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G.R. No. 176381: December 15, 2010

PCI LEASING AND FINANCE, INC., Petitioner v. TROJAN METAL INDUSTRIES
INCORPORATED, WALFRIDO DIZON, ELIZABETH DIZON, and JOHN DOE,
Respondents.
CARPIO, J.:
FACTS;
Sometime in 1997, Trojan Metal Industries, Inc. (TMI) came to PCI Leasing and Finance, Inc.
(PCILF) to seek a loan. Instead of extending a loan, PCILF offered to buy various equipment
TMI owned. Hard-pressed for money, TMI agreed. PCILF and TMI immediately executed deeds
of sale evidencing TMIs sale to PCILF of the various equipment.
PCILF and TMI then entered into a lease agreement , whereby the latter leased from the former
the various equipment it previously owned. Pursuant to the lease agreement, TMI issued
postdated checks representing 24 monthly installments.
The lease agreement required TMI to give PCILF a guaranty deposit which would serve as
security for the timely performance of TMIs obligations under the lease agreement, to be
automatically forfeited should TMI return the leased equipment before the expiration of the lease
agreement. Further, spouses Dizon, as TMIs President and Vice-President, executed in favor of
PCILF a Continuing Guaranty of Lease Obligations. Under the continuing guaranty, the Dizon
spouses agreed to immediately pay whatever obligations would be due PCILF in case TMI failed
to meet its obligations under the lease agreement.
To obtain additional loan from another financing company, TMI used the leased equipment as
temporary collateral. PCILF considered the second mortgage a violation of the lease agreement.
PCILF sent TMI a demand letter for the payment of the latters outstanding obligation. PCILFs
demand remained unheeded.

RTC ruled that the lease agreement must be presumed valid as the law between the parties even
if some of its provisions constituted unjust enrichment on the part of PCILF. On appeal, the CA
reversed the RTCs decision.

ISSUES:
I. Whether the sale with lease agreement the parties entered into was a financial lease or a loan
secured by chattel mortgage.
II. Whether PCILF should pay TMI, by way of refund
HELD: Petition DENIED.
First issue:
In the present case, since the transaction between PCILF and TMI involved equipment already
owned by TMI, it cannot be considered as one of financial leasing, as defined by law, but simply
a loan secured by the various equipment owned by TMI.

Hence, had the true transaction between the parties been expressed in a proper instrument, it
would have been a simple loan secured by a chattel mortgage, instead of a simulated financial
leasing. Thus, upon TMIs default, PCILF was entitled to seize the mortgaged equipment, not as
owner but as creditor-mortgagee for the purpose of foreclosing the chattel mortgage. PCILFs sale
to a third party of the mortgaged equipment and collection of the proceeds of the sale can be
deemed in the exercise of its right to foreclose the chattel mortgage as creditor-mortgagee.

Second issue

Section 14 of the Chattel Mortgage Law expressly entitles the debtor-mortgagor to the balance of
the proceeds, upon satisfaction of the principal loan and costs. Prevailing jurisprudence also
holds that the Chattel Mortgage Law bars the creditor-mortgagee from retaining the excess of the
sale proceeds.

TMIs right to the refund accrued from the time PCILF received the proceeds of the sale of the
mortgaged equipment. However, since TMI never made a counterclaim or demand for refund
due on the resulting overpayment after offsetting the proceeds of the sale against the remaining
balance on the principal loan plus applicable interest, no interest applies on the amount of refund
due. Nonetheless, in accord with prevailing jurisprudence, the excess amount PCILF must refund
to TMI is subject to interest at 12% per annum from finality of this Decision until fully paid.
11. BPI FAMILY BANK VS. FRANCO
FACTS:
On August 15, 1989, Tevesteco opened a savings and current account with BPI-FB. Soon
thereafter, FMIC also opened a time deposit account with the same branch of BPI-FB

On August 31, 1989, Franco opened three accounts, namely, a current, savings, and time deposit,
with BPI-FB. The total amount of P2,000,000.00 used to open these accounts is traceable to a
check issued by Tevesteco allegedly in consideration of Franco’s introduction of Eladio Teves, to
Jaime Sebastian, who was then BPI-FB SFDM’s Branch Manager. In turn, the funding for the
P2,000,000.00 check was part of the P80,000,000.00 debited by BPI-FB from FMIC’s time deposit
account and credited to Tevesteco’s current account pursuant to an Authority to Debit purportedly
signed by FMIC’s officers.

It appears, however, that the signatures of FMIC’s officers on the Authority to Debit were
forged. BPI-FB, debited Franco’s savings and current accounts for the amounts remaining therein.
In the meantime, two checks drawn by Franco against his BPI-FB current account were dishonored
and stamped with a notation “account under garnishment.” Apparently, Franco’s current account
was garnished by virtue of an Order of

Notably, the dishonored checks were issued by Franco and presented for payment at BPI-FB prior
to Franco’s receipt of notice that his accounts were under garnishment. It was only on May 15,
1990, that Franco was impleaded in the Makati case. Immediately, upon receipt of such copy,
Franco filed a Motion to Discharge Attachment. On May 17, 1990, Franco pre-terminated his time
deposit account.

BPI-FB deducted the amount of P63,189.00 from the remaining balance of the time deposit
account representing advance interest paid to him. Consequently, in light of BPI-FB’s refusal to
heed Franco’s demands to unfreeze his accounts and release his deposits therein, Franco filed on
June 4, 1990 with the Manila RTC the subject suit.

ISSUE: WON Respondent had better right to the deposits in the subject accounts which are part
of the proceeds of a forged Authority to Debit

HELD: NO
There is no doubt that BPI-FB owns the deposited monies in the accounts of Franco, but not as a
legal consequence of its unauthorized transfer of FMIC’s deposits to Tevesteco’s account. BPI-FB
conveniently forgets that the deposit of money in banks is governed by the Civil Code provisions
on simple loan or mutuum. As there is a debtor-creditor relationship between a bank and its
depositor, BPI-FB ultimately acquired ownership of Franco’s deposits, but such ownership is
coupled with a corresponding obligation to pay him an equal amount on demand. Although BPI-
FB owns the deposits in Franco’s accounts, it cannot prevent him from demanding payment of
BPI-FB’s obligation by drawing checks against his current account, or asking for the release of the
funds in his savings account. Thus, when Franco issued checks drawn against his current account,
he had every right as creditor to expect that those checks would be honored by BPI-FB as debtor.
More importantly, BPI-FB does not have a unilateral right to freeze the accounts of Franco based
on its mere suspicion that the funds therein were proceeds of the multi-million peso scam Franco
was allegedly involved in. To grant BPI-FB, or any bank for that matter, the right to take whatever
action it pleases on deposits which it supposes are derived from shady transactions, would open
the floodgates of public distrust in the banking industry.

Ineluctably, BPI-FB, as the trustee in the fiduciary relationship, is duty bound to know the
signatures of its customers. Having failed to detect the forgery in the Authority to Debit and in the
process inadvertently facilitate the FMIC-Tevesteco transfer, BPI-FB cannot now shift liability
thereon to Franco and the other payees of checks issued by Tevesteco, or prevent withdrawals from
their respective accounts without the appropriate court writ or a favorable final judgment.

53. BPI Family Savings Bank, Inc. v. Golden Power Diesel Sales Center, Inc.
Facts:
1.the loan and the mortgage: CEDEC (predecessor-in-interest of Golden Power Diesel Sales
Center) executed a real estate mortgage in favour of BPI Family Savings to secure a loan of P6.5M.
subsequently, CEDEC obtained other several loansa.the mortgage was duly annotated.
2.Default and Extrajudicial Foreclosure: CEDEC failed to pay its obligations, hence, BPI Family
Savings filed with the ex-officio sheriff of the RTC a petition for extrajudicial foreclosure of real
estate mortgage over the properties underAct No. 3135. a.After the notice reqs had been complied
with, thesale was done in the public auction and was soldto BPI family as the highest bidder.
3.the 1 year redemption lapsed from the date of sale without the CEDEC exercising redemption.
4.Issue of Possession: Despite repeated demands by the Bank to vacate the land, CEDEC refused
to surrender the possession to BPI Family a.Because of this, the trial court granted and issued the
writ of possession in favour of BPI.
5.the Assignee: Golden power then filed a motion To Hold implementation of the Writ of
Possession alleging that they are in possession of the properties acquired g form CEDEC pursuant
to a Deed of Sale with Assumption of Mortgage. a.They argue that they are claiming possession
adverse to CEDEC, hence, seeking exception to therule that the purchaser has the right to possess
under Sec. 33 of Rule 39 of the Rules of Court whichstates that:

The possession of the property shall be given to thepurchaser or last redemptioner by the
same officerunless a third party is actually holding the propertyadversely to the judgment obligor
6.because of this, the trial court suspended the implementationof the writ of possession to take into
consideration the claim of Golden Power.
7.The APPEAL: the Court of Appeals upheld the said decisionof the RTC and ruled that the
suspension was proper because Golden power was in actual possession of the properties and are
claiming rights adverse to CEDEC and The ministerial implementation of the writ of possession
hasan exception—when in it in possession of third persons claiming adverse title.
8.Hence, the present action by the petitioner BPI Family Savings bank arguing that the exception
under Sec. 33 of Rule 39 will not apply because Power Diesel Sale was not possessing the property
adversely to CEDEC and is merely stepping into the shoes of CEDEC because it acquired its rights
by buying the property of CEDEC.

Issue: Does the BPI Family Savings Bank, being the purchaser in thepublic sale, have the right to
possess the property or to the remedy of writ of execution?
Ruling: BPI has the right to possess because Golden Power is not a third person claiming adversely
to the debtor.
1.Rights of the purchaser:
a.Under Sec. 7 of RA 3135, the purchaser has the following rights:
i.to petition made under oath to give him the possession of the property during the redemption
period, after furnishing bond in an amount equivalent to the use of the property for the period of
12 months.
ii. To possess the foreclosed property boughtat the public auction after the redemption period has
expired without the redemption having been made.

2.The RULE:it is settled under jurisprudence that once the expiration of the period of redemption
had already lapsed without the exercise of redemption, the purchaser become the absolute owner.
hence, he has the absolute right possession of the property at any time. The issuance of writ of
possession is merely ministerial.The Exception: under Sec. 33 of Rule 39 of Rules of Court, The
possession of the property shall be given to the purchaser or last redemptioner by the same officer
unless a third party is actually holding the property adversely to the judgment obligor
3.Applying the said rules in this case: In this case, respondents possession of the properties was
premised on ʼthe sale to them by CEDEC. Therefore, respondents hold title to and possess the
properties as CEDEC s transferees ʼand any right they have over the properties is derived from
CEDEC. a.As transferees of CEDEC, respondents merely stepped into CEDEC’s shoes and are
necessarily bound to acknowledge and respect the mortgage CEDEC had earlier executed in favor
of BPI Family. Respondents are the successors-in-interest of CEDEC and thus, respondents
occupancy over the ʼproperties cannot be considered adverse to CEDEC.
4. Furthermore, it is settled that a pending action for annulment of mortgage or foreclosure sale
does not stay the issuance of the writ of possession. The trial court, where the application for a
writ of possession is filed, does not need to look into the validity of the mortgage or the manner of
its foreclosure. The purchaser is entitled to a writ of possession