FIRST DIVISION
[G.R. No. 133366. August 5, 1999]
UNIONBANK OF THE PHILIPPINES, petitioner, vs. THE COURT OF APPEALS and FERMINA S. DARIO and REYNALDO S. DARIO, respondents.
D E C I S I O N
DAVIDE, JR., C.J.:
Unionbank of the Philippines
(hereafter UNIONBANK) appeals, by way of certiorari, the Decision[1] of the Court of Appeals (CA) of 26 June 1997 and its
Resolution of 7 April 1998[2] The CA nullified the Regional Trial Court’s (RTC)
Order[3] of 7 August 1995 denying private respondents’
application for preliminary injunction as UNIONBANK’s consolidation of
ownership divested private respondents of their property without due process of
law. It also ordered the register of
deeds to cancel UNIONBANK’s title and the trial court to hear private
respondents’ prayer for injunctive relief.
This case stemmed from a real
estate mortgage executed on 17 December 1991 by spouses Leopoldo and Jessica
Dario (hereafter mortgagors) in favor of UNIONBANK to secure a P3
million loan, including interest and other charges. The mortgage covered a Quezon City property with Transfer
Certificate of Title (TCT) No. 41828 in Leopoldo Dario’s name and was annotated
on the title on 18 December 1991. For
non-payment of the principal obligation, UNIONBANK extrajudicially foreclosed
the property mortgaged on 12 August 1993 and sold the same at public auction,
with itself posting the highest bid.
On 4 October 1994, one week before
the one-year redemption period expired, private respondents filed a complaint
with the RTC of Quezon City against the mortgagors, UNIONBANK, the Register of
Deeds and the City Sheriff of Quezon City.
Docketed as Civil Case No. Q-94-21830, the complaint was for annulment
of sale and real estate mortgage with reconveyance and prayer for restraining
order and prohibitory injunction. A
notice of lis pendens was annotated on the title.
On 10 October 1994, RTC, Branch 81,
through Presiding Judge (later CA Justice) Celia Lipana-Reyes, issued a
temporary restraining order (TRO) enjoining the redemption of property within
the statutory period and its consolidation under UNIONBANK’s name. At a hearing four days later, UNIONBANK’s
counsel orally moved for dismissal of the complaint alleging that a
certification of non-forum shopping as prescribed by SC Circular 4-94[4] is now
Rule 7 Section 5 of the 1997 Rules of Civil Procedure.4 was not attached thereto. Judge Lipana-Reyes settled the motion in favor of UNIONBANK and
dismissed[5] the complaint on 17 October 1994.
Aggrieved, private respondents
filed a motion for reconsideration[6] of the dismissal on 20 October 1994 and prayed that
they be permitted to amend their verified complaint to comply with the
requisites of Circular 4-94. Upon the
appointment of Judge Lipana-Reyes to the CA, pairing Judge Agustin S. Dizon
took over the case and on 15 November 1994 allowed private respondents to incorporate
the mandatory formal requirements of SC Administrative Circular 4-94 to their
complaint.
In the meantime, without notifying
private respondents, UNIONBANK consolidated its title over the foreclosed
property on 24 October 1994. TCT No.
41828 was cancelled and TCT No. 120929 in UNIONBANK’s name was issued in its
stead.
Private respondents filed an
amended complaint[7] on 9 December 1994, alleging that they, not the
mortgagors, are the true owners of the property mortgaged and insisting on the
invalidity of both the mortgage and its subsequent extrajudicial
foreclosure. They claimed that the
original title, TCT No. 61571, was entrusted to a certain Atty. Reynaldo
Singson preparatory to its administrative reconstitution after a fire gutted
the Quezon City Hall building.
Mortgagor Leopoldo, private respondent Fermina’s son, obtained the
property from Atty. Singson, had the title reconstituted under his name without
private respondents’ knowledge, executed an ante-dated deed of sale in his
favor and mortgaged the property to UNIONBANK.
On 19 December 1994, Judge Ignacio
M. Capulong to whom this case was assigned admitted the aforementioned amended
complaint and set the application for writ of preliminary injunction for
hearing. After UNIONBANK’s motion for
reconsideration of said Order was denied on 17 January 1995, it filed a
petition for certiorari with the CA questioning the admission of the
amended complaint. The CA upheld Judge
Capulong’s order admitting the amended complaint on 24 April 1995, UNIONBANK
thereafter elevated its cause to this Court.
Meanwhile, on 9 February 1995
UNIONBANK filed its answer ad cautelam asserting its status as an
innocent mortgagee for value whose right or lien upon the property mortgaged
must be respected even if the mortgagor obtained his title through fraud. It also averred that the action had become
“moot and academic by the consolidation of the foreclosed property on 24
October 1994” in its name, resulting to the issuance of TCT No. 120929 by the
Register of Deeds of Quezon City. In
reaction to UNIONBANK’s revelation, private respondents moved to declare
UNIONBANK’s counsel in indirect contempt attacking his disobedience to the TRO.
On 19 May 1995, private
respondents moved to declare the other defendants in default for their
non-filing of responsive pleadings within the mandatory period and to set the
application for preliminary injunction and indirect contempt for pre-trial and
trial.
On 14 June 1995 the second
division of this Court denied the petition for certiorari, which it
considered as a petition for review under Rule 45, “for failure to show that
the CA had committed any reversible error” in judgment.
In its 19 August 1995 Order, the
RTC held the mortgagors and the City Sheriff of Quezon City in default and
sustained UNIONBANK’s contention that the act sought to be enjoined had been
enforced, negating the need of hearing the application for preliminary
injunction. Private respondents filed a
lengthy motion for reconsideration to this Order.
The annulment case was re-raffled
to Branch 227 under Presiding Judge Vicente Q. Roxas upon the creation of new salas. Judge Roxas, on 25 March 1996, denied the
motion to reconsider the 19 August 1995 Order but suggested that private
respondents amend their application from prohibitory to mandatory injunction.
As private respondents were unable
to amend their application, the RTC denied the motion for reconsideration and
their motion for indirect contempt, “in the interest of free speech and
tolerance” on 9 July 1996. Asserting
grave abuse of discretion, private respondents brought the denial of their
motion for reconsideration with the Court of Appeals on 6 September 1996.
After considering the arguments
presented by the parties, the CA ruled that despite its knowledge that the
ownership of the property was being questioned, UNIONBANK took advantage of
private respondents’ procedural error by consolidating title to the property,
which “smack[ed] of bad faith” and “evince[d] a reprobate disposition of the
part of its counsel to advance his client’s cause by fair means or foul.” As a
result thereof the transfer of title was vitiated by non-adherence to
procedural due process.[8]
On 26 June 1997, CA nullified the
consolidation of ownership, ordered the Register of Deeds to cancel the
certificate of title in UNIONBANK’s name and to reinstate TCT No. 41828 with
the notice of lis pendens annotated at the back. The CA also set aside the portion of the
assailed RTC Orders that declared private respondents’ prayer for writ of
preliminary injunction as moot and academic.
UNIONBANK’s motion for reconsideration of the above-mentioned decision
was likewise rejected for lack of merit on 7 April 1998.
Hence, UNIONBANK came to this
Court claiming to be a mortgagee in good faith and for value with a right to
consolidate ownership over the foreclosed property with the redemption period
having expired and there having been no redemptioners. UNIONBANK contends that the TRO which
provisionally enjoined the tolling of the redemption period was automatically
dissolved upon dismissal of the complaint on 17 October 1994. Conformably, consolidation of title in its
name and the issuance of TCT No. 120929 rendered further proceedings on the
application for injunction academic.
Moreover, the alleged fraudulent mortgage was facilitated through private
respondents’ negligence so they must bear the loss. It also contends that since private respondents had filed several
pleadings, due process, being an opportunity to be heard either through
pleadings or oral arguments, was observed.
Private respondents maintain that
UNIONBANK’s consolidation of the title in its name was in bad faith, vitiated a
standing court order, is against the law, thus void ab initio. The application for preliminary injunction
was not rendered moot and academic by consolidation, which took place during
the lifetime of the TRO, and did not follow the proper legal procedure due to
the surreptitious manner it was accomplished.
By treating the application for preliminary injunction as moot and
academic and denying the motion for indirect contempt without hearing, the RTC
order ran afoul with the requirements of due process.
Two main issues can be gleaned
from the posturing and claims of the parties, to wit, was the consolidation of
title in UNIONBANK’s name proper, and was the dismissal of the application for
preliminary prohibitory injunction valid.
The issues must be answered in the
affirmative.
UNIONBANK’s consolidation of title
over the property on 24 October 1994 was proper, though precipitate. Contrary to private respondents’ allegation
UNIONBANK violated no standing court order.
The only bar to consolidation was the temporary restraining order issued
by Justice Lipana-Reyes on 10 October 1994 which effectively halted the tolling
of the redemption period 7 days short of its expiration. When private respondents’ original complaint
was dismissed on 17 October 1994 for failure to append a certification of
non-forum shopping, the TRO, as an ancillary order that cannot stand
independent of the main proceeding, became functus officio. Thus the tolling of the 12-month redemption
period, interrupted by the filing of the complaint and the TRO, recommenced and
eventually expired 7 days thereafter or on 24 October 1994, the date of the
disputed consolidation.
The motion for reconsideration and
to amend complaint filed by private respondent on 20 October 1994 was of no
moment, this Court recognizing that “a dismissal, discontinuance or non-suit of
an action in which a restraining order or temporary injunction has been granted
operates as a dissolution of the restraining order or temporary injunction,”[9] regardless of whether the period for filing a motion
for reconsideration of the order dismissing the case or appeal therefrom has
expired.[10] The rationale therefor is that even in cases where an
appeal is taken from a judgment dismissing an action on the merits, the appeal
does not suspend the judgment, hence the general rule applies that a temporary
injunction terminates automatically on the dismissal of the action.[11]
We disagree with the appellate
court’s observation that consolidation deprived private respondents of their
property without due process. It is
settled that the buyer in a foreclosure sale becomes the absolute owner of the
property purchased if it is not redeemed during the period of one year after
the registration of the sale.[12] Consolidation took place as a matter of right since
there was no redemption of the foreclosed property and the TRO expired upon
dismissal of the complaint. UNIONBANK
need not have informed private respondent that it was consolidating its title
over the property, upon the expiration of the redemption period, without the
judgment debtor having made use of his right of redemption, the ownership of
the property sold becomes consolidated in the purchaser.[13] Notice to the mortgagors and with more reason, to
private respondents who are not even parties to the mortgage contract nor to
the extrajudicial sale is not necessary.
In real estate mortgage, when the
principal obligation is not paid when due, the mortgage has the right to
foreclose the mortgage and to have the property seized and sold with a view to
applying the proceeds to the payment of the principal obligation.[14] Foreclosure may be effected either judicially or
extrajudicially.
In a public bidding during
extra-judicial foreclosure, the creditor-mortgagee, trustee, or other person
authorized to act for the creditor may participate and purchase the mortgaged
property as any other bidder.
Thereafter the mortgagor has one year within which to redeem the
property from and after registration of sale with the Register of Deeds.[15] In case of non-redemption, the purchaser at
foreclosure sale shall file with the Register of Deeds, either a final deed of
sale executed by the person authorized by virtue of the power of attorney
embodied in the deed or mortgage, or his sworn statement attesting to the fact
of non-redemption; whereupon, the Register of Deeds shall issue a new
certificate of title in favor of the purchaser after the owner’s duplicate of
the certificate has been previously delivered and cancelled.[16] Thus, upon failure to redeem foreclosed realty,
consolidation of title becomes a matter of right on the part of the auction
buyer,[17] and the issuance of a certificate of title in favor
of the purchaser becomes ministerial upon the Register of Deeds.
There is, moreover, nothing
erroneous with the denial of private respondents’ application for preliminary
prohibitory injunction. The acts
complained of have already been consummated.
It is impossible to restrain the performance of consummated acts through
the issuance of prohibitory injunction.
When the act sought to be prevented had long been consummated, the
remedy of injunction could no longer be entertained,[18] hearing the application for preliminary injunction
would just be an exercise in futility.
In addition, to be entitled to the
injunctive writ, movant must show that there exists a right to be protected
which is directly threatened by an act sought to be enjoined. Furthermore, there must be a showing that
the invasion of the right is material and substantial and that there is an
urgent and paramount necessity for the writ to prevent a serious damage.[19] The injunctive remedy prevents a threatened or
continuous irremediable injury to some of the parties before their claim can be
thoroughly investigated and advisedly adjudicated; it is resorted to only when
there is a pressing necessity to avoid injurious consequences which cannot be
remedied under any standard compensation.[20]
In the case at bar, the consolidation
of ownership over the mortgaged property in favor of UNIONBANK and the issuance
of a new title in its name during the pendency of an action for annulment and
reconveyance will not cause irreparable injury to private respondents who are
plaintiffs in the said action that will merit the protection of the court
through the writ of preliminary injunction.
This is because as purchaser at a public auction, UNIONBANK is only
substituted to and acquires the right, title, interest and claim of the
judgment debtors or mortgagors to the property at the time of levy.[21] Perforce, the judgment in the main action for
reconveyance will not be rendered ineffectual by the consolidation of ownership
and the issuance of title in the name of UNIONBANK.
More importantly, with the main
action for reconveyance pending before the RTC, the notice of lis pendens, which
despite consolidation remains annotated on UNIONBANK’s transfer certificate of
title subject to the outcome of the litigation, sufficiently protects private
respondents’ interest over the property.
A transferee pendente lite stands exactly in the shoes of the
transferor and is bound by any judgment or decree which may be rendered for or
against the transferor. Once a notice
of lis pendens has been duly registered, any cancellation or issuance of
the title of the land involved as well as any subsequent transaction affecting
the same, would have to be subject to the outcome of the litigation. In other words, upon the termination of the
litigation there can be no risk of losing the property or any part thereof as a
result of any conveyance of the land or any encumbrance that may be made
thereon posterior to the filing of the notice of lis pendens.[22]
Finally, as to the issue of who
between private respondents and UNIONBANK is negligent and hence must bear the
loss, the same is not the proper subject of the present petition and can only
be resolved by the trial court after the trial on the merit of the main case.
WHEREFORE, the assailed Decision of the Court of Appeals of 26
June 1997 nullifying the consolidation of ownership and ordering the Register
of Deeds of Quezon City to cancel TCT No. 120929 and reinstate TCT No. 41828 is
hereby REVERSED and SET ASIDE.
The order of the trial court dated 7 August 1999, declaring UNIONBANK’s
prayer for writ of preliminary injunction moot and academic, is hereby
REINSTATED. Let this case be remanded
to the Regional Trial Court for trial on the merits.
No pronouncement as to costs.
SO ORDERED.
Puno, Kapunan, Pardo, and Ynares-Santiago, JJ., concur.
[1] Per
Brawner, R., J. with Tayao-Jaguros, L. and Aquino, H., JJ.,
concurring. Rollo, 21-29.
[2] Id., 31-32.
[3] Annex “N,” Memorandum for Private
Respondents, Rollo, 217.
[4] Circular
4-9
[5] Rollo, 179-180.
[6] Id., 181-189.
[7] Rollo,
33-49.
[8] Rollo,
26.
[9] Santiago
v. Vasquez, 217 SCRA 633, 645-646 [1993].
[10] Golez v.
Leonidas, 107 SCRA 187, 189 [1981].
[11] Santiago v. Vasquez, supra, note 16 at
645. See Paras v. Roura, 163
SCRA 1 [1988].
[12] F. David
Enterprises v. Insular Bank of Asia and America,
191 SCRA 516, 523 [1990].
[13] Medida et al. v. Court of Appeals, et al.,
May 8, 1992, citing Mateo v. Court of Appeals, et al., 99 Phil.
1042 [1956].
[14] Commodity Financing Co., Inc. v.
Jimenez, 91 SCRA 57 [1979].
[15] Secs. 1,
4-6 Act No. 3135; Section 78, General Banking Act.
[16] Section
63 (b), paragraph 3, P.D. 1529.
[17] Spouses
Tarnate v. CA, 241 SCRA 254, 260 [1995].
[18] Africa v. Sandiganbayan, 287 SCRA 408 [1998];
See Manila Railroad Company v. Yatco, 23 SCRA 735 [1968].
[19] Medina, et
al. v. City Sheriff, Manila, et al., 276 SCRA 133, 139 [1997].
[20] Wenceslao
G. Laureta, Commentaries and Jurisprudence on Injunction 3, citing American
Smelting & Ref. Co. v. Godfrey [OCA 8th] 158 F 225, 14 Am. Cas. 8.
[21] See PNB v.
Court of Appeals, 275 SCRA 70 [1997].
[22] J.P.
Pellicer & Co., Inc. v. Phil. Realty Corp., 87 Phil. 302, 307
[1950].