BANK OF THE PHILIPPINE ISLANDS V.
COURT OF APPEALS  In the Order, the preliminary injunction was subject to a
G.R. No. 142731
June 8, 2006
Azcuna, J.
DOCTRINE
Article 1169. Those obliged to deliver or to do something incur in
delay from the time the obligee judicially or extrajudicially demands
from them the fulfillment of the obligation.
However, the demand by the creditor shall not be necessary in
order that delay may exist:
(1) When the obligation or law expressly so declare;
xxx
FACTS
 Petitioner Far East Bank and Trust Company (FEBTC now
BPI) granted a total of EIGHT loans to Noah’s Ark
Merchandising, a single proprietorship owned by Mr. Albert
Looyuko.
 The loans were evidenced by Promissory Notes all signed by
Looyuko. Also, the loans were secured by real estate mortgage
registered in the names of Looyuko and respondent Jimmy Go.
 Petitioner claimed that Noah’s Ark defaulted in its obligations
and subsequently foreclosed the mortgage, now subject to an
auction sale set on April 14, 1998.
 Respondent filed a complaint for damages and for the issuance
of a temporary restraining order (TRO) and writ of preliminary
injunction to enjoin BPI from executing the said auction.
 The application for the TRO was granted by the trial court
through Judge Victorio. Thereby, a 15-day extension for the TRO
was also granted, which amounts to a 20-day TRO.
condition of a cash bond1 of Php200,000. Upon payment, the
Court ordered defendants to cease and desist from proceeding
with the foreclosure and auction sale of the property.
 Subsequent MRs were filed and all were denied.
 In the Court of Appeals, petitioner filed a petition for certiorari
on the ground that the trial court erred in granting the injunction
and that the cash bond was insufficient. However, the CA only
agreed that the cash bond was insufficient and modified the
amount of the cash bond and ordered petitioners to increase it
to 5 MILLION pesos.
 Hence, the petition.
ISSUE:
1. Whether or not respondent was entitled to the TRO
and injunction (main)
2. Whether or not the TRO and injunction was properly issued
by Judge Victorio
HELD:
1. No.
First Argument: Respondent argues that, despite the fact that he
signed the promissory notes, a demand was not made upon him,
and that only FOUR (out of eight) promissory notes have become
due.
1
Cash bond – answer for the damages which may be sustained against
whom the mandatory injunction was issued; to protect against loss or
damage by reason of the injunction
The Court does not agree. As co-signor, private respondent has
waived demand. An acceleration clause is also contained in the
promissory note:
“FEBTC or the holder may at its option, forthwith, accelerate
maturity and the unpaid balance of the principal x x x shall become
due and payable without demand or notice.
xxx
I/we hereby waive any diligence, presentment, demand, protest or
notice of non-payment or dishonor with respect to this note or any
extension thereof.
Under Article 1169 of the Civil Code, one incurs delay or is in default
from the time the obligor demands the fulfillment of the obligation
from the obligee. However, demand is not necessary when the
parties expressly waive demand. Therefore, in the case at bar,
demand was unnecessary for the respondent, as co-signor, to be
considered in default.
Second Argument: Respondent argues that FEBTC withheld their
lease payments for the space occupied by the bank and applied it to
the outstanding obligations of Noah’s Ark instead. Therefore,
respondents argue, FEBTC has waived default and novated the
contract of loan in the promissory notes and cannot anymore
foreclose the properties.
The Court does not agree. The actions of FEBTC was only an
acknowledgement of the legal compensation2 that occurred by
2
Compensation – mode of extinguishing the concurrent amount of
obligations of persons who, in their own right and as principals, are debtors
and creditors of each other.
The requisites are enumerated in Article 1278 and 1279 (see: Relevant
Provisions)
operation of law. There was no new contract. Novation cannot occur
in the absence of a new contract between parties. The promissory
notes and the mortgages subsist. Therefore, in the absence of
novation, FEBTC is not estopped from proceeding with the
foreclosure.
It is clear that FEBTC was acting within its rights when it initiated the
foreclosure and cannot be considered in bad faith.
2. No.
The issuance of the TRO was procedurally irregular and not in
accordance with the Rules of Civil Procedure. Also, the Orders issued
by Judge Victorio exceeded the authority granted by the Rules of
Court when he excluded Saturdays, Sundays and legal holidays in
the counting of days.
PETITION GRANTED.
RELEVANT PROVISIONS:
Article 1278. Compensation shall take place when two persons, in
their own right, are creditors and debtors of each other.
Article 1279. In order that compensation may pre proper, it is
necessary:
(1) That each one of the obligors be bound principally, and that
he be at the same time a principal creditor of the other;
(2) That both debts consist in a sum of money x x x;
(3) That the two debts are due;
(4) That they be liquidated and demandable;
(5) That over neither of them, there be any retention or
controversy, commenced by third persons and
communicated in due time to the debtor.