Philippine National Bank v. Florendo
REITERATIONFacts
The Antecedents: Spouses Teodoro and Victoria Florendo (Florendos) mortgaged three parcels of land to Philippine National Bank (PNB) to secure a loan. Upon promulgation of Presidential Decree No. 27, one parcel (OCT No. S-V-97) was subjected to land reform and redistributed to 31 tenants. The Land Bank of the Philippines (Land Bank) remitted P94,500.00 in bonds and P332.31 in check to PNB to pay the Florendos' outstanding obligation for this parcel, intending to release it. Procedural History: PNB notified the Florendos that it would only accept P15,500.00 of the bonds at face value, discounting the remaining P79,400.00 by 40%, resulting in a credit of only P53,232.31. The Florendos disagreed, and PNB refused to release the mortgaged titles and register the "Assignment of Rights." The Court of Agrarian Relations (CAR) ruled in favor of the Florendos, declaring their loan paid, ordering the release of all collaterals, and stating the Land Bank bonds and check constituted full satisfaction of the obligation. Both parties appealed to the Court of Appeals (CA). The CA affirmed the CAR decision. PNB filed a petition for certiorari with preliminary injunction to stay execution, which was also denied by the CA. The Supreme Court issued a temporary restraining order. The Petition: PNB sought review of the CA decision, raising issues regarding the applicability of Section 80 of Republic Act 3844 (as amended by PD 251) to lands not covered by PD 27, the PNB Charter's applicability, the sufficiency of payment, the release of mortgages, and the CAR's jurisdiction.
Issue(s)
Whether the Court of Agrarian Relations had jurisdiction over the case. Whether Section 80 of Republic Act 3844, as amended by Presidential Decree 251, applies to lands not covered by Presidential Decree No. 27. Whether the Land Bank bonds and check remitted to PNB were sufficient to pay the Florendos' outstanding obligation.
Ruling
The Supreme Court dismissed the petitions for lack of merit, modified the CA decision by deleting the order for the Land Bank to pay the Florendos' indebtedness to the Development Bank of the Philippines, and affirmed the CA decision in all other respects. The temporary restraining order was dissolved.
Ratio Decidendi
On the jurisdiction of the Court of Agrarian Relations: The Court held that PNB was precluded from raising the issue of jurisdiction for the first time on appeal, having actively participated in the proceedings before the CAR and sought affirmative relief. Furthermore, the Court found that the CAR had jurisdiction because the mortgage obligation is indivisible. Even though only one parcel was under the land reform program, the entire mortgaged property was subject to the CAR's jurisdiction, especially since the mode of payment under PD 251 involved settling the outstanding balance of the obligation with Land Bank bonds. This fell under Section 12(b) of PD 946, granting the CAR original and exclusive jurisdiction over questions involving rights and obligations related to the agrarian reform program. On the applicability of Section 80, Republic Act 3844, as amended by Presidential Decree 251: The Court reiterated its ruling in Gonzales v. GSIS. Presidential Decree No. 251 mandates that the outstanding balance of obligations to lending institutions shall be paid by the Land Bank in Land Bank bonds or other securities, existing charters to the contrary notwithstanding. This provision clearly indicates that it is not only the loan value but the entire outstanding balance that must be settled with Land Bank bonds at their par or face value. The PNB's contention that bonds should be discounted for portions of the loan not directly secured by land under PD 27 was rejected. On the sufficiency of payment: The Court found that the P94,500.00 in Land Bank bonds and the P332.31 check were sufficient to fully discharge the Florendos' outstanding obligation to PNB. The Court rejected PNB's unilateral computation of the Florendos' total obligation, noting that at the time of remittance, the agreed outstanding obligation between the banks was P94,832.31. PNB's insistence on discounting the bonds led to its erroneous calculation of an alleged excess balance. The Court affirmed that the bonds should be applied at face value, thereby covering the entire obligation.
Main Doctrine
Land Bank bonds issued for lands under the agrarian reform program must be accepted at face value by lending institutions to settle outstanding obligations, even if only a portion of the mortgaged property is covered by the program, due to the indivisibility of the mortgage obligation. The mortgage on multiple parcels of land is indivisible, and each parcel answers for the totality of the debt.