demand letter to Edgar C. Rodrigueza, South City Homes, Inc., Aurelio Tablante, Palawan Lumber Manufacturing Corporation, Joseph L. G. Chua, George D. Tan and Joselito C. Baltazar (Folder of Exhibits, pp. 29-37). Since the defendants-appellants failed to settle their outstanding account with plaintiff-appellant, the latter filed on December 22, 1983 a complaint for a sum of money with prayer for preliminary attachment, with the Regional Trial Court of Manila.
Issue: WON respondent BAFC has a valid cause of action for a sum of money following the drafts and trust receipts transactions.
Held: As an entruster, respondent BAFC must first demand the return of the unsold vehicles from Fortune Motors Corporation, pursuant to the terms of the trust receipts. Having failed to do so, petitioners had no cause of action whatsoever against Fortune Motors Corporation and the action for collection of sum of money was, therefore, premature.
A trust receipt is a security transaction intended to aid in financing importers and retail dealers who do not have sufficient funds or resources to finance the importation or purchase of merchandise, and who may not be able to acquire credit except through utilization, as collateral, of the merchandise imported or purchased.9 In the event of default by the entrustee on his obligations under the trust receipt agreement, it is not absolutely necessary that the entruster cancel the trust and take possession of the goods to be able to enforce his rights thereunder.
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G.R. No. 119723 February 23, 2001
PHILIPPINE BANK OF COMMUNICATIONS, petitioner,
vs.
HON. COURT OF APPEALS and FILIPINAS TEXTILE MILLS, INC., respondents.
Facts:
petitioner, on April 8, 1991, of a Complaint against private respondent Bernardino Villanueva, private respondent Filipinas Textile Mills and one Sochi Villanueva (now deceased) before the Regional Trial Court of Manila. In the said Complaint, petitioner sought the payment of P2,244,926.30 representing the proceeds or value of various textile goods, the purchase of which was covered by irrevocable letters of credit and trust receipts executed by petitioner with private respondent Filipinas Textile Mills as obligor; which, in turn, were covered by surety agreements executed by private respondent Bernardino Villanueva and Sochi Villanueva. In their Answer, private respondents admitted the existence of the surety agreements and trust receipts but countered that they had already made payments on the amount demanded and that the interest and other charges imposed by petitioner were onerous.
On May 31, 1993, petitioner filed a Motion for Attachment, contending that violation of the trust receipts law constitutes estafa, thus providing ground for the issuance of a writ of preliminary attachment.
Issue: WON there was a sufficient basis for the issuance of the writ of preliminary attachment.
Held: NO. The Motion for Attachment filed by petitioner and its supporting affidavit did not sufficiently establish the grounds relied upon in applying for the writ of preliminary attachment. While the Motion refers to the transaction complained of as involving trust receipts, the violation of the terms of which is qualified by law as constituting estafa, it does not follow that a writ of attachment can and should automatically issue. private respondents claimed that substantial payments were made on the proceeds of the trust receipts sued upon. They also refuted the allegations of fraud, embezzlement and misappropriation by averring that private respondent Filipinas Textile Mills could not have done these as it had ceased its operations starting in June of 1984 due to workers' strike.
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ONG VS CA (1983)
124 SCRA 578
Facts:
Under an agreement between petitioner and Tramat Mercantile, Inc., several units of machineries was obtained and received in trust by petitioner for the purpose of displaying and selling the machineries for cash, under the express obligation on the part of said petitioner of turning over to said Tramat Mercantile, Inc., the proceeds from the sale thereof, if sold, or of returning to the latter the said goods, if not sold, within ninety (90) days, or immediately upon demand.
Petitioner was charged with a criminal case of estafa for allegedly faing to turn over the proceeds of the sale several units of machineries or to return the goods to Tramat Mercantile, Inc. under the aforesaid covenant.
Petitioner was later charged with a complaint for collection of sum of money with the then CFI of Manila wherein both parties entered a compromise agreement to settle the claim. Petitioner subsequently filed a motion to dismiss the criminal case against him on the ground of novation because of the compromise agreement entered into between him and the complainant.
CFI of Manila denied the motion to dismiss. On petition for certiorari with the then Court of Appeals the petition was dismissed on the grounds, among others, that “novation does not extinguish the criminal liability if the crime of estafa has been completed. (2 REYES 670, 1975 ed., citing People vs. Clemente, CA, 65 O.G. 6892). In the instant case, the crime of estafa had been consummated long before the compromise agreement was agreed upon. In fact, the criminal case had already been filed in the court. Therefore , the subsequent agreement did not affect the criminal culpability of the petitioner.” (p. 16, Rollo)
Hence, the filing of the instant petition for certiorari, mandamus, prohibition and for a writ of preliminary injunction , with prayer that “the Decision of the respondent Court of Appeals be reversed and set aside; and that respondent judge of the First Instance be prohibited permanently from further proceeding in said criminal case and to command him to dismiss “ said case after due hearing of this petition x x x. (p. 11, Rollo)
It is the position of herein petitioner that the compromise agreement in the civil case novated the contract embodied in the trust receipts on which the information in the Criminal Case No.43423 was based, “inasmuch as there was a change of object or principal conditions, under Article 1291 of the Civil Code. There being a novation, it is respectfully submitted that even if the novation took place after the filing of the Information in the criminal case, the transaction had nonetheless been converted from a criminal violation to civil obligation, which would therefore necessitate the consequent dismissal of the criminal case.” (p. 8, Rollo).
Issue: Whether or not the compromise agreement made after the filing of the criminal case novated the trust receipt agreement.
Ruling:
We are not persuaded. The Court, speaking through Justice J.B.L. Reyes, in People vs. Nery, 10 SCRA 244, said that:
“The novation theory may perhaps apply to the filing of the criminal information in court by the state prosecutors because up to that time the original trust relation may be converted by the parties into an ordinary creditor-debtor situation, thereby placing the complainant in estoppel to insist on the original trust. But after the justice authorities have taken cognizance of the crime and instituted action in court, the offended party may no longer divest the prosecution of its power to exact criminal liability, as distinguished from the civil. The crime being an offense against the state, only the latter can renounce it, (People vs. Gervacio, 54 Off. Gaz. 2898; People vs. Velasco, 42 Phil. 76; U.S. vs. Montañes, 8 Phil. 620).
“It may be observed in this regard that novation is not one of the means recognized by the ,Penal Code whereby criminal liability can be extinguished; hence the role of novation may be either to prevent the rise of criminal liability or to cast doubt on the true nature of the original basic transaction, whether or not it was such that its breach would not give rise to penal responsibility, as when money loaned is made to appear as a deposit, or other similar disguise is resorted to (cf. Abeto vs. People, 90 Phil. 581; U.S. vs. Villareal, 27 Phil. 481).”
Thus it is clear that the respondent Court of Appeals did not abuse its discretion amounting to lack of jurisdiction in denying petitioner’s motion to dismiss the criminal case of estafa on the basis of a compromise agreement made after the filing of the information.
ACCORDINGLY, the petition is DISMISSED for lack of merit.
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SPOUSES TIRSO VINTOLA AND LORETA DY VS INSULAR BANK OF ASIA ANDAMERICA, (1987)
150 SCRA 578
FACTS:
Petitioner spouses Vintola owns and manages manufacturing of raw seashells into finished products, under their business name, Dax kin International. They applied for domestic letter of credit by respondent Insular Bank of Asia and America which was granted. Then, executed a Trust Receipt Agreement with Insular bank stipulating that the Vintolas shall hold the goods in trust for IBAA. Having defaulted in its payment, the Vintolas offered to return the goods to IBAA, but the latter refused. Due to their continued refusal, IBAA charged them with estafa. The Court acquitted the Vintolas.
ISSUE: Whether or not IBAA became the real owners of the goods held in trust by the Vintolas.
RULING: No. Insular bank of Asia and America did not become the holder or real owner of the goods. The Vintola’s retained ownership of the goods. TheCourt held that the trust receipt arrangement did not convert the IBAA intoan investor, it remained a lendor and creditor. Under the law, a trust receipt is a document wherein the entrustee binds himself to hold thedesignated goods, documents or instruments in trust for the entruster to sell or otherwise dispose of the goods, to the amount owing to the entruster.
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ALLIED BANKING CORPORATION VS SECRETARY SEDFREY ORDOÑEZ AND ALFREDOCHING
192 SCRA 246 (1990)
FACTS: Respondent Alfredo Ching duly authorized officer of Philippine Blooming Mills(PBM) applied for the issuance of commercial letters of credit with petitioner Allied banking Corporation. The latter issued an irrevocable letter of credit infavor of Nikko Industry wherein it drew four (4) drafts which were accepted by Blooming Mills and duly honored and paid by Allied Bank. In order to secure the payment of the loan, Blooming Mills as entrustee, executed four (4) Trust Receipt Agreements acknowledging Allied bank’s ownership of the goods and Blooming Mills obligation to turn over the proceeds of the sale of the goods if sold or to return the same within the stated period. Blooming Mills failed to pay itsobligation, thereby prompting petitioner bank to file a criminal complaint for violation of Presidential Decree 115.
ISSUE: Whether or not the penal provision of Presidential decree 115 apply when the goods covered by a Trust Receipt do not form part of the finished products which are ultimately sold but are instead, utilized in the operation of the equipment of entrustee-manufacturer?
RULING: Yes. In trust receipts, there is an obligation to repay the entruster. The entrustee binds himself to sell or otherwise dispose of the entrusted goods with the obligation to turn over to the entruster the proceeds if sold, or return the goods if unsold or not otherwise disposed of according to the terms and conditions of the trust receipt. Petition granted.
G.R. No. L-39922-25 August 21, 1987
TRINIDAD RAMOS, petitioner,
vs.THE HONORABLE COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents.
NARVASA, J.:
Facts:
This is an appeal of Trinidad Ramos seeking reversal of the judgment of the Court of Appeals which affirmed her conviction of four felonies of estafa handed down by the Court of First Instance of Manila.
Petitioner applied for four letters of credit with Philippine National Cooperative Bank (PNCB) supported by commercial invoices. After the applications were processed and approved, domestic letters of credit were opened on the same dates of the applications and in the amounts applied for . The different suppliers then drew sight drafts against the petitioner payable to the order of the PNCB, also bearing the same dates as the respective applications and for the same amounts. The PNCB then drew its own drafts against the petitioner as the buyer of the merchadise and which drafts were accepted by the accused also on the same dates of the respective applications. After such acceptance, the corresponding trust receipts were signed by the petitioner also on the same dates of the respective applications.
The four trust receipts signed by the accused uniformly contain the following stipulation:
The undersigned hereby acknowledges to have received in trust from the ... (PNCB) the merchandise covered by the above-mentioned documents and agrees to hold said merchandise in storage as the property of said bank, with the liberty to sell the same for cash and for its account provided the proceeds thereof are turned over in their entirety to the said bank to be applied against any acceptance(s) and any other indebtedness of the undersigned to the said bank.
PNCB claimed that no payments were made excepting partial payments of P3,900.00 and P2,000, inclusive of interests on one of the letters of credit. These partial payments were evidently in pursuance of written demands for payment addressed by the PNCB to the petitioner October 5, 1965. A last formal demand was addressed to the petitioner in a letter of counsel for the PNCB dated January 26,1967.
Trinidad Ramos contends, in her case (1) that there is no adequate proof of her receipt of the goods subject of the trust receipts in question or of her having paid anything on account thereof or in connection therewith; (2) that complainant Bank had suffered no damage whatever, since it had made no payment at all on account of the commercial invoices for which the trust receipts were issued; and (3) that under the laws at the time, transactions involving trust receipts could only give rise to purely civil liability.
Issue: Whether or not the trust receipts signed by petitioner is sufficient to convict her of the crime of estafa.
Ruling:
Petitioner is not guilty of estafa. Conviction was reversed.
“Examined against the evidence of record, the assailed factual findings as to the receipt of the merchandise and the damage sustained by the Bank cannot stand. The proofs are indeed inadequate on these propositions of fact. It is difficult to accept the prosecution's theory that it has furnished sufficient proof of delivery by the introduction in evidence of the commercial invoices attached to the applications for the letters of credit and of the trust receipts. The invoices are actually nothing more than lists of the items sought to be purchased and their prices; and it can scarcely be believed that goods worth no mean sum actually transferred hands without the unpaid vendor requiring the vendee to acknowledge this fact in some way, even by a simple signature on these documents alone if not in fact by the execution of some appropriate document, such as a delivery receipt.
The trust receipts do not fare any better as proofs of the delivery to Ramos of the goods. Except for the invoices, an documents relating to each trust receipt agreement, including the trust receipts themselves, appear to be standard Bank forms accomplished by the Bank personnel, and were all signed by Ramos in one sitting, no doubt with a view to facilitating the pending transactions between the parties. If, as she claims, Ramos was made to believe that bank usage or regulations require the signing of the papers in this way, i.e., on a single occasion, there was neither reason nor opportunity for her to question the statement therein of receipt of the goods since it was evidently assumed that delivery to her of the goods would shortly come to pass.
At any rate, Ramos has categorically and consistently denied ever having received the goods either from the Bank or the suppliers. And this was because, according to her, the suppliers simply refused to part with the goods as no payment had been made therefore by the Bank.
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G.R. No. L-46658 May 13, 1991
PHILIPPINE NATIONAL BANK, petitioner,
vs.HON. GREGORIO G. PINEDA, in his capacity as Presiding Judge of the Court of First Instance of Rizal, Branch XXI and TAYABAS CEMENT COMPANY, INC., respondents.
Facts:
In this petition for certiorari, petitioner Philippine National Bank (PNB) seeks to annul and set aside the orders dated March 4, 1977 and May 31, 1977 rendered in Civil Case No. 24422 1 of the Court of First Instance of Rizal, Branch XXI, respectively granting private respondent Tayabas Cement Company, Inc.'s application for a writ of preliminary injunction to enjoin the foreclosure sale of certain properties in Quezon City and Negros Occidental and denying petitioner's motion for reconsideration thereof.
In 1963, Ignacio Arroyo and Tuason Arroyo (the Arroyo Spouses), obtained a loan of P580,000.00 from PNB secured by La Vista, a parcel of land in order too purchase 60% of the subscribed capital stock, and thereby acquire the controlling interest of private respondent Tayabas Cement Company, Inc. (TCC).
Thereafter, TCC filed with petitioner bank an application and agreement for the establishment of an eight (8) year deferred letter of credit (L/C) for $7,000,000.00 in favor of Toyo Menka Kaisha, Ltd. of Tokyo, Japan, to cover the importation of a cement plant machinery and equipment.
Upon approval of said application and opening of an L/C by PNB in favor of Toyo Menka Kaisha, Ltd. for the account of TCC, the Arroyo spouses executed the following documents to secure this loan accommodation: Surety Agreement dated August 5, 1964 and Covenant dated August 6, 1964.
The imported cement plant machinery and equipment arrived from Japan and were released to TCC under a trust receipt agreement. Subsequently, Toyo Menka Kaisha, Ltd. made the corresponding drawings against the L/C as scheduled. TCC, however, failed to remit and/or pay the corresponding amount covered by the drawings. Thus, on May 19, 1968, pursuant to the trust receipt agreement, PNB notified TCC of its intention to repossess, as it later did, the imported machinery and equipment for failure of TCC to settle its obligations under the L/C.
The Arroyos failed to settle their obligations the La Vista property was foreclosed with PNB winning the bid.
However, when said property was about to be awarded to PNB, the representative of the mortgagor-spouses objected and demanded from the PNB the difference between the bid price of P1,000,001.00 and the indebtedness of P499,060.25 of the Arroyo spouses on their personal account. It was the contention of the spouses Arroyo's representative that the foreclosure proceedings referred only to the personal account of the mortgagor spouses without reference to the account of TCC.
To remedy the situation, PNB filed a supplemental petition on August 13, 1975 requesting the Sheriff's Office to proceed with the sale of the subject real properties to satisfy not only the amount of P499,060.25 owed by the spouses Arroyos on their personal account but also the amount of P35,019,901.49 exclusive of interest, commission charges and other expenses owed by said spouses as sureties of TCC. Said petition was opposed by the spouses Arroyo and the other bidder, Jose L. Araneta.
On October 5, 1976, the CFI, thru respondent Judge Gregorio Pineda, issued a restraining order and on March 4, 1977, granted a writ of preliminary injunction. PNB's motion for reconsideration was denied, hence this petition.
Issue: Whether or not TCC's liability has been extinguished by the repossession of PNB of the imported cement plant machinery and equipment.
Ruling:
“We rule for the petitioner PNB. It must be remembered that PNB took possession of the imported cement plant machinery and equipment pursuant to the trust receipt agreement executed by and between PNB and TCC giving the former the unqualified right to the possession and disposal of all property shipped under the Letter of Credit until such time as all the liabilities and obligations under said letter had been discharged.
PNB's possession of the subject machinery and equipment being precisely as a form of security for the advances given to TCC under the Letter of Credit, said possession by itself cannot be considered payment of the loan secured thereby. Payment would legally result only after PNB had foreclosed on said securities, sold the same and applied the proceeds thereof to TCC's loan obligation. Mere possession does not amount to foreclosure for foreclosure denotes the procedure adopted by the mortgagee to terminate the rights of the mortgagor on the property and includes the sale itself.
Neither can said repossession amount to dacion en pago. Dation in payment takes place when property is alienated to the creditor in satisfaction of a debt in money and the same is governed by sales. Dation in payment is the delivery and transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of the obligation. As aforesaid, the repossession of the machinery and equipment in question was merely to secure the payment of TCC's loan obligation and not for the purpose of transferring ownership thereof to PNB in satisfaction of said loan. Thus, no dacion en pago was ever accomplished.
Proceeding from this finding, PNB has the right to foreclose the mortgages executed by the spouses Arroyo as sureties of TCC. A surety is considered in law as being the same party as the debtor in relation to whatever is adjudged touching the obligation of the latter, and their liabilities are interwoven as to be inseparable. 21 As sureties, the Arroyo spouses are primarily liable as original promissors and are bound immediately to pay the creditor the amount outstanding.
Under Presidential Decree No. 385 which took effect on January 31, 1974, government financial institutions like herein petitioner PNB are required to foreclose on the collaterals and/or securities for any loan, credit or accommodation whenever the arrearages on such account amount to at least twenty percent (20%) of the total outstanding obligations, including interests and charges, as appearing in the books of account of the financial institution concerned. 23 It is further provided therein that "no restraining order, temporary or permanent injunction shall be issued by the court against any government financial institution in any action taken by such institution in compliance with the mandatory foreclosure provided in Section 1 hereof, whether such restraining order, temporary or permanent injunction is sought by the borrower(s) or any third party or parties . . ."
WHEREFORE, the instant petition is hereby granted.
