2.
REPUBLIC OF THE PHILIPPINES, Represented by Executive Secretary Eduardo
R. Ermita, the DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS
(DOTC), and the MANILA INTERNATIONAL AIRPORT AUTHORITY
(MIAA), Petitioners, vs. HON. HENRICK F. GINGOYON, In his capacity as Presiding
Judge of the Regional Trial Court, Branch 117, Pasay City and PHILIPPINE
INTERNATIONAL AIR TERMINALS CO., INC., Respondents.
G.R. No. 166429 December 19, 2005
DECISION
TINGA, J.:
The Ninoy Aquino International Airport Passenger Terminal III (NAIA 3) was
conceived, designed and constructed to serve as the country’s show window to
the world. Regrettably, it has spawned controversies. Regrettably too, despite
the apparent completion of the terminal complex way back it has not yet been
operated. This has caused immeasurable economic damage to the country, not
to mention its deplorable discredit in the international community.
In the first case that reached this Court, Agan v. PIATCO,1 the contracts which
the Government had with the contractor were voided for being contrary to law
and public policy. The second case now before the Court involves the matter of
just compensation due the contractor for the terminal complex it built. We
decide the case on the basis of fairness, the same norm that pervades both the
Court’s 2004 Resolution in the first case and the latest expropriation law.
The present controversy has its roots with the promulgation of the Court’s
decision in Agan v. PIATCO,2 promulgated in 2003 (2003 Decision). This decision
nullified the "Concession Agreement for the Build-Operate-and-Transfer
Arrangement of the Ninoy Aquino International Airport Passenger Terminal III"
entered into between the Philippine Government (Government) and the
Philippine International Air Terminals Co., Inc. (PIATCO), as well as the
amendments and supplements thereto. The agreement had authorized PIATCO
to build a new international airport terminal (NAIA 3), as well as a franchise to
operate and maintain the said terminal during the concession period of 25 years.
The contracts were nullified, among others, that Paircargo Consortium,
predecessor of PIATCO, did not possess the requisite financial capacity when it
was awarded the NAIA 3 contract and that the agreement was contrary to public
policy.3
At the time of the promulgation of the 2003 Decision, the NAIA 3 facilities had
already been built by PIATCO and were nearing completion.4 However,
the ponencia was silent as to the legal status of the NAIA 3 facilities following
the nullification of the contracts, as well as whatever rights of PIATCO for
reimbursement for its expenses in the construction of the facilities. Still, in his
Separate Opinion, Justice Panganiban, joined by Justice Callejo, declared as
follows:
Should government pay at all for reasonable expenses incurred in the
construction of the Terminal? Indeed it should, otherwise it will be unjustly
enriching itself at the expense of Piatco and, in particular, its funders,
contractors and investors — both local and foreign. After all, there is no
question that the State needs and will make use of Terminal III, it being part and
parcel of the critical infrastructure and transportation-related programs of
government.5
PIATCO and several respondents-intervenors filed their respective motions for
the reconsideration of the 2003 Decision. These motions were denied by the
Court in its Resolution dated 21 January 2004 (2004 Resolution).6However, the
Court this time squarely addressed the issue of the rights of PIATCO to refund,
compensation or reimbursement for its expenses in the construction of the NAIA
3 facilities. The holding of the Court on this crucial point follows:
This Court, however, is not unmindful of the reality that the structures
comprising the NAIA IPT III facility are almost complete and that funds have
been spent by PIATCO in their construction. For the government to take over the
said facility, it has to compensate respondent PIATCO as builder of the said
structures. The compensation must be just and in accordance with law and
equity for the government can not unjustly enrich itself at the expense of
PIATCO and its investors.7
After the promulgation of the rulings in Agan, the NAIA 3 facilities have
remained in the possession of PIATCO, despite the avowed intent of the
Government to put the airport terminal into immediate operation. The
Government and PIATCO conducted several rounds of negotiation regarding the
NAIA 3 facilities.8 It also appears that arbitral proceedings were commenced
before the International Chamber of Commerce International Court of
Arbitration and the International Centre for the Settlement of Investment
Disputes,9 although the Government has raised jurisdictional questions before
those two bodies.10
Then, on 21 December 2004, the Government11 filed a Complaint for
expropriation with the Pasay City Regional Trial Court (RTC), together with
an Application for Special Raffle seeking the immediate holding of a special
raffle. The Government sought upon the filing of the complaint the issuance of a
writ of possession authorizing it to take immediate possession and control over
the NAIA 3 facilities.
The Government also declared that it had deposited the amount of
₱3,002,125,000.0012 (3 Billion)13 in Cash with the Land Bank of the Philippines,
representing the NAIA 3 terminal’s assessed value for taxation purposes. 14
The case15 was raffled to Branch 117 of the Pasay City RTC, presided by
respondent judge Hon. Henrick F. Gingoyon (Hon. Gingoyon). On the same day
that the Complaint was filed, the RTC issued an Order16 directing the issuance of
a writ of possession to the Government, authorizing it to "take or enter upon
the possession" of the NAIA 3 facilities. Citing the case of City of Manila v.
Serrano,17 the RTC noted that it had the ministerial duty to issue the writ of
possession upon the filing of a complaint for expropriation sufficient in form and
substance, and upon deposit made by the government of the amount equivalent
to the assessed value of the property subject to expropriation. The RTC found
these requisites present, particularly noting that "[t]he case record shows that
[the Government has] deposited the assessed value of the [NAIA 3 facilities] in
the Land Bank of the Philippines, an authorized depositary, as shown by the
certification attached to their complaint." Also on the same day, the RTC issued
a Writ of Possession. According to PIATCO, the Government was able to take
possession over the NAIA 3 facilities immediately after the Writ of
Possession was issued.18
However, on 4 January 2005, the RTC issued another Order designed to
supplement its 21 December 2004 Orderand the Writ of Possession. In the 4
January 2005 Order, now assailed in the present petition, the RTC noted that its
earlier issuance of its writ of possession was pursuant to Section 2, Rule 67 of
the 1997 Rules of Civil Procedure. However, it was observed that Republic Act
No. 8974 (Rep. Act No. 8974), otherwise known as "An Act to Facilitate the
Acquisition of Right-of-Way, Site or Location for National Government
Infrastructure Projects and For Other Purposes" and its Implementing Rules and
Regulations (Implementing Rules) had amended Rule 67 in many respects.
There are at least two crucial differences between the respective procedures
under Rep. Act No. 8974 and Rule 67. Under the statute, the Government is
required to make immediate payment to the property owner upon the filing of
the complaint to be entitled to a writ of possession, whereas in Rule 67, the
Government is required only to make an initial deposit with an authorized
government depositary. Moreover, Rule 67 prescribes that the initial deposit be
equivalent to the assessed value of the property for purposes of taxation, unlike
Rep. Act No. 8974 which provides, as the relevant standard for initial
compensation, the market value of the property as stated in the tax declaration
or the current relevant zonal valuation of the Bureau of Internal Revenue (BIR),
whichever is higher, and the value of the improvements and/or structures using
the replacement cost method.
Accordingly, on the basis of Sections 4 and 7 of Rep. Act No. 8974 and Section 10
of the Implementing Rules, the RTC made key qualifications to its earlier
issuances. First, it directed the Land Bank of the Philippines, Baclaran Branch
(LBP-Baclaran), to immediately release the amount of US$62,343,175.77 to
PIATCO, an amount which the RTC characterized as that which the Government
"specifically made available for the purpose of this expropriation;" and such
amount to be deducted from the amount of just compensation due PIATCO as
eventually determined by the RTC. Second, the Government was directed to
submit to the RTC a Certificate of Availability of Funds signed by authorized
officials to cover the payment of just compensation. Third, the Government was
directed "to maintain, preserve and safeguard" the NAIA 3 facilities or "perform
such as acts or activities in preparation for their direct operation" of the airport
terminal, pending expropriation proceedings and full payment of just
compensation. However, the Government was prohibited "from performing acts
of ownership like awarding concessions or leasing any part of [NAIA 3] to other
parties."19
The very next day after the issuance of the assailed 4 January 2005 Order, the
Government filed an Urgent Motion for Reconsideration, which was set for
hearing on 10 January 2005. On 7 January 2005, the RTC issued another Order,
the second now assailed before this Court, which appointed three (3)
Commissioners to ascertain the amount of just compensation for the NAIA 3
Complex. That same day, the Government filed a Motion for Inhibition of Hon.
Gingoyon.
The RTC heard the Urgent Motion for Reconsideration and Motion for
Inhibition on 10 January 2005. On the same day, it denied these motions in
an Omnibus Order dated 10 January 2005. This is the third Order now assailed
before this Court. Nonetheless, while the Omnibus Order affirmed the earlier
1
dispositions in the 4 January 2005 Order, it excepted from affirmance "the
superfluous part of the Order prohibiting the plaintiffs from awarding
concessions or leasing any part of [NAIA 3] to other parties." 20
Thus, the present Petition for Certiorari and Prohibition under Rule 65 was filed
on 13 January 2005. The petition prayed for the nullification of the RTC orders
dated 4 January 2005, 7 January 2005, and 10 January 2005, and for the
inhibition of Hon. Gingoyon from taking further action on the expropriation
case. A concurrent prayer for the issuance of a temporary restraining order and
preliminary injunction was granted by this Court in a Resolution dated 14
January 2005.21
The Government, in imputing grave abuse of discretion to the acts of Hon.
Gingoyon, raises five general arguments, to wit:
(i) that Rule 67, not Rep. Act No. 8974, governs the present expropriation
proceedings;
(ii) that Hon. Gingoyon erred when he ordered the immediate release of the
amount of US$62.3 Million to PIATCO considering that the assessed value as
alleged in the complaint was only ₱3 Billion;
(iii) that the RTC could not have prohibited the Government from enjoining the
performance of acts of ownership;
(iv) that the appointment of the three commissioners was erroneous; and
(v) that Hon. Gingoyon should be compelled to inhibit himself from the
expropriation case.22
Before we delve into the merits of the issues raised by the Government, it is
essential to consider the crucial holding of the Court in its 2004 Resolution
in Agan, which we repeat below:
This Court, however, is not unmindful of the reality that the structures
comprising the NAIA IPT III facility are almost complete and that funds have
been spent by PIATCO in their construction. For the government to take over the
said facility, it has to compensate respondent PIATCO as builder of the said
structures. The compensation must be just and in accordance with law and
equity for the government cannot unjustly enrich itself at the expense of PIATCO
and its investors.23
This pronouncement contains the fundamental premises which permeate this
decision of the Court. Indeed, Agan, final and executory as it is, stands as
governing law in this case, and any disposition of the present petition must
conform to the conditions laid down by the Court in its 2004 Resolution.
The 2004 Resolution Which Is
Law of This Case Generally
Permits Expropriation
The pronouncement in the 2004 Resolution is especially significant to this case in
two aspects, namely: (i) that PIATCO must receive payment of just
compensation determined in accordance with law and equity; and (ii) that the
government is barred from taking over NAIA 3 until such just compensation is
paid. The parties cannot be allowed to evade the directives laid down by this
Court through any mode of judicial action, such as the complaint for eminent
domain.
It cannot be denied though that the Court in the 2004 Resolution prescribed
mandatory guidelines which the Government must observe before it could
acquire the NAIA 3 facilities. Thus, the actions of respondent judge under
review, as well as the arguments of the parties must, to merit affirmation, pass
the threshold test of whether such propositions are in accord with the 2004
Resolution.
The Government does not contest the efficacy of this pronouncement in the
2004 Resolution,24 thus its application
to the case at bar is not a matter of controversy. Of course, questions such as
what is the standard of "just compensation" and which particular laws and
equitable principles are applicable, remain in dispute and shall be resolved
forthwith.
The Government has chosen to resort to expropriation, a remedy available
under the law, which has the added benefit of an integrated process for the
determination of just compensation and the payment thereof to PIATCO. We
appreciate that the case at bar is a highly unusual case, whereby the
Government seeks to expropriate a building complex constructed on land which
the State already owns.25 There is an inherent illogic in the resort to eminent
domain on property already owned by the State. At first blush, since the State
already owns the property on which NAIA 3 stands, the proper remedy should
be akin to an action for ejectment.
However, the reason for the resort by the Government to expropriation
proceedings is understandable in this case. The 2004 Resolution, in requiring the
payment of just compensation prior to the takeover by the Government of
NAIA 3, effectively precluded it from acquiring possession or ownership of the
NAIA 3 through the unilateral exercise of its rights as the owner of the ground
on which the facilities stood. Thus, as things stood after the 2004 Resolution, the
right of the Government to take over the NAIA 3 terminal was preconditioned by
lawful order on the payment of just compensation to PIATCO as builder of the
structures.
The determination of just compensation could very well be agreed upon by the
parties without judicial intervention, and it appears that steps towards that
direction had been engaged in. Still, ultimately, the Government resorted to its
inherent power of eminent domain through expropriation proceedings. Is
eminent domain appropriate in the first place, with due regard not only to the
law on expropriation but also to the Court’s 2004 Resolution in Agan?
The right of eminent domain extends to personal and real property, and the
NAIA 3 structures, adhered as they are to the soil, are considered as real
property.26 The public purpose for the expropriation is also beyond dispute. It
should also be noted that Section 1 of Rule 67 (on Expropriation) recognizes the
possibility that the property sought to be expropriated may be titled in the
name of the
Republic of the Philippines, although occupied by private individuals, and in such
case an averment to that effect should be made in the complaint. The instant
expropriation complaint did aver that the NAIA 3 complex "stands on a parcel of
land owned by the Bases Conversion Development Authority, another agency of
[the Republic of the Philippines]."27
Admittedly, eminent domain is not the sole judicial recourse by which the
Government may have acquired the NAIA 3 facilities while satisfying the
requisites in the 2004 Resolution. Eminent domain though may be the most
effective, as well as the speediest means by which such goals may be
accomplished. Not only does it enable immediate possession after satisfaction of
the requisites under the law, it also has a built-in procedure through which just
compensation may be ascertained. Thus, there should be no question as to the
propriety of eminent domain proceedings in this case.
Still, in applying the laws and rules on expropriation in the case at bar, we are
impelled to apply or construe these rules in accordance with the Court’s
prescriptions in the 2004 Resolution to achieve the end effect that the
Government may validly take over the NAIA 3 facilities. Insofar as this case is
concerned, the 2004 Resolution is effective not only as a legal precedent, but as
the source of rights and prescriptions that must be guaranteed, if not enforced,
in the resolution of this petition. Otherwise, the integrity and efficacy of the
rulings of this Court will be severely diminished.
It is from these premises that we resolve the first question, whether Rule 67 of
the Rules of Court or Rep. Act No. 8974 governs the expropriation proceedings in
this case.
Application of Rule 67 Violates the 2004 Agan Resolution
The Government insists that Rule 67 of the Rules of Court governs the
expropriation proceedings in this case to the exclusion of all other laws. On the
other hand, PIATCO claims that it is Rep. Act No. 8974 which does apply. Earlier,
we had adverted to the basic differences between the statute and the
procedural rule. Further elaboration is in order.
Rule 67 outlines the procedure under which eminent domain may be exercised
by the Government. Yet by no means does it serve at present as the solitary
guideline through which the State may expropriate private property. For
example, Section 19 of the Local Government Code governs as to the exercise by
local government units of the power of eminent domain through an enabling
ordinance. And then there is Rep. Act No. 8974, which covers expropriation
proceedings intended for national government infrastructure projects.
Rep. Act No. 8974, which provides for a procedure eminently more favorable to
the property owner than Rule 67, inescapably applies in instances when the
national government expropriates property "for national government
infrastructure projects." 28 Thus, if expropriation is engaged in by the national
government for purposes other than national infrastructure projects, the
assessed value standard and the deposit mode prescribed in Rule 67 continues
to apply.
Under both Rule 67 and Rep. Act No. 8974, the Government commences
expropriation proceedings through the filing of a complaint. Unlike in the case of
local governments which necessitate an authorizing ordinance before
expropriation may be accomplished, there is no need under Rule 67 or Rep. Act
No. 8974 for legislative authorization before the Government may proceed with
a particular exercise of eminent domain. The most crucial difference between
Rule 67 and Rep. Act No. 8974 concerns the particular essential step the
Government has to undertake to be entitled to a writ of possession.
The first paragraph of Section 2 of Rule 67 provides:
SEC. 2. Entry of plaintiff upon depositing value with authorized government
depository. — Upon the filing of the complaint or at any time thereafter and
after due notice to the defendant, the plaintiff shall have the right to take or
2
enter upon the possession of the real property involved if he deposits with the
authorized government depositary an amount equivalent to the assessed value
of the property for purposes of taxation to be held by such bank subject to the
orders of the court. Such deposit shall be in money, unless in lieu thereof the
court authorizes the deposit of a certificate of deposit of a government bank of
the Republic of the Philippines payable on demand to the authorized
government depositary.
In contrast, Section 4 of Rep. Act No. 8974 relevantly states:
SEC. 4. Guidelines for Expropriation Proceedings.— Whenever it is necessary to
acquire real property for the right-of-way, site or location for any national
government infrastructure project through expropriation, the appropriate
proceedings before the proper court under the following guidelines:
a) Upon the filing of the complaint, and after due notice to the defendant, the
implementing agency shall immediately pay the owner of the property the
amount equivalent to the sum of (1) one hundred percent (100%) of the value of
the property based on the current relevant zonal valuation of the Bureau of
Internal Revenue (BIR); and (2) the value of the improvements and/or structures
as determined under Section 7 hereof;
...
c) In case the completion of a government infrastructure project is of utmost
urgency and importance, and there is no existing valuation of the area
concerned, the implementing agency shall immediately pay the owner of the
property its proffered value taking into consideration the standards prescribed
in Section 5 hereof.
Upon completion with the guidelines abovementioned, the court shall
immediately issue to the implementing agency an order to take possession of
the property and start the implementation of the project.
Before the court can issue a Writ of Possession, the implementing agency shall
present to the court a certificate of availability of funds from the proper official
concerned.
...
As can be gleaned from the above-quoted texts, Rule 67 merely requires the
Government to deposit with an authorized government depositary the assessed
value of the property for expropriation for it to be entitled to a writ of
possession. On the other hand, Rep. Act No. 8974 requires that the Government
make a direct payment to the property owner before the writ may issue.
Moreover, such payment is based on the zonal valuation of the BIR in the case of
land, the value of the improvements or structures under the replacement cost
method,29 or if no such valuation is available and in cases of utmost urgency, the
proffered value of the property to be seized.
It is quite apparent why the Government would prefer to apply Rule 67 in lieu of
Rep. Act No. 8974. Under Rule 67, it would not be obliged to immediately pay
any amount to PIATCO before it can obtain the writ of possession since all it
need do is deposit the amount equivalent to the assessed value with an
authorized government depositary. Hence, it devotes considerable effort to
point out that Rep. Act No. 8974 does not apply in this case, notwithstanding the
undeniable reality that NAIA 3 is a national government project. Yet, these
efforts fail, especially considering the controlling effect of the 2004 Resolution
in Agan on the adjudication of this case.
It is the finding of this Court that the staging of expropriation proceedings in this
case with the exclusive use of Rule 67 would allow for the Government to take
over the NAIA 3 facilities in a fashion that directly rebukes our 2004 Resolution
in Agan. This Court cannot sanction deviation from its own final and executory
orders.
Section 2 of Rule 67 provides that the State "shall have the right to take or enter
upon the possession of the real property involved if [the plaintiff] deposits with
the authorized government depositary an amount equivalent to the assessed
value of the property for purposes of taxation to be held by such bank subject to
the orders of the court."30It is thus apparent that under the provision, all the
Government need do to obtain a writ of possession is to deposit the amount
equivalent to the assessed value with an authorized government depositary.
Would the deposit under Section 2 of Rule 67 satisfy the requirement laid down
in the 2004 Resolution that "[f]or the government to take over the said facility,
it has to compensate respondent PIATCO as builder of the said structures"?
Evidently not.
If Section 2 of Rule 67 were to apply, PIATCO would be enjoined from receiving a
single centavo as just compensation before the Government takes over the NAIA
3 facility by virtue of a writ of possession. Such an injunction squarely
contradicts the letter and intent of the 2004 Resolution. Hence, the position of
the Government sanctions its own disregard or violation the prescription laid
down by this Court that there must first be just compensation paid to PIATCO
before the Government may take over the NAIA 3 facilities.
Thus, at the very least, Rule 67 cannot apply in this case without violating the
2004 Resolution. Even assuming that Rep. Act No. 8974 does not govern in this
case, it does not necessarily follow that Rule 67 should then apply. After all,
adherence to the letter of Section 2, Rule 67 would in turn violate the Court’s
requirement in the 2004 Resolution that there must first be payment of just
compensation to PIATCO before the Government may take over the property.
It is the plain intent of Rep. Act No. 8974 to supersede the system of deposit
under Rule 67 with the scheme of "immediate payment" in cases involving
national government infrastructure projects. The following portion of the Senate
deliberations, cited by PIATCO in its Memorandum, is worth quoting to cogitate
on the purpose behind the plain meaning of the law:
THE CHAIRMAN (SEN. CAYETANO). "x x x Because the Senate believes that, you
know, we have to pay the landowners immediately not by treasury bills but by
cash.
Since we are depriving them, you know, upon payment, ‘no, of possession, we
might as well pay them as much, ‘no, hindi lang 50 percent.
xxx
THE CHAIRMAN (REP. VERGARA). Accepted.
xxx
THE CHAIRMAN (SEN. CAYETANO). Oo. Because this is really in favor of the
landowners, e.
THE CHAIRMAN (REP. VERGARA). That’s why we need to really secure the
availability of funds.
xxx
THE CHAIRMAN (SEN. CAYETANO). No, no. It’s the same. It says here: iyong first
paragraph, diba? Iyong zonal – talagang magbabayad muna. In other words, you
know, there must be a payment kaagad. (TSN, Bicameral Conference on the
Disagreeing Provisions of House Bill 1422 and Senate Bill 2117, August 29, 2000,
pp. 14-20)
xxx
THE CHAIRMAN (SEN. CAYETANO). Okay, okay, ‘no. Unang-una, it is not deposit,
‘no. It’s payment."
REP. BATERINA. It’s payment, ho, payment." (Id., p. 63)31
It likewise bears noting that the appropriate standard of just compensation is a
substantive matter. It is well within the province of the legislature to fix the
standard, which it did through the enactment of Rep. Act No. 8974. Specifically,
this prescribes the new standards in determining the amount of just
compensation in expropriation cases relating to national government
infrastructure projects, as well as the manner of payment thereof. At the same
time, Section 14 of the Implementing Rules recognizes the continued
applicability of Rule 67 on procedural aspects when it provides "all matters
regarding defenses and objections to the complaint, issues on uncertain
ownership and conflicting claims, effects of appeal on the rights of the parties,
and such other incidents affecting the complaint shall be resolved under the
provisions on expropriation of Rule 67 of the Rules of Court."32
Given that the 2004 Resolution militates against the continued use of the norm
under Section 2, Rule 67, is it then possible to apply Rep. Act No. 8974? We find
that it is, and moreover, its application in this case complements rather than
contravenes the prescriptions laid down in the 2004 Resolution.
Rep. Act No. 8974 Fits to the Situation at Bar and Complements the 2004 Agan
Resolution
Rep. Act No. 8974 is entitled "An Act To Facilitate The Acquisition Of Right-Of-
Way, Site Or Location For National Government Infrastructure Projects And For
Other Purposes." Obviously, the law is intended to cover expropriation
proceedings intended for national government infrastructure projects. Section 2
of Rep. Act No. 8974 explains what are considered as "national government
projects."
Sec. 2. National Government Projects. – The term "national government
projects" shall refer to all national government infrastructure, engineering
works and service contracts, including projects undertaken by government-
owned and controlled corporations, all projects covered by Republic Act No.
6957, as amended by Republic Act No. 7718, otherwise known as the Build-
Operate-and-Transfer Law, and other related and necessary activities, such as
site acquisition, supply and/or installation of equipment and materials,
implementation, construction, completion, operation, maintenance,
improvement, repair and rehabilitation, regardless of the source of funding.
As acknowledged in the 2003 Decision, the development of NAIA 3 was made
pursuant to a build-operate-and-transfer arrangement pursuant to Republic Act
No. 6957, as amended,33 which pertains to infrastructure or development
projects normally financed by the public sector but which are now wholly or
partly implemented by the private sector.34 Under the build-operate-and-
3
transfer scheme, it is the project proponent which undertakes the construction,
including the financing, of a given infrastructure facility. 35 In Tatad v.
Garcia,36 the Court acknowledged that the operator of the EDSA Light Rail Transit
project under a BOT scheme was the owner of the facilities such as "the rail
tracks, rolling stocks like the coaches, rail stations, terminals and the power
plant."37
There can be no doubt that PIATCO has ownership rights over the facilities
which it had financed and constructed. The 2004 Resolution squarely recognized
that right when it mandated the payment of just compensation to PIATCO prior
to the takeover by the Government of NAIA 3. The fact that the Government
resorted to eminent domain proceedings in the first place is a concession on its
part of PIATCO’s ownership. Indeed, if no such right is recognized, then there
should be no impediment for the Government to seize control of NAIA 3 through
ordinary ejectment proceedings.
Since the rights of PIATCO over the NAIA 3 facilities are established, the nature
of these facilities should now be determined. Under Section 415(1) of the Civil
Code, these facilities are ineluctably immovable or real property, as they
constitute buildings, roads and constructions of all kinds adhered to the
soil.38 Certainly, the NAIA 3 facilities are of such nature that they cannot just be
packed up and transported by PIATCO like a traveling circus caravan.
Thus, the property subject of expropriation, the NAIA 3 facilities, are real
property owned by PIATCO. This point is critical, considering the Government’s
insistence that the NAIA 3 facilities cannot be deemed as the "right-of-way",
"site" or "location" of a national government infrastructure project, within the
coverage of Rep. Act No. 8974.
There is no doubt that the NAIA 3 is not, under any sensible contemplation, a
"right-of-way." Yet we cannot agree with the Government’s insistence that
neither could NAIA 3 be a "site" or "location". The petition quotes the
definitions provided in Black’s Law Dictionary of "location’" as the specific place
or position of a person or thing and ‘site’ as pertaining to a place or location or a
piece of property set aside for specific use.’" 39 Yet even Black’s Law Dictionary
provides that "[t]he term [site] does not of itself necessarily mean a place or
tract of land fixed by definite boundaries."40 One would assume that the
Government, to back up its contention, would be able to point to a clear-cut rule
that a "site" or "location" exclusively refers to soil, grass, pebbles and weeds.
There is none.
Indeed, we cannot accept the Government’s proposition that the only properties
that may be expropriated under Rep. Act No. 8974 are parcels of land. Rep. Act
No. 8974 contemplates within its coverage such real property constituting land,
buildings, roads and constructions of all kinds adhered to the soil. Section 1 of
Rep. Act No. 8974, which sets the declaration of the law’s policy, refers to "real
property acquired for national government infrastructure projects are promptly
paid just compensation." 41 Section 4 is quite explicit in stating that the scope of
the law relates to the acquisition of "real property," which under civil law
includes buildings, roads and constructions adhered to the soil.
It is moreover apparent that the law and its implementing rules commonly
provide for a rule for the valuation of improvements and/or structures
thereupon separate from that of the land on which such are constructed.
Section 2 of Rep. Act No. 8974 itself recognizes that the improvements or
structures on the land may very well be the subject of expropriation
proceedings. Section 4(a), in relation to Section 7 of the law provides for the
guidelines for the valuation of the improvements or structures to be
expropriated. Indeed, nothing in the law would prohibit the application of
Section 7, which provides for the valuation method of the improvements and or
structures in the instances wherein it is necessary for the Government to
expropriate only the improvements or structures, as in this case.
The law classifies the NAIA 3 facilities as real properties just like the soil to which
they are adhered. Any sub-classifications of real property and divergent
treatment based thereupon for purposes of expropriation must be based on
substantial distinctions, otherwise the equal protection clause of the
Constitution is violated. There may be perhaps a molecular distinction between
soil and the inorganic improvements adhered thereto, yet there are no
purposive distinctions that would justify a variant treatment for purposes of
expropriation. Both the land itself and the improvements thereupon are
susceptible to private ownership independent of each other, capable of
pecuniary estimation, and if taken from the owner, considered as a deprivation
of property. The owner of improvements seized through expropriation suffers
the same degree of loss as the owner of land seized through similar means.
Equal protection demands that all persons or things similarly situated should be
treated alike, both as to rights conferred and responsibilities imposed. For
purposes of expropriation, parcels of land are similarly situated as the buildings
or improvements constructed thereon, and a disparate treatment between
those two classes of real property infringes the equal protection clause.
Even as the provisions of Rep. Act No. 8974 call for that law’s application in this
case, the threshold test must still be met whether its implementation would
conform to the dictates of the Court in the 2004 Resolution. Unlike in the case of
Rule 67, the application of Rep. Act No. 8974 will not contravene the 2004
Resolution, which requires the payment of just compensation before any
takeover of the NAIA 3 facilities by the Government. The 2004 Resolution does
not particularize the extent such payment must be effected before the takeover,
but it unquestionably requires at least some degree of payment to the private
property owner before a writ of possession may issue. The utilization of Rep. Act
No. 8974 guarantees compliance with this bare minimum requirement, as it
assures the private property owner the payment of, at the very least, the
proffered value of the property to be seized. Such payment of the proffered
value to the owner, followed by the issuance of the writ of possession in favor of
the Government, is precisely the schematic under Rep. Act No. 8974, one which
facially complies with the prescription laid down in the 2004 Resolution.
Clearly then, we see no error on the part of the RTC when it ruled that Rep. Act
No. 8974 governs the instant expropriation proceedings.
The Proper Amount to be Paid under Rep. Act No. 8974
Then, there is the matter of the proper amount which should be paid to PIATCO
by the Government before the writ of possession may issue, consonant to Rep.
Act No. 8974.
At this juncture, we must address the observation made by the Office of the
Solicitor General in behalf of the Government that there could be no "BIR zonal
valuations" on the NAIA 3 facility, as provided in Rep. Act No. 8974, since zonal
valuations are only for parcels of land, not for airport terminals. The Court
agrees with this point, yet does not see it as an impediment for the application
of Rep. Act No. 8974.
It must be clarified that PIATCO cannot be reimbursed or justly compensated for
the value of the parcel of land on which NAIA 3 stands. PIATCO is not the owner
of the land on which the NAIA 3 facility is constructed, and it should not be
entitled to just compensation that is inclusive of the value of the land itself. It
would be highly disingenuous to compensate PIATCO for the value of land it
does not own. Its entitlement to just compensation should be limited to the
value of the improvements and/or structures themselves. Thus, the
determination of just compensation cannot include the BIR zonal valuation
under Section 4 of Rep. Act No. 8974.
Under Rep. Act No. 8974, the Government is required to "immediately pay" the
owner of the property the amount equivalent to the sum of (1) one hundred
percent (100%) of the value of the property based on the current relevant zonal
valuation of the [BIR]; and (2) the value of the improvements and/or structures
as determined under Section 7. As stated above, the BIR zonal valuation cannot
apply in this case, thus the amount subject to immediate payment should be
limited to "the value of the improvements and/or structures as determined
under Section 7," with Section 7 referring to the "implementing rules and
regulations for the equitable valuation of the improvements and/or structures
on the land." Under the present implementing rules in place, the valuation of
the improvements/structures are to be based using "the replacement cost
method."42 However, the replacement cost is only one of the factors to be
considered in determining the just compensation.
In addition to Rep. Act No. 8974, the 2004 Resolution in Agan also mandated
that the payment of just compensation should be in accordance with equity as
well. Thus, in ascertaining the ultimate amount of just compensation, the duty
of the trial court is to ensure that such amount conforms not only to the law,
such as Rep. Act No. 8974, but to principles of equity as well.
Admittedly, there is no way, at least for the present, to immediately ascertain
the value of the improvements and structures since such valuation is a matter
for factual determination.43 Yet Rep. Act No. 8974 permits an expedited means
by which the Government can immediately take possession of the property
without having to await precise determination of the valuation. Section 4(c) of
Rep. Act No. 8974 states that "in case the completion of a government
infrastructure project is of utmost urgency and importance, and there is no
existing valuation of the area concerned, the implementing agency shall
immediately pay the owner of the property its proferred value, taking into
consideration the standards prescribed in Section 5 [of the law]." 44 The
"proffered value" may strike as a highly subjective standard based solely on the
intuition of the government, but Rep. Act No. 8974 does provide relevant
standards by which "proffered value" should be based,45 as well as the certainty
of judicial determination of the propriety of the proffered value. 46
4
In filing the complaint for expropriation, the Government alleged to have
deposited the amount of ₱3 Billion earmarked for expropriation, representing
the assessed value of the property. The making of the deposit, including the
determination of the amount of the deposit, was undertaken under the
erroneous notion that Rule 67, and not Rep. Act No. 8974, is the applicable law.
Still, as regards the amount, the Court sees no impediment to recognize this sum
of ₱3 Billion as the proffered value under Section 4(b) of Rep. Act No. 8974. After
all, in the initial determination of the proffered value, the Government is not
strictly required to adhere to any predetermined standards, although its
proffered value may later be subjected to judicial review using the standards
enumerated under Section 5 of Rep. Act No. 8974.
How should we appreciate the questioned order of Hon. Gingoyon, which
pegged the amount to be immediately paid to PIATCO at around $62.3 Million?
The Order dated 4 January 2005, which mandated such amount, proves
problematic in that regard. While the initial sum of ₱3 Billion may have been
based on the assessed value, a standard which should not however apply in this
case, the RTC cites without qualification Section 4(a) of Rep. Act No. 8974 as the
basis for the amount of $62.3 Million, thus leaving the impression that the BIR
zonal valuation may form part of the basis for just compensation, which should
not be the case. Moreover, respondent judge made no attempt to apply the
enumerated guidelines for determination of just compensation under Section 5
of Rep. Act No. 8974, as required for judicial review of the proffered value.
The Court notes that in the 10 January 2005 Omnibus Order, the RTC noted that
the concessions agreement entered into between the Government and PIATCO
stated that the actual cost of building NAIA 3 was "not less than" US$350
Million.47 The RTC then proceeded to observe that while Rep. Act No. 8974
required the immediate payment to PIATCO the amount equivalent to 100% of
the value of NAIA 3, the amount deposited by the Government constituted only
18% of this value. At this point, no binding import should be given to this
observation that the actual cost of building NAIA 3 was "not less than" US$350
Million, as the final conclusions on the amount of just compensation can come
only after due ascertainment in accordance with the standards set under Rep.
Act No. 8974, not the declarations of the parties. At the same time, the
expressed linkage between the BIR zonal valuation and the amount of just
compensation in this case, is revelatory of erroneous thought on the part of the
RTC.
We have already pointed out the irrelevance of the BIR zonal valuation as an
appropriate basis for valuation in this case, PIATCO not being the owner of the
land on which the NAIA 3 facilities stand. The subject order is flawed insofar as it
fails to qualify that such standard is inappropriate.
It does appear that the amount of US$62.3 Million was based on the
certification issued by the LBP-Baclaran that the Republic of the Philippines
maintained a total balance in that branch amounting to such amount. Yet the
actual representation of the $62.3 Million is not clear. The Land Bank
Certification expressing such amount does state that it was issued upon request
of the Manila International Airport Authority "purportedly as guaranty deposit
for the expropriation complaint."48 The Government claims in its Memorandum
that the entire amount was made available as a guaranty fund for the final and
executory judgment of the trial court, and not merely for the issuance of the
writ of possession.49 One could readily conclude that the entire amount of
US$62.3 Million was intended by the Government to answer for whatever
guaranties may be required for the purpose of the expropriation complaint.
Still, such intention the Government may have had as to the entire US$62.3
Million is only inferentially established. In ascertaining the proffered value
adduced by the Government, the amount of ₱3 Billion as the amount deposited
characterized in the complaint as "to be held by [Land Bank] subject to the
[RTC’s] orders,"50 should be deemed as controlling. There is no clear evidence
that the Government intended to offer US$62.3 Million as the initial payment of
just compensation, the wording of the Land Bank Certification notwithstanding,
and credence should be given to the consistent position of the Government on
that aspect.
In any event, for the RTC to be able to justify the payment of US$62.3 Million to
PIATCO and not ₱3 Billion Pesos, he would have to establish that the higher
amount represents the valuation of the structures/improvements, and not the
BIR zonal valuation on the land wherein NAIA 3 is built. The Order dated 5
January 2005 fails to establish such integral fact, and in the absence of
contravening proof, the proffered value of ₱3 Billion, as presented by the
Government, should prevail.
Strikingly, the Government submits that assuming that Rep. Act No. 8974 is
applicable, the deposited amount of ₱3 Billion should be considered as the
proffered value, since the amount was based on comparative values made by
the City Assessor.51 Accordingly, it should be deemed as having faithfully
complied with the requirements of the statute.52 While the Court agrees that ₱3
Billion should be considered as the correct proffered value, still we cannot deem
the Government as having faithfully complied with Rep. Act No. 8974. For the
law plainly requires direct payment to the property owner, and not a mere
deposit with the authorized government depositary. Without such direct
payment, no writ of possession may be obtained.
Writ of Possession May Not Be Implemented Until Actual Receipt by PIATCO of
Proferred Value
The Court thus finds another error on the part of the RTC. The RTC authorized
the issuance of the writ of possession to the Government notwithstanding the
fact that no payment of any amount had yet been made to PIATCO, despite the
clear command of Rep. Act No. 8974 that there must first be payment before the
writ of possession can issue. While the RTC did direct the LBP-Baclaran to
immediately release the amount of US$62 Million to PIATCO, it should have
likewise suspended the writ of possession, nay, withdrawn it altogether, until
the Government shall have actually paid PIATCO. This is the inevitable
consequence of the clear command of Rep. Act No. 8974 that requires
immediate payment of the initially determined amount of just compensation
should be effected. Otherwise, the overpowering intention of Rep. Act No. 8974
of ensuring payment first before transfer of repossession would be eviscerated.
Rep. Act No. 8974 represents a significant change from previous expropriation
laws such as Rule 67, or even Section 19 of the Local Government Code. Rule 67
and the Local Government Code merely provided that the Government deposit
the initial amounts53 antecedent to acquiring possession of the property with,
respectively, an authorized
Government depositary54 or the proper court.55 In both cases, the private owner
does not receive compensation prior to the deprivation of property. On the
other hand, Rep. Act No. 8974 mandates immediate payment of the initial just
compensation prior to the issuance of the writ of possession in favor of the
Government.
Rep. Act No. 8974 is plainly clear in imposing the requirement of immediate
prepayment, and no amount of statutory deconstruction can evade such
requisite. It enshrines a new approach towards eminent domain that reconciles
the inherent unease attending expropriation proceedings with a position of
fundamental equity. While expropriation proceedings have always demanded
just compensation in exchange for private property, the previous deposit
requirement impeded immediate compensation to the private owner, especially
in cases wherein the determination
of the final amount of compensation would prove highly disputed. Under the
new modality prescribed by Rep. Act No. 8974, the private owner sees
immediate monetary recompense with the same degree of speed as the taking
of his/her property.
While eminent domain lies as one of the inherent powers of the State, there is
no requirement that it undertake a prolonged procedure, or that the payment of
the private owner be protracted as far as practicable. In fact, the expedited
procedure of payment, as highlighted under Rep. Act No. 8974, is inherently
more fair, especially to the layperson who would be hard-pressed to fully
comprehend the social value of expropriation in the first place. Immediate
payment placates to some degree whatever ill-will that arises from
expropriation, as well as satisfies the demand of basic fairness.
The Court has the duty to implement Rep. Act No. 8974 and to direct compliance
with the requirement of immediate payment in this case. Accordingly, the Writ
of Possession dated 21 December 2004 should be held in abeyance, pending
proof of actual payment by the Government to PIATCO of the proffered value of
the NAIA 3 facilities, which totals ₱3,002,125,000.00.
Rights of the Government upon Issuance of the Writ of Possession
Once the Government pays PIATCO the amount of the proffered value of ₱3
Billion, it will be entitled to the Writ of Possession. However, the Government
questions the qualification imposed by the RTC in its 4 January
2005 Orderconsisting of the prohibition on the Government from performing
acts of ownership such as awarding concessions or leasing any part of NAIA 3 to
other parties. To be certain, the RTC, in its 10 January 2005 Omnibus Order,
expressly stated that it was not affirming "the superfluous part of the Order [of
4 January 2005] prohibiting the plaintiffs from awarding concessions or leasing
any part of NAIA [3] to other parties."56 Still, such statement was predicated on
the notion that since the Government was not yet the owner of NAIA 3 until
final payment of just compensation, it was obviously incapacitated to perform
such acts of ownership.
In deciding this question, the 2004 Resolution in Agan cannot be ignored,
particularly the declaration that "[f]or the government to take over the said
facility, it has to compensate respondent PIATCO as builder of the said
5
structures." The obvious import of this holding is that unless PIATCO is paid just
compensation, the Government is barred from "taking over," a phrase which in
the strictest sense could encompass even a bar of physical possession of NAIA 3,
much less operation of the facilities.
There are critical reasons for the Court to view the 2004 Resolution less
stringently, and thus allow the operation by the Government of NAIA 3 upon the
effectivity of the Writ of Possession. For one, the national prestige is diminished
every day that passes with the NAIA 3 remaining mothballed. For another, the
continued non-use of the facilities contributes to its physical deterioration, if it
has not already. And still for another, the economic benefits to the Government
and the country at large are beyond dispute once the NAIA 3 is put in operation.
Rep. Act No. 8974 provides the appropriate answer for the standard that
governs the extent of the acts the Government may be authorized to perform
upon the issuance of the writ of possession. Section 4 states that "the court shall
immediately issue to the implementing agency an order to take possession of
the property and start the implementation of the project." We hold that
accordingly, once the Writ of Possession is effective, the Government itself is
authorized to perform the acts that are essential to the operation of the NAIA 3
as an international airport terminal upon the effectivity of the Writ of
Possession. These would include the repair, reconditioning and improvement of
the complex, maintenance of the existing facilities and equipment, installation
of new facilities and equipment, provision of services and facilities pertaining to
the facilitation of air traffic and transport, and other services that are integral to
a modern-day international airport.
The Government’s position is more expansive than that adopted by the Court. It
argues that with the writ of possession, it is enabled to perform acts de jure on
the expropriated property. It cites Republic v. Tagle,57 as well as the statement
therein that "the expropriation of real property does not include mere physical
entry or occupation of land," and from them concludes that "its mere physical
entry and occupation of the property fall short of the taking of title, which
includes all the rights that may be exercised by an owner over the subject
property."
This conclusion is indeed lifted directly from statements in Tagle,58 but not from
the ratio decidendi of that case. Tagle concerned whether a writ of possession
in favor of the Government was still necessary in light of the fact that it was
already in actual possession of the property. In ruling that the Government was
entitled to the writ of possession, the Court in Tagle explains that such writ
vested not only physical possession, but also the legal right to possess the
property. Continues the Court, such legal right to possess was particularly
important in the case, as there was a pending suit against the Republic for
unlawful detainer, and the writ of possession would serve to safeguard the
Government from eviction.59
At the same time, Tagle conforms to the obvious, that there is no transfer of
ownership as of yet by virtue of the writ of possession. Tagle may concede that
the Government is entitled to exercise more than just the right of possession by
virtue of the writ of possession, yet it cannot be construed to grant the
Government the entire panoply of rights that are available to the owner.
Certainly, neither Tagle nor any other case or law, lends support to the
Government’s proposition that it acquires beneficial or equitable ownership of
the expropriated property merely through the writ of possession.
Indeed, this Court has been vigilant in defense of the rights of the property
owner who has been validly deprived of possession, yet retains legal title over
the expropriated property pending payment of just compensation. We
reiterated the various doctrines of such import in our recent holding in Republic
v. Lim:60
The recognized rule is that title to the property expropriated shall pass from the
owner to the expropriator only upon full payment of the just compensation.
Jurisprudence on this settled principle is consistent both here and in other
democratic jurisdictions. In Association of Small Landowners in the Philippines,
Inc. et al., vs. Secretary of Agrarian Reform[61 ], thus:
"Title to property which is the subject of condemnation proceedings does not
vest the condemnor until the judgment fixing just compensation is entered and
paid, but the condemnor’s title relates back to the date on which the petition
under the Eminent Domain Act, or the commissioner’s report under the Local
Improvement Act, is filed.
x x x Although the right to appropriate and use land taken for a canal is
complete at the time of entry, title to the property taken remains in the owner
until payment is actually made. (Emphasis supplied.)
In Kennedy v. Indianapolis, the US Supreme Court cited several cases holding
that title to property does not pass to the condemnor until just compensation
had actually been made. In fact, the decisions appear to be uniform to this
effect. As early as 1838, in Rubottom v. McLure, it was held that ‘actual payment
to the owner of the condemned property was a condition precedent to the
investment of the title to the property in the State’ albeit ‘not to the
appropriation of it to public use.’ In Rexford v. Knight, the Court of Appeals of
New York said that the construction upon the statutes was that the fee did not
vest in the State until the payment of the compensation although the authority
to enter upon and appropriate the land was complete prior to the payment.
Kennedy further said that ‘both on principle and authority the rule is . . . that the
right to enter on and use the property is complete, as soon as the property is
actually appropriated under the authority of law for a public use, but that the
title does not pass from the owner without his consent, until just compensation
has been made to him."
Our own Supreme Court has held in Visayan Refining Co. v. Camus and Paredes,
that:
‘If the laws which we have exhibited or cited in the preceding discussion are
attentively examined it will be apparent that the method of expropriation
adopted in this jurisdiction is such as to afford absolute reassurance that no
piece of land can be finally and irrevocably taken from an unwilling owner until
compensation is paid....’"(Emphasis supplied.)
Clearly, without full payment of just compensation, there can be no transfer of
title from the landowner to the expropriator. Otherwise stated, the Republic’s
acquisition of ownership is conditioned upon the full payment of just
compensation within a reasonable time.
Significantly, in Municipality of Biñan v. Garcia[62 ] this Court ruled that the
expropriation of lands consists of two stages, to wit:
"x x x The first is concerned with the determination of the authority of the
plaintiff to exercise the power of eminent domain and the propriety of its
exercise in the context of the facts involved in the suit. It ends with an order, if
not of dismissal of the action, "of condemnation declaring that the plaintiff has a
lawful right to take the property sought to be condemned, for the public use or
purpose described in the complaint, upon the payment of just compensation to
be determined as of the date of the filing of the complaint" x x x.
The second phase of the eminent domain action is concerned with the
determination by the court of "the just compensation for the property sought to
be taken." This is done by the court with the assistance of not more than three
(3) commissioners. x x x.
It is only upon the completion of these two stages that expropriation is said to
have been completed. In Republic v. Salem Investment Corporation[63 ] , we
ruled that, "the process is not completed until payment of just compensation."
Thus, here, the failure of the Republic to pay respondent and his predecessors-
in-interest for a period of 57 years rendered the expropriation process
incomplete.
Lim serves fair warning to the Government and its agencies who consistently
refuse to pay just compensation due to the private property owner whose
property had been
expropriated. At the same time, Lim emphasizes the fragility of the rights of the
Government as possessor pending the final payment of just compensation,
without diminishing the potency of such rights. Indeed, the public policy,
enshrined foremost in the Constitution, mandates that the Government must
pay for the private property it expropriates. Consequently, the proper judicial
attitude is to guarantee compliance with this primordial right to just
compensation.
Final Determination of Just Compensation Within 60 Days
The issuance of the writ of possession does not write finis to the expropriation
proceedings. As earlier pointed out, expropriation is not completed until
payment to the property owner of just compensation. The proffered value
stands as merely a provisional determination of the amount of just
compensation, the payment of which is sufficient to transfer possession of the
property to the Government. However, to effectuate the transfer of ownership,
it is necessary for the Government to pay the property owner the final just
compensation.
In Lim, the Court went as far as to countenance, given the exceptional
circumstances of that case, the reversion of the validly expropriated property to
private ownership due to the failure of the Government to pay just
compensation in that case.64 It was noted in that case that the Government
deliberately refused to pay just compensation. The Court went on to rule that
"in cases where the government failed to pay just compensation within five (5)
years from the finality of the judgment in the expropriation proceedings, the
owners concerned shall have the right to recover possession of their property." 65
Rep. Act No. 8974 mandates a speedy method by which the final determination
of just compensation may be had. Section 4 provides:
In the event that the owner of the property contests the implementing agency’s
proffered value, the court shall determine the just compensation to be paid the
6
owner within sixty (60) days from the date of filing of the expropriation case.
When the decision of the court becomes final and executory, the implementing
agency shall pay the owner the difference between the amount already paid and
the just compensation as determined by the court.
We hold that this provision should apply in this case. The sixty (60)-day period
prescribed in Rep. Act No. 8974 gives teeth to the law’s avowed policy "to
ensure that owners of real property acquired for national government
infrastructure projects are promptly paid just compensation." 66 In this case,
there already has been irreversible delay in the prompt payment of PIATCO of
just compensation, and it is no longer possible for the RTC to determine the just
compensation due PIATCO within sixty (60) days from the filing of the complaint
last 21 December 2004, as contemplated by the law. Still, it is feasible to
effectuate the spirit of the law by requiring the trial court to make such
determination within sixty (60) days from finality of this decision, in accordance
with the guidelines laid down in Rep. Act No. 8974 and its Implementing Rules.
Of course, once the amount of just compensation has been finally determined,
the Government is obliged to pay PIATCO the said amount. As shown in Lim and
other like-minded cases, the Government’s refusal to make such payment is
indubitably actionable in court.
Appointment of Commissioners
The next argument for consideration is the claim of the Government that the
RTC erred in appointing the three commissioners in its 7 January
2005 Order without prior consultation with either the Government or PIATCO,
or without affording the Government the opportunity to object to the
appointment of these commissioners. We can dispose of this argument without
complication.
It must be noted that Rep. Act No. 8974 is silent on the appointment of
commissioners tasked with the ascertainment of just compensation. 67 This
protocol though is sanctioned under Rule 67. We rule that the appointment of
commissioners under Rule 67 may be resorted to, even in expropriation
proceedings under Rep. Act No. 8974, since the application of the provisions of
Rule 67 in that regard do not conflict with the statute. As earlier stated, Section
14 of the Implementing Rules does allow such other incidents affecting the
complaint to be resolved under the provisions on expropriation of Rule 67 of the
Rules of Court. Even without Rule 67, reference during trial to a commissioner of
the examination of an issue of fact is sanctioned under Rule 32 of the Rules of
Court.
But while the appointment of commissioners under the aegis of Rule 67 may be
sanctioned in expropriation proceedings under Rep. Act No. 8974, the standards
to be observed for the determination of just compensation are provided not in
Rule 67 but in the statute. In particular, the governing standards for the
determination of just compensation for the NAIA 3 facilities are found in Section
10 of the Implementing Rules for Rep. Act No. 8974, which provides for the
replacement cost method in the valuation of improvements and structures. 68
Nothing in Rule 67 or Rep. Act No. 8974 requires that the RTC consult with the
parties in the expropriation case on who should be appointed as commissioners.
Neither does the Court feel that such a requirement should be imposed in this
case. We did rule in Municipality of Talisay v. Ramirez 69 that "there is nothing to
prevent [the trial court] from seeking the recommendations of the parties on
[the] matter [of appointment of commissioners], the better to ensure their fair
representation."70 At the same time, such solicitation of recommendations is not
obligatory on the part of the court, hence we cannot impute error on the part of
the RTC in its exercise of solitary discretion in the appointment of the
commissioners.
What Rule 67 does allow though is for the parties to protest the appointment of
any of these commissioners, as provided under Section 5 of the Rule. These
objections though must be made filed within ten (10) days from service of the
order of appointment of the commissioners.71 In this case, the proper recourse
of the Government to challenge the choice of the commissioners is to file an
objection with the trial court, conformably with Section 5, Rule 67, and not as it
has done, assail the same through a special civil action for certiorari. Considering
that the expropriation proceedings in this case were effectively halted seven (7)
days after the Order appointing the commissioners,72 it is permissible to allow
the parties to file their objections with the RTC within five (5) days from finality
of this decision.
Insufficient Ground for Inhibition of Respondent Judge
The final argument for disposition is the claim of the Government is that Hon.
Gingoyon has prejudged the expropriation case against the Government’s cause
and, thus, should be required to inhibit himself. This grave charge is predicated
on facts which the Government characterizes as "undeniable." In particular, the
Government notes that the 4 January 2005 Order was issued motu proprio,
without any preceding motion, notice or hearing. Further, such order, which
directed the payment of US$62 Million to PIATCO, was attended with error in
the computation of just compensation. The Government also notes that the
said Order was issued even before summons had been served on PIATCO.
The disqualification of a judge is a deprivation of his/her judicial power 73 and
should not be allowed on the basis of mere speculations and surmises. It
certainly cannot be predicated on the adverse nature of the judge’s rulings
towards the movant for inhibition, especially if these rulings are in accord with
law. Neither could inhibition be justified merely on the erroneous nature of the
rulings of the judge. We emphasized in Webb v. People:74
To prove bias and prejudice on the part of respondent judge, petitioners harp on
the alleged adverse and erroneous rulings of respondent judge on their various
motions. By themselves, however, they do not sufficiently prove bias and
prejudice to disqualify respondent judge. To be disqualifying, the bias and
prejudice must be shown to have stemmed from an extrajudicial source and
result in an opinion on the merits on some basis other than what the judge
learned from his participation in the case. Opinions formed in the course of
judicial proceedings, although erroneous, as long as they are based on the
evidence presented and conduct observed by the judge, do not prove personal
bias or prejudice on the part of the judge. As a general rule, repeated rulings
against a litigant, no matter how erroneous and vigorously and consistently
expressed, are not a basis for disqualification of a judge on grounds of bias and
prejudice. Extrinsic evidence is required to establish bias, bad faith, malice or
corrupt purpose, in addition to the palpable error which may be inferred from
the decision or order itself. Although the decision may seem so erroneous as to
raise doubts concerning a judge's integrity, absent extrinsic evidence, the
decision itself would be insufficient to establish a case against the judge. The
only exception to the rule is when the error is so gross and patent as to produce
an ineluctable inference of bad faith or malice.75
The Government’s contentions against Hon. Gingoyon are severely undercut by
the fact that the 21 December 2004 Order, which the 4 January
2005 Order sought to rectify, was indeed severely flawed as it erroneously
applied the provisions of Rule 67 of the Rules of Court, instead of Rep. Act No.
8974, in ascertaining compliance with the requisites for the issuance of the writ
of possession. The 4 January
2005 Order, which according to the Government establishes Hon. Gingoyon’s
bias, was promulgated precisely to correct the previous error by applying the
correct provisions of law. It would not speak well of the Court if it sanctions a
judge for wanting or even attempting to correct a previous erroneous order
which precisely is the right move to take.
Neither are we convinced that the motu proprio issuance of the 4 January
2005 Order, without the benefit of notice or hearing, sufficiently evinces bias on
the part of Hon. Gingoyon. The motu proprio amendment by a court of an
erroneous order previously issued may be sanctioned depending on the
circumstances, in line with the long-recognized principle that every court has
inherent power to do all things reasonably necessary for the administration of
justice within the scope of its jurisdiction.76 Section 5(g), Rule 135 of the Rules of
Court further recognizes the inherent power of courts "to amend and control its
process and orders so as to make them conformable to law and justice," 77 a
power which Hon. Gingoyon noted in his 10 January 2005 Omnibus Order.78 This
inherent power includes the right of the court to reverse itself, especially when
in its honest opinion it has committed an error or mistake in judgment, and that
to adhere to its decision will cause injustice to a party litigant. 79
Certainly, the 4 January 2005 Order was designed to make the RTC’s previous
order conformable to law and justice, particularly to apply the correct law of the
case. Of course, as earlier established, this effort proved incomplete, as the 4
January 2005 Order did not correctly apply Rep. Act No. 8974 in several respects.
Still, at least, the 4 January 2005 Order correctly reformed the most basic
premise of the case that Rep. Act No. 8974 governs the expropriation
proceedings.
Nonetheless, the Government belittles Hon. Gingoyon’s invocation of Section
5(g), Rule 135 as "patently without merit". Certainly merit can be seen by the
fact that the 4 January 2005 Order reoriented the expropriation proceedings
towards the correct governing law. Still, the Government claims that the
unilateral act of the RTC did not conform to law or justice, as it was not afforded
the right to be heard.
The Court would be more charitably disposed towards this argument if not for
the fact that the earlier order with the 4 January 2005 Order sought to correct
was itself issued without the benefit of any hearing. In fact, nothing either in
Rule 67 or Rep. Act No. 8975 requires the conduct of a hearing prior to the
issuance of the writ of possession, which by design is available immediately
upon the filing of the complaint provided that the requisites attaching thereto
are present. Indeed, this expedited process for the obtention of a writ of
7
possession in expropriation cases comes at the expense of the rights of the
property owner to be heard or to be deprived of possession. Considering these
predicates, it would be highly awry to demand that an order modifying the
earlier issuance of a writ of possession in an expropriation case be barred until
the staging of a hearing, when the issuance of the writ of possession itself is not
subject to hearing. Perhaps the conduct of a hearing under these circumstances
would be prudent. However, hearing is not mandatory, and the failure to
conduct one does not establish the manifest bias required for the inhibition of
the judge.
The Government likewise faults Hon. Gingoyon for using the amount of US$350
Million as the basis for the 100% deposit under Rep. Act No. 8974. The Court has
noted that this statement was predicated on the erroneous belief that the BIR
zonal valuation applies as a standard for determination of just compensation in
this case. Yet this is manifest not of bias, but merely of error on the part of the
judge. Indeed, the Government was not the only victim of the errors of the RTC
in the assailed orders. PIATCO itself was injured by the issuance by the RTC of
the writ of possession, even though the former had yet to be paid any amount
of just compensation. At the same time, the Government was also prejudiced by
the erroneous ruling of the RTC that the amount of US$62.3 Million, and not ₱3
Billion, should be released to PIATCO.
The Court has not been remiss in pointing out the multiple errors committed by
the RTC in its assailed orders, to the prejudice of both parties. This attitude of
error towards all does not ipso facto negate the charge of bias. Still, great care
should be had in requiring the inhibition of judges simply because the
magistrate did err. Incompetence may be a ground for administrative sanction,
but not for inhibition, which requires lack of objectivity or impartiality to sit on a
case.
The Court should necessarily guard against adopting a standard that a judge
should be inhibited from hearing the case if one litigant loses trust in the judge.
Such loss of trust on the part of the Government may be palpable, yet inhibition
cannot be grounded merely on the feelings of the party-litigants. Indeed, every
losing litigant in any case can resort to claiming that the judge was biased, and
he/she will gain a sympathetic ear from friends, family, and people who do not
understand the judicial process. The test in believing such a proposition should
not be the vehemence of the litigant’s claim of bias, but the Court’s judicious
estimation, as people who know better than to believe any old cry of "wolf!",
whether such bias has been irrefutably exhibited.
The Court acknowledges that it had been previously held that "at the very first
sign of lack of faith and trust in his actions, whether well-grounded or not, the
judge has no other alternative but to inhibit himself from the case." 80 But this
doctrine is qualified by the entrenched rule that "a judge may not be legally
prohibited from sitting in a litigation, but when circumstances appear that will
induce doubt to his honest actuations and probity in favor of either party, or
incite such state of mind, he should conduct a careful self-
examination. He should exercise his discretion in a way that the people's faith in
the Courts of Justice is not impaired."81 And a self-assessment by the judge that
he/she is not impaired to hear the case will be respected by the Court absent
any evidence to the contrary. As held in Chin v. Court of Appeals:
An allegation of prejudgment, without more, constitutes mere conjecture and is
not one of the "just and valid reasons" contemplated in the second paragraph of
Rule 137 of the Rules of Court for which a judge may inhibit himself from
hearing the case. We have repeatedly held that mere suspicion that a judge is
partial to a party is not enough. Bare allegations of partiality and prejudgment
will not suffice in the absence of clear and convincing evidence to overcome the
presumption that the judge will undertake his noble role to dispense justice
according to law and evidence and without fear or favor. There should be
adequate evidence to prove the allegations, and there must be showing that the
judge had an interest, personal or otherwise, in the prosecution of the case. To
be a disqualifying circumstance, the bias and prejudice must be shown to have
stemmed from an extrajudicial source and result in an opinion on the merits on
some basis other than what the judge learned from his participation in the
case.82
The mere vehemence of the Government’s claim of bias does not translate to
clear and convincing evidence of impairing bias. There is no sufficient ground to
direct the inhibition of Hon. Gingoyon from hearing the expropriation case.
In conclusion, the Court summarizes its rulings as follows:
(1) The 2004 Resolution in Agan sets the base requirement that has to be
observed before the Government may take over the NAIA 3, that there must be
payment to PIATCO of just compensation in accordance with law and equity.
Any ruling in the present expropriation case must be conformable to the dictates
of the Court as pronounced in the Agan cases.
(2) Rep. Act No. 8974 applies in this case, particularly insofar as it requires the
immediate payment by the Government of at least the proffered value of the
NAIA 3 facilities to PIATCO and provides certain valuation standards or methods
for the determination of just compensation.
(3) Applying Rep. Act No. 8974, the implementation of Writ of Possession in
favor of the Government over NAIA 3 is held in abeyance until PIATCO is directly
paid the amount of ₱3 Billion, representing the proffered value of NAIA 3 under
Section 4(c) of the law.
(4) Applying Rep. Act No. 8974, the Government is authorized to start the
implementation of the NAIA 3 Airport terminal project by performing the acts
that are essential to the operation of the NAIA 3 as an international airport
terminal upon the effectivity of the Writ of Possession, subject to the conditions
above-stated. As prescribed by the Court, such authority encompasses "the
repair, reconditioning and improvement of the complex, maintenance of the
existing facilities and equipment, installation of new facilities and equipment,
provision of services and facilities pertaining to the facilitation of air traffic and
transport, and other services that are integral to a modern-day international
airport."83
(5) The RTC is mandated to complete its determination of the just compensation
within sixty (60) days from finality of this Decision. In doing so, the RTC is
obliged to comply with "law and equity" as ordained in Again and the standard
set under Implementing Rules of Rep. Act No. 8974 which is the "replacement
cost method" as the standard of valuation of structures and improvements.
(6) There was no grave abuse of discretion attending the RTC Order appointing
the commissioners for the purpose of determining just compensation. The
provisions on commissioners under Rule 67 shall apply insofar as they are not
inconsistent with Rep. Act No. 8974, its Implementing Rules, or the rulings of the
Court in Agan.
(7) The Government shall pay the just compensation fixed in the decision of the
trial court to PIATCO immediately upon the finality of the said decision.
(8) There is no basis for the Court to direct the inhibition of Hon. Gingoyon.
All told, the Court finds no grave abuse of discretion on the part of the RTC to
warrant the nullification of the questioned orders. Nonetheless, portions of
these orders should be modified to conform with law and the pronouncements
made by the Court herein.
WHEREFORE, the Petition is GRANTED in PART with respect to the orders dated
4 January 2005 and 10 January 2005 of the lower court. Said orders are
AFFIRMED with the following MODIFICATIONS:
1) The implementation of the Writ of Possession dated 21 December 2005 is
HELD IN ABEYANCE, pending payment by petitioners to PIATCO of the amount of
Three Billion Two Million One Hundred Twenty Five Thousand Pesos
(₱3,002,125,000.00), representing the proffered value of the NAIA 3 facilities;
2) Petitioners, upon the effectivity of the Writ of Possession, are authorized start
the implementation of the Ninoy Aquino International Airport Pasenger
Terminal III project by performing the acts that are essential to the operation of
the said International Airport Passenger Terminal project;
3) RTC Branch 117 is hereby directed, within sixty (60) days from finality of this
Decision, to determine the just compensation to be paid to PIATCO by the
Government.
The Order dated 7 January 2005 is AFFIRMED in all respects subject to the
qualification that the parties are given ten (10) days from finality of
this Decision to file, if they so choose, objections to the appointment of the
commissioners decreed therein.
The Temporary Restraining Order dated 14 January 2005 is hereby LIFTED.
No pronouncement as to costs.
SO ORDERED.
3. PHILIPPINE VETERANS BANK, Petitioner, vs. BASES CONVERSION
DEVELOPMENT AUTHORITY, LAND BANK OF THE PHILIPPINES, ARMANDO
SIMBILLO, CHRISTIAN MARCELO, ROLANDO DAVID, RICARDO BUCUD, PABLO
SANTOS, AGRIFINA ENRIQUEZ, CONRADO ESPELETA, CATGERUBE CASTRO,
CARLITO MERCADO and ALFREDO SUAREZ,Respondents.
G.R. No. 173085               January 19, 2011
DECISION
ABAD, J.:
This case is about the authority of the court in an expropriation case to
adjudicate questions of ownership of the subject properties where such
questions involve the determination of the validity of the issuance to the
8
defendants of Certificates of Land Ownership Awards (CLOAs) and Emancipation
Patents (EPs), questions that fall within the jurisdiction of the Department of
Agrarian Reform Adjudication Board (DARAB).
The Facts and the Case
In late 2003 respondent Bases Conversion Development Authority (BCDA), a
government corporation, filed several expropriation actions before the various
branches of the Regional Trial Court (RTC) of Angeles City, for acquisition of
lands needed for the construction of the Subic-Clark-Tarlac Expressway Project.
Ten of these cases were raffled to Branch 58 of the court 1 and it is these that are
the concern of the present petition.
The defendants in Branch 58 cases were respondents Armando Simbillo,
Christian Marcelo, Rolando David, Ricardo Bucud, Pablo Santos, Agrifina
Enriquez, Conrado Espeleta, Catgerube Castro, Carlito Mercado, and Alfredo
Suarez. They were the registered owners of the expropriated lands that they
acquired as beneficiaries of the comprehensive agrarian reform program.
Another defendant was Land Bank of the Philippines, the mortgagee of the lands
by virtue of the loans it extended for their acquisition. The lands in these cases
were located in Porac and Floridablanca, Pampanga.
On learning of the expropriation cases before Branch 58, petitioner Philippine
Veterans Bank (PVB) filed motions to intervene in all the cases with attached
complaints-in-intervention, a remedy that it adopted in similar cases with the
other branches. PVB alleged that the covered properties actually belonged to
Belmonte Agro-Industrial Development Corp. which mortgaged the lands to PVB
in 1976. PVB had since foreclosed on the mortgages and bought the same at
public auction in 1982. Unfortunately, the bank had been unable to consolidate
ownership in its name.
But, in its order of August 18, 2004,2 Branch 58 denied PVB’s motion for
intervention on the ground that the intervention amounts to a third-party
complaint that is not allowed in expropriation cases and that the intervention
would delay the proceedings in the cases before it. Besides, said Branch 58, PVB
had a pending action for annulment of the titles issued to the individual
defendants and this was pending before Branch 62 of the court.
PVB filed its motion for reconsideration but Branch 58 denied the same,
prompting the bank to file a petition for certiorari with the Court of Appeals
(CA).3 On January 26, 2006 the CA rendered a decision, dismissing the petition
for lack of merit.4 It also denied in a resolution dated June 2, 20065 PVB’s motion
for reconsideration.
Meanwhile, on April 3, 2006 Branch 58 issued separate decisions in all 10 cases
before it, granting the expropriation of the subject properties. The court noted
the uncertainty as to the ownership of such properties but took no action to
grant BCDA’s prayer in its complaint that it determine the question of ownership
of the same pursuant to Section 9, Rule 67 of the Revised Rules of Civil
Procedure.6
The Issue Presented
The issue presented in this case is whether or not the CA erred in holding that
PVB was not entitled to intervene in the expropriation cases before Branch 58 of
the Angeles City RTC.
The Court’s Ruling
PVB maintains that in deciding the case, the RTC and the CA ignored Section 9,
Rule 67 of the 1997 Rules of Civil Procedure, which authorizes the court
adjudicating the expropriation case to hear and decide conflicting claims
regarding the ownership of the properties involved while the compensation for
the expropriated property is in the meantime deposited with the court. Section
9 provides:
Sec. 9. Uncertain ownership; conflicting claims. – If the ownership of the
property taken is uncertain, or there are conflicting claims to any part thereof,
the court may order any sum or sums awarded as compensation for the
property to be paid to the court for the benefit of the person adjudged in the
same proceeding to be entitled thereto. But the judgment shall require the
payment of the sum or sums awarded to either the defendant or the court
before the plaintiff can enter upon the property, or retain it for the public use or
purpose if entry has already been made.
PVB’s point regarding the authority of the court in expropriation cases to hear
and adjudicate conflicting claims over the ownership of the lands involved in
such cases is valid. But such rule obviously cannot apply to PVB for the following
reasons:
1. At the time PVB tried to intervene in the expropriation cases, its conflict with
the farmer beneficiaries who held CLOAs, EPs, or TCTs emanating from such
titles were already pending before Angeles City RTC Branch 62, a co-equal
branch of the same court. Branch 58 had no authority to pre-empt Branch 62 of
its power to hear and adjudicate claims that were already pending before it.
2. Of course, subsequently, after the CA dismissed PVB’s petition on January 26,
2006, the latter filed a motion for reconsideration, pointing out that it had in the
meantime already withdrawn the actions it filed with Branch 62 after learning
from the decision of the Supreme Court in Department of Agrarian Reform v.
Cuenca,7 that jurisdiction over cases involving the annulment of CLOAs and EPs
were vested by Republic Act 6657 in the DARAB.8
PVB now points out that, since there was no longer any impediment in RTC
Branch 58 taking cognizance of its motion for intervention and adjudicating the
parties’ conflicting claims over the expropriated properties, the CA was in error
in not reconsidering its decision.
But PVB’s withdrawal of its actions from Branch 62 cannot give Branch 58
comfort. As PVB itself insists, jurisdiction over the annulment of the individual
defendants’ CLOAs and EPs (which titles if annulled would leave PVB’s titles to
the lands unchallenged) lies with the DARAB. Branch 58 would still have no
power to adjudicate the issues of ownership presented by the PVB’s
intervention.
Actually, PVB’s remedy was to secure an order from Branch 58 to have the
proceeds of the expropriation deposited with that branch in the meantime,
pending adjudication of the issues of ownership of the expropriated lands by the
DARAB. Section 9 above empowers the court to order payment to itself of the
proceeds of the expropriation whenever questions of ownership are yet to be
settled. There is no reason why this rule should not be applied even where the
settlement of such questions is to be made by another tribunal.1avvphi1
WHEREFORE, the Court DENIES the petition and AFFIRMS the decision of the
Court of Appeals dated January 26, 2006 and its resolution dated June 2, 2006 in
CA-G.R. SP 88144.
SO ORDERED.
4. G.R. No. 170375               October 13, 2010
REPUBLIC OF THE PHILIPPINES, Petitioner, vs. HON. MAMINDIARA P.
MANGOTARA, in his capacity as Presiding Judge of the Regional Trial Court,
Branch 1, Iligan City, Lanao del Norte, and MARIA CRISTINA FERTILIZER
CORPORATION, and the PHILIPPINE NATIONAL BANK, Respondents,
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 170505
LAND TRADE REALTY CORPORATION, Petitioner, vs. NATIONAL POWER
CORPORATION and NATIONAL TRANSMISSION CORPORATION
(TRANSCO),Respondents,
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. Nos. 173355-56
NATIONAL POWER CORPORATION, Petitioner, vs. HON. COURT OF APPEALS
(Special Twenty-Third Division, Cagayan de Oro City), and LAND TRADE REALTY
CORPORATION, Respondents,
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 173401
REPUBLIC OF THE PHILIPPINES, Petitioner, vs. DEMETRIA CACHO, represented by
alleged Heirs DEMETRIA CONFESOR VIDAL and/or TEOFILO CACHO, AZIMUTH
INTERNATIONAL DEVELOPMENT CORPORATION and LAND TRADE REALTY
CORPORATION,Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. Nos. 173563-64
NATIONAL TRANSMISSION CORPORATION, Petitioner, vs. HON. COURT OF
APPEALS (Special Twenty-Third Division, Cagayan de Oro City), and LAND TRADE
REALTY CORPORATION as represented by Atty. Max C. Tabimina, Respondents,
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 178779
LAND TRADE REALTY CORPORATION, Petitioner, vs. DEMETRIA CONFESOR VIDAL
and AZIMUTH INTERNATIONAL DEVELOPMENT CORPORATION,Respondents,
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 178894
TEOFILO CACHO and/or ATTY. GODOFREDO CABILDO, Petitioner, vs.
DEMETRIA CONFESOR VIDAL and AZIMUTH INTERNATIONAL DEVELOPMENT
CORPORATION,Respondents.
RESOLUTION
LEONARDO-DE CASTRO, J.:
On July 7, 2010, the First Division of this Court promulgated its Decision in seven
consolidated Petitions, with the following dispositive portion:
WHEREFORE, premises considered, the Court renders the following judgment in
the Petitions at bar:
9
1) In G.R. No. 170375 (Expropriation Case), the Court GRANTS the Petition for
Review of the Republic of the Philippines. It REVERSES and SETS ASIDE the
Resolutions dated July 12, 2005 and October 24, 2005 of the Regional Trial
Court, Branch 1 of Iligan City, Lanao del Norte. It further ORDERS the
reinstatement of the Complaint in Civil Case No. 106, the admission of the
Supplemental Complaint of the Republic, and the return of the original record of
the case to the court of origin for further proceedings. No costs.
2) In G.R. Nos. 178779 and 178894 (Quieting of Title Case), the Court DENIES the
consolidated Petitions for Review of Landtrade Realty Corporation, Teofilo
Cacho, and/or Atty. Godofredo Cabildo for lack of merit. It AFFIRMS the Decision
dated January 19, 2007 and Resolution dated July 4, 2007 of the Court of
Appeals in CA-G.R. CV. No. 00456, affirming in toto the Decision dated July 17,
2004 of the Regional Trial Court, Branch 3 of Iligan City, Lanao del Norte, in Civil
Case No. 4452. Costs against Landtrade Realty Corporation, Teofilo Cacho, and
Atty. Godofredo Cabildo.
3) In G.R. No. 170505 (The Ejectment or Unlawful Detainer Case – execution
pending appeal before the Regional Trial Court), the Court DENIES the Petition
for Review of Landtrade Realty Corporation for being moot and academic given
that the Regional Trial Court, Branch 1 of Iligan City, Lanao del Norte had already
rendered a Decision dated December 12, 2005 in Civil Case No. 6613. No costs.
4) In G.R. Nos. 173355-56 and 173563-64 (The Ejectment or Unlawful Detainer
Case – execution pending appeal before the Court of Appeals), the
Court GRANTS the consolidated Petitions for Certiorari and Prohibition of the
National Power Corporation and National Transmission Corporation. It SETS
ASIDE the Resolution dated June 30, 2006 of the Court of Appeals in CA-G.R. SP
Nos. 00854 and 00889 for having been rendered with grave abuse of discretion
amounting to lack or excess of jurisdiction. It further ORDERSthe Court of
Appeals to issue a writ of preliminary injunction enjoining the execution of the
Decision dated December 12, 2005 of the Regional Trial Court, Branch 1 of Iligan
City, Lanao del Norte, in Civil Case No. 6613, while the same is pending appeal
before the Court of Appeals in CA-G.R. SP Nos. 00854 and 00889. It
finally DIRECTS the Court of Appeals to resolve without further delay the
pending appeals before it, in CA-G.R. SP Nos. 00854 and 00889, in a manner not
inconsistent with this Decision. No costs.
5) In G.R. No. 173401 (Cancellation of Titles and Reversion Case), the
Court GRANTS the Petition for Review of the Republic of the Philippines.
It REVERSES and SETS ASIDE the Orders dated December 13, 2005 and May 16,
2006 of the Regional Trial Court, Branch 4 of Iligan City in Civil Case No. 6686. It
further ORDERS the reinstatement of the Complaint in Civil Case No. 6686 and
the return of the original record of the case to the court of origin for further
proceedings. No costs.1
In a Resolution2 dated August 25, 2010, the Court denied with finality the
separate motions for reconsideration filed by [1] Teofilo Cacho (Teofilo) and
Atty. Godofredo Cabildo (Atty. Cabildo); [2] Land Trade Realty Corporation
(LANDTRADE); and [3] Demetria Vidal (Vidal), Azimuth International
Development Corporation (AZIMUTH), and Maria Cristina Fertilizer Corporation
(MCFC), considering that the basic issues were already passed upon and there
was no substantial argument to warrant a modification of the previous
judgment of the Court.
Also in the August 25, 2010 Resolution, the Court denied the joint motion of
Vidal, AZIMUTH, and MCFC to refer the cases to the Court En Banc because per
SC Circular No. 2-89 dated February 7, 1989, as amended by the Resolution
dated November 18, 1993, the Court En Banc is not an appellate court to which
decisions or resolutions of the Divisions may be appealed. It is for this same
reason that the Court is now similarly denying the Motion [To Refer to Court En
Banc G.R. Nos. 178779 and 178894, G.R. Nos. 170505, 173355-56, 173562-64
(sic) and G.R. No. 173401] of LANDTRADE.
Thus, the only other matter left for determination of this Court is the Motion for
Leave to File and Admit Attached Motion for Clarification, with the appended
Motion for Clarification, of the Republic of the Philippines (Republic). The
Republic is concerned that the pronouncements of this Court as regards the
Quieting of Title Case (G.R. Nos. 178779 and 178894) would effectively bar or
limit the prosecution of the Cancellation of Titles and Reversion Case (G.R. No.
173401) and Expropriation Case (G.R. No. 170375). Hence, the Republic seeks
the following reliefs from this Court:
WHEREFORE, it is respectfully prayed that a clarification be made confirming
that:
1. The pronouncement in G.R. Nos. 178779 and 178894 that: "Azimuth is the
successor-in-interest of Demetria Vidal to the extent of 23 hectares" is without
prejudice to the final disposition of Civil Case No. 6686 for reversion; and,
2. The pronouncement in G.R. Nos. 178779 and 178894, on Demetria Vidal
Confesor’s heirship vis-à-vis her supposed right to transfer title to Azimuth, is
without prejudice to the outcome of Civil Case No. 106 (Expropriation) where
the government may present eveidence (sic) to belie the aforestated heirship
andor (sic) Demetria Confesor Vidal’s entitlement to just compensation.
Other reliefs deemed just and equitable under the premises are likewise prayed
for.3
The Court only partly grants the Motion for Clarification of the Republic.
In the Quieting of Title Case, the Court held:
Thus, the Court of Appeals did not err when it affirmed in toto the judgment of
the RTC-Branch 3 which declared, among other things, that (a) Vidal is the sole
surviving heir of Doña Demetria, who alone has rights to and interest in the
subject parcels of land; (b) AZIMUTH is Vidal’s successor-in-interest to portions
of the said properties in accordance with the 1998 Memorandum of Agreement
and 2004 Deed of Conditional Conveyance; (c) Teofilo is not the son or heir of
Doña Demetria; and (d) Teofilo, Atty. Cabildo, and their transferees/assignees,
including LANDTRADE, have no valid right to or interest in the same properties.
(Emphasis supplied.)4
Of the total land area of 38.23 hectares covered by Original Certificate of Title
(OCT) Nos. 0-1200 (a.f.) and 0-1201 (a.f.), in the name of Doña Demetria Cacho
(Doña Demetria), Vidal transferred her rights to and interests in a portion
thereof, measuring 23 hectares, to AZIMUTH by virtue of the aforementioned
1998 Memorandum of Agreement and 2004 Deed of Conditional Conveyance.
However, it should be stressed that the main issue in the Quieting of Title Case
was who between Vidal and Teofilo had valid title to the subject properties as
Doña Demetria’s rightful surviving heir. The extent or area of the properties
inherited was not put into question in said case.
Moreover, the Court also ordered in its July 7, 2010 Decision that the
Cancellation of Titles and Reversion Case be reinstated before the Regional Trial
Court, Branch 4 (RTC-Branch 4) of Iligan City, Lanao del Norte. It is the main
contention of the Republic in said case that OCT Nos. 0-1200 (a.f.) and 0-1201
(a.f.) are null and void because they covered parcels of land beyond those
granted by the land registration court to Doña Demetria in GLRO Record Nos.
6908 and 6909. Should the RTC-Branch 4 affirm the nullity of the two OCTs, then
it can order the cancellation of said certificates of title and the reversion to the
Republic of the parcels of land unlawfully included therein.1avvphi1
The Court agrees with the Republic that necessarily, the rights to and interests in
the entire 38.23 hectares, covered by OCT Nos. 0-1200 (a.f.) and 0-1201 (a.f.),
claimed by Vidal as the declared sole heir of Doña Demetria in the Quieting of
Title Case, should be without prejudice to the outcome of the Cancellation of
Titles and Reversion Case yet to be heard by the RTC-Branch 4. As Vidal’s
successor-in-interest to the 23 hectares of the subject properties, AZIMUTH only
stepped into the former’s shoes in so far as said portion is concerned. No one
can acquire a right greater than what the transferor himself has. As the saying
goes, the spring cannot rise higher than its source. 5 As a consequence, the rights
to and interests in the 23-hectare portion of the subject properties, acquired by
AZIMUTH under the 1998 Memorandum of Agreement and 2004 Deed of
Conditional Conveyance, referred to by this Court in the Quieting of Title Case,
are likewise dependent on the final judgment in the Cancellation of Titles and
Reversion Case.
As to whether the Republic may still challenge Vidal’s heirship in the
Expropriation Case, this is an issue not raised in any of the Petitions resolved by
this Court in its July 7, 2010 Decision. It involves legal and factual matters that
need to be argued and established in the Expropriation Case, which was ordered
reinstated by this Court before the RTC-Branch 1. Thus, it is beyond the ambit of
this Court to determine by mere motion for clarification of the Republic.
WHEREFORE, premises considered, the Court hereby RESOLVES:
(1) TO DENY WITH FINALITY the Motion [To Refer to Court En Banc G.R. Nos.
178779 and 178894, G.R. Nos. 170505, 173355-56, 173562-64 (sic) and G.R. No.
173401] of Land Trade Realty Corporation;
(2) TO PARTLY GRANT the Motion for Clarification of the Republic of the
Philippines by declaring that the rights to and interests in the 23-hectare portion
of the subject properties, transferred by Demetria Vidal to Azimuth
International Development Corporation by virtue of the 1998 Memorandum of
Agreement and 2004 Deed of Conditional Conveyance, referred to by this Court
in G.R. Nos. 178779 and 178894 (Quieting of Title Case), shall be without
prejudice to the outcome of Civil Case No. 6686 (Cancellation of Titles and
Reversion Case), which this Court, in its Decision dated July 7, 2010, ordered
reinstated before the Regional Trial Court, Branch 4 of Iligan City, Lanao del
Norte; and
(3) TO ORDER that no further pleadings shall be entertained in these
consolidated cases and that entry of judgment be made in due course.
SO ORDERED.
10

5. PHILIPPINE NATIONAL BANK, Petitioners, vs. SANAO MARKETING
CORPORATION, SPOUSES AMADO A. SANAO and SOLEDAD F. SANAO and
SPOUSES WILLIAM (Willy) F. SANAO and HELEN SANAO and the COURT OF
APPEALS, Respondents.
G.R. No. 153951. July 29, 2005
DECISION
TINGA, J.:
Before the Court is a Petition for Review1 under Rule 45 of the Rules of Court,
wherein petitioner Philippine National Bank (PNB) seeks the review of
the Decision2 rendered by the Court of Appeals Thirteenth Division in C.A. G.R.
SP No. 63162. The assailed Decision nullified two orders3 of the Regional Trial
Court (RTC) of Pili, Camarines Sur, Branch 32, which respectively granted PNB’s
petition for issuance of a writ of possession over seven (7) parcels of land and
directed the execution pending appeal of such writ of possession.
The antecedents are as follows:
In July 1997, Sanao Marketing Corporation, the spouses Amado A. Sanao and
Soledad F. Sanao and the spouses William (Willy) F. Sanao and Helen Sanao (all
respondents herein), as joint and solidary debtors, obtained a loan in the
amount of One Hundred Fifty Million Pesos (₱150,000,000.00) from PNB secured
by a real estate mortgage of several parcels of land situated in the municipalities
of Pili, Tigaon and Camaligan, all of Camarines Sur, and Naga City.4 The contract
expressly provided that the mortgage shall be governed by the provisions of Act
No. 3135, as amended.5 The pertinent portions of said contract provide that:
....
F. FORECLOSURE, POWER OF ATTORNEY, RECEIVERSHIP
If at any time the Mortgagors fail or refuse to pay the obligation herein secured,
or any of the amortization of such indebtedness when due, or to comply with
any of the conditions and stipulations herein agreed, or shall during the time this
mortgage is in force, institute insolvency proceedings or be involuntarily
declared insolvent, or shall use the proceeds of this loan for purposes other than
those specified herein, or if the mortgage cannot be recorded in or the
Mortgagors fail to register the same with the corresponding Registry of Deeds,
then all the obligations of the Mortgagors secured by this mortgage and all the
amortization thereof shall immediately become due, payable and defaulted and
the Mortgagee may immediately foreclose this mortgage judicially in accordance
with the Rules of Court, or extrajudicially in accordance with Act No.
3135, as amended, and P.D. 385. For the purpose of extrajudicial foreclosure,
the Mortgagors hereby appoint the Mortgagee their Attorney-in-Fact to sell the
properties mortgaged under Act No. 3135, as amended, to sign all documents
and perform any act requisite and necessary to accomplish said purpose and to
appoint its substitute as Attorney-in-Fact with the same powers as above
specified. In case of judicial foreclosure, the Mortgagors hereby consent to the
appointment of the Mortgagee or of any of its employees as receiver, without
any bond, to take charge of the mortgaged properties at once, and to hold
possession of the same and the rents, benefits and profits derived from the
mortgaged properties before the sale, less costs and expenses of the
receivership. . . . 6
For failure of respondents to fully pay the loan upon its maturity, PNB caused
the extrajudicial foreclosure of the mortgage through a certain Atty. Marvel C.
Clavecilla (Atty. Clavecilla), a notary public for and in the City of Naga. The
Notice of Extra-Judicial Foreclosure Sale announced that the sale of 13 titles
consisting of 14 parcels of land located in Camarines Sur and Naga City is
scheduled on 22 March 1999 at nine o’clock in the morning or soon thereafter,
at the entrance of the Municipal Court of Pili, Camarines Sur. This notice was
published in the 7, 14 and 21 February 1999 issues of the Vox Bikol- a weekly
tabloid published every Sunday and circulated in the Bicol region and continents
with Bicol communities.7
Thereafter, Atty. Clavecilla executed a Provisional Certificate of Sale8 dated 26
April 1999 certifying that on the 22nd day of March 1999, at exactly ten o’clock
in the morning, he sold at a public auction at the "lobby/main entrance of the
Regional Trial Court, Hall of Justice, Naga City" the mortgaged properties to PNB
for Two Hundred Thirteen Million One Hundred Sixty-Two Thousand Seven
Hundred Eighty- Seven and Fifty Centavos (₱213,162,787.50), which amount the
latter considered as payment pro tanto of petitioners’ loan.9 This Provisional
Certificate of Sale was registered with the Registry of Deeds of Camarines Sur on
3 May 1999 and with the Registry of Deeds of Naga City on 16 June 1999 for the
properties respectively covered by their registries.10
On 26 April 2000, respondents Amado A. Sanao and Sanao Marketing
Corporation filed a complaint11 with the RTC of Naga City, Branch 61, against
PNB, the Register of Deeds of the City of Naga and the Province of Camarines
Sur, and Atty. Clavecilla, for the court to declare the Provisional Certificate of
Sale and the auction and foreclosure proceedings null and void.12
On 11 August 2000, PNB filed with the RTC of Pili, Camarines Sur, Branch 32, a
petition for the issuance of a writ of possession, docketed therein as Spec. Proc.
P-1182, over the properties located in Pili that are covered by Transfer
Certificates of Title Nos. 21448, 24221, 14133, 15218, 15489, 13856, 15216.13
To the petition, respondents Amado A. Sanao and Sanao Marketing Corporation
interposed an answer in opposition, with special and affirmative defenses. 14
PNB countered with its comments/reply to opposition.15
On 24 November 2000, the RTC of Pili issued its first assailed order, 16 granting
the writ of possession prayed for by PNB.
Amado A. Sanao and Sanao Marketing Corporation filed a Motion for
Reconsideration w/ Opposition to the Motion for Execution Pending
Appeal,17 which was denied per the second assailed order18 dated 24 January
2001 of the RTC of Pili.19
Respondents then filed a Petition20 for certiorari and prohibition under Rule 65
of the Rules of Court before the Court of Appeals, imputing grave abuse of
discretion on the part of the RTC of Pili in the issuance of the two assailed
orders. The Petition likewise prayed for the issuance of a temporary restraining
order which the Court of Appeals granted on 15 February 2001, enjoining the
RTC of Pili and PNB from implementing the challenged orders.
In their Memorandum,21 respondents pointed out that the PNB had allegedly
failed to submit the application for extrajudicial foreclosure of mortgage to the
proper clerk of court after payment of the filing fee, in contravention of
Supreme Court Administrative Order No. 3 and Administrative Circular No. 3-98.
In addition, respondents averred that the foreclosure sale was null and void as it
was done at the lobby/main entrance of the RTC Hall of Justice, Naga City and
not at the entrance of the Municipal Trial Court of Pili, Camarines Sur as
published.22
PNB, on the other hand, posited that the invoked administrative order is not
applicable as extrajudicial proceedings conducted by a notary public, as in the
case at bar, do not fall within the contemplation of the directive. 23
With regard to the variance of the venues of the auction sale as published in Vox
Bikol and as recorded in the Provisional Certificate of Sale, PNB asserted that
there was no violation of Act No. 313524 or of the terms of the real estate
mortgage contract,25 as the sale of the mortgaged properties located in
Camarines Sur were held in Naga City which is well within the territorial
jurisdiction of said province.26
The Court of Appeals ruled in favor of herein respondents.27 The Court of
Appeals rendered a litany of lapses that the notary public committed in the
conduct of the foreclosure proceedings which in its estimation had effectively
undermined the soundness of the foreclosure sale. Accordingly, the Court of
Appeals held that the Provisional Certificate of Sale, upon which the issuance of
the writ of possession was based, is fatally infirm, and that consequently, the
writ of possession was not validly issued as the procedural requirements for its
issuance were not satisfied.28
Thus, the Court of Appeals declared null and void the two assailed orders of the
RTC of Pili for having been issued with grave abuse of discretion amounting to
lack or excess of jurisdiction.29
Aggrieved by the Decision, PNB filed the instant petition, arguing in the main
that in nullifying the orders of the RTC of Pili, the Court of Appeals departed
from the accepted and usual course of judicial proceedings as the issuance of
writs of possession is purely ministerial on the part of the trial court. 30
In their comment,31 respondents point out that the instant petition should not
be given due course as it is not sufficient in form and substance. Respondents
proffered the following grounds, thus: (1) there was no special of attorney or
Board Resolution or Secretary’s Certificate attached to the petition which could
serve as basis for the petitioners’ signatory Domitila A. Amon to verify or attest
to the truth of the allegations contained therein, in violation of existing laws and
jurisprudence on the matter; (2) petitioners failed to move for a reconsideration
of the assailed Decision of the Court of Appeals; (3) petitioners failed to disclose
another similar case involving the same legal issues now pending in the Twelfth
Division of the Court of Appeals, docketed as C.A. G.R. CV No. 73718, which is an
appeal from an original petition for issuance of writ of possession filed by the
same petitioner before the RTC of San Jose, Camarines Sur, Branch 58; (4)
petitioner failed to furnish the Twelfth Division of the Court of Appeals a copy of
the petition in C.A. G.R. No. 73718 pending therein, in violation of Section 5,
Rule 7 of the 1997 Rules of Civil Procedure, which failure could lead to
conflicting resolutions, between two divisions of the Court of Appeals and to the
giving of inadequate information to the Supreme Court; and (5) the petition was
11
only accompanied by Annexes A, B, C, D and E, which annexes do not satisfy the
requirements laid down in Sections 4 and 5 of Rule 45 of the Rules of Court. 32
Respondents also reiterate that the PNB in the conduct of the extrajudicial
foreclosure proceedings did not comply with Administrative Order No. 3 and
Administrative Circular No. 3-98, and that the notice of publication was not
sufficient to justify the execution of the Provisional Certificate of Sale.33
Traversing the alleged procedural errors, PNB in its Reply34 raise the following
arguments:
First, Mrs. Domitila A. Amon had authority to sign and verify its petition under
Board Resolution No. 15 dated 8 October 1997,35 in line with her authority to
prosecute and defend cases for and/or against the bank. 36
Second, there are exceptions to the general rule that a motion for
reconsideration must first be filed before elevating a case to a higher court. PNB
insists that the Decision of the Court of Appeals is a patent nullity as it runs
counter to the provisions of Act No. 3135 and existing jurisprudence stating that
Administrative Order No. 3 covers judicial foreclosures. 37 As such, the filing of a
motion for reconsideration prior to elevating the case on certiorari may be
dispensed with.
Lastly, the case which according to respondents is not mentioned in the
certification of non-forum shopping was commenced by respondents
themselves, not PNB, and that the issues similar to those in the instant case
have yet to be raised in respondents’ appeal to the Court of Appeals. Moreover,
the subject matter and the properties involved in the other case are altogether
different.38
There is merit in the petition.
A writ of possession is "a writ of execution employed to enforce a judgment to
recover the possession of land. It commands the sheriff to enter the land and
give possession of it to the person entitled under the judgment." 39
A writ of possession may be issued under the following instances: 40 (1)in land
registration proceedings under Section 17 of Act 496;41 (2) in a judicial
foreclosure, provided the debtor is in possession of the mortgaged realty and no
third person, not a party to the foreclosure suit, had intervened; (3) in an
extrajudicial foreclosure of a real estate mortgage under Section 7 of Act No.
3135, as amended by Act No. 4118;42 and (4) in execution sales (last paragraph of
Section 33, Rule 39 of the Rules of Court).43
The present case falls under the third instance. Under Section 7 of Act No. 3135,
as amended by Act No. 4118, a writ of possession may be issued either (1)
within the one-year redemption period, upon the filing of a bond, or (2) after the
lapse of the redemption period, without need of a bond.44 Section 7 of Act No.
3135, as amended by Act No. 4118, provides:
SECTION 7. In any sale made under the provisions of this Act, the purchaser may
petition the Court of First Instance of the province or place where the property
or any part thereof is situated, to give him possession thereof during the
redemption period, furnishing bond in an amount equivalent to the use of the
property for a period of twelve months, to indemnify the debtor in case it be
shown that the sale was made without violating the mortgage or without
complying with the requirements of this Act. Such petition shall be made under
oath and filed in form of an ex parte motion in the registration or cadastral
proceedings if the property is registered, or in special proceedings in case of
property registered under the Mortgage Law or under section one hundred and
ninety-four of the Administrative Code, or of any other real property
encumbered with a mortgage duly registered in the office of any register of
deeds in accordance with any existing law, and in each case the clerk of court
shall, upon the filing of such petition, collect the fees specified in paragraph
eleven of section one hundred and fourteen of Act Numbered Four hundred and
ninety-six, and the court shall, upon approval of the bond, order that a writ of
possession issue, addressed to the sheriff of the province in which the property
is situated, who shall execute said order immediately.
Under the above-quoted provision, the purchaser in a foreclosure sale may
apply for a writ of possession during the redemption period by filing an ex
parte motion under oath for that purpose in the corresponding registration or
cadastral proceeding in the case of property covered by a Torrens title. Upon the
filing of such motion and the approval of the corresponding bond, the law also in
express terms directs the court to issue the order for a writ of possession.45
A writ of possession may also be issued after consolidation of ownership of the
property in the name of the purchaser. It is settled that the buyer in a
foreclosure sale becomes the absolute owner of the property purchased if it is
not redeemed during the period of one year after the registration of sale. As
such, he is entitled to the possession of the property and can demand it any
time following the consolidation of ownership in his name and the issuance of a
new transfer certificate of title. In such a case, the bond required in Section 7 of
Act No. 3135 is no longer necessary. Possession of the land then becomes an
absolute right of the purchaser as confirmed owner. Upon proper application
and proof of title, the issuance of the writ of possession becomes a ministerial
duty of the court.46 It was held, thus:
As the purchaser of the properties in the extra-judicial foreclosure sale, the
PNCB is entitled to a writ of possession therefore. The law on extrajudicial
foreclosure of mortgage provides that a purchaser in an extrajudicial foreclosure
sale may take possession of the foreclosed property even before the expiration
of the redemption period, provided he furnishes the necessary bond. Possession
of the property may be obtained by filing an ex parte motion with the regional
trial court of the province or place where the property is situated. Upon filing of
the motion and the required bond, it becomes a ministerial duty of the court to
order the issuance of a writ of possession in favor of the purchaser. After the
expiration of the one-year period without redemption being effected by the
property owner, the right of the purchaser to the possession of the foreclosed
property becomes absolute. The basis of this right to possession is the
purchaser’s ownership of the property. Mere filing of an ex parte motion for the
issuance of the writ of possession would suffice, and no bond is required. 47
Any question regarding the regularity and validity of the sale, as well as the
consequent cancellation of the writ, is to be determined in a subsequent
proceeding as outlined in Section 8 of Act No. 3135, as amended by Act No.
4118. Such question is not to be raised as a justification for opposing the
issuance of the writ of possession, since, under the Act, the proceeding is ex
parte.48
In case it is disputed that there was violation of the mortgage or that the
procedural requirements for the foreclosure sale were not followed, Section 8 of
Act No. 3135, as amended by Act No. 4118, provides, to wit:
SECTION 8. The debtor may, in the proceedings in which possession was
requested, but not later than thirty days after the purchaser was given
possession, petition that the sale be set aside and the writ of possession
cancelled, specifying the damages suffered by him, because the mortgage was
not violated or the sale was not made in accordance with the provisions hereof,
and the court shall take cognizance of this petition in accordance with the
summary procedure provided for in section one hundred and twelve of Act
Number Four hundred and ninety-six; and if it finds the complaint of the debtor
justified, it shall dispose in his favor of all or part of the bond furnished by the
person who obtained possession. Either of the parties may appeal from the
order of the judge in accordance with section fourteen of Act Numbered Four
hundred and ninety-six; but the order of possession shall continue in effect
during the pendency of the appeal.
The law is clear that the purchaser must first be placed in possession. If the trial
court later finds merit in the petition to set aside the writ of possession, it shall
dispose the bond furnished by the purchaser in favor of the mortgagor.
Thereafter, either party may appeal from the order of the judge. The rationale
for the mandate is to allow the purchaser to have possession of the foreclosed
property without delay, such possession being founded on his right of
ownership.49
It has been consistently held that the duty of the trial court to grant a writ of
possession is ministerial. Such writ issues as a matter of course upon the filing of
the proper motion and the approval of the corresponding bond. The court
neither exercises its official discretion nor judgment. 50 The judge issuing the
order following these express provisions of law cannot be charged with having
acted without jurisdiction or with grave abuse of discretion. 51 If only to stress
the writ’s ministerial character, we have, in previous cases, disallowed
injunction to prohibit its issuance, just as we have held that the issuance of the
same may not be stayed by a pending action for annulment of mortgage or the
foreclosure itself.52
In the case at bar, PNB has sufficiently established its right to the writ of
possession. It presented as documentary exhibits the contract of real estate
mortgage53 and the Provisional Certificate of Sale54 on the face of which appears
proof of its registration with the Registry of Deeds in Camarines Sur on 3 May
1999. There is also no dispute that the lands were not redeemed within one year
from the registration of the Provisional Certificate of Sale. It should follow,
therefore, that PNB has acquired an absolute right, as purchaser, to the writ of
possession. The RTC of Pili had the ministerial duty to issue that writ, as it did
actually, upon mere motion, conformably to Section 7 of Act No. 3135, as
amended.55
However on certiorari, the Court of Appeals declared null and void the orders of
the RTC of Pili granting the writ of possession and denying respondents’ motion
for reconsideration. The Court of Appeals exhaustively discussed the reasons for
such a declaration, noting the procedural errors of PNB in the conduct of the
12
foreclosure proceedings which allegedly rendered the foreclosure sale and
the Provisional Certificate of Sale of doubtful validity.
The Court of Appeals relied on the case of Cometa v. Intermediate Appellate
Court56 in holding that "for a writ of possession to be validly issued …. in an
extrajudicial foreclosure proceeding, all the procedural requirements should be
complied with. Any flaw afflicting its stages could affect the validity of its
issuance."57 The Court of Appeals reproached the RTC of Pili Sur for granting the
writ despite the existence of these alleged procedural lapses.
This was erroneous. The judge to whom an application for writ of possession is
filed need not look into the validity of the mortgage or the manner of its
foreclosure. In the issuance of a writ of possession, no discretion is left to the
trial court. Any question regarding the cancellation of the writ or in respect of
the validity and regularity of the public sale should be determined in a
subsequent proceeding as outlined in Section 8 of Act No. 3135.58
In fact, the question of the validity of the foreclosure proceedings can be
threshed out in Civil Case No. RTC 2000-00074, pending before the RTC of Naga
City, Branch 61, which was filed by respondents before PNB had filed a petition
for the issuance of a writ of possession. The Court of Appeals should not have
ruled on factual issues on which the RTC of Naga had yet to make any finding.
Besides, a review of such factual matters is not proper in a petition for certiorari.
Having noted the foregoing, the Court dispenses with the need to discuss the
soundness of the foreclosure proceedings, the authenticity of the Provisional
Certificate of Sale, and the applicability of Supreme Court Administrative Order
No. 3 and Administrative Circular No. 3-98. A review of the foregoing matters
properly lies within the jurisdiction of the RTC of Naga City, Branch 61.
It is worthy of note that the pendency of the case for annulment of the
foreclosure proceedings is not a bar to the issuance of the writ of
possession.59 Pending such proceedings whose subject is the validity of the
foreclosure proceedings, the purchaser in a foreclosure sale is entitled to the
possession of property. Until such time the foreclosure sale is annulled, the
issuance of the writ of possession is ministerial on the part of the RTC of Pili. 60
In addition, the Court of Appeals’ reliance on the case of Cometa61 is misplaced.
The cited case involved the issuance of a writ of possession following an
execution sale. The declaration therein that the issuance of said writ is
dependent on the valid execution of the procedural stages preceding it does not
contemplate writs of possession available in extrajudicial foreclosures of real
estate mortgages under Section 7 of Act No. 3135, as amended by Act No. 4118.
Considering that the RTC of Pili issued the writ of possession in compliance with
the provisions of Act No. 3135, as amended, it cannot be charged with having
acted in excess of its jurisdiction or with grave abuse of discretion. Absent grave
abuse of discretion, respondents should have filed an ordinary appeal instead of
a petition for certiorari. The soundness of the order granting the writ of
possession is a matter of judgment with respect to which the remedy is ordinary
appeal. An error of judgment committed by a court in the exercise of its
legitimate jurisdiction is not the same as "grave abuse of discretion." Errors of
judgment are correctible by appeal, while those of jurisdiction are reviewable by
certiorari.62
Palpably, the Court of Appeals exceeded its jurisdiction when it granted
respondents’ petition for certiorari and set aside the orders dated 24 November
2000 and 24 January 2001 of the RTC of Pili in Spec. Proc No. P-1182, and also
when it made a determination as to the validity of the foreclosure proceedings
in clear violation of Act No. 3135. The contention, therefore, that the Court
should not entertain the instant petition until a motion for reconsideration has
been filed may not hold water where the proceeding in which the error occurred
is a patent nullity. Thus, we hold that a motion for reconsideration may be
dispensed with in the instant case. 63
Anent the other procedural grounds for the denial of the instant petition, suffice
it to say that PNB’s rejoinder has sufficiently refuted respondents’ assertions.
We find and so hold that there was substantial compliance with the procedural
requirements of the Court.
Although belatedly filed, the Resolution of the PNB Board amply demonstrates
Mrs. Domitila A. Amon’s authority to sign and verify the instant petition. PNB
likewise was not obligated to disclose the alluded case pending before the Court
of Appeals as it was not initiated by the bank and, more importantly, the subject
matter and the properties involved therein are altogether different. 64 It is well to
remember at this point that rules of procedure are but mere tools designed to
facilitate the attainment of justice. Their strict and rigid application which would
result in technicalities that tend to frustrate rather than promote substantial
justice, must always be avoided.65 In proper cases, procedural rules may be
relaxed or suspended in the interest of substantial justice. 66 And the power of
the Court to except a particular case from its rules whenever the purposes of
justice require it cannot be questioned.67
WHEREFORE, the instant petition is GRANTED. The Decision of the Court of
Appeals dated 11 June 2002 in CA-G.R. S.P. No. 63162 is REVERSED and SET
ASIDE. The orders dated 24 November 2000 and 24 January 2001 of the Regional
Trial Court of Pili, Camarines Sur, Branch 32 in Spec. Pro. No. P-1182 directing
the issuance of a writ of possession in favor of PNB are AFFIRMED.
SO ORDERED.
6. SELEGNA MANAGEMENT AND DEVELOPMENT CORPORATION; and Spouses
EDGARDO and ZENAIDA ANGELES, Petitioners,  vs.
UNITED COCONUT PLANTERS BANK,* Respondent.
G.R. No. 165662             May 3, 2006
DECISION
PANGANIBAN, CJ:
A writ of preliminary injunction is issued to prevent an extrajudicial foreclosure,
only upon a clear showing of a violation of the mortgagor’s unmistakable right.
Unsubstantiated allegations of denial of due process and prematurity of a loan
are not sufficient to defeat the mortgagee’s unmistakable right to an
extrajudicial foreclosure.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing
the May 4, 2004 Amended Decision2 and the October 12, 2004 Resolution3 of the
Court of Appeals (CA) in CA-GR SP No. 70966. The challenged Amended Decision
disposed thus:
"WHEREFORE, the Motion for Reconsideration is GRANTED. The July 18, 2003
Decision is hereby REVERSED and SET ASIDE and another one entered
GRANTING the petition and REVERSING and SETTING ASIDE the March 15, 2002
Order of the Regional Trial Court, Branch 58, Makati City in Civil Case No. 99-
1061."4
The assailed Resolution denied reconsideration.
The Facts
On September 19, 1995, Petitioners Selegna Management and Development
Corporation and Spouses Edgardo and Zenaida Angeles were granted a credit
facility in the amount of P70 million by Respondent United Coconut Planters
Bank (UCPB). As security for this credit facility, petitioners executed real estate
mortgages over several parcels of land located in the cities of Muntinlupa, Las
Piñas, Antipolo and Quezon; and over several condominium units in Makati.
Petitioners were likewise required to execute a promissory note in favor of
respondent every time they availed of the credit facility. As required in these
notes, they paid the interest in monthly amortizations.
The parties stipulated in their Credit Agreement dated September 19,
1995,5 that failure to pay "any availment of the accommodation or interest, or
any sum due" shall constitute an event of default,6 which shall consequently
allow respondent bank to "declare [as immediately due and payable] all
outstanding availments
of the accommodation together with accrued interest and any other sum
payable." 7
In need of further business capital, petitioners obtained from UCPB an increase
in their credit facility.8 For this purpose, they executed a Promissory Note for
P103,909,710.82, which was to mature on March 26, 1999.9 In the same note,
they agreed to an interest rate of 21.75 percent per annum, payable by monthly
amortizations.
On December 21, 1998, respondent sent petitioners a demand letter, worded as
follows:
"Gentlemen:
"With reference to your loan with principal outstanding balance of
[P103,909,710.82], it appears from the records of United Coconut Planters Bank
that you failed to pay interest amortizations amounting to [P14,959,525.10] on
the Promissory Note on its due date, 30 May 1998.
"x x x xxx xxx
"Accordingly, formal demand is hereby made upon you to pay your outstanding
obligations in the total amount of P14,959,525.10, which includes unpaid
interest and penalties as of 21 December 1998 due on the promissory note,
eight (8) days from date hereof." 10
Respondent decided to invoke the acceleration provision in their Credit
Agreement. Accordingly, through counsel, it relayed its move to petitioners on
January 25, 1999 in a letter, which we quote:
"Gentlemen:
"x x x xxx xxx
"It appears from the record of [UCPB] that you failed to pay the monthly interest
due on said obligation since May 30, 1998 as well as the penalty charges due
thereon. Despite repeated demands, you refused and continue to refuse to pay
13
the same. Under the Credit Agreements/Letter Agreements you executed,
failure to pay when due any installments of the loan or interest or any sum due
thereunder, is an event of default.
"Consequently, we hereby inform you that our client has declared your principal
obligation in the amount of [P103,909,710.82], interest and sums payable under
the Credit Agreement/Letter Agreement/Promissory Note to be immediately
due and payable.
"Accordingly, formal demand is hereby made upon you to please pay within five
(5) days from date hereof or up to January 29, 1999 the principal amount of
[P103,909,710.82], with the interest, penalty and other charges due thereon,
which as of January 25, 1999 amounts to [P17,351,478.55]."11
Respondent sent another letter of demand on March 4, 1999. It contained a final
demand on petitioners "to settle in full [petitioners’] said past due obligation to
[UCPB] within five (5) days from [petitioners’] receipt of [the] letter." 12
In response, petitioners paid respondent the amount of P10,199,473.96 as
partial payment of the accrued interests.13 Apparently unsatisfied, UCPB applied
for extrajudicial foreclosure of petitioners’ mortgaged properties.
When petitioners received the Notice of Extra Judicial Foreclosure Sale on May
18, 1999, they requested UCPB to give them a period of sixty (60) days to update
their accrued interest charges; and to restructure or, in the alternative, to
negotiate for a takeout of their account. 14
On May 25, 1999, the Bank denied petitioners’ request in these words:
"This is to reply to your letter dated May 20, 1999, which confirms the request
you made the previous day when you paid us a visit.
"As earlier advised, your account has been referred to external counsel for
appropriate legal action. Demand has also been made for the full settlement of
your account.
"We regret that the Bank is unable to grant your request unless a definite offer
is made for settlement."15
In order to forestall the extrajudicial foreclosure scheduled for May 31, 1999,
petitioners filed a Complaint16(docketed as Civil Case No. 99-1061) for
"Damages, Annulment of Interest, Penalty Increase and Accounting with Prayer
for Temporary Restraining Order/Preliminary Injunction." All subsequent
proceedings in the trial court and in the CA involved only the propriety of issuing
a TRO and a writ of preliminary injunction.
Judge Josefina G. Salonga,17 then executive judge of the Regional Trial Court
(RTC) of Makati City, denied the Urgent Ex-parte Motion for Immediate Issuance
of a Temporary Restraining Order (TRO), filed by petitioners. Judge Salonga
denied their motion on the ground that no great or irreparable injury would be
inflicted on them if the parties would first be heard. 18 Unsatisfied, petitioners
filed an Ex-Parte Motion for Reconsideration, by reason of which the case was
eventually raffled to Branch 148, presided by Judge Oscar B. Pimentel.19
After due hearing, Judge Pimentel issued an Order dated May 31, 1999, granting
a 20-day TRO on the scheduled foreclosure of the Antipolo properties, on the
ground that the Notice of Foreclosure had indicated an inexistent auction
venue.20 To resolve that issue, respondent filed a Manifestation21 that it would
withdraw all its notices relative to the foreclosure of the mortgaged properties,
and that it would re-post or re-publish a new set of notices. Accordingly, in an
Order dated September 6, 1999,22 Judge Pimentel denied petitioners’ application
for a TRO for having been rendered moot by respondent’s Manifestation. 23
Subsequently, respondent filed new applications for foreclosure in the cities
where the mortgaged properties were located. Undaunted, petitioners filed
another Motion for the Issuance of a TRO/Injunction and a Supplementary
Motion for the Issuance of TRO/Injunction with Motion to Clarify Order of
September 6, 1999.24
On October 27, 1999, Judge Pimentel issued an Order25 granting a 20-day TRO in
favor of petitioners. After several hearings, he issued his November 26, 1999
Order,26 granting their prayer for a writ of preliminary injunction on the
foreclosures, but only for a period of twenty (20) days. The Order states:
"Admitted by defendant witness is the fact that in all the notices of foreclosure
sale of the properties of the plaintiffs x x x it is stated in each notice that the
property will be sold at public auction to satisfy the mortgage indebtedness of
plaintiffs which as of August 31, 1999 amounts to P131,854,773.98.
"x x x xxx xxx
"As the court sees it, this is the problem that should be addressed by the
defendant in this case and in the meantime, the notice of foreclosure sale
should be held in abeyance until such time as these matters are clarified and
cleared by the defendants x x x Should the defendant be able to remedy the
situation this court will have no more alternative but to allow the defendant to
proceed to its intended action.
"x x x xxx xxx
"WHEREFORE, premises considered, and finding compelling reason at this point
in time to grant the application for preliminary injunction, the same is hereby
granted upon posting of a preliminary injunction bond in the amount of
P3,500,000.00 duly approved by the court, let a writ of preliminary injunction be
issued."27
The corresponding Writ of Preliminary Injunction 28 was issued on November 29,
1999.
Respondent moved for reconsideration. On the other hand, petitioners filed a
Motion to Clarify Order of November 26, 1999. Conceding that the November 26
Order had granted an injunction during the pendency of the case, respondent
contended that the injunctive writ merely restrained it for a period of 20
(twenty) days.
On December 29, 2000, Judge Pimentel issued an Order29 granting respondent’s
Motion for Reconsideration and clarifying his November 26, 1999 Order in this
manner:
"There may have been an error in the Writ of Preliminary Injunction issued
dated November 29, 1999 as the same [appeared to be actually] an extension of
the TRO issued by this Court dated 27 October 1999 for another 20 days period.
Plaintiff’s seeks to enjoin defendants for an indefinite period pending trial of the
case.
"Be that as it may, the Court actually did not have any intention of restraining
the defendants from foreclosing plaintiff[s’] property for an indefinite period
and during the entire proceeding of the case x x x.
"x x x xxx xxx
"What the [c]ourt wanted the defendants to do was to merely modify the notice
of [the] auction sale in order that the amount of P131,854,773.98 x x x would
not appear to be the value of each property being sold on auction. x x x.30
"WHEREFORE, premises considered and after finding merit on the arguments
raised by herein defendants to be impressed with merit, and having stated in
the Order dated 26 November 1999 that no other alternative recourse is
available than to allow the defendants to proceed with their intended action,
the Court hereby rules:
"1.] To give due course to defendant[‘]s motion for reconsideration, as the same
is hereby GRANTED, however, with reservation that this Order shall take effect
upon after its[] finality[.]"31
Consequently, respondent proceeded with the foreclosure sale of some of the
mortgaged properties. On the other hand, petitioners filed an "[O]mnibus
[M]otion [for Reconsideration] and to [S]pecify the [A]pplication of the P92
[M]illion [R]ealized from the [F]oreclosure [S]ale x x x." 32 Before this Omnibus
Motion could be resolved, Judge Pimentel inhibited himself from hearing the
case.33
The case was then re-raffled to Branch 58 of the RTC of Makati City, presided by
Judge Escolastico U. Cruz.34 The proceedings before him were, however, all
nullified by the Supreme Court in its En Banc Resolution dated September 18,
2001.35 He was eventually dismissed from service.36
The case was re-raffled to the pairing judge of Branch 58, Winlove M. Dumayas.
On March 15, 2002, Judge Dumayas granted petitioners’ Omnibus Motion for
Reconsideration and Specification of the Foreclosure Proceeds, as follows:
"WHEREFORE, premises considered, the Motion to Reconsider the Order dated
December 29, 2000 is hereby granted and the Order of November 26, 1999
granting the preliminary injunction is reinstated subject however to the
condition that all properties of plaintiffs which were extrajudicially foreclosed
though public bidding are subject to an accounting. [A]nd for this purpose
defendant bank is hereby given fifteen (15) days from notice hereof to render an
accounting on the proceeds realized from the foreclosure of plaintiffs’
mortgaged properties located in Antipolo, Makati, Muntinlupa and Las Piñas." 37
The aggrieved respondent filed before the Court of Appeals a Petition for
Certiorari, seeking the nullification of the RTC Order dated March 15, 2002, on
the ground that it was issued with grave abuse of discretion. 38
The Special Fifteenth Division, speaking through Justice Rebecca de Guia-
Salvador, affirmed the ruling of Judge Dumayas. It held that petitioners had a
clear right to an injunction, based on the fact that respondent had kept them in
the dark as to how and why their principal obligation had ballooned to almost
P132 million. The CA held that respondent’s refusal to give them a detailed
accounting had prevented the determination of the maturity of the obligation
and precluded the possibility of a foreclosure of the mortgaged properties.
Moreover, their payment of P10 million had the effect of updating, and thereby
averting the maturity of, the outstanding obligation.39
Respondent filed a Motion for Reconsideration, which was granted by a Special
Division of Five of the Former Special Fifteenth Division.
Ruling of the Court of Appeals
14
Citing China Banking Corporation v. Court of Appeals, 40 the appellate court held was authorized to foreclose on the mortgages, in case of a default by
in its Amended Decision41 that the foreclosure proceedings should not be petitioners. That this authority was granted is not disputed.
enjoined in the light of the clear failure of petitioners to meet their obligations Mora solvendi, or debtor’s default, is defined as a delay49 in the fulfillment of an
upon maturity.42 obligation, by reason of a cause imputable to the debtor. 50 There are three
Also citing Zulueta v. Reyes,43 the CA, through Justice Jose Catral Mendoza, went requisites necessary for a finding of default. First, the obligation is demandable
on to say that a pending question on accounting did not warrant an injunction and liquidated; second, the debtor delays performance; third, the creditor
on the foreclosure. judicially or extrajudicially requires the debtor’s performance. 51
Parenthetically, the CA added that petitioners were not without recourse or Mortgagors’ Default of Monthly Interest Amortizations
protection. Further, it noted their pending action for annulment of interest, In the present case, the Promissory Note executed on March 29, 1998, expressly
damages and accounting. It likewise said that they could protect themselves by states that petitioners had an obligation to pay monthly interest on the principal
causing the annotation of lis pendens on the titles of the mortgaged or obligation. From respondent’s demand letter, 52 it is clear and undisputed by
foreclosed properties. petitioners that they failed to meet those monthly payments since May 30,
In his Separate Concurring Opinion,44 Justice Magdangal M. de Leon added that a 1998. Their nonpayment is defined as an "event of default" in the parties’ Credit
prior accounting was not essential to extrajudicial foreclosure. He cited Abaca Agreement, which we quote:
Corporation v. Garcia,45 which had ruled that Act No. 3135 did not require "Section 8.01. Events of Default. Each of the following events and occurrences
mortgaged properties to be sold by lot or by only as much as would cover just shall constitute an Event of Default of this AGREEMENT:
the obligation. Thus, he concluded that a request for accounting -- for the "1. The CLIENT shall fail to pay, when due, any availment of the Accommodation
purpose of determining whether the proceeds of the auction would suffice to or interest, or any other sum due thereunder in accordance with the terms
cover the indebtedness -- would not justify an injunction on the foreclosure. thereof;
Petitioners filed a Motion for Reconsideration dated May 31, 2004, which the "x x x xxx x x x"
appellate court denied.46 "Section 8.02. Consequences of Default. (a) If an Event of Default shall occur and
Hence, this Petition.47 be continuing, the Bank may:
Issues "1. By written notice to the CLIENT, declare all outstanding availments of the
Petitioners raise the following issues for our consideration: Accommodation together with accrued interest and any other sum payable
I hereunder to be immediately due and payable without presentment, demand or
"Whether or not the Honorable Court of Appeals denied the petitioners of due notice of any kind, other than the notice specifically required by this Section, all
process. of which are expressly waived by the CLIENT[.]" 53
"II Considering that the contract is the law between the parties, 54 respondent is
"Whether or not the Honorable Court of Appeals supported its Amended justified in invoking the acceleration clause declaring the entire obligation
Decision by invoking jurisprudence not applicable and completely identical with immediately due and payable.55 That clause obliged petitioners to pay the entire
the instant case. loan on January 29, 1999, the date fixed by respondent.56
"III Petitioners’ failure to pay on that date set into effect Article IX of the Real Estate
"Whether or not the Honorable Court of Appeals failed to establish its finding Mortgage,57 worded thus:
that RTC Judge Winlove Dumayas has acted with grave abuse of discretion." 48 "If, at any time, an event of default as defined in the credit agreements,
The resolution of this case hinges on two issues: 1) whether petitioners are in promissory notes and other related loan documents referred to in paragraph 5
default; and 2) whether there is basis for preliminarily enjoining the extrajudicial of ARTICLE I hereof (sic), or the MORTGAGOR and/or DEBTOR shall fail or refuse
foreclosure. The other issues raised will be dealt with in the resolution of these to pay the SECURED OBLIGATIONS, or any of the amortization of such
two main questions. indebtedness when due, or to comply any (sic) of the conditions and stipulations
The Court’s Ruling herein agreed, x x x then all the obligations of the MORTGAGOR secured by this
The Petition has no merit. MORTGAGE and all the amortizations thereof shall immediately become due,
First Issue: payable and defaulted and the MORTGAGEE may immediately foreclose this
Default MORTGAGE judicially in accordance with the Rules of Court, or extrajudicially in
The resolution of the present controversy necessarily begins with a accordance with Act No. 3135, as amended, and Presidential Decree No. 385. For
determination of respondent’s right to foreclose the mortgaged properties the purpose of extrajudicial foreclosure, the MORTGAGOR hereby appoints the
extrajudicially. MORTGAGEE his/her/its attorney-in-fact to sell the property mortgaged under
It is a settled rule of law that foreclosure is proper when the debtors are in Act No. 3135, as amended, to sign all documents and perform any act requisite
default of the payment of their obligation. In fact, the parties stipulated in their and necessary to accomplish said purpose and to appoint its substitutes as such
credit agreements, mortgage contracts and promissory notes that respondent attorney-in-fact with the same powers as above specified. x x x[.]" 58
The foregoing discussion satisfactorily shows that UCPB had every right to apply
for extrajudicial foreclosure on the basis of petitioners’ undisputed and
continuing default.
Petitioners’ Debt Considered Liquidated Despite the Alleged Lack of Accounting
Petitioners do not even attempt to deny the aforementioned matters. They
assert, though, that they have a right to a detailed accounting before they can
be declared in default. As regards the three requisites of default, they say that
the first requisite -- liquidated debt -- is absent. Continuing with foreclosure on
the basis of an unliquidated obligation allegedly violates their right to due
process. They also maintain that their partial payment of P10 million averted the
maturity of their obligation.59
On the other hand, respondent asserts that questions regarding the running
balance of the obligation of petitioners are not valid reasons for restraining the
foreclosure. Nevertheless, it maintains that it has furnished them a detailed
monthly statement of account.
A debt is liquidated when the amount is known or is determinable by inspection
of the terms and conditions of the relevant promissory notes and related
documentation.60 Failure to furnish a debtor a detailed statement of account
does not ipso facto result in an unliquidated obligation.
Petitioners executed a Promissory Note, in which they stated that their principal
obligation was in the amount of P103,909,710.82, subject to an interest rate of
21.75 percent per annum.61 Pursuant to the parties’ Credit Agreement,
petitioners likewise know that any delay in the payment of the principal
obligation will subject them to a penalty charge of one percent per month,
computed from the due date until the obligation is paid in full. 62
It is in fact clear from the agreement of the parties that when the payment is
accelerated due to an event of default, the penalty charge shall be based on the
total principal amount outstanding, to be computed from the date of
acceleration until the obligation is paid in full.63 Their Credit Agreement even
provides for the application of payments.64 It appears from the agreements that
the amount of total obligation is known or, at the very least, determinable.
Moreover, when they made their partial payment, petitioners did not question
the principal, interest or penalties demanded from them. They only sought
additional time to update their interest payments or to negotiate a possible
restructuring of their account.65 Hence, there is no basis for their allegation that
a statement of account was necessary for them to know their obligation. We
cannot impair respondent’s right to foreclose the properties on the basis of their
unsubstantiated allegation of a violation of due process.
In Spouses Estares v. CA,66 we did not find any justification to grant a preliminary
injunction, even when the mortgagors were disputing the amount being sought
from them. We held in that case that "[u]pon the nonpayment of the loan,
which was secured by the mortgage, the mortgaged property is properly subject
to a foreclosure sale."67
Compared with Estares, the denial of injunctive relief in this case is even more
imperative, because the present petitioners do not even assail the amounts due
from them. Neither do they contend that a detailed accounting would show that
they are not in default. A pending question regarding the due amount was not a
sufficient reason to enjoin the foreclosure in Estares. Hence, with more reason
15
should injunction be denied in the instant case, in which there is no dispute as to
the outstanding obligation of petitioners.
At any rate, whether respondent furnished them a detailed statement of
account is a question of fact that this Court need not and will not resolve in this
instance. As held in Zulueta v. Reyes,68 in which there was no genuine
controversy as to the amounts due and demandable, the foreclosure should not
be restrained by the unnecessary question of accounting.
Maturity of the Loan Not Averted by Partial Compliance with Respondent’s
Demand
Petitioners allege that their partial payment of P10 million on March 25, 1999,
had the effect of forestalling the maturity of the loan; 69 hence the foreclosure
proceedings are premature. 70 We disagree.
To be sure, their partial payment did not extinguish the obligation. The Civil
Code states that a debt is not paid "unless the thing x x x in which the obligation
consists has been completely delivered x x x."71 Besides, a late partial payment
could not have possibly forestalled a long-expired maturity date.
The only possible legal relevance of the partial payment was to evidence the
mortgagee’s amenability to granting the mortgagor a grace period. Because the
partial payment would constitute a waiver of the mortgagee’s vested right to
foreclose, the grant of a grace period cannot be casually assumed; 72 the bank’s
agreement must be clearly shown. Without a doubt, no express agreement was
entered into by the parties. Petitioners only assumed that their partial payment
had satisfied respondent’s demand and obtained for them more time to update
their account.73
Petitioners are mistaken. When creditors receive partial payment, they are not
ipso facto deemed to have abandoned their prior demand for full payment.
Article 1235 of the Civil Code provides:
"When the obligee accepts the performance, knowing its incompleteness or
irregularity, and without expressing any protest or objection, the obligation is
deemed fully complied with."
Thus, to imply that creditors accept partial payment as complete performance of
their obligation, their acceptance must be made under circumstances that
indicate their intention to consider the performance complete and to renounce
their claim arising from the defect.74
There are no circumstances that would indicate a renunciation of the right of
respondent to foreclose the mortgaged properties extrajudicially, on the basis of
petitioners’ continuing default. On the contrary, it asserted its right by filing an
application for extrajudicial foreclosure after receiving the partial payment.
Clearly, it did not intend to give petitioners more time to meet their obligation.
Parenthetically, respondent cannot be reproved for accepting their partial
payment. While Article 1248 of the Civil Code states that creditors cannot be
compelled to accept partial payments, it does not prohibit them from accepting
such payments.
Second Issue:
Enjoining the Extrajudicial Foreclosure
A writ of preliminary injunction is a provisional remedy that may be resorted to
by litigants, only to protect or preserve their rights or interests during the
pendency of the principal action. To authorize a temporary injunction, the
plaintiff must show, at least prima facie, a right to the final relief. 75 Moreover, it
must show that the invasion of the right sought to be protected is material and
substantial, and that there is an urgent and paramount necessity for the writ to
prevent serious damage.76
In the absence of a clear legal right, the issuance of the injunctive writ
constitutes grave abuse of discretion. Injunction is not designed to protect
contingent or future rights. It is not proper when the complainant’s right is
doubtful or disputed.77
As a general rule, courts should avoid issuing this writ, which in effect disposes
of the main case without trial.78 In Manila International Airport Authority v.
CA,79 we urged courts to exercise caution in issuing the writ, as follows:
"x x x. We remind trial courts that while generally the grant of a writ of
preliminary injunction rests on the sound discretion of the court taking
cognizance of the case, extreme caution must be observed in the exercise of
such discretion. The discretion of the court a quo to grant an injunctive writ
must be exercised based on the grounds and in the manner provided by law.
Thus, the Court declared in Garcia v. Burgos:
‘It has been consistently held that there is no power the exercise of which is
more delicate, which requires greater caution, deliberation and sound
discretion, or more dangerous in a doubtful case, than the issuance of an
injunction. It is the strong arm of equity that should never be extended unless to
cases of great injury, where courts of law cannot afford an adequate or
commensurate remedy in damages.
‘Every court should remember that an injunction is a limitation upon the
freedom of action of the defendant and should not be granted lightly or
precipitately. It should be granted only when the court is fully satisfied that the
law permits it and the emergency demands it.’"80 (Citations omitted)
Petitioners do not have any clear right to be protected. As shown in our earlier
findings, they failed to substantiate their allegations that their right to due
process had been violated and the maturity of their obligation forestalled. Since
they indisputably failed to meet their obligations in spite of repeated demands,
we hold that there is no legal justification to enjoin respondent from enforcing
its undeniable right to foreclose the mortgaged properties.
In any case, petitioners will not be deprived outrightly of their property.
Pursuant to Section 47 of the General Banking Law of 2000,81 mortgagors who
have judicially or extrajudicially sold their real property for the full or partial
payment of their obligation have the right to redeem the property within one
year after the sale. They can redeem their real estate by paying the amount due,
with interest rate specified, under the mortgage deed; as well as all the costs
and expenses incurred by the bank.82
Moreover, in extrajudicial foreclosures, petitioners have the right to receive any
surplus in the selling price. This right was recognized in Sulit v. CA, 83 in which the
Court held that "if the mortgagee is retaining more of the proceeds of the sale
than he is entitled to, this fact alone will not affect the validity of the sale but
simply gives the mortgagor a cause of action to recover such surplus." 84
Petitioners failed to demonstrate the prejudice they would probably suffer by
reason of the foreclosure. Also, it is clear that they would be adequately
protected by law. Hence, we find no legal basis to reverse the assailed Amended
Decision of the CA dated May 4, 2004.
WHEREFORE, the Petition is DENIED and the assailed Amended Decision and
Resolution AFFIRMED. Costs against petitioners.
SO ORDERED.
7. SPOUSES GODOFREDO V. ARQUIZA and REMEDIOS D.
ARQUIZA, petitioners, vs. COURT OF APPEALS and EQUITABLE
PCIBANK, respondents.
G.R. No. 160479               June 8, 2005
DECISION
CALLEJO, SR., J.:
Before us is a petition for review on certiorari of the Decision1 of the Court of
Appeals (CA) in CA-G.R. CV No. 74592 and its Resolution denying the motion for
reconsideration of the said decision. The assailed decision affirmed the decision
of the Regional Trial Court (RTC) of Quezon City, Branch 221, granting the ex
parte petition for the issuance of a writ of possession in LRC Case No. Q-
14150(01).
The petitioners, spouses Godofredo V. Arquiza and Remedios D. Arquiza,
obtained a loan from private respondent Equitable PCIBank for ₱2.5 million. To
secure the payment thereof, the petitioners executed a Real Estate Mortgage
over their parcel of land covered by Transfer Certificate of Title (TCT) No. N-
143274 of the Registry of Deeds of Quezon City.2
When the spouses defaulted in the payment of their loan, the private
respondent filed a petition for extrajudicial foreclosure of the real estate
mortgage. A public auction was held on October 18, 1999 in accordance with Act
No. 3135, as amended by Act No. 4118 during which the mortgaged property,
together with all the improvements existing thereon, was sold to the private
respondent as the highest bidder.3 Accordingly, a Certificate of Sale4 over the
property was issued in favor of the private respondent. This was registered with
the Registry of Deeds of Quezon City on November 22, 1999. 5
Following the expiry date of the redemption period without the petitioners
having exercised their right to redeem the property, the private respondent
consolidated its ownership over the subject property. 6 As a consequence, the
Registry of Deeds issued TCT No. N-2216507 in the name of the private
respondent, canceling the petitioners’ former title.
The petitioners filed a complaint against the private respondent and the sheriffs
with the Regional Trial Court (RTC) of Quezon City for the declaration of the
nullity of the promissory note, real estate mortgage and the foreclosure sale and
damages with a plea for injunctive relief for the suspension redemption period.
The case was docketed as Civil Case No. Q-98-34094.8
Meanwhile, the private respondent demanded that the petitioners vacate and
surrender possession of the subject property, but the latter refused to do so.
This compelled the private respondent to file an Ex Parte Petition for Issuance of
a Writ of Possession,9 docketed as LRC Case No. Q-14150(01) also with the
Quezon City RTC.
16
Instead of acting on the petition and receiving the evidence of the private
respondent ex parte, as mandated by Act No. 3135, as amended, the RTC set the
case for hearing at 8:30 a.m. of August 30, 2001, and ordered that a copy of the
petition be served on the petitioners.10 The latter filed their Answer alleging that
(1) the private respondent failed to incorporate a Certificate of Non-Forum
Shopping in its petition; and (2) the petition was abated by the pendency of
their complaint in Civil Case No. Q-98-34094 involving the non-payment of their
mortgage obligation, the validity of the foreclosure sale of the mortgaged
property and their failure to redeem the same. The petitioners prayed that the
trial court dismiss the petition outright.11 They appended to their answer a copy
of their amended and supplemental complaint in Civil Case No. Q-98-34094.
The trial court conducted a hearing of the petition during which the petitioners
and the private respondent adduced their respective evidence.
On February 22, 2002, the trial court rendered a Decision in LRC Case No. Q-
14150(01) granting the petition, thus:
WHEREFORE, the Court holds that the Instant Petition for Issuance of a Writ of
Possession is meritorious and should be granted. Let a writ of possession be
issued in favor of the petitioner and directing the Respondents Sps. Godofredo
and Remedios Arquiza and all persons claiming rights and interest under them to
vacate the premises and place the petitioner in possession thereof.
The petitioner Equitable PCIBank is directed to coordinate with the Branch Clerk
of Court, this Court, for the expeditious issuance and implementation of the Writ
of Possession.
SO ORDERED.12
The petitioners appealed the decision to the CA alleging that:
1. THAT THE LOWER COURT ERRED IN GIVING DUE COURSE TO THE "EX-
PARTE PETITION FOR ISSUANCE OF WRIT OF POSSESSION" AND IN NOT
DISMISSING THE SAME FOR BEING INDEROGATION OF THE APPELLANTS’ RIGHT
TO A DUE PROCESS OF LAW;
2. THAT THE LOWER COURT ERRED IN NOT APPLYING IN THIS CASE THE WELL-
ESTABLISHED RULE ON "LITIS PENDENCIA" BY NOT DISMISSING THE "EX-PARTE
PETITION, etc." IN QUESTION FOR THE REASON "THAT THERE IS ANOTHER
ACTION PENDING BETWEEN THE SAME PARTIES FOR THE SAME CAUSE; (Sec.
1(e), Rule 16, Rules of Court).
3. THAT THE LOWER COURT ERRED IN IGNORING THE RULE AGAINST "FORUM
SHOPPING" AND THE MANDATORY REQUIREMENT FOR A "CERTIFICATION OF
NON-FORUM SHOPPING" IN AN INITIATORY PLEADING LIKE PETITIONER-
APPELLEES’ ÉX-PARTE PETITION, etc." IN QUESTION AND FOR NOT DISMISSING
SAID PLEADING ON THE GROUND "THAT A CONDITION PRECEDENT FOR FILING
THE CLAIM HAS NOT BEEN COMPLIED WITH" (Sec. 1(j), Rule 16, Rules of Court).
4. THAT THE LOWER COURT ERRED IN HOLDING TO THE EFFECT THAT SECTIONS
4 & 5, RULE 7 OF THE 1997 RULES OF CIVIL PROCEDURE DOES NOT APPLY TO THE
"EX-PARTE PETITION, etc." IN QUESTION BECAUSE ALLEGEDLY THE CASE AT BAR
IS A LAND REGISTRATION CASE.
5. THAT THE LOWER COURT ERRED IN RENDERING A DECISION GRANTING THE
RELIEF PRAYED FOR IN THE "EX-PARTE PETITION, etc. FOR THE ISSUANCE OF A
WRIT OF POSSESSION AGAINST THE RESPONDENTS-APPELLANTS ALBEIT NO
EVIDENCE WAS ADDUCED PROVING THAT THE SUBJECT REAL ESTATE
MORTGAGE AND ITS FORECLOSURE, AMONG OTHER SUBSEQUENT
PROCEEDINGS, ARE LAWFUL, VALID AND REGULAR, IN CIRCUMVENTION OF THE
PREJUDICIAL ISSUES PRECISELY RAISED IN THE PENDING CIVIL CASE NO. Q-98-
34094 INVOLVING THE DECLARATION OF NULLITY OF SAID MORTGAGE AND
RELATED TRANSACTIONS.13
The CA rendered judgment affirming the appealed decision. The CA held that the
petition for the issuance of a writ of possession was not an initiatory pleading;
hence, a certification against forum shopping was not necessary. The appellate
court also held that there could be no forum shopping because a petition for the
issuance of a writ of possession is but an incident in the transfer of title. The CA
held that the rule requiring the highest bidder to be placed in possession of the
property is founded on the right of ownership, which becomes absolute after
title thereto has been issued in favor of the new owner, and that the court must
aid in effecting its delivery.14
The motion for reconsideration of the decision having been denied by the CA,
the petitioners filed their petition for review on certiorari with this Court and
raised the following issues:
Firstly, is it right, proper and just for the Court below to completely ignore and
disregard a related prior and pending action between the same parties where
the very basis of the right of possession over the subject property sought to be
enforced as a result of the foreclosure of a "mortgage" is being assailed in court
for being NULL AND VOID ab initio OR INEXISTENT?
Secondly, is it right, proper and just for the Court below to summarily close its
eyes to the patent and obvious flaw or irregularity of the "mortgage" in the
appreciation of the evidence offered in support of the Ex-Parte Petition For the
Issuance of a Writ of Possession?
Thirdly, does the application of Section 7 of Act 3135, as amended by Act 4118,
as the Court below did, exclude or preclude the effectivity or applicability of the
mandate against forum shopping, of the requirement for certification in
pleadings against forum shopping, of the principle of "litis pendentia," and of
due process of law?15
The petitioners assert that the ex parte petition for the issuance of the writ of
possession should have been dismissed by the RTC for failure to attach a
certification against forum shopping. They claim that this requirement is
mandatory and there is no law exempting the private respondent’s ex
parte petition from compliance therewith.16
The petitioners contend that they are legally entitled to be protected in their
possession over the subject property pending the resolution of Civil Case No. Q-
98-34094 for the declaration of nullity of the promissory note, real estate
mortgage, and foreclosure sale. They argue that the issuance of a writ of
possession preempted and pre-judged the outcome of Civil Case No. Q-98-
34094. The petitioners maintain that the ex parte petition for the issuance of a
writ of possession violated the petitioners’ right to procedural due process
considering that Section 4, Rule 15 of the Rules of Court requires every written
motion to be set for hearing, except for those which would not prejudice the
rights of the adverse party.17
The petitioners maintain that the private respondent failed to substantiate
its ex parte petition for the issuance of the writ of possession. They fault the trial
court for not scrutinizing judiciously the private respondent’s evidence because
had it done so, it would have noted the nullity of the mortgage, which appears
to have been executed not by the owners of the subject property. They question
the private respondent’s failure to attach the promissory notes evidencing their
loan, which would have shown that the real estate mortgage was executed prior
to the execution of the said promissory notes. The petitioners aver that the
private respondent failed to prove the validity and legality of the real estate
mortgage, and without a valid mortgage, there can be no valid foreclosure sale
or valid title.18
For its part, the private respondent contends that the requirement for the filing
of a certificate of non-forum shopping is not applicable, considering that the ex
parte motion for the issuance of a writ of possession is not an initiatory
pleading.19 It submits that litis pendentia does not exist because there is no
identity of the issues and the reliefs prayed for between the present case and
Civil Case No. Q-98-34094. Hence, forum shopping cannot likewise exist.20
The private respondent maintains that after the expiration of the redemption
period and the consolidation of ownership over the property, it had the right to
be placed in possession thereof without the need of a separate and independent
action. It posits that the right to possess an extrajudicially foreclosed property is
not affected by the pendency of an action for annulment of foreclosure
proceedings. The private respondent stresses that the issuance of a writ of
possession is a ministerial function of the court, and should be issued as a
matter of course upon the filing of the proper ex parte motion.21
It asserts that the petitioners were not denied their right to due process
because, notwithstanding the grant of the writ of possession, they may still
resort to another proceeding to question the regularity and validity of the
foreclosure sale. It points out that the petitioners should appreciate the fact that
the court a quo allowed them to participate in the proceedings even if the
motion for issuance of a writ of possession was ex parte in nature.22Finally, the
private respondent avers that it had presented sufficient evidence to show that
it is entitled to the possession of the subject property. 23
The petition is denied for lack of merit.
The assailed ruling of the CA is correct. The certification against forum shopping
is required only in a complaint or other initiatory pleading.24 The ex
parte petition for the issuance of a writ of possession filed by the respondent is
not an initiatory pleading. Although the private respondent denominated its
pleading as a petition, it is, nonetheless, a motion. What distinguishes a motion
from a petition or other pleading is not its form or the title given by the party
executing it, but rather its purpose. The office of a motion is not to initiate new
litigation, but to bring a material but incidental matter arising in the progress of
the case in which the motion is filed.25 A motion is not an independent right or
remedy, but is confined to incidental matters in the progress of a cause. It
relates to some question that is collateral to the main object of the action and is
connected with and dependent upon the principal remedy. 26 An application for a
writ of possession is a mere incident in the registration proceeding. Hence,
although it was denominated as a "petition," it was in substance merely a
motion. Thus, the CA correctly made the following observations:
17
Such petition for the issuance of a writ of possession is filed in the form of an ex
parte motion, inter alia, in the registration or cadastral proceedings if the
property is registered. Apropos, as an incident or consequence of the original
registration or cadastral proceedings, the motion or petition for the issuance of
a writ of possession, not being an initiatory pleading, dispels the requirement of
a forum-shopping certification. Axiomatic is that the petitioner need not file a
certification of non-forum shopping since his claims are not initiatory in
character (Ponciano vs. Parentela, Jr., 331 SCRA 605 [2000])27
It bears stressing that Section 7 of Act No. 3135, as amended by Act No. 4118,
specifically provides that the buyer at public auction may file a verified petition
in the form of an ex parte motion.
SEC. 7. In any sale made under the provisions of this Act, the purchaser may
petition the Court of First Instance (now Regional Trial Court) of the province or
place where the property or any part thereof is situated, to give him possession
thereof during the redemption period, furnishing bond in an amount equivalent
to the use of the property for a period of twelve months, to indemnify the
debtor in case it be shown that the sale was made without violating the
mortgage or without complying with the requirements of this Act. Such petition
shall be made under oath and filed in form of an ex parte motion in the
registration or cadastral proceedings if the property is registered, or in special
proceedings in the case of property registered under the Mortgage Law or under
Sec. 194 of the Administrative Code, or of any other real property encumbered
with a mortgage duly registered in the office of any register of deeds in
accordance with any existing law, and in each case the clerk of court shall, upon
the filing of such petition, collect the fees specified in par. 11 of Sec. 114 of Act
No. 496, and the court shall, upon the filing of the bond, order that a writ of
possession issue, addressed to the sheriff of the province in which the property
is situated, who shall execute said order immediately.
Indeed, it is well-settled that an ordinary action to acquire possession in favor of
the purchaser at an extrajudicial foreclosure of real property is not necessary.
There is no law in this jurisdiction whereby the purchaser at a sheriff’s sale of
real property is obliged to bring a separate and independent suit for possession
after the one-year period for redemption has expired and after he has obtained
the sheriff’s final certificate of sale.28 The basis of this right to possession is the
purchaser’s ownership of the property. The mere filing of an ex parte motion for
the issuance of the writ of possession would suffice, and no bond is
required.29lawphil.net
The Court rejects the contention of the petitioners that the RTC erred in not
dismissing the petition of the private respondent on the grounds of forum
shopping and litis pendentia, in view of the pendency of Civil Case No. Q-98-
34094.
The requisites of litis pendentia are the following: (a) identity of parties, or at
least such as representing the same interests in both actions; (b) identity of
rights asserted and relief prayed for, the relief being founded on the same facts;
and (c) the identity of the two cases such that judgment in one, regardless of
which party is successful, would amount to res judicata in the other.30 And one
element of res judicata is that the judgment or order must be on the merits of
the case.31
As heretofore ruled by the Court, the petition of the private respondent for a
writ of possession was not an ordinary action. Any order or decision of the RTC
in LRC Case No. Q-14150(01) is not determinative of the merits of Civil Case No.
Q-98-34094.
Well established is the rule that after the consolidation of title in the buyer’s
name for failure of the mortgagor to redeem, the writ of possession becomes a
matter of right. Its issuance to a purchaser in an extrajudicial foreclosure is
merely a ministerial function.32 The issuance of the writ of possession being a
ministerial function, and summary in nature, it cannot be said to be a judgment
on the merits, but simply an incident in the transfer of title. Hence, a separate
case for annulment of mortgage and foreclosure sale cannot be barred by litis
pendentia or res judicata.33
Conversely, we reject the petitioners’ argument that the ex parte petition for
the issuance of a writ of possession should have been dismissed on the ground
of forum shopping. The test to determine whether a party violated the rule
against forum shopping is whether the elements of litis pendentia are present,
or whether a final judgment in one case will amount to res judicata in
another.34 In other words, when litis pendentia or res judicata does not exist,
neither can forum shopping exist. Having settled that litis pendentia does not
exist, it follows then that no forum shopping likewise exists in this case. The
Court’s ruling in Ong vs. Court of Appeals35 is instructive, thus:
As a rule, any question regarding the validity of the mortgage or its foreclosure
cannot be a legal ground for refusing the issuance of a writ of possession.
Regardless of whether or not there is a pending suit for annulment of the
mortgage or the foreclosure itself, the purchaser is entitled to a writ of
possession, without prejudice of course to the eventual outcome of said case. 36
Likewise barren of merit is the petitioners’ contention that they were denied
their right to due process by the RTC.
Section 7 of Act No. 3135, as amended, specifically provides that a petition (for a
writ of possession) is in the nature of an ex parte motion in which the court
hears only one side of the controversy. 37 An ex parte proceeding presupposes a
right of the petitioners to which there is no adverse party. 38 An ex
parte proceeding merely means that it is taken or granted at the instance and
for the benefit of one party, and without notice to or contestation by any party
adversely affected.39
In this case, the RTC opted not to conduct an ex parte hearing. It went out of its
way and set the application for a writ of possession for hearing as shown by the
trial court’s Order40 dated June 25, 2001. Moreover, the petitioners were
allowed to file an Answer,41 and a Rejoinder42 to the private respondent’s Reply.
The petitioners were even allowed to adduce and offer documentary
evidence.43 What the fundamental law prohibits is total absence of opportunity
to be heard. When a party has been afforded opportunity to present his side,
such party cannot feign denial of due process.44
The petitioners’ contention that the private respondent failed to sufficiently
establish its right to a writ of possession is belied by the evidence. In support of
its application for a writ of possession, the private respondent submitted the
following documentary evidence: (1) real estate mortgage; (2) TCT No. N-143274
in the name of the petitioners, and the annotations on its back of the real estate
mortgage, certificate of sale, and the consolidation of ownership; (3) the
petition for sale; (4) affidavit of publication of the extrajudicial sale; (5) TCT No.
N-221650 in the name of the private respondent; (6) notice to vacate; (7)
petitioners’ reply to the notice to vacate; and (8) affidavit of consolidation of
ownership.
The petitioners fault the trial court for not delving into the validity of the
mortgage and the foreclosure proceeding before granting the petition for a writ
of possession. This contention is barren of legal basis. The judge to whom an
application for writ of possession is filed need not look into the validity of the
mortgage or the manner of its foreclosure. In the issuance of a writ of
possession, no discretion is left to the trial court. Any question regarding the
cancellation of the writ or in respect of the validity and regularity of the public
sale should be determined in a subsequent proceeding as outlined in Section 8
of Act No. 3135.45
IN VIEW OF ALL THE FOREGOING, the petition is DENIED for lack of merit. The
Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 74592 are
AFFIRMED. Costs against the petitioner.
SO ORDERED.
8. DEVELOPMENT BANK OF THE PHILIPPINES, Petitioners, vs. SPOUSES
WILFREDO GATAL and AZUCENA GATAL, Respondents.
G.R. No. 138567. March 04, 2005
DECISION
SANDOVAL-GUTIERREZ, J.:
Before us for resolution is the petition for review on certiorari1 assailing the
Decision2 dated January 18, 1999 of the Court of Appeals and its
Resolution3 dated April 27, 1999 in CA-G.R. SP No. 47736, "Development Bank of
the Philippines, petitioner, vs. Hon. Raineldo T. Son, in his capacity as Presiding
Judge of Branch 47, Regional Trial Court of Tagbilaran City, and Spouses
Wilfredo Gatal and Azucena Gatal, respondents."
Records show that sometime in 1993, spouses Wilfredo and Azucena Gatal,
respondents, obtained a loan of ₱1,500,000.00 from the Development Bank of
the Philippines (DBP), petitioner. The loan was secured by a real estate
mortgage over a commercial lot at No. 3 J.A. Clarin Street, Tagbilaran City,
covered by Transfer Certificate of Title No. T-22697 of the Registry of Deeds,
same city. For failure of respondents to pay their loan, petitioner foreclosed the
mortgage in December 1994. In January 1996, the title of the lot
was consolidated in the name of petitioner DBP.
On October 29, 1996, the property was offered for sale at public auction, but
none of the bidders was able to meet the bid price ceiling.
On November 18, 1996, petitioner offered the property for negotiated sale on
condition that the buyer must pay 20% of the selling price as down payment, the
balance payable under the terms of the interested buyer.
18
Respondents then submitted their bid in the amount of ₱2,160,000.00 and made
a deposit equivalent to 10% of the bid price. However, another buyer, Jimmy
Torrefranca, offered a bid of ₱2,300,000.00, or ₱140,000.00 higher than
respondents’ bid. Upon learning of Torrefranca’s offer, respondents
wrote4 petitioner requesting that they will match his bid. But petitioner rejected
respondents’ request because Torrefranca was already declared the preferred
bidder.5
Aggrieved, respondents, filed with the Regional Trial Court (RTC), Branch 4,
Tagbilaran City a complaint for injunction with prayer for a temporary
restraining order and a preliminary injunction, docketed as Civil Case No. 5996.
The action sought to (a) declare the sale of the property to Torrefranca void and
uphold respondents’ right of pre-emption; and (b) maintain the status
quo between the parties prior to the filing of the suit.
On February 22, 1997, the RTC issued an Order granting respondents’ application
for a preliminary injunction.
Meantime, on August 27, 1997, petitioner filed with the same RTC, Branch 47, a
petition for issuance of a writ of possession, docketed as Civil Case No. 6097. On
October 31, 1997, the court issued a writ of possession in favor of petitioner.
On November 12, 1997, respondents filed with Branch 47 a motion to dismiss
Civil Case No. 6097 and a motion to quash the writ of possession on the ground
that there is another case (Civil Case No. 5996 for injunction) pending before
Branch 4 involving the same parties, the same subject matter and the same legal
issues.
On December 18, 1997, Branch 47 issued an Order dismissing Civil Case No. 6097
and recalling its earlier Order granting the writ of possession on the ground
of litis pendentia.
Petitioner DBP filed a motion for reconsideration but was denied by Branch 47 in
an Order dated February 10, 1998.
Thereafter, petitioner filed with the Court of Appeals a petition
for certiorari assailing the Orders dated December 18, 1997 and February 10,
1998 of Branch 47, docketed as CA-G.R. SP No. 47736. On January 18, 1999, the
Appellate Court rendered its Decision dismissing the petition, thus upholding the
challenged Orders.
Petitioner filed a motion for reconsideration but was denied in a Resolution
dated April 27, 1999.
Hence, the instant petition.
The fundamental issue for our resolution is whether the Court of Appeals
committed a reversible error in holding that the trial court correctly dismissed
Civil Case No. 6097 on the ground of litis pendentia.
The petition is meritorious.
One of the grounds for dismissing an action is when there is litis pendentia as
provided under Section 1(e), Rule 16, of the 1997 Rules of Civil Procedure, as
amended, thus:
"SECTION 1. Grounds. – Within the time for but before filing the answer to the
complaint or pleading asserting a claim, a motion to dismiss may be made on
any of the following grounds:
xxx
(e) That there is another action pending between the same parties for the same
cause;
x x x."
For litis pendentia to lie as a ground for a motion to dismiss, the following
requisites must be present: (1) that the parties to the action are the same; (2)
that there is substantial identity in the causes of action and reliefs sought; and
(3) that the result of the first action is determinative of the second in any event
and regardless of which party is successful.6
It is undisputed that both cases involve the same parties and the same
property. Civil Case No. 5996 is an action for injunction filed by respondents
against petitioner DBP. It seeks to declare the sale of the property to Torrefranca
void and to order petitioner DBP "to respect respondents’ right of pre-emption;"
and maintain the status quobetween the parties.
Upon the other hand, Civil Case No. 6097 is a petition for the issuance of a writ
of possession filed by petitioner DBP, being the purchaser of the lot at the public
auction.
Clearly, the rights asserted and the reliefs sought by the parties in both cases are
not identical. Thus, respondents’ claim of litis pendentia is unavailing.
Section 33, Rule 39 of the same Rules provides:
"SECTION 33. Deed and possession to be given at expiration of redemption
period; by whom executed or given. – If no redemption be made within one (1)
year from the date of the registration of the certificate of sale, the purchaser is
entitled to a conveyance and possession of the property; x x x.
Upon the expiration of the right of redemption, the purchaser or redemptioner
shall be substituted to and acquire all the rights, title, interest and claim of the
judgment obligor to the property as of the time of the levy. The possession of
the property shall be given to the purchaser or last redemptioner by the same
officer unless a third party is actually holding the property adversely to the
judgment obligor."
Corollarily, Section 7 of Act 3135,7 as amended by Act 4118, reads:
"Sec. 7. In any sale made under the provisions of this Act, the purchaser may
petition the Court of First Instance of the province or place where the property
or any part thereof is situated, to give him possession thereof during the
redemption period, furnishing bond in an amount equivalent to the use of the
property for a period of twelve months, to indemnify the debtor in case it be
shown that the sale was made without complying with the requirements of this
Act. x x x"
In Tan Soo Huat vs. Ongwico,8 we ruled that "once a mortgaged estate is
extrajudicially sold, and is not redeemed within the reglementary period, no
separate and independent action is necessary to obtain possession of the
property. The purchaser at the public auction has only to file a petition for
issuance of a writ of possession pursuant to Section 33 of Rule 39 of the Rules of
Court."
To give effect to the right of possession, the purchaser must invoke the aid of
the court and ask for a writ or possession9 without need of bringing a separate
independent suit for this purpose.10
Records show that title to the property has been consolidated to petitioner DBP.
Thus, its petition for a writ of possession is in order.
Obviously, the RTC (Branch 47) erred when it granted respondents’ motion to
dismiss and recalled the writ of possession it earlier issued. Where, as here, the
title is consolidated in the name of the mortgagee, the writ of possession
becomes a matter of right on the part of the mortgagee, and it is a ministerial
duty on the part of the trial court to issue the same. The pendency of a separate
civil suit questioning the validity of the sale of the mortgaged property cannot
bar the issuance of the writ of possession. The rule equally applies to separate
civil suits questioning the validity of the mortgage or its foreclosure and the
validity of the public auction sale.11
There being no litis pendentia, the Court of Appeals likewise erred in applying
the doctrine of non-interference between courts of equal rank. Under the said
doctrine, a trial court has no authority to interfere with the proceedings of a
court of equal jurisdiction.12 When Branch 47 issued the writ of possession, it
did not interfere with the jurisdiction of Branch 4 in the injunction case. It
merely exercised its ministerial function of issuing the writ of possession.
Finally, we do not find merit in respondents’ contention that petitioner violated
the rule against forum shopping. Forum shopping exists where the elements
of litis pendentia are present or where a final judgment in one case will amount
to res judicata in the other.13 This situation is not present here.
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals
dated January 18, 1999 and its Resolution dated April 27, 1999 in CA-G.R. SP No.
47736 are REVERSED.
SO ORDERED.
9. SPOUSES PIO DATO and SONIA Y. SIA, Petitioners,  vs. BANK OF THE
PHILIPPINE ISLANDS, Respondent.
G.R. No. 181873               November 27, 2013
DECISION
REYES, J.:
This is a petition for review on Certiorari 1 of the Decision2 dated July 25, 2007
and Resolution3 dated February 8, 2008 of the Court of Appeals (CA) in CA-G.R.
CV No. 61289, affirming with modifications the Decision 4 dated December 15,
1997 of the Regional Trial Court (R TC) of Cebu City, Branch 18 The RTC dismissed
herein petitioners complaint and declared the extrajudicial foreclosure sale, the
subject of this petition valid and binding.
Antecedent Facts
On May 23, 1990, petitioners Spouses Pio Dato (Pio) and Sonia Y. Sia (Spouses
Sia) applied for a ₱240,000.00 loan which was granted by the Bank of the
Philippine Islands (BPI) with a term of six months and secured by a real estate
mortgage over a parcel of land owned by Spouses Sia denominated as Lot 1,
situated in Labangon, Cebu, covered by Transfer Certificate of Title (TCT) No.
102434. Subsequently, on August 8, 1990, Spouses Sia availed of a ₱4 Million
Revolving Promissory Note Line with a term of one year, secured by the same
real estate mortgage over TCT No. 102434.5
Spouses Sia alleged that their loan was "precipitated by the representation of
the [BPI] that the same will be indorsed to [Industrial Guarantee and Loan Fund]
(IGLF) [in order] for the spouses to be able to avail of a much lower interest rate
and longer payment terms."6
19
Before the ₱240,000.00 and ₱4 Million loans matured, Spouses Sia approached
BPI through Mona Padilla (Padilla), account officer of BPI for additional loans.
One was for ₱2 Million, and another was for ₱2.8 Million. After some discussion
with Padilla, Spouses Sia agreed to obtain a Credit Facility of ₱5.7 Million using
the same collaterals offered in their previous loans and four additional parcels of
land, namely, TCT Nos. 87010, 102435, 102436 and 102437.7
On November 23, 1990, Spouses Sia obtained ₱800,000.00 from their Credit
Facility of ₱5.7 Million which was credited to their current account with BPI after
executing a Promissory Note for the same amount. While Spouses Sia paid some
of the interest on their loans, the amount was insufficient to cover the principal
amount of said loans.8
On February 13, 1991, Padilla sent a written reminder to Spouses Sia to settle all
unpaid interest before February 22, 1991. Yet the spouses failed to pay the
same. Their principal loans of ₱240,000.00 and ₱4 Million loan also remained
unsettled. BPI, through Padilla and Assistant Vice President, Danilo A. Quinto
sent another demand letter to them requesting payment of the outstanding
loan.9
Spouses Sia still failed to pay the principal amount of ₱4,240,000.00 exclusive of
interest, penalties and other charges. But the amount of ₱800,000.00 from the
₱5.7 Million Credit Facility was paid through a Letter of Credit. As the
₱240,000.00 and ₱4 Million loans of Spouses Sia were not yet settled, BPI
cancelled the ₱5.7 Million Credit facility. To facilitate and assist Spouses Sia in
paying off their loans, the four lots which secured the ₱5.7 Million Credit Line
Facility were released. Spouses Sia agreed to sell the lots and use the proceeds
thereof to make partial payments of their loans. Consequently, BPI issued a
cancellation of the real estate mortgage over the four lots which secured the
₱5.7 Million Credit Line Facility.10
Despite the cancellation of the real estate mortgage, Spouses Sia failed to make
good their promise to sell the lots to pay off their loans. BPI, through Padilla,
sent a follow-up demand letter to Spouses Sia dated July 11, 1991 requesting
payment of the principal loan amounting to ₱4,240,000.00 as well as all unpaid
interests, penalties and charges thereon on or before July 30, 1991.11 Spouses
Sia, through a letter dated July 19, 1991, acknowledged their account to BPI and
stated therein that they are "seriously considering selling some of their ‘choiced’
real estate properties to service their debt to BPI x x x."12
On August 3, 1993, Spouses Sia filed a complaint13 with the RTC of Cebu City
praying for the issuance of a temporary restraining order (TRO) to maintain
status quo, award of moral and exemplary damages, attorney’s fees and
litigation costs. In the said complaint, Spouses Sia alleged that BPI "deliberately
refused to comply with the condition/undertaking of the loan for IGLF
endorsement and approval" until the maturity date of the loan lapsed to their
great prejudice and irreparable damage.14
Spouses Sia failed to pay notwithstanding the numerous demands made by BPI,
leading to the extrajudicial foreclosure of the real estate mortgage covered by
TCT No. 102434 which secured Spouses Sia’s loans of ₱240,000.00 and ₱4
Million. The lot was sold at a public auction held on August 9, 1993, with BPI as
the sole bidder in the amount of ₱10,060,080.20.15 The certificate of sale was
issued on August 10, 1993 upon payment of all the required registration fees. 16
In the course of the trial proceedings, Spouses Sia alleged that they discovered
that the document embodying the cancellation of the real estate mortgage
presented by BPI (over the four lots previously released by BPI for the Credit
Line Agreement Facility), stated the following:
[T]he consideration for this cancellation being the full and complete payment
made by the said debtor/s- mortgagor/s to the creditor-mortgagee of the
obligation secured thereby in the principal amount of FIVE MILLION SEVEN
HUNDRED THOUSAND ONLY PESOS ([P]5,700,000.00) Philippine Currency,
together with the corresponding interest thereon up to this date. 17
Spouses Sia thereafter amended their complaint claiming that the bank inserted
and annotated a falsified/illegal Real Estate Mortgage of ₱5.7 Million,
purportedly availed of by Spouses Sia.18 They alleged "that TCT No. 102434 was
never intended to secure a fabricated and falsified loan of ₱5,700,000.00 or for
any loan [by] whomsoever, accommodated by [BPI] using [Spouses Sia’s]
collaterals." 19
Lastly, the spouses claimed extinguishment of their obligation. They alleged that
as BPI credited the payment of ₱5.7 Million to their account, which is more than
sufficient to cover their promissory notes of ₱240,000.00 and ₱4 Million, their
obligation with the BPI was totally extinguished as of August 5, 1991 and that
the foreclosure proceedings on TCT No. 102343 is illegal and baseless for they
have the right as of August 5, 1991 to secure full release of said lot by such
payment of ₱5.7 Million.20
Spouses Sia prayed for ₱5 Million as moral damages, ₱2 Million as exemplary
damages, attorney’s fees equivalent to 25% of the adjudged amount plus
₱350.00 per court appearance but not less than ₱350,000.00 and for whatever
proven damages of not less than ₱500,000.00. In their Second Supplemental
Complaint, Spouses Sia prayed for additional ₱25 Million as moral damages, ₱6
Million as exemplary damages and 25% attorney’s fees based on the additional
damages but not less than ₱200,000.00.21
During the pendency of the instant case, the one-year redemption period had
lapsed without Spouses Sia exercising their right to redeem the subject
property. Thus on January 27, 1995, BPI filed a supplemental answer with
counterclaim, alleging therein that with the expiration of the period of
redemption, BPI is entitled to a writ of possession over foreclosed property and
the occupancy of Spouses Sia on the foreclosed property entitles BPI to a
reasonable compensation which is conservatively pegged at ₱10,000.00 per
month from the date of the issuance of the certificate of sale in favor of BPI. 22
The RTC Ruling
On December 15, 1997, the RTC rendered its judgment in favor of BPI and
against Spouses Sia, the dispositive portion of which states:
WHEREFORE, premises all considered, JUDGMENT is hereby rendered in favor of
[BPI] and against Spouses Sia as follows:
1. Dismissing [Spouses Sia’s] complaint, supplemental and amended complaint
for lack of merit; 2. Declaring the extrajudicial foreclosure sale conducted on
August 8, 1993 as valid and binding; 3. Declaring defendant [BPI] as absolute and
legal owner of Lot No. 1 covered by TCT No. 102434 as well as the residential
house and all improvements thereon; 4. Ordering [Spouses Sia] to pay
defendant [BPI’s] counsel the sum of ₱500,000.00 as attorney’s fees; ordering to
pay defendant [BPI] the sum of ₱10,000.00 per month from August 10, 1994 for
use and occupancy of the foreclosed properties until the same are vacated and
possession delivered to defendant [BPI]; to pay the sum of ₱1,000,000.00 as
exemplary damages so as to prevent others from following [Spouses Sia’s] filing
a suit to prevent payment of a just and valid debt; the sum of ₱2,000,000.00 as
compensatory damages; the sum of ₱50,000.00 as litigation expenses as well as
costs of the suit.
SO ORDERED.23
The RTC found that "there is no logical and valid reason to support the
allegations in the complaint for Breach of Contract, Rescission and Cancellation
of Contract with Damages." 24
The RTC also found that BPI could not be held guilty of delay in endorsing the
loan to IGLF because BPI, through Padilla, never committed itself to make such
endorsement. There was no contract, either oral or written, which would prove
that there was any agreement between BPI and Spouses Sia to endorse their
loans to the IGLF. Petitioner Pio asked for the restructuring of his loans after he
failed to pay his ₱240,000.000 and ₱4 Million loans. As petitioner Pio wanted to
obtain an industrial loan for a longer period, Padilla merely suggested to them
to obtain loans through IGLF of the Development Bank of the Philippines, if
qualified to do so. Spouses Sia could not however, qualify because their loans
were on the "past due status’ and there was also a diversion of the proceeds of
their loans.25
The alleged verbal agreement between [Spouses Sia] and [BPI] that the latter
would endorse the ₱4 Million to IGLF is a clear violation of the parol evidence
rule which provides that "when the terms of an agreement have been reduced
to writing, it is to be considered as containing all such terms and therefore,
there can be between the parties and the successors in interest no evidence of
the terms of the agreement other than the contents of the writing" (Rule 130,
Section 7 of the Rules of Court).26
As regards the testimony of petitioner Pio that the real estate mortgage
covering the ₱5.7 Million credit facility was falsified, the RTC also found no legal
and factual basis therein because petitioner Pio admitted the authenticity of
their signatures appearing on the Promissory Notes and Real Estate Mortgages
evidencing the various loans and credit facility from BPI. Spouses Sia admitted
under oath that their signatures appearing on the Real Estate Mortgage
document (Exh. "23") to secure the ₱5.7 Million Credit facility are their
signatures. They in effect admitted the authenticity of those documents as well
as the correctness of the matters incorporated therein. As held by this Court in
the case of Heirs of Amparo del Rosario v. Aurora Santos, et al., 27 "when a party
admits the genuineness of a document, he also admits that the words and
figures of the documents are set out correctly." 28
On the topic of extinguishment of obligation, Spouses Sia failed to sway the RTC
to their assertions of payment by way of donation by an unknown third party.
The RTC considered the explanation of the bank as worthy of credence, as it had
extensively discussed, to wit:
Culled from the evidence on record, [Spouses Sia] in addition to the ₱240,000.00
and ₱4,000,000.00 loans, sometime in November 1990 requested for additional
loans from defendant bank. Plaintiff Pio Dato Sia applied for ₱2,000,000.00 loan
20
sometime in November, 1990 and ₱2.8 Million per loan application dated
December 8, 1990 (Exh. "25"). As there were several loans which Pio Dato Sia
applied for, Mona Padilla advised him that it would be more practical to obtain
Credit Facility or Credit Line to cover contingent financial requirements of his
business. Plaintiff Pio Dato agreed to obtain a Credit Facility of ₱5.7 Million. To
cover such facility, plaintiff Pio Dato Sia submitted four (4) additional collaterals
covered by titles. Subsequently, he executed a Real Estate Mortgage to secure
the Credit Line of ₱5.7 Million, dated November 22, 1990 (Exh. "23-C"). The
signatures of [Spouses Sia] on this document are admitted by [Spouses Sia] to be
genuine. On the same date November 22, 1993, [Spouses Sia] made an initial
availment from the ₱5.7 Million Credit Facility as evidenced by Exhibit "23". The
amount of ₱800,000.00 was credited to [Spouses Sia’s] Current Account No.
1303-2188-97 per Credit Memo (Exh. "27"). Such availment was fully paid by
[Spouses Sia]. After the first availment, [Spouses Sia] wanted to obtain another
availment from said Credit facility but [BPI] could no longer approve such
application due to [Spouses Sia’s] failure to pay the principal loan of
₱240,000.00 and interest thereof which matured on November 11, 1990. As
clearly setforth in the agreement, [BPI] can suspend availments from the Credit
Facility in the event of [Spouses Sia’s] default in the payment of any other
existing loans with [BPI]. Thereafter, [Spouses Sia] also failed to pay their
₱4,000,000.00 loan with [BPI]. As no additional loan could be granted to
[Spouses Sia], the latter requested the release of their four (4) collaterals which
were used to secure the ₱5.7 Million Credit Facility and per loan documents all
other existing loans with [BPI]. x x x [Spouses Sia] admitted having received the
four titles which were released by [BPI] upon [Spouses Sia’s] request as well as
the cancellation of the mortgage on the ₱5.7 Million Credit Facility after
[Spouses Sia’s] payment of the ₱800,000.00 availment. It is this cancellation of
mortgage which [Spouses Sia] are trying to use to escape payment of their
₱240,000.00 and ₱4 Million loans as well as unpaid interest, penalties and
charges. [BPI] argued that it is the distorted concept of [Spouses Sia] that since
the cancellation of the Real Estate Mortgage mentions the Credit facility of ₱5.7
Million, that someone paid [BPI] the sum of ₱5.7 Million. x x x.29 (Emphasis and
underscoring ours)
The RTC further explained:
It is a mistaken notion of [Spouses Sia] that the cancellation of Real Estate
Mortgage presupposed an alleged payment made by a third person to [BPI] of
the sum of ₱5.7 Million.
There is no iota of evidence establishing any payment in the sum of ₱5.7 Million
from [Spouses Sia] or from any third persons to [BPI] to settle any account of
[Spouses Sia]. x x x [Spouses Sia] admitted that they have not paid their
₱240,000.00 and ₱4 Million loans to [BPI].
The cancellation of mortgage refers only to the Real Estate Mortgage covering
the Credit Facility.30 (Emphasis ours)
Spouses Sia timely filed a Motion for Reconsideration which was denied by the
RTC.31 Spouses Sia next filed an appeal before the CA.
The CA Ruling
The CA rendered its Decision on July 25, 2007, affirming the RTC Decision with
Modification, as follows:
WHEREFORE, in view of the foregoing, the instant appeal is PARTLY GRANTED.
The Decision of the Regional Trial Court is hereby AFFIRMED with
MODIFICATIONS by deleting the award to BPI of compensatory and exemplary
damages.
SO ORDERED.32
After the denial of their Motion for Reconsideration in the CA Resolution dated
February 8, 2008, Spouses Sia raised a myriad of issues33 before this Court via
the instant petition for review on certiorari dated March 3, 2008.
Pending the resolution of this case, Spouses Sia filed on September 20, 2013 an
Urgent Motion for Issuance of Temporary Restraining Order and/or Writ of
Preliminary Injunction34 alleging that in an Order35 dated December 5, 2011,
Judge Sylva G. Aguirre-Paderanga of the RTC of Cebu City, Branch 16, ordered
the issuance of a Writ of Possession over TCT No. 130468 (Formerly TCT No.
102434) after BPI filed an Ex-Parte Motion for Issuance of a Writ of Possession.36
Pursuant to the said Order, a writ of possession was issued by the Clerk of Court
of the RTC Branch 16, directing Sheriff Generoso Regalado to issue a Notice to
Vacate.37
Spouses Sia filed a Motion for Reconsideration 38 of the RTC Branch 16 Order
granting the Motion for Issuance of the Writ of Possession, which was
subsequently denied in an Order39 dated March 8, 2012. Spouses Sia then filed a
Motion to Recall and to Quash Writ of Possession which was also denied in an
Order40 dated April 20, 2012. A Motion for Reconsideration of the Order denying
the Motion to Recall and to Quash Writ of Possession was filed by Spouses Sia
which was denied once more in an Order41 dated September 7, 2012.42
An Urgent Motion for Issuance of Temporary Restraining Order and/or Writ of
Preliminary Injunction43 was filed by Spouses Sia on September 20, 2013 before
the Court as they have received a Second Notice to Vacate on Writ of
Possession.
On October 17, 2013, Spouses Sia filed before the Court an Extremely Urgent
Reiterative Motion for Issuance of Temporary Restraining Order and/or Writ of
Preliminary Injunction to Enjoin Enforcement of Third Notice to Vacate dated
October 8, 2013, giving Spouses Sia ten (10) days from receipt thereof within
which to vacate the premises.
Issues
Basically, the issues presented by Spouses Sia boil down to the following:
I.
WHETHER THE CA ERRED IN HOLDING THAT BPI DID NOT BREACH ITS CONTRACT
WITH SPOUSES SIA CONCERNING THE IGLF ENDORSEMENT
II.
WHETHER THE CANCELLATION OF THE ₱5.7 MILLION CREDIT FACILITY OF
SPOUSES SIA RAISES A LEGAL ISSUE
The Court’s Ruling
The petition has no merit.
BPI did not commit Breach of Contract
The Court concurs with the CA and the RTC that BPI did not commit breach of
contract against Spouses Sia. In ruling so, the CA found that petitioner Pio
admitted the execution and genuineness of the notarized contract of real estate
mortgage and promissory note, including the signature of Spouses Sia on the
letter of advice to signify their conformity with the terms and conditions during
his oral testimony.44 Furthermore, the CA ruled that jurisprudence laid down the
consequences of admission:
By the admission of the due execution of a document, it means that the party
whose signature it bears admits that he signed it voluntarily or that it was
signed by another for him and with his authority; and by the admission of the
genuineness of the document, it means that the party whose signature it bears
admits that at the time it was signed it was in the words and figures exactly as
set out in the pleading of the party relying upon it.45
The Court finds no cause to deviate from the factual findings of both the RTC and
the CA. "The settled rule is that conclusions and findings of fact of the trial court
are entitled to great weight on appeal and should not be disturbed unless for
strong and cogent reasons because the trial court is in a better position to
examine real evidence, as well as observe the demeanor of the witnesses while
testifying in the case. The fact that the CA adopted the findings of fact of the
trial court makes the same binding upon this Court." 46
Since both the RTC and the CA found no evidence on record to support Spouses
Sia’s bare assertions that the endorsement to IGLF is a condition precedent to
their contract of loan with BPI, the Court is inclined to disregard Spouses Sia’s
contentions on this score.
There is no legal issue as regard to the cancellation of the ₱5.7 Million Credit
Line Facility
Initially, Spouses Sia insisted that the foreclosure of their real estate mortgage
was premature because BPI violated their agreement to have their loan
endorsed to IGLF.
Thereafter, Spouses Sia changed their stance and insisted that there was no
Credit Line Facility agreement of ₱5.7 Million. Spouses Sia further alleged that it
was the banking officers of BPI who borrowed the ₱5.7 Million and who
prepared the Cancellation of the Real Estate Mortgage. But the cancellation was
credited in favor of Spouses Sia. Payment should be therefore credited in their
favor to extinguish the loans of ₱4 Million and ₱240,000.00 and that BPI is
obligated to return the excess amount of ₱1,460,000.00 by way of solutio
indebiti.47
The Court is hardly convinced with Spouses Sia’s arguments. Both the RTC and
the CA have profusely examined the evidence on the record, wherein the
following observations were gathered:
The bases of the extrajudicial foreclosure proceeding were the three real estate
mortgage contracts executed by Sps. Sia in favor of BPI, to wit:
1. over TCT No. 102434 and its improvements for ₱240,000.00 dated August 10,
1990;
2. over TCT No. 102434 and its improvements for ₱4,000,000.00 dated May 24,
1990; and
3. over TCT No. 102434 and its improvements, and TCT Nos. 87010, 102435,
102436 and 102437 for ₱5,700,000.00 dated November 22, 1990.
Paragraph 6 of the aforecited real estate mortgage contracts provides that:
"In the event that the Mortgagor/Debtor herein, should fail or refuse to pay any
of the sums of money secured by this mortgage, or any part thereof, in
accordance with the terms and conditions herein set forth or those stipulated in
21
the correlative promissory note(s), or should he/it fail to perform any of the
conditions stipulated herein, or those in the promissory note(s), then and in any
such case the Mortgagee shall have the right at its election, to foreclose this
mortgage, x x x."
xxxx
At the outset, Sps. Sia admitted that they have not updated the interest due for
their loans and in fact, they intentionally stopped servicing the interest, more
particularly for the ₱4,000,000.00 loan because of the alleged breach of contract
by BPI. x x x.
xxxx
x x x In fact, it was admitted by Mr. Sia in his oral testimony that his only basis
for the claim of full payment was the cancellation of real estate mortgage
executed by BPI on August 2, 1991. Based on such document, they assumed that
a third person whom they did not know, paid in their behalves by way of
donation. Sps. Sia were not even able to present a deed of donation but only a
deed of acceptance of donation.48 (Emphasis ours and italics supplied)
Another argument posited by Spouses Sia is that, they neither executed any
₱5.7 Million promissory note nor did they receive ₱5.7 Million from BPI. 49 Thus,
there is no existing ₱5.7 Million Credit Line Facility Agreement as far as they are
concerned. It appears from the allegations in their pleadings that Spouses Sia
have misconstrued the concept of a Credit Line Facility Agreement. The Court
has previously defined a credit line as the following:
[A] credit line is "that amount of money or merchandise which a banker,
merchant, or supplier agrees to supply to a person on credit and generally
agreed to in advance." It is the fixed limit of credit granted by a bank, retailer, or
credit card issuer to a customer, to the full extent of which the latter may avail
himself of his dealings with the former but which he must not exceed and is
usually intended to cover a series of transactions in which case, when the
customer’s line of credit is nearly exhausted, he is expected to reduce his
indebtedness by payments before making any further drawings. 50 (Citations
omitted and emphasis and underscoring ours)
Thus, contrary to the belief and understanding of Spouses Sia, BPI does not have
to require the execution of promissory note of the entire ₱5.7 Million since a
credit line as stated above, is merely a fixed limit of credit. Furthermore, still
applying the above quoted definition, a credit line usually presupposes a series
of transactions until the credit line is nearly exhausted. BPI is not obliged to
release the amount of ₱5.7 Million to Spouses Sia all at once, in a single
transaction.
In this case, BPI allowed the release only of ₱800,000.00 out of the ₱5.7 Million
credit line and precluded any more availments since Spouses Sia have not yet
satisfied their obligation to pay their loans of ₱4 Million and ₱240,000.00. Again,
Spouses Sia are reminded that the Court is not a trier of facts. As the RTC and
the CA both found, the release of the four collaterals was done to assist Spouses
Sia in paying off their loans, not due to payment of ₱5.7 Million by Spouses Sia
or any other person on their behalf. Spouses Sia read much into the Cancellation
of the Real Estate Mortgage contract when in fact, the release was made for
their benefit.
In any case, the extrajudicial foreclosure which is the subject of the present case
pertains to Spouses Sia’s failure to pay their ₱240,000.00 and ₱4 Million loans.
The Court sees no real issue as regards the ₱5.7 Million credit line since it is as
plain as day that the entire ₱5.7 Million was not availed of by Spouses Sia and
that the real estate mortgages securing such credit line were cancelled in their
favor. Spouses Sia thwart the issue towards the ₱5.7 Million credit line when the
real issue is their non-payment of ₱4 Million and ₱240,000.00 loans, which
eventually led to the extrajudicial foreclosure of TCT No. 102434.
It is a settled rule of law that foreclosure is proper when the debtors are in
default of the payment of their obligation.51 As the CA had appositely
considered, due to Spouses Sia’s failure to pay their loans covered by Promissory
Notes (PN) Nos. 90/98 and 90/152, the extrajudicial foreclosure of the real
estate mortgage is valid and binding against them:
Finding for the non-payment of obligations covered by PN Nos. 90/98 and
90/152, Sps. Sia’s prayer to declare null and void the extrajudicial foreclosure of
the subject real estate mortgage is now foiled. Therefore, the extrajudicial
foreclosure and the corresponding certificate of sale executed on August 9, 1993
for the subject real estate property covered by TCT No. 102434 which sought to
reach the property and subject it to the payment of Sps. Sia’s obligations was
valid and binding. We further rule that for failure of Sps. Sia to exercise the right
of redemption, the right to consolidate ownership on the foreclosed property
was validly exercised by BPI.52
Prayer for Issuance of Writ of Preliminary Injunction must be denied
In their Extremely Urgent Reiterative Motion For Issuance of Temporary
Restraining Order and/or Writ of Preliminary Injunction filed on October 17,
2013, Spouses Sia referred to the ruling of this Court in Cometa v. Intermediate
Appellate Court53 where it was held that an issue in a separate case wherein the
validity of levy and sale of properties is questioned, is one that requires pre-
emptive resolution.54
A scrutiny of the above-cited case reveals that it is not applicable to this case. In
Cometa, the property which was the subject of dispute was sold after levy and
execution when the judgment award was not satisfied in another case for
damages. Therein petitioner Herco Realty, assailed the validity of the execution
sale and contended that the ownership of the lots had been transferred to it by
Cometa before such execution sale. The ownership of the property sold in the
execution sale was put into the very issue.
Whereas in this case, the property owned by Spouses Sia covered by TCT No.
102434 was mortgaged to BPI as security for their loans. The same property was
sold after it was extrajudicially foreclosed. Hence, the facts in Cometa and this
case cannot be any more different. Spouses Sia cannot invoke the application of
the Court’s ruling in Cometa to a case which is poles apart to it.
The pending suit questioning the validity of the extrajudicial foreclosure of
mortgage does not entitle Spouses Sia to a suspension of the issuance of writ of
possession. The Court calls to mind its ruling in Baldueza v. CA 55:
The Court upholds the decision of the Court of Appeals as respondent bank is
entitled to possession of the subject property. In several cases 56, this Court has
held:
"It is settled [that] the buyer in a foreclosure sale becomes the absolute owner
of the property purchased if it is not redeemed during the period of one year
after the registration of the sale. As such, he is entitled to the possession of the
property and can demand it at any time following the consolidation of
ownership in his name and the issuance to him of a new transfer certificate of
title. The buyer can in fact demand possession of the land even during the
redemption period except that he has to post a bond in accordance with Section
7 of Act 3135 as amended.
No such bond is required after the redemption period if the property is not
redeemed. Possession of the land then becomes an absolute right of the
purchaser as confirmed owner. Upon proper application and proof of title, the
issuance of the writ of possession becomes a ministerial duty of the court."
The facts show that petitioner mortgaged the subject property to respondent
bank. Upon maturity of the loan, petitioner failed to pay the loan despite
demand. The property was foreclosed and sold in a public auction where
respondent bank was the highest bidder.1âwphi1 Petitioner failed to redeem
the property within the one-year redemption period. Respondent bank
consolidated its ownership over the property and a new title was issued in its
favor. Hence, it became the ministerial duty of the court to issue the writ of
possession applied for by respondent bank.
Despite the pending suit for annulment of the mortgage and Notice of Sheriff’s
Sale, respondent bank is entitled to a writ of possession, without prejudice to
the eventual outcome of the said case.57 (Citation omitted and emphasis and
underscoring ours)
Based on the reasons discussed above, the Court holds that there is no basis for
the issuance of a Temporary Restraining Order/Writ of Preliminary Injunction to
enjoin the enforcement of the third notice to vacate dated October 8, 2013.
Reduction of Attorney’s Fees and
Litigation Expenses is in order
The Court is in consonance with the CA and RTC that BPI is entitled to receive
rental fees as the new owner of the property covered by TCT No. 102434 (Now
TCT No. 130468)58, following the Court’s ruling in F. David Enterprises v. Insular
Bank of Asia and America59, that the buyer in a foreclosure sale becomes the
absolute owner of the property purchased if it is not redeemed during the
period of one year after the registration of the sale.60
Also, the Court agrees with the RTC and CA that the award of attorney’s fees and
litigation expenses is warranted owing to the fact that BPI was compelled to
engage the services of a counsel to protect its rights. It is so stated under Article
2208 of the Civil Code that attorney’s fees and expenses of litigation may be
recovered by a party when an act or omission has compelled him to litigate with
third persons or to incur expenses to protect his interest. However, the Court
deems the award of ₱500,000.00 as attorney’s fees and ₱50,000 for litigation
expenses, as excessive, considering the nature of this case. Award of attorney’s
fees, being part of a party’s liquidated damages, may be equitably reduced. 61
WHEREFORE, the instant petition is DENIED. The Decision dated July 25, 2007
and Resolution dated February 8, 2008 of the Court of Appeals are AFFIRMED
with MODIFICATIONS. The award of attorney’s fees and litigation expenses are
hereby reduced to ₱50,000.00.
22
The prayer for the issuance of a Temporary Restraining Order/Writ of deceived them in that they were assured that the said certificate was already
Preliminary Injunction is being processed when such was not the case. 14Eventually, they found out that
DENIED. the property had already been mortgaged to Sps. Marquez, and that when they
SO ORDERED. tried to contact Gonzales for an explanation, she could no longer be found.
Separately, Sps. Alindog averred that when the mortgage was executed in favor
of Sps. Marquez, Gutierrez was already dead.15
10. SPOUSES NICASIO C. MARQUEZ AND ANITA J. MARQUEZ, Petitioners,  In their defense,16 Sps. Marquez disputed Sps. Alindog’s ownership over the
vs. SPOUSES CARLITO ALINDOG AND CARMEN ALINDOG, Respondents. subject property, arguing that the purported sale in the latter’s favor was never
G.R. No. 184045               January 22, 2014 registered and therefore, not binding upon them. Further, they insisted that
DECISION their certificate of title, TCT No. T-41939, was already indefeasible, and cannot
PERLAS-BERNABE, J.: be attacked collaterally.
Assailed in this petition for review on certiorari 1 are the Decision2 dated Meanwhile, on March 16, 2005, Anita filed an ex-parte petition for the issuance
February 29, 2008 and Resolution3 dated August 6, 2008 of the Court of Appeals of a writ of possession17 (ex-parte petition) before the RTC, docketed as LRC Case
(CA) in CA-G.R. SP No. 97744 finding no grave abuse of discretion on the part of No. TG-05-1068, claiming that the same is ministerial on the court’s part
the Regional Trial Court of Tagaytay City, Branch 18 (RTC) in issuing the Orders following the consolidation of her and her husband’s title over the subject
dated November 14, 20054and January 17, 2007[[5 ]] in SCA No. TG-05-2521. property. Impleaded in said petition are Sps. Gutierrez, including all persons
Based on these orders, a writ of preliminary injunction was issued against claiming rights under them.
petitioners-spouses Nicasio C. Marquez and Anita J. Marquez (Sps. Marquez), The RTC Rulings and Subsequent Proceedings
enjoining them from taking possession of the property subject of this case In an Order18 dated August 1, 2005, the RTC granted Anita’s ex-parte petition
despite the consolidation of their title over the same. and thereby directed the issuance of a writ of possession in her favor.
The Facts Consequently, a notice to vacate19 dated September 23, 2005 was issued by
Records show that sometime in June 1998, petitioner Anita J. Marquez (Anita) Acting Sheriff Teodorico V. Cosare (Sheriff Cosare) against Sps. Gutierrez and all
extended a loan in the amount of ₱500,000.00 to a certain Benjamin Gutierrez persons claiming rights under them. Sps. Alindog were served with a copy of the
(Gutierrez). As security therefor, Gutierrez executed a Deed of Real Estate said notice to vacate on September 27, 2005.20
Mortgage6 dated June 16, 1998 over a parcel of land located in Tagaytay City Claiming that they would suffer irreparable injury if the implementation of the
with an area of 660 square meters, more or less, covered by Transfer Certificate writ of possession in favor of Sps. Marquez would be left unrestrained, Sps.
of Title (TCT) No. T-134437 (subject property), registered under the name of Alindog sought the issuance of a temporary restraining order (TRO) and/or writ
Benjamin A. Gutierrez, married to Liwanag Camerin (Sps. Gutiererez). The of preliminary injunction with prayer for damages,21 in a separate case docketed
mortgage was duly annotated on the dorsal portion of TCT No. T-13443, which as SCA No. TG-05-252122(injunction case) which was raffled to the same court.
Sps. Marquez had verified as clean prior to the mortgage. 8 While it appears that the RTC issued a 72-hour TRO on September 29, 2005 in
Since Gutierrez defaulted in the payment of his loan obligation, Anita sought the Sps. Alindog’s favor, records nonetheless show that said order was not extended
extra-judicial foreclosure of the subject property. At the public auction sale held to a full 20-day TRO.23 To this end, the Sheriff’s Return24 dated November 14,
on January 19, 2000, Anita emerged as the highest bidder for the amount of 2005 shows that Sheriff Cosare was able to implement the writ of possession on
₱1,171,000.00.9 Upon Gutierrez’s failure to redeem the same property within November 11, 2005, turning over the possession of the subject property to Sps.
the prescribed period therefor, title was consolidated under TCT No. T- Marquez.
4193910 on November 5, 2001 (in the name of Anita J. Marquez, married to After further proceedings on the injunction case, the RTC, through an
Nicasio C. Marquez) which, however, bore an annotation of adverse Order25 dated November 14, 2005, issued a writ of preliminary injunction
claim11 dated March 2, 2000 in the names of respondents-spouses Carlito and enjoining Sps. Marquez from taking possession of the subject property until
Carmen Alindog (Sps. Alindog). Said annotation was copied from an earlier after the controversy has been fully resolved on the merits. The said issuance
annotation on TCT No. T-13443 made only after the subject property’s mortgage was based on the RTC’s appreciation of the initial evidence adduced by Sps.
to Sps. Marquez. Alindog, concluding that they appear to have a right to be protected. Thus,
Subsequently, or on March 21, 2000, Sps. Alindog filed a civil case for annulment notwithstanding the consolidation of Sps. Marquez’s title over the subject
of real estate mortgage and certificate of sale with prayer for damages against property, the RTC granted Sps. Alindog’s prayer for injunctive relief, holding that
Sps. Marquez and a certain Agripina Gonzales (Gonzales) before the RTC, any further dispossession on their part would cause them irreparable injury. 26
docketed as Civil Case No. TG-1966 (annulment case). In their complaint, 12 Sps. Aggrieved, Sps. Marquez moved for reconsideration, 27 essentially pointing out
Alindog alleged that they purchased 13 the subject property from Gutierrez way that, as the confirmed and registered owners of the subject property, they are
back in September 1989, but were unable to secure a certificate of title in their entitled to its possession as a matter of right. They argued that pursuant to
names because Gonzales – to whom they have entrusted said task – had Sections 728 and 829 of Act No. 3135,30 as amended by Act No. 4118,31 the RTC was
legally bound to place them in possession of the subject property pending
resolution of the annulment case. Further, it is their position that the purpose
for the issuance of the injunctive writ – i.e., to restrain the implementation of
the writ of possession – had already been rendered moot and academic by its
actual enforcement in the interim.
For their part, Sps. Alindog filed a Motion for Approval of Cash Bond and to
Regain Possession32 of the subject property.
In an Order33 dated January 17, 2007, the RTC denied the motion of Sps.
Marquez, while granted that of Sps. Alindog. Unperturbed, Sps. Marquez
elevated the case to the CA on certiorari.34
The CA Ruling
In a Decision35 dated February 29, 2008, the CA denied Sps. Marquez’s petition
as it found no grave abuse of discretion on the RTC’s part when it issued the
injunctive writ that enjoined Sps. Marquez from taking possession of the subject
property. It observed that Sps. Alindog had indeed "adduced prima facie proof
of their right to possess the subject property" 36 while the annulment case was
pending, adding that the latter’s "right to remain in possession" 37 proceeds from
the fact of the subject property’s earlier sale to them. Thus, while Sps. Marquez
concededly had a right to possess the subject property on account of the
consolidation of the title in their names, the CA nonetheless found no fault on
the part of the RTC for "proceeding with caution" 38 in weighing the conflicting
claims of the parties and subsequently issuing the writ of preliminary injunction
in Sps. Alindog’s favor.
Dissatisfied, Sps. Marquez moved for reconsideration 39 which was, however,
denied in a Resolution40 dated August 6, 2008, hence, this petition.
The Issue Before the Court
The essential issue in this case is whether or not the CA erred in finding no grave
abuse of discretion on the part of the RTC when it issued the injunctive writ
which enjoined Sps. Marquez from taking possession of the subject property.
The Court’s Ruling
The petition is meritorious.
It is an established rule that the purchaser in an extra-judicial foreclosure sale is
entitled to the possession of the property and can demand that he be placed in
possession of the same either during (with bond) or after the expiration
(without bond) of the redemption period therefor. To this end, the Court, in
China Banking Corp. v. Sps. Lozada41 (China Banking Corp.), citing several cases
on the matter, explained that a writ of possession duly applied for by said
purchaser should issue as a matter of course, and thus, merely constitutes a
ministerial duty on the part of the court, viz.: 42
The procedure for extrajudicial foreclosure of real estate mortgage is governed
by Act No. 3135, as amended. The purchaser at the public auction sale of an
extrajudicially foreclosed real property may seek possession thereof in
accordance with Section 7 of Act No. 3135, as amended, which provides:
SEC. 7. In any sale made under the provisions of this Act, the purchaser may
petition the Court of First Instance of the province or place where the property
or any part thereof is situated, to give him possession thereof during the
redemption period, furnishing bond in an amount equivalent to the use of the
property for a period of twelve months, to indemnify the debtor in case it be
23
shown that the sale was made without violating the mortgage or without
complying with the requirements of this Act. Such petition shall be made under
oath and filed in form or an ex parte motion in the registration or cadastral
proceedings if the property is registered, or in special proceedings in the case of
property registered under the Mortgage Law or under section one hundred and
ninety-four of the Administrative Code, or of any other real property
encumbered with a mortgage duly registered in the office of any register of
deeds in accordance with any existing law, and in each case the clerk of court
shall, upon the filing of such petition, collect the fees specified in paragraph
eleven of section one hundred and fourteen of Act Numbered Four hundred and
ninety six as amended by Act Numbered Twenty-eight hundred and sixty-six,
and the court shall, upon approval of the bond, order that a writ of possession
issue addressed to the sheriff of the province in which the property is situated,
who shall execute said order immediately.
The Court expounded on the application of the foregoing provision in De Gracia
v. San Jose, thus:
As may be seen, the law expressly authorizes the purchaser to petition for a writ
of possession during the redemption period by filing an ex parte motion under
oath for that purpose in the corresponding registration or cadastral proceeding
in the case of property with Torrens title; and upon the filing of such motion and
the approval of the corresponding bond, the law also in express terms directs
the court to issue the order for a writ of possession. Under the legal provisions
above copied, the order for a writ of possession issues as a matter of course
upon the filing of the proper motion and the approval of the corresponding
bond. No discretion is left to the court. And any question regarding the
regularity and validity of the sale (and the consequent cancellation of the writ) is
left to be determined in a subsequent proceeding as outlined in section 8. Such
question is not to be raised as a justification for opposing the issuance of the
writ of possession, since, under the Act, the proceeding for this is ex parte.
Strictly, Section 7 of Act No. 3135, as amended, refers to a situation wherein the
purchaser seeks possession of the foreclosed property during the 12-month
period for redemption. Upon the purchaser’s filing of the ex parte petition and
posting of the appropriate bond, the RTC shall, as a matter of course, order the
issuance of the writ of possession in the purchaser’s favor.
In IFC Service Leasing and Acceptance Corporation v. Nera, the Court reasoned
that if under Section 7 of Act No. 3135, as amended, the RTC has the power
during the period of redemption to issue a writ of possession on the ex parte
application of the purchaser, there is no reason why it should not also have the
same power after the expiration of the redemption period, especially where a
new title has already been issued in the name of the purchaser. Hence, the
procedure under Section 7 of Act No. 3135, as amended, may be availed of by a
purchaser seeking possession of the foreclosed property he bought at the public
auction sale after the redemption period has expired without redemption having
been made.
xxxx
It is thus settled that the buyer in a foreclosure sale becomes the absolute
owner of the property purchased if it is not redeemed during the period of one
year after the registration of the sale. As such, he is entitled to the possession of
the said property and can demand it at any time following the consolidation of
ownership in his name and the issuance to him of a new transfer certificate of
title. The buyer can in fact demand possession of the land even during the
redemption period except that he has to post a bond in accordance with Section
7 of Act No. 3135, as amended. No such bond is required after the redemption
period if the property is not redeemed. Possession of the land then becomes an
absolute right of the purchaser as confirmed owner. Upon proper application
and proof of title, the issuance of the writ of possession becomes a ministerial
duty of the court. (Emphases and underscoring supplied; citations and emphases
in the original omitted)
In the case of Spouses Espiridion v. CA,43 the Court expounded on the ministerial
nature of the foregoing issuance as follows:44
The issuance of a writ of possession to a purchaser in a public auction is a
ministerial act.1âwphi1 After the consolidation of title in the buyer’s name for
failure of the mortgagor to redeem the property, the writ of possession
becomes a matter of right. Its issuance to a purchaser in an extrajudicial
foreclosure sale is merely a ministerial function. The trial court has no discretion
on this matter. Hence, any talk of discretion in connection with such issuance is
misplaced.
A clear line demarcates a discretionary act from a ministerial one. Thus:
The distinction between a ministerial and discretionary act is well delineated. A
purely ministerial act or duty is one which 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 and not ministerial. The duty is ministerial
only when the discharge of the same requires neither the exercise of official
discretion or judgment.
Clearly, the use of discretion and the performance of a ministerial act are
mutually exclusive. (Emphases and underscoring supplied; citations omitted)
The ministerial issuance of a writ of possession in favor of the purchaser in an
extra-judicial foreclosure sale, however, admits of an exception. Section
33,45 Rule 39 of the Rules of Court (Rules) pertinently provides that the
possession of the mortgaged property may be awarded to a purchaser in an
extra-judicial foreclosure unless a third party is actually holding the property by
adverse title or right. In the recent case of Rural Bank of Sta. Barbara (Iloilo), Inc.
v. Centeno,46 citing the case of China Banking Corp., the Court illumined that
"the phrase ‘a third party who is actually holding the property adversely to the
judgment obligor’ contemplates a situation in which a third party holds the
property by adverse title or right, such as that of a co-owner, tenant or
usufructuary. The co-owner, agricultural tenant, and usufructuary possess the
property in their own right, and they are not merely the successor or transferee
of the right of possession of another co-owner or the owner of the property.
Notably, the property should not only be possessed by a third party, but also
held by the third party adversely to the judgment obligor." 47 In other words, as
mentioned in Villanueva v. Cherdan Lending Investors Corporation, 48 the third
person must therefore claim a right superior to that of the original mortgagor.
In this case, it is clear that the issuance of a writ of possession in favor of Sps.
Marquez, who had already consolidated their title over the extra-judicially
foreclosed property, is merely ministerial in nature. The general rule as herein
stated – and not the exception found under Section 33, Rule 39 of the Rules –
should apply since Sps. Alindog hinged their claim over the subject property on
their purported purchase of the same from its previous owner, i.e., Sps.
Gutierrez (with Gutierrez being the original mortgagor). Accordingly, it cannot
be seriously doubted that Sps. Alindog are only the latter’s (Sps. Gutierrez)
successors-in-interest who do not have a right superior to them.
That said, the RTC therefore gravely abused its discretion when it issued the
injunctive writ which enjoined Sps. Marquez from taking possession of the
subject property. To be sure, grave abuse of discretion arises when a lower court
or tribunal patently violates the Constitution, the law or existing
jurisprudence.49 Here, while the RTC had initially issued a writ of possession in
favor of Sps. Marquez, it defied existing jurisprudence when it effectively
rescinded the said writ by subsequently granting Sps. Alindog's prayer for
injunctive relief. The RTC's finding anent the initial evidence adduced by Sps.
Alindog constitutes improper basis to justify the issuance of the writ of
preliminary injunction in their favor since, in the first place, it had no authority
to exercise any discretion in this respect. Jurisprudence is clear on the matter:
without the exception under Section 33, Rule 39 of the Rules availing, the
issuance of a writ of possession in favor of the purchaser of an extra-judicially
foreclosed property - such as Sps.
Marquez in this case - should come as a matter of course, and, in such regard,
constitutes only a ministerial duty on the part of the court. Besides, it was
improper for the RTC to have issued a writ of preliminary injunction since the act
sought to be enjoined, i.e., the implementation of the writ of possession, had
already been accomplished in the interim and thus, rendered the matter moot.
Case law instructs that injunction would not lie where the acts sought to be
enjoined had already become fait accompli (meaning, an accomplished or
consummated act).50 Hence, since the consummation of the act sought to be
restrained had rendered Sps. Alindog's injunction petition moot, the issuance of
the said injunctive writ was altogether improper.
All told, by acting averse to well-settled jurisprudential rules and resultantly
depriving Sps. Marquez of their right of possession over the subject property,
the Court therefore concludes that the RTC gravely abused its discretion in this
case. In effect, the CA's contrary ruling thereto is hereby reversed and set aside,
which consequentially leads to the nullification of the writ of preliminary
injunction issued by the RTC in favor of Sps. Alindog, and the reinstatement of
the writ of possession issued by the same court in favor of Sps. Marquez. It
must, however, be noted that these pronouncements are without prejudice to
any separate action which Sps. Alindog may file in order to recover ownership of
the subject property.
WHEREFORE, the petition is GRANTED. The Decision dated February 29, 2008
and Resolution dated August 6, 2008 of the Court of Appeals in CA-G.R. SP No.
97744, as well as the Orders dated November 14, 2005 and January 17, 2007 of
the Regional Trial Court of Tagaytay City, Branch 18 in SCA No. TG-05-2521 are
hereby REVERSED and SET ASIDE. Accordingly, the writ of preliminary injunction
24
in SCA No. TG-05-2521 is NULLIFIED, while the Writ of Possession in LRC Case No.
TG-05-1068 is REINSTATED.
SO ORDERED.
11. PRODUCERS BANK OF THE PHILIPPINES, Petitioner, vs. EXCELSA INDUSTRIES,
INC., Respondent.
G.R. No. 173820               April 16, 2012
DECISION
PERALTA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court filed
by petitioner Producers Bank of the Philippines against respondent Excelsa
Industries, Inc. assailing the Court of Appeals (CA) Decision 1 dated April 4, 2006
and Resolution2 dated July 19, 2006 in CA-G.R. SP No. 46514. The assailed
decision reversed the Regional Trial Court (RTC) 3 Decision4 dated December 16,
1997 in the consolidated cases docketed as LR Case No. 90-787 and Civil Case
No. 1587-A, while the assailed resolution denied petitioner’s motion for
reconsideration for lack of merit.
The present case stemmed from the same set of facts as in G.R. No.
1520715 entitled "Producers Bank of the Philippines v. Excelsa Industries, Inc.,"
which the Court promulgated on May 8, 2009. The relevant facts, as found by
the Court in said case, are as follows:
Respondent obtained a loan from petitioner in the form of a bill discounted and
secured credit accommodation in the amount of ₱200,000.00, secured by a real
estate mortgage over real estate properties registered in its name. 6 The
mortgage secured also loans that might be extended in the future by petitioner
in favor of respondent.7 Respondent thereafter applied for a packing credit line
or a credit export advance with petitioner supported by a letter of credit issued
by Kwang Ju Bank, Ltd. of Seoul, Korea, through Bank of the Philippine Islands.
The application was approved.8 When respondent presented for negotiation to
petitioner drafts drawn under the letter of credit and the corresponding export
documents in consideration for its drawings in the amount of US$5,739.76 and
US$4,585.79, petitioner purchased the drafts and export documents by paying
respondent the peso equivalent of the drawings.9The Korean buyer, however,
refused to pay the export documents prompting petitioner to demand from
respondent the payment of the peso equivalent of said export documents
together with its due and unpaid loans.10 For failure of respondent to heed the
demand, petitioner moved for the extrajudicial foreclosure of the real estate
mortgage.11 At the public auction, petitioner emerged as the highest
bidder.12 The corresponding certificate of sale was later issued and eventually
registered. For failure of respondent to redeem the properties, the titles were
consolidated in favor of petitioner and new certificates of title were issued in its
name.13
On November 17, 1989, respondent instituted an action for the annulment of
extrajudicial foreclosure with prayer for preliminary injunction and damages
against petitioner and the Register of Deeds of Marikina. The case was docketed
as Civil Case No. 1587-A which was raffled to Branch 73 of the RTC of Antipolo,
Rizal.14 On April 5, 1990, petitioner filed a petition for the issuance of a writ of
possession, docketed as LR Case No. 90-787 before the same court. The RTC
thereafter ordered the consolidation of the two cases, Civil Case No. 1587-A and
LR Case No. 90-787.
On December 18, 1997, the RTC rendered a decision upholding the validity of
the extrajudicial foreclosure and ordering the issuance of a writ of possession in
favor of petitioner.15
Aggrieved, respondent availed of two modes of appeal. Respondent appealed
Civil Case No. 1587-A via ordinary appeal16 to the CA which was docketed as CA-
G.R. CV No. 59931 and raffled to the First Division. Respondent likewise filed a
special civil action for certiorari under Rule 65 of the Rules of Court as to LR Case
No. 90-78717 also before the CA which was docketed as CA-G.R. SP. No. 46514
and was raffled to the Tenth Division. In both cases, respondent assailed the
December 18, 1997 Decision of the RTC which is actually a joint decision on the
two consolidated cases subject of the separate actions.
On May 30, 2001, the CA (First Division) rendered a decision in CA-G.R. CV No.
59931 reversing and setting aside the RTC decision thereby declaring the
foreclosure of mortgage invalid and annulling the issuance of the writ of
possession in favor of petitioner.18 Petitioner elevated the case to this Court and
was docketed as G.R. No. 152071.
On April 4, 2006, the CA (Tenth Division) also rendered the assailed decision in
CA-G.R. SP No. 46514, the dispositive portion of which reads:
WHEREFORE, premises considered, the instant petition is hereby GRANTED.
ACCORDINGLY, the Decision dated December 18, 1997 of the Regional Trial
Court of Antipolo, Rizal, Branch 73, is hereby REVERSED.
SO ORDERED.19
While declaring that the case had become moot and academic in view of the
May 30, 2001 decision of the CA (First Division), the CA (Tenth Division) decided
on the merits of the case and resolved two issues, namely: (1) whether or not
petitioner was the agent of respondent; and (2) whether or not the foreclosure
of mortgage was valid.20 The decision substantially echoed the ruling of the CA
(First Division) in CA-G.R. CV No. 59931.
Aggrieved, petitioner comes before the Court with the following arguments:
I.
The Petition for Certiorari should have been immediately dismissed by the Court
of Appeals on the ground of FORUM SHOPPING.
II.
The Petition for Certiorari should have been immediately dismissed as there was
a remedy (i.e., Motion for Reconsideration and Appeal) available to the
Respondent.
III.
The respondent’s Petition, purportedly a Petition for Certiorari under Rule 65 of
the Rules of Court, did not allege that any tribunal, board or officer exercising
judicial or quasi-judicial functions has acted without or in excess of jurisdiction
or with grave abuse of discretion amounting to lack or excess of jurisdiction.
IV.
Even if the respondent’s Petition is decided on the issues enumerated by the
Court of Appeals in its questioned Decision, the Petition for Certiorari must be
dismissed for utter lack of merit and for not being supported by the evidence on
record.21
The petition is meritorious.
The case stemmed from two separate cases – one for annulment of foreclosure
in Civil Case No. 1587-A and another case for issuance of the writ of possession
in LR Case No. 90-787. The cases were consolidated by the RTC and were
eventually disposed of in one judgment embodied in the December 18, 1997 RTC
decision. This notwithstanding, respondent treated the cases separately and
availed of two remedies, an appeal in Civil Case No. 1587-A and a petition
for certiorari under Rule 65 in LR Case No. 90-787. The appeal was decided by
the CA (First Division) then eventually settled by the Court in G.R. No. 152071 on
May 8, 2009. The petition for certiorari, on the other hand, was later decided by
the CA (Tenth Division), which decision is now the subject of this present
petition.
Respondent herein committed a procedural blunder when it filed a separate
petition for certiorari before the CA, because when the two cases were
consolidated and a joint decision was rendered, the cases lost their identities;
and a petition for certiorari is not the proper remedy to assail a decision
granting the issuance of a writ of possession.
Consolidation is a procedural device granted to the court as an aid in deciding
how cases in its docket are to be tried so that the business of the court may be
dispatched expeditiously and with economy while providing justice to the
parties.22 It is governed by Rule 31 of the old Rules of Court 23 which states:
Section 1. Consolidation. – When actions involving a common question of law or
fact are pending before the court, it may order a joint hearing or trial of any or
all the matters in issue in the actions; it may order all the actions consolidated;
and it may make such orders concerning proceedings therein as may tend to
avoid unnecessary costs or delay.24
As aptly observed by the Court in Republic of the Philippines v. Sandiganbayan,
et al.,25 Rule 31 is completely silent on the effect/s of consolidation on the cases
consolidated; on the parties and the causes of action involved; and on the
evidence presented in the consolidated cases. 26 In the same case, the Court
declared that the effect of consolidation would greatly depend on the sense in
which the consolidation is made. Consolidation of cases may take place in any of
the following ways:
(1) Where all except one of several actions are stayed until one is tried, in which
case the judgment in the one trial is conclusive as to the others. This is not
actually consolidation but is referred to as such. (quasi-consolidation)
(2) Where several actions are combined into one, lose their separate identity,
and become a single action in which a single judgment is rendered. This is
illustrated by a situation where several actions are pending between the same
parties stating claims which might have been set out originally in one complaint.
(actual consolidation)
(3) Where several actions are ordered to be tried together but each retains its
separate character and requires the entry of a separate judgment. This type of
consolidation does not merge the suits into a single action, or cause the parties
to one action to be parties to the other. (consolidation for trial)27
25
In this case, there was a joint hearing and the RTC eventually rendered a Joint
Decision disposing of the cases both as to the validity of the foreclosure (subject
of Civil Case No. 1587-A) and the propriety of the issuance of a writ of
possession (subject of LR Case No. 90-787). This being so, the two cases ceased
to be separate and the parties are left with a single remedy to elevate the issues
to the appellate court. This is bolstered by the fact that when the appeal in CA-
G.R. CV No. 59931 was disposed of by the CA (First Division) by reversing the RTC
decision, the appellate court not only declared the foreclosure of mortgage
invalid but likewise annulled the issuance of the writ of possession. Again, when
the Court finally settled the issues in G.R. No. 152071, it reversed and set aside
the CA decision and reinstated that of the RTC thereby disposing of the said two
issues.
Assuming that respondent could still treat the original cases separately and
could avail of separate remedies, the petition for certiorari under Rule 65 was
incorrectly availed of to assail the issuance of the writ of possession.
A special civil action for certiorari could be availed of only if a tribunal, board, or
officer exercising judicial or quasi-judicial functions has acted without or in
excess of its or his jurisdiction, or with grave abuse of discretion amounting to
lack or excess of jurisdiction; and if there is no appeal or any other plain, speedy,
and adequate remedy in the ordinary course of law.28 It has been repeatedly
held in a number of cases29 that the remedy of a party from the trial court’s
order granting the issuance of a writ of possession is to file a petition to set
aside the sale and cancel the writ of possession, and the aggrieved party may
then appeal from the order denying or granting said petition. 30 When a writ of
possession had already been issued as in this case, 31 the proper remedy is an
appeal and not a petition for certiorari. 32 To be sure, the trial court’s order
granting the writ of possession is final.33 The soundness of the order granting the
writ of possession is a matter of judgment, with respect to which the remedy of
the party aggrieved is ordinary appeal.34 As respondent availed of the wrong
remedy, the appellate court erred in not dismissing outright the petition for
certiorari.
We would like to stress at this point that when respondent received the
unfavorable decision of the RTC dated December 18, 1997, it appealed the
decision to the CA assailing the validity of the foreclosure. The CA (First Division)
reversed and set aside the RTC decision, declared the foreclosure invalid, and
annulled the issuance of the writ of possession.35 When it rendered the assailed
decision, the CA (Tenth Division) addressed the issues raised by respondent
which were the very same issues raised by it in its appeal. In short, the assailed
decision was a mere reiteration of the findings and conclusions of the CA (First
Division). This emphasizes the error committed by the CA (Tenth Division) in
rendering the assailed decision.1âwphi1
On May 8, 2009, in G.R. No. 152071, we reversed and set aside the CA (First
Division) decision in CA-G.R. CV No. 59931 and reinstated that of the RTC. In
other words, we settled once and for all the validity of the foreclosure and the
propriety of the issuance of the writ of possession. This should have put to rest
the petitioner’s claim over the properties subject of the foreclosure sale if not
for respondent’s erroneous resort to the court. The rights of the parties should,
therefore, be governed by the Court’s decision in G.R. No. 152071.
WHEREFORE, premises considered, the petition is hereby GRANTED. The Court
of Appeals Decision dated April 4, 2006 and Resolution dated July 19, 2006 in
CA-G.R. SP No. 46514 are SET ASIDE. The parties are bound by the decision of
the Court in G.R. No. 152071 entitled "Producers Bank of the Philippines v.
Excelsa Industries, Inc." promulgated on May 8, 2009.
SO ORDERED.
12. HEIRS OF THE LATE SPOUSES FLA VIANO MAGLASANG and SALUD ADAZA-
MAGLASANG, namely, OSCAR A. MAGLASANG, EDGAR A. MAGLASANG,
CONCEPCION CHONA A. MAGLASANG, GLENDA A. MAGLASANG-ARNAIZ, LERMA
A. MAGLASANG, FELMA A. · MAGLASANG, FE DORIS A. MAGLASANG, LEOLINO
A. MAGLASANG, MARGIE LEILA A. MAGLASANG,MA. MILALIE A. MAGLASANG,
SALUD A. MAGLASANG, and MA. FLASALIE A. MAGLASANG, REPRESENTING THE
ESTATES OF THEIR AFORE-NAMEDDECEASED PARENTS, Petitioners, vs. MANILA
BANKING CORPORATION, now substituted by FIRST SOVEREIGN ASSET
MANAGEMENT SPV-AMC, INC. FSAMI, Respondent.
G.R. No. 171206               September 23, 2013
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari 1 are the Decision2 dated July 20,
2005 and Resolution3 dated January 4, 2006 of the Court of Appeals (CA) in CA-
G.R. CV No. 50410 which dismissed petitioners’ appeal and affirmed the
Decision4 dated April 6, 1987 of the Regional Trial Court of Ormoc City, Branch
12 (RTC) directing petitioners to jointly and severally pay respondent Manila
Banking Corporation the amount of ₱434,742.36, with applicable interests,
representing the deficiency of the former’s total loan obligation to the latter
after the extra-judicial foreclosure of the real estate mortgage subject of this
case, including attorney’s fees and costs of suit.
The Facts
On June 16, 1975, spouses Flaviano and Salud Maglasang (Sps.Maglasang)
obtained a credit line from respondent5 in the amount of ₱350,000.00 which
was secured by a real estate mortgage6 executed over seven of their
properties7 located in Ormoc City and the Municipality of Kananga, Province of
Leyte.8 They availed of their credit line by securing loans in the amounts of
₱209,790.50 and ₱139,805.83 on October 24, 1975and March 15, 1976,
respectively,9 both of which becoming due and demandable within a period of
one year. Further, the parties agreed that the said loans would earn interest at
12% per annum (p.a.) and an additional 4% penalty would be charged upon
default.10
After Flaviano Maglasang (Flaviano) died intestate on February 14,1977, his
widow Salud Maglasang (Salud) and their surviving children, herein petitioners
Oscar (Oscar), Concepcion Chona, Lerma, Felma, FeDoris, Leolino, Margie Leila,
Ma. Milalie, Salud and Ma. Flasalie, all surnamed Maglasang, and Glenda
Maglasang-Arnaiz, appointed11 their brother petitioner Edgar Maglasang (Edgar)
as their attorney-in-fact.12 Thus, on March 30, 1977, Edgar filed a verified
petition for letters of administration of the intestate estate of Flaviano before
the then Court of First Instance of Leyte, Ormoc City, Branch 5 (probate court),
docketed as Sp. Proc. No. 1604-0.13 On August 9, 1977, the probate court issued
an Order14 granting the petition, thereby appointing Edgar as the
administrator15 of Flaviano’s estate.
In view of the issuance of letters of administration, the probate court, on August
30, 1977, issued a Notice to Creditors16 for the filing of money claims against
Flaviano’s estate. Accordingly, as one of the creditors of Flaviano, respondent
notified17 the probate court of its claim in the amount of ₱382,753.19 as of
October 11, 1978, exclusive of interests and charges.
During the pendency of the intestate proceedings, Edgar and Oscar were able to
obtain several loans from respondent, secured by promissory notes 18 which they
signed.
In an Order19 dated December 14, 1978 (December 14, 1978 Order),the probate
court terminated the proceedings with the surviving heirs executing an extra-
judicial partition of the properties of Flaviano’s estate. The loan obligations
owed by the estate to respondent, however, remained unsatisfied due to
respondent’s certification that Flaviano’s account was undergoing a
restructuring. Nonetheless, the probate court expressly recognized the rights of
respondent under the mortgage and promissory notes executed by the Sps.
Maglasang, specifically, its "right to foreclose the same within the statutory
period."20
In this light, respondent proceeded to extra-judicially foreclose the mortgage
covering the Sps. Maglasang’s properties and emerged as the highest bidder at
the public auction for the amount of ₱350,000.00.21 There, however, remained a
deficiency on Sps. Maglasang’s obligation to respondent. Thus, on June 24, 1981,
respondent filed a suit to recover the deficiency amount of ₱250,601.05 as of
May 31, 1981 against the estate of Flaviano, his widow Salud and petitioners,
docketed as Civil Case No. 1998-0.22
The RTC Ruling and Subsequent Proceedings
After trial on the merits, the RTC (formerly, the probate court)23 rendered a
Decision24 on April 6, 1987 directing the petitioners to pay respondent, jointly
and severally, the amount of ₱434,742.36 with interest at the rate of 12% p.a.,
plus a 4% penalty charge, reckoned from September 5,1984 until fully paid.25 The
RTC found that it was shown, by a preponderance of evidence, that petitioners,
after the extra-judicial foreclosure of all the properties mortgaged, still have an
outstanding obligation in the amount and as of the date as above-stated. The
RTC also found in order the payment of interests and penalty charges as above-
mentioned as well as attorney’s fees equivalent to 10% of the outstanding
obligation.26
Dissatisfied, petitioners elevated the case to the CA on appeal,
contending,27 inter alia, that the remedies available to respondent under Section
7, Rule 86 of the Rules of Court (Rules) are alternative and exclusive, such that
the election of one operates as a waiver or abandonment of the others. Thus,
when respondent filed its claim against the estate of Flaviano in the proceedings
before the probate court, it effectively abandoned its right to foreclose on the
mortgage. Moreover, even on the assumption that it has not so waived its right
26
to foreclose, it is nonetheless barred from filing any claim for any deficiency
amount.
During the pendency of the appeal, Flaviano’s widow, Salud, passed away on
July 25, 1997.28
The CA Ruling
In a Decision29 dated July 20, 2005, the CA denied the petitioners’ appeal and
affirmed the RTC’s Decision. At the outset, it pointed out that the probate court
erred when it, through the December 14, 1978 Order, closed and terminated the
proceedings in Sp. Proc. No. 1604-0 without first satisfying the claims of the
creditors of the estate – in particular, respondent – in violation of Section 1, Rule
90 of the Rules.30 As a consequence, respondent was not able to collect from the
petitioners and thereby was left with the option of foreclosing the real estate
mortgage.31Further, the CA held that Section 7, Rule 86 of the Rules does not
apply to the present case since the same does not involve a mortgage made by
the administrator over any property belonging to the estate of the
decedent.32According to the CA, what should apply is Act No. 3135 33 which
entitles respondent to claim the deficiency amount after the extra-judicial
foreclosure of the real estate mortgage of Sps. Maglasang’s properties. 34
Petitioners’ motion for reconsideration was subsequently denied in a
Resolution35 dated January 4, 2006. Hence, the present recourse.
The Issue Before the Court
The essential issue in this case is whether or not the CA erred in affirming the
RTC’s award of the deficiency amount in favor of respondent.
Petitioners assert36 that it is not Act No. 3135 but Section 7, Rule 86of the Rules
which applies in this case. The latter provision provides alternative and exclusive
remedies for the satisfaction of respondent’s claim against the estate of
Flaviano.37 Corollarily, having filed its claim against the estate during the
intestate proceedings, petitioners argue that respondent had effectively waived
the remedy of foreclosure and, even assuming that it still had the right to do so,
it was precluded from filing a suit for the recovery of the deficiency obligation. 38
Likewise, petitioners maintain that the extra-judicial foreclosure of the subject
properties was null and void, not having been conducted in the capital of the
Province of Leyte in violation of the stipulations in the real estate mortgage
contract.39 They likewise deny any personal liability for the loans taken by their
deceased parents.40
The Court’s Ruling
The petition is partly meritorious.
Claims against deceased persons should be filed during the settlement
proceedings of their estate.41 Such proceedings are primarily governed by special
rules found under Rules 73 to 90 of the Rules, although rules governing ordinary
actions may, as far as practicable, apply suppletorily. 42 Among these special
rules, Section 7, Rule 86 of the Rules (Section 7, Rule86) provides the rule in
dealing with secured claims against the estate:
SEC. 7. Mortgage debt due from estate. – A creditor holding a claim against the
deceased secured by a mortgage or other collateral security, may abandon the
security and prosecute his claim in the manner provided in this rule, and share in
the general distribution of the assets of the estate; or he may foreclose his
mortgage or realize upon his security, by action in court, making the executor or
administrator a party defendant, and if there is a judgment for a deficiency,
after the sale of the mortgaged premises, or the property pledged, in the
foreclosure or other proceeding to realize upon the security, he may claim his
deficiency judgment in the manner provided in the preceding section; or he may
rely upon his mortgage or other security alone, and foreclose the same at any
time within the period of the statute of limitations, and in that event he shall
not be admitted as a creditor, and shall receive no share in the distribution of
the other assets of the estate; but nothing herein contained shall prohibit the
executor or administrator from redeeming the property mortgaged or pledged,
by paying the debt for which it is held as security, under the direction of the
court, if the court shall adjudged it to be for the best interest of the estate that
such redemption shall be made. (Emphasis and underscoring supplied)
As the foregoing generally speaks of "a creditor holding a claim against the
deceased secured by a mortgage or other collateral security" as above-
highlighted, it may be reasonably concluded that the aforementioned section
covers all secured claims, whether by mortgage or any other form of collateral,
which a creditor may enforce against the estate of the deceased debtor. On the
contrary, nowhere from its language can it be fairly deducible that the said
section would – as the CA interpreted – narrowly apply only to mortgages made
by the administrator over any property belonging to the estate of the decedent.
To note, mortgages of estate property executed by the administrator, are also
governed by Rule 89 of the Rules, captioned as "Sales, Mortgages, and Other
Encumbrances of Property of Decedent."
In this accord, it bears to stress that the CA’s reliance on Philippine National
Bank v. CA43 (PNB) was misplaced as the said case did not, in any manner, limit
the scope of Section 7, Rule 86. It only stated that the aforesaid section equally
applies to cases where the administrator mortgages the property of the estate
to secure the loan he obtained.44 Clearly, the pronouncement was a ruling of
inclusion and not one which created a distinction. It cannot, therefore, be
doubted that it is Section 7, Rule 86which remains applicable in dealing with a
creditor’s claim against the mortgaged property of the deceased debtor, as in
this case, as well as mortgages made by the administrator, as that in the PNB
case.
Jurisprudence breaks down the rule under Section 7, Rule 86 and explains that
the secured creditor has three remedies/options that he may alternatively adopt
for the satisfaction of his indebtedness. In particular, he may choose to: (a)
waive the mortgage and claim the entire debt from the estate of the mortgagor
as an ordinary claim; (b) foreclose the mortgage judicially and prove the
deficiency as an ordinary claim; and (c) rely on the mortgage exclusively, or
other security and foreclose the same before it is barred by prescription,
without the right to file a claim for any deficiency. 45 It must, however, be
emphasized that these remedies are distinct, independent and mutually
exclusive from each other; thus, the election of one effectively bars the exercise
of the others. With respect to real properties, the Court in Bank of America v.
American Realty Corporation 46 pronounced:
In our jurisdiction, the remedies available to the mortgage creditor are deemed
alternative and not cumulative. Notably, an election of one remedy operates as
a waiver of the other. For this purpose, a remedy is deemed chosen upon the
filing of the suit for collection or upon the filing of the complaint in an action for
foreclosure of mortgage, pursuant to the provision of Rule 68 of the 1997 Rules
of Civil Procedure. As to extrajudicial foreclosure, such remedy is deemed
elected by the mortgage creditor upon filing of the petition not with any court of
justice but with the Office of the Sheriff of the province where the sale is to be
made, in accordance with the provisions of Act No. 3135, as amended by Act
No.4118.47 (Emphasis supplied)
Anent the third remedy, it must be mentioned that the same includes the option
of extra-judicially foreclosing the mortgage under Act No. 3135,as availed of by
respondent in this case. However, the plain result of adopting the last mode of
foreclosure is that the creditor waives his right to recover any deficiency from
the estate.48 These precepts were discussed in the PNB case, citing Perez v.
Philippine National Bank49 which overturned the earlier Pasno v. Ravina ruling:50
Case law now holds that this rule grants to the mortgagee three distinct,
independent and mutually exclusive remedies that can be alternatively pursued
by the mortgage creditor for the satisfaction of his credit in case the mortgagor
dies, among them:
(1) to waive the mortgage and claim the entire debt from the estate of the
mortgagor as an ordinary claim;
(2) to foreclose the mortgage judicially and prove any deficiency as an ordinary
claim; and
(3) to rely on the mortgage exclusively, foreclosing the same at anytime before it
is barred by prescription without right to file a claim for any deficiency
In Perez v. Philippine National Bank, reversing Pasno vs. Ravina, we held:
The ruling in Pasno v. Ravina not having been reiterated in any other case, we
have carefully reexamined the same, and after mature deliberation have
reached the conclusion that the dissenting opinion is more in conformity with
reason and law. Of the three alternative courses that section 7, Rule 87 (now
Rule 86), offers the mortgage creditor, to wit, (1) to waive the mortgage and
claim the entire debt from the estate of the mortgagor as an ordinary claim; (2)
foreclose the mortgage judicially and prove any deficiency as an ordinary claim;
and (3) to rely on the mortgage exclusively, foreclosing the same at any time
before it is barred by prescription, without right to file a claim for any deficiency,
the majority opinion in Pasno v. Ravina, in requiring a judicial foreclosure,
virtually wipes out the third alternative conceded by the Rules to the mortgage
creditor, and which would precisely include extra-judicial foreclosures by
contrast with the second alternative.
The plain result of adopting the last mode of foreclosure is that the creditor
waives his right to recover any deficiency from the estate. Following the Perez
ruling that the third mode includes
extrajudicial foreclosure sales, the result of extrajudicial foreclosure is that the
creditor waives any further deficiency claim. x x x. 51 (Emphases and underscoring
supplied; italics in the original)
To obviate any confusion, the Court observes that the operation of Act No. 3135
does not entirely discount the application of Section 7, Rule 86, or vice-versa.
Rather, the two complement each other within their respective spheres of
operation. On the one hand, Section 7, Rule 86 lays down the options for the
secured creditor to claim against the estate and, according to jurisprudence, the
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availment of the third option bars him from claiming any deficiency amount. On or in the municipal building of the municipality in which the property or part
the other hand, after the third option is chosen, the procedure governing the thereof is situated. (Italics supplied) ..
manner in which the extra-judicial foreclosure should proceed would still be In this regard, since the auction sale was conducted in Ormoc City, which is
governed by the provisions of Act No. 3135.Simply put, Section 7, Rule 86 within the territorial jurisdiction of the Province of Leyte, then the Court finds
governs the parameters and the extent to which a claim may be advanced sufficient compliance with the above-cited requirement.
against the estate, whereas Act No. 3135sets out the specific procedure to be All told, finding that the extra-judicial foreclosure subject of this case was
followed when the creditor subsequently chooses the third option – specifically, properly conducted in accordance with the formalities of Act No. 3135,the Court
that of extra-judicially foreclosing real property belonging to the estate. The upholds the same as a valid exercise of respondent's third option under Section
application of the procedure under Act No. 3135 must be concordant with 7, Rule 86. To reiterate, respondent cannot, however, file any suit to recover any
Section 7, Rule 86 as the latter is a special rule applicable to claims against the deficiency amount since it effectively waived its right thereto when it chose to
estate, and at the same time, since Section 7, Rule 86 does not detail the avail of extra-judicial foreclosure as jurisprudence instructs.
procedure for extra-judicial foreclosures, the formalities governing the manner WHEREFORE, the petition is PARTLY GRANTED. The complaint for the recovery
of availing of the third option – such as the place where the application for of the deficiency amount after extra-judicial foreclosure filed by respondent
extra-judicial foreclosure is filed, the requirements of publication and posting Manila Banking Corporation is hereby DISMISSED. The extra-judicial foreclosure
and the place of sale – must be governed by Act No. 3135. of the mortgaged properties, however, stands.
In this case, respondent sought to extra-judicially foreclose the mortgage of the SO ORDERED.
properties previously belonging to Sps. Maglasang (and now, their estates) and,
therefore, availed of the third option. Lest it be misunderstood, it did not
exercise the first option of directly filing a claim against the estate, as petitioners
assert, since it merely notified52the probate court of the outstanding amount of
its claim against the estate of Flaviano and that it was currently restructuring the
account.53 Thus, having unequivocally opted to exercise the third option of
extra-judicial foreclosure under Section 7, Rule 86, respondent is now precluded
from filing a suit to recover any deficiency amount as earlier discussed.
As a final point, petitioners maintain that the extra-judicial foreclosure of the
subject properties was null and void since the same was conducted in violation
of the stipulation in the real estate mortgage contract stating that the auction
sale should be held in the capital of the province where the properties are
located, i.e., the Province of Leyte.
The Court disagrees.
As may be gleaned from the records, the stipulation under the real estate
mortgage54 executed by Sps. Maglasang which fixed the place of the foreclosure
sale at Tacloban City lacks words of exclusivity which would bar any other
acceptable for a wherein the said sale may be conducted, to wit:
It is hereby agreed that in case of foreclosure of this mortgage under Act 3135,
the auction sale shall be held at the capital of the province if the property is
within the territorial jurisdiction of the province concerned, or shall be held in
the city if the property is within the territorial jurisdiction of the city concerned;
x x x.55
Case law states that absent such qualifying or restrictive words to indicate the
exclusivity of the agreed forum, the stipulated place should only be as an
additional, not a limiting venue.56 As a consequence, the stipulated venue and
that provided under Act No. 3135 can be applied alternatively.
In particular, Section 2 of Act No. 3135 allows the foreclosure sale to be done
within the province where the property to be sold is situated, viz.:
SEC. 2. Said sale cannot be made legally outside of the province which the
property sold is situated; and in case the place within said province in which the
sale is to be made is subject to stipulation, such sale shall be made in said place

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