G.R. No. L-67496 July 7, 1986 tenants.
tenants. The sheriff levied on the properties
TOP RATE INTERNATIONAL SERVICES,
INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT and
RODRIGO TAN, doing business under the name
and style "ASTRO AUTOMOTIVE
SUPPLY," respondents.
G.R. No. L-68257 July 7, 1986
GUTIERREZ, JR., J.:
The two consolidated petitions before us seek to annul
the decisions of the Intermediate Appellate Court in
G.R. No. 67496 dated January 6, 1984 and in G.R. No.
68257 dated June 6, 1984, respectively. The two
decisions both upheld the validity of the levy made on
two properties whose ownership is claimed by
petitioner, notwithstanding the fact that the value of
said properties are far in excess of the amount of the
liens thereon. The decisions are based on the ground
that what was attached and levied upon are not the
properties themselves but only the vendor's equity of
redemption. The petitioner also asks that the
resolutions of the appellate court denying its motions
for reconsideration be set aside,
In Civil Case No. 142443 now, G.R. No. 67496, the
facts as found by the appellate court are:
On August 12, 1981, petitioner (Rodrigo Tan,
doing business under the name Astro
Automotive Supply') filed a complaint against
Consolidated Mines Inc. and Jose Marino
Olondriz, the president of said corporation,
for the payment of the purchase price of
certain heavy equipment, parts and
accessories sold to Consolidated Mines, Inc.
with a total cost of P271,372.20. In said
complaint, plaintiff asked that a writ of
preliminary attachment be issued against
defendants on the ground that said
defendants were guilty of fraud in securing
said equipment.
On August 17, 1981, respondent Court
granted plaintiff's motion for the issuance of a
writ of preliminary attachment upon plaintiff's
posting of a bond in the amount of P
271,372.20. Pursuant to said order, a writ of
attachment was issued on August 26, 1981.
The sheriff served notices of garnishment on
the tenants of the building owned by
defendant Consolidated Mines, Inc.
garnishing the rentals due from said tenants,
but since there were earlier notices of
garnishment served upon said tenants issued
in two (2) other cases, the sheriff was not
able to garnish any amount from said
The petitioner filed a motion to quash the of the levy on attachment on the two properties
of defendant Consolidated Mines, Inc. and
the notice of levy was duly annotated on
Transfer Certificate of Title No. S-68501
(143900) and Transfer Certificate of Title
No. S-68500 (14329). The notice of levy
was not annotated on the transfer
certificate of title of a third property covered
by Transfer Certificate of Title No. 79776,
although notice of said levy was duly
entered in the primary book of the Registry
of Deeds of Rizal.
Annotated as prior encumbrances on the
first two properties on December 20, 1978
was a mortgage in favor of twelve (12)
consortium banks and a notice of levy
issued in Civil Case No. 136406 entitled
'Warmco Trading Company versus
Consolidated Mines, Inc. and Jose Marino
Olondriz' on May 15, 1981.
Meanwhile, in Civil Case No. 142598 now, G.R. No.
68257, the appellate court made the following
findings:
On August 18, 1981, the petitioner (Polaris
Motor Supply, Co.) brought suit (Civil Case
No. 142598) in the Court of First Instance
of Manila against the respondents
Consolidated Mines, Inc. (CMI) and its
president Jose Marino Olondriz for the
collection of P71,855.20. The amount
represents the price of the heavy
equipment and accessories which the
respondent CMI had purchased from the
petitioner. On November 3, 1981, the
respondent judge ordered the attachment
of CMI's properties. On November 26,
1981, notice of the attachment of real
properties of the CMI was served on the
Register of Deeds of Makati who on
December 9, 1981 annotated the levy on
Transfer Certificate of Titles Nos. S-68500
(143929), S-68501 (143900) and 79711.
On May 31, 1981, several banks,
constituting the Consortium Banks, filed a
third party claim with the sheriff, alleging
that they were the mortgagees of the real
and personal properties of the CMI with a
total book value of P656,613,303.00 and an
appraised value of P4,497,443,040.00.
They claimed that their mortgage was
evidenced by a deed executed on
November 10, 1978. They, therefore, asked
that the properties be released from
attachment.
third party claim but its motion was denied
by the respondent judge in his order of
August 6, 1982. The court ruled that the
Consortium Banks, as mortgagees of the
real and personal properties of the CMI had
a superior lien on the properties and that
the petitioner could validly levy only on the
mortgagor's (CMI's) equity of redemption
after the sale of the mortgaged properties.
The personal properties were foreclosed by
the Consortium Banks to which the
properties were sold as the highest bidder
and the certificate of sale issued on July 6,
1982. The petitioner then asked that it be
allowed to exercise its right of redemption.
But the Consortium Banks opposed the
motion on the ground that there was an
equity in redemption only in case of
foreclosure sale of real properties but not in
the case of chattels.
In the meantime, on March 17, 1982, the
Court of First Instance of Rizal, Branch
XXIII, acting as an insolvency court,
authorized in Sp. Proc. No. 9623 the sale of
the properties of the CMI. Accordingly, on
September 17, 1982, the properties
covered by TCT Nos. S-68500 (143929)
and S-68501 (143900) were sold to the
private respondent Top Rate International
as assignee of the El Grande Development
Corp. The sale is evidenced by a 'Deed of
Confirmation of Sale with Assumption of
Mortgage.' (Previously, a contract to sell
was executed between the CMI and the El
Grande (Annex C). On the basis of the sale
to it, Top Rate International filed a third
party claim with the sheriff. It asked that the
properties covered by TCT No. S-68500
(143929) and S-68501 (143900) be
discharged from attachment.
On the basis of the same "Deed of Confirmation of
Sale with Assumption of Mortgage," Top Rate
International, Inc. (Top Rate) also filed a third-party
claim in Civil Case No. 142443 alleging that the
properties involved therein had been sold to it for
Forty Million Pesos (P40,000,000.00) on December
10, 1981 with the approval of the Court of First
Instance of Rizal in Special Proceeding No. 69623 in
the course of the involuntary insolvency proceedings
filed against Consolidated Mines. Petitioner,
therefore, asked that the attachment made on these
properties be discharged.
After hearing on the merits, the trial court in Civil
Case No. 142598 ordered the lifting and setting aside
involved while in Civil Case No. 142443, the trial court
issued the same order maintaining, however, the levy
on attachment on the property covered by TCT No.
79776 in favor of plaintiff Rodrigo Tan.
The plaintiffs in the above civil cases appealed to the
Intermediate Appellate Court.
On January 6, 1984, the appellate court reversed the
decision of the trial court in Civil Case No. 142443, and
ordered the levy on the two properties maintained. The
appellate court ruled:
We find no merit in the contention of
respondent Top Rate International Services
that its right over the properties in question
based on the deed of sale in its favor on
September 17, 1982 confirming the contract
to sell of December 10, 1981 in favor of El
Grande Development Corporation, should be
recognized as superior to the right of
petitioner under the writ of attachment issued
in his favor and registered on October 1,
1981 because it succeeded to the rights of
the twelve (12) consortium of banks which
hold a mortgage over said properties
registered on December 20, 1978. Said sale
was not actually a sale or assignment by the
banks of their rights as mortgagee over said
properties but a sale of said properties by the
mortgagor, Consolidated Mines, Inc. with the
consent of the mortgagee. The consortium of
banks could not have sold the properties to
Top Rate International Services except
through foreclosure proceedings, for as
mortgagees they have no right to appropriate
for themselves or dispose of the mortgaged
properties (Article 2088, Civil Code
Appropriation of the mortgaged properties of
sale by the mortgagee of said property even
if stipulated by the parties would be nun and
void being what is known as pactum
commissorium. In the present case the sale
of the properties by Consolidated Mines, Inc.
to Top Rate International Services with the
consent of the mortgagee banks under an
arrangement where the purchase price of
P40,000,000.00 would be paid directly to the
banks did not adversely affect the rights of
plaintiff under the writ of attachment issued in
the present case.
The appellate court also found that the Regional Trial
Court in the insolvency proceedings dismissed the
petition to declare Consolidated Mines, Inc. insolvent
on the ground that it had no jurisdiction over the same
because the petitioners in said case were not residents
of the Philippines and, thus, not qualified to file said
petition. It, therefore, ruled that the claim of Top Rate
over said properties based on the approval of the sale
in its favor by the insolvency court must necessarily fail.
On June 6, 1984, the appellate court likewise reversed
the decision of the trial court in Civil Case No. 142598
citing the same reasons it adopted in its earlier decision
in the other civil case. It further ruled that there is no
merit in Top Rate's claim that the attachment is
improper because the value of the property levied upon
is in excess of the total claim of the petitioners which
was only P71,885.20 plus interest from November,
1979 for what was actually attached by the petitioners
(Rodrigo Tan and Polaris) was the equity of redemption
of Consolidated Mines, Inc. the levy made pursuant to
the writ of attachment being upon "all rights, titles,
interests, claims and participation of the defendant
Consolidated Mines, Inc." to the properties covered by
TCT No. S-68501, TCT No. S-68500 and TCT No.
79777. However, as regards the validity of the sale of
the properties to Top Rate which was authorized by the
insolvency court, the Court ruled that this matter should
be threshed out in an independent action to give Top
Rate the opportunity to ventilate its claims over said
properties.
On the same day, Top Rate filed a petition before this
Court assailing the decision of the appellate court in
Civil Case No. 142443, docketed as G.R. No. 67496.
On August 16, 1984, Top Rate again filed a similar
petition, as the decision in Civil Case No. 142598,
docketed as G.R. No. 68257.
As the two petitions raised Identical issues, we issued
a resolution dated January 28, 1985 ordering the
consolidation of the two petitions.
The only question raised by petitioner Top Rate in
these consolidated petitions, is whether or not the
respondent appellate court committed grave abuse of
discretion when it ruled that "because the private
respondent through the sheriff could not have levied on
the properties but only on the right of redemption or
equity of redemption thereon, there could not have
been an over-levy sufficient to justify a quashal of the
notice of levy on attachment on the properties claimed
by the petitioner."
Top Rate states that the respondents' claims are only
P271,372.20 and P71,855.20 respectively. It contends
that an over-levy is obvious because the properties
levied upon are worth more than P40,000,000.00. It
alleges as error the appellate court's ruling that since
the equity of redemption and not the properties
themselves were attached, its value has no way of
exceeding the respondents' individual claims because
the value of the equity of redemption should be that
which will effectively release the properties, that is
P40,000,000.00. This is the amount which the
respondents must necessarily pay, at the very least, to
exercise such right and not the amount of their
claims. There is, therefore, no over-levy.
Equity of redemption is the right of the mortgagor to
redeem the mortgaged property after his default in
the performance of the conditions of the mortgage
but before the sale of the property or the confirmation
of the sale, whereas the right of redemption means
the right of the mortgagor to repurchase the property
even after confirmation of the sale, in cases of
foreclosure by banks, within one year from the
registration of the sale. (Cf. Moran, Comments on the
Rules of Court, Vol. 3, pp. 283-284, 1980 Edition;
Quimson vs. Philippine National Bank, 36 SCRA 26).
As we have ruled in Northern Motors, Inc. v. Coquia,
(66 SCRA 415,420):
To levy upon the mortgagor's incorporeal
right or equity of redemption, it was not
necessary for the sheriff to have taken
physical possession of the mortgaged
taxicabs. ...Levying upon the property itself
is distinguishable from levying on the
judgment debtor's interest in it (McCullough
& Co. vs. Taylor, 25 Phil. 110, 115).
Likewise, in the case of Blouse Potenciano vs.
Mariano, (96 SCRA 463, 469), we ruled:
Quirino's interest in the mortgaged lots is
merely an equity of redemption, an
intangible or incorporeal right (Sun Life
Assurance Co. of Canada vs. Gonzales
Diez, 52 Phil 271; Santiago vs. Dionisio, 92
Phil. 495; Northern Motors Inc. vs. Coquia,
66 SCRA 415).
That interest could be levied upon by
means of writ of execution issued by the
Manila Court as had been done in the case
of property encumbered by a chattel
mortgage (Levy Hermanos, Inc. vs.
Ramirez and Casimiro, 60 Phil 978, 982;
McCullough and Co. vs. Taylor, 25 Phil.
110).
It is, therefore, error on the part of the petitioner to
say that since private respondents' lien is only a total
of P343,227.40, they cannot be entitled to the equity
of redemption because the exercise of such right
would require the payment of an amount which
cannot be less than P40,000,000.00.
When herein private respondents prayed for the
attachment of the properties to secure their
respective claims against Consolidated Mines, Inc.,
the properties had already been mortgaged to the
consortium of twelve banks to secure an obligation of
US$62,062,720.66. Thus, like subsequent
mortgagees, the respondents' liens on such
properties became inferior to that of the banks, which
claims in the event of foreclosure proceedings, must
first be satisfied. The appellate court, therefore, was
correct in holding that in reality, what was attached by
the respondents was merely Consolidated Mines'
right or equity of redemption. Thus, in the case
of Alpha Insurance and Surety Co., Inc. vs.
Reyes (106 SCRA 274, 278), we ruled:
Deciding the legal question before Us, even
ff the DBP were just an ordinary first
mortgage without any preferential liens
under Republic Act No. 85 or
Commonwealth Act 459, the statutes
mentioned in the Associated Insurance
case relied upon by the trial court, it would
be unquestionable that nothing may be
done to favor plaintiff-appellant, a mere
second mortgage, until after the obligations
of the debtors-appellees with the first
mortgagee have been fully satisfied and
settled. In law, strictly speaking, what was
mortgaged by the Reyeses to Alpha was no
more than their equity of redemption.
We, therefore, hold that the appellate court did not
commit any error in ruling that there was no over-levy
on the disputed properties. What was actually
attached by respondents was Consolidated Mines'
right or equity of redemption, an incorporeal and
intangible right, the value of which can neither be
quantified nor equated with the actual value of the
properties upon which it may be exercised.
WHEREFORE, the petitions in G.R. No. 67496 and
G.R. No. 68257 are hereby DISMISSED for lack of
merit. The decisions of the respondent court are
AFFIRMED.
G.R. No. L-30904 March 6, 1980
MAXIMA BLOUSE POTENCIANO, in substitution
of the deceased MAX BLOUSE, petitioner,
vs.
HON. HERMINIO C. MARIANO, as Judge of the
Court of First Instance of Rizal, and ANTONIO
QUIRINO, respondents.
AQUINO, J.:
The question in this special civil action of mandamus
is whether respondent Judge of the Court of First
Instance of Rizal, who examined the judgment debtor
under section 38, Rule 39 of the Rules of Court, may
be compelled to order the sale of the debtor's
properties to satisfy the judgment rendered by
the Court of First Instance of Manila.The antecedents
of this incident are as follows:
1. The Court of First Instance of Manila in its decision
dated October 5, 1961 ordered Antonio Quirino,
Fernando Suzara and Alto Surety & Insurance Co., Inc.
to pay solidarily to Maxima Blouse Potenciano the sum
of P16,000, with eight percent annual interest from
March 6, 1951 until the obligation is paid, plus P1,000
as attorney's fees, P5,000 as liquidated damages and
the costs (Civil Case No. 24665).
2. From the decision, the defendants appealed to the
Court of Appeals. For failure to file their brief, the Court
of Appeals dismissed the appeal in its resolution of
September 28, 1962. Entry of judgment as to that
dismissal was made on November 13, 1962.
3. The trial court issued writs of execution dated
November 24, 1962 and January 22, 1964. The
judgment was not fully satisfied. On May 6, 1964, Mrs.
Potenciano filed in the Court of First Instance of Rizal,
Pasig Branch X, a petition for the examination of
Antonio Quirino, one of the solidary judgment debtors
who was a resident of San Juan, Rizal. She alleged
that as of that date there was still due from the
defendants the sum of P22,645.
4. Due to Quirino's alleged dilatory tactics, that incident
remained pending in the Rizal court up to July 16, 1968
when it issued an order declaring that Quirino's six lots
and residential house situated in Rizal and two lots and
a house located in Baguio, all mortgaged to the
Philippine National Bank, were "available for the
satisfaction of the judgment debt". The examination of
Quirino also revealed that he owned shares of stock in
the General Fertilizer Corporation of which he was the
president and general manager. However, the amount
of his cash earnings or income was not disclosed.
5. Mrs. Potenciano filed a motion for reconsideration
dated September 3, 1968. She asked the Rizal court to
order the sale of Quirino's properties and the
application of the proceeds of the sale to the payment
of his obligation which had reached the sum of
P23,990. She said that that was the prayer in her
motion of April 18, 1968 which was captioned "motion
for the application of the available properties of
defendant Antonio Quirino for the payment of his
judgment debt to the plaintiff". The Rizal court denied
the motion in its order of September 12, 1968.
6. Mrs. Potenciano then filed in the Rizal court a
"motion for execution" dated September 16, 1968
wherein she again asked that Quirino's above-
mentioned properties be sold for the payment of the
judgment debt Quirino opposed the motion on the that
the five year period for minting a judgement by motion
had already expired. The Rizal court in its order of
November 21, 1968 denied the motion on the ground
that it should be filed in the Manila court.
7. At the same time, the Rizal court held that Quirino's
contention that the enforcement of the judgment by
motion bad y prescribed was "not in consonance with
justice and equity because the disposition of the
incident was delayed due to Quirino's dilatory tactics
and because Mrs. Potenciano's motion for the
examination of Quirino suspended the running of the
period for executing the judgment by motion.
8. Mrs. Potenciano's motion for the reconsideration of
the Rizal court's order of November 21, 1968 was
denied on March 14, 1969. The instant mandamus
petition was filed on August 29, 1969. Quirino in his
answer to the petition insists that the period for
enforcing the judgment by writ of execution had y
expired and that it is not the Rizal court's ministerial
duty to apply his properties to the satisfaction of the
judgment and, therefore, mandamus does not lie in this
case.
The provisions of Rule 39 involved in this case are the
following:
SEC. 6. Execution by motion or by
independent action. — A jut may be executed
on motion within five (5) years from the date
of its entry or from the date it becomes final
and executory. After the lapse of such time,
and before it is barred by the statute of
limitations, a judgment may be enforced by
action.
SEC. 38. Examination of judgment debtor
when execution unsatisfied. — When an
execution issued in accordance with law
against property of a judgment debtor, or any
one of several debtors in the same judgment,
is returned unsatisfied, in whole or in
judgment creditor t any time after such return
is made, shall be entitled to an order from the
judge of the Court of First Instance of the
province in which the judgment was rendered
or of the province in which the execution was
returned, requiring such judgment debtor to
appear and answer co g his property and
income before judge of the Court of First
Instance, or before appointed by him at a
specified time and place; proceedings may
thereupon be had for the application of the
property and income of the judgment debtor
toward the satisfaction of the judgment. But
no judgment debtor shall be so required to
appear before a judge of first instance or
commissioner outside the province in which
such debtor resides or is found.
SEC. 42. Order for application of property
and income to satisfaction of judgment. —
The judge may order any property of the
judgment debtor, or money due him not
exempt from execution, in the hands of
either himself or other person, or of a
corporation or other legal entity, to be
applied to the satisfaction of the judgment,
subject to any prior rights over such
property and if, upon investigation of his
current income and expense, it appears
that the earnings of the judgment debtor for
his personal services are more than is
necessary for the support of his family, the
judge may order that he pay the judgment
in fixed monthly installments, and upon his
failure to pay such installment when due
without good excuse may punish him for
contempt.
SEC. 43. Appointment and bond of
receiver. — The judge may, by order,
appoint the sheriff, or other proper officer or
person, receiver of the property of the
judgment debtor; and he may also, by
order, forbid a transfer or other disposition
of, or any interference with, the property of
the judgment debtor not exempt from
execution. If a bonded officer be appointed
receiver, he and his sureties shall be liable
on his official bond as such receiver, but if
another person be appointed he shall give
a bond as receiver as in other cases.
SEC. 44. Sale of ascertainable interest of
judgment debtor in real estate. — If it
appears that the judgment debtor has an
interest in real estate, in the province in
which proceedings are had, as mortgagor
or mortgagee or otherwise, and his interest
therein can be attained without controversy,
the receiver may be record to sell and
convey such real estate or the interest of
debtor therein, and such sale shall be
conducted in all respects in the manner as
is provided for the sale of real estate upon
execution, and the pro. proceedings
thereon shall be approved by the court
before the exemption of the deed.
Section 38 et sequentia provide for pr supplementary
to execution, which are designed to aid judgment
creditors in the discovery of the debtor's property and
its application to the satisfaction of the judgment.
"Such proceedings are said to be an extraordinary
remedy, largely equitable in their nature intended to
reach dishonest debtors, and generally are only to be
resorted to when the or processes of the law are not
adequate." (33 C.J.S. 647-8: 30 Am Jur. 2nd 879.)
Supplementary proceedings are in part a
summary method of purging the debtor's
conscience and compelling the disclosure
of any property he may have which is not
exempt from execution. Such proceedings
are not a substitute for an execution but are
merely intended to supplement it by
reaching assets which could not be
obtained thereby. (33 C.J.S. 648.)
In this jurisdiction, supplementary proceedings have
usually been utilized to ascert what portion of a
judgment debtor's earnings should be applied to the
satisfaction of the judgement as contemplated in
section 42.
We hold under the facts of this case that the Rizal
court cannot be compelled by mandamus to sell
Quirino's shares of stock and his interest in the
mortgaged lots and to apply the proceeds of the salu
to the satisfaction of the judgment debt.
Quirino's interest in the mortgaged lots is merely an
equity of redemption, an intangible or incorporeal
right (Sun Life Assurance Co. of Canada vs.
Gonzales Diez, 52 Phil. 271; Santiago vs. Dionisio,
92 Phil. 495; Northern Motors, Inc. vs. Coquia, L-
40018, August 29, 1975, 66 SCRA 415).
That interest could be levied upon by means of a writ
of execution issued by the Manila court as had been
done in the case of property encumbered by a chattel
mortgage (Levy Hermanos, Inc. vs. Ramirez and
Casimiro, 60 Phil. 978, 982; Mc Cullough Co vs.
Taylor, 25 Phil. 110).
"A writ of execution in this jurisdiction reaches both
legal and equitable interests, with the result that the
equity of redemption of the mortgagor will pass to the
purchaser at an execution sale" (Tizon vs. Valdez
and Morales, 48 Phil. 910, 914-5).
The same is true with respect to Quirino's shares in
the General Fertilizer Corporation. The shares can be
levied upon by means of a writ of execution issued by
the Manila court.
Since the proceedings supplementary to execution
cannot be a substitute for an execution, the Rizal
court did not err in holding that it is the Manila court,
as the court that rendered the judgment, that should
take the necessary measures to reach Quirino's
properties so that the same may be applied to the
satisfaction of its judgment.
We further hold that, as correctly ruled by the Rizal
court, the five-year period for enforcing the judgment
by execution, counted from November 13, 1962
(Gutierrez Hermanos vs. De la Riva, 46 Phil. 827),
was interrupted or suspended by petitioner's filing on
May 6, 1964 in the Rizal court of the motion for
examination of the judgment debtor and by the
instant mandamus action.
The proceedings supplementary to execution and this
mandamus case amounted to stay of execution. "In
computing the time limited for suing out an execution,
the time during which execution is stayed should be
excluded, and the time will be extended by any delay
occasioned by the debtor"(33 C.J.S. 208; Lanchita vs.
Magbanua, 117 Phil. 39, 44 and Manila Railroad Co.
vs. Court of Industrial Relations, 117 Phil. 192, 197).
The Rizal court found that Quirino delayed the
execution of the judgment.
WHEREFORE, the petition for mandamus is
dismissed. We affirm the lower court's order of
November 21, 1968, directing the petitioner to secure a
writ of execution from the Manila court in Civil Case No.
24665. No costs
SO ORDERED.
G.R. No. 115902 September 27, 1995
FILINVEST CREDIT CORPORATION, petitioner,
vs.
HON. COURT OF APPEALS and SPOUSES
EDILBERTO and MARCIANA
TADIAMAN, respondents.
DAVIDE, JR., J.:
This petition for review on certiorari seeks to set aside
the decision of the Court of Appeals in CA-G.R. CV No.
302311 affirming in toto the decision of the Regional
Trial Court (RTC) of San Fernando (Pampanga),
Branch 46, in Civil Case No. 6599.2
The antecedent facts are summarized by the Court of
Appeals as follows:
Defendants-appellees, spouses Edilberto and
Marciana Tadiaman, residents of
Cabanatuan City, purchased a 10-wheeler
Izusu cargo truck from Jordan Enterprises,
Inc., in Quezon City, in installments. Said
spouses executed a promissory note for
P196,680.00 payable in 24 monthly
installments in favor of Jordan Enterprises,
Inc., and a Chattel Mortgage over the motor
vehicle purchased to secure the payment of
the promissory note. Jordan Enterprises, Inc.
assigned its rights and interests over the said
instruments to Filinvest Finance and Leasing
Corporation, which in turn assigned them to
plaintiff-appellant Filinvest Credit
Corporation.
Subsequently, the spouses Tadiaman
defaulted in the payment of the installments
due on the promissory note, and plaintiff-
appellant filed an action for replevin and
damages against them with the court below.
Upon motion of the plaintiff-appellant, a writ
of replevin was issued, and the truck was
seized in the province of Isabela, by persons
who represented themselves to be special
sheriffs of the court, but who turned out to be
employees of the plaintiff-appellant. The truck
was brought by such persons all the way
back to Metro Manila.
Thereafter, defendant spouses filed a
counterbond, and the lower court ordered the
return of the truck. This was not immediately
implemented because the defendant spouses
were met with delaying tactics of the plaintiff-
appellant, and when they finally recovered
the truck, they found the same to be
"cannibalized". This was graphically
recounted in the report (Exhibit "3") of Deputy
Sheriff Anastacio Dizon, who assisted the
spouses in recovering the vehicle, excerpts
of which are as follows:
On February 14, 1983, the undersigned
contacted Mr. Villanueva, Branch Manager of
the FILINVEST at Bo. Dolores, San
Fernando, Pampanga and he gave the
information that the said Isuzu Cargo Truck,
subject of the aforesaid Court Order, was
already delivered to their main garage at Bo.
Talon, Las Piñas; Metro Manila. Mr.
Villanueva further told the undersigned that in
order to effectively enforce the
aforementioned Court Order, the
undersigned should discuss the matter with
Mr. Telesforo (Jun) Isidro, Collection in-
charge, and Mr. Gaspar Antonio delos
Santos, Vice President for Branch
Administration of the FILINVEST main office
at Makati, Metro Manila.
On February 18, 1983, defendant Marciana
Tadiaman, Atty. Benites and the undersigned
contacted Messrs. Gaspar Antonio delos
Santos and Telesforo (Jun) Isidro at the main
office, FILINVEST at Paseo de Roxas,
Makati, Metro Manila and we discussed the
smooth retaking of possession by the
defendants of the 10-wheeler Isuzu Cargo
Truck with motor No. E 120-22041, Serial No.
SPM 710164864. Messrs. Delos Santos and
Isidro alternatively argued that the Traveler's
Insurance Company is one of the black listed
Insurance firm, so much so, it is only the
company's lawyer who can direct the delivery
of the above-cited Cargo Truck to us. They
told us to wait for the arrival of their Lawyer at
5:40 p.m., and we agreed that in the
meantime that their lawyer is not around, the
said vehicle would not be transferred to any
other place.
Came 5:30 P.M., but the company's lawyer
never arrived and we were told to go back
on February 21, 1983. Mr. delos Santos
finally told us that the company will not
deliver to us the said Cargo Truck until and
after their company lawyer would say so.
On February 19, 1983, Mr. Felicisimo
Hogaldo, Atty. Benites, defendant Marciana
Tadiaman, three policemen of Las Pinas,
Metro Manila, and the undersigned went
directly to the FILINVEST garage at Bo.
Talon, Las Pinas, Metro Manila and there
contracted Mr. Ismael Pascual, Custodian
of all repossessed vehicles of the said
company, and Mr. Pedro Gervacio,
Security Guard of the company assigned
by the Allied Investigation Bureau at 6th
Floor, Ramon Santos Bldg. They told us
that the 10-wheeler Cargo Truck subject of
the above-cited court order is not one of the
vehicles listed in their in-coming and out-
going ledger books and they told us to
examine their books.
Defendant Marciana Tadiaman told
Messrs. Pedro Gervacio and Ismael
Pascual that she saw the above-mentioned
Cargo-Truck last February 14, 1983 at the
end corner of the garage. And for that
purpose she requested us, including Mr.
Pascual and the Security Guard, to inspect
the site where the said truck was supposed
to have been placed when she for the first
time saw it on February 14, 1983.
Unexpectedly, she saw and pointed to us
on the site oil leaks on the ground which
she believed came from the vehicle we
were looking for. We also saw skid marks
of tires of a truck starting from the site
where the cargo truck was previously
placed as pointed to by defendant
Marciana Tadiaman up to around 20
meters before reaching the gate of the
compound. The other skid larks of tires of a
truck was also seen on a portion of a road
leading to a compound owned by other
person.
Mr. Gervacio and Pascual strongly insisted
that they do not know the whereabouts of
the said Cargo Truck. The undersigned
requested the Policemen of Las Pinas,
Metro Manila, Atty. Benites and defendant
Marciana Tadiaman to see for ourselves
the road leading to a compound owned by
another firm, about 1/3 of the Length of
which road is completely blocked by a big
and tall building. It was at this portion
where the subject Cargo Truck was placed.
Mr. Ismael Pascual called their main office,
FILINVEST, by telephone about the
discovery of the whereabouts of said cargo
truck by the undersigned. Defendant
Marciana Tadiaman to
Mr. Pascual that there were missing parts
and that other parts of the truck were
completely changed with worn-out spare
parts.
Mr. Pascual told the undersigned that he
will only affix his signature on the
acknowledgment receipt, below the line
"GIVEN BY", if the missing parts and
replaced parts were not mentioned in said
receipt.
It was because of the said actuations of the
plaintiff-appellant that the defendants-
appellee [sic] filed a counterclaim for
damages. . . .3
After trial, the trial court rendered a decision the
dispositive portion of which reads as follows:
WHEREFORE, judgment is hereby
rendered on the main action, in favor of
plaintiff and against defendants, ordering
the latter, jointly and severally, to pay the
plaintiff the following sums:
(a) The sum of P88,333.32 which is the
balance of the promissory note as of
September 26, 1982, with interest thereon
at 14% per annum from said date.
(b) The sum equivalent to 25% of the
amount sued upon, as and for attorney's
fees, that is P88,333.32 plus the stipulated
interest; and
(c) The costs of suit.
On the Counterclaim:
Plaintiff not having successfully rebutted
the defendants' evidence respecting
damages caused to them by virtue of the
illegal seizure of the property, and hiding
the truck in some other place not their
garage, feigning knowledge that the same
had been recorded in their incoming ledger
books, the "cannibalizing" done while the
truck was in the custody of plaintiff's
garage, the frustrations which the
defendants had to undergo for two weeks
before the truck was finally placed in the
hands of Sheriff Dizon, all point to the liability
of plaintiff for its failure intentionally or
otherwise "to observe certain norms that
spring from the fountain of good conscience
and guide human conduct to the end that law
may approach its supreme ideal, which is the
sway and dominance of justice.
WHEREFORE, judgment is rendered in favor
of counter-claimants defendants and against
plaintiff, ordering the latter to pay to the
defendants the following sums:
(1) Actual damages representing lost spare
parts while in the custody of plaintiff in its
garage being hidden from defendants, in the
sum of P50,000.00;
(2) P50,000.00 as moral damages;
(3) P20,000.00 as exemplary damages;
(4) P20,000.00 as attorney's fee; and
(5) Proportionate part of the costs adjudged
against plaintiff.
SO ORDERED.4
Petitioner Filinvest Credit Corporation
(hereinafter Filinvest) appealed that portion of the
judgment on the counterclaim to the Court of Appeals
(CA-G.R. CV No. 30231) and assigned the following
errors of the lower court:
I
THE TRIAL COURT ERRED IN AWARDING
DAMAGES; ACTUAL, MORAL,
EXEMPLARY AND ATTORNEY'S FEES
AND PROPORTIONATE PART OF THE
COSTS IN FAVOR OF THE DEFENDANTS
IN THEIR COUNTER-CLAIMS IN THE
ABSENCE OF ANY ACTIONABLE LOSS
SUSTAINED BY THEM FOR IT WAS THE
DEFENDANTS WHO VIOLATED THEIR
PROMISSORY NOTE AND CHATTEL
MORTGAGE WITH THE PLAINTIFF.
II
THE TRIAL COURT ERRED IN HOLDING
THAT THE PLAINTIFF OR ANY OF ITS
REPRESENTATIVES HAD NO RIGHT TO
TAKE THE MORTGAGED PROPERTY
AFTER THE BREACH OF THE
CONDITIONS IN THE PROMISSORY NOTE
AND CHATTEL MORTGAGE BY THE
DEFENDANTS. 5
In its decision of 26 May 1994, the Court of Appeals
affirmed in toto the decision of the trial court. It found
no merit in the appeal. Thus:
The plaintiff-appellant argues that it had the
right to seize the truck from the moment that
the defendants-appellees defaulted in the
payment of the monthly installments, and to
institute an action for replevin preliminary to
effecting a foreclosure of the property
mortgaged extrajudicially. The plaintiff-
appellant misses the point entirely. In the first
place, it has not been held liable for filing an
action for replevin in order to recover
possession of the truck prior to its
foreclosure, but for the manner in which it
carried out the seizure of the vehicle. It is
ironic that, in spite of plaintiff-appellant's
apparent recognition of the necessity of legal
means for the recovery of the truck, in the
end, it utilized illegal means in the actual
seizure of the vehicle by having its
employees pose as special agents of the
court in effecting the same. Plaintiff-appellant
even went to the extent of asking the
appointment of a special sheriff to enforce
the order of seizure, but still had the truck
seized by its own people instead. It is as if
the plaintiff-appellant utilized the court only to
clothe its employees with apparent authority
to seize the vehicle concerned.
In the second place, plaintiff-appellant was
held liable for hiding the truck and making it
difficult for the defendants-appellees to
recover the same. Defendants-appell[ees]
were able to have the writ of seizure quashed
on the basis of a counterbond. Plaintiff-
appellant should have been the first to obey
the order for the return of the seized truck,
considering its avowed adherence to law and
order. And yet, it made it difficult for the
defendants-appellees to actually recover the
vehicle, as reported by the deputy sheriff
above.
In the third place, there is unrebutted
evidence that the truck was "cannibalized"
while in the custody of the plaintiff-appellant.
The latter argues that such evidence is not
credible, because, if the truck was stripped of
vital parts, it could not have been driven by
the defendants-appellees all the way back to
Cabanatuan City. Plaintiff-appellant
conveniently overlooks the testimony of
defendant-appellee Mrs. Tadiaman that they
had to buy the missing parts in order to make
the truck run (t.s.n., p. 40, October 2, 1986,
Exhibits "'9", "10" and "11").6
Filinvest now comes to us alleging that the
Court of Appeals:
(a) . . . DECIDED A QUESTION OF
SUBSTANCE IN A WAY NOT IN ACCORD
WITH LAW AND THE APPLICABLE
DECISIONS OF THIS HONORABLE
COURT WHEN IT REVERSED THE
DECISION OF THE REGIONAL TRIAL
COURT OF MANILA, BRANCH 9;
(b) . . . ACTED WITH GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OF
JURISDICTION WHEN IT SUSTAINED
THE ERRONEOUS DECISION OF THE
HONORABLE REGIONAL TRIAL COURT
BRANCH 46 OF SAN FERNANDO,
PAMPANGA;
(c) . . . ACTED WITH GRAVE ABUSE OF
DISCRETION AND CONTRARY TO
EXISTING LAW AND JURISPRUDENCE
WHEN [IT] SUSTAINED THE
SPECULATIVE FINDING OF THE RTC
THAT THE PETITIONER
"CANNIBALIZED" THE MORTGAGED
VEHICLE;
(d) . . . ERRED GRIEVOUSLY WHEN IT
EXONERATED PRIVATE RESPONDENTS
FROM PAYING THE PETITIONER ON
THE LATTER'S LEGITIMATE CLAIMS
UNDER THE COMPLAINT
PARTICULARLY ON THE UNPAID
PROMISSORY NOTE MADE BY THE
PRIVATE RESPONDENTS;
(e) . . . ACTED CONTRARY TO LAW
WHEN IT IGNORED THE PLAIN
ADMISSIONS IN THE ANSWER (AT
PARAGRAPH 2, & 3, PAGE 1) OF THE
DEFENDANTS (PRIVATE
RESPONDENTS) THAT THEY HAVE
DULY EXECUTED A PROMISSORY
NOTE SECURED BY A DEED OF
CHATTEL MORTGAGE AND THAT THE
PRIVATE RESPONDENTS VIOLATED
THE TERMS OF THE PROMISSORY
NOTE IN FAILING TO PAY THE
INSTALLMENTS DUE THEREON FOR
NOV. 15, 1981 AND THE SUBSEQUENT 9
INSTALLMENTS OR UP TO AUGUST 15,
1982;
(f) . . . ERRED IN REFUSING TO APPLY
THE TERMS AND CONDITIONS OF THE
PROMISSORY NOTE AND THE DEED OF
CHATTEL MORTGAGE SIGNED BY THE
PONCES "AS THE LAW BETWEEN THE
PARTIES" TO THE CONTRACT SUBJECT
OF THE SUIT IN THE RTC.7
Additionally, Filinvest maintains that:
(g) THERE IS NO PROOF TO SUSTAIN
THE AWARD OF MORAL DAMAGES FOR
P50,000.00 ACCORDINGLY THERE IS
NO BASIS FOR THE AWARD OF
EXEMPLARY DAMAGES.8
We gave due course to the petition and required the
parties to submit their respective memoranda after
the filing of the comment to the petition by the private
respondents and of the reply thereto by Filinvest. The
parties subsequently filed their memoranda which
merely reiterated the arguments in their respective
initiatory pleadings.
The only relevant issue in this petition is whether or
not the Court of Appeals committed reversible error in
dismissing Filinvest's appeal from the decision of the
trial court on the private respondents' counterclaim
and in affirming in toto the said decision. The first
ground raised herein by Filinvest is baseless since
the discussions or arguments in Filinvest's petition
and memorandum fail to disclose what the decision
of Branch 9 of the RTC of Manila is all about. So is
the fourth ground, for, the unappealed portion of the
trial court's decision did in fact order the private
respondents to pay Filinvest the unpaid balance of
the promissory note, with interest and attorney's fees.
All the other grounds are deemed waived for not
having been raised in the appeal to the Court of
Appeals. In any event, Filinvest's disquisitions on
such irrelevant issues are confounded.
As to the sole issue defined above, the Court of
Appeals correctly ruled that Filinvest is liable for
damages not because it commenced an action for
replevin to recover possession of the truck prior to its
foreclosure, but because of the manner it carried out
the seizure of the vehicle. Sections 3 and 4, Rule 60
of the Rules of Court are very clear and direct as to
the procedure for the seizure of property under a writ
of replevin, thus:
Sec. 3. Order. — Upon the filing of such
affidavit and bond with the clerk or judge of
the court in which the action is pending, the
judge of such court shall issue an order
describing the personal property alleged to
be wrongfully detained, and requiring
the sheriff or other proper officer of the
court forthwith to take such property into his
custody.
Sec. 4. Duty of the officer. — Upon
receiving such order the officer must serve
a copy thereof on the defendant together
with a copy of the application, affidavit and
bond, and must forthwith take the property,
if it be in the possession of the defendant or
his agent, and retain it in his custody. . . .
(emphasis supplied)
In the instant case, it was not the sheriff or any other
proper officer of the trial court who implemented the
writ of replevin. Because it was aware that no other
person can implement the writ, Filinvest asked the trial
court to appoint a special sheriff. Yet, it used its own
employees who misrepresented themselves as deputy
sheriffs to seize the truck without having been
authorized by the court to do so. Filinvest justified its
seizure by citing a statement in Bachrach Motor
Co. vs. Summers,9 to wit, "the only restriction on the
mode by which the mortgagee shall secure possession
of the mortgaged property after breach of condition is
that he must act in an orderly manner and without
creating a breach of the peace, subjecting himself to an
action for trespass."
This justification is misplace and misleading for
Bachrach itself had ruled that if a mortgagee cannot
obtain possession of a mortgaged property for its sale
on foreclosure, it must bring a civil action either to
recover such possession as a preliminary step to the
sale or to obtain judicial foreclosure. Pertinent portions
of Bachrach read as follows:
Where, however, debtor refuses to yield up
the property, the creditor must institute an
action, either to effect a judicial foreclosure
directly, to secure possession as a
preliminary to the sale contemplated in the
provision above quoted. He cannot lawfully
take the property by force against the will of
the debtor. Upon this point the American
authorities are even more harmonious that
they are upon the point that the creditor is
entitled to possession. As was said may
years ago by the writer of this opinion in a
monographic article contributed to an
encyclopedic legal treatise, "if possession
cannot be peaceably obtained the mortgagee
must bring an action." (Trust Deeds and
Power of Sale Mortgages, 28 Am. & Eng.
Encyc. of Law, 2d ed., 783.) In the Article of
Chattel Mortgages, in Corpus Juris, we find
the following statement of the law on the
same point: "The only restriction on the mode
by which the mortgagee shall secure
possession of the mortgaged property after
breach of condition is that he must act in an
orderly manner and without creating a breach
of the peace, subjecting himself to an action
to trespass. (11 C.J., 560; see also 5 R.C.L.,
462.)
The reason why the law does not allow the
creditor to possess himself of the mortgaged
property with violence and against the will of
the debtor is to be found in the fact that the
creditor's right of possession is conditioned
upon the fact of default, and the existence of
this fact may naturally be the subject of
controversy. The debtor, for instance, may
claim in good faith, and rightly or wrongly,
that the debt is paid, or that for some other
reason the alleged default is nonexistent. His
possession in this situation is as fully entitled
to protection as that of any other person, and
in the language of article 446 of the Civil
Code he must be respected therein. To allow
the creditor to seize the property against the
will of the debtor would make the former to a
certain extent both judge and executioner in
his own cause — a thing which is
inadmissible in the absence of unequivocal
agreement in the contract itself or express
provision to that effect in the statute.
It will be observed that the law places the
responsibility of conducting the sale upon "a
public officer;" and it might be supposed that
an officer, such as the sheriff, can seize the
property where the creditor could not. This
suggestion is, we think, without force, as it is
manifest that the sheriff or other officer
proceeding under the authority of the
language already quoted from section 14 of
the Chattel Mortgage Law, becomes pro hac
vice the mere agent of the creditor. There is
nothing in this provision which creates a
specific duty on the part of the officer to seize
the mortgaged property; and no intention on
the part of the law-making body to impose
such a duty can be implied. The conclusion is
clear that for the recovery of possession,
where the right is disputed, the creditor must
proceed along the usual channels by action
in court. Whether the sheriff, upon being
indemnified by the creditor, could safely
proceed to take the property from the debtor,
is a point upon which we express no opinion.
...
But whatever conclusion may be drawn in the
premises with respect to the true nature of a
chattel mortgage, the result must in this case
be the same; for whether the mortgagee
becomes the real owner of the mortgaged
property — as some suppose — or acquires
only certain rights therein, it is none the less
clear that he has after default the right of
possession; though it cannot be admitted that
he may take the law into his own hands and
wrest the property violently from the
possession of the mortgagor. Neither can he
do through the medium of a public officer that
which he cannot directly do himself. The
consequence is that in such case the creditor
must either resort to a civil action to recover
possession as a preliminary to a sale, or
preferably he may bring an action to obtain
a judicial foreclosure in conformity, so far
as with the provisions of the Chattel to
Mortgage Law. 10
Replevin is, of course, the appropriate action to
recover possession preliminary to the extrajudicial
foreclosure of a chattel mortgage. Filinvest did in fact
institute such an action and obtained a writ of
replevin. And, by filing it, Filinvest admitted that it
cannot acquire possession of the mortgaged vehicle
in an orderly or peaceful manner. Accordingly, it
should have left the enforcement of the writ in
accordance with Rule 60 of the Rules of Court which
it had voluntarily invoked.
Parenthetically, it must be observed that the trial
court erred in holding that the action for replevin was
"not in order as [Filinvest] is not the owner of the
property (Sec, 2 par. (a) Rule 60)."11 It is not only the
owner who can institute a replevin suit. A person
"entitled to the possession" of the property also can,
as provided in the same paragraph cited by the trial
court, which reads:
Sec. 2. Affidavit and bond. — Upon
applying for such order the plaintiff must
show . . .
(a) That the plaintiff is the owner of the
property claimed, particularly describing
it, or is entitled to the possession thereof; . .
. (emphasis supplied)
Upon the default by the mortgagor in his
obligations, Filinvest, as a mortgagee, had
the right to the possession of the property
mortgaged preparatory to its sale in a
public auction.12 However, for employing
subterfuge in seizing the truck by
misrepresenting its employees as deputy
sheriffs and then hiding and cannibalizing
it, Filinvest committed bad faith in violation
of Article 19 of the Civil Code which
provides:
Every person must, in the exercise of his
rights and in the performance of his duties,
act with justice, give everyone his due, and
observe honesty and good faith.
In common usage, good faith is ordinarily used to
describe that state of mind denoting honesty of
purpose, freedom from intention to defraud, and,
generally speaking, means being faithful to one's duty
or obligation.13 It consists of the honest intention to
abstain from taking an unconscionable and
unscrupulous advantage of another.14
This leaves us to the issue of damages and
attorney's fees.
In their answer with counterclaim, the private
respondents asked for (a) actual damages of
P50,000.00 for the spare parts found missing after
their recovery of the truck and another P50,000.00 for
unearned profits due to the failure to use the truck in
their ricemill business; (b) moral damages of
P50,000.00 for "the mental anguish, serious anxiety,
physical suffering, wounded feelings, social
humiliation, moral shock, sleepless nights and other
similar injury" which they suffered as a "proximate
result of the [petitioner's illegal, wrongful and unlawful
acts"; (c) nominal damages of P30,000.00; (d)
exemplary damages of P20,000.00; and (e)
attorney's fees of P20,000.00 which they incurred "as
a direct result of [petitioner's] illegal and unwarranted
actuations and in connection with the defense of this
action."15
As to actual damages, the petitioner admits that per
Exhibits "1," "9," and "10" of the private respondents,
only the sum of P33,222.00 — and not P50,000.00 —
was "supposedly spent for the alleged lost spare
parts."16 The petitioner may thus be held liable only
for such amount for actual or compensatory
damages.
Anent the moral damages, the trial court ruled that
the acts of the petitioner were in total disregard of
Articles 19, 20, and 21 of the Civil Code.17 It added
that the petitioner had not only caused actual
damages in lost earnings, but had also caused the
private respondents to suffer indignities at the hands
of the petitioner's personnel in hiding the truck in
question, misleading them, and making them work for
the release of the truck for about two weeks, thereby
justifying the award of moral damages along with the
exemplary and other damages in favor of the private
respondents.18
We agree with this finding of the trial court. The
petitioner's acts clearly fall within the contemplation of
Articles 19 and 21 of the Civil Code.19 The acts of
fraudulently taking the truck, hiding it from the private
respondents, and removing its spare parts show
nothing but a willful intention to cause loss to the
private respondents that is punctuated with bad faith
and is obviously contrary to good customs. Thus, the
private respondents are entitled to the moral
damages they prayed for, for under Article 2219 of
the Civil Code, moral damages may be recovered in
cases involving acts referred to in Article 21 of the
same Code.
The private respondents prayed for nominal damages
of P30,000.00 which the trial court did not award
them. Having failed to appeal this omission by the
trial court, we cannot make anymore such award at
this point.
The award of exemplary damages is in order in view of
the wanton, fraudulent, and oppressive manner by
which the petitioner sought to enforce its right to the
possession of the mortgaged vehicle. Article 2232 of
the Civil Code provides:
In contracts and quasi-contracts,
the court may award exemplary
damages if the defendant acted in
a wanton, fraudulent, reckless,
oppressive, or malevolent manner.
Of course, a plaintiff need not prove the
actual extent of exemplary damages, for its
determination is addressed to the sound
discretion of the court upon proof of the
plaintiff's entitlement to moral, temperate, or
actual or compensatory damages. Article
2234 of the Civil Code thus provides in part
as follows:
While the amount of the exemplary
damages need not be proved, the
plaintiff must show that he is
entitled to moral, temperate or
compensatory damages before the
court may consider the question of
whether or not exemplary damages
should be awarded. . . .
The award for attorney's fees must, however, be set
aside. There is no question that the petitioner filed in
good faith its complaint for replevin and damages to
protect its rights under the promissory note and the
chattel mortgage. That the private respondents had
defaulted in its obligation under the promissory note
thereby authorizing the petitioner to seek enforcement
of its claim thereunder and proceed against the
mortgage of the vehicle was duly recognized by the
trial court by its judgment against the private
respondents incorporated in the first part of the
dispositive portion. The private respondents did not
appeal therefrom. There would then be no basis for
awarding attorney's fees in favor of the private
respondents for whatever physical suffering, mental
anguish, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, or
any other similar injury they had suffered, even if
proven, were only such as are usually caused to
parties haled into court as a defendant and which are
not compensable, for the law could not have meant to
impose a penalty on the right to litigate.20
WHEREFORE, the assailed judgment of the Court of
Appeals in CA-G.R. CV No. 30231 as well as that of
the Regional Trial Court of San Fernando, Pampanga,
Branch 46 in Civil Case No. 6599 on the counterclaim
is AFFIRMED, subject to the modifications
abovestated. As so modified, the petitioner is hereby
ordered to pay the private respondents only the
following:
(a) actual damages in the reduced amount of
P33,222.00;
(b) moral damages in the amount of P50,000.00; and
(c) exemplary damages in the amount of P20,000.00.
No pronouncement as to costs.
SO ORDERED.
G.R. No. 157659 Petitioner, January 25,
2010
ELIGIO P. MALLARI,
vs.
GOVERNMENT SERVICE INSURANCE SYSTEM and
THE PROVINCIAL SHERIFF OF
PAMPANGA,Respondents.
DECISION
BERSAMIN, J.:
By petition for review on certiorari, the petitioner
appeals the decision promulgated on March 17, 2003,
whereby the Court of Appeals (CA) dismissed his
petition for certiorari.
Antecedents
In 1968, the petitioner obtained two loans totaling
₱34,000.00 from respondent Government Service
Insurance System (GSIS). To secure the performance
of his obligations, he mortgaged two parcels of land
registered under his and his wife Marcelina Mallari’s
names. However, he paid GSIS about ten years after
contracting the obligations only ₱10,000.00 on May 22,
1978 and ₱20,000.00 on August 11, 1978.1
What followed thereafter was the series of inordinate
moves of the petitioner to delay the efforts of GSIS to
recover on the debt, and to have the unhampered
possession of the foreclosed property.
After reminding the petitioner of his unpaid obligation
on May 2, 1979, GSIS sent on November 2, 1981 a
telegraphic demand to him to update his account. On
November 10, 1981, he requested a final accounting,
but did not do anything more. Nearly three years later,
on March 21, 1984, GSIS applied for the extrajudicial
foreclosure of the mortgage by reason of his failure to
settle his account. On November 22, 1984, he
requested an updated computation of his outstanding
account. On November 29, 1984, he persuaded the
sheriff to hold the publication of the foreclosure notice
in abeyance, to await action on his pending request for
final accounting (that is, taking his payments of
₱30,000.00 made in 1978 into account). On December
13, 1984, GSIS responded to his request and rendered
a detailed explanation of the account. On May 30,
1985, it sent another updated statement of account.
On July 21, 1986, it finally commenced extrajudicial
foreclosure proceedings against him because he had
meanwhile made no further payments.
On August 22, 1986, the petitioner sued GSIS and
the Provincial Sheriff of Pampanga in the Regional
Trial Court (RTC), Branch 44, in San Fernando,
Pampanga, docketed as Civil Case No.
7802,2 ostensibly to enjoin them from proceeding
against him for injunction (with an application for
preliminary injunction). The RTC ultimately decided
Civil Case No. 7802 in his favor, nullifying the
extrajudicial foreclosure and auction sale; cancelling
Transfer Certificate of Title (TCT) No. 284272-R and
TCT No. 284273-R already issued in the name of
GSIS; and reinstating TCT No. 61171-R and TCT No.
54835-R in his and his wife’s names.3
GSIS appealed the adverse decision to the CA,
which reversed the RTC on March 27, 1996.4
The petitioner elevated the CA decision to this Court
via petition for review on certiorari (G.R. No.
124468).5
On September 16, 1996, this Court denied his
petition for review.6 On January 15, 1997, this Court
turned down his motion for reconsideration.7
As a result, the CA decision dated March 27, 1996
became final and executory, rendering unassailable
both the extrajudicial foreclosure and auction sale
held on September 22, 1986, and the issuance of
TCT No. 284272-R and TCT No. 284273-R in the
name of GSIS.
GSIS thus filed an ex parte motion for execution and
for a writ of possession on September 2,
1999.8 Granting the ex parte motion on October 8,
1999,9 the RTC issued a writ of execution cum writ of
possession on October 21, 1999,10 ordering the
sheriff to place GSIS in possession of the properties.
The sheriff failed to serve the writ, however, partly
because of the petitioner’s request for an extension
of time within which to vacate the properties. It is
noted that GSIS acceded to the request.111avvphi1
Yet, the petitioner did not voluntarily vacate the
properties, but instead filed a motion for
reconsideration and/or to quash the writ of execution
on March 27, 2000.12 Also, the petitioner
commenced a second case against GSIS and the
provincial sheriff in the RTC in San Fernando,
Pampanga (Civil Case No. 12053), ostensibly for
consignation (coupled with a prayer for a writ of
preliminary injunction or temporary restraining order).
However, the RTC dismissed Civil Case No. 12053
on November 10, 2000 on the ground of res judicata,
impelling him to appeal the dismissal to the CA (C.A.-
G.R. CV No. 70300).13
In the meanwhile, the petitioner filed a motion dated
April 5, 2000 in Civil Case No. 7802 to hold GSIS, et
al.14 in contempt of court for painting the fence of the
properties during the pendency of his motion for
reconsideration and/or to quash the writ of
execution.15 He filed another motion in the same
case, dated April 17, 2000, to hold GSIS and its local
manager Arnulfo B. Cardenas in contempt of court for
ordering the electric company to cut off the electric
services to the properties during the pendency of
his motion for reconsideration and/or to quash the
writ of execution.16>
To prevent the Presiding Judge of Branch 44 of the
RTC from resolving the pending incidents in Civil
Case No. 7802, GSIS moved to inhibit him for alleged
partiality towards the petitioner as borne out by his
failure to act on the motion for reconsideration and/or
to quash writ of execution, motions for contempt of
court, and motion for issuance of break open
order for more than a year from their filing, praying
that the case be re-raffled to another branch of the
RTC.17 Consequently, Civil Case No. 7802 was re-
assigned to Branch 48, whose Presiding Judge then
denied the motions for contempt of court on July 30,
2001, and directed the Branch Clerk of Court to
cause the re-implementation of the writ of execution
cum writ of possession dated October 21, 1999.18
The petitioner sought reconsideration,19 but the
Presiding Judge of Branch 48 denied his motion for
reconsideration on February 11, 2002.20
Ruling of the CA
By petition for certiorari dated March 15, 2002 filed in
the CA, the petitioner assailed the orders of February
11, 2002, July 30, 2001, October 21, 1999, and
October 8, 1999.21
On March 17, 2003, however, the CA dismissed the
petition for certiorari for lack of merit,22 stating:
We find the instant petition patently devoid of merit.
This Court is not unaware of the legal tactics and
maneuvers employed by the petitioner in delaying the
disposition of the subject case (Civil Case No. 7802)
which has already become final and executory upon
the final resolution by the Supreme Court affirming
the judgment rendered by the Court of Appeals. We
construe the actuation of the petitioner in resorting to
all kinds of avenues accorded by the Rules of Court,
through the filing of several pleadings and/or motions
in litigating this case, as running counter to the
intendment of the Rules to be utilized in promoting
the objective of securing a just, speedy and
inexpensive disposition of every action and
proceeding.
The issues raised in the present controversy have
already been settled in our existing jurisprudence on
the subject. In the case of De Jesus vs. Obnamia,
Jr., the Supreme Court ruled that "generally, no notice
or even prior hearing of a motion for execution is
required before a writ of execution is issued when a
decision has already become final."
The recent accretion to the corpus of our jurisprudence
has established the principle of law, as enunciated
in Buaya vs. Stronghold Insurance Co., Inc. that "once
a judgment becomes final and executory, the prevailing
party can have it executed as a matter of right, and the
issuance of a Writ of Execution becomes a ministerial
duty of the court."
The rule is also firmly entrenched in the
aforecited Buaya case that "the effective and efficient
administration of justice requires that once a judgment
has become final, the prevailing party should not be
deprived of the fruits of the verdict by subsequent suits
on the same issues filed by the same parties. Courts
are duty-bound to put an end to controversies. Any
attempt to prolong, resurrect or juggle them should be
firmly struck down. The system of judicial review should
not be misused and abused to evade the operation of
final and executory judgments."
As succinctly put in Tag Fibers, Inc. vs. National Labor
Relations Commission, the Supreme Court is emphatic
in saying that "the finality of a decision is a jurisdictional
event that cannot be made to depend on the
convenience of a party."
We find no cogent reason to discompose the findings
of the court below. Thus, we sustain the assailed
Orders of the court a quo since no abuse of discretion
has been found to have been committed by the latter in
their issuance. Moreover, this Court finds this petition
to be part of the dilatory tactics of the petitioner to stall
the execution of a final and executory decision in Civil
Case No. 7802 which has already been resolved with
finality by no less than the highest tribunal of the land.
WHEREFORE, premises considered, the instant
petition is hereby DISMISSED for lack of merit. Costs
against the petitioner.
SO ORDERED.23
Issues
Hence, this appeal.
The petitioner insists herein that the CA gravely erred
in refusing "to accept the nullity of the following orders"
of the RTC, to wit:
1. THE ORDER OF THE TRIAL COURT
DATED OCTOBER 8, 1999, GRANTING
THE EX-PARTE MOTION FOR EXECUTION
AND/OR ISSUANCE OF THE WRIT OF
 EXECUTION OF POSSESSION IN FAVOR
OF THE RESPONDENT GSIS;
2. THE ORDER OF THE TRIAL COURT
DATED OCTOBER 21, 1999 GRANTING
THE ISSUANCE AND IMPLEMENTATION
OF THE WRIT OF EXECUTION CUM WRIT
OF POSSESSION IN FAVOR OF
RESPONDENT GSIS;
3. THE ORDER OF THE TRIAL COURT
DATED JULY 30, 2001 DIRECTING TO
CAUSE THE RE-IMPLEMENTATION OF
THE WRIT OF EXECUTION CUM WRIT OF
POSSESSION IN FAVOR OF THE
RESPONDENT GSIS; and
4. THE ORDER OF THE TRIAL COURT
DATED FEBRUARY 11, 2002, DENYING
THE MOTION FOR RECONSIDERATION
OF THE ORDER DATED SEPTEMBER 14,
2001, IN RELATION TO THE COURT
ORDER DATED JULY 30, 2001.24
Ruling of the Court
The petition for review on certiorari absolutely lacks
merit.
I
Petition for Certiorari in CA
Was Filed Beyond Reglementary Period
The petition assailed before the CA on certiorari the
following orders of the RTC, to wit:
1. The order dated October 8, 1999 (granting
the ex parte motion for execution and/or
issuance of the writ of execution cum writ of
possession of GSIS);25
2. The order dated October 21, 1999
(directing the issuance of the writ of
execution cum writ of possession in favor of
GSIS);26
3. The order dated July 30, 2001 (requiring
the Branch Clerk of Court to cause the re-
implementation of the writ of execution cum
writ of possession, and dismissing the
motions to hold GSIS, et al. in
contempt);27 and
4. The order dated February 11, 2002
(denying the motion for reconsideration dated
August 17, 2001 seeking the reconsideration
of the order dated July 30, 2001).28
The July 30, 2001 order denied the petitioner’s motion
for reconsideration and/or to quash writ of execution,
and motion to hold GSIS, Tony Dimatulac, et al. and
Arnulfo Cardenas in contempt; and declared
GSIS’s motion for issuance of break open order and
for designation of special sheriff from GSIS Legal
Services Group as premature. In turn, the motion for
reconsideration and/or to quash writ of
execution denied by the order of July 30, 2001
hadmerely challenged the orders of October 8, 1999
and October 21, 1999 (granting the writ of execution
cum writ of possession as a matter of course).
Considering that the motion for reconsideration dated
August 17, 2001 denied by the order dated February
11, 2002 was in reality and effect a prohibited second
motion for reconsideration vis-à-vis the orders dated
October 21, 1999 and October 8, 1999, the assailed
orders dated July 30, 2001, October 21, 1999, and
October 8, 1999 could no longer be subject to attack
by certiorari. Thus, the petition for certiorari filed only
in March 2002 was already improper and tardy for
being made beyond the 60-day limitation defined in
Section 4, Rule 65, 1997 Rules of Civil Procedure, as
amended,29 which requires a petition for certiorari to
be filed "not later than sixty (60) days from notice of
the judgment, order or resolution," or, in case a
motion for reconsideration or new trial is timely filed,
whether such motion is required or not, "the sixty (60)
day period shall be counted from notice of the denial
of the said motion."
It is worth emphasizing that the 60-day limitation is
considered inextendible, because the limitation has
been prescribed to avoid any unreasonable delay
that violates the constitutional rights of parties to a
speedy disposition of their cases.30
II
Nature of the Writ of Possession
and its Ministerial Issuance
The petitioner claims that he had not been notified of
the motion seeking the issuance of the writ of
execution cum writ of possession; hence, the writ
was invalid.
As earlier shown, the CA disagreed with him.
We sustain the CA, and confirm that the petitioner, as
defaulting mortgagor, was not entitled under Act
3135, as amended, and its pertinent jurisprudence to
any prior notice of the application for the issuance of
the writ of possession.
A writ of possession, which commands the sheriff to
place a person in possession of real property, may be
issued in: (1) land registration proceedings under
Section 17 of Act No. 496; (2) judicial foreclosure,
provided the debtor is in possession of the
mortgaged property, and no third person, not a party
to the foreclosure suit, had intervened; (3)
extrajudicial foreclosure of a real estate mortgage,
pending redemption under Section 7 of Act No. 3135,
as amended by Act No. 4118; and (4) execution
sales, pursuant to the last paragraph of Section 33,
Rule 39 of the Rules of Court.31
Anent the redemption of property sold in an
extrajudicial foreclosure sale made pursuant to the
special power referred to in Section 132 of Act No.
3135,33 as amended, the debtor, his successor-in-
interest, or any judicial creditor or judgment creditor
of said debtor, or any person having a lien on the
property subsequent to the mortgage or deed of trust
under which the property is sold has the right to
redeem the property at anytime within the term of one
year from and after the date of the sale, such
redemption to be governed by the provisions of
Section 464 to Section 466 of the Code of Civil
Procedure, to the extent that said provisions were not
inconsistent with the provisions of Act 3135.34
In this regard, we clarify that the redemption period
envisioned under Act 3135 is reckoned from the date
of the registration of the sale, not from and after the
date of the sale, as the text of Act 3135 shows.
Although the original Rules of Court (effective on July
1, 1940) incorporated Section 464 to Section 466 of
the Code of Civil Procedure as its Section 25
(Section 464); Section 26 (Section 465); and Section
27 (Section 466) of Rule 39, with Section 27 still
expressly reckoning the redemption period to be "at
any time within twelve months after the sale;" and
although the Revised Rules of Court (effective on
January 1, 1964) continued to provide in Section 30
of Rule 39 that the redemption be made from the
purchaser "at any time within
twelve (12) months after the sale,"35 the 12-month
period of redemption came to be held as beginning
"to run not from the date of the sale but from the time
of registration of the sale in the Office of the Register
of Deeds."36 This construction was due to the fact
that the sheriff’s sale of registered (and unregistered)
lands did not take effect as a conveyance, or did not
bind the land, until the sale was registered in the
Register of Deeds.37
Desiring to avoid any confusion arising from the
conflict between the texts of the Rules of Court (1940
and 1964) and Act No. 3135, on one hand, and the
jurisprudence clarifying the reckoning of the
redemption period in judicial sales of real property, on
the other hand, the Court has incorporated in Section
28 of Rule 39 of the current Rules of Court (effective
on July 1, 1997) the foregoing judicial construction of
reckoning the redemption period from the date of the
registration of the certificate of sale, to wit:
Sec. 28. Time and manner of, and amounts payable
on, successive redemptions; notice to be given and
filed. — The judgment obligor, or redemptioner, may
redeem the property from the purchaser, at any time
within one (1) year from the date of the registration of
the certificate of sale, by paying the purchaser the
amount of his purchase, with one per centum per
month interest thereon in addition, up to the time of
redemption, together with the amount of any
assessments or taxes which the purchaser may have
paid thereon after purchase, and interest on such last
named amount at the same rate; and if the purchaser
be also a creditor having a prior lien to that of the
redemptioner, other than the judgment under which
such purchase was made, the amount of such other
lien, with interest.
Property so redeemed may again be redeemed within
sixty (60) days after the last redemption upon payment
of the sum paid on the last redemption, with two per
centum thereon in addition, and the amount of any
assessments or taxes which the last redemptioner may
have paid thereon after redemption by him, with
interest on such last-named amount, and in addition,
the amount of any liens held by said last redemptioner
prior to his own, with interest. The property may be
again, and as often as a redemptioner is so disposed,
redeemed from any previous redemptioner within sixty
(60) days after the last redemption, on paying the sum
paid on the last previous redemption, with two per
centum thereon in addition, and the amounts of any
assessments or taxes which the last previous
redemptioner paid after the redemption thereon, with
interest thereon, and the amount of any liens held by
the last redemptioner prior to his own, with interest.
Written notice of any redemption must be given to the
officer who made the sale and a duplicate filed with the
registry of deeds of the place, and if any assessments
or taxes are paid by the redemptioner or if he has or
acquires any lien other than that upon which the
redemption was made, notice thereof must in like
manner be given to the officer and filed with the registry
of deeds; if such notice be not filed, the property may
be redeemed without paying such assessments, taxes,
or liens. (30a) (Emphasis supplied).
Accordingly, the mortgagor or his successor-in-interest
must redeem the foreclosed property within one year
from the registration of the sale with the Register of
Deeds in order to avoid the title from consolidating in
the purchaser. By failing to redeem thuswise, the
mortgagor loses all interest over the foreclosed
property.38 The purchaser, who has a right to
possession that extends beyond the expiration of the
redemption period, becomes the absolute owner of the
property when no redemption is made,39 that it is no
longer necessary for the purchaser to file the bond
required under Section 7 of Act No. 3135, as amended,
considering that the possession of the land becomes
his absolute right as the land’s confirmed owner.40 The
consolidation of ownership in the purchaser’s name
and the issuance to him of a new TCT then entitles him
to demand possession of the property at any time, and
the issuance of a writ of possession to him becomes a
matter of right upon the consolidation of title in his
name.
The court can neither halt nor hesitate to issue the writ
of possession. It cannot exercise any discretion to
determine whether or not to issue the writ, for the
issuance of the writ to the purchaser in an extrajudicial
foreclosure sale becomes a ministerial
function.41 Verily, a marked distinction exists between
a discretionary act and a ministerial one. A purely
ministerial act or duty is one that an officer or tribunal
performs in a given state of facts, in a prescribed
manner, in obedience to the mandate of a legal
authority, without regard to or the exercise of his own
judgment upon the propriety or impropriety of the act
done. If the law imposes a duty upon a public officer
and gives him the right to decide how or when the duty
shall be performed, such duty is discretionary, not
ministerial. The duty is ministerial only when its
discharge requires neither the exercise of official
discretion nor the exercise of judgment.42
The proceeding upon an application for a writ of
possession is ex parte and summary in nature, brought
for the benefit of one party only and without notice
being sent by the court to any person adverse in
interest. The relief is granted even without giving an
opportunity to be heard to the person against whom the
relief is sought.43 Its nature as an ex parte petition
under Act No. 3135, as amended, renders the
application for the issuance of a writ of possession a
non-litigious proceeding.44
It is clear from the foregoing that a non-redeeming
mortgagor like the petitioner had no more right to
challenge the issuance of the writ of execution cum writ
of possession upon the ex parte application of GSIS.
He could not also impugn anymore the extrajudicial
foreclosure, and could not undo the consolidation in
GSIS of the ownership of the properties covered by
TCT No. 284272-R and TCT No. 284273-R, which
consolidation was already irreversible. Hence, his
moves against the writ of execution cum writ of
possession were tainted by bad faith, for he was only
too aware, being his own lawyer, of the dire
consequences of his non-redemption within the period
provided by law for that purpose.
III
Dismissal of Petitioner’s Motion for Indirect Contempt
Was Proper and In Accord with the Rules of Court
The petitioner insists that the RTC gravely erred in
dismissing his charges for indirect contempt against
GSIS, et al.; and that the CA should have consequently
granted his petition for certiorari.
The petitioner’s insistence is plainly unwarranted.
First of all, Section 4, Rule 71, 1997 Rules of Civil
Procedure, provides as follows:
Section 4. How proceedings commenced. —
Proceedings for indirect contempt may be
initiated motu proprio by the court against which the
contempt was committed by an order or any other
formal charge requiring the respondent to show
cause why he should not be punished for contempt.
In all other cases, charges for indirect contempt shall
be commenced by a verified petition with supporting
particulars and certified true copies of documents or
papers involved therein, and upon full compliance
with the requirements for filing initiatory pleadings for
civil actions in the court concerned. If the contempt
charges arose out of or are related to a principal
action pending in the court, the petition for contempt
shall allege that fact but said petition shall be
docketed, heard and decided separately, unless the
court in its discretion orders the consolidation of the
contempt charge and the principal action for joint
hearing and decision. (n) (Emphasis supplied).
Indeed, a person may be charged with indirect
contempt only by either of two alternative ways,
namely: (1) by a verified petition, if initiated by a
party; or (2) by an order or any other formal charge
requiring the respondent to show cause why he
should not be punished for contempt, if made by a
court against which the contempt is committed. In
short, a charge of indirect contempt must be initiated
through a verified petition, unless the charge is
directly made by the court against which the
contemptuous act is committed.
Justice Regalado has explained why the requirement
of the filing of a verified petition for contempt is
mandatory:45
1. This new provision clarifies with a regulatory norm
the proper procedure for commencing contempt
proceedings. While such proceeding has been
classified as a special civil action under the former
Rules, the heterogeneous practice, tolerated by the
courts, has been for any party to file a mere motion
without paying any docket or lawful fees therefor and
without complying with the requirements for initiatory
pleadings, which is now required in the second
paragraph of this amended section. Worse, and as a
consequence of unregulated motions for contempt,
said incidents sometimes remain pending for
resolution although the main case has already been
decided. There are other undesirable aspects but, at
any rate, the same may now be eliminated by this
amendatory procedure.
Henceforth, except for indirect contempt proceedings
initiated motu proprio by order of or a formal charge
by the offended court, all charges shall be
commenced by a verified petition with full compliance
with the requirements therefor and shall be disposed
of in accordance with the second paragraph of this
section. (Emphasis supplied).
Clearly, the petitioner’s charging GSIS, et al. with
indirect contempt by mere motions was not permitted
by the Rules of Court.
And, secondly, even assuming that charges for
contempt could be initiated by motion, the petitioner
should have tendered filing fees. The need to tender
filing fees derived from the fact that the procedure for
indirect contempt under Rule 71, Rules of Court was
an independent special civil action. Yet, the petitioner
did not tender and pay filing fees, resulting in the trial
court not acquiring jurisdiction over the action. Truly,
the omission to tender filing fees would have also
warranted the dismissal of the charges.
It seems to be indubitable from the foregoing that the
petitioner initiated the charges for indirect contempt
without regard to the requisites of the Rules of Court
simply to vex the adverse party. He thereby
disrespected the orderly administration of justice and
committed, yet again, an abuse of procedures.
IV
Petitioner Was Guilty of
Misconduct As A Lawyer
The CA deemed it unavoidable to observe that the
petition for certiorari brought by the petitioner to the
CA was "part of the dilatory tactics of the petitioner to
stall the execution of a final and executory decision in
Civil Case No. 7802 which has already been resolved
with finality by no less than the highest tribunal of the
land."46
The observation of the CA deserves our concurrence.
Verily, the petitioner wittingly adopted his
aforedescribed worthless and vexatious legal
maneuvers for no other purpose except to delay the
full enforcement of the writ of possession, despite
knowing, being himself a lawyer, that as a non-
redeeming mortgagor he could no longer impugn
both the extrajudicial foreclosure and the ex parte
issuance of the writ of execution cum writ of
possession; and that the enforcement of the duly-
issued writ of possession could not be delayed. He
thus deliberately abused court procedures and
processes, in order to enable himself to obstruct and
stifle the fair and quick administration of justice in
favor of mortgagee and purchaser GSIS.
His conduct contravened Rule 10.03, Canon 10 of
the Code of Professional Responsibility, by which he
was enjoined as a lawyer to "observe the rules of
procedure and xxx not [to] misuse them to defeat the
ends of justice." By his dilatory moves, he further
breached and dishonored his Lawyer’s Oath,
particularly:47
xxx I will not wittingly or willingly promote or sue any
groundless, false or unlawful suit, nor give aid nor
consent to the same; I will delay no man for money or
malice, and will conduct myself as a lawyer according
to the best of my knowledge and discretion with all
good fidelity as well to the courts as to my clients xxx
We stress that the petitioner’s being the party litigant
himself did not give him the license to resort to dilatory
moves. His zeal to defend whatever rights he then
believed he had and to promote his perceived
remaining interests in the property already lawfully
transferred to GSIS should not exceed the bounds of
the law, for he remained at all times an officer of the
Court burdened to conduct himself "with all good fidelity
as well to the courts as to [his] clients."48His true
obligation as a lawyer should not be warped by any
misplaced sense of his rights and interests as a litigant,
because he was, above all, bound not to unduly delay
a case, not to impede the execution of a judgment, and
not to misuse Court processes.49 Consequently, he
must be made to account for his misconduct as a
lawyer.
WHEREFORE, we deny the petition for review on
certiorari for lack of merit, and affirm the decision of the
Court of Appeals promulgated on March 17, 2003, with
the costs of suit to be paid by the petitioner.
The Committee on Bar Discipline of the Integrated Bar
of the Philippines is directed to investigate the
petitioner for what appear to be (a) his deliberate
disregard of the Rules of Court and jurisprudence
pertinent to the issuance and implementation of the writ
of possession under Act No. 3135, as amended; and
(b) his witting violations of the Lawyer’s Oath and the
Code of Professional Responsibility.
SO ORDERED.
G.R. No. 98334 May 8, 1992
MANUEL D. MEDIDA, Deputy Sheriff of the
Province of Cebu, CITY SAVINGS BANK (formerly
Cebu City Savings and Loan Association, Inc.) and
TEOTIMO ABELLANA, petitioners,
vs.
COURT OF APPEALS and SPS. ANDRES DOLINO
and PASCUALA DOLINO, respondents.
Gines N. Abellana for petitioners.
Dionisio U. Flores for private respondents.
REGALADO, J.:
The core issue in this case is whether or not a
mortgagor, whose property has been extrajudicially
foreclosed and sold at the corresponding foreclosure
sale, may validly execute a mortgage contract over the
same property in favor of a third party during the period
of redemption.
The present appeal by certiorari assails the
decision 1 of respondent Court of Appeals in CA-G.R.
CV No. 12678 where it answered the question posed
by the foregoing issue in the negative and modified the
decision 2 of the then Court of First Instance of Cebu in
Civil Case No. R-18616 wherein the validity of said
subsequent mortgage was assumed and the case was
otherwise disposed of on other grounds.
The facts which gave rise to the institution of the
aforesaid civil case in the trial court, as found by
respondent Court of Appeals, are as follows:
On October 10, 1974 plaintiff spouses,
alarmed of losing their right of redemption
over lot 4731 of the Cebu City Cadastre and
embraced under TCT No. 14272 from Mr.
Juan Gandioncho, purchaser of the aforesaid
lot at the foreclosure sale of the previous
mortgage in favor of Cebu City Development
Bank, went to Teotimo Abellana, president of
defendant Association, to obtain a loan of
P30,000.00. Prior thereto or on October 3,
1974, their son Teofredo Dolino filed a similar
loan application for Twenty-Five Thousand
(P25,000.00) Pesos with lot No. 4731 offered
as security for the Thirty Thousand
(P30,000.00) Pesos loan from defendant
association. Subsequently, they executed a
promissory note in favor of defendant
association. Both documents indicated that
the principal obligation is for Thirty Thousand
(P30,000.00) Pesos payable in one year with
interest at twelve (12%) percent per annum.
When the loan became due and demandable
without plaintiff paying the same, defendant
association caused the extrajudicial
foreclosure of the mortgage on March 16,
1976. After the posting and publication
requirements were complied with, the land
was sold at public auction on April 19, 1976
to defendant association being the highest
bidder. The certificate of sale was issued on
April 20, 1976 and registered on May 10,
1976 with the Register of Deeds of Cebu.
On May 24, 1971 (sic, 1977), no redemption
having been effected by plaintiff, TCT No.
14272 was cancelled and in lieu thereof TCT
No. 68041 was issued in the name of
defendant association.3
xxx xxx xxx
On October 18, 1979, private respondents filed the
aforestated Civil Case No. R-18616 in the court a
quo for the annulment of the sale at public auction
conducted on April 19, 1976, as well as the
corresponding certificate of sale issued pursuant
thereto.
In their complaint, private respondents, as plaintiffs
therein, assailed the validity of the extrajudicial
foreclosure sale of their property, claiming that the
same was held in violation of Act No. 3135, as
amended, and prayed, inter alia, for the cancellation
of Transfer Certificate of Title No. 68041 issued in
favor of therein defendant City Savings and Loan
Association, Inc., now known as City Savings Bank
and one of the petitioners herein.
In its answer, the defendant association therein
denied the material allegations of the complaint and
averred, among others, that the present private
respondent spouses may still avail of their right of
redemption over the land in question.
On January 12, 1983, after trial on the merits, the
court below rendered judgment upholding the validity
of the loan and the real estate mortgage, but
annulling the extrajudicial foreclosure sale inasmuch
as the same failed to comply with the notice
requirements in Act No. 3135, as amended, under
the following dispositive part:
WHEREFORE, the foregoing premises
considered and upon the view taken by the
Court of this case, judgment is hereby
rendered, as follows:
1. Declaring ineffective the extrajudicial
foreclosure of the mortgage over Lot No.
4731 of the Cadastral Survey of Cebu;
2. Ordering the cancellation of Transfer
Certificate of Title No. 68041 of the
Registry of Deeds of the City of Cebu in the
name of defendant Cebu City Savings and
Loan Association, Inc. the corresponding
issuance of a new transfer certificate to
contain all the annotations made in TCT
No. 14272 of the plaintiffs Pascuala
Sabellano, married to Andres Dolino;
3. Ordering the plaintiffs aforenamed to pay
the defendant Cebu City Savings and Loan
Association, Inc. the unpaid balance of the
loan, plus interest; and reimbursing said
defendant the value of any necessary and
useful expenditures on the property after
deducting any income derived by said
defendant from the property.
For this purpose, defendant Association is
given 15 days from receipt hereof within
which to submit its statement of the amount
due it from the plaintiffs Dolino, with notice
to them. The payment to be made by the
plaintiffs shall be within ninety (90) days
from their receipt of the order approving the
amount due the defendant Cebu City
Savings and Loan Association, Inc.
No award of damages or costs to
either party.
SO ORDERED. 4
Not satisfied therewith, herein private respondents
interposed a partial appeal to respondent court with
respect to the second and third paragraphs of the
aforequoted decretal portion, contending that the
lower court erred in (1) declaring that the mortgage
executed by the therein plaintiff spouses Dolino is
valid; (2) permitting therein Cebu City Savings and
Loan Association, Inc. to collect interest after the
same foreclosure proceedings and auction sale
which are null and void from the beginning; (3) not
ordering the forfeiture of the capital or balance of the
loan with usurious interest; and (4) not sentencing
therein defendant to pay damages and attorney's
fees to plaintiffs. 5
On September 28, 1990, respondent Court of
Appeals promulgated its decision modifying the
decision of the lower court, with this adjudication:
WHEREFORE, PREMISES
CONSIDERED, the decision appealed from
is hereby MODIFIED declaring as void and
ineffective the real estate mortgage
executed by plaintiffs in favor of defendant
association. With this modification, the
decision is AFFIRMED in other respects. 6
Herein petitioners then filed a motion for
reconsideration which was denied by respondent
court in its resolution dated March 5, 1991, hence the
present petition which, in synthesis, postulates that
respondent court erred in declaring the real estate
mortgage void, and also impugns the judgment of the
trial court declaring ineffective the extrajudicial
foreclosure of said mortgage and ordering the
cancellation of Transfer Certificate of Title No. 68041
issued in favor of the predecessor of petitioner
bank. 7
The first submission assailing the judgment of
respondent Court of Appeals is meritorious.
Said respondent court declared the real estate
mortgage in question null and void for the reason that
the mortgagor spouses, at the time when the said
mortgage was executed, were no longer the owners
of the lot, having supposedly lost the same when the lot
was sold to a purchaser in the foreclosure sale under
the prior mortgage. This holding cannot be sustained.
Preliminarily, the issue of ownership of the mortgaged
property was never alleged in the complaint nor was
the same raised during the trial, hence that issue
should not have been taken cognizance of by the Court
of Appeals. An issue which was neither averred in the
complaint nor ventilated during the trial in the court
below cannot be raised for the first time on appeal as it
would be offensive to the basic rule of fair play, justice
and due process. 8
Nonetheless, since respondent Court took cognizance
thereof and, in fact, anchored its modificatory judgment
on its ratiocination of that issue, we are inclined to
liberalize the rule so that we can in turn pass upon the
correctness of its conclusion. We may consider such
procedure as analogous to the rule that an unassigned
error closely related to an error properly assigned, or
upon which the determination of the question properly
assigned is dependent, may be considered by an
appellate court. 9 We adopt this approach since, after
all, both lower courts agreed upon the invalidity of the
extrajudicial foreclosure but differed only on the matter
of the validity of the real estate mortgage upon which
the extrajudicial foreclosure was based.
In arriving at its conclusion, respondent court placed
full reliance on what obviously is an obiter dictum laid
down in the course of the disquisition in Dizon
vs. Gaborro, et al. which we shall analyze. 10 For, as
explicitly stated therein by the Court, "(t)he basic issue
to be resolved in this case is whether the 'Deed of Sale
with Assumption of Mortgage' and the 'Option to
Purchase Real Estate,' two instruments executed by
and between petitioner Jose P. Dizon and Alfredo G.
Gaborro (defendant below) on the same day, October
6, 1959, constitute in truth and in fact an absolute sale
of the three parcels of land therein described or merely
an equitable mortgage or conveyance thereof by way
of security for reimbursement or repayment by
petitioner Jose P. Dizon of any and all sums which may
have been paid to the Development Bank of the
Philippines and the Philippine National Bank by Alfredo
G. Gaborro . . . ." Said documents were executed by
the parties and the payments were made by Gaborro
for the debt of Dizon to said banks after the
Development Bank of the Philippines had foreclosed
the mortgage executed by Dizon and during the period
of redemption after the foreclosure sale of the
mortgaged property to said creditor bank.
The trial court held that the true agreement between
the parties therein was that Gaborro would assume and
pay the indebtedness of Dizon to the banks and, in
consideration thereof, Gaborro was given the
possession and enjoyment of the properties in question
until Dizon shall have reimbursed him for the amount
paid to the creditor banks. Accordingly, the trial court
ordered the reformation of the documents to the extent
indicated and such particular relief was affirmed by the
Court of Appeals. This Court held that the agreement
between the parties is one of those innominate
contracts under Article 1307 of the Civil Code whereby
the parties agreed "to give and to do" certain rights and
obligations, but partaking of the nature of antichresis.
Hence, on appeal to this Court, the judgment of the
Court of Appeals in that case was affirmed but with the
following pronouncements:
The two instruments sought to be reformed in
this case appear to stipulate rights and
obligations between the parties thereto
pertaining to and involving parcels of land
that had already been foreclosed and sold
extrajudicially, and purchased by the
mortgage creditor, a third party. It becomes,
therefore, necessary, to determine the
legality of said rights and obligations arising
from the foreclosure and sale proceedings
not only between the two contracting parties
to the instruments executed between them
but also in so far as the agreement affects
the rights of the third party, the purchaser
Bank.
xxx xxx xxx
Under the Revised Rules of Court, Rule 39,
Section 33, the judgment debtor remains in
possession of the property foreclosed and
sold, during the period of redemption. If the
judgment debtor is in possession of the
property sold, he is entitled to retain it, and
receive the fruits, the purchaser not being
entitled to such possession. (Riosa vs.
Verzosa, 26 Phil. 86; Velasco vs.
Rosenberg's, Inc., 32 Phil. 72; Pabico vs.
Pauco, 43 Phil. 572; Power vs. PNB, 54 Phil.
54; Gorospe vs. Gochangco, L-12735, Oct.
30, 1959).
xxx xxx xxx
Upon foreclosure and sale, the purchaser is
entitled to a certificate of sale executed by
the sheriff. (Section 27, Revised Rules of
Court). After the termination of the period of
redemption and no redemption having been
made, the purchaser is entitled to a deed of
conveyance and to the possession of the
properties. (Section 35, Revised Rules of
Court). The weight of authority is to the effect
that the purchaser of land sold at public
auction under a writ of execution has only an
inchoate right to the property, subject to be
defeated and terminated within the period
of 12 months from the date of sale, by a
redemption on the part of the
owner. Therefore, the judgment debtor in
possession of the property is entitled to
remain therein during the period for
redemption. (Riosa vs. Verzosa, 26 Phil.
86, 89; Gonzales vs. Calimbas, 51 Phil.
355).
In the case before Us, after the extrajudicial
foreclosure and sale of his properties,
petitioner Dizon retained the right to
redeem the lands, the possession, use and
enjoyment of the same during the period of
redemption. And these are the only rights
that Dizon could legally transfer, cede and
convey unto respondent Gaborro under the
instrument captioned Deed of Sale with
Assumption of Mortgage (Exh. A-
Stipulation), likewise the same rights that
said respondent could acquire in
consideration of the latter's promise to pay
and assume the loan of petitioner Dizon
with DBP and PNB.
Such an instrument cannot be legally
considered a real and unconditional sale of
the parcels of land, firstly, because there
was absolutely no money consideration
therefor, as admittedly stipulated, the sum
of P131,831.91 mentioned in the document
as the consideration "receipt of which was
acknowledged" was not actually paid; and,
secondly, because the properties had
already been previously sold by the sheriff
at the foreclosure sale, thereby divesting
the petitioner of his full right as owner
thereof to dispose and sell the lands.
(Emphasis ours.)
It was apparently the second reason stated by the
Court in said case which was relied upon by
respondent court in the present case on which to
premise its conclusion. Yet, as demonstrated by the
relevant excerpts above quoted, not only was
that obiter therein unnecessary since evidently no
sale was concluded, but even inaccurate, if not
inconsistent, when considered in the context of the
discussion in its entirety. If, as admitted, the
purchaser at the foreclosure sale merely acquired an
inchoate right to the property which could ripen into
ownership only upon the lapse of the redemption
period without his credit having been discharged, it is
illogical to hold that during that same period of twelve
months the mortgagor was "divested" of his
ownership, since the absurd result would be that the
land will consequently be without an owner although
it remains registered in the name of the mortgagor.
That is why the discussion in said case carefully and
felicitously states that what is divested from the
mortgagor is only his "full right as owner thereof to
dispose (of) and sell the lands," in effect, merely
clarifying that the mortgagor does not have the
unconditional power to absolutely sell the land since
the same is encumbered by a lien of a third person
which, if unsatisfied, could result in a consolidation of
ownership in the lienholder but only after the lapse of
the period of redemption. Even on that score, it may
plausibly be argued that what is delimited is not the
mortgagor'sjus dispodendi, as an attribute of
ownership, but merely the rights conferred by such
act of disposal which may correspondingly be
restricted.
At any rate, even the foregoing considerations and
arguments would have no application in the case at
bar and need not here be resolved since what is
presently involved is a mortgage, not a sale, to
petitioner bank. Such mortgage does not involve a
transfer, cession or conveyance of the property but
only constitutes a lien thereon. There is no obstacle
to the legal creation of such a lien even after the
auction sale of the property but during the redemption
period, since no distinction is made between a
mortgage constituted over the property before or after
the auction sale thereof.
Thus, a redemptioner is defined as a creditor having
a lien by attachment, judgment or mortgage on the
property sold, or on some part thereof, subsequent to
the judgment under which the property was
sold. 11 Of course, while in extrajudicial foreclosure
the sale contemplated is not under a judgment but
the proceeding pursuant to which the mortgaged
property was sold, a subsequent mortgage could
nevertheless be legally constituted thereafter with the
subsequent mortgagee becoming and acquiring the
rights of a redemptioner, aside from his right against
the mortgagor.
In either case, what bears attention is that since the
mortgagor remains as the absolute owner of the
property during the redemption period and has the
free disposal of his property, there would be
compliance with the requisites of Article 2085 of the
Civil Code for the constitution of another mortgage on
the property. To hold otherwise would create the
inequitable situation wherein the mortgagor would be
deprived of the opportunity, which may be his last
recourse, to raise funds wherewith to timely redeem
his property through another mortgage thereon.
Coming back to the present controversy, it is
undisputed that the real estate mortgage in favor of
petitioner bank was executed by respondent spouses
during the period of redemption. We reiterate that
during said period it cannot be said that the
mortgagor is no longer the owner of the foreclosed
property since the rule up to now is that the right of a
purchaser at a foreclosure sale is merely inchoate until
after the period of redemption has expired without the
right being exercised. 12 The title to land sold under
mortgage foreclosure remains in the mortgagor or his
grantee until the expiration of the redemption period
and conveyance by the master's deed. 13 To repeat,
the rule has always been that it is only upon the
expiration of the redemption period, without the
judgment debtor having made use of his right of
redemption, that the ownership of the land sold
becomes consolidated in the purchaser. 14
Parenthetically, therefore, what actually is effected
where redemption is seasonably exercised by the
judgment or mortgage debtor is not the recovery of
ownership of his land, which ownership he never lost,
but the elimination from his title thereto of the lien
created by the levy on attachment or judgment or the
registration of a mortgage thereon. The American rule
is similarly to the effect that the redemption of property
sold under a foreclosure sale defeats the inchoate right
of the purchaser and restores the property to the same
condition as if no sale had been attempted. Further, it
does not give to the mortgagor a new title, but merely
restores to him the title freed of the encumbrance of the
lien foreclosed. 15
We cannot rule on the plaint of petitioners that the trial
court erred in declaring ineffective the extrajudicial
foreclosure and the sale of the property to petitioner
bank. The court below spelled out at length in its
decision the facts which it considered as violative of the
provisions of Act No. 3135, as amended, by reason of
which it nullified the extrajudicial foreclosure
proceeding and its effects. Such findings and ruling of
the trial court are already final and binding on
petitioners and can no longer be modified, petitioners
having failed to appeal therefrom.
An appellee who has not himself appealed cannot
obtain from the appellate court any affirmative relief
other than the ones granted in the decision of the court
below. 16 He cannot impugn the correctness of a
judgment not appealed from by him. He cannot assign
such errors as are designed to have the judgment
modified. All that said appellee can do is to make a
counter-assignment of errors or to argue on issues
raised at the trial only for the purpose of sustaining the
judgment in his favor, even on grounds not included in
the decision of the court a quo nor raised in the
appellant's assignment of errors or arguments.17
WHEREFORE, the decision of respondent Court of
Appeals, insofar as it modifies the judgment of the trial
court, is REVERSED and SET ASIDE. The judgment of
said trial court in Civil Case No. R-18616, dated
January 12, 1983, is hereby REINSTATED.
SO ORDERED.
G.R. No. L-36821 June 22, 1978
JOSE P. DIZON, petitioner,
vs.
ALFREDO G. GABORRO (Substituted by PACITA
DE GUZMAN GABORRO as Judicial Administratrix
of the Estate of Alfredo G. Gaborro) and the
DEVELOPMENT BANK OF THE
PHILIPPINES, respondents.
Leonardo Abola for petitioner.
Carlos J. Antiporda for respondents.
GUERRERO, J.:
Petition for review on certiorari of the decision of the
Court Appeals 1 in CA-G.R. No. 46975-R entitled "Jose
P. Dizon, Plaintiff-Appellant, vs. Alfredo G.
Gaborro (substituted by Pacita de Guzman Gaborro as
Judicial Administratrix of the Estate of Alfredo G,
Gaborro) trial the Development Bank of the Philippines,
Defendants-Appellees," affirming with modification the
decision of the Court of First Instance of Pampanga,
Branch II in Civil Case No. 2184.
The dispositive portion of the decision sought to be
reviewed reads:
IN VIEW OF THE FOREGOING, the
judgment appealed therefrom is hereby
affirmed with modification that the plaintiff-
appellant has the right to refund or reimburse
the defendant- appellees he sum of
P131,831.91 with interest at 8% per annum
from October 6, 1959 until full payment, said
right to be exercised within one year from the
date this judgment becomes final, with the
understanding that, if he fails to do so within
the said period, then he is deemed to have
lost his right over the lands forever. With
costs against the appellant. 2
MODIFIED.
The basic issue to be resolved in this case is whether
the 'Deed of Sale with Assumption of Mortgage', trial
Option to Purchase Real Estate". two instruments
executed by trial between Petitioner Jose P. Dizon trial
Alfredo G. Gaborro (defendant below) on the same
day, October 6, 1959 constitute in truth trial in fact an
absolute sale of the three parcels of land therein
described or merely an equitable mortgage or
conveyance thereof by way of security for
reimbursement, refund or repayment by petitioner Jose
P. Dizon of any trial all sums which may have been
paid to the Development Bank of the Philippines trial
the Philippine National Bank by Alfredo G. Gaborro
(later substituted herein by his wife Pacita de
Guzman Gaborro as administratrix of the estate of
Alfredo G. Gaborro) who had died during the
pendency of the case.
A supplementary issue raised is whether or not
Gaborro or the respondent administratrix of the
estate should account for all the fruits produced trial
income received by them from the lands mentioned
trial described in the aforesaid "Deed of Sale with
Assumption of Mortgage."
The antecedent facts established in the record are
not disputed. Petitioner Jose P. Dizon was the owner
of the three (3) parcels of land, subject matter of this
litigation, situated in Mabalacat, Pampanga with an
aggregate area of 130.58 hectares, as evidenced by
Transfer Certificate of Title No. 15679. He constituted
a first mortgage lien in favor of the Develop. ment
Bank of the Philippines in order to secure a loan in
the sum of P38,000.00 trial a second mortgage lien in
favor of the Philippine National Bank to cure his
indebtedness to said bank in the amount of
P93,831.91.
Petitioner Dizon having defaulted in the payment of
his debt, the Development Bank of the Philippines
foreclosed the mortgage extrajudicially pursuant to
the provisions of Act No. 3135. On May 26, 1959, the
hinds were sold to the DBP for- P31,459.21, which
amount covered the loan, interest trial expenses, trial
the corresponding "Certificate of Sale," (Exhibit A-2,
Exhibit 1b was executed in favor of the said On
November 12, 1959, Dizon himself executed the
deed of sale (Exhibit Al over the properties in favor of
the DBP which deed was recorded in the Office of the
Register of Deeds on October 6, 1960.
Sometime prior to October 6, 1959 Alfredo G.
Gaborro trial Jose P. Dizon met. Gaborro became
interested in the lands of Dizon. Dizon originally
intended to lease to Gaborro the property which had
been lying idle for some time. But as the mortgage
was already foreclosed by the DPB trial the bank in
fact purchased the lands at the foreclosure sale on
May 26, 1959, they abandoned the projected lease.
They then entered into the following contract on
October 6, 1959 captioned trial quoted, to wit:
DEED OF SALE WITH ASSUMPTION
OF MORTGAGE
KNOW ALL MEN BY THESE PRESENTS:
This DEED OF SALE WITH ASSUMPTION
OF MORTGAGE, made trial executed at
the City of Manila, Philippines, on this 6th
day of October, 1959 by trial between —
JOSE P. DIZON, of legal age, Filipino,
married to Norberta Torres, with residence
trial postal address at Mabalacat,
Pampanga, hereinafter referred to as the
VENDOR.
ALFREDO G. GABORRO, likewise of legal
age, Filipino, married to Pacita de Guzman,
with residence trial postal address at 46,
7th St., Gilmore Avenue, Quezon City,
hereinafter referred to as the VENDEE,
W I T N E S S E T H: That —
WHEREAS, the VENDOR is the registered
owner of three (3) parcels of land covered
by Transfer Certificate of Title No. 15679 of
the land records of Pampanga. situated in
the Municipality of Mabalacat, Province of
Pampanga, trial more particularly described
trial bounded as follows:
1. A parcel of land (Lot No. 188 of the
Cadastral Survey of Mabalacat), with the
improvements thereon, situated in the
Municipality of Mabalacat, Bounded on the
NE by Lot No 187: on the SE., by Lots Nos.
183, 189, 191 trial 192; on the SW by Lot
No. 192 trial on the NW by the unimproved
provincial road to Magalang. Containing an
area of TWO HUNDRED AND TWENTY
ONE THOUSAND ONE HUNDRED
SEVENTY TWO SQUARE METERS
(221,172), more or less.
2. A parcel of land (Lot No. 193 of the
Cadastral Survey of Mabalacat), with the
improvements thereon, situated in the
Municipality of Mabalacat. Bounded on the
NE., by a road trial Lots Nos. 569,570 trial
571; on the SE., by Lot No. 571 trial the
unimproved road to Magalang, on the SW
by a road; trial on the NE., by a road trial
the Sapang Pritil Containing an area of
NINE HUNDRED SEVENTY EIGHT
THOUSAND SEVEN HUNDRED AND
SEVENTEEN SQUARE METERS
(978,717), more or less.
3. A parcel of land (Lot No. 568 of the
Cadastral Survey of Mabalacat), with the
improvements thereon, situated in the
Municipality of Mabalacat. Bounded on the
NE., by Lot No. 570, on the SE SW trial
NW by roads. Containing an area of ONE
HUNDRED FIVE THOUSAND NINE
HUNDRED AND TWENTY ONE SQUARE
METERS (105,921), more or less,
WHEREAS, the above-described
properties are presently mortgaged (first
mortgage) to the Development Bank of the
Philippines (,formerly Rehabilitation Finance
Corporation) to secure the payment of a loan,
plus interest, of THIRTY EIGHT THOUSAND
PESOS ONLY (P38,000.00), Philippine
currency, as evidenced by a deed of
mortgage for- P... dated ... which deed was
ratified trial acknowledged before Notary
Public of Manila, Mr. ... as Doc. No. Page No.
Reg. No. Series of 196 ... ;
WHEREAS, the aforesaid properties are
likewise mortgage (second mortgage) to the
Philippine National Bank to secure the
payment of a loan of NINETY THREE
THOUSAND EIGHT HUNDRED THIRTY
ONE PESOS & 91/100 (P93,831.91),
Philippine Currency, plus interest up to
August 13, 1957, as evidenced by deed of
Mortgage for P............. dated...................
which deed was ratified trial acknowledged
before Notary Public of Manila, Mr, I . I as
Doc. No............ Page No.......... Reg. No.
Series of 196........... ; WHEREAS, the
VENDOR, has offered to sell trial the
VENDEE is willing to purchase the above-
described properties for ONE HUNDRED
THIRTY ONE THOUSAND EIGHT
HUNDRED THIRTY ONE PESOS & 91 /100
(P131,831.91), Philippine Currency, under
the terms trial conditions herein below set
forth;
NOW, THEREFORE, for- trial in
consideration of the above premises trial the
amount of ONE HUNDRED THIRTY ONE
THOUSAND EIGHT HUNDRED THIRTY
ONE PESOS & 91/100 (P131,831.91),
Philippine Currency, in hand paid in cash by
the VENDEE unto the VENDOR, receipt
whereof is hereby acknowledged by the
VENDOR to his entire trial full satisfaction,
trial the assumption by the VENDEE of the
entire mortgage indebtedness, both with the
Development Bank of the Philippines trial the
Philippine National Bank above mentioned,
the VENDOR does by these presents, sell,
transfer trial convey, as he had sold,
transferred, trial conveyed, by way of
absolute sale, perpetually trial forever, unto
the VENDEE, his heirs, successors trial
assigns. above-described properties, with all
the improvements thereon, free from all liens
trial encumbrances of whatever nature.
except the pre- existing mortgage obligations
with the Development Bank of the Philippines
trial the Philippine National Bank
aforementioned. The VENDOR does hereby
warrant title, ownership trial possession over
 the properties herein sold trial conveyed, trial
binds himself to defend the same from any
trial all claimants.
That the VENDEE, does by these presents,
assume as he has assumed, under the same
terms trial conditions of the mortgage
contracts dated ... and ... of the mortgage
indebtedness of the VENDOR in favor of the
Development Bank of the Philippines trial the
Philippine National Bank, respectively, as if
the aforesaid documents were personally
executed by the VENDEE trial states trial
reiterates all the terms trial conditions
stipulated in said both documents, making
them to all intent trial purposes, parts hereof
by reference.
IN WITNESS WHEREOF, the VENDOR and
the VENDEE together with their instrumental
witnesses, have signed this deed of the
place, date, month trial year first above
written.
(Sgd.) JOSE P. DIZON (Sgd.) ALFREDO G.
GABORRO
Vendor Vendee
Signed in the Presence of:
(Sgd.) (Illegible) (Sgd.) (Illegible)
(Acknowledgment Omitted)
The second contract executed the same day, October
6, 1959 is called Option to Purchase Real Estate, trial
is in the following wise trial manner:
OPTION TO PURCHASE REAL ESTATE
KNOW ALL MEN BY THESE PRESENTS:
That 1, ALFREDO G. GABORRO, of legal
age, Filipino, married to Pacita de Guzman,
with residence trial postal address at 46, 7th
St., Gilmore Ave., Quezon City, for- valuable
consideration, do hereby give to JOSE P.
DIZON, of legal age, Filipino, married to
Norberta Torres, resident of Mabalacat,
Pampanga, his heirs, successors and
assigns, the option of repurchasing the
following described properties:
TRANSFER CERTIFICATE OF TITLE
NO. 15679, PROVINCE OF PAMPANGA
1. A parcel of land (Lot No. 188 of Cadastral
Survey of Mabalacat, Pampanga containing
an area of (211,172) more or less.
2. A parcel of land (Lot No. 193 of the
Cadastral Survey of Mabalacat,
Pampanga), containing an area of
(978,172) more or less.
3. A parcel of land (Lot No. 568 of the
Cadastral Survey of Mabalacat, Pampanga
containing an area of (105,921), more or
less. which I acquired from the said Jose P.
Dizon by purchase by virtue of that
document entitled "Deed of Sale with
Assumption of Mortgage" dated October 6,
1959, acknowledged by both of us before
Notary Public of Manila GREGORIO
SUMBILIO as DOC. No. 342, Page No. 70,
Reg. No. VII Series of 1959.
Said option shall be valid trial effective
within the period comprises from January,
1965 to December 31, 1970, inclusive,
upon payment of the amount of ONE
HUNDRED THIRTY ONE THOUSAND
EIGHT HUNDRED THIRTY ONE PESOS &
91/100 (?131,831.91), Philippine Currency,
plus an interest of eight per centum (8%)
thereof, per annum. This is without
prejudice at any time to the payment by Mr.
Dizon of any partial amount to be applied to
the principal obligation, without any way
disturbing the possession and/or ownership
of the above properties since only full
payment can effect the necessary change.
In the event that Mr. Jose P. Dizon may be
able to find a purchaser for- the foregoing
properties on or the fifth year from the date
the execution of this document, the
GRANTEE, Mr. JOSE P. DIZON, may do
so provided that the aggregate amount
which was Paid to Development Bank of
the Philippines trial to the Philippine
National Bank together with the interests
thereon at the rate of 8% shall be refunded
to the undersigned.
Furthermore, in case Mr. Jose P. Dizon
shall be able to find a purchaser for- the
said properties, it shall be his duty to first
notify the undersigned of the contemplated
sale, naming the price trial the purchaser
therefor, trial awarding the first preference
in the sale hereof to the undersigned.
IN WITNESS WHEREOF, I have hereunto
signed these presents at the City of Manila,
on this 6th day of October, 1959.
(Sgd.) ALFREDO G. GABORRO
CONFORME:
(Sgd.) JOSE P. DIZON
SIGNED IN THE PRESENCE
OF:
(Acknowledgment Omit)
The sum of P131,813.91 which purports to be the
consideration of the sale was not actually paid by
Alfredo G. Gaborro to the petitioner. The said amount
represents the aggregate debts of the petitioner with
the Development Bank of the Philippines trial the
Philippine National Bank.
After the execution of said contracts, Alfredo G.
Gaborro took possession of the three parcels of land
in question.
On October 7, 1959, Gaborro wrote the Development
Bank of the Philippines a letter (Exh. J), as follows:
Sir:
This is with reference to your mortgage lien
of P38,000.00 more or less over the
properties more particularly described in
TCT No. 15679 of the land records of
Pampanga in the name of Jose P. Dizon. In
this connection, we have the honor to
inform you that pursuant to a Deed of Sale
with Assumption of Mortgage executed on
October 6, 1959 by Jose P. Dizon in my
favor, copy of which is hereto attached, the
ownership of the same has been
transferred to me subject of course to your
conformity to the assumption of mortgage.
As a consequence of the foregoing
document, the obligation therefore of
paying your goodselves the total amount of
indebtedness has shifted to me
Considering that these agricultural
properties have not been under cultivation
for- quite a long time, I would therefore
request that, on the premise that the
assumption of mortgage would be
agreeable to you, that I be allowed to pay
the outstanding obligation, under the same
terms trial conditions as embodied in the
original contract of mortgage within ten (10)
years to be divided in 10 equal annual
amortizations. I am enclosing herewith a
check in the amount of P3,609.95
representing 10% of the indebtedness of
Jose P. Dizon to show my honest intention
in assuming the mortgage obligation to you
...
The Board of Governors of the DBP, in its Resolution
No. 7066 dated October 21, 1959 approved the offer
of Gaborro but said Board required him to pay 20% of
the purchase price as initial payment, (Exh. D)
Accordingly, on July 11, 1960, the DBP trial Gaborro
executed a conditional sale of the properties in
consideration of the sum of P36,090.95 (Exh. C)
payable 20% down trial the balance in 10 years in the
yearly amortization plan at 8% per annum.
On January 7, 1960, Dizon assigned his right of
redemption Lo Gaborro in an instrument (Exh. 9)
entitled:
ASSIGNMENT OF RIGHT OF
REDEMPTION
AND ASSUMPTION OF OBLIGATION
KNOW ALL MEN BY THESE PRESENTS:
This instrument, made trial executed by trial
between JOSE P. DIZON, married to
Norberta P. Torres, Filipino, of legal age, with
residence trial postal address at Mabalacat,
Pampanga. hereinafter referred to as the
ASSIGNOR trial ALFREDO G. GABORRO,
married to Pacita de Guzman, likewise of
legal age, Filipino, with residence trial postal
address at 46, 7th Street, Gilmore Ave.,
Quezon City, hereinafter referred to as the
ASSIGNEE,
WITNESSETH:
WHEREAS, the Assignor is the owner trial
mortgagor of three (3) parcels agricultural
land together with all the improvements
existing thereon trial more particularly
described trial bounded as follows:
TRANSFER CERTIFICATE OF TITLE NO.
1567
PROVINCE OF PAMPANGA
1. A parcel of land (Lot No. 188 of the
Cadastral Survey of Mabalacat), with the
improvements thereon, situated in the
Municipality of Mabalacat. Bounded on the
NE by Lot No. 187: on the SE. by Lots Nos.
183, 189, 191 trial 192; on the SW. by Lot
No. 192; trial on the NW by the unimproved
provincial road to Magalan. Containing an
area of two hundred twenty-one thousand
one hundred trial seventy two square meters
(221,172), more or less.
2. A parcel of land (Lot No. 193 of the
Cadastral Survey of Mabalacat), with the
improvements thereon, situated in the
Municipality of Mabalacat. Bounded on the
NE. by a road trial Lots Nos. 569, 570 trial
571; on the SE. by Lot No. 571 trial the
unimproved road to Magalan-, on the SW. by
a road; trial on the NW by a road trial the
Sapang Pritil Containing an area of nine
hundred seventy eight thousand seven
hundred and seven hundred square meters
(978,717), more or less.
3. A parcel of Land (Lot No. 568 of the
Cadastral Survey of Mabalacat), with the
improvements thereon, situated in the
Municipality of Mabalacat, Bounded on the
NE. by Lot No. 570; and on the SE., SW. and
NW. by roads. Containing an area of one
hundred five thousand nine hundred and
twenty-one square meters (105,921), more or
less.
WHEREAS, the above described properties
were mortgaged with the Rehabilitation
Finance Corporation, now Development Bank
of the Philippines, which mortgage has been
foreclosed on May 26, 1959;
AND WHEREAS, the herein Assignor has
still the right to redeem the said properties
from the said Development Bank of the
Philippines within a period of one (1) year
counted from the date of foreclosure of the
said mortgage.
NOW, THEREFORE, for
......................................... trial other valuable
considerations, receipt whereof is hereby
acknowledged by the Assignor from the
Assignee, The herein Assignor does hereby
transfer trial assign to the herein Assignee,
his heirs, successors trial assigns the
aforesaid right to redeem the aforementioned
properties above described.
That with this document the herein Assignor
relinquishes any and all rights to the said
properties including the improvements
existing thereon.
That the Assignee, by these presents, hereby
assumes the obligation in favor of the d
Development Bank of the Philippines, as
Paying whatever legal indebtedness the
Assignor has with the d B in connection with
the transaction regarding the hove mentioned
Properties subject to the file and conditions
that the said Bank may require and further
recognizes the second mortgage in favor Of
the Philippine National Bank.
IN WITNESS WHEREOF, the parties have
hereunto set their hands in the City of Manila,
Philippines this --------- day of - - - - - -1959.
(Sgd-) JOSE P. DIZON (Sgd.) ALFREDO G.
GABORRO
Assignor (Assignee)
(Acknowledgment Omitted)
After the execution of the conditional e to him
Gaborro made several payments to the DBP and
PNB. He introduced improvements, cultivated the
kinds raised sugarcane and other crops and
appropriated the produce to himself. He will paid the
land taxes thereon.
On July 5, 1961, Jose P. Dizon through his lawyer,
Atty. Leonardo Abola, wrote a letter to Gaborro
informing him that he is formally offering reimburse
Gaborro Of what he paid to the banks but without,
however, tendering any cash, and demanding an
accounting of the income and of the pro contending
that the transaction they entered into was one of
antichresis. Gaborro did not accede to the demands
of the petitioner, whereupon, on JULY 30, 1962, Jose
P. Dizon instituted a complaint in the Court of First
Instance of Pampanga, Gaborro, alleging that the
documents Deed of Sale With Assumption of
Mortgage and the Option to Purchase Real Estate did
not express the true intention and agreement bet.
between the parties. Petitioner Dizon, as Plaintiff
below, contended that the two deeds constitute in
fact a single transaction that their real agreement was
not an absolute e of the d of land but merely an
equitable mortgage or conveyance by way of security
for the reimbursement or refund by Dizon to Gaborro
of any and all sums which the latter may have paid
on account of the mortgage debts in favor of the DBP
and the PNB. Plaintiff prayed that defendant Gaborro
be ordered to accept plaintiff's offer to reimburse him
of what he paid to the banks; to surrender the
possession of the lands to plaintiff; to make an
accounting of all the fruits, produce, harvest and
other income which he had received from the three
(3) parcels of land; and to pay the plaintiff for the loss
of two barns and for damages.
In its answer, the DBP specifically denied the
material averments of the complaint and stated that
on October 6, 1959, the plaintiff Dizon was no longer
the owner of the land in question because the DBP
acquired them at the extrajudicial foreclosure sale
held on May 26, 1959, and that the only right which
plaintiff possessed was a mere right to redeem the
lands under Act 3135 as amended.
Defendant Alfredo G. Gaborro also answer, denying
the material averments of the complaint, stating that
the "Deed of Sale with Assumption of Mortgage"
expresses the true agreement of the parties "fully,
truthfully and religiously" but the Option to Purchase
Real Estate" does not express the true intention of
the parties because it was made only to protect the
reputation of the plaintiff among his townmates, and
even in the supposition that said option is valid, the
action is premature. He also filed a counterclaim for
damages, which plaintiff denied.
The issues having been joined, a pre-trial was held
and the following stipulation of facts admitted by the
parties was approved by the Court in the following
order dated February 22, 1963:
ORDER
At today's initial trial the following were
present: Mr. Leonardo Abola, for the
plaintiff; Mr. Carlos Antiporda, for the
defendant Alfredo Gaborro; and Mr. Virgillo
Fugoso, for the Development Bank of the
Philippines:
The parties brave stipulated on the
following facts:
1. That Annex A attached to the complaint
is marked Exhibit
A- Stipulation. The parties have admitted
the due execution, authenticity and
genuineness of said Exhibit A-Stipulation.
This fact has been admitted by all the three
parties.
2. That the defendant Gaborro executed
Annex B, which is marked Exhibit B-
Stipulation. This fact has been admitted
only between plaintiff and defendant
Gaborro.
3. That the three parcels of land referred to
in paragraph 3 of the complaint, on or
before October 6, 1959, were subject to a
first mortgage lien in favor of the
Development Bank of the Philippines,
formerly Rehabilitation Finance
Corporation, to secure payment of a loan
obtained by the plaintiff Jose P. Dizon in
the original sum of P38,000.00 plus
interest, which has been assumed by
defendant Gaborro by virtue of a document,
Exhibit A-Stipulation, and also subject to a
second mortgage lien in favor of the
Philippine National Bank to secure the
payment of a loan in the sum of P93,831.91
plus interest up to August 30, 1951, which
mortgage liens were duly annotated on
TCT 15679. This fact has been admitted by
the plaintiff and defendant Gaborro.
4. In respect to the foreclosure of the first
mortgage referred to above, it was admit
that the same was foreclosed on May 26,
1959, the second mortgage has not been
admitted nor foreclosed.
5. That the Development Bank of the
Philippines admits that the first mortgage
referred to above was foreclosed on May 26,
1959 under the provision,,; of Public Act No-
3135, as amended.
6. That subsequently the Development Bank
and the defendant Gaborro executed a
document entitled Conditional Sale over the
same parcels of land referred to in paragraph
3 of the complaint, and copy thereof will be
furnished by the Development Bank of the
Philippines and marked Exhibit C-Stipulation.
7. That on or before October 6, 1960, TCT
No. 15679 of the Register of D of Pampanga
in the name of Jose P. Dizon covering the
three parcels of land referred to in the
complaint was cancelled and in lieu thereof
TCT NO. 24292 of the Register of Deeds of
Pampanga was issued in the name of the
Development Bank of the Philippines. This
fact has been admitted by all the parties.
8. That after the execution of the deed of
conditional sale, certain payments were
made by the defendant Gaborro to the
Development Bank, the exact amount to be
determined later and receipts of payments to
be also exhibited later. This fact has been
admitted by all the three parties.
9. That since October 6, 1959, the defendant
Gaborro has made several payments to the
PNB in the amounts appearing on the
receipts which will be shown later, such
payments being made on account of the sum
of P38,831.91. The payment was assumed
by said - defendant Gaborro. This fact has
been admitted by plaintiff and defendant
Gaborro only.
10. That since the execution of Exhibits A
and B-Stipulation, it,, defendant Gaborro has
been and still is in the actual possession f the
three parcels of land in question and he is
actually cultivating the same and that the
land taxes thereon have been paid by said
defendant Gaborro, the amounts of said
taxes appearing on the official receipts to be
shown later. This fact has been admitted by
plaintiff and defendant Gaborro only.
11. That since defendant Gaborro took
possession of the lands in question, he has
been appropriating all the fruits produced and
income of said lands without giving to the
plaintiff any share hereof. This fact has been
admitted by plaintiff and defendant Gaborro
only.
 Let a copy of this order be served upon the
plaintiff, defendant Gaborro and the
Development Bank of the Philippines with the
understanding that, if, within fifteen (15) days,
none of the parties questions the correctness
of The facts set forth above. this stipulation of
facts shall be conclusive upon the parties
interested in this case.
Set the trial on the controversial facts on April
18, 1963 at 13:00 clock in the morning.
Paragraphs 3 and 10 of the above quoted order were
deleted in an order dated July 26, 1963.
The records disclose that during the pendency of the
case in the trial court, motions were filed by the plaintiff
for the appointment of a receiver of the properties but
all were denied. plaintiff also reiterated the same
motion before the appellate court which, however,
dismissed the same, reserving to him the right to file in
the trial court. Plaintiff did file but with the same result.
certiorari proceedings were resorted to in the Court of
Appeals in CA-G.R. No. SP-01403 entitled "Jose P.
Dizon vs. Hon. Felipe Buencamino, et al." which the
respondent court denied.
After trial the court held that the true agreement
between Jose P. Dizon, the plaintiff therein, and the
defendant Alfredo G. Gaborro is that the defendant
would assume and pay the indebtedness of the plaintiff
to the Development Bank of the Philippines and the
Philippine National Bank, and in consideration therefor,
the defendant was given the possession and
enjoyment of the properties in question until the plaintiff
shall have reimbursed to defendant fully the amount of
P131,831.91 plus 8% interest per annum.
Accordingly, on March 14, 1970, the lower court
rendered judgment, the dispositive part of which reads:
IN VIEW OF THE FOREGOING, the
documents entitled 'Deed of Sale with
Assumption of Mortgage'(Exhibit A-
Stipulation) and 'Option to Purchase Real
Estate' (Exhibit B-Stipulation) are hereby
reformed to the extent indicated above.
However, since this action was filed before
the period allowed the plaintiff to redeem his
property, the prematurity of this action aside
from not being principally alleged in the
complaint, deters this Court from ordering
further reliefs and remedies. The
counterclaim of the defendant is dismissed.
The plaintiff's motion for new trial and for
reconsideration and motion for admission of
supplemental complaint having been denied for lack of
merit, on June 6, 1970, plaintiff appealed to the Court
of Appeals, which. however, affirmed the decision with
the modification that the plaintiff-appellant has the right
to refund or reimburse the defendant-appellee the
sum of P131,831.91 with interest at 8% per annum
from October 6, 1959 until full payment, said right to
be exercised within one (1) year from the date the
judgment becomes final, with the understanding that,
if he fails to do so within the said period, then he is
deemed to have lost his right over the lands forever.
Petitioner's motion for reconsideration and/or
rehearing having been denied by the Court of
Appeals, hence the present petition for review on
certiorari. The petitioner assigns the following errors,
to wit:
I. The Court of Appeals, like the lower
court, erred in not holding that upon
established facts and undisputed
documentary evidence, the deed of sale
with assumption of mortgage (Exhibit A-
Stipulation) constitutes an equitable
mortgage or conveyance to secure
petitioner's obligation to reimburse or
refund to defendant Alfredo Gaborro any
and all sums to the extent of P131,831.91,
paid by said defendant in total or partial
satisfaction of petitioner's mortgage debts
to the DBP and the PNB. In this
connection, the Court of Appeals erred:
(A) In not finding that the petitioner was the
lawful owner of the lands in question:
(B) In not finding that the deed of sale in
question is not a real and unconditional
sale; and
(C) In not holding that the option to
purchase real estate (Exhibit B-Stipulation
is conclusive evidence that the transaction
in question is in fact an equitable mortgage.
II. The Court of Appeals also erred in
finding that the instrument entitled
'Assignment of Right of Redemption and
Assumption of Obligation' is conclusive
evidence that the real transaction
Evidenced by the 'Deed of Sale with
Assumption of Mortgage' is not an
equitable mortgage. In this connection the
said court also erred or at least committed
a grave abuse of discretion:
(A) In not finding that the said deed of
assignment is in fact a mere reiteration of
the terms and condition of the deed of sale;
(B) In finding that the price or consideration
of The aforesaid assignment. of right of
redemption consisted of 300 cavans of
palay delivered by Mrs. Gaborro to the
petitioner; and
(C) In finding that defendant Gaborro
purchased the lands in question by virtue of
the aforementioned deed of assignment.
III. The, Court of Appeals, like the trial
court, also erred in not finding that the
estate of Alfredo G. Gaborro is under
obligation to render an accounting of all the
produce, fruits and other income of the
lands in question from October 6, 1959,
and to reconvey the said lands to the
herein petitioner. In to connection, the said
court also erred:
(A) In not holding that as a mortgagee in
possession the Gaborro estate has the
obligation to either render an accounting of
the produce or fruits of the lands, or to pay
rentals for the occupation of said lands;
(B) In not finding that the Gaborro estate
has the obligations to reconvey the lands in
controversy to the herein petitioner, upon
payment of the balance due from him after
deducting either the net value of the
produce or fruits of the Said lands or the
rentals thereof,
(C) In not finding that further reliefs or
remedies may be granted the herein
petitioner; and
(D) In not ordering the admission of herein
petitioners 'Supplemental Complaint' dated
April 30, 1970.
IV. The Court of Appeals finally erred in not
reversing the decision of the trial court, and
in not rendering judgment declaring that the
deed of sale with assumption of mortgage
(Exhibit A Stipulation) is in fact an equitable
mortgage; and in not ordering the Gaborro
estate either to render an accounting of all
the produce or fruits of the lands in
question or to pay rentals for the
occupation thereof, from October 6, 1959;
and in not ordering the estate of Alfredo G.
Gaborro to reconvey, transfer and assign
unto the petitioner the aforementioned
lands.
The two instruments sought to be reformed in this
case ap pear to stipulate rights and obligations
between the parties thereto Pertaining to and
involving parcels of land that had already beer
foreclosed and sold extrajudicially, and purchased by
the mortgage creditor, a degree party. It becomes,
therefore, necessary to determine the legality of said
rights and obligation arising from the foreclosure and
e pro. proceedings only between the two contracting
parties to the instruments executed between them
but also in the so far a agreement affects the rights of
the degree panty, the purchase Bank.
Act 3135, Section 6 as amended by Act 4118, under
which the Properties were extrajudicially foreclosed
and sold, provides that:
Sec. 6. In all cases in which an extrajudicial
rule is made under the special power
hereinbefore referred to, the debtor, his
successors in interest or any judicial creditor
or judgment creditor of e debtor, or any
person having a lien on the property
subsequent to the mortgage or deed of trust
under which the property is sold, may
redeem the same at any time within the term
or one year from and after the date of the
sale; and such redemption shall be governed
by the provisions of sections four hundred
and sixty-four to four hundred and sixty-six,
inclusive, of the Code of Civil Procedure, in
so far as these are not consistent with the
provisions of this Act.
Under the Revised Rules of Court, Rule 39, Section 33,
the judgment debtor remains in possession of the
property foreclosed and sold, during the period of
redemption. If the judgment debtor is in possession of
the property sold, he is entitled to retain it and receive
the fruits, the purchaser not being entitled to such
possession. (Riosa v. Verzosa, 26 Phil. 86; Velasco v.
Rosenberg's Inc., 32 Phil. 72; Pabico v. Pauco 43 Phil.
572; Power v. PNB, 54 Phil. 54; Gorospe v. Gochangco
L-12735, Oct. 30, 1959).
A judgment debtor, whose property is levied on
execution, may transfer his right of redemption to any
one whom he may desire. The right to redeem land
sold under execution within 12 months is a property
right and may be sold voluntarily by its owner and may
also be attached and sold under execution (Magno v.
Viola and Sotto, 61 Phil. 80).
Upon foreclosure and sale, the purchaser is entitled to
a certificate of sale executed by the sheriff. (Section 27,
Revised Rules of Court) After the termination of the
period of redemption and no redemption having been
made, the purchaser is entitled to a deed of
conveyance and to the possession of the properties.
(Section 35, Revised Rules of Court). The weight of
authority is to the effect that the purchaser of land sold
at public auction under a writ of execution only has an
inchoate right in the property, subject to be defeated
and terminated within the period of 12 months from the
date of sale, by a redemption on the part of the owner.
Therefore, the judgment debtor in possession of the
property is entitled to remain therein during the period
allowed for redemption. (Riosa v. Verzosa. 26 Phil, 86;
89; Gonzales v. Calimbas, 51 Phil. 355.)
In the case before Us, after the extrajudicial foreclosure
and sale of his properties, petitioner Dizon retained the
right to redeem the lands, the possession, use and
enjoyment of the same during the period of redemption.
And these are the only rights that Dizon could legally
transfer, cede and convey unto respondent Gaborro
under the instrument captioned Deed of Sale with
Assumption of Mortgage (Exh. A-Stipulation), likewise
the same rights that said respondent could acquire in
consideration of the latter's promise to pay and assume
the loan of petitioner Dizon with DBP and PNB.
Such an instrument cannot be legally considered a real
and unconditional sale of the parcels of land, firstly,
because there was absolutely no money consideration
therefor, as admittedly stipulated the sum of
P131,831.91 mentioned in the document as the
consideration "receipt of which was acknowledged"
was not actually paid; and secondly, because the
properties had already been previously sold by the
sheriff at the foreclosure sale, thereby divesting the
petitioner of his full right as owner thereof to dispose
and sell the lands.
In legal consequence thereby, respondent Gaborro as
transferee of these certain limited rights or interests
under Exh. A-Stipulation, cannot grant to petitioner
Dizon more that said rights, such ac the option Co
purchase the lands as stipulated in the document
called Option to Purchase Real Estate (Exhibit B-
Stipulation), This is necessarily so for the reason that
respondent Gaborro did not purchase or acquire the full
title and ownership of the properties by virtue of the
Deed of Sale With Assumption of Mortgage (Exh. A
Stipulation), earlier executed between them which We
have ruled out as an absolute sale. The only legal
effect of this Option Deed is the grant to petitioner the
right to recover the properties upon reimbursing
respondent Gaborro of the total sums of money that the
latter may have paid to DBP and PNB on account of
the mortgage debts, the said right to be exercised
within the stipulated 5 years period.
In the light of the foreclosure proceedings and sale of
the properties, a legal point of primary importance here,
as well as other relevant facts and circumstances, We
agree with the findings of the trial and appellate courts
that the true intention of the parties is that respondent
Gaborro would assume and pay the indebtedness of
petitioner Dizon to DBP and PNB, and in consideration
therefor, respondent Gaborro was given the
possession, the enjoyment and use of the lands until
petitioner can reimburse fully the respondent the
amounts paid by the latter to DBP and PNB, to
accomplish the following ends: (a) payment of the bank
obligations; (b) make the lands productive for the
benefit of the possessor, respondent Gaborro, (c)
assure the return of the land to the original owner,
petitioner Dizon, thus rendering equity and fairness to
all parties concerned.
In view of all these considerations, the law and
Jurisprudence, and the facts established. We find
that the agreement between petitioner Dizon and
respondent Gaborro is one of those inanimate
contracts under Art. 1307 of the New Civil Code
whereby petitioner and respondent agreed "to give
and to do" certain rights and obligations respecting
the lands and the mortgage debts of petitioner which
would be acceptable to the bank. but partaking of the
nature of the antichresis insofar as the principal
parties, petitioner Dizon and respondent Gaborro, are
concerned.
Mistake is a ground for the reformation of an
instrument which there having been a meeting of the
minds of The parties o a contract, their true intention
is not expressed in the instrument purporting to
embody the agreement, and one of the parries may
ask for such reformation to the end that such true
intention may be expressed. (Art. 1359, New Civil
code). When a mutual mistake of the parties causes
the failure of the instrument to disclose their real
agreement, said instrument may be reformed. (Art.
1361, New Civil Code.) It was a mistake for the
parties to execute the Deed of Sale With Assumption
of Mortgage and the Option to Purchase Real Estate
and stand on the literal meaning of the file and
stipulations used therein.
The instruments must, therefore, be reformed in
accordance with the intention and legal rights and
obligations of the parties — the petitioner, the
respondent and the Banks. We agree with the
reformation decreed by the trial and appellate courts,
but in the sense that petitioner Jose P. Dizon has the
right to reacquire the three parcels of land within the
one-year period indicated below by refunding or
reimbursing to respondent Alfredo G. Gaborro or the
Judicial Administratrix of his Estate whatever amount
the latter has actually paid on account of
the principal only, of the loans of Dizon with the DBP
and PNB, excluding the interests and land taxes that
may have been paid or may have accrued, on duly
certified financial statements issued by the said
banks.
On the issue of the accounting of the fruits, harvests
and other income received from the three parcels of
land from October 6, 1959 up to the present, prayed
and demanded by Dizon of Gaborro or the Judicial
Administratrix of the latter's estate, We hold that in
fairness and equity and in the interests of justice that
since We have ruled out the obligation of petitioner
Dizon to reimburse respondent Gaborro of any
interests and land taxes that have accrued or been
paid by the latter on the loans of Dizon with DBP and
PNB, petitioner Dizon in turn is not entitled to an
accounting of the fruits, harvests and other income
received by respondent Gaborro from the lands, for
certainly, petitioner cannot have both benefits and the
two may be said to offset each other.
By virtue of the Option to Purchase Real Estate (Exh.
B Stipulation) which on its face granted Dizon the
option to purchase the properties which must be
exercise within the period from January, 1960 to
December 31, 1965 but which We held to be simply
the grant of the right to petitioner Dizon to recover his
properties within the said period, although already
expired by reasons and circumstances beyond his
control, petitioner is entitled to a reconveyance of the
properties within a reasonable period The period of
one year from the date of the finality of this judgment
as laid down by the Court of Appeals for the exercise
of such right by petitioner Dizon appears fair and
reasonable and We approve the same.
Since We are not informed of the status of Dizon's
loan of P93,831.91 with the Philippine National Bank
which appears to be on a subsisting basis, it is proper
to indicate here how petitioner Dizon may exercise
the right to a reconveyance of the properties as
herein affirmed, as follows:
(a) Dizon is granted the right to a
reconveyance of the properties by
reimbursing Gaborro (or his estate)
whatever amounts) the latter has actually
paid on account of the principal only, of
Dizon's loans of P38,000.00 and
P93,831.91 which the DBP and PNB,
respectively, exclusive of the interests that
may have accrued thereon or may have
been paid by Gaborro, on the basis of duly
certified statements issued by said banks;
(b) Any outstanding balance due on Dizon's
original principal loan of P38,000.00 with
the Development Bank of the Philippines
assumed by Gaborro and on Dizon's
original principal loan of 93,831.91 with the
PNB shag be deducted from the above-
fixed reconveyance price payable to
Gaborro, in order to enable Dizon to pay off
the said mortgage loans directly to the said
banks, in accordance with file mutually
agreed upon with them by Dizon;
(c) In other words, the maximum
reconveyance price that Dizon is obligated
to pay is the total sum of ?131,831.91 (the
sum total of the principals of his two original
loans with the DBP and PNB), and should
the amounts due to the said banks exceed
this total of P131,831.91 (because of
delinquent interests and other charges),
nothing shall be due Gaborro by way of
reimbursement and Dizon will thereupon step
into the shoes of Gaborro as owner-
mortgagor of the properties and directly
arrange with the banks for the settlement of
the amounts still due and payable to them,
subject to the right of Dizon to recover such
amounts in excess of P131,831.91 from
Gaborro by writ of execution in this case; and
(d) As already stated, Dizon is not entitled to
an accounting of the fruits, harvests and
other income received by Gaborro from the
land while Gaborro in turn is not entitled to
the payment of any interests on any amounts
paid by him on account of the principal loans
to the banks nor reimbursement of any
interests paid by him to the banks.
WHEREFORE, the judgment appealed from is hereby
affirmed with the modification that petitioner Dizon is
granted the right within one year from finality of this
decision to a reconveyance of the properties in
litigation upon payment and reimbursement to
respondent estate of o G. Gaborro of the amounts
actually paid by Gaborro or his estate on account of the
principal only of Dizon's original loans with the
Development Bank of the Philippines and Philippine
National Bank in and up to the total amount of
P131,831.91, under the terms and conditions set forth
in the preceding paragraph with subparagraphs (a) to
(d), which are hereby incorporated by reference as an
integral part of this judgment, and upon the exercise of
such right, respondent estate shall forthwith execute
the corresponding deed of reconveyance in favor of
petitioner Dizon and deliver possession of the
properties to him. Without pronouncement as to costs.
G.R. No. 144499 February 19, 2002
FIRST GLOBAL REALTY AND DEVELOPMENT
CORPORATION, petitioner,
vs.
CHRISTOPHER SAN AGUSTIN, respondent.
DECISION
PANGANIBAN, J.:
A writ of preliminary injunction is issued pendente lite to
preserve the status quo. To be entitled to one, the
applicant must show a prima facie right to the relief
demanded in the complaint. In the present case, the
applicant has sufficiently demonstrated that, indeed, he
has such right and that grave and irreparable injury
would befall him and his family, unless the injunctive
relief is granted while the main case pends in the trial
court.
Statement of the Case
Before us is a Petition for Review on Certiorari1 under
Rule 45 of the Rules of Court, challenging the April 28,
2000 Decision2 of the Court of Appeals3 (CA) in CA-
GR SP No. 49083 and the August 10, 2000 CA
Resolution4 denying reconsideration. The dispositive
portion of the assailed Decision reads as follows:
"WHEREFORE, the order dated May 21, 1998 and
June 26, 1998 of the court a quo are SET ASIDE and
the petition is hereby GRANTED. FGRDC is hereby
enjoined from taking possession of the subject property
until Civil Case No. 97-2678, which is pending before
the court a quo has been heard and finally resolved."5
The Facts
The undisputed facts of the case are summarized by
the Court of Appeals in this wise:
"The subject matter of the instant controversy is a
parcel of land, including the house built thereon,
located at No. 3491 Honda St., Bo. Pinagkaisahan,
Makati City (‘subject property’). The subject property
was previously covered by TCT No. 180235, dated
January 27, 1967, which was issued in the name of
[herein respondent’s] mother, Lilian Sales-San Agustin.
[Respondent], together with his parents, brothers and
sisters have been in possession of the subject property
since 1967 up to the present.
xxx xxx xxx
"The conflict leading to the instant petition began when
the subject property was sold to spouses Enrique and
Angelina Camacho (spouses Camacho) in 1994 for the
amount of ₱2.5 million pesos, ‘net of capital gains tax,
documentary stamp tax, transfer taxes and the
remaining balance of the petitioner’s loan with DBP.
"The records show that spouses Camacho succeeded
in convincing petitioner to accept a partial payment of
₱100,000.00 pesos upon the execution of a deed of
absolute sale in their favor over the subject property.
The balance of ₱2.4 million pesos would be paid once
the title over the same was transferred in the name of
spouses Camacho. The latter agreement came about
because spouses Camacho would use the subject
property to raise the amount of ₱2.4 million pesos, that
is to say, they would secure a loan from a bank or
financial institution with the subject property as
collateral.
"On May 24, 1994, DBP released the subject property
to petitioner upon full payment of the latter’s
outstanding loan. Thereafter, [respondent] executed a
deed of sale in favor of spouses Camacho, who in turn
paid respondent] the amount of ₱100,000.00 pesos.
On May 26, 1994, TCT No. 194868 was issued in the
name spouses Camacho.
"It appeared that First Global Realty Development
Corporation (FGRDC), [herein petitioner], granted
spouses Camacho’s loan application with the subject
property as collateral, in the amount of P1.190
million. However, despite receipt of the loan and
petitioner’s demand to pay the balance of the
purchase price of the subject property, spouses
Camacho did not pay the same.
"Sensing that [respondent’s] demand to pay fell on
deaf ears, he filed a criminal complaint for estafa
against spouses Camacho. Unfortunately, the case
did not prosper because the spouses Camacho could
not be located for the proper service of the warrant of
arrest.
"In the ensuing period, [respondent] discovered that
FGRDC filed a special civil action for the foreclosure
of the subject property inasmuch as spouses
Camacho defaulted in the payment of their loan
obligation. The case was assigned to the Regional
Trial Court, Branch 143, Makati City (Branch 143),
and docketed as Civil Case No. 95-697.
"On June 28, 1996, Branch 143 rendered a decision
ordering the foreclosure of the subject property and
the subsequent sale thereof at public auction.
Spouses Camacho did not file a motion for
reconsideration of the said decision. Consequently,
FGRDC filed a motion for execution which was
granted on February 7, 1997.
"The sale of the subject property at public auction
was, nevertheless, thrust aside in view of the dacion
en pago which spouses Camacho executed in favor
of FGRDC. On April 29, 1997, the dacion en
pago was registered before the Register of Deeds of
Makati City, which paved the way for the issuance of
TCT No. 209050 in the name of FGRDC.
"Accordingly, on September 8, 1997, FGRDC
demanded rentals from [respondent], specifically
[from] his mother, for the latter’s use of the subject
property. When FGRDC’s demand was unheeded by
[respondent], it filed a motion for issuance of a writ of
possession before Branch 143.
"Apparently, on November 20, 1997, [respondent]
filed a motion for intervention before Branch
143, wherein he asked for the rescission of the deed
of absolute sale/mortgage, dacion en pago and
cancellation of FGRDC’s title over the subject
property.
"However, finding the motion for intervention to be a
futile undertaking, [respondent] filed a separate
complaint for ‘rescission of the deed of absolute sale,
annulment of the dacion en pago and cancellation of
title and issuance of a new title with prayer for the
issuance of a temporary restraining order and/or a
writ of injunction’ against FGRDC, seeking to enjoin
the latter from taking possession of the subject
property. The case was raffled to Branch 141 (court a
quo), where public respondent is the presiding judge,
and docketed as Civil Case No. 97-2673.
"On May 21, 1998, the court a quo issued an order
denying [respondent’s] prayer for issuance of a writ of
preliminary injunction. Petitioner filed a motion for
reconsideration but [it] was denied in an order dated
June 26, 1998 for lack of merit."6
Order of the Trial Court
In its Order7 dated May 21, 1998, the RTC denied
the application of respondent for a preliminary
injunction to prevent petitioner from evicting him from
the subject property. The trial court held that under
the facts alleged in the Complaint, respondent had
sold the property to the Camacho spouses for
₱2,500,000. The spouses initially gave him
₱100,000, with the balance to be paid after they
would have secured a loan using the property as
collateral. The lower court added that cause of action
of respondent was to demand payment of the
balance from the Camachos. The former’s Motion for
Reconsideration of the Order was denied by the RTC
in its June 26, 1998 Order.
Ruling of the Court of Appeals
The Court of Appeals reversed the RTC and granted
the injunctive relief prayed for by respondent. It held
that petitioner should not be given possession of the
property pendente lite, because it knew of the
agreement between respondent and the Camachos.
Moreover, the fact that the property remained in the
possession of respondent’s mother at the time the
couple sold it to petitioner should have warned it of a
defect in its claims.
Aggrieved by the CA Decision, petitioner lodged the
present recourse.8
Issues
In its Memorandum, petitioner raises the following
issues for our consideration:
"1. Whether or not the factual findings of
the Honorable Court of Appeals upon which
it issued the April 28, 2000 Decision and
the August 10, 2000 Resolution are devoid
of support by the evidence or the same are
based on a misapprehension of facts; and
2. Whether or not petitioner is a purchaser
in good faith and for value; hence, entitled
to the possession of the litigated
property."9
The foregoing points really boil down to the gut issue
of whether respondent is entitled to the possession of
the property while the main case for rescission is
pending in the RTC.
The Court’s Ruling
The Petition has no merit.
Principal Issue:
Possession Pendente Lite
Petitioner seeks to dispossess respondent of the
subject property on the strength of a dacion en
pago executed in its favor by the Camacho spouses
who, in turn, had purportedly bought it from herein
respondent.
Respondent, on the other hand, claims that petitioner
failed to show a clear right to possess it. To dispossess
him pendente lite would be clearly unjust. We agree.
Section 3 of Rule 58 of the Rules of Court enumerates
various grounds for the issuance of a preliminary
injunction, as follows:
"SEC. 3. Grounds for issuance of preliminary
injunction. - A preliminary injunction may be granted
when it is established:
"(a) That the applicant is entitled to the relief
demanded, and the whole or part relief
consists in restraining the commission or
continuance of the act or acts complained of,
or in requiring the performance of an act or
acts, either for a limited period or perpetually;
"(b) That the commission, continuance or
non-performance of the act or acts
complained of during the litigation would
probably work injustice to the applicant; or
"(c) That a party, court, agency or a person is
doing, threatening or is attempting to do, or is
procuring or suffering to be done, some act
or acts probably in violation of the rights of
the applicant respecting the subject of the
action or proceeding, and tending to render
the judgment ineffectual."
A preliminary injunction is a provisional remedy that a
party may resort to in order to preserve and protect
certain rights and interests during the pendency of an
action. It is issued to preserve the status quo ante --
the last actual, peaceful, and uncontested status that
preceded the actual controversy.10 In Saulog v.
CA, the Supreme Court ruled thus:
"A preliminary injunction is an order granted at any
stage of an action prior to final judgment, requiring a
person to refrain from a particular act. It may be
granted at any time after the commencement of the
action and before final judgment, when it is established
that the plaintiff is entitled to the relief demanded, and
the whole or part of such relief consists in restraining
the commission or continuance of the acts complained
of, or in the performance of an act or acts, either for a
limited period or perpetually; that the commission or
continuance of some act complained of during the
litigation or the non-performance thereof would
probably work injustice to the plaintiff; or that the
defendant is doing, threatens, or is about to do, or is
procuring or suffering to be done, some act probably in
violation of the plaintiff's rights respecting the subject of
the action, and tending to render the judgment
ineffectual.
"A preliminary injunction, as the term itself suggests, is
merely temporary, subject to the final disposition of the
principal action and its purpose is to preserve the
status quo of the things subject of the action and/or the
relation between the parties, in order to protect the right
of the plaintiff respecting the subject of the action
during the pendency of the suit. Otherwise or if no
preliminary injunction were issued, the defendant may,
before final judgment, do or continue the doing of the
act which the plaintiff asks the court to restrain, and
thus make ineffectual the final judgment rendered
afterwards granting the relief sought by the plaintiff. Its
issuance rests entirely within the discretion of the court
taking cognizance of the case and is generally not
interfered with except in cases of manifest abuse."11
Likewise, in Paramount Insurance v. CA, this Court
held that "[i]njunction is an extraordinary remedy
calculated to preserve the status quo of things and to
prevent actual or threatened acts violative of the rules
of equity and good conscience as would consequently
afford an injured party a cause of action resulting from
the failure of the law to provide for an adequate or
complete relief x x x. Its sole purpose is not to correct a
wrong of the past, in the sense of redress for injury
already sustained, but to prevent further injury."12
The purpose of a preliminary injunction, then, is "to
prevent threatened or continuous irremediable injury to
some of the parties before their claims can be
thoroughly studied and adjudicated. Its sole aim is to
preserve the status quo until the merits of the case can
be heard fully."13 Thus, it will be issued only upon a
showing of a clear and unmistakable right that is
violated. Moreover, an urgent and permanent necessity
for its issuance must be shown by the applicant.14
In the present case, the status quo that is sought to be
preserved is the possession of the property by
respondent and his right to use it as his dwelling,
pending determination of whether or not he had indeed
sold it to the Camachos and, consequently, whether
the latter’s transfer of its ownership to petitioner
via dacion en pago should be upheld.
Prima Facie
Right to Possess
Respondent’s Complaint in the trial court seeks the sellers effectively waived the redemption period
following: the rescission of the Deed of Absolute Sale normally given a mortgagor.
between himself and the Camacho spouses, the
annulment of the dacion en pago executed by the In sum, we hold that respondent was able to show a
latter in favor of petitioner, and the cancellation of prima facie right to the relief demanded in his
petitioner’s certificate of title to it as well as the Complaint. The Camachos’ nonpayment of the
issuance of a new one in favor of respondent. purchase price agreed upon and the irregularities
surrounding the dacion en pago are serious enough
The factual findings of both the trial and the appellate to allow him to possess the property pendente lite.
courts show that respondent intended to sell the
subject property to the Camacho spouses for the sum Grave Injustice in a
Transfer of Possession
of ₱2,500,000. The couple initially paid ₱100,000,
with the agreement that the balance would be paid In addition, respondent has shown that to allow
when they would have secured a loan using the petitioner to take immediate possession of the
subject property as collateral. To facilitate their property would result in grave injustice. As we have
procurement of a loan, the title to the property was stated above, the ownership of the property, the
transferred to them. validity of the sale between respondent and the
Camachos and the legitimacy of the dacion en
Using the subject property as collateral, the
Camachos were able to obtain a loan of ₱1,190,000 pago executed by the latter in favor of petitioner are
still subject to determination in the court below.
from petitioner. Upon the former’s failure to pay the
loan, the latter sought to foreclose the mortgage over Furthermore, there is no question that respondent
has been in possession of the premises during all this
it. However, before the property could be foreclosed,
petitioner and the couple allegedly agreed on time -- prior to and during the institution of the
Complaint. He and his family have long owned,
a dacion en pago, in which the latter ceded
ownership of the property in favor of the former in possessed and occupied it as their family home since
1967. To dispossess him of it now would definitely
consideration of the payment of the loan. Respondent
contends that when petitioner conducted an on-site alter the status quo to their detriment.
investigation of the property in connection with the Ineffectual Judgment
couple’s application for a loan, the latter learned that
the former was living in the subject premises and was By selling their family home to the Camachos for
thus in actual possession of it. The CA found, in fact, ₱2,500,000, the respondent hoped to improve the
that petitioner was aware that respondent -- the plight of his family. By a strange turn of events, he
previous owner -- remained an unpaid seller. will now find himself homeless with only the sum of
₱100,000 to purchase a new dwelling for himself and
Moreover, respondent argues that the dacion en his relatives. Indeed, justice and equity dictate that he
pago is riddled with a number of irregularities. He should remain in possession of the
maintains that the Camachos executed it way back in property pendente lite.
1994 when they were still applying for a loan, not
immediately prior to the supposed foreclosure in WHEREFORE, the Petition is DENIED and the
1997. At the same time, they also executed a assailed Decision AFFIRMED. Costs against
promissory note and mortgage for the same amount. petitioner.
As respondent points out, a dacion en pago that
SO ORDERED.
cedes property in favor of the creditor is not
compatible with a mortgage wherein property is
foreclosed in case of failure to pay the principal loan.
Indeed, the records show that the dacion en
pago signed in 1994 was registered only in
1997.1âwphi1 It was executed in lieu of the
foreclosure of the property when the Camachos failed
to pay their loan obligations. The amount stated in
the dacion as consideration was the ₱1,190,000 loan
that they had obtained from petitioner. It is therefore
strange that the couple would buy a parcel of land for
₱2,500,000, obtain a loan to help finance payment for
the same, and finally cede the same property for an
amount much lower than that for which they
purchased it. Moreover, by executing a dacion, the