Garin, DIANA KIND of REDEMPION
G.R. No. L-67496 July 7, 1986
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
TOP RATE INTERNATIONAL SERVICES, INC., petitioner,
vs.
THE INTERMEDIATE APPELLATE COURT and POLARIS
MOTOR SUPPLY COMPANY, respondents.
Meanwhile, in Civil Case No. 142598 now, G.R. No. 68257, the appellate
court made the following findings:
De Santos, Balgos & Perez for petitioner in L-67496 & L-68257.
Ponciano Subido for respondents in both cases.
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 tenants. The sheriff
levied on the 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-
Page 1 of 30
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.
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.
The petitioner filed a motion to quash the 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,
Garin, DIANA KIND of REDEMPION
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 of the levy on attachment on the two
properties 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
Page 2 of 30
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).
Garin, DIANA KIND of REDEMPION
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.
Page 3 of 30
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 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.
Picazo, Agcaoili, Santayana, Reyes & Tayao for petitioner.
Rosauro Alvarez for private respondent.
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.
Garin, DIANA KIND of REDEMPION
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
Page 4 of 30
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).
Garin, DIANA KIND of REDEMPION
"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.
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.

We further hold that, as correctly ruled by the Rizal court, the five-year Thereafter, defendant spouses filed a counterbond,
period for enforcing the judgment by execution, counted from November and the lower court ordered the return of the truck.
13, 1962 (Gutierrez Hermanos vs. De la Riva, 46 Phil. 827), was This was not immediately implemented because the
interrupted or suspended by petitioner's filing on May 6, 1964 in the Rizal defendant spouses were met with delaying tactics of
court of the motion for examination of the judgment debtor and by the the plaintiff-appellant, and when they finally
instant mandamus action. recovered the truck, they found the same to be
"cannibalized". This was graphically recounted in
the report (Exhibit "3") of Deputy Sheriff Anastacio
The proceedings supplementary to execution and this mandamus case Dizon, who assisted the spouses in recovering the
amounted to stay of execution. "In computing the time limited for suing vehicle, excerpts of which are as follows:
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 On February 14, 1983, the
Manila Railroad Co. vs. Court of Industrial Relations, 117 Phil. 192, undersigned contacted Mr.
197). The Rizal court found that Quirino delayed the execution of the Villanueva, Branch Manager of
judgment. the FILINVEST at Bo. Dolores,
San Fernando, Pampanga and he
gave the information that the
WHEREFORE, the petition for mandamus is dismissed. We affirm the said Isuzu Cargo Truck, subject
lower court's order of November 21, 1968, directing the petitioner to of the aforesaid Court Order,
secure a writ of execution from the Manila court in Civil Case No. 24665. was already delivered to their
No costs main garage at Bo. Talon, Las
Piñas; Metro Manila. Mr.
G.R. No. 115902 September 27, 1995 Villanueva further told the
undersigned that in order to
FILINVEST CREDIT CORPORATION, petitioner, effectively enforce the
vs. aforementioned Court Order, the
undersigned should discuss the
HON. COURT OF APPEALS and SPOUSES EDILBERTO and
MARCIANA TADIAMAN, respondents. matter with Mr. Telesforo (Jun)
Isidro, Collection in-charge, and
Mr. Gaspar Antonio delos
Santos, Vice President for
Branch Administration of the
DAVIDE, JR., J.: FILINVEST main office at
Makati, Metro Manila.
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 On February 18, 1983,
decision of the Regional Trial Court (RTC) of San Fernando (Pampanga), defendant Marciana Tadiaman,
Branch 46, in Civil Case No. 6599.2 Atty. Benites and the
undersigned contacted Messrs.
Gaspar Antonio delos Santos
The antecedent facts are summarized by the Court of Appeals as follows:
and Telesforo (Jun) Isidro at the
main office, FILINVEST at
Defendants-appellees, spouses Edilberto and Paseo de Roxas, Makati, Metro
Marciana Tadiaman, residents of Cabanatuan City, Manila and we discussed the
purchased a 10-wheeler Izusu cargo truck from smooth retaking of possession
Jordan Enterprises, Inc., in Quezon City, in by the defendants of the 10-
installments. Said spouses executed a promissory wheeler Isuzu Cargo Truck with
note for P196,680.00 payable in 24 monthly motor No. E 120-22041, Serial
installments in favor of Jordan Enterprises, Inc., and No. SPM 710164864. Messrs.
a Chattel Mortgage over the motor vehicle purchased Delos Santos and Isidro
to secure the payment of the promissory note. Jordan alternatively argued that the
Enterprises, Inc. assigned its rights and interests over Traveler's Insurance Company is
the said instruments to Filinvest Finance and Leasing one of the black listed Insurance

Page 5 of 30
Garin, DIANA KIND of REDEMPION
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
Page 6 of 30
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
Garin, DIANA KIND of REDEMPION
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 by the defendants-appellees all the way back to
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
Page 7 of 30
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
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:
Garin, DIANA KIND of REDEMPION
(a) . . . DECIDED A QUESTION OF SUBSTANCE The only relevant issue in this petition is whether or not the Court of
IN A WAY NOT IN ACCORD WITH LAW AND Appeals committed reversible error in dismissing Filinvest's appeal from
THE APPLICABLE DECISIONS OF THIS the decision of the trial court on the private respondents' counterclaim
HONORABLE COURT WHEN IT REVERSED and in affirming in toto the said decision. The first ground raised herein
THE DECISION OF THE REGIONAL TRIAL by Filinvest is baseless since the discussions or arguments in Filinvest's
COURT OF MANILA, BRANCH 9; 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
(b) . . . ACTED WITH GRAVE ABUSE OF unappealed portion of the trial court's decision did in fact order the private
DISCRETION AMOUNTING TO LACK OF respondents to pay Filinvest the unpaid balance of the promissory note,
JURISDICTION WHEN IT SUSTAINED THE with interest and attorney's fees. All the other grounds are deemed waived
ERRONEOUS DECISION OF THE HONORABLE for not having been raised in the appeal to the Court of Appeals. In any
REGIONAL TRIAL COURT BRANCH 46 OF event, Filinvest's disquisitions on such irrelevant issues are confounded.
SAN FERNANDO, PAMPANGA;
As to the sole issue defined above, the Court of Appeals correctly ruled
(c) . . . ACTED WITH GRAVE ABUSE OF that Filinvest is liable for damages not because it commenced an action
DISCRETION AND CONTRARY TO EXISTING for replevin to recover possession of the truck prior to its foreclosure, but
LAW AND JURISPRUDENCE WHEN [IT] because of the manner it carried out the seizure of the vehicle. Sections
SUSTAINED THE SPECULATIVE FINDING OF 3 and 4, Rule 60 of the Rules of Court are very clear and direct as to the
THE RTC THAT THE PETITIONER procedure for the seizure of property under a writ of replevin, thus:
"CANNIBALIZED" THE MORTGAGED
VEHICLE; Sec. 3. Order. — Upon the filing of such affidavit
and bond with the clerk or judge of the court in which
(d) . . . ERRED GRIEVOUSLY WHEN IT the action is pending, the judge of such court shall
EXONERATED PRIVATE RESPONDENTS issue an order describing the personal property
FROM PAYING THE PETITIONER ON THE alleged to be wrongfully detained, and requiring
LATTER'S LEGITIMATE CLAIMS UNDER THE the sheriff or other proper officer of the court
COMPLAINT PARTICULARLY ON THE forthwith to take such property into his custody.
UNPAID PROMISSORY NOTE MADE BY THE
PRIVATE RESPONDENTS; Sec. 4. Duty of the officer. — Upon receiving such
order the officer must serve a copy thereof on the
(e) . . . ACTED CONTRARY TO LAW WHEN IT defendant together with a copy of the application,
IGNORED THE PLAIN ADMISSIONS IN THE affidavit and bond, and must forthwith take the
ANSWER (AT PARAGRAPH 2, & 3, PAGE 1) OF property, if it be in the possession of the defendant or
THE DEFENDANTS (PRIVATE his agent, and retain it in his custody. . . . (emphasis
RESPONDENTS) THAT THEY HAVE DULY supplied)
EXECUTED A PROMISSORY NOTE SECURED
BY A DEED OF CHATTEL MORTGAGE AND In the instant case, it was not the sheriff or any other proper officer of the
THAT THE PRIVATE RESPONDENTS trial court who implemented the writ of replevin. Because it was aware
VIOLATED THE TERMS OF THE PROMISSORY that no other person can implement the writ, Filinvest asked the trial court
NOTE IN FAILING TO PAY THE to appoint a special sheriff. Yet, it used its own employees who
INSTALLMENTS DUE THEREON FOR NOV. 15, misrepresented themselves as deputy sheriffs to seize the truck without
1981 AND THE SUBSEQUENT 9 having been authorized by the court to do so. Filinvest justified its seizure
INSTALLMENTS OR UP TO AUGUST 15, 1982; 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
(f) . . . ERRED IN REFUSING TO APPLY THE possession of the mortgaged property after breach of condition is that he
TERMS AND CONDITIONS OF THE must act in an orderly manner and without creating a breach of the peace,
PROMISSORY NOTE AND THE DEED OF subjecting himself to an action for trespass."
CHATTEL MORTGAGE SIGNED BY THE
PONCES "AS THE LAW BETWEEN THE This justification is misplace and misleading for Bachrach itself had ruled
PARTIES" TO THE CONTRACT SUBJECT OF that if a mortgagee cannot obtain possession of a mortgaged property for
THE SUIT IN THE RTC.7 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
Additionally, Filinvest maintains that: foreclosure. Pertinent portions of Bachrach read as follows:

(g) THERE IS NO PROOF TO SUSTAIN THE Where, however, debtor refuses to yield up the
AWARD OF MORAL DAMAGES FOR property, the creditor must institute an action, either
P50,000.00 ACCORDINGLY THERE IS NO to effect a judicial foreclosure directly, to secure
BASIS FOR THE AWARD OF EXEMPLARY possession as a preliminary to the sale contemplated
DAMAGES.8 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
We gave due course to the petition and required the parties to submit their even more harmonious that they are upon the point
respective memoranda after the filing of the comment to the petition by that the creditor is entitled to possession. As was said
the private respondents and of the reply thereto by Filinvest. The parties may years ago by the writer of this opinion in a
subsequently filed their memoranda which merely reiterated the monographic article contributed to an encyclopedic
arguments in their respective initiatory pleadings. legal treatise, "if possession cannot be peaceably
obtained the mortgagee must bring an action." (Trust

Page 8 of 30
Garin, DIANA KIND of REDEMPION
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
Page 9 of 30
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.
Garin, DIANA KIND of REDEMPION
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
Page 10 of 30
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.
G.R. No. 146322 December 6, 2006
ERNESTO RAMAS UYPITCHING and RAMAS UYPITCHING
SONS, INC., petitioners,
vs.
ERNESTO QUIAMCO, respondent.
DECISION
CORONA, J.:
Honeste vivere, non alterum laedere et jus suum cuique tribuere. To live
virtuously, not to injure others and to give everyone his due. These
supreme norms of justice are the underlying principles of law and order
in society. We reaffirm them in this petition for review on certiorari
assailing the July 26, 2000 decision1 and October 18, 2000 resolution of
the Court of Appeals (CA) in CA-G.R. CV No. 47571.
In 1982, respondent Ernesto C. Quiamco was approached by Juan
Davalan,2 Josefino Gabutero and Raul Generoso to amicably settle the
civil aspect of a criminal case for robbery3 filed by Quiamco against
them. They surrendered to him a red Honda XL-100 motorcycle and a
photocopy of its certificate of registration. Respondent asked for the
original certificate of registration but the three accused never came to see
him again. Meanwhile, the motorcycle was parked in an open space
inside respondent’s business establishment, Avesco-AVNE Enterprises,
where it was visible and accessible to the public.
It turned out that, in October 1981, the motorcycle had been sold on
installment basis to Gabutero by petitioner Ramas Uypitching Sons, Inc.,
a family-owned corporation managed by petitioner Atty. Ernesto Ramas
Uypitching. To secure its payment, the motorcycle was mortgaged to
petitioner corporation.4
When Gabutero could no longer pay the installments, Davalan assumed
the obligation and continued the payments. In September 1982, however,
Davalan stopped paying the remaining installments and told petitioner
corporation’s collector, Wilfredo Veraño, that the motorcycle had
allegedly been "taken by respondent’s men."
Nine years later, on January 26, 1991, petitioner Uypitching,
accompanied by policemen,5 went to Avesco-AVNE Enterprises to
recover the motorcycle. The leader of the police team, P/Lt. Arturo
Vendiola, talked to the clerk in charge and asked for respondent. While
P/Lt. Vendiola and the clerk were talking, petitioner Uypitching paced
Garin, DIANA KIND of REDEMPION
back and forth inside the establishment uttering "Quiamco is a thief of a
motorcycle."
On learning that respondent was not in Avesco-AVNE Enterprises, the
policemen left to look for respondent in his residence while petitioner
Uypitching stayed in the establishment to take photographs of the
motorcycle. Unable to find respondent, the policemen went back to
Avesco-AVNE Enterprises and, on petitioner Uypitching’s instruction
and over the clerk’s objection, took the motorcycle.
On February 18, 1991, petitioner Uypitching filed a criminal complaint
for qualified theft and/or violation of the Anti-Fencing Law6 against
respondent in the Office of the City Prosecutor of Dumaguete
City.7 Respondent moved for dismissal because the complaint did not
charge an offense as he had neither stolen nor bought the motorcycle. The
Office of the City Prosecutor dismissed the complaint8 and denied
petitioner Uypitching’s subsequent motion for reconsideration.
Respondent filed an action for damages against petitioners in the RTC of
Dumaguete City, Negros Oriental, Branch 37.9 He sought to hold the
petitioners liable for the following: (1) unlawful taking of the motorcycle;
(2) utterance of a defamatory remark (that respondent was a thief) and (3)
precipitate filing of a baseless and malicious complaint. These acts
humiliated and embarrassed the respondent and injured his reputation and
integrity.
On July 30, 1994, the trial court rendered a decision 10 finding that
petitioner Uypitching was motivated with malice and ill will when he
called respondent a thief, took the motorcycle in an abusive manner and
filed a baseless complaint for qualified theft and/or violation of the Anti-
Fencing Law. Petitioners’ acts were found to be contrary to Articles
1911 and 2012 of the Civil Code. Hence, the trial court held petitioners
liable to respondent for P500,000 moral damages, P200,000 exemplary
damages and P50,000 attorney’s fees plus costs.
Petitioners appealed the RTC decision but the CA affirmed the trial
court’s decision with modification, reducing the award of moral and
exemplary damages to P300,000 and P100,000,
respectively.13 Petitioners sought reconsideration but it was denied. Thus,
this petition.
In their petition and memorandum, petitioners submit that the sole
(allegedly) issue to be resolved here is whether the filing of a complaint
for qualified theft and/or violation of the Anti-Fencing Law in the Office
of the City Prosecutor warranted the award of moral damages, exemplary
damages, attorney’s fees and costs in favor of respondent.
Petitioners’ suggestion is misleading. They were held liable for damages
not only for instituting a groundless complaint against respondent but
also for making a slanderous remark and for taking the motorcycle from
respondent’s establishment in an abusive manner.
Correctness of the Findings of the RTC and CA
As they never questioned the findings of the RTC and CA that malice and
ill will attended not only the public imputation of a crime to
respondent14 but also the taking of the motorcycle, petitioners were
deemed to have accepted the correctness of such findings. This alone was
sufficient to hold petitioners liable for damages to respondent.
Nevertheless, to address petitioners’ concern, we also find that the trial
and appellate courts correctly ruled that the filing of the complaint was
tainted with malice and bad faith. Petitioners themselves in fact described
their action as a "precipitate act."15 Petitioners were bent on portraying
respondent as a thief. In this connection, we quote with approval the
following findings of the RTC, as adopted by the CA:
Page 11 of 30
x x x There was malice or ill-will [in filing the complaint before
the City Prosecutor’s Office] because Atty. Ernesto Ramas
Uypitching knew or ought to have known as he is a lawyer, that
there was no probable cause at all for filing a criminal
complaint for qualified theft and fencing activity against
[respondent]. Atty. Uypitching had no personal knowledge that
[respondent] stole the motorcycle in question. He was merely
told by his bill collector ([i.e.] the bill collector of Ramas
Uypitching Sons, Inc.)[,] Wilfredo Veraño[,] that Juan Dabalan
will [no longer] pay the remaining installment(s) for the
motorcycle because the motorcycle was taken by the men of
[respondent]. It must be noted that the term used by Wilfredo
Veraño in informing Atty. Ernesto Ramas Uypitching of the
refusal of Juan Dabalan to pay for the remaining installment
was [‘]taken[’], not [‘]unlawfully taken[’] or ‘stolen.’ Yet,
despite the double hearsay, Atty. Ernesto Ramas Uypitching
not only executed the [complaint-affidavit] wherein he named
[respondent] as ‘the suspect’ of the stolen motorcycle but also
charged [respondent] of ‘qualified theft and fencing activity’
before the City [Prosecutor’s] Office of Dumaguete. The
absence of probable cause necessarily signifies the presence of
malice. What is deplorable in all these is that Juan Dabalan, the
owner of the motorcycle, did not accuse [respondent] or the
latter’s men of stealing the motorcycle[,] much less bother[ed]
to file a case for qualified theft before the authorities. That Atty.
Uypitching’s act in charging [respondent] with qualified theft
and fencing activity is tainted with malice is also shown by his
answer to the question of Cupid Gonzaga16 [during one of their
conversations] - "why should you still file a complaint? You
have already recovered the motorcycle…"[:] "Aron motagam
ang kawatan ug motor." ("To teach a lesson to the thief of
motorcycle.")17
Moreover, the existence of malice, ill will or bad faith is a factual matter.
As a rule, findings of fact of the trial court, when affirmed by the
appellate court, are conclusive on this Court. We see no compelling
reason to reverse the findings of the RTC and the CA.
Petitioners Abused Their Right of Recovery as Mortgagee(s)
Petitioners claim that they should not be held liable for petitioner
corporation’s exercise of its right as seller-mortgagee to recover the
mortgaged vehicle preliminary to the enforcement of its right to foreclose
on the mortgage in case of default. They are clearly mistaken.
True, a mortgagee may take steps to recover the mortgaged property to
enable it to enforce or protect its foreclosure right thereon. There is,
however, a well-defined procedure for the recovery of possession of
mortgaged property: if a mortgagee is unable to obtain possession of a
mortgaged property for its sale on foreclosure, he must bring a civil
action either to recover such possession as a preliminary step to the sale,
or to obtain judicial foreclosure.18
Petitioner corporation failed to bring the proper civil action necessary to
acquire legal possession of the motorcycle. Instead, petitioner Uypitching
descended on respondent’s establishment with his policemen and ordered
the seizure of the motorcycle without a search warrant or court order.
Worse, in the course of the illegal seizure of the motorcycle, petitioner
Uypitching even mouthed a slanderous statement.
No doubt, petitioner corporation, acting through its co-petitioner
Uypitching, blatantly disregarded the lawful procedure for the
enforcement of its right, to the prejudice of respondent. Petitioners’ acts
violated the law as well as public morals, and transgressed the proper
norms of human relations.
Garin, DIANA KIND of REDEMPION
The basic principle of human relations, embodied in Article 19 of the
Civil Code, provides:
Art. 19. Every person must in the exercise of his rights and in
the performance of his duties, act with justice, give every one
his due, and observe honesty and good faith.
Article 19, also known as the "principle of abuse of right," prescribes that
a person should not use his right unjustly or contrary to honesty and good
faith, otherwise he opens himself to liability.19 It seeks to preclude the
use of, or the tendency to use, a legal right (or duty) as a means to unjust
ends.
There is an abuse of right when it is exercised solely to prejudice or injure
another.20 The exercise of a right must be in accordance with the purpose
for which it was established and must not be excessive or unduly harsh;
there must be no intention to harm another.21 Otherwise, liability for
damages to the injured party will attach.
In this case, the manner by which the motorcycle was taken at petitioners’
instance was not only attended by bad faith but also contrary to the
procedure laid down by law. Considered in conjunction with the
defamatory statement, petitioners’ exercise of the right to recover the
mortgaged vehicle was utterly prejudicial and injurious to respondent. On
the other hand, the precipitate act of filing an unfounded complaint could
not in any way be considered to be in accordance with the purpose for
which the right to prosecute a crime was established. Thus, the totality of
petitioners’ actions showed a calculated design to embarrass, humiliate
and publicly ridicule respondent. Petitioners acted in an excessively harsh
fashion to the prejudice of respondent. Contrary to law, petitioners
willfully caused damage to respondent. Hence, they should indemnify
him.22
WHEREFORE, the petition is hereby DENIED. The July 26, 2000
decision and October 18, 2000 resolution of the Court of Appeals in CA-
G.R. CV No. 47571 are AFFIRMED.
Triple costs against petitioners, considering that petitioner Ernesto
Ramas Uypitching is a lawyer and an officer of the court, for his improper
behavior.
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
Page 12 of 30
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
Garin, DIANA KIND of REDEMPION
In the meanwhile, the petitioner filed a motion dated April 5, 2000 in As succinctly put in Tag Fibers, Inc. vs. National Labor Relations
Civil Case No. 7802 to hold GSIS, et al. 14 in contempt of court for Commission, the Supreme Court is emphatic in saying that "the finality
painting the fence of the properties during the pendency of his motion for of a decision is a jurisdictional event that cannot be made to depend on
reconsideration and/or to quash the writ of execution.15 He filed another the convenience of a party."
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 We find no cogent reason to discompose the findings of the court below.
electric company to cut off the electric services to the properties during Thus, we sustain the assailed Orders of the court a quo since no abuse of
the pendency of his motion for reconsideration and/or to quash the writ discretion has been found to have been committed by the latter in their
of execution.16> 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
To prevent the Presiding Judge of Branch 44 of the RTC from resolving decision in Civil Case No. 7802 which has already been resolved with
the pending incidents in Civil Case No. 7802, GSIS moved to inhibit him finality by no less than the highest tribunal of the land.
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 WHEREFORE, premises considered, the instant petition is hereby
execution, motions for contempt of court, and motion for issuance of DISMISSED for lack of merit. Costs against the petitioner.
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 SO ORDERED.23
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 Issues
execution cum writ of possession dated October 21, 1999.18
Hence, this appeal.
The petitioner sought reconsideration,19 but the Presiding Judge of
Branch 48 denied his motion for reconsideration on February 11, 2002. 20 The petitioner insists herein that the CA gravely erred in refusing "to
accept the nullity of the following orders" of the RTC, to wit:
Ruling of the CA
1. THE ORDER OF THE TRIAL COURT DATED
By petition for certiorari dated March 15, 2002 filed in the CA, the OCTOBER 8, 1999, GRANTING THE EX-PARTE MOTION
petitioner assailed the orders of February 11, 2002, July 30, 2001, FOR EXECUTION AND/OR ISSUANCE OF THE WRIT OF
October 21, 1999, and October 8, 1999.21 EXECUTION OF POSSESSION IN FAVOR OF THE
RESPONDENT GSIS;
On March 17, 2003, however, the CA dismissed the petition for certiorari
for lack of merit,22 stating: 2. THE ORDER OF THE TRIAL COURT DATED
OCTOBER 21, 1999 GRANTING THE ISSUANCE AND
We find the instant petition patently devoid of merit. This Court is not IMPLEMENTATION OF THE WRIT OF EXECUTION
unaware of the legal tactics and maneuvers employed by the petitioner in CUM WRIT OF POSSESSION IN FAVOR OF
delaying the disposition of the subject case (Civil Case No. 7802) which RESPONDENT GSIS;
has already become final and executory upon the final resolution by the
Supreme Court affirming the judgment rendered by the Court of Appeals. 3. THE ORDER OF THE TRIAL COURT DATED JULY 30,
We construe the actuation of the petitioner in resorting to all kinds of 2001 DIRECTING TO CAUSE THE RE-
avenues accorded by the Rules of Court, through the filing of several IMPLEMENTATION OF THE WRIT OF EXECUTION
pleadings and/or motions in litigating this case, as running counter to the CUM WRIT OF POSSESSION IN FAVOR OF THE
intendment of the Rules to be utilized in promoting the objective of RESPONDENT GSIS; and
securing a just, speedy and inexpensive disposition of every action and
proceeding. 4. THE ORDER OF THE TRIAL COURT DATED
FEBRUARY 11, 2002, DENYING THE MOTION FOR
The issues raised in the present controversy have already been settled in RECONSIDERATION OF THE ORDER DATED
our existing jurisprudence on the subject. In the case of De Jesus vs. SEPTEMBER 14, 2001, IN RELATION TO THE COURT
Obnamia, Jr., the Supreme Court ruled that "generally, no notice or even ORDER DATED JULY 30, 2001.24
prior hearing of a motion for execution is required before a writ of
execution is issued when a decision has already become final."
Ruling of the Court

The recent accretion to the corpus of our jurisprudence has established The petition for review on certiorari absolutely lacks merit.
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 I
issuance of a Writ of Execution becomes a ministerial duty of the court."
Petition for Certiorari in CA
The rule is also firmly entrenched in the aforecited Buaya case that "the Was Filed Beyond Reglementary Period
effective and efficient administration of justice requires that once a
judgment has become final, the prevailing party should not be deprived The petition assailed before the CA on certiorari the following orders of
of the fruits of the verdict by subsequent suits on the same issues filed by the RTC, to wit:
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."

Page 13 of 30
Garin, DIANA KIND of REDEMPION
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,
Page 14 of 30
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 1 32 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
Garin, DIANA KIND of REDEMPION
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
Page 15 of 30
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.
Garin, DIANA KIND of REDEMPION
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.
Page 16 of 30
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
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.
Garin, DIANA KIND of REDEMPION
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.
Page 17 of 30
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
Garin, DIANA KIND of REDEMPION
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.
Page 18 of 30
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
Garin, DIANA KIND of REDEMPION
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
Page 19 of 30
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.
Garin, DIANA KIND of REDEMPION
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
Page 20 of 30
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........... ;
Garin, DIANA KIND of REDEMPION
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
Page 21 of 30
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.
Garin, DIANA KIND of REDEMPION
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.
Page 22 of 30
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.
Garin, DIANA KIND of REDEMPION
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
Page 23 of 30
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
Garin, DIANA KIND of REDEMPION
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.
Page 24 of 30
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.
Garin, DIANA KIND of REDEMPION
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:
Page 25 of 30
(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.
Garin, DIANA KIND of REDEMPION
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,
Page 26 of 30
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.
Garin, DIANA KIND of REDEMPION
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,
Page 27 of 30
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
Garin, DIANA KIND of REDEMPION
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
Page 28 of 30
₱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
Garin, DIANA KIND of REDEMPION
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
Page 29 of 30
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 following: the
rescission of the Deed of Absolute Sale between himself and the
Camacho spouses, the annulment of the dacion en pago executed by the
latter in favor of petitioner, and the cancellation of petitioner’s certificate
of title to it as well as the issuance of a new one in favor of respondent.
The factual findings of both the trial and the appellate courts show that
respondent intended to sell the subject property to the Camacho spouses
for the sum of ₱2,500,000. The couple initially paid ₱100,000, with the
agreement that the balance would be paid when they would have secured
a loan using the subject property as collateral. To facilitate their
procurement of a loan, the title to the property was transferred to them.
Using the subject property as collateral, the Camachos were able to obtain
a loan of ₱1,190,000 from petitioner. Upon the former’s failure to pay
the loan, the latter sought to foreclose the mortgage over it. However,
before the property could be foreclosed, petitioner and the couple
allegedly agreed on a dacion en pago, in which the latter ceded
ownership of the property in favor of the former in consideration of the
payment of the loan. Respondent contends that when petitioner
conducted an on-site investigation of the property in connection with the
couple’s application for a loan, the latter learned that the former was
living in the subject premises and was thus in actual possession of it. The
CA found, in fact, that petitioner was aware that respondent -- the
previous owner -- remained an unpaid seller.
Moreover, respondent argues that the dacion en pago is riddled with a
number of irregularities. He maintains that the Camachos executed it way
back in 1994 when they were still applying for a loan, not immediately
prior to the supposed foreclosure in 1997. At the same time, they also
executed a promissory note and mortgage for the same amount. As
respondent points out, a dacion en pago that 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 sellers effectively waived the redemption period
normally given a mortgagor.
In sum, we hold that respondent was able to show a prima facie right to
the relief demanded in his Complaint. The Camachos’ nonpayment of the
purchase price agreed upon and the irregularities surrounding the dacion
en pago are serious enough to allow him to possess the
property pendente lite.
Grave Injustice in a
Transfer of Possession
In addition, respondent has shown that to allow petitioner to take
immediate possession of the property would result in grave injustice. As
we have stated above, the ownership of the property, the validity of the
sale between respondent and the Camachos and the legitimacy of
the dacion en pago executed by the latter in favor of petitioner are still
Garin, DIANA KIND of REDEMPION
subject to determination in the court below. Furthermore, there is no
question that respondent has been in possession of the premises during
all this time -- prior to and during the institution of the Complaint. He and
his family have long owned, possessed and occupied it as their family
home since 1967. To dispossess him of it now would definitely alter the
status quo to their detriment.

Ineffectual Judgment

By selling their family home to the Camachos for ₱2,500,000, the

respondent hoped to improve the plight of his family. By a strange turn
of events, he will now find himself homeless with only the sum of
₱100,000 to purchase a new dwelling for himself and his relatives.
Indeed, justice and equity dictate that he should remain in possession of
the property pendente lite.

WHEREFORE, the Petition is DENIED and the assailed

Decision AFFIRMED. Costs against petitioner.

Page 30 of 30