SECOND DIVISION
G.R. No. 238462, May 12, 2021
ELENA R. QUIAMBAO, Petitioner, v. CHINA BANKING CORPORATION, Respondent.
D E C I S I O N
LOPEZ, M., J.:
A contract of adhesion is a veritable trap for the weaker party whom the courts are bound to protect from abuse and imposition. Hence, in case
of doubt which will cause a great imbalance of rights, the contract
shall be construed strictly against the party who prepared it.1 This resolves the Petition for Review on Certiorari2 under Rule 45 of the Rules of Court assailing the Court of Appeals' (CA) Decision3 dated September 11, 2017 and Resolution4 dated March 21, 2018 in CA-G.R. CV No. 97888.
In due course, the RTC issued a notice of extra-judicial sale scheduled on May 5, 2005.13 The notice was published in a newspaper of general circulation14 and posted in public places. At the public auction sale, the mortgaged property was sold to China Banking Corporation for the amount of P5,254,708.00. On May 6, 2005, the Ce1iificate of Sale was issued to China Banking Corporation.15 However, Elena and Daniel failed to redeem the property. Thus, the title was consolidated in the name of China Banking Corporation.16 Accordingly, TCT No. 227449-PR 2143217 in the name of Elena was cancelled and TCT No. N-30738018 was issued in the name of China Banking Corporation.
Promissory Note No. Dated of Execution Description 1. PN No. 001071438686 for P500,000.00 March 19, 2004 Renewal of the initial PN No. T-134040-6 dated June 16, 2000, for P500,000.00 2. PN No. 001071438693 for P1,000,000.00 March 19, 2004 Renewal of the initial PN No. S-136992-6 dated July 24, 2001, for P1,000,000.00 3. PN No. 001071438723 for P500,000.00 March 19, 2004 Renewal of the initial PN No. S-137764-4 dated October 30, 2001, for P500,000.00 4. PN No. 001071438730 for P1,000,000.00 March 19, 2004 Renewal of the initial PN No. S-138142-1 dated December 20, 2001, for P1,000,000.00 5. PN No. 001071445042 for P400,000.00 June 16, 2004 Renewal of the initial PN No. S-141161-2 dated March 12, 2003, for P400,000.00 6. PN No. 001071445035 for P600.000.00 June 16, 2004 Renewal of the initial PN No. S-137041-4 dated July 30, 2001, for P600,000.00 7. PN No. 001071445011 for P500,000.00 June 16, 2004 Renewal of the initial PN No. S-137526-6 dated September 28, 2001, for P500,000.00 8. PN No. 001071445004 for P500,000.00 June 16, 2004 Renewal of the initial PN No. S-136971-1 dated July 20, 2001, for P500,000.00
WHEREFORE, premises considered, judgment is hereby rendered in favor of the petitioner and against the respondents [sic]. The Amendment to the Real Estate Mortgage dated April 29, 1997 is declared null and void and the Extra-judicial foreclosure sale executed on May 5, 2005 is likewise declared null and void.On September 11, 2017, the CA reversed the RTC's findings and held that the REM was intended to secure all succeeding obligations of Elena in view of the blanket mortgage clause.25 The CA noted that Elena and Daniel were capable of understanding the legal effects of contracts given their business experience, thus:chanroblesvirtualawlibraryx x x x
SO ORDERED.24
[Elena] and [Daniel's] lengthy actual experience and dealings in running their complex money[-]changing business and various other businesses, more than equipped them with the business acumen that earned them millions. [Elena] and [Daniel] have long been engaged in business even prior to 1990. The latter affim1ed that he managed their general merchandising business continuously up to the time he testified on June 28, 2006. The contracting parties, being of age and businessmen of experience, were presumed to have acted with due care and to have signed the contracts with full knowledge of their import.26 (Citation omitted.)Hence, this recourse. Elena maintains that she and Daniel signed the eight PNs in blank or without the material particulars. They thought that these are character loans without any renewal of mortgage. Lastly, Elena only finished high school while Daniel reached only grade two. They both have limited educational attainment which prevented them from discerning the effects of the transactions.27 Meantime, China Banking Corporation advised Elena to remove her personal belongings from the foreclosed property, otherwise it will be forced to dispose them. Aggrieved, Elena moved to hold in abeyance the hauling off, and disposal of her personal properties.
Nonetheless, the parties do not dispute that what the REMs secured were only Sengkon's availments under the Credit Line and not all of Sengkon's availments under other sub-facilities which are also secured by other collaterals. Since the liability of PDCP's properties was not unqualified, the PNs, used as basis of the Petition for Extrajudicial Foreclosure of Mortgage should sufficiently indicate that it is within the terms of PDCP's limited liability. In this case, the PNs failed to make any reference to PDCP's availments, if any, under its Credit Line. In fact, it did not even mention Sengkon's securities under the Credit Line. Notably, the Disclosure Statements, which were "certified correct" by FEBTC's authorized representative, Ma. Luisa C. Ellescas, and which accompanied the PNs, failed to disclose whether the loan secured thereby was actually secured or not.39 (Emphases supplied and citation omitted.)Here, the eight PNs likewise failed to allude to Elena and Daniel's liability under the latest amendment to the REM dated April 29, 1997. The PNs do not even make any reference to the REM as a security. Further, China Banking Corporation did not adduce any evidence proving that the REM and its amendments secured these obligations. Worse, China Banking Corporation's loan assistant categorically testified that one of the PNs was not subject of the REM. Hence, the doubt on whether the rest of the PNs are secured or not must be construed against China Banking Corporation or the party who prepared the contracts. The bank could have avoided the ambiguity had it exercised a little more care in drafting the instruments. Consequently, the latest amendment to the REM cannot be interpreted to cover the P5,000,000.00 succeeding loans under the eight PNs for which the mortgage was foreclosed. As such, the foreclosure proceedings are void. The bank cannot validly foreclose a mortgage based on non-payment of unsecured PNs.
The peculiar nature of such contracts behooves the Court to closely scrutinize the factual milieu to which the provisions are intended to apply. Thus, just as consistently and unhesitatingly, but without categorically invalidating such contracts, the Court has construed obscurities and ambiguities in the restrictive provisions of contracts of adhesion strictly albeit not unreasonably against the drafter thereof when justified in light of the operative facts and surrounding circumstances.40 (Emphases supplied and citation omitted.)We reiterate that the validity or enforceability of the impugned contracts will have to be determined by the peculiar circumstances obtaining in each case and the situation of the parties concerned.41 The stringent treatment towards a contract of adhesion is pursuant to the mandate that in all contractual, property, or other relations, when one of the parties is at a disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, tender age or other handicap, the courts must be vigilant for his protection.42
Endnotes:
* Designated additional Member per Special Order No. 2822 dated April 7, 2021.
1Asiatrust Development Bank v. Tuble, 691 Phil. 732, 745 (2012).
2Rollo, pp. 10-52.
3Id. at 55-68; penned by Associate Justice Myra V. Garcia-Fernandez, with the concurrence of Associate Justices Romeo F. Barza and Rafael Antonio M. Santos.
4Id. at 69-70.
5Id. at 88-89.
6Id. at 55-56.
7Id. at 283-287.
8Id. at 90-92.
9Id. at 288-290. The blanket mortgage clause provided:
WHEREAS, to secure the payment of certain obligation already incurred or which may hereafter be incurred by the MORTGAGOR(S) and/or to the MORTGAGEE, up to the principal sum of ONE MILLION FOUR HUNDRED THOUSAND [PESOS] ONLY x x x (P1,400,000.00), the MORTGAGOR(S) x x x mortgaged to the MORTGAGEE for the same amount the parcel(s) of land situated in Quezon City, x x x. Id. at 288. (Emphasis supplied.)
10Id. at 291-293. The blanket mortgage clause provided:
WHEREAS, to secure the payment of certain obligations already incurred or which may hereafter be incurred by the MORTGAGOR(S) and/or to the MORTGAGEE, up to the principal sum of ONE MILLION SEVEN HUNDRED [THOUSAND] PESOS ONLY x x x (P1,770,00.00), the MORTGAGOR(S) x x x mortgaged to the MORTGAGEE for the same amount the parcel(s) of land situated in Quezon City, x x x. Id. at 291. (Emphasis supplied.)
11Id. at 294-296. The blanket mortgage clause provided:chanroblesvirtualawlibraryWHEREAS, to secure the payment of certain obligations already incurred or which may hereafter be incurred by the MORTGAGOR(S) and/or to the MORTGAGEE, up to the principal sum of TWO MILLION SIX HUNDRED THOUSAND PESOS ONLY x x x (P2,600,000.00), the MORTGAGOR(S) x x x mortgaged to the MORTGAGEE for the same amount the parcel(s) of land situated in Quezon City, x x x.12Id. at 297-304; and 305-308.x x x x
WHEREAS, upon application of the MORTGAGORS(S) and/or the MORTGAGEE has agreed to extend to the MORTGAGOR(S) and/or - increased credit facilities up to the principal sum of FOUR MILLION PESOS ONLY x x x (P4,000,000.00), Philippine Currency, only[.] Id. at 294. (Emphasis supplied.)
13Id. at 309.
14Id. at 310-313.
15Id. at 315.
16Id. at 322-323.
17Id. at 316-321.
18Id. at 324-328.
19Id. at 75-86.
20Id. at 83.
21Id., pp. 134-135.
22Id. at 137.
23Id. at 134-140; penned by Presiding Judge Tita Marilyn Payoyo-Villordon.
24Id. at 140.
25Supra note 3. The CA Decision, disposed as follows:chanroblesvirtualawlibraryWHEREFORE, the appeal is GRANTED. The decision of the [RTC] x x x in Civil Case No. Q-05-55289 dated February 22, 2011 is REVERSED and SET ASIDE. The petition for annulment of mortgage and extrajudicial foreclosure sale is dismissed.SO ORDERED. Supra at 67.26Supra note 2, at 61.
27Supra note 2, at 19.
28Galan v. Vinarao, 820 Phil. 257, 266 (2017); Heirs of Teresita Villanueva v. Heirs of Petronila Syquia Mendoza, 810 Phil. 172, 178 (2017); and Bacsasar v. Civil Service Commission, 596 Phil. 858, 867 (2009).
29Office of the Ombudsman v. De Villa, 760 Phil. 937, 949-950 (2015); Miro v. Vda. de Erederos, 721 Phil. 772, 787 (2013); Office of the Ombudsman v. Dechavez, 721 Phil. 124, 129-130 (2013); and Medina v. Mayor Asistio, Jr., 269 Phil. 225, 232 ( 1990).
30Prudential Bank v. Alviar, 502 Phil. 595, 610 (2005).
31Phil. National Bank v. The Hon. Court of Appeals, G.R. No. 88880, April 30, 1991, citing Qua [Chee Gan] v. Law Union & Rock Insurance Co., [Ltd., G.R. No. L-4611, December 17, 1955].
32RCPI v. Verchez, 516 Phil. 725, 742 (2006).
33Norton Resources and Dev't. Corp. v. All Asia Bank Corp., 620 Phil. 381, 392 (2009).
34Philippine Bank of Communications v. CA, 323 Phil. 297, 312 (1996).
35Prudential Bank v. Alviar, supra note 30, at 606.
36Mojica v. Hon. Court of Appeals, G.R. No. 94247, September 11, 1991.
37Philippine Bank of Communications v. CA, supra note 34.
38 810 Phil. 539 (2017).
39Id. at 561.
40Philippine Airlines, Inc. v. CA, 325 Phil. 303, 314 (1996).
41Cabanting v. BPI Family Savings Bank, Inc., 781 Phil. 164, 169 (2016).
42 NEW CIVIL CODE, Art. 24.
43Rollo, pp. 68-69. cralawredlibrary