G.R. No.

166859 June 26, 2006

REPUBLIC OF THE PHILIPPINES, Petitioner,

vs.
SANDIGANBAYAN (FIRST DIVISION), EDUARDO M. COJUANGCO, JR., AGRICULTURAL
CONSULTANCY SERVICES, INC., ARCHIPELAGO REALTY CORP., BALENTE RANCH, INC.,
BLACK STALLON RANCH, INC., CHRISTENSEN PLANTATION COMPANY, DISCOVERY
REALTY CORP., DREAM PASTURES, INC., ECHO RANCH, INC., FAR EAST RANCH, INC.,
FILSOV SHIPPING COMPANY, INC., FIRST UNITED TRANSPORT, INC., HABAGAT REALTY
DEVELOPMENT, INC., KALAWAKAN RESORTS, INC., KAUNLARAN AGRICULTURAL CORP.,
LABAYUG AIR TERMINALS, INC., LANDAIR INTERNATIONAL MARKETING CORP., LHL
CATTLE CORPORATION, LUCENA OIL FACTORY, INC., MEADOW LARK PLANTATIONS, INC.,
METROPLEX COMMODITIES, INC., MISTY MOUNTAIN AGRICULTURAL CORP., NORTHEAST
CONTRACT TRADERS, INC., NORTHERN CARRIERS CORPORATION, OCEANSIDE MARITIME
ENTERPRISES, INC., ORO VERDE SERVICES, INC., PASTORAL FARMS, INC., PCY OIL
MANUFACTURING CORP., PHILIPPINE TECHNOLOGIES, INC., PRIMAVERA FARMS, INC.,
PUNONG-BAYAN HOUSING DEVELOPMENT CORP., PURA ELECTRIC COMPANY INC., RADIO
AUDIENCE DEVELOPERS INTEGRATED ORGANIZATION, INC., RADYO PILIPINO
CORPORATION, RANCHO GRANDE, INC., REDDEE DEVELOPERS, INC., SAN ESTEBAN
DEVELOPMENT CORP., SILVER LEAF PLANTATIONS, INC., SOUTHERN SERVICE TRADERS,
INC., SOUTHERN STAR CATTLE CORP., SPADE ONE RESORTS CORP., UNEXPLORED LAND
DEVELOPERS, INC., VERDANT PLANTATATIONS, INC., VESTA AGRICULTURAL CORP. AND
WINGS RESORTS CORPORATION, Respondents.

RESOLUTION

CARPIO MORALES, J.:

For resolution is the Urgent Motion for Issuance of Temporary Restraining Order and/or Writ of
Preliminary Injunction which was filed by petitioner, Republic of the Philippines, during the pendency
of its Petition for Certiorari before this Court challenging the denial by public respondent, the
Sandiganbayan, of its Motion for Partial Summary Judgment in Civil Case No. 0033-F (the civil
case).

In support of its present urgent motion, petitioner pleads that the issue it raised in its Petition for
Certiorari — whether public respondent committed grave abuse of discretion in denying its Motion
for Partial Summary Judgment — must first be resolved, as a continuation of the proceedings in the
civil case by public respondent might be rendered unnecessary in the event that its Petition before
this Court is resolved in its favor.

The mere elevation of an interlocutory matter to this Court through a petition for Certiorari under
Rule 65 of the Rules of Court, like in the present case, does not by itself merit a suspension of the
proceedings before a public respondent, unless a temporary restraining order or a writ of preliminary
injunction has been issued against the public respondent. Rule 65, Section 7 of the Rules of Court
so provides:

SECTION 7. Expediting proceedings; injunctive relief. — The court in which the petition [for
Certiorari, Prohibition and Mandamus] is filed may issue orders expediting the proceedings, and it
may also grant a temporary restraining order or a writ of preliminary injunction for the preservation of
the rights of the parties pending such proceedings. The petition shall not interrupt the course of the
principal case unless a temporary restraining order or a writ of preliminary injunction has been
issued against the public respondent from further proceeding in the case. (Emphasis and
underscoring supplied)

The burden is thus on the petitioner in a petition for Certiorari, Prohibition and Mandamus to show
that there is a meritorious ground for the issuance of a temporary restraining order or writ of
preliminary injunction for the purpose of suspending the proceedings before the public
respondent.1 Essential for granting injunctive relief is the existence of an urgent necessity for the writ
in order to prevent serious damage.2

The Court finds that petitioner has failed to discharge the burden. The ground on which it bases its
urgent motion is the alleged futility of proceeding with the trial of the case. This assertion, however, is
speculative, anchored on the mere supposition that the petition would be decided in its favor.

There is thus, in this case, a marked absence of any urgent necessity for the issuance of a
temporary restraining order or writ of preliminary injunction.

It is gathered though that even prior to the filing of the instant motion, public respondent suspended
the proceedings in the civil case, the absence of any temporary restraining order or writ of
preliminary injunction from this Court notwithstanding. Thus, petitioner brought to this Court’s
attention private respondents’ insistence to have the civil case set for trial by public respondent,
citing private respondents’ filing of a "Motion Reiterating Motion to Set Case for Trial" dated June 27,
2005, "Second Motion Reiterating Motion to Set Case for Trial" dated October 26, 2005, and
"Manifestation and Motion Reiterating Motion to Set Case for Trial" dated December 8, 2005. 3

The earlier quoted Section 7 of Rule 65 provides the general rule that the mere pendency of a
special civil action for Certiorari commenced in relation to a case pending before a lower court or
court of origin does not stay the proceedings therein in the absence of a writ of preliminary injunction
or temporary restraining order.4

There are of course instances where even if there is no writ of preliminary injunction or temporary
restraining order issued by a higher court, it would be proper for a lower court or court of origin to
suspend its proceedings on the precept of judicial courtesy. As this Court explained in Eternal
Gardens Memorial Park v. Court of Appeals:5

Although this Court did not issue any restraining order against the Intermediate Appellate Court to
prevent it from taking any action with regard to its resolutions respectively granting respondents'
motion to expunge from the records the petitioner's motion to dismiss and denying the latter's motion
to reconsider such order, upon learning of the petition, the appellate court should have refrained
from ruling thereon because its jurisdiction was necessarily limited upon the filing of a petition for
certiorari with this Court questioning the propriety of the issuance of the above-mentioned
resolutions. Due respect for the Supreme Court and practical and ethical considerations should
have prompted the appellate court to wait for the final determination of the petition before taking
cognizance of the case and trying to render moot exactly what was before this court x x x (Emphasis
and underscoring supplied)

A reading of Eternal Gardens Memorial Park shows that the appellate court’s failure to observe
judicial courtesy which was frowned upon by this Court lay in its recall of its (the appellate court’s)
Orders expunging from the records the Motion to Dismiss filed by the therein petitioner, which
Orders were the orders being questioned before this Court via a petition for Certiorari and
Mandamus. Such act of the appellate court tended to render moot and academic the said petition.
No parity of circumstances obtains in the present case, however, where merely setting the case for
trial would not have the effect of rendering the present petition moot.

This Court explained, however, that the rule on "judicial courtesy" applies where "there is a strong
probability that the issues before the higher court would be rendered moot and moribund as a result
of the continuation of the proceedings in the lower court [or court of origin]". 6

A final word. This Court takes notice that in most cases where its interlocutory orders are challenged
before this Court, public respondent, Sandiganbayan, suspends proceedings in the cases in which
these assailed interlocutory orders are issued despite the non-issuance by this Court of a temporary
restraining order or writ of preliminary injunction and the absence of a strong probability that the
issues raised before this Court would be rendered moot by a continuation of the proceedings before
it (Sandiganbayan).

WHEREFORE, the URGENT MOTION FOR ISSUANCE OF TEMPORARY RESTRAINING ORDER

AND/OR WRIT OF PRELIMINARY INJUNCTION filed by petitioner REPUBLIC OF THE
PHILIPPINES is DENIED.

The SANDIGANBAYAN is, however, ORDERED,in light of the foregoing discussion, to continue the
proceedings in Civil Case No. 0033-F, as well as in all other cases where its interlocutory orders are
on challenge before this Court but no Temporary Restraining Order or Writ of Preliminary Injunction
has been issued and there is no strong probability that the issues raised before this Court would be
rendered moot and moribund.

SO ORDERED.

CONCHITA CARPIO MORALES

Associate Justice
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-49568 October 17, 1979

BANCO DE ORO, petitioner-appellant,

vs.
JAIME Z. BAYUGA and ROBERTO P. TOLENTINO, respondents- appellees, THE COURT OF
APPEALS and HON. FRANCISCO DE LA ROSA in his capacity as Judge of the CFI-Rizal,
Branch VII-Pasay City, respondents.

Dionisio M. Capistrano for petitioner.

Robito P. Tolentino for private respondents.

MELENCIO-HERRERA, J.:

A Petition for Review by certiorari of the Decision of the Court of Appeals * upholding with modification the
Special Order, dated March 10, 1978, issued by the Court of First Instance of Rizal, Branch VI I. Pasay City, directing the issuance of a Writ
of Execution pending appeal.

Factual Antecedents

Respondent Roberto P. Tolentino is a lawyer appearing on his own behalf and as counsel for his co-
respondent Jaime Z. Bayuga.

On November 2, 1976, as security for a loan of P375,000.00 respondent Jaime Z. Bayuga, as

attorney-in-fact of respondent Roberto P. Tolentino, and Leonardo Zaballero, executed a Real Estate
Mortgage in favor of the Acme Savings Bank (now Banco de Oro, petitioner herein) over a parcel of
land covered by TCT No. 4841.8 in the names of TOLENTINO and Zaballero, with an area of 2
hectares, more or less, situated at Mabato, Calamba, Laguna. The purpose of the loan was for the
1

"acquisition of real estate property." The mortgage was duly registered.

2

According to petitioner BANK, it approved the loan subject to the following terms and conditions:

1. That the interest rate shall be l9% per annum;

 2. That the monthly amortization shall be P7,000.12;

3. That the loan shall be payable within ten (10) years;

4. That the property sought to be acquired which is located in Tagaytay City, covered
and described under TCT No. 2703, Lot B (LRC) Psd-1537 registered in the name of
Algue Incorporated shall be given as additional collateral;

5. That the property located at Calamba, Laguna (TCT No. T48418, Lot 1995-U
(LRC) Psd-6481) shall first be registered provided, however, that the release of tile
proceeds shall be paid directly to the owner of the property above-mentioned, and

6. That the loan shall be subject to availability of funds. 3

Private respondents contend, however, that they were unaware of the foregoing conditions, the
same having been embodied only in the Minutes of the meeting of "the Board of Directors/Executive
Committee" of petitioner BANK, and, therefore, self-serving, as held by the trial Court.

On November 15, 1976, the BANK made a partial release of P200,000.00 less charges of
P6,000.00, which amount was credited to the account of TOLENTINO in the said BANK. On the
same date, out of the balance of P194,000.00, TOLENTINO purchased from the BANK a certificate
of time deposit in the amount of P50,000.00. He also withdrew on the said date P100,000.00, and on
November 16, 1976, the amount of P44,000.00. TOLENTINO then purchased from the BANK a
Manager's check in the total amount of P144,000.00, P135,000.00 of which he deposited in his
savings account, and P9,000.00 in his checking account, both with the Far East Bank & Trust
Company.

Thereafter, claiming that the borrowers showed no indication of complying with his obligation to pay
the amount of the loan to the vendor (Algue, Inc.) of the Tagaytay City property, which constituted
diversion in violation of Sec. 77, Republic Act No. 337, the BANK stopped payment of its Manager's
check at the same time that it refused to release the balance of the loan. That action was necessary,
according to the BANK, in order to prevent private respondent from perpetrating a fraud against it.

CC NO. 5271-B, CFI, Rizal

Branch VII, Pasay City, and

CA-G.R. No. SP-07573, Court

of Appeals

On December 2, 1976, private respondents TOLENTINO and Bayuga, as plaintiffs, brought an

action for Specific Performance with Damages against the BANK before the Court of First Instance
of Rizal, Branch VI I, Pasay City, docketed as CC No. 5271-B. On December 27, 1976, after a
preliminary hearing, the trial Court ordered the issuance of a Writ of Preliminary Mandatory
Injunction directing the BANK to comply with the mortgage contract by releasing immediately to
Bayuga the consideration thereof in the amount of P375,000.00 upon private respondents' posting of
a bond of P200,000.00. Apparently, however, the BANK did not release the amount.
4
On December 12, 1977, the trial Court rendered its Decision with the following decretal portion:

WHEREFORE, judgment is hereby rendered in favor of plaintiffs (private

respondents herein):

a) Ordering Defendant Bank (petitioner in this case) to comply with its obligations
towards Plaintiff Bayuga under the Real Estate Mortgage (Exhibit "E", Exhibit 14);

b) Ordering Defendant Bank to pay to Plaintiff Tolentino P144,000.00 in its manager's

check and P50,000.00 in its Certificate of Time Deposit;

c) Ordering Defendant Bank to pay to Plaintiff Bayuga the balance of P175,000-00 in

cash or in check, as said Plaintiff Bayuga may demand;

d) Ordering Defendant Bank to pay to Plaintiff Bayuga the following:

1) P5,000.00 - as nominal damages,

2) P20,000.00-as moral damages;

3) P 10,000.00 -as exemplary damages,

4) P10,000.00 - as attorney's fees;

e) Ordering Defendant Bank to pay Plaintiff Tolentino the following:

1) P80,000.00 - as actual damages,

2) P20,000-00 - as moral damages,

3) P10,000.00 - as exemplary damages,

4) P10,000.00 - as attorney's fees.

COSTS AGAINST DEFENDANT BANK.

On December 27, 1977, the BANK filed its Notice of Appeal to the Court of Appeals, posted an
appeal bond, and moved for extension of time within which to submit its Record on Appeal.

Before the perfection of said appeal, however, and upon private respondents' "Petition for Execution
with Prayer for Contempt", the trial Court issued an Order, dated February 10, 1978, confirming and
reiterating the Writ of Preliminary Mandatory Injunction it had issued on December 27, 1976 and
ordering the BANK to comply therewith.

The BANK challenged the aforestated Orders of December 27, 1976 and February 10, 1978 in a
Petition for certiorari and Prohibition filed before the Court of Appeals on February 16, 1978 in CA-G.
R. No. SP-07-D73.
On March 10, 1978, upon private respondents' Motion for Execution Pending Appeal, the trial Court
released a "Special Order" authorizing execution in this wise:

WHEREFORE, independently of whatever resolution the Honorable Court of Appeals

may hand down in the Petition now pending before it (CA-G.R. No. 07573), and
without the necessity of passing upon the issue of delay allegedly intended by the
Defendant Bank, this Court finds that there is a good reason for the granting of the
writ of execution pending the appeal herein-to deny the issuance of the writ of
execution pending appeal will be to deny from the Plaintiffs the relief from the
substantial injustice which they have been burdened, which injustice started from the
time the parcel of land of Plaintiff Tolentino was mortgaged in favor of Defendant
Bank, and the same will continue for some time more unless the writ of execution is
immediately granted. It bears repeating t hat their substantial injustice consists of
having said parcel of land mortgaged to Defendant Bank and said Defendant Bank
not paying any single centavo of the loan guaranteed by the mortgage. Plaintiffs are
willing to post sufficient bonds, as a token of good faith, to cover the award of
damages of P120,000.00 in favor of Plaintiff Tolentino and of P45,000.00 in favor of
Plaintiff Bayuga. It is therefore, hereby ordered that a writ of execution pending
appeal be issued immediately for the enforcement and execution of the DECISION of
this Court dated December 12, 1977, upon the posting, in favor of Defendant Bank, a
bond in the amount of P45,000.00 by Plaintiff Tolentino and a bond in the amount of
P15,000.00 by Plaintiff Bayuga.

On March 13, 1978, private respondents posted the required bonds for special execution in the total
sum of P55,000.00. The bonds were approved by the trial Court on the same date.
5

On March 14, 1978, the corresponding Writ of Execution was issued by the trial Court, by virtue of
which the amount of P389,000.00 the BANK'S deposit with the Central Bank, was garnished.

On March 16, 1978, a Supplemental Petition for certiorari was filed by the BANK with the Court of
Appeals in the same CA-G.R. No. SP-07573, seeking the nullification of the aforementioned Special
Order of March 10, 1978 and the issuance of a Restraining Order enjoining the enforcement of
execution pending appeal.

On March 17, 1978, the Court of Appeals issued a Restraining Order as prayed for by the BANK.

On October 16, 1978, the Court of Appeals ruled that the trial Court committed no grave abuse of
discretion in granting execution pending appeal but excluded the images awarded to private
respondents. Its Decision, in CA-G.R. No. SP-07573. reads thus in its dispositive portion:

WHEREFORE, the herein petition is denied. The challenged order is accordingly

modified in order to exclude the damages assessed in favor of respondent Bayuga
and respondent Tolentino (letters D and C of the dispositive portion of the decision a
quo). In an other respects, the challenged order dated March 10, 1978 and all other
orders flowing therefrom stand. With costs.
On October 20, 1978, in virtue of said Decision of the Court of Appeals, the trial Court issued its
Order granting private respondents' ex-parte Motion for the enforcement of the Writ and/or the
issuance of an Alias Writ. On October 25, 1978, the BANK filed a Motion to Quash/Lift Order dated
October 20, 1978 or in the alternative, a Motion for Authority to File Supersedeas Bond to stay
execution pending appeal.

On December 11, 1978, the trial Court denied quashal of the Writ as well as the BANK'S alternative
prayer to be allowed to file a superdeas bond, and ordered the Central Bank, upon receipt of the
Order, to deliver to the Deputy Sheriff the amount of P389,000.00 the amount garnished by virtue of
the Writ of Execution of March 14, 1978, for said Sheriff to deliver the mentioned amount to the Clerk
of Court, and for the latter, in turn, to deliver the same to private respondents.
6

On December 15, 1978, the Court of Appeals, upon the BANK'S Motion, issued a Restraining Order
enjoining the execution of its Decision until the BANK would be able to elevate an appeal to this
Court. On January 22, 1979, the Court of Appeals lifted its Restraining Order since a Petition for
7

Review on certiorari had actually been filed with this Court.8

In the meantime, or on August 10, 1978, the trial Court approved the BANK'S Record on Appeal. In
the Court of Appeals, the appealed case was docketed as CA-G.R. No. 64130R, where it is still
pending.

G.R. No. L,49568 before the

Supreme Court

On January 12, 1979, after an extension having been granted, the BANK filed the instant appeal by
way of certiorari before this Court impugning the Decision of the Court of Appeals, as well as the trial
Court Orders a) of December 27, 1976 ordering the issuance of a Writ of Preliminary Mandatory
Injunction, b) of February 10, 1978 reiterating the said Order, and c) the Special Order of March 10,
1978 granting execution pending appeal. On January 19, 1979, the BANK filed an Urgent Petition for
the Issuance of Preliminary Injunction with Restraining Order, to enjoin the trial Court "from further
9

proceeding with any matter in connection with Civil Case No. 5271-P of this Court" and praying that
Injunction be made permanent until the final outcome of the appeal on the merits in C.A.-G.R. No.
64130 of the Court of Appeals is known.

In a Resolution dated January 24, 1979, we required private respondents to submit their Comment
and issued a Restraining Order enjoining the trial Judge from further proceeding with Civil Case No.
5271-P and from enforcing his Order dated December 11, 1978, authorizing the Central Bank to
release the amount of P389,000.00. Private respondents' Comment, which included a prayer for the
dismissal of the Petition and the immediate quashing of the Restraining Order, was filed on January
29, 1979, and connected mainly that execution pending appeal is a necessity in order to serve the
10

interest of justice.

On February 14, 1979, we denied the Petition for lack of merit and, on February 21, 1979, lifted the
Restraining Order. The BANK moved for reconsideration and for the restoration of the Restraining
11

Order, which was opposed by private respondents. In support of its Motion for Reconsideration, the
BANK claimed that the amount of P375,000.00 would be secured only by the Calamba property, with
a loan value of only P157,889.76; that the bonds posted by private respondents totalling P55,000.00
only are grossly inadequate; that it would be made to violate the General Banking Act, R. A. No. 337,
which mandates that the loan in question should be used only for the purpose of acquiring urban or
rural land; and that release of the loan would render its appeal in CA-G.R. No. 64130-R moot and
academic.

In the interim, in view of the lifting of the Restraining Order, a check for P389,000.00 was released
by the Central Bank to the Deputy Sheriff on February 26, 1979. The check was encashed on the
same date and turned over to private respondents. The BANK claims that execution was
implemented with irregularity and haste, with no explanation as to why the amount of P369,000.00
was raised to P389,000.00.

In a Motion filed before the trial Court on March 15, 1979, the BANK prayed for an Order directing
private respondents to execute the corresponding promissory note in its favor. This was followed
12

by a Manifestation that it was without prejudice to whatever action the Supreme Court may take in
the premises. 13

In our Resolution of March 19,1979, we required the BANK to file a Reply to private respondents'
Opposition to the Motion for Reconsideration, and we reinstated the Restraining Order lifted on
February 21, 1979, unaware that execution had been implemented. The BANK filed its Reply on
14

March 26, 1979 and reiterated its prayer for the restoration of the amount of P389,000.00.

We set the Petition and all pending incidents for hearing, which was tantamount to a due course
Order, on April 16, 1979. This was reset to-May 14, 1979 for non-service of the notice of hearing of
15

April 16 on TOLENTINO. On the date of the first hearing on April 16, however, the same having been
attended by the BANK's counsel, the Court required the BANK to submit such pertinent documents
as would give the Court a complete picture of the controversy. In its Compliance, petitioner
submitted Application for Loan of Jaime Z. Bayuga (Annex "A"); Application for Loan of Roberto P.
Tolentino (Annex "A-1 "); Resolution No. 76-93 G M of the Board of petitioner Bank (Annex "B"); Real
Estate Mortgage (Annex "C"); Affidavit of Undertaking signed by Bayuga (Annex "D"); Letter of the
Bank dated April 4, 1979 addressed to Bayuga, Zaballero and TOLENTINO reminding them of the
monthly amortization due (Annex "E"). For its part, private respondents claimed that those
documents were misleading, that the Application for Loan, which he had signed (Annex "A-1 "), had
16

nothing to do with the transaction in question; that the excerpt of the Minutes of the meeting of
petitioner Bank (Annex "B") is self- serving, that the Real Estate Mortgage (Annex "C") was executed
only between Bayuga and the BANK; that the Affidavit of undertaking signed by Bayuga (Annex "D")
should not be given any value; that the subject mortgage is not yet due and the BANK's letter dated
April 14, 1979 (Annex "E") is "a worthless piece of paper coming from (the BANK'S) dirty heart."

The hearing of May 14, 1979 was further postponed to June 6,1979 after denying TOLENTINO's
prayer that said hearing of May 14, 1979 be cancelled for being "unnecessary, the facts of the case
being beyond dispute." We resolved to impose upon Atty. TOLENTINO a fine of P200.00, and
instead we required the personal appearance of both private respondents Bayuga and TOLENTINO
at the hearing set fortune 6,1979.

During the oral argument, the Bank was required to submit copies of the Record on Appeal filed in
CA-G.R. No. 64130- R of the Court of Appeals and a chronology of relevant incidents. Its
Compliance was filed on June 8, 1979. TOLENTINO was also required to submit, not later than the
close of office hours of June 7, 1979, copy of the alleged deed showing the purchase by him of
about eight hectares of real estate in Tagaytay City on account of which he allegedly paid
P350,000.00 out of the P389,000.00 received by him from the loan proceeds. TOLENTINO complied
by submitting on June 7, 1979, at 11:00 A.M., a Deed of Sale dated March 9, 1979 of a parcel of
land of 5 hectares in Tagaytay City for which he is shown to have made a down payment of
P280,000.00. At 3:00 P.M. of the same day, he submitted another Deed of Sale dated April 2, 1979
over a piece of property of 2 hectares in Tagaytay City for which he obligated himself to make a
down payment of P70,000.00. Both sales, while duly acknowledged before a Notary Public, do not
disclose any evidence of registration.

On July 2, 1979, we granted private respondents' prayer for 10 days within which to file a comment
to the BANK's Compliance dated June 7, 1979, but the said comment was not filed. On August 3,
1979, the case was considered submitted for resolution, with the Court noting a Motion for Early
Resolution filed by the BANK on, July 31, 1979. In this Petition before us, the BANK contends:

RESPONDENT COURT OF APPEALS ERRED IN DISREGARDING THE

ELEMENTARY PRINCIPLE OF LAW THAT A MORTGAGE CONTRACT IS MERELY
AN ACCESSORY CONTRACT, THUS DISPLAYING LACK OF INSIGHT IN THE
LAW AND THE REASONS OR PRINCIPLES UNDERLYING THE SAME;

II

RESPONDENT COURT OF APPEALS COMMITTED ERRORS OF LAW BY NOT

CONSIDERING THE LEGAL PROVISION ATTENDANT TO THE ORDERS
COMPLAINED OF BEFORE IT ISSUED BY THE RESPONDENT JUDGE;

III

RESPONDENT COURT OF APPEALS ENTIRELY DISREGARDED THE SPECIFIC

DIRECTION LAID DOWN BY R. A. NO. 337;

IV

RESPONDENT COURT OF APPEALS ERRED IN ARRIVING AT A DECISION

OBVIOUSLY CONTRARY TO PUBLIC INTEREST AND TO PUBLIC POLICY; and

RESPONDENT COURT OF APPEALS ERRED IN NOT CONSIDERING THE FACT

THAT A WRIT OF EXECUTION IS NOT PROPER IN THE ABOVE-ENTITLED CASE,
AGAIN DISPLAYING LACK OF INSIGHT IN THE LAW.

The critical issue posed before us is the propriety of the issuance of the Writ of execution pending
appeal by the trial Court, and its affirmance, except as to the aspect of damages. by the Court of
Appeals. The trial Court opined that to deny execution pending appeal would have Been to deny the
borrowers relief from the substantial injustice with which they have been burdened considering that
their land had been mortgaged without the BANK having paid any centavo for the loan. The Court of
Appeals, in turn ruled that the issuance of a Writ of execution pending appeal is a matter of
discretion on the part of the issuing Court and as long as it is not exercised in a capricious or
whimsical manner, and a special reason for its issuance is stated in the Order, appellate Courts will
not, disturb the same. The Court of Appeals was most persuaded by the fact that the loan is
intended to buy real estate property, the price of which varies as days go by." Upon the other hand,
the BANK maintains that the issuance of the Writ would patently work violence with justice and
equity because the property given as collateral as well as the bonds which have been posted are
inadequate, and petitioner would be made to violate the General Banking Act. Which provides that
17

the loan in question should be for the purpose only of acquiring urban or rural land; and that the
appeal in CA-G.R. NO. 64130 would be rendered moot and academic.

While, prima facie, execution pending appeal seemed justified because of the unilateral cancellation
of the release of the loan by the BANK without notice, and the absence of complete supporting
documents to the Petition, disclosures by the parties during the hearing and pleadings and
documents subsequently filed uphold a contrary view. Thus, during the hearing as well as in his
Comments filed on May 30, 1979, 'TOLENTINO contended that he is not a party to the mortgage
contract which was executed only between the BANK and Bayuga; that he became a party only
because he was "injured and damaged by the bad faith of the BANK;" that he is not willing to co-sign
a promissory note in the BANK's favor for the amount of P389,000.00, alleging that Bayuga had
already signed a promissory note in November, 1976 in the sum of P200,000.00; and that neither he
nor Bayuga had obligated himself to put up any additional collateral. Bayuga, for his part, during the
hearing, assumed a very passive role admitting that he was but an employee of TOLENTINO who
was the prime mover in the entire transaction. The lack of good faith and of a sense of fair play on
the part of private respondents was all too evident. 'They were treating the release of the amount of
P389,000.00 in their favor more as a money judgment, which it is not, rather than as a loan which it
is. They want to avail of the full benefits of the loan without assumption of the corresponding
obligations, or very minimally at, that. Since receipt of the aforestated amount, they have even
refused to make any monthly amortizations even upon demand by the BANK, contending that "no
amount of the said loan is due. It will only be paid ten (10) years after the execution of the mortgage
contract as interpreted by our Courts." 18

The unfairness and inequity of this posture to the banking business is too evident to require
elaboration. Funds of a bank are, in a sense, held in trust. There are the interests of depositors to be
protected. The collateral the BANK has in its favor, with a loan value of only P157,889.76, is far from
adequate to answer for the amount of P389,000.00 that is now in the hands of private respondents.
The manner of repayment by private respondents of that amount remains nebulous. Of course, the
BANK is not without fault for this sorry state of affairs.

The special reason cited by the trial Court and upheld by the Court of Appeals, i.e., the "substantial
injustice" wrought on private respondents whose land had been mortgaged without any centavo paid
for the loan, does not exist in law. As pointed out by the BANK, the Calamba property need not have
remained subject to the mortgage, the mortgage being but an accessory contract to the contract of
loan which is the principal obligation and which has been cancelled. The consideration of the
mortgage is the same consideration of the principal contract without which it cannot exist as an
independent contract. The "persuasive" factor considered by the Court of Appeals "that the loan is
19

intended to buy real estate property, the price of which varies as days go by" was disproved by the
fact that TOLENTINO utilized the amount initially released to purchase a certificate of time deposit
and to open bank accounts in his name rather than pay for the Algue property.

In the absence of good reasons, private respondents have not shown a clear entitlement to
20

execution pending appeal. Moreover, after having received the loan proceeds of P389,000.00 on
February 26, 1979 by means of the execution pending appeal improvidently granted, they refused to
make any monthly amortizations since March, 1979, notwithstanding the BANK's demands, on the
outrageous claim against all banking practice that they are not obligated to pay any amount on the
loan until the lapse of ten (10) years after the execution of the mortgage contract. Under the
circumstances, defendants are clearly in default on their loan and are liable to repay the whole
amount with the stipulated interest.

WHEREFORE, the judgment of the Court of Appeals in CA-G.R. No. SP-07573 is hereby set aside.
Private respondents are hereby jointly and severally ordered to restore and repay petitioner Banco
de Oro the sum of P389,000.00 with the stipulated interest of nineteen per cent (19%) per annum
from February 26, 1979 until the whole amount due shall have been fully paid. The property given in
mortgage by respondents under the mortgage contract as well as the bonds totalling P55,000.00
posted by respondents for the issuance of the questioned order of execution pending appeal shall
stand liable for satisfaction of the judgment herein rendered in favor of petitioner bank.

In effect, this conclusion renders the appeal in CA-G.R. No. 64130-R moot and academic and tile
judgment of the trial court is accordingly set aside. the interests of substantial justice and demands
of fair play so dictate.

Costs against private respondents-appellees jointly and severally.

This judgment shall be immediately executory upon its promulgation.

SO ORDERED

Republic of the Philippines

Supreme Court
Manila

SECOND DIVISION

HILARIO P. SORIANO, G.R. No. 162336

 Petitioner,

- versus - Present:

PEOPLE OF CARPIO, J., Chairperson,

THE PHILIPPINES,
BANGKO SENTRAL NG CORONA,
PILIPINAS (BSP), PHILIPPINE BRION,
DEPOSIT INSURANCE DEL CASTILLO, and
CORPORATION (PDIC), PEREZ, JJ.
PUBLIC
PROSECUTOR ANTONIO C.
BUAN, and STATE
PROSECUTOR ALBERTO R. Promulgated:
FONACIER,
Respondents. [1] February 1, 2010
x------------------------------------------------------
-------------x

DECISION

DEL CASTILLO, J.:

A bank officer violates the DOSRI[2] law when he acquires bank funds
for his personal benefit, even if such acquisition was facilitated by a
fraudulent loan application. Directors, officers, stockholders, and their
related interests cannot be allowed to interpose the fraudulent nature
of the loan as a defense to escape culpability for their circumvention
of Section 83 of Republic Act (RA) No. 337.[3]
Before us is a Petition for Review on Certiorari[4] under Rule 45 of
the Rules of Court, assailing the September 26, 2003 Decision[5] and
the February 5, 2004 Resolution[6] of the Court of Appeals (CA) in CA-
G.R. SP No. 67657. The challenged Decision disposed as follows:
WHEREFORE, premises considered, the instant
petition for certiorari is hereby DENIED.[7]

Factual Antecedents

Sometime in 2000, the Office of Special Investigation (OSI) of

the Bangko Sentral ng Pilipinas (BSP), through its officers,
[8]
transmitted a letter[9] dated March 27, 2000 to Jovencito Zuo, Chief
State Prosecutor of the Department of Justice (DOJ). The letter
attached as annexes five affidavits,[10] which would allegedly serve as
bases for filing criminal charges for Estafa thru Falsification of
Commercial Documents, in relation to Presidential Decree (PD) No.
1689,[11] and for Violation of Section 83 of RA 337, as amended by PD
1795,[12] against, inter alia, petitioner herein Hilario P. Soriano. These
five affidavits, along with other documents, stated that spouses
Enrico and Amalia Carlos appeared to have an outstanding loan of P8
million with the Rural Bank of San Miguel (Bulacan), Inc. (RBSM), but
had never applied for nor received such loan; that it was petitioner,
who was then president of RBSM, who had ordered, facilitated, and
received the proceeds of the loan; and that the P8 million loan had
never been authorized by RBSM's Board of Directors and no report
thereof had ever been submitted to the Department of Rural Banks,
Supervision and Examination Sector of the BSP. The letter of the OSI,
which was not subscribed under oath, ended with a request that a
preliminary investigation be conducted and the corresponding
criminal charges be filed against petitioner at his last known address.

Acting on the letter-request and its annexes, State Prosecutor Albert

R. Fonacier proceeded with the preliminary investigation. He issued a
subpoena with the witnesses affidavits and supporting documents
attached, and required petitioner to file his counter-affidavit. In due
course, the investigating officer issued a Resolution finding probable
cause and correspondingly filed two separate informations against
petitioner before the Regional Trial Court (RTC) of Malolos, Bulacan.[13]

The first Information,[14] dated November 14, 2000 and docketed as

Criminal Case No. 237-M-2001, was for estafa through falsification of
commercial documents, under Article 315, paragraph 1(b), of the
Revised Penal Code (RPC), in relation to Article 172 of the RPC and PD
1689. It basically alleged that petitioner and his co-accused, in abuse
of the confidence reposed in them as RBSM officers, caused the
falsification of a number of loan documents, making it appear that
one Enrico Carlos filled up the same, and thereby succeeded in
securing a loan and converting the loan proceeds for their personal
gain and benefit.[15] The information reads:

That in or about the month of April, 1997, and

thereafter, in San Miguel, Bulacan, and within the jurisdiction
of this Honorable Court, the said accused HILARIO P.
SORIANO and ROSALINDA ILAGAN, as principals by direct
participation, with unfaithfulness or abuse of confidence and
taking advantage of their position as President of the Rural
Bank of San Miguel (Bulacan), Inc. and Branch Manager of
the Rural Bank of San Miguel San Miguel Branch [sic], a duly
organized banking institution under Philippine Laws,
conspiring, confederating and mutually helping one another,
did then and there, willfully and feloniously falsify loan
 documents consisting of undated loan
application/information sheet, credit proposal dated April 14,
1997, credit proposal dated April 22, 1997, credit
investigation report dated April 15, 1997, promissory note
dated April 23, 1997, disclosure statement on loan/credit
transaction dated April 23, 1997, and other related
documents, by making it appear that one Enrico Carlos filled
up the application/information sheet and filed the
aforementioned loan documents when in truth and in fact
Enrico Carlos did not participate in the execution of said loan
documents and that by virtue of said falsification and with
deceit and intent to cause damage, the accused succeeded
in securing a loan in the amount of eight million pesos
(PhP8,000,000.00) from the Rural Bank of San Miguel San
Ildefonso branch in the name of Enrico Carlos which amount
of PhP8 million representing the loan proceeds the accused
thereafter converted the same amount to their own personal
gain and benefit, to the damage and prejudice of the Rural
Bank of San Miguel San Ildefonso branch, its creditors, the
Bangko Sentral ng Pilipinas, and the Philippine Deposit
Insurance Corporation.

CONTRARY TO LAW.[16]

The other Information[17] dated November 10, 2000 and docketed as

Criminal Case No. 238-M-2001, was for violation of Section 83 of RA
337, as amended by PD 1795. The said provision refers to the
prohibition against the so-called DOSRI loans. The information alleged
that, in his capacity as President of RBSM, petitioner indirectly
secured an P8 million loan with RBSM, for his personal use and
benefit, without the written consent and approval of the bank's Board
of Directors, without entering the said transaction in the bank's
records, and without transmitting a copy of the transaction to the
supervising department of the bank. His ruse was facilitated by
placing the loan in the name of an unsuspecting RBSM depositor, one
Enrico Carlos.[18] The information reads:
 That in or about the month of April, 1997, and thereafter, and within the
jurisdiction of this Honorable Court, the said accused, in his capacity as President of the
Rural Bank of San Miguel (Bulacan), Inc., did then and there, willfully and feloniously
indirectly borrow or secure a loan with the Rural Bank of San Miguel San Ildefonso
branch, a domestic rural banking institution created, organized and existing under
Philippine laws, amounting to eight million pesos (PhP8,000,000.00), knowing fully well
that the same has been done by him without the written consent and approval of the
majority of the board of directors of the said bank, and which consent and approval the
said accused deliberately failed to obtain and enter the same upon the records of said
banking institution and to transmit a copy thereof to the supervising department of the
said bank, as required by the General Banking Act, by using the name of one depositor
Enrico Carlos of San Miguel, Bulacan, the latter having no knowledge of the said loan,
and one in possession of the said amount of eight million pesos (PhP8,000,000.00),
accused converted the same to his own personal use and benefit, in flagrant violation of
the said law.

CONTRARY TO LAW.[19]

Both cases were raffled to Branch 79 of the RTC of Malolos, Bulacan.[20]

On June 8, 2001, petitioner moved to quash[21] these informations on two grounds: that
the court had no jurisdiction over the offense charged, and that the facts charged do not
constitute an offense.

On the first ground, petitioner argued that the letter transmitted by the BSP to the DOJ
constituted the complaint and hence was defective for failure to comply with the
mandatory requirements of Section 3(a), Rule 112 of the Rules of Court, such as the
statement of address of petitioner and oath and subscription. [22] Moreover, petitioner
argued that the officers of OSI, who were the signatories to the letter-complaint, were not
authorized by the BSP Governor, much less by the Monetary Board, to file the
complaint. According to petitioner, this alleged fatal oversight violated Section 18, pars.
(c) and (d) of the New Central Bank Act (RA 7653).

On the second ground, petitioner contended that the commission of estafa under
paragraph 1(b) of Article 315 of the RPC is inherently incompatible with the violation of
DOSRI law (as set out in Section 83[23] of RA 337, as amended by PD 1795),[24] hence a
person cannot be charged for both offenses. He argued that a violation of DOSRI law
requires the offender to obtain a loan from his bank, without complying with
procedural, reportorial, or ceiling requirements. On the other hand, estafa under par. 1(b),
Article 315 of the RPC requires the offender to misappropriate or convert something that
he holds in trust, or on commission, or for administration, or under any other
obligation involving the duty to return the same.[25]

Essentially, the petitioner theorized that the characterization of possession is

different in the two offenses. If petitioner acquired the loan as DOSRI, he owned the
loaned money and therefore, cannot misappropriate or convert it as contemplated in the
offense of estafa. Conversely, if petitioner committed estafa, then he merely held the
money in trust for someone else and therefore, did not acquire a loan in violation of
DOSRI rules.

Ruling of the Regional Trial Court

In an Order[26] dated August 8, 2001, the trial court denied petitioner's Motion to Quash
for lack of merit. The lower court agreed with the prosecution that the assailed OSI letter
was not the complaint-affidavit itself; thus, it need not comply with the requirements
under the Rules of Court.The trial court held that the affidavits, which were attached to
the OSI letter, comprised the complaint-affidavit in the case. Since these affidavits were
duly subscribed and sworn to before a notary public, there was adequate compliance with
the Rules. The trial court further held that the two offenses were separate and distinct
violations, hence the prosecution of one did not pose a bar to the other.[27]

Petitioners Motion for Reconsideration was likewise denied in an Order

dated September 5, 2001.[28]

Aggrieved, petitioner filed a Petition for Certiorari[29] with the CA, reiterating his
arguments before the trial court.

Ruling of the Court of Appeals

The CA denied the petition on both issues presented by petitioner.

On the first issue, the CA determined that the BSP letter, which
petitioner characterized to be a fatally infirm complaint, was not
actually a complaint, but a transmittal or cover letter only. This
transmittal letter merely contained a summary of the affidavits which
were attached to it. It did not contain any averment of personal
knowledge of the events and transactions that constitute the
elements of the offenses charged. Being a mere transmittal letter, it
need not comply with the requirements of Section 3(a) of Rule 112 of
the Rules of Court.[30]

The CA further determined that the five affidavits attached to the

transmittal letter should be considered as the complaint-affidavits
that charged petitioner with violation of Section 83 of RA 337 and for
Estafa thru Falsification of Commercial Documents. These complaint-
affidavits complied with the mandatory requirements set out in the
Rules of Court they were subscribed and sworn to before a notary
public and subsequently certified by State Prosecutor Fonacier, who
personally examined the affiants and was convinced that the affiants
fully understood their sworn statements.[31]

Anent the second ground, the CA found no merit in petitioner's

argument that the violation of the DOSRI law and the commission of
estafa thru falsification of commercial documents are inherently
inconsistent with each other. It explained that the test in considering
a motion to quash on the ground that the facts charged do not
constitute an offense, is whether the facts alleged, when
hypothetically admitted, constitute the elements of the offense
charged. The appellate court held that this test was sufficiently met
because the allegations in the assailed informations, when
hypothetically admitted, clearly constitute the elements of Estafa thru
Falsification of Commercial Documents and Violation of DOSRI law.[32]

Petitioners Motion for Reconsideration[33] was likewise denied for lack

of merit.

Hence, this petition.

Issues
Restated, petitioner raises the following issues[34] for our
consideration:

I
Whether the complaint complied with the mandatory
requirements provided under Section 3(a), Rule 112 of the
Rules of Court and Section 18, paragraphs (c) and (d) of RA
7653.

II
Whether a loan transaction within the ambit of the DOSRI law
(violation of Section 83 of RA 337, as amended) could also be
the subject of Estafa under Article 315 (1) (b) of the Revised
Penal Code.

III
Is a petition for certiorari under Rule 65 the proper remedy
against an Order denying a Motion to Quash?

IV
Whether petitioner is entitled to a writ of injunction.

Our Ruling
The petition lacks merit.

First Issue:
 Whether the complaint complied with the
mandatory requirements provided under Section
3(a), Rule 112 of the Rules of Court and Section 18,
paragraphs (c) and (d) of
Republic Act No. 7653

Petitioner moved to withdraw

the first issue from the instant
petition

On March 5, 2007, the Court noted[35] petitioner's Manifestation and

Motion for Partial Withdrawal of the Petition[36] dated February 7,
2007. In the said motion, petitioner informed the Court of the
promulgation of a Decision entitled Soriano v. Hon. Casanova,
[37]
which also involved petitioner and similar BSP letters to the
DOJ. According to petitioner, the said Decision allegedly ruled
squarely on the nature of the BSP letters and the validity of the sworn
affidavits attached thereto. For this reason, petitioner moved for the
partial withdrawal of the instant petition insofar as it involved the
issue of whether or not a court can legally acquire jurisdiction over a
complaint which failed to comply with the mandatory requirements
provided under Section 3(a), Rule 112 of the Rules of Court and
Section 18, paragraphs (c) and (d) of RA 7653.[38]

Given that the case had already been submitted for resolution of the
Court when petitioner filed his latest motion, and that all respondents
had presented their positions and arguments on the first issue, the
Court deems it proper to rule on the same.
In Soriano v. Hon. Casanova,
the Court held that
the affidavits attached to the
BSP transmittal letter complied
with the mandatory
requirements under the Rules
of Court.

To be sure, the BSP letters involved in Soriano v. Hon.

Casanova[39] are notthe same as the BSP letter involved in the instant
case. However, the BSP letters in Soriano v. Hon. Casanova and the
BSP letter subject of this case are similar in the sense that they are all
signed by the OSI officers of the BSP, they were not sworn to by the
said officers, they all contained summaries of their attached affidavits,
and they all requested the conduct of a preliminary investigation and
the filing of corresponding criminal charges against petitioner
Soriano. Thus, the principle of stare decisis dictates that the ruling
in Soriano v. Hon. Casanova be applied in the instant case once a
question of law has been examined and decided, it should be deemed
settled and closed to further argument.[40]

We held in Soriano v. Hon. Casanova, after a close scrutiny of

the letters transmitted by the BSP to the DOJ, that these were not
intended to be the complaint, as envisioned under the Rules. They did
not contain averments of personal knowledge of the events and
transactions constitutive of any offense. The letters merely
transmitted for preliminary investigation the affidavits of people who
had personal knowledge of the acts of petitioner.We ruled that these
affidavits, not the letters transmitting them, initiated the preliminary
investigation. Since these affidavits were subscribed under oath by
the witnesses who executed them before a notary public, then there
was substantial compliance with Section 3(a), Rule 112 of the Rules of
Court.
Anent the contention that there was no authority from the BSP
Governor or the Monetary Board to file a criminal case against
Soriano, we held that the requirements of Section 18, paragraphs (c)
and (d) of RA 7653 did not apply because the BSP did not institute the
complaint but merely transmitted the affidavits of the complainants
to the DOJ.

We further held that since the offenses for which Soriano was charged
were public crimes, authority holds that it can be initiated by any
competent person with personal knowledge of the acts committed by
the offender.Thus, the witnesses who executed the affidavits clearly
fell within the purview of any competent person who may institute the
complaint for a public crime.
The ruling in Soriano v. Hon. Casanova has been adopted and
elaborated upon in the recent case of Santos-Concio v. Department of
Justice.[41] Instead of a transmittal letter from the BSP, the Court
in Santos-Concio was faced with an NBI-NCR Report, likewise with
affidavits of witnesses as attachments. Ruling on the validity of the
witnesses sworn affidavits as bases for a preliminary investigation, we
held:

The Court is not unaware of the practice of

incorporating all allegations in one document denominated
as complaint-affidavit. It does not pronounce strict adherence
to only one approach, however, for there are cases where the
extent of ones personal knowledge may not cover the entire
gamut of details material to the alleged offense. The private
offended party or relative of the deceased may not even
have witnessed the fatality, in which case the peace officer or
law enforcer has to rely chiefly on affidavits of witnesses.
The Rules do not in fact preclude the attachment of a referral
or transmittal letter similar to that of the NBI-NCR. Thus,
in Soriano v. Casanova, the Court held:
 A close scrutiny of the letters transmitted by the BSP
and PDIC to the DOJ shows that these were not intended to
be the complaint envisioned under the Rules. It may be
clearly inferred from the tenor of the letters that the officers
merely intended to transmit the affidavits of the bank
employees to the DOJ. Nowhere in the transmittal letters is
there any averment on the part of the BSP and PDIC officers of
personal knowledge of the events and transactions
constitutive of the criminal violations alleged to have been
made by the accused. In fact, the letters clearly stated that
what the OSI of the BSP and the LIS of the PDIC did was to
respectfully transmit to the DOJ for preliminary investigation
the affidavits and personal knowledge of the acts of the
petitioner. These affidavits were subscribed under oath by the
witnesses who executed them before a notary public. Since
the affidavits, not the letters transmitting them, were
intended to initiate the preliminary investigation, we hold
that Section 3(a), Rule 112 of the Rules of Court was
substantially complied with.

Citing the ruling of this Court in Ebarle v. Sucaldito,

the Court of Appeals correctly held that a complaint for
purposes of preliminary investigation by the fiscal need not be
filed by the offended party. The rule has been that, unless
the offense subject thereof is one that cannot be
prosecuted de oficio, the same may be filed, for
preliminary investigation purposes, by any competent
person. The crime of estafa is a public crime which can be
initiated by any competent person. The witnesses who
executed the affidavits based on their personal knowledge of
the acts committed by the petitioner fall within the purview of
any competent person who may institute the complaint for a
public crime. x x x (Emphasis and italics supplied)

A preliminary investigation can thus validly proceed

on the basis of an affidavit of any competent person, without
the referral document, like the NBI-NCR Report, having been
sworn to by the law enforcer as the nominal complainant. To
require otherwise is a needless exercise. The cited case
of Oporto, Jr. v. Judge Monserate does not appear to dent this
proposition. After all, what is required is to reduce the
 evidence into affidavits, for while reports and even raw
information may justify the initiation of an investigation, the
preliminary investigation stage can be held only after
sufficient evidence has been gathered and evaluated which
may warrant the eventual prosecution of the case in court.[42]

Following the foregoing rulings in Soriano v. Hon.

Casanova and Santos-Concio v. Department of Justice, we hold that
the BSP letter, taken together with the affidavits attached thereto,
comply with the requirements provided under Section 3(a), Rule 112
of the Rules of Court and Section 18, paragraphs (c) and (d) of RA
7653.
Second Issue:

Whether a loan transaction within the ambit of the

DOSRI law (violation of Section 83 of RA 337, as
amended) could be the subject of Estafa under
Article 315 (1) (b) of the
Revised Penal Code

The second issue was raised by petitioner in the context of his

Motion to Quash Information on the ground that the facts charged do
not constitute an offense.[43] It is settled that in considering a motion
to quash on such ground, the test is whether the facts alleged, if
hypothetically admitted, would establish the essential elements of the
offense charged as defined by law. The trial court may not consider a
situation contrary to that set forth in the criminal complaint or
information. Facts that constitute the defense of the petitioner[s]
against the charge under the information must be proved by [him]
during trial. Such facts or circumstances do not constitute proper
grounds for a motion to quash the information on the ground that the
material averments do not constitute the offense. [44]
We have examined the two informations against petitioner and we
find that they contain allegations which, if hypothetically admitted,
would establish the essential elements of the crime of DOSRI violation
and estafa thru falsification of commercial documents.

In Criminal Case No. 238-M-2001 for violation of DOSRI rules, the

information alleged that petitioner Soriano was the president of
RBSM; that he was able to indirectly obtain a loan from RBSM by
putting the loan in the name of depositor Enrico Carlos; and that he
did this without complying with the requisite board approval,
reportorial, and ceiling requirements.

In Criminal Case No. 237-M-2001 for estafa thru falsification of

commercial documents, the information alleged that petitioner, by
taking advantage of his position as president of RBSM, falsified
various loan documents to make it appear that an Enrico Carlos
secured a loan of P8 million from RBSM; that petitioner succeeded in
obtaining the loan proceeds; that he later converted the loan
proceeds to his own personal gain and benefit; and that his action
caused damage and prejudice to RBSM, its creditors, the BSP, and the
PDIC.

Significantly, this is not the first occasion that we adjudge the

sufficiency of similarly worded informations. In Soriano v. People,
[45]
involving the same petitioner in this case (but different
transactions), we also reviewed the sufficiency of informations for
DOSRI violation and estafa thru falsification of commercial
documents, which were almost identical, mutatis mutandis, with the
subject informations herein. We held in Soriano v. People that there is
no basis for the quashal of the informations as they contain material
allegations charging Soriano with violation of DOSRI rules and estafa
thru falsification of commercial documents.
 Petitioner raises the theory that he could not possibly be held
liable for estafa in concurrence with the charge for DOSRI
violation. According to him, the DOSRI charge presupposes that he
acquired a loan, which would make the loan proceeds his own money
and which he could neither possibly misappropriate nor convert to the
prejudice of another, as required by the statutory definition of estafa.
[46]
On the other hand, if petitioner did not acquire any loan, there can
be no DOSRI violation to speak of. Thus, petitioner posits that the two
offenses cannot co-exist. This theory does not persuade us.

Petitioners theory is based on the false premises that the loan

was extended to him by the bank in his own name, and that he
became the owner of the loan proceeds. Both premises are wrong.

The bank money (amounting to P8 million) which came to the

possession of petitioner was money held in trust or administration by
him for the bank, in his

fiduciary capacity as the President of said bank.[47] It is not accurate to

say that petitioner became the owner of the P8 million because it was
the proceeds of a loan. That would have been correct if the
bank knowinglyextended the loan to petitioner himself. But that is not
the case here.According to the information for estafa, the loan was
supposed to be for another person, a certain Enrico Carlos; petitioner,
through falsification, made it appear that said Enrico Carlos applied
for the loan when in fact he (Enrico Carlos) did not. Through such
fraudulent device, petitioner obtained the loan proceeds and
converted the same. Under these circumstances, it cannot be said
that petitioner became the legal owner of the P8 million.Thus,
petitioner remained the banks fiduciary with respect to that money,
which makes it capable of misappropriation or conversion in his
hands.

The next question is whether there can also be, at the same
time, a charge for DOSRI violation in such a situation wherein the
accused bank officer did not secure a loan in his own name, but was
alleged to have used the name of another person in order to indirectly
secure a loan from the bank. We answer this in the
affirmative. Section 83 of RA 337 reads:

Section 83. No director or officer of any banking

institution shall, either directly or indirectly, for himself or as
the representative or agent of others, borrow any of the
deposits of funds of such bank, nor shall he become a
guarantor, indorser, or surety for loans from such bank to
others, or in any manner be an obligor for moneys borrowed
from the bank or loaned by it, except with the written
approval of the majority of the directors of the bank,
excluding the director concerned. Any such approval shall be
entered upon the records of the corporation and a copy of
such entry shall be transmitted forthwith to the
Superintendent of Banks. The office of any director or officer
of a bank who violates the provisions of this section shall
immediately become vacant and the director or officer shall
be punished by imprisonment of not less than one year nor
more than ten years and by a fine of not less than one
thousand nor more than ten thousand pesos. x x x

The prohibition in Section 83 is broad enough to cover various modes of borrowing.[48]

It covers loans by a bank director or officer (like herein petitioner) which are made either:
(1) directly, (2) indirectly, (3) for himself, (4) or as the representative or agent of others. It
applies even if the director or officer is a mere guarantor, indorser or surety for someone
else's loan or is in any manner an obligor for money borrowed from the bank or loaned
by it. The covered transactions are prohibited unless the approval, reportorial and ceiling
requirements under Section 83 are complied with. The prohibition is intended to protect
the public, especially the depositors,[49] from the overborrowing of bank funds by bank
officers, directors, stockholders and related interests, as such overborrowing may lead to
bank failures.[50] It has been said that banking institutions are not created for the benefit of
the directors [or officers]. While directors have great powers as directors, they have no
special privileges as individuals. They cannot use the assets of the bank for their own
benefit except as permitted by law. Stringent restrictions are placed about them so that
when acting both for the bank and for one of themselves at the same time, they must keep
within certain prescribed lines regarded by the legislature as essential to safety in the
banking business.[51]

A direct borrowing is obviously one that is made in the name of

the DOSRI himself or where the DOSRI is a named party, while
an indirectborrowing includes one that is made by a third party, but
the DOSRI has a stake in the transaction. [52] The latter type indirect
borrowing applies here. The information in Criminal Case 238-M-2001
alleges that petitioner in his capacity as President of Rural Bank of
San Miguel San Ildefonso branch x x x indirectly borrow[ed] or
secure[d] a loan with [RBSM] x x x knowing fully well that the same
has been done by him without the written consent and approval of
the majority of the board of directors x x x, and which consent and
approval the said accused deliberately failed to obtain and enter the
same upon the records of said banking institution and to transmit a
copy thereof to the supervising department of the said bank x x x by
using the name of one depositor Enrico Carlos x x x, the latter having
no knowledge of the said loan, and once in possession of the said
amount of eight million pesos (P8 million), [petitioner] converted the
same to his own personal use and benefit.[53]

The foregoing information describes the manner of securing the

loan as indirect; names petitioner as the benefactor of the indirect
loan; and states that the requirements of the law were not complied
with. It contains all the required elements[54] for a violation of Section
83, even if petitioner did not secure the loan in his own name.
 The broad interpretation of the prohibition in Section 83 is
justified by the fact that it even expressly covers loans to third parties
where the third parties are aware of the transaction (such as
principals represented by the DOSRI), and where the DOSRIs interest
does not appear to be beneficial but even burdensome (such as in
cases when the DOSRI acts as a mere guarantor or surety). If the law
finds it necessary to protect the bank and the banking system in such
situations, it will surely be illogical for it to exclude a case like this
where the DOSRI acted for his own benefit, using the name of an
unsuspecting person. A contrary interpretation will effectively allow a
DOSRI to use dummies to circumvent the requirements of the law.
In sum, the informations filed against petitioner do not negate
each other.

Third Issue:

Is a Rule 65 petition for certiorari the proper remedy against

an Order denying a Motion to Quash?

This issue may be speedily resolved by adopting our ruling in Soriano v. People,
[55]
where we held:

In fine, the Court has consistently held that a special civil action
for certiorari is not the proper remedy to assail the denial of a motion to quash
an information. The proper procedure in such a case is for the accused to enter
a plea, go to trial without prejudice on his part to present the special defenses
he had invoked in his motion to quash and if after trial on the merits, an
adverse decision is rendered, to appeal therefrom in the manner authorized by
law. Thus, petitioners should not have forthwith filed a special civil action
for certiorari with the CA and instead, they should have gone to trial and
 reiterated the special defenses contained in their motion to quash. There are no
special or exceptional circumstances in the present case that would justify
immediate resort to a filing of a petition for certiorari. Clearly, the CA did not
commit any reversible error, much less, grave abuse of discretion in dismissing
the petition.[56]

Fourth Issue:

Whether petitioner is entitled to a writ of injunction

The requisites to justify an injunctive relief are: (1) the right of the
complainant is clear and unmistakable; (2) the invasion of the right
sought to be protected is material and substantial; and (3) there is an
urgent and paramount necessity for the writ to prevent serious
damage. A clear legal right means one clearly founded in or granted
by law or is enforceable as a matter of law. Absent any clear and
unquestioned legal right, the issuance of an injunctive writ would
constitute grave abuse of discretion.[57] Caution and prudence must,
at all times, attend the issuance of an injunctive writ because it
effectively disposes of the main case without trial and/or due process.
[58]
In Olalia v. Hizon,[59] the Court held as follows:

It has been consistently held that there is no power the

exercise of which is more delicate, which requires greater
caution, deliberation and sound discretion, or more
dangerous in a doubtful case, than the issuance of an
injunction. It is the strong arm of equity that should never be
extended unless to cases of great injury, where courts of law
cannot afford an adequate or commensurate remedy in
damages.
Every court should remember that an injunction is a
limitation upon the freedom of action of the [complainant]
and should not be granted lightly or precipitately. It should be
 granted only when the court is fully satisfied that the law
permits it and the emergency demands it.

Given this Court's findings in the earlier issues of the instant case, we find no compelling
reason to grant the injunctive relief sought by petitioner.

WHEREFORE, the petition is DENIED. The assailed September 26, 2003Decision as

well as the February 5, 2004 Resolution of the Court of Appeals in CA-G.R. SP No.
67657 are AFFIRMED. Costs against petitioner.

SO ORDERED.