FIRST DIVISION 

FAR EAST BANK AND TRUST COMPANY (NOW BANK OF THE PHILIPPINE ISLANDS) AND ROLANDO BORJA, DEPUTY SHERIFF,                             Petitioners,                     - versus -  SPS. ERNESTO AND LEONOR C. CAYETANO,                             Respondents.

        G.R. No. 179909         Present:         PUNO, C.J., Chairperson,        CARPIO MORALES,        LEONARDO-DE CASTRO,        BERSAMIN, and        VILLARAMA, JR., JJ.          Promulgated:         January 25, 2010

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DECISION VILLARAMA, JR., J.: 

          This is a petition for review[1] under Rule 45 of the 1997 Rules of Civil Procedure, as amended, of the December 8, 2006 Decision[2] of the Court of Appeals in CA-G.R. CV No. 76382 which affirmed the May 24, 2002 Decision[3] of the Regional Trial Court (RTC) of Naga City, Branch 61 and dismissed petitioner Far East Bank and Trust Company’s appeal. The appellate court likewise denied its motion for reconsideration in a Resolution[4] dated September 6, 2007.

          The undisputed facts of the case are summarized as follows:

Respondent Leonor C. Cayetano (Cayetano) executed a special power of attorney in favor of her daughter Teresita C. Tabing (Tabing) authorizing her to contract a loan from petitioner in an amount not more than three hundred thousand pesos (P300,000.00) and to mortgage her two (2) lots located in Barangay Carolina, Naga City with Transfer Certificate of Title

Nos. 12304 and 11621.[5]For the approval of the loan, Cayetano also executed an affidavit of non-tenancy.[6]  Petitioner loaned Tabing one hundred thousand pesos (P100,000.00) secured by two (2) promissory notes and a real estate mortgage over Cayetano’s two (2) properties.[7]  The mortgage document was signed by Tabing and her husband as mortgagors in their individual capacities, without stating that Tabing was executing the mortgage contract for and in behalf of the owner (Cayetano).[8]

Petitioner foreclosed the mortgage for failure of the respondents and the spouses Tabing to pay the loan. A notice of public auction sale, to be conducted on September 18, 1991,[9] was sent to respondents.   The latter’s lawyer responded with a letter[10] to petitioner requesting that the public auction be postponed. Respondents’ letter went unheeded and the public auction was held as scheduled wherein the subject properties were sold to petitioner for one hundred sixty thousand pesos (P160,000.00).[11]Subsequently, petitioner consolidated its title and obtained new titles in its name after the redemption period lapsed without respondents taking any action.

More than five (5) years later, Tabing, on behalf of Cayetano, sent a letter dated September 10, 1996 to petitioner expressing the intent to repurchase the properties for two hundred fifty thousand pesos (P250,000.00) with proposed terms of payment.[12]Petitioner refused the offer stating that the minimum asking price for the properties was five hundred thousand pesos (P500,000.00) and it was not amenable to the proposed terms of payment. Petitioner nevertheless gave respondents the chance to buy back the properties by joining a bidding to be set in some future date.[13]  However, respondents filed on December 18, 1996 a complaint for annulment of mortgage and extrajudicial foreclosure of the properties with damages in the RTC of Naga City.  Respondents sought nullification of the real estate mortgage and extrajudicial foreclosure sale, as well as the cancellation of petitioner’s title over the properties.[14]

After trial, the RTC rendered judgment in favor of the respondents, holding that the principal (Cayetano) cannot be bound by the real estate mortgage executed by the agent (Tabing) unless it is shown that the same

was made and signed in the name of the principal; hence, the mortgage will bind the agent only. The trial court also found that there was no compliance with the requirement of publication of the foreclosure sale in a newspaper of general circulation as provided in Act No. 3135, as amended. Such requisite must be strictly complied with as any slight deviation therefrom will render the sale voidable.[15]

The Court of Appeals affirmed the RTC’s ruling. It held that it must be shown that the real estate mortgage was executed by the agent on-behalf of the principal, otherwise the agent may be deemed to have acted on his own and the mortgage is void. However, the appellate court further declared that the principal loan agreement was not affected, which had become an unsecured credit. The Court of Appeals denied petitioner’s motion for reconsideration.[16]

          Hence, the present petition.

          The only issue before us is whether or not the principal is bound by the real estate mortgage executed by the authorized agent in her own name without indicating the principal.

          The issue is not novel. The RTC and the Court of Appeals are both correct in holding that our decision in The Philippine Sugar Estates Development Co., Ltd., Inc. v. Poizat, et al.[17] (Poizat Case), as reiterated in the case of Rural Bank of Bombon (Camarines Sur), Inc.  v. Court of Appeals[18] (Bombon Case), finds application in the instant case. The factual circumstances of said cases are similar to the case at bar, where an authorized agent executed a real estate mortgage on the principal’s property in her own name without indicating that she was acting on behalf of the principal.

          In the Poizat Case, Gabriela Andrea de Coster (Coster) executed a general power of attorney authorizing her husband, Juan Poizat (Poizat), to obtain a loan and to secure the same with mortgage, pledge or personal securities. Poizat obtained a credit of ten thousand (10,000) Pounds Sterling from petitioner therein, and executed a mortgage upon the

real property of his wife. Although the provisions of the real estate mortgage mentioned that it was entered also in Poizat’s capacity as attorney-in-fact of Coster, Poizat signed the contract in his own name without any indication that he also signed it as the attorney-in-fact of his wife. For failure to pay the loan, the petitioner foreclosed on the mortgage but this was opposed by Coster. The Court ruled on the legal force and effect of the real estate mortgage in question, by whom and for whom it was executed, and whether or not it was void as to Coster, in this wise:

It is a general rule in the law of agency that, in order to bind the principal by a mortgage on real property executed by an agent, it must upon its face purport to be made, signed and sealed in the name of the principal, otherwise, it will bind the agent only. It is not enough merely that the agent was in fact authorized to make the mortgage, if he has not acted in the name of the principal. Neither is it ordinarily sufficient that in the mortgage the agent describes himself as acting by virtue of a power of attorney, if in fact the agent has acted in his own name and has set his own hand and seal to the mortgage. This is especially true where the agent himself is a party to the instrument. However clearly the body of the mortgage may show and intend that it shall be the act of the principal, yet, unless in fact it is executed by the agent for and on behalf of his principal and as the act and deed of the principal, it is not valid as to the principal.  [EMPHASIS SUPPLIED]

Thus, while Poizat may have had the authority to borrow money and mortgage the real property of his wife, the law specifies how and in what manner it must be done, and the stubborn fact remains that, as to the transaction in question, that power was never exercised. The mortgage in question was executed by him and him only, and for such reason, it is not binding upon the wife, and as to her, it is null and void.

          In Bombon, respondent Ederlinda M. Gallardo (Gallardo) authorized Rufino S. Aquino (Aquino) to contract a loan from any bank and secure it with mortgage on her property. Gallardo also delivered her owner’s copy of Transfer Certificate of Title to Aquino. Aquino obtained a loan from petitioner bank and executed a deed of real estate mortgage without indicating that he was acting in behalf of Gallardo. At the beginning of the mortgage deed, it was mentioned that the mortgage was executed by Aquino, attorney-in-fact of Gallardo, together with a description of his legal capacity

to contract. Gallardo and her husband filed a complaint for annulment of mortgage against the petitioner and Aquino and one (1) of the grounds raised was that the mortgagor in the deed was Aquino instead of Gallardo. The trial court ordered the suspension of the foreclosure of the real estate mortgage until after the decision in the annulment case shall have become final and executory. The dismissal of the complaint for annulment of mortgage was appealed to the Court of Appeals which reversed the trial court and declared the mortgage contract void and unenforceable against Gallardo. Upon elevation to this Court, we held that “Aquino’s act of signing the Deed of Real Estate Mortgage in his name alone as mortgagor, without any indication that he was signing for and in behalf of the property owner, Ederlinda M. Gallardo, bound himself alone in his personal capacity as a debtor of the petitioner Bank and not as the agent or attorney-in-fact of Gallardo.”[19]      

          In the fairly recent case of Gozun v. Mercado,[20]  respondent Mercado denied having authorized his sister-in-law (Lilian) to borrow money from petitioner who gave her “cash advance” of P253,000.00 allegedly for allowances of poll watchers.  Petitioner sued respondent to collect on various sums due from the latter including the “cash advance” obtained by Lilian.  The trial court found for the petitioner and ordered the respondent to pay all amounts being claimed by the petitioner.  The Court of Appeals reversed the trial court’s decision and dismissed the complaint for lack of cause of action.  When the case reached this Court, petitioner argued that respondent had informed him that he had authorized Lilian to obtain the loan and hence, following Macke v. Camps which held that one who clothes another with apparent authority as his agent, and holds him out to the public as such, respondent cannot be permitted to deny the authority.  We sustained the Court of Appeals’ ruling on the matter and held that respondent was not liable for the “cash advance” given by petitioner to Lilian who signed the receipt in her name alone, without indicating therein that she was acting for and in behalf of respondent. She thus bound herself in her personal capacity and not as an agent of respondent or anyone for that matter.[21]

          Notwithstanding the nullity of the real estate mortgage executed by Tabing and her husband, we find that the equity principle of laches is

applicable in the instant case. Laches is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it. [22] Its essential elements are: (1) conduct on the part of the defendant, or of one under whom he claims, giving rise to the situation complained of; (2) delay in asserting complainant’s right after he had knowledge of the defendant’s conduct and after he has an opportunity to sue; (3) lack of knowledge or notice on the part of the defendant that the complainant would assert the right on which he bases his suit; and (4) injury or prejudice to the defendant in the event relief is accorded to the complainant.[23]

There is no absolute rule on what constitutes laches. It is a creation of equity and applied not really to penalize neglect or sleeping upon one’s rights but rather to avoid recognizing a right when to do so would result in a clearly inequitable situation. The question of laches, we said, is addressed to the sound discretion of the court and each case must be decided according to its particular circumstances.[24] Verily, in a number of cases, it had been held that laches, the essence of which is the neglect to assert a right over a long period of time, may prevent recovery of a titled property.[25] 

In the present case, records clearly show that respondents could have filed an action to annul the mortgage on their properties, but for unexplained reasons, they failed to do so.  They only questioned the loan and mortgage transactions in December 1996, or after the lapse of more than five (5) years from the date of the foreclosure sale.  It bears noting that the real estate mortgage was registered and annotated on the titles of respondents, and the latter were even informed of the extrajudicial foreclosure and the scheduled auction. Instead of impugning the real estate mortgage and opposing the scheduled public auction, respondents’ lawyer wrote a letter to petitioner and merely asked that the scheduled auction be postponed to a later date. Even after five (5) years, respondents still failed to oppose the foreclosure and the subsequent transfer of titles to petitioner when their agent, Tabing, acting in behalf of Cayetano, sent a letter proposing to buy back the properties. It was only when the negotiations failed that respondents filed the instant case. Clearly, respondents slept on their rights.[26]

WHEREFORE, the petition is GRANTED. The Decision dated December 8, 2006 and the Resolution dated September 6, 2007 of the Court of Appeals in CA-G.R. CV No. 76382, as well as the Decision dated May 24, 2002 in Civil Case No. 96-3684 of the Regional Trial Court, Branch 61, Naga City, are hereby SET ASIDE.  

The complaint for annulment of mortgage and extrajudicial foreclosure with damages and cancellation of titles filed by respondents is hereby DISMISSED.

          No costs.

          SO ORDERED. 

MARTIN S. VILLARAMA, JR.Associate Justice

 WE CONCUR:

REYNATO S. PUNOChief JusticeChairperson

CONCHITA CARPIO MORALESAssociate Justice

TERESITA J. LEONARDO-DE CASTROAssociate Justice

LUCAS P. BERSAMINAssociate Justice

   

          C E R T I F I C A T I O N 

          Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division. 

REYNATO S. PUNOChief Justice

  

 

[1]       Rollo, pp. 10-26.[2]       Id., pp. 30-37. Penned by Associate Justice Mario L. Guariňa III and concurred in by Associate

Justices Roberto A. Barrios and Lucenito N. Tagle. The dispositive portion of the Decision reads as follows:

                         “IN VIEW OF THE FOREGOING, the decision appealed from is

MODIFIED in that the interest rate shall be the stipulated 23 percent per annum instead of 12 percent. All other aspects of the decision are AFFIRMED.

                         SO ORDERED.”

[3]       Id. at 88-95. Penned by Executive Judge Corazon A. Tordilla. The dispositive portion of the Decision reads as follows:

                        “WHEREFORE, the real estate mortgage executed in favor of the defendant Bank is hereby declared void and unenforceable against plaintiffs. Consequently, the Transfer Certificates of Title Nos. 24272 and 24273 are hereby ordered annulled.

                         “The loan however, of the spouses Tabing in the amount of Php.

100.000.00 shall remain valid and enforceable against them solodarily, as stated in the two promissory notes they executed (Exhs. A& B).

                         “Applying the ruling of the Supreme Court in the case of Medel vs. Court

of Appeals, G.R. No. 131622, November 27, 1998, the spouses Tabing are to pay to the Far East Bank & Trust Company the amount of Php. 100,000.00 from July 13, 1989 with interest thereon of 12% per annum until the amount due is fully paid. They are also to pay attorney’s fees equivalent to 25% of the amount due.

                         “For insufficiency of evidence, the complaint against Sheriff Rolando

Borja is hereby dismissed.                         “SO ORDERED.” 

[4]       Id., p. 49.[5]       Id., pp. 145-146.[6]       Id., p. 160.[7]       Id., pp. 147-151.[8]       Id., pp. 149-151.[9]       Id., pp. 152 and 161.[10]     Id., p. 153.[11]     Id., pp. 154-155.[12]     Id., pp. 156-157.[13]     Id., p. 158.[14]     Id., pp. 50-55.[15]     Id., pp. 92-94.[16]     Id., pp. 34-36.[17]     48 Phil. 536 (1925).[18]     G.R. No. 95703, August 3, 1992, 212 SCRA 25.[19]     Id., p. 30.[20]     G.R. No. 167812, December 19, 2006, 511 SCRA 305.[21]     Id., pp. 314-316, citing  Rural Bank of Bombon v. Court of Appeals (supra), Philippine Sugar Estates

Development Co. v. Poizat, (supra) and Aguenza v. Metropolitan Bank and Trust Co., 337 Phil. 448, 457 (1997).

[22]     Republic v. Sandiganbayan, G.R. Nos. 112708-09, March 29, 1996, 255 SCRA 438, 451.[23]     Catholic Bishop of Balanga v. Court of Appeals, G.R. No. 112519, November 14, 1996, 264 SCRA

181, 194.[24]     Chavez v. Bonto-Perez, G.R. No. 109808, March 1, 1995, 242 SCRA 73, 80.[25]     Ignacio v. Basilio, G.R. No. 122824, September 26, 2001, 366 SCRA 15; Po Lam v. Court of

Appeals, G.R. No. 116220, December 6, 2000, 347 SCRA 86; and Declaro v. Court of Appeals, G.R. No. 119747, November 27, 2000, 346 SCRA 57.

[26]     Vide: Carpo v. Chua, G.R. Nos. 150773 & 153599, September 30, 2005, 471 SCRA 471, 483; Landrito, Jr. v. Court of Appeals, G.R. No. 133079, August 9, 2005, 466 SCRA 107, 115; and Navarro v. Metropolitan Bank and Trust Company, G.R. No. 165697, August 4, 2009.

 SECOND DIVISION

  SPOUSES CARMEN S. TONGSON                G.R. No. 167874and JOSE C. TONGSONsubstituted by his children namely:                  Present:

JOSE TONGSON, JR.,RAUL TONGSON,                                   CARPIO, J., Chairperson,TITA TONGSON,                                    BRION,GLORIA TONGSON                                       DEL CASTILLO,                                  ALMA TONGSON,                                          ABAD, and                         Petitioners,                          PEREZ, JJ.                                                                                             - versus -  EMERGENCY PAWNSHOP BULA,      Promulgated:INC. and DANILO R. NAPALA,                         Respondents.              January 15, 2010x-----------------------------------------------------------------------------------------x  

D E C I S I O N  CARPIO, J.: 

The Case  

         Before the Court is a petition for review[1] of the 31 August 2004 Decision[2] and 10 March 2005 Resolution[3] of the Court of Appeals in CA-G.R. CV No. 58242.  In the 31 August 2004 Decision, the Court of Appeals partially granted the appeal filed by Emergency Pawnshop Bula, Inc. (EPBI) and Danilo R. Napala (Napala) by modifying the decision of the trial court.  In the 10 March 2005 Resolution, the Court of Appeals denied the motion for partial reconsideration filed by the Spouses Jose C. Tongson and Carmen S. Tongson (Spouses Tongson).

 The Facts

  

         In May 1992, Napala offered to purchase from the Spouses Tongson their 364-square meter parcel of land, situated in Davao City and covered by

Transfer Certificate of Title (TCT) No. 143020, for P3,000,000.  Finding the offer acceptable, the Spouses Tongson executed with Napala a Memorandum of Agreement[4] dated 8 May 1992.          On 2 December 1992, respondents’ lawyer Atty. Petronilo A. Raganas, Jr. prepared a Deed of Absolute Sale[5] indicating the consideration as only P400,000.  When Carmen Tongson “noticed that the consideration was very low, she [complained] and called the attention of Napala but the latter told her not to worry as he would be the one to pay for the taxes and she would receive the net amount of P3,000,000.”[6]           To conform with the consideration stated in the Deed of Absolute Sale, the parties executed another Memorandum of Agreement, which allegedly replaced the first Memorandum of Agreement,[7]  showing that the selling price of the land was onlyP400,000.[8]

          Upon signing the Deed of Absolute Sale, Napala paid P200,000 in cash to the Spouses Tongson and issued a postdated Philippine National Bank (PNB) check in the amount of P2,800,000,[9] representing the remaining balance of the purchase price of the subject property.  Thereafter, TCT      No. 143020 was cancelled and TCT No. T-186128 was issued in the name of EPBI.[10]

          When presented for payment, the PNB check was dishonored for the reason “Drawn Against Insufficient Funds.”  Despite the Spouses Tongson's repeated demands to either pay the full value of the check or to return the subject parcel of land, Napala failed to do either.  Left with no other recourse, the Spouses Tongson filed with the Regional Trial Court, Branch 16, Davao City a Complaint for Annulment of Contract and Damages with a Prayer for the Issuance of a Temporary Restraining Order and a Writ of Preliminary Injunction.[11]           In their Answer, respondents countered that Napala had already delivered to the Spouses Tongson the amount of P2,800,000 representing the face value of the PNB check, as evidenced by a receipt issued by the Spouses Tongson.  Respondents pointed out that the Spouses Tongson never returned the PNB check claiming that it was misplaced.  Respondents asserted that the payment they made rendered the filing of the complaint baseless.[12]

 

         At the pre-trial, Napala admitted, among others, issuing the postdated PNB check in the sum of P2,800,000.[13]  The Spouses Tongson, on the other hand, admitted issuing a receipt which showed that they received the PNB check from Napala.  Thereafter, trial ensued.         

The Ruling of the Trial Court           The trial court found that the purchase price of the subject property has not been fully paid and that Napala’s assurance to the Spouses Tongson that the PNB check would not bounce constituted fraud that induced the Spouses Tongson to enter into the sale. Without such assurance, the Spouses Tongson would not have agreed to the contract of sale. Accordingly, there was fraud within the ambit of Article 1338 of the Civil Code, [14] justifying the annulment of the contract of sale, the award of damages and attorney’s fees, and payment of costs. 

         The dispositive portion of the 9 December 1996 Decision of the trial court reads: 

            WHEREFORE, judgment is hereby rendered – 

              I Annulling the contract entered into by the plaintiffs with the                defendants;

        II Declaring the writs of preliminary injunctions issued permanent;              III Ordering defendants to:

 1)      reconvey the property subject matter of

the case to the plaintiffs;2)      pay plaintiffs:

 a)  P100,000 as moral damages;

b)  P50,000 as exemplary damages;c)  P20,000 as attorney’s fees; andd)  P35,602.50 cost of suit broken down as

follows:                                  P70.00 bond fee

                                   P60.00 lis pendens fee                                   P902.00 docket fee                                   P390.00 docket fee

                                   P8.00 summons fee                                        P12.00 SDF                                   P178.50 Xerox                                   P9,000 Sidcor Insurance Bond fee                                   P25,000 Sidcor Insurance Bond fee 

             or the total sum of P205,602.50. 

            It is further ordered that the monetary award be offsetted [sic] to defendants’ downpayment of P200,000 thereby leaving a balance of P5,602.50.[15]

           Respondents appealed to the Court of Appeals.

 The Ruling of the Court of Appeals

           The Court of Appeals agreed with the trial court’s finding that Napala  employed fraud when he misrepresented to the Spouses Tongson that the PNB check in the amount of P2,800,000 would be properly funded at its maturity.  However, the Court of Appeals found that the issuance and delivery of the PNB check and fraudulent representation made by Napala could not be considered as the determining cause for the sale of the subject parcel of land.  Hence, such fraud could not be made the basis for annulling the contract of sale.  Nevertheless, the fraud employed by Napala is a proper and valid  basis for the entitlement of the Spouses Tongson to the balance of the purchase price in the amount of P2,800,000 plus interest at the legal rate of 6% per annum computed from the date of filing of the complaint on       11 February 1993.          Finding the trial court’s award of damages unconscionable,  the Court of Appeals reduced the moral damages from P100,000 to P50,000 and the exemplary damages from P50,000  to P25,000.          The dispositive portion of the 31 August 2004 Decision of the Court of Appeals reads:

 

             WHEREFORE, the instant appeal is PARTIALLY GRANTED.  The assailed decision of the Regional Trial Court,

11th Judicial Region, Branch 16, Davao City, in Civil Case No. 21,858-93, is hereby MODIFIED, to read:

      WHEREFORE, judgment is hereby rendered ordering defendants to pay plaintiffs: 

        a)  the sum of P2,800,000.00 representing the balance of the purchase price of the subject parcel of land, plus interest at the legal rate of 6% per annum computed from the date of filing of the complaint on 11 February 1993, until the finality of the assailed decision; thereafter, the interest due shall be at the legal rate of 12% per annum until fully paid;

                           b) P50,000 as moral damages;

                          c)  P25,000 as exemplary damages;                          d)  P20,000 as attorney’s fees; and                          e)  The costs of suit in the total amount of P35,602.50.             It is understood, however, that plaintiffs’ entitlement to items a to d, is subject to the condition that they have not received the same or equivalent amounts in criminal case for Violation of Batas Pambansa Bilang 22, docketed as Criminal Case No. 30508-93, before the Regional Trial Court of Davao City, Branch 12, instituted against the defendant Danilo R. Napala by plaintiff Carmen S. Tongson.             SO ORDERED.[16]

  

 

         The Spouses Tongson filed a partial motion for reconsideration which was denied by the Court of Appeals in its Resolution dated 10 March 2005. 

The Issues           The Spouses Tongson raise the following issues: 

 1.     WHETHER THE CONTRACT OF SALE CAN BE

ANNULLED BASED ON THE FRAUD EMPLOYED BY NAPALA; and

  

2.     WHETHER THE COURT OF APPEALS ERRED IN REDUCING THE AMOUNT OF DAMAGES AWARDED BY THE TRIAL COURT.

   

The Ruling of the Court           The petition has merit.  

On the existence of fraud  

         A contract is a meeting of the minds between two persons, whereby one is bound to give something or to render some service to the other. [17]  A valid contract requires the concurrence of the following essential elements: (1) consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price; (2) determinate subject matter; and (3) price certain in money or its equivalent.[18]

  

         In the present case, there is no question that the subject matter of the sale is the 364-square meter Davao lot owned by the Spouses Tongson and the selling price agreed upon by the parties is P3,000,000.  Thus, there is no dispute as regards the presence of the two requisites for a valid sales contract, namely, (1) a determinate subject matter and (2) a price certain in money.          The problem lies with the existence of the remaining element, which is consent of the contracting parties, specifically, the consent of the Spouses  Tongson to sell the property to Napala. Claiming that their consent was vitiated, the Spouses Tongson point out that Napala’s fraudulent representations of sufficient funds to pay for the property induced them into signing the contract of sale. Such fraud, according to the Spouses Tongson, renders the contract of sale void. 

         On the contrary, Napala insists that the Spouses Tongson willingly consented to the sale of the subject property making the contract of sale valid. Napala maintains that no fraud attended the execution of the sales contract.  

         The trial and appellate courts had conflicting findings on the question of whether the consent of the Spouses Tongson was vitiated by fraud. While the Court of Appeals agreed with the trial court’s finding that Napala employed fraud when he assured the Spouses Tongson that the postdated PNB check was fully funded when it fact it was not, the Court of Appeals disagreed with the trial court’s ruling that such fraud could be the basis for the annulment of the contract of sale between the parties.             Under Article 1338 of the Civil Code, there is fraud when, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to.  In order that fraud may vitiate consent, it must be the causal (dolo causante), not merely the incidental (dolo incidente), inducement to the making of the contract.[19] Additionally, the fraud must be serious.[20]

          We find no causal fraud in this case to justify the annulment of the contract of sale between the parties.  It is clear from the records that the Spouses Tongson agreed to sell their 364-square meter Davao property to Napala who offered to pay P3,000,000 as purchase price therefor.  Contrary to the Spouses Tongson’s belief that the fraud employed by Napala was “already operational at the time of the perfection of the contract of sale,” the misrepresentation by Napala that the postdated PNB check would not bounce on its maturity hardly equates to dolo causante.  Napala’s assurance that the check he issued was fully funded was not the principal inducement for the Spouses Tongson to sign the Deed of Absolute Sale.  Even before Napala issued the check, the parties had already consented and agreed to the sale transaction. The Spouses Tongson were never tricked into selling their property to Napala. On the contrary, they willingly accepted Napala’s offer to purchase the property at P3,000,000. In short, there was a meeting of the minds as to the object of the sale as well as the consideration therefor. 

         Some of the instances where this Court found the existence of causal fraud include: (1) when the seller, who had no intention to part with her property, was “tricked into believing” that what she signed were papers pertinent to her application for the reconstitution of her burned certificate of title, not a deed of sale;[21] (2) when the signature of the authorized corporate officer was forged;[22] or (3) when the seller was seriously ill, and died a week after signing the deed of sale raising doubts on whether the seller could have read, or fully understood, the contents of the documents he signed or of the consequences of his act.[23] Suffice it to state that nothing analogous to these badges of causal fraud exists in this case.          However, while no causal fraud attended the execution of the sales contract, there is fraud in its general sense, which involves a false representation of a fact,[24] when Napala inveigled the Spouses Tongson to accept the postdated PNB check on the representation that the check would be sufficiently funded at its maturity. In other words, the fraud surfaced when Napala issued the worthless check to the Spouses Tongson, which is definitely not during the negotiation and perfection stages of the sale. Rather, the fraud existed in the consummation stage of the sale when the parties are in the process of performing their respective obligations under the perfected contract of sale.   In Swedish Match, AB v. Court of Appeals,[25] the Court explained the three stages of a contract, thus:  

           I n general, contracts undergo three distinct stages, to wit: negotiation; perfection or birth; and consummation. Negotiation begins from the time the prospective contracting parties manifest their interest in the contract and ends at the moment of agreement of the parties. Perfection or birth of the contract takes place when the parties agree upon the essential elements of the contract. Consummation occurs when the parties fulfill or perform the terms agreed upon in the contract, culminating in the extinguishment thereof. 

  

         Indisputably, the Spouses Tongson as the sellers had already performed their obligation of executing the Deed of Sale, which led to the cancellation of their title in favor of EPBI. Respondents as the buyers, on the  other hand, failed to perform their correlative obligation of paying the

full amount of the contract price.  While Napala paid P200,000 cash to the Spouses Tongson as partial payment, Napala issued an insufficiently funded PNB check to pay the remaining balance of P2.8 million. Despite repeated demands and the filing of the complaint, Napala failed to pay the P2.8 million until the present. Clearly, respondents committed a substantial breach of their reciprocal obligation, entitling the Spouses Tongson to the  rescission of the sales contract.  The law grants this relief to the aggrieved party, thus:          Article 1191 of the Civil Code provides: 

            Article 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.

            The injured party may choose between the fulfillment and the rescission of the obligation, with payment of damages in either case.  He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.

  

         Article 1385 of the Civil Code provides the effects of rescission, viz:     

 

         ART. 1385.  Rescission creates the obligation to return the things which were the object of the contract, together with their fruits, and the price with its interest; consequently, it can be carried out only when he who demands rescission can return whatever he may be obliged to restore.           

            Neither shall rescission take place when the things which are the object of the contract are legally in the possession of third persons who did not act in bad faith.

  

         While they did not file an action for the rescission of the sales contract, the Spouses Tongson specifically prayed in their complaint for the annulment of the sales contract, for the immediate execution of a deed of reconveyance, and for the return of the subject property to them. [26]  The Spouses Tongson likewise prayed “for such other reliefs which may be deemed just and equitable in the premises.” In view of such prayer, and

considering respondents’ substantial breach of their obligation under the sales contract,  the rescission of the sales contract is but proper and justified. Accordingly, respondents must reconvey the subject property to the Spouses Tongson, who in turn shall refund the initial payment of P200,000 less the costs of suit.          Napala’s claims that rescission is not proper and that he should be given more time to pay for the unpaid remaining balance ofP2,800,000 cannot be countenanced. Having acted fraudulently in performing his obligation, Napala is not entitled to more time to pay the remaining balance of P2,800,000, and thereby erase the default or breach that he had deliberately incurred.[27] To do otherwise would be to sanction a deliberate and reiterated infringement of the contractual obligations incurred by Napala, an attitude repugnant to the stability and obligatory force of contracts.[28]

          The Court notes that the selling price indicated in the Deed of Absolute Sale was only P400,000, instead of the true purchase price of P3,000,000. The undervaluation of the selling price operates to defraud the government of the taxes due on the basis of the correct purchase price.  Under the law,[29] the sellers have the obligation to pay the capital gains tax.  In this case, Napala undertook to “advance” the capital gains tax, among other fees, under the Memorandum of Agreement, thus: 

ATTY. ALABASTRO: Q         Is it not a fact that you were the one who paid for the capital gains          tax?A         No, I only advanced the money. Q         To whom?A         To BIR. COURT: Q         You were the one who went to the BIR to pay the capital gains tax?

A         It is embodied in the memorandum agreement.[30]

 

         While Carmen Tongson protested against the “very low consideration,” she eventually agreed to the “reduced” selling price indicated in the Deed of Absolute since Napala assured her not to worry about the taxes and expenses, as he had allegedly made arrangements with the Bureau of Internal Revenue (BIR) regarding the payment of the taxes, thus: 

Q         What is the amount in the Deed of Absolute Sale?A         It was only Four Hundred Thousand.  And he told me not to worry because x x x the BIR and not to worry because he will pay me what was agreed – the amount of Three Million and he will be paying all these expenses so I was thinking, if that is the case, anyway he paid me the Two Hundred Thousand cash and a subsequent Two Point Eight Million downpayment check so I really thought that he was paying the whole amount. COURT:             Proceed. ATTY. LIZA: Q         So you eventually agreed that this consideration be reduced to Four Hundred Thousand Pesos and to be reflected in the Deed of Absolute Sale?A         Yes, but when I was complaining to him why it is so because I was worried why that was like that but Mr. Napala told me don’t worry because [he] can remedy this.  And I asked him how can [he] remedy this?  And he told me we can make another Memorandum of Agreement. COURT: Q         Before you signed the Deed of Absolute Sale, you found out the amount?A         Yes, sir. Q         And you complained?

 A       Yes.[31]

          Considering that the undervaluation of the selling price of the subject property, initiated by Napala, operates to defraud the government of the correct amount of taxes due on the sale, the BIR must therefore be informed of this Decision for its appropriate action. 

On the award of damages 

         Citing Article 1338 of the Civil Code,  the trial court awarded P100,000 moral damages and P50,000 exemplary damages to the Spouses Tongson. While agreeing with the trial court on the Spouses Tongson’s entitlement to moral and exemplary damages, the Court of Appeals reduced such awards for being unconscionable. Thus, the moral damages was reduced from P100,000 to P50,000, and  the exemplary damages was reduced from P50,000 to P25,000.           As discussed above, Napala defrauded the Spouses Tongson in his acts of issuing a worthless check and representing to the Spouses Tongson that the check was funded, committing in the process a substantial breach of his obligation as a buyer.  For such fraudulent acts, the law, specifically the Civil Code, awards moral damages to the injured party, thus:  

         ART. 2220.  Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due.  The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith.  (Emphasis supplied) 

          Considering that the Spouses Tongson are entitled to moral damages, the Court may also award exemplary damages, thus:

 

          ART. 2232.  In contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.             Article 2234. When the amount of the exemplary damages need not be proved, the plaintiff must show that he is entitled to moral, temperate or compensatory damages before the court may consider the question of whether or not exemplary damages would be awarded. In case liquidated damages have been agreed upon, although no proof of loss is necessary in order that such liquidated damages may be recovered, nevertheless, before the court may consider the question of granting exemplary in addition to the liquidated damages, the plaintiff must show that he would be entitled to moral, temperate or compensatory damages were it not for the stipulation for liquidated damages. (Emphasis supplied)

  

         Accordingly, we affirm the Court of Appeals’ awards of moral and exemplary damages, which we find equitable under the circumstances in this case.            WHEREFORE, we PARTIALLY GRANT the petition. We SET ASIDE the  31 August 2004 Decision and 10 March 2005 Resolution of the Court of Appeals in CA-G.R. CV No. 58242, except as to the award of moral and exemplary damages, andORDER the rescission of the contract of sale between the Spouses Tongson and Emergency Pawnshop Bula, Inc.              Let a copy of this Decision be forwarded to the Bureau of Internal Revenue for its appropriate action. 

         SO ORDERED.   

                                     ANTONIO T. CARPIO

                                           Associate Justice

 

WE CONCUR: 

 

 

               ARTURO D. BRION        

          Associate Justice 

   

  

 

 

 

  MARIANO C. DEL CASTILLO           ROBERTO A. ABAD                                                                                     Associate Justice                                   Associate Justice                                       

 

 

  JOSE P. PEREZ

       Associate Justice        

 

       

 

 

 

 

ATTESTATION         I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

 

 

                                                     ANTONIO T. CARPIO

                                                                   Associate Justice

                              CHAIRPERSON

 

CERTIFICATION         PURSUANT TO SECTION 13, ARTICLE VIII OF THE CONSTITUTION, AND THE DIVISION CHAIRPERSON’S ATTESTATION, I CERTIFY THAT THE CONCLUSIONS IN THE ABOVE DECISION HAD BEEN REACHED IN CONSULTATION BEFORE THE CASE WAS ASSIGNED TO THE WRITER OF THE OPINION OF THE COURT’S DIVISION. 

 

                                                               REYNATO S. PUNO                                                                         Chief Justice

[1]              Under Rule 45 of the Rules of Court.[2]              Rollo, pp. 33-63.  Penned by Associate Justice Perlita J. Tria Tirona with Associate Justices Ruben           T. Reyes and Jose C. Reyes, Jr., concurring.[3]              Id. at 73-74.[4]              Exhibit “B.”[5]              Exhibit “C.”[6]              Records, pp. 4-5;  TSN, 29 April 1994, pp. 10-11.[7]              TSN, 27 January 1995, pp. 5-6.  Atty. Petronilo Raganas testified on this matter, thus:  

ATTY. ALABASTRO: Q             After this Exhibit “B” was prepared, a new Memorandum Agreement was prepared to replace this Memorandum of Agreement marked as Exhibit “B”?A            That other Memorandum Agreement was made to replace that Memorandum Agreement in the amount of Three Million pesos to jibe with the Deed of Sale. Q             So the first Memorandum Agreement which was prepared and replaced by another Memorandum Agreement with the consideration of Four Hundred Thousand pesos was this Memorandum Agreement wherein the consideration was Three Million Pesos?A            Yes, sir.  Q             And of course, this was notarized by you, this Exhibit “B”?A            Actually, this was notarized but this was replaced by another Memorandum of Agreement using the same document. Q             You mean using the same document number, page number?A            Yes, to jibe. 

Q             I’m showing to you these documents consisting of 2 pages marked as Exhibit “J” and “J-1” with the letter head of Raganas Law Office.  That is in you own handwriting?A            Yes, sir. Q             So, the true consideration of the transaction involving the property of the spouses is Three Million and not Four Hundred Thousand?A            In principle, they agreed on that amount.[8]              Exhibit “EE-1.”[9]              Exhibit “D.”[10]             Exhibit “F.”[11]             Docketed as Civil Case No. 21,858-93.[12]             Records, p. 27.[13]             Id. at 110.[14]             ART. 1338.  There is fraud when, through insidious words or machinations of one of the               contracting parties, the other is induced to enter into a contract which, without them, he would not       have agreed to.[15]             Rollo, p. 148.  Penned by Judge Romeo D. Marasigan.[16]             Id. at 61-62.[17]             Article 1305 of the Civil Code.[18]             Article 1318 of the Civil Code in relation to Article 1458 of the same Code.                ART. 1318.  There is no contract unless the following requisites concur:                (1)  Consent of the contracting parties;                (2)  Object certain which is the subject matter of the contract;                (3)  Cause of the obligation which is established. 

      ART. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.

[19]             Woodhouse v. Halili, 93 Phil. 526, 537 (1953).[20]             Article 1344 of the Civil Code provides:  “In order that fraud may make a contract voidable, it      should be serious and should not have been employed by both contracting parties.                 Incidental fraud only obliges the person employing it to pay damages.”[21]             Archipelago Management and Marketing Corp. v. CA, 359 Phil. 363 (1998).[22]             Sanchez v. Mapalad, G.R. No. 148516, 27 December 2007, 541 SCRA 397.[23]             Paragas v. Heirs of Balacano, G.R. No. 168220, 31 August 2005, 468 SCRA 717.[24]            See Bartolo v. Sandiganbayan, G.R. No. 172173, 16 April 2009.[25]             483 Phil. 735, 750-751 (2004), citing Bugatti v. Court of Appeals, 397 Phil. 376 (2000).[26]             Records, p. 8.[27]             Luzon Brokerage v. Maritime Building Co., Inc., 150 Phil. 114, 125 (1972).[28]             Id.

(D) [29]Capital Gains from Sale of Real Property. —

 (1) In General. - The provisions of Section 39(B) notwithstanding, a final tax of six percent (6%) based on the gross selling price or current fair market value as determined in accordance with Section 6(E) of this Code, whichever is higher, is hereby imposed upon  capital gains presumed to have been realized from the sale, exchange, or other disposition of real property located in the Philippines, classified as capital assets, including pacto de retro sales and other forms of conditional sales, by individuals, including

estates and trusts: Provided, That the tax liability, if any, on gains from sales or other dispositions of real property to the government or any of its political subdivisions or agencies or to government-owned or -controlled corporations shall be determined either under Section 24(A) or under this Subsection, at the option of the taxpayer; x x x

[30]            TSN, 20 July 1995, p. 61.[31]            TSN, 29 April 1994, pp. 10-11.

 SECOND DIVISION

  ROMEO D. MARIANO,                          G.R. No. 169438                       Petitioner,                                                                                              Present:                                                                                                                                               CARPIO, J.,         Chairperson,                                                                   BRION,                                                                   PERALTA,*

               - versus -                                               DEL CASTILLO, and                                                PEREZ, JJ.         

                                                                               PETRON CORPORATION,                    Promulgated:                      Respondent.                         January 21, 2010        x --------------------------------------------------------------------------------------- x

  

                   D E C I S I O N  CARPIO, J.:  

The Case  

          For review[1] is the Decision[2] of the Court of Appeals upholding the lease contract between petitioner Romeo D. Mariano and respondent Petron Corporation.

  

The Facts  

          On 5 November 1968,[3] Pacita V. Aure, Nicomedes Aure Bundac, and Zeny Abundo (Aure Group), owners of a 2,064 square meter parcel of land in Tagaytay City[4] (Property), leased the Property to ESSO Standard Eastern, Inc., (ESSO Eastern), a foreign corporation doing business in the country through its subsidiary ESSO Standard Philippines, Inc. (ESSO Philippines). The lease period is 90 years[5] and the rent is payable monthly for the first 10 years, and annually for the remaining period.[6] The lease contract (Contract) contained an assignment veto clause barring the parties from assigning the lease without prior consent of the other.[7] Excluded from the prohibition were certain corporations to whom ESSO Eastern may unilaterally assign its leasehold right.[8]

           On 23 December 1977, ESSO Eastern sold ESSO Philippines to the Philippine National Oil Corporation (PNOC).[9]Apparently, the Aure Group was not informed of the sale. ESSO Philippines, whose corporate name was successively changed to Petrophil Corporation then to Petron Corporation (Petron), took possession of the Property.             On 18 November 1993, petitioner Romeo D. Mariano (petitioner) bought the Property from the Aure Group and obtained title to the Property issued in his name bearing an annotation of ESSO Eastern’s lease.[10]

           On 17 December 1998, petitioner sent to Petron a notice to vacate the Property. Petitioner informed Petron that Presidential Decree No. 471 (PD 471),[11] dated 24 May 1974, reduced the Contract’s duration from 90 to 25 years, ending on 13 November 1993.[12] Despite receiving the notice to vacate on 21 December 1998, Petron remained on the Property.

           On 18 March 1999, petitioner sued Petron in the Regional Trial Court of Tagaytay City, Branch 18, (trial court) to rescind the Contract and recover possession of the Property. Aside from invoking PD 471, petitioner alternatively theorized that the Contract was terminated on 23 December 1977 when ESSO Eastern sold ESSO Philippines to PNOC, thus assigning to PNOC its lease on the Property, without seeking the Aure Group’s prior consent.                   In its Answer, Petron countered that the Contract was not breached because PNOC merely acquired ESSO Eastern’s shares in ESSO Philippines, a separate corporate entity. Alternatively, Petron argued that petitioner’s suit, filed on 18 March 1999, was barred by prescription under Article 1389 and Article 1146(1) of the Civil Code as petitioner should have sought rescission within four years from PNOC’s purchase of ESSO Philippines on 23 December 1977[13] or before 23 December 1981.[14]

            To dispense with the presentation of evidence, the parties submitted a Joint Motion for Judgment (Joint Motion) containing the following stipulation:

             5. On December 23, 1977, the Philippine National Oil Co. (PNOC), a corporation wholly owned by the Philippine Government, acquired ownership of  ESSO Standard Philippines, Inc.,  including its leasehold right over the land in question, through the acquisition of its shares of stocks.[15] (Emphasis supplied)           

 The Ruling of the Trial Court

           In its Decision dated 30 May 2000, the trial court ruled for petitioner, rescinded the Contract, ordered Petron to vacate the Property, and cancelled the annotation on petitioner’s title of Petron’s lease.[16] The trial court ruled that ESSO Eastern’s sale to PNOC of its interest in ESSO Philippines included the assignment to PNOC of ESSO Eastern’s lease over the Property, which, for lack of the Aure Group’s consent, breached the

Contract, resulting in its termination. However, because the Aure Group (and later petitioner) tolerated ESSO Philippines’ continued use of the Property by receiving rental payments, the law on implied new lease governs the relationship of the Aure Group (and later petitioner) and Petron, creating for them an implied new lease terminating on 21 December 1998 upon Petron’s receipt of petitioner’s notice to vacate.[17]              Petron appealed to the Court of Appeals, distancing itself from its admission in the Joint Motion that in buying ESSO Philippines from ESSO Eastern, PNOC also acquired ESSO Eastern’s leasehold right over the Property. Petron again invoked its separate corporate personality to distinguish itself from PNOC. 

 The Ruling of the Court of Appeals

           In its Decision dated 29 October 2004, the Court of Appeals found merit in Petron’s appeal, set aside the trial court’s ruling, declared the Contract subsisting until 13 November 2058[18] and ordered petitioner to pay Petron P300,000 as attorney’s fees. The Court of Appeals found no reason to pierce ESSO Philippines’ corporate veil, treating PNOC’s buy-out of ESSO Philippines as mere change in ESSO Philippines’ stockholding. Hence, the Court of Appeals rejected the trial court’s conclusion that PNOC acquired the leasehold right over the Property. Alternatively, the Court of Appeals found petitioner’s suit barred by the four-year prescriptive period under Article 1389 and Article 1146 (1) of the Civil Code, reckoned from PNOC’s buy-out of ESSO Philippines on 23 December 1977 (for Article 1389) or the execution of the Contract on 13 November 1968[19] (for Article 1146 [1]).[20]

           Petitioner sought reconsideration but the Court of Appeals denied his motion in its Resolution of 26 August 2005.           Hence, this petition.

      The Issue

 

          The question is whether the Contract subsists between petitioner and Petron. 

The Ruling of the Court 

          We hold in the affirmative and thus sustain the ruling of the Court of Appeals.

 ESSO Eastern Assigned to PNOC its

Leasehold Right over the Property, Breaching the Contract

           PNOC’s buy-out of ESSO Philippines was total and unconditional, leaving no residual rights to ESSO Eastern. Logically, this change of ownership carried with it the transfer to PNOC of any proprietary interest ESSO Eastern may hold through ESSO Philippines, including ESSO Eastern’s lease over the Property. This is the import of Petron’s admission in the Joint Motion that by PNOC’s buy-out of ESSO Philippines “[PNOC],    x x x acquired ownership of ESSO Standard Philippines, Inc., including its leasehold right over the land in question, through the acquisition of its shares of stocks.”  As the Aure Group gave no prior consent to the transaction between ESSO Eastern and PNOC, ESSO Eastern violated the Contract’s assignment veto clause.           Petron’s objection to this conclusion, sustained by the Court of Appeals, is rooted on its reliance on its separate corporate personality and on the unstated assumption that ESSO Philippines (not ESSO Eastern) initially held the leasehold right over the Property. Petron is wrong on both counts. 

Courts are loathe to pierce the fictive veil of corporate personality,  cognizant of the core doctrine in corporation law vesting on corporations legal personality distinct from their shareholders (individual or corporate) thus facilitating the conduct of corporate business. However, fiction gives way to reality when the corporate personality is foisted to justify wrong, protect fraud, or defend crime, thwarting the ends of justice.[21] The fiction even holds lesser sway for subsidiary corporations whose

shares are wholly if not almost wholly owned by its parent company. The structural and systems overlap inherent in parent and subsidiary relations often render the subsidiary as mere local branch, agency or adjunct of the foreign parent corporation.[22]    

           Here, the facts compel the conclusion that ESSO Philippines was a mere branch of ESSO Eastern in the execution and breach of the Contract. First, by ESSO Eastern’s admission in the Contract, it is “a foreign corporation organized under the laws of the State of Delaware, U.S.A., duly licensed to transact business in the Philippines, and doing business therein under the business name and style of ‘Esso Standard Philippines’ x x x”. In effect, ESSO Eastern was ESSO Philippines for all of ESSO Eastern’s Philippine business. 

Second, the Contract was executed by ESSO Eastern, not ESSO Philippines, as lessee, with the Aure Group as lessor. ESSO Eastern leased the Property for the use of ESSO Philippines, acting as ESSO Eastern’s Philippine branch. Consistent with such status, ESSO Philippines took possession of the Property after the execution of the Contract. Thus, for purposes of the Contract, ESSO Philippines was a mere alter ego of ESSO Eastern.

 The Lessor’s Continued Acceptance of Lease Payments

Despite Breach of Contract Amounted to Waiver           The breach of contract notwithstanding, we hold that the Contract subsists. Contrary to the trial court’s conclusion that ESSO Eastern’s violation of the assignment veto clause extinguished the Contract, replaced by a new implied lease with a monthly term,[23]we hold that the breach merely gave rise to a cause of action for the Aure Group to seek the lessee’s ejectment as provided under Article 1673, paragraph 3 of the Civil Code.[24] Although the records do not show that the Aure Group was formally notified of ESSO Philippines’ sale to PNOC, the successive changes in the lessee’s name (from ESSO Philippines to Petrophil Corporation then to Petron) suffice to alert the Aure Group of a likely change in the personality of the lessee, which, for lack of the Aure Group’s prior consent, was in

obvious breach of the Contract. Thus, the continued receipt of lease payments by the Aure Group (and later by petitioner) despite the contractual breach amounted to a waiver of their option to eject the lessee.

 Petitioner’s Suit Barred by Prescription

           Petitioner’s waiver of Petron’s contractual breach was compounded by his long inaction to seek judicial redress. Petitioner filed his complaint nearly 22 years after PNOC acquired the leasehold rights to the Property and almost six years after petitioner bought the Property from the Aure Group. The more than two decades lapse puts this case well within the territory of the 10 year prescriptive bar to suits based upon a written contract under Article 1144 (1) of the Civil Code.[25]

   

            WHEREFORE, we DENY the petition. The Decision dated 29 October 2004 and the Resolution dated 26 August 2005 of the Court of Appeals  are AFFIRMED. 

          SO ORDERED.   

                                      ANTONIO T. CARPIO

                                            Associate Justice

 

WE CONCUR:

 

 

 

                                ARTURO D. BRION                   

           Associate Justice

   

  

 

 

 

DIOSDADO M. PERALTA                MARIANO C. DEL

CASTILLO                               

            Associate Justice                                             Associate

Justice              

 

 

 

         

                                           JOSE P. PEREZ                     

                                             Associate

Justice                                                             

 

 

ATTESTATION

          I attest that the conclusions in the above Decision had been reached in

consultation before the case was assigned to the writer of the opinion of the

Court’s Division.

 

 

                                                     ANTONIO T. CARPIO

                                                                    Associate Justice

                             Chairperson

 

CERTIFICATION

          Pursuant to Section 13, Article VIII of the Constitution, and the

Division Chairperson’s Attestation, I certify that the conclusions in the

above Decision had been reached in consultation before the case was

assigned to the writer of the opinion of the Court’s Division.

 

                                                                      REYNATO S. PUNO                                                                           Chief Justice

*               Designated additional member per Raffle dated 18 January 2010.[1]               Under Rule 45 of the 1997 Rules of Civil Procedure.[2]               Penned by Associate Justice Eloy R. Bello, Jr., with Associate Justices Regalado E. Maambong

and Lucenito N. Tagle, concurring.[3]               13 November 1968 is the date the lower courts used to place the execution of the lease contract.

However, the contract shows that it was signed on 5 November 1968 but notarized on 13 November 1968 (see Records, p. 14).

[4]               Covered by Transfer Certificate of Title No. T-6190.[5]               Ending on 5 November 2058.[6]               P740 monthly rent for the first 10 years and P1 annual rent for the succeeding years (Records, p.   13-A).[7]               This is a modification of the statutory ban on unconsented assignment of lease under Article

1649 of the Civil Code which provides: “The lessee cannot assign the lease without the consent of the lessor, unless there is a stipulation to the contrary.”

[8]               The stipulation provides (Records, p. 13-A):                This contract may not be assigned or transferred by either party without the prior written consent of the other, provided, however, that the Lessee may assign and transfer its rights and obligations under this contract to Standard Oil Company (a New Jersey corporation) or any company 50% or more of whose capital stock is owned or

controlled directly or indirectly by Standard Oil Company, without need of obtaining the consent of the Lessor.

[9]              Other parts of the record show the following alternative dates: 23 December 1979 (Records, p. 91); 23 December 1978 (id. at 92); and 23 December 1979 (Rollo, p. 27).

[10]             Transfer Certificate of Title No. T-29178.[11]             Fixing a maximum period of 25 years for the lease of private lands to aliens.[12]             This should be 5 November 1993, the 25th year after the Contract’s signing.[13]             Petron erroneously indicated this date as 23 December 1973 (see Records, p. 36).[14]              Petron also argued that PD 471, which carried penal clauses, cannot be retroactively applied to

shorten the term of the Contract without violating the constitutional ban on ex post facto laws and on impairment of contracts. 

[15]             Records, p. 91.[16]             The dispositive portion of the trial court’s ruling provides (id. at 94):

                 WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered declaring the lease contract, subject matter of this case, be rescinded and ordering the defendant to vacate and surrender possession of the leased premises to plaintiff.                It is likewise ordered that the annotation of said lease agreement at the back of TCT No. T-29178 be cancelled. Defendant is also ordered to pay the cost of the suit.

[17]             Id. at 86-94.[18]             See note 3.[19]             But see note 3.[20]             Rollo, pp. 19-33.[21]             Koppel (Phils.), Inc. v. Yatco, 77 Phil. 496 (1946).[22]             Id.[23]             Records, pp. 91-93. The trial court gave no reason for its conclusion but deducing from its

finding that the Contract was replaced by an implied lease with a monthly term, it could have only treated the unconsented assignment of lease as resulting in the Contract’s novation. However, novation takes place only in two instances (1) by express agreement or (2) when the old and the new obligations are incompatible on every point (Lim Tay v. Court of Appeals, 355 Phil. 381 [1998]). None of these obtain here as the parties to the contract did not expressly novate it and except for the term of lease and the personality of the lessee, all the other contractual stipulations remained unchanged.

[24]             This provides: “The lessor may judicially eject the lessee for any of the following causes:                x x x                (3) Violation of any of the conditions agreed upon in the contract;”

[25]             This provides: “The following actions must be brought within ten years from the time the right of   action accrues:

                (1) Upon a written contract;” 

Republic of the Philippines

Supreme CourtManila

  

FIRST DIVISION                                                                 ELIGIO P. MALLARI,                           G.R. No. 157659                              Petitioner,

                                                                    Present:                                                                     PUNO, C.J., Chairperson,                -versus-                                       CARPIO-MORALES,

                                                          LEONARDO-DE CASTRO,                                                              

                                                          BERSAMIN, and                                                          VILLARAMA, JR., JJ.

GOVERNMENT SERVICEINSURANCE SYSTEM and                THE PROVINCIAL SHERIFF               Promulgated:OF PAMPANGA,                                                                 Respondents.                     January 25, 2010x-----------------------------------------------------------------------------------------x 

D E C I S I O N 

 BERSAMIN, J.:                   By petition for review on certiorari, the petitioner appeals the decision promulgated on March 17, 2003, whereby the Court of Appeals (CA) dismissed his petition for certiorari.

 Antecedents

          

In 1968, the petitioner obtained two loans totaling P34,000.00 from respondent Government Service Insurance System (GSIS). To secure the performance of his obligations, he mortgaged two parcels of land registered under his and his wife Marcelina Mallari’s names. However, he paid GSIS about ten years after contracting the obligations only P10,000.00 on May 22, 1978 and P20,000.00 on August 11, 1978.[1]  

 What followed thereafter was the series of inordinate moves of the

petitioner to delay the efforts of GSIS to recover on the debt, and to have the unhampered possession of the foreclosed property.  

After reminding the petitioner of his unpaid obligation on May 2, 1979, GSIS sent on November 2, 1981 a telegraphic demand to him to update his account.  On November 10, 1981, he requested a final accounting, but did not do anything more. Nearly three years later, on March 21, 1984, GSIS applied for the extrajudicial foreclosure of the mortgage by reason of his failure to settle his account. On November 22, 1984, he requested an updated computation of his outstanding account. On November 29, 1984, he persuaded the sheriff to hold the publication of the foreclosure notice in abeyance, to await action on his pending request for final accounting (that is, taking his payments of P30,000.00 made in 1978 into account). On December 13, 1984, GSIS responded to his request and rendered a detailed explanation of the account. On May 30, 1985, it sent another updated statement of account. On July 21, 1986, it finally commenced extrajudicial foreclosure proceedings against him because he had meanwhile made no further payments. 

 On August 22, 1986, the petitioner sued GSIS and the Provincial

Sheriff of Pampanga in the Regional Trial Court (RTC), Branch 44, in San Fernando, Pampanga, docketed as Civil Case No. 7802,[2] ostensibly to enjoin them from proceeding against him for injunction (with an application for preliminary injunction).  The RTC ultimately decided Civil Case No. 7802 in his favor, nullifying the extrajudicial foreclosure and auction sale; cancelling Transfer Certificate of Title (TCT) No. 284272-R and TCT No. 284273-R already issued in the name of GSIS; and reinstating TCT No. 61171-R and TCT No. 54835-R in his and his wife’s names.[3]

 GSIS appealed the adverse decision to the CA, which reversed the

RTC on March 27, 1996.[4]

 The petitioner elevated the CA decision to this Court via petition for

review on certiorari (G.R. No. 124468).[5]

 On September 16, 1996, this Court denied his petition for review.

[6] On January 15, 1997, this Court turned down his motion for reconsideration.[7]

 

As a result, the CA decision dated March 27, 1996 became final and executory, rendering unassailable both the extrajudicial foreclosure and auction sale held on September 22, 1986, and the issuance of TCT No. 284272-R and TCT No. 284273-R in the name of GSIS.

 GSIS thus filed an ex parte motion for execution and for a writ of

possession on September 2, 1999.[8] Granting the ex partemotion on October 8, 1999,[9] the RTC issued a writ of execution cum writ of possession on October 21, 1999,[10] ordering the sheriff to place GSIS in possession of the properties. 

 The sheriff failed to serve the writ, however, partly because of the

petitioner’s request for an extension of time within which to vacate the properties. It is noted that GSIS acceded to the request.[11]

Yet, the petitioner did not voluntarily vacate the properties, but instead filed a motion for reconsideration and/or to quash the writ of execution on March 27, 2000.[12] Also, the petitioner commenced a second case against GSIS and the provincial sheriff in the RTC in San Fernando, Pampanga (Civil Case No. 12053), ostensibly for consignation (coupled with a prayer for a writ of preliminary injunction or temporary restraining order). However, the RTC dismissed Civil Case No. 12053 on November 10, 2000 on the ground of res judicata, impelling him to appeal the dismissal to the CA (C.A.-G.R. CV No. 70300).[13]

 In the meanwhile, the petitioner filed a motion dated April 5, 2000 in

Civil Case No. 7802 to hold GSIS, et al.[14] in contempt of court for painting the fence of the properties during the pendency of his motion for reconsideration and/or to quash the writ of execution.[15] He filed another motion in the same case, dated April 17, 2000, to hold GSIS and its local manager Arnulfo B. Cardenas in contempt of court for ordering the electric company to cut off the electric services to the properties during the pendency of his motion for reconsideration and/or to quash the writ of execution.[16]

 To prevent the Presiding Judge of Branch 44 of the RTC from

resolving the pending incidents in Civil Case No. 7802, GSIS moved to

inhibit him for alleged partiality towards the petitioner as borne out by his failure to act on the motion for reconsideration and/or to quash writ of execution, motions for contempt of court, and motion for issuance of break open order for more than a year from their filing, praying that the case be re-raffled to another branch of the RTC.[17]  Consequently, Civil Case No. 7802 was re-assigned to Branch 48, whose Presiding Judge then denied the motions for contempt of court on July 30, 2001, and directed the Branch Clerk of Court to cause the re-implementation of the writ of execution cum writ of possession dated October 21, 1999.[18]

 The petitioner sought reconsideration,[19] but the Presiding Judge of

Branch 48 denied his motion for reconsideration onFebruary 11, 2002.[20]  

Ruling of the CA  

By petition for certiorari dated March 15, 2002 filed in the CA, the petitioner assailed the orders of February 11, 2002, July 30, 2001, October 21, 1999, and October 8, 1999.[21]

 On March 17, 2003, however, the CA dismissed the petition

for certiorari for lack of merit,[22] stating: 

We find the instant petition patently devoid of merit.  This Court is not unaware of the legal tactics and maneuvers employed by the petitioner in delaying the disposition of the subject case (Civil Case No. 7802) which has already become final and executory upon the final resolution by the Supreme Court affirming the judgment rendered by the Court of Appeals.  We construe the actuation of the petitioner in resorting to all kinds of avenues accorded by the Rules of Court, through the filing of several pleadings and/or motions in litigating this case, as running counter to the intendment of the Rules to be utilized in promoting the objective of securing a just, speedy and inexpensive disposition of every action and proceeding.

 The issues raised in the present controversy have already been

settled in our existing jurisprudence on the subject.  In the case of De Jesus vs. Obnamia, Jr., the Supreme Court ruled that “generally, no notice or even prior hearing of a motion for execution is required before a writ of execution is issued when a decision has already become final.”

 The recent accretion to the corpus of our jurisprudence has

established the principle of law, as enunciated in Buaya vs. Stronghold Insurance Co., Inc. that “once a judgment becomes final and executory, the prevailing party can have it executed as a matter of right, and the issuance of a Writ of Execution becomes a ministerial duty of the court.”

 The rule is also firmly entrenched in the aforecited Buaya case that

“the effective and efficient administration of justice requires that once a judgment has become final, the prevailing party should not be deprived of the fruits of the verdict by subsequent suits on the same issues filed by the same parties.  Courts are duty-bound to put an end to controversies.  Any attempt to prolong, resurrect or juggle them should be firmly struck down.  The system of judicial review should not be misused and abused to evade the operation of final and executory judgments.”

 As succinctly put in Tag Fibers, Inc. vs. National Labor Relations

Commission, the Supreme Court is emphatic in saying that “the finality of a decision is a jurisdictional event that cannot be made to depend on the convenience of a party.”

 We find no cogent reason to discompose the findings of the court

below.  Thus, we sustain the assailed Orders of the court a quo since no abuse of discretion has been found to have been committed by the latter in their issuance.  Moreover, this Court finds this petition to be part of the dilatory tactics of the petitioner to stall the execution of a final and executory decision in Civil Case No. 7802 which has already been resolved with finality by no less than the highest tribunal of the land.

 WHEREFORE, premises considered, the instant petition is hereby

DISMISSED for lack of merit.  Costs against the petitioner. SO ORDERED.[23]

 Issues

           Hence, this appeal.

 The petitioner insists herein that the CA gravely erred in refusing “to

accept the nullity of the following orders” of the RTC,  to wit: 1.      THE ORDER OF THE TRIAL COURT DATED OCTOBER 8, 1999,

GRANTING THE EX-PARTE MOTION FOR EXECUTION

AND/OR ISSUANCE OF THE WRIT OF EXECUTION OF POSSESSION IN FAVOR OF THE RESPONDENT GSIS;

 2.      THE ORDER OF THE TRIAL COURT DATED OCTOBER 21,

1999 GRANTING THE ISSUANCE AND IMPLEMENTATION OF THE WRIT OF EXECUTION CUM WRIT OF POSSESSION IN FAVOR OF RESPONDENT GSIS;

3.      THE ORDER OF THE TRIAL COURT DATED JULY 30, 2001 DIRECTING TO CAUSE THE RE-IMPLEMENTATION OF THE WRIT OF EXECUTION CUM WRIT OF POSSESSION IN FAVOR OF THE RESPONDENT GSIS; and

 4.      THE ORDER OF THE TRIAL COURT DATED FEBRUARY 11,

2002, DENYING THE MOTION FOR RECONSIDERATION OF THE ORDER DATED SEPTEMBER 14, 2001, IN RELATION TO THE COURT ORDER DATED JULY 30, 2001.[24]

 Ruling of the Court

 The petition for review on certiorari absolutely lacks merit. 

IPetition for Certiorari in CA

Was Filed Beyond Reglementary Period The petition assailed before the CA on certiorari the following orders

of the RTC, to wit: 1.     The order dated October 8, 1999 (granting the ex

parte motion for execution and/or issuance of the writ of execution cum writ of possession of GSIS);[25]

 2.     The order dated October 21, 1999 (directing the issuance of

the writ of execution cum writ of possession in favor of GSIS);[26]

 3.     The order dated July 30, 2001 (requiring the Branch Clerk

of Court to cause the re-implementation of the writ of execution cum writ of possession, and dismissing the motions to hold GSIS, et al. in contempt);[27] and

 

4.     The order dated February 11, 2002 (denying the motion for reconsideration dated August 17, 2001 seeking the reconsideration of the order dated July 30, 2001).[28]

 

 The July 30, 2001 order denied the petitioner’s motion for

reconsideration and/or to quash writ of execution, and motion to hold GSIS, Tony Dimatulac, et al. and Arnulfo Cardenas in contempt; and declared GSIS’s motion for issuance of break open order and for designation of special sheriff from GSIS Legal Services Group as premature. In turn, the  motion for reconsideration and/or to quash writ of execution denied by the order of July 30, 2001 had merely challenged the orders of October 8, 1999 andOctober 21, 1999 (granting the writ of execution cum writ of possession as a matter of course).

 Considering that the motion for reconsideration dated August 17,

2001 denied by the order dated February 11, 2002 was in reality and effect a prohibited second motion for reconsideration vis-à-vis the orders dated October 21, 1999 and October 8, 1999, the assailed orders dated July 30, 2001, October 21, 1999, and October 8, 1999 could no longer be subject to attack by certiorari. Thus, the petition for certiorari filed only in March 2002 was already improper and tardy for being made beyond the 60-day limitation defined in Section 4, Rule 65, 1997 Rules of Civil Procedure, as amended,[29] which requires a petition for certiorari to be filed “not later than sixty (60) days from notice of the judgment, order or resolution,” or, in case a motion for reconsideration or new trial is timely filed, whether such motion is required or not, “the sixty (60) day period shall be counted from notice of the denial of the said motion.”

 It is worth emphasizing that the 60-day limitation is considered

inextendible, because the limitation has been prescribed to avoid any unreasonable delay that violates the constitutional rights of parties to a speedy disposition of their cases.[30]  

 II

Nature of the Writ of Possession

and its Ministerial Issuance 

 The petitioner claims that he had not been notified of the motion

seeking the issuance of the writ of execution cum writ of possession; hence, the writ was invalid. 

 As earlier shown, the CA disagreed with him. We sustain the CA, and confirm that the petitioner, as defaulting

mortgagor, was not entitled under Act 3135, as amended, and its pertinent jurisprudence to any prior notice of the application for the issuance of the writ of possession.

 A writ of possession, which commands the sheriff to place a person in

possession of real property, may be issued in:  (1) land registration proceedings under Section 17 of Act No. 496; (2) judicial foreclosure, provided the debtor is in possession of the mortgaged property, and no third person, not a party to the foreclosure suit, had intervened; (3) extrajudicial foreclosure of a real estate mortgage, pending redemption under Section 7 of Act No. 3135, as amended by Act No. 4118; and (4) execution sales, pursuant to the last paragraph of Section 33, Rule 39 of the Rules of Court.[31]

          Anent the redemption of property sold in an extrajudicial foreclosure sale made pursuant to the special power referred to in Section 1 [32] of Act No. 3135,[33] as amended, the debtor, his successor-in-interest, or any judicial creditor or judgment creditor of said debtor, or any person having a lien on the property subsequent to the mortgage or deed of trust under which the property is sold has the right to redeem the property at anytime within the term of one year from and after the date of the sale, such redemption to be governed  by  the  provisions  of  Section  464  to Section 466 of the Code of Civil Procedure, to the extent that said provisions were not inconsistent with the provisions of Act 3135.[34]  

In this regard, we clarify that the redemption period envisioned under Act 3135 is reckoned from the date of the registration of the sale, not from

and after the date of the sale, as the text of Act 3135 shows. Although the original Rules of Court (effective on July 1, 1940) incorporated Section 464 to Section 466 of the Code of Civil Procedure as its Section 25 (Section 464); Section 26 (Section 465); and Section 27 (Section 466) of  Rule 39, with Section 27 still expressly reckoning the redemption period to be “at any time within twelve months after the sale;” and although the Revised Rules of Court (effective on January 1, 1964) continued to provide in Section 30 of Rule 39 that the redemption be made from the purchaser “at any  time within twelve (12) months after the sale,”[35] the 12-month period of redemption came to be held as beginning “to run not from the date of the sale but from the time of registration of the sale in the Office of the Register of Deeds.”[36] This construction was due to the fact that the sheriff’s sale of registered (and unregistered) lands did not take effect as a conveyance, or did not bind the land, until the sale was registered in the Register of Deeds.[37] 

 Desiring to avoid any confusion arising from the conflict between the

texts of the Rules of Court (1940 and 1964) and Act No. 3135, on one hand, and the jurisprudence clarifying the reckoning of the redemption period in judicial sales of real property, on the other hand, the Court has incorporated in Section 28 of Rule 39 of the current Rules of Court (effective on July 1, 1997) the foregoing judicial construction of reckoning the redemption period from the date of the registration of the certificate of sale, to wit:

 Sec. 28. Time and manner of, and amounts payable on, successive

redemptions; notice to be given and filed. — The judgment obligor, or redemptioner, may redeem the property from the purchaser, at any time within one (1) year from the date of the registration of the certificate of sale, by paying the purchaser the amount of his purchase, with one per centum per month interest thereon in addition, up to the time of redemption, together with the amount of any assessments or taxes which the purchaser may have paid thereon after purchase, and interest on such last named amount at the same rate; and if the purchaser be also a creditor having a prior lien to that of the redemptioner, other than the judgment under which such purchase was made, the amount of such other lien, with interest.

 

Property so redeemed may again be redeemed within sixty (60) days after the last redemption upon payment of the sum paid on the last redemption, with two per centum thereon in addition, and the amount of any assessments or taxes which the last redemptioner may have paid thereon after redemption by him, with interest on such last-named amount, and in addition, the amount of any liens held by said last redemptioner prior to his own, with interest. The property may be again, and as often as a redemptioner is so disposed, redeemed from any previous redemptioner within sixty (60) days after the last redemption, on paying the sum paid on the last previous redemption, with two per centum thereon in addition, and the amounts of any assessments or taxes which the last previous redemptioner paid after the redemption thereon, with interest thereon, and the amount of any liens held by the last redemptioner prior to his own, with interest.

 Written notice of any redemption must be given to the officer who

made the sale and a duplicate filed with the registry of deeds of the place, and if any assessments or taxes are paid by the redemptioner or if he has or acquires any lien other than that upon which the redemption was made, notice thereof must in like manner be given to the officer and filed with the registry of deeds; if such notice be not filed, the property may be redeemed without paying such assessments, taxes, or liens. (30a) (Emphasis supplied).

 

 Accordingly, the mortgagor or his successor-in-interest must redeem

the foreclosed property within one year from the registration of the sale with the Register of Deeds in order to avoid the title from consolidating in the purchaser. By failing to redeem thuswise, the mortgagor loses all interest over the foreclosed property.[38] The purchaser, who has a right to possession that extendsbeyond the expiration of the redemption period, becomes the absolute owner of the property when no redemption is made,[39] that it is no longer necessary for the purchaser to file the bond required under Section 7 of Act No. 3135, as amended, considering that the possession of the land becomes his absolute right as the land’s confirmed owner.[40] The consolidation of ownership in the purchaser’s name and the issuance to him of a new TCT then entitles him to demand possession of the property at any time, and the issuance of a writ of possession to him becomes a matter of right upon the consolidation of title in his name.

 

The court can neither halt nor hesitate to issue the writ of possession. It cannot exercise any discretion to determine whether or not to issue the writ, for the issuance of the writ to the purchaser in an extrajudicial foreclosure sale becomes a ministerial function.[41] Verily, a marked distinction exists between a discretionary act and a ministerial one. A purely ministerial act or duty is one that an officer or tribunal performs in a given state of facts, in a prescribed manner, in obedience to the mandate of a legal authority, without regard to or the exercise of his own judgment upon the propriety or impropriety of the act done.  If the law imposes a duty upon a public officer and gives him the right to decide how or when the duty shall be performed, such duty is discretionary, not ministerial. The duty is ministerial only when its discharge requires neither the exercise of official discretion nor the exercise of judgment.[42]

           The proceeding upon an application for a writ of possession is ex parte and summary in nature, brought for the benefit of one party only and without notice being sent by the court to any person adverse in interest. The relief is granted even without giving an opportunity to be heard to the person against whom the relief is sought.[43] Its nature as an ex parte petition under Act No. 3135, as amended, renders the application for the issuance of a writ of possession a non-litigious proceeding.[44]

 It is clear from the foregoing that a non-redeeming mortgagor like the

petitioner had no more right to challenge the issuance of the writ of execution cum writ of possession upon the ex parte application of GSIS. He could not also impugn anymore the extrajudicial foreclosure, and could not undo the consolidation in GSIS of the ownership of the properties covered by TCT No. 284272-R and TCT No. 284273-R, which consolidation was already irreversible. Hence, his moves against the writ of execution cum writ of possession were tainted by bad faith, for he was only too aware, being his own lawyer, of the dire consequences of his non-redemption within the period provided by law for that purpose.

 III

Dismissal of Petitioner’s Motion for Indirect ContemptWas Proper and In Accord with the Rules of Court

           The petitioner insists that the RTC gravely erred in dismissing his charges for indirect contempt against GSIS, et al.; and that the CA should have consequently granted his petition for certiorari.           The petitioner’s insistence is plainly unwarranted. 

First of all, Section 4, Rule 71, 1997 Rules of Civil Procedure, provides as follows:

 Section 4. How proceedings commenced. — Proceedings for indirect

contempt may be initiated motu proprio by the court against which thecontempt was committed by an order or any other formal charge requiring the respondent to show cause why he should not be punished forcontempt.

 In all other cases, charges for indirect contempt shall be

commenced by a verified petition with supporting particulars and certified true copies of documents or papers involved therein, and upon full compliance with the requirements for filing initiatory pleadings for civil actions in the court concerned. If the contempt charges arose out of or are related to a principal action pending in the court, the petition for contempt shall allege that fact but said petition shall be docketed, heard and decided separately, unless the court in its discretion orders the consolidation of the contempt charge and the principal action for joint hearing and decision. (n) (Emphasis supplied).

 Indeed, a person may be charged with indirect contempt only by either

of two alternative ways, namely: (1) by a verified petition, if initiated by a party; or (2) by an order or any other formal charge requiring the respondent to show cause why he should not be punished for contempt, if made by a court against which the contempt is committed. In short, a charge of indirect contemptmust be initiated through a verified petition, unless the charge is directly made by the court against which the contemptuous act is committed.  

 Justice Regalado has explained why the requirement of the filing of

a verified petition for contempt is mandatory:[45]

 

1. This new provision clarifies with a regulatory norm the proper procedure for commencing contempt proceedings.  While such proceeding has been classified as a special civil action under the former Rules, the heterogeneous practice, tolerated by the courts, has been for any party to file a mere motion without paying any docket or lawful fees therefor and without complying with the requirements for initiatory pleadings, which is now required in the second paragraph of this amended section. Worse, and as a consequence of unregulated motions for contempt, said incidents sometimes remain pending for resolution although the main case has already been decided. There are other undesirable aspects but, at any rate, the same may now be eliminated by this amendatory procedure.

  Henceforth, except for indirect contempt proceedings

initiated motu proprio by order of or a formal charge by the offended court, all charges shall be commenced by a verified petition with full compliance with the requirements therefor and shall be disposed of in accordance with the second paragraph of this section. (Emphasis supplied).

 Clearly, the petitioner’s charging GSIS, et al. with indirect contempt

by mere motions was not permitted by the Rules of Court. 

And, secondly, even assuming that charges for contempt could be initiated by motion, the petitioner should have tendered filing fees. The need to tender filing fees derived from the fact that the procedure for indirect contempt under Rule 71, Rules of Courtwas an independent special civil action. Yet, the petitioner did not tender and pay filing fees, resulting in the trial court not acquiring jurisdiction over the action. Truly, the omission to tender filing fees would have also warranted the dismissal of the charges.

 It seems to be indubitable from the foregoing that the petitioner

initiated the charges for indirect contempt without regard to the requisites of the Rules of Court simply to vex the adverse party. He thereby disrespected the orderly administration of justice and committed, yet again, an abuse of procedures.

 IV

Petitioner Was Guilty ofMisconduct As A Lawyer

 The CA deemed it unavoidable to observe that the petition

for certiorari brought by the petitioner to the CA was “part of the dilatory tactics of the petitioner to stall the execution of a final and executory decision in Civil Case No. 7802 which has already been resolved with finality by no less than the highest tribunal of the land.”[46]

The observation of the CA deserves our concurrence. Verily, the petitioner wittingly adopted his aforedescribed worthless

and vexatious legal maneuvers for no other purpose except to delay the full enforcement of the writ of possession, despite knowing, being himself a lawyer, that as a non-redeeming mortgagor he could no longer impugn both the extrajudicial foreclosure and the ex parte issuance of the writ of execution cum writ of possession; and that the enforcement of the duly-issued writ of possession could not be delayed. He thus deliberately abused court procedures and processes, in order to enable himself to obstruct and stifle the fair and quick administration of justice in favor of mortgagee and purchaser GSIS.

 His conduct contravened Rule 10.03, Canon 10 of the Code of

Professional Responsibility, by which he was enjoined as a lawyer to “observe the rules of procedure and xxx not [to] misuse them to defeat the ends of justice.”  By his dilatory moves, he further breached and dishonored his Lawyer’s Oath, particularly:[47]

 xxx I will not wittingly or willingly promote or sue any groundless,

false or unlawful suit, nor give aid nor consent to the same; I will delay no man for money or malice, and will conduct myself as a lawyer according to the best of my knowledge and discretion with all good fidelity as well to the courts as to my clients xxx

  

We stress that the petitioner’s being the party litigant himself did not give him the license to resort to dilatory moves. His zeal to defend whatever rights he then believed he had and to promote his perceived remaining

interests in the property already lawfully transferred to GSIS should not exceed the bounds of the law, for he remained at all times an officer of the Court burdened to conduct himself “with all good fidelity as well to the courts as to [his] clients.”[48] His true obligation as a lawyer should not be warped by any misplaced sense of his rights and interests as a litigant, because he was, above all, bound not to unduly delay a case, not to impede the execution of a judgment, and not to misuse Court processes.[49] Consequently, he must be made to account for his misconduct as a lawyer. 

 WHEREFORE, we deny the petition for review on certiorari for lack

of merit, and affirm the decision of the Court of Appeals promulgated on March 17, 2003, with the costs of suit to be paid by the petitioner.

 The Committee on Bar Discipline of the Integrated Bar of the

Philippines is directed to investigate the petitioner for what appear to be (a) his deliberate disregard of the Rules of Court and jurisprudence pertinent to the issuance and implementation of the writ of possession under Act No. 3135, as amended; and (b) his witting violations of the Lawyer’s Oath and the Code of Professional Responsibility.

           SO ORDERED.                                                                         LUCAS P. BERSAMIN                                                                           Associate Justice WE CONCUR:                                                                                                                  

 REYNATO S. PUNO

Chief Justice

Chairperson     CONCHITA CARPIO MORALES      TERESITA J. LEONARDO-DE

CASTRO       Associate Justice                                         Associate Justice     

MARTIN S. VILLARAMA, JR.Associate Justice

    

C E R T I F I C A T I O N           Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.                                                                         REYNATO S. PUNO                                                                           Chief Justice    

[1]       Rollo, p. 42-43.

[2]       Id., p. 148.[3]       Id., p. 44.[4]       Id., pp. 169-179.[5]       Id., p. 45.[6]       Id., p. 45, 180.[7]       Id., p. 45.[8]       Id., pp. 51-54.[9]       Id., p. 55.[10]     Id., p. 56.[11]    Id., pp. 45-46.[12]    Id., pp. 57-62.[13]     Id., p. 46.[14]     The other respondents were designated as Tony Dimatulac, Allan Doe, John Doe, Peter Doe, Richard Doe, Romy Doe, Roland Doe, and Juan Doe.[15]    Rollo, pp. 64-66.[16]     Id., pp. 75-78.[17]     Id., pp. 107-108.[18]     Id., pp. 120-121.[20]     Id., pp. 139-144.[21]     Id., pp. 47-48.[22]     Id., pp. 42-50.[23]     Id., pp. 48-49.[24]     Id., pp. 12-13.[25]     Id., p. 55.[26]     Id., p. 56.[27]     Id., pp. 120-121.[28]     Id., pp. 139-141.[29]     A.M. No. 00-2-03-SC (Re: Amendment To Section 4, Rule 65 of The 1997 Rules of Civil Procedure) took effect  September 1, 2000. This amendment, being a curative one, is applied retroactively (Romero v. Court of Appeals, G.R. No. 142803, November 20, 2007, 537 SCRA 643; Dela Cruz v. Golar Maritime Services, Inc., G.R. No. 141277, December 16, 2005, 478 SCRA 173; Ramatek Philippines, Inc. v. De Los Reyes, G.R. No. 139526,  October 25, 2005, 474 SCRA 129; PCI Leasing and Finance, Inc. v. Go Ko, G.R. No. 148641, March 31, 2005, 454 SCRA 586).[30]     People v. Gabriel, G.R. No. 147832, December 6, 2006, 510 SCRA 197; Yutingco v. Court of Appeals, G.R. No. 137264, August 1, 2002, 386 SCRA 85.[31]     Philippine National Bank v. Sanao Marketing, Inc., G.R. No. 153951, July 29, 2005, 465 SCRA 287, 301; Autocorp. Group and Autographics, Inc. v. Court of Appeals, G.R. No. 157553, September 8, 2004, 437 SCRA 678, 689.[32]     Section 1. When a sale is made under a special power inserted in or attached to any real estate mortgage hereafter made as security for the payment of money or the fulfillment of any other obligation, the provisions of the following sections shall govern as to the manner in which the sale and redemption shall be effected, whether or not provision for the same is made in the power.[33]    An Act to Regulate the Sale of Property under Special Powers Inserted In or Annexed To Real Estate Mortgages (Approved on March 6, 1924).[34]     Section 6, Act No. 3135, as amended, provides:        Sec. 6. Redemption. – In all cases in which an extrajudicial sale is made under the special power herein before referred to, the debtor, his successors-in-interest or any judicial creditor or judgment creditor of said debtor or any person having a lien on the property subsequent to the mortgage or deed of trust under which the property is sold, may redeem the same at anytime within the term of one year from and after the date of the sale; and such redemption shall be governed by the provisions of section four hundred and sixty-four to four hundred and sixty-six, inclusive, of the Code of Civil Procedure, in so far as these are not inconsistent with the provisions of this Act.[35]     Sec. 30. Time and manner of, and amounts payable on, successive redemptions. Notice to be given and filed. – The judgment debtor, or redemptioner, may redeem the property from the purchaser, at any time within twelve (12) months after the sale, on paying the purchaser the amount of his purchase, with

one per centum per month interest thereon in addition, up to the time of redemption, together with the amount of any assessments or taxes which the purchaser may have paid thereon after purchase, and interest on such last-named amount at the same rate; and if the purchaser be also a creditor having a prior lien to that of the redemptioner, other than the judgment under which such purchase was made, the amount of such other lien, with interest. Property so redeemed may again be redeemed within sixty (60) days after the last redemption upon payment of the sum paid on the last redemption, with two percentum thereon in addition, and the amount of any assessments or taxes which the last redemptioner may have paid thereon after redemption by him, with interest on such last-named amount, and in addition, the amount of any liens held by said last redemptioner prior to his own, with interest. The property may be again, and as often as a redemptioner is so disposed, redeemed from any previous redemptioner within sixty (60) days after the last redemption, on paying the sum paid on the last previous redemption, with two per centum thereon in addition, and the amounts of any assessments or taxes which the last previous redemptioner paid after the redemption thereon, with interest thereon, and the amount of any liens held by the last redemptioner prior to his own, with interest.        Written notice of any redemption must be given to the officer who made the sale and a duplicate filed with the registrar of deeds of the province, and if any assessments or taxes are paid by the redemptioner or if he has or acquires any lien other than that upon which the redemption was made, notice thereof must in like manner be given to the officer and filed with the registrar of deeds; if such notice be not filed, the property may be redeemed without paying such assessments, taxes, or liens.[36]     Garcia v. Ocampo,105 Phil. 1102, 1108 (1959).[37]     Section 50, Act No. 496, states:        Sec. 50. An owner of registered land may convey, mortgage, lease, charge, or otherwise deal with the same as fully as if it had not been registered.  He may use forms of deeds, mortgages, leases, or other voluntary instruments like those now in use and sufficient in law for the purpose intended.  But no deed, mortgage, lease, or other voluntary instrument, except a will, purporting to convey or affect registered land, shall take effect as a conveyance or bind the land, but shall operate only as a contract between the parties and as evidence of authority to the clerk or register of deeds to make registration.  The act of registration shall be the operative act to convey and effect the land, and in all cases under this Act the registration shall be made in the office of register of deeds for the province or provinces or city where the land lies.        Section 51, Presidential Decree No. 1529, provides:        Sec. 51. Conveyance and other dealings by registered owner.— An owner of registered land may convey, mortgage, lease, charge or otherwise deal with the same in accordance with existing laws.  He may use such forms of deeds, mortgages, leases or other voluntary instruments as are sufficient in law.  But no deed, mortgage, lease, or other voluntary instrument, except a will purporting to convey or affect registered land shall take effect as a conveyance or bind the land, but shall operate only as a contract between the parties and as evidence of authority to the Register of Deeds to make registration.        The act of registration shall be the operative act to convey or affect the land insofar as third persons are concerned, and in all cases under this Decree, the registration shall be made in the office of the Register of Deeds for the province or city where the land lies.        See also State Investment House, Inc. v. Court of Appeals, G.R. No. 99308, November 13, 1992, 215 SCRA 734; Agbulos v. Albert, G.R.  No. L-17483, July 31, 1962, 5 SCRA 790; Tuason v. Raymundo, 28 Phil. 635 (1914); Sikatuna v. Guevara, 43 Phil. 371 (1922); Worcester v. Ocampo, 34 Phil. 646 (1916).[38]     Yulienco v. Court of Appeals, G.R. No. 141365, November 27, 2002, 393 SCRA 143.[39]     Samson v. Rivera, G.R. No. 154355, May 20, 2004, 428 SCRA 759, 771.[40]     Chailease Finance Corporation v. Ma, G.R. No. 151941, August 15, 2003, 409 SCRA 250, 253.[41]     De Vera v. Agloro, G.R. No. 155673, January 14, 2005, 448 SCRA 203, 213-314.[42]     Espiridion v. Court of Appeals, G.R. No. 146933, June 8, 2006, 490 SCRA 273, 277.[43]     Santiago v. Merchants Rural Bank of Talavera, Inc., G.R. No. 147820, March 18, 2005, 453 SCRA 756, 763-764.[44]     Penson v. Maranan, G.R. No. 148630, June 20, 2006, 491 SCRA 396, 407.[45]   Remedial Law Compendium, Sixth Revised Edition, p. 808; see also Land Bank of the Philipines v. Listana, Sr., G.R. No. 152611, August 5, 2003, 408 SCRA 328.[46]     Rollo, p. 49.[47]     Rules of Court, Rule 138. Sec. 3.[48]     Lawyer’s Oath.

[49]     Rule 12.04, Canon 12, Code of Professional Responsibility, states:        A lawyer shall not unduly delay a case, impede the execution of a judgment or misuse Court processes.

font-family:"Times New Roman";mso-ansi-language:EN-US;mso-fareast-language: EN-US;mso-bidi-language:AR-SA'>[49]     Rule 12.04, Canon 12, Code of Professional Responsibility, states:        A lawyer shall not unduly delay a case, impede the execution of a judgment or misuse Court processes.